Shareholder Dispute: Appraisal Actions
By definition, minority shareholders are in a less advantageous position than those with majority control. Unfortunately, minority stakeholders in a business are sometimes mistreated. Majority shareholders, corporate officers, and corporate directors may even abuse their position of power.
Appraisal rights are among the most important tools that minority shareholders can utilize to ensure that their best interests are properly protected in any transaction. Here, our Miami shareholder dispute lawyers highlight the key things to know about appraisal actions in Florida.
Know the Law: Shareholder Appraisal Rights in Florida
Under Florida law (Florida Statutes § 607.1302), shareholders have certain appraisal rights. In effect, these rights allow minority shareholders to ensure that their stake in the company—their share—are being properly valued during significant transactions.
Most often, appraisal rights in Florida are invoked when the majority shareholders and/or corporate directors work to alter the fundamental ownership structure of the company. As an example, shareholder appraisal rights may be used when corporate leadership initiates a merger.
To be clear, appraisal rights cannot be invoked to stop corporate officers and directors from exercising their general business discretion. Appraisal rights are reserved only for matters in which the core structure of the business is changing due to a transaction.
Appraisal Action: Fair Market Value Must Be Determined
As noted above, shareholder appraisal rights in Florida may be invoked if the fundamental structure of the business is subject to change as the consequence of a proposed transaction. Typically, that transaction is a merger, a stock swap, or some other type of complex maneuver. When a minority shareholder uses their appraisal rights, they are asking the court to step in and determine the true fair market value of the company and its shares.
If the proposed deal results in shares being sold at a price below the fair market value, the court can require that the agreement be altered or halted in order to protect the rights and interests of minority shareholders. Put another way, the court could require the company/entity that is getting control of the shares to pay a higher price. Depending on the circumstances, the proposed deal will be reconfigured or it may fall apart altogether.
Summary: Shareholder Appraisal actions are a Tool for Minority Shareholders in Florida
Through the use of their appraisal rights and an appraisal action, a minority shareholder may be able to stop an unfair structural transaction such as a merger or an acquisition. Shareholder appraisal rights help to ensure that minority shareholders are not mistreated in these deals.
Contact Our West Palm Beach, FL Shareholder Lawyer Today
At Pike & Lustig, LLP, our South Florida shareholder dispute attorneys work tirelessly to protect the rights and interests of our clients. If you have any questions about appraisal actions and shareholder disputes, we can help. Give us a call now or connect with us online for your confidential consultation. Our law firm handles shareholder disputes throughout South Florida, including in Miami, Miami Beach, West Palm Beach, Jupiter Fort Lauderdale, Boca Raton, and Hollywood.