Delaware Chancery blocks Cloudflare's founder-control recapitalization plan

The Delaware Court of Chancery on October 16, 2026 barred Cloudflare Inc. from proceeding with a recapitalization that would have preserved co-founders Matthew Prince and Michelle Zatlyn's voting control, finding stockholders had shown a reasonable chance of proving a special committee acted to appease the founders rather than advance the company's interests. The plan would have created a new class of non-voting and special preferred shares, letting the founders sell billions of dollars in stock while keeping majority voting power despite holding only a small economic stake. Shareholders sued in June 2026 arguing the restructuring gave the founders the benefits of both cashing out and retaining control.

Why it matters. The decision is an early test of how Delaware courts will police special-committee conduct and founder-control preservation schemes under the state's revised corporate law framework, relevant to investors in other dual-class companies.