Inspecting Corporate Records may Require More than Beneficial Shareholder Status

Ramirez v. Gilead Sciences, Inc. (2021) 66 Cal.App.5th 218

Gilead Sciences, a pharmaceutical corporation, was alleged to have withheld a safer and more effective HIV/AIDS treatment in and effort to extend the sales of an older, and more dangerous treatment. Ramirez, who is a beneficial shares owner of Gilead brought an action against Gilead to allow him to inspect corporate records to allow him to obtain information about his investment as it relates to Gilead's violation of federal and state laws that impact his investment. Gilead denied Ramirez's request.

The trial court denied Ramirez's request, in which the Court of Appeal affirmed based on Ramirez's lack of standing. Ramirez, who is a beneficial owner, has shares indirectly through a bank or broker-deal, while a registered owner or record holder holds shares with the company directly. Corporations Code section 1601(a)(1) allows a right of inspection to “any shareholder or holder of a voting trust certificate.” Section 185 explains that a shareholder is “one who is a holder of record of shares.” The Court of Appeal determined that because the appellant was a beneficial holder of shares, he was not a “holder of record of shares,”; therefore, Ramirez lacked standing under Corporations Code section 1601(a)(1) to require an inspection of records.

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