Appraisal rights give a minority shareholder in a corporation the ability to sell their shares back to the corporation in the event of an organic change in the corporation's structure. "Organic changes" include mergers, extraordinary sales of assets and changes to shareholder rights such as preemptive rights and cumulative voting.
Appraisal rights are only relevant in privately-held corporations. In a corporation listed on a stock exchange, the shareholder always has the option of selling their shares on the open market. When a corporation's shares are not publicly traded, it is almost impossible to sell a minority stake to anyone, which is why the law intervenes to allow a minority shareholder to leave.
To exercise appraisal rights, the shareholder must first notify the corporation of their intent to do so. The corporation must then make the shareholder an offer for their interest.
If the corporation makes an offer which the shareholder does not wish to accept, the shareholder can then sue the corporation. The judge will then calculate the fair market value of the shares at issue, taking into account the earnings, capitalization and book value of the corporation, as well as recent sales of similar businesses in that area. If this value is considerably higher than what the corporation offered, the judge may award the shareholder their attorney's fees as well.
Appraisal rights can only be exercised on all of the shareholder's shares—the idea is to allow the shareholder to completely leave the company, not to let them recapture a portion of their investment.