Legal Question in Investment Law in California

Who gets to look at the bank accounts in a corporation?

We have a small 2 person startup corporation in California. (Only two stockholders). We've brought on a programmer and given him a 10% stake in the company stock and named him our CTO. He now says as an officer of the company he has a right to view the corporate bank accounts to see how the money is being spent. Does he have that right? Can we show him quarterly reports?


Asked on 5/10/06, 6:36 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Who gets to look at the bank accounts in a corporation?

He doesn't have an inspection right as Chief Technology Officer. However, your question strongly suggests that you now have three stockholders -- that would be the normal implication of "we have him a 10% stake" -- and as a 10% shareholder has the right to inspect the shareholder list and the books and records. See Corporations Code sections 1600, 1601 and following sections re enforcement of the right.

What's more, you probably have to add a third director to your board of directors (not necessarily this person, however). See Corps. Code section 212 re minimum number of directors in relation to number of shareholders.

Also make sure you are in compliance with Corps. Code section 25102 regarding reporting the securities-registration exemption you're relying upon.

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Answered on 5/10/06, 8:13 pm


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