• Video

Why Is the Delaware Court of Chancery Important?

Why do so many companies incorporate in the state of Delaware? The most important reason is the Delaware Court of Chancery. Professor Robert Miller explains why the Court of Chancery is unique both in its expertise and in its process. A corporation with a complaint brought to the Court of Chancery can expect not only a fair and impartial hearing, but also a ruling from some of the most knowledgeable corporate law lawyers in the country. https://youtube.com/watch?v=hhbmBfNiwJ8


Most public companies are incorporated in Delaware. One of the reasons for that is the excellence of the Delaware General Corporation Law, but really the most important reason is the Delaware Court of Chancery. Issues arising under Delaware corporate law for the most part are channeled directly into the Delaware Court of Chancery. The Court of Chancery is a court of equity. There are no juries. There is one chancellor and number of vice chancellors and you make your case to the chancellor or the vice chancellor directly on both matters of fact and matter of law. The chancellors and vice chancellors are selected in a non-political process and they are chosen from the Delaware bar for their excellence as corporate lawyers. They are routinely voted the best court system in the United States. The Delaware Court of Chancery is routinely regarded as the premier corporate and commercial court in the world. There are not many judges who will throw down with an investment banker from Goldman Sachs on the proper way to value a company, but that absolutely will happen in the Delaware Court of Chancery. Delaware judges are in a class entirely by themselves. Read a Delaware quote transfer opinion. The first thing you might notice is it could easily be 200 pages long, and the reason is it will be absolutely exhaustive. Another thing you might see is that it might have 700 footnotes, and the reason for this is that the Delaware chancellors not only know Delaware law, but they tend to be very well read in corporate law scholarship, in financial scholarship, in financial textbooks. They will often have read every important corporate law article on a topic and they will cite many of them in their opinions. There's a level of scholarly achievement on that court that is probably unmatched anywhere. Even the Supreme Court of the United States does not cite academic scholarship the way the Delaware Court of Chancery does. If you are a corporate party and you have a dispute, you want several things. You want your contract enforced in accordance with its terms. That will happen in Delaware. Write something down in a Delaware contract, and, the Court of Chancery would force it in accordance with its terms. You know ahead of time what you're going to get. The second thing is that you get judges who have a great deal of knowledge about the market. They can't be bamboozled by experts telling them what's going on in the marketplace because usually they already know. Being very experienced, transactional and business lawyers, they have great sense of market judgment about what parties would reasonably likely to have agreed to and what they would never have done. This is the law for the sharks, not the law for widows and orphans. Delaware is not protecting consumers. Its corporate law is not aimed at consumers. It's aimed at the sharks, the public companies, the banks, the hedge funds, the investment funds, people who absolutely should know what's in the market and how to properly draft a corporate agreement. They will get what they signed up for.

Related Content