Picking back up after February’s post, I’ve got an updated list looking at movement between states so far this year in preparation for a panel at KPMG’s Board Leadership Conference this week. This list has grown with another five companies announcing attempts to shift their incorporation jurisdiction since the last update. Some thoughts on the announced moves after the list as well, infographics, and quick note about my new Senior Of Counsel role.

This is the current iteration of the spreadsheet. It’s a work in progress but has links to filings and more information that we’re tracking.

Infographics

We’ve got some updated infographics as well.

Origin & Destination States

Market Capitalization By State

Having Exxon in the mix dramatically shifts the market capitalization picture, but this is the current breakdown.

Vote Results

Many thanks again to research assistants Ethan Viator and Hunter Hawkins for giving us charts showing voting results so far at different companies.

Part of the reason for doing these infographics around vote results is to make it easier to see if there are significant voting differences depending on the destination jurisdiction. Both LQR House and EQV Ventures had Delaware as the target jurisdiction and attracted little opposition. I think that reflects a lot of institutional investor comfort with Delaware as a default still.

LQR House’s New Franchise Tax Fees

LQR House winning the vote to shift to Delaware doesn’t mean that it’s an optimal business decision. This is how it described the possible fees it might incur in Delaware upon approval of the move:

Delaware imposes annual franchise tax fees on all corporations incorporated in Delaware. The annual fee ranges from a nominal fee to a maximum of $180,000, based on an equation of the number of shares authorized and outstanding and the net assets of the corporation. Based on our current capital structure and anticipated number of outstanding shares following the effect of one or more Reverse Stock Splits, our annual Delaware franchise tax could be significant, and may be substantially higher than our current Nevada fees.

Golly, this sits in tension with the Delaware’s own guidance that says fees go up to $200,000 for companies that do not qualify as Large Corporate Filers. For them it caps out at $250,000. LQR House’s shiny new Delaware charter now authorizes it to issue “an aggregate of 2,000,000,000 shares of capital stock, which shall consist of: (i) 1,500,000,000 shares of common stock, $0.0001 par value per share (‘Common Stock’); and (ii) 500,000,000 blank check preferred stock $0.0001 par value per share (‘Blank Check Preferred Stock’).” I’m not a Delaware lawyer, but my rough calculation is that under either method, LQR House will now pay $200,000 annually to Delaware.

Hopefully it pays on time because Delaware charges $200 and 1.5% interest for each month the payment is late.

Exxon

Exxon stands out as significant here, proposing to shift from New Jersey to Texas. It’s attracted some commentary already. Ann covered it for the blog. We also have a recent Bloomberg OpEd from Christina Sautter. Tony Rickey also addressed the move and offered thoughts in response to Sautter’s view.

One common discussion point around it is that Exxon has not included a threshold for bringing shareholder derivative claims as part of the proposed move but also has not committed to not adopt such a provision in the future. Texas now allows companies to set an ownership threshold of up to 3% of the stock as a requirement for bringing a derivative claim. The Texas provision recently survived a challenge when Southwest added a 3% threshold via a bylaw amendment after it adopted the provision after receiving a stockholder’s demand.

How should stockholders think about the possibility that Exxon will add such a provision in the future? Here, views will vary. Some stockholders might worry that they could lose their ability to bring a claim without assembling a broader coalition. Other stockholders might prefer that Exxon have an easy way to tidily dispose of lawsuits that dissipate corporate assets and that are not supported by a meaningful block of shareholders. They might be glad that Exxon has kept its options open and not committed to never adopt such a provision without amending its charter. The business environment changes and Exxon preserved its flexibility. It’s not hard to imagine that wars, changing climate conditions, or other developments might create conditions where Exxon could face more stockholder litigation.

My concern is that these issues are often discussed in a one-sided way where any restriction on stockholders’ ability to bring claims gets decried as muzzling stockholders or taking away investor protections. But there is another side to the coin that low-value lawsuits may do more harm than good by distracting management, dissipating corporate funds on attorney fees, and driving insurance premiums up. It’s a tradeoff.

The optional up-to-3%-threshold operates as a filtering mechanism. A good filter will screen out low-utility claims and allow stockholders to go to court when there has been a problem that needs to be addressed. I don’t know whether the optional Texas filter gets the calibration right, but we can watch it over time and see how it works out.

New Role & Disclaimer

Last week, Wilson Sonsini announced that I had joined them as Senior Of Counsel in the firm’s Corporate Governance practice. I’m looking forward to helping the firm’s clients make thoughtful governance decisions. I’m also hopeful that having a presence in both the academic and practicing world will make me a better professor and also help me continue to improve the treatise I write with Lori Johnson on Nevada Business and Commercial Law. It’s one thing to view the law from an academic remove watching statutory changes and decisions come out. Seeing how people use the Nevada statute in practice will help me better understand what areas need more development for practical utility.

