Texas, Nevada, and Delaware have been competing to relieve corporate managers of liability for breach of fiduciary duty (the interesting question is not the race so much as why none feels sufficiently emboldened to say what they mean – shareholders can’t sue – they all feel it necessary to dress up their legislation in a lot of conditions so as to obscure the practical effect), but what if they could compete to eliminate other shareholder rights?

That’s the innovation currently being advanced by the Texas Legislature, with HB 4115 – just passed the House. 

The legislation tackles the scourge of nonbinding shareholder proposals.  Corporations that meet certain criteria can amend their governing documents – and I can’t tell whether that means bylaws, the certificate, or either, though I suspect the latter – to block shareholder proposals unless the shareholder holds the lesser of $1 million worth of securities or 3% of the securities entitled to vote, and solicits at least 67% of the corporation’s voting power (again, not sure if that means sending proxy materials or if 14a-8 inclusion in the corporation’s proxy materials is sufficient).

The conditions to take advantage of this provision are that the corporation must: (1) be listed on a national exchange and either (1) have its principal office in Texas or (2) be listed on an exchange that, as far as I can tell, meets criteria that likely only the Texas Stock Exchange can currently meet.

So the first thing to note is that, as far as I can tell, the current version of the bill – there were earlier ones – does not require the company to be organized in Texas.  That sets up a delightful fight about the internal affairs doctrine and federal preemption.  Federal Rule 14a-8 – which governs shareholder proposals for public companies – largely attempts to use proxy rules to replicate the rights that shareholders have under state law, meaning, under the law of the organizing state.  Texas’s bill would purport to limit shareholder rights regardless of the organizing state, so I’d assume Delaware would, you know, have something to say about that.  

That said, the bill appears to encourage either Texas headquarters or Texas exchange listing.  But if that’s the goal, joke’s on them because, as Mohsen Manesh convincingly argues, even a Delaware corporation can amend its charter – and possibly even its bylaws – to prohibit shareholder proposals on any terms it likes.  Which means, if Professor Manesh is right, all of this is theater.

And another thing. On this week’s Shareholder Primacy podcast, Mike Levin and I use Tesla’s wildly … umm, optimistic … projections as a jumping off point to talk about the legal and practical implications of corporate predictions. Here at Apple, here at Spotify, and here at YouTube.

And finally … goodbye, Justice Souter. You were an excellent jurist and better person.

Continuing with the series, this week I found only one reincorporation, this time from Nevada to Delaware.

Upexi now looks to move to Delaware. This is the reasoning set out:

There are a number of reasons why Delaware is an attractive state for the incorporation of the Company and why the Redomicile is in the interests of our stockholders. For many years, Delaware has followed a policy of encouraging incorporation in that state. To advance that policy, Delaware has adopted comprehensive, modern and flexible corporate laws that are updated and revised periodically to meet changing business needs. As a result, many major corporations have initially chosen Delaware for their domicile or have subsequently reincorporated in Delaware. Delaware courts have developed considerable expertise in dealing with corporate issues. In doing so, Delaware courts have created a substantial body of case law construing Delaware law and establishing public policies with respect to Delaware corporations. Our Board believes that this environment provides greater predictability with respect to corporate legal affairs and allows a corporation to be managed more efficiently.

The procedures and degree of stockholder approval required for Delaware corporations for the authorization of additional shares of stock, and for approval of certain mergers and other transactions, present fewer practical impediments to the time-sensitive capital raising process than those which apply to Nevada corporations. For example, a Delaware corporation has greater flexibility in declaring dividends, which can aid a corporation in marketing various classes or series of dividend paying securities. Under Delaware law, dividends may be paid out of surplus, or if there is no surplus, out of net profits from the corporation’s previous fiscal year or the fiscal year in which the dividend is declared, or both, so long as there remains in the stated capital account an amount equal to the par value represented by all shares of the corporation’s stock, if any, having a preference upon the distribution of assets. Under Nevada law, dividends may be paid by the corporation unless after giving effect to the distribution, the corporation would not be able to pay its debts as they come due in the usual course of business, or (unless the corporation’s articles of incorporation permit otherwise) the corporation’s total assets would be less than the sum of its total liabilities, plus amounts payable in dissolution to holders of shares carrying a liquidation preference over the class of shares to which a dividend is declared. These and other differences between Nevada’s and Delaware’s corporate laws are more fully explained below.

