Legal Question in Business Law in California

Re: corporation ownership

Generally a 5% ownership interest will be owner of 5% of the outstanding stock in the corporation. You should make sure that you have your stock certificate(s) that were issued by the corporation as evidence of ownership. Otherwise you might face a battle with the corporation if they claim that you were not an owner or not an owner of that interest.

I have had cases like this where the current officers/board find it more useful to deny ownership interest by one or more of the founders.

Assuming that you have the stock, generally, the stock cannot be taken from you barring some agreement that would provide for mandatory sale of your shares based on certain circumstances.

Also generally you are not entitled to receive annual dividends unless the board votes for dividends. Then, it would be likely that you would receive dividends along with the other shareholders.

If you haven't received any of the benefits of ownership or the other owners are operating to their benefit to your exclusion, you will have rights of redress.

You may want to consult with an attorney about your options especially since it appears that there is now a significant amount of money involved.

Re: corporation ownership

You're entitled to whatever terms and conditions the company by-laws, plans, and your agreements specify. consult local counsel, not California.

Re: corporation ownership

The short answer seems to be Yes and Yes. Very probably you own 5% of the company and are entitiled to dividends on the shares; however what do you mean by "I was made a 5% owner" did you put your own money; did you just borrow money (whcih would still make you the owner; but you will have to reimburse the creditor with interest) or, and this is the critical issue: did someone else had you enter into an agreement to hold the shares in his or her name.

coroporation wi

Re: corporation ownership

If I were interviewing you as a new client, in order to advise you I would ask a series of questions to amplify upon the rather brief facts set forth.

First, how were you "made" a 5% owner in the corporation? Did you put up money or other valuable consideration in exchange for stock? Or did you just sit down with the other founders and reach an informal agreement, and if so, was it ever placed in writing?

Did you have anti-dilution protection? You may have been a 5% holder when the corporation was in its infancy, but as corporations grow, they tend to issue more and more stock, and unless you have rights to buy (or receive) more as the new stock is issued, you percentage will go down and down. If you started out with 5%, worth $10,000, today you may own .05%, still worth $10,000 (or maybe $9,000 or $12,500) and this would be perfectly legal and fair unless you had a right to maintain your percentage ownership and didn't waive it by failing to respond to capital calls.

So, perhaps what's happened is that you started out with 500 shares in a corporation with 10,000 outstanding shares - that would be 5%. Today, you may own the same 500 shares, but the corporation now has 1,000,000 issued and outstanding shares - and you have .05%. Likely all legal, too.

Thus, "ownership" can be taken away from you in terms of percentage of total. It can't be taken away from you by recalling or canceling any of your existing shares, at least not without some kind of justification, such as your not paying for the shares, a contractual call provision, a bankruptcy proceeding, or such.

Whether any of this can be done without notice to you is dependent to some extent on exactly why it happened. In most cases, you would be legally or morally entitled to notice, but in my experience giving notice is not always sufficient to give someone actual knowledge, because recipients of legal notices either don't read them or don't understand them.

Finally, you are entitled to dividends if the stock is (a)preferred stock with a fixed dividend commitment, or (b) common stock and the company has declared dividends. However, many companies don't declare and pay dividends on their common stock. Those that do pay may send out dividends annually, quarterly (perhaps most often), or at other intervals as determined by the board.

Stockholders have rights to reports and to inspect corporate records. These rights vary by state, by whether the stock is publicly traded or not, and sometimes by the amount of stock the shareholder owns.

You can contact the secretary of state of the state of incorporation for contact information such as the corporation's registered agent and officers. Then inquire of the corporate secretary about your holdings. Or get a business lawyer.

Re: corporation ownership

When you say you are the 5% owner, I assume you mean you own 5% of the outstanding stock of the corporation. Yes, as a stock owner you do have several legal rights, and no, ownership of that stock cannot simply be taken away from you without legal process, since it is your property. Please feel free to contact me if you would like to discuss this further.