Right to Inspect Corporate Financial Records

Posted on: July 9, 2013

Omes v. Ultra Enterprises, Inc., 3D12-814 (Fla. 3d DCA 2013):

The legal issue analyzed by the Third District Court of Appeal (“3d DCA”) was whether a corporation or LLC that fails to maintain an accounting record specified to be accessible to shareholders can be ordered to either (a) prepare and provide such a record, or (b) produce those “source” or original accounting records that would be necessary to produce the statement.

Plaintiff filed a two-count complaint claiming unlawful denial of access to corporate books and records under Florida Statute §607.1602 and unlawful denial of access to limited liability company records under §608.4101. The Defendants include two corporations and two LLCs associated with the Ultra Music Festival.

By agreement between the parties, the trial court granted a motion by the Plaintiff for the appointment of a comptroller to manage the production and copying of records provided by the Defendants. The court-appointed comptroller requested various records from the Defendants, and when certain documents were not produced, the trial court directed that they be produced. After conducting hearings to assess the Defendants’ compliance with the records statutes, the court determined no further records were required to be produced. Plaintiff appealed the final judgment denying him further access and documents relating to the finances of the entities.

The 3d DCA agreed with the holding in Nu Med Home Health Care, Inc. v Hospital Staffing Services, Inc., 664 So. 2d 353 (Fla. 4th DCA 1995) that the corporation is not obligated to produce a corporate record that it does not have at the time the request is made, and that it is not required to prepare the request record from documents that it might obtain from others. The 3d DCA also agreed with Plaintiff that the corporation must provide access to its existing records that would be used to prepare the statement of cash flows.

In conclusion, the statutory inspection rights of shareholders are not tantamount to a free-ranging bill of discovery for corporate financial records, nor do they obligate a corporation to prepare a record that does not exist. The Plaintiff was afforded ample access to records for the purposes of valuation expressed in his requests for corporate information. Here, the Plaintiff was attempting to find or substantiate shareholder claims for a later lawsuit, which is not part of the letter or spirit of the records inspection statutes.