In spring 2025, there was significant debate over Delaware’s Senate Bill 21 (SB21), which offered new Delaware amendments addressing controller and board conflicts, as well as access to books and records. These amendments, codified in amended Section 144 and Section 220, were enacted to provide greater predictability but also to limit excessive litigation.
- Amended Section 144 established statutory safe harbors for conflicted transactions involving the board or controlling stockholders.
- Amended Section 220 was designed to curtail broad stockholder inspection rights.
In general, these provisions were heralded by the corporate bar as a stabilizing measure for corporate practitioners, offering greater clarity and certainty for books and records demands and transactions involving conflicts, and helping to avoid incessant and unnecessary litigation costs in every transaction.
So why haven’t we seen many significant opinions involving these new, crucial provisions? Because the provisions were the subject of a lengthy appeal challenging amended Section 144.1 The good news is that the Delaware Supreme Court declared these provisions fully constitutional.
In other words, amended Sections 144 and 220 are fully operational and ready to be incorporated into corporate transactions and decision-making.
There’s a clean slate right now, and these statutory provisions can be utilized the way the drafters intended and should have an immediate impact on corporate transactions and litigation. Delaware expects these new provisions will be a central part of corporate planning and litigation for years to come.
This article provides a starting point for those who have been watching the reincorporation debate this past year with a keen eye or are somewhat aware of these new provisions but haven’t paid much attention to the details.
Below, we outline five crucial aspects of the new statutory provisions that may not be fully appreciated.
1. Perks of Being a ‘Disinterested Director’
Prior to new Section 144, determining whether a public company director was “disinterested” was left entirely to common law tests and judicial determination. Under amended Section 144(d)(2), directors of public companies who meet stockholder exchange criteria for independence are now statutorily presumed to be independent if they are not involved in the transaction, or even if the director was named to the board by a person who is interested in the transaction.
Qualifying disinterested directors benefit from a statutory presumption that is “heightened” and can only be rebutted by “substantial and particularized facts,” such as a “material interest” in the transaction or a “material relationship” with an interested party that could reasonably impair the objectivity of the director’s judgment in connection with the transaction.
The bottom line is that the amendments make it much harder to challenge the independence of directors on weak grounds. This change was reinforced in a recent, novel decision where Vice Chancellor Lori Will interpreted Section 144 on this very topic and ruled that:
- Section 144(d)(2) should apply broadly.
- It is not limited only to Section 144.
- “By requiring both ‘substantial and particularized facts’ … [it] suggests a legislative intent to strengthen the presumption beyond the Rule 23.1 standard.”2
2. Clarity of Control
The Section 144 amendments also clarified what constitutes a “controller” or “control group” with less than a majority control position — an issue that vexed many companies in the Delaware courts under the common law.
The new provisions define a “controlling stockholder” or “control group” as one who:
- owns or controls at least 33.3% of the voting power, and
- has the capacity to exercise managerial authority of the business and affairs of the company.
The overall goal of these changes is to provide greater clarity as to when a controlling stockholder or control group has “control” and to reduce litigation activity in light of clear statutory definitions. Moreover, the Section 144 amendments clarify that both controlling stockholders and control groups — in their capacity as such — are shielded from monetary damages for breaches of the duty of care. This brings controllers in line with other fiduciaries that are statutorily permitted to be exculpated for money damages based on care violations.
3. The ‘Votes Cast’ Ratification Standard
Another perk for companies of the Section 144 amendments is an enhanced voting standard under the safe harbors. Under the common law, obtaining the protection of a majority-of-the-minority stockholder vote could be incredibly difficult, given voting standards that require a majority of the outstanding shares rather than just those voting.
Under Section 144, the voting standard has shifted to an informed, uncoerced, affirmative vote of a majority of the “votes cast” by “disinterested stockholders” who do not have a material interest in the transaction or a material relationship with the controlling stockholder or control group, or with any other materially interested person.
This makes securing cleansing votes significantly more feasible for public companies, particularly those that may not have a track record of stockholders showing up at the ballot box.
4. Statutory Safe Harbors
Historically, navigating transactions with conflicted fiduciaries required significant thought and planning based on hundreds of cases issued over decades. The applicable standards left significant discretion to the courts around nearly every aspect of judicial challenges in controller or conflicted board situations.
