Houston, TX asked in Business Law for Delaware

Q: Can I contest action taken by shareholders on the basis of lacking authority to take action and voided corporation?

I cofounded a company (became shareholder, officer and director). The company was incorporated in Delaware by the other founder (CEO and board member). The CEO and I had various disagreements over the first 2 years... long story but I ended up citing him with grave misconduct and negligence in writing (outside the scope of this question). Additionally, we did a board resolution to limit his power. The company failed and has not been in business for a year. Recently I discovered that the CEO neglected to pay franchise tax; therefor the corporation became void. The CEO then called a "special meeting" of shareholders in which he appointed his friend as a director to replace me. He used his lawyer as proxy vote as well. I did not attend the meeting protesting that he is not authorized to take action based on BOD resolution, unethical conduct above PLUS based on the fact that the corporation is void and any action would require ratifying by the original board of directors. Can I contest?

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1 Lawyer Answer

A: Sounds like a messy situation. A lawyer should review the organizational and board documents (bylaws and board resolutions in particular, as well as examine whether the special meeting was properly noticed). There are many questions here, and they can't be answered without reviewing those documents first. Talk to a local business lawyer.

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