Shareholder Buyout Valuation: Florida Statutory Fair Value Framework

By Joey N. Friedman, CPA, ABV, MAcc, MIB — President, Joey Friedman CPA PA.

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Shareholder buyout valuation Florida statutory fair value framework
Shareholder Buyout Valuation: Florida Statutory Fair Value Framework 1

Florida shareholder buyouts under shareholder oppression statutes apply the “fair value” standard — Florida Statutes §607.1436. Fair value is fundamentally different from fair market value (FMV) used in divorce and estate matters: fair value is the proportional share of total enterprise value WITHOUT marketability or minority (control) discounts. A 25% minority interest in a $4,000,000 enterprise has fair value of $1,000,000 — no discount applied — even though the same interest’s fair market value might be $600,000 after typical marketability (25%) and control (20%) discounts. This statutory framework is plaintiff-favorable for minority shareholders: it rejects the discounts that controlling shareholders would otherwise use to reduce the buyout price.

Florida Statutory Framework

Florida Statute §607.1436 (Closely Held Corporation Buyout):

  • Minority shareholder files action for oppression, breach of fiduciary duty
  • Court may order corporation OR controlling shareholders to purchase minority shares
  • Purchase price = fair value of minority shares as of court-determined date

Statute defines fair value as the value determined using customary valuation concepts and techniques, without discounting for lack of marketability or minority status.

Fair Value vs Fair Market Value

Aspect Fair Value (FL shareholder oppression) Fair Market Value (FL divorce, estate)
Standard Florida Statute §607.1436 Common law / IRS regulations
Marketability discount (DLOM) NO YES (typically 15-35%)
Lack-of-control discount (DLOC) NO YES (typically 10-30%)
Result for minority Proportional enterprise value Proportional, then discounted

Same 25% in $4M enterprise: Fair Value = $1M (no discount); FMV = $600K (with discounts). Minority shareholder receives 67% more under fair value.

How Fair Value Is Quantified

Same underlying methodology as other valuations:

Income approach

Capitalization of earnings or DCF applied to entire enterprise. See DCF and 6 key BV methods.

Market approach

EV/EBITDA from guideline public companies and transactions. See relative valuation.

Asset approach

Net asset value as floor check.

Methods produce enterprise value. Minority shareholder’s fair value = enterprise value × ownership %. NO discounts at equity-interest level.

What Adjustments Still Apply Under Fair Value

Normalization of earnings. EBITDA normalized for owner-driven distortions. Applies under both fair value and FMV.

Premise of value. Going concern vs liquidation.

Equitable considerations. Florida courts may make equitable adjustments — pre-judgment interest, cost allocation.

Non-operating assets / liabilities. Excess cash, non-operating real estate, contingent liabilities accounted for.

Common Areas of Dispute in Fair Value Cases

Effective date of value

What constitutes the triggering action? Disputed. The forensic CPA performs valuation as of multiple plausible dates.

Normalization of earnings

Controlling shareholders often dispute proposed adjustments.

Comparable selection

Guideline comparables challenged on industry/size/growth match.

Treatment of non-operating items

Excess cash, related-party loans, owner-occupied real estate.

Discount rate / capitalization rate

DCF and capitalization methods sensitive to the rate.

Going concern vs liquidation premise

If business is borderline failing, premise of value disputed.

Other Fair Value Contexts in Florida

Dissenters’ rights / appraisal rights. Florida Statutes Chapter 607.

LLC member buyouts. Florida LLC statute (Chapter 605).

Partnership buyouts. Florida Partnership Act (Chapter 620).

When the Forensic CPA Is Engaged

Plaintiff-side (minority shareholder). Quantify fair value to support buyout claim.

Defendant-side (controlling shareholder). Quantify fair value as defense position.

Neutral / court-appointed. Same methodology, no party bias.

Settlement support. Parties engage experts to support settlement positions.

Common Misconceptions

“Fair value means market value.” NO. Distinct statutory concept.

“Minority and marketability discounts always apply.” NO. Under Florida fair value, they don’t apply.

“Fair value = book value.” NO. Current valuation methodology, not historical book.

“All states define fair value the same way.” NO. Florida’s no-discount framework is one approach.

Frequently Asked Questions

What is fair value in Florida shareholder buyouts?

The statutory standard under §607.1436. Proportional share of total enterprise value WITHOUT marketability or minority discounts.

How is fair value different from fair market value?

Fair value = proportional share, NO discounts. FMV = same proportional share, then discounted 30-50%.

Why does Florida use fair value for shareholder oppression?

Policy intent. Compensate oppressed minority shareholders without controlling-shareholder-driven discounts.

How is fair value calculated?

Same underlying methodology as other valuations (income, market, asset). NO discounts applied.

What’s the valuation date in shareholder oppression cases?

“Immediately before the effectuation of the corporate action to which the dissenter objects.”

Do normalization adjustments apply under fair value?

Yes. EBITDA normalization applies. Only marketability/minority discounts differ.

Does Joey Friedman CPA PA handle fair value valuations?

Yes. Florida shareholder oppression matters are part of the firm’s business valuation practice.

Working with a Forensic CPA

Joey Friedman CPA PA provides ABV-credentialed business valuation services throughout Florida.

About Joey Friedman CPA PA

954-282-9615 / Contact the Firm

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