Minority Shareholder Rights in Delaware

Many venture backed (and other corporations) choose to incorporate in Delaware due to its well-developed law regarding various common corporate issues. One such issue is a shareholder’s right to inspection.

8 Del. C. Sec. 220

The controlling statute governing shareholder inspection rights is 8 Del. C. Sec. 220, which provides that :

“(b) Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to make copies and extracts from:

(1) The corporation’s stock ledger, a list of its stockholders, and its other books and records; and

(2) A subsidiary’s books and records….”

Heavy Procedural Requirements

In order to exercise their rights under Section 220, the shareholder must comply with each procedural requirement of the statute. Like many areas of law there are “procedural” requirements that must be satisfied in order for the individual or entity to receive access to the “substantive” benefits of the law. Here, a failure to comply with the procedural requirements of the statute could result in a delay or denial of an otherwise proper request.

Expedited Process Via Summary Proceeding

Delaware courts have a summary proceeding designed specifically for inspection demands brought pursuant to Section 220. The goal is to promote a quick resolution of any disputed inspection demand for both the company and the shareholder.

Each Case Unique

It is common for shareholders to want information about their corporate investments, and it is common for Company management to want to minimize the amount of information disclosed. Often these differences can be resolved informally, however there are many times where a compulsory court process is necessary. If you find yourself at a stalemate with an inspection demand to a Delaware corporation, we recommend that you contact an attorney promptly. Through our network of attorneys, we can refer you to competent, experienced Delaware co-counsel to advance your case.

About Adishian Law Group, P.C.

Adishian Law Group is a California law firm with a statewide practice in the areas of Corporate law, Employment law, Real Estate law and Mediation Services. Adishianlaw.com is one of the oldest continually operating law firm websites on the Internet. The firm serves its clientele via three offices located in the major business hubs of El Segundo, Palo Alto and San Francisco. As of March 2013, Adishian Law Group, P.C. has represented individual and corporate clients located across 20 California counties, 4 States outside of California and 9 foreign countries — in over 340 legal matters.

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