Minority Shareholder Rights in Delaware

[Originally published July 3, 2007 at California Corporate Lawyer]
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. 220The 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 UniqueIt
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.
Note: The
information contained is not legal advice and does not establish an
attorney-client relationship. Our contact information is included and we
always offer a free consultation. For more information about MINORITY SHAREHOLDERS’ RIGHTS, CORPORATE LAW and other areas of law, please visit http://www.adishianlaw.com/, contact us via email to mailto:info@adishianlaw.com or call us at 415.955.0888 or 310.726.0888. Copyright ALG, P.C. 2007.

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Christopher M. Adishian, Esq.

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Member at firm Adishian Law Group, P.C.

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Christopher M. Adishian, Esq.

Licensed since 1994

Member at firm Adishian Law Group, P.C.

AWARDS

AV Preeminent
Champion Badge Gold

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