Delaware Fights Back: DGCL Amendments Target Corporate Exodus

Delaware, long the leader in corporate law, has recently faced a exodus (or “DExit”) of corporations due to certain Court of Chancery decisions. In response, the Delaware legislature swiftly amended the Delaware General Corporation Law (DGCL), aiming to clarify legal standards, reduce litigation risk, and reassert its premier status. These significant amendments, enacted in early 2025 (Senate Bill 21) and 2024 (Senate Bill 313), directly address corporate concerns.

The most impactful changes focus on limiting controlling stockholder liability and broadening safe harbors against the rigorous “entire fairness” standard of review.

• Controlling Stockholder Definition and Safe Harbors (DGCL § 144): The amendments introduce a clearer “controlling stockholder” definition, generally setting a one-third voting power threshold. This aims to limit when a minority stake triggers controller status. Crucially, new statutory “safe harbors” provide greater predictability for transactions involving controlling stockholders:
  • For most controlling stockholder transactions (excluding “going private” or “squeeze-out” deals), courts will generally not review the transaction if approved by either a committee of independent directors or an informed and uncoerced vote of a majority of other disinterested stockholders. This offers a clearer path to avoid the burdensome “entire fairness” review, and, if properly applied, aims to preclude equitable relief and monetary damages.
  • “Going private” transactions still generally require both a special committee and a majority of disinterested stockholders’ vote for insulation from equitable relief and damages.

Another significant change addresses stockholder inspection rights (DGCL § 220). To curb overly broad “books and records” demands, inspection is now primarily limited to core documents such as governing documents, minutes, and financial statements. This change explicitly aims to reduce “fishing expeditions” by generally excluding informal communications like emails, unless formal records are demonstrably unavailable.

Furthermore, the amendments establish a presumption of director independence for directors meeting national securities exchange standards, making it harder to challenge their impartiality. New DGCL § 122(18) also explicitly permits corporations to enter into contracts with stockholders granting governance rights, clarifying a previously debated area.

While Delaware updates its laws, states like Texas and Nevada are actively seeking to attract corporate incorporations.

• Texas is positioning itself with specialized business courts, strong director and officer protections, restricted derivative litigation, and permission for jury trial waivers in corporate governance disputes.
• Nevada continues to revise its corporate statutes, offering favorable terms, clarifying fiduciary duties for controlling stockholders, and streamlining corporate reorganizations.

Both states aim to provide flexible and potentially less litigious corporate environments.

Delaware’s recent DGCL amendments are a clear signal of its commitment to remaining the preferred jurisdiction for corporations. By directly addressing judicial decisions that caused uncertainty, Delaware hopes to restore predictability. However, the ongoing efforts by Texas and Nevada highlight a growing competitive landscape. The “race to the top” (or perhaps “race to the bottom” on shareholder rights, depending on perspective) in corporate law continues, ensuring companies have increasingly diverse options for their corporate home.