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Business Insider
6 minutes ago
- Business
- Business Insider
Elon Musk urged businesses to ditch Delaware. Nevada saw an opportunity.
Elon Musk has made his feelings about the state of Delaware clear. "Companies should get the hell out of Delaware," Musk wrote last August on X. Although Delaware's Secretary of State told Business Insider its role as the "corporate capital of the world" is not under threat, states like Wyoming, Texas, and Florida — and especially Nevada — have emerged as popular alternatives. Musk's unhappiness with Delaware began in 2024 after a judge for the state's Court of Chancery denied his multi-billion-dollar pay package. In response, Musk attacked the court on X and advised others to avoid incorporating in Delaware. The billionaire has since moved Tesla and SpaceX to Texas. Musk wasn't the only business leader ready to ditch Delaware, as it turns out. VC firm Andreessen Horowitz announced its departure from the state in July, saying recent rulings in the Court of Chancery undermined its "reputation for unbiased expertise." Roblox, Dropbox, and Trump Media have also left Delaware. Delaware is considered a premier state for businesses to incorporate, in part, because of the Delaware General Corporation Law. The business-friendly statute is the foundation of its corporate law. While there are various reasons a business might incorporate outside Delaware, Musk and companies like Andreessen Horowitz said they are seeking a more favorable legal landscape. Nevada sees an opening Some of the companies that have left Delaware have chosen Nevada as their new corporate home. Andreessen Horowitz is one. The company said in its blog post that Nevada law provided less "legal uncertainty" than Delaware. Bill Ackman, the billionaire CEO of Pershing Square Capital Management, said in February that his firm would also move from Delaware to Nevada. "Top law firms are recommending Nevada and Texas over Delaware," Ackman posted to X at the time. Nevada isn't just seeking companies to incorporate there, however, it also wants to attract their offices and workers. "What it's about is making sure that we're not just getting those businesses to incorporate on paper, but we also want their physical assets here," Clark County Commissioner Michael Naft told Business Insider. Clark County is home to Las Vegas. Len Jessup, a general partner with Desert Forge Ventures, which is based in Las Vegas and invests in early-stage companies, told Business Insider that he's seen more corporations choose Nevada as a home. "We've seen founders moving here — a lot of them from California because it's adjacent — but they're coming from all over," Jessup said. They're being drawn to Nevada for a variety of reasons, including no state income tax on individuals, no capital gains tax, and what Jessup described as lighter regulations. While Nevada doesn't have an individual income tax, it does enforce a commerce tax on businesses earning more than $4 million in gross revenue. Lindsey Mignano, a founding partner of SSM Law PC who represents emerging tech companies, said the different tax structures "may make less of a difference" in the early stage because "revenue is not yet high, but at the later stages of a company's lifecycle, this can absolutely add up." Clark County is hoping to draw more companies to the region by developing what it's calling an "innovation district." "It has been something that we've been really methodical about. We've gotten stakeholders together, but at the end of the day, Clark County's innovation district is really about lifting up what's happening here organically and using those assets to attract more like-minded businesses and individuals to be part of that space," Naft said. For Jessup, getting companies to incorporate in Nevada is a way to expand the state's economy, which mostly relies on its hospitality and tourism industries. "My goal is, 10 years down the road, I want to have helped to create companies in tech and biotech — so, outside of gaming, hospitality, sports, and entertainment — that add to the ecosystem and help to diversify the economy," Jessup said. The Las Vegas Convention and Visitors Authority reported that the number of visitors declined 11.3% this June compared to the same time last year. "The state still does these cycles of boom and bust. I'd like to see us add more companies locally, like Switch's data center company, that are a little bit more recession-resistant," Jessup said, referring to the AI, cloud, and data center company. Naft said officials are still determining details about the Clark County innovation district, but are hopeful it could help solidify it's foothold as a business capital. "We want to make sure that people understand that we are open to new ideas," he said.
Business Insider
3 days ago
- Business
- Business Insider
Elon Musk called on corporations to leave Delaware. Delaware says it's doing just fine.
