Abstract
A company has the freedom to choose which state’s laws will govern its internal affairs when first deciding where to incorporate. Once established and operating under the laws of a particular jurisdiction, the corporation’s shareholders receive a set of rights they opted into by purchasing shares. Many Fortune 500 companies have chosen Delaware as their home due to its robust body of corporate law. Recently, however, some fiduciaries at high-profile companies have grown frustrated with the shareholder-friendly trend in Delaware courts—one that makes it easier for shareholders to sue. In response, western states—particularly Nevada and Texas—have gained the attention of those peeved fiduciaries by offering legal frameworks that provide them greater litigation protection. Given the substantial financial benefits that states derive from company incorporations, both Delaware and states like Nevada and Texas have much at stake. When a company decides to reincorporate in another state, however, an important question arises: Should shareholders be compensated for changes to their rights under the state of reincorporation’s laws? The longstanding tension between fiduciary business judgment and shareholder rights has been a central issue in Delaware corporate law. Reincorporation further complicates the balancing of these interests by extending beyond Delaware’s borders as the corporation has already decided to pack their bags to head West. Delaware courts are no longer just analyzing the rights under Delaware’s own law and precedent; they must now compare those rights to those afforded by another state. This Note explores that issue by taking a deep dive into TripAdvisor’s decision to reincorporate in Nevada. While the Delaware Supreme Court declined to compensate TripAdvisor shareholders in Maffei v. Palkon, this Note proposes a balancing test for the Delaware courts to apply—one that ensures shareholder rights are being protected, while allowing corporations to make an exit when they see fit.
Recommended Citation
Caroline Grady,
DExit Stage West: You Can Incorporate Anytime You Like, but Can You Ever Leave?,
78 Vanderbilt Law Review
(2025)
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol78/iss5/1