Stockholder's Right to Inspect Corporate Books in the Philippines: What to Do If Refused
Yes.
A stockholder of record may inspect corporate records and ask for copies. Section 73 of the Revised Corporation Code opens the records to directors, trustees, stockholders and members, in person or through a representative, at reasonable hours on business days. If the corporation refuses without good reason, the stockholder may report the refusal to the SEC, which must investigate and issue an order within five days, or file a case in court. The officer who refused may be liable for damages and a fine.
Read the full text: Republic Act No. 11232 (Revised Corporation Code)
Who may inspect corporate books and records?
Any director, trustee, stockholder or member may inspect, in person or through a representative, at reasonable hours on business days. The person may also demand in writing copies of the records or excerpts from them, at his or her own expense (Section 73). The law sets no minimum number of shares.
What records can a stockholder see?
Section 73 covers corporate records "regardless of the form in which they are stored." These are the books and records every corporation must keep at its principal office:
the articles of incorporation and by-laws, and all their amendments;
the current ownership structure and voting rights, including lists of stockholders or members, group structures and beneficial ownership;
the names and addresses of the directors, trustees and executive officers;
a record of all business transactions;
a record of the resolutions of the board and of the stockholders or members;
copies of the latest reports submitted to the SEC; and
the minutes of all meetings of the stockholders or members and of the board.
Two more rights go with these:
Stock and transfer book. Any director or stockholder may inspect it at reasonable hours on business days.
Financial statements. The corporation must furnish its most recent financial statement within 10 days from receipt of a stockholder's or member's written request (Section 74). See our guide on audited financial statements.
Who has no right to inspect?
Section 73 denies inspection and copies to a requesting party who:
is not a stockholder or member of record; or
in the words of the Code, "is a competitor, director, officer, controlling stockholder or otherwise represents the interests of a competitor." The clause is aimed at competitors and those who act for them.
The inspecting party also stays bound by the rules on confidentiality, including those on trade secrets under the Intellectual Property Code, the Data Privacy Act, the Securities Regulation Code and the Rules of Court. A stockholder who abuses the right may be penalized under Section 158.
When may the corporation refuse?
The Code gives the corporation these defenses:
the person improperly used information obtained from an earlier examination of
the records of this or another corporation;
the person is not acting in good faith or for a legitimate purpose; or
the person falls under the competitor clause quoted above.
A refusal that rests on none of these is risky for the officer who makes it.
What can you do if the corporation refuses or ignores your demand?
Report it to the SEC. Within five days from receipt of the report, the SEC must conduct a summary investigation and issue an order directing the inspection or reproduction of the records (Section 73).
File a case in court. An action to enforce the right of inspection is an intra-corporate case before the Regional Trial Court. Under Rule 7 of the Interim Rules of Procedure Governing Intra-Corporate Controversies, the complaint must state the right being enforced, the demand made, the refusal and the reasons given, and why the refusal is unjustified. The defendant answers within 10 days from service of summons.
The court decides within 15 days from receipt of the last pleading. A decision that orders inspection also directs the plaintiff to deposit the estimated cost of the manpower and the copying. Rule 7 refers to the old Corporation Code provisions, which are now Sections 73 and 74.
Hold the responsible officers liable. An officer or agent who refuses without justification is liable for damages and commits an offense under Section 161. The fine is ₱10,000 to ₱200,000, or ₱20,000 to ₱400,000 if the violation is injurious or detrimental to the public. If the refusal followed a board resolution, the liability falls on the directors or trustees who voted for it. See the duties and liabilities of corporate directors.
How should you make the demand?
Confirm that you are a stockholder of record. If your shares were bought from another stockholder, check that the transfer of shares was recorded in the corporation's books.
Send a written demand to the corporate secretary or the president. List the records and the period covered, state your purpose, propose dates within business hours, and name your representative if you will send one.
Offer to pay the cost of copies.
Keep proof that the demand was received.
If you are refused or ignored, keep the reply or note the date, then report to the SEC or go to court.
Frequently asked questions
Can a minority stockholder with only a few shares inspect the books?
Yes.
Section 73 gives the right to stockholders of record and sets no minimum shareholding. In court, however, the size of the shareholding is one of the factors a judge weighs in deciding whether a case is a nuisance or harassment suit.
Can I bring my lawyer or accountant?
Yes.
The Code allows inspection in person or by a representative.
Can the board pass a resolution refusing inspection?
It can, but the directors who voted for an unjustified refusal take on the liability. This is a common flashpoint in family corporations.
Sources
Republic Act No. 11232 (Revised Corporation Code), Section 73
Republic Act No. 11232 (Revised Corporation Code), Sections 74, 158 and 161
A.M. No. 01-2-04-SC (Interim Rules of Procedure Governing Intra-Corporate
Controversies), March 13, 2001, Rule 1 and Rule 7
Republic Act No. 8799 (Securities Regulation Code), Section 5.2
Need help with SEC or corporate compliance?
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Related guides
This article is general information as of its publication date, not legal advice, and does not create a lawyer-client relationship. For advice on your situation, consult a lawyer.
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