Fullerton Builder Reincorporating in Delaware

Covington Technologies of Fullerton said Monday that its shareholders have voted to change the company’s state of incorporation from California to Delaware in a bid to protect its directors from potential liability suits.

Delaware is an increasingly popular state of incorporation because its laws tend to give managers more latitude than many other states. Faced with escalating costs for liability insurance, a growing number of companies have reincorporated in Delaware, which allows corporations to reduce or eliminate director and officer liability.

In addition, Covington spokeswoman JoEtta Bandy said the company, which builds prefabricated houses, was attracted to Delaware because its laws make it easier for companies to thwart hostile takeovers.

Three current or former Covington directors were named along with the company as defendants in a patent-infringement suit filed last month, but Bandy said the case had no bearing on the reincorporation decision.

One analyst who follows Covington agreed. “They did it for their directors. I don’t think they’re too worried about somebody coming in on them,” said Kenneth Campbell of Audit Investments, a research firm in Montvale, N.J.

Under the reincorporation plan, each share of Covington Technologies stock will be converted into one share in a newly created company, Covington Development Group Inc.

Covington said it expects the change to be completed within 30 days. The change will have no effect on the location of the company’s operations.