Appraisal Rights

What are appraisal rights?

Appraisal rights refer to the statutory rights of shareholders to receive a fair valuation of their shares in certain corporate transactions, such as mergers, consolidations, or the sale of all or substantially all assets of the corporation. In addition, appraisal rights provide minority shareholders protection against potential coercion or unfair treatment by majority shareholders during such transactions.

One example of when corporate executives or boards of directors require counsel on appraisal rights under Florida and federal law is during a merger or acquisition. In this scenario, the board must ensure that minority shareholders are treated fairly and receive an accurate assessment of their shares’ value. Another example is the sale of a significant portion of a company’s assets. This sale may trigger appraisal rights for shareholders who dissent from the transaction and wish to obtain a fair valuation of their shares.

Need help with a matter related to appraisal rights? Schedule your consultation today with a top corporate governance and operations attorney.

Which Florida and federal laws and regulations apply to appraisal rights?

The Florida Business Corporation Act (FBCA) covers appraisal rights for shareholders of corporations. Sections 607.1301 to 607.1333 of the FBCA outline the specific circumstances under which shareholders can assert appraisal rights, the procedures for doing so, and the determination of fair value for their shares.

Similarly, the Florida Revised Limited Liability Company Act (FRLLCA) contains provisions addressing appraisal rights for LLC members. Specifically, Section 605.1006 of the FRLLCA guides asserting appraisal rights and determining the fair value of membership interests in limited liability companies.

What appraisal rights issues commonly lead to litigation?

The following issues are among the most common in litigation involving appraisal rights:

Disagreement Over Fair Value: Shareholders and companies may have differing opinions on the fair value of shares, leading to disputes and potential litigation.
Inadequate Disclosure: Companies may fail to provide sufficient information about the transaction and the appraisal rights process, resulting in lawsuits claiming that shareholders were not adequately informed.
Improper Exercise of Appraisal Rights: Shareholders may fail to properly assert their appraisal rights according to the required procedures, leading to disputes over whether they are entitled to a fair value determination.
Breach of Fiduciary Duties: Shareholders may claim that the board of directors or corporate executives breached their fiduciary duties in connection with the transaction, resulting in unfair treatment or coercion of minority shareholders.
Challenges to the Appraisal Process: Shareholders may contest the methodology or experts used by the company to determine the fair value of their shares.
Timing Issues: Disputes may arise regarding the relevant dates for determining fair value or the deadlines for asserting appraisal rights.

What are effective measures to minimize the risk of litigation over appraisal rights?

Implementing the following strategies may help mitigate risk:

Transparent and Timely Communication: Ensure that all relevant information about the transaction and the appraisal rights process discloses to shareholders promptly and transparently.
Engage Qualified Experts: Retain experienced professionals, such as appraisers or financial advisors, to provide independent, objective valuations of the company’s shares.
Adhere to Procedural Requirements: Strictly follow all legal requirements and procedures related to appraisal rights under Florida and federal law, including proper notice to shareholders and adherence to deadlines.
Fair Treatment of Shareholders: Treat all shareholders equitably during the transaction process, avoiding coercion or disparate treatment of minority shareholders.
Seek Legal Guidance: Consult with experienced legal counsel to ensure compliance with applicable laws and regulations and address potential disputes or challenges related to appraisal rights.
Consider Alternative Dispute Resolution: Explore options such as mediation or arbitration to resolve disputes before they escalate to litigation, saving time and resources for both parties.

When a set of facts is appropriate to meet litigation requirements, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

Frequently Asked Questions

How are appraisal rights different from dissenters’ rights?

Appraisal rights allow shareholders to receive a fair value for their shares in certain corporate transactions, such as mergers or consolidations. Dissenters’ rights, on the other hand, allow shareholders to object to specific actions taken by the company that they believe may harm their interests. Both rights may exist under Florida law, but the specific rights and procedures for exercising them can vary depending on the applicable statute and entity type.

2. Are appraisal rights available in all types of corporate transactions?

No, appraisal rights are typically limited to specific corporate transactions, such as mergers, consolidations, or the sale of substantially all assets. The availability of appraisal rights will depend on the nature of the transaction, the type of entity involved, and the governing Florida or federal statutes and regulations.

3. Can minority shareholders exercise appraisal rights?

Yes, minority shareholders can exercise appraisal rights if they meet the requirements outlined in the applicable statutes and regulations. However, the extent of their rights and the process for asserting them may vary depending on the type of entity and the governing documents of the company

Have more questions about governance or operations for your business?

Crucially, this overview of appraisal rights does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.