Delaware
Delaware Court of Chancery Invalidates Governance Rights in Stockholder Agreement | Insights & Resources | Goodwin
On February 23, 2024, the Delaware Court of Chancery issued a decision in a class action lawsuit (West Palm Beach Firefighters’ Pension v. Moelis & Co.) that concluded most of the control provisions in a stockholder agreement in favor of a stockholder were facially invalid under Delaware’s General Corporation Law (“DGCL”) because they were not in the Charter.
Key Takeaways:
- Most or all of the invalidated governance provisions would be valid if included in a company’s certificate of incorporation, rather than a stockholders’ agreement
- Stockholder agreement provisions could also be incorporated by reference into certificates of incorporation to make amending those provisions easier
- Existing arrangements that may be subject to challenge on the same basis as Moelis can be amended to be compliant, subject to fiduciary considerations
- This ruling does not impact similar governance provisions for limited liability companies (LLCs) or limited partnerships (LPs)
At the center of the case is a 2014 stockholder agreement (the “Stockholder Agreement”) that provides Moelis & Co.’s (the “Company”) founder, CEO, and Chairman, Ken Moelis, certain negative covenants, or “blocking rights,” with respect to eighteen of the Company’s key decisions, including stock issues, financing, contracts, litigation decisions, dividend payments, and senior officer selections (the “Pre-Approval Requirements”). In addition, under the Stockholder Agreement, the Company’s board of directors (the “Board”) was required to ensure that Moelis can select a majority of its members (the “Board Composition Provisions”).
In its motion for summary judgment, plaintiff stockholder alleged that the Pre-Approval Requirements and the Board Composition Provisions are invalid on their face because they violate the “bedrock” principles of director decision making under Delaware law. More specifically, plaintiff argued that the challenged provisions in the Stockholder Agreement violate Delaware law because they effectively remove from directors “in a very substantial way” their duty to use their own best judgment on matters of management. Meanwhile, the Company argued that Delaware corporations possess the power to contract, including contracts that may constrain a board’s freedom of action, and the Stockholder Agreement should not be treated any differently.
After a painstaking analysis of applicable Delaware cases, the court found that several of the Board Composition Provisions, and all of the Pre-Approval Requirements, were facially invalid under Delaware law. The court decided that each of the Pre-Approval Requirements went “too far” because they forced the Board to obtain Moelis’s prior written consent before taking “virtually any meaningful action” and, thus, “the Board is not really a board.” Potentially worth note, the court decided only to address the Pre-Approval Requirements together, rather than individually, leaving open the possibility that some of them, standing alone, could be valid. It is not clear whether that choice was meant to convey legal significance, but at a minimum it leaves open the question for future litigation of how any particular blocking right might have been viewed when analyzed through the multi-prong test laid out in the opinion.
Offering some counsel to market participants, the court makes the point that the provisions it invalidated could have been accomplished consistent with Delaware law if they had been included in the Company’s certificate of incorporation, rather than in a stockholder agreement. The court also posited that, even now, the Board could implement many of the challenged provisions by using its blank check authority to issue Moelis a single “golden share” of preferred stock carrying a set of voting rights and director appointment rights.
Additionally, because this decision arises out of the DGCL, it does not apply to other corporate forms such as LLCs or LPs.
The Opinion will likely have a ripple effect on cases already pending in the Chancery Court that involve similar “new wave” stockholder agreements. Beyond those matters, in this Firm’s view and based on our experience, the most likely practical impact is that the next time that a target’s counsel argues against including one or more stockholder rights in the target’s certification of incorporation—perhaps based on the efficiency of leaving certain matters to the Board, instead of requiring stockholder votes—the potential investor will win that negotiation.
Our team will continue to monitor the Moelis & Co. case, including with respect to any appeals, and will continue to give thought to the decision’s impact. Please contact Jordan Weiss, Mike Kendall, Jennifer Chunias, Joe Rockers or Dylan Schweers with any questions.
This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee a similar outcome.
School board elections are one of the highest-leverage, lowest-participation decisions in Delaware. Turnout is low. Margins are small. In some cases, candidates run without a real contest. When voters do not engage, leadership is not selected. It is decided by default. When governance is decided by default, the system performs accordingly.
It’s clear that when residents fail to vote, it can have consequences — ones that most people recognize, but rarely connect to the ballot box. It shapes whether schools are focused on clear priorities or pulled in competing directions. It determines whether resources are invested in what improves student outcomes or spread thin. Those decisions show up in real ways: in the preparedness of students, the confidence of families, and the strength of Delaware’s workforce and economy.
In 2024, fewer than 5% of eligible voters cast ballots in Delaware school board elections, even as concern about outcomes, funding, and district leadership remained high across every sector of public life. The disconnect between what communities demand and how they participate is one of the most significant, and most solvable, barriers to progress in our state.
Data from the 2026 Delaware Opportunity Outlook reinforce this disconnect. A majority of Delawareans believe school board members have a direct influence on the quality of K–12 education, yet far fewer report understanding how improvement efforts are being carried out, or how decisions are made at the local level. In other words, people believe boards matter, but are not consistently using the one mechanism they have to influence who serves and how decisions are made.
