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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
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Chancery Declines to Establish New Rule Concerning Books and Records Inspections Related to Proxy Contests
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 ›