How a Long Island Business Valuation Lawyer Reviews Buyout Values

A shareholder agreement may set a pricing formula, appraiser, or dispute procedure. Review its terms alongside applicable law.

Business Corporation Law (BCL) § 1104-a permits qualifying shareholders holding at least 20% of the voting shares in certain nonpublic corporations to seek dissolution for specified misconduct. BCL § 1118 permits the corporation or other shareholders to elect a fair-value buyout. Neither provision covers every departing shareholder.

Under BCL § 1118(b), fair value is generally measured the day before filing the dissolution petition. The filing itself must not affect value, although statutory adjustments may apply.

Under BCL § 623(h)(4), an eligible dissenting shareholder’s appraisal uses the close of business the day before shareholder authorization. A later date may distort the result. Forecasts prepared afterward should be checked for information unavailable on the controlling date.

Compare tax returns, financial statements, bank records, and forecasts for:

• Owner pay and related-party transactions.
• Nonrecurring income or expenses.
• Projected cash flow and margins.
• Capital spending and working capital.
• Debt, surplus cash, and other assets.

Test cash-flow projections and discount rates against historical records. Reconcile enterprise value to equity value before pricing shares. A forecast prepared for financing may rest on different assumptions than one prepared for litigation.

Compare transaction multiples by company size, profitability, growth, and control rights. Check whether the comparison includes assets or liabilities absent from the subject company.

Customer relationships, intellectual property, and goodwill may add value, but must not duplicate projected earnings. Business valuation uses income, market, and asset approaches; their relevance depends on the legal question.

In Matter of Friedman v. Beway Realty Corp., 87 N.Y.2d 161 (1995), the New York Court of Appeals rejected minority discounts under BCL §§ 623 and 1118. Statutory fair value reflects a proportionate interest in the going concern, without a reduction solely for lack of control. Negotiated sales may follow different rules.

In Matter of Seagroatt Floral Co., 78 N.Y.2d 439 (1991), the Court of Appeals accepted a capitalization rate that already reflected illiquidity, without an additional marketability discount. Compare discount rates and percentage deductions to avoid counting illiquidity twice.

Payment terms, debt, and transfer restrictions may change the amount payable in shareholder disputes.

For LLCs, Limited Liability Company Law § 702 permits judicial dissolution when operating under the articles or operating agreement is not reasonably practicable. BCL § 1118 does not automatically provide an LLC buyout right.

A decline in enterprise value alone proves neither liability nor damages. The claimant must link misconduct to proven loss while accounting for unrelated changes. Lost profits and diminished value can overlap; awarding both may duplicate recovery.

Under 22 NYCRR § 202.70, Commercial Division thresholds are generally $200,000 in Nassau and $100,000 in Suffolk. Qualifying dissolution cases are exempt, but other assignment rules apply.

Nassau generally requires e-filing for new Supreme Court cases, subject to exceptions; Suffolk requires it for Commercial Division matters. Check NYSCEF and the assigned judge’s rules. Filing requirements depend on the proceeding and any applicable exemption.

BCL § 1118(a) generally sets a 90-day buyout election period after a qualifying dissolution petition, subject to court extension.

BCL § 623 has separate objection, election, offer, and appraisal procedures. Objections generally precede the vote, with exceptions. Where prior objection is unnecessary, shareholders generally have 20 days after the prescribed notice to elect dissent. Missing a required step can affect appraisal rights.

Preserve agreements, financial reports, forecasts, original spreadsheets, calculations, and relevant communications. They show how assumptions and figures developed. Keep versions available on the relevant valuation date distinct from later revisions.

These records may determine the credibility of competing reports in complex commercial litigation.

• Does the report use the correct valuation date and legal standard?
• Can material earnings adjustments be traced to accounting records?
• Are comparable transactions and intangible assets treated consistently?
• Are minority or marketability discounts legally and financially supported?
• Has the same risk or loss been counted more than once?
• Which notice, election, or filing deadline applies?

A specific, documented error provides a stronger basis for challenging the price.