Delaware is the top jurisdiction for corporate law in that over 60% of the major companies are incorporated there. The courts of chancery have developed a coherent body of law, which other jurisdictions now follow.
Other states have tried to copy Delaware’s success with limited results. But it’s not just about copying the statute, it’s also about having a body of professionals who are experts in that law and who have provided a well-developed framework that the companies can rely on.
From my experience and having worked in Delaware for many years and now being a long-term member of the bar, I can give you a few reasons that Delaware leads the way in incorporating companies.
#1 Laws are current. Since Delaware is a small state (and they get significant revenue from the corporate filing fees and income tax on lawyer salaries — yes, Delaware has an income tax) they keep the statute up to date with annual updates.
When case law emerges or court notices and ambiguity in the law the lawyers consider it and propose amendments to the legislature. Those are usually adopted annually.
I am aware of no other state that gives the attention to make sure to update their law every year like clockwork.
#2 Judges are vetted. Delaware has no merger law and equity so almost all cases go to the Court of Chancery that has significant expertise in corporate matters and sees them regularly. And judges that are seated on that court are selected because they understand and have expertise in business law.
#3 Judges are responsive. I’ve been on 8 pm conference call with judges on emerging matters. They will make time for emergencies — when they are true emergencies — rather than be tied to a court calendar. For certain matters, this can make all the difference.
These are just a few reasons to incorporate in Delaware, and there might be others.
This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity. Freeimages.com/Photographer Klemen Valjavec.
About the Author
Shawn McBride — R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Firm, PLLC. Shawn works successful, private business owners in their growth and missions to make a company that stands the test of time. You can email R. Shawn McBride or call (214) 418-0258.
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