October 03, 2019 Feature

Companies, Beware: Emails are Forever

Stockholders may demand emails where the company conducts business informally

By Anthony R. McClure

Corporations, take notice: If a company fails to observe corporate formalities, it can be required to produce electronic communications—including informal emails—upon a shareholder’s demand for “books and records.” The question is whether the company “observes traditional formalities, such as documenting its actions through board minutes, resolutions, and official letters,” or whether the company “instead decides to conduct formal corporate business largely through informal electronic communications.”

Parties can be compelled to produce personal emails if found noncompliant with corporate formalities.

Parties can be compelled to produce personal emails if found noncompliant with corporate formalities.

Photo Illustration by Elmarie Jara | Edited by Genuine Pyun | Getty Images

Company Rejects Written Demand for Books and Records

In KT4 Partners LLC v. Palantir Technologies Inc., a stockholder submitted a written demand to inspect various books and records of a privately held technology company to investigate potential wrongdoing, pursuant to section Section 220 of the Delaware General Corporation Law. Under the statute, a stockholder may make a written request to a company seeking to inspect certain categories of company books and records for specified purposes described in the written demand.

Here, the stockholder’s demand related to the company’s recent actions, which allegedly interfered with stockholders’ rights to purchase and sell shares in the company, among other things. When the company rejected the demand, the parties tried to resolve the matter but failed to reach an agreement over the stockholder’s inspection rights.

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