It's been about two months since SB 21 became law in Delaware. Let's get up to speed on what's been happening re: DExit.
1. Since the passage of SB 21, 12 public corporations have reincorporated outside Delaware. Ten have moved to Nevada: Tempus AI, Roblox, Sphere Entertainment, Madison Square Garden Entertainment, Madison Square Garden Sports, Xoma Royalty, BAIYU Holdings, Fidelity National Financial, AMC Networks, and Affirm. Two have moved to Texas: Zion Oil & Gas and Mercado Libre. One company, Upexi, moved from Nevada to Delaware. (Thanks to UNLV's William S. Boyd School of Law Professor Benjamin Edwards for keeping track.)
2. Several constitutional challenges to SB 21 have been filed. In one of those suits, a case against Dropbox, Chancellor Kathaleen McCormick is weighing whether to certify the constitutional question to the Delaware Supreme Court.
3. Meanwhile, Texas and Nevada are making big moves to compete with Delaware.
𝗦𝗽𝗲𝗰𝗶𝗮𝗹𝗶𝘇𝗲𝗱 B𝘂𝘀𝗶𝗻𝗲𝘀𝘀 C𝗼𝘂𝗿𝘁𝘀
Delaware's dominance is due largely to the Court of Chancery, where shareholder disputes and many other business matters are resolved by expert judges.
Texas established a business court last year, with appointed judges who must meet certain qualifications.
Nevada has long had a business court, but legislation is pending to establish a specialized business court with appointed judges. Nevada's effort will take at least two years as it requires an amendment to Nevada's Constitution.
𝗝𝘂𝗿𝘆 T𝗿𝗶𝗮𝗹𝘀
Another key advantage to Delaware is the lack of jury trials in the Court of Chancery.
On May 14, Texas passed new legislation (SB 29) that allows business entities to waive jury trials in their governing documents, including their bylaws.
Nevada is also working on legislation (AB239) that would similarly allow for jury trial waivers in a company's charter for internal actions.
𝗖𝗼𝗺𝗽𝗮𝗻𝘆 P𝗿𝗼𝘁𝗲𝗰𝘁𝗶𝗼𝗻𝘀
Nevada has long sought to entice corporations by offering greater protection for corporate fiduciaries, including by codifying the business judgment rule, eliminating entire fairness review, and restricting books and records rights.
Texas is catching up. SB 29 also codified the business judgment rule and added additional features. Of note, the law allows public companies to require up to 3% minimum stock ownership to bring a derivative suit, allows for the court to make an upfront determination on independence, and prohibits attorneys' fees for disclosure-only settlements. The law also restricts books and records requests.
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