Missouri Shareholder Law Survey
Shareholder Inspection Rights
Shareholders of Missouri close corporations have the same inspection rights as those in ordinary Missouri corporations. See Mo. Ann. Stat. § 351.215(1) (West 2001). Corporations must keep and make available for examination by shareholders complete and correct books and records of account, minutes of meetings of shareholders and directors, names and business or residence addresses of its officers and its shareholder list. § 351.215(1). Regardless of the stated purpose of the inspection, a shareholder has an absolute right to examine the books of the corporation. Brown v. III Investments, Inc., 80 S.W.3d 855, 860 (Mo. Ct. App. 2002). However, in order to inspect other documents such as confidential communications or internal studies, there must be a proper purpose for the inspection. Id. The corporation has the burden to show that a shareholder seeking inspection has a purpose that is “evil, improper or unlawful.” Id.
Additionally, any officer of a corporation that refuses to present corporate records for shareholder inspection are subject to a $250 fine for each instance of refusal. § 351.215(2). Shareholder inspection rights stem from the shareholders’ status as owners of the corporation and serve to ensure that the corporation is being properly managed by allowing examination of the actions of those in control. Schultz v. Schultz, 710 S.W.2d 507, 509 (Mo. Ct. App. 1986).
Missouri law provides for involuntary dissolution of a close 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.” § 351.494(2)(b). However, Missouri courts have stated that dissolution should not be granted lightly but only in instances where the corporation is threatened with imminent injury and where there is no other adequate remedy. Struckhoff v. Echo Ridge Farm,Inc., 833 S.W.2d 463, 466 (Mo.Ct. App. 1992); see also Churchman v. Kehr, 836 S.W.2d 473, 482 (Mo. Ct. App. 1992).
Although not statutorily defined, Missouri courts have used the often cited definition of oppression that it is “burdensome, harsh and wrongful conduct, a lack of probity and fair dealing in the affairs of a company to the prejudice of some of its members, or a visible departure from the standards of fair dealing, and a violation of fair play on which every shareholder who entrusts his money to a company is entitled to rely.” Churchman, 836 S.W.2d at 482. This definition is intended to describe the boundaries of the oppression concept in broad terms rather than as a narrow definition in order to retain its flexibility in practice. Fix v. Fix Material Co., 538 S.W.2d 351, 358 (Mo. Ct. App. 1976). It is also useful to analyze what constitutes oppressive conduct in terms of the fiduciary duties owed by the controlling shareholders to the minority interest. Whale Art Co. v. Doctor, 743 S.W.2d 511, 514 (Mo. Ct. App. 1987). Although majority shareholders are “not fiduciaries in the strict sense, the general concepts of fiduciary law are useful in measuring the conduct of those in control” to determine whether oppression has occurred. Id. Pursuant to the duties owed by majority shareholders, they cannot use their control to obtain a profit for themselves at the expense of the minority interest or initiate a corporate action that is intended to disadvantage the minority. Fix, 538 S.W.2d at 358.
Shareholders of close corporations may bring derivative suits on behalf of a corporation for wrongs against the corporation. Mo. Sup. Ct. R. 52.09. In order to have standing to bring a derivative suit, a plaintiff must adequately and fairly represent the interests of the other shareholders and have been a shareholder at the time the cause of action arose or received the shares by operation of law from someone who held them at that time. Id. In his or her complaint, the shareholder must allege the actions taken to obtain appropriate relief from the corporation or state why no such actions were taken or why the actions taken failed. Id. Court approval is required before a suit may be discontinued or settled and notification of affected shareholders may be required. Id.
Missouri recognizes the general rule that a shareholder cannot pursue an action for an injury to the corporation as an individual and for his or her own personal gain. K-O Enters., Inc. v. O’Brien, 166 S.W.3d 122, 129 (Mo. Ct. App. 2005). However, shareholders are permitted to bring actions individually and obtain a personal recovery for injuries where a right unique to them has been violated. Centerre Bank v. Angle, 976 S.W.2d 608, 614 (Mo. Ct. App. 1998).