As discussed in a prior post, a stockholder seeking inspection of the books and records of a Delaware corporation must assert both a “proper purpose”, and the scope of the demand must be “necessary and essential” to the proper purpose asserted.
The Delaware Supreme Court recently defined the “necessary and essential” standard in the decision of Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, Del. Supr., No. 614, 2013 (July 23, 2014).
The Delaware Supreme Court in Wal-Mart stated that:
Documents are “necessary and essential” pursuant to a Section 220 demand if they address the “crux of the shareholder’ purpose” and if that information “is unavailable from another source.” Whether documents are necessary and essential “is fact specific and will necessarily depend on the context in which the shareholder’s inspection demand arises.
This opinion is significant in that the standard set forth above will be applied by Delaware Courts to determine whether the scope of the demand is narrowly tailored to a proper purpose asserted. This standard should be considered by any individual or entity seeking to made a Section 220 books and records demand, or defend against one.