Delaware Senate Bill 21: A New Era in Corporate Litigation Risk and Governance

Delaware Senate Bill 21 (SB 21), enacted by the 153rd General Assembly and effective in 2025, marks a sweeping update to the Delaware General Corporation Law (DGCL). For corporate litigators, this bill is more than a statutory adjustment—it reshapes key doctrines of fiduciary duty, shareholder access to records, and transaction oversight involving interested parties and controlling stockholders. Below, I outline the most impactful features and the implications for litigation strategy and corporate governance.

1. Codification of Safe Harbors for Interested Transactions

What Changed:

Section 1 of SB 21 amends § 144 of the DGCL to expand and clarify the safe harbor protections for corporate acts and transactions involving interested directors, officers, and controlling stockholders.

• Transactions can no longer be invalidated or lead to damages solely due to conflicts of interest.

• A transaction is protected if:

  • Disinterested directors approve it with full knowledge of material facts,

  • Disinterested stockholders approve it in good faith, or

  • It is “fair as to the corporation.”

Litigation Impact:

SB 21 shifts the burden of proof in fiduciary litigation. Corporate litigators must now reckon with statutorily defined defenses that, if satisfied, can bar claims for equitable relief or damages. Plaintiffs alleging breach of fiduciary duty must now overcome heightened procedural shields, making pleading standards and discovery strategy even more critical.

2. Defining "Controlling Stockholders" and “Control Groups”

What Changed:

The bill defines “controlling stockholder” and “control group” more concretely, with specific thresholds:

• A controlling stockholder includes those owning a majority, or functionally controlling at least one-third, of voting power and managerial authority.

• A control group includes non-controlling persons who, by agreement or understanding, collectively exercise control.

  
  

Litigation Impact:

This definitional clarity gives courts a bright-line test to determine when enhanced scrutiny or fiduciary duties arise. Defense counsel can now assert that their clients fall outside the statutory definitions to defeat claims early, while plaintiffs must provide “substantial and particularized facts” to rebut presumptions of independence or disinterest.

3. Reform of “Going Private” Transaction Procedures

What Changed:

For “going private” transactions—typically high-risk from a litigation standpoint—the bill establishes dual safe harbor paths:

• Approval by a disinterested committee, and

• Approval by a majority of disinterested stockholders.

Both steps are required to invoke immunity from equitable relief or damages.

Litigation Impact:

Defense counsel now have a clearer roadmap for structuring going-private deals to minimize litigation risk. Plaintiffs face increased difficulty challenging transactions where both procedural prongs are met. Expect a rise in motion-to-dismiss practice on these grounds.

4. Enhanced Protections for Director Independence

What Changed:

Directors serving on boards of listed companies are presumed disinterested if deemed “independent” by the board or exchange rules—rebuttable only by “substantial and particularized facts.”

Litigation Impact:

This provision arms defense litigators with a powerful rebuttable presumption that can foreclose derivative claims at the pleading stage. Plaintiffs will need to allege detailed facts—not conclusory assertions—to survive a motion to dismiss.

5. Expanded Stockholder Books and Records Rights under § 220

What Changed:

Section 2 of SB 21 redefines “books and records” under § 220, codifying that stockholders may inspect a broad array of materials, including:

• Board and committee minutes,

• Board materials,

• Officer independence questionnaires,

• Communications to shareholders.

  
  

However, inspection is conditioned upon demonstrating:

• A proper purpose,

• That the documents sought are specifically related to that purpose, and

• That the request is made in good faith. Moreover, corporations can:

• Impose confidentiality and use restrictions,

• Require that inspected information be deemed incorporated into any related shareholder litigation,

• Redact unrelated information.

Litigation Impact:

This expanded access strengthens shareholders’ pre-suit information rights but also raises the stakes for precision in demand letters. Defense counsel should advise clients to prepare for broader disclosure obligations, while plaintiffs must be meticulous in tying document requests to litigation strategy. This codification may also reduce “fishing expedition” disputes in § 220 actions.

6. Anticipated Effects on Kansas Corporation Code

While Delaware is the statutory home of a majority of publicly traded companies and sets the gold standard for corporate law, Kansas has historically tracked Delaware jurisprudence—especially in areas of fiduciary duty, director independence, and shareholder rights.

Likely Legislative Ripple Effect:

Kansas has corporation statutes modeled in part on the DGCL, and courts in Kansas frequently rely on Delaware precedent. It is therefore likely that:

• Kansas lawmakers may consider updating provisions in the Kansas General Corporation Code (KGCC) to include similar safe harbor frameworks for interested transactions, particularly given the agricultural and family-business- heavy corporate base where related-party transactions are common.

Strategic Considerations for Regional Counsel:

Counsel advising Kansas entities should track these developments closely and may even proactively adopt parallel procedures—such as forming disinterested committees or structuring shareholder approvals—to gain early insulation from fiduciary claims.

Furthermore, boards and general counsel in Kansas corporations incorporated in Delaware but operating locally must update compliance protocols to reflect the revised Delaware standards now codified by SB 21.

Final Thoughts

Delaware SB 21 will inevitably reshape the landscape of fiduciary duty litigation, particularly in M&A transactions and derivative suits. It offers clear procedural pathways for companies to immunize transactions from challenge, while also redefining the threshold for shareholder inspection and litigation leverage. Corporate litigators must adjust their toolkits—both offensively and defensively—to align with the bill’s extensive procedural architecture. Meanwhile, practitioners in Kansas would be wise to anticipate statutory harmonization—and prepare accordingly.

Author Bio: Charles Lee is a corporate and litigation attorney resident in the firm’s Kansas City office practicing in corporate law and complex litigation.