Shareholder Access to Key Books and Records Curtailed by New DGCL Amendments

Much ado has been made of Senate Bill 21’s recent adoption and its amendments to the Delaware General Corporation Law (DGCL).  Driven by fears of a “DExit,” and the re-domestication of several prominent Delaware corporations, legislators hastily crafted sweeping, controversial changes to the DGCL—most notably, new safe harbors in DGCL Section 144 for transactions involving interested directors or officers and controlling shareholder transactions.  But buried beneath the din over that overhaul are the revisions to Section 220, which grants shareholders the right to review corporate books and records—a well-worn part of the plaintiff toolbox that often serves as the opening salvo in shareholder litigations. 

Key Takeaways:

• Revised Section 220(a) now explicitly defines (and narrows) “books and records,” with certain temporal limitations.
• These specified categories omit, and the statute now potentially excises, certain documentation, like emails and texts, from books and records demands.
• There are several other changes to Section 220 which threaten to defang the tool even further, including codification of three substantive conditions, all of which must be satisfied by a shareholder in making a books and records request.
• Revised Section 220 also allows the corporation to prophylactically place certain conditions on its acquiescence to a shareholder’s demand.
• These requirements will not end demands, but will present many more roadblocks and detours to shareholders’ ultimate derivative complaints.

Read the complete client alert.

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Kasowitz Benson Torres’s Securities Litigation practice is trial-ready and known for advising and litigating shareholder actions, securities litigations, and corporate governance disputes for a wide range of sophisticated clients, including private and public corporations, private equity funds, investment banks, corporate directors and executives, and institutional shareholders.  Our lawyers have significant experience and success litigating and resolving these matters nationwide.

For more information, please contact:

Sheron Korpus
Partner 
skorpus@kasowitz.com

Andrew L. Schwartz
Partner 
aschwartz@kasowitz.com

William Wolfe "Volvi" Taub
Associate 
wtaub@kasowitz.com