Brief Fact Summary. Respondent, Crane Co., brought this action to compel Appellant, Anaconda Co., to release to Respondent a list of Appellant’s shareholders in an attempt to purchase more shares in Appellant company.
Synopsis of Rule of Law. A qualified shareholder is allowed, when in good faith, to inspect a corporation’s stock register in order to notify shareholders of exchange and solicitation offers for stock.
It is well settled that a shareholder has both statutory and common-law rights to inspect the books and records of a corporation if inspection is sought in good faith and for a valid purpose.View Full Point of Law
Issue. The issue is whether Respondent should be able to inspect a corporation’s stock register in order to notify them directly of an exchange offer.
Held. The court held that it was in the shareholders’ best interests to allow Respondent to inspect the stock register in order to identify shareholders who they can then notify of relevant offers for their stock. Section 1315 of the statute requires a written demand along with an affidavit that the inspection will be for a proper purpose, which Respondent did in this case (the proper purpose being the tender offer). Once Respondent met the statutory requirements, the burden is on Appellant to prove an improper purpose. The Appellant did not meet their burden.
Discussion. The proper purpose is determined from a shareholder’s perspective rather than the corporation. The ability to identify other shareholders is rooted in common law where the identification of other shareholders was important in understanding the factors that affected a business.