Delaware Law for Venture-Backed Companies: 2017 Year in Review
For many years Delaware corporate law was mainly public company law. But now there is a critical mass of case law relevant to private and venture-backed companies, with 2017 adding to that law perhaps more than any prior year.
Continuing a trend that began in 2015-2016, stockholder litigation in Delaware involving public companies remains drastically down from previous levels. But the Court of Chancery’s caseload is busier than ever, with the Court having requested the addition of two new judges to its current roster of five. What are all the cases? Many are lawsuits concerning private companies, often venture-backed, that were much less likely to be filed in years past – but are being filed today, perhaps due to a combination of higher valuations, larger capital tables and changing attitudes toward the efficacy of litigation in the private company sphere.
The cases of course include headline “unicorn” cases, epitomized by the much-publicized lawsuits brought in Delaware concerning Uber (e.g., Benchmark’s governance dispute with Travis Kalanick, and the stockholder derivative suit against the Uber board relating to its self-driving car division). But the cases also include disputes over many of the “inside” issues that VC-backed companies face every day. Some of the main ones are discussed below. For better or worse, the new reality for practitioners is that there is a burgeoning Delaware case law creating both guidance and pitfalls for private company practice.
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Jeffrey R. Wolters, “Delaware Law for Venture-Backed Companies: 2017 Year in Review,” (January 29, 2018)