Can a Shareholder see the Corporation’s Records in California?

Posted in Business and Real Estate Litigation on October 31, 2015

It depends on the type of records, the shareholder seeking them, and, possibly, on the purpose of the inspection:

  • Inspection of the articles of incorporation and bylaws is absolute;
  • A shareholder may inspect accounting records and minutes of the shareholder or board meetings, if it’s for a “purpose reasonably related to their interests as a shareholder”;
  • A shareholder may inspect the corporation’s income tax returns, if they own 1% of stock;
  • A shareholder may inspect other records, if they have a “proper and reasonable purpose relating to their interest as a shareholder”;
  • A shareholder can get a shareholder list if they (or they and another group of shareholders making the request) own at least 5% shares;
  • A shareholder may get a list of the shareholders, even if they (or their group) own less than 5% if they can show a “purpose reasonably related to their interests as a shareholder”
Typically, obtaining these records is done by a letter to the corporation.  A shareholder may also bring a lawyer to enforce inspection rights.  A lawsuit is more likely if the “reasonable purpose” of the inspection is disputed.
Corporations and shareholders should be aware that California law permits the recovery of costs and attorney fees in a lawsuit to enforce shareholder inspection rights.
The corporation, visa versa, may need an attorney to review the propriety of the shareholder request(s).
 If you or your business needs help with a shareholder record inspection issue, please contact our shareholder lawyers for a free consultation.