Sec. 144 Safe Harbor and Interested Director Transactions

During the 19th century, transactions between the corporation and its directors were commonplace. Such transactions often worked to the advantage of the interested director at the expense of the stockholder. Examples of interested director transactions include, the corporation purchasing materials from a director for use in producing the corporation's product. Alternatively, the corporation might sell corporate assets to a director. These kinds of self-dealing transactions with directors provide opportunities for directors to extract value from the corporation at the expense of the shareholders.  The pernicious effect of such transactions caused legislatures to strictly regulate relationships between corporations and their directors.

The general approach to policing interested director transactions is to expose such transactions to the approval (or rejection) by disinterested stakeholders in the corporation. Where disinterested parties, acting in a fully-informed manner, are free to accept or reject such transaction, courts will generally not interpose to prevent the transactions from going forward. In 1967, Section 144's statutory safeharbor codified the common law approach to interested director transactions. In 2025, the Delaware legislature amended Section 144 and expanded the statute's protections to cover interested directors, officers and controlling shareholders.