February 18, 2019

February 15, 2019

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Legislature Passes Bill Requiring In State Inspection of Corporate Records

Corporations Code Section 1601 requires that records "be open to inspection . . . at any reasonable time during usual business hours . . .".  The statute is silent on where the inspection must occur. In Innes v. Diablo Controls, Inc., 248 Cal. App. 4th 139 (2016), the Court of Appeal held that Section 1601 requires that the records be made available for inspection at the office where those records are kept.  See Court Holds Inspection Statute Does Not Require That Records Be Brought To California.  

Assembly Member Brian Maienschein disagreed with the result in Innes and authored a bill, AB 2237, that would require that corporate records be open to inspection at a corporation’s principal office in California, or if none, at the physical location for the corporation’s registered agent for service of process in California.  See Legislator Seeks To Require Inspection Of Records In California.  As an alternative, a shareholder may elect to request that the corporation produce the books, records, and minutes by mail or electronically, if the shareholder or holder of a voting trust certificate pays for the reasonable costs for copying or converting the requested documents to electronic form.  Yesterday, the legislature approved AB 2237 and it only awaits a gubernatorial signature to become law.

This may seem to be a small change, but it could lead to an increase in "books and records" litigation in California as the bill applies to domestic corporations (see Corp. Code § 167) as well as foreign corporations (See Corp. Code § 171) keeping records in California or having their principal executive office in California.

As a final note, one wonders whether professional registered agents have the facilities to permit the inspection of corporate records.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...