2025 Amendments to the Delaware General Corporation Law in a Nutshell

In 2025, the Delaware General Assembly adopted two tranches of amendments to Chapter 1 of Title 8 of the Delaware Code (the “DGCL”). The first tranche to become effective (referred to by many as the “Balancing Amendments”) was intended to address perceived uncertainties and inefficiencies with respect to the approval of conflict transactions and the inspection of corporate books and records by stockholders. The second tranche, among other things, (i) clarified the types of claims that may be covered by certificate of incorporation- or bylaw-based forum selection provisions and (ii) extended the prohibition on certificate of incorporation- or bylaw-based fee-shifting provisions to cover this clarified universe of claims.

I. INCREASING CERTAINTY IN APPROVING CONFLICT TRANSACTIONS

1. Conflict Transactions. Delaware courts review transactions posing a conflict of interest for a controlling stockholder or a majority of the directors under the entire fairness standard. If parties follow certain conflict-mitigating procedures, then the Delaware courts apply the more deferential business judgment review.
2. Section 144 Safe Harbor. DGCL Section 144 was recently amended to codify “safe harbor” procedures to mitigate conflicts, which, if properly followed, will shield directors, officers and controlling stockholders from liability for breach of the duty of loyalty.
   1. Board Conflict. The safe harbor applies to transactions posing a conflict for directors and/or officers if approved by either (i) a majority of the disinterested directors (or, if a majority of the board is conflicted, a disinterested committee) or (ii) a majority of the votes cast by disinterested stockholders.
   2. Going Private Transactions. The safe harbor applies to controlling stockholder going private transactions (e.g., 13e-3 transactions) if approved by both (i) a disinterested committee or (ii) a majority of the votes cast by disinterested stockholders.
   3. Other Controller Transactions. The safe harbor applies to other transactions posing a conflict for a controlling stockholder if approved by either (i) a disinterested committee or (ii) a majority of the votes cast by disinterested stockholders.
3. Disinterested Committees. Amended Section 144 imposes certain committee requirements.
   1. Composition. The committee must be composed of at least two directors, each of whom the board determines is a disinterested director. Even if a court later second guesses such a determination, the safe harbor would still apply if a majority of the court-determined disinterested directors on the committee approve the transaction.
   2. Function. The committee must act in good faith and without gross negligence, and, in controlling stockholder conflict transactions, the committee must be empowered to negotiate and reject the transaction.
4. Defining Disinterested Directors. Amended Section 144 also defines the criteria used to determine which directors are “disinterested directors.”
   1. Generally. A “disinterested director” is not a party to the transaction and has neither (i) a material interest in the transaction different from stockholders generally nor (ii) a material familial, financial, professional, employment or other relationship with a party who has a material interest in the transaction.
   2. Pubco Directors. Public company directors who the board determines satisfy applicable stock exchange independence criteria have a heightened presumption of disinterest that can be rebutted only with substantial and particularized facts.
5. Defining Controlling Stockholder. Amended Section 144 also sets forth criteria to determine whether a stockholder is a “controlling stockholder” or “control group” and thus owes fiduciary duties.
   1. Controlling Stockholder. A “controlling stockholder” is a stockholder who:
      1. owns a majority of the voting power of the outstanding stock entitled to elect a board majority;
      2. has a right to cause the election of a board majority; or
      3. has power functionally equivalent to a majority stockholder via ownership of at least 1/3 of the voting power of the outstanding stock and has the power to exercise managerial authority over the corporation’s affairs.
   2. Control Group. Two or more persons who are not individually controlling stockholders will constitute a “control group” if such persons, “by virtue of an agreement, arrangement, or understanding between or among such persons, constitute a controlling stockholder.”
6. Retroactivity. Amended Section 144 applies both prospectively and retroactively, except with respect to any commenced action that is completed or pending on or before February 17, 2025.
7. Constitutional Challenge. Stockholder plaintiffs have initiated litigation challenging the constitutionality of Amended Section 144.
   1. Certified Questions. In one of the actions, the Delaware Supreme Court accepted, and will consider, certified questions relating to whether (i) Amended Section 144 violates the Delaware constitution by purporting to divest the Court of Chancery of its equitable jurisdiction and (ii) the retroactivity violates the Delaware constitution by purporting to eliminate causes of action that had already accrued or vested.
   2. Other Pending Challenges. Other pending challenges have been stayed pending resolution of these certified questions.

