Question

Erin, a shareholder of Finance Inc., demands the right to inspect corporate records to determine whether management has engaged in self-dealing that impacts the company. The firm refuses the request. On Erin’s challenge, a court is most likely to hold that her request constitutes:________

a. harassment.
b. unreasonable access to trade secrets and other confidential information.
c. a proper purpose.
d. potential abuse.

Answer 1

Answer:

c. a proper purpose.

Explanation:

Proper purpose is an action taken by a shareholder or member of a corporation that is reasonable related to his position or rights.

With the proper purpose rule there is a constraint on a director's autonomy within an organisation and it provides checks to excesses by the management team.

Erin demands the right to inspect corporate records to determine whether management has engaged in self-dealing that impacts the company.

As a shareholder she is enforcing proper right and the court will uphold this.