DExit: Why Some Companies Are Leaving Delaware

Key Takeaways

• “DExit” Movement: There is a widely-reported trend of companies reincorporating out of Delaware into states like Texas, Nevada, and Florida due to recent Delaware court decisions affecting director protections and compensation packages. 
• Legislative Responses: Delaware has responded with new statutes to clarify and codify rules around controlling shareholders and board decision-making, but the long-term impact depends on judicial interpretation. 
• Texas Business Innovations: Texas has introduced business courts, codified the business judgment rule, and allows companies to set ownership thresholds for shareholder litigation, aiming to provide more certainty and innovation for corporations. 
• Review Incorporation Strategy: Board and legal teams should assess current state of incorporation and evaluate potential benefits and risks of moving to Texas, Nevada, or Florida, considering recent legislative and judicial changes.