Tag: Delaware SB 21
Delaware SB 21 signed into law
Controversial Delaware SB 21 was signed into law last evening after passage yesterday by the legislature. According to this Statement from the office of Delaware Governor Matt Meyer, the Governor has “signed Senate Bill 21 into law, thanking lawmakers for the swift passage of this critical update to Delaware’s corporate law, aimed at ensuring the state remains the premier home for U.S. and global businesses. The legislation, developed in collaboration with corporate leaders and legal experts, clarifies key governance structures to reinforce Delaware’s reputation for equitable, predictable, and efficient corporate oversight.” The law provides a process for boards to invoke safe harbor protection from litigation over potentially conflicted transactions for directors and controlling stockholders. It also addresses Delaware’s provisions related to books and records. (For a brief summary of the bill, see this PubCo post.) Notably, the legislature rejected five proposed amendments, including a proposed amendment discussed in this PubCo post, providing for an opt-in provision. The legislature also rejected a proposed amendment that would have eliminated the February 17 retroactive effective date.
Will an opt-in mechanism resolve the melee over Delaware’s controversial SB 21?
As widely reported, the Delaware legislature has responded to increasing chatter and speculation about the intentions of some companies—as well as action in some cases—to change their states of incorporation from Delaware to other states by proposing new legislation, Senate Bill 21. That proposed bill would offer a process for boards to invoke safe harbor protection from litigation over potentially conflicted transactions for directors and controlling stockholders. The bill would also address Delaware’s provisions related to books and records. (For a brief summary of the bill, see this PubCo post.) At this point, the bill has passed the State Senate and been reported out of the Judiciary Committee in the Delaware House. As you probably know, however, SB 21 has been quite contentious. Now, a group of 26 corporate law and governance professors from universities worldwide—apparently representing a broad spectrum of political opinion—have submitted a letter proposing a “pragmatic solution that simultaneously renders much of the debate moot and aligns with Delaware’s longstanding commitment to contractarianism: an opt-in mechanism.” An amendment providing for that opt-in has been introduced.
Sponsor of SB 21, controversial Delaware bill to amend corporate law, speaks out
In an exclusive interview with Law360, the Delaware legislator who was the primary sponsor of the proposed amendments to the Delaware General Corporation Law that have fueled so much debate recently discusses the thinking behind the proposed legislation. As discussed in this PubCo post, in response to much chatter and speculation about companies changing their states of incorporation from Delaware to other states—in other words, concerns about Delaware’s valuable corporate franchise—the Delaware legislature introduced a bill that, if adopted, would effect “sweeping changes” to Delaware’s corporate law. The bill would offer a process for boards to invoke safe harbor protection from litigation over potentially conflicted transactions for directors and controlling stockholders. The bill would also address Delaware’s provisions related to books and records. The impact could be fundamental. But there has been substantial pushback—some of which is quoted in the referenced post—from critics of the bill. In the Law360 interview, Delaware Senate Majority Leader Bryan Townsend defends the bill, citing the “‘urgency of the moment.’” In his analysis, “‘[w]hat seems to be happening here is growing frustration out there in the marketplace as to what people believe to be a departure in predictability’ in Delaware’s courts, ‘at a time when other states are standing up alternative frameworks that people are seriously considering.’” Check out the article!
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