Yearly Archives: 2025

One of the biggest changes in Delaware litigation over the past decade has been the increased usage of books and records demands under Section 220 of the Delaware General Corporation Law (“DGCL”) and the attendant burden of responding to these demands. This was, in part, the result of the encouragement of the Delaware courts in the apparent hope that allowing limited pre-litigation fact-finding would allow would-be plaintiff stockholders to make a determination of whether a lawsuit was really worth pursuing or not.[1] As the demands increased, however, so too did the burdens, as stockholders began making more extensive demands and some Delaware cases ordered extensive inspections that almost mimicked full-blown discovery. Responding to the proliferation of demands and the heightened burdens imposed by them, the Delaware legislature recently adopted amendments to Section 220 to unify its application and restrict its scope. While subsequent case law has reinforced Section 220 as a viable tool for stockholders, the new amendments will allow corporations that maintain thorough and consistent board documentation to take advantage of the amendment’s protections.

What Changed and What Hasn’t

1. DGCL Amendments

On March 25, 2025, the Delaware legislature amended Section 220 of the DGCL in several important respects, as outlined below:

Definition of “books and records.” The amendment limits the definition of “books and records” to enumerated categories of formal corporate documents akin to those required in a Schedule 13E-3 going-private filing, e.g., minutes, records and materials of board or committee meetings, and director and officer independence questionnaires.[2] Noticeably absent from this list is informal email correspondence, which had become the frequent subject of many demands prior to the amendment.

If a stockholder wishes to obtain records beyond these enumerated categories,[3] she has two options:

First, if the corporation lacks sufficient formal records matching the enumerated categories, the court may order production of their “functional equivalent,” but only to the extent “necessary and essential” to fulfill the stockholder’s proper purpose.[4] The “necessary and essential” standard is new, although courts might draw a parallel to the “essential and sufficient” standard that was previously applied.[5]

Second, the court may order other records produced if the stockholder demonstrates a “compelling need” for these additional records and proves by “clear and convincing evidence that such specific records are necessary and essential to further the proper purpose.”[6] The amendment provides increased protections to corporations in two concrete ways:

First, the new “compelling need” standard introduces an undoubtedly higher threshold that a stockholder must meet to obtain additional records. Pre-amendment case law allowed a stockholder to obtain information from the other document categories (like emails) so long as she “demonstrated a need.”[7] However, it remains to be seen how courts will interpret the difference.

Second, when determining the scope of production, stockholders now face a higher burden of proof in the form of “clear and convincing evidence” when they seek records beyond those listed in new Section 220(a)(1). Pre-amendment case law only required a stockholder to demonstrate by a preponderance of the evidence that the specific documents sought were “essential and sufficient” to the demand’s purpose.

To some extent, this framework codifies the approach of most Delaware cases, which allowed the production of “Formal Board Materials” such as minutes and presentations, and noted that a stockholder could then “demonstrate a need” for “Informal Board Materials” such as emails with directors or “Officer-Level Materials” that did not go to the board at all.[8] However, this codification makes a substantive difference by drawing clear lines between these categories and imposing heightened burdens of proof on stockholders.

Proper Purpose. The amendment codified the common law understanding of “proper purpose” in new Section 220(a)(2), which requires that inspection demands be for a “purpose reasonably related to a stockholder’s interest as a stockholder.” The amendment also added a new subsection, Section 220(b)(2), which provides that a stockholder may inspect a corporation’s books and records “only if all of the following apply:” (a) the stockholder’s demand is made in good faith and for a proper purpose; (b) the stockholder’s demand describes with “reasonable particularity” the stockholder’s purpose and the documents sought; and (c) the records sought are “specifically related” to that purpose.[9]

New production and use restrictions. The amendment also codifies the ability for corporations to impose reasonable confidentiality or use restrictions on the documents produced and to redact information not specifically related to the purpose of the demand, and requires that any document production be incorporated by reference into any later-filed complaint.[10] The incorporation-by-reference provision is especially noteworthy since it enables corporations to expand the evidentiary record a court can consider when evaluating a motion to dismiss and prevents a stockholder plaintiff from selectively quoting documents received in response to a Section 220 demand. Allowing a court to consider the entirety of a document and the surrounding context could prove particularly beneficial to corporations attempting to dismiss oversight (Caremark) cases where the existence of reporting or monitoring systems or the board’s monitoring of such systems is in dispute.

2. Recent Case Law

While these amendments might curtail the scope of books and records productions, two decisions from the Delaware courts show that stating a “proper purpose” for inspection remains a low bar.

