Richard L. Renck – Duane Morris Delaware Business Law

July 23, 2026July 23, 2026 by Richard L. Renck

Court of Chancery Provides First Interpretation of DGCL Section 144(d)(2)’s Heightened Director Independence Standard

On June 15, 2026, Vice Chancellor Will issued an opinion in Ayers v. Foley, et al. (C.A. No. 2025-0650-LWW) that marks the first judicial interpretation of the director independence provisions added to Section 144 of the Delaware General Corporation Law in 2025. For practitioners, the decision offers important guidance on how the Court of Chancery will apply the statute’s heightened presumption of disinterestedness when a board’s independence determinations are challenged—especially for directors of corporations whose shares are traded on a national exchange.

The 2025 Amendments to Section 144 and the New Independence Framework

The 2025 amendments to Section 144 were designed to strengthen the protections afforded to directors of Delaware corporations, particularly those whose shares are publicly traded. Under new Section 144(d)(2), any director of a corporation with a class of stock listed on a national securities exchange is “presumed to be a disinterested director with respect to an act or transaction to which such director is not a party” if the board has determined that the director satisfies the applicable exchange’s independence standards. This presumption is expressly described as “heightened” and “may only be rebutted by substantial and particularized facts” demonstrating that the director has a “material interest” in the transaction or a “material relationship” with a person who does.

Ayers is the first case to interpret these provisions. The court addressed a threshold question: does Section 144(d)(2) apply only within Section 144’s safe harbors, or does it extend to other contexts such as demand futility under Court of Chancery Rule 23.1? Vice Chancellor Will held that the statute’s reach is broad. The court reasoned that where the General Assembly intended a provision of Section 144 to apply only to specific paragraphs, it said so expressly—as it did in paragraph (d)(7) and subsection (e). The absence of similar limiting language in (d)(2) reflects a deliberate legislative choice. The heightened presumption therefore applies when courts assess director disinterestedness for demand futility purposes as well.

The Standard for Director Independence Under Section 144(d)(2)

The court’s analysis of what “substantial and particularized facts” means under the statute offers a useful roadmap. While Rule 23.1 has long required “particularized” facts to rebut the presumption of director independence, Section 144(d)(2) adds the modifier “substantial.” The court interpreted “substantial” in its qualitative sense—meaning “important, essential, and material; of real worth and importance”—rather than merely quantitative. Accordingly, 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 a director’s objective judgment. Volume alone cannot substitute for materiality; a collection of trivial facts will not satisfy the standard simply by force of accumulation.

The court also looked to the statutory definitions provided in the 2025 amendments themselves. Section 144(e)(7) defines “material interest,” and Section 144(e)(8) defines “material relationship” as a “familial, financial, professional, employment, or other relationship” that “would reasonably be expected to impair the objectivity of the director’s judgment when participating in the negotiation, authorization, or approval of the act or transaction at issue.” Importantly, the court emphasized that this inquiry is holistic: it reviews the pleaded facts “in their totality and not in isolation from each other,” assessing whether the director “had ties to the person whose proposal or actions he or she is evaluating that are sufficiently substantial” such that the director “could not objectively discharge his or her fiduciary duties.” At the same time, the court cautioned that volume alone cannot substitute for materiality—a collection of trivial facts will not satisfy the standard simply by force of accumulation. And “consistent with [the] predicate materiality requirement, the existence of some financial ties between the interested party and the director, without more, is not disqualifying.” The upshot is a standard that looks to the qualitative weight and character of the relationship, not merely its existence or the number of connections a plaintiff can identify.

Applying the Standard: What Fell Short

In applying this framework, the court found that the plaintiff’s allegations regarding three challenged directors did not meet the heightened standard. The plaintiff alleged overlapping board service with the interested party across multiple affiliated companies and co-investments in professional sports franchises. The court held these allegations insufficient for several reasons. Overlapping board service, standing alone, does not compromise independence. The co-investments were characterized in incorporated documents as “small non-voting minority interests,” and the plaintiff failed to allege that the investments gave the interested party authority over the challenged directors or created a “bias-producing” relationship. Aggregated board fees over a ten-year period were insufficient without particularized facts explaining why those fees were personally material to the individual directors. And the plaintiff’s characterization of sports-team co-ownership as an “exceedingly rare and prestigious opportunity” was dismissed as broad conjecture that does not alter the independence inquiry compared to any other private venture.

