By Kealan Santistevan, Michael Mencher and Liz Dunshee

This post is the first in a series updating our February 2026 comparative playbook on conflicted transactions in Delaware and Nevada. The original playbook explained how each state handles transactions involving insiders, investor-appointed directors and controlling stockholders – and outlined process steps that can reduce litigation risk. Here, we add Texas to the picture and address the broader domicile decision for late-stage technology companies.

The choice of state of incorporation used to be handled quietly at formation or IPO and rarely revisited. Even as a handful of high-profile companies and commentators began questioning Delaware’s judge-made law and domicile dominance in 2024, it was unclear whether the sentiment would be temporary or make corporate domicile a more consequential decision.

For now, the latter appears more likely. In the past two years, 50+ public companies have reincorporated out of Delaware, while the First State’s share of the IPO market dropped from 81% in 2024 to “nearly 70%” in 2025. More recently, certain prominent companies have chosen Texas as their state of incorporation and are using the state’s statutory tools to tailor stockholder rights. Although very few widely held large-cap public companies have moved out of Delaware, the trend is more pronounced among founder-led companies or companies with large influential shareholders. The topic is drawing attention in proxy statements, academic journals and the financial press.

Once a company is public and widely held, reincorporation becomes much tricker, as proxy advisory firms have generally opposed moves to Nevada and Texas, and large institutional shareholders have also often opposed reincorporations, resulting in difficult shareholder votes for noncontrolled companies. For a founder-led technology company, where to incorporate is a strategic governance decision. This post offers factors to help companies and their advisors evaluate three prominent options: Delaware, Nevada and Texas. Contact your Cooley counsel to apply these factors to your company’s circumstances.

Delaware: Balanced and established

Delaware remains the default because of its well-established corporate law ecosystem. As recently retired Delaware Supreme Court Justice Karen Valihura observed in a June 2026 lecture, Delaware’s corporate law reflects more than 230 years of “testing, trial and error, of navigating new territory” – a platform that has been “studied by many other jurisdictions” and consistently adapted to market needs. She cautioned that the depth of that foundation cannot be replicated quickly:

“One’s first mission cannot be flying around the Moon. It takes decades of study, trial and error, test-runs and hard work to even get to the launchpad. Anyone who attempts to launch a space capsule without the painstaking work of trial and error over time could be destined for failure or disaster.”

Delaware’s advantages for companies include:

  • Experienced judiciary. The Delaware Court of Chancery is a dedicated equity court with constitutionally required political balance among its judges, no juries, extensive experience with corporate matters, and a track record of deciding urgent cases in days or weeks when circumstances require judicial responsiveness. Delaware’s established body of case law contributes to a reputation for predictability, which can be valuable to companies even where other jurisdictions may offer greater protections in certain areas on paper.
  • Responsive legislature. The Delaware General Corporation Law (DGCL) is amended regularly through a two-thirds legislative vote, informed by proposals from the Delaware State Bar Association’s Corporation Law Council, which includes both management-side and plaintiff-side practitioners. The 2026 DGCL amendments – signed by the governor in June – were comparatively measured, but demonstrate continued efforts to clarify and refine the statute to reduce friction.
  • Market familiarity. Delaware law governs many public company M&A agreements, financing documents and board processes, creating a degree of market familiarity and predictability that other states do not (yet) have. Even some non-Delaware companies choose Delaware law for merger agreements, in part because of its developed case law on material adverse effects and fiduciary outs.
  • Flexible statute. The DGCL gives parties substantial leeway to structure their relationships. The reincorporation debate has centered on statutory constraints and judicial review of director conduct, but Delaware’s guardrails still afford significant deference to board decisions. Some academics have suggested that companies could go even further by using stockholder agreements to limit director liability or require arbitration, but public companies are unlikely to adopt that approach anytime soon.

The primary concern driving some companies away from Delaware – heightened scrutiny of controller and conflicted transactions – has eased. Delaware Senate Bill 21 (SB 21), effective in 2025 and upheld against a constitutional challenge in 2026, codified statutory safe harbors for certain interested-party transactions (i.e., controller and conflicted transactions). These amendments establish clear procedural steps that, when followed, entitle a challenged transaction to deferential judicial review – and they demonstrate the Delaware legislature’s willingness to respond to market concerns.

That said, Delaware generally presents a greater risk of fiduciary duty litigation than Nevada or Texas, particularly when plaintiffs can allege serious oversight failures. Even after the SB 21 2025 amendments, Delaware law provides comparatively stockholder-friendly books-and-records rights and established paths to litigation. Its framework also continues to depend more heavily on judicial development rather than black-letter statutory law.

Nevada: Statutory protections, but largely untested

Nevada’s appeal rests on its statute-centric framework. To impose monetary liability on a director or officer, a plaintiff generally must prove both a breach of fiduciary duty and intentional misconduct, fraud or a knowing violation of law; gross negligence alone is insufficient. Nevada also codifies the business judgment rule, and its statutory safe harbors do not apply heightened standards of review to controller transactions. Together, these features can make it harder for derivative claims to survive the pleading stage.

