Delaware Chancery Court Clarifies Limits of §220 Record Confidentiality

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By Michael Greene

Jan. 5 — The Delaware Chancery Court clarified in a Dec. 31 letter opinion that it can limit the number of years that information received under a §220 books and records request must be kept confidential.

“Materiality of financial information—which is the fundamental issue—lessens as it ages,” Vice Chancellor John W. Noble opined.

In this case, the court ruled that one year after the production of the books and records is a reasonable accommodation of the competing interests.

This ruling comes just a week after the Delaware Supreme Court held that the chancery court can use its broad discretion to allow a corporation to require a stockholder to agree to a forum selection provision as a condition for inspecting books and records.

Time Limits and Conditions

In the underlying case, Ravenswood Investment Co., LP initiated proceedings under 8 Del. C. §220 to inspect certain books and records belonging to Winmill & Co. Inc.

Although Winmill is not a reporting company under the federal securities laws, its stock trades in the over-the-counter market. Ravenswood sought to inspect Winmill's financial statements from the previous two years that had not been released to the public.

In a May 30 ruling, Vice Chancellor Noble held that Winmill could not condition the right to inspect its financial statements on Ravenswood agreeing not to trade in Winmill's stock upon receiving the material nonpublic information.

To help settle two ongoing topics of dispute, the court issued the Dec. 31 opinion to address: (i) the appropriate scope of confidentiality, and (ii) indemnification for losses resulting from violations or alleged violations of federal or state securities laws.

Although the court noted that it is difficult to set a precise amount of time that the information requested needs to be kept confidential, in this case, “[o]ne year after the production to Ravenswood (or, if earlier, when it becomes public information) is a reasonable accommodation of the competing interests.”

The court also held that it would not condition Ravenswood's access to Winmill's books and record upon an indemnification commitment. “[C]onditioning a right provided by 8 Del. C. § 220 upon an unlimited and unrestricted indemnification obligation unduly impairs a shareholder’s rights as conferred by Delaware law,” Vice Chancellor Noble opined.

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The opinion is available at