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Program on Corporate Governance Advisory Board
- William Ackman
- Peter Atkins
- David Bell
- Kerry E. Berchem
- Richard Brand
- Daniel Burch
- Paul Choi
- Jesse Cohn
- Arthur B. Crozier Christine Davine
- Renata J. Ferrari
- John Finley
- Andrew Freedman
- Ray Garcia
- Byron Georgiou
- Joseph Hall
- Jason M. Halper
- Paul Hilal
- Carl Icahn William P. Mills
- David Millstone
- Theodore Mirvis
- Philip Richter
- Elina Tetelbaum
- Sebastian Tiller
- Marc Trevino Jonathan Watkins
- Steven J. Williams
- Daniel Wolf
HLS Faculty & Senior Fellows
The Delaware Law Series
Court Permits “Do-Over” for Non-Compliant Nomination Notice under Company’s Advance Notice Bylaw
Gail Weinstein is a Senior Counsel, Philip Richter is a Partner, and Steven Epstein is the Managing Partner at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Richter, Mr. Epstein, and Steven J. Steinman, and is part of the Delaware law series; links to other posts in the series are available here.
In Vejseli v. Duffy (“Ionic”) (May 21, 2025), the Delaware Court of Chancery, in a post-trial decision, held that the directors of Ionic Digital, Inc., who were facing an imminent proxy contest over control of the board, (i) breached their fiduciary duties when they reduced the size of the board so that only one director would be elected at the upcoming annual meeting; but (ii) did not breach their fiduciary duties when they rejected Plaintiffs’ nomination notice on the basis that it did not comply with the requirement under the company’s advance notice bylaw that all agreements relating to the nominations be disclosed. The court ordered that, given the directors’ breach in reducing the board size, the company had to reopen its window for nominations so that all stockholders, including Plaintiffs, could nominate the two directors that would have been up for election if the board size had not been reduced.
Key Points
- The court stressed the critical informational function served by an advance notice bylaw requirement that all agreements relating to the nomination be disclosed. Of note, the court suggested that even such agreements that had been recently terminated potentially had to be disclosed. And, in any event, the court held, a provision in a terminated agreement that survived termination of the agreement had to be disclosed.
- The court permitted Plaintiffs a “do-over” although they had submitted a non-compliant nomination. The court explained that, although normally a party that submitted a non-compliant nomination notice would not be permitted to submit a corrected notice, in this case, where it was the wrongful conduct of board that necessitated reopening the nomination window, there was no reason not to permit Plaintiffs to submit a new nomination notice.
- The court, applying the Coster standard of review to both actions by the board, focused on the directors’ motivations and justifications. The court reaffirmed that the standard established in Coster v. UIP (Del. Supreme Court 2023) applies to board actions that are defensive in nature, not adopted on a “clear day,” and affect the stockholder franchise. While some practitioners speculated that the Coster standard might be more objective than the former Blasius standard, with less focus on directors’ motivations and justifications, in each case in which the new standard has been applied (Coster, Kellner v. AIM (2024), and Ionic), the judicial focus has been on the directors’ motivations and justifications—suggesting that the court’s analyses and outcomes may not may not be significantly different than they were under Blasius.
Caremark’s Politics
Itai Fiegenbaum is an Assistant Professor of Law at St. Thomas University College of Law. This post is based on his recent article forthcoming in Cardozo Law Review, and is part of the Delaware law series; links to other posts in the series are available here.
How and why do corporate rules evolve? Delaware is the unquestioned jurisdiction of choice for most publicly traded US corporations. And since the decision of where to incorporate belongs to corporate insiders, one might attribute Delaware’s market dominance to a corporate law that caters to their needs. According to this view, Delaware corporate law habitually relaxes the restraints that hamper insider expropriation of gains that would otherwise be distributed to outside investors. Conversely, because insiders anticipate the need to tap the capital markets for future funding, Delaware’s supremacy might be due to the lower cost of capital enjoyed by Delaware-incorporated companies. Subscribers of this view highlight Delaware’s robust legal constraints that deter self-dealing and other harmful actions by powerful insiders.
These two views, commonly known as the “race to the bottom” and the “race to the top,” share a point of commonality regarding Delaware’s apprehension of being displaced by a competing state as the trigger for corporate law evolution. In practice, no other state comes close to Delaware’s market share of publicly traded corporations. If not the fear of competition from other jurisdictions, what external forces influence the trajectory of Delaware corporate law? Professor Mark Roe provided a compelling answer to this question: State corporate law is not the only game in town. If displeased with the level of investor protection provided at the state level, Congress will enact corrective federal legislation. Congressional intervention, however, only occurs for issues that reach national prominence. Delaware’s concern for the value of its corporate brand incentivizes it to nip public debate about those issues in the bud. In practical terms, the Delaware courts – as arbiters of Delaware law – will appear to be sufficiently vigilant in protecting outside investors lest Congress assume that task.
