Corporate Interested-Director Transaction Requirements in Delaware
At a glance
| Governing law, entity, transaction, and covered-person scope | DGCL § 144; Delaware corporation. Ordinary branch covers an act/transaction involving the corporation or subsidiaries and its directors/officers, or another entity where they hold a listed role or financial interest; controlling transactions use §§ 144(b)-(c) (§ 144(a)-(c)) |
|---|---|
| Interest, relationship, control, and materiality definitions | Disinterested director is not a party and lacks a material interest or material relationship with a materially interested person; material interest includes an actual/potential nongeneral benefit or avoided detriment expected to impair director objectivity; material relationship includes familial, financial, professional, employment, or other ties meeting the statutory test (§ 144(e)(4)-(5), (7)-(8)) |
| Required disclosure, facts, timing, knowledge, and recipients | Board route: all board/committee members receive or know material relationship/interest and transaction facts, including initiation, negotiation, or approval involvement. Stockholder route requires an informed, uncoerced vote but § 144(a)(2) states no separate delivery, writing, recipient, or advance-time formula (§ 144(a)(1)-(2)) |
| Disinterested or qualified board/committee composition, quorum, vote, and good faith | Good-faith, non-grossly-negligent authorization by majority of disinterested directors then serving, even below quorum; if board majority is not disinterested, approval/recommendation must come from a 2+-member committee whose members the board determined disinterested. Interested/common directors count toward quorum (§ 144(a)(1), (d)(1)) |
| Disinterested shareholder notice, voting group, quorum, consent, and threshold | Informed, uncoerced affirmative vote of a majority of votes cast by disinterested stockholders. § 144(a)(2) states no separate conflict quorum, voting-group allocation, outstanding-share floor, meeting-notice content, or written-consent formula (§ 144(a)(2)) |
| Fairness alternative, relevant time, burden, and statutory standard | Separate route if the act/transaction is fair to the corporation and its stockholders. Current § 144 states no relevant time, fairness elements, or express burden allocation; the same fairness wording appears for controlling and going-private transactions (§ 144(a)(3), (b)(3), (c)(2)) |
| Interested-person presence, participation, vote, abstention, and written consent | Presence, participation, initiation/negotiation/approval involvement, and a counted director vote are listed conflict-related grounds protected by a qualifying route; interested/common directors count toward meeting quorum. § 144 states no special consent abstention; ordinary board/committee action without meeting requires all-member consent filed with minutes (§§ 141(f), 144(a), (d)(1)) |
| Controlling stockholders, officers, compensation, and special transaction routes | Express officer coverage. Non-going-private controlling transaction uses disinterested committee, conditioned disinterested-stockholder, or fairness route; going-private uses both committee and stockholder routes or fairness. Listed-company director presumption and § 251(h) deemed-vote rule apply; no separate compensation, loan, or corporate-opportunity branch (§ 144(b)-(e)) |
| Statutory effect, remedies, records, fiduciary, and public-company boundaries | Qualifying ordinary route bars equitable relief/damages against director/officer on enumerated conflict, benefit, presence, participation, involvement, or vote grounds—not all claims. Savings preserve authorization/governing-document/governmental-plan challenges, change-control injunction review, and aiding claims; written board consents go with minutes. 2025 rewrite is retroactive subject to stated pre-Feb. 18 exceptions (85 Del. Laws ch. 6, § 3; §§ 141(f), 144(a), (d)(6)) |
Requirements one by one
Governing law, transaction, and covered-person scope
8 Del. C. § 144(a) now covers an “act or transaction” involving the corporation or one or more subsidiaries and a director or officer. It also reaches a deal with another corporation, partnership, limited liability company, statutory trust, association, entity, or organization in which a director or officer holds one of the listed roles or has a financial interest.
That is broader wording than the pre-2025 “contract or transaction” provision. Controlling-stockholder transactions leave subsection (a) and use subsection (b) or (c), depending on whether the deal is a going-private transaction.
Interest, relationship, and materiality definitions
A disinterested director is not a party, has no material interest in the act or transaction, and has no material relationship with a person holding a material interest. The statute describes material interest as an actual or potential benefit—including avoiding a detriment—other than one shared generally, coupled with its stated objectivity or materiality test.
A material relationship can be familial, financial, professional, employment, or another relationship. Section 144(e) defines the controlling-stockholder and control-group triggers separately; the cell does not decide whether any real person satisfies those fact-dependent definitions.
Required disclosure and the board or committee route
For § 144(a)(1), all members of the board or committee must receive or know the material facts about the director's or officer's relationship or interest and the act or transaction. The required facts expressly include involvement in the transaction's initiation, negotiation, or approval.
The board or committee then must act “in good faith and without gross negligence” by affirmative votes from a majority of the disinterested directors then serving. Those voters may be fewer than a quorum. If a board majority is not disinterested, a committee of at least two directors—each determined by the board to be disinterested—must approve or recommend approval.
