Texas Corporate Law · When the deal is conflicted

Conflicted transactions by type: Texas vs. Delaware.

Three transaction types, two states, seven questions. Pick the column that matches the deal and read down.

Built from the enrolled texts · September 30, 2026

How to read it. The three cards at the top are the transaction types Delaware’s § 144 distinguishes; Texas distinguishes only the first, which is why the Texas cells in columns two and three point back to the director-and-officer provisions. A director who is also a controller belongs in column two or three, never column one: § 144(a) opens by excluding controlling-stockholder transactions.

Conflicted Transactions: Texas vs. Delaware

Different paths. Different standards. Different outcomes.
Same question.
Different tools.
A clearer choice.

How to Use This Chart

Pick the transaction type, then read the Texas or Delaware column down: governing law, cleansing routes, process, standard of review, plaintiff’s burden, who can sue. A director who is also a controller belongs in column 2 or 3.

Key Takeaways Up Front

  • ✓Texas puts the director-and-officer rules in the statute; listed and electing corporations add a liability gate (§ 21.418(f)), presumptions (§ 21.419) and a pre-deal court ruling on committee independence (§ 21.4161).
  • ✓Delaware puts the controller rules in the statute (§ 144(b)–(c), 2025) and scrutinises how the process was run (Dodiya v. Franklin).
  • ✓Both states cleanse a director-or-officer deal several ways. Only Delaware gives a controller deal its own statutory route; Texas covers a controller through the roles it holds and the § 21.418 circle, not as shareholder.
Start here: what type of transaction?
1. Conflicted director or officer transaction

The corporation deals with a director or officer, an affiliate or associate of one, or an entity in which one is a managerial official or holds a financial interest. No controller on the other side.

Examples: related-party contracts, compensation, a director on both sides.

2. Controller transaction, not a going-private

A controlling stockholder or control group is the counterparty, or receives a financial or other benefit not shared with stockholders generally, and the corporation stays public.

Examples: asset sale to the controller, controller-side financing, a recapitalisation that benefits the controller.

3. Controller going-private (Rule 13e-3)

The controller takes the company private: a squeeze-out merger, tender offer or other transaction that ends public ownership. SEC Rule 13e-3 disclosure applies whatever the state of incorporation.

Examples: squeeze-out merger, controller tender offer followed by a short-form merger.

