Corporate Records Access: Stockholder Rights and Officer Duties After Dissolution

The Supreme Court recently settled an important question for Philippine corporations: does a stockholder's right to inspect corporate records survive the corporation's dissolution? In Chua v. People (G.R. No. 216146, August 24, 2016), the Court answered yes—and affirmed that corporate officers who refuse inspection can face criminal liability even after the corporation has ceased operations.

The case also clarifies the nature of this offense under the Corporation Code, the effect of an affidavit of desistance, and the penalties that may be imposed.

The Facts of the Case

Joselyn Chua was a stockholder of Chua Tee Corporation of Manila (CTCM). Alfredo Chua served as president and chairman, Tomas Chua as corporate secretary and board member, and Mercedes Diaz as accountant with physical custody of corporate records.

In August 2000, Joselyn demanded in writing to inspect the corporation's business transaction records, financial statements, and meeting minutes. She sent demand letters through counsel and later engaged an accounting firm to conduct the examination. However, the requested records were never formally presented, and the inspection never took place.

The petitioners argued they could not be held liable because CTCM had ceased operations and its corporate term expired in May 1999. They claimed the officers had no continuing duty to allow inspection.

The Stockholder's Right to Inspect

Section 74 of the Corporation Code grants every stockholder the right to inspect corporate records at reasonable hours on business days. The right is based on the stockholder's necessity of self-protection—it allows owners to monitor how their corporation is being managed.

The Court held that this right does not vanish upon dissolution. Under Sections 122 and 145 of the Corporation Code, a dissolved corporation continues as a body corporate for three years after dissolution, specifically to settle and close its affairs. During this liquidation period, the board of directors is not rendered functus officio (without authority). Officers retain their duties, and a stockholder's right to inspect records subsists.

Criminal Liability Under Section 74

The offense under Section 74, in relation to Section 144, requires: (a) a stockholder's prior written demand for inspection; (b) refusal by corporate officers to allow inspection; and (c) if raised as a defense, proof that the stockholder previously misused records or acted in bad faith.

The Court noted that this is a mala prohibita offense—one punishable regardless of criminal intent. Even if the officers had no malicious motive, the deprivation of the stockholder's right to effective inspection was enough to constitute the offense.

The Affidavit of Desistance Had No Effect

The petitioners argued that an affidavit of desistance executed by the complainant's mother should have abated the case. The Court disagreed. Once a criminal action has been instituted in court, the private complainant loses the right to decide whether the prosecution should proceed. An affidavit of desistance is not, by itself, a ground for dismissal.

The Penalty Was Modified

While the Court affirmed the conviction, it modified the penalty. Instead of 30 days of imprisonment, each petitioner was ordered to pay a fine of P10,000.00. The Court considered that permission to view the records was actually granted, albeit not fully effected; that the complainant had predeceased the petitioners; and that the complainant's family had executed an affidavit of desistance attributing the case to a family misunderstanding.

Practical Takeaways

• Inspection rights survive dissolution. A stockholder may inspect corporate records during the three-year liquidation period after a corporation's term expires.
• Officers remain accountable. Corporate officers cannot avoid liability by claiming the corporation has ceased operations.
• Written demand is essential. Stockholders should make inspection requests in writing and document any refusal.
• No intent required. Violations of Section 74 are mala prohibita; good faith is not a complete defense.
• Desistance is not automatic dismissal. An affidavit of desistance does not terminate a criminal case already filed in court.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.