Method system of inspection right of shareholder of the Usa Inc

                    Zhejiang Xingyun law firmZhou Jianwei lawyer

The ability to examine the company's books and records for the exertion of the voting rights or to support the prosecution is necessary. Most of the time, only know the name and address of other shareholders, the shareholders can launch control for the company. As a necessary condition for the shareholder derivative litigation also require shareholders to contact other shareholders, or in order to meet the conditions of prosecution, or as a co plaintiff to avoid providing guarantee. In addition to the roster of the shareholders, the shareholders may request access to company records or books for various reasons, such as the evaluation of stock prices or confirmation proceedings related information.[1]Therefore, the company law gives shareholders inspection right is absolutely necessary. The modern company law countries invariably regulations, company shareholders inspection right and right of access to information, have the right to examine the company important legal documents, have the right to request the company management legal materials in accordance with the law to submit the relevant[II].

A theoretical basis and historical origin of the inspection right of shareholder

The theoretical basis of the inspection right of shareholder is the two related legal principle agent relationship exists between: shareholders of company property right and the shareholder and the company management layer[3]. First of all, from the perspective of property rights, in order to protect the economic interests of the shareholders in the company have the right to examine the company books and records to obtain information. The inspection right of shareholder shareholder of company assets and property ownership based on potential, although the property law belong to the company.

Secondly, based on the right of inspection and the agency relationship between the shareholders and the company managers: shareholders shall have the right to know their agent to perform its obligations. Shareholders must have access to the company officials and other agents under the control of the books and records. No matter from which angle, inspection rights system should provide shareholders with quick and cheap means to obtain the monitoring management layer and contact other shareholders required information.

1 the inspection right of shareholder's case law

Before seventeenth Century, the company strictly as a shareholder holding property to the trustee[4]. With the development of the Modern Corporation during the industrial revolution, began in the British case law that shareholders have the right to examine the company books and records to protect the interests of property.

In early seventeenth Century, the court granted shareholders have the right to examine the company books and records. This rule is illustrated in Rex v. Fraternity of Hostman case[⑤]: "every member of the company for any matters associated with itself have the right of access to books, though it may conflict with others." The court further think, books as common property group is recognized, our laws in this, each member has its benefits, is the property or voting right evidence, correct exercise or voting basis. This is with shareholders about the company's books.

Now, the general rules of case law is the Business Companies of all shareholders have the right to access and Censorship Incorporation's books and records. However, this case law right is not absolute, but the qualification conditions right, only when the shareholders have legitimate purpose, and in the right time and place to the right of inspection. In the case of legitimate objective is defined as "the shareholders by referring to protect its interests." Such as Delaware Supreme Court recently said: "the legitimacy required by the shareholders to whether the purpose and as shareholders interests related to measure, namely the legitimate purpose of the request is defined with the petition as shareholders or position appropriate to."[6]

The case law of the inspection right of shareholder to guarantee, through a series of judicial form including: mandamus; injunction; pretrial review; or found after consulting.[7]

 The 2 law of the right of access to development

In eighteenth Century, the company scale expansion, the complex structure, the increase in the number of shareholders and dispersion. With the rapid expansion of the number of shareholders, corporate finance and production becomes more and more complex, the shareholders demand for reliable information about the affairs of the company of the corresponding expansion. Shareholders are increasingly unlikely to participate in the company management or easily learned inside the relevant business. In order to understand their investments, they need help to get this information. Therefore, they turned to get that kind of help to develop the company law[8].

Early in eighteenth Century, the company legislation provides two methods to solve this problem: (1) announced the company have the right to examine the company's books and records; (2) require the company to the periodic reports to shareholders. Although in nineteenth Century and mid twentieth Century, states agreed to not effective reporting conditions, but the state of the inspection right of shareholder of company legislation is very useful.

Over the years, the court through the interpretation of statute law requires the shareholder is the exercise of shareholder inspection right to limit for good and proper purpose. Due to its definition as case law, a correlation with the interests of shareholders in the company[9]. Those restrictions caused controversy, often leading to long and cost of litigation.

