The company law in Delaware, which has been considered a model case for protecting shareholder right..
The company law in Delaware, which has been considered a model case for protecting shareholder rights, has recently been revised to restrict it to prevent the harmful effects of excessive shareholder litigation.
With Democratic Party presidential candidate Lee Jae-myung expressing his intention to re-promote the revision of the commercial law, attention is focusing on how Delaware’s case will affect domestic discussions. This is because Delaware, which was cited as a key basis for the need to amend the commercial law, is rather focusing on protecting business activities, such as guaranteeing directors’ immunity requirements.
On the 15th, Yulchon, a law firm, reported the news through a report titled “Director’s fiduciary duty and principles of management judgment – Key contents and implications of Delaware Supreme Court ruling and revised company law.”
“As a series of minority shareholder-friendly rulings were sentenced in Delaware, some companies, including Tesla and Dropbox, began to move or consider relocating their headquarters to other states such as Texas and Nevada,” Yulchon said. “There are concerns that the so-called Dexit phenomenon may be in full swing.”
As concerns over corporate exodus grew, Delaware implemented a revision to the company law at the end of March that limits excessive shareholder litigation.
The revised company law explicitly stipulates the requirement for exemption from liability for transactions involving directors and controlling shareholders. If the requirements for the majority consent of shareholders, directors, and committees are met, they will be exempted from liability for damages or relief under the Equity Act.
It also included restrictions on shareholders’ right to access documents.
In the future, access to official documents such as financial statements and minutes of the board of directors needs to meet “reasonable partularity” requirements, and access to informal documents such as e-mails and text messages needs to meet “compelling necessity” requirements.
In addition, it stipulated that the company could impose reasonable restrictions on the scope of book access, and that personal or sensitive information could be edited and provided.
Delaware Governor Matt Meyer signed the revised company law bill and said it will “strengthen legal clarity and predictability, and contribute to maintaining a balance between shareholders and the board of directors.”
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