Inspection of records/suits by shareholders

Question 1

Inspection of records without restriction

Answer 1

Without restriction, a shareholder/beneficial owner whose shares are held in a voting trust can inspect/copy the:

1. Articles
2. Bylaws
3. Annual report.
4. Contract details of current directors, officers
5. minutes of shareholders meetings, and
6. certain board resolutions

Question 2

Inspection of records with proper purpose

Answer 2

Shareholder can inspect and copy corporate records directly related to proper purpose if:

1. the shareholder is a shareholder of record owner for at least 6 months; OR
2. A beneficial owner of at least 5% of outstanding shares

Question 3

How to inspect records

Answer 3

1. The shareholder must send a signed written request within at least 10 business days in advance

Question 4

Where can a SH inspect and copy the records

Answer 4

Only at the corporations main office during business hours

Question 5

What is a proper purpose ?

Answer 5

A proper purpose is one that relates to the shareholder’s interest in the company

Question 6

Direct actions

Answer 6

1. Is an action to enforce shareholder rights for breach of fiduciary duty a director or officer; Or
2. a suit on grounds unrelated to shareholders status as a shareholder

Question 7

What is a derivative action

Answer 7

When a Shareholder sues on behalf of the corporation for a harm suffered by the corporation.

Any recovery goes to the corporation

Question 8

Standing of derivative actions

Answer 8

1. The P must have been a SH at the time of the act or omission; or
2. became a SH by operation of law form a Sh at the time of the act or omission, or
3. Become a shareholder before public disclosure and without notice of the act or omission

Must have been a shareholder when demand was made

Question 9

Demand upon board

Answer 9

1. The P must make a written demand upon the board to act, even if the demand would be futile.
2. The P must wait 90 days after filling the demand with the board before taking action. unless, the board rejects or the C will suffer irreparable harm if the P waits the 90 days
3. If demand is rejected, the SH must allege that the C failed to comply with procedures , a rejection of demand is tested against the business judgment rule.

Question 10

Dismissal of Derivative action

Answer 10

Corp can move to dismiss a derivative action IF disinterested directors submit a short explanatory statement after adequately reviewing allegations and determining in good faith that the suit was not in the C’s best interest

Question 11

Discontinuance of derivative action

Answer 11

May be settled without court approval

Question 12

Litigation expenses

Answer 12

1. Court may order the Corp to reimburse the Shareholder for litigation expenses if the suit resulted in substantial benefit to the corp
2. Court may order SH to pay corps litigation expenses if the proceeding was maintained arbitrary, vexatiously, or not in good faith