Or, It’s Impossible to Appease Critics Making Bad Faith Arguments (So Stop Trying)
Below is the email I wrote my local representatives, in response to a recent announcement from a notable Delaware-registered business entity.
Dear Rep. Gorman and Sen. Sokola:
Greetings, I hope this finds you well. I wanted to bring a recent piece of news to your attention, as it bears on the General Assembly’s treatment of corporate law.
Last week, Silicon Valley venture capital firm Andreessen Horowitz announced it had “decided to move the state of incorporation of our primary business, AH Capital Management, from Delaware to Nevada.” In a blog post titled “We’re Leaving Delaware, And We Think You Should Consider Leaving Too,” the firm’s legal and policy leads listed a number of complaints about Delaware law that pertain specifically to how Delaware’s corporate code operates – that is, to how Delaware law affects corporations. (These complaints echo those made by outside supporters of SB21.)
Here’s the thing, though: Andreessen Horowitz (AH Capital Management) is not a Delaware corporation. It’s a Delaware LLC.
As a limited liability company, it can’t “move” its incorporation anywhere; it doesn’t exist. More to the point, none of Andreessen Horowitz’s complaints about Delaware apply to their firm, or to any of the subsidiaries they have registered here as LLCs or Limited Partnerships (LPs), as a quick search of the DE Division of Corporation Business Entity Filing database will attest. This distinction is not a mere matter of synonyms, but one with material consequences for how a business operates. As legal scholars have observed, “An LLC By Any Other Name Is Still Not A Corporation.”
It seems unlikely that the leaders of the world’s wealthiest venture capital firm cannot distinguish between two basic types of business entity structure. It seems equally unlikely, then, that Andreessen Horowitz’s decision to leave Delaware is motivated by their stated reasons. Their critique, in other words, appears to be made in bad faith.
As you and your colleagues contemplate further revisions to Delaware’s corporate law, I urge you to keep this evidence of deceptive arguments from Delaware’s critics in mind – whether they come from business owners, directly, or the locally influential legal advocates they employ.
Sincerely,
your constituent,
DN
NB: most of the outlets reporting on this move – NYT, Bloomberg, Inc – reproduce Andreessen Horowitz’s statement without comment, and thus its errors.
Dael A. Norwood 