Latest news with #Dexit
Business Insider
4 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.
The Star
21-07-2025
- Business
- The Star
Meta investors settlement with Zuckerberg takes heat off Delaware
FILE PHOTO: Meta Platforms CEO Mark Zuckerberg departs after attending a Federal Trade Commission trial at U.S. District Court in Washington, D.C., U.S., April 15, 2025. REUTERS/Nathan Howard/File Photo WILMINGTON, Delaware (Reuters) -A last-minute settlement between Meta Platforms shareholders and the company's leadership last week ended an $8 billion trial and spared Mark Zuckerberg from testifying about alleged violations of Facebook users' data. It also took the heat off the state of Delaware, which has been plagued by criticism from technology and business leaders. The second day of the eight-day trial in Delaware's Court of Chancery was about to start on Thursday when the legal team for the shareholder plaintiffs announced they had reached a deal to resolve the case. The terms are still being hammered out, but the agreement ends a case that had the potential to fuel a trend of companies abandoning the state as their legal home. Since last year, Elon Musk and other business leaders have attacked the state's courts, once the key reason companies incorporated in Delaware, for rulings that they say made it easier for shareholders to sue directors. Musk encouraged companies to leave the state and in the past year Dropbox, Trump Media & Technology, Roblox and Simon Property Group were among the large public companies that reincorporated outside Delaware, a trend dubbed "Dexit." Critics claim the state's courts are biased against company founders-- an uncomfortable backdrop for the Meta case, whose 11 defendants included the billionaires Zuckerberg, Sheryl Sandberg, Marc Andreessen, Palantir Technologies co-founder Peter Thiel and Reed Hastings, who co-founded Netflix. A ruling that spared the defendants might have given the impression the court caved to pressure to let them off the hook, while one that favored the plaintiffs could have led to further calls for companies to leave Delaware. "It was going to be really awkward for the court," said Ann Lipton, a professor at Colorado Law School. Meta, which owns Facebook, Instagram and WhatsApp, and lawyers for Meta investors and the defendants did not respond to requests for comment. Meta shareholders alleged current and former officers and directors of Facebook were liable for failing to protect users' data. The shareholder plaintiffs wanted the court to order the defendants to use their personal fortune to reimburse the company for the $8 billion in legal costs that Facebook had shelled out for violating user privacy, including a $5 billion fine paid to the Federal Trade Commission in 2019. The case put a spotlight on Delaware courts and the judge handling the case, Chancellor Kathaleen McCormick, who gained prominence last year for rescinding Musk's $56 billion pay package from Tesla. That ruling is on appeal. Adding to the high stakes, Andreessen's venture capital firm, Andreessen Horowitz, said earlier this month it was moving its incorporation to Nevada from Delaware and encouraged other companies to follow. "In particular, Delaware courts can at times appear biased against technology startup founders and their boards," said a blog post on the firm's website, citing McCormick's Musk pay ruling. The firm did not respond to a request for comment. Earlier this year, representatives from Meta met with Delaware's governor and soon after the state changed its widely used corporate law to make it harder for shareholders to sue corporate boards over deals with controlling shareholders like Zuckerberg. Delaware's political leaders said the changes were meant to keep Meta and other companies from fleeing the state. Delaware gets more than a quarter of its budget revenue from fees associated with chartering businesses. Despite the new law, some companies, like Affirm Holdings, still opted to leave, saying it was unclear how it would be interpreted by Delaware courts. Lawrence Cunningham, directorof the Weinberg Center for Corporate Governance in Delaware, said the Meta shareholder settlement highlighted the strengths of the Delaware court in handling a complicated case and guiding it to a resolution, which might be hard to replicate elsewhere. "It was a very desired judicial outcome," he said of the case. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and Daniel Wallis)
Mint
21-07-2025
- Business
- Mint
Meta investors settlement with Zuckerberg takes heat off Delaware
