Requests for Inspection Under Chapter 607 – Qualified and Unqualified Inspection Rights
By Valeria Angelucci
Under Florida law, Corporations have a duty to retain certain records, and to make them available for inspections to their shareholders or members.
It is important to be fully aware of such duties and differentiate between the various provisions under the statute since certain provisions may provide for unqualified inspection rights while other may provide for inspections rights that are contingent on an assertion of good faith and proper purpose. Certain records may also be requested under more than one provision depending on the circumstances (an example is the right to inspect records of shareholders which is contained in both 607.1602(2)(c) and 607.0720).
Unqualified Inspection Rights
Under Fla. Stat. 607.1601(1) Corporations have a duty to maintain: a) articles of incorporation, b) certain notices to shareholders, c) their bylaws, d) all written communications within the past 3 years to the shareholders; e) Minutes of all meetings of, and records of all actions taken, f) a list of the names and business street addresses of its current directors and officers; and g) the most recent annual report. Under 607.1602(1) access to these records (except for minutes and records of action) must be granted to a shareholder during regular business hours at the corporation’s principal office if the shareholder gives written notice of the shareholder’s demand at least 5 business days before the date on which the shareholder wishes to inspect and copy the records. The Corporation does not have any right to object to the shareholder’s request as long as properly provided. If a shareholder requests inspection pursuant to s. 607.1602(1) and that inspection is denied, upon application by the shareholder, the circuit court in the county where the corporation’s principal office (or, if non in this state, its registered office) is located may summarily order inspection, at the corporation’s expense, to the requesting shareholder pursuant to 607.1604(1).
Contingent Inspection Rights
A Corporation must also maintain other records, such as annual financial statements, accounting records and a list of its shareholder (§607.1601(2), (3) and (4)). Under 607.1602(2) a shareholder may also request to inspect: (a) Excerpts from minutes of any meeting, and records of action taken; (b) Accounting records of the corporation, (c) The record of shareholders, and (d) Any other books and records. However, a records request under Section 607.1602(2) is contingent upon the shareholder meeting the requirements set forth in section (3). Section (3) requires that the shareholder’s demand is made in good faith and for a proper purpose; the shareholder describes with reasonable particularity his or her purpose and the records he or she desires to inspect; and the records are directly connected with the shareholder’s purpose. Courts have found that:
“A proper purpose is one that is lawful in character and not contrary to the interest of the corporation. It is one wherein a stockholder seeks information bearing upon the protection of his interest (and/or that of other stockholders), and not satisfaction of curiosity or a general fishing expedition.” Delaney v. Santafe Healthcare, Inc., 741 So. 2d 595 (Fla. 1st DCA 1999); Oil Conservationists, Inc. v. Gilbert, 471 So. 2d 650, 653 (Fla. 4th DCA 1985).
If a corporation does not within a reasonable time allow a shareholder who complies with §607.1602(2) and (3) to inspect and copy the records, then the shareholder may apply to the circuit court in the applicable county for an order to permit inspection and copying of the records demanded pursuant to §607.1604(2). Under §607.1604(3) the court may also order that the corporation pay the shareholder’s expenses incurred, including reasonable attorney fees, incurred to obtain the order and enforce its rights under this section unless the corporation establishes that the corporation refused inspection in good faith because the corporation had a reasonable basis for doubt about the right of the shareholder to inspect or copy the records demanded; or required reasonable restrictions on the disclosure, use, or distribution of the records to which the demanding shareholder had been unwilling to agree.