Meaning
A statutory provision in corporate law grants shareholders the right to inspect a company’s books and records upon showing a proper purpose. This right, established under delaware dgcl 220, allows investors to investigate corporate wrongdoing or waste. It serves as a tool for shareholder activism and pre-suit discovery.
Shareholder Entitlement
Any stockholder of record is entitled to make a written demand under oath to inspect the corporation’s documents. The exercise of delaware dgcl 220 requires the shareholder to follow strict procedural guidelines regarding the form of the demand. If the corporation refuses, the shareholder can file an action in the court of chancery to compel disclosure.
The court handles these matters on an expedited basis to protect investor interests.
Proper Purpose
The applicant must demonstrate a primary purpose that is reasonably related to their interest as a stockholder. Under delaware dgcl 220, investigating mismanagement qualifies as a proper purpose if the stockholder has a credible basis to suspect wrongdoing. General curiosity or a desire to disrupt corporate operations does not satisfy the statutory requirement.
Inspection Scope
Production is limited to those documents that are necessary and essential to satisfy the shareholder’s proper purpose. Courts applying delaware dgcl 220 typically order the production of board minutes and committee reports rather than general corporate emails.
