Within corporate tax law in the U.S., the article in the url below reports there is currently a struggle to remain the state of choice for incorporation:
"Delaware is fighting to maintain its status as the country's corporate capital. … Delaware has long reigned supreme as a home for companies' legal residence, or where they incorporate their businesses. More than two-thirds of Fortune 500 companies are incorporated in the state."
The reason for the threat to Delaware's crown is, apparently, companies not appreciating the application of the law:
"Executives of public companies have expressed frustration with the Delaware Court of Chancery, often following legal rulings that didn't go their way. Officials elsewhere are taking note."
From the states' point of view, of course, the goal is to maximize incorporation fees through a race to the bottom – appeasing corporate interests by further undermining the concept of shareholder democracy:
"Delaware Gov. Matt Meyer has signed a law that will make it harder for shareholders to sue companies, an attempt to quell threats by U.S. corporations to move their legal residences to other states. … Texas introduced a new court system for corporate matters last year. Musk is in the process of reincorporating Tesla to the Lone Star State from Delaware. Meta is considering moving its incorporation to Texas. Hedge-fund manager Bill Ackman tweeted that his Pershing Square is looking to leave Delaware and incorporate in Nevada or Texas."
Given the emphasis placed on finding the most lenient legal environment, the state of choice has varied over the years:
"A century ago, New Jersey was the incorporation capital of the country. The state lost the title, and Meyer said he doesn't want Delaware facing a similar fate because of complacency."
Although why states care so much about levels of incorporation is unclear:
"Even if companies move to incorporate and list stock in Texas, the benefits to the state beyond bragging rights are less clear. Moving a company's incorporation isn't the same as moving its headquarters; in practical terms it means the business rents a P.O. box in the state, not an office building."
More fundamentally, why any company should care that much about shareholder interests is somewhat baffling. It is as if Ford was 'owned' by everyone who purchased one of its cars, whether they bought it directly from the company through one of their dealerships, or indirectly from a prior owner. For Ford, issuing shares to raise capital is very similar to 'issuing' cars to generate revenue. In both cases, the firm is 'producing' something, with little associated rights, that can be sold initially for money, and then traded on a third-party exchange.
Take care
David
David Chandler
© Sage Publications, 2023
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Delaware Punches Back at Texas Efforts to Lure Away Companies
By Corrie Driebusch
March 26, 2025
The Wall Street Journal
