Why Should Delaware Care?
A major piece of state legislation will change the rules of its influential business court, making it more difficult to sue powerful, rich owners of companies. Proponents of the bill say it is necessary to ensure that Delaware remains the incorporation capital of America, which contributes about a third of the state budget independent of taxpayers.
The Delaware Senate on Thursday passed a controversial corporate law bill that proposes to change rules governing how deals get done by powerful people within some of the biggest companies in the world.
Backers of the proposal, called Senate Bill 21, include Gov. Matt Meyer, the Senate’s Democratic leadership and the corporate defense attorneys who represent big publicly traded companies. They call the bill a “course correction” that will bring the state’s business courts back into alignment with rulings from a decade ago.
They also contend that the bill needs to be expedited to stem threats from disgruntled executives who may cancel their companies’ Delaware registrations and set up legal homes in other states.
Opponents include prominent law professors, lawyers who represent pension funds and other shareholders, and even U.S. Sen. Elizabeth Warren (D-Massachusetts). By and large, they have argued that the bill removes constraints on the power of founders or other key officials within companies to engage in deal-making that they say could hurt small investors.
Many have also linked the bill to Elon Musk, contending that dismay with past Delaware court opinions from the bill’s backers follows a backlash against the state from the world’s richest person that erupted last year after a judge in Wilmington nullified his $56 billion pay package from Tesla.
In all, the bill has sparked competing online screeds written by prominent lawyers and national law professors, open letters sent to Delaware lawmakers contending that the state’s lucrative corporate franchise business is at risk, and even political signs posted around Wilmington suggesting the bill is in place to satisfy Musk.
Still, sentiments from the national controversy did not enter into the Senate Chambers on Thursday, as no senator expressed outright opposition to the bill.
Ultimately, the body unanimously passed the chamber following testimony from two proponents, who also are among the most influential figures within Delaware’s corporate franchise system. Those are Delaware Law School Emeritus Professor Lawrence Hamermesh and Delaware Corporation Law Council Vice Chair Srinivas Raju.
The bill now heads to the Delaware House of Representatives, where two lawmakers have told Spotlight Delaware that expect to see opposition to the bill, unlike in the Senate
“I am not surprised that this bill sailed through the Senate and I look forward to it getting a robust debate in the people’s House,” Rep. Madinah Wilson-Anton said.
Last year, Wilson-Anton led the opposition in the House of Representatives to another bill that made significant changes to the state’s corporate law. That bill, Senate Bill 313, ultimately became law.
Last year’s debate and the current one highlights Delaware’s unique place in the world as an arbiter of global corporate governance overseen by lawmakers and judges, who hail from modest towns such as Smyrna, Bear, and Milford.
That position – which Delaware has because of its industry and corporate registrations and prominent courts – brings the state roughly a third of its government revenues each year.
This is a breaking story that will be updated.
The post Controversial corporate law bill unanimously passes Senate appeared first on Spotlight Delaware.