October 16, 2026|Publications
Companies now face a more defined but strategically complex books-and-records landscape where demands filed early can strengthen over time with new developments, making Section 220 responses critical merits litigation rather than routine compliance tasks.
For decades, Section 220 of the Delaware General Corporation Law (DGCL) was described as a summary proceeding vindicating a modest inspection right. Few practitioners would describe it that way now. The books-and-records demand has become the opening move of virtually every serious stockholder campaign: the discovery vehicle that Delaware courts told plaintiffs to use before filing derivative suits, and that plaintiffs learned to use with prosecutorial thoroughness.
In the past year and a half, the two institutions that control Section 220 rewrote it from opposite directions. The General Assembly narrowed what stockholders can get. The Supreme Court loosened when they can prove they deserve it. Companies that update only half their playbook will lose fights they should win.
The Statute Contracted
Senate Bill 21, effective March 2025, gave Section 220 something it never had: a statutory definition of “books and records.” The amended statute enumerates the core categories a stockholder with a proper purpose may inspect: the charter and bylaws, stockholder meeting minutes and communications to stockholders within defined lookback periods, board and committee minutes and the materials provided to directors, annual financial statements, and director independence questionnaires, among others.
Everything else now sits behind a gate. To reach records beyond the enumerated categories (the emails, texts, and informal communications that became the currency of post-AmerisourceBergen practice), a stockholder must satisfy the demand prerequisites, show a compelling need for the inspection to further its proper purpose, and demonstrate by clear and convincing evidence that the specific records are necessary and essential to that purpose. The statute also authorizes corporations to redact non-responsive material and to condition production on confidentiality agreements. That codifies, and in places extends, protections companies previously had to litigate for.
The 2025 amendments were pitched as restoring predictability to an inspection regime that had sprawled into pre-suit discovery. Whatever one thinks of that characterization, the practical effect is real: the paper a derivative plaintiff can harvest before filing is narrower, better defined, and easier to produce on the company’s terms.
Then the Statute Widened
On March 25, 2026, one year to the day after SB 21 was signed, a divided Delaware Supreme Court decided Paramount Global v. State of Rhode Island Office of the General Treasurer, 2026 WL 820647 (Del. Mar. 25, 2026) (en banc), and moved the other lever.
The case grew out of a stockholder’s investigation of Shari Redstone’s role at Paramount. Redstone controlled National Amusements, which owned a majority of Paramount’s voting shares, and the demanding stockholder, Rhode Island’s treasury on behalf of its public-employee retirement system, suspected that Redstone had obstructed whole-company sale opportunities while pursuing a transaction that favored National Amusements: a classic controller-conflict theory. A Magistrate in Chancery heard the Section 220 trial, the Court of Chancery found a credible basis to suspect a breach of the duty of loyalty, and Paramount obtained certification of an interlocutory appeal. The fight on appeal was over evidence, not document categories: could the stockholder support its “credible basis” showing, the modest evidentiary threshold Section 220 requires for an investigative purpose, with material that emerged after the demand was served?
Three justices said yes, sometimes. Justice Gary Traynor wrote, joined by Justices Abigail LeGrow and Christopher Griffiths. The majority adopted the framework as the Court of Chancery had articulated it: the general rule is that a stockholder seeking relief under Section 220 “will be limited to evidence identified in the demand and the information available to the stockholder when the demand was made,” but “under exceptional circumstances,” the court may, in the exercise of its sound discretion, consider post-demand evidence that is material to the credible-basis inquiry and not prejudicial to the corporation. The baseline rule survives; the exception is for the unusual case. The judgment was affirmed and the case remanded.
Chief Justice Collins Seitz and Justice Karen Valihura dissented, and their objection was institutional: a bright-line bar on post-demand evidence keeps Section 220 proceedings summary, discourages stockholders from filing thin demands as placeholders and backfilling later, and avoids importing “materiality” litigation into what is supposed to be a fast, narrow action.
The dissent did not carry the day, but its predictions describe the practice that is likely coming.
The New Terrain Mapped
Put the two developments together and the shape of modern books-and-records litigation emerges: the universe of available documents is narrower, the proof rules are looser, and the stakes of each fight are higher.
For companies, the statutory walls are real but the moat is gone. SB 21 lets a well-advised company produce a defined, redacted, confidentiality-protected record. But Paramount means the credible-basis fight is no longer frozen at the demand date. A demand that looked deficient when served can ripen on a news cycle. The court also affirmed the Court of Chancery’s discretion to treat hearsay statements in news reports as sufficiently reliable to be admissible, which makes contemporaneous journalism a live source of credible-basis evidence: reputable reporting about a company’s troubles now functions, practically, as an amendment to every pending demand against it.
