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Dear Dameon:
As I am sure you know, a corporation is made up of shareholders,
directors and officers. A corporation does not have partners, per se. So in
order to address your question in the simplest terms, let's think of the
partner in question as two people: A shareholder and an officer.
(article continued below ...)
First, you want to remove a shareholder. This is often easier said than
done, because once shares have been issued to an individual (generally in
exchange for money, services, or other thing of value), that individual
becomes a shareholder. Period. However, a shareholder agreement can play a
critical role in determining if and when a shareholder can be "removed".
Depending on the provisions of such an agreement, there may be certain
events such as a personal bankruptcy, divorce or disability that might
trigger a forced sale of the shareholder's stock in the corporation. If not,
then the corporation might simply try to negotiate a buy-back of the
shareholder's stock.
Next, let's talk about removing a corporate officer. In a corporation, it
is typically the board of directors that elects and/or removes corporate
officers. A corporation's by-laws define the procedure for removing an
officer, which usually involves the calling of a meeting of the board of
directors and removal of the officer by a majority vote of the board. If
there are no corporate by-laws, or if the by-laws do not address removal of
a corporate officer, then the removal procedure outlined in the
corporation's articles of incorporation would be followed. If the articles
do not provide for a removal procedure, then the corporation would look to
state law--or, more specifically, the statutes governing corporations in the
state of incorporation--for guidance. For recordkeeping purposes, a board
action removing a corporate officer would be documented via a signed board
resolution or written consent.
The officer's employment as an employee of the corporation may also (but
not necessarily) be terminated along with his removal as an officer. If this
is the case, be sure to review any employment agreement that may be in
place, esp. with respect to any payments due in the event of termination.
Chrissie Mould
About the PowerHomeBiz.com Guide:
 Chrissie
Mould has over a decade of experience in business
administration and startup business consulting. She has helped launch
companies in multiple industries and has managed corporate administration
and governance for public and private companies. She is an incorporation
specialist with MyNewVenture.com LLC. The company provides low-cost
incorporation services to entrepreneurs and small businesses. Visit
www.MyNewVenture.com to form
a corporation or LLC.
The opinions expressed in this column are those of the
author, not of PowerHomeBiz.com. Users should not treat the Guide's response as
legal, accounting, or professional advice as all answers are intended to be
general in nature. Such advice can only be properly given by qualified
professionals who are fully aware of a user's specific geographical areas or
circumstances, such as an attorney or accountant.
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