In recent years, concerns have grown over Delaware losing its status as an incorporation and business court capital. Recently, a few folks raised red flags over the departure of Twitter to Nevada after a Chancery Court ruling that gazillionaire Elon Musk could not walk away from his agreement to buy the social media company.
It followed a similar move a few years back to Nevada by translation services company TransPerfect over the drawn-out and expensive Chancery-supervised sale of the company after its 50-50 owners deadlocked over a buyout plan.
Now making its way through Chancery Court is a suit by a shareholder unhappy about travel services company TripAdvisor moving its charter to Nevada after being bruised by settlements over shareholder actions. Click here for an analysis of the TripAdvisor case.
The New York Post, no fan of Delaware and the current First State occupant of the White House, recently published a story pointing out the lure of Nevada for companies like Twitter.
The Post piece led to the long-time critic of Delaware’s courts, Citizens for Judicial Fairness to isssue the following. (By way of background, Citizens was born out of the contentious TransPerfect sale process):
“Delaware is teetering on the edge of a potential business exodus, as more and more corporations seek out states with more transparent and accommodating business environments. The recent departures of industry giants such as TransPerfect, DraftKings Inc., Light & Wonder, and now Twitter is more than concerning and it requires solutions immediately. The gradual migration of businesses may seem insignificant now, but the ripple effects could ultimately lead to a devastating financial crisis in Delaware. Taking proactive measures to address the problem now is crucial in avoiding such a catastrophic outcome.”
To date, signs of a looming mass exodus are few.
Since TransPerfect’s exit from Delaware, the pace of incorporations through 2021 has been strong.In 2021 alone, total business entities rose above 1.8 million at year-end with 36.9 percent growth in new formations of LLCs and 20.8 percent in the number of new corporations. The recent state revenue forecast, sees a nearly 10% increase in incorporation and related fees.
Chancery remained busy with the court handling increasingly complex cases that led to additional vice chancellors and staff.
It could also come down to this. In the Reuters analysis piece, while defending the state’s business court system, a University of Nevada-Las Vegas law professor also quipped that Nevada “has become a home for billionaires leaving Delaware in a huff.”
