Delaware has long been a popular jurisdiction for many businesses, offering favorable corporate governance and tax statutes and robust judicial expertise through its state courts. Delaware’s well-established legal structures draw many foreign corporations, with more than 60 percent of Fortune 500 companies being incorporated there. However, recent competition from other states, which promise more lenient regulatory regimes, have led to uncertainty as to whether Delaware will retain its dominance over the corporate law sector.
To combat this shifting landscape, on March 25, 2025, Delaware Governor Matt Meyer signed Senate Bill 21 into law, enacting a series of sweeping changes to the Delaware General Corporation Law (DGCL), specifically Sections 144 and 220 of Title 8. These amendments aim to reinforce Delaware’s status as the leading jurisdiction for US and foreign corporations while also addressing concerns regarding legal clarity and business efficiency.
What Changed and What It Means for Your Business
The DGCL amendments introduce, among other things, key updates regarding director and shareholder relations and impacts to corporate governance.
- New Safe Harbors for Conflicted Transactions – Section 144(a)-(c): The DGCL amendments provide clear, liability reducing procedures for approving transactions where directors, officers, or controlling shareholders have a financial interest. If a conflicted transaction is approved by a committee of disinterested directors or a vote of disinterested shareholders, those transactions will be insulated from legal challenge. Under the old rules, using just one of these cleansing mechanisms was not enough. It is important to note that if a deal involves a controlling shareholder attempting to take the company private, approval from both disinterested directors and shareholders is still required.
- Clarity Around Controlling Shareholders – Section 144(e)(1)-(2): The DGCL amendments help define who a “controlling stockholder” or “control group” is and extend safe harbor protections to transactions involving them. This change reduces the burden of proof previously required to defend these deals, and those who fail to meet the definition cannot be found to be a controller.
- Clarity Around Disinterested Directors – Section 144(d)(2) and 144(e)(4), (7-8): The DGCL amendments also provide definitions of “disinterested director,” “material interest,” and “material relationship.” If a board of directors determines that a director is considered independent according to the applicable exchange rules, this now creates a heightened presumption that the director is a disinterested director—rebuttable only by specific and substantial evidence. In addition, simply being dominated by a stockholder does, by itself, make a director “interested” in transactions involving that stockholder.
- Controller Exculpation for Duty of Care Claims – Section 144(d)(5): DGCL now allows controlling stockholders or control groups to be exculpated from monetary damages for breaches of the duty of care. This is similar to the protections already available to directors and officers. However, unlike with directors and officers, this exculpation does not require a charter amendment to be effective.
- Narrower Shareholder Inspection Rights – Section 220: The rights of shareholders to inspect corporate books and records have been scaled back. The DGCL now provides a definition of the “books and records” that can be subject to inspection by shareholders. While board-level materials remain accessible, informal communications like emails and texts are generally off-limits. Requests for items not part of the nine types of “books and records” outlined in the statutory definition must now specify a proper purpose with reasonable detail, and the materials sought must directly relate to that purpose.
The amendments to the DGCL apply to all acts and transactions whether occurring before, on, or after enactment; however, they do not apply to actions, proceedings commenced in court, or any demand to inspect books or records commenced or made on or before February 17, 2025.
If you have any questions regarding the content of this alert, please contact the author, Joslin Valiyaveettil, associate, at jvaliyaveettil@barclaydamon.com; Andy Henderson, partner, at ahenderson@barclaydamon.com; or another member of Barclay Damon’s Corporate Practice Area.