My full-time role at the William S. Boyd School of Law at the University of Nevada, Las Vegas (UNLV Law) continues. I write these blog posts on my own behalf and not on behalf of UNLV Law or Wilson Sonsini. Neither UNLV Law or Wilson Sonsini approve these posts and they are not responsible for them. Any errors and omissions are mine alone.*

*No really. Do you think Wilson Sonsini wouldn’t have fancier and consistently-sized graphics and charts? I’m doing this on my own with some help from law student research assistants.

Southwest is (and has long been) a Texas-incorporated company.

After Texas reformed its governance laws, Southwest adopted a bylaw requiring that derivative actions only be brought by shareholders with a minimum 3% stake.

Subsequently, an investor holding only 100 shares filed a derivative action in federal court, alleging that Southwest’s directors breached their fiduciary duties to the company when they abandoned Southwest’s “Bags Fly Free” policy in the wake of an activist intervention by Elliott Investment Management. (It’s a silly lawsuit, whatever). Southwest invoked the bylaw in its motion to dismiss.

The plaintiff offered a number of challenges to the Texas law, including that it was inapplicable to him because he served a demand before the law passed, and that the law was impermissibly retroactive as applied to his claim. In Gusinsky v. Reynolds, 3:25-cv-01816, the court rejected these.

The plaintiff also, however, alleged that Southwest’s directors breached their fiduciary obligations by adopting such a limit on derivative lawsuits in the first place, a claim that the court rejected because … the plaintiff did not have the 3% stake necessary to advance it.

More seriously, it’s worth noting that when plaintiffs in Delaware brought a facial challenge to a litigation-limiting bylaw in Boilermakers Local 154 v. Chevron, then-Chancellor Strine noted that if the bylaw were invoked to dismiss a specific claim, the plaintiff could at that point “sue” to establish that applying the bylaw to that particular case breached the directors’ fiduciary obligations. (Though Strine may have envisioned a second lawsuit that would be brought in compliance with the bylaw, which itself merely declared Delaware an exclusive forum).

Strine also, however, suggested that, in a specific case, plaintiffs could make an argument that the bylaw was unreasonable as applied under contract law principles, which was something the Southwest plaintiff tried, as well. However, he argued that the bylaw was unfair because it was adopted in response to his written demand, which the court rejected as a factual matter, finding it more plausible that the bylaw was adopted in response to the new Texas law authorizing it.

Which means the contract argument might not be … off the table entirely … if the facts warrant it in the future. As for the fiduciary argument, well, all things considered, I’d have preferred to see it advanced in a case where the underlying claims inspired a little more sympathy.

And another thing. New Shareholder Primacy podcast!  This week, me and Mike Levin talk about Exxon’s proposed move to Texas, and about pending proxy contests in 2026. Here at Apple; here at Spotify; and here at YouTube.

(Previously.) Here is one company’s method for avoiding inclusion:

Service. They’re contesting service.

I’ve previously blogged a couple of times about SPVs as a vehicle for investing in private companies. They not only skirt the law regarding the number of investors a company can have before it is required to make public disclosures, but they also may layer on high fees and suspect valuations – and that’s if they aren’t outright fraudulent.

Anyway, I post because Bloomberg had a nice feature on this yesterday, pointing out both the risk of fraud, and simply the risk of losing one’s shirt.  (It references two lawsuits that have been filed in Delaware over these vehicles; if I’m right, one I blogged about before, and the other is this one, where a fund put $10 million into an SPV that was supposed to acquire SpaceX shares, and doesn’t seem to be able to get any financial reports.)

But even aside from actual fraud cases, the SPV may only have shares in another SPV that somewhere down the line has shares, and leaving aside valuation and fee questions, when the company does go public, those shares might be locked up and nontradeable for some period of time, leaving the SPVs holding illiquid investments that could go down as easily as they go up.

Well, let’s just say if/when there are disappointed investors, you might think Delaware would have some interesting LLC interpretation to do, but, realistically, the arbitration clauses in those documents may prevent Delaware courts from ever getting ahold of it.

And another thing. New Shareholder Primacy podcast!  Me and Mike Levin talk about the EngageSmart opinion, and about proxy advisors and executive comp.  Here at Apple; here at Spotify; and here at YouTube.

