Are you concerned about a shareholder’s right to inspect the books in San Diego or Southern California? Does a San Diego shareholder have the right to inspect the books?
A Shareholder’s Right to Inspect the Books
California laws protect shareholders. All shareholders should have the right to inspect the articles of incorporation or “corporate charter,” bylaws and the shareholders agreement itself. Shareholders who own 5% or more of the stock in a corporation should have access to and the rights to review the “list of shareholders” as well as quarterly financials.
Generally speaking, a shareholder’s right to inspect the books may be limited to a substantial shareholder or holder of a “voting rights certificate.” This class of shareholder should have the right to inspect the books or financial records of the corporation for reasonable purposes during normal business purposes. This right also usually extends to any subsidiaries owned by the corporation. California’s Corporations Code specifies that this right may not be limited by the articles or bylaws.
You may be required to provide a written request to inspect your corporate accounting records that includes specific and reasonable purpose(s) for inspecting the books. This might include the simple requirement to protect your interests as a shareholder.
However, while shareholders may have access to financial and corporate information that is unavailable to the general public, they do not have the right to access most of a corporation’s trade secrets or confidential communications.
Why Do Most Shareholder Disputes Develop?
After more than 40 years of experience in shareholder disputes and lawsuits I can tell you the primary reason for a shareholder dispute to develop is money. The second most common reason is restriction of access to the information needed to protect the shareholder’s interests.
There are many reasons why shareholder disputes arise, and there can be sound reasons for wishing to review the corporation’s financial records, and make copies of or notes about specific information. It is important to understand a shareholder’s right to inspect the books as well as the required circumstances and process to do so.
You may be denied access to the books by well-intentioned managers if you are simply curious, or if there is seemingly no business reason for the request. It is not unusual for such a request to trigger a bit of a defensive response from many corporate officers.
However, a minority shareholder has the right to manage and protect their investment. California laws that address shareholder rights and access to financial records are quite complex. Attorneys at the Watkins Firm have decades of experience and legal skill in these matters, and we can work with you to ensure proper notice, and to assert and protect your rights as a shareholder.
If you are concerned about exercising your rights as a shareholder, have questions about how money is handled in the corporation, or have been denied access to inspect the books or corporate meeting notes of your company we invite you to review our podcast Episode 14 – Shareholders’ Rights and Disputes as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
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