Right of Inspection of Corporate Records in Limited Liability Companies

Wednesday, 27 April 2016 16:28 Written by  Thomas P. Donnelly

Pennsylvania has adopted specific provisions relating to a shareholder’s right to inspect the books and records of a corporation duly organized under the laws of the Commonwealth.  The Business & Corporations Law clearly provides for a shareholder’s inspection of corporate records, including the share registry, books of account and records of proceedings upon written notice stating a proper purpose.  However, when the legislature adopted the Limited Liability Company Law of 1994 (the “LLC law”) no similar provision was made relating to a member’s right to review company books and records, and no reference was made to the right of inspection applicable to corporations.

The absence of a specific reference in the LLC law does not mean that a member in a Limited Liability Company does not have the right to inspect business records.  The statute approaches that right from a different direction through the application and incorporation of partnership law.  Section 8904 of the LLC law incorporates by reference provisions relating to general partnerships in the case of a member managed LLC and additional provisions related to limited partnerships in the case of a manager managed LLC.  In either case, the provisions of Chapter 83 relating to general partnerships are rendered applicable.

Section 8332 provides that “the partnership books shall be kept, subject to agreement between the partners, at the principal place of business of the partnership, and every partner shall at all times have access to and may inspect and copy any of them”.  While partnership law does not define the types of records which are to be maintained in the same manner as the provisions relating to corporations, the statutory intent appears to be the same and thus the types of records subject to inspection are arguably similar in scope.           

There are material differences between the right applicable to corporations and partnerships/ LLC’s.  One major difference is that the partnership/LLC provision does not reference a requirement that the partner seeking an inspection state a “proper purpose” for the inspection.  The right as stated appears to be absolute as to partnerships/LLCs whereas in a corporate setting the shareholder must identify and communicate the purpose.  In addition, the provisions relating to corporations specifically provide for a cause of action for review of corporate records and for the recovery of attorney fees associated with the enforcement of that right.  No provision in the partnership law applicable to LLCs provides a specific similar right, nor the recovery of attorney fees.  A practitioner is left to argue the applicability of the provisions relating to corporations and the similarity of purposes served by the two statutory provisions.  

Last modified on Wednesday, 27 April 2016 16:32
Thomas P. Donnelly

Thomas P. Donnelly

Tom’s practice focuses on commercial litigation and transactions. In litigation, Tom represents both Plaintiffs and Defendants. Throughout his career, he has undertaken the representation of both individual and corporate clients in subject matters concerning fraud, contracts, employment agreements, breach of fiduciary duty, securities violations, real estate and insurer bad faith. Tom’s clients include individuals and businesses local to the Philadelphia area, as well as national corporations.

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