Delaware Judge Rules Companies Must Comply with State Law

Delaware Court Rules Companies Must Comply with State Law, Rejects Stockholder Agreements

In a recent decision, Delaware Chancellor Andre Bouchard ruled that companies must comply with Delaware law, rejecting the use of stockholder agreements that bypass state regulations. The ruling, described by Bouchard as “major surgery,” emphasizes the importance of market participants conforming to legal requirements.

The case, which involved Rep. Madinah Wilson-Anton and Republican Rep. Michael Smith calling experts to testify on the issue, highlighted concerns about the lack of transparency in these stockholder agreements. Wilson-Anton’s expert, Charles Elson, raised alarms about the potential for minority shareholders to be blindsided by undisclosed agreements that dictate how a company is managed.

Former Chancellor William Chandler defended the Corporation Law Council’s role in drafting the bill, dismissing claims that the revisions represent a sweeping overhaul of current law. Chandler expressed confidence in the Council’s track record and criticized those questioning the objectivity of judges involved in cases related to the bill’s amendments.

Chandler emphasized the importance of judges staying within their judicial lane and not interfering with the legislative process. He also noted concerns within the corporate market about Delaware’s reputation, urging a focus on upholding the integrity of state law.

The ruling serves as a reminder of the significance of legal compliance in corporate governance and the need for transparency in business agreements. As the debate continues over the implications of the decision, stakeholders are urged to prioritize adherence to Delaware law to maintain trust and accountability in the marketplace.