Delaware's 2025 DGCL amendment

In March 2025, Delaware enacted significant amendments to the Delaware General Corporation Law (DGCL). These amendments, enacted through Senate Bill 21 (SB 21) and signed into law by Gov. Matt Meyer on March 25, 2025, substantively modify the safe harbor provisions for interested transactions and refine the scope of stockholder inspection rights. We analyze these critical changes and their practical implications for Delaware corporations, their boards and stockholders.
Background and context
The amendments were passed by the Delaware legislature in response to a concerning trend of corporations redomesticating to other states. The law took effect immediately upon the governor's signature and represents Delaware's proactive effort to maintain its position as the premier state for corporate domicile by providing greater statutory clarity in areas previously defined primarily through case law.
Section 144: Comprehensive safe harbor framework
Defining the 'controlling stockholder'
The amendments provide a statutory definition of a 'controlling stockholder' as one who:
Owns or controls a majority of voting stock entitled to vote in director elections
Can appoint directors with majority voting power, or
Has equivalent control by holding at least 33.33% of the corporation's voting stock and managerial authority over the corporation
Three distinct safe harbor paths
The amendments establish differentiated approval requirements for interested transactions based on the specific conflict scenario:
1. Majority interested board safe harbor
For transactions involving a majority interested board, the amendments provide a safe harbor from both equitable relief and damages liability through either:
Approval by an independent committee comprising at least two disinterested directors, or
Approval or ratification by a majority of the votes cast by disinterested stockholders
Notably, the director safe harbor no longer requires conditioning approval before the start of substantive economic negotiations, though the board must determine all committee members are disinterested. For stockholder approval, the 'votes cast' standard replaces the previous 'outstanding' shares standard.
2. Conflicted controller/non-go-private transactions
For transactions where a controlling stockholder has a conflict but is not taking the company private:
Safe harbor is available through either:
Approval by an independent committee comprising at least two disinterested directors, or
Approval or ratification by a majority of the votes cast by disinterested stockholders
This effectively overrules prior case law requiring both protections for such transactions.
3. Conflicted controller / go-private safe harbor
For transactions where a controlling stockholder is taking the company private:
Safe harbor requires both:
This codifies the dual-protection framework from Kahn v. M&F Worldwide Corp. (MFW) while eliminating the 'ab initio' requirement that these protections be implemented before the start of substantive economic negotiations.
Enhanced protection for public company directors
The amendments create a strong presumption that directors of public companies are disinterested and independent if they meet stock exchange independence definitions. This presumption:
Does not apply if the director is a party to the transaction
Can only be rebutted by 'substantial and particularized facts'
The amendments also limit controller liability to breaches of loyalty or improper benefits, shielding controlling stockholders from damages for breaches of the duty of care in their capacity as controllers.
Section 220: Refining stockholder inspection rights
Statutory definition of 'books and records'
The amendments provide a statutory definition of 'books and records' to establish clearer boundaries for stockholder inspection rights, including:
Enhanced requirements for inspection
SB 21 also institutes more structured requirements for books and records inspections:
Demands must be conducted in good faith
Proper purpose must be described with reasonable particularity
Requested records must be specifically related to the stockholder's proper purpose
Additionally, the amendments codify that corporations can impose reasonable confidentiality restrictions, limiting the use and distribution of inspected records and redacting irrelevant information.
Limited expansion provision
Unlike the original bill, the enacted amendments permit the inspection of materials beyond those covered by the 'books and records' definition if a stockholder:
Makes a showing of a compelling need for inspection to further a proper purpose, and
Demonstrates by clear and convincing evidence that such specific records are necessary and essential to further such purpose
This balanced approach is designed to preserve meaningful inspection rights while providing companies with greater certainty about the scope of potential demands.
Practical implications
For corporate governance:
Strategic flexibility in transaction planning: The amendments provide multiple pathways to cleanse conflicted transactions based on the nature of the conflict, enhancing flexibility in transaction structuring.
Greater certainty for boards: The presumption of independence for public company directors who meet exchange requirements reduces litigation risk in board decision-making.
Protection for controllers: Limiting controller liability to breaches of loyalty or improper benefits shields controlling stockholders from damages for breaches of the duty of care.
Streamlined approval processes: Removal of the 'ab initio' requirement and other timing constraints allows more practical implementation of protective measures.
For transaction planning:
Clearer standards: The 33.33% threshold for controlling stockholder status provides a bright-line rule.
Tailored approval paths: Different cleansing options based on transaction type allow more efficient governance approaches.
Special committee requirements: Committees must include at least two directors determined to be disinterested and fulfill their duty of care.
Modified stockholder approval standard: The shift to a 'votes cast' standard from 'outstanding shares' may make stockholder approval more attainable.
For stockholder rights:
More defined inspection scope: The statutory definition of 'books and records' provides both corporations and stockholders with greater clarity.
Balanced protection: While defining limits to inspection rights, the amendments preserve access to additional records when stockholders can demonstrate compelling need.
expand
To learn more about King & Spalding's global M&A practice, please visit www.kslaw.com/capabilities/mergers-and-acquisitions.
With nearly 140 years of service, King & Spalding is an international law firm that represents a broad array of clients, including half of the Fortune Global 100, with 1,300 lawyers in 24 offices in the United States, Europe, the Middle East and Asia.
Rob Leclerc works with publicly traded and private companies as well as private equity firms to execute mergers and acquisitions, strategic investments, joint ventures and other complex transactions. Leclerc is a partner in our Mergers and Acquisitions and Corporate Governance practices.
Zack Davis specializes in representing issuers and underwriters in a variety of capital markets activities in the U.S. and abroad. He also advises a number of public companies in connection with governance issues, SEC reporting and disclosure requirements and other corporate and securities matters.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Yahoo

