Q&A: Right to See Project Documents

Q My co-op is about to engage in a multi-million dollar energy upgrade project.  The board president has decided to not allow me—a newly elected member of the board— and any shareholders 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. What can the other interested  shareholders and I do to obtain this information?  

 -- Seeing Red on Green Light

A According to Phyllis Weisberg, Esq. of the law firm of Kurzman Karelsen & Frank, “In New York, a director has an absolute and unqualified right to inspect all  corporate books and records. 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 provided another shareholder and that shareholder’s involvement 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.”  

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