On June 15, 2026, the Delaware Court of Chancery issued an Opinion interpreting Section 144 of the Delaware General Corporation Law (the DGCL), the landmark statutory measure adopted last year to provide safe harbors for certain conflicted transactions and address director independence, among other reforms.1 The Opinion arose in a common context in Delaware stockholder litigation: claims over director and management compensation. In the decision, Vice Chancellor Lori W. Will applied, for the first time, the statute’s heightened presumption of independence for directors of public companies determined by the board to be independent under the relevant NYSE or Nasdaq listing standards to dismiss derivative claims on demand futility grounds.
The decision includes several noteworthy rulings based on the plain language of the statute. At the outset, the Court confirmed that the heightened presumption of director independence set forth in Section 144(d)(2) is not limited to the safe harbor procedures in Section 144, but rather, the statute makes clear that the General Assembly intended the heightened presumption to apply broadly to independence determinations under Delaware law, including in the demand futility context under Court of Chancery Rule 23.1.
In conducting the demand futility analysis, which looks to whether a majority of the board can independently consider a stockholder demand to bring derivative litigation, the Court reasoned that the new statutory language requiring a plaintiff to plead “substantial and particularized facts” to rebut the “heightened” presumption of independence sets a higher bar than under pre-existing law. Specifically, the Court held that the addition of “substantial” to the existing standard that already required particularized facts meant that “a plaintiff must plead specific, non-conclusory facts of sufficient qualitative significance to support a reasonable inference of a material interest or relationship that would impair the director’s objective judgment.” The Court was clear that it is not a matter of quantity but rather quality, observing that “a collection of trivial facts” will not rise to the level of materiality required to satisfy this “heightened” standard. Applying that standard to the facts in the case, the Court concluded that the plaintiff’s allegations of various overlapping board positions, overlapping investments, and other “business ties” with the company’s founder and non-executive chairman were not sufficiently material.
The Court also looked to the safe harbors in Section 144(a) to consider whether the plaintiff could show the directors were incapable of considering a demand because they faced a substantial likelihood of liability for approving the challenged founder equity grant. The Court concluded the plaintiff had not met that burden because, in addition to waiving the argument through briefing and oral argument, the complaint lacked particularized facts supporting a reasonable inference that the elements of the safe harbor in Section 144(a)(1) were not met. As a result, at least some of the claims in the case will be dismissed.
In sum, the Court’s decision applying the heightened presumption of independence should provide welcome comfort for directors of Delaware corporations deemed independent under relevant listing standards. And, more generally, the Vice Chancellor’s straightforward application of the new statutory language is a strong signal to market participants that the reforms codified in Section 144 will be given full effect.
For more information on this or any related matter, please contact any member of Wilson Sonsini's Corporate Governance or Corporate Governance Litigation practices.
[1] Our earlier client alert on the amendments is available here: https://www.wsgr.com/en/insights/delaware-enacts-landmark-corporate-law-amendments.html.
