Delaware committee releases bill to revise corporate law after hours-long hearing

Senate Substitute 1 for Senate Bill 21, a set of changes to the Delaware General Corporation Law, was released from the House committee after an extended hearing that drew corporate lawyers, legal scholars, the secretary of state and dozens of public commenters.

The bill would amend Title 8 of the Delaware Code to clarify how certain conflicted transactions involving directors, officers and controlling stockholders may be validated and would narrow the scope and process for stockholder books-and-records demands under Section 220. Committee members voted by roll call to release the substitute for signatures; the motion passed and the bill will be reported out of committee.

Why it matters: Delaware’s corporate code and the Court of Chancery together underpin the state’s role as the premier U.S. corporate domicile. Witnesses who supported the bill said it restores predictability that some corporate clients are demanding; critics said the statute would overturn decades of Delaware precedent, weaken investor protections and risk economic harm to Wilmington and the state.

Amy Zimmerman, a corporate lawyer at Wilson Sonsini, told the committee that her firm had had “15 significant companies” recently asking whether to leave Delaware and that client conversations “paused” after the substitute was introduced. "It's not just chatter," Zimmerman said. "We are seeing companies leave," she told members, and described market materials and law-firm marketing that, she said, show reincorporation is an active…