In 1996, Congress offered national banks the opportunity to become Subchapter S entities. Amboy Bancorporation was a small, highly profitable New Jersey Bank that was overcapitalized. Amboy’s president and CEO utilized Bank Advisory Group, Inc. (BAG), to calculate the fair value of individual shares of Amboy stock. The board of directors approved a merger cash buy-out program designed to reduce the shareholder base to below the 75 qualified shareholders necessary to obtain Subchapter S status. BAG incorrectly applied a minority and marketability discount to its evaluation of the fair value of the stock, bringing it down from $110 per share to $70.13 per share. Casey and other shareholders who cashed out under the plan at $73 per share sued the board of directors individually for damages for approving such a flawed plan. Are directors personally liable when they act in reliance on a report by an outside expert whose advice is flawed? If a public accounting firm or an attorney gave the flawed advice, would the directors be personally liable? [Casey v. Brennan, 344 N.J. Super. 83]
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