After Threat of Exodus, Delaware Lawmakers Swiftly Respond: Six Things To Know About Recent Amendments to the DGCL

Several recent decisions in Delaware courts have driven a variety of companies to publicly initiate actual or threatened reincorporation out of Delaware. After fallout from these cases and corporate actions, Delaware lawmakers in February 2025 swiftly proposed amendments to Sections 144 and 220 of the Delaware General Corporation Law (DGCL), which were passed by the Delaware General Assembly and signed into law by Delaware Governor Matt Meyer on March 25, 2025. Here are six things to know about these recent amendments:

1. Director/Officer Conflict Transactions. Section 144(a) was overhauled to clarify the process for approval of conflict transactions involving directors or officers of a corporation. The safe harbor applies so long as one of the following is true: (1) a fully informed board or committee approves the act or transaction in good faith and without gross negligence, (2) the act or transaction is approved or ratified by “an informed, uncoerced, affirmative” vote of a majority of the votes cast by disinterested stockholders, or (3) the entire fairness standard of review is met. The substance of the alternatives adds new procedural clarity but is largely similar to the prior 144(a), and the safe harbor now expressly protects against equitable relief or awards of damages against a director or officer involved in the conflict transaction or present at or a participant in the meeting at which the act or transaction was authorized.
2. Controlling Stockholder Transactions. Section 144(b) goes beyond existing caselaw and establishes a clear safe harbor for controlling stockholder transactions (other than going private transactions) against claims of breach of fiduciary duty. The safe harbor applies so long as one of the following is true: (1) a board committee, consisting of at least two disinterested directors, is delegated authority to negotiate and reject the transaction, and the transaction is approved in good faith and without gross negligence by the fully informed committee (Majority Disinterested Committee Approval), (2) the transaction is conditioned, prior to a vote, on the approval or ratification by disinterested stockholders and is approved or ratified by a majority of votes cast by informed, uncoerced, disinterested stockholders (Majority Disinterested Stockholder Approval), or (3) the entire fairness standard of review is met.
3. Going Private Controlling Stockholder Transactions. Section 144(c) establishes a new safe harbor for controlling stockholder transactions that are going private transactions against claims of breach of fiduciary duty. The safe harbor applies so long as one of the following is true: (1) both the Majority Disinterested Committee Approval and the Majority Disinterested Stockholder Approval is obtained, or (2) the entire fairness standard of review is met. In some ways this codifies the MFW standard adopted by the Delaware courts, but limiting that approach to going private transactions. In addition, it eliminates the requirement that the controller condition the transaction on both Majority Disinterested Committee Approval and the Majority Disinterested Stockholder Approval from the outset (before any negotiations occur).
4. Director Independence for Purposes of Conflict Transactions. Section 144(d)(2) adds a presumption that a director of a corporation whose stock is listed on a national securities exchange is disinterested in an act or transaction if the director is not a party to the act or transaction and the board determines such director satisfies the independence standards under the stock exchange rules. This presumption may be rebutted only by “substantial and particularized facts” that the director has a material interest, or a material relationship with someone with a material interest, in the act or transaction.
5. Definition of Controlling Stockholder. New Section 144(e)(2) defines “controlling stockholder” to provide clarity on who is and is not a controlling stockholder. Under former Delaware caselaw, it was not always easy to determine whether a stockholder constituted a “controlling stockholder” at the outset of a transaction, sometimes pressuring parties to obtain extra approvals out of caution or leaving them exposed to litigation risk. For a transaction to involve a controlling stockholder, it now must involve a person (together with affiliates and associates) that: (1) owns or controls a majority of the voting power of the corporation entitled to vote in the election of directors, (2) has the right to cause the election of directors constituting a majority of the board, or (3) has the functional equivalent of a majority stockholder, which means the person or group must hold at least one-third of the voting power of the outstanding stock of the corporation and have the power “to exercise managerial authority over the business and affairs of the corporation.”
6. Books and Records Request Updates. The DGCL amendments also include substantive revisions to Section 220, the statute that allows stockholders of Delaware corporations to inspect a company’s books and records. Our securities litigation colleagues published an extensive Update on these amendments. They noted:

“The amendments to Section 220 are likely to make it more difficult for stockholders to obtain evidence to support viable fiduciary duty and other corporate governance claims. This is especially true with respect to documents reflecting communications among directors or officers that take place outside of board meetings—including emails, texts, and other electronic communications—which are frequently a more fertile source of information that will support viable claims than most of the categories that the amended statute explicitly makes subject to stockholder inspection rights. While the amendments do not eliminate the potential for a stockholder to obtain email or other electronic communications via a Section 220 demand, they increase the burden on stockholders who seek to obtain such documents.”