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What is my obligation to my shareholders to set up a new company that will offer a similar educational service but on-line.

Asked over 2 years ago - New York, NY

I am founder, president and CEO of company that provides educational services. Through my research I discovered a business model to offer the same services on-line. I approached my shareholders who recommend I establish a second company to manage and raise capital for the new venture with the current company as the controlling shareholder. I proposed that they have 51%, I have 25% and use 24% to raise start-up capital for new venture.

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Attorney answers (1)

Dana Howard Shultz

Reputation Level 15

Answered over 2 years ago. Business Attorney in Oakland, CA.

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Although I practice in CA, rather than NY, I suspect that my answer would be similar in both jurisdictions.

The short answer is that your fiduciary obligation is to the existing company, rather than its shareholders. You need to act prudently and in good faith in protecting the existing corporation's best interests.

If your question is whether the proposed equity split for the new corporation would be a violation of your fiduciary obligation, you have not provided enough facts for the question to be answered.

Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.

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