Redrawing the Lines: How Delaware's 2025 Safe Harbor Reforms to DGCL § 144 Are Playing Out in Practice
Introduction
Sooner or later, most corporations face a deal in which someone on the inside stands to benefit: a director sells the company an asset, an executive negotiates a generous pay package, or a controlling stockholder buys out everyone else. Delaware courts have long reviewed those transactions with suspicion, and defendants who couldn't point to the right procedural protections risked having to prove in court that the deal was entirely fair. In March 2025, the Delaware legislature changed that calculus. Senate Bill 21 rewrote Section 144 of the Delaware General Corporation Law to create statutory safe harbors for conflicted transactions. For ordinary director and officer conflicts, one approval path is now enough, and the dual-approval framework built around Kahn v. M & F Worldwide Corp. and In re Match Group was loosened for controller deals. The reform was then challenged as unconstitutional, and in February 2026 the Delaware Supreme Court upheld it in Rutledge v. Clearway Energy Group LLC. Since then, the Court of Chancery has begun applying the new provisions, first in Ayers v. Foley and then in Dodiya v. Franklin, where it found the safe harbor unavailable at the pleading stage. With the law settled and the first decisions in, this article reviews what the amendments changed, why they were challenged, and what courts and deal lawyers have done with them so far.
What the Amendments Did
Before 2025, § 144 addressed only whether an interested transaction was automatically void, a limit the Delaware Supreme Court noted in Match, and courts supplied the standard of review. In March 2025, Senate Bill 21 rewrote the statute into three safe harbors. Section 144(a) covers transactions in which a director or officer is interested, § 144(b) covers controlling stockholder transactions, and Section 144(c) covers controller deals that are going-private transactions. A transaction that satisfies a safe harbor is shielded from claims for equitable relief and damages.
Under § 144(a), any one of three routes is enough; approval by a majority of disinterested directors, acting in good faith and without gross negligence; approval by a majority of the votes cast by disinterested stockholders; or proof that the deal is fair to the corporation and its stockholders. Section 144 (b) works the same way for controller deals, offering a committee of at least two disinterested directors empowered to negotiate and reject the deal, a disinterested stockholder vote the deal is expressly conditioned on, or fairness. Section 144(c) is stricter; a controller’s going-private deal needs both the committee approval and the stockholder vote, or fairness.
That two step requirement is not new. In Kahn v. M & F Worldwide Corp., the Delaware Supreme Court held that a controller's going-private merger receives business judgment review only if, from the beginning, it was approved by both a special committee of independent directors and a fully informed majority of disinterested stockholders. In In re Match Group, Inc. Derivative Litigation, the court extended that dual requirement to every controller transaction in which the controller receives a non-ratable benefit. SB 21 reversed Match. Outside the going-private context, a controller deal now needs only one approval, and for every controller deal the stockholder-vote condition only has to be in place when the deal goes to stockholders, ending Kahn’s “from-the-beginning” requirement. Only going-private deals still require both approvals.
The legislative target was Match: Benesch describes the amendments as a legislative override of that decision. The bill also arrived amid concern that companies were considering reincorporating elsewhere, and Skadden describes the amendments as designed to address the concerns that led some to consider leaving.
Senate Bill 21 also defines "disinterested director" and adds a presumption in § 144(d)(2) that a director of an exchange-listed company whom the board has determined to be independent under listing standards is disinterested, rebuttable only by substantial and particularized facts. In Ayers, Vice Chancellor Will held that the presumption is not limited to the safe harbors and applied it to dismiss at least some derivative claims over director and management compensation for failure to plead demand futility.
Why the Amendments Were Challenged
Senate Bill 21 applies to transactions that predate it, except in court proceedings pending on or before February 17, 2025. That retroactivity drew a constitutional challenge, and related cases were stayed while the Delaware Supreme Court considered it.
