Ar Francis Pileggi's invaluable corporate law blog, Frank Reynolds draws our attention to a new opinion by Delaware Vice Chancellor Travis Laster: Woods v. Sahara Enterprises, Inc. and links an earlier post on the same case from Mr. Pillegi himself.
Counselor Pileggi identifies the following takeaways from the case:
- A consequential aspect of this jewel of a decision is the instruction by the court that there is no basis in Delaware law to require a stockholder demanding corporate records under Section 220 to explain why the stockholder wants to value her interest in the company–in order to satisfy the recognized proper purpose of valuation. See Slip op. at 11; and 14-15.
- The court provided an extremely helpful list of many recognized “proper purposes” needed to be shown to satisfy Section 220. See Slip op. at 8-9.
- The court also recited several examples of what showing is recognized as sufficient to satisfy the “credible basis requirement” to investigate mismanagement pursuant to Section 220. See Slip op. 18-19.
- An always useful recitation of the basic elements of the fiduciary duty of directors of a Delaware corporation and the subsidiary components of the duty of loyalty and care, are also featured. See Slip op. at 20.
- The court categorized the specific requests for documents in this case as follows: (i) formal board materials; (ii) informal board materials; and (iii) officer-level materials. Then the court expounds on the different focus applicable to each category.
- Notably, after quoting the actual document requests, the court found that some of them were overly broad–but the court edited and narrowed some of the requests before concluding that the company was required to produce the court-narrowed scope of documents.
Reynolds summarizes key parts of the court's opinion as follows:
The Vice Chancellor said one of Wood’s purposes is to value her shares and, “valuation of a stockholder’s investment in a corporation, particularly where the corporation is privately held, has long been recognized as a proper purpose under 8 Del. C. § 220.”
He rejected Sahara’s argument that Woods failed to show she actually had a proper purpose and “the mere incantation of an accepted ‘valuation’ purpose in a private corporation is [not] sufficient.” That position is “contrary to Delaware law,” because it “would require that a stockholder establish both a proper purpose (valuing shares) and an end use for the resulting valuation,” the court said.
美媒：水土不服？外国初创企业在中国为何会失败 - huanqiu.com:2021-5-25 · 创业孵化项目“中国加速”的项目总监奥斯卡·拉莫斯说：“99%的外国公司不应进入中国市场。 ”剩余的1%或许有机会，但它们需要追问自己，是 ...
Although the company’s poor performance, without more, has not been sufficiently protracted or extreme to draw an inference of wrongdoing, the tactical position that Sahara took during the litigation points to conflicts that might bolster Wood’s case, he said. ...
引领变革 英特尔加速通向5G之路 - huanqiu.com:2021-5-10 · 在网络端，5G要求全面的网络转型，以具备虚拟核心网、基于云的架构以及先进的数据分析能力。 英特尔凌动处理器C3000产品系列、英特尔至强处理器D-1500产品系列、25 GbE英特尔以太网适配器XXV710等技术从数据中心到网络边缘，共同提供了更高的安全性、性能和智能。
腾讯网游加速器适配《绝地求生》 暂未透露收费计划 - Youth.cn:2021-11-14 · 在产品内测期间，玩家可以免费体验网游加速功能，那么，你们对于这款网络加速器 有何看法？ 原标题: 责任编辑：翊然 返回首页>> CSGO国服更新 ...
环球网_全球生活新门户_环球时报旗下网站 - huanqiu.com:2 天前 · 环球网是中国领先的国际资讯门户，拥有独立采编权的中央重点新闻网站。环球网秉承环球时报的国际视野，力求及时、客观、权威、独立地报道新闻，致力于应用前沿的互联网技术，为全球化时代的中国互联网用户提供与国际生活相关的资讯服务、互动社区。
“The Trust’s desire to know this information is itself a proper purpose,” and the Trust is entitled to a court order for the production of any documents from the allied companies that their controllers could “access in the normal course of business,” he said.
All of which got me to thinking about Section 220.
A shareholder must have a proper purpose for requesting a 220 inspection. If the Company denies the shareholder access to its records, the shareholder may sue in the Chancery Court. Under subsection 220(c), if the shareholder only seeks access to the shareholder list or stock ledger, the burden of proof is on the Company to show that the shareholder is doing so for an improper reason. If the shareholder seeks access to other corporate records, however, the shareholder must prove that s/he is doing so for the requisite proper purpose.