Elon Musk has a Rolodex of feuds: US President Donald Trump, "212" rapper Azealia Banks, and even a British diver who helped save a Thai soccer team stuck in a flooded cave. In 2024, he set his sights on Delaware. Although Delaware is generally considered a business-friendly state with a robust corporate legal system, Musk tried to shatter that reputation after a judge at Delaware's Court of Chancery denied his multi-billion-dollar pay package, which was approved by Tesla's board. In typical Musk fashion, he used his X account as a megaphone to blast the court and urged others to incorporate their business elsewhere. "Companies should get the hell out of Delaware," Musk wrote last August. Musk moved SpaceX and Tesla from Delaware to Texas in 2024. Some prominent companies have since followed Musk out of the state. VC firm Andreessen Horowitz is the most recent high-profile company to exit Delaware because, the company said in a blog post, recent rulings by the Court of Chancery had undermined its "reputation for unbiased expertise." Companies like Roblox, Dropbox, and Trump Media have also left the state. Texas, Nevada, Florida, and Wyoming have become preferred destinations for some business leaders in a shift that some have dubbed "Dexit," a reference to the UK's withdrawal from the European Union, known as Brexit. The state's historical dominance as a destination for companies to incorporate is rooted in the Delaware General Corporation Law, a business-friendly statute that acts as the bedrock of its corporate law. Companies leaving Delaware might do so for various reasons, including privacy or tax preferences, but for Musk, it's about finding greener legal pastures. For its part, Delaware isn't overly worried. Dexit? Not according to Delaware. Attorneys and state officials still consider Delaware the premier destination for corporations, despite Musk's criticism. "Yes, there has been some political rhetoric about leaving Delaware," Delaware Secretary of State Charuni Patibanda-Sanchez told Business Insider. "What our data is showing is that Delaware is still the preeminent place to incorporate your business." Patibanda-Sanchez's office oversees the Division of Corporations, which says the state was home to over 2.1 million corporations and two-thirds of Fortune 500 companies in 2024. Still, the number of business entities formed in Delaware has slowed slightly, falling from about 313,000 in 2022 to about 289,000 in 2024. Joshua Margolin, a partner at Selendy Gay who is familiar with corporate governance in Delaware, told Business Insider that the state's decadeslong experience navigating corporate disputes is a big reason the state remains a top destination. "You've got judges who sit on the Court of Chancery who have spent their entire careers litigating corporate disputes," Margolin said. "That is invaluable to have that experience on the bench when you're bringing a dispute, whether you're the plaintiff or the defendant." Margolin added that Delaware has a "breadth and depth of case law and precedent that I don't think other states can rival." "I think if you went back over time, you'd see various states creating business courts that are in one way or another meant to try to mirror the expertise of the Court of Chancery," he said. Lindsey Mignano, founding partner of SSM Law PC, which represents emerging tech companies, said Delaware remains the "simplest, most cost-effective choice" for business founders. Mignano said many of the documents related to governing financing for startups are based on Delaware corporate law, meaning attorneys would need to adopt those templates to fit the requirements of other states. "This is an expensive lift from a practical perspective," Mignano said. Patibanda-Sanchez said, for now, the state isn't sweating. "We don't believe that Delaware's position as the corporate leader and corporate capital of the world is being threatened in any significant way," Patibanda-Sanchez said. "We always come under threat, though, because states are always trying to get a piece of the action." In February, Delaware Gov. Matt Meyer told Business Insider that things may "need to change" as companies considered leaving the state. Meyers approved changes to Delaware's corporate law in March. This month, Delaware's Court of Chancery said it would automate its process for case assignment, which could address concerns of bias.
