2020 Georgia Code
Title 14 - Corporations, Partnerships, and Associations
Chapter 2 - Business Corporations
Article 16 - Records and Reports
Part 1 - Records
§ 14-2-1602. Inspection of Records by Shareholders

1. A corporation shall keep a copy of the following records:
   1. Its articles or restated articles of incorporation and all amendments to them currently in effect;
   2. Its bylaws or restated bylaws and all amendments to them currently in effect;
   3. Resolutions adopted by either its shareholders or board of directors increasing or decreasing the number of directors, the classification of directors, if any, and the names and residence addresses of all members of the board of directors;
   4. Resolutions adopted by its board of directors creating one or more classes or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding and any resolutions adopted by the board of directors that affect the size of the board of directors;
   5. The minutes of all shareholders' meetings, executed waivers of notice of meetings, and executed consents, delivered in writing or by electronic transmission, evidencing all action taken by shareholders without a meeting, for the past three years;
   6. All communications in writing or by electronic transmission to shareholders generally within the past three years, including the financial statements furnished for the past three years under Code Section 14-2-1620;
   7. A list of the names and business addresses of its current directors and officers; and
   8. Its most recent annual registration delivered to the Secretary of State under Code Section 14-2-1622.
2. A shareholder of a corporation is entitled to inspect and copy, during regular business hours at the corporation's principal office, any of the records of the corporation described in subsection (a) of this Code section if he gives the corporation written notice of his demand at least five business days before the date on which he wishes to inspect and copy.
3. A shareholder of a corporation is entitled to inspect and copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation if the shareholder meets the requirements of subsection (d) of this Code section and gives the corporation written notice of his demand at least five business days before the date on which he wishes to inspect and copy:
   1. Excerpts from minutes of any meeting of the board of directors, records of any action of a committee of the board of directors while acting in place of the board of directors on behalf of the corporation, minutes of any meeting of the shareholders, and records of action taken by the shareholders or board of directors without a meeting, to the extent not subject to inspection under subsection (a) of this Code section;
   2. Accounting records of the corporation; and
   3. The record of shareholders.
4. A shareholder may inspect and copy the records described in subsection (c) of this Code section only if:
   1. His demand is made in good faith and for a proper purpose that is reasonably relevant to his legitimate interest as a shareholder;
   2. He describes with reasonable particularity his purpose and the records he desires to inspect;
   3. The records are directly connected with his purpose; and
   4. The records are to be used only for the stated purpose.
5. The right of inspection granted by this Code section may not be abolished or limited by a corporation's articles of incorporation or bylaws. However, the right to inspection enumerated in subsection (c) of this Code section may be limited by a corporation's articles of incorporation or bylaws for shareholders owning 2 percent or less of the shares outstanding.
6. This Code section does not affect:
   1. The right of a shareholder to inspect records under Code Section 14-2-720 or, if the shareholder is in litigation with the corporation, to the same extent as any other litigant; or
   2. The power of a court, independently of this chapter, to compel the production of corporate records for examination.
7. For purposes of this Code section, "shareholder" includes a beneficial owner whose shares are held in a voting trust or by a nominee on his behalf.

(Code 1981, §14-2-1602, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 2004, p. 508, § 20.)

- Right of members of public to inspect state, county, and municipal records, § 50-18-70 et seq.

- For annual survey on business associations, see 61 Mercer L. Rev. 45 (2009). For article, "Business Associations," see 63 Mercer L. Rev. 83 (2011). For annual survey on business corporations, see 64 Mercer L. Rev. 61 (2012). For article, "2018 Georgia Corporation and Business Organization Case Law Developments," see 24 Ga. St. B.J. 36 (June 2019). For note, "Skimming from the 2%: The Status of Georgia's Restrictions on Shareholder Access to Corporate Information," 46 Ga. L. Rev. 835 (2012).

Source: Model Act § 16.01(e) & 16.02. This replaces former § 14-2-122.

