By Daniel W. Glasser on May 16, 2025.
For decades, Delaware has been regarded as the “go-to” forum for business formation, especially for publicly traded companies. The state’s Court of Chancery, a specialized court dedicated exclusively to business matters, has provided companies with consistent, predictable, and expert resolution of corporate disputes without jury trials. Delaware’s General Corporation Law has long been considered flexible but with sufficiently clear governance guidelines, and the state’s legislature regularly updates these laws to address emerging business needs.
But in recent years, companies started looking for greener pastures. According to Reuters, several prominent corporations have either already moved or are scheduled to vote on a departure from Delaware this week:
[I]nvestors in nine public companies worth at least $1 billion each will vote on proposals to ditch Delaware as their place of incorporation, potentially denting the state’s longtime reputation as Corporate America’s capital, Reuters has found.
Five companies with a stock market value of at least $1 billion have moved their legal home out of Delaware since last year, in what some have nicknamed “Dexit.” Tesla made a high-profile move to Texas last year and in April, President Donald Trump’s social media company Trump Media & Technology, which owns the Truth Social platform, decamped to Florida.
Most of the companies are dominated by a significant shareholder or founder. Delaware judges have expanded the court’s most stringent legal standard to a growing range of situations involving controllers, increasing the risk of shareholder lawsuits. The decisions culminated with the blockbuster ruling last year that rescinded Musk’s $56 billion pay package from Tesla.[1]
A recent opinion—published by a Federal District Court in Texas—illustrates at least one reason companies are incorporating in places like Nevada. In Rowe v. Doris, the plaintiff (Lawrence Rowe) challenged a merger transaction on the theory that it was the product of self-dealing.[2] Mr. Rowe was an investor in a Nevada corporation called Viking Energy Group, Inc. (“Viking”). Viking operated in the oil and gas industry and was based in Houston (hence, Mr. Rowe filed his claims in Texas). Mr. Rowe asserted that Viking’s CEO, James Doris, had violated his fiduciary duties by merging Viking into another Nevada corporation controlled by Mr. Doris called Camber Energy, Inc. (“Camber”). In a nutshell, the complaint alleged that the merger was “conflicted” because Mr. Doris stood “on both sides” as “the CEO, President and director of both Viking and Camber” and held enough stock in Viking to ensure a favorable vote.
The Rowe court dismissed plaintiff’s breach of fiduciary duty claims because Nevada law—under which both Viking and Camber were incorporated—governed the dispute. Nevada’s statutory framework offers broad protections to corporate directors and officers, in part through its detailed codification of the “business judgment rule” which applies a presumption of good faith to their business decisions. NRS § 78.138. In Delaware, “[w]here a transaction involving self-dealing by a controlling stockholder is challenged, the applicable standard of judicial review is ‘entire fairness’ […] the defendants bear the ultimate burden of proving that the transaction with the controlling stockholder was entirely fair to the minority stockholders.” Kahn v. M&F Worldwide Corp., 88 A.3d 635, 642 (Del. 2014). Citing NRS § 78.138 and NRS § 78.140, Rowe made very clear that Nevada does not apply the Delaware standard:
Under these controlling provisions of statutory law, the Nevada Supreme Court has rejected the sort of conflicted-transaction theory alleged here by Plaintiff. In Guzman v Johnson, a former shareholder of an acquired company sued the company’s directors (which included the allegedly conflicted directors) along with the non-director controlling shareholder, “alleging that they breached their fiduciary duties to her and the other minority stockholders in connection with the transaction.” 483 P3d 531, 535 (Nev 2021). As here, the Guzman shareholder-plaintiff “argue[d] that when a stockholder challenges an interested fiduciary’s corporate dealings, the business judgment rule is rebutted as a matter of law and the burden shifts to the interested fiduciary to prove good faith and the inherent fairness of the challenged transaction.” Id at 536.
The dissent invoked Delaware law and the same protections sought by Plaintiff as cited in his complaint, including the decision in Kahn v M&F Worldwide Corp. See id at 540–42; see also Dkt 1 at ¶77 n11. To the contrary, the Nevada Supreme Court affirmed dismissal on the pleadings, holding that “a litigant who sues directors or officers of a corporation individually for breach of fiduciary duty must satisfy both requirements of NRS § 78.138(7), which provides the sole method for holding individual directors liable for corporate decisions.” Id at 535 (emphasis added). This means that the exclusive statutory basis for director and officer liability under Nevada law “requires the claimant to (1) rebut the business judgment rule and (2) demonstrate a breach of fiduciary duty involving intentional misconduct, fraud, or another knowing violation of the law.” Id at 536.
“Nevada’s corporate statutes are more protective of directors and officers than Delaware’s, particularly in the context of interested transactions.”
Guzman thus clearly departed from Delaware law. In doing so, it specifically “conclude[d] that the inherent fairness standard cannot be utilized to rebut the business judgment rule and shift the burden of proof to the individual directors.” Id at 537; see also In re Newport Corp. Shareholder Litigation, 507 P3d 182, 2022 WL 970210, at *4 (Nev 2022, unpublished disposition): “The cases shareholders provide do not substantiate their claims because they apply Delaware’s less-forgiving inherent-fairness standard to assess the directors’ actions, which Nevada does not.”
Such precedent is binding and directly undermines Plaintiff’s basic theory that “the mere allegation that a director was an interested party in the transaction rebuts the business judgment rule.” Guzman, 483 P3d at 533–34. And he can’t avoid that result simply by suing only Doris, as the interested director and controlling shareholder, while entirely ignoring the fact that the board of directors of Viking unanimously approved the merger. Such approach would again be contrary to other provisions of Nevada law.
Rowe v. Doris, 2025 U.S. Dist. LEXIS 60066, *13-15.
The Rowe court emphasized that the merger at issue had been negotiated with the assistance of independent advisors, disclosed fully in a 400-page proxy statement, and approved unanimously by Viking’s board, which included two independent directors. And Mr. Rowe did not allege that a majority of the board was conflicted, a key requirement to overcome the business judgment rule under the Nevada statute. Thus, the Rowe court distinguished Delaware’s stricter “entire fairness” standard in such contexts, noting that Nevada expressly rejects that approach, as reaffirmed in Guzman.
This decision marks yet another reason companies may be considering Dexit. Nevada’s corporate statutes are more protective of directors and officers than Delaware’s, particularly in the context of interested transactions. Nevada law limits judicial interference in corporate decision-making, requires proof of intentional wrongdoing to impose personal liability, and favors board autonomy. For these reasons alone, Nevada may be a more appealing place of incorporation for companies seeking greater latitude in governance and reduced litigation risks.
[1] Hals, “In Tesla’s wake, more big companies propose voting “Dexit” to depart Delaware,” Reuters.com (May 14, 2025), https://www.reuters.com/business/autos-transportation/teslas-wake-more-big-companies-propose-voting-dexit-to-depart-delaware-2025-05-14/.
[2] Rowe v. Doris, No. 4:24-cv-00489, 2025 U.S. Dist. LEXIS 60066, 2025 WL 963590 (S.D. Tex. Mar. 31, 2025).