Delaware Freezes Out Russia-Linked Startups, Extending Sanctions’ Reach

The commercial hub of Delaware is blocking startup ventures with past ties to Russia from maintaining their corporate standing in the state, ensnaring some tech firms that say they have little or no current connection to Russia following its invasion of Ukraine, WSJ Pro Bankruptcy reported. The Delaware Division of Corporations this year has told dozens of technology ventures incorporated in Delaware that they can’t do further business with the state after determining their corporate filings contained individuals or business addresses in Russia, according to lawyers and startup founders. Startup ventures that spring from Russia’s technology sector regularly incorporate in Delaware to establish a presence in the U.S. and seek venture investment, drawn to the state’s reputation as a hospitable corporate environment. Delaware is now extending U.S. sanctions meant to punish Russia for its invasion of Ukraine to business ventures incorporated in the state. Those that are blocked are in a legal limbo—still existing as Delaware corporations, but barred from making customary corporate filings or paying taxes to stay in good standing with the state. That puts legal and financial pressure on startups that were flagged based on individual connections to Russia, such as an individual corporate director, officer or investor located in the country. Blocked startups also can’t raise outside financing because they can’t amend their articles of incorporation in Delaware to issue new capital stock, according to several startup founders and their lawyers. (a href="">Read more. (Subscription required.)