July 7, 2023
Books & Records: Meanwhile, In Nevada . . .
Speaking of books & records, Keith Bishop recently blogged about some changes to Nevada’s corporate inspection statute. One of these changes authorizes a Nevada corporation’s board of to require a stockholder exercising inspection rights to agree to enter into an appropriate confidentiality agreement with the company. That’s a helpful revision, but I thought that the second change Keith points out is more interesting:
The bill makes other changes to the inspection statute, NRS 78.257, and one of those changes may allow corporations to impose limitations on inspection of certain records in their articles or bylaws:
The right of stockholders to inspect the [
corporate records] books of account and financial statements of the corporation in accordance with this section may not be limited in the articles or bylaws of any corporation.Thus, the current statute prohibits limitations on inspection of “corporate records” and the bill would limit the prohibition to “books of account and financial statements”.
Nevada already takes a more restrictive approach to stockholder inspection rights than Delaware does, and this change gives Nevada corporations an even greater ability to limit those rights. In recent years, Delaware courts have taken an increasingly broad approach to what may be regarded as corporate “books & records” subject to inspection – including, in some cases, director email communications. By narrowing the statutory language, Nevada corporations will likely be able to make it even more difficult for stockholders to reach these materials through pre-litigation books & records requests.
As Allison Frankel noted in a column earlier this year, Nevada’s management-friendly approach to its corporate statute is something that some high-profile Delaware corporations have decided to take advantage of by reincorporating there. Plaintiffs opposing those efforts have accused the state of having a “no liability regime” – and based on recent case law, they may not be far off in that characterization.
– John Jenkins