Delaware has recently enacted two sets of amendments to the Delaware General Corporation Law (“DGCL”).  One from 2024 is Senate Bill 313, which made explicit the right of a corporation to grant governance rights to a shareholder by contract.  More recently, in March 2025, Senate Bill 21 amended the DGCL in two ways: (1) to expand and strengthen the safe harbors for certain transactions with related parties and (2) to limit the scope of corporate books and records that a stockholder may access without demonstrating a compelling need for the materials.

Senate Bill 313 – Stockholders’ Agreements

On July 17, 2024, Delaware’s governor signed Senate Bill 313 into law.  The bill amended the DGCL in reaction to the Delaware Court of Chancery’s opinion in West Palm Beach Firefighters’ Pension Fund v. Moelis & Co. (Moelis).  The decision involved a stockholders’ agreement in which the company granted its founder and key stockholder certain governance rights. The court held that the granting of certain of those rights violated Section 141(a) of the DGCL, which provides that “[t]he business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation.”

The court found that Section 141(a) did not allow the company to enter into an agreement that (1) required the prior written consent of the company’s founder and majority stockholder for the company’s board of directors to take a range of actions, (2) allowed that stockholder to select a majority of the board’s members, and (3) required that board committees include a number of that stockholder’s designees that is proportionate to the board’s overall composition.  The court noted that a corporation lacked the power to grant these governance rights by contract, but that such grants could be permissible if included in the company’s certificate of incorporation or bylaws, and many practitioners began using that approach.

Senate Bill 313 amended DGCL Section 122 to allow corporations to delegate governance rights like those in Moelis to stockholders, even where that grant is not provided for in the corporation’s charter. The amendment became effective on August 1, 2024.

The amendment gives Delaware companies a statutory right to enter into agreements that grant governance rights typically held by corporate boards to stockholders without having to amend their charter. This codifies a right to include these terms in stockholders’ agreements, a practice that had been common among Delaware companies prior to Moelis. The Delaware General Assembly’s rush to pass these amendments while the Moelis case was still pending and subject to appeal raised much criticism. Some argued that the bill threatened Delaware’s dominant position in corporate law, which is centered on the fact that its law is heavily judge-made. Others worried that the bill did not contain limiting language on how much an agreement can alter a company’s corporate governance. Delaware companies that engage in these agreements should consider placing limitations on the scope of authority granted. 

Senate Bill 21 – Related Party Transactions and Stockholders’ Information Rights

On March 25, 2025, the governor of Delaware signed into law Senate Bill 21.  This bill amended Section 144 of the DGCL to clarify the approval process necessary for corporations to transact with related parties and Section 220 of the DGCL to limit the scope of corporate materials that a stockholder has the right to access.

Section 144 Amendments – Related Party Transactions

DGCL Section 144 addresses transactions with “interested directors and officers” as well as “controlling stockholder transactions.”  The bill to amend this section was controversial and only passed the Delaware House with some rancor.  The new law amends the following subsections of Section 144.

Section 144(a) – The amendments to this subsection strengthen the safe harbor protections for transactions with interested directors or officers. Under Section 144(a), these transactions are not deemed void or voidable solely because of director conflicts of interest if:

(1)  all material facts regarding the director or officer’s conflict are disclosed and a majority of disinterested directors on the board (or a board committee) approve the transaction, regardless of whether the disinterested directors are less than a quorum (provided, that if the interested directors are a majority of the board, the approval must be by a board committee with two or more members, all of whom are disinterested directors); or

(2)  the transaction is approved by a majority of votes cast from informed, uncoerced disinterested, stockholders.

If the transaction fails to satisfy the above, it must satisfy the “entire fairness doctrine” by being “fair as to the corporation and the corporation’s stockholders.” Previously Section 144(a) allowed these transactions to be the subject of litigation for breach of fiduciary duties and only prevented them from being deemed void or voidable solely on the grounds of director interest. Under the new amendment equitable relief and money damages are now precluded, expanding the protection of the safe harbor. Overall, these changes strengthen the ability of independent directors, when properly informed, to make good-faith decisions without second guessing by the courts.

Section 144(b) – The amendment added this subsection to provide a safe harbor that is similar to the safe harbor in Section 144(a) for transactions involving controlling shareholders, other than “going private” transactions.  This new safe harbor expanded upon protections that had developed through court precedent.  The safe harbor is conditioned upon either (1) approval by a well-informed committee of disinterested directors appointed to negotiate and approve the transaction, or (2) the transaction itself is conditioned on receiving the approval of disinterested stockholders and receives that approval by a majority of the votes cast by informed, uncoerced, disinterested stockholders. Absent meeting the safe harbor, the transaction must satisfy the entire fairness doctrine.

Section 144(c) – This new subsection was added to provide a safe harbor barring equitable relief and damages to “going private” transactions with a controlling stockholder. This safe harbor requires that both prongs of the test in Section 144(b) are met, namely that the transaction receive approval from both (1) a well-informed committee of disinterested directors appointed to negotiate and approve the transaction, and (2) a majority of the votes cast by informed, uncoerced, disinterested stockholders. The transaction would have to satisfy the entire fairness doctrine if neither of these conditions are satisfied.

Section 144(e) – This subsection was added to provide definitions used in the new provisions, including: “control group,” “controlling stockholder,” “controlling stockholder transaction,” “disinterested director,” “disinterested stockholder,” “going private transaction,” “material interest,” and “material relationship.”

Notably, this new provision defines “controlling stockholder” as someone who (1) “owns or controls a majority [of the corporation’s] voting power” in director elections, (2) “[h]as the right, by contract or otherwise,” to elect nominees selected at their discretion and constitute a majority of the directors or the majority of voting directors, or (3) has “power functionally equivalent to that of a stockholder that owns or controls a majority [of a corporation’s] voting power” in director elections through owning “at least one-third in voting power” in addition to the “power to exercise managerial authority over the business and affairs of the corporation.”

Section 220 Amendment

DGCL Section 220 gives stockholders and directors qualified rights to inspect the books and records of a corporation if there is a “proper purpose” which is defined as one “reasonably related to the stockholder’s interests as a stockholder.” The amended rule seeks to limit the judicial expansion of the scope of books and records that Section 220 makes available. “Books and records” now refer to “board level materials” as defined in case law.¹ If a stockholder seeks additional materials a “compelling need” will have to be demonstrated along with “clear and convincing evidence” that the materials are “necessary and essential.”

If you have any questions, please contact a member of the Capital Markets team or your primary attorney at Seward & Kissel LLP.