Formal Demand to Audit the Books as a Shareholder?

Asked 3 months ago - Albany, NY

Over a month ago I sent a letter to the secretary of a private corporation of which I am a preferred shareholder, inquiring into how to view legal and financial information regarding the company. I have yet to hear back from anyone. I now want to get a hold of a copy of the bylaws of the corporation. What would be the best way to do this? Is illegal for a corporation to deny the shareholders something as simple as the bylaws? Can I send them a formal notice of demand? Should I seek council?

Attorney answers (5)

  1. Richard J. Chertock

    Pro

    Contributor Level 17

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    Answered . As a shareholder you have the right to inspect the books and records. Since you already sent a letter and they ignored you it would be best if you hired an attorney to send a demand letter seeking the financial information.

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  2. Richard Albert Luthmann

    Pro

    Contributor Level 14

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    Answered . I agree with the prior answer. You have a right to inspect the books and records of the corporation as a shareholder. Since you have been ignored, it is time to escalate the situation through attorney involvement.

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  3. Mario David Cometti

    Contributor Level 11

    2

    Lawyers agree

    Answered . Believe it or not there is a specific statute (law) that governs a right to review books. There is also a common-law right (ie under case law) of inspection of records.

    Beginning with the statutory right, Business Corporation Law § 624, narrowly sets forth which books and records are available to shareholders. In particular, subsection (b) permits a shareholder to examine the “minutes of the proceedings of [the corporation's] shareholders and record of shareholders and to make extracts therefrom for any purpose reasonably related to such person's interest as a shareholder.” Subsection (e) allows a shareholder to obtain “an annual balance sheet and profit and loss statement for the [corporation's] preceding fiscal year, and, if any interim balance sheet or profit and loss statement has been distributed to its shareholders or otherwise made available to the public, the most recent such interim balance sheet or profit and loss statement.”
    More detailed records may be obtained through court intervention. Under the common-law courts generally hold that a shareholder is entitled to access only those books and records that are “relevant and necessary” to his “proper purpose.” Therefore, the shareholder's purpose in seeking access is important in determining the extent of the books and records that the shareholder is entitled to review. Thus the scope of materials available through the exercise of common-law inspection rights generally is much narrower than the scope of materials available through disclosure in the context of litigation.

    You need to confer with an attorney. The more detailed you can be in terms of the need for an audit, the more chance you may have in forcing the issue

  4. Thomas Howard Mallory Jr.

    Pro

    Contributor Level 2

    3

    Lawyers agree

    Answered . I see you are located in New York. I practice law only in Ohio where I am licensed. In Ohio, any owner of a corporate entity (whether corporation, LLC, or partnership) is entitled to obtain from the company copies of its bylaws and its books and records. There would be no justifiable reason for withholding that documentation. However, your right to obtain that information from the company may be subject to limitations of reasonableness. For instance, you cannot request that information weekly, the company would not have to produce it to you within an unreasonably short period of time, and the company may be able to charge you for the cost of producing and sending that information to you.

    My response is not intended to offer legal advice and it does not create an attorney-client relationship, and it... more
  5. John P Corrigan

    Contributor Level 19

    1

    Lawyer agrees

    Answered . See New York Statute -- BCL Sec. 624 http://codes.lp.findlaw.com/nycode/BSC/6/624 This governs rights to access books and records.
    Also see BCL Sec. 601 as to requirements for Bylaws which would make up part of the corporation's books and records.
    You should send a final demand letter threatening you will hire an attorney to make a formal demand by Petitioning the court to enforce your shareholder rights.

    My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a... more

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