In July 2025, the Delaware Supreme Court reversed a Court of Chancery decision dismissing a books and records action brought by a revocable trust representing stockholders of Amazon.[11] The trust’s demand stated that its purpose was to investigate wrongdoing by Amazon fiduciaries, alleging Amazon had engaged in anticompetitive practices.[12] In such circumstances, a stockholder must “show, by a preponderance of the evidence, a credible basis from which the [court] can infer there is possible” wrongdoing.[13] To support its stated purpose, the trust cited ongoing litigation and investigations in which it was alleged that Amazon had engaged in anticompetitive activities.[14] In finding a sufficient basis to infer possible wrongdoing, the Delaware Supreme Court emphasized that the credible basis test is the “lowest possible burden of proof under Delaware law” and that investigations or lawsuits that have advanced beyond untested allegations—even if there has been no decision on the merits—can demonstrate a credible basis.[15]

Similarly, earlier this year, Vice Chancellor J. Travis Laster held that a stockholder had established a credible basis to suspect corporate wrongdoing where the stockholder heavily relied upon post-demand news articles that themselves cited confidential sources.[16] In reaching this conclusion, the Chancery Court rejected the company’s bright-line argument that “unreliable hearsay” in the form of news articles could not be relied upon to establish a credible basis, noting that “evidentiary determinations” are a “case-specific responsibility” and that courts “must weigh evidence and make factual findings.”[17] Here, the Chancery Court concluded that “[n]ews articles from reputable publications that rely on anonymous sources will generally be sufficiently reliable for a court to consider when assessing whether a stockholder has a credible basis to suspect wrongdoing.”[18]

How to Respond

Despite the greater predictability for those corporations poised to avail themselves of the amendments, it is likely that books and records demands will remain a central feature of Delaware litigation. In light of these significant developments, there are a number of important takeaways for corporations to keep in mind when keeping corporate records and responding to an inspection request:

Draft minutes with care and keep the record consistent. Corporations should maintain detailed, contemporaneous minutes and attach key board materials to minutes to avoid “functional equivalent” disputes and to reduce any claim of necessity for emails. Consistency with public disclosures is critical to avoid arguments of a gap or inconsistency that could support the need for a functional equivalent.

Pressure test proper purpose. The demand must describe, with reasonable particularity, the purpose of the stockholder’s demand and the books and records sought, and the books and records sought must specifically relate to the stockholder’s stated purpose.

Require a robust confidentiality agreement. After receiving a demand, corporations should take advantage of their codified right to impose reasonable restrictions on the records produced that: (i) limits the use and distribution of the documents produced, (ii) allows redaction of content “not specifically related” to the purpose, and (iii) deems the production incorporated by reference in any subsequent complaint (so you may use the full record on a motion to dismiss). However, corporations should think carefully about whether to redact information that is not specifically related to the stockholder’s purpose if there are proper use protections otherwise in place. In certain instances, too many redactions can be net harmful, especially on a motion to dismiss.

Produce formal board materials but resist emails and informal/officer-level materials. Corporations should argue that the statutory default controls and that formal board materials are sufficient, forcing stockholders to meet the “compelling need”/clear‑and‑convincing standard in order to obtain additional records.

1 State of Rhode Island Off. of Gen. Treasurer on Behalf of Emps.’ Ret. Sys. of Rhode Island v. Paramount Glob., 331 A.3d 179, 193 (Del. Ch. 2025). (go back)

2 8 Del. C. § 220(a)(1). Many of these categories contain three-year lookback periods.(go back)

3 Section 220(b)(1)(a) entitles stockholders to inspect a few other categories of documents, like a corporation’s stock ledger and a list of its stockholders “for any proper purpose.”(go back)

4 § 220(f).(go back)

5 See, e.g., NVIDIA Corp. v. City of Westland Police & Fire Ret. Sys., 282 A.3d 1, 26 (Del. 2022), as revised (July 25, 2022) (holding officer-level emails were essential and sufficient because of “specific and concrete” allegations that officers communicated about the subject matter of the request); KT4 Partners LLC v. Palantir Techs. Inc., 203 A.3d 738, 752 (Del. 2019) (holding emails were essential and sufficient for the stockholder’s purpose where allegations showed that the company conducted corporate business over email rather than in more traditional ways).(go back)

6 § 220(g).(go back)

7 Hightower v. SharpSpring, Inc., 2022 WL 3970155, at *10 (Del. Ch. Aug. 31, 2022).(go back)

8 Id. at *9.(go back)

9 § 220(b)(2).(go back)

10 § 220(b)(3).(go back)

11 Roberta Ann K.W. Wong Leung Revocable Tr. v. Amazon.com, Inc., 2025 WL 2104036, at *11 (Del. July 28, 2025).(go back)

12 Id. at *2–3.(go back)

13 Id. at *8.(go back)

14 Id. at *2–3.(go back)

15 Id. at *8–10.(go back)

16 Paramount Glob., 331 A.3d at 183.(go back)

17 Id. at 196, 198.(go back)

18 Id. at 198–99.(go back)