Top Law Firms Defend Overhaul of America’s Business Court

As Delaware lawmakers prepare to hold hearings tomorrow about a bill that could reshape corporate America, some of the biggest corporate law firms are coming out in favor of it.

On Tuesday, 21 law firms — including Simpson Thacher and Bartlett; Cravath, Swaine & Moore; and Paul, Weiss, Rifkind, Wharton & Garrison — will publish a letter strongly supporting legislation that would override a series of decisions by the Delaware Court of Chancery. These rulings have prompted backlash from companies and led many, including Meta, to contemplate moving their incorporation outside the state.

The bill is “an important step in maintaining Delaware’s status as the jurisdiction of choice for sophisticated clients when they create companies,” the law firms write.

Delaware has been ensnared in controversy after several rulings, including Chancellor Kathaleen McCormick’s decision last year to nullify a big payout for Elon Musk at Tesla. While Mr. Musk’s ire over that decision brought attention to the chancery court, many corporate lawyers say they’re more broadly frustrated with the court’s treatment of companies with controlling shareholders, arguing that it has been overly deferential to noncontrolling shareholders.

Given how corporate America fuels Delaware’s budget, a group of Delaware state senators proposed a bill last month to amend the state constitution that would effectively override years of case law by the Delaware Court of Chancery. The group sidestepped the usual process for proposing bills, allowing it to move swiftly — but critics say that it also left out early input from key members of the influential Delaware bar.

“Lowering standards for corporate behavior at the expense of shareholders undermines the executives duty toward the corporation and its shareholders and is simply the wrong move,” wrote Thomas DiNapoli, the New York State Comptroller, in a letter to lawmakers opposing the bill.