Valuation

Discount for Minority Interest

Marriage of Davies 266 Mont. 466, 880 P.2d. 1368 (1994) held that a discount for minority interest is not to be used when the owner of the interest has effective control over: salaries, dividends, profit distribution and day-to-day business operations. Only where

In fact it is only appropriate to discount shares when there is the absence of control.

The Court also noted that the discount should be used in cases where there are no real comparable actual sales and the value of the business must be computed. 

Here husband had effective control over two farm and ranch corporations. His employment contract gave him broad legal authority over the running of the whole operation. Held improper for the district court to discount the value of his shares.  

Marriage of Danelson 253 Mont. 310 Essentially makes the same point as Davies later: that control is key. If a minority shareholder nevertheless exercises effective control, there should be no discount in valuing the shares.


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