DGCL Narrows Stockholder Access to Corporate Records

2025-03-30 20:27:37

On March 25, 2025, Delaware enacted an amendment to Section 220 of the Delaware General Corporation Law (“DGCL”), narrowing the scope of corporate books and records available to stockholders making inspection demands. This amendment, aimed at reducing the growing burden and expense to corporations for stockholder records requests, particularly those seeking directors’ electronic communications, is a noteworthy development for corporate governance and stockholder rights.

Key Changes Under Amended Section 220 

Under the newly revised Sections 220(a)(1) and 220(b), stockholders are now explicitly limited to requesting the following categories of corporate books and records:

1. Certificate of Incorporation, including referenced agreements and instruments.

2. Bylaws, including referenced agreements and instruments.

3. Stockholder Meeting Records - Minutes of all stockholder meetings and written consents from the past three years.

4. Corporate Communications - Any written or electronic communications sent to stockholders generally within the past three years.

5. Board and Committee Meeting Records - Minutes from board and committee meetings, including actions taken by written consent.

6. Board and Committee Materials - Documents provided to the board or its committees relating to board actions.

7. Annual Financial Statements - The corporation’s annual financial reports for the past three years.

8. Stockholders Agreements - Any agreements entered into under Section122(18).

9. Director and Officer Independence Questionnaires. 

Exceptions and Carve-Outs

While the revised law significantly narrows the types of records stockholders may access through routine requests, two key exceptions remain:

· Litigation Exception (Section 220(b)(4)): A stockholder involved in active litigation retains the right to seek discovery of additional books and records beyond the restricted list.

· Compelling Need Exception (Section 220(g)): A stockholder can obtain additional records by demonstrating that the requested documents are necessary and essential to their stated purpose and showing a compelling need for their inspection. 

Implications for Corporations and Stockholders

This amendment marks a strategic shift in Delaware corporate law, favoring corporate efficiency and reduced costs over broader stockholder access. The changes are particularly impactful in curtailing stockholder demands for electronic communications, which have historically led to costly and contentious legal battles. 

Stockholders, however, still have pathways to access broader corporate records, provided they meet the higher burden of proving necessity and compelling need. Delaware corporations should review their corporate governance policies to ensure compliance with these new rules and prepare for more streamlined document request procedures.

Delaware’s latest amendment to Section 220 of the DGCL represents a significant development in corporate law, reinforcing the state’s business-friendly environment while refining stockholder inspection rights. As this new framework takes effect, both corporations and stockholders should carefully consider their records requests and disclosure strategies.