Q. I am a shareholder in a cooperative apartment, and I believe that building money is being used for personal uses. I have been denied access to the building’s books. As a shareholder, what can I do to see them?
—Exercising My Rights
A. According to attorney Eric Sherman with the New York City-based firm of Pryor Cashman LLP: “Cooperative shareholders are afforded certain rights by statute, under common law and possibly in the co-op’s governing documents, to inspect the books and records of the cooperative corporation. What constitutes a cooperative corporation’s ‘books and records,’ however, has been the source of much litigation in New York courts. And in many cases, what a shareholder is entitled to see is a function of the way in which the materials are requested.
“If a shareholder makes a general request to review a corporation’s ‘books and records,’ then that corporation is only required to make available materials specifically enumerated in the Business Corporation Law (BCL)—namely: (i) a record of shareholders; (ii) shareholder meeting minutes; and (iii) profit and loss statements.
“A more detailed request for inspection (i.e., identifying categories/types of documents to be inspected), provided it is made ‘in good faith and for a valid purpose’ must be honored by the cooperative corporation. For example, it is clear under New York law that seeking to investigate potential mismanagement or breaches of fiduciary duties (which could arise from the use of building money for personal use) are appropriate grounds for requesting inspection of books and records, provided that the inquiry is grounded in good faith and for a valid purpose. Note, however, that the board of directors may condition your access to the documents on the execution of a reasonable confidentiality agreement.