Delaware Supreme Court Affirms Validity of Amendments to Section 144 of the DGCL Under SB 21
03.04.26
On February 27, 2026, the Delaware Supreme Court issued a unanimous decision in Rutledge v. Clearway Energy Group LLC, No. 248, 2025, upholding the constitutionality of the amendments to Section 144 of the Delaware General Corporation Law (DGCL) by the Delaware legislature’s enactment of Senate Bill 21 (SB 21). The ruling confirms that Delaware corporations may rely fully on SB 21’s revised framework for approving conflict-of-interest transactions. In doing so, the court validated the legislature’s effort to restore predictability for corporations after a period of uncertainty in Delaware corporate law following decisions such as In re Match Group, which had expanded the entire fairness review for controlling stockholder transactions and generated concern among constituents with interests in Delaware corporations.
SB 21, enacted by the state legislature in March 2025, introduced significant changes to Sections 144 and 220 of the DGCL. The amendments to Section 144 provide a more predictable and flexible statutory pathway for cleansing transactions involving potential conflicts of interest, including transactions in which one or more directors, officers, controlling stockholders or members of a control group have an interest. Under the revised statute, such transactions may obtain safe harbor protection if approved by either (1) a majority of fully informed, disinterested directors or (2) a majority of the votes cast by fully informed, disinterested stockholders. This “either‑or” structure represents a significant clarification following recent case law that had created uncertainty about the procedural steps needed to obtain the deferential business judgment standard of review. When the safe harbor requirements are met, the amended statute precludes equitable and monetary remedies, meaning that fiduciary duty claims challenging these transactions are now likely to be dismissed at the pleading stage under the business judgment rule.
SB 21 also refined the standards governing stockholder inspection rights under Section 220 of the DGCL. The Delaware Supreme Court did not address the Section 220 amendments in its decision.
With the Rutledge decision confirming the constitutionality of SB 21, stakeholders in Delaware corporations can move forward with greater confidence in applying the updated framework under Section 144 of the DGCL.
Co-author Elizabeth Bucilla, partner, and Riley Wright, associate, are members of the Corporate & Securities Department at Klehr Harrison.