Shareholder Inspection Demands
One of the available tools to manage your ownership of corporate stock is the inspection demand. Inspection demands can give any eligible shareholder access to crucial Company information that he or she would not otherwise have access to, or would be difficult to gather.
In California, shareholders possess certain crucial rights that cannot be compromised by corporate bylaws or majority shareholders actions. One of the most valuable rights for shareholders is the right to access information about the corporation. In particular, shareholders of California corporations have rights to inspect two different sets of records: (I) record of shareholders; and (II) accounting books, records, and minuts of proceedings.
Inspection of the Corporation's record of shareholders
Certain shareholders have the right to inspect a corporation’s record of shareholders. Those who hold either: (a) 5% of the shares; or (b) 1% of the shares and have filed a federal Schedule 14B relating to the election of directors, have an absolute right, on 5 business days’ notice, to both: (1) to inspect and copy the record of shareholders; and (2) to obtain a current list of the names, addressses and share holdings of the voting shareholders (Corp. C. 1600(a)(b)). Furthermore, anyshareholder who does not qualify under either (a) or (b) above, with a written demand, has a right to access a corporation's record of shareholders. BUT if and only if the acquisition of such records is directed towards an end deemed reasonably related to the holder’s interest (Corp. C. 1600 (c)).
Inspection of the Corporation's books and records
Shareholders also have the valuable right to inspect accounting books, records, and minutes of proceedings. Inspection of said information is provided if and only if the acquisition of such information is directed towards an end deemed reasonably related to the holder’s interest (Corp. C. 1601 (a)).
These are important rights for all shareholders to keep in mind as they review and manage their investments. Indeed, these rights may not be limited by either the bylaws or articles. If a lawful demand for inspection is refused without justification, the superior court can intervene and compel the corporation to forfeit the requested information. In some cases, the courts have exercised their power to award complaining shareholders with reasonable expenses, including attorneys’ fees. (Corp. C. 1600 (b)).
We have represented clients in formal inspection demands with respect to large publicly traded companies, venture-backed companies and successful privately held companies.
If you would like to explore the availability of an inspection demand, please use our FREE corporate submission form to organize the facts and law regarding your matter. Our FREE corporate submission will help you gather the information that you will need to answer basic questions and help our staff review your matter. There is no charge and no obligation to use our FREE corporate submission.
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