Delaware lawmakers approve bill to keep companies from moving

(Reuters) — Delaware lawmakers Tuesday approved an overhaul of the state’s corporate law in a bid to keep powerful business leaders like Mark Zuckerberg from moving their companies’ legal home to another state, although opponents call it a giveaway to billionaires.

SB 21 was approved by a vote in Delaware’s House and now goes to Governor Matt Meyer, who has said he will sign it.

The bill mostly impacts companies with a controlling shareholder, like Meta Platforms, which is controlled by Mr. Zuckerberg.

The measure provides steps that allow for a company and its controlling shareholder to arrange deals, such as selling corporate assets to the controller, that cannot be challenged in court by the company’s other investors.

Supporters and opponents of the bill both agreed during Tuesday’s debate that the state must prevent “DExit” — or a stampede of companies moving their legal home out of one of the country’s smallest and least populated states — although they disagreed on the strategy.

While other states are trying to attract corporations, Delaware remains home to most large public companies in part because its corporate law protects board directors from being sued if they are independent and act in the company’s best interest.

The state’s corporate legal system, which locals refer to as “the franchise,” generates more than 20% of Delaware’s budget revenue.

“We have a million Delawareans who rely on the $2.2 billion that the corporation franchise brings into the state,” Representative Krista Griffith, a Democrat, told lawmakers Tuesday. “What seems permanent can easily vanish.”

Several companies, mostly with controlling shareholders, have said they might or will leave Delaware, including Dropbox, Meta, Tripadvisor and President Donald Trump’s media company.

The proposed legislation has been labeled “the billionaire’s bill” by critics, which include attorneys for shareholders and managers of pension funds. High-profile opposition ads included a billboard truck featuring an image of Elon Musk waving a chainsaw that circled Legislative Hall in Dover before lawmakers voted.

Corporate leaders have expressed frustration in recent years over court rulings that upset certain expectations about the state’s law. Mr. Musk fueled the debate last year by urging companies to follow Tesla and leave the state after a Delaware judge rescinded his $56 billion pay package as CEO of the electric car maker.