Delaware General Corporation Law, abbreviated as DGCL, is the statute governing corporate law in the U.S. state of Delaware. It was originally adopted in 1899 and since the early 20th century has grown to become the most important jurisdiction in United States corporate law. The extensive experience of the Delaware courts and the accumulated body of case law gives corporations and their counsel greater guidance than other states on matters such as corporate governance. This experience and standardization of corporate processes helps the state, and subsequently firms, minimize corporate expenditures. This in turn creates a nucleus of companies incorporating in Delaware further adding to the positive cycle.
Approximately half of the companies in the S&P 500 index are incorporated in Delaware due to the business friendly legal framework. References to Delaware General Corporation Law are often made in various SEC filings such as the treatment of appraisal rights or dissenters rights during a takeover. See also DGCL.
Delaware General Corporation Law and the Race to the Bottom
At the end of the 19th century, New Jersey enacted a liberal corporation charter, which charged low fees for company registration and lower franchise taxes than other states. This was aimed at attracting businesses from New York, Delaware adopted its own general incorporation act on March 10, 1899, aimed at attracting more businesses to its own state. This charter competition between states gave rise to the term “Race to the Bottom”. This practice was effectively ended by Governor Woodrow Wilson following the tightening of New Jersey’s laws through a series of statutes culminating in the Delaware General Corporation Law of today.
