220 Demand Confidentiality Agreement

The Delaware Supreme Court yesterday rejected a presumption of secrecy for documents following requests to inspect records and sound records, in accordance with Delaware General Corporation Law`s 220. Tiger v. Boast Apparel, Inc. (August 7, 2019) states that courts may impose confidentiality restrictions in appropriate cases, but that some justification for confidentiality is required – and that an unlimited period of confidentiality should be the exception, not the rule. Although the Supreme Court did not agree with the Court of Chancery`s argument, it upheld the decision because there was no abuse of discretion or reversible error with the result. The Supreme Court clarified that there was no presumption of confidentiality in Section 220 productions. Instead, the Court of Chancery must assess and compare benefits and damages when determining the initial degree and duration of the confidentiality order. To determine the degree and duration of a confidentiality order, the burden is greater for the company and the burden on the shareholder is less onerous, since there is no presumption of confidentiality in section 220 productions. (iii) a party requesting books and records is not required to identify exceptional circumstances for a court to grant a little less indeterminate confidentiality under Section 220.

With respect to the duration of any confidentiality restriction, the Supreme Court held that “an indeterminate period of confidentiality should be the exception, not the rule.” “While permanent confidentiality may be entirely appropriate in a particular case, a party requesting section 220 books and recordings does not have to show exhilarating circumstances for a court to grant a little less than indeterminate confidentiality.” After analyzing Disney`s decisions, the court found that there was no presumption of confidentiality. Id. at 4. In this context, the Court stated that recent decisions had misrepresced Disney`s previous decisions: we conclude that, although the Court of Chancery, although the Court of Chancery may apply it to the imposition of a reasonable – and generally done – confidentiality order, these checks are not subject to a presumption of confidentiality. When the court adopts a confidentiality decision in the exercise of its discretion, the length of the order does not depend on the fact that the shareholder does not have incriminating circumstances. On the contrary, the Court of Chancery should balance the legitimate interests of the shareholder in free communication with the legitimate privacy interests of the company. However, in future cases, it would be possible to examine whether and to what extent confidentiality agreements may prevent complainants from communicating with other shareholders about possible derivative claims related to non-public information from S. 220 productions.