Greg's Corner

Delaware to act on Backpage’s ‘good standing’

Last week, it was reported that Backpage had re-registered as a company in good standing in Delaware even though the company has been seized by the Federal Government. Delaware is known for encouraging corporations to register in their state by offering tax incentives that are both beneficial to the state and the businesses. However, it’s not unheard of for criminal enterprises to register as a Delaware corporation in order to try to hide their illegal activities.

Since the last report came out, the Delaware Attorney General, Matt Denn, has said that his office will seek to have Backpage dissolved as a corporation in Delaware. According to news station WHYY in Wilmington, Denn can do this under a new state law that gives his office the authority to dissolve LLCs that are petitioned to be dissolved. The new law, while promising, reflects that the state isn’t really actively searching for companies abusing the state’s generous corporate tax status. If it wasn’t for WHYY’s reporting and the investigating by a human trafficking support group, the state may not have realized that Backpage was still registered in Delaware.

WHYY also reports that the Attorney General’s office will not appoint an independent counsel to recommend corrections to Delaware law preventing criminal organizations from registering in the first place, or re-registering after they’ve broken the law. While Delaware’s corporate tax breaks may be lucrative for the small state, there definitely needs to be some kind of system in place for holding corporations accountable when they egregiously run afoul of the law like Backpage has.