I was (understandably IMHO) annoyed when former Trump AG William Barr suddenly decided that Delaware was going to lose its dominance of the market for corporate charters because Delaware has gone woke. Not surprisingly, I am now annoyed by a column on The Hill by Michael Toth, in which he claims that:
Delaware’s secret sauce has long been its corporate jurisprudence. But recently, activist judges in the state have set out to padlock Delaware’s main attraction. They are sending companies packing for states like Texas, which for its part is doubling down on its efforts to recruit businesses to the Lone Star State.
Contrary to the headline to Toth's column, companies are not fleeing Delaware. I've got a law review article in the works on the subject and have some actual data on the topic (like most lawyers Toth seems to treat anecdotes as data).
In total, there are almost 400,000 companies incorporated in Delaware. Although Delaware accounts for less than one-third of one percent of the United States’ population, it is the legal home for two-thirds of the Fortune 500 companies.[1] As for the broader set of all public corporations, Delaware is home to more than half of the corporations listed for trading on U.S. stock exchanges.[2] As for newly formed corporations, while most business entities form under the law of the state in which they have their primary place of business, Delaware is the leading choice of businesses that opt to incorporate outside their home state.[3]
Guess how many publicly held Delaware corporations reincorporated outside of Delaware between 2012 and 2024. My research assistants and I have scoured SEC filings and various databases to get the answer. The answer? A whopping total of 65, with seven pending. That’s a total of 72 over 12 years. Six per year.
That’s not flight. That’s rounding error.
So why’s Toth boosting Texas and slamming Delaware? Might we draw an inference from the fact that he’s a partner at a Texas law firm that represents Texas (and other corporations).
By the way, only 6 of the corporations in our dataset moved to Texas. Six.
[1] See Peter Molk, Delaware's Dominance and the Future of Organizational Law, 55 Ga. L. Rev. 1111, 1113 (2021).
[2] Delaware Corporate Law: Facts and Myths, Delaware.gov, https://corplaw.delaware.gov/facts-and-myths/ (last visited Mar. 21, 2024).
[3] Id.
