The Shareholder Who Wants the Company's Books
F holds 8% of the shares in a private joint-stock company (sherkat-e sahami-e khass). For two years the board has refused to convene an ordinary general meeting and has refused F's written requests to inspect the company's books and minutes. F suspects the managing director diverted 30,000,000,000 rials to a related party. F wants to (a) compel the company to hold a general meeting, (b) inspect the records, and (c) hold the managing director liable. The company argues F's stake is too small and that inspection would reveal trade secrets.
1. What rights does F have to convene a meeting and inspect records, and how should F proceed?
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Two separate rights are in play.
- Convening the meeting. A minority shareholder holding at least the statutory threshold (in Iranian company law, holders of at least one-fifth of the shares may request an extraordinary meeting; for ordinary meetings, the inspectors or a statutory percentage may act) may apply to the court or the competent authority to convene a meeting when the board fails to do so. F's 8% alone may fall short of the one-fifth threshold for the extraordinary-meeting route, so F should first document the refusal in writing and then combine with other minority holders to cross the threshold, or invoke the inspectors' duty to call the meeting. The board's two-year failure to convene is itself a breach of statutory duty.
- Inspection. Shareholders have a statutory right to inspect the company's books and minutes, typically exercised at the registered office and subject to confidentiality. The trade-secret objection does not defeat the right; it may justify conditions (inspection in person, no copying of sensitive commercial data).
Procedure: send a formal written demand, then petition the court/authority for an order convening the meeting and for inspection. Preserve the refusal letters as evidence.
2. How can F hold the managing director liable, and what must F prove?
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F must establish the elements of director liability: (1) a wrongful act - diversion of company funds to a related party; (2) fault; (3) damage to the company; and (4) causation. The claim belongs primarily to the company, so F faces the derivative-action problem: the general meeting or the board normally decides whether to sue. If the company refuses, F may pursue a derivative claim on the company's behalf, but must first show the refusal and that the wrongdoer controls the decision-making body.
Evidence: the inspection right from the first task is the key - F should obtain the minutes and financial records showing the transfer, then quantify the 30,000,000,000 rials. F should also consider that the related-party transaction may require disclosure and approval; absence of approval strengthens the fault element. The remedy is restitution to the company, plus possible personal liability of the director, not payment to F individually.