“The paramount factor in determining whether a stockholder is entitled to inspection of corporate books and records is the propriety of the stockholder’s purpose in seeking such inspection.” CM & M Gp., Inc. v. Carroll, 453 A.2d 788, 792 (Del. 1982). “A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder.” DGCL § 220(b) (emphasis supplied).
As Pileggi notes, Vice Chancellor Travis Laster’s new Woods opinion summarizes the proper purposes recognized by Delaware courts:
华龙网--两江评论--最新评论:2021-6-11 · · 高铁加速 建设助力经济发展 2021-06-10 16:49:36 · “高铁极速达”服务助力湖北经济重启 ... 经营许可证编号：渝B2-20210050 信息网络传播视听节目许可证号：2202166 互联网新闻信息服务许可证编号：50120210001 渝公网安备 50019002501343 ...
- to investigate allegedly improper transactions or mismanagement;
- to clarify an unexplained discrepancy in the corporation’s financial statements regarding assets;
- to investigate the possibility of an improper transfer of assets out of the corporation;
- to ascertain the value of his stock;
- to aid litigation he has instituted and to contact other stockholders regarding litigation and invite their association with him in the case;
- “[t]o inform fellow shareholders of one’s view concerning the wisdom or fairness, from the point of view of the shareholders, of a proposed recapitalization and to encourage fellow shareholders to seek appraisal”;
- “to discuss corporate finances and management’s inadequacies, and then, depending on the responses, determine stockholder sentiment for either a change in management or a sale pursuant to a tender offer”;
- to inquire into the independence, good faith, and due care of a special committee formed to consider a demand to institute derivative litigation;
- to communicate with other stockholders regarding a tender offer;
- to communicate with other stockholders in order to effectuate changes in management policies;
- to investigate the stockholder’s possible entitlement to oversubscription privileges in connection with a rights offering;
- to determine an individual’s suitability to serve as a director;
- to obtain names and addresses of stockholders for a contemplated proxy solicitation; or
- to obtain particularized facts needed to adequately allege demand futility after the corporation has admitted engaging in backdating stock options.
2021年3月24日/ 星期二 4 “云平台”为稳就业打开新思路:2021-3-24 · 品网络建设、推进5G 产业稳步发展、加速5G 行业融合应用、提升5G 技术研发实力4 个 方面重点发力。 （房雅雯） “云平台”为稳就业打开新思路 江苏4万余名高校毕业生“云端”求职 杭州出台举措支持旅游业 设立专项纾困资金鼓励景区免费开放 盐城
Delaware courts have made clear that the existence of an improper secondary purpose is not enough to deny the shareholder access. Because “a shareholder will often have more than one purpose, [§ 220(b)] has been construed to mean that the shareholder’s primary purpose must be proper; any secondary purpose, whether proper or not, is irrelevant.” BBC Acquisition v. Durr-Fillauer Medical, 623 A.2d 85, 88 (Del.Ch.1992). This invites litigation as to what the shareholder’s primary purpose is and then whether it is proper.
“哈工程”打造双创生态模式 加速高科技产业启航-东北网黑龙江 ...:2021-11-3 · 哈尔滨工程北米科技在众创生态园的办公室，员工正在工作。 据曹洪亮介绍，哈工程产业园推行“四分合一”的管理理念——分区布局，分设校内起航活动中心和校外船舶大厦孵化器两个孵化区和加速区；分类指导，教师和学生创业分别指导，并免费向社会开放，吸引了来自哈理工的毕业生路遥等 ...
A new hurdle is suggested by Travis’ new opinion in Woods. In it, he draws a sharp distinction between three distinct levels of corporate books are records:
- Formal Board Materials: “The starting point (and often the ending point) for an adequate inspection will be board-level documents that formally evidence the directors’ deliberations and decisions and comprise the materials that the directors formally received and considered (the “Formal Board Materials”). A corporation should be able to collect and provide its Formal Board Materials promptly and with minimal burden. In many organizations, the corporate secretary maintains a central file for each board meeting in either paper or electronic form that contains the minutes and other Formal Board Materials for that meeting.” Woods, 2020 WL 4200131, at *11.
