How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask TexLaw Your Own Question

TexLaw
TexLaw, Attorney
Category: Legal
Satisfied Customers: 4212
Experience:  Lead trial/International commercial attorney licensed 11 yrs
17219180
Type Your Legal Question Here...
TexLaw is online now
A new question is answered every 9 seconds

Hi Zach, I have a question that is a continuation of my

Customer Question

Hi Zach,

I have a question that is a continuation of my previous inquiry.

As you said previously, the bylaws do allow my mother and myself to represent a quorum – being the majority shareholders, but not less than a 1/3 of the board.

My question is --

1. Since we are/were a family-owned business, the formal Board of Director’s meetings sort of fell by the wayside. We only have copies of formal minutes up to 2002. Does this compromise our rights as detailed in the bylaws?

2. I noticed the bylaws are not dated and are/were not required to be filed legally. How do we prove they are original? We have the old, faded minute books.

Also, my mother is the Treasurer and has served as such since the corporation’s birth. She’s very precise and although old - is sharp as a tack. When she noticed that my brother, the President, and his wife were selling equipment under my father’s company name, but having the money wired to one of their company’s accounts, she removed funds from my father’s company in the form of cashier’s checks and is holding them. She has not deposited any monies in her or anyone else’s accounts. She has just been renewing the money orders marked as “holding for investment” and placed them in a safety deposit box. They are suing her for failing fiduciary duties and denying them access to all funds.

For your information this corporation has never paid dividends.

There is a clause in bylaws stating:

RESERVES
Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time in their absolute discretion think proper as a reserve fund to meet contingencies or for equalizing dividends or for repairing or maintaining any property of the corporation or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may abolish any such reserve in the manner in which it was created.

Would my mother and myself be protected under the bylaws in our right to do this in lieu of, above “conducive to the interest of the corporation”

Thanks.
Submitted: 2 years ago.
Category: Legal
Expert:  TexLaw replied 2 years ago.

Zachary D. Norris :

Hi,

Zachary D. Norris :

Thanks for finding me.

Zachary D. Norris :

Give me a few minutes to read your question.

Zachary D. Norris :

1. The by-laws are undated and were not filed.

Zachary D. Norris :

Do you have any record where the board of directors approved the by-laws?

Zachary D. Norris :

2. Alleged Breach of Fiduciary Duty by your mother.

Zachary D. Norris :

The unauthorized withdrawal of company funds and isolation of the same from the company is on its face suspicious. However, arguably this was done in order to protect the company from misappropriation of company assets by the President.

Zachary D. Norris :

The presence of the safe harbour provision in the by-laws does provide her with some shelter, as the money has been kept in the form of cashiers checks and has not been converted by her personally.

Zachary D. Norris :

The actions of the President in paying his own account from the sale of equipment could be argued as an illegal dividend, to which your mother, as secretary, acted upon her authority to protect the company's operational ability.

Zachary D. Norris :

sorry...I mean, as treasurer.

Zachary D. Norris :

The question that is raised in my mind is whether there is any provision in the by-laws which require board approval for the movement of the funds.

Zachary D. Norris :

Also, look to see in the by-laws or the incorporating instrument to see if there is any requirement that the by-laws be approved by a super majority.

Zachary D. Norris :

If not, and if there is no documentation that the by-laws were previously approved, call a board meeting and issue a corporate resolution approving the by-laws. Also issue a corporate resolution authorizing your mother's movement of the funds.

Zachary D. Norris :

If I recall correctly, you are in Texas, which does not require that by-laws be filed.

Zachary D. Norris :

Thus, you may have some challenge as to their authenticity, which can be simply overcome with the testimony of your mother as present during their original drafting. Also you can prove them up as an official record of the company with a business records affidavit.

Zachary D. Norris :

I see that you have likely stepped away, or I am not otherwise receiving your responses. I'm going to switch out of the IM format over to the Q&A format.

Zachary D. Norris :

Please communicate with me that way.

Expert:  TexLaw replied 2 years ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  TexLaw replied 2 years ago.
I look forward to hearing back from you.
Customer: replied 2 years ago.

I am in Texas and have researched that the bylaws do not require filing, unfortunately. There are no signatures of approval on the document.


 


The bylaws were drafted in 1977.


 


There is no super majority verbage.


 


I w

Customer: replied 2 years ago.

I am in Texas and have researched that the bylaws do not require filing, unfortunately. There are no signatures of approval on the document.


 


The bylaws were drafted in 1977.


 


There is no super majority verbage.


 


I will

Customer: replied 2 years ago.

I am in Texas and have researched that the bylaws do not require filing, unfortunately. There are no signatures of approval on the document.


 


The bylaws were drafted in 1977.


 


There is no super majority verbage.


 


I will stay

Customer: replied 2 years ago.

I am in Texas and have researched that the bylaws do not require filing, unfortunately. There are no signatures of approval on the document.


 


The bylaws were drafted in 1977.


 


There is no super majority verbage.


 


I will stay here

Customer: replied 2 years ago.

I am in Texas and have researched that the bylaws do not require filing, unfortunately. There are no signatures of approval on the document.


 


The bylaws were drafted in 1977.


 


There is no super majority verbage.


 


I will stay here to b

Customer: replied 2 years ago.

I am in Texas and have researched that the bylaws do not require filing, unfortunately. There are no signatures of approval on the document.


 


The bylaws were drafted in 1977.


 


There is no super majority verbage.


 


I will stay here to be

Customer: replied 2 years ago.