WILMINGTON, Delaware, July 21 (Reuters) - A last-minute settlement between Meta Platforms shareholders and the company's leadership last week ended an $8 billion trial and spared Mark Zuckerberg from testifying about alleged violations of Facebook users' data. It also took the heat off the state of Delaware, which has been plagued by criticism from technology and business leaders. The second day of the eight-day trial in Delaware's Court of Chancery was about to start on Thursday when the legal team for the shareholder plaintiffs announced they had reached a deal to resolve the case. The terms are still being hammered out, but the agreement ends a case that had the potential to fuel a trend of companies abandoning the state as their legal home. Since last year, Elon Musk and other business leaders have attacked the state's courts, once the key reason companies incorporated in Delaware, for rulings that they say made it easier for shareholders to sue directors. Musk encouraged companies to leave the state and in the past year Dropbox, Trump Media & Technology, Roblox and Simon Property Group were among the large public companies that reincorporated outside Delaware, a trend dubbed "Dexit." Critics claim the state's courts are biased against company founders -- an uncomfortable backdrop for the Meta case, whose 11 defendants included the billionaires Zuckerberg, Sheryl Sandberg, Marc Andreessen, Palantir Technologies co-founder Peter Thiel and Reed Hastings, who co-founded Netflix. A ruling that spared the defendants might have given the impression the court caved to pressure to let them off the hook, while one that favored the plaintiffs could have led to further calls for companies to leave Delaware. "It was going to be really awkward for the court," said Ann Lipton, a professor at Colorado Law School. Meta, which owns Facebook, Instagram and WhatsApp, and lawyers for Meta investors and the defendants did not respond to requests for comment. Meta shareholders alleged current and former officers and directors of Facebook were liable for failing to protect users' data. The shareholder plaintiffs wanted the court to order the defendants to use their personal fortune to reimburse the company for the $8 billion in legal costs that Facebook had shelled out for violating user privacy, including a $5 billion fine paid to the Federal Trade Commission in 2019. The case put a spotlight on Delaware courts and the judge handling the case, Chancellor Kathaleen McCormick, who gained prominence last year for rescinding Musk's $56 billion pay package from Tesla. That ruling is on appeal. Adding to the high stakes, Andreessen's venture capital firm, Andreessen Horowitz, said earlier this month it was moving its incorporation to Nevada from Delaware and encouraged other companies to follow. "In particular, Delaware courts can at times appear biased against technology startup founders and their boards," said a blog post on the firm's website, citing McCormick's Musk pay ruling. The firm did not respond to a request for comment. Earlier this year, representatives from Meta met with Delaware's governor and soon after the state changed its widely used corporate law to make it harder for shareholders to sue corporate boards over deals with controlling shareholders like Zuckerberg. Delaware's political leaders said the changes were meant to keep Meta and other companies from fleeing the state. Delaware gets more than a quarter of its budget revenue from fees associated with chartering businesses. Despite the new law, some companies, like Affirm Holdings, still opted to leave, saying it was unclear how it would be interpreted by Delaware courts. Lawrence Cunningham, director of the Weinberg Center for Corporate Governance in Delaware, said the Meta shareholder settlement highlighted the strengths of the Delaware court in handling a complicated case and guiding it to a resolution, which might be hard to replicate elsewhere. "It was a very desired judicial outcome," he said of the case. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and Daniel Wallis)
New York Times
10-07-2025
- Business
- New York Times
A Silicon Valley Giant Calls for a Delaware Exodus
Andrew here. Andreessen Horowitz just announced plans to move from Delaware and reincorporate in Nevada, following similar moves out of the state by companies including Dropbox, Tesla and TripAdvisor. It could be a watershed moment: One of the most influential firms in Silicon Valley is openly telling its young portfolio companies to consider moving, too. This isn't just about a few big names. It's a signal to the entire tech ecosystem that the 'Delaware default' might be coming to an end. We dive into that below, along with Linda Yaccarino's exit from X, big news in noncompete agreements and more. A loud new cheerleader for 'Dexit' For more than a year, Delaware has battled against what legal observers have nicknamed Dexit: companies leaving the First State, the legal home for most of corporate America, over concerns that it has become hostile to big business. Elon Musk has been among the most prominent proponents of the movement. But Andreessen Horowitz, an influential venture capital firm, may have just become the most consequential. What's happening: Andreessen Horowitz is moving the incorporation of its primary business, AH Capital Management, to Nevada, three executives of the venture firm wrote in a blog post on Wednesday. The firm — known in Silicon Valley as A16Z — has been incorporated in Delaware since its founding in 2009. In the post, the executives wrote that what once was a no-brainer — incorporating in Delaware — was 'no longer the case.' A state court system that had clear laws that afforded founders and their boards sensible leeway to run their businesses now has an 'unprecedented level of subjectivity' that leaves companies vulnerable to expensive shareholder litigation, they argued. Want all of The Times? Subscribe.
