For more than a century, Delaware has been the go-to state of incorporation for American businesses. Even though a business may file Articles of Incorporation in any state (even if the state bears no relation to where it is actually doing business), more than two-thirds of corporations choose Delaware.
There are a number of reasons why Delaware has become the favored location for business, many of them related to litigation. Delaware has a reputation for having somewhat corporate-friendly laws, and has a specialized business court–the Delaware Court of Chancery–whose judges are sophisticated in business litigation. Moreover, current laws governing personal jurisdiction make it easier for corporations to funnel cases against them into the state in which they are incorporated, again making it more likely that they will benefit from business-friendly laws and business-savvy judges.
But times may be changing. The Wall Street Journal reported yesterday that Meta is exploring the possibility of leaving Delaware and reincorporating in Texas or another state. The story explains:
Executives and controlling shareholders of public companies have long expressed frustration with the Delaware Court of Chancery, which has become home to a thriving shareholder plaintiffs’ bar. The big companies that have reincorporated elsewhere have tended to have a dominant owner potentially affected by the recent Delaware decisions.
Meta is not alone. Earlier this week Dropbox formally announced its intent to reincorporate in Nevada, and yesterday Pershing Square CEO Bill Ackman announced that his his management company would also be reincorporating in Nevada.
To be sure, Delaware remains the dominant state for incoporation, at least for now. But with nearly half the state establishing their own specialized business courts and certain states (like Nevada and Texas) actively courting businesses, it would not be surprising to see a very different corporate litigation landscape in the coming years.
The Interdependent Third Branch 