Delaware Supreme Court Upholds Constitutionality of Amendments to Delaware General Corporation Law Section 144

On February 27, 2026, the Delaware Supreme Court issued an en banc decision upholding the constitutionality of Senate Bill 21 (“SB 21”), a 2025 law that instituted sweeping changes to Section 144 of the Delaware General Corporation Law (“DGCL”). SB 21 has faced considerable controversy since its enactment. Supporters welcomed the amendments as a legislative “reset” designed to curtail the “DExit” movement. However, opponents of SB 21 dubbed the measure the “billionaire’s bill,” claiming that it unconstitutionally reshaped stockholder rights. The Delaware Supreme Court’s long-awaited decision resolves uncertainty concerning the validity of the 2025 amendments and confirms the General Assembly’s broad authority to modify Delaware corporate law. 

The Legal Issues Presented

SB 21’s amendments to the DGCL provide a statutory framework for transactions involving controlling stockholders. Among other things, they: (i) define “controlling stockholder” and “control group,” (ii) establish safe harbors protecting certain controlling stockholder-transactions from equitable relief or damages, and (iii) apply the amendments retroactively except in the case of actions pending or completed on or before February 17, 2025. 

Following SB 21’s enactment, a stockholder brought a derivative action against Clearway Energy’s controlling stockholder and former CEO, challenging a $117 million asset transaction allegedly tainted by fiduciary breaches. Rutledge v. Clearway Energy Group LLC, No. 248, 2025 (Del. Feb. 27, 2026). In addition to raising substantive legal issues, the case challenged SB 21’s constitutionality on the grounds that it improperly limited the jurisdiction of the Delaware Court of Chancery. 

Faced with an issue of first impression, the Court of Chancery certified two questions to the state Supreme Court. First, whether the safe harbor provisions in SB 21 impermissibly limited the Court of Chancery’s equity jurisdiction, and second, whether the statute’s retroactive effect violated due process.

The Court’s Decision

The Delaware Supreme Court answered both questions in the negative. As to the first question, it held that although amended Section 144 limits the availability of equitable relief and damages when certain statutory conditions are satisfied, it does not divest the Court of Chancery of jurisdiction over fiduciary duty claims. Instead, it establishes a statutory framework for review. The Court of Chancery retains the ability to determine whether the statutory prerequisites for the safe harbor have been met.

The Supreme Court supported its conclusion by reference to the DGCL’s history, noting that the General Assembly has routinely amended corporate law in ways that affect the remedies available in corporate litigation. According to the Court, accepting the appellant’s expansive reading of the state constitution as preempting the General Assembly’s legislative rights would threaten the validity of numerous longstanding DGCL provisions. 

As to the second question, the Court determined that SB 21’s retroactive application did not violate due process by extinguishing the appellant’s right of action.  Instead, his fiduciary duty claim remained justiciable, albeit subject to the new statutory review standards. The Court noted that even if SB 21 had affected a vested right, it nonetheless satisfied due process requirements because it bears a reasonable relation to a permissible legislative objective: the General Assembly's constitutional authority to create and modify Delaware's corporate law. 

Implications for Legal Practitioners

The Delaware Supreme Court’s decision removes any lingering uncertainty about the validity of the 2025 amendments to the DGCL. And it carries with it implications for legal practitioners.  Among other things, the decision provides:

• Enhanced Transaction Planning Certainty. Practitioners advising controlling stockholders and corporate boards should note that compliance with either safe harbor mechanism under Section 144(b)—committee approval or a majority-of-the-minority stockholder vote—now suffices to avoid liability for most controlling stockholder transactions, absent a showing that the transaction was not fair.  Going-private transactions, however, remain subject to the more stringent MFW requirements demanding both “cleansing” mechanisms.
• Greater Predictability in Litigation. SB 21’s amendments also signal a doctrinal pivot. By clarifying the DGCL, the General Assembly made pleading-stage dismissal more attainable for defendants who can demonstrate compliance with at least one of the statutory safe harbors.  In addition to fundamentally reshaping future litigation, these changes may also affect the settlement calculus in matters involving pre-SB 21 transactions. 

Although it remains to be seen whether the Delaware Supreme Court’s imprimatur will stem the “DExit” exodus, one thing is clear: courts and litigants will have to recalibrate their approaches in light of the new law.