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Directors’ Inspection Rights Include (Almost) Anything in California

Picture of a fox hunt, symbolizing corporate directors' inspection rights

I have written about shareholders’ rights to inspect corporate financial records and shareholder lists. This post discusses directors’ inspection rights, which are far greater.

California Corporations Code Section 1602 states:

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.

California’s statute creates directors’ inspection rights that are quite broad. It permits inspection of physical properties in addition to books and records; applies to domestic and foreign (out-of-state) subsidiaries; and applies to foreign corporations having a principal office, or customarily holding board meetings, in California.

Delaware General Corporation Law Section 220(d) states, in relevant part:

Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to the director’s position as a director…. The burden of proof shall be upon the corporation to establish that the inspection such director seeks is for an improper purpose.

The Delaware statute is noticeably narrower. It applies only to books and records (not physical properties), and it requires that the inspection be “for a purpose reasonably related to the director’s position as a director.” Nevertheless, in Delaware directors’ inspection rights are substantially greater than those of shareholders.

Related post: Enforcing Inspection Rights: “Absolute” Does not Mean “Absolute” in California

Photo credit: iStockphoto

Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

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