The disinterested-stockholder route
Section 144(a)(2) requires an informed, uncoerced affirmative vote by a majority of the votes cast by disinterested stockholders. The subsection does not state a separate conflict quorum, voting-group allocation, outstanding-share floor, meeting-notice checklist, or written-consent formula.
“Disinterested stockholder” is defined by material interest and, where applicable, material relationships with a controller, control-group member, or another materially interested person. Applying that definition requires the actual ownership, relationship, and transaction record.
The fairness alternative has no stated time or burden
The third ordinary route is that the act or transaction “is fair as to the corporation and the corporation's stockholders.” Unlike the superseded text, current § 144(a)(3) does not specify authorization, approval, or ratification as the relevant fairness time. It also states no fairness elements or express burden allocation.
The same fairness wording appears as an alternative for non-going-private controlling transactions and going-private transactions. This page reports the statutory words; it does not determine fairness.
Presence, participation, quorum, vote, and consent
The ordinary branch expressly includes presence or participation at the authorizing board or committee meeting, involvement in initiation, negotiation, or approval, and a director's counted vote among the conflict-related grounds covered by a qualifying route. Section 144(d)(1) separately allows common or interested directors to count toward meeting quorum.
Section 144 does not state a special interested-director abstention procedure for action without a meeting. Under 8 Del. C. § 141(f), ordinary board or committee action without a meeting requires consent from all members unless the certificate or bylaws restrict the route, and the resulting consents are filed with the minutes.
Controlling-stockholder and public-company branches
For a controlling-stockholder transaction that is not going private, § 144(b) offers three alternatives: a properly empowered two-or-more-member disinterested committee approving or recommending in good faith without gross negligence; a transaction conditioned on and receiving an informed, uncoerced majority of votes cast by disinterested stockholders; or statutory fairness.
A going-private transaction under § 144(c) uses both the committee and stockholder procedures together, or the fairness route. The definitions cover specified public-company Rule 13e-3 transactions and, for other corporations, listed forms that acquire or eliminate all or substantially all disinterested shares. The section also includes a listed-company disinterested-director presumption and a special deemed-vote rule for shares in a § 251(h) offer.
Statutory effect, savings, and application
The ordinary route's effect is precise. It prevents equitable relief or damages against a director or officer because of the listed relationship, benefit, presence, participation, involvement, or counted-vote circumstances. It does not declare the transaction authorized, fair, or immune from every claim.
Section 144(d)(6) preserves challenges based on failure to comply with statutory authorization procedures, the certificate or bylaws, or an applicable governmental plan, agreement, or order. It also preserves specified change-of- control injunctive review and knowing-aiding-and-abetting claims.
The 2025 rewrite has an unusual application rule. Under 85 Del. Laws chapter 6, § 3, it took effect on enactment and applies to acts and transactions before, on, or after March 25, 2025. It does not apply to or affect a court action or proceeding completed or pending, or a books-and-records demand made, on or before February 17, 2025.
What trips people up
Old summaries describe a different statute. The 2025 act replaced the former “void or voidable” formula with the current equitable-relief and damages language, added officers, definitions, controlling-stockholder routes, and an express application rule. Pre-2025 checklists cannot be treated as the current text.
Quorum is not the disinterested vote. An interested director may count toward meeting quorum, but the board-route approval still comes from the required majority of disinterested directors then serving.
Going private changes the architecture. A non-going-private controller deal may use either the committee route or conditioned stockholder route. A going- private deal needs both procedures together unless it uses the statutory fairness alternative.
Common questions
Does an interested director's vote automatically defeat protection?
No. Section 144(a) identifies a counted director vote as one of the grounds that does not support the specified relief when a qualifying route is met. The board-approval route itself still requires the stated disinterested-director majority.
Must every ordinary controller transaction use both approvals?
No. The dual committee-and-stockholder route applies to a controlling- stockholder transaction that constitutes a going-private transaction. Subsection (b) provides alternative routes for other controller transactions.
Does § 144 protection prove that the deal was properly authorized?
No. Section 144(d)(6) expressly preserves a challenge that the transaction was not authorized or approved under the DGCL, the certificate, or the bylaws.
Statutes and sources
- 8 Del. C. § 141(f) — board and committee action without a meeting and storage of consents with minutes.
- 8 Del. C. § 144(a) — ordinary director and officer transaction scope, disclosure, disinterested-board and stockholder routes, fairness, and effect.
- 8 Del. C. § 144(b)–(e) — controller and going-private routes, quorum, savings, public-company provisions, and definitions.
- 8 Del. C. § 251(h)(2)–(3) — offer and irrevocably accepted-share context for § 144(d)(7)'s deemed-vote rule.
Those sections are in the official Delaware Code, accessed September 4, 2026. The 2025 rewrite's application rule is in 85 Delaware Laws chapter 6, § 3, accessed September 4, 2026.
Source links
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