As the company highlighted dividend flexibility in its proxy, I infer that they intend to declare a dividend under Delaware law that they would not be able to under Nevada law.

I recently published a piece with FT Alphaville arguing that, after a brief experiment with democratization, corporate and securities law were taking on a distinct authoritarian turn.  (See also Christine Hurt, Texas, Delaware, and the New Controller Primacy).

Further to that, I doubt anyone was surprised when the Business Roundtable came out with its wish list for SEC/congressional rulemaking, which essentially is designed to minimize shareholder voice by attacking both shareholder proposals and proxy advisors.

They want to ban ESG proposals, for example and, hilariously, they cite a survey – with a pie chart! – showing that 91% of their own members agree that shareholder proposals are more focused on special interests than increasing company value.  Next, you’ll tell me that 91% of Business Roundtable members agree that income taxes are too high, employees are too entitled, and Gstaad lets just anyone in these days.

They also want to codify a policy I earlier blogged about, namely, to bar the use of Rule 14a-6 to distribute solicitation material by anyone holding less than $5 million.

But most aggressively, they want to ban the use of the universal proxy for shareholder proposals.  This use of universal proxy is a new development – the United Mine Workers, and later Starboard Value, both took advantage of universal proxy rules to run “proposal only” proxy contests.  (Mike Levin explained the situation here and here; we also had a Shareholder Primacy podcast about it here).

By running a proposal-only proxy contest, these shareholders could avoid the usual restrictions on 14a-8 (word limits, subject matter limits, etc), while allowing shareholders to vote for director candidates and other matters on the dissidents’ ballots.  The critical thing about these contests, I thought, was the shareholders running them had to invest real money to do it – the estimate was $15,000 in the United Mine Workers case.  So what these contests demonstrated was, shareholders had a nontrivial interest in running them, and it was only the artificiality of the proxy rules – which limited the ballots that shareholders could return – that prevented these contests in the past.  I personally suspect that if 14a-8 is eliminated and/or declared unconstitutional, these kinds of proposal-only proxy contests might be the new frontier. 

Which is probably why the Business Roundtable wants to nip that in the bud by making clear that administrative burdens, rather than any substantive issue, should bar shareholders from paying their own money to circulate their own alternative proxy materials, if they aren’t actually running an alternative director candidate.  I can’t imagine why the federal government should be in the business of imposing administrative burdens for the sole purpose of protecting corporate boards from hearing the views of their own shareholders, but that is why I am not a public company CEO.

But that’s not all!

Naturally, the Business Roundtable fired its usual salvo of attacks at proxy advisors, including the practice of “robovoting,” in which they, as per usual, misleadingly conflate the administrative service that permits an institutional shareholder to automatically cast ballots according to the shareholders’ preferences with the act of “blindly” following an advisor recommendation as to how those ballots should be cast.   Frankly, I agree with them – not a single institutional investor should be permitted to access voting technology.  In fact, they should all vote exclusively by sending a representative to attend shareholder meetings in person.  In the next proxy season, I look forward to seeing how many companies have a quorum to do business.

Of course, the most telling thing about the demand for proxy advisor reform is that absolutely none of it comes from the proxy advisor clients – the shareholders – and all of it comes from companies subject to shareholder discipline.

But, unquestionably, proxy advisors have been feeling the heat – this week especially, since the House, in the spirit of objective inquiry, held testimony on the subject, “Exposing the Proxy Advisory Cartel: How ISS & Glass Lewis Influence Markets.”

ISS has responded by ostentatiously including an “ESG-skeptic” template among its voting options, on the assumption that the objection here is to substantively-liberal proxy advisor recommendations, while Glass Lewis is apparently considering getting out of the advice business entirely. Instead of generating recommendations for clients, it might instead simply administer “custom” voting policies – where institutions identify their preferences, and Glass Lewis effectuates them company by company. 

Now, it’s previously been suggested that proxy advisors’ true value is not the bottom line “advice” they offer, but their substantive analysis of company proxies. Therefore, I suppose it makes sense for Glass Lewis to get out of the advice business, and sell the analysis alone. 

That said, there’s a particular regulatory quirk here.  It’s the advice part that the SEC claims constitutes a proxy solicitation; and it’s the categorization of advice as a “solicitation” that ostensibly gives the SEC authority to regulate proxy advisors.  (an interpretation of the concept of “solicitation” that is now being considered by the D.C. Circuit).

Now, one might reasonably think that if one is not offering advice – but is simply offering analysis, and a technology to effectuate client voting preferences – then one is not engaging in solicitation, and therefore is outside of the purview of (perhaps vengeful) SEC regulation.

But one would be wrong!  Because the SEC has previously concluded that even though “custom” advice simply effectuates investor preferences, it still counts as a “solicitation” and is therefore still within the purview of SEC regulation.

So, Glass Lewis – and ISS – might believe they can relieve the heat by minimizing or altering their advice-giving functions, but my cynical take is that the objections fundamentally are not about the substance of what they recommend, but about making it easy for shareholders to express preferences at all (i.e., “robovoting”)– and there’s no way either Glass Lewis or ISS can take themselves out of that business while remaining in business.

And another thing. On this week’s Shareholder Primacy podcast, Mike Levin and I talk about the ESG securities fraud lawsuit against Target (Ben Edwards blogged about the motion to dismiss here, but the story only gets crazier after that), and about what it means to “solicit” proxies under federal law.  Here at Apple, here at Spotify, and here at YouTube.

Also also. Shareholder Primacy is taking questions! If there’s something you’d like us to talk more about, drop us an email at shareholderprimacy@freefloat.llc. Once we have a critical mass of requests, we’ll go through them on the pod.

New decision out from a California appellate court enforcing Rivian’s charter provision requiring that federal Securities Act cases be brought in federal, rather than state, court.

I realize the ship has pretty much sailed on this issue, but I wrote a whole paper about why this trend is problematic both from a doctrinal and a policy perspective.

My issue doctrinally, of course, is that I do not think charters are contracts, and I also believe the question of contract formation is not part of the internal affairs doctrine, and therefore is not dependent on the law of the chartering state. On that latter point, at least, Delaware agrees with me; in Salzberg v. Sciabacucchi, the Delaware Supreme Court conceded that forum provisions governing federal law claims are not, strictly, governed by the internal affairs doctrine, although the court argued that other states should respect them nonetheless.

These doctrinal points, however, tend to be lost when the issue reaches non-Delaware courts, and Bullock v. Rivian is no exception. There, the California court not only situated the dispute squarely within the internal affairs doctrine, but also assumed that charter-based forum provisions are in fact contractual agreements, without even attempting to ask whether the basic elements of contract formation (offer, acceptance, consideration) were met.

And to bring everything back to DExit, of course, I believe at least some of this kind of unconsidered deference is at least partly the product of a baseline assumptions regarding Delaware’s fairness and expertise in corporate matters. What happens when that baseline assumption is challenged, or when large, public corporations seek refuge in states with different reputations? I suppose we may find out.

And another thing. On this week’s Shareholder Primacy podcast, Mike Levin has a conversation with Matt Moscardi of Free Float Media about the proxy season so far.  Here at Apple, here at Spotify, and here at YouTube.