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Choose your jurisdiction
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Governing law & key framework
TBOC § 21.418Interested director and officer transactions.1TBOC § 21.419Statutory presumptions for directors and officers of listed or electing corporations; § 21.418(f) routes any claim against them through § 21.419.
DGCL § 144(a)Director and officer transactions, as amended by S.B. 21 (eff. Mar. 25, 2025).2Common lawBusiness judgment rule (Aronson v. Lewis); entire fairness if not cleansed.
No controller-transaction safe harbor§ 21.418 applies only where a director or officer, an affiliate or associate, or an entity with a director-or-officer interest is on the other side. § 21.416(g) lets the board of a listed or electing corporation form a committee; § 21.4161 lets the corporation get a court ruling on its independence. A controller who is a director or officer has § 21.419 in that role; one inside the § 21.418(a) circle has § 21.418(e); one acting only as shareholder has the common law, which imposes no fiduciary duty on a controlling shareholder as such: the Supreme Court of Texas has “never recognized a formal fiduciary duty between majority and minority shareholders” (Ritchie v. Rupe),3 and in Willis v. Donnelly it assumed one could exist and declined to find it.4 An informal duty can arise from a pre-existing relationship of trust, case by case; in the opinions read for this map, none has been recognized for the controller of a listed corporation.
DGCL § 144(b)Controlling-stockholder transactions other than going-privates. Controller defined at § 144(e)(2): majority voting power, the right to elect a board majority, or one-third plus managerial authority.Common lawEntire fairness if not cleansed.
Same as column 2. Texas has no separate going-private category. The directors and officers who approve it are covered by §§ 21.418 and 21.419; the controller is not.
DGCL § 144(c)Controlling-stockholder going-private transactions: MFW (Kahn v. M&F Worldwide, Del. 2014) codified for this category only.Common lawEntire fairness if not cleansed.
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Cleansing options (“safe harbors”)
Any one of the following, § 21.418(b):
  1. Approval in good faith by a majority of the disinterested directors or committee members, quorum or not — (b)(1)(A)
  2. Specific approval in good faith by a vote of the shareholders entitled to vote — (b)(1)(B). No disinterest requirement.
  3. Fair to the corporation when authorised, approved or ratified — (b)(2). Burden on the interested director (Estate of Poe).5
Any one of the following, § 144(a):
  1. Approval in good faith and without gross negligence by a majority of the disinterested directors; a committee of two or more if a board majority is interested — (a)(1)
  2. Informed, uncoerced majority of the votes cast by disinterested stockholders — (a)(2)
  3. Fair as to the corporation and its stockholders — (a)(3)6
For the directors and officers: the § 21.418(b) routes, where the nexus exists.
For the controller: if it is an affiliate or associate of a director or officer, or the counterparty entity, a (b) route clears the deal and § 21.418(e) bars the interest-based claim against it too. Outside that circle: no statutory cleansing; common-law fairness.
A § 21.416(g) committee and a § 21.4161 order insure the directors’ independence. Neither clears the transaction.7
Any one of the following, § 144(b):
  1. A committee of two or more disinterested directors expressly empowered to negotiate and to reject, acting in good faith and without gross negligence — (b)(1)
  2. A vote conditioned in the deal’s terms on approval by an informed, uncoerced majority of the votes cast by disinterested stockholders — (b)(2)
  3. Fair as to the corporation and its stockholders — (b)(3)8
Same as column 2.
Both, § 144(c)(1): the empowered committee and the conditioned disinterested-stockholder vote.
Or fairness, § 144(c)(2).
3
Process requirements
Material facts disclosed to or known by the board, committee or shareholders; approval in good faith.
Listed or electing corporations: whether or not (b) is met, no cause of action against a director or officer because of the (a) relationship or interest unless § 21.419 permits it — § 21.418(f).
Material facts, including any role in initiating or negotiating the deal, disclosed to or known by all directors. Good faith and no gross negligence across the whole process, not only the final vote (Dodiya v. Franklin, Del. Ch. Aug. 26, 2026). Courts look behind the vote.
Form a committee of independent and disinterested directors — § 21.416(g).
Optionally petition the Business Court, on notice to shareholders, for a determination that the members are independent and disinterested — § 21.4161; dispositive absent facts not presented.
Satisfy § 21.418(b) for any director-or-officer nexus.
Delegate real negotiating power and the power to reject to the committee, or condition the vote in the deal’s terms from the outset. Good faith and no gross negligence throughout. Exchange-independent directors are presumed disinterested; rebuttal needs substantial and particularised facts — § 144(d)(2).
Same as column 2, plus SEC Rule 13e-3 disclosure.
Run both protections together: the empowered committee and the conditioned vote. Same good-faith and gross-negligence standard as (b). Plus SEC Rule 13e-3 disclosure.
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Standard of judicial review
Listed or electing corporations: § 21.419 presumptions — good faith, informed basis, the corporation’s interest, obedience to law and the governing documents.
Other corporations: common law; if not cleansed, the interested director must prove fairness.
§ 144(a) met: no equitable relief or damages on the fiduciary claim; statute, charter and bylaw challenges survive (§ 144(d)(6)).
