Reincorporation: It’s All in the Timing

By Courtney Tygesson and Liz Dunshee

For years, Delaware has been the default domicile for growing late-stage companies (and most companies generally, for that matter). For the reasons detailed in these CapitalXchange posts from June 2025 and September 2025, that may be changing. In the public company sphere, Analysis Group reported in this September 2025 memo that Delaware lost 11 public companies to reincorporation from January 2024 to June 2025 – mostly “controlled” companies. Since then, a running scorecard from UNLV law professor Benjamin Edwards shows that 28 public companies have submitted proposals to a vote by stockholders on the matter of reincorporating to Nevada – and 6 have submitted proposals to reincorporate in Texas.  

For pre-public companies, an April 2025 PitchBook article observed that most are continuing to incorporate in Delaware – but a “vibe shift” may be underway, leading some startups and late-stage private companies to reexamine their state of incorporation. Even if staying in Delaware is the right move, the “DExit” trend is sparking important conversations in boardrooms about the practical impact of corporate statutes and court decisions.

Whatever their circumstances, companies can save time and money by strategically timing these conversations in relation to corporate events. In this post, we explain how.  

Reincorporation conversations aren’t one size fits all

Board-level “DExit” conversation can range from casual conversations to authorizing significant near-term action. Your company’s position on that spectrum may depend on things like:

Keep in mind that company circumstances are always evolving – and so are state laws. Companies that may have shelved the topic for now can revisit domicile discussions if the calculus shifts.

When to talk about reincorporation

During IPO planning

A company’s state of incorporation is important for a number of reasons, and management teams and boards should consider all angles before making changes, including:

• Tax and fee obligations.
• Litigation issues – including the ability to defend against matters not based on corporate law, such as patent infringement lawsuits.
• Whether state officials make examples of companies doing business within their borders.

From a corporate law perspective, the incorporation choice is most consequential in the public company context. Once public, a company has little control over who acquires its shares and for what purpose, which means:

• Stockholders may file lawsuits to challenge related-party transactions, M&A deals and significant actions (or lack of action) at the board level.
• Activists may run proxy contests to unseat directors and control the company’s strategy.
• Short sellers may publish unfavorable views of the company.

The law of the state of incorporation affects whether certain litigation claims can move forward and, ultimately, the likelihood of success. Corporate law also sets parameters for activist defense measures, stockholder rights, limits on personal liability for directors and officers, and the processes the board needs to follow if the company is for sale.

This doesn’t mean a company should wait until after it goes public to analyze its state of incorporation. It’s smart to include reincorporation in IPO readiness discussions, since the company is already reviewing and updating its governance structure and associated documents. The mechanics of reincorporation are also easier while the company is privately held. 

Here is where strategic timing comes in. In this September 2025 CapitalXchange post, we described why being “market ready” for an IPO includes tackling incorporation and other corporate governance updates at least 18 to 24 months ahead of time. Companies can save money – and keep options open – by using this time to:

• Discuss corporate law frameworks with the board and how they would apply to the company’s circumstances.
• Understand what steps the company will need to take if it decides to reincorporate.

For fast-moving companies, 18 to 24 months can seem like forever, but companies often need this amount of lead time to lay groundwork with stakeholders – and here’s why that’s important:

• Appraisal rights: For companies considering a move out of Delaware, stockholders who don’t consent to the reincorporation may be eligible to assert appraisal rights. To date, this hasn’t been a major practical issue, but companies can mitigate uncertainty by helping as many stockholders as possible understand the benefits of the move. Companies need to allow enough time for outreach and discussions, while also being close enough to business milestones to show how the action fits into the company’s big-picture plan and higher valuation opportunities.
• Contractual notices and consents: Companies should also reserve time to review key contracts, which may require notifying or getting consent from counterparties for the reincorporation.        

After going public

While appraisal rights generally don’t apply to public company reincorporations, there are plenty of other complexities with getting stockholders to approve reincorporating. Companies should factor in:

• Extra disclosures and filings, which can be complex.
• The possibility of low voter turnout, which could derail a proposal.

These issues can delay your move and create unnecessary expenses and risks if handled incorrectly. In our experience, companies have greater chances for success when they:

• Approve and submit the proposal on a “clear day” – not in response to existing or threatened litigation – as we described in this February 2025 alert.
• Start early with messaging and outreach.
• Understand how the laws of the new state will affect stockholder rights.
• Communicate the company’s rationale and economic justification for the move.
• Proactively tailor proposals to investors’ voting policies and stockholder feedback.
• If a proposal doesn’t pass, consider adding stockholder protections that go beyond the new state’s default rules.

In addition to getting stockholder approval, companies should consider technicalities around any ongoing offerings, including under employee benefit plans, and may need to make additional filings with the Securities and Exchange Commission to update legal opinions and descriptions of applicable corporate law. Contract review is also still an issue – and keep in mind that amending material contracts may trigger disclosures or new exhibit filings.  

Using ‘DExit’ as a conversation starter

Even if reincorporation isn’t on the table, boards may want to understand the landscape. These discussions can lead to:

• Better understanding of fiduciary duties.
• Review of shareholder rights and governance practices.
• Updates to governing documents.

Public companies should think ahead to whether updates to governing documents will require stockholder approval and disclosure. If so, time these conversations strategically in advance of the company’s annual meeting, and factor in reporting deadlines.

What to watch going forward

The reincorporation landscape is still evolving, but the topic has become more than a niche legal issue. Founders, boards and stockholders are gaining awareness that it’s a strategic consideration that touches on governance, litigation risk, investor relations and long-term planning. Going forward, companies should watch:

• Venture capital and IPO trends: Historically, 80%+ of US IPOs were Delaware corporations. That dropped to 75% during the first half of 2025, according to Analysis Group’s September 2025 analysis. It’s too early to declare this “the beginning of the end” for Delaware’s dominance – but acceptance of Nevada or other states by VC and IPO investors could have a snowball effect. Longer-term IPO data will show whether alternatives are becoming mainstream.   
• Legislative updates: Nevada is actively modernizing its corporate statutes and may create a dedicated business court. These moves show a long-term commitment to corporate-friendly governance, but the court will not be as time-tested as Delaware. Meanwhile, Delaware is also committed to refining its statute on at least an annual basis, in consultation with corporate practitioners, and court opinions continue to color how the statute is interpreted.
• SEC policy changes: Issues like mandatory arbitration and stockholder proposals could intersect with state law in ways that influence reincorporation decisions.
• Investor and proxy advisor sentiment: The voting landscape is rapidly changing, which in and of itself bears watching. On reincorporation proposals, institutional investors currently take a case-by-case approach, reviewing the company’s past governance and oversight practices and other factors. BlackRock, for example, evaluates whether the change increases or decreases stockholder protections – and as applicable, weighs whether the benefits of moving outweigh diminished rights. Proxy advisors also play a key role in shaping investor sentiment and may influence how reincorporation proposals are received. Time will tell whether reincorporating becomes a flash point for investors that want to see “best practices.”