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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

220 Actions and Tools at Hand

Stockholders have a statutory right to access the books and records of the corporation. This power is an extremely important tool for stockholders to monitor the actions the board of directors and to root wrong-doing or malfeasance. However, the right to monitor a corporation's books and records is also subject to limitations. In the following cases we learn about using the “tools at hand” and the limits to their use.

Courts – as in Beam v. Stewart – regularly exhort plaintiffs to use Section 220 to seek out books and records prior to filing derivative complaints.  However, the 220 process can be lengthy.  Consequently, the economics of plaintiff litigation make it difficult for plaintiffs to both pursue 220 litigation and also maintain control positions in early filed derivative litigation. This challenge makes 220 actions a less than perfect vehicle for curbing the excesses of the litigation industrial complex.