First Court of Chancery Decision Interpreting New DGCL Amendments Provides Greater Certainty for Boards and M&A

On June 15, 2026, the Delaware Court of Chancery issued Ayers v. Foley, the first decision applying the recently amended Section 144 of the DGCL.¹ In 2025, through Senate Bill 21 (“SB 21”), the Delaware General Assembly amended Section 144 in response to growing market concerns about the lack of predictability in Delaware law and news reports that significant public companies were evaluating leaving Delaware as their place of incorporation.²

While the amendments to Section 144 offered hope for greater predictability in Delaware law, questions have lingered as to how the statute would be applied. The Ayers decision begins to answer those questions through its robust application of the presumption of director disinterestedness in Section 144(d)(2). The Court held that the provision’s heightened presumption of disinterestedness applies beyond the Section 144(a)–(c) safe harbors to the demand-futility analysis under Court of Chancery Rule 23.1.³ The Court’s holding makes clear that when the board of directors of a listed company has determined that a director meets the applicable exchange independence standards, a plaintiff must overcome the statutory presumption by pleading “substantial and particularized facts” of a material interest or material relationship that would disable the director’s independence.⁴

The Court’s decision gives effect to the General Assembly’s goals when it adopted Section 144 by providing greater certainty for disinterested boards invoking the business judgment rule and for navigating conflicted transactions through the creation of special committees of disinterested directors. This effect is important for directors and transaction planners, as it provides greater comfort that incidental and immaterial relationships should not be used as fodder to challenge successfully a careful and independent process.

Background

Fidelity National Financial, Inc. (“FNF”), formerly a Delaware corporation, is a publicly traded provider of title insurance, mortgage servicing, and related real estate services.⁵ The plaintiff filed a derivative action one day before FNF’s redomestication to Nevada took effect.⁶ In his complaint, the plaintiff challenged (1) an equity grant to the company’s founder and non-executive chairman (the “Chairman Grant”) and (2) the approval and receipt of non-employee director compensation. This Dechert OnPoint focuses on the Court's analysis of the Chairman Grant claims and its application of SB 21; the director compensation claims raised by the plaintiff, while surviving in part, turned on more established principles of director self-dealing.⁷

As to the Chairman Grant, and given the award’s size and related-party nature, the Compensation Committee conditioned its approval on sign-off by the Related Person Transaction (“RPT”) Committee of the FNF board of directors. The RPT Committee reviewed the compensation consultant’s independence and market research, obtained legal advice, and approved the grant.⁸ The plaintiff challenged the Chairman Grant, which the Court dismissed due to the plaintiff’s failure to plead demand futility.

The Court’s Decision

Section 144(d)(2) Applies Beyond the New Section 144 Safe Harbors

Section 144(d)(2) presumes a director of an exchange-listed corporation is disinterested as to a transaction to which the director is not a party, provided the board has determined the director meets the exchange’s independence criteria.⁹ The presumption is heightened and rebuttable only by “substantial and particularized facts” showing a material interest in the transaction or a material relationship with a person who has one.¹⁰

The Court held this presumption is not confined to the Section 144 safe harbors for conflicted transactions.¹¹ In particular, the Court observed that, unlike other provisions of the statute, Section 144(d)(2) contains no language purporting to limit the presumption to the safe harbors.¹² Applying ordinary interpretive principles, the Court treated this difference as purposeful and read the presumption to apply more broadly beyond Section 144, including to the test for director disinterestedness for demand futility under Rule 23.1.¹³

The Court’s holding of a broad application of the new presumption of director disinterestedness should therefore extend well beyond Section 144 or Rule 23.1. Pursuant to the business judgment rule, Delaware law already presumes directors act independently and with disinterestedness. Section 144(d)(2) adds a requirement that, for directors of a publicly listed company whom the board has determined to be independent under applicable listing standards, the factual allegations challenging a director’s disinterestedness must be both “substantial” and “particularized” to rebut the statutory presumption. As shown below, this result would amplify the already significant protections afforded by the business judgment rule and should curtail concerns about picayune challenges to director independence.

Common Allegations of Director Relationships Were Insufficient

The Court’s application of the “substantial” and “particularized” standard shows the import of its likely broad application.

