Valuations and Economics

Disagreements in the governance of a corporation - whether due to mishandling of corporate assets, opinions on strategy, unfairness, fraud, illegality, malfeasance, or even personality conflicts - are not uncommon. California law allows minority shareholders to file for involuntary dissolution under Section 2000 of the California Corporations Code on certain grounds.  Section 2000  provides that, in an action for involuntary dissolution, the corporation or, if it does not elect, the shareholders holding 50% or more of the voting power, may avoid dissolution of the corporation by purchasing for cash the shares owned by the plaintiffs at their fair value. Shareholders can protect the corporation from Section 2000 actions by entering into Shareholder Agreements or Buy-Sell Agreements which would govern the exit process of a dissenting shareholder. Absent one of these agreements, however, Section 2000 of the Corporations Code will govern. The Standard of Value Under Section 2000...

     The California legislature has once again changed the laws regarding partitions in California. Effective January 1, 2023, the Partition of Real Property Act ("Act") took effect, adding a twist to any partition action filed on or after that date.      The crux of the law is this: A non-partitioning co-tenant can avoid the partition and sale of the property by buying out the partitioning co-tenant.      This purchase option is new to California law. This right did not exist at all until the Uniform Partition of Heirs Property Act took effect January 1, 2022, but this only applied only to "heirs properties." The Partition of Real Property Act applies to all partition actions.        From a valuation perspective, this gives the partitioning co-tenant a path to liquidity without any "discounts." The rub is that the partitioning co-tenant has no control over whether the property is partitioned or whether the ...