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Loren
Loren, Attorney
Category: Business Law
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Experience:  30 years experience representing clients .
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In 2009, my family corporation had a board meeting to add new

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In 2009, my family corporation had a board meeting to add new members to our board of directors. We are now interested in removed the minority board members. We can vote to remove them and hold majority. However, we are unsure as to whether or not they still hold shares in the company. No filing was made to the State of California and no share certificates were issued. Also, no money changed hands to purchase the shares that were allocated at the meeting. In other words, the meeting minutes are the only record of an intent to add the extra members and no other action was taken. Do the extra board members actually have shares? Or, can we vote to nullify the plan?

The meeting minutes are below. Names have been left off for privacy:
_______________________________________________


Minutes from Meeting of January 9, 2009

New Board of Directors - Voting Shares*

Board Member 1
Board Member 2
Board Member 3
Board Member 4
Board Member 5
Board Member 6
Board Member 7
Board Member 8
Board Member 9

Board Member 10**
Board Member 11**

1,000 shares @ $10.00 share. 9,000 shares to be issued

* No shares shall be withdrawn or resold prior to June 5 2014.
** Submit to Board approval by April 21, 2009
Submitted: 5 years ago.
Category: Business Law
Expert:  Loren replied 5 years ago.
Board members are elected by shareholders. Unless your bylaws provide otherwise, you can be a board member without owning any shares. You can check tax returns for shareholder information if there is no minute book or share certificates.
Customer: replied 5 years ago.
To clarify. Shareholder board members were at the meeting and voted for the change. However, we never issued any physical shares. We did not enter the minutes into a legal minutes book. The minutes were not signed by any secretary. No payments or other information has ever been recorded that would show up on tax returns. Basically, this was an "idea" that never took legal form. We're just trying to determine if it is all null and void, or whether we need to do something extraordinary to reverse things.

Thank you for the clarification as to the fact that shareholders elect board members.

Best
Expert:  Loren replied 5 years ago.
If no shares have been issued then there is no corporation. All the shareholders will need to get together and hash out the structure of the corporation. A corporation must have issued shares to vote and to receive assets in the event of a dissolution. There is no way around the shareholders reaching agreement. The alternative is to litigate the matter.
Customer: replied 5 years ago.
Correct. We have the shares that were issued when we originally filed the corporation. There are 3 shareholders. The extra shares that were discussed at this board meeting were never issued. So, there is a corporation. But what we're trying to determine is whether or not we have legally given shares to the extra members by simply holding a board meeting authorizing issuing the shares. We are hoping that it requires filing for them. And since we didn't file with the state, we hope that they have NOT been issues shares legally.
Expert:  Loren replied 5 years ago.
If the shares were authorized but not issued then the board authorizing the shares be conveyed is enough. If the shares were not authorized, you would need to file articles of amendment authorize the shares to be issued.
Customer: replied 5 years ago.
We have authorized them, but not issued them. Can we file an amendment to take them back?
Expert:  Loren replied 5 years ago.
Not without the consent of the parties who they were to be issued to.
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