Summary
concluding that the 1961 amendment "was deemed to work no substantive change in the law"
Summary of this case from Airtran v. MidwestOpinion
Argued February 11, 1976
Decided February 19, 1976
Appeal from the Appellate Division of the Supreme Court in the First Judicial Department, SIDNEY H. ASCH, J.
Edward C. McLean, Jr., Michael C. Gilbert and Terry A. Thompson for appellant.
John J. Loflin, R. Scott Greathead and Mark J. Lawless for respondent.
In August, 1975 respondent Crane Company, an Illinois corporation, publicly announced a proposed offer to exchange up to 100 million dollars in subordinated debentures for as many as 5 million shares of common stock of the appellant Anaconda Company, a Montana corporation. This offer was vigorously opposed by Anaconda's management which sent four letters to shareholders asserting, inter alia, that the exchange offer was not in the best interests of Anaconda. Before the exchange offer could proceed Crane was obligated to file with the Securities and Exchange Commission a registration statement detailing the material facts of the offer in a prospectus (see Securities Exchange Act of 1934, U.S. Code, tit 15, § 78n; rule 14a-7, 17 C.F.R. § 240.14a-7; see, generally, Aranow Einhorn, Tender Offers for Corporate Control, pp 12-18). However, litigation between Crane and Anaconda ensued, culminating in a consent order which imposed a 5 million share limit on Crane's acquisition of Anaconda stock, prohibited Crane from seeking representation on Anaconda's board of directors and required Crane to comply with the antitrust laws in its dealings with Anaconda.
Anaconda sued in United States District Court in Montana to enjoin the commencement of Crane's proposed exchange order. Shortly thereafter, Crane commenced an action in the Southern District of New York (Crane v Anaconda, 75 Civ 4400 [IBW]) seeking to enjoin Anaconda from violating the securities laws in connection with its communications with its shareholders and the investing public. Anaconda's action was subsequently transferred to the Southern District of New York (Anaconda v Crane, 75 Civ 4535 [RO]) and both actions were terminated in a consent order.
On November 19, 1975 Crane's registration statement became effective and Crane proceeded to distribute its prospectus to numerous brokers, dealers, commercial banks and trust companies for use in soliciting Anaconda stockholders. The next day Crane requested a copy of Anaconda's list of shareholders claiming that Anaconda had a fiduciary duty to its shareholders to present them with all the information pertinent to the pending tender offer. Crane owned no Anaconda stock at this time and Anaconda refused contending that there was no basis for Crane's request. However, as of December 11, 1975, approximately 2,350,000 Anaconda shares had been tendered to Crane, making Crane Anaconda's largest stockholder. The following day, a formal written demand to produce its stock book for inspection was made by Crane on Anaconda. This demand, accompanied by an affidavit stating that the inspection was "not desired for a purpose which is in the interest of a business or object other than the business of Anaconda," was made pursuant to section 1315 of the Business Corporation Law and the common-law right to inspect corporate records. Anaconda rejected the demand but offered to mail Crane's prospectus to its shareholders at Crane's expense. Crane responded by commencing this article 78 proceeding.
The operative language of section 1315 of the Business Corporation Law applies to foreign corporations. (See, also, Business Corporation Law, § 624 [domestic corporations]; Not-For-Profit Corporation Law, § 621, containing substantially the same language.) In view of our disposition on the statutory basis it is unnecessary to reach the common-law ground.
In its petition Crane stated that it held in excess of 11% of Anaconda's common stock and that its request conformed to the requirements of the Business Corporation Law in that the inspection was not required for a purpose other than the business of Anaconda and that Crane had not participated in the sale of any stockholder list within the last five years (Business Corporation Law, § 1315, subd [b]). Crane also stated in substance that it desired to communicate directly with its fellow stockholders to inform them of the terms of both its tender offer and the consent order in the Federal litigation, to reply to misleading statements issued and distributed by Anaconda to its stockholders, and thereby dispel any misconceptions and facilitating the further tender of Crane debentures. Anaconda answered by asserting that Crane's alleged reasons for inspection were not purposes relating to the business of Anaconda within the meaning of section 1315 of the Business Corporation Law.