Yahoo
10-07-2025
- Business
- Yahoo
The early winner in the 'Dexit' war for corporate relocations: Nevada
More companies are following the example of Tesla's (TSLA) Elon Musk and signing off on an exit from Delaware. But many are choosing Nevada — not Texas, as Musk did with Tesla in 2024 — as a new corporate home in 2025. The latest example came Wednesday when a high-profile venture capital firm, Andreessen Horowitz, announced it would move the incorporation of its primary business, AH Capital Management, from Delaware to Nevada as it offered a critique of Delaware's powerful business court. The VC firm long associated with Marc Andreessen accused the state's Chancery Court of injecting "legal uncertainty" into Delaware's reputation as the gold standard for corporate law. "In contrast, Nevada has taken significant steps in establishing a technical, non-ideological forum for resolving business disputes," the company said. Andreessen Horowitz is not the only one decamping for Nevada, which has been vying with Texas for the new attention of companies considering a so-called 'Dexit' from Delaware — the dominant place for American companies to incorporate for roughly a century. Seven publicly traded companies with market caps ranging from $1.5 billion to $71 billion have also asked their shareholders to vote in favor of leaving Delaware for Nevada during this year's proxy season, and investors said yes to all of the departure proposals, according to a report from Freshfields. Investor support for that move ranged from just over 50% to 85%. "I think what boards are trying to do right now is figure out, what are the [state] differences, what are the differences that matter, and should we stay? Should we go?" said Benjamin Edwards, University of Nevada Las Vegas associate dean and corporate governance law professor. The votes in this year's proxy season favored Nevada reincorporations for Fidelity National Financial (FNF), Roblox (RBLX), Madison Square Garden Entertainment (MSGE, MSGS), AMC Networks (AMCX), Sphere Entertainment (SPHR), and Tempus AI (TEM). Smaller firms with market caps under $1 billion, including XOMA Royalty (XOMA), a biotech company; electronic gaming company (GXAI); Universal Logistics Holdings (ULH); and Jade Biosciences (JBIO), also secured votes to move to the state. Others that have already made the move over the past year include Dropbox (DBX), Trade Desk (TTD), and Sonoma Pharmaceuticals (SNOA). And Bill Ackman, Pershing Square's CEO, announced his own decision to reincorporate in Nevada in an X post earlier this year, saying that 'top law firms are recommending Nevada and Texas over Delaware.' Some Delaware-to-Nevada reincorporation bids have failed. Revelation Biosciences (REVB) lacked enough votes despite more than 89% of present stockholders voting in favor of the proposal. Eightco Holdings (OCTO) and Remark Holdings (MARK) similarly fell short of gaining requisite support. Edwards said he doesn't expect Delaware to lose its wide appeal to American businesses anytime soon but corporate leaders are evaluating which state's laws are the best fit for their businesses. "There's a reality that where you're incorporated affects how you're going to make high level governance decisions, particularly when you're a public company," Edwards said. "You want to maximize flexibility. And Delaware may not be it." Some companies, for example, may choose Nevada over Delaware because Nevada law allows companies to insulate directors and officers from personal liability for breaches of their duty of loyalty, unless they intentionally acted in bad faith. As for the duty of care to the corporation, both Delaware and Nevada allow corporations to insulate directors and officers from personal liability. Critics argue that the difference gives shareholders of Nevada corporations less protection from unfair director and officer actions because Nevada's law gives them leeway to violate their duty of loyalty. But Edwards said that's unlikely because, in practice, it would be difficult