Missed: the common law decides the standard; entire fairness where a controller stands on both sides of an uncleansed deal, otherwise the review the common law assigns. Failing the safe harbor is not itself liability: common-law protections and charter exculpation remain, and gross negligence is exculpated where bad faith is not alleged (Dodiya).
Directors and officers: § 21.419 presumptions if listed or electing; otherwise common law.
Controller: § 21.419 for what it does as director or officer; § 21.418(e) for the interest once a (b) route is met; otherwise the common law, under which duties run to the corporation, not to minority holders (Ritchie v. Rupe).
§ 144(b) met: the controller is exculpated for the transaction; no liability for the directors.
Missed: entire fairness.
Controller monetary liability limited to disloyalty, bad faith, intentional misconduct, a knowing violation of law or an improper personal benefit — § 144(d)(5).
Same as column 2.
§ 144(c) met: exculpated.
Missed: entire fairness.
§ 144(d)(5) limit applies.
5
Plaintiff’s burden
Listed or electing corporations, § 21.419(d), (f): rebut a presumption, prove a breach of duty, and prove the breach involved:
  1. Fraud
  2. Intentional misconduct
  3. An ultra vires act
  4. A knowing violation of law
Pleaded with particularity. The statute states no evidentiary standard.9
Other corporations: common-law breach.
Plead facts that take the deal outside § 144(a) — an interested majority, undisclosed material facts, gross negligence, a coerced or uninformed vote — and then a breach of fiduciary duty. If the deal is uncleansed, the defendant proves entire fairness.10
Against directors and officers: as in column 1 (§ 21.419 if listed or electing).
Against the controller as shareholder or counterparty: no § 21.419 presumption to rebut; § 21.418(e) if a (b) route was met; otherwise a common-law breach of a duty owed to the corporation, which the claimant must first establish.
Plead facts that take the deal outside § 144(b) — a committee without real power, a vote not conditioned up front, gross negligence. If uncleansed, the defendant proves entire fairness.
Same as column 2.
Plead that either prong of § 144(c)(1) failed. If uncleansed, the defendant proves entire fairness.
6
Who can sue, and how
Derivative. The duty runs to the corporation, so the claim is the corporation’s: ownership when the act occurred and for the duration of the suit (Somers), fair and adequate representation, and for listed corporations and electing corporations with 500 or more shareholders the elected threshold of up to 3%. A direct claim exists only for a duty owed to the shareholder individually (Wingate). The closely-held exception (fewer than 35 shareholders, no listed or OTC-quoted shares) lets a court treat the claim as direct; it creates no direct right.12
Derivative, unless the stockholder’s own injury. Tooley: who was harmed and who gets the remedy. A related-party contract that costs the corporation money is the corporation’s claim.13
Derivative. As column 1; the controller is a defendant only where a duty to the corporation can be established (column 1, row 1).
Derivative after Brookfield. Dilution and overpayment claims against a controller that keeps the company public are “exclusively derivative under Tooley”; Gentile is overruled.
Appraisal. A holder cashed out in the merger no longer holds shares and loses derivative standing; the statutory remedy is dissent and appraisal of fair value, exclusive absent fraud in the transaction (§ 10.368). The listed-share exception to appraisal does not apply when the holder must take cash other than in lieu of fractions. No direct fiduciary claim against the directors in a cash-out merger has been recognized (Somers).
Direct class action, plus appraisal. The cashed-out minority sues the controller and the directors directly, as a class (Weinberger); MFW / § 144(c) sets the standard. § 262 appraisal runs alongside, and its market-out exception yields where holders must accept cash or unlisted stock rather than listed or widely held shares.13
7
Practical takeaways
  • Statutory clarity and presumptions for listed and electing corporations.
  • Document the disclosure; take the vote through disinterested directors.
  • Consider a § 21.4161 order when independence may be contested.
  • Document the entire process, not just the vote.
  • Manage information flow and the interested director’s role.
  • A clean vote is not bulletproof (Dodiya).
  • Use § 21.416(g) plus § 21.4161 to lock in committee independence before signing.
  • The order protects the directors. The controller’s own cover is § 21.419 for its board or officer role and § 21.418(e) for the interest; nothing in S.B. 29 covers it as shareholder.
  • One protection suffices: committee or conditioned vote.
  • Give the committee real power to negotiate and to say no.
  • Expect scrutiny of process and information handling.
  • As column 2.
  • Coordinate the state process with the Rule 13e-3 filing.11
  • Both protections required: follow the MFW playbook from the first offer.
  • Condition the vote in the deal’s terms before economic negotiation begins.
Bottom Line
Delaware has the controller safe harbor; Texas has the director-and-officer safe harbor. For a director-or-officer deal, both states put the safe harbor in the statute — Texas adds a liability gate and presumptions for listed and electing corporations, Delaware adds a judicial gloss on how the process is run. For a controller deal, Delaware supplies a statutory route (§ 144(b)–(c)); Texas reaches the deal only through its director-and-officer provisions, and its committee tools insure independence, not the transaction. And the plaintiff is a different person: in Texas the claim is the corporation’s and the cashed-out minority has appraisal; in Delaware the cashed-out minority sues directly.
Different roadmaps.
The state of incorporation decides which one applies.

