Key Finding
Corporate law polices conflicted transactions through internal processes. But procedural safeguards work only when courts can verify them. Delaware’s SB 21 chips away at two verification tools: timing scrutiny (ab initio) and shareholder inspection rights
Abstract
In 2025, Delaware’s legislature enacted the most significant corporate law overhaul in decades, making it easier for controlling shareholders to cleanse conflicted transactions. The reform—Senate Bill 21 (SB 21)—sparked a fierce public debate. Critics framed the legislation as a concession to powerful controllers, while proponents defended it as a necessary response to judicial overreach. Most of the debate focused on the high-profile provisions concerning who counts as a controller and which transactions trigger heightened scrutiny. But a more revealing change largely escaped attention: SB 21 also eliminated corporate law’s timing requirement.
Before SB 21, controllers seeking to cleanse conflicted transactions had to adopt procedural safeguards from the outset (“ab initio”), before deal negotiations began. Over the preceding decade, that requirement became one of the most consequential prerequisites in conflicted-transaction litigation. Yet the legislature omitted the requirement without explanation. And neither practitioner nor academic commentary has supplied a theory of why timing matters.
This Article provides that theory and makes three contributions. Descriptively, it offers the first systematic account of the rise and fall of the ab initio requirement, situating it within corporate law’s broader shift from substantive fairness review to process-based protections. Normatively, the Article evaluates the desirability of eliminating the requirement and concludes that the legislature erred. Timing matters. Negotiation research demonstrates that early communications anchor expectations, and early commitments are hard to unwind. More fundamentally, the timing requirement is a potent tool for protecting the integrity of internal corporate procedures and distinguishing meaningful oversight from cosmetic compliance. Prescriptively, the Article identifies steps courts can take to preserve investor protection in a post-SB 21 world, such as interpreting shareholders’ inspection rights liberally. More broadly, the ab initio saga reveals that the effectiveness of procedural safe harbors depends not only on statutory design or judicial specialization, but also on doctrinal and evidentiary tools needed to detect and deter opportunistic compliance with the process. The saga thus surfaces lessons about state competition, specialized business courts, and the systemic value of litigation.
