How To Get Corporate Financial Records as a Shareholder

Shareholders are entitled to know how the corporation they own is performing financially.  The company’s board of directors and executives have a fiduciary obligation to shareholders, each of whom own a portion of the company. Shareholders have the right to know what the organization’s financial state is and whether the board and executives are managing money effectively for the best interests of the business.

CA Code section 1500 requires that each company keep accurate financial records. Section 1501 sets forth information on reporting requirements to shareholders as well as establishes the rights of shareholders to obtain corporate records. Under the law, it should be a simple process to get corporate financial records as a shareholder. A California experienced business law attorney at Brown & Charbonneau, LLP can assist you with the process of obtaining the records you want to see. Our attorneys can also help you if a dispute arises with the board or executives about how money is being managed.

How to Get Corporate Financial Records as a Shareholder

California law requires that the board of directors of a corporation send an annual report to shareholders within 120 days of the close of the fiscal year. The only exception to this requirement is when there are less than 100 holders of record of corporate shares and the requirement for annual reports is expressly waived in the corporate bylaws.  CA code section 1501 states that: “This report shall contain a balance sheet as of the end of that fiscal year and an income statement and a statement of cashflows for that fiscal year, accompanied by any report thereon of independent accountants or, if there is no report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.”

If the company has more than 100 shareholders, there are also additional reporting requirements such as reporting certain transactions in excess of $40,000.

A shareholder or group of shareholders that own at least five percent of the outstanding shares of any class of corporate stock also have additional rights to get corporate financial records as a shareholder. Eligible shareholders may make a written request to the corporation at any time to provide an income statement for the three-month, six-month or nine-month period of the current fiscal year. A written request may also be made to provide a balance sheet of the corporation at the end of the period.

When a written request is made to get corporate financial records as a shareholder, the company has to mail or deliver the statements within a 30 day period of time. A copy of the statements also must be kept on file for at least 12 months in the principal office of the corporation. The copy of the statement must be “exhibited at all reasonable times” to any shareholder who asks to examine the statements.

The ability to get corporate financial records as a shareholder is a very important legal protection for investors, who may wish to see how the company they own is performing. An experienced California business lawyer at Brown & Charbonneau, LLP can help you to make a request for financial records and can assist you if you feel that company money is being misused.