Going Public

Does a shareholder have the right to see a company's internal records? What if it's a former employee with dubious motives?

When must a private company make its internal records available? That’s a question digital-disk manufacturer BlueRay Technologies is facing — in court.

The person asking that question is the company’s former CFO, Yelena Simonyan. She filed suit against the company, which replicates and packages digital disks, claiming that as a shareholder with a $100,000 investment she’s entitled to the company’s financial records.

But BlueRay, based in Spokane, Washington, thinks Simonyan has ulterior motives. The company fired her last October after learning that she had pleaded guilty to defrauding the Internal Revenue Service. Now, the company charges, Simonyan wants BlueRay’s records released to influence its buyback of her stock.

The court sealed some court documents, but Simonyan may still succeed in gaining access to the financials, says Jill Fisch, T.J. Maloney professor of business law at Fordham University. “It’s very common for stockholders to seek access to records of private companies, because they don’t have access to them through periodic securities filings,” she says.

While every state gives private-company shareholders the right to access the books, each sets its own requirements. “In most states,” Fisch says, “it’s the stockholders’ obligation to show a proper purpose for the records.” At press time, a hearing to determine if Simonyan’s purpose passes muster was being scheduled.

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