for a director or officer to unintentionally act disloyal toward a company they serve. Companies may also choose Delaware or Nevada over Texas because intellectual property allegations carry more litigation risk in Texas. On the other hand, he said, a larger volume of lawsuits should be expected in Delaware. "Now they're thinking, 'Okay, do we want to be in Delaware?'" Edwards said. The trouble for Delaware started in January 2024 when its Chancery Court's head judge, Chancellor Kathaleen McCormick, struck down a 2018 Tesla shareholder vote approving Musk's $56 billion performance-based compensation deal. Musk immediately warned other companies: "Never incorporate your company in the state of Delaware.' Musk-led companies Tesla and SpaceX ( then left Delaware for Texas. But he also chose Nevada for some of his other companies: The Boring Company, Neuralink, and X. Nevada, Texas, and Delaware have all made major changes to their respective laws this year designed to increase their allure with companies. Delaware cut back on director and officer liability by limiting fiduciary duties for controlling shareholders and reducing a company's burden to respond to shareholder information demands known as 220 requests, which allow shareholders to inspect a company's books and records. Nevada, which offers no shareholder rights to books and records outside of litigation, further limited the fiduciary duties required of controlling shareholders, made it possible for judges rather than juries to decide shareholder litigation, and made it less risky for boards to approve mergers. Like Nevada, Texas's amended law further limits the fiduciary duties of controlling shareholders and enhances other liability protections for directors and officers. Places like South Dakota, North Carolina, Washington, and Wyoming have also been trying to chip away at Delaware's dominance with their own business-friendly strategies. After Delaware lawmakers in March pushed through controversial changes designed to keep more businesses from leaving the state, Gov. Matthew Meyer said the changes would maintain Delaware's place as the best place in the world to incorporate a business — "ensuring clarity and predictability, balancing the interests of stockholders and corporate boards." Delaware is not in danger of a mass exodus just yet. The state touts that it is home to more than two-thirds of all Fortune 500 companies. In 2023, Delaware hit a record 2 million total incorporations even as it saw a slight drop in the percentage of Fortune 500 companies registered there to 67.6% from 68.2% in 2022. Delaware generated $1.33 billion in incorporation revenue from corporations in 2024, about 22% of the state's total revenue. The state charges $250,000 to register C-Corporations and much smaller fees to register limited liability companies. University of Pennsylvania Wharton School professor Daniel Taylor wrote in the Columbia Law School blog in March that hundreds of companies would have to leave Delaware for the resulting incorporation fee losses to have a real effect on the state's budget and its residents. Delaware gets a "staggering" number of LLCs and other entities, Edwards said, noting that the state pulls in more than $2 billion in total annual filing fees. Delaware's advantages, he said, still include more than a century of case law, corporate law-savvy judges who issue expedited decisions, and lawyers who specialize in corporate disputes, all of which make switching costs another consideration. On the other hand, some companies could be warming up to the simplicity of Nevada's corporate laws, which boast that they are clear, comprehensible, and easy for judges and juries to interpret, and its efforts to create a business court. "Really to understand Delaware law, you have to be marinating in the constantly evolving case law coming out of Chancery," Edwards said. Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed. Click here for in-depth analysis of the latest stock market news and events moving stock prices
