LLC and corporate inspection rights under California and Delaware law.
Minority shareholders and LLC members have statutory rights to inspect company books and records. A well-drafted demand letter is often the first step before filing a formal petition--and frequently resolves the issue without court involvement.
Use this guide when: You are being denied financials, minutes, cap tables, or key contracts, and you need information to evaluate a buyout, investigate mismanagement, or prepare derivative claims.
Legal Framework
California Corporations
Corporations Code § 1601
Shareholders may inspect and copy accounting books, records, minutes of shareholder meetings, and the shareholder ledger. The request must be for a purpose reasonably related to the shareholder's interest.
Corporations Code § 1602
Directors have absolute, unconditional rights to inspect the entire accounting books and records of the corporation.
LLCs - Corporations Code § 17704.10
Members may inspect and copy the LLC's records, tax returns, and financial statements during regular business hours for purposes reasonably related to the member's interest.
Delaware Corporations (8 Del. C. § 220)
Requires written demand under oath stating a proper purpose. Inspection is limited to books and records essential to that purpose.
Proper Purpose Examples
Purpose
Why It Works
Investigate mismanagement/self-dealing
Courts routinely recognize this as proper; show specific concerns.
Value your ownership interest
Needed for buy-sell decisions, estate planning, or exit discussions.
Communicate with other owners
Shareholder lists can be inspected to solicit proxies or rally support.
Prepare for derivative litigation
Books and records provide facts needed for a well-pled complaint.
Documentation Checklist
Proof of ownership (subscription agreements, stock certificates)
Operating or shareholder agreements outlining inspection rights
Prior requests or emails showing denial of access
Financial statements or tax returns previously provided (establish baseline)
Evidence of suspected misconduct (related-party contracts, unusual expenses)
Timeline of events leading to the demand
Demand Letter Templates
1. Identification & Legal Basis
"I am a [X]% shareholder of [Company Name], a California corporation. Pursuant to California Corporations Code Section 1601, I hereby demand inspection and copying of the following books and records..."
2. Proper Purpose Statement
"The purpose of this inspection is to:
- Investigate potential mismanagement and self-dealing by management
- Evaluate the fair value of my ownership interest
- Assess whether to pursue derivative claims on behalf of the company
- Verify that company funds are being used for proper corporate purposes"
3. Specific Records Requested
"1. Financial statements (balance sheets, income statements, cash flow) for fiscal years 2021-2024
2. General ledger entries for the same period
3. Minutes of all board and shareholder meetings since January 1, 2020
4. Shareholder/member register showing all current ownership interests
5. All related-party contracts, loans, or agreements entered since January 1, 2020
6. Bank statements for all company accounts for 2023-2024
7. Tax returns (federal and state) for 2021-2023"
4. Logistics
"Please make these records available for inspection at the company's principal office within ten (10) business days of this letter. We are willing to:
- Conduct inspection during normal business hours
- Accept electronic copies where available
- Sign a reasonable confidentiality agreement protecting trade secrets"
5. Consequences of Refusal
"This demand is made in good faith for legitimate purposes. Should you refuse or unreasonably delay compliance, we will have no choice but to seek judicial enforcement through a books and records petition, at which time we will seek our attorneys' fees and costs as permitted by law."
Tone tip: Frame this as information-gathering, not an accusation. Save breach of fiduciary duty allegations for later letters or litigation.
If You Received a Demand
Don't ignore it. Unreasonable refusal strengthens the shareholder's case and may result in fee-shifting.
Evaluate the purpose. Pure harassment or competitive use can be challenged.