On Wednesday, March 26, 2025, Delaware Governor Matt Meyer signed into law Senate Bill 21, a bill that amends Delaware’s General Corporation Law. The controversial new law introduces a safe harbor for corporate transactions involving interested or conflicted directors, officers, or controlling stockholders. Corporate transactions involving a conflicted principal can now be ratified with the approval of a majority of disinterested directors or stockholders.
Prior to the legislation, a conflicted transaction would require the approval of both a majority of disinterested directors and a majority of disinterested stockholders. The legislation was introduced in response to the Delaware Supreme Court’s In re Match Group, Inc. decision, in which the Delaware Supreme Court held that conflicted transactions must be approved by a majority of both disinterested directors and stockholders, or else Delaware’s most stringent standard of review, entire fairness, would apply. The new legislation also limits what records a stockholder is entitled to view under a Section 220 books and records request. The new amendments went into effect immediately upon becoming law.
Here are the key takeaways:
- For interested corporate transactions, the transaction will be reviewed under the business judgment rule if it was approved by (a) a majority of fully-informed disinterested directors or (b) a majority of fully-informed disinterested stockholders. Prior to SB 21, entire fairness would apply unless the corporation could show the transaction was approved by both the disinterested directors and the disinterested stockholders.
- SB 21 allows for a conflicted transaction to be approved even if it was not conditioned “ab initio” on approval from the disinterested directors or disinterest stockholders. This is a reversal of the Delaware Supreme Court’s holding in In re: Match Group, Inc.
- SB 21 limited the types of documents available upon a Section 220 books and records request. Corporations may now explicitly impose confidentiality obligations as a condition for viewing books and records.