Delaware Court of Chancery Interprets Senate Bill 21’s Amended Books and Records Provisions in First Post-Enactment Decision

On December 22, 2025, the Delaware Court of Chancery issued its decision in Moran v. Unation, Inc., providing the first judicial interpretation of the sweeping amendments to Section 220 of the Delaware General Corporation Law enacted through Senate Bill 21 (“SB 21”). The opinion addresses how Delaware courts will evaluate stockholder demands to inspect corporate books and records under the new statutory framework, including the heightened evidentiary burdens stockholders must now satisfy to obtain corporate records beyond the newly defined categories of “books and records."

Key Takeaways

• Additional Burdens and Hurdles. The new Section 220 framework imposes additional procedural and evidentiary hurdles. Stockholders should ensure their demands clearly articulate their purposes and identify records with sufficient specificity to enable the corporation to understand what documents are sought.
• Valuation Rights Preserved. The Court reaffirmed that valuing one’s ownership interest remains a proper purpose for inspection under Section 220. Private equity investors and other institutional stockholders who need to value their holdings for fund reporting, secondary sales, or fiduciary purposes should take comfort that this purpose remains viable under the amended statute.
• Financial Records Remain Accessible. Financial statements and their “functional equivalents”—including capitalization tables, tax returns, and valuation support materials—remain available to stockholders who can demonstrate their records are necessary for legitimate valuation purposes. For institutional investors in private companies that may lack formal financial statements, the “functional equivalent” doctrine provides an avenue to obtain alternative financial records.
• Investigation of Portfolio Companies. The Court confirmed that investigating possible waste, mismanagement, or breaches of fiduciary duty remains a proper purpose under Section 220. Institutional investors with governance concerns about portfolio companies can still use Section 220 as a tool to obtain information necessary to evaluate potential claims or remedial action.
• Consequences for Non-Cooperation. The decision makes clear that corporations that refuse to engage in good faith in books-and-records litigation do so at their peril. The Court noted that construing a corporation’s default to limit relief to only core board materials “would create undesirable incentives and could encourage corporations to continue the very sort of ‘trench warfare’ SB 21 was intended to discourage.” Institutional investors facing stonewalling from portfolio companies can take comfort that Delaware courts will not reward such tactics.
• Document Preservation Implications. The decision underscores the importance of proper corporate record-keeping. Companies that fail to maintain defined “books and records” may be required to produce broader categories of “functional equivalents.” Institutional investors should encourage their portfolio companies to maintain proper corporate records to avoid complications in any future inspection dispute.

Background

The plaintiff, Robert F. Moran, was the largest outside stockholder and former CEO of Unation, Inc., a Delaware corporation operating an events discovery platform. While serving as Unation’s CEO, Moran was allegedly kept “in the dark” by the company’s  chairman about the corporation’s operations and financial state, including “detailed financial statements, burn rates, plans to raise capital, capitalization tables, or other documents evidencing other funding sources.” Moran became concerned when Unation engaged in an equity offering at “$3 per share”—half the price Moran had paid for his shares—without providing detailed information about the company’s financial performance.

After resigning in April 2025, Moran submitted a formal demand to inspect twelve categories of Unation’s books and records, stating his purposes were to value his investment and investigate possible “mismanagement, waste, or wrongdoing.” Unation’s Chairman rejected the demand as “procedurally and substantively improper” and threatened claims against Moran for breaches of fiduciary duty. Moran then filed suit in the Court of Chancery, and Unation defaulted by failing to appear or defend the action.

The Amended Section 220 Framework

The Court provided an extensive roadmap for practitioners navigating the new Section 220 requirements established by SB 21. Under the amended statute:

Form and Manner Requirements. A stockholder seeking to inspect corporate records must submit a “written demand under oath” that is (1) “made in good faith and for a proper purpose,” (2) “describes with reasonable particularity the stockholder’s purpose and the books and records the stockholder seeks to inspect,” and (3) identifies books and records that are “specifically related to the stockholder’s purpose.”

