CHAPTER 9
Fair Value
The world of fair value is among the most tightly constricted value worlds. It applies only to minority shareholders who are either oppressed by the majority or dissent from majority actions. The governing authorities in this world are the laws and court systems of the various states. This world is entirely statutory. Each state has adopted laws to grant rights to minority shareholders. Further, each state is an independent authority regarding these matters. The definition and application of fair value can be quite different from state to state.
The language in this world is legalistic because a legal action has been taken by the minority shareholder to determine the value of the shares. Although some of the general concepts are similar to those in other worlds, a unique language and set of concepts are found in the world of fair value.
This world is especially important to minority shareholders in private companies since they have no public market in which to sell shares. Shareholders in this world are motivated to receive fair value for their shares and must assert their claim through court action.
A snapshot of key tenets of the fair value world is provided in Exhibit 9.1.
EXHIBIT 9.1 Longitude and Latitude: Fair Value
| Definition | The value of the shares immediately before a corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. (From Model ... |
