Corporate Fraud

Most corporate fraud cases involve an investor or partner who was duped by company or corporate insiders. It’s the age old saw: If you are at the negotiating table and you look around and can’t identify the sucker, it’s probably you!

Like most legal issues, an ounce of prevention is worth a pound of cure. If you are about to invest money in something, take the time to negotiate a clear agreement of your rights and responsibilities up front. Check the track record, reputation and financial references of the people with whom you are investing.

But what happens if you end up as the victim of business fraud? The first rule is to be diligent. Keep tabs on the company and the way they spend their money. Ask for regular meetings and financial information. Talk to vendors, suppliers and customers of the company.

If you have invested in a company and do not have access to the financial books and records of that company you are at a distinct disadvantage. The Texas Business Organizations Code gives shareholders the right to inspect corporate books and records. It even requires the business entity to pay attorney’s fees for the requesting party if they are forced to file suit to gain access to the financial records.

Specifically Section 21.218(b) of the Texas Business Organizations Code states that shareholders are entitled to examine and copy “the corporation’s relevant books, records of account, minutes and share transfer records.”

This right of inspection is open to any shareholder who a) makes a written demand; b) states a proper purpose; and c) has held shares for at least 6 months preceding the demand or holds at least 5 percent of the corporation. A common purpose would include determining the financial condition of the company; determining share value; investigating company management or communicating with other shareholders.

Contact Hoch Law Firm for help with corporate fraud cases in Dallas-Fort Worth.