A shareholder makes a demand to review board minutes under DGCL 220. The “Memorandum Supplementing Order Affirming Judgment Pursuant to Rule 84.16(b)”, dated Aug. 20, 2013, from the Western District, describes the shareholder as:
“demanding, pursuant to Delaware General Corporation Law Section 220, to inspect and copy “the minutes of the Company’s Board of Directors and Nominating Committee from January 2009 to the present date.” [The shareholder] explained that the purpose of the demand was “to confirm that the Company’s Directors satisfied their fiduciary duties and maintained board independence, as opposed to the entrenchment of management, in connection actions taken since January 1, 2009.” A week later, [the issuer’s] legal counsel sent a response to [a stockholder] declining the demand for several reasons, including that the demand failed to state a proper purpose under Delaware law, was not made in good faith, and failed to consider [the issuer’s] legitimate interest in protecting the confidentiality of nonpublic corporate records.”
This author is somewhat displeased that the court’s discussion of this matter is in a memorandum not generally available (i.e., not available through Westlaw or Lexis). Does this not present an issue of the type as to which practicing lawyers should have guidance?
By way of background, Delaware law provides shareholders have the right to inspect books and records for proper purposes under DGCL 220. This right is important, because the Delaware law is that if a derivative lawsuit is brought without demand having been first made, discovery is stayed pending determination of whether demand was excused is determined. As the Drexler et al. treatise (§ 42.03) explains,
More after the break …