DOVER, Del. — Delaware lawmakers are set to review a major corporate law reform bill on March 12 as part of an effort to maintain the state's status as a leading business hub. Senate Bill 21, backed by both Democratic and Republican leaders, aims to clarify corporate governance rules and prevent major companies from leaving Delaware.
Proposed Changes to Corporate Law
SB 21, which will be heard in the Senate Judiciary Committee, introduces several changes to corporate governance, particularly regarding conflict-of-interest transactions and shareholder rights. Key provisions include:
- Strengthening conflict-of-interest rules for transactions involving corporate directors.
- Requiring a committee of disinterested directors to approve certain deals.
- Ensuring stockholder votes are "informed" to meet legal disclosure standards.
- Clarifying when a person qualifies as a controlling stockholder.
- Preserving shareholders’ rights to sue over fiduciary breaches.
- Allowing courts to grant stockholders access to corporate records if they demonstrate a "compelling need."
The Corporate Law Section of the Delaware State Bar Association has proposed amendments to fine-tune the bill, ensuring the changes align with long-standing corporate law principles.
Protecting Delaware’s Corporate Industry
Delaware has long been the preferred home for major corporations, thanks to its specialized Chancery Court, which handles business disputes. However, recent legal rulings have caused some businesses to reconsider their ties to the state.
In January, a Delaware Chancery Court judge voided Elon Musk’s $56 billion Tesla pay package, prompting him to move Tesla and SpaceX out of Delaware. The decision fueled concerns that more companies might follow, with some relocating to states like Texas and Nevada.
“If corporations continue to leave Delaware, it could be a burden for taxpayers,” said Christian Hudson, a Sussex County business leader. “Even if only 10% of Delaware’s 1.8 million incorporated businesses leave, that’s hundreds of millions of dollars gone from the state budget.”
Hudson warned that losing corporate tax revenue could lead to higher taxes or even the introduction of a state sales tax. “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?” he said.
Bipartisan Support for SB 21
State lawmakers from both parties are backing SB 21, emphasizing the need to protect Delaware’s corporate franchise.
“Delaware remains the leading domicile of choice for incorporation by publicly traded companies,” said Sen. Darius Brown, chair of the Senate Judiciary Committee. “Senate Bill 21 preserves a balanced and fair approach to both the customer and constituent.”
Gov. Matt Meyer echoed the importance of the bill. “With the chaos coming out of Washington, D.C., it’s more important than ever that we protect the corporate franchise so we can continue to fund the critical programs that help our families, children, and seniors.”
The Senate Judiciary Committee will review SB 21 at 2 p.m. on March 12 at the Senate Chamber in Legislative Hall.
