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  • Will You Add? - Shareholder Agreements Prevent Minority Shareholders from Receiving Fair Value

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    lack of control for up to 40% can be applied on top of that.

    Theoretically, if you owned 49.9999% of a company with a $10 million value and these maximum discounts were a

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    Our Investment Banking firm is receiving an unusually high number of inquiries from minority interest shareholders looking for help. Often times they have just been terminated and concurrently receive a Letter of Intent to purchase their minority shareholder stock.

    When they look at these offers, they are hit with their second punch in the gut. The offers are often woefully short of what the terminated shareholder expected. However, when they start to investigate, the harsh reality of the situation sets in. IRS Revenue Ruling 59-60 allows steep discounts when valuing minority interests in privately held companies. The lack of marketability discount can be as high as 40%. A second discount for lack of control for up to 40% can be applied on top of that.

    Theoretically, if you owned 49.9999% of a company with a $10 million value and these maximum discounts were ap

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    and concurrently receive a Letter of Intent to purchase their minority shareholder stock.

    When they look at these offers, they are hit with their second punch in the gut. The offers are often woefully short of what the terminated shareholder expected. However, when they start to investigate, the harsh reality of the situation sets in. IRS Revenue Ruling 59-60 allows steep discounts when valuing minority interests in privately held companies. The lack of marketability discount can be as high as 40%. A second discount for lack of control for up to 40% can be applied on top of that.

    Theoretically, if you owned 49.9999% of a company with a $10 million value and these maximum discounts were a

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    The offers are often woefully short of what the terminated shareholder expected. However, when they start to investigate, the harsh reality of the situation sets in. IRS Revenue Ruling 59-60 allows steep discounts when valuing minority interests in privately held companies. The lack of marketability discount can be as high as 40%. A second discount for lack of control for up to 40% can be applied on top of that.

    Theoretically, if you owned 49.9999% of a company with a $10 million value and these maximum discounts were a

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    Ruling 59-60 allows steep discounts when valuing minority interests in privately held companies. The lack of marketability discount can be as high as 40%. A second discount for lack of control for up to 40% can be applied on top of that.

    Theoretically, if you owned 49.9999% of a company with a $10 million value and these maximum discounts were a

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    lack of control for up to 40% can be applied on top of that.

    Theoretically, if you owned 49.9999% of a company with a $10 million value and these maximum discounts were applied, your $5 million value evaporates into $800,000.

    Wait, it gets worse. The oppressive shareholder understands that through either the shareholder agreement or the Corporate By Laws, they have every right to buy your minority stock at an even bigger discount from fair value. I cannot tell you how many times I have seen almost exactly the identical language as below in either By Laws or Shareholder Agreements:

    Right of First Refusal: “The Corporation Shall have the power, at its option to purchase any and all of its shares owned and held by any shareholder who should desire to sell……the shareholders shall not assign, transfer, encumber, or in any manner dispose of any of all of the sh

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