The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Tue, 20 Oct 2026 13:51:45 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.13 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Court of Chancery Reinforces Section 144’s Protections–and the Need for Faithful Implementation – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Court of Chancery Reinforces Section 144’s Protections–and the Need for Faithful Implementation https://corpgov.law.harvard.edu/2026/10/20/court-of-chancery-reinforces-section-144s-protections-and-the-need-for-faithful-implementation/?utm_source=rss&utm_medium=rss&utm_campaign=court-of-chancery-reinforces-section-144s-protections-and-the-need-for-faithful-implementation https://corpgov.law.harvard.edu/2026/10/20/court-of-chancery-reinforces-section-144s-protections-and-the-need-for-faithful-implementation/#respond Tue, 20 Oct 2026 11:30:40 +0000 https://corpgov.law.harvard.edu/?p=184434?d=20261020095145EDT Posted by Kevin Schwartz, Steven Winter, and Theo. Mirvis, Wachtell Lipton Rosen & Katz, on Tuesday, October 20, 2026
Editor's Note:

Kevin S. Schwartz and Steven P. Winter are Partners and Theo. Mirvis is Of Counsel at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Schwartz, Mr. Winter, Mr. Mirvis, Zachary M. David, and John-Francis S. Flynn, and is part of the Delaware Law Series; links to other posts in the series are available here.

In an important decision interpreting the new Section 144 of the Delaware General Corporation Law, added by the adoption of SB 21 in 2025, the Court of Chancery last week preliminarily enjoined a proposed recapitalization of Cloudflare, Inc. designed to preserve founder control. In re Cloudflare, Inc. Stockholder Litigation, C.A. No. 2026-0772-JTL (Del. Ch. Oct. 16, 2026). The recapitalization sought to create a new class of voting preferred and nonvoting common stock to secure the founders’ continued control notwithstanding the dilution caused by equity compensation and other corporate uses of its stock. The board formed a special committee to determine whether the recapitalization was in the best interests of Cloudflare and its public minority stockholders. The injunction grant turned on an unusual record that enabled the stockholder plaintiffs to assert that coercive and aggressive behavior of the controlling founders, together with evidence of process issues that included unauthorized backchannel communications and deleted Signal messages, impacted the special committee’s fulfillment of its fiduciary duties.

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