(Elena Elisseeva)

Although shareholders can force a corporation to open its books and records for inspection through court action, doing so may not be the best use of their time.

So argues Francis Pileggi, a corporate and commercial litigation specialist and managing member of Eckert Seamans Cherin & Mellot’s Wilmington, Del. office, in light of a recent ruling in Caspian Select Credit Master Fund Ltd. v. Key Plastics Corp.

The plaintiff in the case, a shareholder, was forced to go to trial to gain access to Key Plastics Corp.’s books and records for the purpose of valuing its shares. The defendants alleged that the plaintiff was instead seeking the information for an unstated, improper purpose, which is, according to the court documents, “to use litigation to harass the Company and to force the Controlling Stockholders to buy Caspian’s interest.”

According to Delaware General Corporation Law Section 220, a shareholder should have permitted access during regular business hours to “inspect for any proper purpose, and to make copies and extracts.” The trial court concluded in the Key Plastics case that the plaintiff’s reasons for seeking access to the company’s records were legitimate and therefore, under Section 220, should be permitted.

However, Pileggi maintains that even though the shareholder won the case, the whole exercise may not have been worth it in the first place. Pileggi recommends that unless the shareholder has substantial money at stake, becoming embroiled in such court proceedings is “not an economically rational option for most non-institutional or non-substantial shareholders to exercise.”