Delaware’s reign as the nation’s number one place to incorporate is no secret, but what remains a secret to so many is the reason why it is number one.
Actually, Delaware’s “corporate crown” can be credited in large part to a court system whose roots reach back to feudal England.
In its infancy the Court of Chancery was set up by the King of England to hear matters where no law was in existence to settle some disputes.
Thus the King’s Chancellor was to hear the case and consider the fairness of the matter. This type of court does not exist in other legal systems and only three U.S. States have such a court.
A court of equity differs from a court of law; matters before the Court of Chancery are heard as bench trials meaning that they are tried before a judge, alone. Without juries, judges are left to make rulings considering all issues of fact and law.
For more than 200 years, the Delaware Court of Chancery has exercised exclusive jurisdiction over all matters and causes in equity in the State of Delaware.
The Court is comprised of one chancellor and four vice chancellors, all of whom are nominated by the Governor and confirmed for 12 year terms by the Senate. The five chancellors must all be well versed in law and must be Delaware citizens. The Delaware Court of Chancery has jurisdiction over a number of matters including commercial proceedings, real property, guardianship, and civil matters.
The majority of the litigation heard in today’s Delaware Court of Chancery consists of corporate, trust and estate matters. The most notable power of the Court is its ability to issue injunctions and temporary restraining orders, and is most frequently exercised in corporate differences over mergers or acquisitions.
A typical merger dispute will see a plaintiff seek temporary relief to preserve the status quo until a trial can occur. If the need should arise, the Court of Chancery may order issues of fact to be tried by a jury in the Supreme Court of Delaware.
With more than 200 years of judicial precedent, the Delaware Court of Chancery is hailed as the nation’s leading forum for settling corporate disputes, and is one of the most important reasons why Delaware is the most favorable environment for the world’s commercial affairs.