The right of shareholders to inspect company records

 In Blog, Business Law

If you are a shareholder of a corporation with its principal executive office in California, you have the right to inspect certain records of that corporation. California Corporations Code Section 1601 grants this right to shareholders. This includes access to the following:

  • Accounting books
  • Records and minutes of proceedings of the shareholders
  • Records and minutes of proceedings of the Board of Directors and committees

It also applies to foreign corporations if they keep records or have their principal executive office in California.

The code requires the records to be open for inspection at a reasonable time during regular business hours upon the following:

  • A written demand;
  • Made in person or by the shareholder’s agent or attorney;
  • With a purpose reasonably related to the shareholder’s interests in the company

This right extends even to the subsidiaries of the corporation. It also includes the right to make copies of the records. This right cannot be restricted by either the articles of incorporation or the bylaws of the company.

Here is the full text of California Corporations Code Section 1601:

“(a) The accounting books and records and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping any such records in this state or having its principal executive office in this state, shall be open to inspection upon the written demand on the corporation of any shareholder or holder of a voting trust certificate at any reasonable time during usual business hours, for a purpose reasonably related to such holder’s interests as a shareholder or as the holder of such voting trust certificate. The right of inspection created by this subdivision shall extend to the records of each subsidiary of a corporation subject to this subdivision.

(b) Such inspection by a shareholder or holder of a voting trust certificate may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. The right of the shareholders to inspect the corporate records may not be limited by the articles or bylaws.”

This statute helps illustrate the importance of keeping corporate records up to date and observing all required formalities, including keeping minutes of meetings. In addition to potentially losing the limited liability benefits of incorporation, poorly kept records can be the cause of a shareholder dispute. If you are a shareholder and the corporation is not cooperating with your right to inspect, this may be the reason.

If you own a corporation, your records should be up to date and formalities followed and documented. If you are a shareholder and wish to look at the records, California law allows you to do so. If the corporation refuses, you may be able to obtain a court order forcing the company to comply with the statute.

Helix Law Firm can help with business matters

We regularly represent both individuals and companies in a wide range of business disputes. If you are a shareholder and are having trouble enforcing your right to inspect the company records, we can help. Or if you would like to incorporate your business, we can form your corporation and help you comply with the required formalities.

If you’re interested in learning more about how Helix can help, please call us at (619) 567-4447 to schedule a free consultation.

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