Subsection (a) appeared as Section 14-2-1601(e) of the Model Act. It requires certain basic records to be kept by the corporation, including minutes of shareholders' meetings for the preceding three years and records of shareholder action taken without a meeting during the same period. The Model Act requirement that these records be kept at the principal office of the corporation was deleted as too restrictive, since in many cases persons performing services for a corporation may keep some of these records. It is only important that shareholders be able to inspect these records at the principal office. The Model Act provisions were expanded to include in subparagraph (a)(3) any resolutions adopted by the board that affect the size of the board, and in subparagraph (a)(4) waivers of notices of meetings. Board resolutions affecting the size of the board are just as important to shareholders as information in bylaws setting the size of the board, and waivers of notices of recent meetings may be critical to determining the validity of corporate actions.

Subsection (b) provides that every shareholder is entitled to examine upon written request at the principal office of the corporation all documents described in subsection (a).

Subsection (c) grants a shareholder who meets the requirements of subsection (d) the right to inspect three classes of corporate records: (1) excerpts from minutes of meetings of the board of directors; excerpts from records of action of committees of the board of directors when acting in place of the board on behalf of the corporation; excerpts from minutes of meetings of shareholders; and excerpts from records of either directors' or shareholders' actions taken without a meeting; (2) the accounting records of the corporation; and (3) the record of shareholders, subject to Section14-2-1603(e). This right is independent of the right to inspect a shareholders' list immediately before a meeting under Section14-2-720. See Subsection (f). The Code followed the Model Act in granting inspection rights only as to "excerpts from" minutes of meetings and other records; former § 14-2-122(c) granted the right to inspect "its books and records of account, minutes. . . ."

Subsection (d) follows former § 14-2-122(b)-(d) and permits inspection of the records described in subsection (c) by a shareholder only if his demand is made in good faith and for a "proper purpose." A "proper purpose" means a purpose that is reasonably relevant to the demanding shareholder's legitimate interest as a shareholder. This excludes interests related to personal interests, such as those as a competitor, which are not addressed directly to his interests as an investor. Subsection (d) attempts to require more meaningful statements of purpose, if feasible, than former law, by requiring that a shareholder designate "with reasonable particularity" his purpose and the records he desires to inspect; the records demanded must also be "directly connected" with that purpose.

Subsection (e), taken from the Model Act, states that the inspection rights granted by this article are inherent rights of shareholders and may not be generally abolished or limited by the articles of incorporation or bylaw; the subsection is based on Cal. Corp. Code Ann. § 1600(d) (West 1977). The Code eliminates the requirement of former law that a requesting shareholder must either have held stock for at least six months or own at least five percent of the corporation's stock. The Model Act provision was amended in the Code to permit limitation of inspection rights, except with respect to shareholders owning two percent or more of a company's shares. The reference to "limits" in the second section should be contrasted with the absolute preclusion of "abolition" in the first sentence. No inference of any kind should be drawn from this subsection as to whether other, unrelated sections of the Code may be modified by provisions in the articles of incorporation or bylaws. As indicated in other comments to the Code, each section is intended to have independent legal significance.

Consistent with the "independent legal significance" approach of the Code, subsection (f) provides that the right of inspection granted by Section 14-2-1602 is an independent right of inspection that is not a substitute for or in derogation of rights of inspection that may exist (1) under Section 14-2-720, to inspect the shareholders' list at a meeting; (2) as part of a right of discovery that exists in connection with litigation; and (3) as a "common law" right of inspection, if any is found to exist by a court, to examine corporate records. Subsection (f) simply preserves whatever independent right of inspection exists under these sources and does not create or recognize any rights, either expressly or by implication.

Subsection (g) extends the inspection rights provided by Section 14-2-1602 to beneficial owners of shares by a nominee or in a voting trust. No such right existed under former Georgia law.

