Corporations' books, records open to shareholders by law

Missouri law has long required corporations to maintain financial books and records of its activities and ownership. Most, if not all, of the information would be maintained by any entity even without the law. There is also a common law and statutory right of a shareholder to examine and review this information at reasonable times, so long as they have a proper purpose for doing so.

As contained in Section 351.215 of the Missouri Revised Statutes, each corporation "shall keep correct and complete books and records of account." The law then lists the types of information that corporations must maintain.

First, the company's records must reflect all of its assets and liabilities. Second, minutes must be maintained of the meetings of the shareholders and directors. Finally, a Missouri corporation must hold a meeting of its shareholders and board of directors at least annually.

The corporation must too maintain a list of the names and business or residential addresses of its officers. The number of shares subscribed by the company, the names and numbers of shares of each owner, and the transfer dates for such shares, must all be recorded for examination.

Under the common law, namely the law developed by the courts, shareholders have the right to inspect the books and records at reasonable times for proper purposes.

Since shareholders are the owners of the entity, the courts have seen it fitting to grant them the right to examine financial records and minutes of proceedings by officers and directors. This common law right to inspect is supplemented by a statutory right under Missouri law.

Missouri's statutory right to inspect states that shareholders may "at all proper times have access to the books of the company, to examine the same, and under such regulations as may be prescribed by the bylaws." The bylaws typically do not further abridge such inspection rights, except perhaps to state that inspections must take place on business days during regular business hours.

Courts routinely grant a right to inspect as long as the shareholder acts in good faith with honesty of purpose. In order to deny a shareholder the right to inspect, one court has said there must be an evil, improper or unlawful motive.

Another Missouri court has held that there is a presumptive right to inspect. Still other courts have found that being unfriendly to management, or desiring to change management or the conduct of the corporation is not an improper purpose.

If the corporate officers denies the inspection rights of a shareholder, they may forfeit the sum of two hundred fifty dollars for each offense. As a result of Missouri statutory and case law, it is difficult for a corporation to deny a shareholder's right of inspection.

Maintaining proper books and records of a corporation, while at times burdensome, is required by law. Failure to do so may impose personal liability upon the shareholders for the debts and obligation of the company.

Corporate officers also have an obligation to allow shareholders access to books and records, unless an improper purpose can be shown. Adhering to these provisions will often limit the risk of personal liability of shareholders and avoid litigation detrimental to the company.

(Stephen F. Aton is a Springfield attorney practicing in the areas of corporate law and taxation, and estate planning.)