The vehicle was Rutledge. Thomas Rutledge, a stockholder of Clearway Energy, Inc., sued derivatively against the company's former CEO, Christopher Sotos, and its majority stockholder, Clearway Energy Group LLC, alleging the company overpaid its controller for an Idaho wind project. A committee of directors that the conflicted board deemed independent allegedly approved the deal at $107 million. It closed at $117 million without a majority-of-the-minority vote. Because a controller was involved, the deal is the kind § 144(b) addresses, but the constitutional questions reach § 144 as a whole.
With the parties' agreement, the Court of Chancery certified two questions. Did SB 21 unconstitutionally divest the Court of Chancery of its equitable jurisdiction by limiting its power to award equitable relief or damages? And did applying the amendments retroactively eliminate causes of action that had already vested?
In a unanimous opinion by Justice Traynor, the Supreme Court answered no to both. On jurisdiction, it distinguished between a court's authority to hear a case and the standards governing relief: § 144 limits relief when a safe harbor is satisfied but leaves fiduciary claims within the Court of Chancery's jurisdiction. On retroactivity, it noted that the General Assembly clearly intended the amendments to reach earlier transactions, and it treated Rutledge's interest as a mere expectation that existing law would continue, not a vested right. His claim goes forward, now under the new framework.
The ruling cleared the main constitutional cloud over § 144 for any deal lawyer relying on a safe harbor, not only in controller deals. The opinion does not decide whether any transaction, including Clearway's, actually satisfies one.
Section 144 In Practice Since the Ruling
` The Court of Chancery's first full look at whether a sale process met the new safe harbors came in Dodiya. The case arose from the take-private of Whole Earth Brands by Sababa Holdings, an entity controlled by Martin Franklin, at $4.875 per share. The complaint alleged that Franklin's son, Michael, then Whole Earth's CEO and a director, passed confidential information to his father's firm, including a valuation report, and that the board later restored his access to sale-process materials. The company's proxy told stockholders he had not participated in the process.
Vice Chancellor Will held that neither of the defendants' safe harbors was available at the pleading stage. Board approval under § 144(a)(1) requires good faith and no gross negligence, and the court found it reasonably conceivable that a board aware of earlier leaks and then restoring access to confidential briefings fell short. The stockholder vote under § 144(a)(2) failed because it must be informed, and the proxy's assurance about Michael Franklin's role conflicted with the pleaded facts. Overall, approval by disinterested directors is necessary but not sufficient.
Failing the safe harbor did not mean liability, however. The court dismissed the outside directors under the company's exculpation provision and let loyalty claims proceed only against Michael Franklin and the executive chairman. It also applied the § 144(d)(2) presumption, finding the plaintiff had not pleaded substantial and particularized facts to rebut it for directors the board had deemed independent under Nasdaq standards. Read alongside Ayers, the message from the early cases is that the statute works as written for boards that run a clean process and disclose it accurately, but it is not a rubber stamp.
On deal practice, practitioner guidance points toward caution. Some expect Delaware courts to apply the safe harbors "strictly and as written," and advise confirming that any stockholder-vote condition is in place no later than submission to stockholders and building a record of committee composition, each member's disinterestedness, and the information the committee relied on. They also note that the safe harbors do not displace common-law protections, so a process that follows the earlier case law, but not the statute, remains available. Law firm commentary after Rutledge likewise stresses that process design remains critical and that going-private deals still require both approvals.
Conclusion
SB 21 has now cleared its first two hurdles. The Delaware Supreme Court confirmed that the Legislature could reshape the standard of review for conflicted transactions, and the Court of Chancery has applied the new provisions as written, giving independent directors a strong presumption in Ayers while declining to extend the safe harbor to a process that broke down in Dodiya. The message for boards is that the reform rewards process: one clean approval can now be enough for ordinary director and officer conflicts, but only if the directors are truly disinterested, the process is not grossly negligent, and the disclosure is accurate. Early practitioner guidance suggests the market's answer so far is caution: build the record, confirm the timing of any stockholder-vote condition, and keep common-law protections within reach. How often deal lawyers actually rely on a single approval is a question published data does not yet answer, and the next wave of transactions and decisions will test it.
*The views expressed in this article do not represent the views of Santa Clara University.
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