28.10 COURT APPLICATION TO DETERMINE FAIR VALUE
A shareholder who has made a demand also has the right to apply to court to determine the fair value of the shares that are subject to that demand, and for an order to pay the shareholder the fair value so determined if the company has failed to make an offer to make a payment under s 164(11) or if the company has made an offer that the shareholder considers to be inadequate and that the offer has not lapsed.
In terms of s 164(15) provides in an application to court;
(a) that all the dissenting shareholders who have not accepted an offer from the company as of the date of the application must be joined as parties and are bound by the court’s decision.
(b) The company must notify each affected dissenting shareholder of the date, place and consequence of the application and of their right to participate in the court proceedings.
(c) and the court
- must determine a fair value of the shares of all the dissenting shareholders. Such fair value must be determined as at the date on which and the time immediately before the special resolution was adopted by the Company.
- The court may determine whether any other person is a dissenting shareholder who should be joined as a party.
- The court in its discretion may allow a reasonable rate of interest of the amount payable to each dissenting shareholder from the date the action is approved by the resolution is effective until the date of payment.
- The court in its discretion may appoint one or more appraisers to assist in determining the fair value of the shares.
- The court may make an appropriate order of costs having any offer made by the company and its final determination of the fair value, and
- the court must make an order requiring
o the dissenting shareholders to either withdraw their demands or transfer their shares to the company or its transfer agent who compliance with s 164(13)(a); and
o the company to pay the fair value in respect of the shares to each dissenting shareholder who complies with s 164 (13)(a), subject to any conditions the court considers necessary to ensure that the company fulfils its obligations under s 164. NOTE: Remember the exception contemplated in s 164(17) (i.e the company is unable to pay its debts) also applies in this instance.
The Act gives no indication of the method to determine fair value. At any time before the court has made an order the dissenting shareholder may accept the offer made by the Company, in which case that shareholder in the company must comply with the requirements of s 164(13)(a) and (b) - (tender shares and get paid).
The appraisal procedure has an advantage that it does not involve or commit any form of court intervention other than the determination of fair value of the affective shares. Section 164(14) (application for fair value) and the limited exception in Section 164(17) which is the Company’s ability to pay all its debts.