Decoding Delaware Chancery Rules: A Global Impact Perspective on Governance

The Delaware Chancery Rules are used by large corporations around the world, not just in the United States. Many countries have their own version of the rules, known as statutes. The United States’ version is known as the Delaware Court of Chancery Rules, which can be found on their website. The Delaware Chancery Court is regarded as the place to go for domestic business disputes in the U.S.

Going back to the year 1792, The Delaware Court of Chancery was a court of equity. The rules were first established in 1863. From the beginning, the court had jurisdiction over issues of equity, but with the additional powers of a law court. They were able to grant judgments and issues of equity and confine the issues to only those amounts required to grant the proper remedy. In civil actions, what was sought by the plaintiff were the only items that could be seized.

They were able to change from owner to cotenancies and vice versa. A life estate could be turned into a fee simple. The court was able to break up joint tenancies, give an equitable remedy to a covenant by subrogation, and deliver an accounting for a partnership and for the rent of real property. These rules affected all international business transactions.

The corporate governance of Multinational Corporations (MNC) can be quite complex. When it comes to governance, regardless of where you live, you will find the rules from the Delaware Chancery Rules applied. Today, the Delaware Chancery Rules hold a solid position among the boards of directors of every MNC around the globe.

Some of the most celebrated historical cases were heard by the Delaware Chancery Court, including the: These rulings established the importance and role of the Delaware Chancery Court in corporate America.

The fact that so many MNCs implement the Delaware Chancery rules. The net worth of these companies comes to more than one-third of the global GNP. These companies are possibly the most successful international companies in the Arab world. These companies have developed and implemented policies and practices that enhance corporate governance. For example, Akzo Nobel and Huntsman had a dispute over the acquisition and reached a settlement with the help of the Delaware Chancellor.

The legal community of Delaware has been hailed as the leader when it comes to inventing and developing corporate governance. The state produces corporate legal expertise to provide a governing body for international businesses.

Today, the ripple effect that the Delaware Chancery Court decisions have had on non-U.S. businesses and economies worldwide has been phenomenal. As technology becomes the norm of the day, all eyes are on Delaware. Legal Department Managers and Corporate Counsel are constantly on the lookout for the latest changes to the Delaware Courts. For example, litigation experts look for updates on catastrophic loss or bankruptcy laws. This has affected all international business transactions.

Why is the Delaware Chancery important to multinational corporations? The consequences of boards of directors that fail to provide the necessary oversight or employ the proper governance procedures can be severe.

As the Delaware Chancery is considered, by many, the best court in the world, they have influenced the corporate governance of the entire globe. Their rules are the gold standard for compliance. If there is a politically motivated lawsuit, it is very common to see D.J. Baltodano presiding over the case. That should tell you why this is such a highly rated court of law.

There is the question of the political and economic implications of the Delaware Chancery rules. There are two sides to this argument: those that believe the Delaware Chancery Rules are positive for global trade relations and those that believe otherwise.

For example, in response to a political “race to the bottom” criticism of Delaware’s takeover policy, the Delaware Legislature has allowed preferred stock with staggered board provisions. This move was due to the investment banks providing support for the actions taken by Unocal. The Delaware court has supported these preferred stock plans. The impact this has on the Middle East is that it provides them with the knowledge needed to deal with Western corporations, creating a greater potential for investment opportunities.

Does the Delaware Chancery Rules affect the corporate governance practices of the board of directors of corporations in the Middle East? The answer is yes. The more the business community embraces the rules from the United States, the more likely they are to understand how companies like Unocal or Franklin Mint operate. For example, Franklin Mint, did business with Arab royalty from Saudi Arabia to Afghanistan and OPEC. Investing in Middle Eastern corporations would be more familiar as more local entities embrace the rules from the Delaware Chancery Court.

The changes the Delaware Chancery has undergone have kept up with the changes to international corporations. As they have continued to evolve, the court has set new interpretations on merger transactions and corporate restructuring. Other major issues include fiduciary duties. This has resulted in the court having jurisdiction over all future fees and expenses. This provides fresher stability, probably increasing the amount of investments received.

Mergers are one of the problems commonly seen in the Arab world. Having someone familiar with both the Arab world and U.S. Laws could make the negotiations go smoother and faster. This could save them money, another issue, and time spent in negotiations. One of the most fundamental principles for any business is to ensure rules are properly followed. The consequences for failing to do so could be dire.

Delaware business litigators are ahead of the curve when it comes to corporate governance. Delaware will always remain on the forefront of global corporate governance. The fact that the Delaware Chancery has such a strong focus on international issues will continue to shape the ways corporations do business within the Arab world. The simple fact that the Delaware rules are standard for corporate governance provides a common ground for MNC’s and gives them a starting point.

For more information on corporate governance practices, you can visit Wikipedia.