Earlier today Pershing Square filed an S-1 seeking to raise “between $5 and $10 billion . . . consisting of the $2.8 billion in the PSUS Private Placement and between $2.2 billion and $7.2 billion, respectively, in the PSUS IPO.”

The IPO market is another key area to watch for jurisdictional competition. I’m working up some month-by-month statistics and materials for tracking this year’s IPO trends. The draft sheet is back with the research assistant team for some tweaking now, but January is nearly ready and should be out soon. It appears that the Caymans will take the crown for January IPOs when SPACs are included. If we exclude SPACs, Delaware again dominates.

If you want coverage of the Exxon proposal to shift from New Jersey to Texas, Ann has covered that one already. My only thought to add on it is that it’s consistent with what we’ve been seeing for corporations with a substantial Texas nexus already to shift to Texas–as Ann noted. This is how Exxon put it:

ExxonMobil is a Texas corporation in all but name, with most senior corporate executives and all corporate functions based in the state for the last 35 years. Our global headquarters are in Texas; approximately 30% of our global employees are based in Texas. Of the company’s U.S. employees, approximately 75% work in Texas and our U.S.-based research facilities are in Texas.

Here are some quick notes on the S-1 for Pershing.

Jurisdiction

The planned IPO is notable on the jurisdictional competition front because the company “will convert into a Nevada corporation by means of a statutory conversion and change its name to Pershing Square Inc.” before the registration statement becomes effective.

Counsel

In terms of lawyers on the IPO, it includes Simpson Thacher & Bartlett LLP, Washington, D.C. (Issuer Counsel), Brownstein Hyatt Farber Schreck, LLP, Las Vegas, (Nevada Counsel), and Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York (Underwriter Counsel). Sullivan & Cromwell LLP also appears, but I’m not sure where to sort them at this time.

Bench Trial Election

Pershing looks to take advantage of last session’s amendment to the Nevada law and opt into bench instead of jury trials. This creates a degree of parity with Delaware’s Chancery bench trials.

Controlling Stockholder Provision

Nevada’s controlling stockholder statute applies. This is how the S-1 describes it:

Pursuant to NRS 78.240 (as amended effective May 30, 2025, pursuant to Assembly Bill No. 239), no stockholder (other than a “controlling stockholder” as discussed below) has any fiduciary duty to us or any other stockholder, and each stockholder (other than a “controlling stockholder”), regardless of such stockholder’s relative ownership of shares, is entitled to exercise or withhold the voting power of such shares in such stockholder’s personal interest and without regard to any other person or interest.

A “controlling stockholder” is defined as a stockholder of a corporation having the voting power, by virtue of such stockholder’s relative beneficial ownership of shares or otherwise pursuant to the articles of incorporation, to elect at least a majority of the corporation’s directors. The only fiduciary duty of a controlling stockholder of a corporation, in such person’s capacity as a stockholder, is to refrain from exerting undue influence over any director or officer of the corporation with the purpose and proximate effect of inducing a breach of fiduciary duty by such director or officer, for which breach the director or officer is liable pursuant to NRS 78.138, and which breach:

• directly relates to the initiation, evaluation, negotiation, authorization or approval by the board of directors, or a committee thereof, of a contract or transaction to which the controlling stockholder or any of its affiliates or associates is a party or in which the controlling stockholder or any of its affiliates or associates has a material and nonspeculative financial interest; and
• results in material, nonspeculative and non-ratable financial benefit to the controlling stockholder, which benefit excludes, and results in a material and nonspeculative detriment to the other stockholders generally.

However, the exercise or withholding of voting power by a controlling stockholder, or the indication or implication by a controlling stockholder as to whether or to what extent such voting power may be exercised or withheld, does not, by itself, constitute or indicate a breach of this limited fiduciary duty. A controlling stockholder is presumed to have not breached its fiduciary duty with respect to any contract or transaction if it is authorized or approved, or recommended to the board of directors, by a committee of the board consisting only of disinterested directors.

Due to the anticipated aggregate voting power of our capital stock by ManagementCo (including its holding of the Special Voting Share) at the time of this offering, ManagementCo would be deemed, at such time, to be a “controlling stockholder” under the statutory provisions described above.

Hustling off to teach, but wanted to get this out and keep an active eye on the IPO space going forward.

Sorry, Ben, I’m jumping on this one.

Exxon is proposing to move its domicile to Texas.

It’s an obvious move for Exxon; their headquarters are there so they’re not exposing themselves to lawsuits in a different venue, and they also perhaps expect, shall we say, a friendlier judicial reception in Texas.

But Exxon isn’t a Delaware company. It’s a New Jersey one, old school from when it was Standard Oil and New Jersey dominated the market for corporate charters. Right now, they’re the subject of a couple of lawsuits in New Jersey over their retail shareholding program, and they’re fighting to transfer those to Texas.

