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What are my rights as 30% owner of this California corporation I am a co-founder of?

Long Beach, CA |

My partners offered me a much lower offer on my 30% than an external party, who is willing to buy up to 100% of the shares. I stepped away from working in the company for 18 months, and they started making a lot of important decisions without notifying me: they stopped paying dividends and gave themselves a nice raise, stopped paying the credit lines which I'm the personal guarantor for 3 months, changed company logo, took me off the website as a founder,etc. what are my rights on this situation? How should I proceed? Shouldn't they have to included me in these resolutions?
Thank you!

Attorney Answers 5


  1. Your company should have corporate by-laws and/or a shareholder's agreement that should address these issues and lay out what rights a shareholder of the corporation has.


  2. You may have a claim for breach of fiduciary duty, among other things. However, if you haven't been to work for 18 months, of course business decisions have to be made. Anyway, a shareholder does not particiapate in management.
    You need to be interviewed for many, many additional facts to give you proper analysis.

    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.


  3. You have not indicated whether the corporation is a C corp. or an S corp. You need to have a consult with a business attorney to review the resolutions, by-laws, shareholders agreement and determine your rights under these documents. A review of the corporate tax returns will give you some idea of what dividends you might expect to have received, which will depend on whether the corp is an S or a C.

    Under California law, you have a right to inspect the corporate records. You are also required by law to have annual sharesholders meetings.

    Hope this helps!

    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.


  4. Start with reviewing your Corporate Bylaws. There is little you can do as a Shareholder, but the companies do have certain duties. If the actions your mention in your facts are accurate then a Claim for Breach of Fiduciary Duties is a good start. There may be other claims, but without knowing hard to provide direction. You should find an attorney you wish to work with and see what other claims you might have.

    Sincerely,
    Ripal Patel, Esq.
    San Jose Attorney

    Your particular situation may be different. This answer is intended for information purposes only. No Attorney-Client relationship has been established. I am an attorney in the Bay Area.


  5. The By-Laws and any operating agreements for the Company will generally control. You have essentially raised several issues, shareholder rights concerning management of the Company, shareholder's rights regarding the sale of their stock, and, fiduciary obligations regarding the Board and Officers. You should consult with an attorney to get answers regarding your legal rights.

    cms1law@sbclgobal.net
    (408) 796-9616

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