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BV News and Trends July 2024

A monthly roundup of key developments of interest to business valuation experts.

ESOP experts anxious about upcoming DOL regs

A panel at the ASA ESOP Virtual Conference last week was clearly concerned over proposed rules the DOL is expected to issue on how to establish fair market value for shares of a business to be acquired by an ESOP, i.e., “adequate consideration.”

Most professional liability claims triggered from transactions

According to Duncan Will (CAMICO), the average professional liability claim against business valuation experts is $101,000, compared with $141,000 for forensic accounting.

BV News and Trends April 2024

A monthly roundup of key developments of interest to business valuation experts.

Still waiting for the DOL ESOP regs

First, they were expected at the end of 2023, then the end of March 2024, but there is no sign yet (at the time of this writing) of the proposed regulations regarding ESOP valuations.

Palkon v. Maffei

Two minority shareholders challenged the conversion of two Delaware corporations into Nevada corporations with the intent to reduce potential liability for directors and officers, with the controlling shareholder casting the deciding vote. The business rule did not apply since the controller received a nonratable benefit.

Delaware Chancery Court Determines That Reducing Potential Personal Liability Exposure Through a Change in Corporate Domicile Constituted a Nonratable Benefit

Two minority shareholders challenged the conversion of two Delaware corporations into Nevada corporations with the intent to reduce potential liability for directors and officers, with the controlling shareholder casting the deciding vote. The business rule did not apply since the controller received a nonratable benefit.

ESOP group drafts rule framework for DOL valuation regs

In advance of the Department of Labor issuing its proposed final regulations related to ESOP valuations, the ESOP Association has drafted a “proposed regulatory framework,” according to the group’s blog post.

BV News and Trends January 2024

A monthly roundup of key developments of interest to business valuation experts.

Time to Engage Over Upcoming ESOP Valuation Rules

Some examples of how the valuation profession has worked with regulators in the past may help inform interactions with the Department of Labor (DOL), which will soon issue regulations regarding ESOP valuations.

BV News and Trends December 2023

A monthly roundup of key developments of interest to business valuation experts.

BV News and Trends November 2023

A monthly roundup of key developments of interest to business valuation experts.

Don’t hold your breath over the DOL valuation regs, some say

While in Las Vegas, BVWire stopped in at the ESOP Association’s Employee Owned Conference, billed as the largest ESOP conference in the world.

Regulatory uncertainty regarding ESOP valuation is a major problem

The regulatory uncertainty around valuations for employee stock ownership plans (ESOPs) is a significant burden that creates undue risk and can “hamper employee-owned businesses,” says Alex Brill, a senior research fellow at the American Enterprise Institute, in a new paper.

Lone dissenter of medical merger challenges share valuation

In a California case, a physician was a nonexclusive provider to a physician network and was one of 75 shareholders.

DOL ESOP valuation regs coming by year-end

The Department of Labor (DOL) will issue long-awaited guidance on ESOP valuations by the end of this year, according to a blog post from the National Center for Employee Ownership (NCEO).

Takeaways From ASA’s ESOP Virtual Conference

ESOP valuation basics, sell-side transactions, issues with mature ESOPs, and common critiques with valuations in litigation were the topics of discussion at ASA ESOP Virtual Conference.

Valuation Implications of the Changing ESOP Litigation Landscape

The tide has started to turn with respect to litigation over ESOP valuations, speakers reported at the recent ASA ESOP Virtual Conference. There has been a major court victory and pressure from the ESOP and valuation profession, and now the DOL has committed to moving forward—hopefully— with long-awaited regulations on the valuation of company shares to be bought by an ESOP.

Low buyback value stings departing owners

Shareholder-employees should take a lesson from a recent case and take a fresh look at their buyout agreements—especially the part about the redemption value.

Physician Shareholder Asserts Transaction Bonuses Breach Board’s Fiduciary Duties—Appeals Court Finds Them Just and Reasonable

A physician shareholder claimed that the fair market value of his one share (of 75 total shares) was undervalued when the physician practice was merged and sold to NAMM California, a company that develops and manages physician provider networks. NAMM paid $18 million in the merger, and over $12 million of that amount was paid to individual physician shareholders in the form of “transaction bonuses.” The remaining almost $6 million was paid pro rata to the shareholders. The plaintiff appealed the judgment of the California trial court, but the appellate court deemed the transaction bonuses as “just and reasonable” and affirmed the trial court.

Ghaly v. Riverside Cmty. Healthplan Med. Grp.

A physician shareholder claimed that the fair market value of his one share (of 75 total shares) was undervalued when the physician practice was merged and sold to NAMM California, a company that develops and manages physician provider networks. NAMM paid $18 million in the merger, and over $12 million of that amount was paid to individual physician shareholders in the form of “transaction bonuses.” The remaining almost $6 million was paid pro rata to the shareholders. The plaintiff appealed the judgment of the California trial court, but the appellate court deemed the transaction bonuses as “just and reasonable” and affirmed the trial court.

BV News and Trends June 2023

A monthly roundup of key developments of interest to business valuation experts.

Laurilliard v. McNamee Lochner, P.C.

The plaintiffs, minority shareholder employees in a law firm, brought suit against their firm for breaching their employment contracts. The court determined that the plaintiffs were at-will employees and that there was no breach of their agreements when they were terminated. The court also determined that the under-market-value payment under their repurchase agreements was allowable since they were at-will employees.

New York Court Allows Enforcement of Under-Market-Value Buy-Sell and Approves At-Will Termination of Shareholder-Employees

The plaintiffs, minority shareholder employees in a law firm, brought suit against their firm for breaching their employment contracts. The court determined that the plaintiffs were at-will employees and that there was no breach of their agreements when they were terminated. The court also determined that the under-market-value payment under their repurchase agreements was allowable since they were at-will employees.

Musk prevails in lawsuit claiming he meddled in SolarCity deal

In a unanimous 106-page opinion, the Delaware Supreme Court has upheld the Delaware Chancery Court’s judgment in favor of Elon Musk in a case involving Tesla’s acquisition of SolarCity in 2016.

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