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' rulings, 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 argue that this type of agreement is quite common and must be preserved in order to facilitate efficient corporate governance and adapt to the evolving landscape of business ownership. They claim that major investors are often better positioned to make swift and informed decisions that could be beneficial to the company's long-term goals.

However, not everyone is convinced. Judges and academics have criticized the legislation, voicing concerns that it could hurt small investors. According to them, the complex nature and potentially far-reaching impacts of Senate Bill 313 warrant more deliberation and should not have been rushed through the legislative process.

The criticisms point to the potential for increased investor dominance to marginalize smaller shareholders, thus exacerbating inequalities between different classes of stockholders. Critics argue that such a shift might lead to an imbalanced corporate governance structure, where a handful of major investors hold inordinate sway over crucial decisions, potentially sidelining the interests of minority shareholders.

On August 1, Governor John Carney is expected to sign the bill into law, formalizing these changes. This move will mark a pivotal point in Delaware's corporate law, reflecting broader trends in corporate governance and investor relations across the United States.

As Delaware houses a significant number of incorporated US companies due to its business-friendly legal framework, changes in its corporate laws often set a precedent for other states. This new legislation could serve as a benchmark for how corporate governance evolves in response to pressures from major investors and market dynamics.

The law is likely to spur a heated debate among regulatory bodies, investors, and corporations regarding the balance of power in boardrooms and the protection of minority shareholders. As companies navigate this new legal landscape, the repercussions of this shift will gradually unfold, influencing corporate strategies and governance practices.

As this legislative development gains traction, stakeholders within and outside Delaware will be closely watching its implementation and the resulting impact on corporate governance. This law embodies a critical intersection of legal adaptation, investor influence, and the foundational principles of corporate equity.