The Delaware Court of Chancery yesterday denied a Motion to Dismiss a shareholder’s demand for books and records of a company based on DGCL Section 220. The Court ruled that the issue of whether this action was an attempt to circumvent the stay on discovery imposed in a related federal securities action, was an issue to be decided at trial, which was scheduled for November. An article about the case is available here. The case is Starr Investments v. China Media Express Holdings.
If a transcript becomes available, I’ll link it. A transcript of the Court’s ruling is available here.
A voluminous number of Section 220 decisions have been highlighted on these pages over the last 6 and one-half years. The large collection of articles and case summaries regarding Section 220 that have been published on this blog can be accessed here. One conclusion, among many, that can be made from the dozens of cases summarized and related articles about Section 220 at the above link, is that despite clearly recognized proper purposes for Section 220 actions, there is an air of indeterminacy about Section 220 issues due to factual details that vary from case to case.
The bottom line is this: a company that is determined to make it difficult for a shareholder to obtain books and records under Section 220, can at least make it a very expensive and laborious exercise, and even after a trial awarding books and records, a company can still engage in Fabian tactics and tarry for months with pedantic disputes about exactly which documents should be produced. Sometimes one might get lucky and the documents will be provided quickly, but it would be unrealistic to view Section 220 demands as exercises for the faint-hearted.