Notes · Bluebook (21st ed.)

  1. Tex. Bus. Orgs. Code Ann. § 21.418(a) (West 2025). The section reaches a contract or transaction between the corporation and a director or officer, an affiliate or associate of one, or an entity in which one of them is a managerial official or holds a financial interest. Id. § 21.416(g) (committee to review transactions with a controlling shareholder, director or officer; authorization only). The 2025 amendments: Act of May 14, 2025, 89th Leg., R.S., ch. 21 (S.B. 29), enrolled text, eff. May 14, 2025. ↩
  2. Del. Code Ann. tit. 8, § 144(a) (2025) (director or officer transactions); Id. § 144(b) (controlling-stockholder transactions other than going-privates); Id. § 144(c) (controlling-stockholder going-private transactions); Id. § 144(e)(2) (defining “controlling stockholder”). Amended by 85 Del. Laws ch. 6 (2025) (S.B. 21), eff. Mar. 25, 2025. ↩
  3. Ritchie v. Rupe, 443 S.W.3d 856, 874–75 (Tex. 2014) (“[T]his Court has never recognized a formal fiduciary duty between majority and minority shareholders in a closely-held corporation, and no party has asked us to do so here.”) (citing Willis v. Donnelly, 199 S.W.3d 262, 276–77 (Tex. 2006)); Willis, 199 S.W.3d at 277 (“Assuming without deciding that such a relationship can give rise to a general fiduciary duty, we decline to recognize the existence of such a duty on this record.”). Both are closely-held-corporation cases. In the Texas Supreme Court, court of appeals and Business Court opinions read for this map (bounded search, Oct. 1, 2026), none recognizes a formal fiduciary duty owed by the controlling shareholder of a listed corporation; the absence is a search result, not a holding. ↩
  4. Ritchie, 443 S.W.3d at 874 (informal fiduciary duties “arise from ‘a moral, social, domestic, or purely personal relationship of trust and confidence’” and “are not owed in business transactions unless the special relationship of trust and confidence existed prior to, and apart from, the transaction(s) at issue”) (quoting Meyer v. Cathey, 167 S.W.3d 327, 331 (Tex. 2005)). ↩
  5. Tex. Bus. Orgs. Code Ann. § 21.418(b)(1)(A) (West 2025) (disinterested-director or committee approval, “regardless of whether the disinterested directors or committee members constitute a quorum”); Id. § 21.418(b)(1)(B) (approval “in good faith by a vote of the shareholders”; the text imposes no disinterest requirement on the approving shareholders); Id. § 21.418(b)(2) (fairness); In re Estate of Poe, 648 S.W.3d 277, 289 (Tex. 2022) (“The burden of proving that a transaction falls within this safe harbor rests on the interested director.”). ↩
  6. Del. Code Ann. tit. 8, § 144(a)(1) (2025) (disinterested-director approval “in good faith and without gross negligence,” with disclosure of “any involvement in the initiation, negotiation, or approval of the act or transaction”; a committee of two or more disinterested directors where a board majority is interested); Id. § 144(a)(2) (“informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholders”); Id. § 144(a)(3) (fair as to the corporation and the corporation’s stockholders). ↩
  7. Tex. Bus. Orgs. Code Ann. § 21.418(e) (West 2025) (where a Subsection (b) condition is met, no breach-of-duty claim based on the relationship or interest against “any of the persons described by Subsection (a)”); Id. § 21.418(f) (for listed or electing corporations, whether or not Subsection (b) is satisfied, no cause of action against a director or officer “for breach of duty with respect to the making, authorization, or performance of the contract or transaction because the director or officer had the relationship or interest described by Subsection (a)” or took a Subsection (d) action, “unless the cause of action is permitted by Section 21.419”); Id. § 21.416(g); Id. § 21.4161 (petition to the Business Court for a determination that committee members are independent and disinterested; “dispositive” absent facts not presented). ↩