Practical Takeaways for Practitioners

Document independence determinations carefully. Section 144(d)(2)’s heightened presumption is triggered by the board’s own determination that a director satisfies exchange independence criteria. General counsel should ensure that independence assessments are conducted rigorously and reflected in proxy statements and board minutes, as these records may be dispositive in future litigation.
Understand the elevated pleading burden. The “substantial and particularized facts” standard is qualitatively more demanding than Rule 23.1 alone. Directors of listed companies who are not parties to the challenged transaction now benefit from significant protection—but only if the board has made the threshold independence determination.
Distinguish between interested and disinterested transactions. The opinion draws a critical line between conflicted transactions approved by disinterested committees (which benefit from Section 144’s safe harbors) and self-compensation decisions (which remain subject to entire fairness review). Delegating approval of related-party transactions to a properly constituted committee remains a best practice.
Materiality is the touchstone. The court will examine whether alleged relationships are sufficiently material to impair objectivity—not merely whether they exist. Overlapping board service, routine co-investments, and financial ties that are not shown to be personally material to the individual director will not suffice.

July 21, 2026July 22, 2026 by Richard L. Renck

When Is a Founder a Director? Delaware Court of Chancery Highlights the Line Between Officer Authority and Board Membership

A recent ruling from the Delaware Court of Chancery offers important guidance on the distinction between officer-level authority and board membership—and on when an equity interest survives termination. In Tchernavskikh v. Accetturo, C.A. No. 2025-1284-LM (Del. Ch. July 20, 2026), Magistrate in Chancery Loren Mitchell addressed a motion to dismiss in a dispute between the co-founders of FilmPort, Inc., an AI film production company. The opinion’s treatment of director status and stockholder status provides practical lessons for general counsel of Delaware entities.

Director Status: Operational Authority Is Not Board Authority

The plaintiff, FilmPort’s former CTO and later CEO, alleged she had been given a seat on FilmPort’s board through an oral agreement with the company’s sole director. The Court rejected this claim, finding the complaint did not adequately plead either de jure or de facto director status.

The Court examined whether the company held the plaintiff out as a director, whether she acted as a director with the company’s knowledge, whether she was formally invited to join the board, whether she accepted, whether the appointment was publicly announced, and whether she attended board meetings. The Court found that while the plaintiff was described as a “co-founder” and “CEO”—titles reflecting substantial operational leadership—she was never identified as a director. Critically, there was no allegation of a formal vote to expand the board or appoint her, no participation in board deliberations, no execution of board consents, and no exercise of powers reserved to the board under Delaware law. The Court emphasized that officers may exercise substantial operational control without simultaneously serving as directors.

Stockholder Status: Derivative Standing Survives

While the plaintiff failed to establish director status, she succeeded in pleading continuous stock ownership sufficient for derivative standing. The plaintiff alleged that her original 30% equity interest predated and existed independently of the Restricted Stock Purchase Agreement (RSPA), which governed only the additional 20% equity she received later. Because the RSPA’s repurchase option applied only to shares subject to that agreement, the Court found it reasonably conceivable that her original equity survived her termination. The Court held that resolving the competing interpretations of the RSPA presented a factual question inappropriate for dismissal.

Practical Takeaways for Practitioners

Document board appointments with formality. Oral agreements to grant board seats are insufficient. Ensure director appointments are evidenced by board resolutions, bylaw amendments expanding the board, and formal acceptance.
Distinguish officer roles from board roles in corporate communications. Describing someone as “CEO” or “co-founder” does not create director status, but ambiguous communications can invite litigation. Use precise titles in internal and external correspondence.
Ensure stock agreements clearly define the shares they govern. Ambiguity about whether a repurchase agreement covers all of a holder’s equity—or only a portion—can preserve standing and expose the company to derivative claims even after termination. Draft RSPAs and similar agreements to expressly identify the universe of shares subject to their terms.

