A board I advise received a § 220 demand letter the morning after announcing a take-private transaction. The deal had been negotiated for nine months, the special committee had run a clean process, the price was a meaningful premium to the unaffected trading price, and the public reaction had been favorable. The demand letter came from a stockholder holding seventy-eight shares — about $4,000 of stock — and was delivered through plaintiff’s counsel at one of the well-known stockholder firms. The letter requested fifteen categories of corporate books and records, with a response demanded within twenty business days. The board’s chair called me at 7:30 the next morning.
The first question he asked was whether the demand was real or whether it could be ignored. The second was whether responding to it would derail the deal timeline. The answers, in order, were: very real, and possibly. The § 220 demand was not just a minor procedural irritation. It was the opening of a pre-closing investigation that, if it surfaced documents suggesting process flaws or undisclosed conflicts, would become the predicate for a class action seeking to enjoin or unwind the transaction. The legal infrastructure for converting a demand letter into deal-blocking litigation had been built piece by piece over the prior decade, and 2024-2026 had been the period in which the infrastructure had matured.
If you sit on a board of a Delaware-incorporated public or private company that is about to enter or announce a sale transaction, the § 220 demand is the form of pre-closing pressure you are most likely to face. The mechanics of responding to it — and, more importantly, the mechanics of anticipating it — are the practical work of getting deals closed in 2026.
What § 220 actually does
Section 220 of the Delaware General Corporation Law permits a stockholder to inspect the corporation’s books and records for “any proper purpose reasonably related to such person’s interest as a stockholder.” The statute itself has not been substantially amended in many years. The doctrinal expansion has come from the Court of Chancery’s interpretation of “proper purpose” and “books and records,” and the expansion has been notable.
A stockholder can establish proper purpose by alleging “a credible basis from which the court can infer wrongdoing or mismanagement.” That standard sounds high. In practice, it is not. The Court of Chancery has accepted a wide variety of allegations as sufficient to meet it — press reports of regulatory inquiries, drops in stock price following a corporate announcement, public statements by senior officers that are arguably inconsistent with internal information, the existence of related-party transactions, and so on. The stockholder does not have to prove wrongdoing; the stockholder has to show a credible basis to investigate it.
The “books and records” scope has similarly expanded. Historically, § 220 was understood to cover formal corporate records — minutes, certificates, organizational documents — and not to extend to informal materials like emails or text messages. The post-2018 Chancery cases, beginning with KT4 Partners in 2019, have steadily expanded the scope to include electronic communications “necessary and essential” to the stockholder’s stated purpose. By 2024-2025, the working assumption among Delaware practitioners was that § 220 demands can reach board emails, special-committee communications, banker work product, and the internal correspondence of senior officers, when those materials are necessary to investigate the stated wrongdoing.
How the demand becomes deal-blocking
The mechanics are these. A stockholder serves a § 220 demand within days of a deal announcement. The board has twenty business days to respond. If the board refuses, the stockholder files a § 220 complaint in Chancery, which is on an accelerated track and often produces a decision within sixty to ninety days. If the board produces documents, the stockholder reviews them and, in the typical case, files a follow-on class action under Caremark or Revlon theories using the produced documents as evidence.
The deal-blocking effect comes from the timing. The § 220 process runs in parallel with the deal’s path to closing. A § 220 demand served the morning after announcement creates a documentary record that the stockholder can use, mid-deal, to seek a preliminary injunction. The injunction motion, even if ultimately denied, can take six to eight weeks to resolve. Six to eight weeks of injunction-motion practice is six to eight weeks of deal-team distraction, six to eight weeks during which the buyer is weighing whether the deal certainty has degraded, and six to eight weeks during which interim-period operational decisions get scrutinized by hostile counsel.
In a strategic deal with a long path to closing — antitrust review, regulatory approvals in other jurisdictions, financing or stockholder votes — the § 220 process is often completed before closing and the resulting documents become the predicate for litigation that proceeds in parallel. In a faster-moving deal, the § 220 process can extend past closing and become the engine of post-closing class action litigation. Either way, the demand is consequential.
