What To Do When Your Company Receives a Stockholder Demand To Inspect Corporate Records

This article was originally published on January 20, 2022, and has been updated as of July 10, 2025.

At a Glance

• The following guide summarizes the purpose and requirements of a stockholder demand under Section 220 of the Delaware General Corporation Law (DGCL), as well as issues to consider when planning a response. 

What Is a Books and Records Demand?

• Delaware General Corporation Law Section 220 provides stockholders the right to inspect corporate records.
  
  • Philosophy underlying inspection rights: “As a matter of self-protection, the stockholder was entitled to know how his agents were conducting the affairs of the corporation…” Shaw v. Agri-Mark, Inc., 663 A.2d 464, 467 (Del. 1995).
• DGCL § 220(b) sets forth the procedural requirements for a stockholder seeking to inspect corporate books and records.
  
  • Strict compliance with the statute is mandatory.
• Effective as of March 25, 2025, DGCL § 220 was amended to address the concern that inspection rights had become overly burdensome for corporations.
  
  • The amended § 220 applies retroactively. But it does not apply to or affect any action or proceeding that is completed or pending, or any demand to inspect books and records made, on or before February 17, 2025, the date the amendments were first introduced in the Delaware General Assembly.

What Are the Basic Requirements?

• The law requires that stockholder demands be made in writing and under oath under penalty of perjury.
• The demand also must:
  
  • Be made in good faith and for proper purpose.
  • Describe with reasonable particularity the stockholder’s purpose and the books and records the stockholder seeks to inspect.
  • Identify the books and records that are specifically related to the stockholder’s purpose.
    
    • **Note: The demand need not develop a fully articulated theory of corporate wrongdoing that could support an actionable claim. AmerisourceBergen Corp. v. Lebanon Cnty. Employees' Ret. Fund, 243 A.3d 417, 432 (Del. 2020)
• The demanding party must be owner of record or beneficial owner of the stock:
  
  • If the stockholder seeking inspection is an owner of record, no documentary evidence of ownership is required.
  • If the owner seeking inspection is a beneficial owner — like most stockholders of public companies — documentary evidence of ownership is required.  
    
    • Beneficial owners must state their status, provide documentary evidence, and attest that the documentary evidence is true and correct.
    • Under Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 776 (Del. Ch. Feb. 2, 2016), it suffices to provide periodic account statements as evidence of beneficial ownership, as long as the statements are “sufficiently proximate in time” to the date of the demand.

Has a Proper Purpose Been Stated?

• A stockholder seeking corporate records must state a proper purpose for doing so (i.e., what it will do with the information or an end to which that investigation may lead). A proper purpose is one “reasonably related to such person’s interest as a stockholder.”
• If the stockholder is only seeking a stock list or stock ledger, the burden is on the corporation to prove that the stockholder seeks corporate records for an improper purpose.
• If the stockholder seeks documents beyond the stock list or stock ledger, the stockholder must establish a proper purpose.

What Are Examples of Proper Purpose?

• Proper purposes include:
  
  • To investigate allegedly improper transactions, wrongdoing or mismanagement
  • To clarify an unexplained discrepancy in the corporation’s financial statements regarding assets
  • To ascertain the stock’s value or explore a possible sale of stock
  • To aid litigation the stockholder has instituted and to contact other stockholders regarding litigation and invite their association in the case 
  • To inquire into the independence, good faith, and due care of a special committee formed to consider a demand to institute derivative litigation
  • To communicate with stockholders regarding the desirability of a change in board composition
  • To conduct a proxy fight
  • To make a tender offer

How Can I Quickly Identify a Purpose That is Improper?

• The burden of proof shall be upon the corporation to establish that the inspection a director seeks is for an improper purpose.
• The following are examples of reasons for a §220 demand that are excluded from the definition of “proper purpose:”
  
  • Mere suspicion or subjective belief of wrongdoing
  • Bare allegations of possible waste, breach of fiduciary duty or mismanagement, “without more”
  • To institute annoying or harassing litigation against the corporation
  • To force the corporation to buy out a stockholder’s interest
  • To develop a cause of action against the company’s financial advisors during a transaction (or other third parties) 
  • “[T]o seek an audience with the board to discuss proposed reforms”
  • “[T]o mount a proxy fight to elect new directors”
  • “Idle curiosity”

What Should Be Considered if Litigation Is the Only Purpose Described in the Demand for Records?

