FOR IMMEDIATE RELEASE | March 5, 2025
Contact: Sarah Fulton (302) 401-1114
WHAT: Senator Darius Brown of New Castle announced that the Senate Judiciary Committee will hear Senate Bill 21, sponsored by the leaders of all four legislative caucuses, at its next meeting.
With strong bipartisan support for these corporate law changes, SB 21 codifies long-standing values of Delaware corporate law.
In advance of the committee meeting, leaders from the Corporate Law Section of the Delaware State Bar Association have proposed an amended version of the legislation. Those changes include:
- For transactions not involving a controlling stockholder that pose a conflict of interest because a majority of the directors has potential conflicts, the corporation cannot use the director approval safe harbor unless the transaction is approved by a disinterested director committee of the board.
- To use any safe harbor that involves a disinterested director committee: (i) the board of directors must make an initial determination that all the directors on the committee are disinterested; and (ii) the committee must consist of at least two disinterested directors.
- To use a safe harbor involving the board or a disinterested director committee, the safe harbor is not available if the directors approving the act or transaction acted with gross negligence.
- To use a safe harbor involving disinterested stockholder approval, the stockholder vote must be “informed,” which clarifies that there is no change to the traditional director duties of disclosure established in the common law.
- For a public corporation director to be presumed “independent” in connection with a controlling stockholder transaction, the director must be independent from the controlling stockholder under applicable listing standards, in addition to being independent from the corporation under those standards.
- The statute will expressly state that the safe harbors will not limit or eliminate the right of a stockholder or other person to seek relief on a claim that a stockholder or other person has knowingly aided and abetted a breach of fiduciary duty by one or more directors.
- A person will be deemed a controlling stockholder if that person has a contractual right to cause the election of a majority of directors and has the discretion to determine who those nominees are.
- The detailed definition of “fair as to the corporation” would be replaced with a reference to an act or transaction being “fair as to the corporation and its stockholders,” clarifying that the common law fairness doctrine would apply to an act or transaction if the disinterested director or disinterested stockholder safe harbors do not apply.
- Regarding the proposed amendments to § 220, Council has recommended a “safety valve” provision, permitting inspection of records that are not part of the defined list of documents set forth in proposed § 220(a)(1). A stockholder may inspect additional records if the stockholder can show a “compelling need” for inspection of those records and if the stockholder has demonstrated by “clear and convincing evidence” that those specific records are necessary and essential to further a proper purpose for inspection.
- Council has proposed that the amendments to §§ 144 and 220 apply to all acts and transactions (including books and records demands), whether occurring before, on or after the effective date of the amendments, except with respect to actions and proceedings commenced in a court of competent jurisdiction that are pending or completed on or before February 17, 2025, which was the date that Senate Bill No. 21 was publicly released.
“Thank you to the Corporate Law Council for their valuable feedback. For over 100 years Delaware has been the home to a majority of America’s companies. With the chaos coming out of Washington D.C, it’s more important than ever that we protect the corporate franchise so we can continue to fund the critical programs that help our families, children, and seniors,” said Governor Matt Meyer.
“Delaware remains the leading domicile of choice for incorporation by publicly traded companies. Delaware’s corporate franchise is an integral part of our state’s economy and prosperity,” said Senator Darius Brown, Chair of the Senate Judiciary Committee. “Senate Bill 21 preserves a balanced and fair approach to both the customer and constituent.” I thank the Corporate Law Council for its feedback on Senate Bill 21. Businesses throughout the world can be assured that Delaware is the destination for them to do business with consistency and predictability, opportunity lives here.”
WHEN: Wednesday, March 12, 2025
2 p.m.
WHERE: Senate Chamber, Legislative Hall
411 Legislative Avenue, Dover, DE 19901
The committee hearing will also be livestreamed on legis.delaware.gov.
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