January 2, 2026January 15, 2026 by Richard L. Renck

DGCL Section 220: How to Satisfy the “Form and Manner” Requirements for Making a Demand for Inspection of Corporate Records

The Supreme Court of Delaware recently issued a decision reiterating the rigidity of the relatively few “form and manner” requirements that Section 220 places on stockholders seeking to inspect corporate books and records. That decision, and its import, is described in my recent article in the Delaware Business Court Insider, linked here.

Duane Morris’ legal team in Delaware is experienced in advising both stockholders making such demands, and corporate teams responding to books and records demands. We’d appreciate the opportunity to assist you or your clients if you find yourself on either the “making” or the “receiving” end of a Section 220 demand to inspect corporate records.

October 27, 2025October 27, 2025 by Richard L. Renck

Delaware Rapid Arbitration Act–The Constitutional Question

As noted in last week’s post, the Delaware Rapid Arbitration Act (DRAA), enacted in 2015, replaced an earlier judicial arbitration procedure that was declared unconstitutional for violating public access rights to courts. In 2009, the Delaware General Assembly and the Court of Chancery acted to implement voluntary arbitration rules for business disputes in a move to add a sophisticated, dispute-resolution product that was available to entities that had joined the Delaware franchise. But this procedure was struck down as unconstitutional by the Third Circuit Court of Appeals in Delaware Coalition for Open Government v. Strine because the court found that such arbitrations essentially functioned as civil bench trials conducted by taxpayer-paid judges in taxpayer-funded courthouses, which triggered First Amendment public access rights. The current version of the DRAA avoided these constitutional problems by using private arbitrators in private venues, maintaining the confidentiality of traditional arbitration while providing expedited business dispute resolution within 120-days and.

The Unconstitutional Predecessor: 2010 Judicial Arbitration Procedure

In January 2010, the Delaware Court of Chancery issued an order adopting new voluntary arbitration rules for business disputes involving claims solely for monetary damages. This procedure was designed to provide faster resolution of business disputes while maintaining judicial oversight. To that end, the 2010 procedures would have used members of the Court of Chancery to conduct private arbitrations between parties that would likely be conducted in the courthouses of Delaware. This procedure, however, turned out to be foundationally flawed because it blurred the line between public judicial proceedings and private arbitrations. The Third Circuit Court of Appeals declared this judicial arbitration procedure unconstitutional in Delaware Coalition for Open Government v. Strine. The court applied the Supreme Court’s experience and logic test to determine whether the First Amendment required public access to these proceedings. Under the experience prong, the court found that civil trials had historically been open to the press and general public while arbitrations had historically been private in nature. Thus, the court held that “[t]aking the private nature of many arbitrations into account, the history of civil trials and arbitrations demonstrates a strong tradition of openness for proceedings like Delaware’s government-sponsored arbitrations. Under the logic prong, the court determined that public access would ensure accountability of litigants, lawyers, and judges, and allow the public to maintain faith in the Delaware judicial system. Because the proposed arbitration proceedings would function essentially as civil bench trials to which there is a qualified right of public access under the First Amendment, the new statute and rules foundered on the rocks of the U.S. Constitution. The procedures violated the First Amendment because they attempted to maintain arbitration’s private nature while using the judicial system’s infrastructure and personnel, thus creating an irreconcilable conflict with constitutional requirements for public access to court proceedings.

The Delaware Rapid Arbitration Act: Constitutional Solution

In 2015, the Delaware General Assembly enacted the Delaware Rapid Arbitration Act in a second effort to provide Delaware-chartered entities with a rapid (and confidential) arbitration option. The DRAA was specifically designed to avoid the constitutional problems that doomed the 2010 judicial arbitration procedure. It did so by using private arbitrators conducting arbitrations in private facilities. Thus, the proceedings under the DRAA would be private and confidential, as with other private arbitrations, but if a challenge is filed with the Delaware Supreme Court, the proceedings would be treated as a typical appeal and subject to the court’s public’s right of access rules.

Since its enactment in 2015, the DRAA has not faced constitutional challenges. The DRAA’s use of private arbitrators in private venues, combined with its limitation of public access to Supreme Court appeals only, successfully addressed the First Amendment concerns that invalidated the earlier judicial arbitration procedure. The constitutional success of the DRAA demonstrates how Delaware learned from the failure of its 2010 judicial arbitration experiment. By maintaining clear boundaries between public judicial proceedings and private arbitration, the DRAA provides the expedited business dispute resolution Delaware sought while respecting constitutional requirements for court access.