For a founder-controlled technology company that has watched Delaware litigation consume resources over compensation or governance decisions, Nevada’s more protective liability threshold may be attractive. Under comparable facts, directors might face extended litigation in Delaware versus winning an earlier dismissal in Nevada. The outcome, however, will depend on the claims and record in a particular case.

Like Delaware, the Nevada State Bar Association’s Business Law Section regularly proposes statutory amendments. Despite all these benefits, the Silver State’s limitations are also real:

  • Developing courts. Nevada launched a 2026 pilot program assigning business cases to two designated judges. Establishing a permanent, constitutionally established business court requires a constitutional amendment that must pass the 2027 legislature and receive voter approval in 2028 – a process that is already underway.
  • Thin case law. Even with these judicial developments, novel governance issues will be resolved by a court with limited corporate precedent and without the Court of Chancery’s institutional expertise. Nevada has very limited experience dealing with large public company issues, as no S&P 100 companies and only a handful of S&P 500 companies are incorporated in the state.
  • Investor skepticism. There is still no precedent for a large-cap technology company without a controlling stockholder reincorporating in Nevada. Proxy advisors generally oppose reincorporation from Delaware to Nevada, while institutional investors take a case-by-case approach.
  • Perception gap. Some academic and media commentary has overstated the extent to which Nevada law eliminates directors’ accountability to stockholders. Nevada law does not eliminate fiduciary duties or make stockholder litigation impossible, and Nevada companies have paid multimillion-dollar settlements to resolve disputes. Companies should obtain Nevada-specific legal analysis and be prepared to explain their governance framework accurately to stockholders.

Texas: Customizable governance with jurisdictional risks

Texas is the fastest-moving new entrant. It shares some of Nevada’s attractions, including a business-friendly legislative environment and broader directors-and-officers liability protections than Delaware. But as discussed below, it also presents jurisdiction-specific risks.

Texas corporate law combines statutory rules with a developing body of case law. The Texas Business Court has operated since September 2024, and its judges have reported resolution times averaging roughly 12 months from a defendant’s appearance – fast by Texas trial court standards, although that pace may change as case volume grows. As of June 2026, the 15th Court of Appeals, which hears appeals from the Texas Business Court, had already decided roughly half of the cases sent up from the trial court and had begun issuing substantive opinions.

With amendments to the Texas Business Organizations Code in 2025, the Lone Star State has endeavored to create a company-friendly framework that corporations can further customize if desired. Here’s the current state of play:

  • Litigation protections
    • A codified business judgment rule that requires plaintiffs to overcome company-favorable presumptions and, for monetary liability, prove a breach involving fraud, intentional misconduct, an ultra vires act or a knowing violation of law.
    • A universal written-demand requirement before derivative litigation, with substantial deference to qualifying special litigation committee determinations.
    • Ability to require ownership thresholds of up to 3% of outstanding shares to bring derivative litigation.
    • Potential use of mandatory arbitration provisions to address stockholder claims. The enforceability and permissible scope of this type of provision remain unsettled – but unlike Delaware, Texas law does not expressly prohibit the practice, and a prominent company recently included such a provision in its IPO organizational documents.
    • Ability to waive jury trials for internal entity claims and designate Texas courts as an exclusive forum to resolve such disputes.
  • Opt-in limits on stockholder proposals. Eligible nationally listed corporations – those headquartered in Texas or listed on a Texas stock exchange – can impose stricter eligibility requirements on stockholders submitting proposals for a vote at the company’s annual meeting of stockholders.

The 2026 proxy season showed that companies are treating Texas corporate law as a customizable menu rather than a fixed package of stockholder rights and corporate boundaries. Currently, no clear market standard has emerged for how far companies should go in embracing that flexibility. For example:

  • A large integrated energy company that moved from New Jersey to Texas declined to opt into ownership thresholds, proposal requirements or jury trial waivers – and secured 71% of votes cast on its reincorporation proposal.
  • A large technology company proposing to move from Delaware to Texas included a 3% ownership threshold for derivative proceedings, limitations on stockholder proposals and other company-friendly provisions. The company’s dual-class share structure contributed to overwhelming support of the proposal – 97% in favor.

These approaches have materially different governance implications. In evaluating reincorporation proposals – and potentially investments – investors and proxy advisors appear to be looking beyond the state of incorporation to the specific package of stockholder rights. How far a company can go in adopting company-friendly provisions will depend on its circumstances.

Texas’s potential advantages also come with drawbacks and uncertainties, particularly for technology companies:

  • Potential scrutiny from a state attorney general with a record of significant technology and privacy recoveries in consumer litigation.
  • Jury trials and broad discovery in commercial disputes unless an enforceable waiver, forum provision or other procedural protection applies.
  • Potential exposure to partisan legislation.
  • As in Nevada, limited corporate case law and developing business courts, along with potential perception concerns – particularly when a company lacks a meaningful connection to the state.
  • Heightened exposure to IP litigation in plaintiff friendly courts.

Companies without a meaningful Texas connection should weigh these considerations carefully and distinguish risks created by incorporation from those tied to operations, venue or regulatory contacts.

Next in this series: What we’re seeing in the market – and what to watch.

Additional resources

See these previous blog posts for more background on domicile considerations and the process of reincorporating:

For more guidance on issues affecting late-stage private and newly public companies, explore our IPO GO tools and resources:

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