On the Right of a Stockholder to Inspect Corporate Books and Records

TERELAY INVESTMENT AND DEVELOPMENT CORPORATION, Petitioner, v. CECILIA TERESITA J. YULO, Respondent; G.R. No. 160924; 05 August 2015

Among the rights of a stockholder under the law is to inspect the corporate books and records.  

May the corporation deny such right on the ground that the stockholder does not own a substantial interest in the corporation and/or that the inspection would be used for doubtful or dubious reason?

In the case of Terelay Investment and Development Corporation vs. Cecilia Teresita Yulo, G.R. No. 160924, the Supreme Court resolved these issues in the negative.

In upholding the right of the stockholder to inspect and examine the corporate books and records despite her shareholding being a measly .001% interest, the Supreme Court said:

“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.”

As regards the claim of the corporation that the inspection would be used for doubtful or dubious reason, the Supreme Court stressed:

“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. “