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In Re Right of Inspection

1) Stockholders have the right to inspect corporate records and documents under relevant laws and jurisprudence to protect themselves from possible mismanagement, ascertain the company's financial condition, and obtain information for litigation involving the corporation - even if they own an insignificant amount of shares. 2) A stockholder's interest in a company's financial affairs is not negated even if they have received some benefits from the company. All stockholders have an equal right to inspect records under the law. 3) Simply providing a breakdown of fund expenditures is not sufficient - stockholders have the right to a more thorough inspection of relevant records, documents, and details to satisfy themselves.

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151 views3 pages

In Re Right of Inspection

1) Stockholders have the right to inspect corporate records and documents under relevant laws and jurisprudence to protect themselves from possible mismanagement, ascertain the company's financial condition, and obtain information for litigation involving the corporation - even if they own an insignificant amount of shares. 2) A stockholder's interest in a company's financial affairs is not negated even if they have received some benefits from the company. All stockholders have an equal right to inspect records under the law. 3) Simply providing a breakdown of fund expenditures is not sufficient - stockholders have the right to a more thorough inspection of relevant records, documents, and details to satisfy themselves.

Uploaded by

Clarissa de Vera
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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As to the argument that Atty.

Quevedos purpose is not germane to his interest as a member of


the corporation and that he is in bad faith:

- Terelay v. Yulo, G.R. No. 160294 (2015)


o Facts: Cecilia Yulo wrote a letter to TERELAY requesting that she be allowed to
inspect its books and records which the corporation continually denied. Thus,
Yulo went to the SEC. They agreed in the Preliminary Conference that Yulo is a
registered stockholder of TERELAY. However, one of the issues stipulated in
said hearing is the right of Yulo to inspect its books and records. One of Terelays
arguments was that conceding that Yulo is a stockholder, she is an owner of
0.001% of stock thus, she has no right to examine its books.
o The court held that:
Cecilia Yulo has the right to be fully informed of TERELAY's corporate
condition and the manner its affairs are being managed. It is well-settled
that the ownership of shares of stock gives stockholders the right under
the law to be protected from possible mismanagement by its officers. This
right is predicated upon self-preservation.
Among the purposes held to justify a demand for inspection are the
following:
To ascertain the financial condition of the company or the
propriety of dividends;
the value of the shares of stock for sale or investment;
whether there has been mismanagement;
in anticipation of shareholders' meetings to obtain a mailing list
of shareholders to solicit proxies or influence voting;
to obtain information in aid of litigation with the corporation or
its officers as to corporate transactions (emphasis supplied)
- It is not necessary for a stockholder to aver mismanagement or fraud to obtain his right
to inspect corporate records. Where a stockholder's object in requiring a list of his
fellow-stockholders is to enable him to communicate with them regarding the election of
other officers than those then serving, he need not aver mismanagement, or state why he
desires the change to be made. In fact, the right to inspect corporate records may be
validly exercised by a stockholder even though his only object is to ascertain whether
the business has been properly conducted [Klein v. Scranton Life Insurance, (1940)]

As to the argument that Atty. Quevedo, being able to benefit from the services provided by the
association, had already received the value of his money, thus, no longer has interest in the
financial affairs of the association:

- TERELAY's submission that the respondent's "insignificant holding" of only .001% of the
petitioner's stockholding did not justify the granting of her application for inspection of
the corporate books and records is unwarranted.
- 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 nee nos distinguere debemos.
When the law has made no distinction, we ought not to recognize any distinction
[Terelay v. Yulo, G.R. No. 160294 (2015)]

As to the argument that the AAVA had already furnished Atty. Quevedo a breakdown on how
the funds were spent:

- Lim Po v. DOJ and Tan, G.R. No. 195198 (2013)


o Facts of the Case: Jasper T. Tan (Tan), is a stockholder of Coastal Highpoint
Ventures, Inc. (CHVI), a real estate development company. Antonio Ng
Chiu1 (Chiu) is its President. Tan lamented that pertinent information relative to
CHVIs operations were withheld from him. His repeated requests for copies of
financial statements and allowance to inspect corporate books proved futile.
Consequently, he filed before the Office of the City Prosecutor of Cebu a
complaint against Chiu and Po for violation of Section 74(2), in relation to Section
144 of the Corporation Code of the Philippines, the origin of the two
consolidated petitions now before us. As a stockholder, he is entitled to inspect
the corporate books and records of the CHVI. The record clearly shows that
complainant had been demanding to inspect the corporate books, records of
business and corporate reports since 13 June 2007. Noticeably, though several
demands/requests for inspection of corporate records have been made by the
complainant, the same were not granted until after the month of April 2008 or
roughly 10 months thereafter. The December 15, 2007 collective inspection
cannot be regarded as compliance with the request.
o The Court held that:
The allegation of the respondent Chiu that the complainant could easily
secure copies of the corporate records for (sic) the Securities and
Exchange Commission cannot justify the refusal of the latters demand
for inspection. As beneficial owner of the business, the complainant has
the right to know not only the financial condition of the corporation but
also how the corporate affairs are being managed.
Moreover, "records of all business transaction[s]" contemplated in
Section 74 covers more than the reportorial requirements mandated by
the SEC. "Records of all business transaction[s]" include books of
inventories and balances, business correspondence, letters, telegrams,
contracts, memoranda, etc.[,] as well as journals, ledgers and supporting
documents fro (sic) tax purposes such as income tax returns, vouchers
and receipts, financial statements and voting trust agreements.
[I]t is quite inexplicable why the complainant is not made to inspect the
corporate records to the extent that is satisfactory to him. x x x [T]he
assertion of the complainant that the inspection team was limited to see
the books of accounts for 2006 to 2007 with carry forward balances and
not detailed schedules of accounts except for bank reconciliation, lapsing
schedule and deposit on subscription has to be given credence
considering that this was based on the communication sent by and (sic)
independent accounting company which has no interest in the
corporation and which does not stand to benefit from whatever
transaction that the corporation may have.

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