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Ask a Lawyer -- Corporations
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Brought to you by MedLawPlus.com®-- Corporate Bylaws and initial board of directors resolution Price: $14.99 (free trial) |
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Question: I started an S corp in California with my brother in 2004 as a minority shareholder. We had a falling out because he was not running the business properly. I emailed him a resignation letter in august 2005. It appears he is still running the business. Are there any forms I need to fill out to make this official and protect myself. Response: Most states (including California) do not make a distinction between an S and C corporation. All for profit corporation are treated essentially the same. If you wish to resign from the management of the corporation, then it is necessary to resign as an officer and/or director. Check the corporation's bylaws to see if they specify a method for withdrawing from these positions. California Corporate Code Section 305(d) provides: Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.As to resigning as an officer, California Corporate Code Section 312(b) provides: Any officer may resign at any time upon written notice to the corporation without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.Is an email effective as "written notice" under the California Corporate Code? I believe it is according to California Corporate Code Section 195 which defines "written" as including "an electronic transmission". It is not uncommon for shareholders of closely held corporations to guaranty the debts of the business. If you executed such a guaranty with a lending institution or a supplier, you'll have to negotiate terms with the lender for terminating the guaranty or at least limiting it. In any case, I would notify the lender that you shall not guaranty any new loans to the corporation. As to the final issue--terminating your interest as a shareholder of the corporation--I am not sure how a shareholder voluntarily returns his or her shares to the corporation and could not find any procedure set forth in the California Corporate Code. The first place to check would be the bylaws. Another option would be to have your brother purchase your shares for $1. Submitted: 1-23-2007; Jeff, CA Response: 2-14-2007; JJR Add A Comment |
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