Delaware hosts over 1.8 million registered business entities and more than 60% of Fortune 500 companies, but that dominance is eroding. Tesla reincorporated to Texas with 84% non-controller shareholder support after a Delaware court invalidated a shareholder-approved compensation package twice. Dropbox, TripAdvisor, Trade Desk, and others have followed or announced plans to follow. The destination states are Nevada and Texas.
The case against Delaware is specific, not rhetorical. 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 founder agreements, disclosed at IPO and unchallenged for years, were void, requiring a legislative fix. It decided that simply moving incorporation to Nevada constituted a non-ratable benefit to controllers, requiring minority shareholder approval to leave. These are not edge cases. They represent a pattern of courts rewriting disclosed terms after the fact.
The full piece includes a state-by-state comparison from Ben Potter's team at Latham and Watkins, open-sourced as a PDF. The core tradeoff: Delaware still has deeper case law and a specialized judiciary, but Nevada codifies fiduciary duties in statute rather than case law, which is the precise vector Delaware judges have exploited. Texas relies on case law like Delaware, meaning the same politicization risk exists there in theory. The Latham analysis is the primary reason to read this in full.
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