You’re the CEO of a Delaware C-corp. Series B, $80M post, 90 employees, a year out from your next round. On a Tuesday at 4:11 p.m., your general counsel forwards you an email from a plaintiff firm you have never heard of. Attached is a four-page letter on firm letterhead. The opening paragraph identifies the firm’s client (a stockholder you have never spoken to, who owns 900 shares of your common stock through a brokerage account), and the next 19 pages demand production, within five business days, of 47 categories of corporate records. Board minutes. Committee minutes. Drafts of board minutes. Director questionnaires. Officer questionnaires. D&O questionnaires from the last three years. Internal communications regarding the most recent acquisition. Communications between the board and management. Communications between members of the board. Communications between members of the board and counsel. Calendar invites. Slack exports. The “proper purpose” recited in the cover letter is investigation of potential mismanagement and breach of fiduciary duty in connection with a transaction your board approved 14 months ago and the press has been mostly positive about.
Your general counsel calls outside counsel. Outside counsel says the letter is a Section 220 demand under the Delaware General Corporation Law and that the firm sending it has filed about 300 of these in the last two years. Most settle. The ones that don’t get litigated to a fact-driven decision in the Court of Chancery. Either way, you produce documents. Either way, you write checks to your defense counsel. Either way, the production becomes the discovery file for the derivative complaint that follows, drafted by the same firm, filed in the same court, naming your board and your officers as defendants for the same transaction.
You ask outside counsel what your defenses are. Outside counsel pulls up your certificate of incorporation. It is the standard 2018-vintage form your incorporation lawyer used when you formed the company eight years ago. It does not address Section 220 at all. [M: most certificates from that era do not.]
This is the story of an enormous and growing share of Delaware corporate litigation in 2026. It is happening right now to companies who never thought of themselves as litigation targets, and the lawyers who incorporated them did not include the four lines that would have made today’s letter shorter, narrower, and more expensive to send.
The letter doesn’t have to come from a plaintiff firm
The same statute is available to the angel who put $50K into your seed round and now feels iced out of Series B information rights. To the small fund that took a token check in the pre-seed and decided after the priced round that it didn’t like the option pool sizing. To the holdout SAFE investor who reads MFN clauses better than you do. To the pro rata holder who thinks the last round was priced too low and wants to make a point. None of them needs a “proper purpose” beyond what they can recite in a demand letter. None of them needs to allege harm. They have one share each, a grievance, and the same 220 right.
The plaintiff firm sends 300 demands a year because the economics work at scale. The annoyed investor sends one because the economics work at scale of one. The corporation pays the same response cost either way. [S: the angry angel uses the same statute as the plaintiff firm.]
What Section 220 actually is
Section 220 of the Delaware General Corporation Law gives any stockholder of a Delaware corporation, including someone who bought a single share through Robinhood three weeks ago, the right to inspect the corporation’s books and records for any “proper purpose.” The corporation must respond, must produce, must pay its own defense costs, and must do so on the timeline the demand sets unless it can convince the Court of Chancery to narrow or refuse the demand.
The statute was written in 1967 to let stockholders confirm what was actually happening inside the companies they owned. Books-and-records inspection was a check on management, exercised by stockholders with real economic stakes, to test specific concerns about specific decisions. It was a narrow tool with a narrow purpose.
The tool is still narrow. The purpose is no longer narrow.
Over the last 15 years, plaintiff firms built a business model around 220.1 The mechanics are simple. A firm identifies a transaction or disclosure that it believes can be litigated. It locates a stockholder client, sometimes one of the firm’s repeat plaintiffs, sometimes a quickly recruited holder of a few hundred shares. It serves a 220 demand on the corporation seeking the broadest possible category of records. It litigates the demand if the corporation pushes back. It uses the production as the factual record for a derivative complaint, a class action, or an appraisal proceeding. The 220 production is not the lawsuit. The 220 production is the lawsuit’s discovery file, obtained pre-suit, on the corporation’s dime, before the corporation has any meaningful procedural defenses.
The asymmetry is the product. The plaintiff bears almost no cost to send the letter. The corporation bears every cost of the response. [M: this is the business model.]
How the asymmetry works
Three asymmetries, compounding.