Next week, we’ll take a look at some of the key features of the DRAA, so stay tuned!

October 20, 2025October 20, 2025 by Richard L. Renck

Delaware Rapid Arbitration Act–After a Decade, Has Its Day Arrived?

In 2015, Delaware adopted a new statute, the Delaware Rapid Arbitration Act (the “DRAA”), designed to address an identified need of parties for a very rapid and streamlined way to address disputes confidentially and outside the four walls of a courtroom. This new statue replaced an earlier statutory scheme that would have used sitting jurists of Delaware’s famed Court of Chancery as decisionmakers in private arbitrations because that statute was found to violate the constitutionally-protected access of the state’s citizens to “open courts.”

Over the course of the next few weeks, we’ll explore in this blog the history behind the DRAA, its key features, the kinds of disputes that are best suited for resolution under the act, how to adopt the DRAA in contracts, and some practice tips for presenting and resolving disputes under the DRAA.

While the DRAA has been in place for a decade now, there is little data beyond anecdotal evidence for how often this type of ADR is happening “in the wild.” Rumors are, however, that it has not been used with the frequency that its original proponents had envisioned. But the winds appear to be changing.

The Court of Chancery has seen rapidly-rising case loads year-over-year, a pace that show no signs of slowing. The addition of chancellors (from 5 to 7) and magistrates in chancery (from 1 to 5) has done little to lighten the collective load for those judges. That rise in case load has also been accompanied by a material increase in the number of cases that are being filed that seek expedited treatment–which comes with the concomitant upheaval to the dockets of the individual chambers to which they are assigned.

The DRAA, if adopted by more parties in their agreements, could play a key role in both (a) allowing parties with certain types of disputes access to a very quick (120 days) and streamlined ADR procedure, and (b) perhaps, help take some of the case load off the shoulders of the Delaware courts and place it in the hands of private arbitrators. Last week, the Delaware State Bar Association and Delaware ADR, LLC put on a day’s worth of CLE panels, two of which specifically discussed the DRAA. Indeed, two of the former judges on the panels noted that in recent months they have each completed an arbitration for parties under the DRAA–so there have been recent sightings of DRAA proceedings in the wild! The CLE event had the flavor of a “re-launch” for the DRAA, and it is a statue worth highlighting and discussing.

So watch this page over the coming weeks as we walk through the DRAA–particularly when and how it might be useful for parties to adopt as their ADR method for disputes.

August 11, 2025August 11, 2025 by Richard L. Renck

Delaware Supreme Court Clarifies Standards Applicable to Books-and-Records Demands Under Section 220 of the Delaware General Corporation Law

Please see the Duane Morris alert [here] addressing a recent decision of the Supreme Court of Delaware. The court provides guidance on the pleading standards a stockholder must satisfy in order to show a “credible basis to infer wrongdoing” to state a proper purpose for an inspection of corporate books and records.

December 11, 2024 by Richard L. Renck

Minding Your Financial Affairs–Corporate Stock and Communications

Do you own shares of stock? Are the stock certificates in a dusty bank box somewhere? Have you received communications from the company recently? If not, you should probably check in with the company to see if your shares have been escheated to the state. Please see here my recent article in the Delaware Business Court Insider discussing a recent Delaware opinion on the matter.

November 7, 2024November 7, 2024 by Richard L. Renck

PRECISION IN DRAFTING–PART DEUX

A new decision of Delaware’s Court of Chancery addresses an interesting intersection of recent attention to entities potentially moving their places of incorporation from Delaware to some other jurisdiction–like Nevada–and 2022 amendments to Section 266 of the DGCL that changed the historic need for a unanimous stockholder vote to enact such a conversion to the need to seek and receive only the vote of a simple majority of the shares entitled to vote (matching the voting requirements for a merger or consolidation under Section 251 of the DGCL).

