The following is part of our annual publication Selected Issues for Boards of Directors in 2025. Explore all topics or download the PDF.
2024 was a remarkable year in Delaware. For the first time in as long as anyone can remember, people began to seriously question whether Delaware would retain its dominance as the go-to jurisdiction for incorporating companies. There was an uproar following several decisions by the Delaware Court of Chancery that seemed to shake the market’s confidence in Delaware law’s venerable predictability. One such decision invalidated shareholder agreement provisions that had long been commonplace and another found that a board had not validly approved a merger agreement because, as is typical, the board had not received a draft in final form. At the same time, a certain well-known CEO’s $50 billion compensation package was struck down, leading him to publicly declare “Never incorporate your company in the state of Delaware.”
In the face of this public pressure, the Delaware legislature moved at unprecedented speed to amend the Delaware General Corporation Law in order to “overrule” several of the decisions that caused the most immediate concern (to the consternation of many, including the judges who had decided the cases that were overruled). But a sense of unease persists, especially regarding the Delaware courts’ recent perceived hostility towards controlling stockholders. For this reason, several controlled companies have already elected to leave Delaware for other jurisdictions such as Nevada or Texas–in one such case, the Delaware Court of Chancery found the decision to leave should be reviewed under the entire fairness test, although the Delaware Supreme Court quickly accepted an interlocutory appeal (which remains pending) to reconsider that issue.