The cost asymmetry. A 220 demand is a letter. Drafting it takes a paralegal an afternoon and a partner an hour of review. The corporation’s response is a months-long document collection, privilege review, redaction pass, and production effort that runs through outside counsel, e-discovery vendors, and the time of every executive whose communications fall in scope. A demand that costs the plaintiff firm $2,000 to send costs the corporation six figures to answer. The firm that sends 300 demands a year is running a business at scale. Each defendant is a one-off facing the full cost.
The standing asymmetry. A 220 plaintiff needs to be a stockholder. That is the entire bar to entry. One share is enough. The plaintiff does not need to allege harm. The plaintiff does not need to allege loss. The plaintiff does not need to be a long-term holder, a meaningful holder, or a holder during the period the demand investigates. The plaintiff needs a brokerage statement and a “proper purpose,” and Delaware courts construe proper purpose forgivingly. The pleading standard for an actual derivative suit is much higher. The 220 demand is the path around the pleading standard.
The information asymmetry. Stockholders sue corporations because corporations have the documents. The 220 production hands the documents over before the suit is filed. The plaintiff drafts a complaint with the corporation’s own minutes, the corporation’s own emails, and the corporation’s own deliberative drafts already in hand. The motion to dismiss the complaint that follows is therefore harder to win, because the complaint cites real documents the plaintiff would have had no access to without 220. The corporation that produced the documents is now defending against a complaint built from them.
The plaintiff’s bar did not invent these asymmetries. The statute has had them since 1967. What changed is the volume of demands and the sophistication of the firms sending them. There were a handful of 220 demands a year in the 1990s. There are now thousands.
The four mechanics that eat your defense
The “proper purpose” stretch. Delaware courts have allowed almost any plausibly stated purpose to support a 220 demand: investigating mismanagement, considering a derivative suit, valuing shares for sale, communicating with other stockholders, evaluating director independence. Almost every demand is drafted to recite multiple purposes, because if any one of them is proper, the demand survives. The corporation that wants to challenge the demand on purpose grounds usually loses. The corporation that wants to narrow the demand on scope grounds gets a hearing, and a partial production order, and the bill anyway.
The scope expansion. Books and records, read literally, means the corporation’s formal records: certificate, bylaws, board minutes, stockholder lists. Read by the Delaware courts over decades of decisions, books and records grew to encompass officer-level communications, director text messages, draft minutes, board materials never adopted, and informal communications among directors made over personal email. The “books and records” of a 2026 Delaware corporation, as a 220 plaintiff will define them, includes essentially every document the corporation’s leadership has ever generated about the matter under investigation. The expansion was incremental, case by case, and a corporation defending a demand inherits the cumulative breadth.
The privilege fight. Once the production scope is set, the corporation has to identify what within scope is privileged and what is not. A 220 production is preceded by a document-by-document privilege review run by outside counsel, with privilege logs, claw-back protocols, and an opposing firm that will challenge every withholding. The privilege review is often the largest line item in the response budget. The plaintiff firm has built its workflow to push as much as possible past the privilege wall: the Garner exception, fiduciary exception arguments, communications with non-lawyers in the room, communications about commercial rather than legal matters. Every challenged withholding is a hearing. Every hearing is a fee.
The follow-on suit. The 220 production is rarely the end. It is the beginning. The same firm that sent the demand uses the production to draft a derivative complaint, a class action complaint, a books-and-records-anchored appraisal petition, or a stockholder proposal campaign. The complaint is filed weeks after the production closes, in the same court, on the same set of facts, supported by the same documents. The corporation that paid to produce the records is now paying to defend against the suit those records produced. The defense costs of the suit dwarf the defense costs of the demand.
If your certificate of incorporation predates 2023 case law on Section 220, it almost certainly does not have the carveout it should.
Talk to a Talairis attorney →What changed in 2025
The Delaware legislature passed Senate Bill 21 in early 2025, the most significant amendments to the DGCL in 20 years. Section 220 was one of the headline targets.
The amendments added a new statutory definition of “books and records,” 13 specific categories, including certificate and bylaws, board and committee minutes, certain stockholder communications, financial statements, D&O questionnaires, and a defined set of officer materials. Documents outside the 13 categories are not “books and records” by default. A stockholder seeking documents outside the categories must show “compelling need,” a higher standard than the historical “proper purpose.”
The amendments also let corporations require, as conditions of inspection, that the stockholder execute a confidentiality agreement, that the inspection be conducted at a specified location, and that the records produced be used only for the proper purpose stated in the demand.