II. STREAMLINING BOOKS AND RECORDS INSPECTION

1. Inspection Rights. Pursuant to DGCL Section 220, stockholders have the right to inspect, for a proper purpose, a corporation’s books and records and to petition a court to compel production if the corporation fails to comply with a valid inspection demand.
2. Streamlining Perfection of Rights. In response to increasingly intrusive stockholder inspection demands, DGCL Section 220 was amended to (1) put parameters around the type of documents that constitute “books and records” subject to stockholder inspection, (2) clarify the inspection demand requirements, and (3) codify certain rights of a corporation.
3. Scope of Books and Records.
   1. Default Books and Records. Amended Section 220 generally permits stockholders to seek inspection of the following books and records:
      1. the charter and bylaws (and documents incorporated therein by reference); annual financial statements for the preceding 3 years;
      2. stockholder agreements subject to DGCL Section 122(18);
      3. stockholder minutes/consents and communications to stockholders within the preceding 3 years;
      4. board and committee minutes/records of action and materials provided to directors in connection with such actions; and
      5. D&O independence questionnaires.
   2. Other Documents. If (i) the corporation does not maintain formal records of stockholder or director actions, annual financial statements, or D&O independence questionnaires (if publicly traded), or (ii) the stockholder shows a compelling need, by clear and convincing evidence, the court can order production of additional documents necessary and essential to fulfill or further, as applicable, the purpose of the inspection.
4. Demand Requirements. Amended Section 220 imposes certain conditions that a stockholder seeking inspection must satisfy.
   1. Intent. The stockholder’s demand must be made in good faith and for a purpose reasonably related to his or her interest as a stockholder.
   2. Form. The demand must describe the stockholder’s purpose and the books and records sought “with reasonable particularity.”
   3. Nexus. The books and records must be “specifically related” to the identified purpose.
5. Production. Amended Section 220 codifies certain rights of a corporation in connection with producing books and records for stockholder inspection.
   1. Confidentiality. Amended Section 220 codifies the Court of Chancery’s typical practice of conditioning production on a confidentiality agreement by expressly permitting a corporation to impose reasonable confidentiality, use, and distribution restrictions on any books and records produced.
   2. Redactions. Amended Section 220 codifies the common law and permits a corporation to redact portions of produced books and records that “are not specifically related to the stockholder’s purpose.”
   3. Incorporation by Reference. Amended Section 220 expressly permits a corporation to condition production on the stockholder agreeing that all information produced will be “incorporated by reference in any complaint filed by or at the direction of the stockholder in relation to the subject matter referenced in the demand.” Incorporation by reference allows the corporation to refer to, and the court to consider, produced information not expressly included in the complaint without converting a motion to dismiss into a motion for summary judgment.
6. Retroactivity. Amended Section 220 applies both prospectively and retroactively, except with respect to any commenced action that is completed or pending, or any inspection demand made, on or before February 17, 2025.

