Court Orders Records Turned Over to Shareholder
In September 2021, Jacob White, a shareholder and former officer of a local construction company, Elusive Holdings, Inc. d/b/a Trinity Constructors, won the right to review the corporation’s books and records over the corporation’s objection.
The Texas Business Organizations Code gives shareholders who have held at least 5% of stock for more than six months the right to inspect the corporation’s books and records.
On written demand stating a proper purpose, a holder of shares of a corporation for at least six months immediately preceding the holder’s demand, or a holder of at least five percent of all of the outstanding shares of a corporation, is entitled to examine and copy, at a reasonable time, the corporation’s books, records of account, minutes, and share transfer records relating to the stated purpose. The examination may be conducted in person or through an agent, accountant, or attorney.
Tex. Bus. Org. Code s 21.218.
In an order signed September 2, 2021, Judge Catherine A. Mauzy found that White had identified a proper purpose of his review of books and records under the Texas Business Organizations Code and that the corporation had failed to identify specific facts that disputed White’s purposes. The court ordered Elusive to permit White to inspect detailed monthly financial statements, balance sheets, asset lists and depreciation schedules, loan balances, accounts payable, accounts receivable, tax returns from 2015 to present, officer and director compensation, and other documents.