Special Term found that neither Crane's overriding purpose to further its tender offer nor its ancillary purposes were proper in this context and dismissed the petition. The Appellate Division reversed, with two Justices dissenting. The majority concluded that the matter was proper being one of general interest to Anaconda's shareholders by virtue of their common interest in the corporation as shareholders. We agree with this determination.
Succinctly put, the issue here is whether a qualified stockholder may inspect the corporation's stock register to ascertain the identity of fellow stockholders for the avowed purpose of informing them directly of its exchange offer and soliciting tenders of stock? In our view this question should be answered in the affirmative. A shareholder desiring to discuss relevant aspects of a tender offer should be granted access to the shareholder list unless it is sought for a purpose inimical to the corporation or its stockholders — and the manner of communication selected should be within the judgment of the shareholder.
The significance of this appeal is evident in view of the fact that this right is the one most frequently litigated by stockholders (see 2 Hornstein, Corporation Law and Practice, § 611) and the fact that the tender offer is the primary method of corporate acquisition (see U.S. Senate Rep No. 550, 90th Cong, 1st Sess [1967]; HR Rep No. 1711, 91st Cong, 2d Sess [1968]; U.S. Code Congressional and Administrative News, 1968, p 2811). The authority to inspect corporate books and records in general is traceable to the right given to partners to ascertain the names of other partners and the condition of the business, and is recognized both at common law (see, e.g., Matter of Steinway, 159 N.Y. 250; Cotheal v Brouwer, 5 N.Y. 562; Matter of Tuttle v Iron Nat. Bank, 170 N.Y. 9; see, generally, 2 Cook, Corporations [8th ed], ch 30, § 511 et seq.) as well as by statute (see Business Corporation Law, §§ 624, 1315; Not-For-Profit Corporation Law, § 621). The conceptual basis for this right is derived from the shareholder's beneficial ownership of corporate assets and the concomitant right to protect his investment (see 5 Fletcher, Cyclopedia Corporations [1967 rev ed], § 2213; Guthrie v Harkness 199 U.S. 148).
At common law, this right is qualified and can only be asserted where the shareholder is acting in good faith (Matter of Waldman v Eldorado Towers, 25 A.D.2d 836, affd 19 N.Y.2d 843; Matter of Kole v Combined Ind., 28 Misc.2d 649) and has established that inspection is for a "proper purpose" (Matter of Steinway, supra, p 258). "The general rule is that a stockholder has a right to examine the original papers and vouchers of the corporation, where some property right is involved, or some controversy exists, or some specific and valuable interest is in question, to settle which an inspection of these documents is necessary." (2 Cook, Corporations [8th ed], ch 30, § 511, pp 1764-1765.) When asserting a common-law right of access the petitioner must plead and prove that inspection is desired for a "proper purpose" (see Model Business Corporation Act, Ann., § 52, par 4.05[5]). Where access is refused, the most effective means of enforcement is to proceed by mandamus (see 5 Fletcher, Cyclopedia Corporations [1967 rev ed], § 2214). Although article 78 in the nature of mandamus is based on legal considerations its exercise lies in the discretion of the court in light of equitable principles (Matter of Coombs v Edwards, 280 N.Y. 361, 364) and will be granted "with caution so as to prevent abuse". (Matter of Steinway, 159 N.Y., at p 258, supra, and cases cited therein.) As noted in Steinway relief will not be granted for (p 263) "speculative purposes, [or] the gratification of curiosity".
