appraisal right

8/11/2019 Appraisal Right

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Definition

Right of a stockholder to demand payment of the fair value oshares, after dissenting from a proposed corporate action, in

cases provided by law


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When appraisal right may be exercised

Change in the AI has the effect ofchanging or restricting rights of

stockholder/shares, or ofauthorizing preferences in any

respect superior to those ofoutstanding shares of any class, or

of extending or shortening theterm of corporate existence

In case of sale, lease, exchange,transfer, mortgage, pledge or

other disposition of all orsubstantially all of the corporate

property and assets as provided inthe Code

In case of merger or con

When corporation invests inanother corporation or business or

for any purpose other than itsprimary purpose

When the corporation hassufficient assets in its books to

cover its debt and liabilitiesexclusive of capital stock (Close

corporations only)


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How right is exercised

Dissenting stockholdershall make writtendemand within 30 daysafter the date on whichthe vote was taken for

payment of the fair valueof his shares

Demand

After implementation ofcorporate actiondissented to, corporation

pays fair market value ofshares

Payment After payment, the

stockholder shall trahis shares to thecorporation

TransfeShar


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Some rules

1. Right may be waived

2. Fair market value is determined as of the day prior to the on which the vote was taken

3. Payment may only be made if the corporation has unrestretained earnings

4. If they cannot agree on the amount of the fair market valthe same will be determined by arbitration


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Effect of exercise of right

1. All rights accruing to such shares including voting anddividend rights shall be suspended

2. Dissenting stockholder shall be entitled to receive paymethe fair market of their shares as agreed upon between thand the corporation or as determined by the appraisers cby them

3. If the dissenting stockholder is not paid the value of his swithin 30 days after the award/agreement, his voting anddividend rights shall be restored until payment is ade

4. If the proposed corporate action is abandoned, his rightsstatus as a stockholder shall be permanently restored


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When right to payment ceas

Withdrawal of

demand withcorporateconsent

Proposed

corporateaction isabandoned or

rescinded

Proposedcorporate

action isdisapproved bythe SEC (where

approval isnecessary)

SEC deter

thatstockholnot entitl

the rig


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Liability for costs and expenses of appraisalBy the corporation By the dissenting stockhold

Where the price which the corporationoffered to pay the dissenting stockholder islower than the fair market value asdetermined by the appraisers named bythem

Where the price offered by the corpis approximately the same as the fa

ascertained by the appraiser

Where an action is filed by the dissentingstockholder to recover such fair value andthe refusal of the stockholder to receivepayment is found by the court to bejustified

Where the same action is filed bdissenting stockholder and his refaccept payment is found by the co

be unjustified


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Post demand obligation

Within ten (10) days after demanding payment for his sharesdissenting stockholder shall submit the certificates of stockrepresenting his shares to the corporation for notation therethat such shares are dissenting shares. His failure to do so shthe option of the corporation, terminate his rights under this


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Effect of Transfer of dissenting shares

1. Transferee shall become a regular stockholder with the rigreceive all dividend distributions which would have accrusuch shares

2. The right of the transferor as a dissenting stockholder to paid the fair value of the shares shall cease

appraisal right

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