AITA? Majority Shareholder Spends Without Asking
Hello!
I own 7% of a company, a real estate brokerage launched a few months ago. The majority shareholder owns 55%. There are 4 other shareholders with varying degrees of shares.
The company has made money, and so we’re all expecting a dividend at the end of the quarter.
The 55% majority shareholder also owns the parent company of our new company. It’s a far more established brokerage targeting a specifc country.
He recently, without informing any shareholders, spend $84,000 reserving 30 apartments to sell. It was a new launch that was going to sell out quickly, so he felt it best to reserve the units.
He then informed our company about his decision, urging us to sell, sell, sell.
After a few weeks of no sales, and with the parent company also under performing, he reaches back out. He informs us that out of the 30 units, 10 have been sold ny the parent company, and he has allocated 10 to our company. And if we are unable to sell 10 in the next few weeks, the company will bear the cost ($28,000). This would obviously come out of our soon-to-be dividends.
He never consulted us or informed us prior about the purchase, or the fact that he was “allocating” 10 of the units to our freshly launched brokerage.
I am pushing back against this, claiming that he can’t take such action without shareholder approval.
He disagrees, and feels it’s his right, and I should simply trust him on this decision, and future decisions (indicating that this probably won’t be the last time he does this!)
AITA?
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What’s the Operating Agreement say?
I want to be pretty real here. This isn’t the AITA forum, this small business. People here are going to tell you, your emotions and wants aren’t particularly relevant here.
As the other commenter has stated what do your OA’s say? What state are you in?
You are a minority shareholder, without the ability to have over 50% of the voting shareholders vote against him. You may have no right ever, to tell him what he can and cant do. You may only have limited recourse. You may actually be unable to stop him from even diluting your share ownership down to 0.000001%.
He could decide to partner with his own company he makes on the side and pay that company 99.9% of all profit of the company, and you could all be effectively holding a zombie company worth nothing. You and the other 45% owners may not be able to stop that from happening.
I don’t mean to be scary, but if you don’t have any operating agreements, you may be in for quite the lesson.