Q My co-op is about to engage in a multi-million dollar upgrade energy project. The board president has decided to not let myself (a newly elected member of the board) and any shareholder access to review the documents on this project. However, the Board has given one shareholder complete access to all documents pertaining to this project. This individual has all the documents and is privately meeting with the contractors on this project.
My request was turned down and other shareholders who are skeptical of this project have been denied access to view the project material. What can the interested shareholders and I do to obtain this information?
—Inquiring Board Member
“This rule recognizes that a corporation is governed by its Board of Directors, who, in exercising their fiduciary duty to act in the best interests of the corporation, must have access to all information.
“The documents relating to the upgrade energy project clearly are corporate books and records. Therefore, the questioner has an absolute right to inspect these documents. This should be discussed with corporate counsel. The board should also be made aware of the law. If counsel and/or the board persist in refusing access to the documents (the president alone does not have authority to deny such access), the questioner may enforce the right to inspect in a court proceeding.
“Unlike directors, shareholders do not necessarily have a right to inspect such documents. While shareholders have a statutory right to see minutes of shareholders’ meetings, a list of shareholders, and an annual financial statement, no statutory right exists with respect to any other documents. To the extent any right exists to see other documents, it exists only if it is exercised in good faith, for what is deemed a proper purpose, and at a proper time and place. This limited right is enforceable in court; whether to grant the request is, however, subject to the court’s discretion, and the shareholder’s case will rise or fall on the facts of the particular case and the purpose articulated for the inspection. The shareholder’s position here might be strengthened by the fact that the board has already given another shareholder complete access to all documents pertaining to the project.
That access was provided to another shareholder who is involved with the project raises an important issue: Has the board improperly delegated its responsibility to manage the affairs of the corporation to this shareholder? The questioner would be well-advised to seek clarification as to what the respective roles of the shareholder and the board are with respect to this project.”