Note to 2004 Amendment The 2004 amendments require a corporation to retain for three years copies of all shareholder minutes, waivers, and consents evidencing actions taken without a meeting, which are delivered by electronic transmission, and all communications by electronic transmission by a corporation to its shareholders.

Cross-References Board of directors' meeting, see § 14-2-820. Bylaws, see § 14-2-206 and Article 10, Part 2. Committees of board of directors, see § 14-2-825. Corporate records required, see §§ 14-2-1601 &14-2-1602. Court-ordered inspection, see § 14-2-1604. "Deliver" includes mail, see § 14-2-140. Directors' action without meeting, see § 14-2-821. Effective date of notice, see § 14-2-141. "Notice" defined, see § 14-2-141. "Principal office": defined, see § 14-2-140; designated in annual registration, see § 14-2-1622. "Shareholder" defined, see § 14-2-140. Shareholders' action without meeting, see § 14-2-704. Shareholders' list inspection, see § 14-2-720. Shareholders' meeting, see § 14-2-701 et seq. Waivers of notice of shareholders' meetings, see § 14-2-706.

ANALYSIS

• General Consideration
• Basic Corporate Records
• Other Corporate Records
• Demand for Inspection
• Right to Inspection

General Consideration

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Code 1933, § 22-613 and former Code Section 14-2-122, which were repealed by Ga. L. 1988, p. 1070, § 1, effective July 1, 1989, are included in the annotations for this Code section.

- The common-law rule as recognized and applied in Georgia and summarized in Winter v. Southern Secs. Co., 155 Ga. 590, 118 S.E. 412 (1923), is that a bona fide stockholder has the legal right to inspect the books and records of the company, when the examination is asked for in good faith for a specific and honest purpose, and not to gratify curiosity, or for speculating or for vexatious purposes, and provided, further, that the purpose of the stockholder desiring to make the examination is germane to the person's interest as a stockholder, proper and lawful in character, and not inimical to the interests of the corporation itself, and the inspection is made during reasonable business hours. Master Mtg. Corp. v. Craven, 127 Ga. App. 367, 193 S.E.2d 567 (1972) (decided under former Code 1933, § 22-613).

Construction with O.C.G.A. § 14-2-940. - Language of O.C.G.A. § 14-2-940(b), governing closely held corporations, did not preclude a shareholder from availing oneself of the provisions of O.C.G.A. §§ 14-2-1602 and14-2-1604, relating to inspection of corporate records, in a separate suit despite the shareholder's pending action against the corporation for breach of fiduciary duty. Advanced Automation, Inc. v. Fitzgerald, 312 Ga. App. 406, 718 S.E.2d 607 (2011).

- While admissibility is a matter to be determined when records, documents, etc., are tendered in evidence and is not a test for determining whether an order requiring production should be entered, pertinence or relevance is. Master Mtg. Corp. v. Craven, 127 Ga. App. 367, 193 S.E.2d 567 (1972) (decided under former Code 1933, § 22-613).

No court should impose upon the opposite party the onerous task of producing great quantities of records which have no relevancy. Master Mtg. Corp. v. Craven, 127 Ga. App. 367, 193 S.E.2d 567 (1972) (decided under former Code 1933, § 22-613).

- Minority shareholder did not have a common law right to inspect a corporation's records and books because O.C.G.A. § 14-2-1602(e) disallowed such a right for shareholders who owned less than 2% of a corporation's shares and the legislative history indicated an intent for the statutory provision to supersede the common law right. Mannato v. SunTrust Banks, Inc., 308 Ga. App. 691, 708 S.E.2d 611 (2011).

- Trial court properly dismissed the tobacco farmers' claim for an equitable account of a tobacco cooperative because it was undisputed that that the tobacco cooperative was a foreign corporation organized under North Carolina law and, therefore, the trial court lacked the authority to order an inspection of the tobacco cooperative's records. Rigby v. Flue-Cured Tobacco Coop. Stabilization Corp., 327 Ga. App. 29, 755 S.E.2d 915 (2014).

