What Are “Books and Records”? Delaware Reduces Uncertainty Surrounding Stockholder Inspection Rights

With the whirlwind of recent events threatening Delaware’s standing as the preeminent jurisdiction for incorporation in America, press coverage understandably has centered around certain high-profile billionaires and the possibility of a corporate exodus from the First State (dubbed “Dexit”). Flying under the radar are demands for books and records under Section 220 of the Delaware General Corporation Law (DGCL). While these mundane statutory rights for stockholders (and directors) may never be the plot line of an episode of Law & Order or Suits, they are a feature of doing business as a Delaware corporation—and a tinderbox for disputes and litigation.

On February 17, 2025, the Delaware General Assembly introduced a proposed bill (SB 21) to amend Section 220 of the DGCL; a revised version of the bill (SS1 for SB21) was signed into law on March 25, 2025. The amendment applies to Section 220 demands made, or any action commenced in court, after February 17, 2025. 

The amendment makes the following changes: 

• New section 220(a)(1) specifically defines “books and records,” including both the categories of documents as well as a three-year time limitation on certain of those categories (such as annual financial statements and stockholder meeting minutes and consents). 
• New section 220(e) prohibits the Delaware Court of Chancery from “order[ing] the corporation to produce any records of the corporation other than the books and records set forth in paragraph (a)(1),” with two exceptions: 
  • Under Section 220(f), if the company does not have certain books and records listed in (a)(1), the Court may order the company to produce the “functional equivalent” of those records.  
  • Under Section 220(g), the Court may order the company to produce additional records if the stockholder has a “compelling need” for such records and they are necessary and essential to further the stockholder’s purpose.
• New section 220(b)(2) conditions inspection on (a) the stockholder’s “good faith” in making the demand (in addition to the preexisting condition of a “proper purpose”); (b) “reasonable particularity” as to the stockholder’s purpose and the books and records sought; and (c) a purpose that is “specifically related” to the books and records sought. 
• New section 220(b)(3) further authorizes companies to condition the production of books and records on the stockholder’s agreement to “reasonable restrictions on the confidentiality, use, or distribution of books and records” (and companies may redact information that is not specifically related to the stockholder’s purpose), and the stockholder’s agreement that the books and records would be deemed to be incorporated by reference into any complaint that the stockholder files.

The Old Section 220 

Under the former Section 220, a stockholder (or director) could demand to inspect a company’s books and records for a purpose that is reasonably related to their interest as a stockholder (or director) (i.e., a “proper purpose”), subject to various strictly enforced procedural requirements (i.e., that the demand be in writing, under oath, state the stockholder’s purpose, and include proof of beneficial stock ownership if the stockholder was not the record holder). The corporation would then have to respond within five business days, at which point the stockholder could commence an action in the Delaware Court of Chancery to enforce the demand.

Examples of proper purposes from Delaware case law include investigating corporate wrongdoing and valuing the stockholder’s interest; if the former, the stockholder must show, by a preponderance of the evidence, a credible basis to find corporate wrongdoing. Examples of improper purposes include the stockholder’s mere curiosity or a fishing expedition, disagreement with the board’s decision, or harassing the company to obtain a buyout of the stockholder’s interest. 

What was missing was a clear definition of “books and records.” Delaware courts had applied the phrase to generally cover the company’s certificate of incorporation, bylaws, and board minutes and related board materials. Certain cases, however, such as the Delaware Supreme Court’s 2019 decision in KT4 Partners LLC v. Palantir Technologies, Inc., permitted inspection of a broader scope of materials (such as directors’ and officers’ emails and text messages) under the particular circumstances of those cases. But some stockholders tried to leverage those cases to aggressively pursue types of documents that ordinarily would be available only in discovery in plenary litigation. 

