Mr. Roel C. Reyes

March 15, 1991 Mr. Roel C. Reyes Gen. Manager RP Enterprises, Inc. Suite 219, 2nd Floor Bank of P.I. Office Condominium Plaza Cervantes, Binondo Manila, Philippines Dear Mr. Reyes : This refers to your letter dated 6 December, 1990 requesting information on how your corporation, which is a stockholder of an insurance corporation, can exercise its right to inspect the books of accounts of the latter corporation. prcd The right of inspection is a basic right afforded to a director, trustee, stockholder or member of a corporation. Section 74 of the Corporation Code specifically provides: SECTION 74. ... The records of all business transactions of the corporation and the minutes of any meeting shall be open to the inspection of any director, trustee or member of the corporation at reasonable hours on business days and he may demand, in writing, for a copy of excerpts from said records of minutes, a this expense. xxx xxx xxx." The "records of all business transactions" would include the journal, ledger, financial statements, income tax returns, vouchers, receipts, contracts and all papers pertaining to the operation of the corporation of interest to its stockholders. The right may be exercised either personally or thru an agent who may be an accountant or a lawyer or any other person who can help the requesting stockholder to understand and interpret the corporate records. (Philpotts v. Phil. Manufacturing Co., G.R. No. 15568 November 8, 1919, 40 Phil. 471) As to time and place of inspection, the same may be undertaken only at reasonable hours on business days throughout the year at the principal office of the corporation. A stockholder may make copies, extracts and memoranda of the pertinent records (Veraguth vs. Isabela Sugar Co. G.R. No. 37064 October 4, 1932, 57 Phil. 266) but a stockholder cannot demand that he be allowed to take the corporate books out of the principal office for the purpose of inspecting them. (Pardo v. Hercules Lumber Co., 47 Phil. 965) The purpose of inspection should be a proper or legitimate one. This means that it should be germane to the interests of a stockholder as such, as where the purpose is to find out how his investment is being used and the actual condition of the company. Likewise, the purpose should not be contrary to the interests of the corporation nor should it be made merely to gratify a stockholder's curiosity or for a speculative use. (Guthrie v. Harkness 199 US 148, 50 L Ed 130, 26 SCt 4; Steinberg v. American Bantam Car Co. 76 F Supp. 426, dismd 173 F2d 179). The Corporation Code provides a penalty for any violation or refusal of such right. Sec. 74 provides, thus: "SECTION 74. ... Any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder or member of the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable under Sec. 144 of this Code. Provided, That if such refusal is made pursuant to a resolution or order of the Board of Directors or trustees, the liability under this section for such action shall be imposed upon the directors or trustees, who voted for such refusal: and Provided further, that it shall be a defense to any action under this section that the person demanding to examine and copy excerpts from the corporation's records and minutes has improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporations or was not acting in good faith or for a legitimate purpose in making his demand." cdll Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman