Denied the Company Books? Shareholder Inspection Rights in California

In December 2024, a San Francisco company offered to buy one of its shareholders out for about $1.37 million. He held 11.11 percent of the common stock. He had never been an officer or a director. And he had no way to know whether $1.37 million was a fair price or a fraction of one, because he had not seen the company's financial records. So he asked for them, under the California statutes that give shareholders the right to look. The company refused. Its stated reason was that it "is a Delaware corporation."

That refusal produced two appellate decisions in two states inside of five months, and the company lost both of them. Together they answer a question that comes up constantly in closely held California businesses: when the majority will not show you the books, what can you actually do about it?

What California gives a shareholder

Two statutes do the work, and they cover different things.

Corporations Code section 1600 governs the shareholder list. A shareholder or group holding at least 5 percent of the outstanding voting shares, or 1 percent if they have filed a Schedule 14A with the SEC, has what the statute itself calls an "absolute right" to inspect and copy the record of shareholders, including names, addresses, and shareholdings. The demand is made in writing and the company has five business days. Note what is missing from that sentence: you do not have to explain why you want it.

Corporations Code section 1601 governs the substance. It covers the accounting books, records, and minutes of proceedings of the shareholders, the board, and board committees. Any shareholder may inspect them, at any reasonable time, for a purpose reasonably related to that person's interests as a shareholder. This is the provision that reaches the general ledger, the bank statements, and the board minutes where the majority approved its own compensation.

Then comes the part that makes both statutes worth having. Section 1600, subdivision (d) and section 1601, subdivision (b) each provide that the right may not be limited by the articles or the bylaws.

Think about why the Legislature bothered. In a closely held corporation, the majority controls the board, and the board controls the bylaws. If the inspection right could be cut back by bylaw, it would evaporate at exactly the moment a minority shareholder needed it, by a vote the minority shareholder could not stop. So the Legislature put it beyond the reach of the governing documents. That single design choice is what decided the case below.

Why "we are a Delaware corporation" is not an answer

Incorporating in Delaware is ordinary advice for a Los Angeles company, and there are good reasons for it. What it does not do is move the company's books out of California's reach.

Section 1601 applies by its terms to any foreign corporation keeping its records in this state or having its principal executive office here. As the Court of Appeal put it, sections 1600 and 1601 "expressly apply to any foreign corporation having its principal office in California." A Delaware certificate of incorporation with an operation run out of San Francisco or Century City is squarely inside that language.

What the Court of Appeal decided in Salamon

The shareholder petitioned the San Francisco Superior Court for a writ of mandate to enforce his demand. The company moved to stay, pointing to a bylaw naming the Delaware Court of Chancery as the exclusive forum for internal affairs disputes. The trial court granted the stay. The Court of Appeal reversed.

The decision is Salamon v. Orchid Global, Inc. (July 31, 2026, mod. Aug. 26, 2026, A173959), a published opinion of the First Appellate District, Division Two, authored by Justice Richman.

The reasoning turns on who carries the burden. A party asking a California court to send a California resident's claims elsewhere "bears the burden to show litigating the claims in the contractually designated forum 'will not diminish in any way the substantive rights afforded ... under California law.'" That burden is met, the court explained, "only by showing the foreign forum provides the same or greater rights than California, or the foreign forum will apply California law on the claims at issue."

The company could not do it. The court compared the two regimes and found Delaware's more restrictive: Delaware requires a stockholder to demonstrate a proper purpose, limits inspection to enumerated categories of books and records, and applies a lookback of three years, while California section 1600 requires no purpose showing at all. California also lets a shareholder recover fees under section 1604 when the refusal was without justification, where Delaware follows the American rule and each side pays its own. Rights that California declares unwaivable would have been diminished. The clause therefore could not be enforced.

The holding: "The trial court abused its discretion in enforcing the forum selection clause in Orchid's bylaws and in thereby granting Orchid's motion to stay this proceeding." The order was reversed and the matter remanded with directions to vacate the stay and enter an order denying the motion.

One caution, because the coverage of this case has been loose about it. Salamon decided where the dispute is litigated. It did not order a single document produced. The merits of the inspection demand were left for the trial court on remand. A shareholder reading this opinion is reading a decision about forum, not a decision that the books are already his.

A forum bylaw is a shield, not a sword

The half of this story that has gotten far less attention is what happened in Delaware, and for a minority shareholder it may be the more useful half.