Delaware case law also had developed to require that the books and records sought be “necessary and essential” to accomplish the stated purpose of the inspection demand. Courts also generally permitted the company to (i) redact irrelevant information from the documents to be produced; (ii) impose reasonable restrictions on the confidentiality and use of the books and records; and (iii) require the stockholder to agree that the documents will be deemed incorporated by reference into any subsequent complaint filed by the stockholder.

The New Section 220 

The most important aspect of the amendment is that it defines books and records. Section 220 in its prior formulation left open the scope of materials that stockholders could pursue in their demand, resulting in several decisions from Delaware courts that provided ammunition for stockholders to argue that the scope of books and records in their particular case should be expanded. By providing a specified list of books and records, and by expressly requiring that the books and records sought be “specifically related” to the stockholder’s proper purpose, the amendment narrows the universe of materials that stockholders can demand. The statute still leaves open primary issues of whether the stockholder has a proper purpose and whether the books and records sought are necessary and essential to satisfy such purpose.

Under the amendment, “books and records” includes the following documents: 

• The certificate of incorporation (the original and any amendments);
• The current bylaws; 
• Any agreement or other instrument incorporated by reference in the certificate or bylaws;
• Minutes of all stockholders meetings and executed stockholder consents for the past three years;
• All written communications to stockholders generally within the past three years;
• Board and committee meeting minutes and records of any actions of the board or committee;
• Materials provided to the board or a committee in connection with actions taken by the board or committee; 
• Annual financial statements for the past three years; 
• Any agreement entered into pursuant to DGCL § 122(18) (i.e. contracts the company entered into with current or prospective stockholders in their capacity as such); and 
• Director and officer independence questionnaires.

The amendment codifies much of the rules established through Delaware case law. For example, the statute now expressly permits the company to redact irrelevant information from the materials produced, to require the stockholder to agree that the documents will be deemed incorporated by reference into any subsequent complaint filed by the stockholder, and to impose reasonable restrictions on the confidentiality and use of the books and records.¹  

What does the amendment mean for Delaware corporations?

Under the new Section 220, the Court of Chancery may not order the corporation to produce any materials other than the defined list of books and records except in two circumstances. 

The first is if the corporation does not have (i) all stockholders meetings minutes and executed consents for the past three years; (ii) board and committee meeting minutes and records of any actions of the board or committee; (iii) annual financial statements for the past three years; and (iv) if a public company, director and officer independence questionnaires. The second way that a stockholder may obtain materials outside of the defined list of books and records is if the stockholder has a “compelling need” for such documents and the stockholder demonstrates by clear and convincing evidence that such specific records are necessary and essential to further the stockholder’s purpose. Both of these exceptions underscore the importance for boards of Delaware corporations to respect corporate formalities by preparing and maintaining the records identified in the amended Section 220(a)(1) to properly document corporate action.

Even without triggering the two exceptions, the category of “all written communications to stockholders generally within the past three years” could result in stockholders seeking all types of written communications, including potentially emails and text messages. Delaware companies should therefore formalize the system of how they distribute such written communications to stockholders and the content of the communications to define and limit the scope of what is subject to a stockholder demand for books and records.

Lastly, because the amended Section 220 explicitly allows corporations to place confidentiality restrictions on stockholders requesting books and records, Delaware companies should develop a form confidentiality agreement that can be readily presented to stockholders exercising inspection rights.

^[1] While Section 220 is the operative provision of the DGCL for corporate books and records, Delaware LLCs and LPs are governed by separate provisions in the Delaware Limited Liability Company Act (LLC Act) and the Delaware Revised Uniform Limited Partnership Act (LP Act), respectively. The LLC Act and LP Act differ from Section 220 in allowing LLC operating agreements and LP partnership agreements to restrict access to books and records (whereas a corporation cannot eliminate or limit a stockholder’s Section 220 rights in the company’s charter). Outside of contractual restrictions in LLC operating agreements and LP partnership agreements, however, Delaware courts typically apply Section 220 principles in evaluating books and records demands for LLCs and LPs.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.