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Appraisal Right

Definition
Right of a stockholder to demand payment of the fair value of his
shares, after dissenting from a proposed corporate action, in the
cases provided by law
When appraisal right may be exercised
Change in the AI has the effect of
changing or restricting rights of
stockholder/shares, or of
authorizing preferences in any
respect superior to those of
outstanding shares of any class, or
of extending or shortening the
term of corporate existence
In case of sale, lease, exchange,
transfer, mortgage, pledge or
other disposition of all or
substantially all of the corporate
property and assets as provided in
the Code
In case of merger or consolidation
When corporation invests in
another corporation or business or
for any purpose other than its
primary purpose
When the corporation has
sufficient assets in its books to
cover its debt and liabilities
exclusive of capital stock (Close
corporations only)
How right is exercised
Dissenting stockholder
shall make written
demand within 30 days
after the date on which
the vote was taken for
payment of the fair value
of his shares
Demand
After implementation of
corporate action
dissented to, corporation
pays fair market value of
shares
Payment
After payment, the
stockholder shall transfer
his shares to the
corporation
Transfer of
Shares
Some rules
1. Right may be waived
2. Fair market value is determined as of the day prior to the date
on which the vote was taken
3. Payment may only be made if the corporation has unrestricted
retained earnings
4. If they cannot agree on the amount of the fair market value,
the same will be determined by arbitration
Effect of exercise of right
1. All rights accruing to such shares including voting and
dividend rights shall be suspended
2. Dissenting stockholder shall be entitled to receive payment of
the fair market of their shares as agreed upon between them
and the corporation or as determined by the appraisers chosen
by them
3. If the dissenting stockholder is not paid the value of his shares
within 30 days after the award/agreement, his voting and
dividend rights shall be restored until payment is ade
4. If the proposed corporate action is abandoned, his rights and
status as a stockholder shall be permanently restored
When right to payment ceases
Withdrawal of
demand with
corporate
consent
Proposed
corporate
action is
abandoned or
rescinded
Proposed
corporate
action is
disapproved by
the SEC (where
approval is
necessary)
SEC determines
that
stockholder is
not entitled to
the right
Liability for costs and expenses of appraisal
By the corporation By the dissenting stockholder
Where the price which the corporation
offered to pay the dissenting stockholder is
lower than the fair market value as
determined by the appraisers named by
them
Where the price offered by the corporation
is approximately the same as the fair value
ascertained by the appraisers
Where an action is filed by the dissenting
stockholder to recover such fair value and
the refusal of the stockholder to receive
payment is found by the court to be
justified
Where the same action is filed by the
dissenting stockholder and his refusal to
accept payment is found by the courts to
be unjustified
Post demand obligation
Within ten (10) days after demanding payment for his shares, a
dissenting stockholder shall submit the certificates of stock
representing his shares to the corporation for notation thereon
that such shares are dissenting shares. His failure to do so shall, at
the option of the corporation, terminate his rights under this Title
Effect of Transfer of dissenting shares
1. Transferee shall become a regular stockholder with the right to
receive all dividend distributions which would have accrued to
such shares
2. The right of the transferor as a dissenting stockholder to be
paid the fair value of the shares shall cease

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