Delaware lawmakers have proposed a bill aimed at limiting shareholder lawsuits in the state, which is home to companies like Meta Platforms (META.O) and Dropbox (DBX.O). The bill would restrict access to internal records that shareholders can use to build their cases and set out steps for corporate boards to insulate directors from litigation over alleged conflicts.
The move comes after several high-profile companies said they might leave Delaware due to legal concerns. Texas has established a business court that rivals Delaware’s Court of Chancery, which sparked the bill. Elon Musk’s Tesla moved its incorporation to Texas last year after a Delaware judge ordered his $56 billion pay package to be rescinded.
The bill is sponsored by leaders of both parties and would not change existing cases in progress. However, it has been criticized by academics, who say shareholder lawsuits help prevent worst-case boardroom abuses and self-dealing. Instead, they argue that institutional investors like large pension funds play a crucial role in policing corporate boards.
Delaware’s corporate law governs relations between company boards and investors for around two-thirds of the S&P500 index, generating significant revenue for the state. The bill aims to address concerns raised by companies, including Meta Platforms, which recently said it was considering leaving Delaware due to legal risks.
Source: https://www.reuters.com/legal/delaware-bill-would-limit-investor-lawsuits-companies-threaten-leave-state-2025-02-18