The statutory right to inspect corporate records was adopted in 1848 and has had a checkered history. The early legislation expanded the common-law right by omitting the "proper purpose" requirement (General Manufacturing Act, L 1848, ch 40, § 25, as amd by L 1854, ch 201, § 1, L 1862, ch 472, § 1; see, also, 2 Hornstein, Corporation Law and Practice, § 611). This absolute right, which was intended to remedy management recalcitrance (see Starr Schmidt, Inspection Rights of Corporation Stockholders: Toward a More Effective Statutory Model, 26 U Fla L Rev 173, 176) was not exclusive but supplemented the common law (e.g., Matter of Steinway, 159 N.Y. 250, supra; Matter of Ochs v Washington Hts. Fed. Sav. Loan Assn., 17 N.Y.2d 82, 86; Sivin v Schwartz, 22 A.D.2d 822; see, also, 3 White, New York Corporations [13th ed], par 624.03[1]). The Stock Corporation Law of 1890 retained the right of access to the stock book without any statement of particular intent. (L 1890, ch 564, § 29, as amd by L 1892, ch 688, § 53; Henry v Babcock Wilcox Co., 196 N.Y. 302.) The absolute access provision was ultimately discarded in 1937 when the law was amended to provide that the record of shareholders could not be obtained "for the purpose of communicating with stockholders in the interest of a business or object other than the business of the corporation" (Stock Corporation Law, § 113, L 1937, ch 639, § 1; see, also, Stock Corporation Law, § 10, L 1933, ch 641, § 1). However, this right to inspect the stock book was still broader than the common-law right due to the fact that the burden of establishing improper purpose was on the corporation (see Matter of Durr v Paragon Trading Corp., 270 N.Y. 464; see, generally, Aranow Einhorn, Tender Offers for Corporate Control, p 13) and it applied specifically to communicating with fellow shareholders.
The present statute (Business Corporation Law, §§ 1315, 624) was enacted in 1961 and modified the direct mandate of the Stock Corporation Law by providing that access be permitted to qualified shareholders on written demand, subject to denial if the petitioner refused to furnish an affidavit that the "inspection is not desired for a purpose * * * other than the business" of the corporation and that the petitioner has not been involved in the sale of stock lists within the last five years (Business Corporation Law, § 1315, subd [b]; § 624, subd [c]). This was deemed to work no substantive change in the law (see Matter of Gottdenker v Philadelphia Reading Corp., 31 A.D.2d 152, 155; see, generally, Joint Legislative Committee to Study Revision of Corporation Laws, 7th Interim Report [1963], §§ 624, 1315; Hornstein, Analysis of Business Corporation Law, McKinney's Cons Laws of NY, Book 6, Business Corporation Law, Appendix 1, p 463). This revision also eliminated the seldom used monetary penalty provisions and replaced them with a summary enforcement procedure in Supreme Court (Business Corporation Law, § 1315, subd [c]; § 624, subd [d]).
In an enforcement proceeding the stockholder must allege compliance with the statute. At this point the bona fides of the shareholder will be assumed (Matter of Waldman v Eldorado Towers, 19 N.Y.2d 843, supra) and it becomes incumbent on the corporation to justify its refusal by showing an improper purpose or bad faith (e.g., Matter of Durr v Paragon Trading Corp., supra; Matter of Schulman v Dejonge Co., 270 App. Div. 147, 149). Needless to say the court may exercise its discretion and deny the petition where it was not made in good faith (e.g., Matter of Ochs v Washington Hgts. Fed. Sav. Loan Assn., 17 N.Y.2d 82 supra; Matter of Breswick Co. v Greater N.Y. Ind., 308 N.Y. 1041) or for unlawful purposes (e.g., Matter of Gottdenker v Philadelphia Reading Corp., 31 A.D.2d, at p 156, supra; Matter of Tate v Sonotone Corp., 272 App. Div. 103).
In attempting to sustain its burden of proof, appellant contends that inspection should not be compelled where the stockholder desires to obtain the identity of other stockholders to convince them to sell their stock, since this does not involve the business of the corporation. Anaconda argues that a "proper purpose" should be determined with respect to the corporation and not in light of the interest to all the shareholders in relation to their stock holding. It claims that this position is supported by the explicit language of the Business Corporation Law and applicable precedent. We read this authority to compel the opposite conclusion.
