Delaware enacts significant changes to its corporate law with the passage of Senate Bill 21

On March 25, 2025, Governor Matt Meyer signed Senate Bill 21 (“SB 21”), significantly altering the Delaware General Corporation Law (“DGCL”). Governor Meyer noted that the legislation was “developed in collaboration with corporate leaders and legal experts,” and confirmed that it “clarifies key governance structures to reinforce Delaware’s reputation for equitable, predictable, and efficient corporate oversight.”

SB 21 incorporates several newly defined terms within Section 144 of the DGCL addressing stockholder and director ownership and relationship interests. For example, “controlling stockholder” is now defined to include those with 1) ownership or control of at least one-third voting power of the outstanding stock and 2) power to exercise managerial authority over the business and affairs of the corporation, rather than just stockholders with sufficient voting rights to elect a majority of the board of directors. This requirement addresses concerns that recent case law has over-designated persons with relatively de minimis stock holdings as a controller, thereby invoking the onerous entire fairness standard of review.

However, SB 21’s more controversial changes to the DGCL are found in the safe harbor provisions for interested director and officer transactions. Revisions to Section 144 eliminate equitable relief or an award of damages for transactions where the following elements are established:

144(a): Interested director or officer	Approved by a fully informed majority of the disinterested board of directors or special committee thereof; or Approved or ratified by a fully informed and uncoerced majority of disinterested stockholders
144(b): controller, not going private	All material facts are disclosed to a special committee of the board of directors and said committee approves the transaction in good faith; or The transaction is conditioned upon approval of a majority of the disinterested stockholders, and is actually approved or ratified by said disinterested stockholders
144(c): controller, going private	Both elements of Section 144(b)

A catch-all provision eliminates equitable relief and an award of damages if the transaction is fair to the corporation and its stockholders.

Lastly, new Section 144(5) of the DGCL exculpates a controlling stockholder from liability for a duty of care claim. Unlike Section 102(b)(7), there is no requirement to specify the Section 144(5) exculpation in the certificate of incorporation to render it effective.

Proponents argue that SB 21 will provide good-faith corporate actors with greater ability to defeat questionable stockholder litigation at the pleading stage. Critics argue that these sweeping changes may effect a flurry of challenges probing for holes in the newly enacted legislation, thereby requiring court intervention on potentially novel claims. 

Throughout it all, the Kennedys team is available to steer corporate clients through the churning wake following the enactment of SB 21. It would be our pleasure to speak with you.