Then the shareholders law the right of inspection is not restricted. In late eighteenth Century, the state legislature is generally established and expanded the case law on the right of inspection is no longer prescribed conditions. The rules of case law restrictions such as goodwill and legitimate purpose is considered to be too harsh. Therefore, the new law gives shareholders on the company books and records of the absolute right of inspection, whatever the purpose. By early nineteenth Century, many state legislation also refused to provide the shareholder of the company and its officials be punished, even if the demands of shareholders is obviously unreasonable.

The legislative body and the court to the shareholders of the company of the inspection right of books and records the infinite has an unfortunate consequence. For example, commercial competitors will buy a company's stock to improper access to the company information or blackmail their competitors.

The abuse of rights by legislation to rebound in nineteenth Century thirty years, legislation back to the case law of the inspection right of shareholder's Limited[⑩]. Some states even beyond the rules of case law stipulates the qualification of shareholders have the right to access, these restrictive conditions including the request for access to books and records of the company shareholders must have a certain proportion of stock and must hold the stock reaches the minimum time requirements refer to previous[11].

Now, the state formulated law provisions eligible shareholders have the right to obtain the register of shareholders and company search books and records. The essence of Business Companies law in terms of the correction as a demonstration for the adoption of many state. Correction of Business Companies law contains provisions defining the company records, the inspection right of shareholder, the scope of inspection and the court ordered the inspection program[12].

Business Companies law revised edition gives any shareholders have the right to request access to books and records in the form of Censorship Incorporation at the right time for legitimate purposes[13]. The legitimate purpose is to put forward and access request of shareholders as shareholders reasonably related[14]. If the company refuses to the demands of shareholders, shareholders can provide the required books and records of the command to apply to the court for compulsory.[15]If the court orders, companies must demonstrate its refusal to good faith, or have to pay shareholders' legal fees and litigation costs. Law is supplemented by the case law of the inspection right of shareholder and not a substitute for[16].

Two. Development American Delaware Corporation Law shareholder inspection system

 Delaware is the leader of the judicial system of Usa Inc[17]. The company law for the whole American lawyers to provide legal services by using complex. Delaware court verdict American most important company law case, whether it is a hostile takeover cases or the inspection right of shareholder disputes. The judicial system, so it is the Delaware courts in other states to follow suit.

However, at the turn of the twentieth Century, is the state of New Jersey, not the state of Delaware, leading the company's market. Out of competition, Delaware state in 1899 basically not to copy the New Jersey Amendment Act 1896.[18]Including the New Jersey Codex statutory right of inspection.

 1.1967 years ago the state of Delaware, the inspection right of shareholder

In March 10, 1899, the Delaware state legislature passed the Delaware General Corporation Law of the seventeenth quarter, Delaware, the predecessor of the modern legislation. The method comprises the following a standardized shareholder shareholder household account or register of shareholders:

Contains the names of the shareholders, address, holding the number of shareholders of the household account books original or copy this should always be in the state's principal place of business or main office is usually Business Hours open access to the shareholders. The shareholders of household books original book or copy can be used as the evidence of all court[19].

Although the specification of the inspection right of shareholder of the Delaware General Corporation Law of the relevant provisions of change over the next 50 years several times, but the provision of basic language remained the same until the revised code of 1967.

In the revised 1967 Delaware General Corporation Law, Delaware Supreme Court (not the courts at the grassroots level) by mandamus to perform the inspection right of shareholder. Mandamus is the name of a court order, the high court, pointing to a Private Companies, or its officers, in accordance with the command shown in the performance of their duties, belongs to the public, or administrative obligations, or restore the prosecution of illegal deprivation of rights or interests[20].

Delaware in 1967 before the mandamus program would require shareholders, that the prosecution, state support for relief legal fact. As the defense, the defendant must show has followed the writ in command or other shareholders do not have a right to seek relief show to refuse the claim. If the respondent is not clear, complete, full, then claimed that support, court of mandamus to exercise the shareholder's right of inspection.[21]

Delaware court by interpreting the law established the unconditional shareholders the right of inspection.

