RECENT SIGNIFICANT AMENDMENTS TO DELAWARE’S CORPORATE GOVERNANCE LAW
Many large US corporations, including two-thirds of the Fortune 500, are incorporated in Delaware, making it the preeminent source of corporate governance law in the US. Delaware’s legislature has long strived to strike a reasonable balance between deference to boards’ business judgments and stockholders’ ability to challenge their actions.
On 25 March 2025, Delaware enacted several significant amendments to the Delaware General Corporation Law (DGCL) to address a growing perception that, over the past decade, the Delaware courts’ interpretation of the law has swung too far in the direction of stockholder challenges. In turn, that perception has prompted some high-profile US corporations, including Tesla, SpaceX, TripAdvisor and Dropbox, to reincorporate in other states they judged friendlier to directors and large stockholders, such as Texas and Nevada. These moves sparked fear in Delaware of a broader exodus of corporations from the state and a concomitant loss of franchise tax revenue, which funds a third of the Delaware government’s budget.
To bring greater certainty to boards, and to ward off the feared ‘DExit’, Delaware amended the DGCL to establish bright-line rules more favourable to directors and large stockholders in the areas of transactions with controlling stockholders or conflicted directors or officers (D&Os), standards for director independence, and stockholder access to corporate books and records. In this article, we summarise those amendments and the trends in Delaware case law they have now reversed.
Jul-Sep 2025 issue
Friedman Kaplan Seiler Adelman & Robbins LLP