Cited in Vohs v. Dickson, 495 F.2d 607 (5th Cir. 1974); G.I.R. Sys. v. Lance, 219 Ga. App. 829, 466 S.E.2d 597 (1995); Parker v. Clary Lakes Rec. Ass'n, 243 Ga. App. 681, 534 S.E.2d 154 (2000).

Basic Corporate Records

Participants in employee stock ownership plan were beneficial owners of stock.

- Although the record owner of all of the shares of a company's stock was the company's employee stock ownership plan (ESOP), and no nominee or voting trust was on file regarding the shares, the company's former chief executive officer and its former company president, as participants in the ESOP, were beneficial owners of the shares allocated to them and were entitled to inspect corporate records pursuant to O.C.G.A. §§ 14-2-1602 through14-2-1604. Kelley Mfg. Co. v. Martin, 296 Ga. App. 236, 674 S.E.2d 92 (2009).

Term "books and records of account" does not apply to file on proposed merger. Riser v. Genuine Parts Co., 150 Ga. App. 502, 258 S.E.2d 184 (1979) (decided under former Code 1933, § 22-613).

- A request under former Code 1933, § 22-613 for a copy of the corporation's most recent balance sheet and profit and loss statement was completely independent from the stockholder's right under former subsection (b) to inspect the books and records. No question of good-faith could be raised under former Code 1933, § 22-613 to defeat a stockholder's unbridled right to this information. Shelters, Inc. v. Reeve, 131 Ga. App. 18, 205 S.E.2d 108 (1974) (decided under former Code 1933, § 22-613).

- Whether a stockholder was entitled to the stock upon which the demand for inspection was based was not an appropriate question for adjudication in an action pursuant to former § 14-2-122. Wholesome Foods, Inc. v. Cook, 141 Ga. App. 34, 232 S.E.2d 380 (1977) (decided under former Code 1933, § 22-613).

Former Code 1933, § 22-613 (see now O.C.G.A. § 14-2-1602) placed much discretion in trial judge to determine whether the purpose named was a proper one, whether the request was vexatious or arising from idle curiosity, whether the documents called for were relevant, material, and not overburdensome, whether granting the requests would violate principles of confidentiality, lead to legal difficulties with federal agencies, or give an unfair advantage to the petitioning stockholders. Riser v. Genuine Parts Co., 150 Ga. App. 502, 258 S.E.2d 184 (1979) (decided under former Code 1933, § 22-613).

- The burden of showing a proper purpose as to specific materials is on the plaintiff and this burden should become somewhat heavier as the information sought becomes increasingly remote from the statutory objects of "books and records of account, minutes, and record of shareholders." Riser v. Genuine Parts Co., 150 Ga. App. 502, 258 S.E.2d 184 (1979) (decided under former Code 1933, § 22-613).

- Company's former chief executive officer and former president sought inspection of the company's corporate records for proper purposes because the inspection sought to enforce the company's bylaws, to ensure proper corporate governance, to determine if corporate waste, mismanagement and other breaches of fiduciary duty were occurring, and to protect their substantial ownership interests in the company as well as the interests of other shareholders. Kelley Mfg. Co. v. Martin, 296 Ga. App. 236, 674 S.E.2d 92 (2009).

- To determine whether proper records are being kept, the performance of management and the condition of the company constitutes a proper purpose for seeking the "books and records of account, minutes, and record of shareholders" which may be available to shareholders on demand. Riser v. Genuine Parts Co., 150 Ga. App. 502, 258 S.E.2d 184 (1979) (decided under former Code 1933, § 22-613).

- Request should be specific enough in demands to relate documents sought to questions at issue. Master Mtg. Corp. v. Craven, 127 Ga. App. 367, 193 S.E.2d 567 (1972) (decided under former Code 1933, § 22-613).

Right to inspect must come either from statute or common law. Master Mtg. Corp. v. Craven, 127 Ga. App. 367, 193 S.E.2d 567 (1972) (decided under former Code 1933, § 22-613).

