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lwpat
lwpat, Attorney
Category: Business Law
Satisfied Customers: 25386
Experience:  Attorney with over 35 years of business experience.
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Situation My colleague is the majority shareholder 66% and

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Situation: My colleague is the majority shareholder 66% and CEO of a S corp. His wife is a shareholder at 33%. They are getting divorced. He has terminated her employment. Scheduled a board meeting to vote her off as an officer and director.

Her lawyer stated that he cannot legally do this because the divorce paper work was filed first. She mentioned a restraining order will stop this procedure.

Question: Can her lawyer stop him from voting her out as officer and director? He is not trying to buy her out. She will still have her shares in the company.
There is nothing stopping him from doing this except maybe a dose of good sense. If all the shares were acquired during the marriage she actually owns 50% since CA is a community property state. Here he is going to want to settle as peacefully as possible since the value of the company will be a big issue. Firing her will look bad to the judge as well as voting her out. That actually gives her another cause of action. I would recommend that he keep paying her salary and hold up on voting her out.
Customer: replied 7 years ago.
That makes sense. He is not going to try and buy her out. He just wants her out of of the business day to day. Does he have the legal right to vote her out as officer and director even if divorce papers were already filed? Can her lawyer stop him from doing this?
The lawyer cannot stop him from doing this. However, I still don't think it is a wise move.
Customer: replied 7 years ago.
I forgot to mention that this past year, she opened a fitness studio and runs that. He kept her on payroll for over 7 months during opening of the studio and beyond. The studio officially has been open for 9 months and has over $20K in gross revenue.

With her having her own company now would that change the courts view?

thanks, XXXXX XXXXX been very helpful.
Here I still stand by my previous answer. The madder she is the harder it will be to reach an agreement.
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