Corporations Exam Checklist

Run the same five steps on every fact pattern. First, identify the actor and the capacity: director, officer, controlling stockholder, minority stockholder, promoter, or agent. Different duties attach to each, and a controlling stockholder on both sides of a deal changes everything downstream.

Second, characterize the transaction: ordinary business decision, conflicted transaction, corporate opportunity, sale of control, defensive measure, or disclosure. Third, ask whether the claim is direct or derivative under Tooley v. Donaldson, Lufkin & Jenrette, 845 A.2d 1031 (Del. 2004) — who suffered the harm and who would receive the recovery. Fourth, select the standard of review and state who bears the burden. Fifth, address cleansing devices, exculpation, indemnification, and remedy.

Write those five headings on your scratch paper before you read the fact pattern. Graders reward a visible structure because it proves you know that the standard of review, not the label 'breach of fiduciary duty,' does the analytical work.

Default to the business judgment rule: a presumption that directors acted on an informed basis, in good faith, and in the honest belief the action served the corporation. Aronson v. Lewis, 473 A.2d 805 (Del. 1984). The plaintiff rebuts it by showing lack of independence, disloyalty, bad faith, waste, or gross negligence in becoming informed — Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) remains the paradigm duty-of-care rebuttal.

Move to enhanced scrutiny when the board faces a structural conflict: defensive measures against a takeover trigger Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985) (reasonable threat, proportionate response, and under Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995), not preclusive or coercive); a sale of control or break-up triggers Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986) and Paramount Communications, Inc. v. QVC Network, Inc., 637 A.2d 34 (Del. 1994); interference with the stockholder franchise triggers the compelling-justification test of Blasius Industries v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988).

Apply entire fairness — fair dealing plus fair price, Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) — when a majority of the board is interested or not independent, or when a controlling stockholder stands on both sides or receives a non-ratable benefit. Sinclair Oil Corp. v. Levien, 280 A.2d 717 (Del. 1971) is the test for whether a parent's dealing with a subsidiary is self-dealing at all.

After you pick a standard, ask whether the defendants can shift it back down. For controller transactions, Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014) restores business judgment review if the deal was conditioned ab initio on both an empowered, independent special committee and an informed, uncoerced majority-of-the-minority vote; In re Match Group (Del. 2024) confirmed MFW's framework governs controller transactions generally. For non-controller mergers, a fully informed, uncoerced vote of disinterested stockholders invokes Corwin v. KKR Financial Holdings LLC, 125 A.3d 304 (Del. 2015). Note that Delaware amended DGCL § 144 in 2025 to codify safe harbors for interested-director and controller transactions — confirm whether your professor tested the statute or the case law.

Then apply DGCL § 102(b)(7): a charter provision exculpating directors from money damages for duty-of-care violations, but never for loyalty, bad faith, intentional misconduct, or improper personal benefit. Say so explicitly — a pure care claim for damages against exculpated directors dies, which is why plaintiffs plead loyalty and bad faith. Close with DGCL § 145 indemnification and advancement if the facts mention litigation expenses.

Confirm the claim is derivative under Tooley, then confirm standing: contemporaneous ownership and continuous ownership through judgment. Next, demand. Under United Food & Commercial Workers Union v. Zuckerberg, 262 A.3d 1034 (Del. 2021), demand is excused if, director by director, at least half the board received a material personal benefit, faces a substantial likelihood of liability, or lacks independence from someone who does. Rales v. Blasband, 634 A.2d 927 (Del. 1993) supplies the frame when the challenged decision was not made by the current board.

If demand is made and refused, the refusal itself is reviewed under the business judgment rule and demand futility is waived. If demand is excused and the board appoints a special litigation committee to seek dismissal, run Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981): the committee bears the burden on independence, good faith, and reasonable investigation, and the court may then apply its own business judgment. Mention DGCL § 220 books-and-records demands as the 'tools at hand' plaintiffs are expected to use before filing.

Oversight claims belong here. In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), as reformulated in Stone v. Ritter, 911 A.2d 362 (Del. 2006), requires either no reporting system at all or conscious disregard of red flags — a bad-faith, non-exculpated loyalty claim. Marchand v. Barnhill, 212 A.3d 805 (Del. 2019) shows a board that failed to monitor a mission-critical risk.

Corporate opportunity: use the line-of-business and interest-or-expectancy test from Guth v. Loft, Inc., 5 A.2d 503 (Del. 1939), refined by the fairness-inflected factors in Broz v. Cellular Information Systems, Inc., 673 A.2d 148 (Del. 1996) — capacity in which the opportunity came, corporate financial ability, and whether the corporation was offered and refused it. DGCL § 122(17) permits charter renunciation.

Executive compensation: analyze as self-dealing if the board is interested, otherwise waste, which is nearly impossible to prove; Tornetta v. Musk (Del. Ch. 2024) is the current teaching vehicle for controller-influenced pay. Duty of disclosure: directors must disclose material facts when seeking stockholder action, materiality measured by TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976).

Purpose and constituency questions invoke Dodge v. Ford Motor Co., 170 N.W. 668 (Mich. 1919) against Shlensky v. Wrigley, 237 N.E.2d 776 (Ill. App. Ct. 1968) and eBay Domestic Holdings v. Newmark (Del. Ch. 2010). Close corporations add minority oppression: reasonable-expectations and freeze-out doctrine, with Donahue v. Rodd Electrotype and Wilkes v. Springside Nursing Home in Massachusetts as the leading partnership-like approach.

For Rule 10b-5, list the six elements: material misrepresentation or omission, scienter, connection with a purchase or sale (the Blue Chip Stamps purchaser-seller rule), reliance, economic loss, and loss causation under Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005). Fraud-on-the-market reliance comes from Basic Inc. v. Levinson, 485 U.S. 224 (1988) and can be rebutted by price-impact evidence. Remember Santa Fe Industries, Inc. v. Green, 430 U.S. 462 (1977): breach of fiduciary duty without deception is state-law territory.

Insider trading: classical theory requires a duty to the counterparty (Chiarella v. United States, 445 U.S. 222 (1980)); tipping liability requires a personal benefit to the tipper (Dirks v. SEC, 463 U.S. 646 (1983), extended to gifts to trading relatives in Salman v. United States (2016)); misappropriation covers outsiders who deceive the source of the information (United States v. O'Hagan, 521 U.S. 642 (1997)). Add Rule 10b5-1 plans and § 16(b) short-swing liability if your course covered them.

Formation issues are usually short-answer: promoter liability on pre-incorporation contracts absent novation, de facto corporation and corporation by estoppel, and veil piercing. For piercing, state the two-prong test — unity of interest and ownership plus fraud or injustice — and contrast Walkovszky v. Carlton, 223 N.E.2d 6 (N.Y. 1966) with cases finding commingling and undercapitalization sufficient.

The single biggest variable is whether your professor teaches Delaware common law, the Model Business Corporation Act, or both. The MBCA handles conflicting-interest transactions through §§ 8.60–8.63 (safe harbor via qualified director or shareholder approval, or fairness), uses a different demand rule — universal demand with a 90-day wait under § 7.42 — and states the director standard of conduct in § 8.30 separately from liability in § 8.31. Delaware has no universal demand and no codified standard of conduct.

Ask three questions before the exam: Does the syllabus include agency and partnership? Does it include securities regulation, or only fiduciary duty? Which state's code is in your supplement? Build one checklist per unit tested, and cite the code your professor assigned by section number — DGCL § 141(a), § 251, § 262, § 271, § 203, or the parallel MBCA provision — because statutory precision is where most students leave easy points on the table.