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Action for Shareholder Oppression
Young v. Vandermeer, No. 349093, February 25, 2021. The Michigan Court of Appeals held that the trial court erred in dismissing a shareholder’s action under Sec. 450.1489 of the corporation statute because the plaintiff was not a minority shareholder. That section provides for a direct action to establish that the acts of directors or those in control of the corporation are acting illegally, fraudulently, or unfair and oppressive. The statute does not require that the plaintiff be a minority shareholder. Thus, the plaintiff in this case did not need to prove that she was a minority shareholder; she only needed to show that the defendant was in control of the corporation during the relevant time frame.
Sterling Heights Pain Management, PLC v. Farm Bureau General Insurance Co. of Michigan, No. 350979, decided December 22, 2020. The Michigan Court of Appeals held that only the attorney general has standing to challenge whether a professional LLC was validly formed. Under the Michigan LLC Act, the filing of the formation document is conclusive evidence that the conditions precedent to formation have been met. Therefore, an insurance company, which claimed the PLLC was not validly formed because it had members and managers who lacked the necessary license, lacked standing to make that challenge.
Member Liability for LLC’s Taxes
Daoud v. Michigan Dep’t of Treasury, No. 351087, decided December 3, 2020. The Michigan Court of Appeals held that the sole member of an LLC could be held liable for the LLC’s unpaid withholding and sales taxes. The court stated that the tax law provides an exemption to the general immunity provided members by the LLC Act and imposes personal liability on responsible officers. The member here was found to be responsible based on the fact he was the sole member, listed himself as president on the tax registration, and executed the agreement directing his brother to pay the LLC’s taxes.
What Constitutes Doing Business
Domestic Uniform Rental v. Falcon Transport Co., No. 350112, decided November 12, 2020. The Michigan Court of Appeals held that a foreign corporation, not registered to do business in Michigan, had standing to intervene in a garnishment proceeding. The appellant was moving to intervene to protect its security interest and collect a debt. Those activities do not constitute doing business under the Michigan corporation law and therefore the appellant was not required to obtain a certificate of authority. In addition, the appellant was permitted to defend its security interest as the failure to obtain a certificate of authority does not prevent a foreign corporation from defending an action.
Raghuram v. Great Lakes Plastic, Reconstructive & Hand Surgery, PC, Nos. 333661, 334050, decided 2/6/2018. The Michigan Court of Appeals ruled the same attorney could not represent both a corporation and one of its shareholders in a shareholder dispute as it had not been established whether the corporation’s interests aligned with the plaintiff shareholder or defendant shareholder.
April 22, 2019 — An alert on the Michigan Department of Licensing and Regulatory Affairs (LARA)’s website, dated April 22, 2019, warns Michigan corporations of a non-governmental entity called “Michigan Council for Corporations” seeking to collect a fee to prepare “corporate consent records in lieu of annual meeting minutes.” The alert states that this notice is not issued by LARA or any governmental agency and that corporations are not required to file an “Annual Records Solicitation Form.”
January 18, 2019 — The Michigan Department of Licensing and Regulatory Affairs (LARA) has issued an alert on its website warning Michigan corporations of a deceptive notice being sent from a non-governmental entity seeking a fee to prepare “corporate consent records in lieu of annual meeting minutes.” LARA states that this mailing is not from LARA or any other government agency and that corporations are not required to file the form referenced in the solicitation.