In recent years, in part in response to decisions like Corwin that have raised the pleading standard for stockholder plaintiffs, the Delaware courts have encouraged stockholders to seek books and records under Section 220 of the Delaware General Corporation Law (DGCL) before filing stockholder derivative or post-merger damages suits, and – in response – each year more stockholders have done so. As a result of this trend, we have already seen several important decisions addressing books and records demands in 2019. These decisions have (i) clarified the types of documents that may be obtained, including (in some limited circumstances) personal emails or text messages; (ii) explained when a stockholder’s demand will be denied as impermissibly lawyer-driven (and when it will not be); and (iii) described the threshold showing of suspected wrongdoing that stockholders must make. As the plaintiffs’ bar makes more use of Section 220, these are important issues for boards of directors to consider.
To read the full article, visit the Cleary M&A and Corporate Governance Watch blog. This was republished by The Harvard Law School Forum on Corporate Governance and Financial Regulation.