Delaware has long been the default jurisdiction of incorporation of high-growth emerging companies due to its advanced, and evolving, body of corporate law, a specialized Court of Chancery, and decades of corporate law cases and precedents. But that default assumption has now come into question.
In recent years, Delaware’s courts have issued a series of decisions that have left some founders of high growth companies unsettled. See, for instance, the recent Tesla cases, following which Elon Musk publicly blasted Delaware and both Tesla and SpaceX reincorporated in Texas. Musk is not alone in this trend to “DExit” – TripAdvisor, Dropbox, AMC Networks and Roblox are among those reincorporating in Nevada, and Dillard’s joined Tesla and SpaceX by reincorporating in Texas. Even Meta publicly announced that it was exploring a move out of Delaware in 2025.
In response, Delaware’s legislature adopted major reforms in 2024 and early 2025 (SB 313 and SB 21) codifying safe harbors for conflicted transactions, narrowing books-and-records access and strengthening management’s shield against litigation.
More and more founders and GCs of later-stage companies are now wondering if Delaware should still be the default.
So, should you care and, if so, where are companies moving?
“Y’all Street” is Open for Business
In recent years, Texas lawmakers have aggressively reformed state law to attract corporations. The state’s pitch? A pro-business legal climate, big-market economy, and fewer stockholder hassles. In 2024, Texas launched a new statewide Business Court system modeled on Delaware’s Chancery Court, with specialized judges to handle complex corporate cases. This was quickly followed in May 2025 with sweeping legislated changes (SB 29) to the Texas Business Organizations Code, in a package branded as “Texas: Open for Business”. Key provisions include:
Codification of the Business Judgment Rule:
Texas now explicitly codifies the business judgment rule and the high bar to rebut it, giving directors stronger protection when their decisions are challenged.
Limits on Derivative Lawsuits:
Allowing corporations to set a minimum ownership threshold (up to 3%) for stockholder-plaintiffs to bring a derivative suit. This threshold is higher than most states and drastically curbs the ability of small stockholders to sue on behalf of the corporation.
Records and Litigation Procedure:
Limiting what constitutes as corporate “books and records” available for stockholder inspection. For instance, emails and electronic communications are excluded. It also allows companies to include provisions in their charters or bylaws waiving the right to jury trials in corporate disputes, meaning cases would be heard solely by judges (as they are in Delaware’s Chancery Court).
In addition to the changes effected by SB 29, Texas later enacted several additional measures to allow certain Texas-listed public companies to adopt higher thresholds for stockholder proposals and to authorize the board of directors to delegate more discretion to the corporation’s executives.
Pros and Cons of the Y’All Street
The Texas proposals seem very attractive, especially to issuers and their insiders, but, in practice, their effectiveness is hard to measure. The new courts lack Delaware’s decades of precedent making Texas less predictable for companies. So, certainty with respect to a few specific matters is offset by uncertainty with respect to treatment of a myriad of others. Additionally, incorporating in Texas might expose a corporation to Texas venue for certain lawsuits.
Texas has certainly had some luck in attracting private and public companies as of late and we are working with a number of companies in exploring Texas as a potential alternative to Delaware.
Nevada: The Silver Sanctuary
Like Texas, Nevada’s appeal lies in providing certainty to companies and their insiders with respect to certain specific common transactions. It automatically offers directors and officers strong protections. Key features of Nevada’s corporate environment include:
Robust Liability Shields
Nevada law automatically exculpates directors and officers from personal liability for breaches of fiduciary duty (except in cases of intentional misconduct, fraud, or knowing law violations). In Delaware, by contrast, corporations must opt in to exculpation (and even then, it covers only duty of care, not loyalty, and only recently were officers allowed similar protection). Nevada’s default rule thus gives executives peace of mind that honest mistakes won’t easily lead to personal liability. Likewise, Nevada statutes make it easier to indemnify and protect managers, which can reduce D&O insurance costs.
Consideration of Other Interests
Nevada explicitly permits boards to consider long-term corporate interests and the impacts on employees, customers, the community, etc. when making decisions. Directors are not strictly bound to maximize immediate stockholder value at all costs. This allows directors to justify decisions that favor sustainable growth or other constituencies, without breaching duty to stockholders. This contrasts with states like Texas or Delaware, where directors must generally act in the best interests of the corporation and its stockholders, with true stakeholder balancing available only if the corporation opts into a Public Benefit Corporation framework.
No Franchise Tax
From a financial perspective, Nevada imposes no corporate franchise tax and so may prove cheaper to operate in especially for early-stage companies.
Pros and Cons of the Silver Sanctuary
Nevada offers what Nevada usually offers – more freedom to operate at the expense of less predictability. Nevada’s business courts were established in 2001, but those courts have not published nearly as many written opinions, or as routinely, as Delaware’s Court of Chancery. The law, while more insider-friendly, is also less modernized in other areas.
So, at the end, what should you do?
The answer is not clear-cut. For now, there is no mass flight out of Delaware but certainly lots of discussions are taking place. No clear winner has emerged for the alternatives but it does appear that more public companies are leaning towards Texas while more private companies are considering Nevada. But the vast majority of new incorporations are still taking place in Delaware.
It all comes down to perception, expectation and, perhaps in the future, actual experience. To help your thinking, a chart summarizing key features of the three regimes may be found [here].
