SEC-OGC OPINION NO. 14-2024: Re: Inspection Rights of Shareholders

The Securities and Exchange Commission-Office of the General Counsel (“SEC-OGC”) in its SEC-OGC Opinion No. 14-2024 (“Opinion”), opined, for purposes of information only, that the inspection rights of shareholders under Section 73 of the Revised Corporation Code (“RCC”) extend even to information deemed confidential.

The Opinion arose from the request of Flexi Finance Asia, Inc. (“FFAI”) who sought guidance on whether Mr. Ronnie Katona (“Mr. Katona”), one of FFAI’s shareholders, may demand for the inspection of their corporate records and documents. FFAI argued that Mr. Katona’s demand should not be granted because the list of documents requested by Mr. Katona covers those that are not allowed to be disclosed pursuant to the Intellectual Property Code of the Philippines (“IP Code”) and the Data Privacy Act of 2012 (“DPA”).

In the Opinion, the SEC-OGC refused to render a categorical ruling reasoning that the issues presented may have already been a proper subject of a case under the RCC. Nevertheless, the SEC-OGC issued the Opinion for purposes of information only.

The SEC-OGC was of the opinion that inspection rights of shareholders under Section 73 of the RCC extend even to that information deemed confidential such as trade secrets under the IP Code or personal information under the DPA, providing the following conclusion:

“Thus, ’all information relating to the corporation’ shall be open for inspection and/or reproduction by any stockholder, member, director or trustee of the corporation.”

In support of the above conclusion, the SEC-OGC cited the case of Gokongwei v. SEC (G.R. No. L-45911, 11 April 1979) where the Supreme Court of the Philippines stated the following:

“It appears to be the general rule that stockholders are entitled to full information as to the management of the corporation and the manner of expenditure of its funds and to inspection to obtain such information especially where it appears that the company is being mismanaged or that it is being managed for the benefit of officers or directors or certain of the stockholders to the exclusion of others.”

Nevertheless, the SEC-OGC added that inspection rights of shareholders under Section 73 of the RCC may be limited. The said provision states that a director, trustee, or officer of a corporation may refuse to allow a shareholder or member to exercise the right to inspect or reproduce corporate records, when:

1. The person demanding to examine has improperly used any information secured through any prior examination of the records or minutes of such corporation or for any other corporation; 
2. The one requesting to inspect was not acting in good faith or for a legitimate purpose in making his demand; or 
3. The requesting party is a competitor, director, officer, controlling shareholder or otherwise represents the interests of a competitor.