Legal Question in Business Law in California

Re: Can a company nullify shares?

No. He can force a breakup of the company, but if you had properly issued shares, he can't unilaterally 'nullify' them. If your interest in the company is worth value and fighting for, get an attorney to do so.

Re: Can a company nullify shares?

It's 99% likely he cannot. Certainly, a corporation cannot wave a magic wand and cause shares to "disappear" when the corporation has a hassle with the holder of those shares. Can you imagine the chaos this would cause on Wall Street in corporate takeover fights? Unh-unh. It is remotely possible that you were issued shares that the corporation wasn't authorized to issue, e.g., if the shares exceeded the number its Articles of Incorporation authorized it to issue -- but if that or other corporate problems were the root cause of the need to "nullify," you would have a very strong remedy against the corporation and its insiders for fraud and securities law violations.

Now, if you and he constitute the board of directors, pray tell how a vote of the two of you can decide anything if you don't agree? A two-director board will assuredly deadlock over any matter such as "nullifying" the minority holder's shares, and no such action could be taken. Often, the ruse is to hold a surreptitious meeting with inadequate or misleading prior notice, then claim that a quorum was present and valid action taken, and you, Mr. #2, are out on your fanny. This is fraud, plain and simple. Still, I see it a lot.

Finally, co-owners of small corporations are almost always fiduciaries of each other, and of the corporation, with respect to business matters. As such, they owe one another, and the business, a high degree of loyalty, openness and candor in their business dealings. Breach of this duty in a way that unreasonably harms the other, or the business, gives the injured parties a right to sue for damages and probably injunctive relief such as a TRO or injunction.

So, the naswer is very very likely no, he can't do that; you are being muscled out; it's unlawful, and you can assert your rights in court if need be.