In law, shareholders requested mandamus only shows in the complaint: (1) the defendant company; (2) the plaintiff's registered shareholders; (3) had access to request the appropriate but was refused; (4) the company does not perform its legal obligation by the implementation of the program.[22]

Therefore, according to the 220th day before the 1967 version, for implementation by shareholders inspection right, shareholders do not complaint that legitimate purpose required to case law. The company has proved that shareholders improper, unlawful or malicious burden of proof, if the company is ready to stop the court written instructions of shareholders, the right of inspection[23]. So, shareholders of the register of shareholders litigation legal burden of proof in no case law is strictly.

According to the 1967 Delaware state law, shareholders have the case law and statutory law to Delaware Corporation to examine the company's books and records of rights. When refer to the company's books and records were denied the right, shareholders for state Supreme Court issued a written order.[24]According to the first 1967 Delaware law, prosecution for mandamus forced to examine the company's books and records, shareholders must put forward a concrete and legitimate access to[25]. "Proper purpose is not a general legal statement, must be revealed specific facts of its legitimacy." shareholders claim must be justified, and not against the interests of the company, shareholders have the proof. Therefore, shareholders through mandamus to examine the company's books and records is not absolute, but is only conditional rights, depending on the specific case facts.[26]

According to the laws of the state of Delaware before 1967, the court's power is limited. If the dispute document in the hands of the other party, and has substantial value for the prosecution claims, the court shall have the right in the trial to sue under one party requires the Command Reference[27]. As a pragmatic approach, which means not in parallel with other outstanding corporate disputes the right of inspection case, must be submitted to the state Supreme court.

 Amendment 2 Delaware General Corporation Law of 220th festival in 1967

 The correction process General Corporation Law of Delaware in 1967 caused a heated debate about according to the laws of the state of Delaware statutory inspection right of shareholder of legitimacy. Ernest. Professor Fuchs is a Delaware Corporation Amendment Act 1967 report. Amendments to the law of the state of Delaware in his 1965 Committee (hereinafter referred to as "the committee") report submitted a preliminary proposal, Fogg right of inspection. His draft articles mainly based on model Business Companies Act section forty-sixth and the New York state Business Companies law.[28]

 Legislative proposals Fogg is to increase shareholder inspection right exercise conditions. Including these new conditions: (1) shareholders must be in present access request for at least 6 months prior to hold the stocks registration; (2) shareholders or other to access request shareholders must be at least any of a class of stock 5% explicit stock; (3) if the shareholders to reject the request of an oath does not exist consult the unfair reasons and in five years not to sell the register of shareholders, the right of inspection will be rejected; (4) the company on the right is not the burden of proof for legitimate purposes.

One member of the European dimension. Morris insisted on Fawkes's substantive changes to the draft. Morris Fawkes debate tends to eliminate exercise see shareholder holding time or shareholding ratio requirements, that these conditions are not necessary and in violation of the laws of the state of delaware. Morris believes that the key lies in the exercise of the right of the right of access to check for specific, reasonable and legitimate purpose. If holding less than 5% shares of the company's shareholders for the purpose of access to meet the requirements, should not because the shares differences. He also thinks that there is no reason to stop just made the shareholder's concerns about the affairs of the company access request. Morris also opposed Fawkes's company unfair to bear the burden of proof of the view of the shareholders. He suggested that the company law revised by the shareholders to justify their. In addition, he proposed the new companies act 220th section, Morris advocated by the grass-roots court exclusive jurisdiction.[29]

Based on the acceptance of other members[30]Morris, the draft amendment was submitted to the commission a proposal[31]. After the meeting in May 4, 1965, Morris was drafted two draft 220th day to reflect the views of members[32]. The Delaware state legislature passed the revised 220th festival in 1967. The final version is, for access to the register of shareholders, the company to improper purpose refused to provide by the company, the burden of proof. The inspection of the register of shareholders, while the objective evidence that inverted.