  8. Del. Code Ann. tit. 8, § 144(b)(1)–(3) (2025) (committee “expressly delegated” the authority to negotiate and to reject, acting in good faith and without gross negligence; or a vote “conditioned, by its terms, as in effect at the time it is submitted to stockholders,” on disinterested-stockholder approval; or fairness); Id. § 144(c)(1)–(2) (going-private: both (b)(1) and (b)(2), or fairness); Id. § 144(d)(5) (controller monetary liability limited to breach of the duty of loyalty, acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, or an improper personal benefit); id. § 144(d)(6) (the safe harbors do not limit claims that an act or transaction violates the statute, the certificate of incorporation or the bylaws, or other specified restrictions). Kahn v. M & F Worldwide Corp., 88 A.3d 635, 644 (Del. 2014) (the dual-protection framework § 144(c) codifies). ↩
  9. Tex. Bus. Orgs. Code Ann. § 21.419(c) (West 2025) (presumptions); Id. § 21.419(d) (claimant must rebut a presumption, prove a breach, and prove fraud, intentional misconduct, an ultra vires act or a knowing violation of law, as to acts “in the person’s capacity as a director or officer”); Id. § 21.419(e) (managerial officials); Id. § 21.419(f) (particularity). The section names no evidentiary standard. ↩
  10. Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983) (“The concept of fairness has two basic aspects: fair dealing and fair price.”); Dodiya v. Franklin, C.A. No. 2025-0932-LWW, slip op. at 2, 33–34 (Del. Ch. Aug. 26, 2026) (Will, V.C.) (“The ‘good faith and without gross negligence’ requirement is not confined to the act of authorization.”; the § 144(a)(1)–(2) safe harbors unavailable at the pleading stage; “This conclusion does not establish fiduciary liability.”); id. at 46–48, 55–67, 76 (a § 144(a) case: directors retain common-law protections and the charter’s § 102(b)(7) exculpation; the disinterested directors, not alleged to have acted in bad faith, dismissed because no non-exculpated claim was pleaded; claims against the conflicted CEO and one director survive). ↩
  11. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984); Del. Code Ann. tit. 8, § 144(d)(2) (2025) (directors of an exchange-listed corporation who meet the exchange’s independence standards are presumed disinterested; rebuttal requires “substantial and particularized facts”). 17 C.F.R. § 240.13e-3 (2025) (going-private transactions by certain issuers or their affiliates). ↩
  12. Poe, 648 S.W.3d at 286; Tex. Bus. Orgs. Code Ann. § 21.552(a)(1) (West 2025) (a shareholder “may not institute or maintain a derivative proceeding unless” the shareholder “was a shareholder of the corporation at the time of the act or omission complained of”); Somers ex rel. EGL, Inc. v. Crane, 295 S.W.3d 5, 13–16 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (“a plaintiff seeking to derivatively enforce the rights of a corporation must be a shareholder”; a former shareholder cashed out in a merger “lacks derivative standing”); id. at 14 n.5 (assuming without deciding that Texas recognizes the Lewis v. Ward exceptions for a merger perpetrated to destroy standing or a mere reorganization, and finding neither pleaded); Zauber v. Murray Sav. Ass’n, 591 S.W.2d 932, 937–38 (Tex. Civ. App.