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H. Joel Newman

H. Newman’s Answers

22 total

  • The primary shareholder is conducting full business out of the office for his other business damaging the company. My rights?

    If a primary shareholder is abusing his S corp and running it into the ground while doing other business of another company out of the S corp. office, harming both the reputation and the S. corp assets, do the minor shareholders have any rights fo...

    H.’s Answer

    This is excerpted from one of my articles. I have more information posted on my website. You definitely need an attorney who specializes in shareholder disputes.
    Owners with controlling interest have the ability to oppress minority stakeholders in a variety of ways and advance their own agendas. But many common types of shareholder or member oppression are grounds for legal action under the Michigan Business Corporation Act.
    A few examples of actionable conduct include interfering with voting rights, withholding information or dividends, eliminating employment or benefits, self-dealing or conducting unfair business transactions with other companies they own, making loans with high interest rates to the company, snagging for themselves business opportunities in the company’s line of business, voting for unreasonable compensation for themselves or making improper capital calls -- requesting funds from investors -- and other bad-faith maneuvers to dilute and freeze out minority ownership. Articles of incorporation, bylaws, and operating agreements are minority owners’ first line of defense, and must be tailored to suit each situation. They can cover voting rights for electing directors and amending documents, powers and limitations of directors and managers, classes of ownership, and regulations for capital calls and dilution, and many other issues. Provisions controlling the transfer of stock also can be very important in protecting minority holders.Still, minority owners must know the business of the company by attending shareholder meetings, asking questions, and reviewing notices and documents. Shareholders have a statutory right to receive company balance sheets, income statements, and sources and application of funds.
    Shareholders, their attorneys and agents also have a statutory right to inspect the company’s list of shareholders, stock ledger, and other records related to their interests. And directors have the right to inspect any documents relevant to their position. If the company fails to provide such requested documents, the shareholder or director can bring a court action. The court will require the company to cover attorney’s fees if the shareholder or director prevails, unless the company shows it acted on a good-faith belief that the demand was improper.
    Directors and managers have a fiduciary duty to remain informed and recognize misconduct. And they are obligated to vote against any action they think is improper. Failing to oppose a potentially oppressive issue as a director could mean waiving the claim.
    The Michigan Business Corporation Act permits a shareholder to sue if the acts of directors or others exercising control are “illegal, fraudulent, or willfully unfair and oppressive to the corporation or to the shareholder,” which means “a continuing course of conduct or a significant action or series of actions that substantially interferes with the interests of the shareholder as a shareholder.” This broad language in the statute could include almost any unfair activity, including termination or other limitations on benefits that disproportionately affect the shareholder; self-dealing; usurping corporate opportunities; or keeping information from minority owners. Actions specifically authorized by the articles of incorporation, bylaws, or consistently applied written policies or agreements, however, are not subject to court action.
    Michigan’s circuit courts have far-reaching powers to fashion a remedy. They can dissolve the company, order a buyout at a fair price, undo or prohibit unfair acts, and award damages and attorney’s fees. But it’s up to shareholders and members to ensure their legal rights are protected.
    It is important to note the applicable statutes of limitation. Though some conflicting cases and circumstances exist, the statutes provide a 2-year limit for filing a suit when actionable wrongdoing is discovered or reasonably should have been discovered, or within three years of the occurrence of

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  • I need an attorney for my up coming hearing in front of the Standing Committee on Character and Fitness

    I have went through an informal hearing, and was given a favorable recommendation, however the BLE did not endorse the opinion, and remanded the case for a hearing infront of the Standing committee on character and fitness

    H.’s Answer

    I recommend Donald Campbell, Ken Mogil, or Thomas Cramner. Good luck.

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  • Owned 50% of common stock in a family business. Dad passed. What are my rights and obligations?

    Never received notice of sale or change in stock status since incorporation, possibly 1989.

    H.’s Answer

    Assuming you do own your Dad's shares You need to understand the status of the business. it is impossible to answer your question without considerably more facts. You need a lawyer to review the corporate documents and financial statements and other pertinent facts. At a minimum. a shareholder in. a closely held Michigan corporation has a statutory right to financial and other information. You have.a right to vote the shares, and barring extraordinary circumstances, you have a right to a pro rata share of dividends.

    Good luck.

