We have covered several aspects of shareholder rights in our blogs, including the rights of minority shareholders in the context of oppression by the majority (available here and here) and, more recently, the right to bring a derivative action on behalf of a wholly owned subsidiary (available here). The fundamental principle underlying all these claims is that shareholders own the corporation. Thus, it is important for shareholders to have access to information regarding the business and management of the corporation in order to protect their interests as shareholders.
Most, if not all, state statutes provide for a mechanism by which shareholders examine corporate books and records. In Texas, for example, a shareholder is entitled to examine and copy the corporation’s relevant books, records of account, minutes, and share transfer records at a reasonable time, in person or through an agent, subject to the governing documents and on written demand stating a proper purpose. Similarly, in New York, a shareholder has the right to examine corporate books and records upon at least five (5) days’ written demand for any purpose reasonably related to such person’s interest as a shareholder. Delaware law is substantially similar. In Maryland, a stockholder is entitled to inspect and copy the corporation’s bylaws, stockholder minutes, annual statements of affairs, and voting trust agreements, on written request, and a stockholder who has owned at least 5% of stock for at least six (6) months may also inspect and copy the corporation’s books of account and its stock ledger, on written request. The Maryland statute, however, does not require that a stockholder’s purpose be proper, which has created much uncertainty. Recently, an appeals court had an occasion to address this issue in Hogans v. Hogans Agency, Inc.
This will be a multi-part blog series on shareholder inspection rights and the limits thereof in Maryland, Delaware, New York, and Texas. In our next post, we will look at the details of the Maryland case.
This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.
Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article. Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.
About the Author
Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C., which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: (214) 418-0258; firstname.lastname@example.org, or www.mcbrideattorneys.com.
 Tex. Bus. Org. Code § 21.218(b) (emphasis added).
 N.Y. Bus. Corp. Law § 624(b) (emphasis added).
 See Del. Code tit. 8, § 220(b).
 Md. Code, Corps. and Ass’ns §§ 2-512, -513.
 See generally Hogans v. Hogans Agency, Inc. (Md. Ct. of Special Appeals, Aug. 28, 2015).