Startup Employees Invoke Obscure Law to Open Up Books

[Recursion]

http://www.wsj.com/article_email/startup-employees-invoke-obscure-law-to-open-up-books-1464082202-lMyQjAxMTA2NjI0NDQyNzQ1Wj

For more than a year, Jay Biederman has pestered Domo Inc. for its financial statements. The former manager wants to estimate how much his tens of thousands of shares in the tech startup are worth.

Domo, whose software analyzes corporate data, has rejected those requests, he said, keeping its financial records under wraps like most privately held startups.

But the law may be on Mr. Biederman’s side.

He recently discovered section 220 of Delaware’s corporate law, which can compel locally incorporated companies such as Domo to open up their books to shareholders. The law, little known in Silicon Valley, is a potentially valuable tool for thousands of tech workers who received stock awards to join fast-growing startups, as well as other small investors, who now question their shares’ worth.

To take advantage of the law, stockholders must simply prove they own at least one share and send the company an affidavit that states which documents they want and why. The magic words for unlocking financial information? “ ‘For the purpose of valuing my shares,’ ” says Michael Halloran, a securities lawyer with Pillsbury Winthrop Shaw Pittman LLP.

I wonder what this will do to DE's "incorporate here and leave" strategy.

[SusanCalvin]

1. I wonder the same.

I love it when stuff like this bites corporations in the €¥£.

[merrily]

2. This is not a little known law, ffs. Stockholders are owners. Owners of a business are entitled to

disclosure. Directors have a fiduciary duty to make disclosures to stockholders, just as trustees, since long before corporations existed, have had a fiduciary duty to make disclosures to the beneficiaries of the trust. If no one had put it into a statute, it would still be well settled law. It's not rocket science or a secret to anyone, except maybe the author of this article.

Of all publications, the wsj in particular should be ashamed of having published an article containing nonsense like that.