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Where Can I Get Assistance With Dealing With A Corporation In Which I Own Stock? Questions commonly received by the Securities Division regarding the operation of corporations: I want to view the corporate records. What access rights do I have? I am a minority shareholder and I am not kept informed about the operations of the corporation. What can I do? How do I find out how much my shares are worth? The corporation in which I am a shareholder is merging with another corporation. Do I have to trade my shares? Is a corporation required to have annual meetings of its shareholders? Corporation governance in general: Differences of opinion may arise within corporations—between officers and directors, between officers or directors and shareholders, or among shareholders—over the direction of the corporation’s activities, or over how the corporation is governed by its officers and directors. These differences can escalate to the level of legal action between the parties, and the Securities Division of the Corporation Commission often receives inquiries from members of the public regarding such disputes. One should be aware of some basic facts regarding these types of disputes: 1) Generally corporation governance issues do not fall under state “securities law” (that is, the Arizona Securities Act), but in fact concern matters that fall under state corporation law (that is, the Arizona Business Corporation Act, or “ABCA” for short). Securities laws generally focus on the legality of securities transactions (for example, what is either disclosed, or not disclosed, by the seller to the buyer during the course of a securities transaction), whereas corporation law focuses on the legality of actions taken by those who form the corporation and who oversee its business activities. The Securities Division enforces the Arizona Securities Act. The ABCA is the province of the Corporations Division. 2) The ABCA does not give the Corporation Commission any authority to resolve the types of internal, corporation-related disputes described above; generally speaking, as long as an incorporated business makes all of the required filings with the Corporation Commission, and as long as it is not being formed for a flagrantly unlawful purpose (for example, selling illegal drugs), the Commission has no authority under the law to remedy disputes. As is typical of most state corporation acts, the ABCA directs contentious parties to the court system to seek resolution of their issues. Access to corporate records: Many of the inquiries received by the Securities Division concern the right of shareholders to review the corporation’s records, and what shareholder options are if their request to review corporate records is denied by the corporation’s officers. The ABCA does provide for a court-ordered remedy in such instances, and these provisions are contained in A.R.S. §§ 10-1601 through 10–1604. For statutes relating to the corporate records of nonprofit corporations, see A.R.S. §§ 10-11601 through 10-11605. Shareholder meetings: The Securities Division also receives inquiries regarding the rights of shareholders to attend and participate in meetings regarding the governance of the corporation. The ABCA contains requirements that the corporation’s articles of incorporation or bylaws provide for annual meeting dates and shareholder notice of the meetings. These provisions are contained in A.R.S. §§ 10-701 through 10-708. (For nonprofit corporations - §§ 10-3701 through 10-3708.) Provisions relating to shareholder voting are at A.R.S. §§ 10-720 through 10-732. (For nonprofit corporations - §§ 10-3720 through 10-3732.) Dissenters’ rights: Another potentially troublesome area concerns the issue of “dissenters’ rights,” which governs the payment to be made to those shareholders who may disagree with the decision of the corporation’s officers to merge with another company, or to otherwise dispose of the corporation’s assets. The ABCA sets forth a procedure for determining the value of shares owned by the dissenters, who also enjoy the right of court review over the corporation’s valuation of their shares, pursuant to A.R.S. §§ 10-1301 through 10–1331. These provisions do not apply to nonprofit corporations. Other provisions relating to mergers of nonprofit corporations are contained in A.R.S. §§ 10-11101 through 10-11108. Shareholder lawsuits against the corporation: The ABCA does allow for the filing of “derivative” lawsuits by shareholders, pursuant to A.R.S. §§ 10-740 through 10–747; the shareholder must first present his or her problem to the corporation in writing, before proceeding to court. Derivative law suits also may be brought against nonprofit corporations under A.R.S. §§ 10-3630 through 10-3637. Court removal of directors: The ABCA allows for court removal of a corporation’s directors, based on findings of fraudulent or criminal conduct by the directors, or simply because such removal is found by the court to be in the corporation’s best interests; this remedy is described in A.R.S. § 10-809. This remedy also applies to nonprofit corporations. See A.R.S. § 10-3810. Shareholder remedies: Anyone may view a corporation’s articles of incorporation, amendments to articles, merger documents, statements of bankruptcy, annual reports, and miscellaneous memos filed with the Corporations Division of the Corporation Commission. The names of the officers, directors, and the statutory agent of a corporation may be obtained from the Corporations Division’s website. Shareholders who believe that a problem exists regarding the governance of a corporation should confer with private legal counsel experienced in corporation law. The contents of this web page do not constitute legal advice and are not official positions of the Corporation Commission. This web page is provided solely as a convenience to the public, and visitors to this page are advised to consult a licensed and qualified attorney regarding these matters. |
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