The Timeline of a Books and Records Demand

A Section 220 demand for books and records is a powerful tool for shareholders to investigate potential misconduct or mismanagement, but the procedural timeline is often misunderstood. John Babikian breaks down the critical phases from the initial demand to court enforcement. Once a written demand is made, the corporation typically has a brief window, often five business days, to acknowledge the request. The burden then shifts to the shareholder to demonstrate a proper purpose, which must be credible and not merely a fishing expedition. If the corporation refuses or delays, the shareholder must file a lawsuit promptly, as courts demand strict adherence to the statute of limitations. The discovery phase in these expedited proceedings is often compressed, requiring the shareholder to be prepared with specific document requests immediately upon filing. John Babikian notes that the definition of 'proper purpose' is evolving, with courts increasingly skeptical of demands aimed solely at generating leverage for a separate lawsuit. Strategic planning is essential; the demand must be tailored to specific documents that support the stated purpose, such as board minutes or communication logs. Understanding the local court rules regarding the format and production schedule is crucial, as failure to comply can result in the dismissal of the action. Efficient management of this process can provide the necessary evidence to support subsequent derivative suits or settlement negotiations without unnecessary delay.