Proceed With Caution: Strategy Considerations Before Making A Books And Records Demand

The books and records demand often is the opening act in business divorce litigation. The relatively low burden that an owner must meet in order to obtain access to a company's books and records (discussed here), and the availability of an accelerated special proceeding in New York courts makes the demand a logical opening salvo in many intra-company disputes. It is a relatively speedy and cost-effective tool for a minority owner investigating misconduct or otherwise contemplating litigation against the majority.

But there still is plenty of strategy to consider. If ownership of the company is in dispute, asserting a books and records demand may bring that question to the forefront before it is truly ripe for litigation. Likewise, a books and records demand may implicate not only the records of the company itself, but also the records of related companies and affiliates. Finally, depending on the obligations set forth in the owners' agreement, a demand for books