Legal Question in Business Law in California

Re: legal use of company by an officer of company

Generally no this is not permitted. However there are circumstances which may permit a course of action that benefits both the corp and individual. You should consult with an attorney to discuss ALL of the facts and options.

Re: legal use of company by an officer of company

Legal?? Of course. He won't go to jail for making contracts. However, the corp has the right to fair dealing, and recovery of unfair profits from him, by lawsuit if necessary. He could be removed from office by the shareholders. If you need legal help with management issues and litigation, feel free to contact.

Re: legal use of company by an officer of company

In a corporate setting, the parties bear varying degrees of duty to one aonther, and they can violate those duties to varying legal degrees.

For example, the directors of a corporation are fiduciaries of the corporation, and owe it duties of loyalty and care. If this officer is also a director, as I think likely, obtaining undisclosed or unapproved personal benefits at the expense of the corporation would be both a breach of fiduciary duty and constructive fraud. These are actionable in a civil suit.

Such conduct could also possibly be charged as a crime, e.g. embezzlement or criminal fraud, depending upon additional facts, but this is not highly likely.

An officer of a corporation is sometimes, but not always, in a fiduciary role. It depends upon the amount of discretion the officer may exercise over corporate affairs. Here, the COO is probably a fiduciary as an officer, even though not a director.

Note that a lawsuit against an officer or director for breach of fiduciary duty must be brought by the "real party in interest" which is probably the corporation. The other three shareholders may not have sufficient direct injury to maintain suit. However, if the corporation for whatever reason did not pursue its claim against the malfeasant officer, any of the other stockholders could bring a stockholder's derivative suit.