What is a corporate partner’s rights regarding a possible bogus debt?
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What is a corporate partner’s rights regarding a possible bogus debt?
I own 45% of a sub-chapter S-corp; my partner owns 55%. We recently closed our nightclub and are in the middle of disolving the corp. We own a liquor license worth $100 k. My business partner’s father owns the building we are in. Now that we have closed the nightclub, my partner is claiming that we owe his father (landlord) $45.000 in back rent that my partner claimed he has fell behind on (about 6 years ago, I was kicked out as president of the corp and my partner took over as president). My partner did not call a shareholders meeting to inform me that we were falling behind on rent and I feel this is a false claim. What recourse do I have in this matter and am I responsible for 45% of this debt?
Asked on December 8, 2014 under Business Law, Indiana
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 9 years ago | Contributor
1) As a shareholder in a corporation (even a sub-S), you would only be responsible for corporate debts, even valid ones, if you personally guaranteed them. A shareholder, even a shareholder of a closely held company, is not liable for rent or debts arising from a lease unless there was a written personal guaranty.
2) Even if the debt were valid and even if you were personally liable, if your "partner" (since corporations don't have partners, you mean the majority shareholder) caused you to incur a debt owing to his negligence, gross negligence, or outright fraud or misappropriation of monies, you would have a claim against for breach of fiduciary duty-the duty a majority shareholder owes to minority holders.
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