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Monday
Nov052012

Delaware, Business Regulation, and the Financial Benefits

We have just finished a two week over view of a number of Delaware cases.  Many could comfortably fit into the category of "management friendly."    

Delaware profits from its preeminant role in the realm of corporate governance.  Go here and here.  Moreover, the state does more than attract the largest public companies.  See How Delaware Thrives as a Corporate Tax Haven ("Nearly half of all public corporations in the United States are incorporated in Delaware. Last year, 133,297 businesses set up here. And, at last count, Delaware had more corporate entities, public and private, than people — 945,326 to 897,934.").  And what does Delaware get from this regulatory regime?

Delaware’s tax laws are a bonanza for the state. At a time when many states are being squeezed by a difficult economy, Delaware collected roughly $860 million in taxes and fees from its absentee corporate residents in 2011. That money accounted for a quarter of the state’s total budget.

Whatever the merits (or demerits) of the Delaware approach to corporate governance, any shift away from the current approach would potentially give companies a reason to consider incorporating in other states.  To the extent that they did, there would be a financial penalty imposed on Delaware.   

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