Crane Co. v. Anaconda Co.

New York Court of Appeals · Corporations

CorporationsShareholder inspection rightsTender offersBusiness Corporation Law § 1315stockholder listinspection rightsproper purposetender offer

Facts

Crane publicly announced an exchange offer for up to 5 million shares of Anaconda stock, and Anaconda’s management opposed the offer through letters to shareholders. After Crane acquired approximately 2,350,000 shares and became Anaconda’s largest shareholder, it made a written demand to inspect Anaconda’s stock book, accompanied by the statutory affidavit that the inspection was not sought for a purpose other than Anaconda’s business. Crane stated it wanted to communicate directly with fellow shareholders about the terms of its offer and the federal consent order, and to respond to Anaconda’s communications. Anaconda refused inspection, though it offered to mail Crane’s prospectus to shareholders at Crane’s expense.

Issue

Whether a qualified shareholder may inspect a corporation’s stock register to identify fellow shareholders for the purpose of informing them directly about its exchange offer and soliciting tenders of stock. More specifically, the question was whether that purpose is within the "business of the corporation" under Business Corporation Law § 1315.

Rule

Under Business Corporation Law § 1315, once a qualified shareholder alleges statutory compliance, the shareholder’s bona fides are presumed and the corporation bears the burden of justifying refusal by showing bad faith, unlawful purpose, or that inspection is sought for a purpose contrary to the best interests of the corporation or its shareholders. A pending tender offer with potential substantial effect on the corporation’s well-being or the value of shareholders’ investment involves the business of the corporation, so a shareholder seeking to communicate relevant information about that offer should be granted access to the shareholder list unless the request is for an inimical purpose.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

North Shore Minerals, a Montana corporation with offices in Denver, receives a written demand from its 12% shareholder, Lakeview Holdings, an Illinois company. The demand includes a sworn statement that the shareholder list is not sought for any purpose other than North Shore Minerals' business and states that Lakeview wants to contact other shareholders directly about its pending exchange offer and respond to management's letters opposing the offer.

If North Shore Minerals refuses inspection and, in the ensuing proceeding, argues only that Lakeview hopes to profit by acquiring more shares, which result is most likely?

Explanation. Under the majority rule, once a qualified shareholder alleges compliance with the statute, the shareholder's bona fides are assumed and the corporation bears the burden to justify refusal by showing bad faith, unlawful purpose, or a purpose contrary to the best interests of the corporation or its shareholders. A pending tender or exchange offer with potential substantial effect on the corporation's well-being or value involves the business of the corporation. The court also rejected the notion that personal gain alone makes the purpose improper, because personal gain and shareholder or corporate benefit are not mutually exclusive.