Website Heading

CALIFORNIA CORPORATE & SECURITIES LAW

Improper Purpose Frustrates Member’s Assertion Of A Proper Purpose

The inspection rights of members of California nonprofit mutual benefit corporations mirror those of shareholders of corporations under the General Corporation Law. Section 8333 of the Corporations Code provides that the accounting books and records and minutes of proceedings of the members and the board and committees must be open open to inspection upon the written demand of any member at any reasonable time, for a purpose reasonably related to such person’s interests as a member. What if a member asserts a proper purpose but the court finds an improper purposes as well?

The Court of Appeal tackled that question in an opinion handed down last week.  In an opinion authored by Judge Douglas W. Sortino (sitting by designation), the court found that the mere allegation of a proper purpose is not sufficient to require inspection when a court finds that other, improper purposes are actually motivating the shareholder.  According to the court, to do so “would entirely undermine the statutory limitation on inspection rights, as any member with an improper purpose would surely be capable of asserting a proper one”.  Tract No. 7260 Ass’n v. Parker, 2017 Cal. App. LEXIS 265 (Cal. App. 2d Dist. Mar. 24, 2017)

Share on:

ANY QUESTIONS REGARDING CALIFORNIA CORPORATE AND SECURITIES LAW? CONTACT US DIRECTLY

We offer expert advice with the intricacies of California law.

Our years of experience and expertise allow us to help clients navigate the business laws in California.

CONTACT US

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!