Delaware Court of Chancery Creating a Buzz
Filed Under: Articles of Interest, Delaware
Tags: Articles of Interest, Court of Chancery, Delaware
The News Journal has a great article about the open seat on the Court of Chancery. Read an excerpt below.
When it comes to gossip in the corporate legal community, the Delaware Court of Chancery has made for interesting water-cooler conversation lately.
Lawyers and legal professors across the country are buzzing about who will fill the seat that will be vacated next month by highly respected Vice Chancellor Stephen P. Lamb. The vice chancellor let it be known about a year ago that he would not serve another term. Lamb’s current 12-year term expires on July 28.
“As soon as there’s any inkling that someone is going to retire from the Court of Chancery, it sets off an enormous wave of speculation,” said Lawrence Hamermesh, director of the Widener Institute of Corporate Law at Widener University. “I’ve gotten questions going back two years about Vice Chancellor Lamb.”
What wasn’t surprising to corporate law watchers, however, was the nomination last week of Chancellor William B. Chandler III to a second term as the court’s chief judge. Chandler’s term is set to expire at midnight on June 30. Gov. Jack Markell sent a letter to the Delaware Senate on Wednesday saying he would nominate Chandler as chancellor on July 1, according to Joe Rogalsky, spokesman for Markell. The Delaware Senate is expected to vote to confirm the nomination on July 1, Rogalsky said.
Chancery Court vacancies have long created buzz in the business world because the court is one of the main reasons big business prefers to incorporate in the state, legal experts said. More than half of the companies on the New York Stock Exchange and about 63 percent of Fortune 500 companies have filed their certificates of incorporation in the state.
Corporate lawyers like to bring matters before Chancery Court judges because they spend the majority of their time handling complex corporate and commercial matters, corporate academics said. In addition to the sophisticated and knowledgeable jurists, businesses like the predictability and consistency of the non-jury court.
Read the full post by Maureen Milford here:
101 on The Structure of a General Corporation
Filed Under: 101, Delaware, General Corporation
Tags: Board of Directors, Court of Chancery, Delaware, General Corporation, Officers, Stockholders
The Delaware General Corporation has been the strongest form of company organization in the United States since the late 18oo’s when major entities like the railroads, Standard Oil and DuPont needed to organize into organizational structures that would provide for the governance of the company, as they grew beyond the lives of their famous founders. The General Corporation is perfectly designed as a vehicle for engaging in business, and it also provides a way to raise capital as needed throughout the life of the company.
In its simplest form, the General Corporation has three tiers of power; The Shareholders, The Directors and The Officers. The Shareholders “OWN” the company. The Directors “MANAGE” the company and the Officers “RUN” the company on a day-to-day basis. The Bylaws of the company set forth the powers and the limits of power in each of the tiers. Each group may have separate priorities and they may clash occasionally. When one tier rises up against the others, a takeover battle may ensue. Takeover battles are usually fought in the Delaware Court of Chancery. In this unique business court a single judge decides the case. No juries, no tribunals, no 12 angry men. One judge determines quickly which party shall prevail according to 200 years of laws and legal precedents. It is said that the Chancellors of the Court respect the good-faith decisions of Directors over the profit priorities of shareholders, but a majority of shareholders can generally elect a new board of directors if they don’t like the ones they’ve got.
The “Rules” about how these three categories interact with each other is contained in three general knowledge bases. The “code”, which is the written law passed by the State Legislature, in this case called the “Delaware General Corporation Law” (DGCL); the “case law” handed down by the Delaware Court of Chancery and the Delaware Supreme Court over the past 200 years and in the “Letter Rulings” which are individual judicial decisions on a myriad of minute details that come up in a court case.
Stockholders are granted two “rights” that directors and officers don’t get: The right to vote for the Board of Directors, and the right to share in the dividends of the company in their pro-rata share when the Directors declared dividends. The shareholders, however, cannot operate the company. They cannot walk in and start telling people what to do. They act in a meeting, not individually. (Unless one person owns more than 50% of the company. In that case she could control the entire company and all three tiers of power.)
The Board of Directors also acts in meetings. Directors don’t generally act individually. Meetings must be announced in advance to all Directors and must contain a majority of directors present to be a legal meeting. The Board of Directors makes all the important decisions in the company. They are responsible for company policy and oversee the managers. The Directors determine what the company will do with its profits and they control the sale of stock in the company. They hire the Officers of the company to run the business on a day-to-day business.
The Officers work at the pleasure of the Board of Directors, or by contract with the Board. Officers are usually the President, Vice President, Secretary and Treasurer, but the company’s bylaws can prescribe any officers and their titles, responsibilities and duties. Officers are responsible for the conduct of the company and the profitability. If they fail, they get booted out quickly. If they succeed, they become superstars.
This unique structure, with three mandatory tiers of power, deserves a great deal of credit for the success of the American industrial revolution, the American economy since 1900 and the whole business of Wall Street itself. This structure differs greatly from other forms of company organization such as the sole proprietorship or the partnership, which precede it; and the Limited Liability Company which followed it historically.
If your vision is to form a big company, like Apple or Google or Dell you couldn’t pick a better vehicle to take the ride with than a Delaware General Corporation.
101 on Delaware
Filed Under: 101, Delaware
Tags: Court of Chancery, Delaware, Law, Tax
More businesses choose Delaware because of its favorable and business-friendly environment, which offers numerous benefits in convenience, tax liability and legal protection. Here are just a few:
- In Delaware, one person can hold the title of each of the officers of the business.
- Delaware has no requirement for a minimum balance in the company’s bank account. This is in contrast to a number of states that require a $1,000.00 minimum bank balance.
- Business owners can choose to file business formation papers anonymously in Delaware to maintain privacy.
- Delaware imposes no state income tax on a business that does not operate within the state.
- By forming a company in Delaware the “Domicile” of your company becomes Delaware and the “rules of the game” become the Delaware corporate laws as applied by the Delaware Court of Chancery. Delaware is famous for its fair and flexible corporate laws and its case law, as dispensed by the most respected business court in the country, the Delaware Court of Chancery.
- Directors are free to set any price on shares of stock they wish to sell.
- Forming a business in Delaware is straightforward and uncomplicated, and doing so online, by phone or by mail through Harvard Business Services, Inc. is easy, fast and affordable.
- Anyone can form a business in Delaware through Harvard Business Services, Inc. without ever setting foot in the state. Delaware’s Division of Corporations is the best in the world at processing business formation filings quickly and encourages entrepreneurs from across the country and around the world to form their businesses here.
