Corporation Law
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A Delaware corporation is a corporation chartered in the state of Delaware in the United States.
Delaware is well-known as a corporate haven. Many major corporations
are chartered in Delaware because the state charges no corporate income
tax on companies not operating within the state -- although all
Delaware corporations must pay an annual corporate franchise tax.
Moreover, Delaware's laws, particularly the Delaware General
Corporation Law, are designed to allow maximum flexibility to corporate
operations. Under Delaware law, a corporation need not
have a physical presence in the state, save for a registered agent to
accept service of legal process and pay the corporation's annual
franchise taxes, and officers and directors do not have to reside in
the state.
Despite having their corporate headquarters in the Silicon Valley, many
Californian companies incorporated in the state of Delaware seeking
better protections against hostile take over. For example, Silicon
Graphics was incorporated in California in 1981, but it reincorporated
in Delaware in 1990.
Because of the large number of major corporations chartered in
Delaware, the courts in that state are generally regarded as more
experienced in the application of corporate law than the courts of
other states. Disputes over the internal affairs of Delaware
corporations are frequently filed in the Court of Chancery, which is
one of the last separate courts of equity (as opposed to law) in any
U.S. state. Because it is a court of equity, there are no juries, and
its cases are decided by the "judges" of the Court: one Chancellor and
four Vice-Chancellors.
Because the Court of Chancery cannot award money damages, Delaware's
Superior Court, the trial court of general jurisdiction, also hears and
considers a large number of cases between corporations involving claims
for money. Finally, due to the number of corporations which choose to
incorporate in Delaware, the Federal Bankruptcy court in that state
handles many high-profile insolvency, and the United States district
court for the District of Delaware considers many patent disputes
between Delaware corporations.
In the 1980s, then-Delaware Governor Pierre Samuel du Pont IV
shepherded the Financial Center Development Act through the Delaware
General Assembly. The Act had the practical effect of virtually
eliminating usury laws in Delaware, giving banks an immediate incentive
to start credit-card subsidiaries in Delaware, as Federal law provides
that usury limitations, or lack thereof, in effect in the bank's home
state apply everywhere the bank does business. This encouraged an
explosion in competition for the credit card consumer's dollar. A prime
example is MBNA America Bank, which has grown from insignificant roots
as a small bank operating out of a made-over supemarket to the world's
largest independent credit card issuer.
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Corporate and Securites Law