Delaware Court of Chancery Holds That “Transaction-Specific Control” Has No Place in Delaware’s Safe Harbor Statute

In an October 28, 2026 ruling on a motion to dismiss in In re R1 RCM Inc. Merger Litigation, C.A. No. 2025-1067-JTL, the Delaware Court of Chancery held that control over a particular transaction (a concept often referred to in Delaware case law as “transaction-specific control”), plays no role in determining whether a stockholder is a “controlling stockholder” under Section 144 of the Delaware General Corporation Law (DGCL). Instead, a stockholder must satisfy at least one of the three statutory triggers under the recently amended Section 144 to be a controlling stockholder and therefore owe fiduciary duties to the company and all stockholders. The rule also cuts the other way: under R1, a stockholder that satisfies the statutory board-control trigger cannot avoid controlling stockholder status by arguing that it lacked control over the challenged transaction.

Background

The definition of “controlling stockholder” under DGCL Section 144

Under Delaware law, whether a stockholder owes fiduciary duties to the corporation and other stockholders generally turns on whether it is considered a controlling stockholder. Before the 2025 amendments to Section 144, Delaware courts answered that question through a fact-intensive inquiry into a stockholder’s level of ownership and ability to exercise control over the corporation as a whole. Delaware courts also allowed controlling stockholder status to apply to minority stockholders that lacked control over the corporation generally but did possess actual control over the specific transaction at issue. The 2025 amendments to Section 144, Delaware’s safe harbor statute for conflicted transactions, created an explicit statutory definition of “controlling stockholder” that contains three separate triggers to make a stockholder (or stockholder group) a controlling stockholder that owes fiduciary duties:

• Stock-Majority Trigger: Owns or controls a majority in voting power entitled to vote generally in the election of directors;
• Board-Majority Trigger: Has the right to cause the election of nominees who are selected at the discretion of such person and who constitute either a majority of the members of the board of directors or directors entitled to cast a majority in voting power of the votes of all directors; or
• Non-Majority Trigger: Owns or controls at least one-third of the relevant outstanding stockholder voting power, has power functionally equivalent to that of a majority stockholder, and has the power to exercise managerial authority over the corporation’s business and affairs, with all three requirements needing to be satisfied for controlling stockholder status to lie through this method.

But Section 144’s definition of “controlling stockholder” does not expressly address whether a stockholder can be a controller solely by virtue of control over a single transaction. The court nevertheless concluded, based on the statute’s silence and the associated legislative history, that the definition was intended to foreclose that inquiry.

The transaction at issue in this case

TCP-ASC ACHI Series LLLP, a joint venture between TowerBrook Capital Partners L.P. and Ascension Health Alliance (the Joint Venture), owned approximately 35.7% of R1 RCM Inc.’s (R1 or the Company) equity on a fully diluted basis. The court did not count the Joint Venture’s warrants to purchase certain outstanding shares in measuring its voting power; measured by outstanding common stock, it held 29.4%, below the one-third floor of the Non-Majority Trigger. At all relevant times, the Joint Venture and the Company were parties to an investor rights agreement under which the Joint Venture, for so long as its contractual “Ownership Percentage” (which counted warrants on an as-exercised basis) exceeded 33%, could nominate a majority of the Company’s directors, and R1 would use “all commercially reasonable efforts” to elect them. The Joint Venture’s nominees had to be reasonably acceptable to the board’s nominating committee and include enough independent directors to preserve a majority-independent board under Nasdaq listing standards. The Joint Venture also had contractual approval rights over 11 categories of corporate action, including the annual budget, hiring or firing the CEO, and significant transactions, including acquisitions, dispositions, capital expenditures, and incurring debt.

In late 2024, the Joint Venture participated in taking R1 private. Former R1 stockholders sued in September 2025, alleging that the Joint Venture and its affiliates were controlling stockholders that secured an unfair deal in breach of their fiduciary duty of loyalty. The Joint Venture defendants sought dismissal solely on the ground that the Joint Venture was not a controlling stockholder and therefore owed no fiduciary duties in that capacity.

