In March 2025, Delaware enacted sweeping changes to its General Corporation Law (DGCL) § 144, reshaping the treatment of transactions involving interested directors, officers, and controlling stockholders. Subsection (a) of § 144 provides safe harbors for transactions between a corporation and its directors. Subsection (b) provides a safe harbor for transactions involving controlling stockholders, other than in going private transactions, and § 144(c) provides a separate safe harbor for controlling stockholders in going private transactions. Each of the 144(a), (b), and (c) subsections provides that the targeted party “may not be the subject of equitable relief, or give rise to an award of damages…” if the targeted party’s actions fall within the applicable safe harbor.
The Rutledge Group of Challenges
New §144 was challenged by plaintiffs and others as “eliminating the Court of Chancery’s ability to award ‘equitable relief’ or ‘damages’ where the Safe Harbor Provisions are satisfied … by … divest[ing] the Court of Chancery of its equitable jurisdiction.”[1] On February 27, 2026, the Supreme Court of Delaware, by unanimous opinion in Rutledge, held that SB21 (the bill revising §144) did not divest the Court of Chancery of its equitable jurisdiction and that the “General Assembly’s enactment of SB 21 falls within the ‘broad and ample sweep’ of its legislative power.”[2] The Delaware Supreme Court also approved the retroactive effect of the revisions to § 144. Significantly, the Delaware Supreme Court addressed only these two issues, and not the remainder of the statute.
What’s Left With § 144 and How Far Does Equity Go?
The plaintiff in Rutledge, as well as the Rutledge decision itself, did not consider the additional changes made to § 144, specifically the changes to subsection (d) and its new “equity catch-all.” With respect to equitable jurisdiction and remedies, the drafters of SB21 were presumably not blind to the constitutionality concerns under Delaware law, and § 144(d)(6) was added to act as a set of “guardrails” intended to rein in some of the perceived abuses by controlling persons in light of the new and expanded § 144 safe harbors.
144(d)(6) reads as follows:
Nothing in subsection (a), (b), or (c) of this section shall:
a. Limit or eliminate the right of any person to seek equitable relief on the grounds that an act or transaction, including a controlling stockholder transaction, was not authorized or approved in compliance with the procedures set forth in this chapter, was not authorized or approved in compliance with the certificate of incorporation or bylaws of the corporation, or is in violation of any plan, agreement, or order of any governmental authority to which the corporation is a party or subject; or
b. Limit judicial review for purposes of injunctive relief of provisions or devices designed or intended to deter, delay, or preclude a change of control or other transaction involving the corporation or a change in the composition of the board of directors; or
c. Limit or eliminate the right of any person to seek relief on the grounds that a stockholder or other person knowingly aided and abetted a breach of fiduciary duty by 1 or more of the directors of the corporation.[3]
As noted above, the scope of the equitable powers available to the Court of Chancery pursuant to subsection (d)(6) was not addressed or even mentioned in the Rutledge decision, even though Subsection (d)(6) dampens the statutory safe harbors of subsections (a), (b), and (c). Subsection (d)(6)a. preserves the right to equitable relief, not only if the prongs in (a), (b), or (c) fail to be satisfied, but also if the transaction fails to comply with the organizational documents of the corporation. Subsection (d)(6)b. preserves judicial review for injunctive relief purposes if it is proven that the board or the corporation implemented devices to hinder a change of control or change in board composition. Finally, subsection (d)(6)c. preserves the right to relief if a stockholder or other person knowingly aided and abetted a breach of fiduciary duty by a director or directors of the corporation.
What Rutledge didn’t resolve is whether the provisions preserving equitable relief can stop a director, officer, or interested stockholder from ignoring the corporate governance documents, rushing through a transaction, and leaving the scene with only money—rather than stock—before the person bringing a claim may even notice. Likewise, Rutledge didn’t address what remedies would be available in equity if the plaintiff can only get into court after the transaction is completed?
Before the enactment of new § 144, Delaware courts routinely instructed stockholders to file suit only after conducting a pre-suit investigation.[4] Unsurprisingly, the appellant in Rutledge investigated pursuant to typical practices, delaying the filing of a complaint and lagging behind the completion of the transaction in question. Will the timing of suits under § 144 disrupt the usual practices?
