Delaware Supreme Court Requires Credible Evidence Of A "Proper Purpose" To Review A Corporation's Books And Records

In City of Westland Police & Fire Retirement System v. Axcelis Technologies, Inc., 1 A.3d 281 (Del. 2010), the Delaware Supreme Court affirmed the dismissal of an action brought under Section 220 of the Delaware General Corporation Law, 8 Del. Code § 220, to review books and records of a corporation. The Court of Chancery had dismissed the action on the ground that plaintiff failed to present “some evidence” suggesting a “credible basis” from which the court could infer a “proper purpose” for the review, such as possible wrongdoing or mismanagement. The decision offers enhanced guidance on the “proper purpose” test, particularly with respect to corporations that follow “plurality plus” governance policies.

Axcelis Technologies, Inc. (“Axcelis”) is a Delaware corporation specializing in the manufacture of ion implantation and semiconductor equipment. Plaintiff is a Michigan pension fund that beneficially owns Axcelis common stock. In 1983, Axcelis and a Japanese company, Sumitomo Heavy Industries, Ltd. (“Sumitomo”), became partners in a joint venture. In February and March 2008, Sumitomo made two unsolicited bids to acquire Axcelis. The Board of Directors of Axcelis rejected the bids, stating that the bids undervalued Axcelis and were not in the best interests of the company or its shareholders. The Board, however, expressed its willingness to meet with Sumitomo privately to explore whether the parties could reach an agreement on a transaction involving their joint venture.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.