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Showing 109 posts in Books and Records.

Chancery Holds Statutory Rights to Inspect Books and Records of a Delaware Corporation are Subject to the Internal Affairs Doctrine and Governed Exclusively by Delaware Law

Posted In Books and Records, Chancery, Choice of Law

JUUL Labs, Inc. v. Grove, C.A. No. 2020-0005-JTL (Del. Ch. Aug. 13, 2020)

Stockholder inspection rights are a core matter of the governance of a corporation. This decision holds that, pursuant to the internal affairs doctrine, inspection rights for a stockholder of a Delaware corporation are governed exclusively by Delaware law, not by laws of other jurisdictions, regardless of where a company’s principal place of business is located. More ›

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Chancery Denies Books and Records Request From Indirect LLC Interest Holder That Assigned its Rights Prior to the Demand and the Action

Posted In Books and Records, Chancery, LLC Agreements

SolarReserve CSP Holdings, LLC v. Tonopah Solar Energy, LLC, C.A. 2020-0064-JRS (Del. Ch. Jul. 24, 2020)
Describing the case as deja vu, the Court of Chancery dismissed Plaintiff’s second attempt to enforce alleged rights related to Defendant/Company. See SolarReserve CSP Holdings, LLC v.  Tonopah Solar Energy, LLC, C.A. 2019-0791-JRS (Del.  Ch. Mar. 18, 2020) (“SolarReserve I”). The Company was formed to develop a solar power plant in Nevada, but the plan never came to fruition. More ›

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Delaware Supreme Court Holds That Limited Partnership Agreement That Includes Certain Books and Records Language From Section 17-305 of Limited Partnership Act Does Not Automatically Incorporate Judicial Interpretations of Section 17-305

Posted In Books and Records, Delaware Supreme Court, Limited Partnerships

Murfrey v. WHC Ventures, LLC, App. No. 294, 2019 (Del. Supr. Jul. 13, 2020)

Drafters of alternative entity agreements frequently cite to, or quote, statutory language to describe the parties’ obligations. But, the Delaware Supreme Court has concluded that when drafters do so, the drafters should be explicit in whether they also intend to incorporate judicial interpretations of that language, too. Here, because the governing limited partnership agreements (the “Agreements”) did not include an express requirement limiting books and records rights to those “necessary and essential” to a proper purpose, the Supreme Court declined to imply one. More ›

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Chancery Addresses Burdens for Valuation-Related Books-and-Records Inspections, While Finding Defendant’s Asserted Lack of Records Supported Mismanagement-Related Inspection

Posted In Books and Records, Chancery

Woods v. Sahara Enterprises, Inc., C.A. No. 2020-0153-JTL (Del. Ch. July 22, 2020)

This decision concerning statutory inspection rights under Section 220 of the Delaware General Corporation Law clarifies the requirements of a proper valuation purpose, involves a unique twist concerning a mismanagement-investigation purpose, and provides a helpful summary on the potential scope of books-and-records inspections. More ›

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Chancery Rejects Argument that Books and Records Plaintiff Could “Retroactively” Comply with Statutory Demand Requirements

Posted In Books and Records, Chancery, Limited Partnerships

Martinez v. GPB Capital Holdings, LLC, C.A. No. 2019-1005-SG (Del. Ch. June 9, 2020)

The Delaware Court of Chancery largely entered judgment on the pleadings in favor of GPB Capital Holdings, LLC (“Defendant”), the general partner to four limited partnerships, holding that the plaintiffs had failed to meet the statutory requirements of 6 Del. C. §17-305 (Delaware’s statute pertaining to access to the books and records of limited partnerships).  More ›

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In a Books and Records Action, Court Critiques Defendant’s Motion to Dismiss, and Declines to Order Inspection of Documents Not Requested in the Plaintiff’s Demand

Posted In Books and Records

Paraflon Investments, Ltd. v. Linkable Networks, Inc., C.A. No. 2017-0611-JRS (Del. Ch. Apr. 3, 2020).

Sometimes it bears repeating that Section 220 actions are intended to be summary proceedings to evaluate a stockholder’s pre-suit demand to inspect a corporation’s books and records.  More ›

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Chancery Further Explains the “Proper Purpose” Requirement for Section 220 Demands

Posted In Books and Records

Lebanon County Employees’ Retirement Fund v. AmerisourceBergen Corp., C.A. No. 2019-0527-JTL (Del. Ch. Jan. 13, 2020).

Section 220 of the Delaware General Corporation Law (“DGCL”) provides stockholders seeking information for a proper purpose with the right to inspect a corporation’s books and records. This recent decision provides additional guidance by (i) rejecting a “purpose-plus-an-end” test as inconsistent with the text of Section 220 and Delaware Supreme Court precedent; and (ii) explaining that a stockholder may have a proper purpose to investigate wrongdoing regardless of whether she can show potentially viable claims against a board of directors.  More ›

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Chancery Finds Proper Purpose in Books and Records Demand to Investigate Potential Wrongdoing in CBS-Viacom Merger, Orders Narrowed Inspection that Includes Electronic Documents

Posted In Books and Records

Bucks Cty. Employees Ret. Fund v. CBS Corp., C.A. No. 2019-0820-JRS (Del. Ch. Nov. 25, 2019).