For stockholders, timing strategy inverts. The old logic favored waiting to file until the record was complete. The new logic tolerates, and the dissent would say invites, earlier and thinner demands that events may fortify. Companies in the news should expect more demands, served faster. And the proceedings will get heavier. “Materiality” and “prejudice” are now litigable questions inside a supposedly summary action, layered on top of SB 21’s new gates (“compelling need,” “necessary and essential,” “clear and convincing”). Each of those phrases is a motion. The 3-2 margin guarantees continued appellate attention.
The Enforcement Overlay
Here is the dimension of Section 220 practice that deserves more attention than it gets, particularly from companies that have never faced a books-and-records demand and assume they never will.
The most reliable trigger for a modern Section 220 demand is not a merger. It is an 8-K disclosing a government investigation. A subpoena disclosure supplies the “credible basis” showing nearly by itself and identifies the subject matter the demand will target. After Paramount, it also keeps supplying evidentiary reinforcement as the investigation generates news. In my practice defending parallel government and civil proceedings, the sequence repeats almost mechanically: enforcement disclosure, then securities complaint, then Section 220 demand, then derivative complaint built from the production. The pattern’s latest exhibit is instructive for both sides. The B. Riley derivative plaintiff sued only after taking a Section 220 production, and was dismissed this March largely on the record of functioning board oversight that his own production supplied. Marchner v. Riley, 2025 WL 4669746 (Del. Ch. Mar. 30, 2026).
That sequence has a consequence defense lawyers internalize too late: the Section 220 response is merits litigation. Every minute, every board package, and every redaction call in that production is the raw material from which the derivative complaint will be drafted and against which the Rule 23.1 motion will be decided. The company is, in a real sense, choosing the record on which it will later move to dismiss. That is an opportunity as much as a burden, and it should be handled by the lawyers who will litigate the fiduciary case, not treated as a corporate-secretary compliance task.
The Defense Playbook
Object early, and assume waiver is forever. The procedural lesson of Paramount is specific and unforgiving. The court found no prejudice to Paramount for four reasons, all of Paramount’s own making: the post-demand evidence concerned the company’s own conduct, the parties had stipulated to the admissibility of some of it, Paramount did not object to its use before trial, and Paramount offered post-demand evidence of its own. Every evidentiary concession in a Section 220 action, from stipulations and nonobjections to responsive submissions, should be made with appellate consequences in mind, because a ground conceded at trial is gone on appeal.
Answer the demand you may face at trial, not the one served. Because the credible-basis record can now grow, assess the demand against the company’s realistic news trajectory. A company mid-investigation should assume tomorrow’s reporting will be tomorrow’s exhibit, and should factor that into whether to fight, produce, or negotiate scope.
Use SB 21’s architecture affirmatively. The enumerated categories, redaction rights, and confidentiality conditions are tools for shaping the record, not just limiting volume. A disciplined production that tells the oversight story (the audit committee met, the advisers were engaged, the flags were run down) can win the later Rule 23.1 motion before it is filed. Reflexive over-withholding invites the “compelling need” fight that unlocks the drawer you most wanted closed.
Mind the incorporation trap. Delaware doctrine allows companies to condition production on incorporation-by-reference, deeming the produced documents part of any later complaint. Used well, it prevents cherry-picking. It also means the production must be assembled as an advocacy record, because the plaintiff is not the only one who will live with it.
Track demands the way you track claims. For boards and their counsel, a Section 220 demand is an early-warning system with nearly perfect predictive value: it tells you a derivative or securities complaint is being drafted, on what theory, and from what documents. Log it, staff it, and notify the D&O carriers. The demand is frequently the event that starts the notice-clock conversation, and carriers increasingly expect it.
The Bottom Line
The plaintiffs bar lost documents and gained timing flexibility; companies gained statutory protections and lost the comfort of a closed record. Neither side can treat Section 220 as a sideshow anymore. The books-and-records action is now the opening engagement of litigation whose later stages (demand futility, disclosure claims, insurance) are decided by the record it creates, and the side that litigates it that way from the day the demand arrives is the side that tends to win the cases that matter.
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Ashwin J. Ram is a partner at Buchalter LLP in Los Angeles, where he focuses on white collar defense, securities litigation and corporate governance disputes. He previously served for over seven years as an Assistant U.S. Attorney in the major frauds section of the U.S. Attorney’s Office in Los Angeles, and has tried more than two dozen cases to verdict. He regularly represents companies and executives in parallel government and civil proceedings. He can be reached at aram@buchalter.com.
Reprinted with permission from the Oct. 14, 2026 issue of Delaware Business Court Insider. © 2026 ALM Global Properties LLC, trading as Centellic. Further duplication without permission is prohibited. All rights reserved.
