Controlling stockholders – particularly private equity (PE) sponsors – face different fiduciary duty landscapes depending on a company’s state of incorporation. Seismic legislative and judicial developments in 2025 and 2026 make this a critical moment to reassess.

Delaware: The gold standard

Delaware imposes broad fiduciary duties on any stockholder that exercises actual control, even without a numerical ownership majority (see Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110 (Del. 1994)). Conflicted controller transactions trigger the demanding “entire fairness” standard. Under the MFW framework, controllers could obtain business judgment deference by conditioning a deal ab initio on both an independent special committee and a majority-of-the-minority vote (see Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014)).

Senate Bill (S.B.) 21, enacted in March 2025, overhauled these rules. Non-take-private controller transactions now need only one cleansing mechanism – a disinterested committee or a majority-of-the-minority vote – and the ab initio timing requirement is eliminated. Take-private controller transactions retain MFW’s dual requirements but with a lower disinterested stockholder voting threshold, rendering early dismissal easier. A bright-line rule now bars “controller” status for stockholders holding less than one-third of voting stock (absent board election rights), and the concept of “transactional control” is eliminated. Controllers also gained exculpation from monetary damages except for breaches of the duty of loyalty, for acts or omissions made in bad faith or that involve intentional misconduct or a knowing violation of law, or in connection with transactions from which the controller derived an improper personal benefit.

On February 27, 2026, the Delaware Supreme Court, in Rutledge v. Clearway Energy Group LLC, 2026 WL 548504 (Del. 2026), upheld S.B. 21’s constitutionality, holding that its safe harbors do not divest the Court of Chancery of jurisdiction and that retroactive application does not violate due process.

PE sponsors should also consider that Delaware has ranked first in the U.S. Chamber Institute for Legal Reform’s most recent Lawsuit Climate Survey for having a litigation environment perceived to be fair and reasonable in its handling of civil cases. And the Delaware Court of Chancery is widely regarded as the country’s preeminent business court.

Texas: The contract-first approach

Texas has never formally recognized a fiduciary duty between majority and minority shareholders. The Supreme Court of Texas in Willis v. Donnelly, 199 S.W.3d 262 (Tex. 2006), held that contracts, not equity, govern these relationships. In Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014), the Supreme Court of Texas declined to recognize shareholder oppression as a cause of action, limiting shareholders to the statutory remedy of a rehabilitative receivership. A corporation’s officers and directors owe duties to the corporation – not individual shareholders. 

Texas Senate Bills 29, 1057, and 2411 represent the most comprehensive overhaul of Texas corporate law in recent history. S.B. 29 codifies the business judgment rule, requiring claimants to prove fraud, intentional misconduct, ultra vires acts, or a knowing violation of law to maintain a breach of fiduciary duty claim. A novel procedure allows boards to obtain pre-transaction judicial rulings on special committee independence. Public corporations may now bar derivative suits by stockholders owning less than 3% of the corporation’s shares – a restriction unique to Texas. S.B. 2411 extends exculpation to officers and permits board approval of “substantially final” documents. 

For PE sponsors, Texas’s contract-first approach means robust shareholder agreements and organizational documents are the primary line of defense. Texas ranked 38th in the most recent U.S. Chamber Survey, but new business courts with appointed judges aim to close the perception gap.

Nevada: Narrow statutory duties

Nevada offers narrow controller duties by statute. Nevada Revised Statute (NRS) 78.240(3), as amended by Assembly Bill (A.B.) 239, limits a controller’s fiduciary duty to refraining from exerting “undue influence” over directors or officers with the purpose and proximate effect of inducing a breach of their fiduciary duties for which they are liable under NRS 78.138 and that (i) “directly relates to the initiation, evaluation, negotiation, authorization or approval by the board … of a contract or transaction to which the [controller] … is a party or in which the [controller] … has a material and nonspeculative financial interest” and (ii) “results in a material, nonspeculative and non-ratable financial benefit to the [controller].” Mere exercise of voting power is not a breach. Controllers are presumed not to have breached their duty in connection with a contract or other transaction if such contract or transaction is authorized or approved by a disinterested committee or the full board in reliance on such a committee’s recommendation. 

Generally, directors and officers face individual liability only upon proof of intentional misconduct, fraud, or a knowing violation of law (NRS 78.138(7)). The Supreme Court of Nevada, in Guzman v. Johnson, 483 P.3d 531 (Nev. 2021), confirmed that NRS 78.138(7) is the sole avenue to hold directors and officers individually liable for damages arising from their official conduct, abrogating the broader common-law “inherent fairness” standard. 

A.B. 239 amended certain statutes to permit a Nevada corporation to include a provision in its articles of incorporation to provide jury-trial waivers for certain internal corporate actions; to provide that the fiduciary duties of officers and directors are to exercise their respective powers in good faith and “on an informed basis”; and to clarify that appraisal is generally the exclusive remedy for dissenting stockholders. 

A proposed business court (Assembly Joint Resolution 8) would give Nevada a specialized forum intended to rival Delaware’s Chancery Court. Nevada ranked 29th in the U.S. Chamber 2019 Survey (up from 37th in 2017), and these reforms aim to further close the gap with Delaware.

Open questions remain, such as how broadly Delaware courts will construe certain reforms enacted by S.B. 21 and whether Nevada’s proposed business court will reshape the competitive landscape.