Last week on this blog I wrote about a new Court of Chancery decision demonstrating the need for precision in drafting LLC agreements–specifically in how those agreements might address information rights of LLC Members. Yesterday, in Gunderson v. The Trade Desk, Inc., et al. (C.A. No. 2024-1029-PAF)(Nov. 6, 2024), the court makes the same point, but in this instance it makes clear that need for precision applies to provisions in a certificate of incorporation that provide for supermajority voting rights by stockholders in voting on certain types of corporate events or questions. Here, the court finds, applying Delaware’s venerable “doctrine of independent legal significance,” that where a certificate of incorporation does not clearly provide that supermajority voting rights apply for a conversion of the entity (pursuant to DGCL Sec. 266) from a Delaware corporation to a Nevada corporation, the simple majority voting provision set by the statue applies.

The stockholder plaintiff in this litigation argued that a conversion from a Delaware entity to a Nevada entity necessarily would trigger a provision in the certificate of incorporation that required a supermajority vote for actions that would “amend or repeal, or adopt any provision of this Restated Certificate inconsistent with” certain “Protected Provisions” of that certificate. The defendants argued that the supermajority voting rights applied “only to action taken under Section 242 of the DGCL, which specifically applies to certificate amendments,” and therefore the proper lens through which to review this conversion was Section 266 of the DGCL governing such conversions–including Section 266(b)’s default provision that such a conversion could be approved by a simple majority vote.

The court adopted the position of the defendants by applying the doctrine of independent legal significance. That doctrine “holds that legal action authorized under one section of the corporation law is not invalid because it causes a result that would not be achievable through other action under other provisions of the statute.” As the court noted:

The doctrine of independent legal significance is a bedrock of Delaware corporate law and should not easily be displaced. An open-ended inquiry into substantively equivalent outcomes, devoid of attention to the formal means by which they are reached, is inconsistent with the manner in which Delaware law approaches issues of transactional validity and compliance with the applicable business entity statue and operative entity documents (internal quotations omitted).

The court discussed at length how the courts of Delaware, for over 20 years, have made clear in a number of opinions that drafters wanting to alter statutory default voting provisions (whether in count or by class) must use clear and direct language telegraphing that intent. Historically, those cases involved questions of whether to extend charter-based voting requirements to mergers and consolidations (governed by Section 251 of the DGCL). The court also highlights: “[T]he entire field of corporation law has largely to do with formality. Corporations come into existence and are accorded their characteristics, including most importantly limited liability because of formal acts. Formality has significant utility for business planners and investors.”

The court concludes its discussion with this admonition:

The court’s goal here is to give effect to the drafter’s decisions in selecting which words to use–and which words not to use. Where decades of case law provides express guidance to corporate drafters and emphasizes that our courts charge drafters with knowledge of that case law, giving effect to the drafters’ decisions entails adhering to that guidance at the judicial level as well.

So for all the transactional counsel out there to whom the closing remarks are directed, this case makes clear two things. First, if the parties intend to apply a supermajority voting provision to a corporate act where the statute provides only for a majority vote, make that intent clear by specifically enumerating that act (ideally by mentioning the sections of the statute that are being altered). Second, I should make a shameless plug for this Delaware Business Law Blog where we report on new authority coming out of the Delaware courts, so please subscribe below to stay informed about the new case law as it comes out!

October 29, 2024October 29, 2024 by Richard L. Renck

Precision in Drafting–Information Rights of Members of LLCs

A recent order from the Court of Chancery highlights the need for precision in the drafting of LLC operating agreements, particularly in setting forth the rights that members of the LLC will have to information regarding the LLC. On August 21, 2024, Vice Chancellor Fioravanti issued his Order Addressing Motions to Dismiss in the matter of Potts, et al. v. SYFS Intermediate Holdings, LLC, et al., C.A. No. 2023-0557-PAF (copy below).

Plaintiffs in this action held Class B membership units in the LLC. One of their claims was that the LLC had breached the terms of the LLC operating agreement by failing to provide to them annual, audited financial statements for each fiscal year. It making their claim, the plaintiffs pointed to a provision in the operating agreement providing:

The Company will retain the Auditors to review, audit and report to the Members upon the financial statements of the Company for and as of the end of each Fiscal Year. The Auditors may be replaced or new auditors may be appointed at the discretion of the Board.

The Plaintiffs argued that the phrase “report to the Members” in this section created an obligation on the part of the LLC to send or provide copies of such audited financial statements to them as members of the LLC.

