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Critics call proposal "billionaire's bill"

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Bill creates "safe harbors" for transactions with

controlling

shareholders

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Senate has approved bill and governor plans to sign

By Tom Hals

WILMINGTON, DEL., March 20 (Reuters) - Delaware

lawmakers are expected to vote to overhaul the state's corporate

law on Thursday to protect its business-friendly reputation, but

opponents have called the bill a giveaway to billionaires.

The bill makes it hard for investors to sue over certain

transactions involving controlling shareholders, such as buying

a controlling shareholder's business, if the deal follows

certain steps. It also applies to deals with board members and

executives, but will not impact existing rules for a takeover of

the company by the controlling shareholder.

Attorneys who represent shareholders have dubbed the

proposal "the billionaire's bill" and have launched a public

campaign against it, politicizing the normally sleepy annual

process of tweaking the corporate code.

The bill, known as SB 21, comes as a trickle of companies

leaving Delaware raised concerns of a "DExit" stampede out of

one of the country's smallest and least populated states. While

other states are trying to attract incorporations, Delaware

still remains home to most large public companies and related

fees generate 20% of its 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.

The state's senate approved the bill last week and Governor

Matt Meyer has said he will sign it.

Amy Simmerman, a corporate lawyer in Wilmington, told the

Delaware House Judiciary Committee, which approved the bill on

Wednesday, that she has 15 significant corporate clients that

she declined to identify which were considering leaving the

state. "This is serious," she told lawmakers. "I don't think

it's just bluffing."

Under the proposed bill, if a deal is approved by a board

committee that has a majority of independent directors or by a

vote by public shareholders, investors cannot challenge it in

court. Currently, litigation can only be avoided if both

steps are used and the committee must be entirely made up

of independent directors.

The bill also makes it harder to challenge whether a

director is independent. It defines "controlling

shareholder" and limits records available to shareholders who

want to investigate a deal for conflicts.

At Wednesday's committee hearing, lawmakers focused largely

on the risk of companies leaving Delaware. Witnesses included

corporate lawyers, law professors and a former judge on the

state's Court of Chancery, its business court, and mostly spoke

in support of the bill.

Public comment was dominated by opposition from attorneys

who represent shareholders, who said they were excluded from the

drafting process. They described the changes as radical, rushed

and corrupt.

Joel Fleming, who represents shareholders, told lawmakers

the bill was a result of lobbying by Meta Platforms ( META ) and would

protect its CEO and controlling shareholder Mark Zuckerberg from

potential liability that shareholders are currently

investigating. CNBC published documents on Wednesday it obtained

from an open records request showing that the governor met with

Meta officials in the weeks leading up the bill be proposed.

"Those claims may now be dead," Fleming told the lawmakers.

"This is appalling."

The governor's spokeswoman Mila Myles said the governor met

with Meta representatives to discuss corporate law but said the

company did not lobby for the bill. She said the governor has

been "meeting with everyone" so the state remains a global

leader.

Meta declined to comment.

Corporate leaders have expressed frustration in recent years

over court rulings that upset certain expectations about the

state's law. 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.