Key Takeaways:
- Delaware companies have recently faced an increasingly litigious environment, generating speculation that there would be an exodus of companies reincorporating to other jurisdictions in 2025, also known as DEXIT.
- States such as Nevada and Texas, wanting to offer alternatives to Delaware, amended their corporate laws earlier this year to incentivize and compete for company incorporations.
- In 2025, of the 18 companies that proposed leaving Delaware, 13 sought to move to Nevada and two proposed reincorporation to Texas.
- 55% of reincorporation proposals this proxy season involved companies with significant or controlling shareholders.
- There were more reincorporation proposals this proxy season than in prior years, with a larger number of companies moving away from Delaware. But in terms of a widespread DEXIT, it appears that the fear was greater than reality.
Delaware has long been the preferred state of incorporation for publicly traded companies due to its extensive case law and widely understood corporate law, the Delaware General Corporation Law (DGCL).1 However, recently the Delaware Court of Chancery and Delaware’s Supreme Court issued certain decisions on cases, specifically Maffei v. Palkon (TripAdvisor)2 and Tornetta v. Musk (Tesla),3 which were viewed as unfavorable toward controlling shareholders. At the same time, Delaware companies have faced an increasingly litigious environment where shareholder lawsuits and the amount of plaintiff fees awarded have increased. This legal environment created speculation that there would be an exodus of companies reincorporating to jurisdictions other than Delaware in 2025 (DEXIT).
During the 2025 proxy season, we evaluated 29 reincorporation proposals and, in the case of cloud software company Dropbox, one action by written consent to reincorporate. This represents a 70.6% increase from the 17 proposals during the 2024 proxy season, and a 45% increase from the 20 proposals in 2023.
Incentivizing Company Incorporations: State Changes to Corporate Laws
Nevada and Texas, two states increasingly seen as alternatives to Delaware, amended their own corporate laws earlier this year to incentivize and compete for company incorporations. Among more notable provisions, Nevada’s amendments included: defining controlling shareholders and the fiduciary duties of controllers, establishing safe harbors in conflicted transactions, making certain adjustments to Nevada’s statutory business judgment rule, and establishing a specialized business court.
Texas, a more recent competitor, responded by adopting similar amendments to their corporate laws as Nevada. In addition, the Texas legislature passed amendments, which among other changes, provide for minimum ownership thresholds for derivative lawsuits, books and records requests, and shareholders’ abilities to submit proposals for consideration at annual meetings. These amendments were widely viewed by investors as unfavorable to shareholder rights.
In response to the threat of DEXIT, Delaware also adopted certain amendments to the DGCL in March 2025. Delaware’s amendments provide additional legal clarity regarding the procedures to secure safe harbors from liability in controlling shareholder transactions and conflicted transactions, adds a codified definition of controlling shareholders, and creates certain limits related to books and records requests, among other changes.
Reincorporation Proposals and Common Rationales
During the 2025 proxy season, 18 of 28 companies (64.3%) with reincorporation proposals on their ballots proposed leaving Delaware (vs 23.5% in 2024), while 8 of the 28 companies (28.6%) proposed reincorporating to Delaware (see Figure 1 below). Of the 18 companies that proposed leaving Delaware, 13 reincorporated to Nevada and two proposed reincorporation to Texas, although one of those companies withdrew their proposal prior to the annual meeting. 55% of reincorporation proposals involved companies with significant or controlling shareholders.
Figure 1. U.S. Reincorporation Proposals in 2025
As to companies’ cited rationale for reincorporation, common themes included their current state’s legal environment, lower franchise taxes and fees, litigation risk, and director and officer liability. Specifically, 58.6% of the proposals cited the legal environment of the company’s current jurisdiction, 44.8% cited lower franchise taxes and fees, and 37.9% cited ongoing risk posed by litigation. Rationale citing relocation to align companies’ incorporation with their business operations appeared in only 24.1% of all proposals.
Three Relevant Cases: Dolan Family Companies, TuHura Biosciences, and MercadoLibre
Highlighting the trend of controlled companies leaving Delaware, four companies controlled by the Dolan Family reincorporated from Delaware to Nevada: AMC Networks (AMCX), Madison Square Garden Entertainment (MSGE), Madison Square Garden Sports (MSGS), and Sphere Entertainment (SPHR). All four of these companies cited decreased franchise taxes and fees and the legal environment as reasons to reincorporate. Additionally, three of these companies cited the risk of litigation against the company and its directors and officers as additional reasons, while only one of the companies cited business operations in Nevada as part of its rationale to reincorporate. These rationales appear to reflect these companies’ main impetus to reincorporate — the perception that Nevada offers a more favorable legal environment.