What sophisticated boards do at signing
The pattern in well-advised deals is to anticipate the § 220 demand and prepare for it before the announcement, not after.
First, the board’s pre-signing record should be clean. The deal process should be documented through formal special-committee minutes, retained advisor work product, and a clear paper record showing the process the committee ran. The minutes should reflect the substantive deliberation, not just procedural votes. The records should be retained in a way that allows them to be produced on demand — which means, in practice, that they should exist in board-portal systems or similar tools where they can be assembled cleanly, not scattered across personal email accounts or messaging apps.
Second, the parties’ communications during the negotiation should be channeled through counsel and through formal advisor work product, with personal email and text-message communication about deal-substantive matters minimized. This is not about hiding the substance; the substance gets recorded in formal documents. It is about avoiding the production of informal communications that, read out of context, can look like evidence of process flaws.
Third, the agreement’s drafting should anticipate the § 220 process. The non-disclosure agreement with the buyer should account for the possibility that the seller may be compelled to produce, under § 220, documents the buyer has provided in diligence. The merger agreement’s interim-period covenants should include cooperation language for responding to § 220 demands without requiring buyer consent for each production. The deal-protection provisions should be drafted with the assumption that the deal will face litigation pre-closing, and the no-shop carve-outs should be calibrated to allow the board to engage with stockholders in the event of a credible alternative proposal that emerges through the § 220 process.
Fourth, the board should have, at the time of signing, a § 220 response plan. The plan should identify which records will be produced, which will be resisted, what the process will be for responding to demands, and which counsel will lead the response. Boards that have to assemble this plan after receiving a demand are operating under time pressure in a way that boards that prepared the plan in advance are not.
Why the plaintiffs’ bar has invested in this
The economics of § 220 litigation are favorable to plaintiff’s counsel. The work is done on contingency; the legal fees in the follow-on class action are paid out of the settlement fund or out of the corporate treasury under a “corporate benefit” theory; the discovery burden is low because the documents come from the corporate side rather than from third parties; and the settlement leverage is high because corporate defendants are motivated to resolve litigation before it becomes a financing or transactional impediment.
The plaintiffs’ bar has, over the last several years, invested in the infrastructure necessary to scale § 220 practice. Multiple firms maintain “deal watch” practices that monitor merger announcements and dispatch demand letters within days. The same firms maintain stables of small stockholders who can serve as nominal plaintiffs. The demand letters themselves have become standardized, with template categories that are calibrated to maximize production scope while passing the proper-purpose test. The result is a process that operates with very low friction for the plaintiff’s side and significant friction for the corporate defendant.
This is not a problem that is going to recede. The doctrinal trend has favored expansion, the economic incentives reward the plaintiffs’ bar’s investment, and the procedural infrastructure is now in place. Corporate governance practice in Delaware-incorporated companies has to assume § 220 exposure as a baseline condition of doing transactional work, not as an exceptional event to be addressed when it arises.
The practical implication for boards
The practical implication is that the work of preparing for a sale transaction now includes the work of preparing for the post-announcement § 220 process. The two streams of work are connected, and the documents produced in the process flow from the corporate decisions made in the months and years before the transaction. A board that has run a clean special-committee process, documented its deliberations carefully, and retained advisor work product appropriately is a board that can respond to a § 220 demand without producing materials that become litigation predicates. A board that has not done that work is exposed in a way that the agreement itself cannot fix.
The fix, for a board approaching a sale process, is to treat the process documentation as deal-critical from day one. The minutes, the special-committee records, the advisor work product — each of those documents will eventually be reviewed by hostile counsel. The board’s posture toward them at the time of creation determines the board’s posture when the demand letter arrives. The M&A practice we run includes pre-sale process advice for boards specifically calibrated to anticipate § 220 exposure, because the alternative — running the process without that framework and then scrambling when the demand arrives — is the more expensive path and the one more likely to produce a deal-blocking outcome.
If you are a director, special-committee member, or general counsel preparing for a sale transaction and want to think carefully about the § 220 exposure your process will face after announcement, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
