Case Review

On Tuesday, the Court of Appeals came down with its bi-weekly rendering of opinions. Listed below are a few that might be of interest to the business owner or business law practictioner:

Hickory Orthopaedic Center, P.A. v. Nicks: Doctors entered into a Professional Association (P.A.), and further entered into a shareholder agreement, the basic provisions of which involved whether severance pay and buyout provisions would apply, and also how, if the exiting doctor's stock was to be repurchased, the stock would be valued. The Defendant left after his doctor declared him psychologically unable to continue his practice. The Corporation and he differed (1) on whether he voluntarily left or left due to disability (which would make a difference in his severance pay and (2) how to value his stock on the stock repurchase. Specifically, the defendant stated his stock was worth more than $600,000, and the plaintiff corporation stated it was worth slightly more than $8,000. Though the trial court valued the defendant's stock at more than $600,000, the Court of Appeals reversed, finding there to be insufficient evidence of such value, and remanded for further hearings. The Court of Appeals further agreed with the trial court's ruling that the defendant left because of a disability.

IMPORTANT POINTS TO REMEMBER: When drafting a shareholder's agreement, pay very close attention to the language regarding when shareholders can be bought out, and the value of their buy-out. In this case, the language used in the agreement used "Full Book Value," "Net Book Value," and "Book Value," somewhat interchangably, even though their definitions were somewhat different. When setting up a corporation or limited liability company involving more than one owner, set up very clear guidelines as to how the parties can either dissolve their company, or buy one another out.