Discounts at Wal-Mart, But What About Your Minority Ownership Interest in an Iowa Business?


Will your minority ownership interest in an Iowa business be discounted when determining fair value?

As described in detail here, on June 14, 2013, the Iowa Supreme Court issued an opinion that clarifies the definition of minority shareholder oppression in Iowa.  The opinion, however, also touches upon several other important legal issues that often arise in corporate disputes.  One of those issues relates to whether, when valuing a minority shareholder’s interest in a corporation (or a member’s ownership interest in a limited liability company), a minority discount (a.k.a. a “lack of control” discount) applies when establishing the fair market value of the ownership interest at issue.  On page 11, footnote 5 of the Baur opinion, the Iowa Supreme Court made its “disapproval” of applying a minority discount upon calculating fair market value clear:

Although the subject of a minority discount for jack’s shares was a subject of disagreement in the parties’ earlier negotiations, the record does not reveal whether BFI’s most recent offers to purchase Jack’s stock assumed such a discount.  We note, however, our recent disapproval of share valuations incorporating a discount for a minority interest in other corporations.

Baur, p. 11, n. 5.  The court went on to site several cases in support of its “disapproval” position.

The Iowa Supreme Court’s position on this important and frequently arising issue should provide minority shareholders in Iowa corporations (and minority members in a limited liability company) with further clarity as to whether a minority discount will apply in Iowa under certain circumstances.  Should you have questions about whether this seemingly narrow, yet important issue will impact your stock in an Iowa corporation or membership in an Iowa limited liability company, you should consider contacting an attorney that practices in the area of intra-corporate disputes.


Innovative Litigation, L.L.C., as owner and host of this site, and Matthew McKinney as the author (acting on behalf of and through Innovative Litigation, L.L.C.) cannot and does not warrant the accuracy or reliability of the information presented on or through this site.  The law can and does change over time and the information contained herein may not reflect the most recent laws – whether statutory law, administrative law, case law, constitutional law, or otherwise.  The information on this website does not constitute legal advice and readers should not rely on it to solve problems or other matters.  Further, you should seek licensed counsel in the appropriate legal jurisdiction before taking any action.  Any information provided on this site is presented “As Is” for your personal curiosity and enjoyment.  It is not meant to be relied upon for legal advice, counsel, or for any other purposes.  Such information does not take the place of a lawyer.  Rules and laws differ by jurisdiction and the information contained within this website may not apply in your jurisdiction.  The appearance of articles, listings, or ads, by or for professionals, on this site, does not constitute an endorsement.  In all cases, you are responsible for determining the quality of services, information, and/or advice provided by professionals through, or as a consequence of, your use of this site.  Neither liability nor responsibility shall arise to any person or entity with respect to loss or damage caused (or alleged to be caused), directly or indirectly, by information posted on this website, or by reason of contact with a professional listed on, or posting information to, this site.  No attorney-client relationship is formed by viewing this website and practice is limited to jurisdiction where lawyers are admitted.  The information furnished on the website is only general and not a substitute for personalized legal advice.   Legal advice cannot be given without full consideration of all relevant information relating to the individual(s) situation.  Laws can change daily and new laws may, and likely will, affect the accuracy of the information herein.  The information herein may be outdated and replaced by new law.

If you are seeking representation, please read the following notice before sending an e-mail:

Sending an e-mail will not make you a client.  Until an agreement regarding representation is reached with you, anything you send will not be confidential or privileged.  Before representation can occur, a lawyer will first take you through the conflict of interest procedure and see that you are put in touch with the lawyer best suited to handle your matter.

If you proceed with an e-mail, you confirm that you have read and understood this notice.


About Matthew McKinney

Attorney focused on civil and commercial litigation.
This entry was posted in Business Owner, Director, Intra-corporate dispute, Litigation, Member, Partnership, Shareholder and tagged , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s