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socrateaser, Attorney
Category: Business Law
Satisfied Customers: 39141
Experience:  Retired (mostly)
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My situation. I am a 25% owner of a small contract manufacturing

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My situation. I am a 25% owner of a small contract manufacturing corporation. There are 4 of us equal owners. Our differences are rapidly becoming irreconcilable and the majority 3 owners/75% are looking to push me out in a way that is most advantages to them.

Their plan is to dissolute the corporation, leave me with 25% of combination of assets and customers and relocate with the majority of assets and customers to Nevada. Currently we are in California.

Here is why this doesn't work for me. If I am left with 25% of assets/customers, that 25% will not survive. Reason is because it is not enough to sustain existence of the business, especially since they (the majority) have voted to take with them the key management and plan to leave me with the least profitable customers. Without this key management there is no way to continue in the business.

My question is. Is it legal for them to do this? They voted to dissolute in this fashion and since they are the majority the vote naturally passed. I offered to sell my portion to them and to be bought out but they refused, as the way they are planning to do it is more advantages to them.

What options do I have, how can I defend myself.

PS: Naturally, if things continue on this path, I will get a lawyer. I'm hoping I can talk them out of their plan, equipped with the information you will hopefully provide.

Thank you.
Submitted: 6 years ago.
Category: Business Law
Expert:  socrateaser replied 6 years ago.

Under Cal. Corporations Code § 1904, if a dispute arises over the distribution of net equity (assets - liabilities), during a "voluntary" dissolution of a corporation, then any shareholder can file a petition in Superior Court to have the court resolve the dispute (or, appoint a receiver to control the distribution entirely).

You could state that unless the distribution is "fair," then you want cash, and if you can't have cash, then you will sue, and the lawyers will be the only ones to make any money.

Hope this helps.

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Customer: replied 6 years ago.
In my opinion, since we consist of one main customer and bunch of small ones. To distribute fairly is impossible. There is no way to split the key management and there is no way to split the main customer.

Also, I, the minority here don't want to dissolute the business at all. Especially since this has been our best year ever. Is there any way I can keep this dissolution from happening? If no, is there any way I can force a cash pay out?

Thank you for your patience.
Expert:  socrateaser replied 6 years ago.
A 50%+ majority can absolutely dissolve a California corporation. Your only recourse, assuming that the other owners won't listen to reason, is to ask a court to fairly distribute the assets -- which may require a receiver.

A receiver will charge pretty big bucks to ensure a fair distribution. Sometimes that can get you a settlement, because the alternative will cost a small fortune.

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