Interesting opinion out of the Delaware Court of Chancery this week by Vice Chancellor Cook. Short version: Company adopted advance notice bylaws; shareholders challenged them as a breach of fiduciary duty; in Siegel v. Morse, VC Cook held the dispute was not ripe for review because the shareholders had not proposed to mount their own proxy contest.

Following Kellner v. AIM Immunoctech, VC Cook distinguished between facial challenges, which claim that the bylaws cannot be enforced under any set of circumstances, and as-applied challenges, which depend on a particular set of facts. Facial challenges, per Kellner, are only appropriate when the bylaw is unauthorized under Delaware statutory law or the corporate charter, and here, the shareholders conceded that theirs was an as-applied challenge, rooted in what they claimed was an improper motive by the board to chill all shareholder activism by imposing excessive disclosure requirements. For as-applied challenges, VC Cook held, ripeness requires a plaintiff who is actually contemplating a proxy contest; here, the plaintiffs disclaimed any such intention; therefore, the claim was not ripe.

The difficulty is, defensive measures have previously been the subject of challenges outside the context of active contests for control. For example, as the plaintiffs pointed out, in In re The Williams Companies Stockholder Litigation, 2021 WL 754593 (Del. Ch. Feb. 26, 2021), Chancellor McCormick invalidated a pill outside the context of an active proxy contest.

VC Cook acknowledged this line of precedent, but distinguished it on the ground that other defensive measures present a much greater threat than advance notice bylaws do. As he wrote:

As Defendants ably explain, an advance notice bylaw is not like a stockholder rights plan or dead hand proxy put. Those measures, when triggered, are characterized by “immediate and devastating” financial consequences, which are not present in the context of an advance notice bylaw….In contrast, when a nominating stockholder “triggers” an advance notice bylaw, the stockholder does not suffer devastating equity dilution, nor does the company confront a potentially ruinous debt acceleration. The stockholder instead faces a rejection of her nominees.

I mean, that’s true as far as it goes but, recall, the plaintiffs in Siegel argued that the advance notice bylaws had the purpose and effect of deterring would-be activists, which was what made them inequitable. Cook’s ripeness argument seems to jump ahead to the merits to conclude that, in fact, there would not be much deterrent effect, therefore, the court could afford to wait for an actual activist, making the claim unripe. Which, to me, collapses the merits of the claim with the ripeness inquiry in a manner that is not only aesthetically displeasing, but also does not engage with how aggressive advance notice bylaws deter activists by, implicitly, adding litigation to the list of gauntlets that must be run before a contest can conclude successfully. And because corporate boards have displayed a certain boundless creativity in crafting advance notice bylaws, litigation in one case does not necessarily shed a lot of light on how the next case will unfold, which only heightens the uncertainty (and risk) an activist faces.

And another thing. On this week’s Shareholder Primacy podcast, Mike Levin has a conversation with Nell Minow of ValueEdge Advisors.  Here at Apple, here at Spotify, and here at YouTube.

With another week passing, we have another two public companies announcing moves to Nevada in the last week. My first two posts in this series are available here and here. My post-SB21 running total is now at 10 departures. Nine to Nevada and one to Texas.

This week’s proxies come from:

• Fidelity National Financial
• AMC Networks

I cover each proxy below.

Fidelity National

Notably, Fidelity National held a vote on this last year and, although a majority of votes cast were for Nevada, it wasn’t enough to meet the threshold with the number of broker-non-votes. The proxy explains that Fidelity National talked to its major shareholders and decided to propose a different charter. These are the differences:

From these discussions, we understand that there is a desire to preserve, after the Redomestication, certain stockholder rights that are currently in our current Fifth Amended and Restated Certificate of Incorporation (the Delaware Charter). Since the Board of Directors continues to believe there are many important reasons the Redomestication is advisable and in the best interests of the Company and its stockholders, we have updated the proposed Nevada Charter to preserve certain stockholder rights under our Delaware Charter within the statutory framework established by Nevada law. In particular, the updated Nevada Charter provides that:

