On February 27, 2026, the Delaware Supreme Court upheld the constitutionality of key amendments adopted last year to the Delaware General Corporation Law (“DGCL”). The amendments created a statutory “safe harbor” for conflict-of-interest transactions involving directors, officers, or controlling stockholders. The Supreme Court’s long-awaited decision eliminates any lingering uncertainty as to the validity of the safe harbor. The Supreme Court also upheld the amendments’ retroactive application to transactions or other actions taken before the amendments were adopted by the Delaware General Assembly unless a proceeding was pending as of February 17, 2025.

Last year, the Delaware legislature adopted Senate Bill 21 (“SB 21”), which contained significant amendments to Section 144 of the DGCL. Among other things, the amendments created a safe harbor for conflict of interest transactions. The amended statute broadly states that a transaction “may not be the subject of equitable relief, or give rise to an award of damages,” if it receives disinterested approval in accordance with the safe harbor. The amendments also provided that the revised statute applies to “all acts and transactions, whether occurring before, on or after” the date of enactment except for “any action or proceeding commenced in a court of competent jurisdiction that is completed or pending . . . on or before February 17, 2025.”

In Rutledge v. Clearway Energy Group LLC, a stockholder challenged the constitutionality of the amendments. He argued that the amendments violated Delaware’s Constitution because they (a) improperly divested the Court of Chancery of its equitable powers and jurisdiction and (b) could not apply retroactively to matters occurring before the law became effective. In an unanimous en banc ruling, the Delaware Supreme Court rejected the challenges. Among other things, the Supreme Court noted that the Court of Chancery retains jurisdiction over claims of fiduciary duty in conflicted transactions, but the amendments restrict available remedies if the transaction or other action complied with the safe harbor procedures adopted by the General Assembly. The Supreme Court wrote that, “[a]lthough the relief—equitable relief or damages—the Court of Chancery formerly would consider is now unavailable when it determines that a challenged transaction has been approved by one of the two statutorily designated cleansing mechanisms, SB 21 does not strip the court of its jurisdiction over equitable claims.”

The Delaware Supreme Court’s decision, while not surprising, removes uncertainty as to the validity of the 2025 amendments to the DGCL. The justices held that “[t]he General Assembly’s enactment of SB 21 falls within the ‘broad and ample sweep’ of its legislative power” and represents “a legitimate exercise of the General Assembly’s authority to enact substantive law that, in its legislative judgment, serves the interests of the citizens of our State.”

To that end, SB 21 was adopted to provide increased certainty to transaction planners and hopefully reduce unmeritorious litigation. It plainly forecloses entire fairness review of interested transactions that are properly approved by disinterested directors or stockholders (or both, in the case of “going private transactions”). It also defines a “controlling stockholder,” thus eliminating uncertainty associated the Delaware courts’ prior case-by-case analysis of “controller” status. Although it remains to be seen how Delaware courts will construe the new safe harbor, SB 21 was clearly adopted to respond to the corporate communities’ concerns and discourage corporations from reincorporating to other states.