Brief survey of Nebraska shareholder law.
Nebraska Shareholder Law Survey
Books and Records
Rights to Inspect Books and Records
Nebraska shareholders have the right to inspect and copy corporate records at the corporation’s principal place of business. Neb. Rev. Stat. Ann. § 21-20,183(1) (West 2010). To exercise this right, the shareholder must give five days written notice. § 21-20,183(1).
The shareholder’s demand to inspect must be made “in good faith and for a proper purpose.” § 21-20,183(3). The demand must also “state with reasonable particularity” which records the shareholder wishes to examine. § 21-20,183(3).
The shareholder has the right to inspect and copy accounting records, the list of shareholders, excerpts from minutes of board of directors meetings, records of committee actions, minutes of shareholder meetings and records of actions taken by shareholders or the board of directors without a meeting. § 21-20,183(2).
The corporation has the right to charge a reasonable fee to cover the actual expense of providing copies of the records. § 21-20,184(3).
This right to inspect corporate books and records may not be limited by the corporation’s by-laws or articles of incorporation. §21-20,183(4).
If the corporation denies the shareholder access to corporate records, the shareholder can petition the district court in the county where the corporation is located. § 21-20,185(1). If the district court orders the inspection, the corporation must pay the shareholder’s costs and reasonable attorney’s fees unless the corporation shows it refused the inspection in good faith. § 21-20,185(3).
A Nebraska shareholder may apply for judicial dissolution if the directors have acted in an “illegal, oppressive, or fraudulent,” or if corporate assets are “misapplied or wasted.” § 21-20,162(2)(a)(ii). Nebraska courts have stated that while the Business Corporation Act gives courts the ability to dissolve the corporation to protect minority shareholders from oppression, dissolution should be a last resort. Woodward v. Andersen, 627 N.W.2d 742, 752 (Neb. 2001); Hockenberger v. Curry, 215 N.W.2d 627, 631 (Neb. 1974). Dissolution would not be a remedy if other means resolve the complaint. Woodward, 627 N.W.2d at 752.
If a Nebraska shareholder shows individual harm because of harm to the corporation, and the individual was harmed in his individual capacity rather than as a shareholder, the shareholder may be able to maintain a direct action rather than a derivative one. Trieweiler v. Sears, 689 N.W.2d 807, 828 (Neb. 2004); Meyerson v. Coopers & Lybrand, 448 N.W.2d 129, 133 (Neb. 1989). The shareholder must show a “separate and distinct loss” from other shareholders or that one of the wrongdoers owed the shareholder a “special duty.” Meyerson, 448 N.W.2d at 133, citing Wells Fargo Ag Credit Corp. v. Batterman, 424 N.W.2d 870, 874 (Neb. 1988).
In a close corporation, a derivative claim may be treated as a direct action for purposes of recovering damages. A shareholder may recover individually in an action raising derivative claims, if the court finds that doing so does not “unfairly expose the corporation or defendants to a multiplicity of actions, materially prejudice the interests of creditors of the corporation, or interfere with a fair distribution of the recovery among all interested persons.” Trieweiler, 689 N.W.2d at 838.
Shareholder Derivative Suits
A derivative action is a suit by shareholder to enforce a corporation’s cause of action. Sadler v. Jorad, Inc., 680 N.W.2d 165, 171 (Neb. 2004). Shareholders cannot bring an action in their own names to recover for wrongs done to the corporation. The shareholder’s right to sue is derivative in nature and usually is only brought in their shareholder’s representative capacity for the corporation. Meyerson, 448 N.W.2d at 133.
To maintain a derivative suit, the stockholder must allege that he has made a demand upon the corporation unless making the demand would be excused. § 21-2072; Meyerson, 448 N.W.2d at 133. After the written demand is made, the shareholder must then give the corporation 90 days to respond before filing suit unless the corporation rejects the demand. § 21-2072. If the shareholder can show that “irreparable injury” to the corporation would result by waiting 90 days, the shareholder may file suit before this period expires. § 21-2072. However, in a closely held corporation, a shareholder is not required to make a demand if doing so would be “unavailing.” Meyerson, 448 N.W.2d at 133.
To have standing to bring a derivative action, the shareholder must have been a shareholder at the time the act complained of occurred and also must “fairly and adequately represent the interests of the corporation in enforcing the right of the corporation.” §21-2071.