A Delaware Section 220 Checklist: Seven Cases Every Practitioner Should Know
As regular readers know, this blog sometimes takes a break from recent developments to reflect on bedrock decisions and key principles of which all practitioners should be aware. This post highlights decisions that have shaped legal practice concerning Section 220 of the Delaware General Corporate Law, which allows stockholders to inspect corporate books and records under certain circumstances. Counsel sending or receiving a Section 220 demand would be wise to review these seven decisions. (more…)
Intent Matters: Delaware Court Limits Discovery in Appraisal Action Where Petitioners’ Sole Intent Was to Investigate Potential Breach of Fiduciary Claim
The Delaware Court of Chancery recently issued an opinion making a narrow but key distinction in appraisal proceedings: the petitioners’ underlying intent in filing a Section 262 action matters. The court held that petitioners should not be allowed to obtain full discovery where the sole purpose in bringing the appraisal proceeding is to investigate potential wrongdoing. In this case, such intent was determined from Petitioners’ de minimis financial stake in the company. (more…)
Periodic Reminder: Former Stockholders Have No Standing to Pursue Section 220 Demands
On December 3, 2021, the Delaware Court of Chancery dismissed an action for books and records under Delaware General Corporation Law Section 220, reiterating that when a plaintiff files such an action, they must currently be a stockholder of the company against whom the Section 220 action is filed.
Specifically, a plaintiff must file a books and records action before a merger agreement becomes effective under its own terms; after the merger becomes effective, a plaintiff typically ceases to be a stockholder in the target company, which also precludes their ability to pursue books and records of that company. Companies facing Section 220 demands in the face of a merger agreement should scrutinize the demanding party’s standing to pursue such records. (more…)
Section 220 Is Not a Blank Check
The Delaware Court of Chancery recently issued another decision regarding the statutory right to inspection of corporate books and records under Delaware General Corporation Law Section 220. In Melvin Gross v. Biogen Inc., the plaintiff-stockholder was permitted to obtain certain books and records, but the court limited inspection in key respects, and offered words of caution regarding confidentiality agreements. Companies facing Section 220 demands should review this decision and consider its lessons regarding the appropriate scope of inspection.
