Appraisal, or dissenters’ rights, allows a shareholder who objects to certain transactions to be paid the fair value of their shares as determined by a court rather than accept the deal consideration.
Triggering events typically include mergers, share exchanges, sales of substantially all assets, and certain charter amendments adversely affecting the holder’s rights. Statutes vary and exceptions exist, notably for publicly traded shares in some states.
The procedure is unforgiving. Written notice of intent to demand before the vote, no vote in favour, a timely written demand afterwards, and surrender of certificates where required. Each step has a deadline, and missing one usually forfeits the right entirely.
Fair value in this context is generally the proportionate interest in the company as a going concern, excluding any appreciation or depreciation from the transaction itself. Most states applying the modern formulation exclude minority and marketability discounts, though this is not universal.
Valuation methods commonly include discounted cash flow, comparable companies, comparable transactions, and in some cases the deal price itself where the process was robust.
Cost and interest. Statutory interest accrues, and courts have discretion over fees and expert costs, sometimes shifting them where the company’s payment was arbitrary.
Strategically, appraisal is expensive, slow, and occasionally the only leverage a minority holder has.