A shareholder of a Delaware corporation operating in California demands access to the company’s financial records. The corporation refuses, arguing that Delaware law governs its internal affairs and that its bylaws require shareholder disputes to be litigated exclusively in Delaware.
Can the corporation enforce that provision even when California law grants the shareholder inspection rights that cannot be restricted by corporate bylaws?
In Salamon v. Orchid Global, Inc. (2026) 122 Cal.App.5th 183, the California Court of Appeal addressed this question in a dispute involving a minority shareholder seeking corporate records under California Corporations Code sections 1600 and 1601.
The court held that the corporation’s Delaware forum-selection clause covered the dispute, but could not be enforced where doing so would undermine the shareholder’s unwaivable inspection rights under California law.
The decision has practical significance for California businesses incorporated in Delaware and for shareholders seeking financial information before pursuing corporate governance or fiduciary-duty claims.
A Minority Shareholder Seeks to Inspect Corporate Records
Orchid Global, Inc. was incorporated in Delaware. The company and its subsidiary identified San Francisco as their principal places of business with the California Secretary of State.
David Salamon, a California resident, owned approximately 11.11 percent of Orchid’s outstanding voting shares.
In December 2024, Orchid offered to purchase Salamon’s shares for approximately $1.37 million.
Salamon wanted to evaluate the proposed transaction. According to his petition, he had not received the company’s financial documents for approximately five years.
In April 2025, his attorney demanded access to corporate records under California Corporations Code sections 1600 and 1601.
The requested materials included shareholder information, board and shareholder meeting minutes, financial statements, tax returns, financial audits, and documents concerning loans involving the company and its directors.
Salamon explained that he needed the information to confirm his ownership interest, evaluate the value of his shares, communicate with other shareholders, and investigate possible mismanagement or breaches of fiduciary duty.
Orchid rejected the demand.
The company maintained that because it was incorporated in Delaware, California’s shareholder inspection statutes did not apply. It also questioned the shareholder’s stated purpose, suggesting that the demand was intended to pressure the company into purchasing his shares at an inflated price.
Salamon responded by filing a petition for writ of mandate in San Francisco Superior Court to enforce his inspection rights.
The Corporation Relies on Its Delaware Forum-Selection Clause
Orchid’s bylaws designated the Delaware Court of Chancery as the exclusive forum for certain claims involving the corporation’s internal affairs.
After Salamon filed his California petition, Orchid commenced a separate declaratory relief action in Delaware, seeking a determination that Delaware law governed his inspection rights.
Orchid also moved to stay the California proceeding based on the forum-selection clause.
The San Francisco Superior Court granted the stay.
The court reasoned that shareholder inspection rights concern a corporation’s internal affairs and therefore fall within the provision requiring litigation in Delaware.
Salamon appealed.
He argued that the clause should not apply to his California statutory claims. Alternatively, he maintained that enforcing it would violate California public policy because the Delaware inspection statute provided narrower rights than California law.
The Court of Appeal agreed that the dispute fell within the language of the forum-selection clause.
That conclusion, however, did not resolve whether the clause was enforceable.
California’s Inspection Rights Cannot Be Restricted by Corporate Bylaws
California Corporations Code section 1600 grants qualifying shareholders rights to inspect shareholder records.
Section 1601 addresses inspection of accounting books, records, and minutes, subject to the statutory requirements governing the particular request.
Both statutes contain provisions protecting inspection rights against restrictions imposed through corporate articles or bylaws.
Significantly, the provisions extend to qualifying foreign corporations having their principal office in California.
The Court of Appeal recognized that California has a substantial public policy interest in protecting these statutory rights.
Although courts generally enforce contractual forum-selection clauses, a different analysis applies when enforcement would substantially diminish rights that California law makes unwaivable.
In that situation, the party seeking enforcement must establish that litigation in the selected forum will preserve the substantive protections afforded by California law.
The court applied that framework to Orchid’s Delaware forum-selection clause.
Why the Differences Between California and Delaware Law Mattered
Orchid argued that Salamon could pursue inspection rights under section 220 of the Delaware General Corporation Law.
But the existence of an inspection remedy in Delaware did not establish that the shareholder would receive protections equivalent to those available under California law.
