In the practice of handling business disputes, questions regarding the innerworkings of an entity inevitably come up. A passive owner should know: what is the value of the entity; if it is making profit distributions, and how corporate funds are being handled.
These questions often lead to a “push-pull” in business litigation between companies and owners regarding access to corporate books and records. On the one hand, a company wants to run its business without getting mired in data requests. On the other hand, owners of a company want information about how that company is running. Our business litigation lawyers have justified both positions, always depending upon the circumstances.
So, can an owner of a company get access to that company’s books and records? The answer is that it depends, but here are a few factors that will impact the outcome:
- What sort of a business entity are we talking about? Is it a limited liability corporation (LLC), a corporation, or a partnership? The type of entity affects an owner’s statutory right to inspect company records.
- What do the organization’s documents say about books and records inspections? Oftentimes, a company agreement (for instance) will speak to this very issue.
- What is the owner’s percentage of ownership in the entity, and how long has that owner had such an ownership interest? In some cases, this impacts what information the owner is entitled to.
- What is the purpose of the request for information? Is it to value shares, investigate corporate misconduct, or otherwise? An owner will usually need to have an articulable “proper” purpose to justify the corporate record book
- How broad is the request?
In commercial litigation, these factors will impact whether and to what extent the owner of an entity can access that entity’s business information and corporate record book. Be sure your legal advisor has answers to each.
BoyarMiller’s commercial litigation attorneys have experience across a wide range of business disputes. Contact us for more information.
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