Corporate Governance Field Guide - Delaware Books & Records Demands

Stockholders are increasingly making books and records demands under Delaware General Corporation Law Section 220 to seek information about a company’s internal operations and its board’s decision making. Such demands are a powerful tool for stockholders to gain information about their investment but may be a precursor or pretext for planned litigation or activism. Understanding the contours of what Section 220 allows will help stockholders ensure their demands are appropriate and help companies prepare for and respond to these demands when they arrive. This guide discusses Section 220 as amended by the Delaware General Assembly in 2025, and applies to demands made after February 17, 2025.

Stockholders’ Right to Inspect Books & Records

• Delaware law gives any stockholder the right, “for any proper purpose,” to inspect “[t]he corporation’s stock ledger, a list of its stockholders, and its other books and records.”
• A stockholder must make the demand in writing and under oath, describing “with reasonable particularity” the stockholder’s purpose and the books and records the stockholder seeks to inspect. The books and records sought must be “specifically related to the stockholder’s purpose.”

What Is a Proper Purpose?

• In considering any demand, one key issue is whether the stockholder has a proper purpose to inspect the requested records. The statute defines “proper purpose” as “a purpose reasonably related to a stockholder’s interest as a stockholder.”
• There is no comprehensive list of such purposes, but purposes that stockholders regularly assert in making demands include (i) valuing the stockholders’ shares, (ii) communicating with other stockholders, (iii) assessing director independence, and (iv) investigating possible mismanagement, wrongdoing, or waste.

• If the stated purpose is investigating possible mismanagement, wrongdoing, waste, or lack of independence, the stockholder does not need to establish that these problems exist but must provide some evidence to suggest a “credible basis” that the problem may exist such that further investigation is warranted. Conclusory allegations or mere curiosity are not sufficient.

The Company Must Respond Promptly to Any Demand

• If the corporation does not reply to the demand within 5 business days, or at any time refuses the demand, the stockholder may file suit in the Court of Chancery seeking an order compelling production of the requested books and records.
• It is therefore essential for the corporation to have a plan in place to route demands appropriately, and for engaging counsel to assist in the response if necessary.

Stockholders Have a Low Burden to Inspect the Stock Ledger and List of Stockholders

• Any stockholder who meets the technical “form and manner” requirements of Section 220 must be provided with the stock ledger and list of stockholders unless the corporation can establish that the stockholder is seeking these records for an improper purpose.

For Other “Formal” Books and Records, Stockholders Bear the Burden to Establish a Proper Purpose

• Section 220 includes a defined list other formal books and records that a stockholder may request, including: minutes of board of directors or committee meetings, records of any action taken by the board or committee, materials provided to the board or committee in connection with any action taken, minutes of stockholder meetings, annual financial statements, and director and officer independence questionnaires.
• If the corporation does not permit inspection of such books and records, and the stockholder files suit, the burden is on the stockholder to establish that it is seeking these records for a proper purpose.

The Burden Is Even Higher to Receive Documents Beyond These Formal Books and Records

• The Court may only order production of other books and records (for example, informal communications with or between directors) in two limited circumstances:
• First, if the corporation does not have books and records comprising the formal meeting minutes, annual financial statements, or independence questionnaires, the court may order the corporation to produce documents that would constitute the functional equivalent of those records, to the extent necessary to fulfill the stockholder’s proper purpose.
• Second, in all other instances, additional books and records may be compelled only if the stockholder shows a “compelling need” for their inspection and demonstrates by “clear and convincing evidence” that they are “necessary and essential” to further the stockholder’s purpose.

Protecting the Company’s Confidentiality and Privilege

• The corporation may impose reasonable restrictions on the confidentiality, use, and distribution of any books and records it produces under Section 220. Typically, the corporation and stockholder will enter into a confidentiality agreement governing those terms.
• If the records being produced also include information that is not specifically related to the stockholder’s purpose, the corporation may redact those portions of the records.
• Privileged documents typically may be withheld, though in very limited circumstances the stockholder may seek to show good cause to invade the corporation’s privilege to prove a fiduciary breach.

The Corporate Governance Field Guide is our series offering concise, practical insights on the issues that matter most to public and private company officers, directors, stockholders, and other stakeholders. Each installment delivers quick, actionable perspectives from our Securities Litigation and Corporate Governance teams. Designed to keep busy leaders informed, the series highlights best practices, emerging risks, and trends shaping today’s boardroom.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.