Although everything affecting the shareholders will not affect the corporation, the converse is not true. Whenever the corporation faces a situation having potential substantial effect on its well-being or value, the shareholders qua shareholders are necessarily affected and the business of the corporation is involved within the purview of section 1315 of the Business Corporation Law. This statute should be liberally construed in favor of the stockholder whose welfare as a stockholder or the corporation's welfare may be affected. To say, as Anaconda would, that a pending tender offer involving over one fifth of the corporation's common stock is a purpose other than the business of the corporation is myopic. Since the pendency of such an exchange offer may well affect not only the future direction of the corporation but the continued vitality of the shareholders' investment, inspection of the stock book should be allowed so that qualified shareholders may have the means to independently evaluate the situation. Nor do we consider it significant that the petitioning shareholder precipitated that which may affect the corporation or shareholders; the right adheres as one of property in the shareholder and one for the protection of that interest.
Pertinent though not necessary to our determination are (1) the Federal consent order limiting the number of shares Crane may buy, prohibiting Crane's participation on the board of directors and the finding that Crane was making an investment and not seeking control; (2) the expenditure of corporate funds to circulate a number of letters disparaging Crane's offer. As to the second factor we consider the accuracy or inaccuracy of these communications of little moment; the point is that they were made.
Nevertheless, Anaconda claims support of the applicable case law with special reliance on Matter of Newman v Smith ( 263 App. Div. 85, affd 289 N.Y. 545). The appellant cites Newman for the proposition that inspection should be denied where the party seeking it is motivated primarily by a desire to solicit sales of stock. We believe this reliance is misplaced.
Newman involved a request by the owner of stock in an unincorporated stock association organized under the common-law right of contract, to examine the stock and transfer books of the association. The avowed purpose in seeking the stockholder list was to communicate an offer to purchase the association's stock at a price above market value but below book value and by that means gain control. The association refused and Newman sued to compel inspection. The Appellate Division unanimously reversed a lower court order in Newman's favor. The actual holding, the one in which all five Justices concurred, was that the petitioner had no statutory right to inspect the stock book of an unincorporated joint stock company and that mandamus would not lie to enforce a right arising out of private contract (p 88). The alternative ground, expressed by three Justices, was that even if there had been statutory authority they would have exercised their discretion to deny the request in light of the lack of benefit to either the company or its stockholders (pp 87-88). Therefore, even the Newman court recognized that the right is dependent on benefit to the corporation or its shareholders. Newman should not be read to support the proposition that an intention to solicit the sale of stock is an improper reason for inspection. The dispositive inquiry is whether the recalcitrant corporation can prove that inspection is sought for a purpose which is contrary to the best interests of the corporation or its stockholders.
With the exception of Matter of Laidlaw Co. v Pacific Ins. Co. of N.Y. ( 52 Misc.2d 122) the other New York cases relied on by Anaconda are inapposite either because they involved instances where the assertion of an improper motive was held not to preclude inspection if another proper purpose existed, or they rest on Newman. In Laidlaw, an application seeking examination of the stock book for the sole purpose of soliciting the sale of stock was denied. Although Newman was cited as authority, the analysis of this case stands on its own. The Laidlaw court drew a distinction between proxy contests and tender offers on the ground that the former are proper since the resultant opposition to the incumbent management may benefit the corporation. In contrast, solicitation of tender offers was considered improper since the purchase of stock with a view toward gaining control is at least an additional step removed from benefit to the corporation and "may be as consistent with the end of seeking personal gain for the purchaser as with the end of benefitting the corporation" (p 123).
