Can a President of a 10 person S-corp in Georgia terminate his business partner who acts as the Vice President of the company...
Full Question:
Answer:
The answer will depend on the terms stated in the bylaws. Typically, the bylaws state that an officer is removed by a vote of the board of directors. I suggest you consult a local attorney who can review al lthe facts and documents involved.
In some cases, a shareholder's derivative claim may be brought to remove an officer. The claim may be that management’s wrongdoing has directly injured the corporation. For example, the charge may be that directors or officers have breached their fiduciary duties by taking excessive salaries or appropriating corporate opportunities, or that management has improperly declined to enforce a corporate cause of action against outsiders. In these circumstances, the shareholders’ injury (diminution in the value of their shares) derives from the fact that the alleged misconduct has reduced the value of the corporation’s assets. This type of derivative injury is suffered in common by all shareholders according to their proportionate interest in the corporation. The shareholders’ derivative suit was created by equity courts to permit a shareholder to vindicate wrongs done to the corporation as a whole that management, because of either self-interest or neglect, would not remedy. It allows a shareholder to bring a secondary (or derivative) action on behalf of the corporation (and thus all its shareholders collectively) in contrast to the direct (or primary) cause of action in which shareholders assert their own rights. It may be viewed as a peculiar type of class suit in which the shareholder asserts a right of the corporation for the benefit of all who have an interest in the corporation’s success.
The following are GA statutes:
14-2-841. Each officer has the authority and shall perform the duties set
forth in....
Each officer has the authority and shall perform the duties set forth in
the bylaws or, to the extent consistent with the bylaws, the duties
prescribed by the board of directors or by direction of an officer
authorized by the board of directors to prescribe the duties of other
officers. Unless the articles of incorporation, bylaws, or a resolution of
the board of directors of a corporation provide otherwise, the chief
executive officer (or the president if no person has been designated as
chief executive officer) of a corporation shall have authority to conduct
all ordinary business on behalf of such corporation and may execute and
deliver on behalf of a corporation any contract, conveyance, or similar
document not requiring approval by the board of directors or shareholders
as provided in this chapter.
14-2-842. (a) An officer with discretionary authority shall discharge his
duties....
(a) An officer with discretionary authority shall discharge his duties
under that authority:
(1) In a manner he believes in good faith to be in the best interests of
the corporation; and
(2) With the care an ordinarily prudent person in a like position would
exercise under similar circumstances.
(b) In discharging his duties an officer is entitled to rely on
information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by:
(1) One or more officers or employees of the corporation whom the officer
reasonably believes to be reliable and competent in the matters presented;
or
(2) Legal counsel, public accountants, investment bankers, or other
persons as to matters the officer reasonably believes are within the
person's professional or expert competence.
(c) In the instances described in subsection (b) of this Code section, an
officer is not entitled to rely if he has knowledge concerning the matter
in question that makes reliance otherwise permitted by subsection (b) of
this Code section unwarranted.
(d) An officer is not liable to the corporation or to its shareholders
for any action taken as an officer, or any failure to take any action, if
he performed the duties of his office in compliance with this Code section.
14-2-741. A shareholder may not commence or maintain a derivative
proceeding unless....
A shareholder may not commence or maintain a derivative proceeding unless
the shareholder:
(1) Was a shareholder of the corporation at the time of the act or
omission complained of or became a shareholder through transfer by
operation of law from one who was a shareholder at that time; and
(2) Fairly and adequately represents the interests of the corporation in
enforcing the right of the corporation.
