The Michigan Court of Appeals, in Hammoud v. Advent Home Medical, Inc., recently heard a case examining the importance of making sure stock ownership is properly documented for the corporation and for the shareholder.
Amanda Hammoud requested shareholder and accounting records from Advent claiming she was entitled to receive this information as a shareholder to “monitor the financial health of the corporation, especially given recent communications about the corporation’s financial position and financial decisions, reducing benefit and payments to the shareholders, employees… to affirm her ownership / shareholder share… and to ensure Advent was in compliance with the Articles of Incorporation and Bylaws.”
Advent did not respond to Hammoud’s request for the records so she filed a lawsuit pursuant to MCL 450.1487(3) which states “(3) If the corporation does not permit an inspection within 5 business days after a demand has been received in compliance with subsection (2) . . . the shareholder may apply to the circuit court . . . for an order to compel the inspection.”
In response, Advent claimed that Hammoud was not a legitimate shareholder, but as proof of her shareholder status Hammoud presented a notarized transfer of stock certificate for 400 shares.
The Michigan Court of Appeals determined that Hammoud provided sufficient proof she was a shareholder and that “how or why Hammoud became a shareholder is not probative of whether she is, in fact, a shareholder.” The court also found that “a shareholder who has a genuine, good faith interest in the corporation’s welfare or her own as a shareholder is entitled to inspect those corporate books that bear on her concerns.”