Latest news with #Dexit
The Star
7 days ago
- Business
- The Star
Meta investors settlement with Zuckerberg takes heat off Delaware
FILE PHOTO: Meta Platforms CEO Mark Zuckerberg departs after attending a Federal Trade Commission trial at U.S. District Court in Washington, D.C., U.S., April 15, 2025. REUTERS/Nathan Howard/File Photo WILMINGTON, Delaware (Reuters) -A last-minute settlement between Meta Platforms shareholders and the company's leadership last week ended an $8 billion trial and spared Mark Zuckerberg from testifying about alleged violations of Facebook users' data. It also took the heat off the state of Delaware, which has been plagued by criticism from technology and business leaders. The second day of the eight-day trial in Delaware's Court of Chancery was about to start on Thursday when the legal team for the shareholder plaintiffs announced they had reached a deal to resolve the case. The terms are still being hammered out, but the agreement ends a case that had the potential to fuel a trend of companies abandoning the state as their legal home. Since last year, Elon Musk and other business leaders have attacked the state's courts, once the key reason companies incorporated in Delaware, for rulings that they say made it easier for shareholders to sue directors. Musk encouraged companies to leave the state and in the past year Dropbox, Trump Media & Technology, Roblox and Simon Property Group were among the large public companies that reincorporated outside Delaware, a trend dubbed "Dexit." Critics claim the state's courts are biased against company founders-- an uncomfortable backdrop for the Meta case, whose 11 defendants included the billionaires Zuckerberg, Sheryl Sandberg, Marc Andreessen, Palantir Technologies co-founder Peter Thiel and Reed Hastings, who co-founded Netflix. A ruling that spared the defendants might have given the impression the court caved to pressure to let them off the hook, while one that favored the plaintiffs could have led to further calls for companies to leave Delaware. "It was going to be really awkward for the court," said Ann Lipton, a professor at Colorado Law School. Meta, which owns Facebook, Instagram and WhatsApp, and lawyers for Meta investors and the defendants did not respond to requests for comment. Meta shareholders alleged current and former officers and directors of Facebook were liable for failing to protect users' data. The shareholder plaintiffs wanted the court to order the defendants to use their personal fortune to reimburse the company for the $8 billion in legal costs that Facebook had shelled out for violating user privacy, including a $5 billion fine paid to the Federal Trade Commission in 2019. The case put a spotlight on Delaware courts and the judge handling the case, Chancellor Kathaleen McCormick, who gained prominence last year for rescinding Musk's $56 billion pay package from Tesla. That ruling is on appeal. Adding to the high stakes, Andreessen's venture capital firm, Andreessen Horowitz, said earlier this month it was moving its incorporation to Nevada from Delaware and encouraged other companies to follow. "In particular, Delaware courts can at times appear biased against technology startup founders and their boards," said a blog post on the firm's website, citing McCormick's Musk pay ruling. The firm did not respond to a request for comment. Earlier this year, representatives from Meta met with Delaware's governor and soon after the state changed its widely used corporate law to make it harder for shareholders to sue corporate boards over deals with controlling shareholders like Zuckerberg. Delaware's political leaders said the changes were meant to keep Meta and other companies from fleeing the state. Delaware gets more than a quarter of its budget revenue from fees associated with chartering businesses. Despite the new law, some companies, like Affirm Holdings, still opted to leave, saying it was unclear how it would be interpreted by Delaware courts. Lawrence Cunningham, directorof the Weinberg Center for Corporate Governance in Delaware, said the Meta shareholder settlement highlighted the strengths of the Delaware court in handling a complicated case and guiding it to a resolution, which might be hard to replicate elsewhere. "It was a very desired judicial outcome," he said of the case. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and Daniel Wallis)
Mint
7 days ago
- Business
- Mint
Meta investors settlement with Zuckerberg takes heat off Delaware
WILMINGTON, Delaware, July 21 (Reuters) - A last-minute settlement between Meta Platforms shareholders and the company's leadership last week ended an $8 billion trial and spared Mark Zuckerberg from testifying about alleged violations of Facebook users' data. It also took the heat off the state of Delaware, which has been plagued by criticism from technology and business leaders. The second day of the eight-day trial in Delaware's Court of Chancery was about to start on Thursday when the legal team for the shareholder plaintiffs announced they had reached a deal to resolve the case. The terms are still being hammered out, but the agreement ends a case that had the potential to fuel a trend of companies abandoning the state as their legal home. Since last year, Elon Musk and other business leaders have attacked the state's courts, once the key reason companies incorporated in Delaware, for rulings that they say made it easier for shareholders to sue directors. Musk encouraged companies to leave the state and in the past year Dropbox, Trump Media & Technology, Roblox and Simon Property Group were among the large public companies that reincorporated outside Delaware, a trend dubbed "Dexit." Critics claim the state's courts are biased against company founders -- an uncomfortable backdrop for the Meta case, whose 11 defendants included the billionaires Zuckerberg, Sheryl Sandberg, Marc Andreessen, Palantir Technologies co-founder Peter Thiel and Reed Hastings, who co-founded Netflix. A ruling that spared the defendants might have given the impression the court caved to pressure to let them off the hook, while one that favored the plaintiffs could have led to further calls for companies to leave Delaware. "It was going to be really awkward for the court," said Ann Lipton, a professor at Colorado Law School. Meta, which owns Facebook, Instagram and WhatsApp, and lawyers for Meta investors and the defendants did not respond to requests for comment. Meta shareholders alleged current and former officers and directors of Facebook were liable for failing to protect users' data. The shareholder plaintiffs wanted the court to order the defendants to use their personal fortune to reimburse the company for the $8 billion in legal costs that Facebook had shelled out for violating user privacy, including a $5 billion fine paid to the Federal Trade Commission in 2019. The case put a spotlight on Delaware courts and the judge handling the case, Chancellor Kathaleen McCormick, who gained prominence last year for rescinding Musk's $56 billion pay package from Tesla. That ruling is on appeal. Adding to the high stakes, Andreessen's venture capital firm, Andreessen Horowitz, said earlier this month it was moving its incorporation to Nevada from Delaware and encouraged other companies to follow. "In particular, Delaware courts can at times appear biased against technology startup founders and their boards," said a blog post on the firm's website, citing McCormick's Musk pay ruling. The firm did not respond to a request for comment. Earlier this year, representatives from Meta met with Delaware's governor and soon after the state changed its widely used corporate law to make it harder for shareholders to sue corporate boards over deals with controlling shareholders like Zuckerberg. Delaware's political leaders said the changes were meant to keep Meta and other companies from fleeing the state. Delaware gets more than a quarter of its budget revenue from fees associated with chartering businesses. Despite the new law, some companies, like Affirm Holdings, still opted to leave, saying it was unclear how it would be interpreted by Delaware courts. Lawrence Cunningham, director of the Weinberg Center for Corporate Governance in Delaware, said the Meta shareholder settlement highlighted the strengths of the Delaware court in handling a complicated case and guiding it to a resolution, which might be hard to replicate elsewhere. "It was a very desired judicial outcome," he said of the case. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and Daniel Wallis)
New York Times
10-07-2025
- Business
- New York Times
A Silicon Valley Giant Calls for a Delaware Exodus
Andrew here. Andreessen Horowitz just announced plans to move from Delaware and reincorporate in Nevada, following similar moves out of the state by companies including Dropbox, Tesla and TripAdvisor. It could be a watershed moment: One of the most influential firms in Silicon Valley is openly telling its young portfolio companies to consider moving, too. This isn't just about a few big names. It's a signal to the entire tech ecosystem that the 'Delaware default' might be coming to an end. We dive into that below, along with Linda Yaccarino's exit from X, big news in noncompete agreements and more. A loud new cheerleader for 'Dexit' For more than a year, Delaware has battled against what legal observers have nicknamed Dexit: companies leaving the First State, the legal home for most of corporate America, over concerns that it has become hostile to big business. Elon Musk has been among the most prominent proponents of the movement. But Andreessen Horowitz, an influential venture capital firm, may have just become the most consequential. What's happening: Andreessen Horowitz is moving the incorporation of its primary business, AH Capital Management, to Nevada, three executives of the venture firm wrote in a blog post on Wednesday. The firm — known in Silicon Valley as A16Z — has been incorporated in Delaware since its founding in 2009. In the post, the executives wrote that what once was a no-brainer — incorporating in Delaware — was 'no longer the case.' A state court system that had clear laws that afforded founders and their boards sensible leeway to run their businesses now has an 'unprecedented level of subjectivity' that leaves companies vulnerable to expensive shareholder litigation, they argued. Want all of The Times? Subscribe.
Yahoo
10-07-2025
- Business
- Yahoo
The early winner in the 'Dexit' war for corporate relocations: Nevada
More companies are following the example of Tesla's (TSLA) Elon Musk and signing off on an exit from Delaware. But many are choosing Nevada — not Texas, as Musk did with Tesla in 2024 — as a new corporate home in 2025. The latest example came Wednesday when a high-profile venture capital firm, Andreessen Horowitz, announced it would move the incorporation of its primary business, AH Capital Management, from Delaware to Nevada as it offered a critique of Delaware's powerful business court. The VC firm long associated with Marc Andreessen accused the state's Chancery Court of injecting "legal uncertainty" into Delaware's reputation as the gold standard for corporate law. "In contrast, Nevada has taken significant steps in establishing a technical, non-ideological forum for resolving business disputes," the company said. Andreessen Horowitz is not the only one decamping for Nevada, which has been vying with Texas for the new attention of companies considering a so-called 'Dexit' from Delaware — the dominant place for American companies to incorporate for roughly a century. Seven publicly traded companies with market caps ranging from $1.5 billion to $71 billion have also asked their shareholders to vote in favor of leaving Delaware for Nevada during this year's proxy season, and investors said yes to all of the departure proposals, according to a report from Freshfields. Investor support for that move ranged from just over 50% to 85%. "I think what boards are trying to do right now is figure out, what are the [state] differences, what are the differences that matter, and should we stay? Should we go?" said Benjamin Edwards, University of Nevada Las Vegas associate dean and corporate governance law professor. The votes in this year's proxy season favored Nevada reincorporations for Fidelity National Financial (FNF), Roblox (RBLX), Madison Square Garden Entertainment (MSGE, MSGS), AMC Networks (AMCX), Sphere Entertainment (SPHR), and Tempus AI (TEM). Smaller firms with market caps under $1 billion, including XOMA Royalty (XOMA), a biotech company; electronic gaming company (GXAI); Universal Logistics Holdings (ULH); and Jade Biosciences (JBIO), also secured votes to move to the state. Others that have already made the move over the past year include Dropbox (DBX), Trade Desk (TTD), and Sonoma Pharmaceuticals (SNOA). And Bill Ackman, Pershing Square's CEO, announced his own decision to reincorporate in Nevada in an X post earlier this year, saying that 'top law firms are recommending Nevada and Texas over Delaware.' Some Delaware-to-Nevada reincorporation bids have failed. Revelation Biosciences (REVB) lacked enough votes despite more than 89% of present stockholders voting in favor of the proposal. Eightco Holdings (OCTO) and Remark Holdings (MARK) similarly fell short of gaining requisite support. Edwards said he doesn't expect Delaware to lose its wide appeal to American businesses anytime soon but corporate leaders are evaluating which state's laws are the best fit for their businesses. "There's a reality that where you're incorporated affects how you're going to make high level governance decisions, particularly when you're a public company," Edwards said. "You want to maximize flexibility. And Delaware may not be it." Some companies, for example, may choose Nevada over Delaware because Nevada law allows companies to insulate directors and officers from personal liability for breaches of their duty of loyalty, unless they intentionally acted in bad faith. As for the duty of care to the corporation, both Delaware and Nevada allow corporations to insulate directors and officers from personal liability. Critics argue that the difference gives shareholders of Nevada corporations less protection from unfair director and officer actions because Nevada's law gives them leeway to violate their duty of loyalty. But Edwards said that's unlikely because, in practice, it would be difficult for a director or officer to unintentionally act disloyal toward a company they serve. Companies may also choose Delaware or Nevada over Texas because intellectual property allegations carry more litigation risk in Texas. On the other hand, he said, a larger volume of lawsuits should be expected in Delaware. "Now they're thinking, 'Okay, do we want to be in Delaware?'" Edwards said. The trouble for Delaware started in January 2024 when its Chancery Court's head judge, Chancellor Kathaleen McCormick, struck down a 2018 Tesla shareholder vote approving Musk's $56 billion performance-based compensation deal. Musk immediately warned other companies: "Never incorporate your company in the state of Delaware.' Musk-led companies Tesla and SpaceX ( then left Delaware for Texas. But he also chose Nevada for