Delaware corporation

From Academic Kids

A Delaware corporation is a corporation chartered in the state of Delaware in the United States.

Delaware is well-known as a corporate haven. Many major corporations are chartered in Delaware because the state charges no corporate income tax on companies not operating within the state—although all Delaware corporations must pay an annual corporate franchise tax. Moreover, Delaware's laws, particularly the Delaware General Corporation Law, are designed to allow maximum flexibility to corporate operations. Under Delaware law, a corporation need not have a physical presence in the state, save for a registered agent to accept service of legal process and pay the corporation's annual franchise taxes, and officers and directors do not have to reside in the state.

Despite having their corporate headquarters in the Silicon Valley, many Californian companies incorporated in the state of Delaware seeking better protections against hostile take over. For example, Silicon Graphics was incorporated in California in 1981, but it reincorporated in Delaware in 1990.

Because of the large number of major corporations chartered in Delaware, the courts in that state are generally regarded as more experienced in the application of corporate law than the courts of other states. Disputes over the internal affairs of Delaware corporations are frequently filed in the Court of Chancery, which is one of the last separate courts of equity (as opposed to law) in any U.S. state. Because it is a court of equity, there are no juries, and its cases are decided by the "judges" of the Court: one Chancellor and four Vice-Chancellors.

Because the Court of Chancery cannot award money damages, Delaware's Superior Court, the trial court of general jurisdiction, also hears and considers a large number of cases between corporations involving claims for money. Finally, due to the number of corporations which choose to incorporate in Delaware, the Federal Bankruptcy court in that state handles many high-profile insolvencies, and the United States district court for the District of Delaware considers many patent disputes between Delaware corporations.

In the 1980s, then-Delaware Governor Pierre Samuel du Pont IV shepherded the Financial Center Development Act through the Delaware General Assembly. The Act had the practical effect of virtually eliminating usury laws in Delaware, giving banks an immediate incentive to start credit-card subsidiaries in Delaware, as Federal law provides that usury limitations, or lack thereof, in effect in the bank's home state apply everywhere the bank does business. This encouraged an explosion in competition for the credit card consumer's dollar. A prime example is MBNA America Bank, which has grown from insignificant roots as a small bank operating out of a made-over supemarket to the world's largest independent credit card issuer.

Incorporated in Delaware

Many of the United States' largest corporations are incorporated in Delaware, and many foreign corporations have their US subsidiaries incorporated there.

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