Suppose you are the majority shareholder and the officer-president of a CA corporation that is closely held. One of the corporation’s officers, who also owns 20% of the business, is not performing up to par in his official duties, and you have been looking to have him removed from power for a while now. What is the appropriate way to have him removed from his officer position?
How do I remove an officer or a shareholder
from my Corporation?
The president of the corporation has the option to remove a slacking officer from his position. Unlike in a 50-50 split situation, where the president’s only option is dissolution. In a corporation, the board of directions has the power to control the nomination of officers and the removal of officers. Typically, a majority of the board just needs to vote against the slacking officer. Bylaws can be amended or set up to require this type of voting option. Therefore, it is essential to have a business law professional assist you in drafting the bylaws for your corporation since the board must observe every rule contained in the bylaws.
In general, the officer/shareholder receives notice of the meeting. The notice informs him that he will be removed from his position. The voting members of the board first list their responsibilities and determine whether or not the officer in question met his duties in conducting his operations. The slacking officer’s conduct is held to the standard of a reasonable officer in the same position. The voters then document how the officer was deficient in his duties. This is a precaution to protect the corporation against any potential wrongful termination claims on the part of the slacking officer. Then the board holds a vote. Even if the slacking officer voted in favor of himself at the removal meeting he would be outnumbered.
However, it is important to note that even though the officer has been voted to be removed, his vote and shares are not affected. The minority shareholder still owns his minority share of the company.
The officer may choose to resign at any time. If he does so, the resignation takes effect immediately upon delivery to the corporation. The remaining directors then have the opportunity to appoint a new director to fill the vacancy or amend the corporate documents to reduce the size of the board. The corporation then files documents with the California Secretary of State to inform them of the discharged officer’s removal of power.
Additionally, it is important to inform anyone the officer worked with that they are no longer working for the corporation to defend against any claims of apparent authority.
If you need to talk to a business lawyer about a project such as this, we would be delighted if you would call the Incorporation Attorney at the Law offices of Gale and Vallance (714) 634-4838.
California Small Business Attorneys Home Services Intro – A Processed Video Transcription
Hi, my name is Andrew Gale. I’m a small business attorney and a corporate lawyer. Thank you for stopping by my office.
Do you have a mature corporation or a small business startup? Do you need help incorporating your business? You just have a quick question? Would you like assistance in selecting the right business entity for your business? Do you want advice regarding a seasoned business from an experienced small business attorney?
Talk to a Small Business Attorney
Small Business Attorneys Orange County
Talk to us today, the small business lawyers and corporate attorneys at our offices serve the legal needs of individuals, partnerships, S corporations, C corporations, and limited liability companies all through southern California, and that includes Orange County, Los Angeles, Riverside, San Diego, and San Bernardino County. Now we think that the whole point of starting a business is to make money through steady growth and long-term success. Securing healthy business growth and long-term success requires smart business and legal planning.
Our corporate attorneys and small business legal services ensure that our clients are prepared to operate their businesses properly from the start in order to avoid common legal traps entrepreneurs face when they don’t have the help of experienced small business lawyers. Our small business attorneys Orange County also help keep those businesses running smoothly.
Why Choose Gale and Vallance Small Business Lawyers?
Gale and Vallance Small Business Legal Services
So why pick us? Well, we are small business owners just like you, we treat you like friends, and we are a small business law firm that understands the needs of small business owners. Our clients want us to roll up our sleeves and get to work with them.
We have over 30 years of experience; we have helped over a thousand small business and corporate clients; we are rated by our colleagues and our clients as experts in what we do. We have worked inside of businesses as owners and lawyers. We do not have billable hour requirements like the lawyers in the big law firms therefore we don’t waste time on issues that are not really there.
We do not pass off clients to inexperienced associate lawyers then double or triple charged for the review of their work; we respond properly to phone and email messages usually within the same business day. The bottom line is that we don’t do work that our clients don’t need.
What Makes Gale and Vallance Corporate Attorneys Different?
