Ask HN: Misuse of corporate funds in a small business
I started a corporation with a couple of friends, and we made some money here and there. Not much, however it is enough to keep us afloat and out of the red. In the mean time we are having fun learning the ins-and-outs of owning a business.
However, recently we noticed that one of the founding members/board directors/officers of the corporation has been spending corporate money on little things like vending machine purchases, and gas. When asked about it he mentioned he was accidentally using the wrong card, we (the other founders) thought it would stop and the monies would be repaid to the corporation. Not only did it not stop it continued for a whole other month, and the monies to repay to the corporation has not been deposited.
The thing is that each of us has an equal share in the corporation, and we each hold our officers positions I am not sure how to approach the situation and/or reprimand this individual and make sure the money gets returned since officially he is listed as having access to the corporate account. How would it work if we did decide that he was dead-weight and wanted him out (no investors involved, we each gave ourselves 20% of the shares in the corporation)? Would we have to buy him out? Technically this is embezzlement, could we as a corporation take him to court? If this happened in your corporation how would you handle it? What would be your next steps in resolving the situation amicably?
I understand that the first response is going to be "find a lawyer", however when I mentioned that we are just making enough to stay afloat I really do mean that. The amount that has been embezzled is no small amount compared to our income, and will hurt us and keep us from doing R&D work for products we would like to develop and release to the consumer market.