Aimee Czachorowski, an attorney in the Delaware office of Lewis Brisbois, prepared this post.

Chancellor McCormick’s recent letter decision in Floreani, et al. v. FloSports, Inc., C.A. No. 2023-0684-LM-KSJM (Del. Ch. Oct. 31, 2014), illustrates the pitfalls of non-compliance with the technical requirements of a Section 220 demand by a stockholder for corporate books and records.

The Chancellor summarized the statutory form-and-manner requirements–as well as those imposed by case law–that must be complied with when making a Section 220 books and records request, as follows:

“Breaking it down, Section 220(b) requires that a demand: (1) be in writing, (2) be under oath, (3) state the stockholder’s purpose, and (4) be directed to the corporation at its registered agent or principal place of business. (5) If the stockholder is not a record holder, then the demand must be accompanied by documentary evidence of beneficial ownership of the stock. (6) If the demand is sent by an attorney, then it must be accompanied by a power of attorney. That’s four form-and-manner requirements that apply in all circumstances and two that apply in certain circumstances. The form-and-manner requirements are not onerous, but they are strictly enforced.”

The Court further noted that an “implied condition of the fifth and sixth form-and-manner requirements” is that the demand must “identify the stockholders on whose behalf [the demand] is sent.”

Concluding that three separate demands made under Section 220 were deficient, the Court granted the defendant’s exceptions to the Master’s report. Notably, Section 220 requires a five-day waiting period after the demand–before filing suit.

But here, the five-day waiting period was not complied with when plaintiffs made their third demand; plaintiffs made a motion to amend the same day they served the demand, although they waited an additional five days after the demand to serve the proposed amended complaint. The Chancellor found that the motion to amend, made before the statutory five-day window closed, did not comply with the requirements of Section 220(c).