This was meaningful. The 13-category list is narrower than the breadth Delaware courts had grown 220 to cover. Confidentiality conditions take the marketing of pre-suit documents off the table. The “compelling need” requirement re-introduces friction the case law had eroded.
It is also nowhere near enough.
The 13 categories still include board minutes, committee minutes, stockholder lists, and the financial records, which is almost everything a plaintiff firm wants. The “compelling need” standard is new and untested. The early Court of Chancery decisions interpreting it have been mixed. The confidentiality conditions help with the pre-suit document marketing but not with the cost of the production itself. And the amendments did not change the underlying economics. The plaintiff still files the demand at almost no cost, and the corporation still funds the response.
The amendments narrowed the field. They did not fix the asymmetry.
Where the certificate comes in
Here is the part most founders, most boards, and an embarrassing share of corporate counsel have not absorbed.
Section 220 is a default rule. The certificate of incorporation can modify it within limits the statute and the case law set. A well-drafted Delaware certificate, for a corporation that expects to be a plaintiff target (meaning every corporation with a board, an investor base, a balance sheet, and a public profile), should include a Section 220 carveout. Four kinds of provisions belong in it.
Forum selection. A Delaware-forum provision requires that all internal-affairs litigation, including 220 actions, be brought in the Court of Chancery. Without it, plaintiffs can file in any state where they can establish jurisdiction, and several state courts are markedly more plaintiff-friendly than Chancery. Forum selection clauses for 220 are clearly enforceable under Delaware law and have been since Boilermakers in 2013, but a meaningful share of older certificates do not include them, and a meaningful share of newer ones do not extend the forum clause expressly to 220 demands.
Confidentiality conditions. The 2025 amendments allow the corporation to require confidentiality agreements as conditions of production. The certificate (or bylaws) should pre-impose them. A standing confidentiality requirement, built into the corporation’s governing documents, converts confidentiality from a fight at the demand stage into a settled term. The plaintiff’s lawyer who refuses to sign the standing form is the plaintiff’s lawyer who walks away from the demand.
Holder thresholds and holding periods. The statute does not require a minimum ownership stake or a minimum holding period. The certificate can. A reasonable threshold (for example, a minimum percentage of outstanding shares, or a minimum holding period of a year, calibrated to the size of the company) filters out the smallest opportunistic demands without foreclosing the right entirely. The enforceability of these provisions is the contested frontier. The Delaware courts have not categorically blessed them, but several recent decisions are friendlier than they used to be, and the 2025 amendments support reading the statute as allowing reasonable conditions on the right.
Demand-letter procedural specificity. The certificate can prescribe the form, content, and addressee of a 220 demand: what must be alleged, what must be attached, what must be sworn, where it must be sent, and what cure rights the corporation has to narrow it before suit. Demand-letter rigor is the cheapest defensive lever a corporation has. A demand that fails to comply with the certificate’s procedural requirements is a demand the corporation can answer with a one-page response declining production until the defect is cured. The plaintiff firm that sent 300 form demands last year is not going to redraft them all to comply with your bespoke procedural requirements. The demand goes elsewhere.
None of these provisions eliminates the right of inspection. Eliminating the right is not allowed, and any provision that purports to do so is unenforceable. The point is to channel the right into a form that costs the plaintiff something to invoke and protects the corporation from the costs of the unfocused demand.
What this means for you
Three things every founder and every board should understand.
The certificate you adopted at incorporation was drafted before the plaintiff economics existed. The standard incorporation forms used by every reputable startup firm in 2015 assumed Section 220 was an academic provision exercised rarely, by stockholders with real concerns, in the form contemplated by the statute. The forms reflect that assumption. They include forum selection clauses if you are lucky. They almost never include the rest. The certificate was drafted for a world that does not exist anymore.
The amendment to fix it is procedurally cheap and politically free. Adding a Section 220 carveout to the certificate is a single-issue charter amendment. It does not require a financing. It does not require a board reorganization. It does not require negotiation with investors, because no investor objects to provisions that reduce frivolous-litigation cost. It is a board approval, a stockholder consent, a state filing, and a four-figure fee. The fee is recovered the first time a demand is sent and your counsel’s first response cites the carveout. [M: cheaper than the first demand.]
