Shareholders Rights To Annual Report Under California Law
Under California law, many corporations are required to provide shareholders with an annual financial report. This requirement applies not only to domestic corporations but also to foreign corporations who maintain a presence in the state.
Section 1501(a) of the California Corporations Code requires corporations to send an annual report to shareholders no later than 120 days after the close of the fiscal year. The report must contain a balance sheet, an income statement and a statement of cashflows for the previous year. This information is important for investors to determine the health of their investment.
It’s not required that the statements be audited but if an independent accountant has issued a report, the report must be included as well. If there is no report, there must be a certificate of an authorized officer of the corporation stating that the statements were prepared without audit. These requirements apply to any corporation, public or private, formed under California law (domestic corporations) and also to a foreign corporation having its principal executive office in the state or customarily holding meetings of its board in the state.
If a corporation has less than 100 shareholders it can waive the annual report requirement with a provision in its bylaws. Note that corporations with a class of securities registered under Section 12 of the Securities and Exchange Act will satisfy the report requirement if they comply with Rule 14a-16.