Delaware amends its corporation law to validate stockholder governance agreements
Delaware's Governor signed Senate Bill 313 on 17 July 2024, amending the General Corporation Law. The main change is a new section 122(18), which lets a corporation enter into governance agreements with stockholders that limit the board's discretion, without putting those terms in the certificate of incorporation. It responded to the Court of Chancery's Moelis decision.
Governor John Carney signed Senate Bill 313 into law on 17 July 2024. It amends the Delaware General Corporation Law (DGCL) mainly to reverse three recent Court of Chancery decisions.
What changed
- Stockholder agreements: new section 122(18) authorises a corporation to make contracts with current or prospective stockholders, including ones that restrict the board's actions or give stockholders approval or consent rights. These need not be in the certificate of incorporation, provided they do not conflict with it or with the DGCL. This answered West Palm Beach Firefighters' Pension Fund v. Moelis & Co. (February 2024), which had held such rights in a founder's agreement invalid.
- Merger agreements: further amendments addressed how boards approve merger agreements in substantially final form, and related issues raised by other 2024 Chancery decisions.
- The changes do not affect civil actions completed or pending on or before 1 August 2024.
Who is affected
Delaware corporations, especially those with founder, sponsor or investor rights agreements, and the company secretaries who keep their governance documents.
What to do
Review existing stockholder and investor agreements against section 122(18) and the certificate of incorporation.
Later developments
On 20 January 2026 the Delaware Supreme Court reversed the Moelis decision on other grounds (laches). Section 122(18) remains the statutory basis for these agreements.