Legal Question in Business Law in New Jersey

Re: Firing a share holder

NO attorney can answer your question for sure without seeing all of the documents involved, the documents creating the corporation, the documents signed by you three setting the terms for your agreement to form and run the business.

If you fire him as an employee, and also stop paying his salary, he now has great incentive to fight with you.

Please, please find and use an attorney who does this work located reasonably near you. Spend several hundred dollars preparing to do this the right way, and not thousands of dollars fighting in court after you do it carelessly.

I do this kind of work; I have no idea if you are near me. Call if you like; I never charge for a first phone call.

You can then decide how you would like to proceed.

My contact information can be obtained from the links below, just click on the Attorney Profile link. Let my secretary know you found me through LawGuru.

Disclaimer: Your question and any response does NOT create an attorney-client relationship between you and this law firm. You can not rely on the statements made by an attorney given over the internet. The response that you have received is based only on the small amount of information which you have provided. The exact facts of your situation, including facts which you have not mentioned in your question, may completely change the result for your situation.

Re: Firing a share holder

First, you must follow the requirements of the Certificate of Incorporation and the Corporate ByLaws. There may also be an employment agreement and Shareholder's Agreement which impacts the decision.

Frankly, these matters are complex and the sooner you engage a tax and business lawyer the better off you will be. Because these matters can be particularly nasty, in the legal profession these cases are referred to as "business divorces."

I have just completed three of these type cases. They all took longer, were more expensive and had a greater adverse impact on the business than all of the parties anticipated.

I hope this helps!

Ron Cappuccio

http://www.BusinessEsq.com

Re: Firing a share holder

The easy answer is that a majority of the shareholders may, if no other specific agreement applies, exclude a minority shareholder from management and employment. In the same circumstances, they cannot force the minority owner to sell his interest or deprive him of dividends paid to the others. Things are frequently not that easy and there are protections for the interests of minority shareholders. Mr. Davies and Mr. Cappuccio have given you good advice. If there is a possibility of a fight, it would be best for you to consult with a business lawyer before you take any action.

My firm handles matters of this type. If I can be of further help to you, call or email.

See also: http://info.corbettlaw.net/lawguru.htm

Re: Firing a share holder

I agree that, depending upon whether or not there are limitations that may be in the corporate docuemnts that have not been reviewed, a non-productive shareholder can be "fired" by a majority of the remaining shareholders, presuming that majority controls. While, if he is fired, you cannot deprive him from shareholder benefits (share of profits or losses, dividends, etc.), You will always be at risk of having him looking over your shoulders and questioning all actions of the others, so you might consider making him an offer to buy him out. There may be other things that can be done, but a complete review of all documents and corporate activity might be warranted by an attorney, like myself, familiar with these types of matters. If you have additional questions, contact me directly.

Re: Firing a share holder

All of the attorneys have given you very good advice.

First, gather up all your documents as they will define what can and should be done,

Second, create a timeline of facts that you think the lawyer should know about.

Third, contact a lawyer and learn about your rights and what strategies to employ based on (1) and (2).

These cases can be very expensive to litigate so it is important to try and develop a clear and direct way to resolve your disputes early and budget for expenses.

If you are interested in meeting, please give us a call.

Disclaimer: Your question and any response given are not intended to create an attorney-client relationship. The response given is not intended to be relied upon by you or anyone else as it is based only on the limited information which you have provided. Other information is needed before advice can be given including facts which you have not supplied which may change the response to your question .