Delaware is a material risk. Unbelievable!

Some US companies incorporated in Delaware, classify Delaware as a material risk. Company by-laws combined with Delaware law make life difficult for shareholders and potential shareholders. They can prevent changes to members of the board, prevent or delay takeovers and limit certain forms of lawsuits. 

Now these companies do not mention that the reason they choose Delaware as the place of incorporation is because of these restrictions and difficulties. They protect shareholders more than in other states.

Why on earth then do they transform this advantage into a material risk highlighted in the annual reports? In parallel other companies also incorporated in Delaware do not declare any Delaware related risk. Amazon, for instance, is incorporated in Delaware, but declares no related risk.

In addition the risks are not always similar. Bristol-Myers Squibb Company have a long paragraph blaming the Court of Chancery of the State of Delaware for the restrictions they impose on legal claims against shareholders. These ‘just what they want’ provisions have become risks. They decided to incorporate their company in Delaware

Abbvie concentrate more on coercive takeover practices and inadequate takeover bids, but list restrictions on directors and stockholders.

Risk statements are becoming more and more outrageous.