- The common-law rule as to a shareholder's right of inspection is that every shareholder has the right, by reason of the person's interest therein, to inspect the books and papers of a corporation at reasonable times and places and for proper purposes. It is thus seen that this right is not an absolute one but rather a qualified one. Master Mtg. Corp. v. Craven, 127 Ga. App. 367, 193 S.E.2d 567 (1972) (decided under former Code 1933, § 22-613).

- Request done in good faith to protect the shareholder's interest or to inform the shareholder of the financial condition of the company and the value of stock, should be granted and the minutes, ledgers, and shareholders lists made available under either the statutory or common-law rule, but the common-law right to inspect records is not absolute and the purpose should be relevant and material to the applicant's interests as a shareholder. Master Mtg. Corp. v. Craven, 127 Ga. App. 367, 193 S.E.2d 567 (1972) (decided under former Code 1933, § 22-613).

- Although shareholders have some rights to corporate information not available to the general public, shareholder status does not in and of itself entitle an individual to unfettered access to corporate confidences and secrets. Riser v. Genuine Parts Co., 150 Ga. App. 502, 258 S.E.2d 184 (1979) (decided under former Code 1933, § 22-613).

- Order granting an estate administrator of a deceased shareholder the right to inspect the defendant's corporate books and denying the defendant's motions to compel and stay pending arbitration was affirmed because the statutes governing the transfer of stock to the estate vested ownership of the shares in the administrator of the estate and the probate court's order granted the administrator trustee's powers over those shares. Regal Nissan, Inc. v. Scott, 348 Ga. App. 91, 821 S.E.2d 561 (2018).

- Generally speaking, the right of a stockholder extends to all books, papers, contracts, minutes, or other instruments from which he can derive any information that will enable him to protect his interest. Master Mtg. Corp. v. Craven, 127 Ga. App. 367, 193 S.E.2d 567 (1972) (decided under former Code 1933, § 22-613).

- Minority shareholder's claims against other shareholders for refusing the minority shareholder's request to inspect corporate records was properly dismissed; such a claim could only be brought against the corporation pursuant to O.C.G.A. § 14-2-1604. The minority shareholder's claim for misappropriation of corporate assets was also dismissed because it was a derivative claim, required to be brought on behalf of the corporation pursuant to O.C.G.A. § 14-2-740 et seq. Barnett v. Fullard, 306 Ga. App. 148, 701 S.E.2d 608 (2010).

RESEARCH REFERENCES

Am. Jur. 2d.

- 18A Am. Jur. 2d, Corporations, § 279 et seq.

- 18 C.J.S., Corporations, § 409 et seq.

- Stockholders' right to inspect books and records of corporation, 22 A.L.R. 24; 43 A.L.R. 783; 59 A.L.R. 1373; 80 A.L.R. 1502; 174 A.L.R. 262; 15 A.L.R.2d 11.

Power to compel production of corporate books to aid in assessing holder of stock or his estate, 23 A.L.R. 1351.

Creditor's right to inspect books and records under constitutional or statutory provision relating specifically to corporations, 35 A.L.R. 752.

Right of stockholder or creditor to inspect books or papers of corporation in hands of receiver, 92 A.L.R. 1047.

Stockholder's right to inspect books and records of foreign corporation, 19 A.L.R.3d 869.

Right of stockholder to have corporate books inspected by attorney, accountant, or other agent without stockholder's presence, 48 A.L.R.3d 1072.

Right of stockholder to inspect corporate books or records in pursuit of social or political interest, as distinguished from financial interest, 50 A.L.R.3d 1056.

Right of member, officer, agent, or director of private corporation or unincorporated association to assert personal privilege against self-incrimination with respect to production of corporate books or records, 52 A.L.R.3d 636; 87 A.L.R. Fed. 177.

What corporate documents are subject to shareholder's right to inspection, 88 A.L.R.3d 663.