Pres cannot purchase/sell building ????

[Scott Horan]

I am pres of a small c-corp computer store. Everything is secured in my name (as if it were s-corp)as opposed to other 8 owners who own small % of biz. We are contemplating selling the business whose proceeds we will share. A few years ago I purchased the building it is in which contained our store and 2 other tenants. I have cared for the building with no help and the corp is not at all involved in the bldg business other than to pay rent like the other tenants. This saved us from being bought up someone who is buying our whole block and raising rents to force tenants out. Now that selling is a possibility some lawyers who are very minor owners say I must split the proceeds of the building sale between all owners because I did not give them right of first refusal to buy (since the original loans 12 years ago they have not shared in risk). Most are absentee owners.
Can this be true? I have cleaned up fixed up (new roof HVACs, new windows, painting, repair, etc.) for years out of my own pocket and now they want to take MY proceeds??? Can this be?

 

[JETX]

If the building was purchased in your name (not the corp), AND there is no provision in the corp paperwork (minutes, etc.) to the contrary, the building is yours to do with as you please.

Another thing to consider.... were ANY of the corporations assets used to maintain the building (some leases require tenants to pay for certain repairs, exclude these from this consideration)?? If 'non-required' corp assets were used, be prepared to reimburse the corp for them.

Bottom line.... your signature, your payments, your risk, your money... YOUR BUILDING!

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Steve Halket
Judgment Recovery of Houston
[email protected]
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This is my PERSONAL OPINION and is not legal advice! Consult your local attorney for your specific situation and laws!

 

[Scott Horan]

Thank you, Steve. That what common sense seemed to say, but not being a lawyer, I wasn't sure. It is so easy to be intimidated when you are "out of the circle".

 

[Tracey]

Your fellow sharaholders have confused partnership law with corporate law. A partner may not take advantage of a business opportunity related to the p'ship business without giving the p'ship the right to take the opportunity for themselves. A corporate shareholder has no such obligation unless the bylaws so state.

However, as a corporate officer, you may have had a fiduciary duty similar to a partner's to let the corp try to purchase the building. Review the books. COULD the corp have purchased the building? Could it have qualified for financing? Did the board of directors actually know that the building was for sale? If it did, you had no duty to tell them you intended to buy it. The BOD had to decide to make an offer on the building on its own. (This answer changes if you voted against buying the building without telling the BOD you planned to buy it.) Did the BOD ratify your purchase when it signed a lease with you? Did you excuse yourself from negotiating the lease on behalf of the corp due to conflict of interest?

My gut says you're OK, but a creative lawyer could make your life hell for a while. I recommend you spend $1-2k for an opinion letter from an experienced corporate attorney who has lots of malpractice insurance.

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This is not legal advice and you are not my client. Double check everything with your own attorney and your state's laws.