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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 9885
Experience:  30 years of corporate, litigation and international law
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I am a member of a family s-corporation: all members are on

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I am a member of a family s-corporation: all members are on the board of directors. Mother owns 33.266% of shares of stock. Daughters each has 16.683%. Mother is president in name only, and is not capable of making an agenda or conducting a meeting. Vice president, daughter and another daughter make the agenda and conduct monthly business meetings with all members in attendance. In order to get Mother to settle the estate, the attorney put in a clause in the "Unanimous Written Consent to Action" that " All parties agree that they will execute any documents necessary in order to require a super majority voting requirement such that in order for an action to be deemed to be a valid act of the corporation it shall require an 80% vote". This vote continues until there is an 80% vote to change it.
It seems to me that way the way a motion is worded determines an action, i.e. motion to sell a house, vote 66-33 motion does not pass-- not 80% we must keep the house. If there is a motion to keep a house and the vote is 66-33 it fails, we must sell the house.
My question:
Who or what determines a legal motion?

Richard :

Hello, I will try to help you. Please remember I just report or interpret the law, so the outcome may not be what you hoped for. When you say a Unanimous written consent was this a resolution or did it modify the bylaws of the corporation? What was the purpose of the change in the voting requirements? Did all the members sign the consent? In the example you gave, are you asking if there is a vote to keep a house and it fails then the house must be sold?

Richard :

What does your mother's estate planning have to do with the voting requirements of the S-corp?

Customer:

When my father died he left a signed will written by an attorney and signed by him leaving shares of stock in a c-corporation to his wife and daughters, however there were no stock certificates. Annually he had given shares of stock via verbal declaration in board meetings. Daughters and mother changed the corporation an s-corporation to avoid double taxation. In order for Mother to sign the stock certificates (she erroniously believed that she was giving her inheritance to the daughters) the clause concerning the 80% voting was agreed upon. The first paragraph in the "Consent to Action" is thus: " The undersigned, being all of the Directors and Shareholders of the last name, Inc. a Kansas corporation, do hereby consent in writing, in accordance with the applicable Bylaws of the Corporation and state law, to the following actions, as fully and to the same extent as if adopted in a formal meeting, duly called and held, with a quorum at all times present and voting, to wit:

Customer:

When my father died he left a signed will written by an attorney and signed by him leaving shares of stock in a c-corporation to his wife and daughters, however there were no stock certificates. Annually he had given shares of stock via verbal declaration in board meetings. Daughters and mother changed the corporation an s-corporation to avoid double taxation. In order for Mother to sign the stock certificates (she erroneously believed that she was giving her inheritance to the daughters) the clause concerning the 80% voting was agreed upon. The first paragraph in the "Consent to Action" is thus: " The undersigned, being all of the Directors and Shareholders of the last name, Inc. a Kansas corporation, do hereby consent in writing, in accordance with the applicable Bylaws of the Corporation and state law, to the following actions, as fully and to the same extent as if adopted in a formal meeting, duly called and held, with a quorum at all times present and voting, to wit:

Customer:

I have tried to send the rest of my response and it keeps disappearing. How else can I reply?

Customer:

Mother thought the children would sell the estate which she did not want and the 80% vote was to prevent the sale of the estate. Yes, all members signed the consent form. The house is hypothetical but , yes, if there is a vote to keep the house and it fails, must we sell it? So then what prevents someone from then making another motion to sell the house which would fail to receive 80%? Would we not then be deadlocked?

Richard :

The consent you sent is probably valid. What it does is give your mother a veto power over actions of the corporation, particularly the sale of the estate. You would only take a vote to change the status quo of something. You could have a vote to sell the estate in which case you would need the 80% approval. However, a motion not to sell the estate would have no effect because it would not represent a change in status. If it was voted down because it did not receive 80% that would not force a sale. The special voting would only apply to things that require Board of Director action or shareholder action. These would generally be major actions affecting the corporation. The day to day operations would be carried out by the officers. If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If the answer was especially helpful you can provide a bonus.

Richard - Bizlaw and 4 other Business Law Specialists are ready to help you
Hi Donna,


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


Let me know,if you have any more questions.
Richard

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