Legal Question in Business Law in California

Yes, if you had authority to bind the company. Either partner can probably bind the company in a contract.

Here's what I think you're asking: Your husband and you each own 50% of the shares of a for-profit business corporation which has a C tax-election. You sold some of the corporation's assets without your husband's signing the papers. You want to know if this were legal under California law.

I can think of about a half dozen reasons why such a transaction might be improper. On the other hand, for each of those half-dozen possibilities, there are certain facts that would rescue the transaction from being illegal (or otherwise improper).

First, we have to look at two different areas of law - there is the law respecting the rights and obligations of spouses to each other, reflected in the Family Code. Then, there is the law pertaining to the management of business corporations.

Family Code section 721(b) says that spouses are fiduciaries of one another, owing a duty of utmost fairness and full disclosure, and are not to take unfair advantage of one another in business transactions. I suggest you look it up and read it.

The Corporations Code provides rules for the management and protection of corporations and corporate assets. A corporation with two stockholders must have at least two directors, and if it has only two directors, they would have to act together to approve most major actions. Sale of assets outside the normal course of business would usually require board approval.

Once corporate assets are sold, the proceeds belong to the company, not the stockholders. The corporation, through appropriate action, can declare a dividend by which the money could (perhaps) be passed through to the shareholders, but it would have to be passed through equally.

Corporations cannot declare dividends or make distributions of any kind to shareholders if the payouts would leave the company unable to pay its creditors.

The sale of the assets and taking of the money could be the tort of conversion or the crime of theft or embezzlement if done without required approval by the corporation, and one of two stockholders may not have the requisite authority. Whether the authority existed would depend upon its articles of incorporation, bylaws, and perhaps on any resolutions duly adopted by the board, giving such authority. More likely, it was wrong.

Sorry, I can't give you a more detailed response with only two lines of facts. Please feel free to contact me for further assistance.