New York City-based translation services company TransPerfect is shifting its state of incorporation to Nevada in what may be payback for clashes with the state’s judiciary.
Industry publication, Slator.com reported that Phil Shawe, who won a Delaware Chancery Court auction over former co-owner Elizabeth Elting, said it was the right time for the move.
Elting and Shawe, a former couple, each owned a 50-50 share of the company. That led Chancery Court to appoint a custodian for the company who later recommended a sale to Shawe. The deal was upheld despite objections from Elting.
Crain’s New York reported the lengthy legal battle led to legal expenses totaling a mind-boggling $250 million for a company with more than $600 million in annual revenue.
In confirming the decision known internally as DExit Shawe went on to cite a favorable corporate environment in the state that has long sought to take away incorporation business from Delaware.
It is possible the Delaware judiciary and corporate legal community is breathing a sigh of relief, despite the loss of revenue from the change of domicile.
In the battle for TransPerfect, Shawe frequently clashed with Chancellor Andre Bouchard and the custodian.
There was also the formation of a well-financed group of TransPerfect employees that among other things sought a law that would result in a three-year cooling off period if extremely rare ownership deadlocks end up in Chancery.
The group went on run ads in states outside Delaware, a move that rankled many Delawareans.
Shawe’s move also demonstrates a weakness that comes with Delaware being a top dog in incorporations and corporate law.
While big companies may prefer to incorporate in a state with a strong judiciary and more predictable body of law, enterprises dominated by one or a few individuals may opt to take their chances with states like South Dakota or Nevada.
Chancery Court, by contrast, faces the delicate task of balancing management and shareholder interests. Hard charging Shawe was no fan.
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