The two statutory schemes differ in important respects.
California Corporations Code section 1600 grants certain shareholders holding at least five percent of the outstanding voting shares an absolute right to inspect specified shareholder information. Section 1601 separately governs inspection of corporate books and records for purposes reasonably related to a shareholder’s interests.
Delaware section 220 contains its own requirements concerning proper purpose, available records, and the scope of inspection.
Salamon argued that Delaware law would restrict his access to categories of financial information he sought under California law.
Orchid did not establish that the Delaware proceeding would preserve the same substantive rights or that the Delaware court would apply California law to the inspection claims.
The Court of Appeal concluded that Orchid had failed to satisfy the burden necessary to enforce the forum-selection clause against the shareholder’s unwaivable California statutory rights.
Accordingly, the court reversed the order staying the California proceeding and directed the superior court to deny Orchid’s motion.
The court did not decide that Salamon was entitled to every document he requested. The merits and permissible scope of inspection remained to be determined.
Delaware Incorporation Does Not Necessarily Eliminate California Inspection Rights
The decision addresses a recurring issue for companies that conduct substantial operations in California but choose Delaware as their state of incorporation.
Delaware incorporation generally carries important consequences for corporate governance, including application of the internal affairs doctrine.
Corporate bylaws may also contain enforceable provisions selecting Delaware as the forum for disputes involving directors, officers, and shareholders.
However, Salamon demonstrates that such provisions do not necessarily override California statutes expressly protecting shareholders of qualifying foreign corporations.
The distinction matters when a shareholder suspects that management has withheld financial information, diverted corporate opportunities, engaged in self-dealing, or otherwise breached fiduciary duties.
Inspection rights may provide a means to evaluate those concerns before filing a substantive lawsuit.
For corporate management, the decision illustrates the risks of rejecting an inspection demand solely because the company was incorporated in Delaware.
A company should examine its actual California operations, the statutory basis for the request, the shareholder’s ownership interest, and the documents sought before refusing inspection.
For shareholders, the decision provides authority for challenging a forum-selection clause when enforcing it would materially impair California statutory inspection protections.
The result will depend on the particular corporation, the applicable statutes, and the terms of the governing documents.
What the Court Did Not Decide
The appellate ruling was limited to enforcement of the forum-selection clause.
The court did not adjudicate Salamon’s allegations of mismanagement or fiduciary misconduct.
It did not determine the fair value of his shares or whether Orchid’s repurchase offer was reasonable.
Nor did it hold that every Delaware corporation operating in California must produce all financial records requested by a shareholder.
A shareholder seeking inspection must still establish the applicable statutory requirements, including any ownership threshold and proper-purpose requirement.
The corporation may raise defenses concerning the scope of inspection and whether particular documents fall within the governing statute.
The decision instead confirms that a corporation cannot rely on a Delaware forum-selection clause without addressing the California statutory rights that enforcement may impair.
Implications for California Shareholder Litigation
Corporate records disputes frequently arise before litigation over shareholder oppression, fiduciary duties, company control, or the valuation of ownership interests.
A minority shareholder may need financial information to determine whether management has acted improperly. Corporate management may dispute the shareholder’s purpose or resist disclosure of sensitive records.
Salamon provides guidance on the procedural question of where such disputes may be heard when a Delaware corporation has its principal office in California.
For businesses and shareholders facing an inspection dispute, the analysis should begin with the applicable statutory rights and the corporation’s governing documents. The presence of a Delaware forum-selection clause does not end the inquiry.
Elpis Law represents businesses, shareholders, and corporate stakeholders in California commercial litigation, including shareholder disputes, corporate governance litigation, and proceedings involving access to company records.
Legal Authorities
- Salamon v. Orchid Global, Inc. (2026) 122 Cal.App.5th 183 (Cal. Ct. App., 1st Dist., Div. 2, A173959), filed July 31, 2026, modified Aug. 26, 2026 without change in judgment — official opinion
- California Corporations Code § 1600 — official text
- California Corporations Code § 1601 — official text
- Delaware General Corporation Law § 220
- Code of Civil Procedure § 410.30 — official text
Related practice areas: Partnership and Shareholder Disputes · Corporate Governance and Shareholder Disputes