Delaware legislators have introduced Senate Bill 21, a bipartisan effort to make changes to the state’s corporate laws in order to encourage companies to remain incorporated in Delaware. The bill is a response to recent court decisions that have led to uncertainty and concerns among businesses about the predictability of Delaware’s legal system. The proposed changes aim to bring clarity and balance back to Delaware’s corporate laws.
The bill’s prime sponsor, Senate Majority Leader Bryan Townsend, explains that recent court decisions have muddied key aspects of Delaware’s legal franchise, leading to a “growing drumbeat of problems.” The changes address issues such as the requirements for transactions involving controlling stockholders and the ability of stockholders to inspect books and records.
The legislation is not retroactive and would not affect ongoing litigation, such as the case involving Tesla CEO Elon Musk. Despite concerns from some experts that the changes may weaken protections for minority stockholders, supporters of the bill believe it is necessary to ensure Delaware remains a preeminent jurisdiction for incorporation.
The bill still needs to go through the legislative process before becoming law, including approval from the Senate, House, and Governor. Governor Matt Meyer has expressed full support for the legislation, emphasizing the importance of clarity, predictability, and fairness in Delaware’s corporate laws. The bill could be heard as early as March once the legislature returns from break.
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