A recent Delaware Supreme Court decision highlights the growing risks to companies of extensive statutory “books and records” demands that recently have become a favorite in the toolkit of plaintiffs’ lawyers and even activist shareholders conducting what are often speculative fishing expeditions under the guise of investigating alleged corporate wrongdoing. The statutory inspection right under Section 220 of the Delaware corporation law (and analogous rights in other states) permits shareholders with a holding of any size to access almost any internal information under the control of the company as long as there is a “proper purpose” for the request. Most often, these demands are made within the context of constructing so-called “Caremark" claims that allege that directors violated their fiduciary duties by not appropriately overseeing the corporation’s affairs or to collect grist for proxy and PR campaigns against incumbent directors.
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