Reed Smith Client Alerts

The Delaware Court of Chancery rejects the ability for stockholders to access a corporation’s books and records based on “lawyer driven” motives.

Authors: Brian M. Rostocki Benjamin P. Chapple

A recent decision of the Delaware Court of Chancery, Wilkinson v. A. Schulman, Inc., represents an important judicial effort to balance (i) allowing stockholders of a Delaware corporation that have a “proper purpose” to demand access to the corporation’s books and records, with (ii) ensuring the purpose asserted is actually that of the stockholder, as opposed to the purpose of an entrepreneurial lawyer.

Although Delaware courts encourage stockholders to seek legal counsel when pursing inspection of a corporation’s books and records, the Court of Chancery made clear that a stockholder seeking inspection of a corporation’s books and records, and retaining counsel to carry out the stockholder’s wishes, is “fundamentally different” from having an entrepreneurial law firm pursue inspection “with only minor and non-substantive involvement” from the stockholder. Stockholders seeking inspection of books and records should be actively involved in determining the purpose(s) for which inspection is sought, and remain involved in the process to secure inspection of the corporation’s records, including both prior to litigation and during litigation.