The 3 section 220th amended version of the inspection right of shareholder

The final version of section 220th will all the inspection right of shareholder by the high court to the court, by the grass-roots court decided whether shareholders have access rights and to give the shareholder rights all necessary remedies are absolute judicial jurisdiction. The court of the inspection right of shareholder cases of summary procedure, in order to speed up the problem of limited fact finding and speedy trial[33].                                                                      According to the revised code, the right of inspection condition is intuitive. First of all, the access requirements of shareholders must be the company's registered shareholders.[34]Shareholders can personally refer to or designated agent access. Secondly, access request must swear and submit the company in Delaware, registered or principal place of business. Third, the shareholder company books and records must be for legitimate purposes. Due to the interests of the shareholders and shareholders as the reasonable existence of related purposes[35]. Of course, shareholders should bear the company provides reasonable cost consulting services.

If refusing to provide the information required by the five business day since the company shareholders written request, Delaware laws allow shareholders to grassroots court in summary procedure compulsory inspection. Shareholders of the complaint must show that shareholders have made the appropriate request to the company, and did not provide the required information in the specified period after the past, or the shareholders request was refused.

The simple procedure and its scope of application is the register of shareholders to consult the case. The shareholders may request a single command to reduce the defendant's time and determine a speedy trial days. Generally speaking, the Respondent must be submitted within ten days. The trial will be arranged in a few weeks later.[36]Time arrangement in the company books and records will be extended in the case.

On the right of inspection case fact finding is limited. The defendant may take the oath for the testimony, but to take testimony is strictly limited to the scope of state inspection objective validity and inspection procedures comply with the legal requirements[37]. The file is limited: the defendant may require the plaintiff to provide documents to prove the plaintiff stated purpose; requires the plaintiff to provide have company documents.[38]The court shall not expand the fact finding the right to confirm other problems.[39]

The parties to submit a request for access to the right of general meaning in the last time before a court statement. Usually the parties in court when it comes to solve and submit withdrawal. If access to the trial, the court will support the plaintiff's request, typically command files immediately. However, the court will usually set some conditions to the party. Including giving shareholders a reasonable access rights at the same time show that the inspection must be in normal working hours in the company office.[40]Also, in the company of books and records of the cases, the court would have to meet the purpose of shareholders "necessary and sufficient" to limit the file. These restrictions have the potential for abuse and prevent leakage of shareholders' rights to sensitive commercial information. The court will allow him to access to the company files before signed confidentiality agreements.

Since 1967 since the 220th quarter correction, the only substantive change is the increase in 1981 (d). This revision is the codification of the common law right of company of delaware. The director company shareholders, books and records. Enacted law is now allow the courts at the grassroots level through a simple procedure to exercise their rights.[41]

Three. American "company law" provisions of demonstration of legislation

According to the legal system USA, the State Council has legislative power in addition to Federal Affairs include company legislation, so the State Council have made their company law. In 1950 formulated the "standard method", also known as the "company law", company law is drafted by the USA Lawyers Association, itself does not have mandatory, the legislative reference for state companies. However, the "standard of company law" by the amended several times, has been the majority of states using.

The main qualifications, USA 1969 "company law" stipulates that the fifty-second demonstration, only the list of shareholders holding more than 6 months straight or holding not less than 5% of the issued share capital of the company shareholders, have the right to exercise the law in the books and records the right of inspection, New York commercial company law 624th also has a similar provisions.

The scope of inspection, in the states of company legislation has an important influence on the "company law" demonstration take a list of rules, the first is the company shall be kept in its main office files are listed;[42]Second is the provisions of the company shareholders have the right of access to all records in the main office of the preserved; third is the shareholder and right of access to any meeting of the board of directors, Board Committee on behalf of the company to record any action record, without a meeting of the shareholders meeting or board of directors to take action, accounting books and records of the company shareholders archives.[43]

