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In In re Match Group, Inc. Derivative Litigation, the Delaware Supreme Court confirmed that non-ratable transactions between corporations and their controlling stockholders are subject to review under the onerous entire fairness standard unless the transaction is approved by both a fully empowered committee of independent directors and a fully informed and uncoerced vote of the disinterested stockholders. Despite the important role entire fairness review serves in policing potential conflict-of-interest transactions, it is not without cost to corporations and stockholders. In most cases, entire fairness claims cannot be dismissed on the pleadings, presenting plaintiffs with inherent settlement value and inviting litigation without regard to the merits of a claim. Delaware law's existing safeguards against opportunistic derivative litigation--namely, Delaware's MFW framework, demand futility requirement, and recognition of special litigation committees--curb inefficient entire fairness challenges to some degree, but offer imperfect solutions that do not fully address the problems facing many corporations under the modern entire fairness paradigm.

Delaware cases resolving facial challenges to corporate governance provisions, coupled with the ensuing wave of stockholder demands and litigation that followed, may have led some to overlook the issue of ripeness in connection with facial challenges. But historically, Delaware has taken a principled approach to ripeness and emphasized its importance in this context. This article reviews more than a decade of recent Delaware cases resolving facial challenges, and the case-specific factors that rendered underlying challenges ripe in those circumstances, to conclude that those cases have not departed from Delaware's traditionally cautious approach, which continues to extend to facial challenges involving Delaware corporations.

[...]any societal benefit that these disproportionate fee awards serve as a disincentive against non-compliance with corporate formalities is far outweighed by multiple factors, including the stress that litigation costs and fee awards impose on corporations that could more profitably deploy the funds, the diversion of scarce judicial resources, and the general prohibition for a court of equity to award punitive damages.8 In order to carry out the equitable mandate, we believe the corporate benefit doctrine's application to inadvertent corporate defects should be recalibrated in a way that recognizes the diminution, following the enactment of Sections 204 and Section 205, in the real-world effect of corporate foot-fault litigation. \"13 In Delaware, the doctrine vests the Court of Chancery with the discretion to order the payment of attorneys' fees and expenses to plaintiffs whose efforts result in a corporate benefit.14 This may include benefits causally resulting from a corporate defendant's settlement or mooting of a plaintiffs meritorious claim before its full adjudication.15 Awards may even be supported by a non-pecuniary benefit, provided the benefit is \"significant and substantial\" in nature.16 The size of any award granted under the corporate benefit doctrine is determined based on the factors articulated in SugarlandIndustries, Inc. v. Thomas,17 which the Delaware courts have distilled down to: \"1) the results achieved; 2) the time and effort of counsel; 3) the relative complexities of the litigation; 4) any contingency factor; and 5) the standing and ability of counsel involved. \"21 In EMAK Worldwide, Inc. v. Kurz, the Delaware Supreme Court stated that, in this context, \"the benefit's size does not depend on the corporation's monetary value\" for purposes of fee awards under the corporate benefit doctrine.22 The Supreme Court's statement in EMAK was notable given that, in a line of prior cases, the Court of Chancery scaled back fee awards otherwise supported by precedent to serve equity where the awards were sought for disclosures obtained from micro-cap companies or in connection with relatively small M&A transactions.23 The court has seemingly applied this type of adjustment less frequently following EMAK and, in at least two cases, has questioned the continued vitality of this line of cases in light of EMAK.24 In recent years, the Delaware courts have granted fee awards approaching or exceeding seven figures under the corporate benefit doctrine in favor of those who discovered defects with respect to proposed or completed corporate actions.25 In ordering many of these awards, the courts have looked to Olson v. ev3, Inc., a case in which the Court of Chancery approved a $1.1 million fee award in connection with a settlement that cured alleged statutory defects in a top-up option intended to facilitate a $2.6 billion merger.26 In finding that \"[a]n award of $1 million [was] fair and reasonable compensation for a settlement that cured serious statutory flaws[]\", the ev3 court observed that the challenged top-up option and any shares issued upon its exercise \"likely were void,\" which would have undermined the validity of the merger.27 When ev3 was decided in 2011, these types of statutory flaws posed a real threat of dire consequences. Historically, the Delaware courts have held that many significant corporate actions, including stock issuances,28 charter amendments,29 and mergers,30 that fail to comply with applicable statutory requirements were void ab initio and incapable of being cured or ratified at common law, irrespective of whether the invalidation of that action is inequitable.31 Effective April 1, 2014, however, the Delaware General Assembly adopted sections 204 and 205 of the DGCL for the express purpose of overturning this dramatic common law result and allowing these types of technical defects to be remedied in a manner that restored equity to this area of corporate law.32 These statutes \"established two statutory methods that parties can use to fix defective corporate acts that otherwise might be void\" or voidable.33 \"Section 204 is 'a \"self-help\" provision that allows the board of directors, by following specified procedures, to validate a defective corporate act,'\" while \"Section 205 is a judicial mechanism under which identified parties can 'petition the Delaware Court of Chancery to enter an order validating or invalidating, as the case may be, the defective act.

