The 2014 decision of Jefferson v. Dominion Holdings, Inc., C.A. No. 8663-VCN (Del. Ch. Sept. 24, 2014) provides an excellent example of the scope of production allowable in a Section 220 books and records demand upon a close corporation.

The Court found that Plaintiff demonstrated that valuing his shares is a primary and proper purpose for his demand, and determining executive compensation.

Accordingly, the Court awarded the following categories of documents:

  • Tax returns and financial reports. However, the Court denied the request for “supporting documents relating thereto”, as the tax returns and financial reports sufficed.
  • Audited consolidated annual financial statements. However the Court denied Plaintiff’s request for unaudited statements.

In addition, the Court held as follows:

  • If documents are stored in electronic format, they should be produced in such format. If they are stored in paper format, and not readily available electronically, then paper production is acceptable.
  • Payment by the stockholder of the reasonable costs of copying company paper records is part of the Section 220 process.

Of note, the Court denied Plaintiff’s demand that subsidiary-by-subsidiary financial reports be provided, given that the corporation handles its reports on a consolidated basis.  As stated by the Court:

It is not an objective of a Section 220 proceeding to require the corporation to compile various financial data in a particular format when it has not done so and when the stockholder has offered no reason why the corporation’s standard practices should not be respected.

If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.