The window to amend is now, not after the demand arrives. The Delaware courts will not enforce certificate amendments adopted after the demand is served, at least not against the demand on the table. The protection is prospective. You add the carveout when no demand is pending, against the next demand, not the current one. A board that waits until the first 220 letter arrives to call its incorporation lawyer is a board that pays for the next demand at the old defaults.
What to do
Four things, in order.
- Pull your certificate of incorporation tonight and read the section addressing stockholder rights. If it does not contain a Section 220 carveout, and almost none of them do unless they were drafted in 2025 or later by counsel who specializes in this area, flag it for amendment. The text should mention forum selection for internal-affairs disputes, confidentiality conditions on inspection, holder thresholds or holding periods, and procedural requirements for demand letters. If the section reads in two paragraphs of generic stockholder rights language, it does not have a carveout.
- Have outside counsel draft the carveout provisions for your specific situation. This is not a copy-paste job. The right thresholds depend on your stockholder base, your financing posture, your industry, and your transactional history. A pre-IPO company with 500 employees and a tight cap table needs different carveout language than a public company with a retail stockholder base. Counsel who has actually litigated 220 demands in the Court of Chancery, not counsel whose 220 experience is a secondhand summary of the case law, should write the language.
- Adopt the amendment now, while no demand is pending. Board approval, stockholder consent, state filing. Do it the same week you read this. The amendment is prospective. Its protective value to you is a function of how long it has been in place when the next demand arrives. The earlier the better. The day before the demand is too late.
- Pair the certificate amendment with the bylaws and the D&O insurance review. The carveout sits in the certificate. The procedural mechanics (demand form, response timeline, designated recipient, confidentiality template) sit in the bylaws. The corporation’s defense costs are a function of the D&O policy’s books-and-records sublimit. All three documents should be reviewed at the same time, by the same counsel, against the same plaintiff-economics threat model.2 A carveout in the certificate without the matching bylaws or the matching coverage is half a defense.
Get counsel before the next demand arrives
A 220 demand is not a hypothetical. The plaintiff firms that have built a business around them are well-funded, well-organized, and indifferent to whether your company has done anything wrong. They send demands by the dozen, settle the easy ones, litigate the rest, and roll the productions into follow-on suits. The economic logic of the practice does not require your corporation to have misbehaved. It requires only that your corporation be a Delaware C-corp with an information advantage and a defaults-vintage certificate.
Adding a Section 220 carveout is the single most cost-effective certificate amendment a Delaware corporation can adopt. It is a one-time legal fee that compounds against every demand the corporation will face for the rest of its life. The corporation that does not adopt it pays the demand cost every time. The corporation that adopts it converts the demand cost into a one-page letter of compliance objection and a much smaller fight.
This is the kind of thing you want a lawyer who lives in this practice to handle. Not the firm that incorporated you eight years ago, unless that firm has updated its defaults since 2025 and can show you the post-SB 21 version of the carveout. Not the corporate generalist on retainer at your accounting firm. Counsel who has read every Court of Chancery 220 decision in the last three years and has drafted carveout language tested against the new statute. The fee is not large. The exposure is.
A closing thought
The letter is still on your screen. Forty-seven categories. Five business days. Three hundred filings a year by this firm alone. The cover letter cites your stockholder client by name, alleges a proper purpose in two sentences, and demands production by the end of the week.
Your certificate has nothing to say about it. The standard 2018 form your incorporator used did not anticipate the practice the letter represents, and the eight years since have made the practice the dominant entry point for Delaware corporate litigation. The corporation that did not amend the certificate when the practice emerged is the corporation that funds the production at the old defaults.
Section 220 is not going away. The plaintiff economics are not going away. The amendments narrowed the field. They did not close it. The defensive lever that remains is the certificate, and almost nobody has pulled it.
Pull it before the next letter arrives. Nobody else will.
- Plaintiff firms moved into 220 in the late 2010s when federal disclosure-only securities settlements stopped clearing. Same lawyers, same workflows, retooled for Delaware. The demand letter is a product. Three hundred a year is a baseline for the largest shops, not a ceiling. Most companies have no idea they are on a list. ↩
- Every Delaware C-corp’s certificate, bylaws, and D&O policy interact at the moment a 220 demand arrives. The defenses live in the certificate, the procedural mechanics live in the bylaws, the cost coverage sits in the D&O policy. ↩
