When business relationships fracture, a smart commercial litigation attorney often knows that lawsuits aren’t always the first move. Sometimes, the most strategic first step is a targeted demand for information. That’s where Section 220 of the Delaware General Corporation Law comes in. It gives stockholders a right to inspect a company’s books and records—but only under the right conditions.

A recent case from the Delaware Court of Chancery, Stantic v. HireApp Technologies, Inc. (C.A. No. 2025-0040-SEM), shows just how powerful, and how precarious, this tool can be. It’s a lesson every Delaware business owner, co-founder, and investor should understand.

What Is a Section 220 Demand?

Section 220 lets a stockholder inspect corporate records for a “proper purpose.” This is often used:

• To investigate potential mismanagement or misconduct
• To value shares before a buyout or exit
• To prepare for litigation (including derivative suits)
• To assess the company’s financial condition or board decisions

It’s faster and cheaper than full-blown litigation. And Delaware courts generally encourage parties to use it before filing suit. But it has a strict gatekeeper: you must be a stockholder when you make the demand and when you file the case.

The Case: When a Founder Loses Standing

In Stantic, a co-founder of HireApp Technologies tried to use Section 220 to inspect the company’s financials and investigate potential wrongdoing. He had built the company, contributed capital, and had a major equity stake.

But he had also signed a separation agreement—transferring his shares back to the company in exchange for $50,000, a release of personal guarantees, and operational control over some clients.

Later, he had second thoughts. He tried to back out, arguing the deal wasn’t final or was coerced. But the court reviewed the emails, board minutes, and payments and found otherwise: the agreement was complete. His shares were cancelled. He was no longer a stockholder.

So, even though his concerns might have been legitimate, he no longer had standing to bring a Section 220 case. His demand was dismissed.

Key Takeaways for Business Owners, Founders, and GCs

1. You Must Be a Current Stockholder

This sounds obvious, but many departing founders or investors assume they still “count” as stockholders if their name is on documents or if they never physically handed over a certificate. Not so. If you signed a separation agreement, took money, and gave up your shares—you may no longer have standing, even if the company hasn’t updated its ledger.

2. Emails and Informal Agreements Matter

Delaware courts will examine the full record—including emails, board votes, and payments. If you agree to sell or surrender your shares, and accept the benefits of that deal, you may be held to it even if there’s no formal contract.

3. Don’t Wait Too Long

If you’re considering a 220 demand, act while you’re still a stockholder. Even a short delay can cost you your rights. Make the demand before you finalize any separation, buyout, or settlement agreement.

4. Section 220 Is Strategic—Not Just Procedural

Used well, 220 demands can force transparency, support a future claim, or lead to early settlement. But timing is everything. If you wait until after you’ve exited, you may have no leverage left.

5. You Still Have Options

If you’re no longer a stockholder, other claims—like breach of contract or fraud—may still be available. But don’t expect Section 220 to open doors once you’ve left the building.

Delaware Courts Mean Business

Delaware is famously business-friendly—but it’s also rule-bound. Courts here apply Section 220 carefully. They want to see precision, good faith, and a proper purpose. They don’t tolerate fishing expeditions. And they don’t grant access to non-stockholders.

If you’re involved in a founder breakup, investor dispute, or business divorce, talk to a Delaware business litigation attorney before your shares are canceled. The difference between having standing and not can determine whether you can fight for accountability or walk away empty-handed.

Bottom Line

At Equal Justice Solutions, we help business owners, co-founders, and investors use Section 220 strategically and lawfully. We know how to time demands, draft them carefully, and follow through with discovery or litigation if necessary.

If you’re in a business divorce or suspect misconduct, a Section 220 demand could be your next move—but only if you’re still in the game. Our Delaware commercial litigation attorneys can guide you through it.

Thinking about a Section 220 demand in Delaware? Let’s talk.