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22 family shareholder corporation has quite a few in arrears, are all the shareholders entitled to know who they are?

New York, NY |

The arrears has been going on for almost 2 years & now we have at least 1 home in foreclosure & 2 others in short sale. Shouldn't all the shareholders know who is in arrears and by how much before more & more go into foreclosure or short sale? This is our home too & we are at risk of losing it all.

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Attorney answers 1


Absolutely. In the absence of a shareholders/stockholders/operating agreement to the contrary, NY statutory law provides that the default rights of any and all shareholders (especially those holding similar class of stock with similar voting rights) are entitled to an accounting at any time essentially, to review all or some of the company's financials. The company is obliged to make such financials available - and the scope is very broad here, subject to contrary provisions in the shareholders/operating agreement - available for inspection, review and copying upon your providing "reasonable notice." You should absolutely have been notified. And now, at a minimum, you should consult the operative agreement setting forth the parties' respective rights and so on, and invoke the clause permitting an accounting (interlocutory or final, depending on what's going on with the company - dissolution, buy-out, wind-up, etc.). If the board does not comply and does not make this info available, you have a derivative action against the company, and potentially against the board members too (presuming board-member misdealings), standing in the stead of the company as the plaintiff does in any derivative action taken against - albeit for the benefit and protection of - the company itself.

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