Los Angeles Times
11-07-2025
- Business
- Los Angeles Times
Andreessen Horowitz leaves Delaware for Nevada, tells startups to follow
The Silicon Valley venture capital firm Andreessen Horowitz is reincorporating its business from Delaware to Nevada and calling for its portfolio companies to do the same — citing concerns over bias in the state 'against founders and their boards.' The firm said on Wednesday the decision was driven by growing unease with Delaware's Court of Chancery, which it accused of injecting an 'unprecedented level of subjectivity' into judicial decisions. In a blog post, legal and policy leaders from Andreessen Horowitz argued that recent rulings have undermined the business protections in the state that historically helped make Delaware the default choice for tech companies. Some startups hesitate to leave Delaware 'based in part on concerns for how investors will react,' wrote Jai Ramaswamy, Andy Hill and Kevin McKinley in the blog post. 'As the largest VC firm in the country, we hope our decision signals to our portfolio companies, as well as to prospective portfolio companies, that such concerns may be overblown.' The firm's decision reflects growing frustration among Silicon Valley figures over Delaware and its Chancery Court. Elon Musk in particular has publicly slammed the state after a judge blocked his roughly $56 billion pay package, the largest ever awarded to a US executive. Musk responded by reincorporating Tesla Inc. in Texas in June, which recently launched a business court system. He has also incorporated other of his businesses in Nevada. Musk has been joined by other major companies making the move, including Dropbox Inc., TripAdvisor and Bill Ackman's Pershing Square Capital Management. Meta Platforms Inc. considered a similar transition, Bloomberg reported in January Delaware has been the country's incorporation hotspot for nearly 100 years. More recently, Nevada and Texas have begun to cut into that advantage by offering corporate statutes that give directors more investor-lawsuit protections, and corporate titans like Musk more say in organizing and running their companies. At the same time, critics have said the states are sparking a so-called 'race to the bottom' in terms of corporate-governance restrictions. Business incorporation fees are critical to Delaware's economy: They generate more than a quarter of the state's $6 billion annual budget. Delaware has responded to recent departures with legislative reform efforts aimed at stopping the exodus. Andreessen Horowitz has been incorporated in Delaware since its founding in 2009. The firm previously recommended its startups do the same. The majority of US companies remain incorporated in the state — Delaware houses over 2 million businesses and more than 60% of the Fortune 500. 'We could have made this move quietly, but we think it's important for our stakeholders, and for the broader tech and VC communities, to understand why we've reached this decision,' the firm wrote in the post. Urbano writes for Bloomberg.
Yahoo
31-03-2025
- Business
- Yahoo
Why some think Nevada should challenge Delaware as premier destination for corporate lawsuits
(Stock photo via Getty Images) When state lawmakers talk about enticing businesses to Nevada, they are typically referring to businesses relocating or expanding operations within the state, creating new jobs, perhaps in new professions, for residents, and generating new revenue through tax collection. But one state lawmaker believes there exists another untapped market: corporate litigation. Delaware and its centuries-old Court of Chancery is the undisputed leader of business incorporation and corporate law in the United States. Delaware proudly boasts that 67% of Fortune 500 companies and 80% of the companies filing initial public offerings in 2023 were incorporated there. Nevada movers and shakers have long toyed with the idea of the Silver State jumping in on that corporate action. A bubbling of recent corporate dissatisfaction with Delaware has rekindled interest and created a new window of opportunity. Democratic Assemblymember Joe Dalia is sponsoring Assembly Joint Resolution 8, which proposes amending the Nevada State Constitution to establish a dedicated business court. 'This will allow Nevada to compete more capably for the multibillion dollar corporate filings market by offering businesses greater legal predictability and efficiency,' Dalia told lawmakers on the Assembly Judiciary Committee, which heard his resolution in early March. Nevada over the past two decades has taken steps to make itself a more enticing option for incorporation. 'However, despite the progress we've made, and despite having some very talented judges on the bench right now, our system still suffers from certain structural limitations that put us at a disadvantage relative to Delaware,' he said. AJR8, if passed in the current legislative session, would have to pass again in the 2027 legislative session. Then it would go to voters in the 2028 general election for final approval. The particulars of the business court would then have to be established by the Legislature, presumably during its 2029 session. Once established, the court would handle complex business matters, such as disputes over shareholder rights, mergers and acquisitions, and fiduciary duties. Courts dedicated to specific areas of law are not unusual. In Nevada, family court is its own division and judges do not hear civil or criminal cases. Courts in Clark and Washoe counties have operated dedicated business dockets since 2001, with the goal being to adjudicate those cases more quickly. UNLV Boyd School of Law professor Benjamin Edwards worked on the resolution with Dalia. He explains a dedicated business court using a metaphor of a busy roadway or highway. 