Source: https://indianalawreview.com/2015/06/24/company-records-an-unsexy-tool-for-disputes-within-closely-held-entities/
Timestamp: 2019-04-22 08:23:12+00:00

Document:
In Indiana, corporations are governed by the Indiana Business Corporations Law (“IBCL”) , while LLCs are governed by the Indiana Business Flexibility Act (“IBFA”).  LLCs are a relatively new type of formal business entity designed to combine the benefits of corporations with the flexibility many modern businesses desire.  Although the statutory framework for the IBCL and IBFA are similar, there are some key differences, which often are not and will not be readily apparent until tested and developed by the courts.
(a) A corporation shall keep as permanent records minutes of all meetings of its shareholders and board of directors, a record of all actions taken by the shareholders or board of directors without a meeting, and a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation.
(c) A corporation or its agent shall maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each.
(1) Its articles or restated articles of incorporation and all amendments to them currently in effect.
(2) Its bylaws or restated bylaws and all amendments to them currently in effect.
(3) Resolutions adopted by its board of directors with respect to one (1) or more classes or series of shares and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding.
(4) The minutes of all shareholders’ meetings, and records of all action taken by shareholders without a meeting, for the past three (3) years.
(5) All written communications to shareholders generally within the past three (3) years, including the financial statements furnished for the past three (3) years under IC 23-1-53-1.
(6) A list of the names and business addresses of its current directors and officers.
(1) A list with the full name and last known mailing address of each member and manager, if any, of the limited liability company from the date of organization.
(2) A copy of the articles of organization and all amendments.
(3) Copies of the limited liability company’s federal, state, and local income tax returns and financial statements, if any, for the three (3) most recent years, or if the returns and statements were not prepared, copies of the information and statements provided to or that should have been provided to the members to enable them to prepare their federal, state, and local tax returns for the same period.
(4) Copies of any written operating agreements and all amendments and copies of any written operating agreements no longer in effect.
(A) The amount of cash, if any, and a statement of the agreed value of other property or services contributed by each member and the times at which or events upon the happening of which any additional contributions agreed to be made by each member are to be made.
(B) The events, if any, upon the happening of which the limited liability company is to be dissolved and its affairs wound up.
It is likely that these differences stem from the more flexible nature and often limited resources inherent in LLCs in contrast to the more formal and traditional character of corporations. However, these differences also have potential legal ramifications that may be underutilized by LLC members who encounter various difficulties with their colleagues or who are being frozen out from the information commonly available to owners of closely-held companies.
Although the IBCL and IBFA both specify the minimum requirements of business records necessary, both statutes recognize that entities are free to specify other documents that should be available to shareholders.  And while bylaws, shareholder agreements and operating agreements can be hotly negotiated when it comes to buy/sell provisions, capital calls, etc., it is rare that any attention is paid to the list of records a company shall keep and make available to the owners which exceed the statutory minimums.
Perhaps most importantly, once a member or shareholder obtains copies of the appropriate corporate documents, he or she opens a window into the inner workings of the company and the decision-makers in charge of day-to-day operations.  Frequently, document requests to companies are made well after concerns over improper management—breaches of fiduciary duties, self-dealing, fraud, embezzlement, etc.—bubble to the surface. However, a demand and subsequent review of documents allows an individual to take stock of the company’s health and viability, and effectively peek behind the curtain to make sure those in charge are operating in compliance with Indiana law and in accordance with the agreement amongst owners.  At that point, one can decide whether further legal action is warranted to protect the rights of the members or shareholders impacted by the decisions and actions taken by those in charge.
Certainly in disputes among owners of closely-held companies, the most common claims tend to arise from allegations of breach of fiduciary duty, self-dealing, fraud, etc. However, while it is not glamorous, the failure to properly maintain corporate records can be easy to identify, prove, and remedy. Courts may be reluctant to second-guess corporate management decisions, but whether the records exist or have been provided to all owners is a binary determination. Resolution of that issue can be handled quickly, efficiently, and with the potential for the recovery of attorney’s fees. Equitable claims that originate out of a breach of record keeping requirements may not be where a dispute between owners of closely held companies end, but it may be a great place for one start.
 See generally Ind. Code §§ 23-1-17 to -55 (2015); Ind. Code §§ 23-18-1 to -13 (2015).
 See, e.g., Ind. Code § 23-1-26-3 (2015) (stating individual shareholders are generally not liable to a corporation or its creditors).
 See Ind. Code §§ 23-18-12-1 to -11 (filing requirements for LLCs); Ind. Code §§ 23-1-18-1 to -10 (2015) (filing requirements for corporations).
 See Ind. Code §§ 23-1-17 to -55 (2015).
 See Ind. Code §§ 23-18-1 to -13 (2015).
 Justin D. Petzold, Firm Offers: Are Publicly Traded Law Firms Abroad Indicative of the Future of the United States Legal Sector?, 2009 Wis. L. Rev. 67, 97 n.233 (2009) (“Limited-liability-corporation statutes . . . allow for more flexibility with regard to internal governance of the entity.”).
 See, e.g., John Armour, Bernard Black & Brian Cheffins, Delaware’s Balancing Act, 87 Ind. L. J. 1345, 1347 (2012) (“An extensive body of precedent, developed by expert judges, has been a key part of Delaware’s “value-added” for firms, which has helped to sustain its high share in the market for corporate law . . . .”).
 For example, the Indiana General Assembly enacted the IBFA in 1993. 1993 Ind. Legis. Serv. P.L. 8-1993 (West).
 See Ind. Code § 23-1-52-1 (2015); Ind. Code § 23-18-4-8(a) (2015).
 Ind. Code § 23-1-52-1 (2015).
 Ind. Code § 23-18-4-8(a) (2015).
 See e.g., Grant v. Van Natta, No. 1:10–cv–01220–MJD–LJM, 2013 WL 466212, at *9 (S.D. Ind. Feb. 7, 2013) (quoting Ind. Code § 23-18-4-8(c) (2015)) (discussing similar fiduciary duties between corporations and LLCs).
 Id.; see also Abdalla v. Qadorh-Zidan, 913 N.E.2d 280, 287 (Ind. Ct. App. 2009).
 Ind. Code § 23-1-52-1 (2015); Ind. Code § 23-18-4-8 (2015).
 See Ind. Code § 23-1-52-2 (2015) (stating the requirements for accessing records under the IBCL); Ind. Code § 23-18-4-8 (2015) (stating the requirements for accessing records under the IBFA).
 See Ind. Code § 23-1-52-1 (2015) (requiring corporations to keep and maintain certain records including minutes of all shareholders’ meetings held during the previous three years).
 See generally Ind. Code § 23-1-52-1 (2015); Ind. Code § 23-18-4-8 (2015).
 Ind. Code § 23-1-52-2 (2015); Ind. Code § 23-18-4-8 (2015).
 Ind. Code § 23-18-4-8 (2015).
 See, e.g., Ind. Code § 23-18-4-7 (2015) (allowing a court to enforce an operating agreement by injunction).
 Ind. Code § 23-1-52-4 (2015).
 See Abdalla v. Qadorh-Zidan, 913 N.E.2d 280, 285 (Ind. Ct. App. 2009).
 See generally Ind. Code § 23-1-52-1 (2015).

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