Information – Shareholder Inspection Rights – Proper Purpose and Inspection Requests

Question 1

Shareholders must have a ______ purpose germane to their ________ interest in the corporation to inspect corporate records.

Answer 1

Shareholders must have a PROPER purpose germane to their ECONOMIC interest in the corporation to inspect corporate records.

Question 2

May a shareholder inspect corporate records if his sole purpose in doing so is to convince the corporation to adopt his political concerns, without any regard for his financial interest in the corporation?

Answer 2

No. Shareholders must have a proper purpose germane to their economic interest in the corporation to inspect corporate records. A shareholder therefore may not inspect corporate records if his sole purpose in doing so is to convince the corporation to adopt his political concerns, absent any regard for his financial interest in the corporation. Given the sheer number of shareholders in modern day corporations, some kind of limit needs to be put on shareholders’ ability to inspect records. Without such a limit, it would be very difficult to efficiently keep records and generally conduct business.