As a shareholder or member of a Delaware LLC, you have certain legal rights to access your company’s books and records. This right can be an invaluable asset in corporate litigation.
This right is usually limited to basic accounting information, such as tax returns and balance sheets. However, it can be extended or reduced with agreement.
Registered Agent
If you need to register a business entity in Delaware, you will need to select a registered agent. This individual or company will accept official documentation and correspondence on behalf of your company and forward them on to you.
The name of your registered agent should be included on your articles of incorporation or declared by filling out a form and filing it with the Delaware Secretary of State. Your registered agent must reside or be a resident of Delaware, and be physically present at your LLC’s registered office during normal business hours to accept legal process.
A registered agent is essential for your business to remain compliant with state laws and avoid fines or lawsuits by keeping your LLC up to date on important annual report filings and other government notifications. A knowledgeable registered agent can monitor your company’s compliance levels and alert you if any action is needed in order to remain in good standing with Delaware authorities.
Contact Person
Delaware LLCs must designate a Contact Person who can receive and process legal documents on behalf of the business. This person can be either an officer, manager, or employee of the LLC.
The Contact Person must be authorized to accept official legal notices and documents on behalf of the LLC, such as court orders. Furthermore, this individual should have the capacity to receive and deliver these documents during regular business hours.
Delaware LLCs must appoint and maintain a registered agent for service of process. The name and address of this individual is included in your Certificate of Formation.
About five years ago, Delaware took greater steps to safeguard the privacy of LLCs formed within their state. Following pressure from both U.S. Treasury and international partners, an amendment was passed in 2014 which requires Delaware LLCs to supply their commercial registered agent with the name and contact info for a “communications contact,” who can receive requests for contact info from the LLC.
Meetings
Corporations don’t typically need to hold meetings, while LLCs do. If they do, the operating agreement typically assigns responsibility for organizing them to members or managers – not the company itself.
Section 18-305 of the Delaware LLC Act permits members to inspect the books and records of an LLC. However, most LLC statutes restrict such inspection rights to those holding full membership interests with both voting and economic rights, such as management members or non-voting profit interest holders.
An operating agreement can extend or reduce this right, but is subject to technical requirements in Section 220 of the Delaware General Corporation Law and Section 18-305 of the Delaware LLC Act which must be fulfilled before the Court of Chancery will compel compliance with a demand for access.
In Tungsten Partners LLC v Ace Group International LLC (2017 NY Slip Op 32025(U), Manhattan Commercial Division Justice Shirley Werner Kornreich was asked whether a plaintiff who held a 4% profits interest in a Delaware LLC and identified herself as “Management Member” in its operating agreement was entitled to books-and-records inspection under SS 18-305 of the Delaware LLC Act. The Court held that her requests to value her ownership interest or investigate mismanagement by management for which she had reasonable suspicion were valid inspection purposes.
Minutes
An LLC’s organizational meeting minutes keep a written record of the decisions and votes taken during company gatherings. This documentation is essential for any LLC’s permanent records, helping ensure all members are on the same page with business decisions such as officer elections or adding new members.
Maintaining accurate records related to LLC operations can be invaluable if the business ever faces litigation or accusations of wrongdoing. For instance, if someone is accused of misusing company money for personal gain, having an extensive accounting of activities will demonstrate legality and demonstrate responsible action in court.
Recently, Delaware courts have become more willing to grant stockholders access to corporate books and records beyond formal board materials like minutes and decks. For instance, several recent rulings have held that email and other informal communications may be considered “necessary and essential” for purposes of Section 220 demands brought by stockholders.
