Under what circumstances do church members have a legal right to inspect church records? An Illinois appeals court decision provides some guidance.
Some of the members of a charitable organization incorporated under the state not-for-profit corporation law demanded to see various corporate records. Their request was denied by corporate officers, and the members sued. A trial court ruled in favor of the corporation, and the members appealed. A state appeals court reversed the trial court's decision, and ruled that the members had a broad right to inspect the corporation's records.
The court began its opinion by noting that the corporation was incorporated under the state not-for-profit corporation law, which contains the following provision regarding inspection of corporate records: "Each corporation shall keep correct and complete books and records of account … and shall keep at its registered office or principal office a record giving the names and addresses of its members entitled to vote. All books and records of a corporation may be inspected by any member entitled to vote or that member's agent or attorney, for any proper purpose at any reasonable time."
The court continued:
The [member] has the burden to establish he has a proper purpose to inspect the corporation's records. A proper purpose is shown when a shareholder has an honest motive, is acting in good faith, and is not proceeding for vexatious or speculative reasons; however, the purpose must be lawful in character and not contrary to the interests of the corporation. A proper purpose is one that seeks to protect the interests of the corporation and the [member] seeking the information …. [A member's] right to inspect a corporation's books and records must be balanced against the needs of the corporation depending on the facts of the case. Proof of actual mismanagement is not required; a good faith fear of mismanagement is sufficient to show proper purpose. The [member] is not required to establish a proper purpose for each record he requests. Once that purpose has been established, the [member's] right to inspect extends to all books and records necessary to make an intelligent and searching investigation and from which he can derive any information that will enable him to better protect his interests. The reference in [the not-for-profit corporation statute] to "all books and records" grant a [member] access to a broad range of a corporation's records; however, the access is limited to a showing of proper purpose. Once the purpose is established, the [member] may examine necessary books and records.
In reaching its decision, the court rejected the corporation's claim that granting the members' broad inspection request would violate the "privacy rights" of other members. The court also rejected the corporation's claim that it was being properly managed and therefore the members' request to inspect records to search for evidence of mismanagement was unwarranted. The members have a right to inspect records "to make that determination for [themselves]."
What This Means for Churches:
This decision represents a broad interpretation of a member's right to inspect corporate records. Since it involves an interpretation of the Illinois not-for-profit corporation act, and since many churches are incorporated under this statute in Illinois (and under similar provisions in other states), the court's interpretation is of relevance to all church leaders.
Meyer v. Board of Managers, 583 N.E.2d 14 (Ill. App. 1 Dist. 1991).