The State of Delaware has enacted significant amendments to the Delaware General Corporation Law (“DGCL”) over the past two legislative sessions. These changes make it easier for companies to manage their businesses, work with major investors, and complete transactions without getting tripped up by technical legal issues. These changes were passed after several court decisions created uncertainty around everyday corporate and deal practices. Delaware acted quickly to bring the law back in line with how companies actually operate.
Below is a high level summary of what has changed and why it matters.
What Changed in 2024: Fixing Deal and Governance Mechanics
Companies Can Still Use Stockholder Agreements: Some recent court cases had suggested that common provisions in stockholder agreements, like giving major investors approval rights or a say in certain decisions, might not be valid under Delaware law. The 2024 amendments make clear that companies are allowed to enter into these agreements, even if they limit the board’s flexibility, as long as the board believes the arrangement is good for the company. As a result, companies can continue to work with founders, private equity firms, and key investors using familiar governance structures without worrying those agreements might be invalidated later.
Boards Do Not Have to Wait for Every Last Document to Approve a Deal: Another court decision had raised concerns that boards might need every schedule, exhibit, and attachment fully finalized before approving a merger. Delaware clarified that boards could approve a merger agreement when it is mostly final, even if some details are still being wrapped up. This corresponds better to how deals actually get done and avoids unnecessary delays or technical challenges to board approvals.
Deal Contracts Can Still Include Financial Consequences: The amendments also confirmed that merger agreements can include things like break fees, lost‑premium damages, and designated representatives to act for stockholders after closing. Deal parties can therefore continue to rely on their contracts to allocate risk if something goes wrong.
What Changed in 2025: Fewer Lawsuits Over Conflict Transactions
In 2025, Delaware made even bigger changes to reduce litigation around transactions involving potential conflicts of interest.
Clear Protection for Conflicted Transactions: When a transaction involves a director or officer with a conflict, or a controlling stockholder, the law now clearly says the deal will usually be protected if it is approved by independent board members or disinterested stockholders. For takeover‑style transactions by a controller, both approvals are required. As a result, if companies follow a clean, well‑documented process, they are much less likely to face costly lawsuits later.
A Clearer Definition of “Controlling Stockholder”: The amendments clarify who actually counts as a “controlling stockholder.” Influence alone is not enough; there generally must be significant voting power or real control over the company. This limits after‑the‑fact claims that an investor was a “controller” just because they were influential.
Better Control Over Where Lawsuits Are Filed: Delaware also strengthened companies’ ability to require that internal disputes be brought in Delaware courts, while continuing to prohibit rules that would make stockholders pay a company’s legal fees. This helps companies manage litigation without discouraging legitimate claims.
Bottom Line
Delaware law is now more practical, predictable, and business‑friendly. Common governance and transaction practices are once again clearly permitted. Companies that follow good processes have stronger protection against lawsuits. Boards and management should review existing agreements and deal templates to make sure they reflect the updated law.
Please reach out to Heather G. Sapp Heather@sfcounsel.com or Brandon Smith at Brandon@sfcounsel.com with any questions or if would like us to review your corporate documents for necessary changes.
– Written By Heather G. Sapp