Delaware Supreme Court upholds Senate Bill 21 regarding shareholder protections

The Delaware Supreme Court has upheld the constitutionality of Senate Bill 21, a reform that provides protections for certain transactions involving controlling shareholders against claims of breach of fiduciary duty. The ruling, issued on February 27, 2026, affirms the law's retroactive application and its adjustments to Section 144 of the Delaware General Corporation Law.

The legal challenge arose from a case involving Clearway Energy, where shareholder Thomas Drew Rutledge alleged the company overpaid $117 million for an asset related to a wind project in Idaho. The transaction was approved by a committee of members deemed “independent” by a board with a majority of conflicted members, rather than through a majority vote of minority shareholders.

While the Court resolved the constitutionality of the reform, it did not rule on whether the specific price paid by Clearway was fair. Under the new provisions, companies can obtain protection for non-exit transactions by utilizing a committee of “disinterested” members with the power to negotiate and reject deals, or through the informed vote of disinterested shareholders. For “going private” operations, such as mergers or IPOs, both procedural protections are required to demonstrate that the transaction is fair to the corporation and its shareholders.