By Tom Hals
WILMINGTON, Del., Feb 27 (Reuters) – The Delaware Supreme Court upheld on Friday a 2025 law that overhauled the state’s widely used corporate code to limit lawsuits against powerful business leaders, a measure that opponents had dubbed the “billionaire’s bill.”
Under the law known as SB 21, if a deal is approved by a board committee that has a majority of independent directors or if it is approved by a vote by public shareholders, investors cannot challenge it in court. Previously both steps were required and the board committee had to be entirely made up of independent directors.
The bill also makes it harder to challenge a director’s independence and limits records available to shareholders who want to investigate a deal for conflicts.
Lawmakers adopted the measure in March 2025 to try to prevent companies from leaving Delaware, a trend known as DExit. While other states are trying to attract incorporations, Delaware remains the legal home to most large public companies and related fees generate 20% of its budget revenue.
The law mostly impacts companies with a controlling shareholder, like Meta Platforms, which is controlled by Mark Zuckerberg.
Opponents of the law included pension funds, which feared it would limit their ability to police potential conflicts of interest and viewed it as a gift to influential tech founders.
Shareholder lawyers argued that SB 21 violated the state constitution by taking jurisdiction away from the Court of Chancery and preventing it from reviewing some claims in corporate dealmaking.
Defenders of the law argued that the legislature was not eliminating jurisdiction or certain legal claims, but rather lawmakers were recalibrating standards used by the Court of Chancery to determine if transactions were fair.
Business leaders have expressed frustration in recent years over court rulings that upset certain expectations about the state’s corporate law.
A Delaware judge in January 2024 rescinded Musk’s $56 billion pay package from Tesla. The ruling outraged Musk and he urged companies to abandon Delaware, which some did, including Dropbox, Roblox and Coinbase Global.
The Delaware Supreme Court in December restored Musk’s compensation package on appeal.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and Daniel Wallis)
