United Development Funding IV Issues Response to NexPoint
September 1, 2020
GRAPEVINE, Texas, Sept. 01, 2020 (GLOBE NEWSWIRE) — United Development Funding IV (the “Trust” or “UDF IV,” and together with its affiliates “UDF”) issued a response on August 31, 2020 to NexPoint Advisors, L.P. (together with its affiliates “NexPoint”) regarding their request to inspect certain materials of the Trust (the “Demand”). NexPoint made this Demand in a letter to the UDF IV Board of Trustees (the “Board”) dated August 11, 2020.
In its response, the Trust outlined several objections to the Demand.
• The Demand seeks materials that are beyond the scope of Section 2-512 of the Maryland General Corporation Law, which is limited to bylaws, minutes of stockholder meetings, annual statements of affairs and voting trust agreements.
• The Demand also invokes Section 2-513, which only permits requests to be made by “stockholders of record” of at least 5% of a company’s stock “for at least six months.” NexPoint provides no evidence that they have been shareholders of record for at least six months.
• The Demand seeks materials outside the scope of Section 2-513, which states qualifying stockholders of record may only seek a corporation’s “books of account,” “stock ledger,” “list of stockholders,” and a “statement of affairs” that “sets forth in reasonable detail the corporation’s assets and liabilities as of a reasonably current date.” Unlike Delaware law, Maryland law does not grant stockholders a broad right to inspect a corporation’s “other books and records.” The Demand improperly seeks broad categories of material that are far beyond the scope of Section 2-513, including communications with auditors and the Securities and Exchange Commission.
• Maryland courts have long made clear that shareholder demands may be properly denied when they are “made for some evil, improper, or unlawful purpose.” Here, the Demand is nothing more than a self-serving effort to use the legitimate mechanisms of Maryland law to advance a covert and fraudulent scheme that is being carried out by NexPoint in coordination with Highland Capital Management L.P. with the goals of enriching themselves at the expense of destroying the equity value of the Trust.