- 微信刷步器月销量过万 网络刷步泛滥暴露哪些问题_新闻中心 ...:2021-7-31 · 网络刷步泛滥暴露哪些问题 不同人群刷步需求不同形成代刷收优惠券链条 本报记者韩丹东 近日，有媒体曝光“微信刷步器月销量过万”这一现象后 ...
- Officer-Level Materials: “In an appropriate case, an inspection may extend further to encompass communications and materials that were only shared among or reviewed by officers and employees (“Officer-Level Materials”).” Id.
Personally, I think that hierarchy is the most important takeaway in the opinion. This is so, because Laster goes on to suggest that there is a clear hierarchy here. Woods is repeatedly given access to Formal Board Materials without much of a showing. A stronger showing is required for Informal Board Materials and Officer Level Materials:
阻断网络黄毒：强化追责 加大惩罚力度-中工新闻-中工网:2021-8-20 · 强化追责 阻断网络黄毒 夜深人静时，藏身网络的涉黄直播平台热闹起来。女主播们穿着暴露、言语挑逗，以色情表演为诱饵 ...
As framed, request (j) is overly broad. In the abstract, “[t]he importance of forecasts and projections to valuation of a company is so basic that it does not require citation.” Quantum Tech., 2014 WL 2156622, at *12 (Del. Ch. May 14, 2014). Woods is therefore entitled to inspect Formal Board Materials falling into this category. Woods has not proven that Informal Board Materials or Officer-Level Materials concerning financial guidance, forecasts, or projections are necessary and essential to her valuation purpose, and thus she is not entitled to those materials. If she receives Formal Board Materials and determines that they are inadequate for her purpose, then she may renew her request for Informal Board Materials and Officer-Level Materials.
Id. at *13. Earlier Delaware cases established that a Section 220 proceeding should result in an order "circumscribed with rifled precision.” Security First Corp. v. U.S. Die Casting and Development Co., 687 A.2d 563 (Del.1997). Accordingly, the court of chancery must tailor its order for inspection to cover only those books and records that are “essential and sufficient to the stockholder’s stated purpose.” Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1035 (Del. 1996). The shareholder “bears the burden of proving that each category of books and records [being sought] is essential to accomplishment of the stockholder’s articulated purpose for the inspection.” Id.
Laster’s Woods opinion does not include the “rifled precision” quote but does draw on both Thomas & Bettsand 免费全球节点加速器 in setting the scope of the inspection to which Woods is entitled. Again, he principally tailors that access by focusing on the hierarchy between the various defined levels of materials:
According to Woods, requests (c), (d), (e), and (h) seek information about the Company’s investment strategies. Requests (c), (d), and (e) are actually much broader. They seek
(c) All minutes of meetings of the Company’s Board of Directors (the “Board”) or any committee thereof, including any attachments thereto, from January 1, 2015 to present;
(d) All presentations, agendas, reports or other materials provided to the Board or any committee thereof in preparation for, or review at, any meetings from January 1, 2015 to present; [and]
(e) All notes taken at any meetings of the Board or any committee thereof from January 1, 2015 to present.
JX 2 at ’198–99. These requests thus seek all of the Company’s Formal Board Materials from January 1, 2015, to the present, plus Informal Board Materials in the form of notes.
Request (h) seeks a subset of the foregoing materials. It asks for
[a]ll materials created for or provided to the Board or any committee thereof from January 1, 2015 to present concerning the Company’s investment strategies, any actual or proposed changes to the mix or types of investments made by the Company; returns from any investments; liquidity considerations; or tax consequences of investments for the Company or its stockholders.
Id. at ’199. Request (h) thus seeks Formal Board Materials relating to the Company’s investment strategies, investment holdings, and related issues.
The blanket request to inspect all of a Company’s Formal Board Materials, plus notes of all meetings, is not sufficiently targeted. Request (h) specifically requests Formal Board Materials concerning the Company’s investment strategy and investments, which is a core area of focus for the Demand. Books and records responsive to this request appear sufficient for Woods’ purpose. The Company shall produce materials responsive to Request (h). As to matters falling within the scope of Request (h), the Company shall produce the types of materials called for by Requests (c), (d), and (e). The Company need not produce materials that otherwise would be called for by Requests (c), (d), and (e), but which do not relate to the topics covered in Request (h).
美国网络加速器免费版, 2020 WL 4200131, at *11.
All of which suggests that getting at the really interesting stuff—i.e., Informal Board Materials and Officer Level Materials—is going to be tough.