Senate Majority Leader Bryan Townsend, D-Newark.

PHOTO COURTESY OF legis.delaware.gov

Sen. Darius Brown, D-Wilmington.

PHOTO COURTESY OF ALEXIS WREASE

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By Joseph Edelen

DOVER — The Senate Judiciary Committee will consider a proposal to implement expansive updates to Delaware’s corporate structure on Wednesday, committee chair Sen. Darius Brown, D-Wilmington, announced Thursday.

The bipartisan proposal comes in response to the recent trend of incorporations defecting out of Delaware in favor of states like Texas and Nevada, which follows recent pressure from Tesla and SpaceX CEO Elon Musk amid his legal losses in the Court of Chancery related to his record-setting $56 billion compensation package.

The legislation, Senate Bill 21, will be considered at 2 p.m. in the Senate chamber.

The bill was crafted in consultation with legislative leaders and the governor’s office, as well as John Mark Zeberkiewicz, of the Wilmington-based firm Richards, Layton & Finger; secretary of state Charuni Patibanda-Sanchez, representing the Meyer administration; Lawrence Hamermesh, emeritus professor at Widener University’s Delaware Law School; former Chancellor and Chief Justice Leo Strine Jr.; former Chancellor William Chandler III; and Senate attorneys.

Ahead of the bill’s consideration next week, leaders from the Corporate Law Section of the Delaware State Bar Association proposed 10 amendments to the bill on Monday.

Those amendments include not allowing a safe harbor if the directors who approved an act or transaction acted with “gross negligence;” clarifying that directors must be independent from the controlling stockholder under applicable listing standards, which also extend to the corporation; that safe harbors will not limit stockholders’ rights to seek relief for individuals who knowingly aid and abet a breach of fiduciary duty by a director; and clarifying how a person can be deemed a controlling stockholder.

The legislation – which is being led by Senate Majority Leader Bryan Townsend, D-Newark – has received mixed reviews from corporate law experts in the state, as opponents have categorized the bill as weakening regulations that will allow self-dealing from corporate owners, like Mr. Musk.

Following the announcement that amendments were recommended for the bill, Gov. Matt Meyer thanked the Corporate Law Council for their “valuable feedback.”

“For over 100 years Delaware has been the home to a majority of America’s companies. With the chaos coming out of Washington D.C, it’s more important than ever that we protect the corporate franchise so we can continue to fund the critical programs that help our families, children, and seniors,” he said.

Members of the public can deliver comments once debate on the bill concludes Wednesday. Sign-up is available online at legis.delaware.gov and in person.