Corporate Governance Attorney in California
Governance is what keeps a disagreement among owners from becoming a lawsuit. When it fails, the questions are always the same: who had authority, what was disclosed, and whether the process was fair.
What are the fiduciary duties of a California corporate director?
Under Corporations Code section 309, a California director must act in good faith, in a manner the director believes to be in the best interests of the corporation and its shareholders, and with the care of an ordinarily prudent person in like circumstances. Directors may rely on qualified officers, counsel, and accountants. Interested-party transactions require disclosure and approval or proof of fairness under section 310.
Duties, Authority, and Owner Rights
Governance disputes in closely held California companies follow recognizable patterns. A majority owner takes compensation the minority considers excessive. Distributions stop while the controlling owner's salary continues. A related-party lease or vendor contract is signed without disclosure. Records requests go unanswered. Each of these is a governance failure before it is a lawsuit, and each is far easier to address at that stage.
California law gives owners real tools. Shareholders and LLC members have statutory inspection rights covering books, records, and minutes, enforceable by court order with fee shifting in appropriate cases. Interested-director transactions must be disclosed and approved by disinterested decision-makers, or defended as just and reasonable. Directors are protected by the business judgment rule when they act on an informed basis and in good faith — a protection that disappears when the record shows neither.
The firm advises boards, officers, majority owners, and minority owners on these questions, and litigates them through corporate litigation when they cannot be resolved. Governance work is often the cheapest legal spending a company does, because it prevents the disputes that formation documents were supposed to foreclose.
330 North Brand Boulevard, Suite 1280
Glendale, California 91203
Los Angeles County Superior Court, including the Glendale and Stanley Mosk courthouses.
Formation, contracts, governance, transactions, and litigation for closely held California companies.
Governance Matters We Handle
For boards, officers, and owners of California corporations and LLCs.
Fiduciary Duty Counseling
Advising directors, managers, and controlling owners on duty of care and loyalty, business judgment rule protection, and how to build a defensible record.
Records Inspection Demands
Making and responding to statutory demands for books, records, minutes, and shareholder lists, including enforcement proceedings.
Conflicted Transactions
Structuring and approving related-party leases, loans, and service agreements so they withstand later challenge.
Board & Meeting Procedure
Notice, quorum, written consents, committee authority, and the minute record that establishes what was decided and on what information.
Minority Owner Rights
Oppression, excessive compensation, withheld distributions, dilution, and the statutory and contractual remedies available.
Deadlock & Exit
Resolving deadlock through buy-sell mechanisms, negotiated separation, or dissolution proceedings where no mechanism exists.
Governance Disputes That Reach Our Office
Composite examples drawn from the kinds of matters this practice handles. They illustrate common fact patterns and are not descriptions of specific client cases or predictions of any result.
The Related-Party Lease
A controlling shareholder leases company premises from an entity they own, at rates the minority calls above market. Whether the transaction survives depends on disclosure, disinterested approval, and whether the terms were objectively fair.
The Unanswered Records Demand
A minority member requests financial records and receives nothing for months. California's inspection statutes give a direct enforcement path, and an unexplained refusal tends to color everything that follows.
The Distribution That Stopped
Distributions cease while the managing owner's compensation rises. The question is whether that reflects a legitimate business decision supported by a record, or a squeeze-out dressed as one.
When Governance Issues Need Counsel
- A transaction involves a director, officer, or controlling owner on both sides.
- An owner has demanded books, records, or an accounting.
- Distributions have stopped while insider compensation continues.
- A major decision is being made without a documented board process.
- Minority owners are alleging oppression, dilution, or exclusion.
- The company is deadlocked and no mechanism resolves it.
What to Do First
Document the process
Minutes, written consents, and the information relied on are what establish business judgment protection. Decisions without a record are hard to defend later.
Disclose conflicts fully
Interested transactions are defensible when disclosed and approved by disinterested decision-makers. Undisclosed ones rarely are.
Respond to demands properly
Ignoring a records demand converts a manageable dispute into litigation with fee exposure. Respond to the proper scope rather than not at all.
Corporate Governance — Questions California Clients Ask
What directors, officers, and owners of California companies ask about duties and owner rights.
What is corporate governance and why does it matter for California businesses?
Corporate governance refers to the rules, structures, and processes by which a corporation is directed and controlled — including board composition, officer duties, shareholder rights, decision-making authority, and accountability mechanisms. Strong governance reduces the risk of disputes, fiduciary liability, and regulatory scrutiny.
What fiduciary duties do directors and officers owe in California?
Directors and officers of California corporations owe duties of care and loyalty. The duty of care requires acting on an informed basis with reasonable diligence. The duty of loyalty requires acting in the corporation's best interest rather than for personal gain. Breaches of these duties can expose directors and officers to personal liability.
What is the business judgment rule?
The business judgment rule is a legal presumption that directors act on an informed basis, in good faith, and in the honest belief that the action taken is in the best interests of the corporation. Courts generally will not second-guess board decisions made under these conditions, which protects directors from liability for good-faith errors in business judgment.
What is a shareholder derivative action?
A shareholder derivative action is a lawsuit brought by a shareholder on behalf of the corporation when the board has failed — or refused — to sue someone who has harmed the company. It is commonly used when directors or officers are accused of breaching their fiduciary duties to the corporation.
When is a shareholder entitled to inspect corporate records in California?
California Corporations Code gives shareholders the right to inspect the corporation's accounting books, minutes, shareholder records, and other documents for purposes reasonably related to their interest as shareholders. The right generally requires making a written demand and, in some cases, demonstrating a proper purpose for the inspection.
What is a conflict of interest transaction and how should it be handled?
A conflict of interest transaction is one in which a director or officer has a personal financial interest that could affect their impartiality. California law allows such transactions to be approved if the material facts are disclosed to disinterested directors or shareholders and the transaction is approved in good faith as fair and reasonable to the corporation.
What corporate records must a California corporation maintain?
California corporations must maintain articles of incorporation, bylaws, minutes of all board and shareholder meetings, resolutions, annual reports, shareholder ledgers, and accounting records. Failure to maintain proper records can undermine the corporate veil and create liability exposure in disputes.
What are the most common sources of governance disputes in closely held businesses?
Common sources include disagreements among co-founders or co-owners, disputes over decision-making authority, allegations of self-dealing or breach of fiduciary duty, deadlock between equal shareholders, and disputes over distributions or buyout rights. Well-drafted governing documents and early legal counsel can prevent many of these conflicts.
Local Representation
Governance disputes involving Los Angeles County companies are heard in the county courts.
Talk to a Business Attorney
Governance problems are cheapest to fix before a demand letter arrives. If a transaction, a demand, or a deadlock is pending, bring it in now.