The company cannot rely on a deficient share register to deny the Section 220 application despite being aware of the applicant’s status as a shareholder – Corporate / Commercial law
United States: The company cannot rely on a deficient share register to deny the section 220 application despite being aware of the applicant’s status as a shareholder
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In the recent decision of Knott Partners LP v Telepathy Labs, Inc., CA # 2021-0583-SG (Del. Ch. November 23, 2021), the Delaware Court of Chancellery analyzed the extent to which a company opposing a Section 220 books and records application can rely on its share register to deny the request. .
Vice Chancellor Glasscock said that while a company may rely on its share register to reject a request for a Section 220 inspection when the register does not list the applicant as a shareholder , it cannot do so when the company was otherwise aware of the applicant’s status as a shareholder.
In other words, the court will not allow a company to “rely on [its] book deficient inventory to secure a termination, and put the plaintiff at the expense of a new claim and complaint. »Slip op. to 1. The Court further ruled that in an action on the books and registers, “forcing litigants to submit extrinsic evidence of their shareholder status would be a spur to ineffectiveness generally incompatible with such an action”. Identifier.
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