California Corporation Books And Records Statutes – Important For Shareholder, Officer and Director Rights And Responsibilities

The press tends to cover litigation and court cases that present sensational facts or issues. Have you ever seen a news release that discussed California corporate bookkeeping and records rights and responsibilities? Probably not. But these rights and responsibilities are extremely important for shareholders, officers, directors and others

I have provided below four important California Corporations Code books and records sections (sections 1500, 1507, 1601 and 1602), plus section 1600 relating to information about shareholders’ names and contact information.

Of course, with respect to the books and records, you still need to determine if all of the information has been correctly recorded, kept and provided, if information has been represented correctly, and what the information and numbers mean about the situation, and that’s where legal, accounting and auditing experience and help are useful. Currently I am also in the process of updating my audit committee guide to include SSARS 21 (for review, compilation, and preparation engagements), and I will be posting the updated guide shortly. Sometimes in these situations there are also financial statements that have been audited, reviewed, or compiled.

The following is California Corporations Code section 1500.

Each corporation shall keep adequate and correct books and records of account and shall keep minutes of the proceedings of its shareholders, board and committees of the board and shall keep at its principal executive office, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each. Those minutes and other books and records shall be kept either in written form or in another form capable of being converted into clearly legible tangible form or in any combination of the foregoing. When minutes and other books and records are kept in a form capable of being converted into clearly legible paper form, the clearly legible paper form into which those minutes and other books and records are converted shall be admissible in evidence, and accepted for all other purposes, to the same extent as an original paper record of the same information would have been, provided that the paper form accurately portrays the record.

The following is California Corporations Code section 1507.

Any officers, directors, employees or agents of a corporation who do any of the following are liable jointly and severally for all the damages resulting therefrom to the corporation or any person injured thereby who relied thereon or to both.

(a) Make, issue, deliver or publish any prospectus, report, circular, certificate, financial statement, balance sheet, public notice or document respecting the corporation or its shares, assets, liabilities, capital, dividends, business, earnings or accounts which is false in any material respect, knowing it to be false, or participate in the making, issuance, delivery or publication thereof with knowledge that the same is false in a material respect.

(b) Make or cause to be made in the books, minutes, records or accounts of a corporation any entry which is false in any material particular knowing such entry is false.

(c) Remove, erase, alter or cancel any entry in any books or records of the corporation, with intent to deceive.

The following is California Corporations Code section 1601.

(a) The accounting books and records and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping any such records in this state or having its principal executive office in this state, shall be open to inspection upon the written demand on the corporation of any shareholder or holder of a voting trust certificate at any reasonable time during usual business hours, for a purpose reasonably related to such holder’s interests as a shareholder or as the holder of such voting trust certificate. The right of inspection created by this subdivision shall extend to the records of each subsidiary of a corporation subject to this subdivision.

(b) Such inspection by a shareholder or holder of a voting trust certificate may be made in person or by agent or attorney, and the right of inspection includes the right to copy and make extracts. The right of the shareholders to inspect the corporate records may not be limited by the articles or bylaws.

The following is California Corporations Code section 1602.

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 and also of its subsidiary corporations, domestic or foreign. Such inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts. This section applies to a director of any foreign corporation having its principal executive office in this state or customarily holding meetings of its board in this state.

And, the following is California Corporations Code section 1600.

(a) A shareholder or shareholders holding at least 5 percent in the aggregate of the outstanding voting shares of a corporation or who hold at least 1 percent of those voting shares and have filed a Schedule 14A with the United States Securities and Exchange Commission (or in case the corporation is a bank the deposits of which are insured in accordance with the Federal Deposit Insurance Act, have filed a Form F-6 with the appropriate federal bank regulatory agency) shall have an absolute right to do either or both of the following: (1) inspect and copy the record of shareholders’ names and addresses and shareholdings during usual business hours upon five business days’ prior written demand upon the corporation, or (2) obtain from the transfer agent for the corporation, upon written demand and upon the tender of its usual charges for such a list (the amount of which charges shall be stated to the shareholder by the transfer agent upon request), a list of the shareholders’ names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which it has been compiled or as of a date specified by the shareholder subsequent to the date of demand. The list shall be made available on or before the later of five business days after the demand is received or the date specified therein as the date as of which the list is to be compiled. A corporation shall have the responsibility to cause its transfer agent to comply with this subdivision.

(b) Any delay by the corporation or the transfer agent in complying with a demand under subdivision (a) beyond the time limits specified therein shall give the shareholder or shareholders properly making the demand a right to obtain from the superior court, upon the filing of a verified complaint in the proper county and after a hearing, notice of which shall be given to such persons and in such manner as the court may direct, an order postponing any shareholders’ meeting previously noticed for a period equal to the period of such delay. Such right shall be in addition to any other legal or equitable remedies to which the shareholder may be entitled.

(c) The record of shareholders shall also be open to inspection and copying by any shareholder or holder of a voting trust certificate at any time during usual business hours upon written demand on the corporation, for a purpose reasonably related to such holder’s interests as a shareholder or holder of a voting trust certificate.

(d) Any inspection and copying under this section may be made in person or by agent or attorney. The rights provided in this section may not be limited by the articles or bylaws. This section applies to any domestic corporation and to any foreign corporation having its principal executive office in this state or customarily holding meetings of its board in this state.

Dave Tate, Esq., and licensed CPA (inactive) in California, San Francisco and throughout California, http://directorofficernews.com and http://californiaestatetrust.com.

 

 

 

 

 

Commentary: Can California Find a Way Out of Its Pension Calamity? | PublicCEO

The latest reform effort wouldn’t solve the problem, but it at least would help keep it from getting worse. By Charles Chieppo. The longer you wait to solve a problem, the more painful the fix becomes. Californians are being reminded of that simple truth as their leaders attempt to grapple with the state’s snowballing public-pension …

Click on the following for the discussion: www.publicceo.com

I find this problem disgusting for several reasons. Not to be negative, but the problem, which has been known for a long number of years, (1) evidences that the majority, no not each of them, but the majority of legislators and elected officers as a whole where these problems exist cannot be trusted to perform their duties or represent the voting tax paying public, (2) evidences that there must be absolute transparency and disclosure in governmental accounting and reporting, (3) evidences that there must be an independent watchdog entity that has legal authority to take action and stop these problems early when they happen, and (4) evidences that government will not police itself.

It is my understanding that the new government accounting rules might soon eliminate the ability of governmental entities to hide these unfunded liability problems. These changes should have been made long ago. And I’ll only believe that it is corrected when I actually see it.

Even with transparency the problems continue to exist, for example, with social security and the federal disability fund.

Young people should be screaming about these problems that have been caused for them, elder people should be screaming about these problems that have been created for them, and people in the middle should be screaming about being somewhere in the middle of these problems.

The gross mismanagement of these problems has been extreme. Kind of funny, isn’t it, that the governmental entities enact statutes and regulations over business entities but then violate the public trust and fail to keep their own houses in order?  Sorry to rant a little, but these problems really bother me.  Take care. Onward.

Dave Tate, Esq. (San Francisco / California), http://directorofficernews.com, and working on Tate’s Excellent Audit Committee Guide, Click Here.