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Damien Bosco
Damien Bosco, Attorney
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Experience:  Helping you with your legal questions.
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I am one of 3 shareholders in a sub-s corporation in Virginia;

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I am one of 3 shareholders in a sub-s corporation in Virginia; I own 18%. The other two shareholders are brothers and have controlling interests of 51% and 37%. They have set up a buy-sell agreeement that is being paid for by the corporation and are dumping various amounts from $2,000 to $45,000 per year in this instrument (which I assume is whole life or variable life insurance). Is it legal that they are not including me in the buy-sell agreement since they are using corporatate funds (before profilts are decalared); it seems to me that they should either have to inlcude me or pay for it personally since it does not involve all shareholders. These 2 brother shareholders are also on the Board of Directors (I am not) and they are Employees of the corporation (I am not). My thought is this would be ok if they were paying for this from their own pockets rather than from the corporation.

I do NOT have a copy of the corporate document or by laws so if the answer hinges on this then I'd rather not pay for the answer.

These owners have NEVER invited me to a shareholders meeting nor do they send me minutes or notes from their annual meeting. I did not receive 2009 and 2010 "Accountant's Compilation Report" until recently when I found out they had added 3 new shareholholders. I'm sure they are hiding hundreds of thousands of dollars from me as I received no distributions in 5 of the last 7 years and the 2 years were just enough to cover my taxes. When I was an employee there (ending in 2003) by distibutiions were around $200,000 for the same level of sales the company is currently experiencing. I cannot afford an attorney on retainer as they have drained my personal money on investments in Arizona that either went bankrupt or in some cases they defrauded me. Will attorneys work for me on a contingency basis? I know I need to hire a forensic accountant, any thoughts there.
Any thoughts?
Submitted: 1 year ago.
Category: Business Law
Expert:  Damien Bosco replied 1 year ago.
Welcome!

I am happy to help you. If you need clarification with this answer, hit reply and ask a follow up question prior to providing a rating. Otherwise, after reviewing the answer, please provide a positive rating so I receive credit for the services I am providing you.

You seem to be on the right track and your concerns are justifiable. You are a minority shareholder and have certain rights.

Minority shareholder rights consist of rights that are generally available to all shareholders and rights that may be available under state close corporation laws. Corporations are governed by state law and shareholder rights are set out in the corporate statute of the company’s state of incorporation. Typical rights are:

• The right to vote on the election of directors;

• The right to amend corporate bylaws;

• The right to amend articles of incorporation;

• The right to vote on major corporate events such as mergers, liquidation, or the sale of substantially all the corporation’s assets;

• The right to take action through a written consent;

• The right to annual stockholder meetings;

• The right to call special stockholder meetings; and

• The right to inspect books and records and the list of shareholders.

 

If you are being “freezed out” of decisions making, profits, the right to review records as permitted by statute, then you possibly have a personal claim as well as a derivative claim (a claim on behalf of the corporation). There may be an attorney that would take your case on contingency.

This information provided to you is informative and helpful. If you need clarification, feel free to hit reply so we can work on any clarification prior to providing a rating. Otherwise, please provide a positive rating now without an additional cost to you so I receive credit for the services I am providing to you. I am doing my best to help you. Thank you, Damien

Customer: replied 1 year ago.
What you supplied is very generic information that I already have from many generic sites. My primary question was not answered: can they use company money to fund the buy-sell which will benefit both of the shareholders and exclude me? If they are using company funds then shouldn't I also be given the same benefit?
Expert:  Damien Bosco replied 1 year ago.
Hi Ron:

I see you rated my answer "poor service," which is a negative rating for me. However, I believe you may have been frustrated because I did not address your follow up question. I am sorry and understand your frustration. I am doing my best to help you. I was just notified by the system of your follow up question.

You are correct, the money of the company to use for some of the shareholders' buy sell agreement is inappropriate. All shareholders should be part of a shareholders' agreement and treated equally, unless there are different classes of shares.. As I mentioned, you could bring a claim against the directors on behalf of all the shareholders or a claim yourself for a breach of fiduciary duty.

Please follow up with any more questions so I can help you even more, or rate me with at least "ok service" so to remove the negative rating. I appreciate it. Thanks, Damien
Damien Bosco, Attorney
Category: Business Law
Satisfied Customers: 1220
Experience: Helping you with your legal questions.
Damien Bosco and 9 other Business Law Specialists are ready to help you
Expert:  Damien Bosco replied 1 year ago.
Hi Ron,


I'm just following up with you to see how everything is going. Did my answer help?


Let me know,
Damien Bosco

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