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What are my rights as 50% shareholder of a C Corporation in California

Palmdale, CA |
Filed under: C-corporation

2 shareholders. A cousin and I own 50% each.
When I acquired the stocks from my parents a year ago. My cousin was already President of the company. However, I do not see any minutes from a board of directors meeting showing this. Company was in a state of disarray which is why the stocks were handed over to me. They only have 2 corp minutes from the time the company started which is about 8 years ago. Company is being run like a mom and pop store and a recent review of the general ledger suggests commingling and my cousin who is designated as president and also a 50% shareholder and also a director is the only one in the account along with her brother who acts as the General Manager.

What are my rights as 50% shareholder to try to fix the company and setup checks and balances?

Thanks Michael for your reply. I am already a director on the company, but yet to have a meeting. I recently started a due diligence checklist and what I am finding is troubling. No reporting to other shareholders, no shareholders or board of directors meetings for the past 8 years. They have been deciding dividends on their own without board of directors meetings. Everything they are doing is against what I have been taught in school. Can I insist or force myself to the bank account without a board of director's decision as 50% shareholder? Is it even adviceable if I suspect commingling is occuring? Thank you.

Attorney Answers 3


  1. You have lots of rights, not so much because you are a 50 percent shareholder, but because you will be able to elect yourself a director, and they have big rights including rights of inspection and an accounting. Announce that you will be participating, that starting now you will all follow the rules, and if you get any "push-back" consult a business litigator.

    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.


  2. Attorney Doland is correct. You have right to demand an accounting, and inspect all corporation documents. You want to start by holding and emergency shareholders meeting with an agenda and specific motions that address all your concerns.

    If you meet too much resistence you can petition the court to dissolve the corporation, which could cause your cousin to come to negotiation table and either 1) run the company correctly, or 2) by you out. A business attorney can assist you with resolving this matter.

    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

    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.


  3. I agree with the other two answers and add that the first step you should take is review the Corporation's by-laws to determine the requirement and time period on calling a shareholders meeting with the board of directors.

    Disclaimer: This answer is designed for general information only. The information presented above should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

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