Delaware Chancery Court Section 220 Inspection Demand Mechanics and Enforcement
Delaware Section 220 demands require strict execution formalities, verified proof of ownership, and a credible basis to inspect targeted board records.
Section 220
Meaning
Provision of the Delaware General Corporation Law that grants shareholders the right to inspect the books and records of a company. section 220 is a primary tool for corporate accountability, allowing investors to gather evidence of mismanagement before filing a formal complaint. It requires the shareholder to follow a specific process, including the delivery of a written demand under oath.
Shareholder Access
Stockholders can request everything from minutes of board meetings to lists of fellow investors. This access is limited by the requirement of a proper purpose, ensuring that the inspection is intended to protect the owner investment rather than to serve an outside interest.
Investigative Threshold
Use of this statute often precedes the filing of a derivative lawsuit where the plaintiff must show that the board failed to act on a legitimate concern. By seeing the internal memos and reports, an investor can determine if the directors met their duty of care or if they acted in bad faith.
Judicial Enforcement
Cases involving these requests are heard in the court of chancery, which provides an expedited schedule for resolving the dispute. If the company refusal is found to be unjustified, the judge will order the production of the documents and may even require the corporation to pay the shareholder legal fees. Such rulings act as a deterrent against management trying to hide information from the people who actually own the company equity.