It is axiomatic that directors and officers of a Delaware corporation owe fiduciary duties to stockholders (and the company). Controlling stockholders also owe fiduciary duties. A stockholder is deemed a controller either through ownership of 50-plus% of a company’s voting power, or through actual control over its business affairs. Actual control means the stockholder has general control of a company’s business affairs, or specific control of a transaction.

The actual control theory is “not easy to satisfy.” In its recent decision, Scianella v. AstraZeneca UK Limited, C.A. No. 2023-0125-PAF (Del. Ch. July 8, 2024), the Delaware Court of Chancery emphasized that plaintiffs have a steep burden even at the pleadings stage to demonstrate actual control. The court explained that the controller analysis is highly fact specific and no one set of facts will ensure that the standard is met. Instead, to survive a motion to dismiss, the plaintiff must plead a “constellation of facts” supporting actual control. In Scianella, the court held that the pleaded facts were insufficient to demonstrate actual control of the Company by the minority stockholder.

Background and the Court of Chancery’s Decision