Delaware Supreme Court Upholds Corporate Law Overhaul

The Delaware Supreme Court has upheld a 2025 legislative overhaul of the state's corporate code, a move designed to limit legal challenges against corporate leaders in the United States. The law, officially known as SB 21 and frequently referred to by critics as the billionaires bill, was sustained on Friday following a period of intense legal scrutiny regarding its impact on shareholder rights and judicial oversight. Under the provisions of SB 21, corporate deals are shielded from investor litigation if they receive approval from either a board committee comprised of a majority of independent directors or a vote by public shareholders. This represents a significant shift from previous standards, which required both conditions to be met and mandated that the board committee be entirely independent. Furthermore, the legislation increases the difficulty of challenging a director's independence and places new restrictions on the records available to shareholders investigating potential conflicts of interest. The measure was adopted by lawmakers in March 2025 as a strategic response to DExit, a trend of major corporations relocating their legal homes away from Delaware. Maintaining these incorporations is vital to the state's economy, as related fees contribute approximately 20% of Delaware's total budget revenue. The law particularly impacts companies with controlling shareholders, such as Meta Platforms, Inc., which is overseen by Mark Zuckerberg. Opposition to the bill was led by pension funds and shareholder attorneys. These groups argued that the law would diminish their ability to monitor conflicts of interest and claimed it served as a concession to influential technology founders. Legal arguments against SB 21 suggested it violated the state constitution by stripping the Court of Chancery of its jurisdiction to review certain claims in corporate dealmaking. Conversely, proponents maintained that the legislature was simply recalibrating the standards used by the court to evaluate the fairness of transactions. The push for legislative reform followed high-profile judicial rulings that unsettled the business community. In early 2024, a Delaware judge rescinded a $56 billion compensation package for Elon Musk at Tesla, Inc.. Although the Delaware Supreme Court eventually restored the package on appeal in December, the initial ruling prompted several major entities to abandon the state. Among those that moved their legal headquarters were Dropbox, Inc., Roblox Corporation, and Coinbase Global, Inc..