Your Business Deserves To Thrive
In our previous blog series on Texas Double-Derivative Shareholder Suit, we touched briefly on the concept of business judgment rule when we discussed a board of directors’ decision to pursue or forgo corporate causes of action in the context of closely held corporations. In another recent blog post on Tsui v. Chou, we discussed a recent New York appellate court’s…
Texas: An Issue for the Jury. In Texas, a holder of shares of a corporation for at least six (6) months, or a holder of at least 5% of all of the outstanding shares of a corporation, is entitled to examine and copy the corporation’s relevant books, records of account, minutes, and share transfer records at a reasonable time, in…
New York: Proper Purposes. The New York statute provides that 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.[1] Inspection, however, may be denied if the shareholder refuses to furnish an affidavit to the corporation that such inspection…
Delaware: Reasonable Restrictions. In Delaware, any stockholder is entitled to inspect the corporation’s books and records upon written demand, for any proper purpose.[1] The statute defines a proper purpose as a purpose reasonably related to such person’s interest as a stockholder.[2] Additionally, the statute grants the Court of Chancery the authority to “prescribe any limitations or conditions with reference to…
Maryland: Hogans v. Hogans Agency, Inc. In Hogans v. Hogans Agency, Inc., Hogans was a 37.5% stockholder of Hogans Agency, Inc., an insurance and real estate brokerage company, and an owner of a competing business.[1] In December 2013, Hogans sent a letter to the corporation requesting inspection of corporate records; the corporation responded by providing copies of the bylaws, minutes…
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…
Double-Derivative Action. The court next addressed whether Webre, a shareholder of the parent corporation, could bring a derivative suit on behalf of the wholly owned subsidiary. The court noted that “[i]n a ‘double derivative’ action, the shareholder is effectively maintaining the derivative action on behalf of the subsidiary, based upon the fact that the parent or holding company has derivative…
Business Judgment Rule. The court first addressed whether the business judgment rule, which, among other things, protects the board of directors’ decision to pursue or forgo corporate causes of action, applies to closely held corporations so as to bar Webre’s derivative lawsuit. In Texas, the statute that governed shareholder derivative suits during the relevant time in this case requires a…
Sneed v. Webre. In our previous blog post on Ritchie v. Rupe (available here), we discussed the rights of Texas minority shareholders in a closely held corporation in the context of shareholder oppression. Closely held corporations and many small companies whose shares are not publicly traded present unique legal issues, especially with respect to shareholder rights, because of their distinct…
Bontempo v. Lare. In February 2000, Bontempo joined a company founded by the Lares, his former colleague and his wife, as a minority shareholder and employee.[1] The arrangement was later formalized to a certain extent in the form of an attachment to the stockholders agreement, which, as it turned out, inadequately memorialized the parties’ understanding as to the terms of…