Delaware Chancery Court Clarifies Limits of §220 Record Confidentiality

In a December 31, 2014 letter, the Delaware Chancery Court clarified that financial information some previously ordered produced by Winmill & Co. Incorporated (“Winmill”) was subject to confidentiality protection. The Ravenswood Inv. Co. v. Winmill & Co., C.A. No. 7048-VCN, (Del. Ch. Dec. 31, 2014). Specifically, the court concluded the financial statements produced by Winmill would remain confidential for one year following the production to Ravenswood Investment Co., L.P. (“Ravenswood”).

In Ravenswood Investment Co., L.P. v. Winmill & Co., C.A. No. 7048-VCN, 2014 BL 152126 (Del. Ch. May 30, 2014), Ravenswood initiated the suit seeking access to requested books, records, and financial statements pursuant to 8 Del. C. §220. Winmill proposed a trading restriction that would prohibit Ravenswood from trading in Winmill stock as a condition of inspection. The court, however, declined to impose the restriction, finding that the proposal was contrary to Delaware law and stockholders’ fundamental rights. The court held that Ravenswood did not meet the clear evidence standard of bad faith and, as a result, each party would bear the cost of its own attorneys’ fees.

In producing information, Winmill proposed the information produced remain confidential until it (a) became publicly available, (b) one year after Ravenswood received the documents, or (c) four years from the date of the document. Ravenswood objected to this proposal, wanting documents older than one year to be free from confidentiality restrictions. Winmill requested that Ravenswood’s access to books and records be conditioned upon an indemnification undertaking. Ravenswood objected and the matter returned to the Chancery Court.

The court concluded some confidentiality protection was appropriate. While difficult to establish the “correct” moment in time to treat information as public, the court found one year after the production to Ravenswood was a reasonable amount of time. Additionally, the court clarified that financial information did not warrant confidential treatment after three years. The court concluded that to add an indemnification condition to a right provided by Section 220 would unduly impair a shareholder’s rights.

The primary materials for this case may be found on the DU Corporate Governance website.