Shareholders’ Rights to Corporate Information

Shareholders in large corporations are typically passive investors who have little involvement with the actual management of the company. When it comes to smaller businesses, however, shareholders are much more likely to play an active role. Even shareholders who are not also board members or officers can still exercise considerable influence over a small company. This often begins with demands for disclosure of corporate records and information. While shareholders certainly do have rights to disclosure, it is important for boards and managers to understand where these rights begin and end so they can fulfill their obligations without allowing themselves to be bullied by an intransigent shareholder.

Throughout United States jurisdictions, it is a general rule that shareholders have a right to inspect the books and records of a corporation. However, the exact extent and nature of that right depends on state law in the jurisdiction of incorporation. For example, after five days written notice, shareholders in Virginia have a fairly unrestricted right to inspect and copy certain business records at the corporation’s principal office during regular business hours. These include:

• Records of all shareholder and board meetings
• Records of actions taken without a meeting
• Lists of shareholders
• Articles of incorporation and all amendments
• Certain resolutions of the board
• The minutes of shareholder meetings for the last three years
• All written communications to shareholders for the last three years
• The identities and addresses of all directors and officers
• The most recent annual report

A shareholder may also examine accounting records and the minutes of director meetings, provided the following conditions are met:

• The person has been a shareholder for at least six months.
• The person is demanding the record in good faith and for a proper purpose to which the requested records are relevant.
• The person is able to describe the record requested with reasonable particularity.

Unreasonable and intrusive requests for access are a problem any company may face. An experienced DC metro area corporate governance lawyer can advise boards and managers of their rights and responsibilities in these matters.