Written by: Marcus Wolter, Elizabeth Bestwick
Delaware’s new Senate Bill 21 (SB 21) introduces major changes to the Delaware General Corporation Law (DGCL), impacting how companies approve conflicted transactions and respond to shareholder record requests. The bill amends DGCL Sections 144 and 220 and applies retroactively unless litigation or a demand was already pending as of February 17, 2025.[1]
Key Governance Changes
SB 21 clarifies that controlling stockholder transactions can receive business judgment deference if approved by either disinterested directors or disinterested stockholders—no longer requiring both. It introduces a one-third ownership floor for defining “controlling stockholders,” and strengthens the presumption of independence for public company directors, only rebuttable by substantial and particularized facts.[1]
These changes are important for companies where founders still play a significant role before and after going public. The reforms streamline the approval processes and reduce litigation risk, particularly in deals of the company involving founders, lead investors, or insiders—common scenarios for growth-stage companies.
Narrowed Shareholder Rights
SB 21 also limits shareholder inspection rights under DGCL Section 220. Informal communications (e.g., emails and texts) are excluded from “books and records.” Shareholders must now state a proper purpose with “reasonable particularity” and show that requested materials are specifically tied to that purpose. Corporations can also restrict how materials are used, and anything produced is automatically incorporated into litigation complaints.[1]
This gives boards more protection against expansive document demands and early-stage litigation tactics—but also narrows transparency tools for minority investors.
Speed, Context & Controversy
SB 21 passed just six weeks after introduction, bypassing the typical vetting process by the Delaware State Bar Association. Critics have compared it to past legislative responses, including the 1986 creation of DGCL § 102(b)(7) after Smith v. Van Gorkom, which took nearly a year to pass. That historic shift addressed director liability—just as SB 21 seeks to rebalance risk between boards and shareholders.[2]
As Delaware competes with states like Texas and Nevada for corporate charters, SB 21 signals a shift toward governance models that emphasize board protection and streamlined dispute resolution. Whether this bolsters Delaware’s reputation or invites unintended consequences remains to be seen.
Why It Matters
For startups, SB 21 provides more flexibility in managing board-level transactions involving insiders or lead investors. For example, an inside-led funding round or a founder equity reset may now face less scrutiny—so long as the deal is properly cleansed by independent directors or disinterested stockholders.
However, investors and minority shareholders should understand that their ability to challenge board decisions or request internal communications is now more limited. Books-and-records demands will need to be more focused, and broad requests for informal communications are unlikely to succeed under the new law. This puts a premium on clear governance procedures, proactive communication, and board independence.
This publication is distributed with the understanding that the author, publisher, and distributor of this publication and/or any linked publication are not rendering legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assume no liability whatsoever in connection with its use. Pursuant to applicable rules of professional conduct, portions of this publication may constitute Attorney Advertising. The choice of a lawyer is an important decision and should not be based solely upon advertisements.
[1] National Law Review. (2025, April 4). Delaware Enacts Significant Changes to Delaware General Corporation Law. https://natlawreview.com/article/delaware-enacts-significant-changes-delaware-general-corporation-law
[2] Tabeling, Katie. (2025, April 4). The History of Seismic Revisions of Delaware Corporate Law. Delaware Business Times. https://delawarebusinesstimes.com/news/seismic-revisions-of-delaware-law