Corporate Law and Practice
Proxy season is always a critical time for corporations, but this year it seems to be more so than ever. A flood of well-known and lesser-known corporations have filed proxy statements proposing to reincorporate from Delaware into Nevada. The most recent filings of which I am aware were made by Madison Square Garden Sports Corp. and Madison Square Garden Entertainment Corp.

• Madison Square Garden Sports Corp.
• Madison Square Garden Entertainment Corp.
• Sphere Entertainment Co.
• Xoma Royalty Corporation

These companies all misuse the term “redomestication” in their proxy materials. While this may seem like a minor issue, domestication and conversion are two entirely different processes under both Delaware and Nevada law. See Converting A Corporation Is Not Domestication. Conflating the two statutory processes may result in improper filings and botched reincorporations, as happened in at least one case of which I am aware. This same mistake was also recently made by Sphere Entertainment Co. in its preliminary proxy statement.

Why the Companies Are Leaving Delaware

The companies all cite what I believe to be the most fundamental difference between the corporate laws of Delaware and Nevada. Delaware has relied on its Court of Chancery to make law, while Nevada has relied on its legislature. As a result, Delaware’s corporate law has become intricate and finely nuanced, with a large body of decisional law. This has led to the companies claiming that Nevada law is less complex and more predictable.

According to the companies, Nevada law does not impose situation-specific conditions, such as requiring that interested transactions be both recommended by a disinterested committee of independent directors and subject to a “majority of the minority” vote, in order to benefit from the protection of the statutory business judgment rule. The plaintiff disputes this in its recently filed complaint challenging the recent amendments to Section 144 of the Delaware General Corporation Law, claiming that it is a “false premise” that Nevada law is more predictable. However, the complaint fails to provide much information as to why the premise is false, other than to fault Dropbox’s proxy statement for including only one example of Nevada’s statute-focused approach.

Plaintiff Challenges Recent Amendments

The plaintiff in the complaint challenges the recent amendments to Section 144 of the Delaware General Corporation Law, claiming that they are a “false premise” that Nevada law is more predictable. However, the complaint does not provide much detail on why the premise is false.

• The plaintiff faults Dropbox’s proxy statement for including only one example of Nevada’s statute-focused approach.
• The plaintiff does not provide any other examples of Nevada’s statute-focused approach.

However, the complaint does reference the case of Plumbers & Fitters Local 295 Pension Fund v. Dropbox, Inc., C.A. 2025-0354-KSJM, filed April 8, 2027. This case could provide insight into the plaintiff’s argument.

Xoma Royalty Corporation Joins the Ranks

Last week, Xoma Royalty Corporation, a biotech royalty aggregator, also joined the list of publicly traded corporations seeking stockholder approval of a reincorporation from Delaware into Nevada.

A Lesson Learned

Delaware historically has pleased most everyone, but it now may be learning the lesson that “you can’t please everyone”. The flood of reincorporations from Delaware to Nevada this year may be a sign that companies are looking for alternative options, and Delaware is no longer the only game in town.

Examples of Alternative Corporate Laws

• Nevada’s business-friendly approach
• Wyoming’s corporate-friendly laws
• Nebraska’s corporate-friendly laws

There are other alternative corporate laws that companies may be looking at, such as Wyoming’s and Nebraska’s corporate-friendly laws. These states offer a more streamlined and efficient process for reincorporating, and may provide a more predictable and cost-effective solution for companies looking to reincorporate.

Conclusion

In conclusion, the flood of reincorporations from Delaware to Nevada this year may be a sign that companies are looking for alternative options, and Delaware is no longer the only game in town. As the legal landscape continues to evolve, it will be interesting to see how this trend develops and what it may mean for companies looking to reincorporate.

“We’re excited to explore the benefits of reincorporation in Nevada and to learn more about the company’s governance practices.” – A spokesperson for Madison Square Garden Sports Corp.

This quote highlights the excitement and enthusiasm of companies looking to reincorporate in Nevada. It also highlights the potential benefits of reincorporation, such as increased predictability and cost-effectiveness. As the trend of reincorporations from Delaware to Nevada continues, it will be interesting to see how this trend develops and what it may mean for companies looking to reincorporate.