Can I fire a shareholder?

I have a secretary who is also an officer/shareholder of our small corporation. She has made banking errors, bookkeeping mistakes, employee time card errors, etc. Every facet of her duties have been less than sub-par. Even though she’s an officer/shareholder can I fire her?

Posted  02-09-2011

Ann Kiernan replies:

In many small corporations, there are written contracts that specify the rights of shareholders who are also officers and/or employees. For instance, a shareholders’ agreement might specify that employment can be terminated at will, or only for good cause. It does sound like you may well have good cause, based on her performance.

But I strongly urge you to get legal advice before deciding whether to fire her. In many states, corporation statutes include provisions protecting the rights of minority shareholders against oppression by the majority. For instance, in New Jersey, where I practice law, our Supreme Court has found that someone who owns a minority interest in a small corporation commonly does so, not only in the hope of enjoying an increase in the value of the shares, but also for the assurance of employment and a voice in the operation and management of the business. When the majority frustrates a minority shareholder’s “reasonable expectation” of continued employment, courts have found that such action constitutes unlawful oppression.

So, before taking any disciplinary action, please consult a local lawyer who knows both employment law and corporate law in your state.

 

Information here is correct at the time it is posted. Case decisions cited here may be reversed. Please do not rely on this information without consulting an attorney first.

2015-06-08T21:43:54+00:00

About the Author:

Ann Kiernan has litigated claims of wrongful discharge and discrimination before state and federal courts and administrative matters before the New Jersey Division on Civil Rights, the National Labor Relations Board and the Equal Opportunity Employment Commission, representing both employers and employees. Ms. Kiernan co-hosted The Employee Rights Forum, a weekly radio call-in show reaching up to a half-million listeners in the New York metropolitan area, and her articles on employment law have been published in many books and magazines. Both as a firm partner and as a director, Ms. Kiernan gained solid experience in management and human resources compliance. She has worked with Fair Measures since 1997.