Delaware hosts over 1.8 million registered business entities and more than 60% of Fortune 500 companies, but that dominance is cracking. Tesla reincorporated to Texas with 84% non-controller shareholder support after a Delaware court invalidated a shareholder-approved compensation package. Dropbox, TripAdvisor, and Trade Desk have announced moves to Nevada. SpaceX and Meta are eyeing Texas. The exits are accelerating.
The legal cases driving this are not edge cases. A Delaware court invalidated Activision's merger approval process despite 98% shareholder support and no evidence of harm. It ruled that Moelis and Company's long-standing founder agreements, disclosed at IPO, were invalid, requiring a legislative patch. It told TripAdvisor that simply reincorporating to Nevada required minority shareholder approval because reducing litigation exposure counted as a 'non-ratable benefit' to the controller. The pattern is consistent: courts rewriting disclosed, accepted terms after the fact.
The full analysis worth reading here comes from Ben Potter's team at Latham and Watkins, open-sourced as a PDF comparison of Delaware, Nevada, and Texas across litigation risk, D&O indemnification, takeover defenses, and business judgment rules. The critical structural detail: Nevada codifies fiduciary duties in statute, not case law, which is exactly the predictability Delaware once promised and is now squandering. Texas operates on case law like Delaware, leaving it theoretically exposed to the same drift over time. That distinction alone makes the Nevada vs. Texas choice non-obvious, and the Latham document is where to start.
[READ ORIGINAL →]