• Home
  • About
    • Thomas R. Brule
  • Services
    • Franchise & Business Developement
    • Litigation
    • Arbitration
  • Results
  • Contact
  • Blog
Brule Law Firm, LLC
Phone:  (216) 789-4229
     Fax:  (216) 916-4744
​        [email protected]
​                BruleLaw.com

The Shareholder’s Right to Information Under Ohio Law

5/5/2016

18 Comments

 
Shareholders, like any investor, have an interest in staying informed as to the status of their investment.  This interest may be difficult to exercise in the case of a shareholder in a close corporation, which is not required to make public disclosures.  As an owner of the business, and as a fellow shareholder who is owed a range of fiduciary duties, a shareholder in a close corporation has a right to information regarding the status of the business, as well as assets, investments and the operation and management of the company.  This right to information is closely protected under Ohio law, so long as the shareholder requests information in good faith and for a proper purpose.

The shareholder’s right to information is explicitly protected by the Ohio corporate code.  Ohio law provides that “Any shareholder of the corporation, upon written demand . . . , shall have the right to examine in person or by agent or attorney at any reasonable time and for any reasonable and proper purpose, the articles of the corporation, its regulations, its books and records of account, minutes, and records of shareholders aforesaid, and voting trust agreements, if any, on file with the corporation, and to make copies or extracts thereof.”  O.R.C. § 1701.37(C).  A shareholder is entitled to a wide range of information regarding the condition and state of affairs of the business in order to ascertain the status of his investment. 

This fundamental right to information enshrined in the statutes has been applied by the courts to require a corporation to provide its shareholder with broad access to information.  See No-Burn, Inc. v. Murati, 2011-Ohio-5635 (Ohio Ct. App. 9th Dist., 2011).  In No-Burn, the 9th District affirmed the shareholder’s right to receive documents responsive to eighteen categories of requests, including general ledgers, bank statements, financial statements and reports (including reports and/or memoranda to management), documents pertaining to expense reports and expense reimbursement, sales commissions, salaries and bonuses, and documents pertaining to inter-company transfers, among many other types of documents.  It must be noted that the shareholder in that case made his request as a general inquiry, and not in conjunction with any preexisting litigation.  The 9th District affirmed that the categories of requests were within the shareholder’s general right to information provided by O.R.C. § 1701.37(C).  Further, the 9th District rejected the Defendants’ argument that providing such information was burdensome to the company, affirming the trial court’s finding that “much of the information is stored [on the company’s internal computers] . . . and could be identified easily . . . .”  No-Burn at **18.

The Ohio Supreme Court has also confirmed the shareholder’s broad right to information.  The Court has stated that in order for a shareholder to exercise his or her right to information, “[n]othing more is required than that, acting in good faith for the protection of the interest of the corporation and his own interest, he desires to ascertain the condition of the corporation’s business.”  Lake v. Buckeye Steel Castings Co., 2 Ohio St. 2d 101, 104 (Ohio, 1965).  Furthermore, the Court clarified that the burden is on the corporation, and not the requesting shareholder, to rebut the presumption that the shareholder’s request is made in good faith and for a proper purpose.
​
The courts have also provided guidance on what may be considered a proper purpose for an information request.  For example, a shareholder may rely on his statutory right to information to request inspection of the corporation’s records for the purpose of investigating whether there were any improprieties in the management and operation of the company.  Grossman v. Cleveland Cartage Co., 8 Ohio Op. 2d 492 (Cuy. Cty. Ct. of Com. Pls., 1959).  And the corporation may not be able to object to a shareholder’s right to inspection on the basis that he may compete with the corporation.  The fact that the demanding shareholder is also a shareholder and officer in a competing corporation is not sufficient evidence of an unreasonable or improper purpose to deny the shareholder’s right to information.  Mayer v. Cincinnati Economy Drug Co., 89 Ohio App. 512 (Ohio Ct. App. 1st Dist., 1951) (decided under former analogous section).

Ohio law provides strong protection for a shareholder seeking to inspect corporate records and other information.  So long as the shareholder’s request is made for the purpose of protecting his or her investment, or for any other proper purpose, the corporation can be required to permit inspection of a very broad range of information.
18 Comments
best appeals law firm sacramento link
7/2/2017 10:44:24 pm

Thanks for a wonderful share. Your article has proved your hard work and experience you have got in this field. Brilliant .i love it reading.

