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Program on Corporate Governance Advisory Board
- Peter Atkins
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- Arthur B. Crozier
- Renata J. Ferrari
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The Delaware Law Series
Chancery Finds Potential Liability for Blocking Company Financings Despite Contractual Veto Rights
Gail Weinstein is a Senior Counsel, Philip Richter is a Partner and a Co-Head of the M&A and Private Equity Practice, 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, Steven J. Steinman, Randi Lally, and Colum J. Weiden, and is part of the Delaware Law Series; links to other posts in the series are available here.
In Zync v. Porsche et al (May 29, 2026), the Delaware Court of Chancery, at the pleading stage of litigation, declined to dismiss claims against Porsche, a 5% stockholder in Zync, Inc. (the “Company”), and Porsche’s designee on the Company’s board of directors (the “Porsche Director”), relating to their blocking the Company’s critically needed financings, although Porsche had a contractual veto right over the financings. Allegedly, Porsche’s Director, whose approval was required for the financings, refused to act without Porsche’s prior approval; Porsche delayed providing, or refused to provide, approval for the financings; and, as a result, the Company was unable to secure funding and had to shut down.
The End of the Beginning in Corporate Law: SB 21 and the Ab Initio Requirement
Roy Shapira is Full Professor at Reichman University, Visiting Mehrotra Professor at BU Questrom School of Business, Visiting Senior Fellow at Harvard’s Program on Corporate Governance, and an ECGI Research Member. This post is based on his recent article and is part of the Delaware Law Series; links to other posts in the series are available here.
How did Delaware’s SB 21 reform change corporate law? In corporate circles and the general media, critics framed the reform as a concession to powerful controlling shareholders, while proponents defended it as a necessary response to judicial overreach. Most of the public debate focused on the high-profile provisions concerning who counts as a controlling shareholder and which transactions trigger heightened scrutiny.
But a more revealing change largely escaped attention: SB 21 also eliminated corporate law’s timing requirement. Before SB 21, controllers seeking to cleanse conflicted transactions had to adopt procedural safeguards from the outset (“ab initio”), before deal negotiations began. If a controller initially approached the CEO or board to discuss deal terms, and only later started negotiating with a special committee of independent directors and committed to a majority-of-minority shareholder vote, the transaction remained subject to entire fairness review. Over the preceding decade, the ab initio requirement became one of the most consequential prerequisites in conflicted-transaction litigation. Yet the legislature omitted it without explanation. And neither practitioner nor academic commentary has supplied a theory of why timing matters.
Recent Decisions Amplify Delaware Law on Forum Selection Provisions and Bylaws
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, Steven J. Steinman, Randi Lally, and Colum J. Weiden, and is part of the Delaware Law Series; links to other posts in the series are available here.
In four recent decisions, the Delaware Court of Chancery has addressed forum selection provisions and exclusive forum bylaws in various contexts. In three of the cases, the court rejected applying a Delaware forum selection provision or bylaw—in two of the cases, in the context of employment-related disputes and, in one case, in the context of a reincorporation from Delaware. In the fourth case, the court provides a relevant drafting lesson.
- In GI DI Rushmore Parent v. Stoop (“Bluepeak”) (June 10, 2026), the court refused to enforce, against an employee who lived and worked in Oklahoma, a Delaware forum selection provision that was incorporated by reference into an equity incentive award, from a partnership agreement that was not accessible to the employee.
- In Masimo v. Kiani (Apr. 21, 2026), the court refused to enforce, against an employee who lived and worked in California, a Delaware exclusive forum bylaw, in connection with a dispute relating to an employment agreement that contained a California exclusive forum provision.
- In Tesla Deriv. Litig. (Apr. 13, 2026), the court enforced, retroactively, with respect to conduct occurring before the company reincorporated from Delaware, a Texas exclusive forum bylaw adopted when the company reincorporated.
- In Kelly Roofing v. Flores (June 4, 2026), the court provided a drafting lesson for ensuring clarity as to whether a forum selection provision is mandatory or merely permissive.
Delaware Chancery Dismisses KnowBe4 Take-Private Challenge
Jason Halper is a Partner, Michael C. Holmes is Vice Chair, and Sara Brauerman is a Partner at Vinson & Elkins LLP. This post is based on a Vinson & Elkins memorandum by Mr. Halper, Mr. Holmes, Ms. Brauerman, Marisa Antonelli, and Anna Boos, and is part of the Delaware law series; links to other posts in the series are available here.
