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Ask Barrister Your Own Question
Barrister
Barrister, Attorney
Category: Business Law
Satisfied Customers: 36245
Experience:  16 years practicing attorney, JD, BA, MBA
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Have a sub s corp. three partners 33.3% each one partner

Customer Question

have a sub s corp. three partners 33.3% each one partner abandoned the business.How do we get him off the corp.He's been gone for two years.
Thanks Louis
Submitted: 1 year ago.
Category: Business Law
Expert:  Barrister replied 1 year ago.

Hello and welcome! My name is ***** ***** I will try my level best to help with your situation or get you to someone who can.

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Can you tell me what state this is in?

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Do you have a shareholder agreement in place that addresses a shareholder leaving or being removed?

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Do you have Bylaws that the shareholder has violated to justify their removal?

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Do your Bylaws state how disputes are to be resolved between the shareholders?

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Are you able to contact the other shareholder?

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thanks

Barrister

Customer: replied 1 year ago.
new jersey
no agreement on removal
no by laws do not state removal
he is being unreasonable
the two remaining partners control corp with 66.66% can't we just vote him out.
Customer: replied 1 year ago.
are you still online
louis
Customer: replied 1 year ago.
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Customer: replied 1 year ago.
you never gave me an answer
Customer: replied 1 year ago.
you are a fraud
Expert:  Barrister replied 1 year ago.

I apologize for the delay. I had to step out of my office for a bit..

Expert:  Barrister replied 1 year ago.

The attorneys who work on the site are real attorneys with real law practices. We are not employees of JustAnswer so we are on the site as other work permits so there may be a slight delay with my responses.

Expert:  Barrister replied 1 year ago.

If your Bylaws don't cover removing or buying out a partner, then NJ state corporation law will control. I will have to research the exact provisions and then respond once I have found out what the default laws state you have to do.

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It may take me a few minutes to find the applicable laws on the topic, but I will be back with you.

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thanks

Barrister

Customer: replied 1 year ago.
Ok thanks
Expert:  Barrister replied 1 year ago.

Ok, if you can't reach an amicable solution to buy out the absent partner and have him sign over his shares to the two other owners, then you can't just vote him out because you don't have Bylaws or an Operating Agreement that says you can. Without that power set up during the creation of the Sub S, it doesn't exist. So you will have to seek a judicial resolution under N.J.S.A. 14A:12-7. which basically says that you can sue the other shareholder and a judge can order his shares sold back to the company at fair market value.

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N.J.S.A. 14A:12-7.

8) Upon motion of the corporation or any shareholder who is a party to the proceeding, the court may order the sale of all shares of the corporation's stock held by any other shareholder who is a party to the proceeding to either the corporation or the moving shareholder or shareholders, whichever is specified in the motion, if the court determines in its discretion that such an order would be fair and equitable to all parties under all of the circumstances of the case.

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(a) The purchase price of any shares so sold shall be their fair value as of the date of the commencement of the action or such earlier or later date deemed equitable by the court, plus or minus any adjustments deemed equitable by the court if the action was brought in whole or in part under paragraph 14A:12-7(1)(c).

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(b) Within five days after the entry of any such order, the corporation shall provide each selling shareholder with the information it is required to provide a dissenting shareholder under section 14A:11-6, and within 10 days after entry of the order the purchasing party shall make a written offer to purchase at a price deemed by the purchasing party to be the fair value of the shares.

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(c) If the parties are unable to agree on fair value within 40 days of entry of the order, the court shall make the determination of the fair value, and the provisions of sections 14A:11-8 through 14A:11-11 shall be followed insofar as they are applicable.

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(d) Interest may be allowed at the rate and from the date determined by the court to be equitable, and if the court finds that the refusal of the shareholder to accept any offer of payment was arbitrary, vexatious, or otherwise not in good faith, no interest shall be allowed. If the court finds that the action was maintainable under paragraph 14A:12-7(1)(c), the court in its discretion may award to the selling shareholder or shareholders reasonable fees and expenses of counsel and of any experts, including accountants, employed by them.

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(e) The purchase price shall be paid by the delivery of cash, notes, or other property, or any combination thereof within 30 days after the court has determined the fair value of the shares. The court shall, in its discretion, determine the method of payment of the purchase price. Whenever practicable, the purchase price shall be paid entirely in cash. If the court determines that an all cash payment is not practicable, it shall determine the amount of the cash payment, the kind and amount of any property, whether any note shall be secured, and other appropriate terms, including the interest rate of any note.

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(f) Upon entry of an order for the sale of shares under this subsection, and provided the corporation or the moving shareholders post a bond in adequate amount with sufficient sureties or otherwise satisfy the court that the full purchase price of the shares, plus whatever additional costs, expenses, and fees as may be awarded, will be paid when due and payable, the selling shareholders shall no longer have any rights or status as shareholders, officers, or directors, except the right to receive the fair value of their shares plus whatever other amounts as may be awarded. In such event, the court may remove any custodian or provisional director who may have been appointed.

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thanks

Barrister