20 minutes ago

• Yahoo

AppLovin (NasdaqGS:APP) Reports Robust Q1 Earnings Despite Price Dip Over Last Quarter

AppLovin reported robust Q1 earnings with sales growth and improved net income, yet it faced a 4% share price decline over the last quarter. The price move contrasts with the broader market's flat performance but can be partly attributed to the substantial goodwill impairment and the securities class action lawsuit filed against the company. Despite these challenges, the ongoing share repurchase program and strategic advancements like Chartboost's new capabilities on the MAX platform may have cushioned the impact. Meanwhile, impending board changes and M&A discussions could introduce new dynamics for the company's future trajectory. AppLovin has 3 warning signs we think you should know about. Trump's oil boom is here — pipelines are primed to profit. Discover the 22 US stocks riding the wave. The recent developments surrounding AppLovin, including the goodwill impairment and class action lawsuit, may introduce uncertainties that weigh on investor sentiment. While these challenges could pressure the company's revenue and earnings forecasts in the short term, the ongoing share repurchase program and strategic investments in AI and global advertising might support long-term growth trajectories. Over a three-year period, AppLovin's total shareholder return was very large, showcasing its resilience and potential for significant value creation. Despite a recent 4% share price decline, the company's one-year performance exceeded the US Software industry's 16.8% return, indicating robust comparative growth. With a current share price of US$304.62 and analysts' price target of US$432.90, the stock remains at a substantial discount, suggesting potential for future appreciation if the company meets earnings projections. Gain insights into AppLovin's historical outcomes by reviewing our past performance report. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NasdaqGS:APP. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@

