Legal Question in Business Law in Michigan

Re: Minority owner kickback from sales rep

Shareholders in Michigan are deemed to be in a fiduciary (or "trust") relationship with each other. That means that, with respect to the affairs of the corporation, they must deal honestly with each other in a manner that is in the best interest of the corporation, rather than in their own best interests.

The shareholder receiving "kickbacks" should disclose the payment arrangement to the other shareholders. If the other shareholders agree to the arrangement, then the shareholder receiving the kickbacks does not violate his/her fiduciary duty by receiving them.

The other shareholders might object to the arrangement, because it means that the independent representative is willing to receive less than the agreed commission. The corporation as a whole could benefit from the reduced commission rather than only one of the shareholders receiving the benefit. The corporation also might have a claim against the shareholder receiving the kickbacks (and possibly against the independent sales representative) for other civil or criminal wrongs.

You should consult an attorney regarding this matter to discuss all other relevant facts which might affect your rights and responsibilities. This response does not constitute legal advice and should not be relied upon as legal advice. No attorney/client relationship is created or intended as a result of this response. Please feel free to contact me by telephone or by mail, if you wish to discuss this matter further.

Re: Minority owner kickback from sales rep

I cannot answer this without knowing the arrangement for sharing of profits. In general, the profits are shared according to the percentage of ownership. The 10% owner may owe money to the other owners. Since I don't know the purpose of the kickbacks, I cannot comment any further.