Delaware Reworks General Corporation Law
On March 25, 2025, Delaware enacted sweeping changes to the Delaware General Corporation Law (“DGCL”) to provide certainty to key areas of Delaware corporate law. The changes are expected to reduce the tide of redomestications to other states and reduce litigation risks for corporations and their boards of directors. The key changes include new safe harbor protections for one or more directors, officers, or controlling shareholders/groups, from liability where they may not be independent in a transaction and changes to stockholders’ rights to inspect books and records.
Related Party Liability Protections
Section 144 of the DGCL relates to interested directors, officers and controlling stockholder transactions. In essence, Section 144 provides a safe harbor against liability claims for transactions between a corporation and its officers, directors, or controlling stockholders where conflicts, such as a financial interest, exist. Section 144 prevents a transaction from being declared void or voidable solely due to the conflict of interest, as long as certain conditions
Recent Notable Changes To Delaware Corporate Law
This summer the Delaware legislature passed several amendments to the Delaware General Corporation Law (DGCL) which impact public and private companies incorporated in Delaware, and elsewhere, as many states follow the DGCL.
Mergers Using DGCL Section 251(h)
Section 251(h) was first enacted in 2013. Section 251(h) eliminates the need for shareholder approval to complete a merger, where such merger is completed following a tender or exchange offer and the acquirer owns at least the percentage amount of the target that is needed to approve the merger. That is, Section 251(h) eliminates unnecessary time and expense related to a vote on a merger when certain preconditions have been satisfied. These preconditions include:
- The merger must be consummated as soon as practicable following the tender offer or exchange offer;
- The underlying tender or exchange offer must be for all of the outstanding stock of the target, except for the stock owned by the acquirer or any person that directly or
Contracting Away Fiduciary Obligations In Delaware LLCs And Limited Partnerships
Delaware corporate and alternative entity law has long been the model for other states in drafting statutes and for practitioners in advising clients and preparing limited partnership agreements and limited liability company membership agreements.
In 2005 the Delaware legislature amended its Limited Liability Company Act and Revised Uniform Limited Partnership Act to provide drafters of LP and LLC agreements with broad flexibility to modify default fiduciary duties. Both Acts now provide that default fiduciary obligations mat be restricted or eliminated, provided that the implied covenant of fair dealing and good faith may not be eliminated. Many states have followed suit.
Delaware Corporate Law
Under Delaware law, the purpose of the implied covenant of fair dealing and good faith is to enforce the reasonable expectations of parties to a contract where situations arise that are not expressly contemplated and provided for in the language of the contract itself. Although the covenant of good faith and fair dealing itself cannot be waived,
