New Case Law – Just and Equitable Division of Shares in Business
On May 16, 2012, the Oregon Court of Appeals decided Gay and Gay. This case involved the division of shares in a closely held corporation as part of a general judgment of dissolution. The husband and wife were minority shareholders in the small business that the husband worked for, the majority shareholder was the business owner. The husband was in the process of acquiring shares from the owner in order to eventually become the majority shareholder and owner of the business once the present owner retired.
At trial, the husband and wife could not agree as to how to value or divide the shares acquired during the marriage. Expert witnesses assigned various values to the shares at trial, however, because the business was closely held, and the shares were not saleable on the open market, the trial court determined that they had no true market value. The trial court determined that a just and equitable division of the shares under the circumstances would be to award half of them to the husband and half to the wife. The wife appealed, arguing that it would make more sense for the court to award all of the shares to the husband, since he was to become the majority shareholder, and to order the husband to pay her the fair market value of the shares. The Court of Appeals, on review, determined that, although the division of shares ordered by the trial court might not be ideal, it was permissible under Oregon law and the Kunze line of cases. Because the trial court’s division was permissible based on the facts in evidence, the Court of Appeals could not reverse it simply because it was less convenient for one or both of the parties.