On May 27, 2026, Chancellor Kathaleen McCormick of the Delaware Court of Chancery issued a memorandum opinion in Le Clair v. KnowBe4, Inc., C.A. No. 2024-1143-KSJM, granting defendants’ motions to dismiss all claims arising from Vista Equity Partners’ $4.6 billion acquisition of KnowBe4, Inc. The decision is notable for its treatment of two key issues: (1) the standard for pleading the existence of a stockholder control group, and (2) the cleansing effect of an informed, uncoerced stockholder vote under Corwin v. KKR Financial Holdings LLC where entire fairness would otherwise apply due to director-level conflicts. 125 A.3d 304 (Del. 2015). The opinion reinforces the importance of robust procedural protections — including a fully empowered special committee and a majority-of-the-minority vote — in similar M&A transactions involving director-level conflicts.
Delaware’s First Read on the DGCL Section 144 Safe Harbor
Andre G. Bouchard, Michael Darby, and Carmen X. Lu are Partners at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss memorandum by Mr. Bouchard, Mr. Darby, Ms. Lu, Frances F. Mi, Laura C. Turano, and Cara Fay, and is part of the Delaware Law Series and the Controlling Shareholder Series; links to other posts in the Delaware Law Series are available here; links to other posts in the Controlling Shareholder Series are available here.
Recently in Ayers v. Foley, the Delaware Court of Chancery issued an opinion (by Vice Chancellor Will) interpreting for the first time certain provisions in the 2025 amendments to Section 144 of the Delaware General Corporation Law (“DGCL”), the landmark statutory reforms that provide safe harbor protections for certain conflicted transactions. The practical takeaway of Ayers is that Section 144 has raised the bar materially for rebutting the presumption of director independence at the pleading stage for publicly listed corporations when the board has determined that a director satisfies the exchange’s independence requirements because of the statute’s “substantial and particularized facts” pleading requirement. Significantly, the court reached this conclusion in the context of determining the issue of demand futility, reasoning that the heightened pleading standard in Section 144 is not confined to the safe harbors in Section 144 and was intended to apply broadly to other contexts as well. Ayers also reaffirms that when directors approve their own compensation, they are necessarily interested and their actions continue to be subject to entire fairness review.
Strategy’s Bitcoin Treasury Model: Corporate Omphaloskepsis, Polypharmacy of Risk, and Shareholder and Societal Welfare
Henry T. C. Hu is the Allan Shivers Chair in the Law of Banking and Finance at the University of Texas Law School. This paper is based on his recent article, forthcoming in the Journal of Corporation Law.
Strategy Inc (MSTR), formerly MicroStrategy Incorporated, functions differently from other public companies. At its core, the firm produces no goods or services, has no operating cash flow, and does not compete with other companies. Yet, by early 2025, its share price had risen 27-fold since it began its transformation to a new corporate model less than five years earlier. Its stock’s 110% annualized return was multiples higher than any S&P 500 stock. In a Financial Times film released that spring, Michael Saylor, its chairman and co-founder, stated that the firm’s stock market capitalization of $100 billion “can grow” 100-fold to $10 trillion by 2045—i.e., the current combined market capitalization of Amazon, Apple, and Microsoft.
MSTR styles itself as the first and largest “bitcoin treasury company” (BTCo). Corporations worldwide began imitating its BTCo model. With 4% of all outstanding bitcoins, MSTR is the largest known institutional holder. In 2025 it issued more equity capital than any other U.S. company.
This Article is the first academic work on the law and economics of the MSTR model. It introduces two concepts: “corporate omphaloskepsis,” which helps capture the model’s ends and means, and “polypharmacy of financial risk,” which frames some key consequences for shareholders. MSTR’s path to shareholder wealth maximization departs from longstanding financial and legal understandings. For ordinary public companies, the animating engine of shareholder wealth management rests on the production of goods and services. Perhaps the foremost task of management is to produce new or better goods and services or ones at lower cost than competitors. The overarching pecuniary corporate end is to maximize the fundamental value of its shares, relying on a convergence of share price to fundamental value to maximize shareholder wealth. READ MORE
Court of Chancery Imposes Sanctions for Spoliation of Signal Messages
Mallory Tosch Hoggatt, Alan Goudiss, and Jeffrey Hoschander are Partners at A&O Shearman. This post is based on an A&O Shearman memorandum by Ms. Tosch Hoggatt, Mr. Goudiss, Mr. Hoschander, Henessy Guerrero, and Jessie Donegan, and is part of the Delaware law series; links to other posts in the series are available here.
