The End of the MFW Gauntlet: Why Delaware’s Blessing of SB 21 Rewrites the Playbook for Controller Buyouts

A Statutory Shield for Controlling Stockholders

For over a decade, corporate dealmakers navigating controlling-stockholder transactions have been held hostage by a rigid, two-step dance. If a controller wanted to buy out the minority and avoid the brutal, litigation-heavy "entire fairness" standard of review, they had to perfectly execute the framework established in Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014) (MFW). That meant securing approval from both an independent special committee and a majority-of-the-minority shareholder vote.

In February 2026, the Delaware Supreme Court fundamentally altered that risk calculus. In a highly anticipated ruling, the state’s high court upheld Senate Bill 21—Delaware’s sweeping 2025 corporate-law overhaul. The statute and the court's blessing of it effectively dismantle the mandatory dual-requirement of MFW, limiting shareholder lawsuits against directors and controlling stockholders when a transaction is approved by an independent committee or by a majority of public shareholders.

For practicing corporate lawyers, the inclusion of that single conjunction—"or"—is the most significant shift in Delaware M&A law in a generation. It signals a definitive end to the era of judicial over-engineering in corporate transactions and hands dealmakers a statutory safe harbor that actually works.

The Power of "Or" vs. The Burden of "And"

To understand why this February decision is a seismic event, you have to look at the litigation environment that preceded it. Following the Delaware Supreme Court's 2024 decision in In re Match Group, Inc. Derivative Litigation, 315 A.3d 446 (Del. 2024), the plaintiff's bar was emboldened. Match Group reaffirmed that unless a controller used both MFW protections, entire fairness was the default standard of review. Entire fairness means surviving a motion to dismiss is virtually impossible. It guarantees grueling discovery, massive leverage for plaintiffs, and inevitably, eight-figure settlements.

"By upholding SB 21, the Delaware Supreme Court has confirmed that the legislature—not the courts—dictates the boundaries of corporate safe harbors. The statutory 'or' frees boards from the unpredictability of the retail shareholder vote."

SB 21 was the Delaware legislature's direct response to this creeping judicial expansion. By capping liability and limiting lawsuits where a deal is approved by either a pristine special committee or an uncoerced majority of the public float, the legislature provided an off-ramp from entire fairness. Opponents challenged the overhaul, arguing it improperly stripped minority shareholders of equitable protections. The Delaware Supreme Court’s rejection of those challenges cements SB 21 as the new bedrock of controller jurisprudence.

Starving the Strike Suit

This decision must be read as part of a broader, aggressive campaign by the Delaware Supreme Court in 2026 to rein in the plaintiffs' bar and correct the Chancery Court's occasional tolerance for runaway litigation.

Just one month prior, in January 2026, the Delaware Supreme Court drastically narrowed fee exposure in the Tesla director compensation case, slashing the Chancery-approved attorney-fee award from an astronomical $176.1 million down to $70.9 million. Similarly, the high court recently rebuked the Chancery Court's "fast filer" litigation territorialism, rejecting an irrebuttable presumption that quick-filing stockholders are inadequate representatives.

The message from the Delaware Supreme Court is unmistakable: the era of the corporate strike suit is facing a hard ceiling. By validating SB 21, the court has given defense counsel the ultimate weapon—a viable path to a pleading-stage dismissal in controller transactions. If a complaint concedes that a truly independent, fully empowered special committee negotiated and approved the deal, the plaintiff's case is severely limited, regardless of whether a minority vote was held.

What This Means for M&A Practice

For transactional attorneys and corporate litigators, the upholding of SB 21 demands an immediate adjustment to your deal structuring and defense strategies:

• The Special Committee is King: You no longer need to run the gauntlet of a volatile public shareholder vote to secure standard-of-review protection. If you are representing a controller, your primary focus must be on bulletproofing the special committee. Ensure absolute independence, broad mandates to say "no," and independent financial and legal advisors. If the committee is flawless, the statute shields you.
• Less Deal Risk: Minority votes are inherently unpredictable, heavily influenced by proxy advisory firms like ISS and Glass Lewis, and vulnerable to activist interference. Removing the absolute necessity of the minority vote removes a massive hurdle to deal certainty.
• Early Motions to Dismiss Will Surge: Defense litigators should aggressively utilize SB 21 at the motion to dismiss phase. The days of plaintiffs surviving a Rule 12(b)(6) motion simply by pointing out a minor flaw in the minority vote disclosure (thereby failing the second prong of MFW) are over.

Delaware has long prided itself on balancing board authority with shareholder accountability. But in recent years, the pendulum had swung so far toward shareholder litigation that the state risked losing its reputation for business predictability. By upholding SB 21, the Delaware Supreme Court hasn't just clarified the law; it has rescued the controlling-stockholder buyout from the grip of entire fairness.