rger corps (eg, to restrict ownership to employees). The two most common types of restriction are a right of first refusal and a mandatory sell-buy provision. Restrictions must be reasonable and will be strictly construed.
a) Notice Requirements - a lawful stock transfer restriction is of no effect unless noted conspicuously on the stock certificate. If there is no such notice, an innocent transferee is entitled ti have the shares transferred to him.
C.SHAREHOLDERS 'INFORMATIONAL RIGHTS:
1.TYPES OF BOOKS AND RECORDS - these include shareholder lists, minutes, financial records, and business documents.
2.COMMON LAW - at CL, a sh has a right to inspect records for proper purpose.
3.STATUTES--statutes govern these rights in most states. Many statutes apply only to certain shs but are usually interpreted to supplement the common law. Most statutes preserve the proper purpose test, but place the burden on the corp to prove improper purpose.
4.PROPER VERSUS IMPROPER PURPOSES - the test is whether the sh is seeking to protect the sh interest. Multiple purposes that include a proper one usually will not preclude inspection. Generally, a sh can inspect the sh list because it is often necessary to the exercise of other rights like proxy fights, sh litigation, etc. Inspection of a sh list for proxy contest is a proper purpose. However, it has been held that corporate records cannot be examined solely for the purpose of advancing political and social views or to aid a sh as a litigant on a personal, non-shareholder claim.
5.COMPARE--MANDATORY DISCLOSURE OF INFORMATION - a sh's inspection right is separate and distinct from the statutory requirements governing the affirmative disclosure of certain information by corps (eg, Section 12 of Securities Exchange Act of 1934, proxy rules, state statutes).
D.FIDUCIARY OBLIGATIONS OF CONTROLLING SHAREHOLDERS - a controlling sh owes a fiduciary duty in his business dealings with the corp, in taking advantage of corp opportunities (rules more lenient than those applied to dirs and officers), and in causing fundamental changes.
1.ACTIONS ENTIRELY IN SHAREHOLDER CAPACITY - a controlling sh must NOT act to benefit himself at the expense of the minority shs; ie, in a transaction where control of the corp is material, he must act with good faith and inherent fairness toward the minority.
2.OBLIGATIONS OF SHAREHOLDERS IN CLOSE CORPORATIONS - both majority and minority shs owe each other an even stricter duty (utmost good faith and loyalty) than is owed by controlling shs in publicly held corps. This duty has been interpreted to mean that there must be equal treatment of all shs, ie, they must be afforded equal opportunities.
3.DISCLOSURE--a controlling sh must make full disclosure when dealing with minority shs.
4.SALE OF CONTROL - in most jurisdictions, a controlling sh is permitted to sell his stock ...