'This is basic infrastructure that creates a lane attractive for trailers so they are not next to your Corolla,' he said. But the financial benefit would come when more businesses choose to incorporate in Nevada and pay the state's filing fees. Delaware, a state with a population of 1 million people and 2.2 million businesses, generates $2 billion a year in revenue from commercial business filings. That revenue makes up 29% of their state's general fund. (On top of that, additional taxes, and economic activity, are generated by the lawyers and their staff doing increased business in the state.) By contrast, in Nevada, business licensing generated approximately $200 million last fiscal year, according to a report from the Nevada Secretary of State's Office, whose commercial recordings division oversees them. Nevada Secretary of State Francisco Aguilar, who supports AJR8, says if Nevada could siphon just 5% market share off Delaware, that could mean an additional $100 million in revenue that could help 'solve some of our problems — education, health care, a lot of things.' Edwards doesn't think Nevada will cause a 'DExit' — a silly term being thrown about that plays off the UK's Brexit — but instead will influence new companies. Even the initial approval of AJR8 sends a signal to the business community, he added. 'I don't think Delaware will stop growing anytime soon,' said Edwards, but if their growth slows while Nevada's business community grows that impact will 'compound rapidly' and translate into additional revenue for the state. Other supporters of the prospect of a Nevada business court agree. 'This is the type of economic development that is very cheap for the state,' said Bryan Wachter of the Retail Association of Nevada, which testified in support of the resolution. 'You are going to consider a multitude of ways of approaching economic development. Some of those are going to come with a very heavy price tag. This one does not.' 'Everybody who really understands (AJR8) supports it,' said Edwards. 'If you talk to business lawyers or people who are familiar with it, they get it immediately.' But for everyone else, including the lawmakers who'd have to approve it twice and voters who'd have to approve it once, the issue may come across as Nevada kowtowing to corporate overlords who are throwing a fit because Delaware was mean to them. 'Anybody who tells you they know the right balance between protecting investors and management in corporate law is an idiot,' opined Edwards. 'Nobody has a clear sense of the perfect ratio.' Nevada and Delaware simply 'strike different balances,' he added. Enter the 1,000-lbs elephant in the courtroom: Elon Musk, the controversial billionaire who in addition to being CEO of Tesla and other companies is currently running amok as the head of the Trump administration's slash and burn Department of Government Efficiency. Musk has been one of the loudest critics of Delaware's Court of Chancery and has transferred the incorporation of three of his companies to other states. In early February, he posted on his social media platform: 'Texas and Nevada are the best choices for incorporation.' Texas became the state of incorporation for Tesla and SpaceX last year. Nevada became the state of incorporation for X Corp (formerly Twitter) in 2023. 'He's someone who has brought a lot of attention to the issue,' acknowledged Edwards, but he believes it's shortsighted for Nevada lawmakers to see the business court proposal as being associated with Musk. 'It has nothing to do with him really.' Aguilar, when asked about Musk being outspoken on the issue, all but changed the subject, and said there are a lot of good corporate actors: 'You don't hear about them' in the contest of business litigation venue attractiveness 'because they are driving their businesses forward, and they want a fair environment.' Businesses have broader issues — primarily how easy it is to file litigation against corporations in Delaware — that are long-standing but largely uninteresting to people outside of the insular corporate law world. 'Every maybe 30 years or so there will be something that happens in Delaware that leads to a lot of people freaking out about something,' said Edwards. Indeed, proponents in the late 1990s and early aughts pitched the establishment of dedicated business dockets in Nevada as having the potential to be a siren song for businesses contemplating a state other than Delaware. Musk and the corporate law world's current flavor spike centers on controlled companies — companies where one person owns more than 50% of stock. Delaware law is currently seen as being friendlier to shareholders than controllers, and has ruled that some companies for some purposes can be considered controlled even if technically 50% of the stock isn't held by one person. That includes Tesla and a massive $50 billion shareholder-approved CEO compensation package for Musk, which the Delaware Chancery Court rejected. (The CEO package case is being appealed to the Delaware Supreme Court.) Delaware lawmakers last week passed legislation to make it more difficult for small investors to challenge decisions made by controllers or powerful shareholders. Opponents called it 'a billionaire's bill.' Nevada, while it does not have nearly as extensive a corporate law history as Delaware, does have an established statutory environment, according to Edwards, and is already seen as a business friendly state for incorporating. TripAdvisor, which is moving its incorporation from Delaware to Nevada, has acknowledged in filings the legal appeal in Nevada. Specifically, company leadership says it has more protections from legal liability in Nevada than it does in Delaware. Aguilar as secretary of state, with assistance from Edwards, filed an amicus brief in the TripAdvisor case. Aguilar says lawyers in that case were attempting to paint Nevada as the 'wild wild west' where laws can't be trusted and aren't sophisticated enough. Delaware Gov. Matt Meyer publicly said companies that relocate to Nevada are 'rolling the dice.' 