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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Court of Chancery Denies Books And Records Inspection
Posted In Books and RecordsPolygon Global Opportunities Master Fund v. West Corporation, C.A. No. 2313-N (Del. Ch. October 12, 2006). Stockholders may seek inspection of corporate records to investigate potential wrongdoing. However, as this case holds, when they have purchased their stock after the wrongdoing is alleged to have occurred, they lack standing to pursue a claim for breach of duty and the court will therefore deny their request to inspect records on that claim. This decision also notes two other limits on inspection rights. First, when the company is publicly traded and files the usual SEC disclosures, then inspection for purposes on valuing stock is limited. The information is already available in most cases. Second, Section 220 inspection rights are not as broad as the discovery permitted under Rule 34. Suit must be filed to get the broad discovery permitted by the Court of Chancery rules in litigation.