Defined “Books and Records.” SB 21 now defines nine categories of “books and records” that stockholders may obtain upon satisfying Section 220(b)’s requirements, including: the certificate of incorporation; current bylaws; minutes of stockholder meetings and written consents (for three years); communications to stockholders (for three years); minutes of board and committee meetings; materials provided to the board; annual financial statements (for three years); stockholder agreements under Section 122(18); and director and officer independence questionnaires.

Functional Equivalents Under Section 220(f). If a corporation does not have certain defined books and records—specifically, meeting minutes, stockholder consents, records of board action, financial statements, or (for public companies) independence questionnaires—the court may order production of “functional equivalents,” but “only to the extent necessary and essential to fulfill the stockholder’s proper purpose.”

Additional Records Under Section 220(g). To obtain records beyond the defined “books and records,” a stockholder must satisfy a heightened burden: the stockholder must (1) meet Section 220(b)’s requirements; (2) demonstrate a “compelling need” for inspection of such records to further the stockholder's proper purpose; and (3) show by “clear and convincing evidence” that the specific records are “necessary and essential” to the stockholder’s proper purpose.

The Court’s Interpretations

“Reasonable Particularity” Standard. The Court held that the “reasonable particularity” requirement “does not impose a high threshold.” Drawing from federal discovery rules and the Model Business Corporation Act, the Court concluded that “[s]o long as a demand enables the receiving corporation to understand why the stockholder seeks inspection and what sort of documents it needs to look for, the ‘reasonable particularity’ requirement is satisfied.”

“Specifically Related” Standard. The Court found that the phrase “specifically related” in Section 220(b)(2)(c) was not meant to signal a change in existing Delaware law requiring stockholders to establish that each category of books and records requested is “essential and sufficient to the stockholder’s stated purpose.”

“Functional Equivalent” Defined. The Court defined “functional equivalent” as a document that “(1) contains or conveys, alone or combined with other documents, substantially the same information” as meeting minutes, stockholder consents, records of board committee action, or annual financial statements and “(2) would enable a reasonable individual reviewing that document to learn substantially the same things, come to substantially the same conclusions, or draw substantially the same inferences” as the actual aforementioned books and records.

“Compelling Need” Standard. Borrowing from Delaware’s opinion work product precedent, the Court held that a stockholder demonstrates “compelling need” by establishing that the records sought “are pivotal to the stockholder’s stated purpose” and that the stockholder “would not be able to obtain the information therein from Section 220(a)(1) books and records (or another source).” 

“Specific Records” Standard. The Court rejected an interpretation that would require stockholders to identify unique, individual documents with exacting precision. Instead, the Court adopted an interpretation consistent with Delaware’s existing “rifled precision” standard, requiring the court’s order granting inspection to be tailored to records that are necessary and essential to the stockholder’s proper purposes.

Holdings

Applying these standards to Moran’s demand, the Court found that:

1. Moran had satisfied all form and manner requirements under Section 220(b), including submitting a demand under oath, in good faith, for proper purposes (valuation and investigation of mismanagement), with reasonable particularity.
2. Moran was entitled to inspect Unation’s defined “books and records,” including audited financials (for three years), shareholder agreements, bylaws, stockholder meeting minutes and consents, communications to stockholders, and board and committee meeting materials.
3. Moran was entitled to “functional equivalents” of missing books and records, including capitalization tables, tax returns, and valuation support materials, which the Court found to be the functional equivalent of annual financial statements.
4. Moran was entitled to additional records under Section 220(g), including a fourth year of audited financials, because the well-pleaded facts demonstrated by clear and convincing evidence that these records were necessary and essential to his valuation and investigation purposes.

Looking ahead

This decision represents the first substantive interpretation of SB 21’s books and records amendments. As the Court noted, the amendments apply to all demands made after February 17, 2025, and are severable from the pending constitutional challenges to other portions of SB 21 currently before the Delaware Supreme Court. Practitioners should anticipate additional judicial guidance as more books and records cases are litigated under the new statutory framework, particularly regarding the “compelling need” and “clear and convincing evidence” standards that stockholders must satisfy to obtain records beyond the statutorily defined categories.