This analysis is unsound for several reasons. In the first place, personal gain and benefit to the corporation are not mutually exclusive objectives (see, also, Weeks, Business Associations, 19 Syracuse L Rev 353, 354). Secondly, it focuses solely on benefit to the corporation and fails to consider the effect on the stockholders. An extant tender offer or abandoned tender offer, or for that matter a successful tender offer, may have dramatic impact on the value of the corporate stock. Consequently, shareholders should be apprised of all aspects surrounding a tender offer. In the instant case, Crane argues, we think correctly, that the effect of news about the progress of the tender offer or questions about its motive could lead stockholders to conclude that the tender offer is not in the corporation's best interest. One result could be the unloading of Anaconda stock which would drive the price down and seriously damage Crane's substantial investment as well as that of the remaining shareholders. Nor are we persuaded by Anaconda's argument that Crane's obvious intention to utilize the stockholder's list to choose its own manner of communication with the stockholders, or to choose among the stockholders, is improper.
Early in the proceedings Anaconda offered to have the corporation's transfer agent transmit the tender offer prospectus to all the stockholders. This was declined by Crane as much too expensive and not a productive way of soliciting tenders. While the stay of the Appellate Division order was before this court, Anaconda offered, as a condition of the stay, to transmit through its transfer agent a briefer communication to all stockholders. This invitation too was declined. Obviously then, Crane was and is interested in pursuing a selective and direct approach by other means to stockholders. This is not by itself improper and is due to the pragmatics of soliciting tenders from likely prospects who hold sufficient shares.
Anaconda next raises the specter of the unscrupulous corporate raider as a reason for sustaining its contention that a "proper purpose" should be determined in light of the corporation's business and not the stockholders' interest. This argument is without merit in that it disregards Federal involvement in the area (see Williams Amendment to Securities Exchange Act of 1934, U.S. Code, tit 15, § 78n; see, also, Aranow Einhorn, Tender Offers for Corporate Control, pp 14-15) and our consistent rejection of those seeking personal gain completely apart from any benefit to the corporation or its shareholders. As noted in Matter of Ochs v Washington Hgts. Fed. Sav. Loan Assn. ( 17 N.Y.2d 82, 88, supra), "Our case law has uniformly and without hesitation required a bona fide intention on the part of him who seeks such common-law relief". This principle is equally applicable when statutory relief is sought. In addition, the court has the inherent power to consider any and all relevant factors in exercising its sound discretion. Moreover, in requiring the stockholders to hold a substantial amount of stock or to have held stock for six months, the statute provides additional protection. Lastly, the requirement that the statement of no purpose other than a business one, be made under oath is also designed to deter the unscrupulous (Matter of Gottdenker v Philadelphia Reading Corp., 31 A.D.2d 152, supra). Accordingly, since it appears that Anaconda has failed to sustain its burden of proving an improper purpose and it cannot be said that the court below abused its discretion, we conclude that inspection should be compelled.
Finally, it should be noted that during the pendency of this appeal, Anaconda announced a proposed merger with another corporation, Tenneco. Crane argues that the shareholder list was urgently required so it could discuss the merger with its fellow shareholders. Since our disposition was on other grounds we do not reach this question.
The order of the Appellate Division should be modified by substituting the date of February 24, 1976 for the expired February 2, 1976 date and, as so modified, affirmed.
Chief Judge BREITEL and Judges JASEN, GABRIELLI, JONES, FUCHSBERG and COOKE concur.
Order modified, with costs to petitioner, in accordance with the opinion herein and, as so modified, affirmed.
APPENDIX
BUSINESS CORPORATION LAW§ 624. Books and records; right of inspection, prima facie evidence
(a) Each corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, board and executive committee, if any, and shall keep at the office of the corporation in this state or at the office of its transfer agent or registrar in this state, a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time.
(b) Any person who shall have been a shareholder of record of a corporation for at least six months immediately preceding his demand, or any person holding, or thereunto authorized in writing by the holders of, at least five percent of any class of the outstanding shares, upon at least five days' written demand shall have the right to examine in person or by agent or attorney, during usual business hours, its minutes of the proceedings of its shareholders and record of shareholders and to make extracts therefrom. Holders of voting trust certificates representing shares of the corporation shall be regarded as shareholders for the purpose of this section. If the corporation has failed to pay wages as defined in paragraph (b) of section 630 (Liability of shareholders for wages due to laborers, servants or employees), any person to whom a shareholder may be liable thereunder upon at least five days written demand shall have the right to examine in person or by agent or attorney during usual business hours, the record of shareholders and to make extracts therefrom.