'It's not the wild wild west,' Aguilar told the Current. 'There is accountability. There are measures to do what is best for shareholders.' For large corporations, especially publicly traded ones, where to incorporate is a highly complicated decision made in consultation with an army of attorneys, Aguilar continued. 'All the law firms are aware of Nevada. Those movements (like TripAdvisor) are starting to come because attorneys are saying Nevada is sophisticated and does a good job.' Other companies reportedly considering leaving Delaware include Dropbox and Meta, the parent company of Facebook. Dalia, a freshman assemblymember, is employed by Meta as lead privacy and product counsel. He told the Current his work 'generally centers on enforcement against bad actors using Meta products and Federal Trade Commission compliance' and is 'completely unrelated' to the resolution he is sponsoring. 'AJR8 comes out of my earlier legal career advising investors and startups in Silicon Valley, where I saw first-hand how Delaware profited massively from its Court of Chancery,' he added. That sentiment has been echoed by other supporters of the resolution. Jeff Saling, co-founder of the nonprofit business incubator StartUpNV and venture capital fund Sierra Angels, jokingly told lawmakers during support testimony of AJR8's hearing that he is 'part of the problem.' 'When founders come to me to ask where to incorporate, I have to say Delaware,' he said. 'Whether or not they'll be able to get funding depends on whether they have a Delaware C corp.' What exactly the dedicated business court greenlit by AJR8 would look like would be decided in a future legislative session, presumably in 2029, the session after voter approval. Lawmakers on the Assembly Judiciary Committee, noting that Nevada's existing court system is already strained, raised questions about how a dedicated business court would be funded. Edwards told lawmakers he believes the additional costs of running a business court would be offset by court filing fees and additional revenue from business recordings, but that the Legislature would ultimately have to decide its structure. Democratic Assemblymember Selena La Rue Hatch pointed out there are incarcerated people who have been waiting 'for years and years' in the court system. 'Can you explain why we are jumping business ahead of our constituents' needs?' she asked. Edwards and Dalia argued that a dedicated business court could free up the non-business judges to more expeditiously handle civil and criminal cases, benefitting the judicial system overall. They also expressed their support of additional resources for other aspects of the court system. Edwards said a large public corporation could close a deal in Delaware in 90 days, but in Nevada could be on hold for years because the average adjudication time for business cases is currently around 1,200 days. 'That's a real barrier in terms of selecting Nevada,' he added. Another potential hangup is that AJR8 proposes business court judges be appointed for 6-year terms by the governor from a list of three nominees vetted by a special nominating commission. That's different from Nevada's current status quo of electing all judges. Dalia said that elected benches offer no guarantee that the judge will be an expert or even familiar with business law, creating an efficiency that would be seen unfavorably by businesses and result in longer timelines for cases. He added that, unlike criminal and civil law, business law is not part of the standard curriculum at law school. In Delaware, judges are appointed for 12-year terms and there is a rigorous process to ensure competence and expertise, said Edwards. Texas, which is also making a push to establish a business court, is contemplating judges appointed to 2-year terms by the governor. Edwards told the Current that structure could be problematic, especially if Texas were to ever become a swing state as people have long predicted. 'If you're sued in Texas and politically connected and you don't like the judge, you can just stall and wait until a new governor can appoint a new judge,' he added. AJR8's proposal is more like Delaware than Texas. Edward believes it would be more stable because the special nominating commission would be a mix of lawmakers (the assembly speaker and senate majority leader) and judicial officials (the chief justice of the state supreme court and chief judges of the state's three most populous district courts). The Assembly Judiciary Committee took no action on the resolution during its March 3 hearing. On March 25, AJR8 was withdrawn from the committee and placed on the Chief Clerk's desk. That is typically not a positive sign for a bill or resolution. But proponents are still making the case for why Nevada should try. 'We're in a period where there's a lot of discussion around this shift' in corporate law, said Edwards. 'It's my view that Nevada should do things that make sense. You can create infrastructure that will pay for itself and also make things more efficient and draw in more revenue.'
