Thursday, March 17, 2011

Little Known Facts: Shareholder Rights to Financial Information

In honor of Cliff Clavin, the postman from television's "Cheers," I am starting a new feature on this blog called "Little Known Facts."  We'll explore nuances of corporate and securities law that may be somewhat obscure but (hopefully) pretty interesting.

Today we'll explore the following question: Can shareholders of a Texas corporation demand to see the corporation's financial statements?  Yes they can. 

Section 21.219 of the Texas Business Organizations Code (TBOC) provides: "On written request of a shareholder of the corporation, a corporation shall mail to the shareholder: (1) the annual statements of the corporation for the last fiscal year that contain in reasonable detail the corporation's assets and liabilities and the results of the corporation's operations; and (2) the most recent interim statements, if any, that have been filed in a public record or other publication." 

In addition, a person who has been a shareholder for at least six months or who holds at least 5% of the outstanding shares of the company may examine and copy the corporation's books, records, minutes, and share transfer records for any proper purpose, subject to any contrary provision of the corporation's governing documents.  That provision is set forth in Section 21.218 of the TBOC.

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