Section 220 of the Delaware General Corporation Law is the statute that lets a stockholder inspect a corporation's internal books and records, provided the demand is made in writing, under oath, and for a "proper purpose" reasonably related to the person's interest as a stockholder. The Delaware Supreme Court has confirmed that a stockholder need not prove wrongdoing occurred to invoke the right — only a "credible basis" to suspect it, the lowest evidentiary bar Delaware courts apply.
What does Section 220 actually let a stockholder do?
Under the statute as codified, "any stockholder, in person or by attorney or other agent, shall, upon written demand under oath, have the right during the usual hours for business to inspect for any proper purpose" the corporation's books and records. Directors have a separate, broader inspection right tied to their board duties. The stockholder right is narrower: it exists to serve interests the person holds as an owner of stock, not as a competitor, employee, or outside investigator.
"Proper purpose" is defined in the statute as a purpose reasonably related to the stockholder's interest as a stockholder. Delaware courts have long treated investigating possible corporate wrongdoing — mismanagement, waste, or a breach of fiduciary duty, the obligation directors and officers owe to act in the company's interest — as a proper purpose, provided the stockholder can point to some evidentiary basis for the suspicion rather than mere curiosity.
What must a demand letter contain?
The statute sets out specific form-and-manner requirements. A demand must be in writing and made under oath; it must be directed to the corporation's registered office or principal place of business; and it must describe with reasonable particularity the stockholder's purpose and the specific books and records sought. A stockholder who holds shares through a broker rather than as a record holder must also submit documentary evidence of beneficial ownership. Courts have dismissed demands that fail these mechanical requirements without reaching the merits of the underlying purpose.
How much evidence does a stockholder need to show wrongdoing?
This question reached the Delaware Supreme Court in AmerisourceBergen Corp. v. Lebanon County Employees' Retirement Fund, decided December 10, 2020 (No. 60, 2020). Two pension funds sought board-level records to investigate the company's internal controls over opioid distribution. The Court of Chancery ordered production and allowed a follow-up deposition under Court of Chancery Rule 30(b)(6) to identify who held responsive documents; AmerisourceBergen appealed.
The Supreme Court affirmed on three points that now frame every Section 220 case involving suspected wrongdoing. First, a stockholder investigating wrongdoing need not identify in advance what it will do with the documents if wrongdoing is confirmed. Second, and central to the opinion, a stockholder does not have to show that the wrongdoing under investigation would be "actionable" — that it could support a winning lawsuit — to obtain inspection; the court explicitly narrowed its earlier summary decision in AbbVie to the extent that ruling suggested otherwise. Third, ordering a deposition to identify document custodians was within the trial court's discretion where the company had made that identification difficult.
The opinion also addressed how much a stockholder must show to establish that suspicion in the first place: "a credible basis from which the court can infer there is possible mismanagement as would warrant further investigation," proven by a preponderance of the evidence. The court described this as the lowest possible burden of proof under Delaware law — it requires legitimate, articulable grounds for suspicion, not proof that misconduct actually happened.
What records can a stockholder actually obtain?
Scope disputes are common once a proper purpose is established. In AmerisourceBergen, the company had itself defined "Board Materials" broadly in an earlier stipulation, and the Court of Chancery read that definition to cover three layers: formal materials presented at board or committee meetings; informal or draft materials prepared "in connection with" those meetings; and materials prepared by officers or employees relating to matters the board considered. The Supreme Court upheld that reading, while noting that which specific documents within the informal and officer-level categories are "necessary and essential" to the stockholder's purpose remains a case-by-case determination for the trial court, not an automatic entitlement to everything in those categories.
Delaware's General Assembly revisited the statute's scope directly through Senate Bill 21 in the 153rd General Assembly, part of a broader package of 2025 amendments to the General Corporation Law. Among other changes, the legislation works to define the categories of materials a corporation must maintain and that a stockholder may demand under Section 220, and it addresses what happens when a corporation's own records fall short of that definition: the statute allows the Court of Chancery to order production of additional corporate records that are "necessary and essential" to the stockholder's stated purpose. The amendments were part of a larger legislative response, following debate in the corporate bar over the predictability of books-and-records litigation, and they apply going forward to demands and disputes arising under the amended statute.
What happens if a company refuses a demand?
A stockholder whose demand is refused, ignored, or only partially answered may file a Section 220 action in the Court of Chancery, Delaware's specialized business court, seeking an order compelling inspection. These are typically summary proceedings, meaning they move on an expedited schedule compared with ordinary litigation. The Court of Chancery may condition any production on confidentiality restrictions, and it decides independently whether the stockholder's stated purpose is proper and whether the specific records sought are necessary and essential to that purpose — a corporation's view that a demand is a fishing expedition does not resolve the question; the court does.
A books-and-records action does not itself allege that a company or its directors did anything unlawful, and a court order compelling production is not a finding that misconduct occurred. It resolves only whether the stockholder has cleared the statute's procedural and evidentiary thresholds for access to the underlying documents.
Frequently Asked Questions
Does a Section 220 demand mean the company is being sued?
Not necessarily. A books-and-records demand is often a pre-suit investigative tool stockholders use to gather facts before deciding whether grounds exist to file a separate lawsuit, such as a derivative claim alleging breach of fiduciary duty.
Can any stockholder make a demand, no matter how few shares they hold?
The statute does not set a minimum share threshold for record holders; the requirement is a proper purpose and compliance with the demand's form and manner, not the size of the stockholder's position, per the codified text of Section 220.
What is the "credible basis" standard from the AmerisourceBergen case?
It is the evidentiary threshold the Delaware Supreme Court described for demands investigating wrongdoing: some evidence, proven by a preponderance of the evidence, from which a court can infer possible mismanagement warranting further investigation — described in the opinion as the lowest burden of proof under Delaware law.
Did the 2025 amendments eliminate stockholders' inspection rights?
No. Senate Bill 21 worked to define which categories of materials fall within "books and records" and what a corporation must maintain, and it lets the Court of Chancery order additional necessary and essential records when a company's own records fall short, per the bill's legislative record.
Where does a Section 220 case get filed?
In the Delaware Court of Chancery, the state's specialized business court, which decides whether the stockholder's purpose is proper and which specific records are necessary and essential to that purpose.
For a related corporate news perspective, read Court Vacates FTC's Expanded HSR Form, Restoring Pre-2025 Premerger Filing Rules.