Summary

The "Dexit" trend, corporations leaving Delaware for states like Nevada or Texas, isn't limited to large corporations. It has significant implications for businesses of all sizes, influencing strategy and operations in several key way

Many prominent companies are strategically leaving Delaware to reincorporate elsewhere in what has been labeled a “Dexit.” Tesla and SpaceX have shifted their incorporation to Texas, while Neuralink, Dropbox, TripAdvisor, and Pershing Square Capital Management have opted for Nevada. Meanwhile, Meta, Roblox, Walmart, and others are actively evaluating similar moves. The driving forces behind this trend are recent court decisions and evolving business priorities.

Delaware has historically been the “corporate capital” of the United States, housing over 60% of Fortune 500 companies and nearly 2 million registered businesses. Its appeal has traditionally stemmed from business-friendly laws, the respected and efficient Court of Chancery, and a predictable legal framework that sets the gold standard for corporate governance.

However, recent rulings like the Tesla Compensation Case have prompted companies to reconsider Delaware’s advantages. As the legal and regulatory environment shifts, so does the calculus for where to incorporate.

Why does this matter? Because the trend away from Delaware has implications for corporate governance, legal risk, operational costs, and long-term strategic planning. It’s not just a big business issue; every company should pay attention, regardless of size.

Here’s what’s driving the Dexit movement, and five steps businesses can take to adapt.

Why Companies Are Leaving Delaware

The “Dexit” trend stems from dissatisfaction with Delaware’s evolving legal landscape and competition from other states. Key drivers include:

• Chauncery Court Decisions: Several 2024 cases increased the liability standards for corporate officers and directors, especially in cases involving shareholder control. Also, Delaware General Corporation Law rulings resulted in increased ease of access to corporate records, increasing litigation risks.
• Judicial Scrutiny and Overreach: Recent Delaware Court of Chancery rulings, like the 2024 decision to void Elon Musk’s $56 billion Tesla compensation package, have sparked backlash. The court cited board conflicts and shareholder misrepresentation, prompting Musk to move Tesla and SpaceX to Texas.

• Perceived Activism: Some executives consider Delaware judges increasingly “investor-friendly,” prioritizing shareholders over management. This shift, seen in cases like TripAdvisor’s reincorporation in Nevada, erodes Delaware’s pro-business reputation.
• Competitive Alternatives: Nevada and Texas offer lower taxes, flexible governance, and stronger protections for directors. When announcing its move in April 2025, Roblox cited Nevada’s “supportive, predictable environment.”

The Impact of Dexit on All Businesses: Strategy and Operations

The “Dexit” trend, corporations leaving Delaware for states like Nevada or Texas, isn’t limited to large corporations. Businesses of all sizes are evaluating their options, influencing strategy, and operations. Here are some reasons why:

• Legal Risks: Delaware’s well-established case law offers predictability for businesses. In contrast, states like Nevada have less-developed legal precedents, which can increase litigation risks, especially for smaller companies with limited legal resources.
• Cost Considerations: Delaware’s franchise taxes, which fund approximately 23% of its state budget, are notably higher than Nevada’s minimal fees. While reincorporating could reduce costs, the process involves shareholder approval and legal expenses, which may offset savings for smaller firms.
• Governance Changes: States like Nevada and Texas often prioritize management-friendly policies, potentially reducing shareholder protections. This shift could erode investor confidence in public companies or those eyeing an IPO.
• Market Perception: Investors typically value Delaware’s stable legal environment. Reincorporating elsewhere may lead to lower valuations, as seen in shareholder concerns during TripAdvisor’s move to Nevada.

Example: A small tech startup preparing for an IPO might encounter investor hesitation if it is incorporated in Nevada, where legal protections are less robust. This could potentially impact its market valuation and fundraising efforts.

5 Steps to Navigate the Dexit Trend

Stay ahead of this shift with these actionable steps to protect your business.

1. Assess Your Incorporation Needs

Evaluate whether Delaware’s legal predictability or another state’s flexibility suits your goals. Consider litigation risks, taxes, and governance needs.
Action: Consult a corporate attorney to compare Delaware, Nevada, Texas, and other states.

2. Review Governance Policies

Ensure your board’s fiduciary duties align with your state’s laws. Update bylaws to address potential shareholder or director conflicts.
Action: Conduct a governance audit to confirm compliance with local standards.
Example: Strengthen conflict-of-interest policies to avoid Musk-like challenges.

3. Monitor Legislative Changes

Track Delaware’s reforms and compare new and existing legislation in other states. These affect liability and shareholder rights.
Action: Subscribe to legal updates from the Secretary of States’ Offices and law firms, such as Latham & Watkins, Coolley LLP, Kirkland & Ellis, LLP, etc.
Example: Adjust your shareholder agreement if Delaware limits record inspections.

4. Get Shareholder Support Early

Reincorporation requires shareholder approval. Communicate benefits, like cost savings, to secure support and avoid lawsuits.
Action: Hold a town hall to explain the impact on value.
Example: Roblox’s SEC filing in April 2025 rallied shareholders for its Nevada move.

5. Plan for Cost and Risk

Weigh reincorporation costs (legal fees, filings) against long-term savings. Assess risks of new jurisdictions, like Nevada’s untested courts.
Action: Create a cost-benefit analysis before deciding to move.
Example: Dropbox’s move to Nevada cut franchise taxes but required legal navigation.

Act Now to Stay Ahead

The Dexit trend signals a seismic shift in corporate governance. Corporations leaving Delaware challenge every business to rethink incorporation, governance, and costs. Whether you stay in Delaware, explore Nevada, or Texas, proactive planning is critical. Assess your needs, strengthen governance, and engage stakeholders to navigate this evolving landscape. Delaware’s dominance may wane, but your business can thrive with the right strategy.

Start today by reviewing your incorporation state with your board or a legal advisor. Download a free governance checklist or consult a corporate strategist to stay competitive. Act now, your business’s future depends on it.