WILMINGTON — In his second week, Gov. Matt Meyer has navigated a potential federal funding freeze that would have severely damaged his first budget while shaping his economic policy and responding to the rapidly evolving policies that are coming out of Washington D.C.
He’s also decided to take on a new cause: how to make sure Delaware remains the incorporation capital of the world.
Meyer and his administration have launched a campaign with national and international companies about Delaware’s corporate laws and Court of Chancery. The goal is to understand why leading companies are considering reincorporating in other states that have newer — and competitive — corporate courts.
“I don’t think we’re losing. We’re winning, but of course we can do better. We’re working hard to make sure Delaware remains No. 1 and that starts with the understanding that there are those who are questioning whether they should move to another jurisdiction, and understanding those who have made the decision, and working hard to win them over,” Meyer told the Delaware Business Times on Tuesday.
That campaign started hours after the governor took the oath of office as he began speaking with company representatives. His office also told DBT he is meeting with plaintiff attorneys, CEOs and legal experts, all of whom have a “vested interest in ensuring that the Court of Chancery retains its preeminence amongst the world.”
Meyer declined to elaborate on those conversations he and his administration are having with key players in corporate law, citing that they are early and did not want to influence the future discussion.
Proposed solutions will come from within the judiciary or through legislation to strike a balance for a global marketplace for shareholders and management, the governor said.
Meyer’s campaign comes at a time when major companies like Dropbox, Inc. and Meta Platforms, the parent company of Facebook and Instagram are considering reincorporating in Texas. That state has launched its own Business Court, which was a major factor in why Tesla decided to reincorporate there.
Delaware has long since held the title of incorporation capital of the world, ever since the state adopted a general corporation law modeled on New Jersey’s law in 1899. The corporation law is amended every year to keep it up-to-date in recent developments that make it a rich, complex legal system that draws hundreds of lawyers to take the bar exam here each year.
The Chancery Court, made up of seven judges who are asked to deliberate on corporate matters in decisive fashion, is also a major draw for companies to incorporate here. Instead of waiting through a drawn-out jury trial, companies can have disputes settled comparatively quickly.
But Delaware’s status has found itself under a microscope as Tesla and X owner Elon Musk has repeatedly attacked the Chancery Court through social media for rulings against him regarding a pay package dispute. Musk now has unprecedented power in Washington D.C. and in the Trump administration – namely in deciding which agencies should be closed and how federal funding should be dispersed – and he’s repeatedly attacked Delaware judges on X and encouraged other companies to reincorporate elsewhere.
In the two weeks since President Donald Trump returned to the White House, Meta, Dropbox, Bill Ackman’s Pershing Square Capital Management have indicated they are also likely to follow Musk’s suit.
Meyer pushed back on the idea that this was about Musk, Meta and other individual companies, but rather about making sure Delaware’s corporate business is healthy.
“To be frank it’s less about Musk and more about just making sure our franchise remains one that’s predictable and fair and offers that clarity of law,” he said. “Regardless of the litigant, we have to make sure Delaware’s got sound law and a high-quality court system that the market can rely on globally. He’s got one of the bigger megaphones, no doubt, but I’m adamant we do not create policy for one person, no matter how big their megaphone is.”
The governor also pointed out that it’s also imperative to Delaware’s finances. Close to 2.2 million entities and 80% of initial public offerings in 2024 were incorporated in Delaware. Two-thirds of the Fortune 500 companies are incorporated in the First State.
The taxes and franchise fees had brought in $2 billion in Delaware’s general fund in 2023. That’s more than one-fourth of the current proposed budget.
Delaware’s precarious position has put the entire legal and business community on watch, as the state bar issued a rare statement to defend the Chancery Court last month.
In a rare sight CSC CEO Rod Ward, who oversees the top legal services company that works with companies across the globe to incorporate in the First State, publicly asked Meyer and the business community to unite and defend the franchise tax at an event in January.
Meyer, who practiced corporate law earlier in his career, said he understands the absolute importance of companies’ decision to incorporate in the First State. That revenue is used to help pay for services in education, public safety and road projects across the state.
“The bottom line is that New Jersey lost the corporate franchise tax for a lot of reasons, but one way to describe it is that they didn’t focus on politics,” the governor said. “Regardless of the noise, as long as we can ignore the players in this play and focus on clarity, consistency, predictability and fairness, we will be alright.”