Certainly, Delaware courts have a variety of arrows in their quiver of equitable remedies, not just injunctive relief. These remedies include rescission, reformation, restitution,[5] and ordering accountings,[6] disgorgement and/or the imposition of constructive trusts,[7] and the appointment of receivers.[8] Therefore, the ability of the Court of Chancery to adjudicate § 144 cases, as confirmed by the decision in Rutledge, still has teeth and may prove to offer some bite in addition to its proverbial bark. Nothing in § 144 limits the availability of these remedies.
In spite of the abundance of remedies, Delaware courts have often required those seeking injunctive relief to post bonds. Injunctive relief may be necessary, not only to deter future conduct, but to preserve the status quo to allow for the provision of other equitable remedies. Bonds can be expensive, however, and in certain cases can completely bar a plaintiff from bringing a claim if the plaintiff lacks the financial means to post the bond. This can be especially problematic because the § 144 safe harbor eliminates most damage claims. On the other hand, while Delaware courts may not unilaterally waive the bond requirement under the literal terms of Chancery Rule 65(c),[9] the chancery court has significant discretion in determining the appropriate amount and form of the security, including ordering that a bond be posted in nominal amounts.[10] In order to allow § 144 to keep its teeth, will courts have to have a soft touch in deciding the amount of a bond?
In summation, § 144(d)(6) can provide real potential equitable relief to plaintiffs if, post-Rutledge, the Court of Chancery does not eliminate plaintiffs’ remedies by requiring bonds that are bridges too far. The Delaware Supreme Court has held that while the safe harbors have grown larger and the standard of deference the Chancery Court must provide directors, officers, and controlling shareholders has expanded, the scope of the Chancery Court’s jurisdiction has not itself been narrowed. The issue of bond posting was not addressed, however, by the Rutledge court and so it remains to be seen how effective the Court of Chancery’s jurisdiction will be to impose “guardrails” under subsection (d)(6) if the terms for posting bonds are financially burdensome when equitable relief is requested.
ENDNOTES
[1] Rutledge v. Clearway Energy Group LLC, 2026 WL 548504 at *1 (Del., Feb. 27, 2026).
[2] Id. at *12 (quoting Collison v. State ex rel. Green, 2 A. 2d 97, 101 (Del. 1938)).
[3] 8 Del. C. § 144(d)(6) (Westlaw, 2025-26) (emphasis added).
[4] See Del. Ch. Ct. R. 23.1 (Westlaw, 2026) (establishing heightened pleading requirements for derivative actions that make pre-suit investigation practically necessary); see also King v. VeriFone Holdings, Inc., 12 A. 3d 1140, 1145 (Del. 2011) (“Delaware courts have strongly encouraged stockholder-plaintiffs to utilize [DGCL] Section 220 before filing a derivative action, in order to satisfy the heightened demand futility pleading requirements of Court of Chancery Rule 23.1”).
[5] See Schlosser & Dennis, LLC v. Traders Alley, LLC, 2017 WL 2894845 (Del., July 6, 2017) (asserting recission may be granted for various grounds including breach of fiduciary duty).
[6] See Prospect Street Energy, LLC v. Bhargava, 2016 WL 446202 (Del. Super., Jan. 27, 2016).
[7] Id.
[8] See 8 Del. Ch. § 291 (Westlaw 2025-26); see also in re Krafft-Murphy Co., Inc., 82 A. 3d 696 (Del. 2013).
[9] Del. R. Ch. Ct. Rule 65(c) (Westlaw, Mar. 31, 1999) (“Security. No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the Court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. Any security given as a condition to the issuance of a restraining order shall also constitute security for any preliminary injunction subsequently issued and requiring security”).
[10] See Petróleos de Venezuela, S.A. v. PDV Holding, Inc., 306 A. 3d 572 (Del. 2023) (holding “the court reads the statute and the caselaw as prohibiting the court from waiving the bond and security requirement, but allowing the court to exercise its discretion in determining the form and sufficiency of the bond based upon the circumstances presented in each case”).
Karl Block is a partner, and Samuel Licker and David Spiegel are associates, at the law firm of Raines Feldman Littrell LLP.