Legal Question in Business Law in California

Re: minority stockholder rights

Let's go through the possible actions one by one.

(1) Remove him from office.... If the office you're speaking of is his CEO position, in 99.99% of cases a person serves as CEO at the pleasure of the Board; sounds as though the Board has three members (it cannot lawfully have fewer than three, since the corporation has three or more shareholders) and that none of them would vote to remove this CEO, so you're stuck there.

It's remotely possible to remove incomptetent corporate directors through a shareholder's lawsuit; see Corporations Code section 304. It would take a strong showing of good cause.

(2) "Replace him with an administrator." There are two possibilities here, maybe more. One is a Ch. 11 bankruptcy in which a trustee would administer the company. The other is a receivership under state law. A receiver can be appointed for certain securities-law violations by a corporation (see Corporations Code sections 25330 et seq.) and possibly under Code of Civil Procedure section 564, noting particularly subsections 564(b)(6) and (9).

(3) Forcing a company into liquidation, when you are a 26% minority shareholder, probably means finding a reason to place it in an involuntary bankruptcy. Refer to Corporations Code sections 1800 to 1809 on this topic; you'll see that you'd probably need 1/3 of the voting power or proof of a voting deadlock to get anywhere.

(4) Getting him to repurchase the shares without a repurchase agreement would be difficult, especially if the shares are now "worth" less than what you think you should get.

Lack of support from the other shareholders is not a good sign; they either disagree with you, or are intensely loyal, or stupid, or scared to death of the CEO, or some combination.

Minority shareholders do have rights, but those rights are usually in the context of sharing equitably in the upside, not in being entitled to impose their better helmsmanship on a sinking ship.