In Rutledge v. Clearway Energy Group LLC, the Delaware Supreme Court rejected constitutional challenges to the 2025 amendments to Section 144 of the Delaware General Corporation Law ("DGCL") addressing transactions involving controlling stockholders. The amendments at issue, sections 1 and 3 of Senate Bill 21 (“SB 21”), created statutory safe harbors for interested director and officer and controlling stockholder transactions. 

Upholding the statute’s safe harbor framework and its retroactive application, the Delaware Supreme Court provided both clarity and closure, ending uncertainty about SB 21 and restoring a predictable roadmap for conflict-of-interest transactions.  

Background on Senate Bill 21

In response to a period of upheaval in Delaware corporate law and a growing trend of major corporations reincorporating in other jurisdictions (so-called "DExit"), the Delaware General Assembly introduced several new proposals in February 2025. Among these initiatives was SB 21, which aimed to help Delaware retain businesses by clarifying the rules for transactions involving directors, officers, and controlling stockholders, and by restricting shareholders’ access to corporate records. One month later, Delaware Governor Matt Meyer signed SB 21 into law, effecting a significant reform of Delaware corporate law.  

Among other things, SB 21 enacted the following amendments to DGCL section 144:

• Created statutory safe harbors for transactions involving conflicted directors, controlling stockholders, or control groups, and provided that such transactions may not be the subject of equitable relief, or give rise to an award of damages against a corporation’s directors, officers, or controlling stockholders for a breach of fiduciary duty;
• Defined “controlling stockholder” and “control group”; and
• Applied the amendments retroactively to acts or transactions occurring before enactment, except for actions already pending or completed as of February 17, 2025. 

Constitutional Challenge

Six weeks after the enactment of SB 21, Rutledge, a stockholder of Clearway Energy, Inc., brought a derivative action challenging a transaction between the company and its controlling stockholder. Additionally, Rutledge asserted that SB 21 violated the Delaware Constitution by divesting the Court of Chancery of its equitable jurisdiction and eliminating causes of action that had accrued before the amendments were enacted.  

To address these constitutional issues, the Court of Chancery certified the following two questions to the Delaware Supreme Court: