Background: A Shift in Corporate Law Landscape
Andreessen Horowitz, one of the largest venture capital firms in the country, has announced that it will be reincorporating in Nevada, citing recent changes to Delaware corporate law. The firm’s decision is a significant development in the ongoing debate over the best place to incorporate a company in the United States.
Delaware’s Reputation Takes a Hit
In a statement, the firm’s Chief Legal Officer Jai Ramaswamy noted that Delaware “used to be a no-brainer” when choosing which state to start a company in. However, recent actions by the Court of Chancery have introduced “legal uncertainty” into the state’s corporate law system.
- Chancellor Kathaleen St. J. McCormick’s decision to block the $56 billion CEO compensation deal for Tesla CEO Elon Musk in January 2024
- The court’s ruling on the deal, which was approved by 70% of shareholders
- The subsequent lawsuit brought by Musk and the defendant directors to Tesla
Delaware’s Changes: A Response to Concerns
In response to the concerns raised by Andreessen Horowitz, Delaware has introduced several changes to its corporate law system. Senate Bill 21, which was signed into law in December 2024, aims to provide safe harbor procedures for controlling stockholders during conflicted transactions and lower the thresholds necessary for those transactions.
| Change | Description |
| Safe Harbor Procedures | Provides protections for controlling stockholders during conflicted transactions |
| Lowered Thresholds | Reduces the thresholds necessary for transactions |
| Raised Thresholds | Increases the threshold necessary for shareholder requests to inspect books and records |
Nevada: A Viable Alternative
Andreessen Horowitz argues that Nevada offers a more predictable corporate law structure, with the business judgment rule codified in statute. The state also provides broad protections against individual liability for officers and directors and limits the right to inspect books and records to 15% or greater stockholders.
- Nevada’s codification of the business judgment rule in statute
- Broad protections against individual liability for officers and directors
- Limitations on shareholder requests to inspect books and records
Andreessen Horowitz’s Decision
In a statement, the firm’s Chief Legal Officer Jai Ramaswamy noted that Delaware “used to be a no-brainer” when choosing which state to start a company in. However, the recent changes to the state’s corporate law system have introduced “legal uncertainty” and undermined the court’s reputation for unbiased expertise. “We could have made this move quietly, but we think it’s important for our stakeholders, and for the broader tech and VC communities, to understand why we’ve reached this decision,” the statement reads.
Andreessen Horowitz’s decision to reincorporate in Nevada has significant implications for the tech and VC communities. The firm’s move is likely to encourage other companies to consider alternative jurisdictions for incorporation.
- Delaware’s reputation as a hub for corporate law takes a hit
- Nevada emerges as a viable alternative for companies seeking a more predictable corporate law structure
- Other companies, such as Tripadvisor, Dropbox, and Pershing Square Capital, have already reincorporated in Nevada
Andreessen Horowitz’s decision to reincorporate in Nevada is a significant development in the ongoing debate over the best place to incorporate a company in the United States. The firm’s move is likely to encourage other companies to consider alternative jurisdictions for incorporation, and Nevada emerges as a viable alternative for companies seeking a more predictable corporate law structure.