Recent Developments for Directors
Julia Thompson, Keith Halverstam, and Jenna Cooper are Partners at Latham & Watkins LLP. This post is based on a Latham memorandum by Ms. Thompson, Mr. Halverstam, Ms. Cooper, Charles Ruck, Ryan Maierson, and Joel Trotter.
Delaware Legislature Acts to Stop Corporate Exodus
In an effort to reverse corporate departures from Delaware, its state legislature amended the Delaware General Corporation Law to overturn multiple Chancery Court decisions. Notably, the amendments:
- limit controlling stockholder liability by excluding any stockholder or group that owns less than a third of a company’s voting power and by establishing that, other than in going-private or squeeze-out transactions, courts will not review a controlling stockholder transaction approved either by a committee of independent directors or by an informed and uncoerced vote of a majority of other stockholders;
- limit stockholder rights to inspect corporate books and records to core documents such as governing documents, minutes, board books, financial statements, and D&O questionnaires; and
- presume the independence of directors who satisfy stock exchange independence standards.
Companies have applauded these updates to Delaware law. Texas and Nevada in turn continue to READ MORE
An Eras Tour of Delaware Law
The Honorable J. Travis Laster is Vice Chancellor at the Delaware Court of Chancery. This post is based on his recent paper and is part of the Delaware law series; links to other posts in the series are available here.
In September 2024, the Journal of Corporation Law hosted a symposium in honor of the fiftieth anniversary of its founding. That happy event provided an opportunity for a keynote speech that looked back across the history of Delaware corporate law. A forthcoming article—An Eras Tour of Delaware Law—builds on those remarks.
Since Delaware became a state in 1776, there have been nine eras of Delaware corporate law: the Antecedent Era, the Charter-Mongering Era, the Quiet Era, the Responding Era, the Reformation Era, the Moderating Era, the Generative Era, the Implementing Era, and the Current Era. Each era presented the Delaware courts with different challenges. Not surprisingly, those different challenges produced different responses.
The Eras article examines those eras and the judicial responses. The tour demonstrates that Delaware has offered a principles-based system in which judges shaped corporate law by ruling on the facts of a particular case within the context of a prevailing legal environment. As Chief Justice Leo E. Strine, Jr. observed over two decades ago, Delaware’s corporation law has been “highly dynamic,” deploying principles of equity and case-specific rulings to avoid doctrinal lock-in and ossification.
This Eras article addresses each era, giving primacy to the five decades of the Journal’s existence. Over that period, the Delaware courts have confronted too many issues to cover. The Eras article prioritizes three high-profile areas: controller transactions, third-party mergers and acquisitions, and derivative actions. For each era, the article considers the rules the courts established, the results they reached, and the rhetoric they deployed.
The article reaches an unsurprising conclusion: The defining hallmark of Delaware corporate law has been its independent judiciary, adhering to the rule of law, and reaching case-specific decisions as challenges emerge and conditions change. The judge-led dynamism of Delaware corporate law has been the key to its success.
The article will be published in the Journal of Corporation Law. It is posted on SSRN and can be found here.
Chancery Court Dismisses Challenge to Removal of Tag-Along Rights in Healthcare Merger
Frank J. Favia Jr. and Jonathan A. Dhanawade are Partners at Mayer Brown LLP. This post is based on their Mayer Brown memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
A recent Delaware Chancery Court decision provides important guidance for private equity sponsors, minority investors, and deal professionals regarding the enforceability of contractual waivers and the limits of the implied covenant of good faith and fair dealing in LLC agreements. The court’s ruling underscores the primacy of contract terms in LLC governance, and the limited role of equitable doctrines where fiduciary duties have been expressly disclaimed.
Khan, et al. v. Warburg Pincus, LLC, et al. [1] involved the merger of an urgent care provider and a primary care provider. The urgent care provider, a limited liability company, was majority owned by a private equity sponsor. As explained in more detail below, after the closing, the urgent care provider’s minority unitholders challenged the elimination of their tag-along rights and the allocation of merger consideration. READ MORE
Navigating the Post-SB 21 World of Conflict Transactions
Ethan Klingsberg and Meredith Kotler are Partners, and Victor Ma is an Associate at Freshfields Bruckhaus Deringer LLP. This post is based on their Freshfields memorandum and is part of the Delaware Law series; links to other posts in the series are available here.
Delaware’s entire fairness doctrine – response to which in part drove the SB 21 amendments to Delaware corporate law enacted on March 25, 2025 – is not dead. Thus, it is especially helpful that a new Delaware Court of Chancery opinion reminds us that conflict transactions that fail to meet safe harbors and are therefore subject to entire fairness scrutiny nonetheless have a pathway to dismissal on the pleadings.
This is an important reminder because:
- the new SB 21 statutory safe harbors from entire fairness review include several requirements with which plaintiffs will be on the look-out for non-compliance;
- there are costs (both monetary and from an execution perspective) to complying with some of these safe harbor criteria to which parties to conflict transactions are, from time to time, going to elect not to undertake; and
- the availability of dismissal on the pleadings of entire fairness cases holds out the potential to substantially reduce litigation costs.
