Video Summary:

In this transcript from a video by Gale & Vallance, Andy Gale discusses key strategies for resolving shareholder deadlocks and the potential steps for dissolving a corporation in Orange County. This video provides an overview of practical options such as reviewing corporate records, using dispute resolution agreements, consulting corporate bylaws, retaining third-party mediators, and considering dissolution when necessary. The discussion highlights best practices for maintaining corporate operations and ensuring smooth decision-making between equal shareholders.

To learn more about dissolving a corporation in Orange County and ensure proper compliance, check out our detailed article on dissolving a corporation Orange County procedures and best practices.

Please note that this video does not constitute legal advice, and we recommend contacting a lawyer for guidance specific to your situation.

Introduction – 00:00:00

Hi, I’m a trusted adviser and a corporate attorney. My name is Andy Gale, and I specialize in assisting shareholders and business owners with the formation of corporations and the maintenance of corporate records.

Client Scenario – 00:00:14

This week, I had a call from a client who owned a small business corporation. He was a 50% shareholder with another person, and they had run into a problem. This is not an uncommon issue for shareholders of corporations. When they originally formed their corporation, they decided they wanted to be 50/50 owners. When things are going well, this arrangement works fine because both parties are working together and making equal decisions.

The Deadlock Problem – 00:00:43

The problem arose when the two shareholders disagreed on a business matter related to the corporation. They were stuck, at a standoff, and unsure of what to do, so they called for suggestions.

Resolution Options Overview – 00:01:00

I explained that they essentially had four different directions they could take.

Option 1: Dispute Resolution Agreement – 00:01:06

The first place to check is their corporate records for a document called a dispute resolution agreement. The purpose of this agreement is to establish a formalized process for shareholders with equal power to work through conflicts. If such an agreement is in effect, its rules must be followed.

Option 2: Corporate Bylaws – 00:01:28

The second place to review is the corporation’s bylaws, which form the framework for how operations run. One critical part of the framework is how meetings are conducted. There are annual meetings and special meetings. In this case, a special meeting would likely be appropriate. The bylaws outline how the meeting should be run, including notice requirements and agenda items. Formalizing discussions through a special meeting helps shareholders move past conflicts constructively.

Option 3: Third-Party Mediation – 00:02:16

A third option is to hire an outside, third-party mediator. Many cities have companies offering dispute resolution services, where an independent professional, such as a retired judge, helps guide the shareholders through the conflict. The mediator formalizes the process and assists in finding a mutually satisfactory resolution.

Option 4: Dissolution of the Corporation – 00:02:41

The fourth option, if necessary, is for the shareholders to agree to dissolve the corporation. A corporation can be dissolved with the approval of a shareholder holding 50% or more of the shares. While this is often the least desirable solution, it may be necessary if the other methods fail. Ideally, one of the first three options provides a better way for shareholders to move beyond the problem and continue running the business.

Closing Remarks – 00:03:14

I hope this information was helpful. Below the video, you will find links to other videos we’ve created, which may assist you in managing your corporation.

Conclusion – Dissolving a Corporation Orange County

This video highlighted key strategies for resolving shareholder deadlocks and provided an overview of dissolving a corporation in Orange County. Understanding your corporate records, bylaws, and the available dispute resolution options is essential to maintaining smooth operations and minimizing conflicts. Always consider consulting a qualified attorney to ensure you are taking the proper legal steps for your specific business situation.