—Dallas 1979), writ ref’d per curiam, 601 S.W.2d 940 (Tex. 1980) (shareholder status must be maintained throughout the suit; a court of equity asks whether an involuntary loss of status served a valid business purpose); In re UMTH Gen. Servs., L.P., No. 24-0024, slip op. pt. II (Tex. Nov. 14, 2025) (“a shareholder must own an interest in the corporate entity for the duration of the suit”); Id. § 21.552(a)(2) (fair and adequate representation of the corporation’s interests); Id. § 21.552(a)(3); Id. § 21.563(a) (closely held corporation: fewer than 35 shareholders and no shares listed on a national securities exchange or regularly quoted over the counter); Id. § 21.563(c) (court may treat a closely held corporation’s derivative proceeding as a direct action “if justice requires”); Id. § 21.563(d) (“Other provisions of state law govern whether a shareholder has a direct cause of action or right to sue a director, officer, or shareholder, and this section may not be construed to create that direct cause of action or right to sue.”); Somers, 295 S.W.3d at 11–12 (“A director’s fiduciary duty runs only to the corporation, not to individual shareholders”; “we decline to recognize the existence of a fiduciary relationship owed directly by a director to a shareholder in the context of a cash-out merger”); Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990) (a shareholder may recover individually only for a wrong done to the shareholder, “where the wrongdoer violates a duty arising from contract or otherwise, and owing directly by him to the stockholder”); Tex. Bus. Orgs. Code Ann. § 10.354(a) (West 2025) (dissent and appraisal); id. § 10.354(b)(3) (the exception for shares listed on a national securities exchange or held of record by at least 2,000 owners does not apply where the holder must accept consideration other than such shares, cash in lieu of fractional shares, or a combination); id. § 10.368 (“In the absence of fraud in the transaction,” dissent and appraisal is “the exclusive remedy for recovery of” the value of the ownership interest or money damages with respect to the action). ↩
  13. Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004) (whether a claim is direct or derivative turns on “(1) who suffered the alleged harm … and (2) who would receive the benefit of any recovery or other remedy”); Weinberger, 457 A.2d at 703, 711 (class action by minority stockholders cashed out in a controller merger); Brookfield Asset Mgmt., Inc. v. Rosson, 261 A.3d 1251 (Del. 2021) (overruling Gentile v. Rossette, 906 A.2d 91 (Del. 2006); dilution and overpayment claims against a controller are “exclusively derivative under Tooley”); Kahn, 88 A.3d at 644; Del. Code Ann. tit. 8, § 262(b)(1)–(2) (2025) (appraisal; the market-out exception for shares listed on a national securities exchange or held of record by more than 2,000 holders yields where holders must accept anything other than stock of the surviving or resulting corporation, listed or widely held stock of another corporation, cash in lieu of fractional shares, or a combination). ↩
TBOC §§ 10.354, 21.416(g), 21.4161, 21.418, 21.419, 21.551–21.552, 21.563 (S.B. 29, eff. May 14, 2025) · DGCL § 144(a)–(e) (85 Del. Laws c. 6, S.B. 21, eff. Mar. 25, 2025) · In re Estate of Poe, No. 20-0178 (Tex. 2022) · Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014) · Aronson v. Lewis, 473 A.2d 805 (Del. 1984) · Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) · Dodiya v. Franklin, No. 2025-0932-LWW (Del. Ch. Aug. 26, 2026) · Willis v. Donnelly, 199 S.W.3d 262 (Tex. 2006) · Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) · Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) · Brookfield Asset Mgmt., Inc. v. Rosson, 261 A.3d 1251 (Del. 2021) · Somers ex rel. EGL, Inc. v. Crane, 295 S.W.3d 5 (Tex. App.—Houston [1st Dist.] 2009) · In re UMTH Gen. Servs., L.P., No. 24-0024 (Tex. 2025) · Wingate v. Hajdik, 795 S.W.2d 717 (Tex. 1990) · TBOC § 10.368 · Del. Code Ann. tit. 8, § 262 · 17 C.F.R. § 240.13e-3Shane Goodwin | SMU Corporate Governance Initiative | Educational map · corporations only | Rev. 4a, October 1, 2026
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