Entire Fairness
Delaware's most demanding standard of review. It applies where a controller stands on both sides of a transaction or takes a benefit the other stockholders do not share, and it puts the burden on the defendants to prove both fair dealing and fair price. Texas has no general equivalent, and SB 29 moved Texas further in the opposite direction.
Entire fairness is what a Delaware court applies when the usual deference falls away. Ordinarily the business judgment rule presumes the directors acted properly and the plaintiff has to overcome that presumption. Under entire fairness the presumption is gone and the defendants carry the burden of proving the transaction was fair to the corporation and its stockholders. In practice that means discovery, competing valuation experts and a trial. These cases rarely end on the pleadings, which is precisely why the standard drives behavior at the deal structuring stage.
The two prongs
Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983), set the framework. Fair dealing asks how the transaction came about: when it was timed, how it was initiated, structured, negotiated and disclosed to the directors, and how the approvals of the directors and the stockholders were obtained. Fair price asks about the economics, meaning all relevant factors bearing on the value of the shares. The court treats these as a unitary inquiry rather than a two part checklist, and a badly run process is not cured by pointing at a defensible number. Weinberger also discarded the older business purpose test as adding no meaningful protection, and opened appraisal proceedings to modern valuation methods.
How defendants get back to deference
Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014), gave controllers a route back to business judgment review in a going private transaction. The conditions, universally called MFW, are that the controller conditions the transaction from the outset on approval by both an independent special committee and a majority of the minority stockholders; the special committee is independent; the committee is empowered to select its own advisers and to say no definitively; the committee meets its duty of care in negotiating a fair price; the minority vote is informed; and there is no coercion of the minority. Miss one and entire fairness returns.
Delaware then codified a version of this. Senate Bill 21, effective March 25, 2025, rewrote DGCL Section 144 to give controller transactions statutory safe harbors. For a transaction that is not a going private transaction, one route suffices: approval by a disinterested committee after disclosure, or a transaction conditioned on and receiving approval by a majority of disinterested stockholders, or proof that the transaction was fair. Going private transactions still require both approvals, or fairness. The Delaware Supreme Court upheld those amendments against constitutional challenge in Rutledge v. Clearway Energy Group LLC, No. 248, 2025, 2026 WL 548504 (Del. Feb. 27, 2026).
The Texas position, stated carefully
Texas has not adopted entire fairness as a general standard of review, and no Texas statute imposes it. Texas handles conflicts through a different device. Section 21.418 of the Business Organizations Code validates a transaction involving an interested director, officer or shareholder where the material facts are disclosed and the transaction is approved by disinterested directors or by the shareholders, or where the transaction is fair to the corporation. That is a validating safe harbor. It is not a burden shifting standard of review applied to an entire transaction, and the difference is real.
SB 29 pushed further in the same direction. Section 21.419 presumes good faith, an informed basis and proper purpose, and requires a claimant to rebut a presumption and then prove fraud, intentional misconduct, an ultra vires act or a knowing violation of law, pleaded with particularity. Be precise about the reach, though. Section 21.419 applies only to a corporation with voting shares listed on a national securities exchange or one that has affirmatively elected into it. A closely held Texas corporation that has not elected in is governed by common law fiduciary principles and Section 21.418, not by Section 21.419, and not by entire fairness either.
One more point that clients get backwards. The standard follows the charter, not the office. A Delaware corporation headquartered in Dallas is subject to Delaware law on these questions. Converting the entity to Texas is what changes the analysis. Operating in Texas does not.