Legal Question in Business Law in California

Re: minority shareholders getting share value from close corp.

This is a very interesting legal problem, yet one that a court (if eventually necessary) could probably straighten out in a way that fairly carried out the parties' intent at the time of the poorly-written agreement.

My first observation is that the remedy you're suggesting -- forced buy-out -- may be the result of an out-of-court settlement of the central dispute, but it is not a remedy you are very likely to get in a court judgment after trial. A court could award money damages or perhaps even interpret and enforce the stock redistribution, but obliging a buy-out or its equivalent would probably exceed its powers.

There are situations in which minority shareholders can force the corporation to have the minority interests appraised and bought out, but these involve dissidents to a merger or some other major corporate action and the conditions don't seem to be present here.

The whole subject of minority shareholder rights and correction of minority abuse by the majority is a major area of business law. Essentially, a majority holder can quite legally heap heavy-duty abuse on minority holders in the form of salary, corporate perks, setting policies to his liking, declaring or not declaring dividends, and many other things. However, there are limits.

Since you have an agreement that might be used to re-align stock ownership, and hence board voting strength. By the way, have you looked at the by-laws to see what they say about pre-emptive rights, transferability of shares, cumulative voting for directors, and other matters that affect corporate control?

My strategy if I were representing you would be to bring suit to enforce the share-equalization agreement, then use the probability of winning and taking over control to get the current majority owner to agree to buy you out (if that's what you want). If you did get control, you could then make him sit on the sidelines without dividends or salary while you two run the company the way you want. Might be a better outcome.

Even though I'm in Northern Calif., this is the kind of case I could handle very satisfactorily from a distance, and it fits my experience, e.g. I do business law, have 30 years experience as an entrepreneur before going into law, and my undergrad degrees are BS Engineering and MBA.

Re: minority shareholders getting share value from close corp.

There's a difference between theory in real life. The theory is that you can break up the shareholders of a corporation where there are few shareholders who own interest in the only business Corporation does, pay them often continue the business. Good theory but not necessarily realistic in all situations. You, seemed astute enough but you've hit the nail on ahead in your last sentence. No one on the face of the service can foretell the future so your question is one which is more rhetorical but at the same time of valid question. Without all of the information, past financial data and questioning of the parties as to their particular roles in the business no one could answer this question. If your question was a simple one I could very easily answer it. But you're dealing with four individuals lives, a business that is operating which supports those individuals with income, and numerous other matters which complicates this question. I'm not soliciting your business but my only advice is go see an attorney who is schooled and expert in business/corporate matters so he can tell you how to "force" the sale of the business. Now, the sale of the business and everybody been successful afterwards is something you know that it may not happen. There is again reason for your last sentence and I understand it. I will not answer it though, again because I have insufficient information but more importantly this is the kind of information that takes longer answer and I have space on his computer.i have been practicing law in this speciality for over 30 years in the san francisco bay area and if you wish to consult with me you can contact me at 925-945-6000