Access to books and records for shareholders and LLC members

Access to books and records for shareholders and LLC members

Whether you are a shareholder in a large or closely held corporation or a member of an LLC, you have rights under the law and, in many cases, your corporation or LLC’s governing documents, to inspect the books and records of the entity. In Illinois, there is an additional requirement that a shareholder of a corporation’s inspection of books and records be for a “proper purpose.”

 

Shareholders will sometimes have their demands to inspect the company books and records denied, especially if there is a dispute among shareholders, members, officers, or directors.

 

If a corporation or LLC refuses a properly demanded inspection by a shareholder or interest holder, the person seeking the inspection may file a lawsuit in the circuit court in which the company is registered or maintains its principal office. The lawsuit may request a writ of mandamus or other equitable relief to compel the company to allow the examination of the requested books and records. Individual officers or agents of the company who denied access may be held liable for damages in a penalty of up to 10% of the value of the shares held by the shareholder in addition to any other damages or remedies that may be available.

 

A demand to inspect company finances should be made for proper purpose. (If the shareholder demands to inspect corporate documents such as minutes, shareholder records, or voting agreements, then it will be the company’s burden in the lawsuit to establish that the shareholder lacks a proper purpose.). 805 ILCS 5/7.75(b)

 

805 ILCS 180/10-15(d).

 

A shareholder’s purpose is proper if it is lawful, non-speculative, honest, and aims to protect the company’s interests. Taghert v. Wesley, 799 N.E.2d 377, 381 (Ill. App. Ct. 2003). Although not dispositive, the court in Morris v. Broadview further implied that a proper purpose must outweigh the company’s interest in protecting corporate and shareholder privacy. See Morris v. Broadview, Inc., 52 N.E.2d 769, 772 (Ill. 1944).

 

To speak to one of our lawyers, get in touch with us at (312) 223-1699 or email Thomas E. Patterson at tpatterson@pattersonlawfirm.com for more advice and information.

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