Private Equity and Stockholder Agreements: Empirical Insights for the Moelis Debate
Gladriel Shobe, Jarrod Shobe, and William W. Clayton are Professors of Law at Brigham Young University Law School. This post is based on their recent article forthcoming in the Yale Journal on Regulation, and is part of the Delaware law series; links to other posts in the series are available here.
In 2024, the landmark Moelis opinion from the Delaware Court of Chancery invalidated certain contractual control provisions that allowed insider stockholders to override a board’s statutory role. This decision sparked intense debate over the ways in which insider stockholders should be allowed to control corporations and their boards of directors. The Delaware legislature quickly enacted Delaware Senate Bill 313 (S.B. 313) that created new section 122(18) of the DGCL, effectively overturning Moelis and fundamentally altering Delaware’s traditional board-centric governance model. Proponents claimed the legislation merely codified established market practice, while critics argued it overreacted to a single trial-level decision in ways that could harm public markets.
Both sides, however, lacked empirical data on how common such contractual control rights are, who holds them, and what actual “market practice” entails. Our recent empirical study of 1,362 IPOs from 2010-2021 provides essential context to this debate and a view on what 122(18) is likely to mean going forward. Although the drafters of S.B. 313 claimed they were aiming to validate only those contracts “common” in the market, our data reveal a mismatch between those claims, actual market practice, and the broad scope of the new statutory language.
How Rigid Corporate Law Hinders Venture Capital Contracting: A Taxonomy of the Impediments
Luca Enriques is a Professor of Business Law at Bocconi University, Casimiro Antonio Nigro is an Invited Researcher at the Goethe University, and Tobias H. Troeger is a Professor of Law at Goethe University. This post is based on their recent paper, and is part of the Delaware law series; links to other posts in the series are available here.
Venture capital (VC) has been a driving force behind innovation and economic growth since the 1980s and is an established cornerstone of the U.S. economy. The success of the U.S. VC market hinges also on venture capitalists’ and entrepreneurs’ ability to leverage the flexibility of U.S. (Delaware) corporate law. This flexibility enables them to develop sophisticated contractual frameworks that economists consider the most effective real-world solution to market frictions in financing high-tech innovation—a model that has been widely adopted globally.
A key insight from the existing literature is that efficient VC contracting relies heavily on private ordering. A flexible corporate law framework, therefore, facilitates VC contracting, while rigid corporate laws can constrain it. While scholars have emphasized this point over the past two decades, the precise mechanisms by which rigid corporate laws influence the complex contracting dynamics of VC have received far less attention.
Analysis of Lost Premium Damages Provisions Following the Adoption of DGCL Section 261 Amendments
Thomas W. Christopher is a Partner, and Jennifer Chu and Kyra Luck are Associates, at White & Case LLP. This post is based on their White & Case memorandum and is part of the Delaware law series; links to other posts in the series are available here.
Effective August 1, 2024, Delaware adopted a set of amendments to the Delaware General Corporation Law (the “DGCL”) intended to address, among other things, the Delaware Chancery Court’s 2023 decision in Crispo v. Musk. [1] In the Crispo decision, the Chancery Court stated in dicta that a Delaware target company in a merger could not collect damages from a breaching buyer reflecting any premium or other economic benefits that its stockholders would have been entitled to receive if the merger had been consummated (“lost premium damages”) where the agreement expressly provided that stockholders are not third-party beneficiaries of the agreement for such purposes. The Crispo decision took many Delaware practitioners by surprise as it has been widely assumed that such damages could be provided for in a merger agreement. The Delaware General Assembly and Governor moved swiftly to address the decision.
This article (i) reviews the background to the history of lost premium damages provisions, (ii) addresses the prevalence of lost premium damages provisions following the adoption of the amendments to Section 261 of the DGCL, (iii) discusses the interplay among lost premium damages, other remedies and reverse termination fees, and (iv) identifies some key practice pointers. The analysis contained herein is based on a survey of a selective set of definitive merger agreements executed between August 1, 2024 and December 31, 2024. [2]
READ MORE
Delaware Enacts Important Corporate Law Reforms
Matthew A. Schwartz and Brian T. Frawley are Partners, and William S.L. Weinberg is an Associate, at Sullivan & Cromwell LLP. This post is based on their Sullivan & Cromwell memorandum.
New Law Provides Statutory Clarity for Directors, Officers, and Stockholders
SUMMARY OF NEW DGCL AMENDMENTS
On March 25, 2025, Delaware Governor Matt Meyer signed into law Substitute 1 to Senate Bill 21 (“SB 21”) after both houses of the General Assembly swiftly passed the bill to stem the tide of announced redomestications to other states. As discussed in our prior memo, these amendments to the Delaware General Corporation Law (“DGCL”) provide certainty to key areas of Delaware corporate law and, depending on judicial interpretation, could help reduce litigation risks for Delaware corporations and their boards of directors. The law took effect upon the Governor’s signature. The new law is substantially similar to the original proposal, with certain minor variations as set forth below.