Reply
https://www.researchwritingkings.com/review-of-7dollaressay-com/ link
9/16/2018 12:44:30 am

I think that everyone has the right to information. Since the world has transitioned to a more technologically driven society, the need for information has been a necessity. The world basically runs through information. Having access to information means that you get a lot more of opportunities for jobs and for education. That is why, I am very supportive of Ohio's new law on the right of shareholders to information. Shareholders should be aware of so that they can properly manage their investments.

Reply
Debt Consolidation lawyer in Ontario link
4/28/2022 11:44:05 am

Finding Debt Consolidation Lawyer in Canada? So At VSR Law office, we offer several solutions to help you reach your goals.

Reply
Notary Public Lawyer in Kitchener link
5/11/2022 10:37:11 am

Good Post! Thank you so much for sharing this pretty post, it was so good to read and useful to improve my knowledge as updated one, keep blogging.

Reply
register mark link
7/14/2017 09:54:37 pm

There are many things that must be done when you start a new company. Hiring a trademark attorney can make it easier to get them done.

Reply
Study Permit Visa for Canada link
5/9/2022 10:43:09 am

Excellent web site you have here.. It’s hard to find good quality writing like yours these days. I truly appreciate individuals like you!

Reply
uncontested divorce link
11/10/2017 10:53:17 pm


I wish more authors of this type of content would take the time you did to research and write so well. I am very impressed with your vision and insight.

Reply
attorneys link
1/30/2018 10:57:47 pm


I’ve been searching for some decent stuff on the subject and haven't had any luck up until this point, You just got a new biggest fan!..

Reply
http://businesslawyer124.blogspot.com/ link
2/6/2018 07:27:47 am

great work man i would like to congratulate you on this effort

Reply
click here link
10/18/2018 11:40:48 pm

It is imperative that we read blog post very carefully. I am already done it and find that this post is really amazing.

Reply
fletcher moore
6/9/2021 11:47:44 am

how long does an Ohio corporation have to produce the books and records after receiving the written request? What is the deadline before you can file a lawsuit to compel the records?

Under Section 220(c), if the Delaware corporation refuses to permit compliance with the demand within 5 business days, then the stockholder or director may file an action with the Delaware Court of Chancery. What is the Ohio rule?

Reply
Apply Permanent Residence Card Canada link
4/29/2022 04:32:35 am

Good Post! Thank you so much for sharing this pretty post, it was so good to read and useful to improve my knowledge as updated one, keep blogging.

Reply
Notary Public Lawyer in Cambridge link
5/4/2022 10:47:27 am

Finding Notary Public Lawyer Cambridge, Kitchener or any where in Ontario? We offer a full range of notary public services, including affidavits, notarizing certified true copies, oaths and statutory declarations.

Reply
Orange county mediation lawyer link
8/18/2022 10:34:45 am

The fact that the demanding shareholder is also a shareholder and officer in a competing corporation is not sufficient evidence of an unreasonable or improper purpose to deny the shareholder’s right to information. Thank you, amazing post!

Reply
Family lawyer orange county ca link
8/18/2022 10:50:30 am

It must be noted that the shareholder in that case made his request as a general inquiry, and not in conjunction with any preexisting litigation. Thank you for the beautiful post!

Reply
Joey Marlar link
3/18/2023 10:53:59 am

This right to information is closely protected under Ohio law, so long as the shareholder requests information in good faith and for a proper purpose. I truly appreciate your great post!

Reply
Erich Kelly link
6/23/2023 02:43:31 pm

The fact that the demanding shareholder is also a shareholder and officer in a competing corporation is not sufficient evidence of an unreasonable or improper purpose to deny the shareholder’s right to information. Thank you for making this such an awesome post!

Reply
Jimmy Duke link
7/19/2023 02:08:02 pm

The Ohio Supreme Court has also confirmed the shareholder’s broad right to information. The Court has stated that in order for a shareholder to exercise his or her right to information, Thank you for the beautiful post!

Reply



Leave a Reply.

    Author

    Thomas R. Brule, founder of Brule Law Firm, LLC, has extensive experience in franchise and business law.

    Contact Brule Law Firm
    ​

    Archives

    May 2016
    April 2016

    Categories

    All

    RSS Feed

    Photo by Polybert49
Proudly powered by Weebly