Rights of Private Stockholders in Florida

A corporation formed in Florida is subject to the regulations set forth in state statutes known as the Florida Corporations Act. Some of these regulations cover the rights of the shareholders of the corporation. This is especially true regarding a private or closely held corporation, which is not covered by federal securities regulations.

Open Inspection Rights

A major right of a corporation's stockholders is the right to receive certain information, without justification or reason, either automatically or on demand. The corporation is allowed to ask for five days notice for such demanded information. All the basic records and documents of the corporation are included in this category. This includes the articles of incorporation, the current bylaws, current annual financial reports, resolutions passed by the board of directors, recent board meeting minutes and the current list of directors' names and addresses.

Restricted Inspection Rights

Some types of information are accessible to stockholders with restrictions. For example, a list of names of all current stockholders is made automatically available during a stockholders' meeting, but can only be accessed at other times for a good and justifiable reason. Official accounting records, such as journals and ledgers plus other records, letters or files, fall under this category. A common justifiable reason is for the purposes of valuation of the corporation and its shares of stock. The stockholder must give reasonable notice to the corporation in this category as well.

Bylaws and Agreements

State law requires the corporation to have filed articles of incorporation and current bylaws. The articles set out purposes and structure of the company and the bylaws set out the operational rules. These are public record and cannot be deviated from. However, state law permits private corporations with less than 100 stockholders to draft and follow a separate shareholders' agreement. This agreement often controls the rights of the stockholders, including voting rights, management control and buying and selling of shares. Such an agreement is not public record; therefore, its existence must be conspicuously disclosed on the stock share certificates. State law gives priority to the articles and bylaws in the event of any conflict with an agreement.

Other Provisions

State law imposes penalties on stockholders who improperly use their rights of inspection -- for example, making the list of all stockholders available to outsiders or using it for commercial purposes. Such an action can make the stockholder liable to criminal penalties and the loss of their rights of inspection for two years. The rights of stockholders apply to their attorney or other legal agent, as well as to someone with a beneficial interest, such as an heir of the stockholder. The corporation is permitted to charge a stockholder reasonable costs for assembling and producing information requested.

References

• Legal & Compliance, LLC: Legal Resources: Articles: Shareholders Must Understand Their Rights to Inspect the Companies They Invest In
• Lawrence S. Tolchinsky, P.A.: Shareholder Agreements
• Florida Legislature: Statutes: ss.607.0732 -- Shareholder Agreements
• Glenn M. Cooper and Associates, PA: Florida Companies: Structuring a Florida Business Entity