Andrew Gale – Small Business Attorney
So what makes us different? Well quite frankly, we practice law in the 21st century using such technologies as video conference, SKYPE, email, electronic document signing, cloud storage, document transfer to efficiently and effectively meet your needs. This strategy allows us to reduce attorney’s fees and quickly deliver more affordable small business legal services.
We offer flat transparent rates that can be paid monthly. If you work with us you get small business legal services that fit your business with fees you can manage.
Start just by talking to us! Try our no charge, no-obligation initial consultation. Does that sound fair? I sure hope so and I really look forward to meeting you. Again my name is Andrew Gale.
Visit Gale and Vallance Small Business Attorneys Orange County website now for more information. Go to www.incorporationattorney.com/.
Corporate Attorneys Orange County for Incorporation Services – AProcessed Video Transcription
Your corporation is a fortress, an entity to protect you from all sorts of unusual circumstances. Should you be sued, audited by the IRS, or involved in any kind of legal dispute, your corporation should protect you from losing everything.
Unfortunately, your corporate protection could easily be lost because of inadequate corporate records keeping.
Incorporation Services by Gale and Vallance Corporate Attorneys
Andy Gale – Gale and Vallance Corporate Attorneys
Hi, I’m Andy Gale one of the corporate attorneys Orange County and the managing partner for the law firm Gale and Vallance. Your corporation can be the fortress that you thought you always had.
We made the process for incorporation services easy, affordable, and convenient. I invite you to take our risk assessment survey and have us audit your corporate records with no cost or obligations to you. Get your corporation back on the right track by building record-keeping into the routine of your business.
Andy Gale of Gale and Vallance Corporate Attorney Orange County
Hi! I am a trusted advisor, I am a corporate attorney Orange County, and my name is Andy Gale. I specialize in assisting shareholders and business owners in formation of corporations and maintenance of corporate records.
This week I had a call from a client who owns a small business corporation in Orange County. He was a 50% shareholder with another person and they went into a problem. It’s not an uncommon problem with shareholders of corporations but when they originally formed their corporation they’ve decided that they wanted to be 50-50 owners and when things are going well, of course, that’s a good thing because when they are working together and making decisions.
The problem however arose in a situation where the two shareholders had a disagreement as to what ought to occur in a business matter in relation to the corporation; so they were stuck, they were at a standoff and they didn’t know what to do. So they called to ask a corporate attorney Orange County for some suggestions.
4 Methods to Resolve Corporate Disagreements
Dispute Resolution Agreement – Corporate Records
First Option: The Dispute Resolution Agreement
I told them that I thought that they had basically four different directions to go. The first place they needed to look is to see whether or not in corporate records they have the document what we call the “Dispute Resolution Agreement”. The purpose of the Dispute Resolution Agreement is that it will set out a formalized process on how shareholders with equal power would actually work through a situation like this, and if there is such an agreement in effect it is those rules that must be followed.
Second Option: Bylaws of the Corporation
Call for a Special Meeting
The second place they should look is in the “Bylaws of the Corporation”. The bylaws of the corporation are essentially the framework for how exactly an operation would run within the corporation. One of the pieces of the framework is how do we do meetings? There are two kinds of meetings, regular meetings, and special meetings. In this case, it would probably be a special meeting.
There will be a process set out in the bylaws on how exactly that meeting should be run in terms of when do we give notice, how much time notice must be given, exactly what the agenda items will be. But it’s a very good idea when the shareholders get stuck to formalize the discussion process by exercising the right to call a special meeting and having a special meeting to discuss this particular issue.
Third Option: Third-Party Mediator
Third-Party Mediator
A third option would be to retain an outside third party mediator; there are companies in most cities that offer dispute resolutions services wherein you bring in an independent third party like a retired judge explaining the matter in front of them. The judge will formalize the process and assist the shareholders that are stuck in coming to a resolution of the problem that would be mutually satisfactory to both parties.
