A New Jersey Superior Court, Appellate Division’s ruling clarifies the scope of a shareholder’s right under the New Jersey Business Corporation Act to inspect a corporation’s books and records.  

The act entitles shareholders, upon proof of a proper purpose, to examine a corporation’s minutes and shareholder records, as well as its books and records. The court examined the extent to which a corporation can limit shareholder requests in respect of a shareholder’s “proper purpose,” as well as the types of corporate records that the act permits shareholders to request.  

In clarifying its interpretation of the act, the court held that a shareholder’s inspection request must be limited to those records identified in the statute that are “pertinent to the shareholder’s proper purpose for the investigation.” Shareholder inspection requests must be “circumscribed with rifled precision,” and the burden is on the shareholder to establish that each category of books and records requested is essential to accomplishing the shareholder’s articulated purposes for the inspection.  

In interpreting the categories of books and records that the act permits shareholders to request, the court ruled that the minutes of board and executive committee meetings fell within the act’s permitted categories. However, shareholders are entitled to examine only the portions of these minutes that address the shareholders’ “proper purpose.”  

Cain v. Merck & Co., No. A-2138-08T2 (Superior Court of New Jersey, Appellate Division, decided August 17, 2010)