Shareholder Entitled to Requested Records, but Attorney Fees Denied

In Hammoud v Advent Home Medical, Inc., an unpublished Michigan Court of Appeals opinion, a shareholder in a business corporation requested certain records from the corporation.  The corporation failed to respond and the shareholder filed suit seeking an order compelling disclosure of the records.  On an appeal after remand from a prior appeal, the Michigan Court of Appeals stated that the plaintiff provided sufficient proof that she was a shareholder; the defendant’s claims that the shared had been obtained by fraud or duress were irrelevant; the plaintiff was a shareholder.

The court also held, overruling the trial court, that the plaintiff had stated a “proper purpose” for review of the requested records and the trial court was wrong in denying the request to review certain of the documents.  Finally, the court held that the trial court was correct in denying the plaintiff’s request for attorney fees under the exception contained in the statute that the corporation had a reasonable basis to doubt the right of the shareholder or director to inspect the records demanded.

Although this case was brought and decided under the Business Corporation Act, it is instructive for community associations governed by nonprofit corporations because the Nonprofit Corporation Act contains a substantially similar provision.

© Steve Sowell 2018