Amended Section 144 was designed specifically to establish bright-line, statutory safe harbors for transactions involving conflicted boards and controlling stockholders, with the goal of providing clear guidelines that, if followed, would result in less litigation burden and expense.
In most instances, where the interests of a controlling stockholder, control group or conflicted board diverge from those of other stockholders, the safe harbors provide a more streamlined process. Under the statute, the transaction can be cleansed if:
- the transaction is approved or recommended in good faith by a majority of directors on a committee with at least two disinterested directors, or
- the deal is approved by a majority of votes cast by informed and disinterested stockholders.
As for controlling stockholder “go-private” transactions, the standard for the safe harbor is a higher bar but still comparatively much easier to navigate than before. Specifically, the statute requires that such a transaction must be approved by:
- a majority of the disinterested directors, acting in good faith, serving on a committee, and
- a majority of votes cast by informed, disinterested stockholders.
Ultimately, the goal of these innovative statutory “safe harbor” provisions is to make transaction outcomes more predictable and generate less stockholder litigation in nearly every matter involving a controller or conflicted board. This is a welcome change for companies.
5. Revamped Books and Records Demands
Stockholders frequently seek books and records under Delaware law before filing complaints. But Section 220 demands often became protracted affairs taking months to resolve, particularly when the requests were focused less on board-level materials and more on emails and texts, akin to civil litigation discovery.
Such demands also led to a significant uptick in expedited litigation over books and records that weighed down the Court of Chancery’s dockets.
The new Section 220 amendments provide a much-needed modern overhaul. Specifically, the statute now identifies a limited, itemized list of document categories that can be accessed by a stockholder that satisfies the statutory formalities and requirements.
This includes, among other specific categories, a company’s:
- Charter.
- Bylaws.
- Minutes of board and committee meetings.
- Director independence questionnaires.
- Annual financial statements.
- Certain contracts with stockholders.
The statute also permits companies to “impose reasonable restrictions on confidentiality, use or distribution” of documents, states that information in the books and records are “deemed incorporated by reference in any complaint” filed by a stockholder in relation to the subject matter referenced in the demand, and that the company may “redact portions of any books and records” that “are not specifically related to the stockholder’s purpose.”
Another feature beyond the itemized list of categories and restrictions is that a stockholder seeking access to emails and other written communications must meet a higher burden to obtain them. To access these additional documents, stockholders must prove a “compelling need” for the extra documents and demonstrate this need with “clear and convincing evidence.”
Ultimately, the changes are intended to:
- Provide more streamlined access to board-level materials.
- Reduce the burden on companies facing drawn-out, invasive demands for informal communications.
- Avoid litigation expense at this stage of the proceedings.
Conclusion
In short, the new Delaware statutory provisions are beneficial to Delaware companies, which now have statutory guideposts and definitions that should provide clarity and increased protection when engaging in transactions. The goal of amended Sections 144 and 220 is to provide more certainty and predictability in corporate planning and litigation outcomes. Moreover, reduced overall litigation burden and cost allows for greater value to be generated for all constituents involved.
Stockholders, who undoubtedly will continue to challenge transactions, will do so within the context of the statutory provisions. The first novel ruling interpreting Section 144’s “disinterested director” standard has already been issued in Ayers. Similar rulings interpreting other aspects of amended Sections 144 and 220 will follow.
As these rulings are issued, if the amendments in real world practice require tweaks or additional amendments, the Delaware General Assembly is expected to be responsive to those needs.
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1 The Section 220 amendments were not challenged on appeal. See Rutledge v. Clearway Energy Grp. LLC, -- A.3d --, 2026 WL 548504, at *5 (Del. Feb. 27, 2026) (“The amendments to § 220, which governs stockholder inspections of corporate books and records, are not implicated by the questions the Court of Chancery certified to us.”).
2 See Ayers v. Foley, 2026 WL 1723538, at *10 (Del. Ch. June 15, 2026). (“The General Assembly’s focus on materiality indicates that the facts must be significant enough to evidence a disabling conflict … [and] a plaintiff must plead specific, non-conclusory facts of sufficient qualitative significance to support a reasonable inference of a material interest or relationship that would impair the director’s objective judgment.”)
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.