Delaware corporate law overhaul heads to final vote amid criticism it favors billionaires

By Tom Hals

WILMINGTON, Delaware (Reuters) -Delaware lawmakers are expected to vote as soon as next week to overhaul the state’s corporate law to protect its business-friendly reputation, but opponents have called the bill a giveaway to billionaires.

The bill makes it hard for investors to sue over certain transactions involving controlling shareholders, such as buying a controlling shareholder’s business, if the deal follows certain steps. It also applies to deals with board members and executives, but will not impact existing rules for a takeover of the company by the controlling shareholder.

The proposed legislation has politicized the normally sleepy annual process of tweaking the state’s corporate code. Attorneys who represent shareholders have dubbed it “the billionaire’s bill” and have launched a public campaign against it.

Opponents had expected a vote on Thursday, although the leadership of Delaware’s House of Representatives had not committed to a schedule. A spokesperson for the House Democrats, who control the chamber, said a vote is now likely on Tuesday but could change, and sources said both sides were trying to line up support. Two-thirds of House members must approve the bill for it to pass. Delaware’s Senate approved the bill last week and Governor Matt Meyer has said he will sign it.

The bill, known as SB 21, is being considered amid concerns of a “DExit” stampede by companies from one of the country’s smallest and least populated states. While other states are trying to attract incorporations, Delaware still remains home to most large public companies and related fees generate 20% of its budget revenue.

Several companies, mostly with controlling shareholders, have said they might or will leave Delaware, including Dropbox, Meta Platforms, Tripadvisor and President Donald Trump’s media company.

Amy Simmerman, a corporate lawyer in Wilmington, told the Delaware House Judiciary Committee, which approved the bill on Wednesday, that she has 15 significant corporate clients that were considering leaving the state. “This is serious,” said Simmerman, who declined to identify the clients. “I don’t think it’s just bluffing.”

‘THIS IS APPALLING’

Under the proposed bill, if a deal is approved by a board committee that has a majority of independent directors or by a vote by public shareholders, investors cannot challenge it in court. Currently, litigation can only be avoided if both steps are used and the committee must be entirely made up of independent directors.