• The limitation on individual liability afforded to our directors and officers under the Nevada Revised Statutes (as amended from time to time, the NRS) does not apply to any breach of fiduciary duty that (i) constitutes a breach of the duty of loyalty, (ii) involves acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) results in a transaction from which a director or officer derived an improper personal benefit;
• The Company is prohibited from effectuating any reverse split of our capital stock (that otherwise would not require stockholder approval pursuant to NRS 78.207) without stockholder approval; and
• The exception to dissenter’s rights provided under NRS 92A.390(1) will not apply (if dissenter’s rights would otherwise be available) to any stockholders who are required in the relevant transaction to accept cash-only consideration for their shares.

Here’s my reactions on these.

Individual Liability

Nevada differs from Delaware in that corporations may opt out of the statutory business judgment rule if desired. The statute provides that the default exculpation rule applies “unless the articles of incorporation or an amendment thereto . . . provide for greater individual liability.” In Delaware, corporations have to opt in to 102(b)(7) and essentially everyone opts in.

One of the concerns people sometimes have about Nevada is that the business judgment rule does not explicitly state that you have liability for breaches of the duty of loyalty under Nevada law. Of course, Nevada preserves liability for intentional breaches of fiduciary duty. Most breaches of the duty of loyalty are likely to be intentional. The expansion here may make liability possible for unintentional breaches of the duty of loyalty. This is probably a very small slice of potential additional liability for unintentional disloyalty.

If it isn’t a significant difference, why bother? It probably matters for institutional investors trying to decide how to vote. Investors do not yet have the same familiarity with Nevada law as they do with Delaware law. This sort of charter provision probably makes it easier to address shareholder concerns without needing to spend a whole lot of time discussing the differences between Nevada and Delaware on this point.

It also makes clear that liability is retained for transactions where an officer or director derives an improper personal benefit.

Reverse Splits

Nevada allows companies to effectuate reverse stock splits without stockholder approval (authorizing corporations to “do so by a resolution adopted by the board of directors, without obtaining the approval of the stockholders”).

Nevada’s flexibility here is probably important for corporations that will need to do some kind of reverse split to comply with listing standards. Fidelity National isn’t anywhere near that. It just means that Fidelity will need to go to shareholders should it want to do this for some reason in the future.

Dissenters Rights

This shift protects the right to seek an appraisal remedy if a stockholder is required to accept cash for their shares. Rather than break this one down myself, I’m going to borrow from Wendy Gerwick Couture‘s fantastic Nevadaware article. She explains it this way:

The Nevada market-out exception diverges from both Delaware and the MBCA. In
1991, Nevada retained and expanded its existing market-out exception despite the
omission of a market-out exception in the 1984 version of the MBCA. Under the
current version of the Nevada market-out exception, there is no appraisal right if (1)
the shares impacted by the triggering event satisfy a liquidity test (i.e., were (a) covered
securities under the Securities Act of 1933 or (b) traded in an organized market with
at least 2,000 holders and a market value of at least $20 million); and (2) the holders
receive cash and/or shares satisfying the liquidity test. Thus, in Nevada, cash-out
mergers of publicly traded stock are excepted from the appraisal remedy, even in
interested transactions.

Nevada’s market-out exception is broader than both Delaware’s and the MBCA’s; in
short, it rejects the anti-opportunism goal of appraisal in favor of a singular focus on
liquidity. Unlike Delaware, the Nevada market-out exception applies to cash-out
mergers. Unlike the MBCA, the Nevada market-out exception applies to interested
transactions. Thus, the above critiques of Delaware’s market-out exception as an
outdated furtherance of the liquidity goal at the expense of the anti-opportunism goal
are even more trenchant when applied to Nevada’s market-out exception. Although
Nevada’s triggering events for the appraisal remedy are drafted more broadly than Delaware’s, the appraisal remedy is effectively foreclosed to public stockholders in
Nevada via the market-out exception.

