Assemblyman PATRICK J. DIEGNAN, JR.
District 18 (Middlesex)
Assemblywoman NANCY J. PINKIN
District 18 (Middlesex)
Assemblyman JAMES J. KENNEDY
District 22 (Middlesex, Somerset and Union)
Permits corporation to impose reasonable limitations or conditions on use or distribution of books and records by shareholders.
CURRENT VERSION OF TEXT
An Act concerning corporate books and records and amending N.J.S.14A:5-28.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.14A:5-28 is amended to read as follows:
14A:5-28. Books and records; right of inspection.
(1) Each corporation shall keep books and records of account and minutes of the proceedings of its shareholders, board and executive committee, if any. Unless otherwise provided in the bylaws, such books, records and minutes may be kept outside this State. The corporation shall keep at its principal office, its registered office, or at the office of its transfer agent, a record or records containing the names and addresses of all shareholders, the number, class and series of shares held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into readable form within a reasonable time. A corporation shall convert into readable form without charge any such records not in such form, upon the written request of any person entitled to inspect them.
(2) Upon the written request of any shareholder, the corporation shall mail to such shareholder its balance sheet as at the end of the preceding fiscal year, and its profit and loss and surplus statement for such fiscal year.
(3) Any person who shall have been a shareholder of record of a corporation for at least six months immediately preceding his demand, or any person holding, or so authorized in writing by the holders of, at least 5% of the outstanding shares of any class or series, upon at least five days' written demand shall have the right for any proper purpose to examine in person or by agent or attorney, during usual business hours, its minutes of the proceedings of its shareholders and record of shareholders and to make extracts therefrom, at the places where the same are kept pursuant to subsection 14A:5-28(1).
(4) Nothing herein contained
shall impair the power of any court, upon proof by a shareholder of proper
purpose, irrespective of the period of time during which the shareholder shall
have been a shareholder of record, and irrespective of the number of shares
held by him, to compel the production for examination by such shareholder of
the books and records of account, minutes, and record of shareholders of a
corporation. The court may, in its discretion prescribe any limitations or
conditions with reference to the inspection, or award any other or further
relief as the court may
deem just and proper. The court may order books, documents and records, pertinent extracts therefrom, or duly authenticated copies thereof, to be brought within this State and kept in this State upon whatever terms and conditions as the order may prescribe. In any action for inspection the court may proceed summarily.
(5) Holders of voting trust certificates representing shares of the corporation shall be regarded as shareholders for the purpose of this section.
(6) A corporation may impose reasonable limitations or conditions on the use or distribution of requested materials provided to a demanding shareholder: (a) pursuant to either subsection 14A:5-28(2) or 14A:5-28(3); or (b) prior to the order of a court pursuant to subsection 14A:5-28(4).
(cf: P.L.1988, c.94, s.22)
2. This act shall take effect immediately.
Under current law, corporations are required to maintain certain books and records and provide access to those books and records to requesting shareholders in certain circumstances. This bill modifies current law to allow corporations to impose reasonable limitations or conditions on the use or distribution of these requested materials. The bill preserves the ultimate authority of a court to decide and order relief in actions brought by shareholders for inspection of corporate books and records.
Due to significant changes in technology that have occurred and the related ease by which materials may now be used and disseminated, the sponsor has proposed this bill to allow corporations to continue a common practice, which has developed, to condition the receipt of requested materials on, for example, the demanding shareholder agreeing to customary confidentiality obligations. However, the bill is not intended to provide a corporation with a right to deny access to a demanding shareholder of materials which the demanding shareholder is otherwise entitled.
This bill is a proposal of The New Jersey Corporate and Business Law Study Commission.