TechCrunch

20 minutes ago

• TechCrunch

Moratorium on state AI regulation clears Senate hurdle

A Republican effort to prevent states from enforcing their own AI regulations cleared a key procedural hurdle on Saturday. The rule, as reportedly rewritten by Senate Commerce Chair Ted Cruz in an attempt to comply with budgetary rules, would withhold federal broadband funding from states if they try to enforce AI regulations in the next 10 years. And the rewrite seems to have passed muster, with the Senate Parliamentarian now ruling that the provision is not subject to the so-called Byrd rule — so it can be included in Republicans' 'One Big, Beautiful Bill' and passed with a simple majority, without potentially getting blocked by a filibuster, and without requiring support from Senate Democrats. However, it's not clear how many Republicans will support the moratorium. For example, Republican Senator Marsha Blackburn of Tennessee recently said, 'We do not need a moratorium that would prohibit our states from stepping up and protecting citizens in their state.' And while the House of Representatives already passed a version of the bill that included a moratorium on AI regulation, far-right Representative Marjorie Taylor Greene subbsequently declared that she is 'adamantly OPPOSED' the provision as 'a violation of state rights' and said it needs to be 'stripped out in the Senate.' House Speaker Mike Johnson defended the provision by saying it had President Donald Trump's support and arguing, 'We have to be careful not to have 50 different states regulating AI, because it has national security implications, right?' In a recent report, Americans for Responsible Innovation (an advocacy group for AI regulation), wrote that 'the proposal's broad language could potentially sweep away a wide range of public interest state legislation regulating AI and other algorithmic-based technologies, creating a regulatory vacuum across multiple technology policy domains without offering federal alternatives to replace the eliminated state-level guardrails.' Techcrunch event Save $200+ on your TechCrunch All Stage pass Build smarter. Scale faster. Connect deeper. Join visionaries from Precursor Ventures, NEA, Index Ventures, Underscore VC, and beyond for a day packed with strategies, workshops, and meaningful connections. Save $200+ on your TechCrunch All Stage pass Build smarter. Scale faster. Connect deeper. Join visionaries from Precursor Ventures, NEA, Index Ventures, Underscore VC, and beyond for a day packed with strategies, workshops, and meaningful connections. Boston, MA | REGISTER NOW A number of states do seem to be taking steps toward AI regulation. In California, Governor Gavin Newsom vetoed a high-profile AI safety bill last year while signing a number of less controversial regulations around issues like privacy and deepfakes. In New York, an AI safety bill passed by state lawmakers is awaiting Governor Kathy Hochul's signature. And Utah has passed its own regulations around AI transparency.

The Hill

an hour ago

• The Hill

Trump touts ‘great unity' in GOP after Iran strikes, pushes to get ‘big, beautiful' bill done

President Trump touted the 'great unity' among Republicans following the U.S. strikes on Iranian nuclear facilities, as he called on the party to focus on getting his agenda bill through to his desk. 'Great unity in the Republican Party, perhaps unity like we have never seen before,' Trump said in a post on Truth Social on Sunday. 'Now let's get the Great, Big, Beautiful Bill done. Our Country is doing GREAT. MAGA!' he added. The president's remarks come after he announced Saturday evening that U.S. forces bombed three Iranian nuclear sites and said to Iran in a social media post, 'NOW IS THE TIME FOR PEACE!' The bombs targeted three nuclear sites in Natanz, Esfahan and Fordow, located inside a mountain. Six 'bunker buster' bombs were reportedly dropped on Fordow, while more than two dozen Tomahawk missiles were launched at the other two sites. The bombings put the U.S. directly in Iran's crosshairs for retaliation and made it an active participant in the Mideastern war, which Israel launched with airstrikes against Iran on June 13. Ahead of the strikes, news outlets had focused on the so-called 'civil war' in the GOP, between the pro-Israel foreign policy hawks and supporters who identified more with the 'America-First' agenda. Members of both groups had been publicly lobbying the president in opposite directions as he considered taking military actions against Iran. While some anti-interventionist Republicans—including Rep. Thomas Massie (R-Ky.)—still publicly criticized the strikes, most of the GOP expressed support following the announcement. The news also comes as the Senate enters a pivotal week for the president's massive agenda bill, which Republican leaders in Congress still say they hope to get done by July 4.