Delaware’s Rocky Year–What Lies Ahead?

2024 was a remarkable year in Delaware.

For the first time in as long as anyone can remember, people began to seriously question whether Delaware would retain its dominance as the go-to jurisdiction for incorporating companies. There was an uproar following several decisions by the Delaware Court of Chancery that seemed to shake the market’s confidence in Delaware law’s venerable predictability. One such decision invalidated shareholder agreement provisions that had long been commonplace and another found that a board had not validly approved a merger agreement because, as is typical, the board had not received a draft in final form. At the same time, a certain well-known CEO’s $50 billion compensation package was struck down, leading him to publicly declare “Never incorporate your company in the state of Delaware.” [1]

In the face of this public pressure, the Delaware legislature moved at unprecedented speed to amend the Delaware General Corporation Law in order to “overrule” several of the decisions that caused the most immediate concern (to the consternation of many, including the judges who had decided the cases that were overruled). But a sense of unease persists, especially regarding the Delaware courts’ recent perceived hostility towards controlling stockholders. For this reason, several controlled companies have already elected to leave Delaware for other jurisdictions such as Nevada or Texas–in one such case, the Delaware Court of Chancery found the decision to leave should be reviewed under the entire fairness test, although the Delaware Supreme Court quickly accepted an interlocutory appeal (which remains pending) to reconsider that issue.

Still, notwithstanding the turbulence in Delaware, there has been no mass “DExit.” [2] In large part, that is because it remains unclear whether other jurisdictions would “solve” the perceived problems Delaware is facing. Nevada and Texas, among others, have publicly sought to lure companies away from Delaware, including by setting up dedicated business courts intended to operate like the Delaware Court of Chancery and pointing to differences in their corporate statutes. But it remains to be seen how these courts will operate in practice, and numerous questions abound as to how these states’ corporate laws will be applied in the seemingly countless circumstances that have been addressed by Delaware’s statutory and decisional law over many decades. Meanwhile, notwithstanding the grumbling, Delaware courts remain unparalleled in their sophistication on corporate issues and in their ability to decide complex cases expeditiously.

Below we summarize some of the key developments in Delaware law over the past year and give a preview of what we think is coming in 2025.

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