Delaware bill introduced to balance corporate laws
DOVER, Del. – A new, bipartisan bill has been introduced to balance Delaware’s corporate laws.
The legislation, Senate Bill 21, comes on the heels of concerns that were raised by many of Delaware’s corporate stakeholders. This led a bipartisan coalition of Delaware lawmakers, including all members of legislative leadership, to file legislation Monday to ensure Delaware maintains the balance and consistency when it comes to how the state operates with corporations.
Lawmakers who sponsor the legislation believe it will help maintain the balance and consistency that has been the key to the First State’s successful economy. This comes as other states are adopting similar laws to try and compete with Delaware, according to one of the bill’s sponsors – State Senator Bryan Townsend.
“Other states, they’re trying to stick it to us,” Senator Townsend said. “They’re trying to take this really successful industry and replicate it in their jurisdiction and attract all of our companies. We’ve got to be on top of our game, we’ve got to continue to be the leading edge.”
The bill addresses specific concerns that lawmakers have received since late January’s flurry of reincorporation announcements regarding the importance of certainty as companies undertake efforts to have unconflicted directors make key corporate decisions.
Under the legislation, a clarification is made to the legal protections a controlling stockholder may earn for a transaction if they first secure the approval of unconflicted directors or unconflicted stockholders. That framework ensures that controlling-stockholder companies have certainty as they plan transactions.
The legislation’s prime sponsors Senate Majority Leader Bryan Townsend, Rep. Krista Griffith, Senate Minority Whip Brian Pettyjohn, and House Minority Leader Tim Dukes issued the following joint statement:
“This legislation restores Delaware law to what it was historically known for being: balanced as to the relevant stakeholders, protective of stockholder rights and interests, workable for corporate leaders, and empowering of directors who act in good faith with appropriate process and in accordance with their fiduciary duties. Alongside our heralded Court of Chancery and the exceptional services provided by the Delaware Division of Corporations, the hallmark of Delaware corporate law is that our statute remains balanced and responsive to developments in the market. This legislation continues Delaware on that path.
“We are committed to the responsible development of corporate law. Uncertain standards or barriers to responsible options that cause widespread frustration among Delaware companies are not helpful to anyone, especially to the stockholders who would not enjoy the value of Delaware’s legal protections at all if companies feel forced to relocate to less balanced jurisdictions. For the last century, Delaware law and all relevant stakeholders have benefited from our law having balanced protections and being shepherded by expert corporate law practitioners and thoughtful elected officials. That is what this legislation reflects.”
The bill currently awaits consideration in the Senate Judiciary Committee.
