Legal Memorandum: Access to Audited Financials in DE

Issue: What is necessary to establish a potential claim for access to audited financial statements under Delaware law?

Because Delaware limited liability company law places a premium on the LLC members’ operating agreement in determining respective rights, the LLC’s operating agreement is the starting point in such an analysis.  See Delaware Limited Liability Company Act (the “LLC Act”), Del. Code Ann., tit. 6 §§ 18-101 to 18-110; Elf Atochem N. Am. Inc. v. Jaffari, 727 A.2d 286, 290 (Del. 1999). 

The next step is to examine § 18-305 of the LLC Act.  Again, there is no express requirement in this statute that specifies that members must have access to audited financials.  However, there are at least two more general provisions, § 18-305(a)(1) and (6), that may provide the basis for a colorable claim.  These provisions state that “members may obtain from the limited liability company from time to time upon reasonable demand for any purpose reasonably related to the member’s interest”:

(1)   [t]rue and full information regarding the status of the business and financial condition of the limited liability company” (§18-305(a)(1));

[and]…

(6) Other information regarding the affairs of the limited liability company as is just and reasonable.

Certainly this general language of both subsections (1) and (6) is broad enough to encompass “audited financials” but by the same token neither appear to mandate access to audited financials in all cases. 

An argument can be made, however, that such access is required if the audited financials are necessary […]