From DExit to Senate Bill 21: Codifying the Demise of Shareholder Primacy in Delaware

Delaware’s dominance as the favored jurisdiction of corporations in the United States has been tested in recent years, as several high-profile companies—particularly those with controlling shareholders—have initiated or threatened to pursue reincorporation in states believed to offer a more management-friendly statutory regime, such as Nevada and Texas.[1] This nascent trend, colloquially termed “DExit,”prompted a swift response from Delaware’s General Assembly, which passed Senate Bill 21 (“SB 21” or “the Bill”) through an expedited legislative process. Governor Matt Meyer signed it into law on March 26, 2025. The Bill amends two key provisions of the Delaware General Corporation Law: § 144, which governs transactions involving conflicts of interest; and § 220, which defines and limits shareholders’ rights to inspect corporate books and records. 

SB 21’s amendments to Section 220 narrow the scope of corporate materials a shareholder may demand for inspection. Revised subsection (a) now limits the definition of “books and records” to a discrete set of formal corporate documents, including the certificate of incorporation, bylaws, minutes of shareholder meetings, minutes of board or subcommittee meetings, materials provided to the board or any subcommittees, and annual financial statements for the three years preceding the date of the shareholder’s demand. To obtain access to these materials, shareholders must first satisfy a series of procedural requirements introduced by the amendments to subsection (b). Specifically, demand is proper only if it is “made in good faith and for a proper purpose,” describes “with reasonable particularity” both its purpose and the specific books and records sought, and demonstrates that the requested materials are “specifically related” to the stated purpose.

Whether SB 21 will successfully quell the growing momentum behind DExit and preserve the First State’s corporate franchise remains to be seen. While the Bill may appease corporate insiders by to streamlining corporate governance and reducing regulatory burdens, it has raised concerns among institutional investors, governance advocates, and even the chief judge of the Delaware Court of Chancery. What is clear, however, is that by codifying a more permissive standard and relaxing long-standing protections, SB 21 shifts the internal balance of power within Delaware corporations in a manner that disproportionately favors directors, officers, and controlling shareholders.

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