The Court of Chancery disagreed and dismissed this claim. It did so for two reasons.

First, the Vice Chancellor noted that one of the authorities that Plaintiffs relied upon did not support their position, as the limited partnership agreement at issue in that case provided that the general partner “shall prepare annual financial statements of the Partnership, and shall mail a copy of such statements to each Partner” (emphasis added) and that such statements were to be provided within 120 days of the end of the fiscal year. The court found that level of specificity trumped the less declarative “report to the members” language in the LLC agreement in the instant case.

Second, the Vice Chancellor pointed to a different provision of the LLC Agreement that did, indeed, provide specifically that certain audited financial statements were to be provided to certain members of the LLC:

The Company shall provide a copy of the most recent quarterly and audited annual financial statements of the Company to (i) each Class A Member, (ii) each Material SYFS Holder, so long as such Member continues to hold at least 50% of the Units held by such Member as of the date hereof, and (ii) [sic] so long as GPAC continues to hold at least 25% of the Units held by GPAC as of the date hereof, GPAC, in each case upon such Member’s request.

The Court of Chancery held that this section granted specific, but limited rights to information to the types of members noted. Given that Plaintiffs were neither the holders of the specified units noted in this section, nor had they made a request for the information, they could not look to the LLC agreement for contractual rights to LLC information.

That said, because the LLC Agreement was completely silent as to specific information rights that holders of Series B membership units might enforce, the Court of Chancery highligted that holders of those units could still resort to the default information rights as provided for in Section 18-305 of Delaware’s LLC Act.

As this Order demonstrates, counsel for both LLCs and their investors should be precise in their drafting to ensure that any rights to information in the LLC, whether specifically delineated or relegated to the statutory defaults, accurately reflect the intent of the parties to these agreements.

SYFS Opinion for Blog Post Download

September 3, 2024 by Richard L. Renck

“Stockholder List” and “Stock Ledger”–the same thing? Not under Delaware law.

I have a confession. I know there have been times in my twenty-five years in practice as a Delaware lawyer where I have lapsed or gotten lazy and used the terms “stockholder list” (or “stocklist” for short) and “stock ledger” interchangeably. A short, letter decision by Chancellor McCormick ruling on motions for summary judgment in the matter of Mitchell Partners, L.P. v. AMFI Corp., et al., C.A. No. 2020-0985-KSJM (July 3, 2024) provides a crisp reminder–both to me and to other professionals advising Delaware corporations–that they are not the same thing given the clear language of Section 219(c) of the DGCL.

The letter decision is a quick-read at eight pages, so I commend it to the reader in its entirety. That said, three lessons emerge from this decision.

First, Section 219(c) is specific in its command that a Delaware corporation keep a stock ledger and enumerates the small list of information required to be including on the ledger. The Chancellor quotes from a 1956 decision of the Delaware Supreme Court noting that a stock ledger is “a continuing record of stockholdings, reflecting entries drawn from the transfer books, and including (in modern times) nonvoting as well as voting stock.”

That leads directly to the second lesson: the Chancellor notes that the stock ledger must record “all issuances and transfers of stock of the corporation” (emphasis in original). This includes non-voting shares of stock. The stock ledger in the matter being decided was found deficient because it excluded a class of stock that had been issued but was nonvoting in nature.

Finally, the third lesson–what information must a company record on a compliant stock ledger? The court, in a footnote, provides guidance to practitioners from a variety of sources, whose lists of required information differ slightly. That said, the following types of data should be recorded by corporations on their stock ledger: (1) the stock certificate number, (2) the name of the stockholder, (3) the stockholder’s full address, (4) the class of shares, (5) the date of purchase or transfer, and (6) the price or value of the shares. Other types of information that might be considered for inclusion are: the date shares were cancelled, and the date the board approved the stock issuance.

Given the court’s citation to an opinion from 1956, this does not appear to be an issue that has resulted in litigation with any frequency. But with the issuance of this letter decision, the matter is likely now front and center with stockholders (and their counsel) as a potential source for litigation going forward. Thus, this decision is a perfect catalyst for Delaware corporations, and those that advise them on a regular basis, to dust off the ol’ ledger and make sure it is up to snuff!