World Egg Bank, Inc. v. Nesco Inv., LLC

Our Appeals Court rules that where a minority shareholder dissents from the sale of a corporation, the fair value of those shares is determined at the date of the sale.

A 50% plus owner in a corporation wanted to sell his stock and dissolve a corporation objection of the minority owner.  The majority owner sent a demand to the minority owner that said the stock would be sold to his partner. Great! The minority owner proclaimed she did not plan to vote for such a nutty proposal. She demanded money for her shares.  At the meeting, the majority owner approved the sale and dissolution with his white-shoe law firm.  Yet the closing of the corporation did not occur until six months later when it was valuated and its assets were conveyed to another company through an asset purchase agreement. Say what?

This litigation was whether the date of the shareholder meeting or the date of the valuation and subsequent conveyance/sale should be used to value her shares.  The trial court concluded that the shares should be valued at the shareholder meeting (a wait-and-see game & inviting fraud) when the corporation authorized the sale.  The Court of Appeals disagreed. So do we.

The Arizona statute defining dissenting shareholders’ rights is pretty clear.  Under the statute, a shareholder may “dissent from and obtain payment of the fair value of the shareholder’s shares in the event of . . . consummation of a sale or exchange. . . .”  A.R.S. § 10-1302(A)(3).  And the statute also provided that the fair value is “the value of the shares immediately before the effectuation of the corporate action.”  A.R.S. § 10-1301(4).  Reading these provisions together, the Court concluded that the later date should be used to value her shares.

We have said for over 34 years, there are four times when litigations occur in a closely held business: Fraud, divorce, when it makes a bunch of money, or when it loses a bunch of money. If any of the big three here (not divorce) apply to your business or investments, give us a call at 602.319.6899. We can help you!

We also handle, Breach of contract, Non-compete agreements, Non-disclosure agreements, Employee theft and embezzlement, Insurance purchases and enforcement of policy coverage, Negotiation and/or enforcement of commercial leases, Negligence and gross negligence resulting in losses, Intentional acts causing a company to suffer damages, Tortious interference with contractual relationships, Unjust enrichment, Real Estate fraud, Consumer fraud, Conversion/Theft, Intentional and/or negligent misrepresentation, Business torts and Real estate title and escrow.

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