III. REGULATING FORUM FOR EXCHANGE ACT DERIVATIVE CLAIMS

1. Forum Selection. The governing documents of many corporations include forum selection provisions, identifying a specific court or courts (one of which must be a court in Delaware) as the exclusive forum in which certain claims may be brought.
   1. Internal Corporate Claims. DGCL Section 115 was adopted in 2015 and expressly permitted a corporation’s charter or bylaws to include a forum selection provision requiring all “internal corporate claims” to be brought solely and exclusively in any or all courts in Delaware, some forms of which required “all derivative claims” to be brought in the Court of Chancery.
   2. Intra-Corporate Affairs. In Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020), the Delaware Supreme Court observed that a forum selection provision may regulate claims relating to the corporation’s “intra-corporate” affairs, so long as it is consistent with public policy.
2. Exchange Act Claims – Circuit Split. The U.S. Courts of Appeals for the Seventh and Ninth Circuits reached contrary conclusions regarding whether a forum selection provision requiring all derivative claims to brought exclusively in the Court of Chancery could be enforced to prevent stockholders from bringing derivative claims under the Securities Exchange Act of 1934—for which the federal courts have exclusive statutory jurisdiction—by requiring such claims to be filed in a court that lacked subject matter jurisdiction to hear them.
3. No Claim Extinguishment. Amended Section 115 adopts the result reached by the Seventh Circuit and permits forum selection provisions addressing non-internal corporate claims that “relate to the business of the corporation, the conduct of its affairs, or the rights or powers of the corporation or its stockholders, directors or officers,” so long as they permit stockholders to bring such claims in at least one court in Delaware (e.g., to bring Exchange Act derivative claims in the District of Delaware).

IV. CLARIFYING PROHIBITION ON FEE-SHIFTING PROVISIONS

1. Internal Corporate Claims. Even prior to the amendments, the DGCL prohibited corporate charter or bylaw provisions from shifting to a stockholder liability for the corporation’s fees and expenses incurred in connection with internal corporate claims.
2. Stockholder Claims. Amended DGCL Sections 102(f) and 109(b) extend the moratorium on corporate charter and bylaw fee-shifting provisions to prohibit provisions shifting to a stockholder the corporation’s fees and expenses incurred in connection with “any other claim that a stockholder, acting in its capacity as a stockholder or in the right of the corporation, has brought . . . .”

V. VARIOUS AND SUNDRY AMENDMENTS

1. Nullification of Filings. Amended DGCL 103(f) confirms and clarifies the existing power of corporations to file a certificate of correction to nullify a previously filed instrument that is an inaccurate record of the corporate action taken or that was defectively executed.
2. Registered Office Clarification. Amendments to DGCL Section 132 and Section 502 of Chapter 5 of Title 8 of the Delaware Code (the “Franchise Tax Chapter”) eliminate provisions that automatically treat a corporation’s registered office as its principal office or principal place of business.
3. Delaware-Based Registered Agent. Amended DGCL Section 132 prohibits a registered agent from performing its duties solely through the use of a virtual office (e.g., via the internet) and/or a mail forwarding service.
4. No Bearer Fractions. Amended Section 155 no longer permits corporations to issue fractional shares in bearer form, conforming such provision to the prohibition on issuing certificated whole or fractional interests in bearer form imposed by the Corporate Transparency Act, 31 U.S.C. § 5336(f).
5. Contents of Certain Filings. Amended DGCL Sections 252(c) and 311 update the information required to be included in a certificate of merger (or consolidation) and a certificate of revocation of dissolution (or certificate of restoration), as applicable.
6. Franchise Taxes and Fees.
   1. Amended DGCL Section 312 requires revived corporations later filing a certificate of validation to ratify defective corporate acts to pay certain prior franchise taxes and file annual reports if the certificate of validation relates to a time period when the corporation was forfeited or void. A conforming amendment was made to Section 503 of the Franchise Tax Chapter.
   2. Amended DGCL Section 377 requires a foreign corporation that forfeited its qualification to do business in Delaware under DGCL Section 132 or 136 to pay all fees and file all annual reports that would have been required to be paid and filed during the period of forfeiture.
   3. Amended Section 505 of the Franchise Tax Chapter clarifies that a corporation filing a certificate of correction or certificate of validation is not entitled to a refund of taxes, penalties, or interest.

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