In this article, you will learn what you need to know about shareholder inspection rights directly from an experienced Florida Business Lawyer. If you are a shareholder who wants to have a better understanding of shareholder inspection rights, then this article is for you.
Shareholder Inspection Rights – What You Need to Know
Sometimes, corporations mismanage funds and corporate directors act in their own self-interest. Other times corporations try to out shareholders. This is illegal. In Florida, shareholders must always be allowed to inspect and make copies of corporate documents to use in any potential lawsuits or to simply monitor the corporation to determine whether there is any mismanagement.
Shareholder inspection rights exist so that shareholders may “ascertain whether the affairs of a corporation are properly conducted and that they may vote intelligently on questions of corporate policy and management.” “The predisposition of the law is in favor of allowing reasonable inspections of corporate books and records.”
However, the “right to inspect the books and records of a corporation, is not an absolute right, regardless of the stockholders’ motive.” Courts will not always force the inspection of books. “In issuing the writ of mandamus, the court will exercise a sound discretion and grant the right under proper safeguards to protect the interests of all concerned. The writ should not be granted for speculative purposes, or to gratify idle curiosity, or to aid a blackmailer, but it may not be denied to the stockholder who seeks the information for legitimate purposes.” However, the “right of a stockholder as conferred by statute to examine the corporate records, although not absolute, is a valuable right.”
While Florida shareholders are entitled to inspect and make copies of certain corporate documents, there are procedures and limitations to which they must adhere. Under Florida Statute 607.1602, a shareholder is allowed to inspect and make copies of corporate records at the corporation’s principal office during regular business hours as long as the shareholder gives the corporation written notice at least five business days before the date the shareholder intends to inspect the documents.
In addition, the shareholder’s demand must be made for a proper purpose and in good faith when inspecting and making copies of:
- The corporation’s financial statements;
- Excerpts from minutes of meeting or records of any actions taken by the corporation’s board of directors and board committees without a meeting;
- The corporation’s accounting records;
- The corporation’s shareholder register; and
- Any other records and books.
Florida corporations can legally impose reasonable restrictions on shareholders who want to inspect and make copies of corporate records and books. There are times, however, when a corporation may attempt to make it unjustifiably difficult for a shareholder to inspect corporate records or even completely refuse to let the shareholder inspect the records. Under Section 607.1604 of the Florida Statutes, if a corporation does not comply with a shareholder’s request to inspect the corporation’s records, the circuit court in the county where the corporation is located may order inspection and copying of the records.
If the court orders inspection and copying of the demanded documents, it will also order the corporation to pay the expenses incurred by the shareholder to obtain the order and enforce their rights under this section of the Florida Statutes, including attorney fees.
Do you have any questions? Do you need legal help? Contact Attorney Romy B. Jurado today by calling (305) 921-0976 or by sending an email to [email protected] to schedule an initial consultation and learn how to enforce your rights as a shareholder.