Delaware Corporate Law Update

Updates on Delaware Corporate Law by Evan O. Williford, Esq., Delaware Corporate Litigation Attorney.

Why Delaware?

You may have noticed that many large U.S. and international businesses are incorporated in the U.S. state of Delaware.  (For that matter, the authors are Delaware lawyers.)  Why is that?  After all, Delaware is a small state and very few large businesses are headquartered there.

The United States of America has a federal system of government:  national law governs some subjects while state law governs others.  Business formation and governance (the way the business is structured and controlled) is one subject typically governed by state law.  Thus, each state has its own laws governing businesses formed in that state.

Delaware has a long history of laws allowing businesses to form the entities most appropriate for their needs.  Those laws are designed, and amended typically every year, to allow a flexible response to any business conditions that might be encountered while also protecting the rights of investors.

Delaware also has a separate court, the Court of Chancery, which over the years has evolved into a court that specializes in resolving many business disputes.  Cases involving Delaware entities, particularly regarding their formation and governance, will often be brought or transferred to that court.  Its five judges specialize in resolving those cases fairly and predictably under Delaware laws and the court’s past decisions interpreting those laws.  Therefore, a business has some assurance that if it forms in Delaware a lawsuit brought in that state of formation will proceed predictably.

For these reasons and more, businesses that are large or seek investment will often form in, or move to, Delaware.  Small U.S. businesses, particularly those that anticipate doing business only in one state, might consider forming in that state instead.

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Filed under: Basic Law of Corporations, Uncategorized

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Disclaimer

Delaware Corporate Law Update solely reflect the views of Evan Williford of The Williford Firm, LLP. Its purpose is to provide general information concerning Delaware law; no representation is made about the accuracy of any information contained herein, and it may or may not be updated to reflect subsequent relevant events. This website is not intended to provide legal advice. It does not form any attorney-client relationship and it is not a substitute for one.