Legal Question in Business Law in California

Re: Can we vote out the President?

Why haven't you seem an attorney who has experience in corporate/litigation matters. Why haven't taken all of your documents regarding the operation of the Corporation to an attorney already. If you know he's doing wrong and stealing from you while you're just sitting back and doing nothing. Your type of question is very frustrating to me personally as I have seen numbers of situation similar to yours in the 30 years I have been practicing law in this area. If he knows he can get away with it he's good do everything possible to do more. Do something to help yourself.I have been practicing law in the San Francisco Bay area for approximately 35 years and expert in the area in the category in which your question is placed. I feel I can help you in this matter and if you wish to consult with me please contact me at 925-945- 6000.

Re: Can we vote out the President?

You should consult the bylaws to determine what percentage vote would be necessary to terminate an officer and appoint another. Are you and your husband on the board of directors? If not, you may want to have a special shareholder vote and vote one or two of you on. There must be at least 3 board of directors when there are 3 shareholders. The president owes a fiduciary duty of care when dealing with corporate funds. It is improper to use corporate funds for personal use. In addition, it would be improper to raise the salary of the president when the money is necessary to responsibly operate the company. And lastly, a majority shareholder may not do things which are in bad faith and in complete disregard of minority shareholders. Give us a call to discuss this further (the call is free).

Re: Can we vote out the President?

If there is theft and mis-management you can do better than just voting him out. Sue for an accounting, to dissolve, and recover stolen assets. Call me directly at (619) 222-3504.

Re: Can we vote out the President?

You need out of the company, or to get him out. You can take action about embezzlement and other improper actions. BUT, you are minority shareholders, not a voting majority. You need to consult with experienced counsel about the legal actions and steps you need to take to protect yourselves and reach your objectives. This is not an area for 'self help'. Contact me if interested.

Re: Can we vote out the President?

Embezzlement is the fraudulent appropriation of property by a person to whom it has been entrusted. Penal Code, section 503. Section 504 expands upon that definition and applies the expanded definition to corporate officers and directors. If the President used corporate funds for purely personal purposes, an embezzlement charge (brought by a DA) would probably stick. There are defenses.

You need to obtain and read the Articles of Incorporation and the current bylaws to learn all the provisions that (a) may have been violated or disregarded by the President, and (b) govern appointment or election and removal of officers and directors. Look for annual meeting requirements and quorum percentages. Look also for provisions regarding cumulative voting for directors. You are entitled by law to request copies of these and other corporate records and documents.

Unless the Articles of Incorporation specify the number of directors, the bylaws must; further, if the number of shareholders is 3, the corporation must have at least 3 directors. For some purposes, husband and wife may be counted as one, but I believe you are counted separately for this purpose (further research necessary).

Look at Corporations Code section 304 re removal of directors for cause (also note section 303).

The emphasis upon board size and membership is because corporate officers, including the President, serve "at the pleasure" of the Board, and can be removed by the Board at any time. If the officer has a contract, that only guarantees payment, not powers; a removed officer can sue for pay and other damages, but, generally, not for reinstatement.

The abuse of minority shareholders is a time-honored practice, and there are treatises of several volumas and many thousans of pages discussing what a majority can get away with and what it can't. His 60% stock ownership gives the President a lot of power, authority and discretion, but there are definite limits. Your guy is probably vulnerable to attack by the minority holders here for the embezzlement, and maybe for other violations of law or fiduciary duties.

Re: Can we vote out the President?

If you cannot resolve this issue without court intervention, an action to dissolve the corporation should be filed. Sometimes, just the lawsuit itself may assist in the resolution of the problem. Please contact our office if you need further assistance with respect to this matter.