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   Business Valuation Issues in
        Shareholder Disputes

Shareholder Disputes

There's always a dissenter in the group. That's especially true when it comes to
shareholders in a company which can lead to shareholder disputes. In many
cases, disputing and deadlocked equal shareholders turn to the judicial system
for dispute resolution and assistance. We can prepare business valuations
relevant to shareholder dissent or oppression actions. We also provide support
for alternative shareholder dispute resolution methodologies. B V S  Advisory LLC
and BARR CPA LLC's
Forensic Accounting and Valuation Services dedicated to providing
superior client service.

Specific services in shareholders dispute circumstances include the following:

  • Valuing the subject business interest
  • Analysis of economic terms and conditions provided in shareholder agreements
  • Recommendations as to the timing and structure of a buyout to accommodate
    cash flow considerations and minimize the tax impact of the transaction
  • Consultative assistance to counsel in preparation for trial and depositions
  • Calculation of appropriate lack of marketability and minority discounts related
    to a particular business interest
  • Review of business valuation reports prepared by other experts
  • Measurement of economic impact of violations of non-compete agreements
  • Support for the use of various alternative shareholder dispute resolution methodologies
  • Determination of market compensation for shareholder-employees
  • Calculation of economic damages

Shareholder disputes often involve a minority owner who believes he has
been mistreated or disagrees with decisions made by the controlling owner.
Sometimes, such disagreements can be too significant to resolve peacefully
and lead to costly and time-consuming litigation. This can be a major
distraction for company leadership and therefore have a deteriorating effect
on a business' value. Often, these disputes lead to a minority shareholder or
business partner leaving the company.

Shareholder dispute claims are typically classified as either dissenting shareholder
actions or minority oppression actions. Some of the most common events
triggering shareholder disputes include:

  • Deceptive practices
  • Diversion of income
  • Involuntary dissolution of a business
  • Non-payment of distributions
  • Breach of contract

We as a Business valuation experts often play an important role in resolving shareholder
disputes by providing independent and unbiased opinions of value for the shares
in question. For the most part, business appraisers use the same process and
methodology for shareholder disputes as they use for other types of
engagements. However, attorneys and their experts should be mindful of several
aspects of business valuation that are unique to shareholder disputes.