Hawaii Shareholder Law Survey

Shareholder Inspection Rights

In Hawaii, a stockholder has the right, upon demand, to inspect corporate books and records. Haw. Rev. Stat. Ann. § 414-302 (2010). Corporate records include meeting minutes, accounting records, list of members, articles of incorporation, by-laws, and the most recent annual report. Id. § 414D-301. The corporation can charge a reasonable fee to cover labor and materials to provide copies of records. Id. § 414-303(b)-(c).

A corporation that denies access to records, a court in the county where the corporation is located (or in Honolulu if none exists) can order inspection and copying of the records at the corporation’s expense. Id. § 414-304(a). The court may also order the corporation to pay the stockholder’s reasonable attorney’s fees and court costs unless the corporation shows it denied access based on a good faith belief that the stockholder did not have the right to inspect the records requested. Id. § 414D-304.

Hawaii courts presume that when a stockholder has the right to inspect the books of the corporation, the stockholder’s purpose is proper. Wong Buck Kam v. Lee Chee, No. 1640, 29 Haw. 508, 1926 WL 3052, at *2 (Haw. Terr. Dec. 20, 1926). If the corporation alleges that the stockholder has an improper purpose, the corporation bears the burden to show that improper purpose. Id.

Shareholder Oppression

Hawaii law provides for involuntary dissolution of a corporation by its shareholders if the “directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent” or corporate assets are “misapplied or wasted.” Haw. Rev. Stat. Ann. § 414-411(2)(B),(D).

Shareholder Derivative Suits

To have standing to bring a derivative suit, the shareholder must own shares in the corporation when the act complained of occurred. Id. § 414-172. Before bringing a derivative suit, the shareholder must first make a written demand on the corporation. The corporation then has 90 days to act on the demand before the shareholder can file suit unless the corporation rejects the demand or the shareholder can show irreparable injury to the corporation if the shareholder has to wait 90 days. Id. § 414-173. After the derivative suit is filed, the claim may not be “discontinued” or settled without court approval. Id. § 414-176.

The court can order the corporation to pay reasonable expenses, including attorney’s fees if the court finds that the proceeding “resulted in a substantial benefit to the corporation.” The court can also order the plaintiff to pay the corporation’s expenses if the suit was filed without reasonable cause or for an improper purpose. Id. § 414-177. Limited partners can maintain a derivative suit against general partners if the limited partnership refuses to do so. Phillips v. Kula 200, 629 P.2d 119, 210 (Hawaii App. 1981).

If the shareholder has an individual claim rather than a derivative action, he may, with other shareholders, bring a class action suit. Chambrella v. Rutledge, 740 P.2d 1008, 1013-14 (Haw. 1987). However, shareholders can bring direct and derivative suits together. Id. at n.6.