All corporations are mandated to keep and preserve records of business transactions and minutes of meetings between stockholders and members, and between the board and trustees, at their main offices.
All records should indicate the following information:
- Time and place of the meeting
- How it was authorized
- The kind of notice given
- Whether the meeting was special or regular
- In the case of special meetings: the object, who was present or absent, and every act done or ordered done during the meeting
Any director, trustee, stockholder or member can demand that the minutes include any and all times that a director, trustee, stockholder or member joined or left the meeting. Similarly, the yeas and nays on any motion or proposition must be duly noted and recorded.
Stockholders can also ask to see financial statements – corporations are mandated by law to provide their latest financial statement, including a balance sheet and a profit or loss statement corresponding to the last taxable year. The financial statement must discuss assets, liabilities, and the results of the corporation’s operations in reasonable detail. The documents must be provided within 10 days of receiving a written request from a stockholder or member.
During regular meetings between stockholders and members, the board of trustees must also present a financial report of the corporation’s operations from the previous year. The presentation must include financial statements that have been signed and certified by an impartial certified public accountant.
The right of inspection
All stockholders have the right to inspect the books of a corporation, allowing them to learn about the transactions and dealings entered into by the directors and officers on the corporation’s behalf.
This fundamental right of the stockholder to inspect a corporation’s books stems from Section 74 of the Corporation Code, details of which are as follows:
“The records of all business transactions of the corporation and the minutes of any meeting shall be open to inspection by any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, in writing, for a copy of excerpts from said records or minutes, at his expense.
Any officer or agent of the corporation, who shall refuse to allow any director, trustee, stockholder or member of the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages and, in addition, shall be guilty of an offense, which shall be punishable under Section 144 of this Code.”
However, the right of inspection is not absolute. In Puno vs. Puno Enterprises Inc., GR 177066, September 11, 2009, the Supreme Court ruled that the right of inspection can only be exercised by a stockholder of record or an individual whose name appears on the corporation’s books and will thus receive dividends and distributions from the corporation. Therefore, the corporation can refuse to grant the right of inspection to individuals who are not stockholders of record.
No corporation should be burdened by the demands of unreasonable stockholders who wish to exercise their right of inspection, especially if the corporation’s business efforts could suffer as a result.
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