Final Option – Dissolve a Corporation
Dissolve a Corporation
And finally, the fourth way to approach it would be, if necessary, the two shareholders could agree to actually dissolve a corporation. The corporation could be dissolved on a vote of a person holding 50% or more of the shares and in this particular case that was the factual scenario. To dissolve a corporation of course is probably the worst of all of the solutions and ideally, one of the other three things that we’ve discussed earlier would be the most effective way for the shareholders to move beyond the problem and get back to running their company.
I hope this information was helpful and if you want to look down below this video, you will find some other links to other videos that we, Gale and Vallance Corporate Attorney Orange County created that hopefully would be of some assistance to you in running your corporation.
Highly recommended!
Andy Gale & the associates at Gale and Vallance were awesome in setting up the CA Professional Nursing Corp for ARF Admin Solutions. They were very responsive and knowledgeable from the start. Highly recommended!
George
01/01/2023
Business legal services
Gale & Vallance provided excellent business legal services. The firm was professional, prompt and prepared. The entire process of starting a new corporation was easy and affordable. They have my recommendation.
Raj
07/10/2022
Highly Recommend!!!
I met Andrew Gale through a mutual friend several years go. I was so impressed with their business practice that I made it a point to get to know the attorney to expand my own business. Several years later following their advice i am successful with my business endeavors and do not make any decisions unless i consult with them. Not only do they manage my corporations but also literally help 30 of my clients who use their services. Rare gems in the industry. Highly recommend Gale and Vallance.
X
Incorporation Attorney
1820 W Orangewood Ave Ste 104a, Orange, CA, United States
This firm is excellent, efficient, reliable, with great valuable expertise and very thorough. Their dedication to providing great work and service is apparent in their kind, supportive, consistent great communication. Including providing consistent updates on new laws and regulations. Working with them and having them on my team, I have the confidence and reassurance that all services provided will be of great assistance and help to the continued positive growth and success of my corporation business along with the maintenance of keeping in compliance with and within federal state laws and regulations.
Hannah K
27/01/2024
A trusted colleague/friend of mine actually referred me to Andy's firm and I'm really grateful!
He and his team were incredibly prompt, informative, helpful, and patient (with inevitable questions that came there way by a new business owner like myself). With all the specificities it takes to create a business, this team was awesome in communicating with me and assisting me with navigating not only the needs to get the ball rolling but also how to keep it rolling and with tips to help with bank accounts and accounting packages (if I were to want to take those routes).
They were also very neutral in providing all the options possible and when I requested advisement or pros/cons, they were able to share these promptly and in a way that helped me choose what was best for me.
I'm glad to have worked with them and will continue to work with them
Courtnie L.
07/11/2023
I am so grateful for Andy Gale and his firm's help in getting my S Corp established. He has great expertise and I feel more at ease knowing everything was set up properly with their assistance!
X
Incorporation Attorney
1820 W Orangewood Ave Ste 104a, Orange, CA, United States
Andy and his team were a pleasure to work with! As an LMFT opening a private practice, I was nervous and felt like I didn't know what I was doing. Andy did a great job at explaining everything step by step. I got off of our kick-off call feeling confident and ready to take the next step to opening a practice! I decided to go with a corporation for my private practice. Andy and his team are thorough and answered all my questions throughout the process. I was surprised how quickly everything was taken care of. They also sent me emails along the way, giving me updates. I will be using them for my yearly legal needs. 10/10 recommend!
Julie Eyssallenne
12/11/2023
Andy and his team of professionals are amazing to work with. Not only are they extremely knowledgeable and professional, but they are also very friendly and easy to work with. They will always be my go-to. I appreciate Andy and his team!
Z D
12/01/2024
I could not be more pleased, and frankly impressed with the expertise, attention to detail, follow-up and professionalism of the whole office staff. Andrew Gale Esq is extremely knowledgeable of his craft. His overall approach to corporation creation and management took any doubt or apprehension I had about the process.
Thank you so much for everything and I look forward to a long relationship with your legal practice.
Zouhair Kevin Daif, FNP, Nursing P. C.
