REMOVING A DIRECTOR OR OFFICER OF A CORPORATION

In a recent dispute where I was representing the children in a family owned business against their father who was looting the business, misappropriating assets, and hiding business bank accounts, we turned to New York’s Business Corporation Law Section 706 as part of a strategy to aggressively take back control of the business.

Business Corporation Law Section 706 states:

(a) Any or all of the directors may be removed for cause by vote of the shareholders.  The certificate of incorporation or the specific provisions of a by-law adopted by the shareholders may provide for such removal by action of the board, except in the case of any director elected by cumulative voting, or by the holders of the shares of any class or series, or holders of bonds, voting as a class, when so entitled by the provisions of the certificate of incorporation.

(b) If the certificate of incorporation or the by-laws so provide, any or all of the directors may be removed without cause by vote of the shareholders.

(d) An action to procure a judgment removing a director for cause may be brought by the attorney-general or by the holders of ten percent of the outstanding shares, whether or not entitled to vote.  The court may bar from re-election any director so removed for a period fixed by the court.

So, yes, you might be able to effectively “kick out” your business partner in a corporation. This can be an aggressive strategy for a shareholder in a corporation and one well worth considering to give you the edge in your lawsuit.

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