Mekhaya v. Eastland Food Corp.
The plaintiff pleaded a statutory claim for shareholder oppression. In October 2018, Mekhaya was fired from his position at Eastland, where his salary of $400,000 per year included an implied dividend. The implied dividend was also included in the salaries of the other shareholders, all relatives of Mekhaya. The defendants filed a motion to dismiss, which the district court granted. The plaintiff appealed. He noted that, after his removal, they paid themselves excessively high salaries and refused to pay him dividends, thus frustrating his expectations as a shareholder. The Appellate Court of Maryland disagreed with the decision of the trial court.
Maryland Court of Appeals Reverses Dismissal of an Oppression Claim—Finds There Could Be Disguised Dividend Issue
The plantiff pleaded a statutory claim for shareholder oppression. In October 2018, Mekhaya was fired from his position at Eastland, where his salary of $400,000 per year included an implied dividend. The implied dividend was also included in the salaries of the other shareholders, all relatives of Mekhaya. The defendants filed a motion to dismiss, which the district court granted. The plaintiff appealed. He noted that, after his removal, they paid themselves excessively high salaries and refused to pay him dividends, thus frustrating his expectations as a shareholder. The Appellate Court of Maryland disagreed with the decision of the trial court.
BV News and Trends September 2021
A monthly roundup of key developments of interest to business valuation experts.
Van Vleet comments on use of SEAM in Ryan case
BVWire recently reported on the Ryan Trust v. Ryan case, a buyout dispute in which the Nebraska Supreme Court affirmed the district court’s decision to credit the valuation testimony of the expert for the late majority shareholder.
In buyout dispute, ‘downward bias’ sinks expert’s fair value determination
In a bitter buyout dispute involving a successful private family business and featuring two veteran appraisers, the Nebraska Supreme Court recently affirmed the district court’s decision to unreservedly credit the valuation testimony of the expert for the late majority shareholder.
Ryan Trust v. Ryan
In family buyout dispute, state high court affirms trial court’s decision to adopt expert valuation testimony for selling majority shareholder, finding expert’s DCF inputs were reasonable as was selection of multiple of earnings in GPTC analysis; expert’s explanation for S corp premium was convincing.
State Supreme Court Affirms Adoption of Selling Shareholder’s Expert Value Findings
In family buyout dispute, state high court affirms trial court’s decision to adopt expert valuation testimony for selling majority shareholder, finding expert’s DCF inputs were reasonable as was selection of multiple of earnings in GPTC analysis; expert’s explanation for S corp premium was convincing.
Valuing Minority Interests in the UK Is ‘Especially Challenging’
Comments by Andrew Strickland, a consultant with Scrutton Bland in the UK, on transactions involving fractional interests in closely held companies. He also offers a summary of discounts from a sample of relatively recent cases.
Valuing minority interests in the United Kingdom is ‘especially challenging’
‘Valuing fractional interests in closely held companies is especially challenging,’ Andrew Strickland reports to BVWire—UK.
Manipulation of Valuation of Bequeathed Stock Sinks Charitable Contribution Claim
Tax Court says executor of estate in series of post-death measures changed the value and size of decedent’s stock donation and may not claim date-of-death value of assets not actually transferred to family foundation; court affirms estate tax deficiency.
Estate of Dieringer v. Commissioner
Tax Court says executor of estate in series of post-death measures changed the value and size of decedent’s stock donation and may not claim date-of-death value of assets not actually transferred to family foundation; court affirms estate tax deficiency.
May Court Disregard Shareholder Agreement in Judicial Buyout?
Appeals court finds in judicial buyout, district court properly updated stock price listed in shareholder agreement and could disregard experts’ market approach values, but it erred when it abandoned the contract’s terms as to the manner of the payment.
Piche v. Braaten
Appeals court finds in judicial buyout, district court properly updated stock price listed in shareholder agreement and could disregard experts’ market approach values, but it erred when it abandoned the contract’s terms as to the manner of the payment.
Summit Metals, Inc. v. Gray
Adversary Proceeding to rescind a transfer by The Chariot Group, Inc., a predecessor to Summit Metals, of its interest in its operating subsidiary, Energy Savings Products, Inc.
Controlling Stockholders Have No Duty to Share Control Premium Received
NCC Industries is a publicly traded Delaware corporation involved in the garment business.
Herzog, Heine, Geduld, Inc. v. NCC Industries
Plaintiffs alleged breach of fiduciary duty based on majority shareholders sale of stock at a control premium price, where public sale price dropped significantly thereafter.