In 2025, corporate America is witnessing a significant legal transformation as an increasing number of major companies reconsider their incorporation choices, moving away from Delaware, which has long been regarded as the preeminent jurisdiction for corporate registration. This trend, referred to as “Dexit,” reflects a notable change in how businesses assess their relationships with the judicial system, regulators, and shareholders. Historically, Delaware has attracted corporations due to its stable legal framework, expert Court of Chancery, and established case law that supports managerial discretion. However, recent legal rulings and evolving perceptions of Delaware’s judicial environment have led many companies to question the degree of protection and flexibility the state continues to provide.
The catalyst for this exodus was a pivotal ruling in January 2024, in which the Delaware Chancery Court invalidated Elon Musk’s $56 billion compensation package at Tesla. The court determined that the board’s approval process lacked objectivity and was too closely aligned with Musk. While this decision was welcomed by advocates for shareholder rights, it reverberated throughout the corporate sector, indicating a developing trend toward heightened scrutiny of executive compensation and boardroom governance.
Since this landmark ruling, at least nine publicly traded companies, each valued at more than $1 billion—such as Trump Media & Technology Group, Dropbox, The Trade Desk, and Cannae Holdings—have either proposed or completed their moves to incorporate in other states. These companies cite a common concern regarding Delaware’s potentially diminishing predictability and increasing intervention in corporate governance matters. As a result, these firms are actively seeking jurisdictions that provide legal frameworks more conducive to managerial discretion and less interference.
Texas has emerged as a significant beneficiary of this trend, having positioned itself as a corporate legal haven over the past several years. A notable development occurred on May 14, 2025, when Governor Greg Abbott signed Senate Bill 29 into law, instituting key reforms in the area of corporate governance disputes. Among the most impactful changes is an increase in the threshold for shareholders wishing to file derivative lawsuits, now requiring a minimum of a 3% ownership stake. This provision aims to address concerns about an increase in speculative litigation from minority shareholders and activist investors.
Moreover, the Texas legislation reinforces broad protections under the business judgment rule, which safeguards corporate directors and officers from liability for decisions made in good faith. Consequently, Texas courts will be directed to defer to the decisions of corporate boards unless there is clear evidence of fraud or illegality. The law also establishes a dedicated system of business courts, with judges appointed by the governor, a development that has drawn scrutiny from legal scholars regarding potential political influence over judicial outcomes. Nonetheless, for companies seeking a more favorable legal environment, this centralized and ideologically aligned judiciary is viewed positively.
Other states, such as Nevada and Florida, are also making strides to attract corporations dissatisfied with Delaware’s evolving landscape. Nevada, for example, has existing statutes that provide significant protections to corporate directors, while Florida is positioning itself as a strategic nexus for financial technology firms and a gateway to Latin American markets.
In light of these developments, Delaware is proactively seeking to retain its status as a preferred incorporation destination. Acknowledging the implications for its economy, given that corporate franchise taxes and associated fees represent a significant portion of its budget, the state has implemented amendments to certain statutes with the aim of reassuring business leaders. Recently, Delaware enacted measures to restrict judicial oversight of specific board decisions related to mergers and executive compensation, striving to restore its reputation as a business-friendly jurisdiction. However, opinions about the reliability of Delaware’s legal framework may have already begun to shift among corporate counsel and institutional investors.
Overall, this trend represents more than a mere legal realignment; Dexit encapsulates a broader ideological discourse regarding the nature of corporate governance in the United States. On one side are advocates for shareholder rights, who argue that the judiciary should play a proactive role in ensuring accountability among executives and preventing excessive compensation packages. On the opposite side are executives, board members, and many corporate attorneys, who contend that an excessive level of legal scrutiny may hinder innovation, long-term strategic planning, and the essential risk-taking that underpins corporate growth.
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