DOVER, Del. — A bill aiming to reform Delaware’s corporate governance laws has passed the Senate, but critics are vocalizing concerns as it heads to the House. Senate Bill 21 seeks to clarify business laws to retain corporations in the state, but critics argue it could have far-reaching consequences, including limiting shareholder rights and reducing judicial oversight.
The bill comes as major companies, including Tesla and SpaceX, have moved out of Delaware following high-profile legal rulings. Supporters, including Gov. Matt Meyer, argue that the legislation is necessary to maintain Delaware’s status as the corporate capital of America.
“We must once again demonstrate why we retain an unparalleled reputation for clarity, predictability, and fairness in global markets,” Meyer said. “That is why I am urging both chambers in the state’s legislature to move with the urgency this issue deserves and to pass Senate Bill 21 as quickly as possible.”
Critics Raise Concerns Over Shareholder Rights
However, corporate attorney Joel Friedlander, of Friedlander & Gorris, P.A., strongly opposes the bill, calling it a "radical overhaul" of Delaware’s corporate law.
“This bill is a rebranding,” Friedlander said. “It says, ‘Let’s put the courts aside. Let’s get rid of stockholder litigation.’ And the new message from Delaware to Silicon Valley and Wall Street is: If you don’t like a court decision, come to the General Assembly and we’ll pass legislation to help you out.”
Friedlander argued that the current system, which relies on Delaware’s Court of Chancery and Supreme Court, provides clear legal precedent for businesses while ensuring accountability through stockholder litigation.
“[The bill would be ] eliminating judicial oversight, eliminating stockholder litigation means eliminating trials, eliminating litigators, and eliminating a vibrant part of the Delaware local economy,” he said.
Impact on Investors and State Revenue
The bill’s critics also warn that it could harm everyday investors, including pension funds.
“A lot of the cases I bring have been on behalf of pension funds, like the New York State Retirement Fund and New York City retirement funds,” Friedlander said. “If we just write new statutes that eliminate litigation and court roles, what’s the big differentiator for Delaware?”
However others, such as Sussex County business leader Christian Hudson who supports the bill, warns that losing corporate filings could impact the state’s budget.
“If corporations continue to leave Delaware, it could be a burden for taxpayers,” Hudson said. “Half of our state budget revenues come from these corporations. That’s money for schools, roads, and infrastructure. If those corporations leave, where’s that money going to come from?”
The Next Step in the Legislative Process
Senate Bill 21 now heads to the House Judiciary Committee, where it faces significant opposition. A two-thirds majority is required for passage, and lawmakers are considering amendments to address concerns from business and legal experts.
Friedlander noted that opponents are working on alternative legislation to provide a compromise.