(c) An inspection authorized by paragraph (b) may be denied to such shareholder or other person upon his refusal to furnish to the corporation, its transfer agent or registrar an affidavit that such inspection is not desired for a purpose which is in the interest of a business or object other than the business of the corporation and that he has not within five years sold or offered for sale any list of shareholders of any corporation of any type or kind, whether or not formed under the laws of this state, or aided or abetted any person in procuring any such record of shareholders for any such purpose. The enforcement of liability under section 630 shall not be an object other than the business of the corporation.
(d) Upon refusal by the corporation or by an officer or agent of the corporation to permit an inspection of the minutes of the proceedings of its shareholders or of the record of shareholders as herein provided, the person making the demand for inspection may apply to the supreme court in the judicial district where the office of the corporation is located, upon such notice as the court may direct, for an order directing the corporation, its officer or agent to show cause why an order should not be granted permitting such inspection by the applicant. Upon the return day of the order to show cause, the court shall hear the parties summarily, by affidavit or otherwise, and if it appears that the applicant is qualified and entitled to such inspection, the court shall grant an order compelling such inspection and awarding such further relief as to the court may seem just and proper.
(e) Upon the written request of any person who shall have been a shareholder of record for at least six months immediately preceding his request, or of any person holding, or thereunto authorized in writing by the holders of, at least five percent of any class of the outstanding shares, the corporation shall give or mail to such shareholder an annual balance sheet and profit and loss statement for the preceding fiscal year, and, if any interim balance sheet or profit and loss statement has been distributed to its shareholders or otherwise made available to the public, the most recent such interim balance sheet or profit and loss statement. The corporation shall be allowed a reasonable time to prepare such annual balance sheet and profit and loss statement.
(f) Nothing herein contained shall impair the power of courts to compel the production for examination of the books and records of a corporation.
(g) The books and records specified in paragraph (a) shall be prima facie evidence of the facts therein stated in favor of the plaintiff in any action or special proceeding against such corporation or any of its officers, directors or shareholders. L. 1961, c. 855; amended L. 1962, c. 834, § 41; L. 1963, c. 746, § 16, all eff. Sept. 1, 1963.
§ 1315. Record of shareholders
(a) Any resident of this state who shall have been a shareholder of record, for at least six months immediately preceding his demand, of a foreign corporation doing business in this state, or any resident of this state holding, or thereunto authorized in writing by the holders of, at least five percent of any class of the outstanding shares, upon at least five days' written demand may require such foreign corporation to produce a record of its shareholders setting forth the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof and shall have the right to examine in person or by agent or attorney at the office of the foreign corporation in this state or at the office of its transfer agent or registrar in this state or at such other place in the county in this state in which the foreign corporation is doing business as may be designated by the foreign corporation, during the usual business hours, the record of shareholders or an exact copy thereof certified as correct by the corporate officer or agent responsible for keeping or producing such record and to make extracts therefrom. Resident holders of voting trust certificates representing shares of the foreign corporation shall for the purpose of this section be regarded as shareholders.
(b) An examination authorized by paragraph (a) may be denied to such shareholder or other person upon his refusal to furnish to the foreign corporation or its transfer agent or registrar an affidavit that such inspection is not desired for a purpose which is in the interest of a business or object other than the business of the foreign corporation and that such shareholder or other person has not within five years sold or offered for sale any list of shareholders of any corporation of any type or kind, whether or not formed under the laws of this state, or aided or abetted any person in procuring any such record of shareholders for any such purpose.