On May 26, 2026, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery imposed sanctions for the spoliation of evidence in a fiduciary duty case arising from the merger of a wrestling entertainment company (the “Company”) with a global sports and entertainment company (the “Acquiror”). In re World Wrestling Ent., Inc. Merger Litig., C.A. No. 2023-1166-JTL (Del. Ch. May 26, 2026). The Court found that the Company’s controlling stockholder and senior officers—at a minimum, recklessly— destroyed Signal chats and messages after receiving legal hold notices and that plaintiffs were prejudiced thereby because “context suggests” that the lost evidence was relevant. As a result, the Court ordered a shift of the burden of proof from plaintiffs to defendants by presuming the truth of a limited set of facts in favor of plaintiffs, subject to rebuttal only by clear and convincing evidence.
First Court of Chancery Decision Interpreting New DGCL Amendments Provides Greater Certainty for Boards and M&A
Rick Horvath and Eric Siegel are Partners, and Molly Wang is an Associate at Dechert LLP. This post is based on their Dechert memorandum and is part of the Delaware Law Series and the Controlling Shareholder Series; links to other posts in the Delaware Law Series are available here; links to other posts in the Controlling Shareholder Series are available here.
Key Takeaways
- In 2025, sweeping amendments to the Delaware General Corporation Law (the “DGCL”) were adopted, including a new Section 144 safe harbor for conflicted transactions and a heightened presumption of director disinterestedness.
- The Court of Chancery recently applied this presumption of director disinterestedness to a derivative complaint outside of the Section 144 safe harbor, and made clear that bare allegations of director compensation, overlapping board service, business relationships, and minority co-investments in professional sports teams will not suffice to rebut the presumption of director disinterestedness.
- While addressed in the context of a derivative complaint, the Court’s analysis provides helpful guidance and, if applied in future cases, would remove much of the uncertainty related to conflicted transactions.
Delaware Court of Chancery Interprets New Section 144 and Applies Heightened Presumption of Director Independence
Amy Simmerman and Brad Sorrels are Partners and Jordan Cramer is an Associate at Wilson Sonsini Goodrich & Rosati. This post is based on a Wilson Sonsini memorandum by Ms. Simmerman, Mr. Sorrels, Ms. Cramer, Daniyal Iqbal, and Shannon German, and is part of the Delaware Law Series and the Controlling Shareholder Series; links to other posts in the Delaware Law Series are available here; links to other posts in the Controlling Shareholder Series are available here.
On June 15, 2026, the Delaware Court of Chancery issued an Opinion interpreting Section 144 of the Delaware General Corporation Law (the DGCL), the landmark statutory measure adopted last year to provide safe harbors for certain conflicted transactions and address director independence, among other reforms.[1] The Opinion arose in a common context in Delaware stockholder litigation: claims over director and management compensation. In the decision, Vice Chancellor Lori W. Will applied, for the first time, the statute’s heightened presumption of independence for directors of public companies determined by the board to be independent under the relevant NYSE or Nasdaq listing standards to dismiss derivative claims on demand futility grounds.
Chancery Finds Funds Liable for Aiding Directors’ Fiduciary Breaches
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, Steven Steinman, Maxwell Yim, and Hannah Reiner; and is part of the Delaware law series; links to other posts in the series are available here.
In Guilbeau v. Footprint (May 11, 2026), the Court of Chancery held, at the pleading stage of litigation, that it was reasonable to infer that certain directors of Footprint International Holdco, Inc., a non-controlled Delaware corporation (the “Company”), breached their fiduciary duties when they approved a Company financing (the “Financing”) that was proposed, and largely funded, by three institutional investors (the “Funds”) that were among the Company’s largest stockholders. The court also held that the Funds may have aided and abetted the directors’ breaches, acting through their designees on the Company’s board.
The Financing raised $500 million ($450 million of it from the Funds) through the issuance of a new class of preferred stock (the “Class F Stock”), at a time the Company was verging on insolvency. The Financing was recommended by a three-member special committee of independent directors (the “Committee”) and approved by the full ten-person board of directors (the “Board”) (which included one designee from each of the three Funds—collectively, the “Fund Designees). As would be typical in connection with this type of financing, the Company provided special benefits to the Funds and to two large stockholders (“ZenCap” and “Koch”) who had blocking rights.