New York courts are often called upon to determine the fair value of minority shares in closely held corporations. Judicial fair value determinations commonly arise under New York’s Business Corporation Law (BCL), which provides dissenting or oppressed minority shareholders the right to force the sale of their shares to the corporation—for “fair value” as determined by the court—when they find themselves being denied participation in or being frozen out of corporate management.
In a statutory fair value proceeding, a minority shareholder is entitled to his or her pro rata share of the value of the entire company as a “going concern,” that is, what a willing purchaser in an arm’s-length transaction would offer for the company as an operating business. Where appropriate, New York courts will further discount the value of minority shares to account for the lack of marketability inherent in the sale of a close corporation.1
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