Delaware Law Alert: Delaware Supreme Court Upholds Safe Harbor Procedures for Conflicted Transactions

In a decision with significant implications for transactions involving controlling stockholders and other conflicted fiduciaries, the Delaware Supreme Court has upheld the constitutionality of a series of amendments to Delaware General Corporation Law (DGCL) §144, enacted in 2025.¹

The holding clears the way for boards and parties to such transactions to rely on statutory safe harbors and other limitations on potential liability. The details of amended DGCL §144 are found in our previous Legal Update (A Step-by-Step Approach for Boards Evaluating Conflicted Director, Officer, and Controlling Stockholder Transactions Under the Amended Delaware Corporation Law). In brief, among other things, amended DGCL §144:

• Establishes safe harbors that exempt qualifying corporate actions and transactions from claims for equitable relief and damages;
• Clarifies the definitions of “controlling stockholder” and “control group” and specifies when directors and stockholders are disinterested;
• Eliminates monetary damages for duty of care claims against controlling stockholders and members of control groups; and
• Applies retroactively to most past corporate actions and transactions.

The Delaware General Assembly and governor intended these amendments to clarify and simplify the “cleansing” mechanisms corporate fiduciaries and deal parties could use when approving conflict-of-interest transactions between the corporation and its directors, officers, and controlling stockholders. Over the span of decades, Delaware courts had developed bodies of case law defining when such transactions would be subject to the onerous and fact-intensive “entire fairness” standard of review and defining when a stockholder would be deemed to have exercised “control” over the corporation. These standards were often highly complex, resulted in protracted litigation, and made the effects of certain corporate approvals uncertain.

Soon after its enactment, multiple claimants challenged the constitutionality of amended DGCL §144 on the grounds that the amendments divested the Delaware Court of Chancery of its equitable jurisdiction and purported to eliminate causes of action that had already accrued or vested. In rejecting these challenges, the Court noted, among other considerations, a strong judicial tradition of presuming the constitutionality of legislative enactments and held that the amendments were within the General Assembly’s constitutional authority to modify the DGCL.

Mayer Brown lawyers Nicole Saharsky, Andrew Pincus, and Minh Nguyen-Dang filed an amicus brief in the Delaware Supreme Court in support of the constitutionality of the statutory amendments, representing the Society for Corporate Governance.

¹ Rutledge v. Clearway Energy Group LLC, No. 248, 2025 (Del. February 27, 2026).