Delaware corporations: investor and founder agreements get a firmer footing
After a 2024 court decision cast doubt on common stockholder agreements, Delaware amended its corporate law to allow them, with board approval and within limits.
Reviewed by Laurence S. Bezinover · Published
What changed
In February 2024, the Delaware Court of Chancery invalidated provisions in a stockholder agreement that gave a founder approval rights over many board decisions (West Palm Beach Firefighters' Pension Fund v. Moelis & Co.). Delaware responded with SB 313, effective August 1, 2024. New § 122(18) of the Delaware General Corporation Law lets a corporation, with board approval and for consideration, agree with current or future stockholders to restrict corporate actions or require a stockholder's consent. Terms that conflict with the charter or Delaware law remain unenforceable.
In January 2026, the Delaware Supreme Court reversed the Moelis ruling itself. It held that such provisions, to the extent they conflict with the board's statutory authority, are voidable rather than void, and that the challenge, brought about nine years after the agreement was signed, came too late. It did not decide whether the provisions were valid, so § 122(18) remains the clearer basis for these agreements.
The same law updated rules for approving merger agreements. In 2025, Delaware made further changes (SB 21) on conflicted-controller transactions and books-and-records demands, and in February 2026 the Delaware Supreme Court upheld SB 21's safe-harbor provisions (Rutledge v. Clearway Energy Group). Later amendments effective August 1, 2026 did not change § 122(18).
Who it affects
California founders and investors in Delaware corporations, especially those with investor rights, voting, or side-letter agreements that give veto or consent rights.
Questions to raise with counsel
- Do our stockholder and investor agreements have board approval, and do any of their terms conflict with our charter?
- Which governance rights belong in our charter, and which can sit in a contract?
- If our Delaware company has substantial California ties, does California's corporate law also apply (Corp. Code § 2115)?
Sources
This briefing is general information about California law, not legal advice for your situation. Reading it does not create an attorney-client relationship.