This article first appeared on Diligent Market Intelligence's Voting newswire. To register for a demonstration and trial of the product, click here.
A quiet race is underway to become corporate America’s new legal home. Texas and Nevada continue to court companies with looser liability regimes and tools that can curb shareholder lawsuits, while Delaware leans on its deep precedent and specialist courts. Almost a dozen U.S.-based companies saw their proposals to reincorporate face a vote in the first four months of this year, with support averaging at 82%, Diligent Market Intelligence (DMI) Voting data show. The volume was largely flat on the same period in 2025 but investor backing dropped this year from an average of 93.5% in the same period last year, suggesting investors are becoming more cautious about the risks in transitioning to a new legal home. "There has always been a level of competition among states. Going back, New Jersey used to be the Delaware. Things evolve and innovations occur and especially when there are frustrations with a particular system," said Ferrell Keel, partner at Jones Day. With around two-thirds of Fortune 500 companies incorporated in Delaware, the state remains dominant. "I don't anticipate Delaware becoming a ghost town for corporations anytime soon, particularly given that the state has historically adapted to corporate law and evolving business needs and it really does have this well-developed corporate code, and dedicated judiciary that is admired," said Megan Reda, a partner at the shareholder activism practice in Olshan Frome Wolosky. Texas pride Texas has emerged as the chosen destination for many considering a move in Q1 to follow the path taken by Tesla in the first wave of such transitions in 2024, with others such as Coinbase and Eightco Holdings following after and April reports emerging that Mark Zuckerberg is also mulling such a move for Meta Platforms. The state has tried to differentiate itself with statutory tools seen as more management-friendly including an option under the Texas Business Organizations Code (TBOC) to adopt minimum thresholds for shareholders to file a derivative lawsuit or a shareholder proposal. "There is a notion that Texas is more capitalistic, is more Republican, is more laissez-faire or an impression that if a company moves to Texas, it's going to be less constrained when compared to the rules of the East Coast and Delaware jurists," said Leonard Wood, partner at Goodwin Procter. "That will continue to be pressure tested." Texas Capital Bancshares was one to test such a move with its investor base while pointing to its "strong operational nexus" to Texas. It further argued that "local decision-makers have a deeper understanding" of the company’s business and therefore are best situated to make decisions that may impact the company’s corporate governance. Shareholders didn't agree, however, with almost 55% of votes cast against the plan at the April 21 meeting, along with 87% opposition against a measure to increase the threshold for submitting shareholder proposals. For ArcBest, the move saw it opt out of certain provisions available in Texas and was approved, albeit with 33% opposition at its April meeting. The state's statutory-based approach to director and officer duties was cited by the logistics company as a key pull, seen to foster more clarity and predictability for decision-making while also citing a reduction in the potential for "opportunistic and frivolous litigation." However, in a bid to win investor approval, the board moved to preserve stockholders’ existing rights, by opting out of Section 21.373 (regarding ownership and solicitation thresholds to submit shareholder proposals) and Section 21.552(3) (regarding ownership thresholds greater than one share to bring derivative lawsuits) of the TBOC. The move to Texas, seen by some as a means to negatively engineer governance, has seen investors escalate concerns to directly target directors at the ballot box. At Cloud-based real estate brokerage company eXp World Holdings, New York State Comptroller Thomas DiNapoli called for a vote against all directors at its May 8 AGM arguing that the proposed reincorporation came “just weeks" after a Delaware judge ruled that a lawsuit be allowed to proceed against certain company officers and directors, including its founder and CEO Glenn Sanford. "The timing of this abrupt move — from a state where an adverse ruling occurred in a case seeking to hold the company’s leadership responsible, to a state where they may be shielded from future accountability — is highly suspect and should raise concerns for all investors,” the comptroller stated. The redomestication ultimately passed with all six directors returned. Nevada's liability-lite regime Nevada, meanwhile, has positioned itself as another alternative with a particularly protective regime for directors and officers. Under Nevada law, directors and officers are not individually liable for damages for their actions unless the conduct involves intentional misconduct, fraud, or a knowing violation of law — a higher bar than in many other jurisdictions. Gaming platform Roblox made the move last May with a vote that drew 20% opposition and with many citing a reduction in shareholder rights and protections. Roblox had incorporated in Delaware in 2004. However, as the tech giant reviewed its corporate base, it cited developments in the competitive and regulatory landscape "and views regarding the legal landscape in Delaware including some high-profile litigation outcomes that involved technology companies with controlling stockholders." More recently, Datadog (also in tech) opted for Nevada as it brought the resolution to an April special meeting where it saw pushback from almost 38% of votes cast. The large cap, which has a dual class share structure, selected Nevada as "an attractive alternative to Delaware" given the state's "carefully drafted and innovative corporate statutes and statute-based and business-oriented legal environment." An observational year As states compete to attract corporate charters, advisors caution that there is no one-size-fits-all answer and no guarantee that shareholders will accept management’s preferred option. "We've seen some big-name movers but not a significant number. That said, we have had a lot of conversations weighing the risks and benefits of such a change. Companies who are considering a reincorporation are closely watching outcomes this proxy season, especially at non-controlled companies," noted Keel. One closely-watched test is slated to take place on May 27 when Exxon Mobil will ask shareholders to back its proposed reincorporation from New Jersey to Texas while insisting that the oil giant is a "Texas corporation in all but name, with most senior corporate executives and all corporate functions based in the state for the last 35 years." With the Big Three accounting for over 20% of its outstanding stock, Exxon faces a significant challenge in persuading institutional investors that the move is in shareholders’ best interests. Like ArcBest, the oil major has opted not to include all provisions available in Texas. In arriving at the decision, the board concluded that "shareholder rights remain largely comparable, while Texas law provides protections against abusive litigation, clearer standards, and legal predictability that support sound decision-making and long-term value creation." Critics are unconvinced. The New York City Comptroller’s Office has warned that Exxon's bid to find a new legal home could have “lasting implications for shareholder rights” given Texas’s "less robust" investor rights profile. "Any move by a board that seeks to minimize accountability or lessen shareholder rights is concerning. An investor is not going to view that favorably," said Reda. "However, these types of moves don't make investors powerless and they don't shield boards and management teams from being held accountable at the ballot box."