But Hamilton in the interpretation of "company law" the provisions of the demonstration that this does not mean that all records of this section not listed above may refer to. On the contrary, access to the information of shareholders must persuade the court, namely the shareholder may apply to the court to order the can access relevant records, books.[44]Under most state laws, the right to review not only is extended to cited legal records, but also extended to general company records. In this regard, the case law is generally tend to expand interpretation. One case had authorized access to records, account books, receipts, bills, vouchers and other documents that the company's financial situation. There is also a case company authorized access control subsidiary ledger. In the case, the court has authorized access to the company's contract, communication and even general manager. Inspect right general and shareholders about record those must he held or has a legitimate interest in the company's office. The company can not provide the alternative file, or the company's auditors preparing financial report to the shareholders' right of inspection.[45]But according to the "company law" USA demonstration of sixteenth (2) (c) the provisions of the 3 paragraph, the shareholders can only request for access to its reasonable access to objective is directly related to the books and records. Through this "and referred to the direct relationship between the" qualifier is reasonable limits the scope of the right of inspection.

The subjective conditions, according to Usa Inc law, case law on the shareholder rights, books and records are not absolute, shareholders in the exercise the right to legal requirements for legitimate purposes. As a demonstration, America "standard business corporation law" article 16.02 (C) adopted a generalized legislation, provisions of the legitimate purpose must meet three requirements: ① shareholders inspection and copying the file request is good, in order to the appropriate objective; the shareholders of the company, he explained the purpose of inspection and copying the file objective to clarify, and this should be rational, concrete; the records has direct relationship with what he wants to achieve purpose.

The provisions of the company law the exercise of the right to access to limited objective, at the same time the onus of proof invalidity shareholder inspection right by the company to bear the burden of proof obligations. USA early does have the case that shareholders have the obligation to justify their own access to. Later, for access to the register of shareholders, the steering is assumed by the company as the shareholder to unfair burden of proof.

Four. The relationship between case law and statute, the inspection right of shareholder inspection right of shareholder

According to the case law, shareholders have the right to examine the company's books and records. However, this right is not absolute. Only the exercise of this right for legitimate purposes. Because the limit is very difficult to define itself, in the face of the company is very easy to access request procedure. According to the common law, legitimate purpose of inspection: in order to determine whether the company has the improper management in order to initiate proceedings; determine the financial condition in order to evaluate the dividends is appropriate or decide how to vote in the coming elections; judge the value of the stock to sell or other purposes; in order to solicitation agent, the right to exercise the right to vote, group litigation, to other the shareholders offer than company management higher prices need to acquire the roster of the shareholders. Having improper sexual purposes are: public information about company; pressing stock price; sell shareholders profit; competition; for company v. shareholder defence.

In addition to the case law, institutions American state legislation has right to make laws, such as the Delaware General Corporation law. Enacted law is mainly cover the following aspects: the right of inspection qualification, access to the legitimacy of the purpose, the purpose of the legitimacy of the burden of proof, check request form, the right to defense, the punishment, the court refused to look up the inspection right of execution, refer to the object.

The provisions on the inspection right of shareholder inspection right of shareholder, the common law is still exist? In this regard, Soreno (1932) confirmed case. "This is basically positive, right of access existing law give the shareholder company books and records not deprived of case law, but through the elimination of some common law limits enlarges the inspection right of shareholder."[46]In fact, in this case, law provides relief compared with ordinary method is expanded and limit the inspection right of shareholder. Statute law although allows access to the exercise of the right of shareholders that no legitimate purpose, but limits the request access to qualifications, access to the exercise of the right of shareholders should have a certain proportion of shares. Because shareholders do not hold a certain proportion of the stock, he would be deprived of their statutory rights, but the court still allow it to seek relief on the common law, as long as it shows a legitimate purpose. For example: American 1969 "company law" article fifty-second demonstration set, only the list of shareholders holding more than 6 months straight or holding not less than 5% of the issued share capital of the company shareholders, have the right to exercise the law in the books and records the right of inspection, New York also has similar provisions in article 624th of the business corporation act. Later, USA many state legislation has been relaxed to some extent even cancelled the holding shareholders, such as the revised "company law" article sixteenth demonstration.