Abercrombie’s Reincorporation Bid: Who Needs a Poison Pill if You’ve Got a Buffet Table?
Today, a California resident can incorporate her shipping business in Delaware, register her ships in Panama, hire her employees from Hong Kong, place her earnings in an asset-protection trust formed in the Cayman Islands, and enter into a same-sex marriage in Massachusetts or Canada — all the while enjoying the California sunshine and potentially avoiding many facets of the state’s laws.
- From the editorial introduction to The Law Market (Oxford UP: 2009), by Erin. A. O’Hara and Larry E. Ribstein
And so too, apparently, a Delaware-incorporated company can reincorporate in another state if that state happens to offer friendlier anti-takeover protections. Or at least that is the suggestion made by Steven Davidoff in a column in last week’s NY Times DealBook, echoed by Ribstein himself in this morning’s “Truth on the Market” blog entry (republished in the SM Blogwatch).
Ribstein’s and O’Hara’s book is premised on the idea that in an age of increasing globalization and mobility, the law has evolved into a kind of buffet table, in which an individual or corporation can often choose from among a variety of jurisdictions in order to be bound by the law that is most palatable. The recent move by Abercrombie & Fitch to solicit shareholder approval for a reincorporation from Delaware to Ohio — their preliminary proxy statement was filed December 22 — provides, for Ribstein, another example of the phenomenon.
“This situation illustrates how jurisdictional choice makes contractual what would otherwise seem to be mandatory takeover rules,” Ribstein writes. As both Davidoff and Ribstein detail, Abercrombie will be better able to defend itself from an unwanted buy-out if it is bound by Ohio, rather than Delaware, law.