The Delaware General Assembly recently amended Section 220 of the Delaware General Corporation Law (DGCL) to limit the information a stockholder is entitled to in a books and record sdemand.
Takeaway: Under the new law, in most situations, astockholder will only be entitled to a corporation’s official books and records, rather than informal director communications such as text messages andemails.
Senate Bill 21 (“SB 21”), enacted in March 2025, amended DGCL Section 220, among other sections, to heavily restrict the documents a stockholder is entitled to in a books and records demand, unless the stockholder can meet a high standard to access unofficial documents.
Under new Section 220, a stockholder making a demand for books and records may typicallyonly inspect the “Books and Records” of the corporation. Section 220 defines “Books and Records” as(i) the certificate of incorporation, (ii) the current bylaws, (iii) minutes of all stockholder meetings and the signed stockholder consents for the last threeyears, (iv) all communications to the stockholders generally for the last threeyears, (v) minutes of all board meetings and board consents, (vi) all materials provided to the board in connection with a board or board committee action,(vii) annual financial statements for the last three years, (viii) anyagreement under Section 122(18) of the DGCL, and (ix) director and officerindependence questionnaires.
Ifa stockholder wishes to inspect records not covered as “Books and Records,” thestockholder must sue the corporation under Section 220. The Court of Chancery will only order thoserecords if and to the extent: (i) the request is for a proper purpose, made in good faith, and the documents are specifically related to the proper purpose;(ii) the stockholder showed a compelling need to inspect such records; and(iii) the stockholder demonstrated by clear and convincing that the specific requested records are necessary and essential to further the proper purpose.
In effect, only official “Books and Records” will be available to a stockholder in the vast majority of cases, due to the high burden needed to receive unofficial records. Unofficial materials and communications, such as emails and text messages, will not be accessible without litigation (whether litigation under Section 220 or for a separat ecause of action).
Itis unclear what impact this will have on Delaware’s “tools at hand” doctrine,which functionally requires stockholder plaintiffs to use pre-discovery fact-gathering methods they have at their disposal before filing suit. See King v. VeriFone Holdings, Inc.,12 A.3d 1140, 1147 (Del. 2011). It,however, may be difficult for a Delaware court to fault a stockholder plaintiff or not requesting unofficial corporate documents before initiating a lawsuit when such documents are not available without a Section 220 lawsuit. It is unclear if the Delaware courts will encourage stockholders to first file a Section 220 action to better determine the factual record before a substantive action. This will likely depend on what course of action the Delaware courts believe will promote judicial economy.
