Potential Control Won’t Do: Court of Chancery Confirms Common Law Standards for Actual Control Regarding Challenged Transactions

In Witmer v. Armistice Capital LLC, the Delaware Court of Chancery reaffirmed the high bar for pleading that a minority investor is a controlling stockholder under Delaware common law, emphasizing that potential influence alone is insufficient. The court also held that passive awareness of information does not satisfy the “knowing participation” standard required for aiding and abetting fiduciary duty claims. Ownership stakes, board designees, and flawed board processes, without evidence of domination or transaction-specific control, were not enough to establish liability. Readers will learn how the decision clarifies the standards for actual control, reinforces limits on aiding and abetting theories, and provides practical guidance for structuring and evaluating investor-influenced transactions.