Ceo's Personal Bankruptcy And Corporate Opportunity Results In Loss

by **Dougan** » Sun May 11, 2014 7:11 pm

My question involves bankruptcy in the state of: California.

I, along with another shareholder, were minority shareholders (15% each) in a startup C Corporation.
Our business received a $150,000 SBA loan in March 2011, on which our CEO/President signed as personal guarantor.

Like many new businesses, we were struggling, and our operating capital was running out.
However, things were looking better for us, as we had just made a couple of deals that were going to start bringing in revenue.

We were actively looking for outside help from investors to help us through the two months it would take to have everything in place to make good on the above mentioned business deals.
An investor agreed to get involved with us, was very impressed with what we were doing and how we were generating attention in the press.

Things were looking up, right?

So, we were surprised when our CEO/President showed up and said he could no longer work with us and that our new investor was no longer interested in coming on board.
Furthermore, he refused to allow us to continue with a separate fundraising drive we had been working on for over one month, which, by our estimates, would have brought in between $35,000 and $50,000, plenty to get us through the next couple months.
There was no changing his mind.
He was out, and he told us that we would have to change to Corporation's business name, as well, given that he owned the trademark for it and it was "one of the only things left of any value" of the business.

He would declare personal bankruptcy, default on the business loan, and the bank would liquidate our business.

All of the above has since happened, but not in that order.

But here is where it gets interesting.

As it turns out, on the eve of his "resignation" announcement, he sent our would-be investor all of our business "stuff".
Original business plan, client/industry/investor contacts, projections, etc.
Our CEO/President was starting a new, competetive business with the investor.
Because our CEO regularly used one of our personal computers at work, we saw emails between our CEO and investor that state that their plan was for the new business to buy the old business' infrastructure from the bank during a liquidation sale.
Our CEO's bankruptcy would give them a fresh start, since the old business had worked out the kinks and were on a number of investors' radars.
They were actually shopping around a business/venture plan to investors stating that the old business was the new business' pilot program.

Our CEO filed personal bankruptcy 45 days ago.
He owes me and my other partner $15,000 from personal loans.
He didn't list us as creditors.
He also failed to list his two previous addresses and another second, current address where he stores tools and equipment that is helping him generate income for his new business.

He failed to include some assets on his Voluntary petition (around $10,000).
He stated $0 in income from 2011, but he was paid around $20,000 from our business.

And finally, even though the new business of his is not incorporated yet, he has received income from it, but didn't mention it --surprise-- on his Voluntary

Petition.
The list goes on.

I'm not sure how to approach this situation, but I do think it's in my best interests to have his BK dismissed, so that I can go after him for the personal loan.
I'm not sure if I should contact the Trustee.
I mean, he did intentionally destroy an asset that he owned 70% of, and that his other partners had invested around $50,000 into, not to mention $150,000 from the bank.

The real problem for me is that I have been left penniless by this and my access to legal help is, well, extremely limited.

Suggestions?

Sincere Thanks for taking the time to read this.

by **mabellemurphy** » Mon May 12, 2014 12:51 am

As i read your problem, you must go to the bankruptcy experts to understand what will be the action to settle your problem.

by **oakley** » Thu May 15, 2014 11:31 pm

You can retain a business lawyer to evaluate the evidence for possible action in the bankruptcy court, possible injunctions against the investor and (former) CEO, possible fraud claims against the CEO and "tortious interference"-type claims against the investor.... There's a lot to sort through here, there are a lot of complicating factors, and it's much more complex than the type of issue we can analyze in this type of forum (even if I thought it would be a good idea for you to share the amount of information we would need to get started - and I don't think that would be a good idea).

