Ben duPont is a longtime Delawarean, a venture capitalist and a philanthropist.
Many may not know it, but Delaware is on the verge of crisis.
Multiple major companies incorporated in our state, from The Trade Desk to Dropbox, have announced intentions to move elsewhere, with some, like The Trade Desk, already having left. Others, such as Meta, are on the brink.
For the better part of a century, Delaware has been the incorporation king — the obvious place to anchor a business, thanks to our corporate-friendly tax laws, legal system, privacy protections and more. The result is more than $2 billion in annual revenue, more than one-third of our state budget. A large corporation that leaves Delaware represents a loss of up to $250,000 in tax revenues per year.
If these losses continue, it will be painful. It will require Delaware to look at other funding sources, such as a sales tax or increases to the state’s personal income tax rates, or it could require cuts to government services. We can’t allow it.
My family has been in Delaware for generations. I want my kids and grandkids to benefit from a thriving state economy and strong government. For that to happen, we need to make changes and make them fast. I applaud our state leaders for doing exactly that.
Gov. Matt Meyer, Lt. Gov. Kyle Evans Gay and secretary of state Charuni Patibanda-Sanchez are all former business lawyers, and Senate Majority Leader Bryan Townsend, D-Newark/Glasgow, is currently a business lawyer. These leaders did what any company does: They listened to the customers. Within 30 days of the governor entering office, they put forth proposals to solve the problem with Senate Bill 21.
What will SB 21 do?
So, what is the problem, exactly? First, let me tell you what isn’t. Delaware is still the best state in the country to incorporate a business, bar none. A major reason is our excellent court system, where disputes are decided by judges with extensive experience in corporate law. These judges have been the gold standard of fairness and justice for over 100 years and still are.
The bill before the General Assembly helps our judges and companies by providing greater clarity around what it means to be a controlling stockholder and an independent director. It will ensure more predictable outcomes in disputes. It also draws clearer lines around stockholders’ entitlement to examine books and records, thus limiting lawsuits that are often costly for companies. In recent years, Delaware has been descended upon by plaintiffs’ attorneys and class action firms looking to make a buck off frivolous lawsuits. This is a cancer on our system, and SB 21 will cut it out.
By providing clarity and predictability, the legislation will help assuage the concerns of businesses. I know because I run a business myself and work with many large multinational companies. They love our state, but the truth is that they have options. Delaware is no longer a monopoly. Other states, such as Texas and Nevada, are actively trying to lure them away from us.
Other states want to dethrone Delaware
In fact, on March 5, Texas Gov. Greg Abbott published an opinion piece in The Wall Street Journal, “Forget Delaware — ‘Y’all Street’ Is Open for Business,” which states, “Businesses domiciled in Delaware have a choice to make. They can stay (in Delaware) and be subjected to increasingly unpredictable theories of liability. Or, like Americans before them, they can come to Texas. Unlike Delaware, the Lone Star State is open for business.”
The message from Abbott is clear: Delaware needs to compete for the corporation business.
It’s no wonder these states want a piece of the action. Our incorporation industry is brilliant for how it brings in revenue without causing resource strain. In virtually every other state, the leading industry brings money but also huge numbers of people that place strain on the schools, infrastructure and government services that the industry helps to fund. We get the benefits for our existing residents without many of the costs.
I am both a Delawarean and a client of our incorporation system. I have looked at both sides of the debate and have heard from those who say the proposed changes will disadvantage minority stockholders and risk financial ruin for Delawareans. Only one side makes sense. This bill won’t “rebalance” the system by tipping the scales in any direction; it will simply stabilize the balance that has long existed. Its intent is to clarify rather than change, and that’s exactly what we need. With SB 21’s adoption, corporations and their shareholders will want to be in Delaware, as they have for more than 100 years, bringing continued revenue here and maintaining a legal industry that supports the state’s economy with jobs and ancillary businesses.
We can’t afford to get distracted by headlines and polarizing figures on either side of this conversation. This isn’t about any one person or business; it is about preserving the future of our state for the sake of our kids and grandkids. It is about defending our crown as the incorporation king. Long live that king.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
