Legal Question in Business Law in Indiana

Unlawful transfer of corporation real estate

My wife & I own 60% of a family business. My father owns 40%. The 3 of us are the Board of Directors. I am the Pres., my wife is the VP and my father is Sec/Tres. Our corp. by-laws state the following ''the Sec. & Tres. shall act under the direction of the Pres.'' ''The Pres. shall be CEO, put into effect the decisions of the Board''. ''The Pres. shall supervise & control the business affairs of the corp''. '' The Board may authorize any officer to enter into any contract or to execute any instrument for the corp''. My father (unknown to us) transfered our corp. land & building to himself 6 months ago. We just learned of this 4 days ago. Under Indiana Law IC 23-1-41-1 and 23-1-41-2, can he do this without the knowledge and approval of the Board of Directors? He made this real estate transfer as the Sec/Tres of the corp.

Thank you in advance!

Asked on 7/02/07, 4:08 pm

1 Answer from Attorneys

C. David DuMond Law Offices of David DuMond

Re: Unlawful transfer of corporation real estate

If you are sure of your facts, then I suggest you hire counsel and file an action to rescind the transaction as soon as possible. Record a lis pendens notice immediately after filing your case. Your father's conduct, as described, is unlawful, is a breach of his duty as an officer of the corporation, and can be rescinded. You should file your action and a lis pendens before the man sells the property to a third person. You could still get it back, but it will be more difficult. Be mindful that these family business situations often demand much more than mere legal considerations. What if your father thinks he set you and your wife up in the business, but that you two have been misbehaving toward him and shown little gratitude? If you sue him, does he have power to deny you other benefits? What if he disinherits you and your progeny forever? Would it matter? What if your company is thrown into a receivership because of this? Could you buy out his interest? Could the company be profitably liquidated? If at all feasible, try to think creatively and compassionately about his motives. But first of all, consult your own counsel, someone experienced in real estate or corporate litigation and not connected with your father. Good luck.

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Answered on 7/02/07, 6:04 pm

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