Stock transfer restrictions & right of SH to inspect

Question 1

Stock transfer restrictions

Answer 1

1. default rule: SHs can sell or give their stock away
2. restrictions on transferability are upheld if they are reasonable under the circumstances
   i. restrictions cannot be an absolute prohibition on alienation
   ii. ex. right of first refusal is not absolute prohibition, allows alienation
   iii. restrictions are contractual
3. enforceability of transfer restrictions
   i. enforceable against SH
   ii. also enforceable against a transferee, if:
   a. conspicuously noted on the stock certificate or
   b. transferee had actual knowledge of the restriction

Question 2

Right of SH to inspect books and records

Answer 2

1. standing: any shareholder can demand access
2. procedure: SH must
   i. make a written demand stating the documents desired
   ii. have proper purpose for inspection, meaning a purpose reasonably related to role as SH (ex. investigating corporate mismanagement)
3. if corporation fails to allow proper inspection, the shareholder can seek a court order
   i. SH that wins she can recover costs and attorney’s fees incurred in making the motion
4. directors do not have to go through the procedure here to get access to corporate books and records
   i. directors have unfettered access