In the recent decision of Knott Partners L.P. v. Telepathy Labs, Inc., C.A. No. 2021-0583-SG (Del. Ch. Nov. 23, 2021), the Delaware Court of Chancery analyzed to what extent a corporation opposing a Section 220 books and records demand may rely upon its stock ledger to deny the demand.
Vice Chancellor Glasscock held that while a corporation may rely upon its stock ledger to reject an inspection demand under Section 220 when the ledger does not list plaintiff as a stockholder, it may not do so when the corporation was otherwise aware of plaintiff’s status as stockholder.
In other words, the court will not allow a corporation to “rely on [its] deficient stock ledger to achieve a dismissal, and to put the Plaintiff to the expense of a new demand and complaint.” Slip op. at 1. The Court further held that in a books and records action, “forcing litigants into the position of submitting extrinsic evidence of stockholder status would be a goad to inefficiency generally incompatible with such an action.” Id.
Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.