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How do i foreclose on a personal loan to a sub S corp and…

how do i foreclose on...
how do i foreclose on a personal loan to a sub S corp and seize the stock and assets (patents)
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8/18/2017
Legalease
Legalease, Attorney
Category: Business Law
Satisfied Customers: 16,440
Experience: 14 years experience corps, LLC's and partnerships; preparation, negotiation of complex contracts and business agreements
Verified

Hello Bill --

Do you have a written loan agreement with the sub S corp which specifically gives you a lien on the stock and/or patent assets? If yes, did you register the lien at the patent office where the patents are held (generally speaking, this would be the US Patent and Trade Office but some states also have a registration office for patents and will accept patents from its residents). ?

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Customer reply replied 11 months ago
The loan agreement specifically states that it was to secure FDA approval, patent, and legal expenses to secure the patent. However, it does not give a security interest in them. We would need to argue that we have some form of purchase money security interest. I also paid for the creation of the company, which the guy did without a lawyer, put in he was sole owner of 30,000 shares, no bylaws,. This is really a general partnership where 4 guys kicked in money with a percentages payout agreement of net profits in proportion to their contribution. This is how all payouts have been. Now that we are making money, he is jacking expenses up and trying to sell the company. Since we are on the board, can we grant security interests in the stock of the company and patents?

-H​ello There --

Is it stated in the Sub S Corp application to the Secretary of States office (where all corps and LLC's are formed) that you are all "Directors" of this company? You stated that there are no bylaws but I need to know how you are all directors -- is it onfile with the government in the SubSCorp paperwork or is it simply by verbal agreement of the 4 of you?

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Customer reply replied 11 months ago
all directors in original and in articles of organization. in the 2016 filing he listed everyone as officers and added last person on second page as director. It was an error on his part, but he might argue only 1 guy is director. He claims 100% ownership so probably can disband board. He denied my demand to review financial records and said I was only a lender who gets 17.5% of profits.

Hello again -- Sorry for the delay

What he did was NOT an error because there are no bylaws and he gave himself the power to fire all officers under Corporation Law. I am now going to be brutally honest on the legal views of this matter because it really sounds like he is out to give the rest of you a bath on how the company is run, what is done with any profits, and how much expenses he can charge. Unless your loan agreement contained language that you would be taking a "security interest" in the patents, assets, etc and you subsequently filed written liens at the USPTO on the patents and the Secretary of state where the stock issuance was done, there is nothing that you would be permitted to seize in a lawsuit.. Unless your loan actually has the granting of the security interest in whatever item it is that you want to foreclose on (patents, stock, assets, etc) then you seem to have a non-collateralized personal loan with the company. Now, this does not mean that you cannot bring a lawsuit against him it just means that you must bring a Breach of Contract Action for the calling of the loan (assuming he is either behind in payments or he has done something else to support the breach of contract in the loan agreement). Regarding the re-arrangement of corporate paperwork in 2016 (giving himself the right to terminate you all as officers AND the Director has the legal right under general corporation law to sell the stock for any price or no price without the officers knowledge or consent). Regarding a general oral breach of contract regarding the business formation can also be pursued but you would need the 3 of you on board with such a claim with all of you suing for actual written ownership rights to the corporation. In either a written breach of contract over the loan agreement or an oral breach of contract with all of you suing him regarding the formation of the company and what it is supposed to be and what it actually is, the damages process is the same at the end --- you have to seek a monetary amount against him and the court can review his assets and the company, etc. with a fine tooth comb in order to get you paid what you are actually due under the loan agreement and/or as an actual owner of the company. If you want to continue with the company then you need to seek a court order forcing him to hire an experienced business formation attorney to fix the ownership rights in the SubS Corp (we call this "injunctive relief" which forces a party to take or stop a specific action and then any damages in money you have lost can also be awarded.

-

My suggestion to you here is that if you believe that the company is having and will have some real value potential to it, then band together with the other 2 co=owners and sue for injunctive relief to force him to put all of your names properly on the Corporate Documents. Because at this point it sounds like He is correct and you are simply a lender who gets some profit To do such a case, you really need an experienced business attorney in your state to get the ball rolling and the best place to find lawyers are through you county and state bar referral systems (they are all online).

I know it was not quite what you wanted to hear, but there are legal ways to fix this (as I noted above) and I hope you will consider taking one or more of them. Please press a positive rating above so that I will be credited for my time assisting you today. THANK YOU VERY MUCH FOR CHOOSING JUST ANSWER. MARY "Legalease"

Legalease
Legalease, Attorney
Category: Business Law
Satisfied Customers: 16,440
Experience: 14 years experience corps, LLC's and partnerships; preparation, negotiation of complex contracts and business agreements
Verified
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