Commercial Division Blog
Court Should Have Valued Shares at Time They Should Have Been Transferred
On July 5, 2016, the First Department issued a decision in Moore v. IGPS Co. LLC, 2016 NY Slip Op. 05333, discussing the valuation of shares in an entity that subsequently filed for bankruptcy protection:
Under the operative agreements, plaintiff was entitled to retain his vested equity even if fired for cause. While there were limitations on the marketability of plaintiff's vested shares as of the cancellation date, those limitations were not complete; plaintiff may have been able to sell the shares at that time had he retained possession of them. Thus, the vested shares, which otherwise had considerable value, were not rendered valueless by the limitations on marketability as of that date, and their improper cancellation in the amount of their ascertainable value caused injury to plaintiff. Accordingly, rather than dismissing the claim based on the fact that the value of the shares was later wiped out in IGPS's bankruptcy, the court should have considered plaintiff's evidence as to the shares' valuation as of the cancellation date, and, at most, applied a marketability discount to the valuation.
(Internal citations omitted).