Legal Question in Business Law in Nevada

CEO firing a President

Two partners, one named President, one CEO. They have equal shares in an internet business. The President shoots another individual. He is in jail waiting trial. Can the CEO fire him or must he be removed by the shareholders?


Asked on 2/21/01, 4:27 pm

3 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: CEO firing a President

You've confused the LawGuru attorneys attempting to provide advice by mixing the terminology used in describing corporation and partnership businesses.

To start, is this business incorporated? If not, it is almost certainly a partnership, although there are other forms of business organization.

If it is a partnership, there will be a partnership agreement. If the agreement isn't in writing, it may be oral. If there was not even an oral agreement, the terms of the agreement will be found by inference from the past conduct of the partners and application of traditional partnership law to the facts. The duties and responsibilities of partners are determined from the partnership agreement, as are provisions for removal of a partner and for dissolving the partnership. In many cases, but not all, removal of a partner has the effect of dissolving the partnership entirely.

In the likely event this is an incorporated business, you need to look to the following, and probably in this order of importance: (1) the bylaws, (2) state law, and (3) the articles of incorporation.

The bylaws will (or SHOULD) contain provisions for removal of officers and directors for cause. The most usual provision would be that the president serves at the pleasure of the board of directors and a majority of the board (or a duly authorized committee of the board) can fire the president, or at least strip him of duties and authority. If the president has an employment contract, the company would nevertheless be empowered to strip him of duties but could remain liable for his salary, etc. under the contract. However, shooting someone is probably a breach of any well-written executive employment contract, which would get the company off the hook for salary.

Note Corporations Code section 302 which states: "The Board may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony." Section 303 provides for removal without cause and section 304 for removal with cause. If this person is a director as well as the president, removal from the board should be under 303 since neither 302 nor 304 applies prior to a conviction.

Whether a person is a partner in a partnership or an officer in a corporation, it is important to distinguish between his role as an officer or partner and his rights and role as an owner. Removal of a partner or firing of an officer does not affect his economic rights in the business as an equity participant.

This business probably needs to have an attorney review its setup and organization and give its leadership some basic legal coaching in addition to counseling it on how to handle the current incident. The CEO needs legal advice on removing and replacing the president and also on the responsibilities and legal perils of running a business, whether it be partnership or corporation.

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Answered on 4/04/01, 2:28 pm
C. David DuMond Law Offices of David DuMond

Re: CEO firing a President

The president didn't shoot somebody's lawyer, did he? You should be consulting with a real lawyer for real money on this one. The real lawyer will need to have a copy of any employment agreement, see copies of the minutes of the board of directors showing when the president was hired, see copies of the company articles of incorporation and by-laws and otherwise know the terms of the person's employment. Just because a person has shot someone (unless it was a lawyer) doesn't disqualify him or her from exercising authority as a corporate officer. Generally, corporate officers can only be fired by the board of directors, and if they can't do it, then the directors can be instructed to do it by shareholder resolution, and if that can't happen, then you have to apply for a court order, possibly even a receivership.

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Answered on 4/04/01, 8:38 am
Ken Koury Kenneth P. Koury, Esq.

Re: CEO firing a President

Your question does not make sense. Partnerships do not have shareholders.

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Answered on 4/04/01, 11:42 am


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