Issue No. 8 — September 28, 2026

Lead Matter

In re Sears Hometown — the duties a controller assumes when it votes against its board (Del. Ch. Jan. 24, 2024, 309 A.3d 474, modified on reargument July 2, 2024)

The standard-setting decision for a move every majority investor can make: acting by written consent to override the board. A special committee planned to liquidate a struggling segment; the controlling stockholder believed the plan would destroy value, and used his voting power to amend the bylaws — requiring supermajority board approval at two meetings at least thirty business days apart — and to remove the two committee members most committed to the plan. After trial, Vice Chancellor Laster held that a controller exercising stockholder-level power to change the status quo owes duties of good faith and care to the corporation and the minority, reviewed under enhanced scrutiny — and that this controller met that standard, having acted in good faith after reasonable inquiry and by proportionate means. The subsequent acquisition of the minority's shares by the controller was a different matter: a conflicted transaction reviewed for entire fairness, which the court found unfair on both price and process. On reargument that July, the court reduced its fair-price finding to $4.06 per share, leaving $0.85 per share in damages for holders who had received the $3.21 merger consideration — roughly $8.7 million before interest; it later addressed separately a holder that had not received that consideration, and the litigation subsequently settled. For venture investors holding majority voting power, the decision is a map of the intervention toolkit and its limits: blocking the board is reviewable but survivable; buying the company afterward is judged on its own.

On The Docket

Skye Mineral Investors v. DXS Capital — vetoes that could make minority members controllers (Del. Ch., C.A. No. 2018-0059-JRS)

Majority members of a Delaware LLC alleged that two minority members used contractual blocking rights to starve the company's operating subsidiary of capital, drive it into bankruptcy, and acquire its assets through an affiliate. On February 24, 2020, Vice Chancellor Slights declined to dismiss the fiduciary claims, holding it reasonably conceivable that the blocking rights, as exercised, conferred actual control over financing decisions and were used in bad faith; aiding-and-abetting claims survived against affiliates within the minority members' ownership group, while claims against the company's lender and the fraud counts were dismissed. The court also found it adequately alleged that a member and its board observer breached confidentiality obligations by using information obtained through the observer seat. A pleading-stage ruling — nothing was proven, and later rulings sustained counterclaims by the minority members alleging related-party misconduct by the majority; as the court observed in one of them, there are two sides to every question. Still, a detailed public statement of when protective provisions could amount to control, and of what a board observer may not do with what it hears.

Coster v. UIP Companies — a deadlock broken by dilution, upheld (Del. 2023)

A privately held company deadlocked between two 50 percent holders; the board sold a block of shares to a key employee, breaking the deadlock and mooting the other holder's petition for a custodian. After an initial remand directing the Court of Chancery to review the issuance under Delaware's standards for board action affecting the stockholder franchise, the Supreme Court in 2023 affirmed the finding that the board had acted for a legitimate purpose and by proportionate means, articulating a single enhanced-scrutiny framework: the board must identify a genuine threat to an important corporate interest and respond in a manner that is reasonable and neither preclusive nor coercive. A decided ruling; the description reflects the courts' holdings, and the Supreme Court emphasized the unusual circumstances of the deadlock and the custodian petition — the decision does not establish dilution as a generally available response to a custodian action. The mirror image of Sears Hometown — there, a stockholder overriding the board; here, a board reshaping the stockholder base — and the same question at the center of both: legitimate objective, proportionate means.

Ruling In Focus

Manti Holdings v. Authentix — the appraisal waiver upheld (Del. Sept. 13, 2021)

The Delaware Supreme Court, over a dissent, held that Section 262 does not prohibit sophisticated and informed stockholders, represented by counsel and holding bargaining power, from waiving their statutory appraisal rights in advance in exchange for valuable consideration. The stockholders agreement required its defined “Other Holders” — including the petitioners — to refrain from exercising appraisal rights in a board- and controller-approved sale; when a sale closed, dissenting minority holders sought appraisal anyway, and the Court of Chancery dismissed the petition. The Supreme Court affirmed: the refrain obligation was a clear waiver, the company was an intended beneficiary entitled to enforce it, and the waiver did not need to appear in the charter. Practitioners have noted that the ruling answered a long-open question about a provision found in the standard venture-financing forms; NEA v. Rich (Issue No. 4) addressed a different covenant — one purporting to waive fiduciary claims — and held that such a waiver could not bar well-pleaded claims of intentional wrongdoing; read together, the two decisions mark how far private ordering carries in Delaware and where it stops.

Doctrine Watch

Routes to controller status

The governing test depends on the entity, the challenged act, and when the action arose. Sears Hometown concerns a majority stockholder's use of voting power against a corporate board. Skye Mineral, an LLC case, found it reasonably conceivable at the pleading stage that minority members' financing vetoes conferred control; Basho (Issue No. 4) found control after trial. Pre-amendment corporate law also examined control over a particular transaction — the analysis in Guilbeau (Issue No. 2), which dismissed the controller claim before it as inadequately pleaded. For corporate matters covered by Delaware's 2025 amendments, Section 144(e)(2) supplies a statutory definition with specified voting, board-appointment, or voting-plus-managerial-authority requirements, alongside a fairness alternative for the transactions the safe harbors cover; the amendments expressly exclude actions completed or pending by February 17, 2025 (Issue No. 6). The routes are not interchangeable across entity types or time periods, and the same protective provisions may be analyzed differently under each.

Also Tracking

Cloudflare — the ruling on the plaintiffs' motion, when issued (Issue No. 7) • ATP — implementation of the recognition and funding orders (No. 25-12177-LSS) and the district-court appeal (D. Del. No. 1:26-cv-00495-JLH; Issue No. 5) • TSVC — the September 1 preliminary-injunction motion (Issue No. 3) • Rippling v. Deel — the September 25 rulings, as reported: Deel's motion to strike a witness denied, its counterclaims sent to arbitration, and its Lanham Act claims narrowed (Issue No. 7) • SEC v. Gao — further proceedings concerning Gao's proposed final relief (Issue No. 2).