After close to two hours of debate and five failed amendments, a bill revamping Delaware's General Corporation Law (DGCL) passes in the Delaware House and is signed by Gov. Matt Meyer.
Despite facing widespread public opposition since its introduction, Senate Bill 21 had passed through the legislative process with relative ease up until Tuesday’s House vote — it passed unanimously among members present in the Senate earlier this month.
The legislation was written as an effort to protect Delaware's corporate franchise — which makes up a third of the state's revenue — following some companies publicly threatening to leave the First State, while others have already chosen competing states like Texas and Nevada to reincorporate in.
While the corporate law community appears largely split on if a mass exodus from Delaware is imminent, the majority of Delaware lawmakers and Gov. Matt Meyer have encouraged the swift passage of Senate Bill 21 to appease corporations.
The bill would provide safe harbor procedures for controlling stockholders during conflicted transactions and lower the thresholds necessary for those transactions while raising the threshold necessary for shareholders to make books and records requests — ultimately making it more difficult for investors to bring litigation forward.
Opponents have dubbed the proposed changes “the billionaire’s bill,” and three state representatives introduced a collective five amendments to try and ease some concerns of various corporate attorneys and the general public.
Among them was State Rep. Sophie Phillips (D-Bear), who tried to persuade her colleagues to adopt an “opt-in” option for companies, giving corporations a choice as to whether or not they wanted to abide by the new changes.
"There is a modest alternative that would reflect a true compromise and the best of both worlds. I would propose that any corporation could opt into all the provisions of SB 21 as passed by the Senate. The only change would be to require a shareholder vote to adopt those rules," Rep. Phillips said.
The amendment was deemed "not friendly" by the bill's House sponsor State Rep. Krista Griffith (D-Fairfax), who argued requiring companies to opt into the new changes would be too cumbersome and noted it had not been vetted by the Delaware State Bar Association Corporation Law Council.
"The reason behind this bill is to preserve Delaware's status as a preeminent place to incorporate. Our goal is to have companies stay here, not leave here. The amendment effect adds additional layers that would incentivize these companies even more to leave," Rep. Griffith said.
Rep. Phillips countered that the amendment would make opting in to Senate Bill 21's provisions the same amount of work as a company choosing to reincorporate in another state, but the argument was seemingly not compelling enough to her fellow legislators.
Rep. Phillips' amendment failed 6-32 with one abstention and two members absent.
Rep. Frank Burns (D-Newark) introduced an additional amendment that would ensure Senate Bill 21 applies only to acts, transactions and books and records requests made after the enactment date.
Rep. Burns admitted the proposal was crafted largely out of concern with ongoing books and records requests made by Meta — the parent company of Facebook and Instagram — shareholders, as reported by CNBC, and worries that if these new provisions were to affect any litigation made on or after Feb. 17, 2025, as outlined in the bill, those probes could be hindered.
"I am aware of two actions against Meta where books and records discoveries were going on, and they can continue, but what they were looking into can now never be brought to bear under the SB 21 rules," Rep Burns said.
Rep. Griffith also deemed this amendment unfriendly, explaining the date of Feb. 17 was "very carefully considered," and she does not want to promote more confusion surrounding the enactment date.
Rep Burns' amendment failed 9-30 with two members absent.
State Rep. Madinah Wilson-Anton (D-Newark) introduced three amendments in an attempt to include more "extraordinary" transactions in the acts that would require a higher threshold of approval, give some leeway back to shareholders in terms of meeting the threshold required to make books and records requests and the final would have preserved the right for Delaware courts to determine if directors are independent, instead of a company's board.
Rep. Griffith did not support any of the amendments, making a similar case as to the basis behind her opposition to the first two amendments.
All three of Rep. Wilson-Anton's amendments failed.
"The corporate franchise is unmistakably incredibly important to everyday Delawareans, and that is why it is so important for us to take this decision incredibly seriously," Rep. Wilson-Anton said. "I will not be supporting the bill unamended because I think that it risks the future of the franchise."
Several other legislators from both sides of the aisle voiced their support for the bill prior to the final vote, arguing despite the hastiness and irregular nature of the bill's progression, protecting the franchise as a revenue source is too important to delay any further.
"This legislation may have complexities, but the reasons to support it are very simple — protect Delaware's economy and protect future opportunities for the people in our state," Rep. Griffith said in closing.
"As for our caucus, corporations really want more certainty that Delaware will remain balanced and predictable, and so for that, I stand in full support of this legislation," Minority Leader Tim Dukes (R-Laurel) said on behalf of Republicans.
The legislation passed 32-7 with 2 members absent and was signed by Gov. Meyer Tuesday night.
“Delaware is the best place in the world to incorporate your business, and Senate Bill 21 will help keep it that way, ensuring clarity and predictability, balancing the interests of stockholders and corporate boards,” said Meyer in a statement.
