Legal Question in Business Law in California

One would have to review the full set of corporate goernance documents just to start answering your question regarding options. You almost certainly have litigation remedies but short of that it is impossible to say. You really need to see an attorney in person. I have a affiliation with a firm in San Jose whose founding partner is really tops at sorting out this kind of thing, and doing it as efficiently and at as low cost as possible. I believe she does not charge for intial consultations either. Should you require litigation the firm can handle that as well. If you would like contact information for them, contact me at the email in my lawguru profile.

I recommend reviewing Corporations Code section 300, especially subsection (b) and (c). It certainly appears to me that this corporation was devised by well-informed promoters who knew how to raise investor money but retain control with less that a 50% stake. The 65% dissent is not quite enough - 2/3 is required - for many remedial actions against management. In a sense, it may not be worthwhile to mount a legal challenge seeking control, if the company is inherently unprofitable. Maybe Bonnie and Jeff have drained the capital by taking excessive salaries, and possibly there is a profitable business in there somewhere. Nevertheless, I suspect the 65% majority has been skillfully flimflammed. Maybe seeking involuntary dissolution of the corporation under Chapter 18 of the Corporations Code is the best remedy, but quite possibly the investors should write off this venture as a bad experience.

It is impossible to advise you without a review of the shareholder agreement, by-laws and other corporate documents, and acts by the management. In addition, no one will advise you in a public forum, for reasons of confidentiality and attorney-client privilege.

You need someone who is experienced in handling claims by dissident shareholders. An attorney experienced at representing minority shareholders would be useful to you, even though you own 65% of the shares. It may be that you have a claim for breach of fiduciary duty, it may be that you should be examining ways to dissolve the company, it may be that you bite the bullet and write off this investment, it may be that you decide to settle with Bonnie and Jeff to buy them out, and it may be that you have some other remedy.

Litigation of this type of matter is expensive. It is rare that existing management concedes without a fight -- though it happens. I would be seeking an experienced commercial litigator, who has experience with intra-corporate disputes. Many of us do not charge an initial consultation fee, though we will charge for research and review of documents, writing demand letters, and other pre-litigation work. I suggest you start interviewing counsel right away, as this situation is not likely to improve with time.