I’m going to be on the lookout for how proxy advisory firms respond to these proposed Nevada charter provisions. If this little bit of private ordering and tailoring switches them to recommend votes in favor of moving to Nevada, I’d expect more firms to adopt similar charter provisions and attempt to move.

Reasons for Moving

Fidelity National explains that it seeks to move to Nevada for a range of reasons:

• Cost Savings (Moving to Nevada cuts costs from $250,000 in franchise fees to about $900). This is how they put it “if we redomesticate in Nevada, our current annual fees will consist of an annual Nevada state business license fee of $500, and the current fee for filing the Company’s annual list of directors and officers, based on the number of authorized shares and their par value, would equal to $400.”
• Potential D&O Insurance savings.
• Avoiding Opportunistic Litigation (“the Board believes that in recent years there has been an increased risk of opportunistic litigation for Delaware public companies, which has made Delaware a less attractive place of incorporation due to the substantial costs associated with defending against such suits. These costs are often borne by the Company’s stockholders through, among other things, indemnification obligations, distraction to Company management and employees, and increased insurance premiums.”).
• Strong Local Connections.
• “More Predictability and Certainty in Decision Making.”

Fidelity National also detailed its experience with Delaware litigation and the impact of that litigation on its D&O insurance costs (emphasis added):

Two separate but integrally-related lawsuits recently involving the Company, now both resolved, illustrate the challenges public companies in Delaware can face. More specifically, in August of 2020, a Company stockholder filed a derivative lawsuit, purportedly on behalf of the Company, alleging breach of fiduciary duty claims and conflicts of interest against certain directors and officers on the purported basis that, among other things, the Company overpaid in acquiring FGL Holdings, Inc. (F&G). At the same time as the Delaware lawsuit was pending, former stockholders of F&G filed an appraisal petition in the Cayman Islands (F&G’s place of incorporation), alleging that the price the Company paid for F&G was too low.

With respect to the Delaware derivative litigation, the Board determined that although the Board believed the price the Company paid for F&G was fair to, and in the best interests of, the Company and its stockholders, the Delaware court was unlikely to dismiss the action at the pleading stage, and, accordingly, the Board appointed a special litigation committee to investigate the claims and determine how the Company should respond. In addition to the Company indemnifying the directors and officers who were named as defendants in the lawsuit for their legal fees and expenses in defending the litigation and responding to the special litigation committee, the special litigation committee also retained its own independent legal and financial advisors at considerable expense to the Company. Ultimately, to avoid the time, burden, expense (estimated to be millions of additional dollars to take the case to trial), and uncertainty of litigation in Delaware, the matter was settled for, among other things, a payment of $20 million to the Company (see the Company’s Form 8-K dated April 5, 2022). The settlement payment was largely funded through D&O insurance proceeds, and the plaintiff’s counsel who filed the claims recovered a Fee and Expense Award of $4.4 million. Although the Company received the net proceeds of the settlement in this matter, except for the legal fees paid to plaintiff’s counsel, the Company’s D&O premium increased when subsequently renewed, in part, because of this settlement, increasing from approximately $3.68 million in 2021-22 to a high of approximately $4.87 million in 2022-23 (followed by slight decreases in 2023-24 and 2024-25 to $4.33 million and $4.13 million, respectively, due to a more favorable market for such coverage).

With respect to the Cayman Island appraisal litigation, the Company determined to handle the litigation differently. After a trial on a complete factual record, the Cayman Island court issued a post-trial decision finding that the price paid by the Company for F&G was fair and entered judgment in favor of the Company.

