Small Business Reading Room

Tuesday, November 18, 2008

Delaware Corporate Law is Often Imitated but Never Duplicated

More than 850,000 business entities have their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 63% of the Fortune 500.

So why do corporations choose to make Delaware their home?

Some would say that businesses choose Delaware because we provide a complete package of incorporation services including modern and flexible corporate laws. That's certainly true. In fact, every year there are other states which decide they need to try to compete with Delaware's favorable corporate laws. A few recent examples include new or pending legislation in Vermont and New Jersey.

Vermont Wants to Be the "Delaware of the Net" by enacting new laws which appeal to “virtual firms” who have no headquarters, little paperwork and no face-to-face director meetings. What Vermont has done only this year is hardly groundbreaking or even considered competition for Delaware. The DGCL has long provided the ability for directors to be able to act in writing, and also requires minimal reporting/filing with the Delaware Division of Corporations. No headquarters in Delaware? No problem. You can be incorporated in Delaware and take advantage of the favorable laws here without being physically located here.

In New Jersey, the Gill-Sarlo Bill Package intends To Update Business Laws to Make the state Friendlier To Businesses. These changes have to do with shareholder actions & directors powers and are designed to update NJ’s business laws and make it easier for corporations to do business there. The proposals are molded, for the most part, on Delaware General Corporation Law, a state which is viewed by many in the business community as being very business-friendly.

So should Delaware be worried that other States are trying to “catch up” and change their laws to appeal to corporations and LLC’s?

I don’t think so for two reasons.

First, all those other states only have it partly right. Sure, corporations come to Delaware for their favorable corporate laws, but they also come for other reasons. How about the highly-respected Delaware Court of Chancery? It’s been recognized as the preeminent business court in the country if not the world. How are the business-friendly State of Delaware Government, and the customer service oriented staff of the Delaware Division of Corporations? Take it from someone who has worked with other State Governments on incorporation matters. No one in any other State, and I mean absolutely no one is as accessible, knowledgeable and truly invested in helping you with your incorporation needs as the folks located in the John G. Townsend Building in Dover. Our Division of Corporations operates with a state-of-the-art efficiency and our staff provides prompt, friendly and professional service to clients, attorneys, registered agents and others. These factors have all contributed to making Delaware a premier legal home to companies around the world.

And the second reason? They say imitation is the highest form of flattery. The only thing that can make being the best even better is to be recognized by your peers, your fellow States, as being the model for which your corporation laws aspire to. For all those jurisdictions out there who are hoping to eventually catch up to Delaware, don’t expect us to wait around for you. We didn’t get to the top by accident. Every year, our Governor and General Assembly will continue to work with our Courts and the Delaware State Bar Association to ensure that our legal system is the most modern, flexible and responsive in the nation.



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Delaware Intercorp, Inc.
113 Barksdale Professional center
Newark, DE 19711-3258

"For all the best reasons to incorporate,the best place
is Delaware and the best incorporator is
Delaware Intercorp!"

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