TheCorporateCounsel.net

If present day me were to travel back in time twenty years to tell thirty-seven-year-old me about a future where U.S. foreign policy was marked by threats to annex Canada, Greenland, the Panama Canal and Gaza and people were talking about Delaware potentially losing its dominance as the preferred jurisdiction of incorporation, I would have probably dismissed such warnings as some sort of strange science fiction — but here we are!

As John noted just last week, the prospect of “DExit” remains very much on the table, despite lingering concerns about the suitability of potential alternative jurisdictions when it comes to complex business disputes.

Professor Bainbridge recently weighed in on the topic with his blog “DExit Civil War? The Governor and Legislative Leaders Fire Shots Across Chancery’s Bow.” In the blog, he notes the following recent quotes that Delaware Governor Matt Mayer gave to Business Insider:

“It’s really important we get it right for Elon Musk or whoever the litigants are in Delaware courts,” he said. “We’re cognizant that there may be some things that need to change. We’re going to work on them.”

Though he’s been in office for less than two weeks, Meyer said he’d already met with “leading corporate legal brass” and state government leaders to chart a path forward.

“I think within the coming weeks, you’re going to see some things rolled out that will help move our state forward and bring us into 2025 and beyond to make sure we’re protecting and growing the corporate franchise,” he said.

Professor Bainbridge also notes recent statements from Delaware legislative leaders, who wrote in an op-ed:

While Delaware’s Court of Chancery has remained widely respected for its expertise and fairness, we acknowledge that it’s important to address its lack of diversity and ensure the judiciary reflects the broader perspectives of the communities it serves, thereby enhancing its credibility and fairness, and Delaware’s leadership in corporate governance and justice.

Professor Bainbridge remains unconvinced DExit will ultimately result in a mass exodus of corporations from the First State, stating:

I remain unpersuaded that DExit poses a serious threat to Delaware’s dominance of the market for corporate charters. The recent high profile departures, however, appear to have freaked out the political class in Delaware. This is not surprising, of course. The annual franchise taxes companies pay Delaware for the privilege of being incorporated there make up as much as 20% of the state’s total tax revenue. If that income stream went away because companies incorporated outside Delaware, the state government would either have to make massive budget cuts or raise other taxes dramatically.

From my much less erudite perspective, I believe that whenever something gets a funny Brexit-like name it is never a good thing – it is kind of like every scandal becoming a “gate” because of Watergate. The current phenomenon in Delaware has many complicated moving parts, but as with pretty much everything else of substance that we grapple with today, meme-ification creates a viral panic and corporate leaders begin looking for the exit because they do not want to be the last one off the sinking ship. Such situations tend to favor decisive action on a compressed timetable, so hopefully the powers-that-be in Delaware are paying close attention to the situation.

– Dave Lynn