Q: In a C-corp comprised of only 2 members with one having majority shares make decisions without approval of other member?
We have a tech startup incorporated in Delaware. We are the only 2 founding members. I am the CEO and have 52% stake , while he is the Technical founder with 48% shares. We dont have any specific contracts or provisions Created other than the basic bylaws. Technical founder has not been preforming his tasks for months and the development of our prototype has not moved forward. We are approaching one year since incorporated. I want to bring on other technical cofounders to carry out the development of our prototype and give them a portion of my cofounders unvested shares . Do I legally have the power to do that as CEO and majority shareholder ?
A:
In a Delaware C-corporation with only two shareholders, the majority shareholder (in this case, the CEO with 52% of the shares) generally has significant control over the company's decisions. However, there are some important considerations:
1. Fiduciary duties: As the majority shareholder and CEO, you have fiduciary duties to the company and the minority shareholder, including the duty of care and the duty of loyalty. This means that your decisions must be made in good faith and in the best interests of the company, not just your own interests.
2. Bylaws and shareholder agreements: If there are any specific provisions in the bylaws or a shareholder agreement that require the approval of both shareholders for certain decisions, you must adhere to those provisions.
3. Unvested shares: If the technical founder's shares are subject to a vesting schedule, you may not have the right to unilaterally take away or reassign their unvested shares without their consent, unless such a provision is clearly outlined in a contract or agreement.
4. Legal risks: Even if you have the legal authority to make decisions as the majority shareholder, taking actions that significantly harm the minority shareholder's interests could lead to legal disputes, such as claims of minority shareholder oppression or breach of fiduciary duty.
Before taking any action, it is highly recommended that you consult with a corporate attorney who can review your specific situation, including your bylaws and any agreements, and advise you on the best course of action to minimize legal risks while addressing the company's needs. They can also help you navigate the process of potentially bringing on new cofounders and adjusting equity stakes in a legally compliant manner.
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