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Senate Bill 21
This bill was enacted largely in response to high-profile litigation, such as In re Match Group (In re Match Grp., Inc. Deriv. Litig., 315 A.3d 446 (Del. 2024)) and TripAdvisor (Maffei v. Palkon, 2025 WL 384054 (Del. Feb. 4, 2025)) and to stem the recent tide of Delaware companies reincorporating in Neveda and Texas.
Changes to Conflicted Transactions
- "Cleansing Mechanism." The bill amends the Delaware Code to provide additional protection for directors, officers, controlling shareholders, and members of control groups who might be considered interested or not independent with respect to a particular act or transaction. Under the revision, certain acts or transactions involving such directors, officers, controlling shareholders, and members of control groups will be protected if approved or ratified by a majority of disinterested directors or shareholders, upon disclosure or full knowledge of material facts. These transactions can now often avoid the very tough "entire fairness" standard of review. Previously, the transaction would have had to have been approved by both an independent committee and a majority of disinterested shareholders.
- "Going Private." For transactions in which a controlling shareholder seeks to take a company private, both independent committee approval and a disinterested stockholder vote are still required to obtain safe harbor protection.
Definition of "Controlling Shareholder"
- The law established a bright-line rule: a stockholder is generally considered to be a "controller" only if they own a majority of voting power, have the right to elect a majority of the board, or own at least one-third of voting power and exercise "managerial authority."
Stockholder Inspection Rights
- "Books and Records." Under the new law, the definition of books and records subject to inspection is now limited to an exclusive list of formal documents (e.g., board minutes, financial statements, and charter documents).
- "Exclusion of Informal Documents." The new law excludes emails, text messages, and informal board communications from standard inspection demands, unless a stockholder can show a "compelling need" and meet a "clear and convincing evidence" standard.
- "Enhanced Protections." Corporations can now require stockholders to sign confidentiality agreements and agree that all produced information is "incorporated by reference" into any future lawsuit, making it easier for companies to get lawsuits dismissed early.
Other Amendments
- "Fee-Shifting Moratorium." The prohibition on bylaws that shift a corporation's legal fees to stockholders was clarified and extended to a broader universe of claims.
- "Virtual Offices." Registered agents in Delaware are now prohibited from operating "virtual offices."
** Delaware Retires DORWEBPay for W2/1099 Submissions **
This notice impacts our clients and accounting contacts that have tax reporting obligations in the State of Delaware or do tax reporting for their clients. The Delaware Division of Revenue (DOR) has retired the long-existing DORWEB System, including the W2/1099 submission application. All submissions must now be uploaded through the Delaware Taxpayer Portal at https://tax.delaware.gov.
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