Parsons v. Jefferson-Pilot Corp.

Brief Fact Summary.

Jefferson-Pilot Corp. (Defendant) granted shareholder Parson’s (Plaintiff) request to inspect some of its records, but would not allow her to inspect the corporation’s accounting records.

Synopsis of Rule of Law.

Shareholders of a corporation have a common law right, not invalidated by statute, to make a reasonable inspection of the corporation’s books to assure themselves management is operating efficiently.

Facts.

Parsons (Plaintiff), a Jefferson-Pilot Corp. (Defendant) shareholder, asked to inspect and copy certain corporate records, including accounting records, to determine any possible mismanagement of the company.  Defendant allowed Plaintiff to inspect and copy some records, but denied her request to inspect the accounting records on the ground that they were not within the scope of the state statute.  Defendant also refused to provide her with a list of beneficial owners of its stock.  Plaintiff sought to compel inspection.  The trial court granted her inspection requests but denied her request for a list of beneficial owners since the corporation did not maintain such a list.  The court of appeals affirmed in part but reversed and remanded on the request to inspect the accounting records.  Both Plaintiff and Defendant appealed.

Issue.

Do shareholders of a corporation have a common law right, not invalidated by statute, to make a reasonable inspection of the corporation’s books to assure themselves management is operating efficiently?

Held.

(Mitchell, J.)  Yes.  Shareholders of a corporation have a common law right, not invalidated by statute, to make a reasonable inspection of the corporation’s books to assure themselves management is operating efficiently.  N.C.G.S. § 55-16-02(e)(2), North Carolina’s shareholder inspection statute, was intended to preserve all existing common law rights of inspection of corporate records, including the right to inspect accounting records.  In addition, Parsons (Plaintiff) has described with adequate particularity her purpose and the records she wanted to inspect.  However, the statute does not grant a shareholder a right to require a corporation to obtain lists that it does not already possess.  Affirmed in part, reversed in part, and remanded.

Discussion.

The statute applied in this case was ambiguous.  While § 55-16-02(b) provided that a shareholder of a public corporation was not entitled to inspect or copy a corporation’s accounting records, § 55-16-02(e)(2) provided that § 16-02 did not affect the power of a court to compel the production of corporate records for examination.  North Carolina has since amended the statute, specifically stating that a shareholder of a public corporation has no common law rights to inspect any accounting records of a corporation or any other rights of inspection other than those provided in G.S. § 55-16-02(b).