January 7, 2021
Books & Records: Actionable Wrongdoing Not Required for “Proper Purpose”
This Wilson Sonsini memo reviews the Delaware Supreme Court’s recent decision in Amerisource Bergen v. Lebanon County Employees Retirement Fund, (Del. 12/20). In that case, the Court held that a Section 220 inspection demand need not identify the particular course of action the stockholder will take if the books and records confirm the stockholder’s suspicion of wrongdoing. Here’s an excerpt:
Last week, the Delaware Supreme Court issued a key decision addressing stockholders’ rights to access books and records under Section 220 of the Delaware General Corporation Law. Because the Supreme Court rarely weighs in on the scope of Section 220, the decision is an important guide for corporations and practitioners navigating stockholder demands for books and records under Delaware law.
In the 43-page opinion, the Delaware Supreme Court reiterated that a stockholder need only show a proper purpose for demanding corporate records, such as investigating potential wrongdoing, but need not, at least in many circumstances, show that the wrongdoing is “actionable” or identify the particular course of action the stockholder will take if the books and records confirm the stockholder’s suspicions.
The memo notes that the decision follows on the Chancery Court’s recent Gilead Sciences decision, which reiterated that merits-based defenses to potential claims are not appropriate at the Section 220 stage.
– John Jenkins