Legal Question in Business Law in California

Re: Partners taking unauthorized monies from business

Your message presents a lot of facts but does not pose a specific question.

You mention 'partners' and also 'stock.' Is the business a partnership or corporation? In either case, I think action well beyond recouping the money may be called for. The individual's entire relationship with the business should be re-examined. If it is a partnership, keep in mind the joint and several liability of partners for the business-related deeds of each other. If is is a corporation, should this person be retained as a director or officer with decision-making power and access to corporate property?

Especially since the business is successful, the other parties involved should consider a legal review of the situation to complement the work being done by the CPA.

If you are in Northern California, I would be delighted to work on this matter, which is in my area of specialization.

Re: Partners taking unauthorized monies from business

Although you did refer to the individual(s) in question as "partners," from your mention of stock, I am assuming the business is a corporation. I would do a number of things to secure the business:

1. On Oct. 15, 2000, if the money owed to the company is not paid in full, be sure to have the individual(s) in default sign over (reconvey) the actual stock certificate(s) to the company, and return the certificates themselves.

2. Hire an independent (neutral) accountant to review the books and records to audit and ascertain the actual status of the finances of the company.

3. If additional money, beyond the $32,000 acknowledged in the Promissory Note is owed, you can, if you choose, take legal action and pursue your rights under your UCC1 and under the Promissory Note. (Hopefully, your Note contains provisions for the payment of attorneys fees and interest.)

4. Secure your business entity. If the

individual(s)are Officers and/or Directors, clearly he/they should not remain in a position of trust with the company. Officers and Directors have very clear fiduciary duties and responsibilities toward the company. If violated, legal action can be taken against him/them.

5. Because the individual is a CPA, he/she is licensed by the state, and you may be able to file a complaint against him/her with the appropriate licensing body.

6. Because you stated that the business is very successful, you may want to continue a working relationship with this individual, in spite of his being untrustworthy. If this is the case, I would strongly suggest an attempt at mediation toward the ultimate goal of controlling his ability to wrongfully act within the company, but allowing him to continue being able to contribute (and benefit from) its successes.

I specialize in business and corporate legal situations and am also a mediator. If I am able to assist you, please call me at (818) 888 0533. I wish you good luck with this matter.

Re: Partners taking unauthorized monies from business

Are you looking for specific advice? Is there a specific question that you have?

If you are looking for specific advice on what action you should take, I would be happy to speak with you about your options.

J. Caleb Donner

805-494-6557