I am in Texas and have researched that the bylaws do not require filing, unfortunately. There are no signatures of approval on the document.


 


The bylaws were drafted in 1977.


 


There is no super majority verbage.


 


I will stay here to be available

Customer: replied 2 years ago.

I am in Texas and have researched that the bylaws do not require filing, unfortunately. There are no signatures of approval on the document.


 


The bylaws were drafted in 1977.


 


There is no super majority verbage.


 


I will stay here to be available for

Expert:  TexLaw replied 2 years ago.
Ok,

Since there is no indication that the by-laws were adopted, go ahead and call a meeting of the board of directors to adopt those by-laws. In the resolution, state that the by-laws are being formally adopted but have been in place and have been operated under since 1977.

At the meeting, issue other corporate resolutions which approve of your mother's actions in moving the money and which take away any authorization from your brother to continue on as president or to handle corporate funds.

On the issue of whether the by-laws will protect you and your mother, its not an open and shut case. The determination of whether your mother's movement of the funds was a breach of fiduciary duty is a question of fact to be answered by a jury. The fact that she did not convert the funds and was doing it to protect the company's assets, as is authorized by her position as treasurer, weigh in her favor. However, there is case law out there that shows that any sort of isolation of funds from the corporation done in secret could be a breach of fiduciary duty to the corporation.

This litigation sounds complicated. Have you secured a lawyer?
TexLaw, Attorney
Category: Legal
Satisfied Customers: 4212
Experience: Lead trial/International commercial attorney licensed 11 yrs
TexLaw and 9 other Legal Specialists are ready to help you
Customer: replied 2 years ago.

Yes, she has retained a lawyer. However, after visiting his office with my mother, I am not very confident. My mom lives in a very small town in East Texas and I feel that he is over his head. (respectfully).

 

We are going through discovery and have presented them with documents they have requested.

 

We have a hearing next Friday.

 

I just don't understand how all issues are not moot in the light of his thievery for 15 years. We have many invoices plainly showing his embezzlement.

Expert:  TexLaw replied 2 years ago.
In a sense, it is moot because her actions were taken to protect the company from his breach of fiduciary duty and his embezzlement. The jury needs to see everything out there. Since he filed suit first, he has a right to try to prove his complaint. What is important is that you get to get the case to trial to tell the jury your story. That way when they are asked the question of whether your mother breached her fiduciary duty, they answer "no".

I'm assuming your lawyer has counter-sued your brother on y'all's behalf for embezzlement and breach of fiduciary duty. If the case is filed in the same small town, its always good to have a local attorney handling it who has an established relationship with the court.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
< Last | Next >
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
  • My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer. Eric Redwood City, CA
  • I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight. Michael Wichita, KS
  • PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent. Three H. Houston, TX
  • Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!! Elaine Atlanta, GA
  • It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem. Tony Apopka, FL
  • Not only did he answer my Michigan divorce question but was also able to help me out with it, too. I have since won my legal case on this matter and thank you so much for it. Lee Michigan
 
 
 

Meet The Experts:

 
 
 
  • Tina

    Lawyer

    Satisfied Customers:

    8436
    JD, BBA Over 25 years legal and business experience.
< Last | Next >
  • http://ww2.justanswer.com/uploads/MU/multistatelaw/2011-11-27_173951_Tinaglamourshotworkglow102011.64x64.jpg Tina's Avatar

    Tina

    Lawyer

    Satisfied Customers:

    8436
    JD, BBA Over 25 years legal and business experience.
  • http://ww2.justanswer.com/uploads/RA/ratioscripta/2012-6-13_2955_foto3.64x64.jpg Ely's Avatar

    Ely

    Counselor at Law

    Satisfied Customers:

    19941
    Private practice with focus on family, criminal, PI, consumer protection, and business consultation.
  • http://ww2.justanswer.com/uploads/FL/FLAandNYLawyer/2012-1-27_14349_3Fotolia25855429M.64x64.jpg FiveStarLaw's Avatar

    FiveStarLaw

    Attorney

    Satisfied Customers:

    8189
    25 years of experience helping people like you.
  • http://ww2.justanswer.com/uploads/jespoag/2008-12-17_222355_jessepic.jpg JPEsq's Avatar

    JPEsq

    Attorney

    Satisfied Customers:

    2132
    Experience as general attorney, in house counsel, SSDI, Family Law attorney, and law professor
  • http://ww2.justanswer.com/uploads/gsenmartin/2008-04-22_214950_me1.jpg Guillermo J. Senmartin, Esq.'s Avatar

    Guillermo J. Senmartin, Esq.

    Attorney

    Satisfied Customers:

    110
    7+ years of experience handling various legal matters.
  • http://ww2.justanswer.com/uploads/PA/PaulmoJD/2013-10-10_195858_JAImage.64x64.jpg Law Educator, Esq.'s Avatar

    Law Educator, Esq.

    Attorney

    Satisfied Customers:

    31621
    JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
  • http://ww2.justanswer.com/uploads/dkaplun/2009-05-17_173121_headshot_1_2.jpg Dimitry K., Esq.'s Avatar

    Dimitry K., Esq.

    Attorney

    Satisfied Customers:

    15975
    Multiple jurisdictions, specialize in business/contract disputes, estate creation and administration.
 
 
 

Related Legal Questions

Chat Now With A Lawyer
TexLaw
TexLaw
Lawyer
4212 Satisfied Customers
Lead trial/International commercial attorney licensed 11 yrs