BREAKING — Yale’s Sonnenfeld & Tian: Boards Lose Faith in Delaware’s “Good Faith” Test After the Cloudflare Ruling

Bottom line

Writing in Fortune on 2 November 2026, Yale’s Jeffrey Sonnenfeld and Steven Tian argue that a new Delaware Court of Chancery opinion has left every board in the state without a safe harbor it can count on.

What happened

In March 2025 Delaware passed Senate Bill 21 to stop companies leaving the state: a deal approved by a committee of independent directors was meant to be safe from court challenges. In the first big test, Vice Chancellor J. Travis Laster found Cloudflare’s committee independent and not negligent — and still blocked its plan to keep the founders’ voting control, ruling that the committee had not acted in “good faith.”

The authors say good faith has always been about intent, and that the court judged instead how the committee negotiated, relying on advisers’ notes and auto-deleting messages.

Why it matters

If a fully independent process is not enough, boards cannot know the rules before they act — Delaware’s main promise for a century. The authors count 44 reincorporation proposals this year, up from 17 two years ago, with Texas and Nevada waiting. The Delaware Supreme Court is expected to have the last word.

Disclosure by the authors: Cloudflare’s special committee heard a one-hour presentation of their published research on dual-class shares; they take no position on Cloudflare’s own plan.

Read the full commentary by Jeffrey Sonnenfeld and Steven Tian on Fortune ↗