Legal Question in Business Law in California

The company and the shareholders probably have certain rights based upon a breach of fiduciary duty but an accurate answer would require an analysis of Bylaws and contractual relationship and whether he is an inside or outside director. You need counsel to guide you through this. There are a lot of things to analyze and consider.

No. You can't take away a shareholder's shares any more than you can take his car or the money in his wallet. It's his property.

Nor can a director's seat on the board be taken away summarily, but it's pretty easy. You should reference any applicable provisions of your bylaws first, then look up and read Corporations Code sections 303 (removal of directors without cause) and 304 (removal for cause and shareholders' suit).

Be sure the procedures are followed accurately and fully, including proper notice of any meeting of shareholders needed.

In addition to removing the director as such, the remaining directors should act to terminate the individual from any corporate offices he holds by appropriate board action consistent with the bylaws.

Finally, if the corporation's harm or potential harm warrants, the (former) director can be sued for breach of fiduciary duty and perhaps other misdeeds such as misappropriation of trade secrets. Settlement of such a suit could include his surrender of his shares back to the company.

If you would like a more detailed evaluation at no obligation, I'd be willing to review your (additional) facts and give you a recommendation.

Mr. Whipple already gave pretty much the same answer I would have given, and I can think of no reason you should not take him up on his offer of a further evaluation. My primary office is in Walnut Creek, and I have facilities in Oakland, Santa Clara County, San Mateo County, San Francisco, Sacramento and Carlsbad. If any of those locations are more convenient to you than he is, or you would like a second opinion, please feel free to contact me.