Chuang Wei Pan LLC, et al. v. Hiwin Holding LLC, C.A. No. 2025-0402-LM (MTZ) (Del. Ch. Jan. 22, 2026) (Zurn, VC)

In this letter decision, Vice Chancellor Zurn (the “Court”) resolved the plaintiffs’ exceptions to a Magistrate’s Final Report (the “Final Report”) which found that the plaintiffs lacked standing to inspect books and records pursuant to 6 Del. C. § 18-305 (“Section 18-305”) and the LLC’s operating agreement (the “Operating Agreement”), reversing the decision, and remanding the matter to the Magistrate.

Background

Defendant Hiwin Holding LLC (“Hiwin”) is a board-managed Delaware LLC with two members: Plaintiff Chuang Wei Pan LLC (“CWP”) and non-party WXG Funding, Inc. (“WXG”).  CWP is owned and controlled by Plaintiff Yaning Li (“Ms. Li” and together with CWP, “Plaintiffs”) and her father, non-party Pu Li (“Mr. Li”).  WXG is owned and controlled by non-party Wang Xiaogang (“Mr. Wang”).  Hiwin’s board consists of Mr. Li as chairman, Mr. Wang as vice chair, Ms. Li as secretary, and two additional directors appointed by Mr. Wang.

Hiwin’s Operating Agreement specified that Exhibit A therein contained the names of each member, and that each member listed had membership rights.

By mid-August 2024, Mr. Li suspected mismanagement at Hiwin, which was heightened after Mr. Wang refused to permit an audit.  Shortly thereafter, Mr. Li expressed to Mr. Wang that he wanted to resign as Chairman and withdraw CWP.  The two men discussed CWP’s potential exit but formed no concrete exit plan.  On August 24, Mr. Li sent a WeChat message to Mr. Li (the “August 24 Message”) discussing CWP’s withdrawal—the parties dispute whether the accurate translation of the August 24 Message is that the CWP “withdrew” or “will withdraw.”  Over the next few weeks Mr. Li and Mr. Wang continued to negotiate, but nothing was finalized.

On October 1, 2024, CWP sent a demand to Hiwin for books and records.  Hiwin and WXG responded by agreeing to produce some books and records.  Mr. Li then invoked his status “as a shareholder and the chairman of the board” and again encouraged Hiwin to undertake an audit.  Mr. Wang contacted Mr. Li, referring to him as the chairman, and noted that Hiwin was still seeking a feasible solution for CWP’s withdrawal.  On October 30, CWP sent a second demand, to which Hiwin produced a limited subset of the requested documents.  On December 5, CWP and Mr. Li sent a third demand to Hiwin; Hiwin did not respond.

On March 17, 2025, Mr. Li announced a board meeting and proposed an agenda.  Despite much correspondence, including Mr. Wang’s request to reschedule the meeting, the meeting was held, but Mr. Wang and one other board member did not attend.  Shortly thereafter, CWP, Mr. Li, and Ms. Li served a fourth demand on Hiwin under the Operating Agreement and Section 18-305.  Hiwin refused to produce documents, so Plaintiffs filed this action. 

Hiwin asserted that Mr. Li had voluntarily withdrawn CWP from Hiwin as of December 31, 2024, and that Ms. Li and Mr. Li were no longer board members.  Mr. Wang then unilaterally signed a formal board resolution purporting to retroactively acknowledge that CWP had withdrawn from Hiwin, effective, December 31, 2024; dissolve the five-member board; remove Ms. Li a secretary; and to note Hiwin’s obligation to pay CWP the value of its interest.

After a two-day trial the Magistrate held that Plaintiffs lacked standing to inspect Hiwin’s books and records because Mr. Li’s offer to withdraw constituted an attempt to withdraw CWP, and CWP’s withdrawal effectuated the withdrawal of Ms. Li’s qualifying status on the board.  Plaintiffs filed exceptions to the Final Report.

Key Issues and Holdings

After a de novo review of the evidence presented to the Magistrate, the Court concluded that Plaintiffs did have standing and remanded the case to the Magistrate.

The Court explained that the summary nature of books and records actions “circumscribes how deeply the Court will dive to determine if the plaintiff has standing.”  In the LLC context, a valid membership list is prima facie evidence of standing in a books and records proceeding.  The Court clarified that it should look past the membership list only if a standing defense could be decided based on factual admissions or contractual interpretation, and only if the other evidence rebuts the membership list by clear and convincing evidence. 

The Court relied on the “undisputably valid” Operating Agreement which repeatedly designated and treated CWP as a member, including listing CWP in Exhibit A’s “list of members.”  The Operating Agreement required any membership change to be reflected in an amendment, so Mr. Wang’s purported retroactive resolution failed at minimum because it did not reference any amendment to the Operating Agreement.  The Court determined that the signed Operating Agreement (and its attached Exhibit A) constituted prima facie evidence that CWP was a Hiwin member.

The Court next considered whether the August 24 Message could rebut the prima facie evidence.  The Court concluded it could not because it was not “the type of straightforward instrument or admission that the Court will consider for a standing defense.”  Instead, because it was only a snippet of monthslong negotiations, and contained a disputed translation, additional evidence was required to ascertain the meaning—a plenary analysis not proper for a summary books and record defense.  The Court noted even if it reviewed additional evidence to determine the meaning of the August 24 Message, the subsequent behavior of the parties including Mr. Wang repeatedly providing noncommittal answers about CWP’s impending withdrawal and the boards’ deference to Mr. Li when he continued to act as chairman after the purported withdrawal, did not demonstrate clear and convincing evidence that CWP had withdrawn.  The Court further emphasized that a key provision governing withdrawal in the Operating Agreement was arguably ambiguous, which created an increased burden on the August 24 Message to effectuate a withdrawal.  The Court held that such an in-depth interpretation of the August 24 Message would improperly convert a summary books and records proceeding into a plenary action.  The Operating Agreement met the prima facie presumption, and the August 24 Message could not rebut that presumption.

The Court further held that there was no basis to conclude Mr. Li and Ms. Li were not still Hiwin directors, given that the Magistrate only determined they had been removed based on the conclusion that CWP had withdrawn.

The Court held that Plaintiffs had standing to seek books and records under the Operating Agreement and Section 18-305 and remanded the matter to the Magistrate.

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