It was in Delaware that the first legal act in the dispute between Elon Musk and Twitter opened on Tuesday. But why does this small eastern American state find itself at the heart of a saga involving billions of dollars?
The legal domicile of thousands of large corporations, Delaware is known for its favorable taxation and renowned legal system for resolving corporate disputes.
Fortune 500
Nestled on the east coast, just under a two-hour drive from the federal capital Washington, Delaware has been chosen by Twitter in 2007 to establish its headquarters there, rather than California, where the social network has its operational headquarters. And the firm with the blue bird is far from being the only one to have made this choice: the beverage giant Cokethe world leader in the distribution Walmartor even the aeronautical juggernaut Boeing… All are registered in Delaware.
According to official statistics from the Delaware Business Service, more than 1.6 million businesses have taken up legal residence in the state. This is much more than the number of its inhabitants, close to 970,000. More than two-thirds of the Fortune 500 list of America’s largest corporations have Delaware as their legal domicile. A simple mailbox is however very often the only reminder of the presence of all these companies in the State.
Taxation and opacity
Among the reasons that lead so many businesses to register in Delaware is the state’s reputation for the ease and speed with which it can process business registration. For $1,000, the Delaware Companies Service can register a new entity in an hour flat. Completed in just one day, the normal service costs from 100 to 200 dollars. “Firms choose Delaware not for a single reason, but because we provide a complete set of registration services,” says the state on its official website.
But this ease of procedure comes at the expense of transparency. Delaware does not require the name of the actual beneficiary when registering, and therefore allows companies with little transparency to guarantee near total secrecy to their owners. Screen companies are thus flourishing on the very soil of the United States, as revealed by the Panama Papers in 2016. And this opacity is accompanied by a very advantageous tax policy for companies. If a company does not conduct its operations in the State (which is the case for the majority of them), it will not have to pay taxes on its income, but will instead pay a franchise tax , much more moderate.
For these reasons, Delaware is often considered a corporate tax haven.
Legal ecosystem
With this influx of companies, a whole legal ecosystem has developed in Delaware, allowing it to acquire a reputation for excellence in handling business disputes. The Musk-Twitter affair will thus depend on the Delaware Court of Chancery, a court specializing in business law, established in 1792 on the model of the British Court of Chancery.
“The Delaware Court of Chancery is widely recognized as the preeminent forum in the United States for the arbitration of disputes involving the internal affairs of thousands upon thousands of Delaware businesses and other entities,” the institution boasts on its own website. . “His unique competence and his experience in business law are unparalleled”, she also highlights, since its seven judges are specialists in corporate litigation. And notable fact in the United States, this court never calls on a jury to decide.
The legal home of thousands of large corporations, Delaware is known for its favorable taxation and renowned legal system for resolving corporate disputes. Nestled on the east coast, just under two hours drive from the federal capital Washington, the Delaware was chosen by Twitter in 2007 to establish its headquarters there, rather than California, where the social network has its operational headquarters. And the firm with the blue bird is far from being the only one to have made this choice: the beverage giant Coca-Cola, the world leader in distribution Walmart, or even the aeronautical juggernaut Boeing… All are registered in Delaware. According to official statistics from the Delaware Business Service, more than 1.6 million businesses have taken up legal residence in the state. This is much more than the number of its inhabitants, close to 970,000. More than two-thirds of the Fortune 500 list of America’s largest corporations have Delaware as their legal domicile. A simple mailbox is however often the only reminder of the presence of all these companies in the State. ease and speed with which it can process a business registration. For $1,000, the Delaware Companies Department can register a new entity in one hour flat. Completed in just one day, the normal service costs from 100 to 200 dollars. “Firms choose Delaware not for a single reason, but because we provide a complete set of registration services,” says the state on its official website. But this ease of procedure comes at the expense of transparency. Delaware does not require the name of the actual beneficiary when registering, and therefore allows companies with little transparency to guarantee near total secrecy to their owners. Screen companies are thus flourishing on the very soil of the United States, as revealed by the Panama Papers in 2016. And this opacity is accompanied by a very advantageous tax policy for companies. If a company does not conduct its operations in the State (which is the case for the majority of them), it will not have to pay taxes on its income, but will instead pay a franchise tax , much more moderate. For these reasons, Delaware is often considered a tax haven for businesses. With this influx of businesses, a whole legal ecosystem has developed in Delaware, allowing it to acquire a reputation for excellence in handling corporate disputes. The Musk-Twitter affair will thus depend on the Delaware Court of Chancery, a court specializing in business law, established in 1792 on the model of the British Court of Chancery. “The Delaware Court of Chancery is widely recognized as the preeminent forum in the United States to arbitrate disputes involving the internal affairs of thousands upon thousands of Delaware businesses and other entities,” the institution boasts on its own site. “His unique competence and experience in business law are unparalleled,” she also highlights, since her seven judges are specialists in business litigation. And notable fact in the United States, this court never calls on a jury to decide.