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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
As a rule, all stockholders have the right to inspect the corporate books and records, and in so doing has not required any specific amount of interest for the exercise of the right to inspect. However, the demand to examine and copy the corporation’s records and minutes could be refused is when the corporation puts up as a defense to any action that “the person demanding” had “improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand.” (Terelay Investment and Development Corp. v. Yulo, G.R. No. 160924, [August 5, 2015])
The law says –
Corporate records, regardless of the form in which they are stored, shall be open to inspection by any director, trustee, stockholder or member of the corporation in person or by a representative at reasonable hours on business days, and a demand in writing may be made by such director, trustee or stockholder at their expense, for copies of such records or excerpts from said records. The inspecting or reproducing party shall remain bound by confidentiality rules under prevailing laws, such as the rules on trade secrets or processes under Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as amended, Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012” Republic Act No. 8799, otherwise known as “The Securities Regulation Code”, and the Rules of Court.
A requesting party who is not a stockholder or member of record, or is a competitor, director, officer, controlling stockholder or otherwise represents the interests of a competitor shall have no right to inspect or demand reproduction of corporate records.
Any stockholder who shall abuse the rights granted under this section shall be penalized under Section 158 of this Code, without prejudice to the provisions of Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as amended, and Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”.
Any officer or agent of the corporation who shall refuse to allow the inspection and/or reproduction of records in accordance with the provisions of this Code shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable under Section 161 of this Code: Provided, That if such refusal is made pursuant to a resolution or order of the board of directors or trustees, the liability under this section for such action shall be imposed upon the directors or trustees who voted for such refusal: Provided, further,That it shall be a defense to any action under this section that the person demanding to examine and copy excerpts from the corporation’s record or minutes of such corporation or of any other corporation, or was not acting in good faith or of any other corporation or was not acting in good faith or for a legitimate purpose in making the demand to examine or reproduce corporate records or is a competitor, director, officer, controlling stockholder or otherwise represents the interest of a competitor.
If the corporation denies or does not act on a demand for inspection and/or reproduction, the aggrieved party may report such denial or inaction to the Commission Within five (5) days from receipt of such report, the Commission shall conduct a summary investigation and issue an order directing the inspection or reproduction of the requested records.
Stock corporations must also keep a stock and transfer book, which shall contain a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stocks for which subscription has been made, and the date of payment of any installment; a statement of every alienation, sale or transfer of stock made, the date thereof, by and to whom made; and such other entries as the bylaws may prescribed, The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open or inspection by any director or stockholder of the corporation at reasonable hours on business days.
A stock transfer agent or one engaged principally in the business of registering transfers of stocks in behalf of a stock corporation shall be allowed to operate in the Philippines upon securing a license from the Commission and the payment of a fee to be fixed by the Commission, which shall be renewable annually: Provided, That a stock corporation is not precluded from performing or making transfer of its own stocks, in which case all the rules and regulations imposed on stock transfer agents, except the payment of a license fee herein provided, shall be applicable: Provided, further, That the Commission may require stock corporations which transfer and/or trade stocks in secondary markets to have an independent transfer agent.
Jurisprudence says –
The Corporation Code has granted to all stockholders the right to inspect the corporate books and records, and in so doing has not required any specific amount of interest for the exercise of the right to inspect. Ubi lex non distinguit nec nos distinguere debemos. When the law has made no distinction, we ought not to recognize any distinction. AIDSTE
Neither could the petitioner arbitrarily deny the respondent’s right to inspect the corporate books and records on the basis that her inspection would be used for a doubtful or dubious reason. Under Section 74, third paragraph, of the Corporation Code, the only time when the demand to examine and copy the corporation’s records and minutes could be refused is when the corporation puts up as a defense to any action that “the person demanding” had “improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand.”
The right of the shareholder to inspect the books and records of the petitioner should not be made subject to the condition of a showing of any particular dispute or of proving any mismanagement or other occasion rendering an examination proper, but if the right is to be denied, the burden of proof is upon the corporation to show that the purpose of the shareholder is improper, by way of defense. (Terelay Investment and Development Corp. v. Yulo, G.R. No. 160924, [August 5, 2015])
Read also: Who are allowed to inspect corporate books and records?
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