Legal Question in Business Law in California

Re: Corporation President Theft

You must dissolve the corporation so that you may recover the funds from the President and notice the creditors of the dissolution. Contact me directly.

Re: Corporation President Theft

I have a different view. Dissolving the corporation eventually is probably a good idea, but as a 15% holder, you don't have the power to do so. A majority of the voting power must vote to dissolve, and it's easiest with 100% in agreement. A judge can also order a dissolution, which is what may have to happen here. Next, continued existence of the corporation until its bills are paid may help to protect you from personal liability. Finally, many abandoned and/or failed corporations are never formally dissolved by their boards or shareholders; they simply stop paying the franchise tax and filing statements of officers, and after a few years the Secretary of State suspends them.

I believe there is also a "quickie" corporate dissolution process for corporations that have never done any business, but that doesn't seem to fit your situation, since you have creditors.

The idea of going after the lawyer who set up the corporation for malpractice is also pretty far-fetched. In the first place, you guys probably didn't use a lawyer. If you did, the lawyer's assignment was probably to "get us incorporated," not to provide on-going advice about how to manage a corporation or to do due diligence on the prompters' ethics and honesty.

Instead, everything points to lawsuit against the president. The legal question is what causes of action to bring and whether the causes should be pled directly or derivatively.

Since theft, stealing, embezzlement, etc. are crimes and only the D.A. can initiate criminal actions (although you could consider a police report and see what happens), you need to identify the equivalent civil wrongs and plead them. Coming to mind are conversion, breach of fiduciary duty, and breach of oral or implied contract. You might also seek an accounting, judicially-supervised dissolution, and indemnity.

Re: Corporation President Theft

Being in a corporation is supposed to keep you from being sued for the business debts, that's why they are formed. If the corp didn't follow the rules and the creditors come after you individually, then you'll have to defend yourself and also sue him. Close the business if appropriate, and if you have the authority to do so; and notify the creditors it's closed. Contact the corp lawyer, or feel free to contact me if you need legal help in this.

Re: Corporation President Theft

Adding to what the others have said, these situations are almost always significantly messier when the corporation wasn't set up correctly in the first place - that is, when the owners decided to save $1000 by 'doing it themselves'. But it never ends up getting done, I find. Then, when things fall apart, uncertainty and ambiguity abound.

Re: Corporation President Theft

I would contact the attorney who set up the corporation for you. If it was done correctly, you should have no personal liability. If it was not, someone has committed legal malpractice against you. You may also wish to sue the person who you say stole money from the corporation.