In Delaware every fall, The Secretary of State holds a three-day conference for Delaware Registered Agents and the key people at the Division of Corporations. This year, we just finished the 24th annual conference and, having been in business 30 years, I’ve been to almost every one of them. But this year was particularly interesting.
The highlight of the event is the “Annual Report” given by Richard J. “Rick” Geisenberger, the chief Deputy Secretary of State and Director of Corporations. This year he reported:
Delaware is now the home to 890,000 domestic entities. They include 260,000 corporations and 630,000 LLCs, LPs and Statutory Trusts. An additional 11,000 entities from outside Delaware are registered here as “foreign Entities”. Delaware, which has always had more chickens than people, now has about one company for every person who lives in the State. Most states have about 1 company per 20 people.
Delaware is home to 63% of all fortune 500 companies this year and was the choice of 734 of the 907 new IPO’s (Initial Public Offerings) in the past 7 years. IPO activity reflects the dismal economic business climate in the USA today. It wasn’t long ago that more than 400 IPO’s were launched in a single year, then the total fell abruptly to 28 new IPOs in 2008, then 37 in 2009 and 53 so far this year. The upward trend the past three years could be called a recovery, but still a poor showing when compared to the boom years of the past.
A new trend is emerging however, giving hope for more business. Foreign companies, especially from China, are incorporating in Delaware and going public in the USA. Watch for this trend to continue as China becomes the dominant player in manufacturing for the global markets.
Delaware’s Court of Chancery still makes the news regularly for its many high-profile cases. This year we saw a battle between EBAY and CRAIGSLIST fought in Delaware just up the road from my office. Meg Whitman, and the EBAY group, won this one.
Delaware has been working with the U.S. Treasury Department and the U.S. Department of Justice to reduce the incidents of the fraudulent use of Delaware companies in the International arena. Since Delaware prohibited Bearer Shares in 2003, it has been proactively issuing regulations that are designed to help prevent the fraudulent use of companies.
The U.S. Department of the Treasury has proposed several drafts of a plan to make the ownership of companies easier to trace. Currently, Registered Agents are not obliged to keep Beneficial Ownership information on the companies we form for our customers. In Delaware we are required to keep an up-to-date record of the “Communication Contact”. However, in the future the Department of the Treasury is recommending that Registered Agents will be responsible for keeping Beneficial Ownership information accurate and current.
As a final bit of good news, Mr. Geisenberger reported that the Division of Corporations brought in $878 Million dollars in the last fiscal year which accounted for 27% of the State of Delaware’s budget, emphasizing the importance of this effort for the whole state.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.