Delaware Supreme Court Upholds Constitutionality of SB 21

On February 27, 2026, the Delaware Supreme Court, sitting en banc, issued its landmark ruling in Rutledge v. Clearway Energy Group LLC, upholding the constitutionality of Senate Bill 21’s (“SB 21”) amendments to Section 144 of the Delaware General Corporation Law (“DGCL”). 

The Court’s opinion grappled with two certified questions, answering both of them in the negative:

1. SB 21’s safe harbors do not violate the Delaware Constitution by purporting to divest the Court of Chancery of its equitable jurisdiction thereunder.
2. SB 21 does not violate the Delaware Constitution by purporting to eliminate causes of causes of action that had already accrued or vested prior to its enactment.

Background

SB 21 was passed by the 153rd General Assembly and signed into law in March 2025. Among other things, SB 21 amended Section 144 of the DGCL to include expanded “safe harbor” procedures for transactions between corporations and their controlling stockholders, making it significantly easier to business judgment review (and avoid entire fairness review) of certain controller transactions. The legislation also added statutory definitions for “controlling stockholder” and “control group,” and set standards for assessing director independence and disinterestedness. 

Most notably, SB 21 essentially unwound the Delaware Supreme Court’s highly publicized decision in Match Group, which held that a controlling stockholder must comply with both of the procedural safeguards established in Kahn v. M&F Worldwide Corp. (“MFW”)—i.e., utilizing both an independent special committee and obtaining majority-of-the-minority stockholder approval—in order to obtain business judgment review of a controller transaction, even outside of the context of freeze-out mergers (as in MFW).

SB 21 relaxed this standard for most controlling stockholder transactions (but not freeze-out/going-private transactions) by permitting the use of either cleansing mechanism (rather than both) to shield the transaction from equitable relief or damages. 

The Supreme Court’s Holding

Certified Question 1: The Safe Harbors Do Not Divest the Court of Chancery of Jurisdiction

The plaintiff argued that SB 21’s safe harbors violate Article IV, Section 10 of the Delaware Constitution by purporting to divest the Court of Chancery of its equitable jurisdiction. The Court rejected this argument, holding that SB 21 “does not divest the Court of Chancery of jurisdiction of any cause of action, nor does it direct any claim or category of claims to another court.” As the Court explained in its opinion, breach of fiduciary duty claims remain within the undisputed jurisdiction of the Court of Chancery, “albeit subject to a review framework [the plaintiff] finds unfavorable.”

The Court emphasized that the General Assembly’s enactment of SB 21 “falls within the ‘broad and ample sweep’ of its legislative power.” It noted that the General Assembly has historically amended the DGCL in response to judicial decisions—pointing to Section 102(b)(7) enacted after Smith v. Van Gorkom and Section 102(f) enacted after ATP Tour—and that these amendments “affected how the Court of Chancery might, absent the statutory enactment, exercise its equitable jurisdiction”. 

Certified Question 2: Retroactive Application Does Not Violate Due Process

The plaintiff also argued that Section 3 of SB 21—which applies the safe harbor provisions to “all acts and transactions, whether occurring before, on, or after the enactment date”—violates Article I, Section 9 of the Delaware Constitution by extinguishing accrued or vested causes of action. 

The Court disagreed, finding that “SB 21 does not extinguish [the plaintiff’s] right of action.” The Court explained that a plaintiff may still challenge a transaction based on allegations of breach of fiduciary duty; the court must simply “review the challenged transaction under statutory standards that changed after the transaction closed but before [plaintiff] filed suit.” The plaintiff’s interest, the Court held, was “more an anticipated continuance of the existing law than a vested property right.”

Key Takeaways

1. SB 21’s Safe Harbors Are Constitutional. The Delaware Supreme Court has definitively resolved the threshold constitutional question, clearing the way for application of SB 21’s new controlling stockholder transaction framework.
2. Broad Legislative Authority Affirmed. The Court reaffirmed the General Assembly’s broad constitutional power to enact and modify Delaware corporate law, even where such legislation affects standards of judicial review and the relief available in the Court of Chancery.
3. Retroactive Application Upheld. SB 21 applies to transactions occurring before its enactment (except for proceedings pending on or before February 17, 2025), and such retroactive application does not violate constitutional due process protections.
4. SB 21’s Single-Mechanism Cleansing Remains Sufficient (Except for Going-Private Transactions). For most controlling stockholder transactions, approval by either (i) a committee of disinterested directors or (ii) an informed, uncoerced majority-of-the-minority stockholder vote will now shield the transaction from equitable relief or damages—a departure from Match Group’s requirement of both mechanisms. For going-private transactions, both cleansing mechanisms remain required to obtain the benefits of the safe harbor.