by **Dearbourn** » Sun May 25, 2014 5:51 pm

Thanks for the response. I did not get a contact telling me of one's reaction, so apologies for ready to reply. 
I love your recommendation of destroying his BK and suing him. I do not consider myself a vindictive individual, but he is just a true scumbag (discovered this too late) and confirmed me no mercy. The only real ethical move to make would be to return the benefit. 
I approached the Trustee and delivered him several files he required. He has not gotten back again to me....hope that isn't a poor signal. 
Therefore, I suppose I have to document an opposition towards the BK release. I'd anticipated the Trustee may suggest a release after I offered him details about concealed resources and unreported revenue, and several additional "mistakes" about the Voluntary Petition. 
The financial institution has liquidated the company assets. 
Concerning the brand, it had been in my own companion's title before we included. Actually, I believe the financial institution was extremely careless in this entire procedure. I have spoken for them as well as their lawyer plus they do not appear that thrilled concerning the details below. On the other hand, they truly are just caught with 25% of the excellent stability. 
He lied --by omission-- by what he'd available before I got engaged. Works out that after he explained "money" he intended cash + sweat equity. I'd have not matched his money feedback had I recognized this. He was an excellent buddy, and so I simply respected him. Training learned. 
I am in a difficult monetary place right now, but when I've the means, I intend on filing suit. It eliminates me just how much justice truly costs. 
Would it not be also problematic for me to document an opposition by myself? Are you aware of any assets for me personally to, atleast, obtain the ball moving with this and go on my very own? 
Cheers!

by **fielding** » Tue Jun 03, 2014 2:42 pm

Thanks so much for sorting through my article. You're a courageous spirit, Mr. Knowitall. 
Atleast it is great to understand the buyer may be responsible for his part. 
Today, to locate gifted and innovative appropriate representation who may aid a victm on the budget....whereis that community? 
Easily might bother you for just one more bit of guidance. Could a reasoning of scam against my ex-companion from the BK courtroom or SBA be something which I really could "piggy back" or use as proof in my motion against him or even the would be buyer? Or, might a lawyer discover my situation to become more appealing having a greater probability of achievement with same reasoning? Or might there be any disadvantages --for my potential motion-- in a scam reasoning in support of Their State? 
Again, Cheers!!

by **Cavan** » Sun Jun 08, 2014 9:39 am

Their state isn't likely to perform a factor. This can be a civil issue. If you're able to show scam towards the SBA/lender, then odds are it'll be considered a national factor. Be cautious that which you want however, you simply could easily get it. It's feasible the end result of the may place him in this scenario you'll never get anything back. The financial institution may, although not you. Should you would like to damage him around feasible and do not worry about viewing a cent, then this method may work. 
First, you have to document your statements using the bankruptcy judge prior to the contract, which until they're exempt from release just like a scam view, may be counterproductive. 
You have to look for a great company/monetary lawyer and document a municipal motion for scam, break of agreement and fuduciary responsibility. Despite the fact that he possessed 70-percent, he owes the group investors a legitimate responsibility to safeguard their interests. 
Another method to view it (and also you actually need a lawyer) is the fact that he does not document his debt for you and therefore it's never released in bankruptcy. You are able to prosecute for this later, inside the SOL. 
Another strategy would be to document your state, prosecute him and inform that bankruptcy judge of the scam that'll imply probably he'll not have the ability to release the obligations for you along with other traders and may imply that his bankruptcy gets ignored for scam about the bankruptcy judge and he does not reach apply for BK for several years. Destroying his bankruptcy and suing him may be the very best approach. 
Again, you'll really should discover a lawyer. This ain't likely to occur pro se. 
Judgments for intentional torts, like scam, can't be released in bankruptcy. Obviously he could easily get a BK release before you receive a view. Again, if he doesn't record the obligations, they are able to not be discharged. 
Until the corp has submitted for bankruptcy, that 200k should have bought anything. These resources participate in the organization of course if they're lost from the majority investor, then that's a tort claim also. How can he possess the brand? I'd wish to observe that mortgage contract. I've difficulty thinking there's an SBA loan to some company where the organization didn't possess the intellectual property. Wouldn't the brand and every other intellectual property been area of the expense of most stockholder? What did he place in for that 70-percent of the inventory? That needs to be comprehensive within the panel moments, etc., possibly within the bylaws. Those files you note will also be belongings of the organization and can not be spun-off towards the downside of the stockholders compelled behind. Something made for the organization may be the home of the organization and never most stockholder. 
If it had been me, I'd prosecute him in to the floor and press body in the turnip for that next two decades easily had to.

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