January 19, 2022

Volume XII, Number 19

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January 18, 2022

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Is Someone Else’s Purpose An Improper Purpose?

This post on the Harvard Law School Forum on Corporate Governance and Financial Regulation discusses Vice Chancellor J. Travis Laster’s recent decision in Wilkinson v. A. Schulman, Inc., 2017 Del. Ch. LEXIS 798.  The case involved a stockholder’s demand for inspection under Section 220 of the Delaware General Corporation Law.  Vice Chancellor Laster denied inspection based on the stockholder’s failure to demonstrate a proper purpose as required by Section 220:

On the record presented in this case, the Company proved that Wilkinson’s purported purposes were not his actual purposes. They were his counsel’s purposes.

How would this case fare under Nevada’s corporate law?  Nevada’s inspection statute, NRS 78.257, differs in many ways.  Under the Nevada statute, a corporation may deny inspection if the stockholder refuses to furnish the corporation with “an affidavit that such inspection, copies or audit is not desired for any purpose not related to his or her interest in the corporation as a stockholder”.  In other words, the stockholder may be required to disavow any improper purpose, even though the stockholder may have one or more proper purposes.  The question then becomes whether someone else’s purpose is a purpose not related to a stockholder’s interest in the corporation qua stockholder.

For more on inspection under Nevada’s statute, see Delaware Inspection Ruling May Cause Yahoo! Inc. To Regret Not Incorporating In Nevada and Section 6.14 of Bishop & Zucker on Nevada Corporations and Limited Liability Companies.

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume VII, Number 335
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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