(c) Upon refusal by the foreign corporation or by an officer or agent of the foreign corporation to produce for examination or to permit an examination of the record of shareholders as herein provided, the person making the demand for production and examination may apply to the supreme court in the judicial district where the office of the foreign corporation within this state is located, upon such notice as the court may direct, for an order directing the foreign corporation, its officer or agent, to show cause why an order should not be granted directing such production and permitting such examination by the applicant. Upon the return day of the order to show cause, the court shall hear the parties summarily, by affidavit or otherwise, and if it appears that the applicant is qualified and entitled to such examination, the court shall grant an order compelling such production for examination and awarding such further relief as to the court may seem just and proper.
(d) Nothing herein contained shall impair the power of courts to compel the production for examination of the books of a foreign corporation. The record of shareholders specified in paragraph (a) shall be prima facie evidence of the facts therein stated in favor of the plaintiff in any action or special proceeding against such foreign corporation or any of its officers, directors or shareholders. L. 1961, c. 855; amended L. 1963, c. 684, § 5, both eff. Sept. 1, 1963.
NOT-FOR-PROFIT CORPORATION LAW§ 621. Books and records; right of inspection; prima facie evidence
(a) Except as otherwise provided herein, every corporation shall keep, at the office of the corporation, correct and complete books and records of account and minutes of the proceedings of its members, board and executive committee, if any, and shall keep at such office or at the office of its transfer agent or registrar in this state, a list or record containing the names and addresses of all members, the class or classes of membership or capital certificates and the number of capital certificates held by each and the dates when they respectively became the holders of record thereof. A corporation may keep its books and records of account in an office of the corporation without the state, as specified in its certificate of incorporation. Any of the foregoing books, minutes and records may be in written form or in any other form capable of being converted into written form within a reasonable time.
(b) Any person who shall have been a member of record of a corporation for at least six months immediately preceding his demand, or any person holding, or thereunto authorized in writing by the holders of, at least five percent of any class of the outstanding capital certificates, upon at least five days written demand shall have the right to examine in person or by agent or attorney, during usual business hours, its minutes of the proceedings of its members and list or record of members and to make extracts therefrom.
(c) An inspection authorized by paragraph (b) may be denied to such member or other person upon his refusal to furnish to the corporation, its transfer agent or registrar an affidavit that such inspection is not desired and will not be used for a purpose which is in the interest of a business or object other than the business of the corporation and that he has not within five years given, sold or offered for sale any list or record of members of any domestic or foreign corporation or aided or abetted, or attempted or offered to aid or abet, any person in procuring any such list or record of members for any such purpose.
(d) Upon refusal by the corporation or by an officer or agent of the corporation to permit an inspection of the minutes of the proceedings of its members or of the list or record of members, as herein provided, the person making the demand for inspection may apply to the supreme court in the judicial district where the office of the corporation is located, upon such notice as the court may direct, for an order directing the corporation, its officer or agent to show cause why an order should not be granted permitting such inspection by the applicant. Upon the return day of the order to show cause, the court shall hear the parties summarily, by affidavit or otherwise, and if it appears that the applicant is qualified and entitled to such inspection, the court shall grant an order compelling such inspection and awarding such further relief as to the court may seem just and proper.
(e) Upon the written request of any person who shall have been a member of record for at least six months immediately preceding his request, or of any person holding, or thereunto authorized in writing by the holders of, at least five percent of any class of the outstanding capital certificates, the corporation shall give or mail to such member an annual balance sheet and profit and loss statement or a financial statement performing a similar function for the preceding fiscal year, and, if any interim balance sheet or profit and loss or similar financial statement has been distributed to its members or otherwise made available to the public, the most recent such interim balance sheet or profit and loss or similar financial statement. The corporation shall be allowed a reasonable time to prepare such annual balance sheet and profit and loss or similar financial statement.
(f) Nothing herein contained shall impair the power of courts to compel the production for examination of the books and records of a corporation.
(g) The books and records specified in paragraph (a) shall be prima facie evidence of the facts therein stated in favor of the plaintiff in any action or special proceeding against such corporation or any of its officers, directors or members. L. 1969, c. 1066, § 1; amended L. 1970, c. 847, § 38, both eff. Sept. 1, 1970.