The DGCL’s Newly-Enacted Safe Harbor Procedures and Books and Records Regime
June 2025
Publication| Transactional Committees| Corporate Transactions| Corporate Governance| Mergers & Acquisitions
On March 25, 2025, Delaware’s governor, Matt Meyer, signed Senate Substitute 1 to Senate Bill 21, enacting significant changes to the Delaware General Corporation Law (the DGCL). The bill, as enacted, reflects the basic principles set forth in the original legislation introduced on February 17, 2025, but includes the recommendations made by the Council of the Corporation Law Section of the Delaware State Bar Association. The newly-enacted legislation, among other things:
- Amends Section 144 of the DGCL to provide a safe harbor for transactions in which a director or officer, or a controlling stockholder or control group, may have a conflict of interest. The changes to Section 144 set forth clear procedures for corporations and transaction planners to follow to obtain the protection of the safe harbor for transactions that might otherwise be subject to judicial review under the entire fairness standard. As the procedural protections are obtained through disinterested director or disinterested stockholder approval, revised Section 144 provides statutory definitions of those and other terms necessary to implement and uniformly apply the statute. Revised Section 144 also defines when a party may be found to be a controlling stockholder or a member of a control group, relying principally upon notions of ownership and control of voting stock.
- Amends Section 220 of the DGCL, which governs stockholders’ and directors’ statutory rights to inspect books and records, to specify the core corporate documents that are required to be produced in a books and records action. The amendments also permit a corporation to impose reasonable restrictions on the confidentiality, use or distribution of books and records, to require that the stockholder agree that any information included in the corporation’s books and records is deemed incorporated by reference in any complaint filed by or at the direction of the stockholder in relation to the subject matter referenced in the demand, and to redact portions of any books and records produced not specifically related to the stockholder’s purpose.
Stockholders seeking records beyond those listed in the statute—including emails and text messages—must, among other things, show a compelling need and demonstrate by clear and convincing evidence that the additional records are necessary and essential to further the stockholder’s proper purpose.