DOVER – A controversial bill that would amend Delaware’s corporate laws- and would protect the state’s status as the “corporate capital of the world” passed unanimously with little debate on Thursday afternoon.
A two-thirds majority vote was needed for the bill to pass the upper chamber. All voted “yes,” except for Senator Eric Buckson who was absent for the vote, but present earlier in the afternoon for the conversation preceding the vote.
Rep. Krista Griffith (D-Fairfax), who is a co-sponsor on the bill, plans to introduce Senate Substitute 1 for Senate Bill 21 in the House Judiciary Committee next week, according to a House Democrat spokeswoman. The schedule has not been finalized yet, but it is likely to be held on March 19.
The senators heard from expert testimony Thursday, which included Lawrence Hamermesh, a professor at Widener University’s Delaware Law School, and Srinivas M. Raju, the chair of the Delaware State Bar Association’s Corporation Law section.
Along with his role with the corporation law section, Raju is a practicing lawyer and a director at Richards, Layton & Finger which played a role in writing the legislation. According to bill sponsor Senator Bryan Townsend, the final language draft of the bill was written by Richards, Layton & Finger attorney John Mark Zeberkiewicz with ideas and support from Townsend, bill sponsors, Hammermesh and others.
The bill itself seeks to change the corporate law, with reforms including defining “controlling shareholders” as those who own at least half a company’s shares or a third of shares while also serving in a managerial role. SB 21 lowers the bar for corporate action by those controlling shareholders, requiring them to receive approval from the shareholders by a vote or by independent board members.
It also limits “books and records” requests, which relate to how plaintiffs suing companies can obtain files and communications to build their case. The window would be reduced to three years, as well as increasing rules on what documents can be obtained.
Raju proudly told legislators during the session that both the council and the corporation law section had approved of the measure, even though its crafting didn’t follow the normal drafting protocols.
He detailed six council meetings and two subcommittee meetings in which the members thought about SB 21 and its merits, considered any changes necessary and, ultimately, “delivered an unqualified endorsement of the legislation, that is [that] the council and the section believe it is advisable that Senate Bill 12, as revised by the council, become law.”
Raju said prior to their approval, the council reviewed the bill from the perspective of its membership which includes 26 members who actively practice law, primarily corporate litigation, and others who are primarily transaction planners. He added that while the council believed the bill could work retroactively, it should not affect any litigation pending at the date the bill was announced which was Feb. 17, 2025.
The council suggested several changes that reflect support for stockholders who do not act in gross negligence and seek to “clarify that the traditional fiduciary duties to disclose material information to stockholders would not change and to clarify that when the safe harbors don’t apply, the courts have the discretion they have always had under common law to assess whether a transaction is fair.”
He said the proposed changes would safeguard Delaware’s Court of Chancery, ensuring the court’s ability to continue its longstanding tradition of handling corporate law in the First State.
“Overall, the council has embraced the rationale behind the bill to provide greater certainty as to what procedures can be followed by disinterested directors and disinterested stockholders to safeguard transactions from unnecessary litigation. And with the council’s recommended changes, the council believes that the overall purpose of the bill can be advanced without diminishing protections for stockholders,” Raju told the senators.
As the debate has continued to grow over Delaware’s corporate state and, specifically, Senate Bill 21, many businesses have started to speak out in support of the bill. That included Central Delaware Chamber of Commerce Executive Director Dina Vendetti, who testified before the Senate Judiciary Committee on Wednesday.
“Clearly, the franchise is important to our state and to our economy and for something that important, periodic review of the law seems prudent, and this bill does provide clarity and updating that’s necessary,” she said. “Recent and unfortunate activities have managed to bring outsized attention to this necessary process. That’s the beginning and the end of it. This bill is relevant, and it ensures that our corporate governance remains clear, predictable and balanced.”
Others expressed concern for the bill during that same hearing, including corporate litigator Robert Lackey of Bleichmar Fonti & Auld LLP. As a member of the DSBA’s corporate law section who openly told senators that the bill before them was not what he voted on with other section members.
“I did not vote on this version of the bill. I’m strongly opposed to this bill. It will harm my clients and despite what you’ve heard, it will harm Delaware’s franchise, not promote it,” he said, adding that some of the bill remains inconsistent with Delaware law.