A stockholder seeking books and records in Delaware states a proper purpose for inspection by demonstrating a credible basis to suspect that fiduciaries engaged in wrongdoing. So long as the documents sought are necessary and essential to that purpose, the Court of Chancery will order inspection. The Court generally will not, however, require a broad production of electronic documents akin to plenary discovery. More ›

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Chancery Declines to Establish New Rule Concerning Books and Records Inspections Related to Proxy Contests

Posted In Books and Records, Chancery, Proxy Contest

High River Limited Partnership v. Occidental Petroleum Corp., C.A. No. 2019-0403-JRS (Del. Ch. Nov. 14, 2019).

Section 220 of the DGCL grants stockholders a qualified right to inspect corporate books and records “necessary and essential” to a “proper purpose.”  One recognized proper purpose is investigating potential corporate wrongdoing or mismanagement.  In such cases, the stockholder must establish a “credible basis” for the suspicion before the Court of Chancery will order inspection.  When a stockholder makes that showing, the Court has permitted use of the produced books and records to mount a proxy contest.  However, as the Court of Chancery observes in this decision, no Delaware court has compelled inspection “when the stockholder’s only stated purpose for inspection is a desire to communicate with other stockholders in furtherance of a potential proxy contest.”  And under the facts and circumstances of this case, the Court declines to be first.   More ›

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Chancery Rejects Claim that Books and Records Demand was “Pretextual,” Finds Sufficient Overlap Between Demand Letter and Plaintiff’s Purpose

Posted In Books and Records

Donnelly v. Keryx Biopharmaceuticals, Inc., C.A. No. 2018-0892-SG (Del. Ch. Oct. 24, 2019).

A stockholder-plaintiff seeking a corporation’s books and records must have a genuine proper purpose, and cannot rely simply on a lawyer-crafted demand letter to justify her request.  There must be alignment between a plaintiff’s books and records demand and her own stated interest in seeking books and records.  In this recent decision, the Court of Chancery considers and rejects an attempt by a defendant-corporation to argue that a books and records demand was really driven by plaintiff’s counsel, and that the plaintiff lacked any genuine proper purpose. More ›

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Chancery Denies Section 220 Bid for Executive Compensation Records Involving Facebook

Posted In Books and Records, Cases, Chancery

Southeastern Pa. Trans. Auth. v. Facebook, Inc., C.A. No. 2019-0228-JRS (Oct. 29, 2019)

Shareholders of a Delaware corporation have a qualified right to access corporate books and records for a “proper purpose.” One such proper purpose is to investigate potential mismanagement or fiduciary wrongdoing. Indeed, Delaware law encourages shareholders to use this “tool at hand” prior to bringing a derivative action. But this type of inspection has an important precondition: the shareholder must advance some evidence to suggest a “credible basis” from which the Court can infer actionable wrongdoing. As this decision involving Facebook illustrates, the credible basis standard is lenient but not meaningless, and may turn on, among other things, the potential for monetary damages arising out of the alleged wrongdoing. After a trial on a paper record, the Court of Chancery denied an attempt by two stockholders of defendant Facebook, Inc. to obtain additional documents related to the company’s executive compensation practices. More ›

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Delaware Supreme Court Clarifies: No Presumption of Confidentiality for Documents Produced Pursuant to a Books and Records Request

Posted In Books and Records

Tiger v. Boast Apparel, Inc., C.A. No. 23, 2019 (Del. Aug. 7, 2019).

The Delaware Supreme Court held that documents produced pursuant to a request for books and records under Section 220 of the Delaware General Corporation Law are not subject to a presumption of confidentiality. More ›

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Chancery Finds Unauthorized Transfer of LLC Interest Void and Denies Transferee Inspection Rights

Posted In Books and Records, LLC Agreements

Absalom Absalom Trust v. Saint Gervais LLC, C.A. No. 2018-0452-TMR (Del. Ch. June 27, 2019).

Plaintiff was assigned a membership interest in the defendant, a Delaware limited liability company, and sought to exercise books and records inspection rights.  But the LLC’s operating agreement circumscribed its members’ ability to transfer their interests, stating that any disposition without prior written consent of all members was “null and void,” and otherwise authorized only members to inspect books and records.  According to the Court of Chancery, because the transferor never received prior written consent for the transfer to plaintiff, the transfer was void under the LLC agreement, plaintiff was not a member of the LLC, and plaintiff had no right to inspect the LLC’s books and records.  In addition, the Court relied on the Delaware Supreme Court’s decision in CompoSecure, L.L.C. v. CardUX, LLC to find that the plaintiff could not rely on equitable theories to validate the transfer.  According to the Court, equity can only validate voidable acts, not void acts.  And the LLC agreement’s plain language in this case rendered the attempted transfer void, even if it would have been only voidable under common law.

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Chancery Finds Former Limited Partner Lacks Standing to Seek Books and Records

Posted In Books and Records

Greenhouse v. Polychain Fund I LP, C.A. No. 2018-0214-JRS (Del. Ch. May 29, 2019).

Seeking to inspect an entity’s books and records to value an investment typically is a proper purpose. But a plaintiff must have standing to demand inspection. More ›

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Del. Supreme Court Finds Emails May Be Subject to Production in Books-and-Records Actions

Posted In Books and Records

Section 220 of the Delaware General Corporation Law permits a stockholder to inspect the books and records of a corporation, provided that the demand for inspection meets certain form and manner requirements, and the inspection is sought for a proper purpose—e.g., one reasonably related to the interests of stockholders. Plaintiff stockholders bear the burden of proving that each category of documents sought is essential to accomplish the stockholders’ purpose for the inspection. Section 220 inspections of books and records are not intended to produce a comprehensive set of documents that would likely be produced under discovery rules in a plenary action. Rather, the goal in a 220 action is to provide stockholders with a discrete set of documents sufficient or necessary to accomplish their purpose. More ›

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