First, the Court read the term “particularized” in Section 144(d)(2) as rejecting generalized or conclusory allegations unsupported by specific facts.¹⁴ This standard, which was already required for pleading demand futility under Rule 23.1, would now apply to what was (until now) the easier test for challenging director disinterestedness pursuant to Rule 12(b)(6).¹⁵

Second, the Court’s reading of the term “substantial” does even more. The Court held that “substantial” could have a quantitative and qualitative meaning.¹⁶ The Court rejected applying a quantitative standard, noting that “volume alone cannot substitute for materiality.”[17] Instead, the Court embraced a qualitative test for Section 144(d)(2), requiring that facts of a financial interest or material relationship be “significant enough to evidence a disabling conflict.”¹⁸

Applying this standard, the Court considered the plaintiff’s familiar challenges to director disinterestedness: fees from other boards affiliated with the chairman, overlapping board service, business relationships with entities affiliated with the chairman, and minority co-investments tied to professional sports teams such as the Vegas Golden Knights and European soccer clubs.¹⁹ None satisfied Section 144(d)(2).²⁰ The Court held that:

• bare allegations of overlapping board service alone do not compromise independence;
• a decade of board fees without allegations of personal materiality was insufficient;
• in the absence of allegations about voting rights, financial exposure, or dependence on the chairman, co-investments with the chairman in professional sports teams are not categorically different from other private investments; and
• directors’ roles at private equity firms that transacted with entities affiliated with the chairman, absent allegations showing a personal benefit to the directors, fail to call into question their disinterestedness.²¹

Taken as a whole, the Court held these facts failed to be sufficiently particularized or substantial to reveal a disabling conflict sufficient to overcome the Section 144(d)(2) presumption of director disinterestedness.²²

The Safe Harbor and Exculpation Analysis Reinforced Dismissal of the Chairman Grant Claims

In the alternative, the Court considered whether the directors faced a substantial likelihood of liability for approving the Chairman Grant. Such a claim would have to clear “two interconnected hurdles”: the Section 144(a)(1) safe harbor and the Section 102(b)(7) exculpatory provision in FNF’s certificate of incorporation.²³

Section 144(a)(1) shields an interested-director transaction from equitable relief or damages where the material conflict facts are disclosed or known and the transaction is authorized in good faith and without gross negligence by a majority of disinterested directors of the board or a committee.²⁴ The record undercut any contrary inference: both approving committees were disinterested as to the Chairman Grant, the plaintiff did not allege that material facts were withheld, and the record showed negotiation, expert compensation advice, and legal advice, including through the RPT Committee’s review.²⁵

Even assuming a process defect, the exculpatory charter provision would require particularized allegations of non-exculpated bad faith, which the plaintiff did not make.²⁶ The Court therefore dismissed the Chairman Grant claims for failure to plead demand futility.²⁷

Takeaways

Ayers is an important early data point in the post-SB 21 landscape. The decision provides a direct application of Section 144(d)(2)’s heightened presumption of director disinterestedness, which in turn reinforces the business judgment rule’s powerful presumption of director independence. On balance, Ayers should further the Delaware General Assembly’s goals for SB 21 of providing predictability and certainty to Delaware corporations, directors, and transaction planners.

The Ayers decision should thus help address the unpredictability under pre-SB 21 caselaw regarding allegations of personal interests and relationships that directors may have with interested parties. The Ayers decision indicates that such interests and relationships, when immaterial and insubstantial, should not survive a pleading-stage challenge as to the directors’ disinterestedness. This result should in turn give comfort to directors that their insubstantial relationships with interested parties will not expose them to litigation risk or judicial second-guessing. That said, the contours of SB 21, including Section 144(d)(2), will continue to develop in future decisions, particularly as the Court addresses its application in contexts beyond exchange-listed companies.

In light of Ayers and the new statutory framework, clean proxy disclosure and well-documented board independence determinations are more likely to be outcome-determinative at the pleading stage. Companies and their advisors should ensure that the documentary record supporting director independence is robust and contemporaneous, and ensure that this record is available at the pleading stage through the new mechanisms for books and records inspections—including the broad right to incorporate by reference materials into a complaint—that SB 21 authorizes.