Courts, legislation and Delaware corporate law

Asaf Hamdani and Kobi Kastiel

No 361, Working Papers from The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State

Abstract: Delaware is widely regarded as the global capital of corporate law and the leader in attracting incorporations. Its dominance is often attributed by legal scholars to its expert judiciary and reliance on judicial decision-making to develop corporate norms. Until recently, the prevailing view has been that legislation plays a minimal role in shaping corporate law. This Article examines the interplay between the courts and legislation in Delaware over nearly six decades. We analyze amendments to the Delaware General Corporation Law (DGCL) from 1967 to 2025 and uncover a consistent pattern of legislative responses to judicial decisions. These responses, we argue, address critical challenges inherent in Delaware's reliance on judge-made law, including the tension between norm-setting and insulating corporate insiders from out-of-pocket liability, the limitations of fiduciary-based adjudication, and other institutional constraints of the judiciary. The interplay between courts and legislation also allows Delaware to adapt to stakeholder pressures and mitigate the risk of federal intervention or other threats to Delaware's dominance. However, too frequent or openly contentious legislative overrides could undermine Delaware's dominance by threatening judicial independence and raising concerns about the effect of interest groups on Delaware's corporate law. Uncovering the pattern of legislative responses raises new questions about the forces shaping Delaware's corporate law and the underlying interaction between its judiciary and legislative branches. This Article explores some of these questions and considers implications for future research.

Date: 2025
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