Delaware’s Contractarian Counter-Revolution and the SEC’s Shareholder Proposal Retreat

The Delaware Supreme Court Slams the Door on the Governance Panic of 2024

For corporate practitioners, 2026 will go down as the year Delaware forcefully reminded the nation why it remains the undisputed capital of American corporate law. In a rapid-fire sequence of decisions in early 2026, the Delaware Supreme Court dismantled the creeping judicial interventionism that had spooked founders and controllers over the past two years, restoring predictability to corporate governance and dealmaking.

The counter-revolution began on January 20, 2026. The Delaware Supreme Court officially reversed the Court of Chancery’s highly controversial 2024 ruling in the Moelis litigation. The lower court had previously sent shockwaves through the corporate bar by invalidating a stockholder agreement that gave billionaire Ken Moelis veto power over board decisions, reasoning that it unlawfully constrained the board’s authority under Del. Code Ann. tit. 8, § 141(a). The Supreme Court rejected this paternalistic view, upholding the agreement and reaffirming Delaware’s foundational commitment to private ordering. For deal lawyers, the message is clear: bespoke governance agreements and founder-control mechanisms are back on solid legal footing.

But the high court wasn't finished. On February 27, 2026, the Delaware Supreme Court upheld the sweeping corporate-law overhaul known as SB 21. Enacted in 2025 in direct response to plaintiff-friendly Chancery rulings, the statute drastically limits stockholder litigation against influential executives and controllers. Under the affirmed framework, if a transaction is cleansed by either an independent board committee or a majority-of-the-minority public shareholder vote, investors are statutorily barred from dragging the company through costly fiduciary-duty litigation.

This is not merely a doctrinal correction; it is a survival tactic. By validating both Moelis arrangements and SB 21, Delaware has successfully neutralized the threat of corporations fleeing to Texas or Nevada in search of management-friendly pastures. The era of the plaintiff-driven governance shakedown in Wilmington has been severely curtailed.

M&A Practice Note: The Death of Revlon for Public Benefit Corporations

While the Supreme Court protected traditional corporate structures, the Court of Chancery provided long-awaited clarity for the booming ESG sector. On July 29, 2026, Judge Nathan Cook ruled that Public Benefit Corporations (PBCs) are legally exempt from the mandate to maximize short-term stockholder value in a sale.

Historically, under Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986), a board’s sole duty once a company is in "Revlon mode" (i.e., a sale of control) is to get the highest price per share. Judge Cook’s ruling confirms what statutory drafters had long theorized: PBCs do not have Revlon duties. In practice, this means boards of target PBCs can legally reject a higher-priced acquisition offer in favor of a lower bid from a buyer who commits to preserving the company's public benefit mission. M&A advisors must now fundamentally alter their fairness opinions and auction strategies when a PBC is the target.

The SEC Abdicates Rule 14a-8, But Keeps Its Disgorgement Teeth

On the federal front, corporate counsel are facing a radically altered landscape regarding annual proxy statements. In August 2026, the Securities and Exchange Commission made permanent its policy shift to stop issuing "no-action" letters deciding whether companies can exclude activist shareholder resolutions under 17 C.F.R. § 240.14a-8 (Rule 14a-8).

For decades, the SEC staff acted as the informal referee for proxy fights. If an activist submitted a proposal that a company felt micromanaged its operations, the company’s lawyers would petition the SEC for a no-action letter to exclude it. By abandoning this role, the SEC is effectively forcing these disputes into state and federal courts.

This is a massive shift in leverage. Activist investors know that companies will be hesitant to engage in expensive, public federal litigation just to exclude a proposal. As a result, we expect to see a surge in companies either capitulating to activist demands or allowing fringe proposals to go to a vote.

However, defense counsel should not mistake the SEC's proxy retreat for weakness in enforcement. In early June 2026, the U.S. Supreme Court firmly rejected a constitutional challenge to the SEC’s authority to seek disgorgement. This cements the agency's ability to strip ill-gotten gains from securities law violators, preserving the most feared weapon in the SEC Enforcement Division's arsenal.

Litigation Warning: The AI Privilege Trap

Finally, a critical practice note for litigators handling corporate disputes. A March 2026 post-trial decision from the Court of Chancery in Fortis Advisors v. Krafton highlighted a dangerous new frontier in discovery. The court found that the careless use of generative AI tools to summarize and process sensitive corporate documents created evidentiary risks and potential privilege waivers.

The holding is a stark warning: attorney-client privilege is not absolute when third-party AI vendors are ingested into the workflow without stringent, documented confidentiality guardrails. Corporate legal departments must immediately audit their outside counsel's eDiscovery protocols. If your firm is dumping client data into unvetted AI models, you are not just risking a data breach—you are risking a catastrophic waiver of privilege in your next Chancery showdown.