Meaning
Corporate restructuring events where minority and majority shareholders disagree on valuation or exit terms trigger compulsory transaction procedures. In these situations, contested equity buyouts occur when a dissenting shareholder demands that the company or other investors purchase their shares at a fair price after a major corporate decision or deadlock. It governs transactions following mergers or asset disposals.
This remedy is restricted to shareholders who voted against the disputed resolution and filed formal objections.
Valuation Dispute
Dissenting shareholders and the company often fail to agree on the fair value of the shares. When this occurs, independent appraisal firms are appointed to calculate the value based on asset value or discounted cash flows. This valuation forms the basis of the final buyout offer.
Judicial Remedy
Statutory provisions allow shareholders to file a lawsuit if the buyout agreement is not reached within ninety days of the resolution. The court holds the authority to determine the final price and order the company to purchase the shares. This judicial intervention ensures that minority interests are protected against majority oppression.
Execution Process
Payment timelines must be strictly followed once the price is determined by the court or through negotiation. The company must cancel or distribute the acquired shares within a statutory period.
