Rights of Corporate Shareholders in California

Rights of Corporate Shareholders in California

Rights of Corporate Shareholders in California

The laws related to the rights of corporate shareholders have evolved and changed over time. Broader judicial and legislative efforts regarding Board of Directors, rights and responsibilities of shareholders regarding corporate information have been modified.

General Law

In most cases, shareholders of a corporation have the right to obtain certain corporate information. This is dependent on the size of the corporation and the size of the shareholder’s holding. Specific information might require a shareholder to state their reason and interest in the information.

According to CA Corporations Code Section 1501, “Notwithstanding the previous section on general law, all shareholders irrespective of their corporate holdings are entitled to receive an annual report.” A corporation is fewers than 100 shareholders, a requirement may not be mandatory due to bylaws. When this is the case, a financial report (akin to an annual report) will be given.

According to CA Corporations Code:

  • Notwithstanding the previous section on general law, all shareholders irrespective of their corporate holdings are entitled to receive the corporation’s bylaws (CA Corporations Code Section 213).
  • Notwithstanding the previous section on general law, all shareholders irrespective of their corporate holdings are entitled to receive the results of vote at a regular, special or annual meeting (CA Corporations Code Sections 1509 – 1511)
  • Notwithstanding the previous section on general law, shareholders owning individually OR in the aggregate at least 5 percent of corporate shares are entitled to obtain and copy shareholders lists and records (CA Corporation Code Section 1600) and quarterly financial information (CA Corporations Code Section 1501(c) – (d)).

In situations outside of those illustrated above, all other shareholders are required to state IN WRITING their relationship to the corporation and their specific relations. In theory, any interest must be recorded in order to inspect books and records of a corporation. According to CA Corporations Code Sections 1600 and 1601, if this is stated, shareholders are entitled to:

  • Shareholder’ lists and records
  • Minutes of Books and Records
  • Accounting Books

There is no clear or legal time frame in which this written demand should be made. As a result, a corporation has time in order to evaluate the purpose and make their decision. If a corporation decides to withhold this information to a shareholder less than 5% of shares, then it could result in going to court.

 

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