Why are valuation discounts for minority shareholder interests illegal in some states?

Q: Why are valuation discounts for minority shareholder interests illegal in some states?

A: In most states, laws exist for the purpose of protecting minority shareholders against the majority interest shareholders. A sweep of corporate case law plainly reveals that many situations have occurred where the minority shareholder has been taken advantage of by the majority shareholders. State laws, including those not allowing minority shareholder discounts, have been written to help prevent squeeze outs, freeze outs, and shake outs. When valuing a company in these states, it is important for the appraiser to be aware of the laws and plan and create the valuation accordingly.