While the California stay motion was pending, the company opened a second front. It sued its own shareholder in the Delaware Court of Chancery, asking for a declaration that Delaware law governed his inspection rights and that it did not have to produce anything. The shareholder moved to dismiss for lack of personal jurisdiction, and won.

Orchid Global, Inc. v. Salamon, C.A. No. 2025-0605-LWW (Del. Ch. Apr. 10, 2026), is a memorandum opinion by Vice Chancellor Will. The company argued that its own forum bylaw supplied consent to Delaware jurisdiction. The court read the bylaw. Its operative subsections reached "any action asserting a claim against the corporation or any director or officer or other employee." A declaratory judgment action filed by the corporation against a minority stockholder is the opposite of that.

The court's summary is worth quoting, because it states a principle that survives this particular bylaw: "The bylaw regulates where a stockholder may sue Orchid. It does not constitute consent by a stockholder to be sued by Orchid in Delaware." Reading it otherwise, the court added, "would allow a corporation to subject a nonresident stockholder to personal jurisdiction simply by filing a declaratory judgment action, irrespective of a forum provision's scope."

The company leaned on Juul Labs, Inc. v. Grove, 238 A.3d 904 (Del. Ch. 2020), which held that a stockholder pursuing inspection must proceed under Delaware law in the forum the governing documents designate. The court agreed that is what Juul held, and then pointed out why it did not help: Juul never addressed personal jurisdiction, because the stockholder there answered the complaint and waived the defense. Salamon preserved his.

That distinction is the practical lesson. If a company files first in Delaware to get ahead of your California demand, the response is a motion to dismiss for lack of personal jurisdiction, filed before anything that could waive it. Owning stock in a Delaware corporation, standing alone, does not make you suable in Delaware. That has been settled since Shaffer v. Heitner, 433 U.S. 186 (1977).

When an inspection demand is the right first move

An inspection proceeding is a writ petition, not a lawsuit on the merits. It is narrower, faster, and cheaper than the case it usually precedes, and it carries a fee provision the underlying case may not. That combination makes it the correct opening move more often than clients expect:

• You have been offered a buyout. A price you cannot check is not an offer, it is a number. The books are how you learn what the company earned, what the majority paid itself, and what the offer leaves out. This was exactly the posture in Salamon.
• Distributions stopped and no one will say why. Section 1601 reaches the accounting records that show whether the money stopped or merely changed direction.
• You suspect the majority is running personal expenses through the company. Board minutes and the general ledger are where compensation, related party transactions, and loans to insiders live.
• You need to talk to the other shareholders. That is the section 1600 list, and for a 5 percent holder the right to it is absolute.
• You are evaluating a derivative claim or a dissolution petition. Building the record first through inspection is far less expensive than filing broadly and hoping discovery produces it. It also tests how the other side behaves under a deadline.

If your company is an LLC

The same instinct applies with a different statute. Corporations Code section 17704.10 gives members the right to inspect and copy the records an LLC must keep under section 17701.13, and to receive the company's tax returns and a copy of any written operating agreement. It closes the same loophole in the same way: "Any waiver of the rights provided in this section shall be unenforceable."

So an operating agreement drafted by the manager's lawyer cannot sign away a member's access to the records, any more than a bylaw can.

What to do now

If you are the shareholder or member. Make the demand in writing, date it, and be specific about the categories you want and the purpose that connects them to your interest as an owner. Vagueness is the most common reason a demand stalls. Calendar the statutory response period. Keep the refusal, in writing if you can get it, because section 1604 turns an unjustified refusal into a fee award, and a bare assertion that the company is incorporated elsewhere is now a considerably weaker justification than it was a year ago.

If you are the company. A blanket refusal is now an expensive posture. If your principal executive office is in California, the state's inspection statutes reach you regardless of where you incorporated, your bylaws cannot narrow them, and filing first in Delaware against your own shareholder may accomplish nothing but a dismissal and a delay. The productive response to an overbroad demand is a negotiated scope and a confidentiality agreement, not a refusal to engage.

For related reading, see our discussion of what to do when a business partner locks you out, how business partner buyouts are valued and negotiated in California, what discovery in California litigation actually involves, and when you can recover your attorney fees in litigation.

Talk to a Los Angeles business litigation attorney

The Darvish Firm's Los Angeles business litigation attorneys represent minority shareholders and LLC members in inspection demands, buyout disputes, and freeze out litigation, and advise companies responding to them. Call (310) 677-3512 or request a consultation.

This article is general information about California law, not legal advice, and reading it does not create an attorney-client relationship. Every case depends on its facts. Consult an attorney about your specific situation.