Fairness, like beauty, is often in the eye of the beholder. That is certainly true in many disputes over the “fair value” of shares of stock in a private, closely held corporation (or limited liability company).
More than a decade has passed since the Minnesota Supreme Court defined “fair value” under the Minnesota Business Corporations Act, and surprisingly few reported decisions have seriously examined the issue since then. Courts determine the fair value of corporate stock most often in two types of shareholder disputes:
(1) cases under Minn. Stat. § 302A.751 where the court grants a buy-out remedy upon a showing of certain triggering events such as fraud or “unfairly prejudicial” conduct against a minority shareholder;
(2) dissenter’s rights disputes under Minn. Stat. § 302A.471-.743, in which shareholders who dissent from certain fundamental corporate actions, such as mergers, are entitled to payment for their shares. “Fair value” is the price to be paid in dissenter’s rights cases, and is the price paid upon a court-ordered buy-out under Section 751, at least in the absence of (and sometimes despite the existence of) an applicable buy-sell agreement.