FRESNO – On Sept. 12, the Court of Appeal for the State of California in the 5th Appellate District reversed and remanded a court order that denied four siblings’ request to compel a family member to hold shareholders’ meetings.
The appeals court disagreed with Superior Court of Stanislaus County when it denied the motion to compel. It reversed and remanded the ruling and directed the Superior Court to summarily order annual shareholders’ meetings.
Christian, Anne, Jane and Thomas Ielmini sued Patterson Frozen Foods, the company their late father, John Ielmini, shared fifty-fifty with his first cousin, Angelo Ielmini. The company, along with Valley Frozen Foods Inc. and Del Puerto Farms Inc. were collectively known as the Ielmini Entities in the ruling.
After John passed away in 2010, the ruling states he gave his portion of Ielmini Entities to his four children with each of them receiving 12.5 percent. Angelo allegedly used the control he had over the company, even though it was equal to the shares the siblings had as a whole, and refused to hold any yearly shareholders’ meetings for the Ielmini entities following John’s passing.
Because of his alleged actions, John’s children allege they haven’t been able to elect corporate directors that would serve on their behalf and represent their interests. They filed a lawsuit with the Stanislaus Superior Court in hopes of the court compelling Angelo to hold annual shareholders’ meetings.
While the Superior Court said granting the motion would infringe on a pending action in which Angelo is attempting to buy the siblings’ shares, the appeals court disagreed. It stated that Angelo is a co-equal owner of the shares, and doesn’t have any more rights than the siblings. It also pointed out California law orders businesses to hold yearly shareholders’ meetings in which directors will be elected.
While a section of the law gives the trial court authority to order an annual meeting, there was also a challenge that the section in question doesn’t mean holding shareholders’ meetings are require, but optional, and that the court can determine if it needs to be ordered, the appeals court disagreed. It pointed out the section of the regulation is the only way parties can compel a corporation to hold shareholders’ meetings.
“Therefore, it would be inconsistent to require annual shareholders’ meetings, but also authorize courts to use unfettered discretion to determine whether shareholders’ meetings should be held,” the opinion states.
Considering this, the appeals court reversed and remanded the lower court’s order.