some of his other companies: The Boring Company, Neuralink, and X. Nevada, Texas, and Delaware have all made major changes to their respective laws this year designed to increase their allure with companies. Delaware cut back on director and officer liability by limiting fiduciary duties for controlling shareholders and reducing a company's burden to respond to shareholder information demands known as 220 requests, which allow shareholders to inspect a company's books and records. Nevada, which offers no shareholder rights to books and records outside of litigation, further limited the fiduciary duties required of controlling shareholders, made it possible for judges rather than juries to decide shareholder litigation, and made it less risky for boards to approve mergers. Like Nevada, Texas's amended law further limits the fiduciary duties of controlling shareholders and enhances other liability protections for directors and officers. Places like South Dakota, North Carolina, Washington, and Wyoming have also been trying to chip away at Delaware's dominance with their own business-friendly strategies. After Delaware lawmakers in March pushed through controversial changes designed to keep more businesses from leaving the state, Gov. Matthew Meyer said the changes would maintain Delaware's place as the best place in the world to incorporate a business — "ensuring clarity and predictability, balancing the interests of stockholders and corporate boards." Delaware is not in danger of a mass exodus just yet. The state touts that it is home to more than two-thirds of all Fortune 500 companies. In 2023, Delaware hit a record 2 million total incorporations even as it saw a slight drop in the percentage of Fortune 500 companies registered there to 67.6% from 68.2% in 2022. Delaware generated $1.33 billion in incorporation revenue from corporations in 2024, about 22% of the state's total revenue. The state charges $250,000 to register C-Corporations and much smaller fees to register limited liability companies. University of Pennsylvania Wharton School professor Daniel Taylor wrote in the Columbia Law School blog in March that hundreds of companies would have to leave Delaware for the resulting incorporation fee losses to have a real effect on the state's budget and its residents. Delaware gets a "staggering" number of LLCs and other entities, Edwards said, noting that the state pulls in more than $2 billion in total annual filing fees. Delaware's advantages, he said, still include more than a century of case law, corporate law-savvy judges who issue expedited decisions, and lawyers who specialize in corporate disputes, all of which make switching costs another consideration. On the other hand, some companies could be warming up to the simplicity of Nevada's corporate laws, which boast that they are clear, comprehensible, and easy for judges and juries to interpret, and its efforts to create a business court. "Really to understand Delaware law, you have to be marinating in the constantly evolving case law coming out of Chancery," Edwards said. Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed. Click here for in-depth analysis of the latest stock market news and events moving stock prices
24-06-2025
- Business
Texas, Oklahoma and Nevada make changes to lure business amid Delaware's ‘Dexit' concern
CLAYMONT, Del. -- Lawmakers in Texas, Oklahoma and Nevada have recently approved changes aimed at helping their states dip into the lucrative side of corporate litigation that Delaware, with a specialized court and business-friendly laws, has dominated as the world's incorporation capital. Concerned that these changes may lure corporations away from Delaware, thereby causing the small state to lose millions in corporate franchise taxes, Delaware officials have responded with their own changes to solidify their status in the business world. In Texas, which opened a business court last year, there was bipartisan support for legislation diminishing shareholder powers and giving businesses more legal protections against shareholder lawsuits. Nevada lawmakers approved a corporation-friendly update to its business laws, also with bipartisan support, and separately moved toward asking voters to consider changing the state constitution to create a dedicated business court with appointed judges. Billionaire Elon Musk had advocated both states as better options for incorporation after a Delaware judge struck down his shareholder-approved $56 billion compensation package from Tesla. Musk's businesses have also changed where they're incorporated: Tesla and SpaceX relocated to Texas, while Neuralink moved to Nevada. Oklahoma also took action to get in the mix, as the Republican-led Legislature sanctioned the creation of business courts in its two most populous counties, a move the governor said would help Oklahoma become the most business-friendly state. 