On February 17, 2025, Delaware policymakers, including the governor and a group of bipartisan legislative leaders, took noteworthy steps to enhance transactional certainty and deal protection devices and decrease director, officer, and controlling stockholder liability and related litigation expenses and fees. First, in Senate Bill 21, the legislature has proposed amendments to the Delaware General Corporation Law (DGCL) that would increase protections for directors, officers, and controlling stockholders from fiduciary duty claims and liability when using certain cleansing procedures and decrease stockholders’ access to corporate books and records (Proposed Amendments). Second, in Senate Concurrent Resolution 17, the legislature has requested that the Council of the Corporation Law Section of the Delaware State Bar Association (Council) prepare a report with recommendations for legislative action regarding incentives and caps related to fees granted by the Delaware courts to attorneys representing plaintiff-stockholders (Requested Report). Although the Proposed Amendments remain subject to approval by the Delaware legislature and governor, they are immediately relevant to all companies and investors, and particularly those considering whether to incorporate or remain in Delaware.
Overview of the Proposed Amendments
The Proposed Amendments would significantly modify Sections 144 and 220 of the DGCL. These changes are intended to counteract case law developments in the Delaware litigation and transactional landscape over the past decade and provide all stakeholders with greater clarity and transactional certainty going forward. Specifically, amended Section 144 would codify variations on the deal protection devices used for cleansing breach of fiduciary duty claims by approval of disinterested stockholders (under Corwin v. KKR Financial Holdings LLC, 125 A.3d 304 (Del. 2015), in the absence of a conflicted controlling stockholder transaction) and by approval of both an independent director committee and unaffiliated stockholders (under Kahn v. M & F Worldwide Corp., 88 A.3d 635 (2014), as a conflicted controlling stockholder transaction). Amended Section 220 would largely restrict the inspection of records other than specified formal corporate records. Each of these topics has figured prominently in the recent discourse regarding Delaware’s prominence as a corporate home and source of corporate law and the possibility of a shift toward other jurisdictions. Delaware now appears poised to quickly respond to that discourse by adopting the state-of-the-art Proposed Amendments which will offer corporate constituents unparalleled clarity and transactional certainty moving forward.
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