Note: I will give the answer but ikaw nai bahala mo himo

og explanation. Work your brain not your eyes and

hands.
III. B. Sid used to be the majority stockholder and President of Excellent
Corporation (Excellent). When Meridian Co., Inc. (Meridian), a local
conglomerate, took over control and ownership of Excellent, it brought along
its team of officers. Sid thus became a minority stockholder and a minority
member of the Board of Directors. Excellent, being the leading beverage
manufacturer in the country, became the monopoly when Meridian's own
beverage business was merged with Excellent's, thereby making Excellent
virtually the only beverage manufacturer in the country.

Left out and ignored by the management, Sid became a fiscalizer of sorts,
questioning during the Board meetings the direction being pursued by
Excellent's officers.

Ultimately, Sid demanded the inspection of the books and other corporate
records of Excellent. The management refused to comply, saying that his right
as a minority stockholder has been much reduced.

State under what conditions may Sid properly assert his right to inspect the
books and other corporate records of Excellent. Explain your answer. (3%)

REQUIREMENTS FOR THE EXERCISE OF THE RIGHT OF INSPECTION (SEC. 74)

(1) It must be exercised at reasonable hours on business days and in the
place where the corporation keeps all its records (i.e., principal office).
(2) The stockholder has not improperly used any information he secured
through any previous examination.
(3) Demand is made in good faith or for a legitimate purpose. If the
corporation or its officers contest such purpose or contend that there is evil
motive behind the inspection, the burden of proof is with the corporation or
such officer to show the same.
TEST to determine whether the purpose is legitimate – A legitimate purpose
is one which is germane to the interests of the stockholder as such and not
contrary to the interests of the corporation. [Gokongwei v. SEC (1979)]
Among the changes introduced in the new Code with respect to the right of
inspection granted to a stockholder are the following:
(1) The records must be kept at the principal office of the corporation;
(2) The inspection must be made on business days;
(3) The stockholder may demand a copy of the excerpts of the records or
minutes;
(4) The refusal to allow such inspection shall subject the erring officer or
agent of the corporation to civil and criminal liabilities.

However, while seemingly enlarging the right of inspection, the new Code
has prescribed limitations to the same. It is now expressly required as a
condition for such examination that the one requesting it must not have
been guilty of using improperly any information through a prior examination,
and that the person asking for such examination must be "acting in good
faith and for a legitimate purpose in making his demand." [Gonzales v. PNB
(1983)]

Directors of a corporation have the unqualified right to inspect the books and
records of the corporation at all reasonable times. The right of inspection is
not to be denied on the ground that the director or shareholder is on
unfriendly terms with the officers of the corporation whose records are
sought to be inspected. A director or stockholder can make copies, abstracts,
and memoranda of documents, books, and papers as an incident to the right
of inspection, but cannot, without an order of a court, be permitted to take
books from the office of the corporation. However, a director or stockholder
does not have any absolute right to secure certified copies of the minutes of
the corporation until these minutes have been written up and approved by
the directors. [Veraguth v. Isabela Sugar (1932)]

A stockholder of a sequestered company has the right to inspect and/or

examine the records of the corporation pursuant to Sec. 74 of the
Corporation Code. [Africa v. PCGG
(1992)]