For years, incorporating in the US state of Delaware has been the default move for high-growth African startups seeking foreign investment. The reason is simple: venture capitalists from Silicon Valley to London are comfortable with Delaware’s predictable and highly developed body of corporate law. It provides a stable, neutral ground for governing the complex relationship between founders and the investors who fund them.

But a recent amendment to that very law, which took effect in August 2025, is set to alter this landscape. A change to Section 220 of the Delaware General Corporation Law (DGCL) narrows the rights of shareholders — including VCs and angel investors — to inspect a company’s internal files. This isn’t just a legal footnote; it’s a fundamental shift in transparency that will have direct consequences for how African startups manage investor relations, resolve disputes, and build trust.

The Old Way: Open Books and (Sometimes) Prying Eyes

Historically, Section 220 gave shareholders significant leverage. If an investor had a “proper purpose” — a reason reasonably related to their interests as a shareholder, such as investigating potential mismanagement or valuing their shares — they could demand to inspect a company’s “books and records.”

Delaware courts interpreted this right broadly. “Books and records” didn’t just mean official filings. It could include board minutes, financial ledgers, and, crucially, sensitive internal documents like emails and other private communications. The courts’ logic was that allowing shareholders to look under the hood could help them determine if their concerns had merit before launching costly and disruptive lawsuits. It was a pre-litigation “sniff test.” 

For investors, this was a powerful tool for oversight. For founders and management, however, it could feel like a weapon. These requests could be time-consuming, expensive, and, in some cases, felt like “fishing expeditions” by activist investors looking for leverage to force a change in strategy or build a case for litigation. This often led to legal battles over what information was truly “essential” and what could be kept confidential.

The New Rules: A Shorter, More Specific Menu

The August 2025 amendments put an end to the broad, open-ended interpretation. Instead of a vague right to inspect “books and records,” the law now provides a specific, limited list of documents that shareholders can demand.

The key documents available under the new Section 220 include:

• The company’s certificate of incorporation and bylaws.
• Minutes from stockholder meetings for the preceding three years.
• Board and committee meeting minutes, along with materials provided to the board for those meetings.
• Annual financial statements for the past three years.
• Agreements with current or prospective stockholders.
• Questionnaires concerning the independence of directors and officers.

What’s most striking is not what’s on the list, but what’s excluded from it. The most contentious category — internal emails and communications — is notably absent.

Furthermore, the new rules explicitly grant corporations the power to redact information that falls outside the shareholder’s stated purpose and to place confidentiality conditions on the materials they do produce. In short, the door to a company’s internal filing cabinet, once slightly ajar, has been mostly closed and locked.

The Impact on the African Tech Ecosystem

While Delaware-headquartered African startups have not been particularly at loggerheads with investors in public, this shift in Delaware law creates a new dynamic between African founders and their investors.

For Founders: 

For many startup CEOs, this change may sound as a welcome relief. It could provide a stronger shield against burdensome information requests from minority investors who may be disgruntled or seeking leverage.

• Reduced “Fishing Expeditions”: Founders can worry less that a minor disagreement will escalate into a sweeping demand for years of internal emails.
• Protection of Strategy: Sensitive internal debates about pivots, product development, and competitive strategy are now better protected from shareholder view. This allows for more candid internal discussion without fear that off-the-cuff remarks in an email will be used against management later.
• Less Administrative Burden: Startups can now push back more easily on overly broad requests, saving time and legal fees.

For Investors: 

For venture capitalists and angel investors, the amendment weakens a key tool for monitoring their investments and holding management accountable.

• Loss of Context: Board minutes show what was decided, but emails and internal chats often show why. Without access to this “color commentary,” investors may struggle to understand the full story behind a critical business decision.
• Harder to Investigate Wrongdoing: If an investor suspects mismanagement, fraud, or a breach of fiduciary duty, their ability to gather preliminary evidence without filing a full-blown lawsuit is now severely curtailed.
• Increased Reliance on Trust: Investors must now place even greater trust in the information that management chooses to share. The power to independently verify information through a Section 220 request has been diminished.

The Way Forward: Stronger Contracts and Better Relationships 

This legal shift in Delaware will likely force a practical shift in how investment deals are structured for African startups. With statutory information rights weakened, investors will look to claw them back through contracts. However, it must be noted that not many Delaware-incorporated African startups are notorious for stand-offs with investors.

Founders should expect to see VCs pushing for more robust and specific information rights clauses in term sheets and shareholder agreements. These clauses may contractually obligate the company to provide information that the law no longer guarantees access to.

Furthermore, the value of a board seat has just increased significantly. A director, as a fiduciary of the company, naturally has broader access to information than a typical shareholder. Investors without a board seat will be at a distinct disadvantage, making the negotiation over board composition even more critical.

Ultimately, Delaware’s new rules raise the stakes for transparency and communication. While the law now offers founders more protection, the savviest leaders will understand that trust is paramount. Proactively sharing information and maintaining open lines of communication may become even more important to keep investors confident and aligned, preventing the kind of suspicion and conflict that Section 220 requests were often born from in the first place. 

Udoh Charles

Charles has carved a niche at the forefront of Africa’s booming tech scene. With years of experience, Udoh has become a go-to expert for multi-million dollar deals in venture capital, private equity, and intellectual property across a vast landscape — from Delaware and New York to Singapore and South Africa. But his expertise extends beyond just the legalese. Udoh is also a corporate governance, data privacy, and tax whiz. An award-winning writer and researcher, he’s passionate about chronicling Africa’s startup story, cementing his position as a true pioneer in the field.

The views expressed in this article are for informational purposes only and do not constitute legal advice. The content is based on the author’s personal insights and professional experience and is not intended to create an attorney-client relationship. Readers should seek professional legal counsel for advice on specific matters.