The Court’s Decision

The court held that the plaintiffs adequately pleaded that the Joint Venture was a controlling stockholder under the Board-Majority Trigger prong of Section 144’s definition because it could nominate a majority of the board, and R1 was contractually obligated to use commercially reasonable efforts to elect those nominees. The court expressly left open whether a majority-nomination right alone (without the efforts obligation) would suffice. Neither the requirement that nominees be reasonably acceptable to the nominating committee nor the requirement to preserve a majority-independent board defeated the Joint Venture’s discretion to select nominees under the Board-Majority Trigger.

The Joint Venture argued that because it had chosen not to nominate a board majority, it could not change the board’s composition in time to control the challenged transaction. The court rejected that argument, as the required control for controlling stockholder status need not include the ability to replace directors immediately. What matters is the right to elect a board majority itself, which the Joint Venture possessed. The Company’s charter reinforced the extent of the Joint Venture’s control by placing it in the same position as a majority stockholder would be in terms of when it could engineer a board election. Specifically, the charter eliminated stockholder action by written consent and gave stockholders no power to call special meetings; thus, even a majority stockholder would need to wait for an annual meeting or to ask the board, chairman, or CEO of the Company to call a meeting where a board election could be conducted.

Second, the Joint Venture’s argument depended on transaction-specific control, which the court determined was foreclosed by the amendments to Section 144. Although Section 144’s definition of “controlling stockholder” does not expressly address transaction-specific control, the court concluded that the statute’s legislative history established an intent to foreclose any inquiry into whether a stockholder has that kind of control. The court looked to contemporaneous commentary from two Delaware law firms that were involved in the legislative process; both had interpreted the statutory definition to reject the concept of transaction-specific control as applied to the Non-Majority Trigger by including the requirement that the stockholder have the power to exercise “managerial authority over the business and affairs” of the corporation. The court found that this interpretation applied equally to the Board-Majority Trigger and observed that the legislature’s broader intent in amending Section 144 was to provide bright-line rules that offer clarity and greater predictability to the law.

The court explained that the bar on deploying transaction-specific control cuts both ways: A plaintiff cannot establish controller status solely by alleging a defendant’s control over a particular transaction, and a defendant that satisfies the Board-Majority Trigger cannot escape that status by asserting a lack of transaction-specific control. In other words, Section 144 asks only whether a stockholder satisfies one of its three triggers and not whether the stockholder in fact controlled the particular deal at issue. The court denied the motion to dismiss, allowing the fiduciary duty claim against the Joint Venture defendants to proceed.

Key Takeaways

1. Assess controller status against the statutory triggers, not control over a particular transaction. Controlling stockholders owe fiduciary duties to the company and its stockholders. Before the 2025 amendments to Section 144, a minority stockholder could qualify as a controller based on actual control over a particular transaction, even without control over the corporation generally. This decision confirms that investors and companies must instead assess whether one of Section 144’s three statutory triggers applies; transaction-specific control cannot independently establish controller status or create fiduciary duties in that capacity. Contractual vetoes over budgets, management hiring, or major transactions do not independently satisfy the Board-Majority Trigger.
2. Review board-nomination and election provisions together. Holding less than one-third of the voting power does not prevent controller status under the Board-Majority Trigger. Here, majority-nomination rights combined with the Company’s obligation to use commercially reasonable efforts to elect the nominees were sufficient at the pleading stage. Investors should weigh those governance rights against the resulting fiduciary obligations. The court left open whether majority-nomination rights alone (without the efforts obligation) would suffice.
3. Do not assume unused rights eliminate fiduciary duties. An investor that satisfies the Board-Majority Trigger cannot avoid controller status by declining to nominate a board majority or arguing that it could not replace directors in time to influence a particular deal. Nominee acceptability conditions and requirements to preserve an independent board also did not defeat controller status here.
4. Address controller status early when planning conflicted transactions. Companies and investors should evaluate whether the transaction involves a controlling stockholder and, if so, which Section 144 safe harbor procedures apply. A controller’s lack of influence over the particular transaction does not eliminate its fiduciary duties.
5. Measure voting power at the relevant time. When assessing the Non-Majority Trigger’s one-third threshold, distinguish actual voting power from fully diluted ownership. The court excluded the Joint Venture’s unexercised, nonvoting warrants and assessed its voting power when the alleged breaches occurred, rather than at closing.