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Bill aims to stop firms leaving Delaware for other states

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Critics label it a "billionaire's bill" benefiting

shareholders

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Opposition includes shareholder attorneys, pension fund

managers

By Tom Hals

WILMINGTON, DEL., March 25 (Reuters) - Delaware

lawmakers are scheduled to vote on Tuesday to overhaul the

state's corporate law 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.

The law, known as SB 21, is on the agenda for the Delaware

House session that begins at 2 p.m. ET (1800 GMT) on Tuesday,

where it must receive approval from two-thirds of the chamber's

members.

The bill has already been approved by the Delaware Senate

and Governor Matt Meyer said he will sign it.

The bill mostly impacts companies with a controlling

shareholder, like Meta Platforms ( META ), which is controlled by

Zuckerberg. The proposal provides steps for arranging deals

between a company and its controlling shareholder, such as

selling corporate assets to the controller, that cannot be

challenged in court by the company's other investors. It also

applies to deals between the company and board members and

executives.

Leaders of both parties sponsored the bill in the hopes of

preventing "DExit" -- or a stampede of companies moving their

legal home out of one of the country's smallest and least

populated states. While other states are trying to

attract corporations, Delaware still 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. Fees from chartering businesses

generate more than 20% of Delaware's budget revenue.

Several companies, mostly with controlling shareholders,

have said they might or will leave Delaware, including Dropbox ( DBX )

, Meta Platforms ( META ), Tripadvisor ( TRIP ) and

President Donald Trump's media company. On Friday, Simon

Property Group ( SPG ), which is not a controlled company, asked

its shareholders to approve moving the real estate investment

trust's legal home to Indiana, where it has its headquarters,

from Delaware. REITs like Simon tend to be chartered outside of

Delaware.

The proposed legislation has been labeled the "the billionaire's

bill" by critics, which include attorneys for shareholders and

managers of pension funds. The annual process to amend

Delaware's corporate law rarely attracts attention but this year

has been marked by high-profile opposition ads showing Elon Musk

waving a chainsaw.

The International Corporate Governance Network, which says

its members manage more than $90 trillion in assets, warned

lawmakers in a letter earlier this month the bill could have

"significant negative implications for long-term returns for

investors, including people saving for their retirements."

Delaware Representative Madinah Wilson-Anton, a member of

the majority Democratic Party, told the Breaking Points podcast

on Friday that her "email inbox is unusable because I've gotten

so many emails from constituents that are telling me to vote

no."

The bill prevents shareholders from challenging deals that

are approved by a board committee that has a majority of

independent directors or by a vote by public shareholders. The

bill also limits records available to shareholders who want to

investigate a deal for conflicts.

Corporate leaders have expressed frustration in recent years

over court rulings that upset certain expectations about the

state's law. Tech billionaire Elon 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.