What Newly Amended DGCL §144 Says (and Does Not Say) about Controlling Stockholder Transactions
After a pitched battle, Delaware’s SB21 amended DGCL § 144 and became effective on March 25, 2025. As the rhetoric recedes, we should leave the battle over its enactment behind us and look to the future: What does amended DGCL § 144 now say about controlling stockholder transactions? And to what extent does it change […]
Marcel Kahan is the George T. Lowy Professor of Law and Edward B. Rock is the Martin Lipton Professor of Law at New York University School of Law. This post is part of the Delaware law series; links to other posts in the series are available here.
After a pitched battle, Delaware’s SB21 amended DGCL § 144 and became effective on March 25, 2025. As the rhetoric recedes, we should leave the battle over its enactment behind us and look to the future: What does amended DGCL § 144 now say about controlling stockholder transactions? And to what extent does it change prior law? The actual language of the new section, which we will call the Safe Harbor Provision, does not reflect either its proponents’ dreams nor its opponents’ nightmares. It instead draws a distinction between statutory controllers and common law controllers and leaves Delaware’s law on the latter untouched .
The legislative synopsis for SB21 makes clear that the goal was to create “safe harbors” for interested director and controlling shareholder transactions: “Section 1 of this Act amends § 144 of Title 8 to provide safe harbor procedures for acts or transactions in which one or more directors or officers as well as controlling stockholders and members of control groups have interests or relationships that might render them interested or not independent with respect to the act or transaction.” Law firm memos by, among others, Morris Nichols and Richard Layton and Finger, sound the same theme. Governor Matt Meyer, in his request to intervene in the Dropbox litigation in the event that the Delaware Supreme Court accepts the certified question on the constitutionality of SB21, focuses on the same language in the original synopsis: “[A]mended Section 144 ‘provides safe harbor procedures’ for certain acts or transactions under specified circumstances.”
