Q&A: I Wanna See the Books!

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.   

“Further, to avoid any ambiguity and ensure proper attention is given to your request, make it in writing and send it pursuant to the notice provisions of your proprietary lease for notice on the board of directors. 

“The board can also require you to come to its or its offices to inspect the materials you are entitled to inspect, but it must also allow you to make copies of the materials (or provide the materials electronically if they are maintained that way).  The board of directors may also charge you for the reasonable costs of making such copies. 

“Since, in this respect, cooperative corporations are no different from other corporations, it is imperative to remember that the cooperative’s ‘books and records’ do not belong to the board of directors, but to the cooperative corporation, of which you are a shareholder.  Thus, provided you make a request in writing, with sufficient detail, and in good faith, the board of directors should promptly comply with your request. 

“If you have made a written request and nonetheless have been denied access to the materials requested, which the writer indicates is the case,  you may petition the court for an order compelling the board to permit you to inspect the materials identified in your notice, consistent with New York law.”   

Marion R. Harris, an associate at Pryor Cashman, assisted in the preparation of this response.

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