Shareholders Have Rights to Demand Corporate Financial Information

Luxury Homes and Estates of Florida

Minority shareholders of corporations are not powerless in their efforts to monitor the financial activities of the majority shareholders or the officers of the corporation. On the contrary, complete and full disclosure of financial activities of the corporation is mandated by the Florida Statutes. Any shareholder can demand pursuant to Florida Statute 607.1602(1) and (2) an inspection of records. The demand must be made in writing and sent to the corporation’s principal place of business. Once the demand is received the corporation must allow the inspection of the corporation’s financial records during normal business hours.

The type of information that must be provided are as follows:
(a) records of all minutes of any meeting of shareholders and board of directors;
(b) accounting records of the corporation, including salary and bonus payments made to personnel and all records of vendors paid by the corporation;
(c) complete disclosure of all lawsuits pending or previously filed against the corporation;
(d) complete reporting of advances or expenses paid to any director, officer or employee;
(e) disclosure of the corporation’s issuance of additional shares or promises to pay shares to any party; and
(f) copies of financial statements that are required to be delivered to the shareholders each year

Pursuant to the Florida Statutes, the shareholder may appoint an attorney or agent to inspect the records for him. Not only is inspection required but copying of the documents is also permitted at the request of the shareholder or his agent. The corporation may impose a reasonable charge for copy costs.
If the corporation refuses to comply with the request for inspection a lawsuit may be filed and the court will order the inspection pursuant to §607.1604. The court, in ordering the inspection, may require the corporation to pay reasonable attorneys fees and costs to enforce the shareholder rights.

The mandatory disclosure is a powerful tool to be utilized by a shareholder because it keeps the majority owners or officers of the corporation from freezing out a minority shareholder and engaging in inequitable conduct.

Visit our website for more information on this subject.

Houston Short grew up in the Central Florida area, and continues to reside in Orlando with his family. He provides representation in arbitration actions for the American Arbitration Association and engages in alternative dispute resolutions including mediation both binding and non-binding arbitration, and settlement negotiations. He is an active member of the American Arbitration Association Panel Review Committee, the Orange County Bar Association, and the Florida Bar. He graduated from Florida State University in 1984 with a bachelors of science degree (cum laude) and received his juris doctor from the University of Florida in 1987 (with honors). Houston co-authored, "The Constitutionality of the Legislatures Mandate to Sever Counterclaims in Mortgage Foreclosure Action," the Real Property, Probate and Trust Law Section, The Florida Bar.