Tuesday, July 3, 2012

How are Delaware Entities Like Rabbits?

Delaware corporate law is popular.  How popular?  Well, almost half of U.S. publicly traded corporations were formed in Delaware. Delaware has more corporate entities, public and private, than people — 945,326 to 897,934.  One address in Delaware (1209 North Orange) is the legal address for more than 285,000 separate businesses!  These statistics all come from one of my favorite bloggers, Sandy Leeds of Leeds on Finance (http://leedsonfinance.com/).  

Why is Delaware so popular?  Its corporate law is well-developed.  It has special courts dedicated to corporate law issues; so its corporate justice tends to be swift, fair, and dispensed by judges who specialize in corporate law issues.  But regardless of how Delaware became the go-to state for corporate law, it now enjoys the advantage of familiarity. Virtually every corporate lawyer knows and understands Delaware corporate law, so parties rarely object to doing business under Delaware law.  Even if another state could devise a "better" set of corporate law statutes and courts, corporate lawyers would not be in a hurry to drop decades of precedent and familiarity with Delaware corporate law to get comfortable with another state's laws and practices.  

Like the QWERTY keyboard, it might not be the best layout of letters if one were starting from scratch, but changing keyboards (or state corporate law) after the world has learned and embraced QWERTY (or Delaware) seems unlikely to happen any time soon.

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