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dkennedy
dkennedy, Attorney
Category: Business Law
Satisfied Customers: 5997
Experience:  JD degree, business owner
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Is it legal for the president and 50% shareholder of my company

Resolved Question:

Is it legal for the president and 50% shareholder of my company (I'm secretary and 50% shareholder)...

...to make a lowball offer for my shares? and if I do not take it he will dissolve the company (in order to start his own business with "his" customers.

What are my options? Thank you
Submitted: 11 months ago.
Category: Business Law
Expert:  dkennedy replied 11 months ago.

dkennedy :

Hello,

dkennedy :

What is the legal status of the company? A partnership, a corporation or what? Do you have an operating agreement or by-laws, or is it just a "gentlemen's agreement" as to the rules of operation?

Customer:

No I am sorry is is an S-Corp. I am 50% shareholder, treasurer and secretary. He is president

Customer:

He has twice as many sales as me, thus the dispute

dkennedy :

Do you have an operating agreement or by-laws, anything that rules on what happens if one person "wants out"? There should be rules about non-competing and so on. Do you have anything like that?

Customer:

No, I don't believe so

Customer:

I don't really "want out" I actually love the business we have built

Customer:

I do all of the non-sales work too. But I know that is probably irrelevant to a shareholder issue

dkennedy :

But you said he wants to lowball your shares and dissolve the company. That's what I was talking about/

Customer:

Yeah, between my mom and I, I have $11,000 in debt to the company. I have been floating the company along...

Customer:

I have never been paid

Customer:

and He is offering $7,000 to sign over all my shares

Customer:

So the company will still owe me $4,000 plus sales commission

dkennedy :

does your company have a rule against this? Usually one cannot just force someone out and dissolve a corporation. It is its own legal person. Who makes the decisions about payments and so forth? Why aren't you getting paid but he is?

Customer:

I have been sacrificing for the company. He has a family and kids. I am single and living off savings

Customer:

I paid his rent 3 weeks ago

dkennedy :

You need to take a stand and tell him that due to the company owing you money, he will not receive a salary until you are paid off and then you need to make a firm agreement about the customer list (client list). If you have no operating agreement about non-competing, he can quit working there, still own the shares, but start another company somewhere else.

Customer:

and instead of "thank you" he has taken over the company completely (once I taught his wife how to do scheduling and computer work) Of course I taught her not knowing as soon as they knew how to do my job they would cut me out of the company

Customer:

Yes, I agree that would be the best solution. If he quits. Because I can run the company profitably while it is not able to pay his lifestyle

dkennedy :

Unbelievably, this happens frequently. Is there a way you can get back in? Does his wife work there? How does she have access?

dkennedy :

You need to stop funding him right away.

Customer:

I know I need to take a stand, but he has now removed my password XXXXX our phone system (which I set up) and our customer database, scheduler

Customer:

Oh I am definitely stop funding..

Customer:

But assuming he really comes up with $7,000... I don't know if I should just take it. Even though all my sweat equity is gone

Customer:

And theoretically he will continue to pay the remaining balance and sales commision

dkennedy :

You can consider a civil lawsuit, but it would cost money and you would get...what from him? it would not be worth it. I think you need to cut your losses and get rid of this creep. You have the know-how and start your own business with employees and a firm set of rules and contracts.

Customer:

Yes. Thanks. I agree. I really am handing this guy a ton of value but if he is not careful he will lose it anyway..

Customer:

Oh I must go

dkennedy :

I wish I had a law to point to to "get him" but it sounds as if he's wrecked your business and that's what honest people get out of working so hard, sometimes. He's a jerk and immoral, cut your losses.

dkennedy, Attorney
Category: Business Law
Satisfied Customers: 5997
Experience: JD degree, business owner
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