Pg 23 Flashcards
What does the right to examine corporate books and records do?
This allows shareholders and directors to monitor the activities of the corporation.
Who is responsible for creating the records of a corporation?
Officers, and they are the ones that file records with the secretary of state, keep custody of the documents, and respond to the demands to inspect records from either shareholders or directors
How long must a corporation retain corporate records?
As long as the corporation exists
If information in corporate records changes, what does the corporation have to do?
Update the records
What are the two different categories of corporate records?
– official filings
– internal records
What are official filings with regard to corporate books and records?
Things the corporation must filed with the secretary of state in the corporation’s state of formation and every state the corporation is registered to do business in. Corporations must file annual statements of information and annual reports with the Secretary of State to continue to exist for another year.
What are internal records for a corporation?
Records that are indispensable to the corporation but are not required to be filed with any official office. They are necessary to maintain the corporate form to show that the corporation is being run as a corporation. I.e.: bylaws, meeting minutes, hiring of officers, disclosures or reports to directors, changes in common or preferred stock, etc.
What are corporate books?
The way the corporate records are stored
What are shareholder inspection rights?
- shareholders can inspect and copy
- during regular business hours
- at the corporation’s principal office
- any records of the corporation
- if they give written notice at least five days beforehand
- in good faith and for a proper purpose
- the demand must describe the record the shareholder wants to inspect with reasonable particularity and any records that are inspected must be directly connected with that stated purpose
What is the rationale behind shareholder inspection rights?
This balances the need for the shareholder to access information to protect his economic interest with the corporation’s need to protect itself from shareholders seeking access for improper purposes
What are records that a corporation is obligated to keep at its principal office?
- minutes of all meetings of the shareholders
– all actions taken by the shareholders/board
– accounting records
– list of shareholders and their addresses
– articles of incorporation, bylaws, resolutions - written communication to the shareholders
- names and addresses of directors and officers
- most recent annual report given to the Secretary of State
If a shareholder makes a proper demand to inspect records of a corporation, and the corporation fails to reply within a reasonable time to this request, what happens?
The shareholder can petition the court to order it and then the corporation will pay the shareholder’s costs of getting the order
What are the necessary elements for shareholder inspection rights?
- bases in law of the right of access
– shareholder must have a proper purpose
– scope of the inspection
– timing limitation
What is involved in the basis of the right of access for shareholder inspection rights?
– majority: shareholders have a statutory right of access that supplements a CL right of access
– minority: the statutory right of access has replaced the CL right and allows for reasonable restrictions to be put on shareholder access in either the articles of incorporation or bylaws
Look at the laws of the jurisdiction and regulatory guidelines about recordkeeping
In order to have a right of inspection as a shareholder, what is necessary?
You must be the beneficial owner of the stock (but you don’t have to be the record owner). This includes: trustees in voting trusts, agents, attorneys, etc.
