Legal Question in Criminal Law in Washington

Possible Illegal Shareholder Use of Corporate Funds

My sister's husband is a member of a corporation where some very unusual things have been happening. He does not trust some of the procedures that are being used at the company. Please help so he can either quit working and get rid of his stockholder shares or feel more at ease. Here is the problem:

If an individual makes deposits to a company in which he is a shareholder (and acting CEO) to replace company funds he took for personal use, has he done anything illegal? After all, he is one of the owners, so does it matter? Did he have to let his fellow-shareholders know of his actions before borrowing funds? Also, if he gave ''loans'' to the company to keep it in the black is that a normal mode of operations for a corporation? Does there have to be a record of repayment of funds to the CEO? What state or Federal laws have been violated by any of these actions? Do other shareholders have the right to be apprised of all loans he makes to the company, or those the corporation makes to him?


Asked on 2/12/08, 10:14 pm

1 Answer from Attorneys
Harry Steinmetz Law Office of Harry S. Steinmetz

Re: Possible Illegal Shareholder Use of Corporate Funds

Your sisters husband (I assume he is the acting CEO) needs to talk to a lawyer ASAP. The mere fact that he used some company money for personal use raises several issues concerning the fiduciary duty of an officer to the company and its shareholders.

If your sister's husband is not the acting CEO, his correct course of action depends on his position with the company. Again, he needs individual consultation with an attorney.

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Answered on 2/15/08, 2:26 pm


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