Can I file bankruptcy on an S Corporation as CEO and 50% shareholder without partners permission?
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Answer:
Generally, a corporation's bylaws would dictate what the officers or the company can and can not do and/or the shareholder agreement would address what a shareholder can do with his or her stock. The following is general information regarding corporation law:
The by-laws of a corporation or other entity are its rules and regulations. Bylaws are in effect a contract among members and must be formally adopted and/or amended. They usually specify the number and respective duties of directors and officers and govern how the business is run. They may include rules regarding the conduct of corporate officers, directors, and shareholders, and typically they designate times, locations, and voting requirements for corporate meetings. The exact requirements governing by-laws are determined by state law. The charter creating the corporation usually grants the power to make by-laws in certain persons named, though, when not expressly granted, it is given by implication to the members of the corporation at large, because of the necessity to the existence of a corporation.
The articles of incorporation or the corporate bylaws determine how many directors will serve on the board of directors and how long the directors' terms will be. Directors hold meetings at regular intervals as defined in the corporate bylaws and, in addition, may also call special board meetings when needed. At board meetings, directors discuss issues affecting the corporation and make decisions about the corporation. Before the board can make a decision affecting the corporation, however, there must be a quorum, or certain minimum number of directors, present at the meeting. The precise number constituting a quorum may be determined by the bylaws or by statute. The fiduciary duty held by directors requires them to act with due care, which means that the director must act reasonably to protect the corporation's best interests. Courts will find a breach of the fiduciary duty when a director engages in self-dealing or negligence. Self-dealing occurs when the director makes a decision on behalf of the corporation that simultaneously benefits the director's personal interests.
Corporate officers are the people with day-to-day responsibility for running the corporation, such as the chief executive, chief financial officer and treasurer whose roles are defined by the corporate by-laws, articles of incorporation, and statutes. A corporate officer is a high-level management official of a corporation or an unincorporated business, hired by the board of directors of a corporation or the owner of a business, such as a president, vice president, secretary, financial officer or chief executive officer. Such officers have the actual or apparent authority to contract or otherwise act on behalf of the corporation or business. Officers serve at the pleasure of the Board of Directors, unless the articles of incorporation or bylaws state otherwise. Requirements for the number of votes necessary for removal and whether the removal may be with or without cause vary by corporation. The Board may terminate an officer at any time, subject only to any rights the officer might have under an employment agreement. Similarly, an officer may resign at any time, subject to notice or other requirements set forth in an employment agreement. An officer’s resignation does not affect any contractual obligations of the corporation for documents that were signed by the officer on behalf of the corporation while he or she was an officer.
A shareholder is an owner or investor in a corporation. The benefits of being a shareholder include receiving dividends for each share as determined by the board of directors, the right to vote (except for certain preferred shares) for members of the board of directors, to bring a derivative action (lawsuit) if the corporation is poorly managed, and to participate in the division of value of assets upon dissolution and winding up of the corporation. Shareholders may attend annual meetings or special meetings scheduled at a time other than the annual meeting that are called for a specific purpose, such as to vote on proposals to changes in the corporate charter. A shareholder should have his/her name registered with the corporation, but may hold a stock certificate which has been signed over to him/her. Before registration the new shareholder may not be able to cast votes represented by the shares.
An S corporation may voluntarily revoke its status if it finds that S status is no longer beneficial; it may also lose the status involuntarily. In the first case, a majority of the stockholders is required to make the decision, and a simple notice to the IRS is all that is required. In the second case, any act which disqualifies the corporation's eligibility for S status will result in the termination of that status effective on the date that the infraction occurs.
