CLAYMONT, Del. — Recently, Texas, Oklahoma, and Nevada have taken significant steps to attract corporate incorporation by proposing changes that challenge Delaware’s longstanding dominance as the preferred state for businesses to incorporate. With its specialized court system and corporate-friendly legal environment, Delaware has held this prestigious position, drawing numerous companies to its jurisdiction. However, the allure of lucrative legal battles and franchise taxes has prompted other states to adapt and attract businesses.
In Texas, a new business court was initiated last year alongside legislative measures that reduce shareholder authority, offering businesses greater legal protection against lawsuits from shareholders. This move mirrored bipartisan support similar to Nevada, where lawmakers revamped business regulations and considered a constitutional modification to establish a dedicated business court. These changes received attention from influential entrepreneurs like Elon Musk, who endorsed Nevada and Texas as preferable incorporation locales after a Delaware court invalidated his substantial $56 billion compensation package. Accordingly, Musk relocated Tesla and SpaceX to Texas, while Neuralink chose Nevada.
Meanwhile, motivated by a desire to compete, Oklahoma’s government approved business courts in two of its largest counties, aiming to make the state a haven for businesses. “This is an area where states are behaving comparably to businesses,” stated Robert Ahdieh, dean of Texas A&M University School of Law, reflecting on how states are offering competing legal products to businesses.
The departure of several high-profile companies since 2024, including TripAdvisor and Dropbox to Nevada, signals potential challenges for Delaware. Other corporate giants, such as AMC and Roblox, are also gearing up to move to Nevada, citing a preference for decision-making stability. Concerns over a possible wave of corporate exits, dubbed “Dexit,” have prompted Delaware to enact legislation limiting shareholders’ record access and bolstering executive protections, though the legislation faced criticism as being rushed.
Despite apprehensions among shareholder rights advocates about these changes weakening shareholder protections, other experts suggest average investors are more concerned with returns rather than intricacies of incorporation. Delaware Governor Matt Meyer remains confident in maintaining the state’s economic advantage, emphasizing the experience and reliability of Delaware’s legal system.
Delaware’s Court of Chancery is a crucial element in attracting corporations, providing expertise in equity and corporate law issues. This system contributes $2.2 billion to the state, signifying its significant economic impact. However, shifts in judicial decisions during the past decade have led to discomfort among corporate leaders.
Experts acknowledge the reputational strength of Delaware but also recognize that states like Nevada and Texas offer potentially more adaptable statutes, although these have yet to undergo rigorous testing. Therefore, while some companies have already moved their incorporations, Delaware continues to host over 2 million legal entities, including a large portion of Fortune 500 companies.
In Texas, Governor Greg Abbott recently signed legislation affording corporate officials more protections, including imposing stringent standards for shareholders to initiate lawsuits, which some argue risks diminishing shareholder rights. Businesses gain from potential reductions in costly legal fees, while states benefit from increased business activities and associated tax revenues.
Oklahoma and Nevada are paving paths to establish strong business courts. Oklahoma aims to roll out its business courts by 2026, determined to contest Delaware’s supremacy in business integration, as stated by Governor Kevin Stitt. Nevada is expanding its efforts too with business dockets since 2001 but acknowledges that matching Delaware’s expertise will take time. Plans are in place for Nevada’s business court by 2028, contingent on critical voter and legislative approvals for constitutional changes.