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Question
Alan, Bob, Charles, David, and Edward are the only shareholders of Harbin Corporation. It is a close corporation. Each owns 20 percent of the shares. There are five director positions and each serves as a director. One day the other four find out that Edward has committed a serious crime. They decide that they wish to expel him from the corporation. What action may the others take? Discuss.
Edward is a shareholder. The only way he may be divested of his shares is if there is language in the share certificate or shareholder agreement that permits the corporation to buy out Edward under such circumstances. However, the MBCA permits directors to be removed with or without cause. Provided at least three of the shareholders agreed, there are enough votes to remove Edward from the board of directors, thus effectively taking away any ability to manage or direct the organization.
Answer
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