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jag1149 · Aug 25, 2014, 08:17 AM

I am a 50% shareholder with 2 other partners each having 25%.We are the only directors. They are not acting in best interest of the corporation and have the majority vote over. What steps can the corporation or I take to have them removed as directors?

smoothy · Aug 25, 2014, 09:24 AM

How can they have the majority vote of anything when they only have a total of 50% while you have the other 50%. They would need 51% to have a majority vote.

ScottGem · Aug 25, 2014, 09:33 AM

As noted it would seem that you have a deadlock, not a majority. Therefore the only way would be to file a lawsuit against them if you can prove that they are acting against the best interests of the corporation under the corporate bylaws.

AK lawyer · Aug 25, 2014, 09:44 AM

As I read it, OP owns exactly half of the shares, but since there are three directors, the other two would be the majority of the board of directors.

As noted, OP would have to go to court. Whether the other two directors can be removed will depend upon a close reading of the pertinent provisions of the corporations code in whichever state it is where the corporation is incorporated.

ScottGem · Aug 25, 2014, 09:59 AM

but since there are three directors, the other two would be the majority of the board of directors.

It is my understanding that when it comes to shareholder votes, each person votes the number of shares they hold in their name and by proxy. But its certainly possible that the by-laws allow for certain votes to be director. In such votes then yes they hold a 2-1 margin.

AK lawyer · Aug 25, 2014, 10:04 AM

No. Each director normally has one vote on the board of directors.

Your understanding would be correct if you were looking at shareholder voting. But the board of directors operates differently.

Think of it as a legislative body: The US House of Representatives, for example, has several hundred members. While a representative is elected by a majority of voters in his or her district, each member of the House has one vote. Similarly, with a corporation, the owner of each share has one vote for the purpose of electing directors, and each director has one vote on the board.