Delaware is set to make changes to corporate law that critics say would give major investors such as private equity firms greater influence over US boards.
Lawmakers last week approved Senate Bill 313 which grants companies the power to enter into contracts with one or more stockholders, giving investors greater power over key board decisions.
The bill comes in response to several recent state judges’ ruling, including one known as Moelis which declared that agreements that turn over the power of a company to a single individual are illegal.
Supporters of the bill say this type of agreement is quite common and must be preserved.
Judges and academics have objected to the legislation, claiming that it could hurt small investors and that due to the complex nature of the bill, it should not have been rushed.
The bill will be signed into law by Governor John Carney on August 1.