Courts have narrowed the scope of inspection requests in this way as an additional bulwark against fishing expeditions. ![]() Die Casting and Development Corp., 687 A.2d 563 (Del. Once a stockholder has made an appropriately formatted request for a proper purpose, the corporate documents requested must be "circumscribed with rifled precision." Security First Corporation v. The amount of evidence a stockholder must demonstrate varies with the facts and circumstances of each request. One goal of the proper purpose requirement is to prevent wasteful "fishing expeditions." Accordingly, one stockholder's inspection request alleging corporate mismanagement was recently rejected in Delaware for failure to demonstrate "some evidence of possible mismanagement as would warrant further investigation of the matter." Louisiana Municipal Police Employees' Retirement System v. A proper purpose is one that is related to the stockholder's legitimate interests as such and can include an investigation into self-dealing or mismanagement by the board of directors. The substantive requirements include the need for the stockholder to show a "proper purpose" for the stockholder's request. The procedural requirements include a specific form the request must take, although there are no limitations as to the time the stock must be held before a request can be made or the amount a stockholder must hold. Once a corporation receives an inspection request, it has five days to respond and may object based on a stockholder's failure to meet one or more of these requirements. In Delaware, a stockholder's right to inspect the books and records is subject to procedural and substantive requirements. Stockholders also have certain inspection rights under common law. Other states have similar mechanisms with important differences. Under the DGCL, any stockholder has "the right during the usual hours for business to inspect for any proper purpose, and to make copies and extracts from," the books and records of corporations in which the stockholder has an ownership interest and, in certain circumstances, the books and records of any subsidiary of such corporations. Stockholder Inspectionīeyond the basic requirements, the most relevant statutory provisions relate to a stockholder's limited right to inspect the books and records of the company. ![]() These statutes offer considerable latitude to counsel: There are no specific instructions regarding how to record proceedings or what level of detail to include in the records. Other state statutes largely mirror Delaware's treatment of minutes. The DGCL also provides that records, including minute books, may be stored in any manner so long as the records can be converted into clearly legible paper form within a reasonable time and that clearly legible paper forms of such minute books shall be admissible in evidence and accepted for all other purposes as if they were originals. The only requirement to keep minutes under the Delaware General Corporation Law (the "DGCL") comes from §142(a): "One of the officers shall have the duty to record the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose." 8 Delaware C. The statutory provisions for corporate minutes are spare. Statutory Law and Regulations State Statutory Requirements While the focus is on Delaware state law and public corporations, this Quick Overview discusses other law where appropriate, and its lessons apply more generally. ![]() This Quick Overview reviews the legal requirements underpinning minutes to provide a foundation for counsel when deciding which best practices to adopt. It can range from collecting and preserving all notes taken at a meeting to mandating the destruction of everything but the final record. When it comes to minutes, "best practices" does not necessarily mean consensus. The process is typically more art than science. ![]() By Mark Jackson and Harva Dockery, Norton Rose Fulbright OverviewĪt every meeting of a company's board of directors, counsel faces the decision of what details to include in the minutes and how to memorialize the event in official records.
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