In late March, in order to try to stop a perceived flood of Delaware companies reincorporating in other states (in particular, Nevada and Texas), the Delaware legislature enacted a significant re-write of important sections of its General Corporation Law (DGCL).  Even though it has just been a few short weeks since the Delaware legislation was enacted, it is not too early to start asking whether the legislative changes will stop Delaware companies from reincorporating in other states. As discussed below, early indications seem to suggest that notwithstanding the legislative changes, at least some Delaware corporations will continue to seek to reincorporate elsewhere.

SB 21 and Other States’ Responses

As I detailed in a recent post (here), on March 25, 2025, the Delaware House of Representatives passed, and the Delaware Governor signed, SB 21 (as amended). The Delaware Senate had previously approved the proposed legislation.)  The legislation, among many other things, amends Sections 144 and 220 of the DGCL, in order to provide safe harbor procedures for interested transactions involving controlling shareholders, directors or officers, and tonrestrict the materials subject to shareholder inspection pursuant to books and records requests. The legislation was enacted  to try to address a fear among Delaware politicians that the state is at risk of losing its preferred position for corporate incorporations, after a number of high-profile companies very publicly moved to reincorporate in Texas and Nevada.

As detailed in an interesting April 6, 2025, post by the Fenwick & West law firm on the Harvard Law School Forum on Corporate Governance entitled “Delaware Revamps Its General Corporations Law – Will It Stop Companies from Leaving?” (here), “it remains to be seen whether the changes under SB 21 will be enough to stem the tide of departures” from Delaware. In the meantime, as the law firm memo’s authors note, Delaware’s competitor states are not simply standing still.

Among other things, Texas legislators have introduced significant amendments to the Texas Business Organizations Code in order to, as the law firm memo puts it, “establish Texas as a meaningful alternative to incorporation in Delaware.” Among other things, the Texas legislation would codify the business judgment rule; allow corporations to waive jury trials in their charter documents; and eliminate attorneys’ fees in disclosure-only derivative suit settlements.

As the law firm memo’s authors note, Nevada legislators have also introduced corporate law reforms, among other things, to try to establish a dedicated business court (to mirror the similar courts in place in Texas and Delaware).

The law firm memo’s authors note their expectation that Nevada and Texas will continue to innovate in corporate law, and perhaps even that Delaware will continue to “disrupt itself.” The authors conclude their memo by noting that even with the recent significant changes to Delaware’s corporations law, “the changes may not be enough to quiet the question of choice for state of incorporation.”

There is relevant evidence pertaining to this question whether the Delaware changes will be sufficient to stem to the tide of reincorporations. The early evidence seems to suggest that they will not.

Reincorporations Since SB 21 Was Enacted

In an April 3, 2025, post on the Business Law Prof Blog (here), UNLV Law Professor Benjamin Edwards notes that since March 25, 2025, the date Delaware enacted its recent overhaul to its corporate laws, four separate companies have announced their intent to reincorporate outside of Delaware, with three announcing their intent to reincorporate in Nevada and one in Texas. As Professor Edwards notes, it is “worth considering the rationales” these companies have offered for their changes.

The first of these companies to announce its intent to reincorporate was Tempus AI, which on March 28, 2025, announced its intent to reincorporate in Delaware. The company said that its Board “considered Nevada’s statute-focused approach to corporate law and other merits of Nevada law and determined that Nevada’s approach to corporate law is likely to foster more predictability.” The company added several observations about Delaware’s judicial interpretation approach to corporate legal development, including that its Board “considered the increasingly litigious environment in Delaware, which has engendered less meritorious and costly litigation.” The company said that its Board concluded that “removing ambiguity resulting from the prioritization of judicial interpretation can offer our Board and management clearer guideposts for action that will benefit our stockholders.”

Roblox, which on April 2, 2025, announced its intent to reincorporate to Nevada from Delaware, also said that its Board “considered Nevada’s statute-focused approach to corporate law and other merits of Nevada law and determined that Nevada’s approach to corporate law is likely to foster more predictability than Delaware’s approach.” The company added that its Board has considered the “increasingly litigious environment in Delaware,” and concluded that “removing ambiguity resulting from the prioritization of judicial interpretation can offer our Board and management clearer guideposts for action.” (Readers undoubtedly will note the unmistakable echo of the Tempus AI statements in Reblox’s documents.)

Reblox also specifically noted Delaware’s recent statutory amendments to its corporations code, not that the changes were “new, untested and subject to judicial interpretation and may not fully mitigate a variety of litigation and business planning concerns for the Company.” Reblox also noted the tax savings the company could achieve by avoiding franchise tax obligations in Delaware.

On April 3, 2025, Sphere Entertainment also announced its intent to redomesticate from Delaware to Nevada. The company specifically noted the recent changes to the Delaware corporations code as well as the reasons that Delaware made the changes, observing that “although these amendments are intended to enable boards of directors and controlling stockholders to negotiate and structure transactions with more legal certainty, interpretive questions remain as prior doctrines are reconciled with new statutory mandates.” The company noted that in recent years the company and its board had been the target of “lengthy and costly” Delaware litigation. The company also noted that its own Nevada connections had grown in recent years, as well as the reduced costs that would apply if the company were to redomesticate from Delaware to Nevada. The company concluded that by redomesticating from Delaware to Nevada “we will be better suited to take advantage of business opportunities and that Nevada law can better provide for our ever-changig business needs and lowers our administrative expenses.”

Finally, on March 28, 2025, Zion Oil & Gas announced its intent to move its state of incorporation from Delaware to Texas. Part of the company’s explanation for the move is the fact that the company has its headquarters in Texas. However, the company also expressed its concerns from the Delaware judicial interpretation model of corporate law. It stated that its Board “was persuaded by the broadly held academic view …that Delaware law can be indeterminate because of its broad, flexible standards that are applied in individual cases in a highly fact-specific was. Although Texas has less corporate case law, Texas ‘has a more code-based corporate governance regime,’ and so does not depend on cases to set out the law as much as Delaware.”

Discussion

We are still in the earliest days following Delaware’s recent enactment of corporate reforms. It is far too early to reach any conclusions. However, the early evidence seems to suggest that, as a minimum, the Delaware statutory changes will not entirely stop the move of at least some companies to reincorporate outside of the state.

The reasons given by the companies for their reincorporation moves as cited above are interesting. At least these companies seem to have a uniform perception that a code-based corporations law approach is preferable – and more predictable – that a judicial interpretation based approach. The companies’ observations also seem to reflect a perception that the Delaware approach is unacceptably litigious, as well as a perception that by leaving Delaware, the companies might enjoy the benefits of a less litigious environment. It is also noteworthy that several of the companies noted the higher administrative costs of a Delaware incorporation.

Interestingly, for at least some of these companies, the fact that Delaware recently revised its corporations code didn’t seem to alter or even materially affect that analysis of where to incorporate.

Professor Edwards ended his blog post to which I linked above with a set of very interesting observations, which I quote at length here:

Ultimately, SB21 may introduce a host of new worries for companies. I understand that there may already be a lawsuit challenging SB21’s constitutionality under Delaware law. How it will be interpreted remains to be seen. The way Delaware passed SB 21 also raises big questions. Like many other law professors, I used to always teach that the Delaware legislature took its guidance from the Delaware Bar and passed the amendments give to it by the bar. Delaware abandoned that approach with SB21. Functionally, this means that any Delaware-incorporated firm is going to need to watch Delaware politics because it may pass more changes in the future. You can no longer rely on an expectation that Delaware will continue to use a technocratic process to develop amendments.