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Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 47117
Experience:  32 years of experience practicing law and a businessman.
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I am a 50-50 s corp (flower shop) and I am the president of

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I am a 50-50 s corp (flower shop) and I am the president of the company. My business partner is the director. Our business has essentially dissolved and is headed into bankruptcy. My partner has decided to take the business phone lines and has them forwarded to her personal cell phone and is continuing to conduct business even though our actual store is closed and some of the items liquidated. I have tried to contact the phone company to see what I can do but she is the primary authorized account holder since she established the account. I had sold the phone lines to another flower shop, but she is refusing to comply and is acting independant of the business. What can I do? Is this legal?
Submitted: 5 years ago.
Category: Business Law
Expert:  Richard replied 5 years ago.

Hi there. I can certainly understand your frustration with this situation. Let me see if I can help.

 

Your business partner owes a fiduciary duty to the corporation and her fellow shareholders. By appropriating corporate assets for her own personal use and conducting business outside the corporation, she is breaching that fiduciary duty.

 

I would send her a letter - certified, return receipt requested - explaining the history, informing her that you consider her in breach of her fiduciary duty to the corporation, demanding what it is you want her to do, including that she cease and desist in any activities that continue that breach, and finally telling her that if she does not comply immediately, you will have no choice but to pursue any and all legal and equitable remedies through the judicial system. You could also throw in something about appropriating corporate assets for personal use as constituting theft.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Richard, Attorney
Category: Business Law
Satisfied Customers: 47117
Experience: 32 years of experience practicing law and a businessman.
Richard and 7 other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
Thank you. If I want to sell any of the assets, does it require both of our signatures or just one. She has sold quite a bit of the store merchandise without my permission, but when I try to liquidate assets to pay the trustee for the bankruptcy, she will not allow me to stating I must obtain her permission to sell anything.
Expert:  Richard replied 5 years ago.

Normally a sale of all, substantially all or significant assets outside the ordinary course of business requires a super majority...2/3 vote rather than a simple majority. You would have the right to sell assets in the ordinary course of business, but otherwise would not. But, as only a 50% owner, your partner does not have the right to sell assets outside the normal course of business. The fact that she has consummated such sales is another breach of her fiduciary duty to the corporation and fellow shareholders.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Richard, Attorney
Category: Business Law
Satisfied Customers: 47117
Experience: 32 years of experience practicing law and a businessman.
Richard and 7 other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
It is just my partner and I. No additional shareholders. Outside of sending the certified letter of cease and desist, what should I do with the phone lines? Is there anything I can tell the phone company that may help me gain control of the phone lines? I am fearful she is sabotaging the business. She cannot design flower arrangements so I am unsure how she is processing the orders. I am scared. My partner has cleared out my account, left me with no money, and a forced bankruptcy. She has legal assistance through a friend and I cannot afford an attorney. I will send her the letter tomorrow, but is there anything I should tell the phone company. I explained I am the president and she is director and that she has done this, but to no avail.
Expert:  Richard replied 5 years ago.

After the letter, you will need to pursue this through the court system. You could immediately seek an injunction against her for her conduct. Also, you could seek a judges order compelling the phone company to take action. If you are not in a position to pay a lawyer, I would recommend you contact your local legal aid clinic or sometimes a local law school can help out. You might also contact the police department and file criminal charges against her for stealing corporate assets. I wish you the best of luck.

Richard, Attorney
Category: Business Law
Satisfied Customers: 47117
Experience: 32 years of experience practicing law and a businessman.
Richard and 7 other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
Thanks. I have filed criminal charges but they dont seem to be too concerned. She continues to convert business assets through another business not affiliated with our business so I may never know how much money they have taken from me. Now I am being pressured by the landlord to pay $2,000 to get out of the lease that we defaulted on. Should I just let it go through the bankruptcy?
Expert:  Richard replied 5 years ago.

Good evening to you. If the corporation is essentially insolvent with no assets and you have not personally guaranteed the lease, there really is no reason to pay $2,000 personally to get out of the lease. You don't really even need to file bankruptcy for the corporation. If you default on the lease, she will need to get a judgment against the corporation and then she has to collect it. If the corporation has no assets against which to collect a judgment...1) she likely will not pursue the costs of obtaining and and pursuing collection of a judgment that is uncollectible, and 2) even if she does, there is nothing to collect.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Richard, Attorney
Category: Business Law
Satisfied Customers: 47117
Experience: 32 years of experience practicing law and a businessman.
Richard and 7 other Business Law Specialists are ready to help you
Customer: replied 5 years ago.
That is good advice. So let me ask you this then, I have about $100K in debt through the business and my partner did not want to file bankruptcy so I was going to do a forced bankruptcy and file personal bankruptcy for the debt that is personally guranteed. There are no assets left except the phone lines of which my partner continues to conduct business through. What should I do? Should I dissolve the corporation? It is just her and I. I had retained a BK attorney but my partner backed out so the attorney refunded our money and discharged me based on conflict of interest. I am scared of doing the wrong thing and my partner is very aggressive and is being backed by someone who wants our business (this is the same person whom my partner is converting the business through). There are no assets but the other florist wants my phone lines and customer data base, which my partner has full possession of.
Expert:  Richard replied 5 years ago.

First, do not dissolve the business....the corporate dissolution documentation requires that the shareholder make a representation that the obligations of the corporation have been provided for....the result of that would be to potentially open you up to personal exposure to liabilities that would otherwise be restricted to your corporation.

 

Second, I would not jump into personal bankruptcy yet. The money that you owe personally must be committed to a judgment and then collected. Many times being judgment proof is sufficient to keep the creditors from coming after you aggressively. If they do, you can then always seek bankruptcy protection to get these judgments erased.

 

Third, if your partner's new business becomes successful, you should still consider filing a civil suit against her and her company for breach of fiduciary duty and conversion of corporate assets and opportunity to her own personal good. You must file this suit within the applicable statute of limitations period.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

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