INSPECTION DEMANDS

An important tool to manage share ownership.

One of the available tools to manage your ownership of corporate stock is the inspection demand. Inspection demands can give any eligible shareholder access to crucial Company information that he or she would not otherwise have access to, or would be difficult to gather.

In California, shareholders possess certain crucial rights that cannot be compromised by corporate bylaws or majority shareholders actions. One of the most valuable rights for shareholders is the right to access information about the corporation. In particular, shareholders of California corporations have rights to inspect two different sets of records: (I) record of shareholders; and (II) accounting books, records, and minutes of proceedings.

Inspection of the Corporation’s record of shareholders

Certain shareholders have the right to inspect a corporation’s record of shareholders. Those who hold either: (a) 5% of the shares; or (b) 1% of the shares and have filed a federal Schedule 14B relating to the election of directors, have an absolute right, on 5 business days’ notice, to both: (1) to inspect and copy the record of shareholders; and (2) to obtain a current list of the names, addresses and share holdings of the voting shareholders (Corp. C. 1600(a)(b)). Furthermore, any shareholder who does not qualify under either (a) or (b) above, with a written demand, has a right to access a corporation’s record of shareholders. BUT if and only if the acquisition of such records is directed towards an end deemed reasonably related to the holder’s interest (Corp. C. 1600 (c)).

Inspection of the Corporation’s books and records

Shareholders also have the valuable right to inspect accounting books, records, and minutes of proceedings. Inspection of said information is provided if and only if the acquisition of such information is directed towards an end deemed reasonably related to the holder’s interest (Corp. C. 1601 (a)).

These are important rights for all shareholders to keep in mind as they review and manage their investments. Indeed, these rights may not be limited by either the bylaws or articles. If a lawful demand for inspection is refused without justification, the superior court can intervene and compel the corporation to forfeit the requested information. In some cases, the courts have exercised their power to award complaining shareholders with reasonable expenses, including attorneys’ fees. (Corp. C. 1600 (b)).

We have represented clients in formal inspection demands with respect to large publicly traded companies, venture-backed companies and successful privately held companies.

If you would like to make an inspection demand or have received an inspection demand, it is important to act quickly.

Please take advantage of our FREE online case submission or call us today to start a conversation.

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CASE STUDIES

Exclusive sell side counsel to largest pain management practice in the Bay Area in its sale to private equity-backed consolidator.

TYPE

Sale Transaction

TRANSACTION VALUE

~$15,000,000 to $20,000,000 with earn-outs

Represented Plaintiff, a minority shareholder and former senior level employee of very successful privately-held company, in dispute alleging wrongful termination and corporate claims.

RESULT

Settled low to mid 6 figures

TIME TO RESOLUTION

3 months

HOW WAS CASE RESOLVED?

Attorney to attorney negotiation

General counsel to largest pain management practice in the San Francisco Bay Area (2004-2012)

TYPE

General Counsel

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