The proxy also addresses the recent Delaware amendments. It explains that they didn’t change the Board’s evaluation that Nevada’s statutory approach made better sense for Fidelity National:

The Board is aware of, and has considered, recent amendments to the DGCL that appear to be designed to address, at least in part, some of the uncertainty that has been created by recent Delaware court decisions and to reduce litigation risk for Delaware corporations, but the DGCL amendments are untested, subject to judicial interpretation and may not fully mitigate a variety of litigation and business planning concerns for the Company, and the Board believes that Nevada’s statute-based approach provides greater certainty for corporate decision making, which, in turn will benefit our stockholders.

AMC Networks

Much of AMC’s proxy appears similar to other firms, but this portion stood out to me (emphasis added in places):

Like many corporations, AMC Networks Inc. was originally incorporated in Delaware. A large portion of U.S. corporations have historically chosen Delaware as their state of incorporation due to its reputation for having a well-defined legal environment. Because of the extensive experience of the Delaware courts and considerable body of judicial decisions, Delaware has garnered the reputation of offering corporations greater guidance on matters of corporate governance and transaction liability issues.

However, the increasingly litigious environment facing corporations, especially ones with controlling stockholders, has created unpredictability in decision-making. For example, in 2024, the Delaware Supreme Court determined in In re Match Group, Inc. Derivative Litigation, 315 A.3d 446 (Del. 2024) that all transactions involving a controlling stockholder receiving a non-ratable benefit are presumptively subject to entire fairness review (i.e., Delaware’s most stringent standard) unless the transaction complies with the strictures set out in Kahn v. M&F Worldwide Corporation, 88 A.3d 635 (Del. 2014) (“MFW”). The Match Group decision confirmed what corporate and legal communities had viewed in recent years as an expansion in Delaware of the application of MFW, a case originally establishing the requirements that must be followed to lower the standard of review for freeze-out merger transactions between a controlled corporation and its controlling stockholder from entire fairness to the deferential business judgment standard. In March 2025, Delaware lawmakers amended the DGCL to provide that a controlling stockholder transaction that does not constitute a “going private transaction” is entitled to statutory safe harbor protection if it is approved in good faith by a committee consisting of a majority of disinterested directors or approved or ratified by a majority of the votes cast by the disinterested stockholders and the material facts regarding the transaction have been disclosed to the committee approving, or the disinterested stockholders voting on, the transaction. Although these amendments are intended to enable boards of directors and controlling stockholders to negotiate and structure transactions with more legal certainty, interpretative questions will remain as prior doctrines are reconciled with the new statutory mandates.

In contrast, in Guzman v. Johnson, 137 Nev. 126 (2021), a case relating to the Company’s acquisition of RLJ Entertainment Inc., the Supreme Court of Nevada affirmed that Nevada’s statutory business judgement rule is the sole standard for analysis involving fiduciary duty claims against corporate directors and officers in Nevada, regardless of the circumstances or the parties involved in the transactions (including the presence of a controlling stockholder). Guzman also clarified that Nevada law does not impose conditions related to the use of a committee of disinterested directors or approved by a majority of the votes cast by disinterested stockholders in order to benefit from the protection of the business judgment rule. This is unlike the heightened entire fairness test applicable to certain transactions and board actions in Delaware that do not qualify for the statutory safe harbor protection under the DGCL.

Further, the Company’s franchise tax obligations to Delaware have become significant, amounting to approximately $250,000 in the most recent year, whereas annual business license and filing fees in Nevada are approximately $3,000.

By redomesticating the Company from Delaware to Nevada, we believe we will be better suited to take advantage of business opportunities and that Nevada law can better provide for our ever-changing business needs and lowers our ongoing administrative expenses. Accordingly, our Board believes that it is in our and our stockholders’ best interests that our state of incorporation be changed from Delaware to Nevada and has recommended the approval of the Nevada Redomestication to our stockholders.

This post is already far too long, but I think it’s worth noting that AMC is concerned that even with the amendments, the Delaware process to cleanse stockholder transactions isn’t enough to keep them in Delaware.

We’ll see what happens in the next week!