On March 26, 2025, Delaware Governor Matt Meyer signed Senate Bill 21 (SB 21), significantly amending (among other things) Section 220 of the Delaware General Corporation Law (DGCL), the statute that governs shareholders’ rights to inspect corporate books and records.[1] While other attorneys at Levi & Korsinsky have commented on the consequences of other provisions of SB 21,[2] this article specifically focuses on the amendments to Section 220 of the DGCL and the challenges that stockholders now face in obtaining books and records from a company.

Although the bill’s supporters claimed the amendments merely codify existing practices, promote efficiency, and ensure clarity,[3] these changes present a substantial rollback of transparency and oversight mechanisms that investors have long relied upon to monitor corporate management and investigate wrongdoing.

Section 220, codified in the 1967 DGCL amendments, formalized the long-standing common law principle in Delaware that stockholders are entitled to inspect corporate books and records, a tool that has been central to corporate governance and shareholder oversight.[4] While the underlying principle of inspection rights remains intact, the newly adopted amendments introduced substantial procedural and substantive changes that affect both the scope of permissible inspections and the way demands must be made:

What Has Really Changed—And Why It Matters

1. A Statutory Shrinking of the 220 Evidence Pool

One of the most impactful changes is the restriction of what counts as “books and records.” Historically, Section 220 allowed shareholders to request access to a corporation’s “books and records” so long as they could demonstrate a proper purpose.[5] However, the statute did not define what qualified as "books and records," leaving the interpretation to the courts. SB 21 alters that framework by expressly defining the types of documents that would fall within the scope of inspection and by codifying several judicial doctrines that have developed over decades of litigation.[6] Previously, courts could, and often did, order production of informal materials such as emails or text messages when formal documents were lacking or appeared to have been sanitized.[7] These communications frequently contained key insights into directors’ and officers’ actual decision-making and intent. Under SB 21, such materials are off-limits,[8] unless a shareholder can prove that no formal records exist and can meet a significantly higher evidentiary threshold.[9]

These changes not only limit the types of documents shareholders can access, but also shield behind-the-scenes communications that may reveal misconduct, conflicts of interest, or failures in oversight—precisely the kinds of issues that investors often seek to investigate through a books and records demand.

2. Raising the Bar for Shareholder Demands

The new law also imposes more stringent procedural requirements. Accordingly, beyond just narrowing the range of discoverable materials, SB 21 also raises the bar for initiating a Section 220 demand. Shareholders must now:

• Submit a demand in good faith and for a proper purpose;
• Clearly articulate, with reasonable specificity, both the purpose of the request and the relevance of the documents sought;
• Demonstrate a direct link between the requested records and the stated purpose.[10]

Corporations are further empowered to impose confidentiality restrictions and to condition document production on the shareholder’s agreement that any materials obtained may be incorporated by reference in any related litigation.[11] While shareholders have always needed to show a “proper purpose,” SB 21 demands “reasonable particularity” in describing both the purpose and the specific documents sought.[12] This added specificity creates a serious conundrum: how can a shareholder describe the exact documents needed without knowing what exists?

This added hurdle risks deterring shareholders from pursuing valid inquiries, especially when weighed against the cost of litigation.

3. Confidentiality Restrictions Now Tilt Toward Corporations

As noted above, another shift is the explicit authorization for corporations to impose confidentiality agreements and conditions on use of produced materials.[13] Although confidentiality has long been a feature of books and records actions, it was previously subject to equitable review by the Court of Chancery. Under SB 21, confidentiality terms are now more clearly within the company’s control, potentially limiting shareholders’ ability to share findings with other investors, regulators, or the press.

4. Strategic Impact on Follow-On Litigation

Perhaps one of the most significant changes is the mandatory incorporation by reference of all documents obtained through a Section 220 demand into any future complaint.[14] While this might appear to promote fairness by preventing selective use of materials, it can also increase litigation risk for shareholders—forcing them to include potentially unhelpful or ambiguous documents and giving defendants additional ammunition at the motion to dismiss stage.

Effective Date, Application, and What Comes Next?

The amendments apply to all books and records demands made after February 17, 2025. They do not retroactively affect litigation initiated or concluded prior to that date.

Previously, Delaware courts had operated a balanced framework for Section 220 that required credible evidence before permitting intrusive demands, while still giving shareholders access to the tools needed to investigate fraud or fiduciary breaches. SB 21 represents a substantial shift in how Delaware corporations and their shareholders engage over corporate transparency and governance oversight. While supporters of SB 21 argued that these changes would reduce frivolous litigation and preserve judicial resources, SB 21’s newly imposed procedural and evidentiary roadblocks represent a narrowing of shareholder rights that historically empowered investors to hold corporate management accountable. As a result, shareholders, and their attorneys, may find their ability to monitor companies significantly curtailed under SB 21. Shareholders considering a Section 220 demand should expect to do more upfront legal work and be prepared for companies to push back using the enhanced tools now available to them.

[1]See Office of the Governor, “Governor Meyer Signs SB21 Strengthening Delaware Corporate Law”,  Delaware News (March 26, 2025) https://news.delaware.gov/2025/03/26/governor-meyer-signs-sb21-strengthening-delaware-corporate-law/.

[2] Brian Stewart, “Stockholder Considerations Following SB 21”, Levi & Korsinsky, available at https://zlk.com/Blog/stockholder-considerations-following-sb-21#_ftn2 (last accessed Jun. 17, 2025).

[3] In announcing the signing of SB21, Governor Meyer argued that the bill would protect Delaware’s status as “the best place in the world to incorporate your business” by “ensuring clarity and predictability, balancing the interests of stockholders and corporate boards.” See Office of the Governor, “Governor Meyer Signs SB21 Strengthening Delaware Corporate Law”,  Delaware News (March 26, 2025) https://news.delaware.gov/2025/03/26/governor-meyer-signs-sb21-strengthening-delaware-corporate-law/; Mike Phillips, “Corporate law bill moves out of House committee”, WDEL News (Mar. 19, 2025), https://www.wdel.com/business/corporate-law-bill-moves-out-of-house-committee/article_22ab8ffe-f631-40d3-b6b9-68483cd0ea58.html;

[4] State v. Jessup & Moore Paper Co., 77 A. 16, 22 (Del. 1910).

[5] 8 Del. C. § 220(a)(2) (2025) (as amended by Del. S.B. 21, 153rd Gen. Assemb., (2025)), available at https://delcode.delaware.gov/title8/c001/sc07/ (last accessed Jun. 17, 2025) (“Proper purpose means a purpose reasonably related to a stockholder’s interest as a stockholder.”).

[6] 8 Del. C. § 220(a)(1).

[7] KT4 Partners LLC v. Palantir Techs. Inc., 203 A.3d 738, 752 (Del. 2019).

[8] 8 Del. C. § 220(7)(e).

[9] 8 Del. C. § 220(7)(f).

[10] 8 Del. C. § 220(b)(2).

[11] 8 Del. C. § 220(b)(3).

[12] 8 Del. C. § 220(b)(2).

[13] 8 Del. C. § 220(b)(3).

[14] 8 Del. C. § 220(b)(3).