Delaware Supreme Court Signals Flexibility In Section 220 Actions

In a closely divided 3–2 decision, the Delaware Supreme Court has added an important nuance to the way courts evaluate books-and-records demands under Section 220 of the Delaware General Corporation Law (DGCL). While the opinion does not upend the existing doctrine, it does introduce a measure of flexibility in connection with such demands, particularly in fast-moving, high-profile situations where the factual record continues to develop after a demand is made.

At its core, the case considers a straightforward question: whether the Court of Chancery erred by considering post-demand evidence and confidentially sourced information when a stockholder sought to investigate potential wrongdoing using the Section 220 mechanism. The answer, the Delaware Supreme Court said, is generally yes, albeit subject to certain exceptions.