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In California, can the shareholders of a close Corp agree to give a 40 percent shareholder a 50 percent voting power?

Los Angeles, CA |

I am buying into a Corp and will have 40 percent of stock and there are 5 other shareholders. One shareholder has 50 percent of the shares and the others only have about 5 to 10 percent each. I am insisting that I have 50 percent voting power even though I have 40 percent of shares. The others agree to this. Can we state this in our bylaws and will it be enforceable? Can this be done?

Attorney Answers 3


You can accomplish what you want in a shareholders agreement where all the shareholders agree to this writing. A change in the by-laws is unncessary.Have an attorney draft the agreement.

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

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As noted correctly by my colleague, you can provide for voting rights in a shareholder agreement. You can also use a voting trust and other mechanisms.

If all the shareholders are active in the business, there should be fairly limited securities offering issues. If, however, any of the shareholders are merely passive investors then there are securities issues that must be considered and addressed or this may be a violation of state and federal law.

Contact a local business attorney.

This answer is for informational purposes only and is not legal advice regarding your question and does not establish an attorney-client relationship.

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You may be able to accomplish this through agreement, but I would be inclined to issue different classes of stock. You cannot do that as an S corporation, though. I would prefer that your voting power once established not be subject to continued approval of your fellow shareholders. However, if you cannot issue different classes, a shareholders agreement may work. You might also use a voting trust or similar agreement which guarantees you 50% of the votes.

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