Question

John Smith is a minority shareholder in a family owned corporation that is organized under the Business Corporations Act. The corporation is run by John’s grandfather Michael Sanchez, who is a shareholder and also sits on the Board of Directors. The other shares of the corporation are equally distributed among other family members who hold a two-thirds majority.

John has recently begun fighting with his grandfather and other family members about the corporation. Specifically, John is unhappy with certain actions of Michael in his role on the Board of Directors as well the inaction of the other shareholder family members who have ignored John’s concerns. It appears that Michael has signed contracts with other businesses that have provided direct benefit to him, while damaging the family owned corporation. The other family shareholders have also voted to fundamentally change the business of corporation in a way that John disagrees with. John has consistently requested information about these changes and the financial condition of the corporation but has been ignored by everyone. In addition, John has never received a dividend from the corporation.

Please write a memorandum explaining John’s rights and responsibilities as a shareholder of the corporation. Take care to also identify any actions that John may take to rectify the situation he is facing.

Answer 1