Exxon's novel Retail Voting Program would be offered to all retail investors at no cost on an opt-in basis, allowing retail investors to grant standing instructions to vote their shares as recommended by Exxon's board of directors on either (1) all matters ог (п) all matters other than contested elections and acquisitions, mergers or divestitures requiring stockholder approval.' While a retail voting program may not necessarily consist of a traditional proxy given by the record holder of shares, particularly in the case of beneficial owners who participate by way of voting instructions given to a bank, broker or plan administrator,\" there is no reason to believe Delaware law would view this type of voting agency relationship differently.· Indeed, Delaware amended its corporate law to eliminate any temporal limitations on agency or contractual relationships in respect of voting more than 30 years ago.' In 2023, these problems prompted amendments to Section 242 of the DGCL reducing the default stockholder vote required for charter amendments changing the authorized number of shares of a class of stock or reclassifying a class of stock to effect a reverse stock split in certain cases.

In the first instance, bedrock Delaware law vests primary management authority over such claims in corporate boards, not stockholderplaintiffs. [...]controlled companies utilizing the \"controlled company exemption\" offered by the New York Stock Exchange and NASDAQ are not required to have an independent board majority. Even if a corporation has an independent board majority for stock exchange purposes, Delaware does not adhere to exchange independence standards. A Means for Solidifying Independent Director Authority Over Derivative Claims A recent article in 7he Business Lawyer authored by a Richards, Layton & Finger director proposes a novel solution for corporations seeking to mitigate the growing risks and costs of entire fairness litigation by concentrating the authority over derivative litigation in a committee of independent directors.? The appropriate process for a demand committee to follow should be determined on a case-by-case basis based on the best interests of the corporation. [...]after engaging independent counsel, a committee should work to develop and proceed with a process tailored to the corporation's situation, including its needs and resources, and the particularized allegations made in the demand.

Section 242 will be revised to (i) eliminate the need to obtain the default vote of stockholders for charter amendments effecting specified types of forward stock splits and associated increases in the authorized number of shares, and (ii) reduce the minimum stockholder vote required to authorize a charter amendment increasing or decreasing the authorized shares of a class, or effecting a reverse split of the shares of a class, in circumstances where the shares of such class are listed on a national securities exchange immediately before the amendment becomes effective and meet the listing requirements of such exchange after the amendment becomes effective. 5. Section 265 will be revised to authorize the adoption of a plan by which another entity may convert to a Delaware corporation and to provide that certain acts and transactions effected pursuant to such plan may be accomplished without a further vote of the board of directors or stockholders of the Delaware corporation continuing after the conversion. 7. If enacted, the 2023 amendments will become effective on August 1, 2023, except that (i) the amendments to Section 262 will be effective with respect to (A) a merger or consolidation consummated pursuant to an agreement of merger or consolidation entered into on or after August 1, 2023, (B) a \"short-form\" merger authorized on or after August 1, 2023, or (C) a conversion, transfer, continuance or domestication effected on or after August 1, 2023; (ii) the amendments to Section 265 will apply only to conversions effected pursuant to a plan of conversion entered into on or after August 1, 2023 (or, if no plan of conversion is entered into, a corporation with respect to which the authorization of the conversion under the DGCL is obtained on or after August 1, 2023); and (iii) the amendments to Section 390 will apply only to domestications, transfers or continuances authorized by the board on or after August 1, 2023.

In 2003, however, in the wake of a series of corporate scandals involving Enron, Worldcom and others-and that animated the adoption of the Sarbanes-Oxley Act-Delaware's consent-to-jurisdiction statute was amended to cover \"C-suite\" officers.6 A contemporaneous summary of the amendment to the consent-to-jurisdiction statute observed: Because of enhanced requirements for independent director representation on public company boards of directors, it is likely that fewer senior officers will also serve as directors. [...]had Section 3114 not been amended, the ability to obtain personal jurisdiction in Delaware over some of the most significant participants in corporate governance would have been impaired. The two cases that precipitated the change in the landscape were In re Trulia, Inc. Stockholder Litigation,9 where the Court of Chancery effectively shut down the practice of so-called \"disclosure only\" settlements (which would occur where the stockholder plaintiffs would obtain a relatively nominal settlement payment in exchange for the securing revisions to the proxy statement to correct quibble-style alleged omissions and would grant a blanket release for those claims),10 and Corwin v. KKR Financial Holdings LLC,11 where the Delaware Supreme Court affirmed the Court of Chancery's holding that a fully-informed vote of disinterested stockholders had the effect of restoring the presumption of the business judgment rule to the board's decision to approve a merger, thereby resulting in the dismissal of so-called Revlon claims tested under the standard of enhanced scrutiny12 Although the Supreme Court's opinion in Corwin gave boards a potent weapon with which to dismiss merger litigation, it also provided stockholder plaintiffs a roadmap for pursuing claims beyond the stockholder vote. An exculpatory provision covering officers would not, however, prevent the board of directors from pursuing duty of care claims against officers in the name of the corporation, nor would it prevent stockholders from bringing derivative claims in which officers are alleged to have breached their duty of care. [...]Section 102(b)(7), as amended, recognizes the basic structure of the Delaware corporation- that directors are principally responsible for oversight of the corporation and the long-term best interests of stockholders, while officers are responsible for management of the corporation's day-to-day affairs.