But Exxon doesn’t have a controlling shareholder; its shareholders are normie institutions like BlackRock and State Street.

Perhaps to placate them over the move, it’s explicitly not going to opt in to the Texas provisions that would allow ownership thresholds on shareholder proposals and derivative lawsuits – provisions that did not exist when, say, Tesla asked them to vote on a move.

But, it’s also not committing in the charter not to adopt those provisions in a unilateral director-passed bylaw in the future (compare, for example, ArcBest, which promised in the charter not to adopt ownership thresholds). (Exxon does, however, argue that even under New Jersey law, it would be free to adopt a bylaw limiting shareholder proposals – an untested proposition, but one Mohsen Manesh has advocated)

But there is a provision of Texas law Exxon (and ArcBest) would be bound by: Texas prohibitions on imposing any liability on corporate directors or officers for anything short of fraud, intentional misconduct, an ultra vires act or a knowing violation of law. Notably, these protections of Texas law extend even to director initiated lawsuits – i.e., not just shareholder derivative lawsuits, but ones that the board voluntarily chooses to bring.

All of this, I think, puts the BlackRocks of the world in a political bind. They generally express a preference against diminishing shareholder rights in meaningful ways, but they’re also under heavy pressure to demonstrate that they support the fossil fuel industry.

I’d ask what they plan to do but I …. assume … Exxon wouldn’t have offered this proposal in the first place if it hadn’t put out a few feelers first (in full compliance with the rules on proxy solicitation of course).

In late January, VC Zurn rejected a request for an emergency temporary restraining order enjoining a merger between Fifth Third Bancorp and Comerica. The plaintiff alleged a variety of process failures, including deal protections that inhibited Comerica’s ability to seek a superior offer. It claimed that these failures violated the fiduciary duties of Comerica’s board, and also improperly restricted the board’s authority under DGCL § 141(a).

With respect to the 141(a) claim, VC Zurn wrote:

Illegality Under Section 141 and Omnicare

I begin with illegality. Under Delaware law, contracts “purport[ing] to require a board to act or not act in such a fashion as to limit the exercise of fiduciary duties” are “invalid and unenforceable.” In the merger context, a board may not “disable[] itself from exercising its own fiduciary obligations at a time when the board’s own judgment is most important, i.e., receipt of a subsequent superior offer.” For example, “[d]irectors cannot be precluded by the terms of an overly restrictive ‘no-shop’ provision from all consideration of possible better transactions.”64 Boards are required to bargain for effective fiduciary out clauses permitting them to discharge their managerial authority in fidelity to stockholders. When managerial authority is preserved, the Court will decline to craft a per se rule “that the contract is invalid simply because it delimited the range of discretion the directors otherwise had under the law to act.”…

HoldCo invokes Omnicare, Quickturn, and ACE Ltd. Those cases are readily distinguishable….The Comerica board did not “tie its own hands for a year” as HoldCo alleges. Before the vote, nothing about the Merger was a fait accompli or a mathematical certainty. Nothing prevented Comerica’s board from considering, negotiating, or pursuing alternative transactions if it believed, in good faith, that failing to do so would be inconsistent with its fiduciary duties….

After this section, VC Zurn went on to reject the plaintiff’s Unocal/fiduciary claims.

But … forgive me … after Section 122(18), isn’t the authority question dead letter? Certainly, an acquirer is a “prospective stockholder,” so doesn’t that mean the board has at least the authority to tie its own hands in a merger agreement? Whether it does so in compliance with its fiduciary obligations is a separate question, but VC Zurn did treat these as distinct issues.

I checked the briefing, and the parties made no reference to 122(18). To some extent, that makes sense – everyone was in a rush on this. And the parties – especially defendants – may very well have not wanted to introduce novel legal questions into the mix. But the defendants even cited West Palm Beach Firefighters’ Pension Fund v. Moelis & Co., 311 A.3d 809 (Del. Ch. 2024) as stating the correct standard for evaluating the validity of a contract under 141(a), and the plaintiff cited Moelis repeatedly in its reply, so 122(18) was kind of … glaring in its absence.

Anyway, I’m genuinely asking: is there a reason 122(18) wouldn’t foreclose the 141(a) argument? (Not, of course, the fiduciary argument – just the 141(a) one). I post with some trepidation because if there’s an obvious answer I’ll feel silly for missing it, but I’m a bit stumped and at some point I will have to teach this.

No other thing. Shareholder Primacy experienced some technical recording difficulties this week but we expect to be back soon!