What governing actually requires
A strong board member asks clear, outcome-focused questions and expects specific answers. They connect decisions to priorities, work through tradeoffs with colleagues, and ensure decisions are understood before the board moves forward. They listen for whether information reflects progress or activity, and press for clarity when it does not.
These are not intuitive responsibilities. They require preparation. School board governance is often treated as something individuals can step into without training, but these are complex roles that involve setting priorities, interpreting data, making tradeoffs, and ensuring decisions lead to results over time.
The Delaware Opportunity Outlook suggests that this is not how the role is widely understood. While Delawareans recognize that school boards influence the quality of education, far fewer identify training and professional preparation as essential.
That gap has direct consequences. As the state advances new priorities, the effectiveness of those efforts will depend on whether local board members are prepared to implement them, monitor progress, and make results visible.
Delaware’s moment
Delaware has established a clear direction for public education: defined priorities, a statewide literacy commitment, and a funding reform that will place significant new responsibilities on local boards. Plans set direction. Boards determine whether those plans turn into results.
What happens next will not be determined by those plans alone. It will be determined by how effectively school boards translate those priorities into decisions, how consistently they track progress, and whether they make results visible to the public.
Candidate evaluation
Evaluating a candidate is straightforward: Can they name a small number of district priorities and explain why those matter? Can they describe what data they would review regularly and how they would use it? Can they explain how resources should align to outcomes and what they would do if results do not improve? Candidates who can answer those questions demonstrate an understanding of the role. Those who cannot speak to governance beyond the issues that brought them to the race may find the role more demanding than they anticipated.
Make your voice heard
Voting in a school board election is one of the few places where individual participation has a direct and immediate impact on how the system performs. School board elections are decided by small numbers of voters. Your decision to engage, or not, determines who governs. Choosing not to participate is not neutrality. It is a choice, and it carries the same weight as the vote itself.
Today, a decision will be made about who governs Delaware’s schools. You can be part of that decision, or it will be made without you. Either way, the results will show up in classrooms, in communities, and in the long-term strength of this state.
Find out who is running. Evaluate them on the work the role requires, not only on the positions they hold. Vote, and encourage others to do the same.
For more details about voting in today’s elections, visit First State Educate’s 2026 School Board Elections page.
Read more from Spotlight Delaware
Monday, May 11, 2026 10:57AM
TRAINER BOROUGH, Pa. (WPVI) — A person has died after being hit by a vehicle in Delaware County.
It happened around 2:45 a.m. on Monday in the 4300 block of West 9th Street in Trainer Borough.
Police and fire crews were called to the Parkview Mobile Home community for reports of a pedestrian hit by a car.
Officials say the victim went into cardiac arrest immediately after the crash.
The investigation into the crash is ongoing.
Copyright © 2026 WPVI-TV. All Rights Reserved.
LAUREL, Del. — Delaware State Police are investigating a shooting in Laurel that left a 19-year-old man injured Friday afternoon and resulted in firearm charges against a Georgetown man, authorities said.
Troopers responded around 3:20 p.m. Friday to TidalHealth Nanticoke after the victim arrived at the hospital in a personal vehicle with non-life-threatening gunshot wounds, according to police. Investigators said the man had been shot in front of a residence on Portsville Road near Randall Street in Laurel.
Police said the victim was transported to the hospital in a blue Mazda 3 driven by 20-year-old Alexison Amisial of Georgetown. Troopers later located the vehicle and Amisial at First Stop Gas Station, where investigators said he was found carrying an untraceable firearm concealed in his waistband.
Amisial was taken into custody without incident and charged with carrying a concealed deadly weapon and possession of an untraceable firearm, both felonies, police said. He was arraigned in Justice of the Peace Court 3 and released on a $3,500 unsecured bond.
The Delaware State Police Troop 4 Criminal Investigations Unit continues to investigate the shooting. Authorities are asking anyone with information to contact Detective R. Mitchell at 302-752-3794 or Delaware Crime Stoppers at 800-847-3333.
-
World16 seconds agoTrump administration rejects UN migration declaration, says ‘mass migration was never safe’
-
Politics6 minutes agoStacey Abrams hit with subpoena in alleged campaign finance violations saga: ‘No one is above the law’
-
Health12 minutes agoTwo Maryland residents monitored for hantavirus after sharing flight with infected cruise ship passenger
-
Sports18 minutes agoCraig Morton, quarterback who led the Broncos to their first Super Bowl appearance, dead at 83
-
Technology24 minutes agoRobotaxi drives off from airport with passenger’s suitcase
-
Business30 minutes agoL.A. port traffic rises in April despite trade disruption, higher fuel costs
-
Entertainment36 minutes agoEntertainment mogul Byron Allen to acquire Buzzfeed, HuffPost
-
Politics48 minutes agoOversight chair seeks information from OpenAI’s Sam Altman about potential financial conflicts