Delaware lawmakers approve corporate bill that critics call giveaway to billionaires

 Delaware lawmakers have swiftly approved Senate Bill 21 (SB 21), a corporate law reform aimed at retaining companies considering relocation to states with more lenient regulations. ​

Key Provisions of SB 21:

• Safe Harbor for Transactions: The bill establishes safe harbors that protect transactions involving controlling shareholders from conflict-of-interest claims, provided certain procedural safeguards are met. ​

• Redefinition of Board Independence: It relaxes the criteria for determining the independence of board members, potentially allowing greater influence by controlling shareholders. ​

Motivation Behind the Legislation:

The impetus for SB 21 stems from concerns that influential companies, such as Meta Platforms and Tesla, might relocate their legal domiciles to states like Nevada or Texas, which offer more favorable corporate laws. This potential "DExit" could significantly impact Delaware's economy, given that corporate registration fees contribute over $2 billion annually to the state's revenue. ​

Criticism and Opposition:

Despite its passage, SB 21 has faced substantial opposition:​

• Investor Concerns: Major investors, shareholder attorneys, and pension fund managers argue that the bill disproportionately favors powerful executives and undermines investor protections. ​

• Public Sentiment: Polling indicates that only 21-26% of Delaware residents support the bill, with 50-55% opposing it. Furthermore, 63% of those surveyed stated they would be less likely to support candidates who voted in favor of the bill. ​

• Legal Community's Stance: Critics, including top law professors and large investors, contend that the legislation favors corporate insiders over shareholders, potentially leading to diminished investor confidence. ​

Next Steps:

The bill now awaits the signature of Governor Matt Meyer, who has expressed support for the legislation. Given the contentious nature of SB 21, legal challenges are anticipated, and its long-term impact on Delaware's corporate landscape remains to be seen