In VantagePoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005), we are told that:
The internal affairs doctrine is a long-standing choice of law principle which recognizes that only one state should have the authority to regulate a corporation's internal affairs-the state of incorporation.
The internal affairs doctrine developed on the premise that, in order to prevent corporations from being subjected to inconsistent legal standards, the authority to regulate a corporation's internal affairs should not rest with multiple jurisdictions. It is now well established that only the law of the state of incorporation governs and determines issues relating to a corporation's internal affairs.
Keith Paul Bishop writes that:
In United Techs. Corp. v. Treppel, 2014 Del. LEXIS 608 (Del. Dec. 23, 2014), the Delaware Supreme Court held that the Court of Chancery had authority to condition a stockholder’s inspection under Section 220 of the Delaware General Corporation Law upon the stockholder’s agreement that “any claim, dispute, controversy or causes of action . . . arising out of, relating to, involving or in connection with” the inspection be brought in a Delaware court. The Supreme Court notably did not decide whether the condition should be imposed. Instead, the Supreme Court remanded the matter to the Court of Chancery.
From a California perspective, it is important to remember that stockholders may have inspection rights under California law even though the corporation is incorporated in another state. California Corporations Code Section 1601(a) grants stockholders the right to inspect a foreign corporation’s accounting books and records and minutes if the corporation keeps those records in California or has its principal executive offices in California. In addition, inspection rights under California law are imposed on pseudo-foreign corporations pursuant to Corporations Code Section 2115.
On the one hand, it is certainly true that shareholder inspection rights are a well recognized exception to the internal affairs doctrine:
The right of a shareholder to inspect the books of a corporation poses special problems. This is an issue which can practicably be determined differently in different states. This is also an issue which, if decided differently in different states, will not seriously undermine the policy favoring uniform treatment for all shareholders of a corporation. For these reasons, a court will apply to a foreign corporation doing substantial business in the state a local statute providing for the inspection of books by a shareholder if in the court's opinion the statute embodies an important policy.
Restatement (Second) of Conflict of Laws § 304 (1971).
But while California courts thus would be entitled to apply California law in a case in which a California resident sued in California court seeking to inspect the books and records of a Delaware corporation, I don't see why a shareholder who invokes the Delaware courts to seek inspection should not be required to litigate any resulting disputes in Delaware court. After all, setting side the effect of the case on the plaintiff in this case, future plaintiffs who want to avoid bringing their substantive claims in delaware courts can simply file their books and records claims in their home state.