Notably, of the companies that reincorporated in Delaware, TuHura Biosciences left Nevada and cited Delaware’s corporate laws as the reason for its reincorporation. Specifically, TuHura disclosed in its proxy filing that “the corporate laws of the State of Delaware are more comprehensive, widely used and extensively interpreted than the corporate laws of other states, including Nevada.”4 Even during a time when Delaware’s legal approach to companies is being challenged, it remains the preferred jurisdiction by many.
Comparatively, MercadoLibre, a $120 billion market cap e-commerce company, requested shareholder approval to reincorporate from Delaware to Texas, one of only two companies that proposed reincorporation to Texas during the 2025 proxy season. MercadoLibre cited that in addition to lower franchise taxes and fees, and corporate flexibility gained by having the state of incorporation align with the company’s business operations, the company also considered how, “Delaware law can be indeterminate because of its use of broad, flexible standards…” and “Delaware decisions may be less predictable for an innovative company like MercadoLibre.”5
The company further stated that it considered Texas’s recent amendments, specifically the codification of its business judgement rule, and how it would “provide greater certainty to the board in its decision-marking.”6 However, prior to holding their annual meeting, MercadoLibre withdrew the reincorporation proposal from shareholder consideration. The company did not provide any additional rationale or disclosure surrounding the board’s decision to withdraw the reincorporation proposal.
Vote Results on Reincorporation
While all but one reincorporation proposal from the 2025 proxy season was approved, average support for these proposals declined from 88.7% in 2024 to 81.1%. Revelation Biosciences was the only company that failed to receive majority support, with just 35% of the votes cast in favor and 60.9% abstaining. The overall decline in shareholder support indicates that shareholders were more critical of these proposals than in past seasons, particularly when the company proposed to leave Delaware.
Most reincorporations involved companies with significant or controlling shareholders, and the vote results of unaffiliated shareholders at these companies suggest that the interests of significant or controlling shareholders may have driven DEXITs. Of the companies controlled by the Dolan Family, only two, MSGE and SPHR received majority support from unaffiliated shareholders, while the other two, AMCX and MSGS failed to do so.
Shareholder views on reincorporation may be evolving in response to increased activity. In Glass Lewis’ 2025 Policy Survey,7 we asked whether participants had changed their approach to reincorporations in light of DEXIT and other recent developments. Half of investors reported that when assessing reincorporation proposals, they now view shareholder rights and protections more favorably, while just under one-third reported that they now view protections for directors, officers and controlling shareholders less favorably.
One U.S. stakeholder suggested that, "states might confuse management friendly policies with business friendly policies," citing board exculpation policies that may weaken fiduciary obligation, and shareholder ballot access rules that prevent investors with significant shareholdings from placing proposals on ballots.
The Future of DEXIT
Over the course of the 2025 proxy season, there were more reincorporation proposals, with a larger number of companies moving away from Delaware, compared to previous years. The companies that decided to reincorporate commonly cited their current state’s legal environment, litigation risk, and lower franchise taxes and fees in the new jurisdiction as part of their rationale, highlighting states’ legal environment as their primary concern. In terms of a widespread DEXIT, however, it appears that the fear was greater than reality.
The trend of DEXIT may continue for companies with significant or controlling shareholders as they assess the benefits of reincorporating their companies from Delaware to other states. As seen with the examples discussed above, the choice of jurisdiction continues to be a case-by-case decision for every company as they continue to evaluate the flexibility and protections that various legal regimes provide, while weighing what they believe is most valuable for the long-term best interests of the company and shareholders.
For more information on trends in reincorporation in the U.S., read our 2025 U.S. Proxy Season Review here. Glass Lewis clients can access the full report via Viewpoint and Governance Hub.
Notes and References
- This article also includes contributions from Sarah Wenger, Senior Research and Content Analyst, U.S., Governance and Aaron Wendt, Senior Director of Research.
- Delaware Courts. “Gregory B. Maffei, et al. v. Dennis Palkon, et al.” 2025. https://courts.delaware.gov/Opinions/Download.aspx?id=361660
- Delware Courts. “Richard J. Tornetta v. Elon Musk et al.” 2024. https://courts.delaware.gov/Opinions/Download.aspx?id=359340
- TuHura Biosciences. SEC Filing for 424B3 - Prospectus [Rule 424(b)(3). May 23, 2025. https://s3.amazonaws.com/sec.irpass.cc/2884/0001193125-25-125499.htm
- Mercado Libre. Mercado Libre Proxy Statement. April 28, 2025. https://otp.tools.investis.com/clients/us/mercadolibre_inc/SEC/sec-show.aspx?Type=html&FilingId=18404570&CIK=0001099590&Index=10000#MELI-20250428_HTM_id9f7136ac9074a74ab7b8297a5c14586_5277
- Ibid
- Publication forthcoming.
