Expert: John Varghese - 1/26/2010

Question
Hi John.

Hopefully you can answer a question for me.

I own 20% of the shares of a small California Corporation. There are four other S/H, each owning 20%.

The other 4 S/H are Directors - I am not.

I have been asking for these folks to meet, form a strategy, focus the business, put in place the proper controls to control management, resolve the issue of a lack of operating budget and oversight, and perpetually late financial statements and reports (if they are issued at all) and the lack of financial control over the President (who is one of the 20% S/H - and the only S/H employed by the company).

What steps can I take to get things under control when the President refuses to hold meetings, produce financial reports, operate to a budget, operate under checks and balances, etc.

Can I insist I be made a Director? How?

Thanks much!

Answer
Hi Ron,
Please make a complaint to Companies Department of California, as a minority shareholder pointing out the discrepancies. It is the duty of the Companies Department/Registrar to oversee the corporate governance plan for all corporations, and to ensure that financial statements are properly filed and meetings of shareholders held in time.
Since you have 20% of voting rights and the others control 80% you can be a director only if majority share holder support you. Try to convince other shareholders about the discrepencies and the need for tight control, which may help you in getting yourself to the management.

Regards

John Varghese