Delaware’s Supreme Court upheld a law passed by the state's General Assembly last year, designed to keep companies from leaving the state to incorporate elsewhere.
State lawmakers enacted changes to its business rules last year with Senate Bill 21, after a Court of Chancery-rejected pay deal for Elon Musk led the world's wealthiest man to reincorporate Tesla in Texas.
Senate Bill 21 relaxed some rules and oversight regarding controlling stockholders for companies incorporated in Delaware, with an eye toward avoiding similar reincorporation moves that could threaten the state’s second highest revenue source.
A challenge to the new rules came from a stockholder in Clear Way Energy, who disagreed with a deal the Delaware-incorporated company made. His challenge argued the state violated its own constitution with the new law, in part by diminishing the Court of Chancery’s jurisdiction.
The Court of Chancery asked the state's highest court to weigh in, which it did on Friday.
But Delaware’s Supreme Court ruled in a unanimous decision that the Clear Way investor's challenge didn’t clear the necessary hurdles to dispute the “broad and ample sweep” of the General Assembly and the constitutionality of bills it passes.
Gov. Matt Meyer supported SB 21 and in a statement Friday said the state Supreme Court’s decision affirms Delaware is the “gold standard” for companies to do business.
