Appraisal Rights

What are appraisal rights?

Appraisal rights refer to the right of a shareholder in a publicly traded corporation to seek a judicial appraisal of the fair value of their shares in certain circumstances.

Generally, when a corporation undergoes a significant corporate event such as a merger or acquisition, shareholders may have the right to dissent from the transaction and demand appraisal of the fair value of their shares. This right allows shareholders dissatisfied with the price offered for their shares to obtain a judicial determination of the fair value of their shares.

The appraisal process typically involves an independent valuation of the company and its assets by an expert appraiser, and a court will ultimately decide on the fair value of the shares in question. As a result, shareholders who exercise their appraisal rights may receive a higher price for their shares than what was offered in the transaction, although the process can be time-consuming and costly.

Appraisal rights protect shareholder interests and ensure they receive fair value for their investments. However, not all corporations provide appraisal rights to their shareholders, and the specifics of appraisal rights can vary depending on the applicable laws and regulations.

Need help with a matter related to appraisal rights? Schedule your consultation today with a top shareholder disputes and derivative litigation attorney.

In Florida, which laws and regulations apply to appraisal rights?

Appraisal rights in Florida fall under Chapter 607 of the Florida Statutes, the state’s Business Corporation Act. Under this law, shareholders who dissent from a merger or consolidation may file a written notice of their intent to demand payment of the fair value of their shares. The notification must be filed with the corporation before the vote on the merger or consolidation, and it must include specific information, such as the number and class of shares the shareholder holds.

If the merger or consolidation is approved, the dissenting shareholders may file a petition with the court within a specified timeframe to seek a judicial determination of the fair value of their shares. The court will appoint appraisers to determine the fair value of the shares, and the court will ultimately determine the final payout to the dissenting shareholders. Some specific statutes that address essential aspects of appraisal rights include:

Stat. § 607.1301: This statute sets forth the procedures for dissenting shareholders to exercise their appraisal rights in a merger or consolidation.
Stat. § 607.1302: This statute outlines when a shareholder has the right to appraisal.

What are common issues regarding appraisal rights that lead to litigation?

The following issues are among the most common in actions regarding appraisal rights in shareholder disputes and derivative litigation matters:

Valuation: One of the most common issues is the valuation of the shares subject to appraisal. Shareholders may argue that the value of their shares is higher than what the corporation is offering or what the appraiser determined, leading to disputes over valuation.
Eligibility: Another common issue is whether shareholders can exercise their appraisal rights. Shareholders may dispute whether they meet the requirements for appraisal rights, such as the number or class of shares held, or whether they correctly exercised their rights.
Timing: The timing of the appraisal process can also be a contentious issue. Shareholders may argue that the appraisal process is taking too long or that the corporation is delaying the process to avoid paying fair value.
Process: Shareholders may dispute the appraisal process itself, such as the qualifications of the appraisers or the methodology used in determining fair value.
Payment: Upon receiving a fair value estimate, disputes may arise over the payment of the appraisal award. For instance, shareholders may argue that the corporation is not paying the total amount owed or that the payment is being improperly delayed.

When a set of facts is appropriate to meet the requirements giving rise to appraisal rights, 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.

What evidence does a plaintiff generally need to file a lawsuit regarding appraisal rights, and what are common legal defenses to those claims?

To successfully file a lawsuit in Florida regarding appraisal rights, a plaintiff generally needs to provide evidence of the following:

Eligibility: The plaintiff must demonstrate that they meet the requirements for exercising their appraisal rights, such as the number and class of shares held and the proper exercise of their appraisal rights.
Valuation: The plaintiff must present evidence to support their claim that the fair value of their shares is higher than what the corporation offered or the appraiser determined.
Process: The plaintiff must show that the appraisal process was conducted fairly and per applicable laws and regulations.

Common legal defenses to appraisal rights claims in Florida may include:

Waiver: The plaintiff waived their appraisal rights or failed to exercise them properly.
Fair value: The fair value determined by the appraiser or court is accurate, and the plaintiff is not entitled to a higher price.
Procedural defects: The appraisal process was flawed due to procedural defects, such as a failure to follow proper notice or filing requirements.
Timing: Alternatively, the plaintiff waited too long to exercise their appraisal rights, or the process took too long.
Other defenses: Depending on the case’s specific circumstances, other legal defenses may be available to the defendant corporation, such as limitations on the scope of appraisal rights or the applicability of other laws or regulations.

To see what actions or defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Frequently Asked Questions

How can shareholders protect their interests in the context of appraisal rights?

Shareholders can protect their interests in the context of appraisal rights by seeking the advice of experienced legal counsel, evaluating their options carefully, and ensuring that they understand the applicable laws and regulations.

What is the process for appraisal rights?

Generally, shareholders who dissent from a merger or consolidation must file a written notice of their intent to demand payment of the fair value of their shares. If the merger or consolidation is approved, the dissenting shareholders may file a petition with the court within a specified timeframe to seek a judicial determination of the fair value of their shares.

Have more questions about an appraisal rights-related situation?

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.