Opinion ID: 2189772
Heading Depth: 1
Heading Rank: 4

Heading: Stockholder of Record

Text: Rainbow argues that even if it is proper to examine other evidence, due to the absence of a stock ledger, the Court of Chancery did not make a specific finding that Pan Ocean is a stockholder of record. Rainbow argues further that the proper procedure in this case should have been a bifurcated one to first determine Pan Ocean's status as a stockholder and then to examine its purpose for requesting inspection. The normally expedited nature of the litigation following a demand for inspection would be frustrated by such a protracted procedure. The Court of Chancery has the authority under Section 220(c) to determine if inspection should be granted in one proceeding which examines both the person's status as a stockholder and the purpose of the demand for inspection. Nonetheless, Rainbow's assertion that it was incumbent upon the Court of Chancery to find that Pan Ocean is a stockholder of record is correct. The Court of Chancery concluded that either Pan Ocean or the IRAP is a stockholder of record of Rainbow. The Court of Chancery then held that because Pan Ocean was a wholly-owned subsidiary of the IRAP, it was unnecessary to specifically determine which entity was the stockholder of record. However, the difference between a parent corporation and its subsidiary is an important distinction. [3] That distinction is as important as the difference between the nominal stockholder of record and the beneficial owner of the stock. The rights of stockholders under Delaware corporate law are generally limited to the stockholders of record. [4] This important principle has been reaffirmed by this Court today. See Enstar v. Senouf, Del.Supr., 535 A.2d 1351 (1987). Therefore, we hold that establishing oneself as a stockholder of record is a mandatory condition precedent to the right to make a demand for inspection under 8 Del.C. § 220. This requirement has been satisfied in this case because the Court of Chancery found that if it were to determine whether the IRAP or its wholly-owned subsidiary is the stockholder, the record would point to Pan Ocean. Moreover, in the final order implementing the written opinion the Court of Chancery specifically found that for purposes of 8 Del.C. § 220 Pan Ocean is entitled to be treated as the record owner. We conclude that the record supports a finding that Pan Ocean is a record stockholder in Rainbow.