• A stockholder’s proper purpose must be stated with “credible basis” — the lowest possible burden of proof. 
• Credible basis requires simply that the stockholder has, through documents, logic, testimony or other sources, raised legitimate issues of wrongdoing or demonstrated that wrongdoing is possible.
• Even where there is credible basis to inspect records, the court will deny the demand if the wrongdoing is not justiciable. For example, the court has denied demands when:
  
  • The litigation anticipated is time-barred. Graulich v. Dell, Inc., 2011 WL 1843818 (Del. Ch. May 16, 2011).
  • The stockholder lacks standing to bring suit. West Coast Mgmt. & Capital, LLC v. Carrier Access Corp., 914 A.2d 636, 641 (Del. Ch. 2006).
  • The anticipated lawsuit would bring duty of care claims alone and the directors at issue would be exculpated for breaches of care under Section 102(b)(7) of the DGCL. Se. Pa. Transp. Auth. v. AbbVie, Inc., (Del. Ch. Apr. 15, 2015).
• The Delaware Supreme Court has repeatedly urged stockholders to use §220 to obtain books and records before bringing a lawsuit to better evaluate whether to bring suit and, if litigation is warranted, plead a claim that is more likely to be viable.

If There Is a Proper Purpose, What Types of Corporate Records can the Stockholder See?

• DGCL § 220 now defines corporate books and records, and compared to the prior version, it significantly narrows the scope of materials that stockholders can demand to inspect. 
  
  • “Books and records” are defined as formal corporate documents, including: 
    
    • Certificate of incorporation 
    • Bylaws
    • Three years of stockholder meeting minutes
    • Three years of written consents 
    • Three years of written or electronic communications to stockholders 
    • Three years of annual financial statements 
    • Agreements with current and prospective stockholders
    • Director and officer independence questionnaire 
    • Board and committee meeting minutes and records of any board or committee actions (along with materials provided to the board or committee in connection with such actions)
  • In certain extraordinary circumstances, amended Section 220(g) permits the Court of Chancery to compel production of documents not listed under § 220(a)(1): 
    
    • A stockholder also may see materials that are “functionally equivalent” to a document listed under § 220(a)(1), assuming that the documents are necessary and essential to fulfill the stockholder’s proper purpose.
  • Section 220(b)(3) permits the corporation to impose conditions for the production of the requested books and records, including:
    
    • reasonable confidentiality, use and distribution restrictions on any books and records it produces to the stockholder
    • conditioning production on the stockholder’s agreement that any information included in the books and records is deemed incorporated by reference in any complaint filed by or at the direction of the stockholder relating to the subject matter referenced in the demand 
    • redacting portions of any records produced to the extent the documents include portions not specifically related to the stockholder’s purpose 
• The demand must identify the documents or categories of documents that the stockholder would like to inspect with rifled precision. Brehm v. Eisner, 746 A.2d 244, 266-67 (Del. 2000).
  
  • “Rifled precision” depends on the relevant facts and requires a qualitative analysis of documents demanded. Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Trust Fund IBEW, 95 A.3d 1264, 1283 (Del. 2014).
• The documents identified must be “necessary and essential” to the proper purpose.
  
  • “Necessary and essential” means that the documents or categories of documents deal with the crux of the stockholder’s purpose, and if that information is unavailable from another source. 
  • Like with “rifled precision,” whether documents are necessary and essential is fact specific and will necessarily depend on the context in which the stockholder’s inspection demand arises. Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Trust Fund IBEW, 95 A.3d 1264, 1271 (Del. 2014).

How Long Does my Company Have to Respond?

• Once a stockholder makes a proper demand, the corporation has five business days to respond.  
• A corporation’s failure to respond is tantamount to refusing the stockholder’s demand, which will allow the stockholder to file a lawsuit to compel inspection of the company’s records.
• Tips: Promptly engage outside counsel to seek an extension of response time and to analyze how to respond to the Section 220 demand.
  
  • Try to be reasonable. When companies have flatly refused to produce records responsive to a valid 220 demand, the Court of Chancery has responded by permitting a records deposition before ordering the company to produce the records and by ordering the corporation to pay the stockholder’s fees related to efforts to obtain the books and records, including for the litigation.