Last week the Oregon Court of Appeals held that an individual can be deemed a shareholder of a corporation even though the corporation neither formally recorded her status in its records nor issued stock certificates. In Yeoman v. Public Safety Center, Inc., plaintiff sought a declaratory judgment that his late wife, Anita Yeoman, had been a shareholder in defendant corporation. Plaintiff further requested inspection of corporate records under ORS Chapter 60.
Mrs. Yeoman had been an employee of defendant coporation, and before she started work the corporation's sole officers and shareholders told her she would become a 10% shareholder, earning 2% ownership per year. Her employment was terminated after nearly one year. For three years after that, the corporation mailed annual checks to her, which plaintiff claimed represented dividends associated with the 2% ownership.
The corporation disputed Mrs. Yeoman's status as shareholder, contending that the corporation's records didn't show that she was a shareholder, and no stock certificates were issued to her. The Court of Appeals reversed summary judgment for the corporation, holding that plaintiff had raised a genuine issue of material fact regarding whether she was a shareholder. Under state law, shares are deemed to have "issued" once the corporation accepts payment in exchange for the authorized shares. A factfinder could conclude that the corporate board of directors had authorized the issuance of the shares in exchange for her employment, and that Mrs. Yeoman was a shareholder even though she was never issued stock certificates.
However, according to the Court, plaintiff was not entitled to inspect corporate records because, under ORS Chapter 60, only shareholders whose interest is registered in the corporation's records have that right. This means that, as a prerequisite to inspection of the records, plaintiff must first obtain an injunction requiring that corporate records reflect share ownership.