Among the perennial hot topics in Delaware law is the intersection between freedom of contract and internal corporate governance law—two fields in which Delaware’s courts have national and even international renown. While the Delaware General Corporate Law (DGCL) is a broadly enabling statute, a number of recent decisions have found limits to parties’ ability to renegotiate internal corporate governance by “private ordering” outside of the corporate charter and bylaws. These decisions have prompted a flurry of legislative activity—including a pending bill to introduce a new Section 122(18) to the DGCL, granting legislative sanction to some of these stockholders’ agreements. The latest case to address this field of controversy is Wagner v. BRP Group, C.A. 2023-0150-JTL, which once again finds some governance provisions of a pre-IPO stockholders’ agreement facially invalid for transgressing the DGCL.

In Wagner, the company’s owners (founders) entered into a stockholder’s agreement (agreement) with the nascent corporation (corporation) formed to take the company public via an IPO. The agreement, which was disclosed pre-IPO, required the company to obtain the founders’ pre-approval to take any of a host of corporate acts so long as the founders retained at least 10% equity ownership. The challengers contested the validity of the pre-approval rules as they pertained to decision-making on corporate officers, amendments to the corporate charter, and entering into major transactions. After the suit was filed, the founders and the corporation entered into a modification of the agreement (consent agreement) under which the founders would grant pre-approval if a committee of the corporation’s independent directors unanimously recommended the corporate act in question.