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  • If my nephew damaged a ORV while attending a gathering with me, am I liable for damages or are his parents?

    While attend a gathering at my friends house, my nephew crashed an ORV into a tree. As his uncle I am now being sued by my friend. I have to appear in court for a pretrial on Wednesday of this week. I need to know if I am liable for damages as ...

    H.’s Answer

    I disagree with the previous answer. In Michigan, parents are not generally liable for accidental damage caused by their children. The burden is on the Plaintiff to present legal authority for the lawsuit.

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  • I am a 5% share holder of a company and also an employee. Now that the company is on the verge of big things that I have been a

    I am a 5% share holder of a company and also an employee. Now that the company is on the verge of big things that I have been a crucial part of as General Manager they terminated my employment and are leveraging me within days to sign back my 5% o...

    H.’s Answer

    You do not state whether this is a corporation or an llc, but shareholders and llc members have many rights under the Michigan Business Corporation Act. You have described a classic shareholder/member oppression scheme commonly referred to as a freeze out. The Business Corporation Act provides for remedies including economic damages, a buy-out of your interests at its true full value and more. You need a lawyer who specializes in this area. You might find this article helpful: . http://hjoelnewman.com/news-3.html. Good luck!

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  • Can a creditor retrieve my personal assets or garnish my wages based on non-personally guaranteed S corporation debt?

    An individual loaned my S corporation money a few years ago which was used to pay off an state tax balance owed. The loan was not personally guaranteed by myself (shareholder). Recently, I had to sell the business due to tough economic times. Aft...

    H.’s Answer

    Generally speaking, no. However, if you received distributions from the corporation, he might be able to recover those amounts from you up to the amount of the outstanding indebtedness. This could include the land contract payments you reference. He would have to obtain a judgment against you personally to lien or attach your personal property. Assuming your house is an entireties property, he would need a judgment against you and your wife to assert a claim on the house. There could be defenses or liability that is not readily apparent from the limited facts you provide. Good luck!

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  • What legal actions can I take for explicit images that were acquired without permission and sent without permission?

    I have an ex of seven months that today sent me an email to my work with no subject containing several explicit images of myself. My work strictly monitors emails, and I may lose my job over this. What can I do? These images were acquired with...

    H.’s Answer

    Based on the limited facts you have given, you can file a complaint with the police. You don't need a lawyer to do that. You probably have a civil cause of action against your ex if you are damaged and he is collectible. Good luck!

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  • What steps do I need to take to remove a 49% owning member of an LLC based in MI?

    Our operating agreement states myself as the 51% owning member with the other person being the 49% owning member. We have a restrictions on Transfer clause in the operating agreement that states " A member shall not transfer any membersh...

    H.’s Answer

    It would take a review of the entire operating agreement and all other agreements of the members, as well as a review of the factual circumstances to know exactly what you can and cannot do. There is probably some mechanism, or at least a combination of provisions in your documents to accomplish an equitable buyout .
    However, your questions suggest that you want to orchestrate a classic "freeze out", taking unfair advantage of the company and its minority member and diminishing the benefit and value of his interest. This would be a bad idea. It could constitute member oppression and a breach of your fiduciary duties. Michigan statutes give the courts broad remedies. The court could award damages and could order you to buy your partner out at a price set by the court and pay his attorneys' fees.
    Your issues are too complex for this forum. You should consult with a business attorney. Good luck.

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  • Can someone try to change the law to benefit themselves in pending litigation?

    i am involved in litigation with my brother who is an attorney. we are on opposite sides. i discovered that he went to the arizona legislature to try to change existing law in order to help him in the lawsuit. he was not successful. is this legal?

    H.’s Answer

    Based on the limited facts you provided, yes. Simply asking the legislature to consider a change in the law is not improper. We all have a right to advocate for changes in the law. Nevertheless, if your case is ongoing you should consult with an attorney. Good luck.

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  • Order to Dismiss without prejudice and Stipulation that there are no costs. What should I do if they never had proof of suit?

    Being sued for a debt that the plaintiff had no documentation to prove this existed, judge held it over for discovery and still no information (not even a single piece of paper) exists that this is my account or I owe it and now 6 months later we ...

    H.’s Answer

    You should be entitled to dismissal with prejudice and you are entitled to costs based on the facts you presented.

    H Joel Newman

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