'This is an area in which states, in many ways, are behaving like businesses,' said Robert Ahdieh, dean of the Texas A&M University School of Law. 'Delaware is selling something. Texas is selling something that they hold out to be better. So it is very much a comparative exercise.' Since 2024, several billion-dollar companies including TripAdvisor and DropBox have relocated to Nevada. More than a dozen others, including the AMC theater chain and video game developer Roblox Corporation, have announced plans to incorporate there this year. Latin American e-commerce giant MercadoLibre filed a request for shareholders to approve a Texas relocation in April, citing Delaware's 'less predictable' decision-making process — a common thought among exiting companies. Amid concerns about more companies reincorporating elsewhere in a so-called 'Dexit,' Delaware passed its own legislation to help protect its status as the corporate capital, limiting shareholders' access to records and increasing protections for leadership. Opposition dubbed it 'the Billionaire's Bill.' 'Ultimately, I think the damage is done because businesses successfully undermined shareholder rights in Delaware,' said Corey Frayer, director of investor protection at Consumer Federation of America, who argues that the Delaware bill was a rash acquiescence to 'Dexit' concerns. However, some business law experts, like Ahdieh, say the average shareholder is focused on increasing their returns and does not care about shareholder power or where the company is incorporated. Delaware Gov. Matt Meyer has vowed to win back companies that leave, arguing his state's experience 'beats going to Vegas and rolling the dice.' Companies flock to Delaware for its well-respected Court of Chancery, a sophisticated and separate forum focusing on equity, corporate and business law. This incorporation machine generates $2.2 billion annually, about one-third of the state's operating budget. There is comfort in working in the familiarity of Delaware law, said Ahdieh, but that predictability has come into question in the last decade as corporate leaders grew unhappy over losing precedent-setting court decisions governing corporate conflicts of interest. Widener University Commonwealth law school professor Christian Johnson acknowledged a shift in Delaware but said reincorporating elsewhere might be 'a bit of an overreaction.' Although a few big-name companies have moved, there are still more than 2 million legal entities incorporated in Delaware, including two-thirds of the Fortune 500. Statutes in Texas and Nevada may appear more flexible, but they have not been extensively tested, and their courts are not as experienced working with the larger entities that favor Delaware, Johnson said. In May, Texas Gov. Greg Abbott signed legislation providing greater securities for corporate officers and adding restrictions to shareholder records requests. The bill also allows corporations to require an ownership threshold, no more than 3% in outstanding shares, before a shareholder can initiate a derivative lawsuit, typically on behalf of the company and against its own board or directors. Restrictions on who can initiate such lawsuits are not uncommon, but Texas' implementation imposes a 'far higher barrier than the norm,' Ahdieh said. Consumer advocates worry the changes endanger shareholder and investor protections by giving owners and directors more protection against lawsuits that could hold them accountable if they violate their fiduciary duty. For businesses, the changes mean potentially saving millions of dollars in shareholder lawsuit settlements and legal fees by mitigating the likelihood of those costly cases reaching court. For the states, attracting the companies means millions in business activity and revenue from regulatory filing and court case fees and taxes. Eyeing a piece of that, Oklahoma is on pace to establish its recently approved business courts in 2026. 'I'm trying to take down Delaware," said Oklahoma Gov. Kevin Stitt, a Republican. "We want to be the most business-friendly state.' Nevada wants to compete, too. It has run business dockets in Washoe and Clark counties since 2001, and it's in the state's interest to expand operations considering its fast-growing economy and population, said Benjamin Edwards, a University of Nevada, Las Vegas law professor who studies business and securities law. But he said it could take decades to build up a court comparable to Delaware, which has a valuable reputation for handling cases relatively quickly. Nevada's proposed business court wouldn't take effect until 2028 at the earliest and would require amending the state constitution, which would need approval by the 2027 legislature and voter approval in 2028 to allow for the appointment of judges.
