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Can a shareholder who has been working the day to day of a company be fired?

Ontario, CA |

I am a shareholder of a company that a friend and I started. We added on a 3rd equal partner who along with my friend have been making some bad financial decisions. I voiced my opinion on several occasions and then one day my friend came to me saying the other partner who is also the President no longer needs my services and I should turn over all passwords, logins, etc.. to the company. Can they do this? I am the COO and Secretary of the corporation.

Attorney Answers 3

Posted

Well, I handle litigation like this all the time, and the answer is anything but simple.

If you don't have an employment contract (or belong to a union) normally employment in this state is "at will" meaning you can be fired for any reason or no reason (but not an improper reason like belonging to a protected class, e.g. race, religion, etc.)

An exception is "employment 'coupled with an interest' (meaning stock or LLC membership ownership" Those rules become very complex very quickly.
Among other things a lawyer will be looking at is your bylaws or Operating Agreement.

I urge you to get a lawyer early, not later.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.

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Posted

You can be terrminated notwithstanding the fact that you are the CO and the Secretary of the company. California is an at will state, which means any employee who does not have an emplyment agreement can be termainted at the will of the employer

The real questions are what are your rights now? You have rights as a shareholder. You have rights as an Officer, You have rights as Director. You alsohave right rights as an employee if you were wrongfully terminated. You need to seek a consult with an attorney that represents clients in shareholder disputes, employment litigation, and corporate law.

Good luck!
Phillip M. Smith Jr.
Los Angeles Tax & Business Attorney
Licensed in the United States Tax Court
www.culvercitytaxandbusinesslaw.com
www.corporateattorney.com
www.worlclasslawyers.com
Main: 323-292-4116 ❘ Cell: 562-505-1004

THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is philsmithjr@worldclasslawyers.com.

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Posted

I join Mr. Doland in recommending that you contact an attorney, soon.

Disputes between shareholder-employees of a corporation can quickly get out of hand, and are often very contentious. As also noted, you have rights with respect to the corporation based on your status as a shareholder, and I would be surprised if you were not also a director, but an attorney will need to review your company's records, including by-laws, minutes of actions, and any shareholders' agreement before being able to provide you with any concrete advice.

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Posted

Yes, I am 1 of directors and the secretary of the corporation. Just this morning they sent me an email advising me that they had a shareholder meeting and have removed me as secretary because they claim I am blocking the company from doing business by changing passwords which I have not done. They will be sending a certified copy of the meeting. I believe it only takes 2 votes to remove one person. They are asking me to sign a "Request to Surrender work Product and Property" before I can take my personal belongings from the office. I am not sure I should sign this and I do not have funds available to see an attorney. Everything I have is in the office and in my email which they have control of. Can they claim additional things against me and try to remove me as a shareholder? We have no shareholder agreement in place.

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