By James O. Devereaux, Esq.
Corporations Code section 8334 states:
"Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director."
Is a corporate director's right of access to all of a corporation's records and documents really so ironclad? Although the law's policy favoring broad access to corporate records by a director is strong, both statutory law and appellate decisions show that a director's "absolute" right to inspect and copy records is not always so absolute.
The Corporations Code includes provisions that authorize a court to impose conditions in appropriate circumstances when a director seeks judicial enforcement of his or her absolute right of record access. Also, as discussed in this article, California appellate courts have upheld balancing of a director's rights to inspect corporate records against important interests of the corporation and its members or shareholders. These interests include protecting the members' privacy rights in the voting decisions and the corporation's right to preserve its attorney-client privilege.
The Corporations Code
The General Corporation Law which governs "for profit" corporations includes a provision (Corporations Code § 1602) that is substantially the same as Section 8334 of the Nonprofit Mutual Benefit Corporation Law. In related provisions, both the Nonprofit Corporation Law (§ 8336) and the General Corporation Law (§ 1603) provide that when a director's lawful demand for inspection of corporate records is denied, the superior court may enforce the director's right of inspection with just and proper conditions.
The fact that the Code provides for superior court authority to enforce a director's inspection rights "with just and proper conditions" gives a hint that in using the word "absolute" the Legislature didn't mean absolutely absolute.
Recent Appellate Decisions
California courts have held that a director's statutory right to have access to all corporate documents represents a legislative judgment that directors are better able to discharge their fiduciary duties to the corporation and its shareholders or members if they have free access to information concerning the corporation. However, in the three appellate opinions discussed below, the courts have held that, in certain particular situations, a director's "absolute" right of access to corporate records must be weighed against other important legal considerations.
Surviving in 2009
How can you weather a dismal economy, "green" your association, and protect your assets at the same time? Find out at ECHO's South Bay seminar. ECHO has assembled a lively, knowledgeable group of attorneys and industry experts to speak about Making Ends Meet, green roofing technology, and Insurance Considerations for Construction.
We have also set aside a full hour for an Ask the Attorneys session to answer your pressing legal questions. Join construction expert Patrick Falconio, roofing expert Brian Seifert, and attorney Steven Weil for another outstanding South Bay program.
Saturday April 25, 2009
Campbell Community Center, Campbell CA
There will be a light continental breakfast and every attendee will receive a Seminar Program Book as a part of the registration fee. There will be sponsor tables and sponsor drawings for great prizes.
The Future of Common Interest Developments:
Can they Survive the Current Economic Downturn?
On April 30, 2009, partner Tyler Berding will offer new insights to a topic he has been writing about for the last 10 years: the challenges faced by undercapitalized associations confronting large repair costs.
Saturday April 30, 2009
The topic remains as fresh and timely as ever and we hope our clients and friends can attend.
MAINTENANCE MANUALS FOR NEW ASSOCIATIONS
How Much Maintenance
By Tyler Berding and Steven Weil
Private New Towns
A promising new concept saddled with
an old problem?
The City of Hercules, once known for The Hercules Powder Company, a manufacturer of dynamite, is redeveloping its old industrial properties into what has become one of the most explosive new ideas in housing and one of the finest communities of its type on the West coast.
Call it the anti-suburb plan; Hercules has employed smart growth and green planning concepts to create commuter and retail-friendly spaces among new housing, commercial and office space »
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