Section 220(d) of the Delaware General Corporation Law (DGCL) permits a director to inspect a company’s books and records “for a purpose reasonably related to the director’s position as a director.” It is well settled under Section 220 that a director’s access to corporate books and records is broader than that of stockholders. A director, who has a proper purpose for inspection, i.e., reasonably related to his or her position as a director, has “virtually unfettered” access—at least equal to that of other board members—to inspect the books and records of the company. The broad inspection rights of directors to access corporate books and records relative to that of stockholders under Section 220 are correlative with the directors’ fiduciary obligations to stockholders “to protect and preserve the corporation.” However, in contrast to the broad scope of discovery permitted in a plenary action under the Delaware Court of Chancery Rule 26, Section 220 limits inspection (even by directors) to documents and communications that fall within its more limited “contemplation of ‘books and records,’” which correlates with the “summary nature of a Section 220 proceeding.”
A recent decision of the Court of Chancery reaffirms these principles, and clarifies that a director request for communications among corporate directors or officers must: “(1) state a proper purpose, (2) encompass communications constituting books and records of the corporation, i.e., those that affect the corporation’s rights, duties, and obligations, and (3) be sufficiently tailored to direct the court to the specific books and records relevant to the director’s proper purpose.” In Chammas v. NavLink, C.A. No. 11265-VCN (Del. Ch. Feb. 1, 2016) (Noble, V.C.), the Court of Chancery held the plaintiff directors’ requests for inspection were limited to records affecting the corporation’s rights, duties and obligations, and must be sufficiently tailored to specific documents and communications relevant to the directors’ stated purpose to perform their duties as directors.
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