Yahoo
11-03-2025
- Business
- Yahoo
Musk launches appeal to restore $56 billion Tesla payday
By Tom Hals WILMINGTON, Delaware (Reuters) - Elon Musk kicked off his appeal to try to restore his $56 billion payday from Tesla on Tuesday, claiming a lower court judge made multiple legal errors in rescinding the record compensation. The 2018 pay package resulted in spectacular growth for the electric vehicle maker and yet it was determined by the lower Court of Chancery to be unfair to shareholders, who voted twice to approve the plan, Musk argued. See for yourself — The Yodel is the go-to source for daily news, entertainment and feel-good stories. By signing up, you agree to our Terms and Privacy Policy. "That counterintuitive result defies settled principles of Delaware law, sound corporate governance, and common sense," said the opening appeal brief by Musk and the current and former Tesla directors who are defendants in the case. In January 2024, Chancellor Kathaleen McCormick rescinded the pay package of stock options, calling it "unfathomable." She said it was unfair to Tesla shareholders because the directors who approved it were beholden to Musk and Tesla withheld key information from investors before they voted to approve it. In June, Tesla got shareholder approval for the pay package for a second time, but the judge rejected that as grounds for reversing her ruling. The pay package had awarded Musk options to buy around 303 million Tesla shares at around $23 each if the company hit performance and valuation goals. Tesla stock closed Tuesday at $230.58. Tesla has said creating a new pay package of similar value could result in a charge of $25 billion, making the appeal an important avenue for restoring Musk's compensation and keeping his attention on Tesla. Musk has said that he wants a greater stake in Tesla or he might develop products outside of the company. The appeal comes as he is dedicating time to President Donald Trump's government efficiency effort, known as DOGE, which has sparked demonstrations outside Tesla dealerships. The stock has fallen sharply in recent weeks. In the appeal brief, Musk and the other defendants said McCormick wrongly applied a very difficult legal standard known as entire fairness to assess the pay package. She arrived at that standard by finding Musk, who owned 21.9% of the stock at the time the board approved the pay package, controlled the pay negotiations, according to the brief. In addition, she wrongly determined that ordinary business relationships among directors made them conflicted and she erroneously faulted Tesla's disclosures ahead of the 2018 shareholder vote, according to the brief. Applying the entire fairness standard amounted to granting a "license to sue" to Tesla shareholders, the brief said. The lawsuit was brought by Richard Tornetta, a Tesla investor who owned nine shares when he filed the case in 2018. The lawsuit benefits Tesla, not Tornetta, in what is known as a derivative suit. Musk blasted the pay decision and has encouraged other companies to follow Tesla and SpaceX and reincorporate out of Delaware. A handful have left the state or said they might, including Meta Platforms, TripAdvisor and Trump's media company. Fears that a trickle of companies will turn into a stampede, which has been dubbed "DExit," prompted the state's legislature to consider amending its corporate law to better protect controlling shareholders from lawsuits.
