The American Investment Council (AIC), the premier lobbying group representing the US private equity industry, has thrown its support behind a contentious legislative overhaul of Delaware’s corporate governance laws, according to a report by Bloomberg.
The proposed reform, labelled the “billionaires’ bill”, which has reignited long-standing debates following Elon Musk’s high-profile legal battles, aims to recalibrate shareholder litigation standards – potentially making it more difficult for investors to challenge corporate executives in court.
AIC, whose backers include industry heavyweights Blackstone and KKR, has deployed a team of five lobbyists to advocate for Senate Bill 21, which seeks to lower the bar for approving transactions involving controlling shareholders and executive compensation packages.
Lawmakers have reported an intense lobbying push, with one describing the atmosphere at the statehouse as a swarm of industry influencers.
Private equity firms have a direct stake in the outcome, as they frequently retain significant ownership in companies post-IPO – exposing them to extended shareholder litigation risks that could impact fund performance.
Larger PE firms, in particular, stand to benefit, as the proposed reforms may mitigate shareholder challenges related to take-private and take-public transactions, according to Bill O’Neil, a Partner at Winston & Strawn who advises private equity clients.
The bill successfully passed Delaware’s House of Representatives on Tuesday and is now poised for enactment. While the legislation is framed as a response to growing concerns over the state’s rigid corporate statutes, its momentum accelerated after Musk, the world’s wealthiest individual, announced the reincorporation of his companies in Texas and Nevada.
His move came in the wake of the Delaware Chancery Court’s rejection of his record-breaking Tesla pay package, fuelling renewed scrutiny of the state’s business climate.
Opposition to SB 21 has emerged from public pension funds and shareholder advocacy groups, who argue that fears of a corporate flight from Delaware are overstated. Detractors contend the bill represents a windfall for billionaires and entrenched corporate insiders at the expense of minority shareholders.
