By Rolfe Winkler

Jan. 26, 2017 8:00 a.m. ET

A former manager at privately held Domo Inc. has prevailed in a legal fight to obtain financial records from the company, affirming the rights of startup investors and employee shareholders.

Last week, Jay Biederman received Domo’s audited financial statements, according to people familiar with the case, after a Delaware judge ruled last month that he was entitled to the information so he can value his shares in the business software company.

The ruling came nearly seven months after The Wall Street Journal chronicled Mr. Biederman’s attempt to obtain the documents from Domo. Mr. Biederman had sought the financial records for more than a year before suing the company in August in Delaware, where Domo is incorporated.

Mr. Biederman declined to comment through an attorney.

Mr. Biederman’s victory shines a spotlight on shareholders’ rights to inspect their company’s books, an especially important privilege in an era when startups are staying private longer and, as a result, avoiding mandatory public disclosures.

Unlike publicly traded companies, startups like Domo aren’t required by law to file financial reports. Instead, mostly for competitive reasons, they typically keep their revenue, profit and financial projections hidden from everyone except their top investors.

Tech-startup valuations also don’t fluctuate daily like the shares of publicly traded companies. Venture investors typically set the valuations when startups raise new financing every year or two. So it is difficult to gauge how much these shares are worth without knowing a company’s financial health.

It has been nearly a year since Domo was valued at $2 billion, which would have made Mr. Biederman’s shares worth about $541,000. But some mutual funds that hold the shares have marked them down as much as 50% from that value, according to The Wall Street Journal’s Startup Stock Tracker, raising questions about the company’s current value.

Mr. Biederman invoked section 220 of Delaware’s corporate law to compel Domo to provide the data, one of a handful of rules that require private companies to disclose their records to shareholders. The law gives shareholders the right to inspect a company’s books, including a list of stockholders, financial statements, articles of incorporation and more, so long as they provide a “proper purpose” for their request.

The judge in the Delaware case, Sam Glasscock III, cited precedent in ruling in December that Mr. Biederman’s purpose to value his shares was proper and directing the company to provide audited financials.

At the time, the judge said that the way Mr. Biederman “was treated at the beginning of his request for documents was both unfortunate, and certainly…tested the limits of good faith if not exceeded them.”

Part of the Delaware dispute also was over provisions of the nondisclosure agreement that Domo asked Mr. Biederman to sign in exchange for the financial records, and additional documents related to his other allegations against the company. The NDA was renegotiated and the judge asked Domo to provide limited documentation related to the other allegations.

But the time Mr. Biederman has spent waging his fight shows how difficult it can be for shareholders to exercise such rights.

In January 2015, Mr. Biederman, who was a strategic solutions manager at Domo according to his LinkedIn profile, requested financial statements from the company, and was fired a few days later, according to his complaint.

A year later, he asked for the documents again, and Domo’s vice president of investor relations responded in an email that “shareholders are not entitled to financial information as a matter of law” since Domo is a privately held company. Delaware law states the opposite.

Two months later, in April 2016, Domo General Counsel Dan Stevenson sent him an email raising questions about his request and threatening to sue him for breaching his separation agreement.

Domo sued him in June, a week after the first Journal story ran, filing two legal actions in Utah where the company is based. One legal action was a demand for arbitration alleging disparagement, the other a civil lawsuit in state court alleging defamation and breach of contract.

The defamation case pointed to allegedly “disparaging posts about Domo” that Mr. Biederman put on his Facebook page before the Journal story ran. Domo claimed the posts—which included one that Domo says suggested sexual harassment and drug abuse took place at the company—harmed its business.

Mr. Biederman in September won a motion in Utah state court to force Domo to arbitrate the defamation claim, reducing his legal costs by consolidating the two legal actions. The defamation claim was later dismissed after Domo declined to arbitrate it, according to court transcripts. A separate disparagement claim remains before the arbitrator.

To date, Mr. Biederman’s Utah legal costs have totaled nearly $100,000, according to one of his attorneys.

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