By MINGSON LAU, Associated Press

CLAYMONT, Del. (AP) — Lawmakers in Nevada, Texas and Oklahoma have recently approved changes aimed at helping their states dip into the lucrative side of corporate litigation that Delaware, with a specialized court and business-friendly laws, has dominated as the world's incorporation capital.

Concerned that these changes may lure corporations away from Delaware, thereby causing the small state to lose millions in corporate franchise taxes, Delaware officials have responded with their own changes to solidify their status in the business world.

In Texas, which opened a business court last year, there was bipartisan support for legislation diminishing shareholder powers and giving businesses more legal protections against shareholder lawsuits. 

Nevada took steps toward launching a dedicated business court by approving AJR8 in the recently concluded legislative session. The proposed constitutional amendment requires a second approval from the Legislature in 2027 before voters can weigh in on the issue in 2028. 

Secretary of State Cisco Aguilar said the steps, such as the appointment of judges and designating the court’s legal jurisdiction, location and make-up, can only happen if voters approve it in 2028. He said the court’s development could lead to the appointment of judges who specialize in complex business litigation issues. 

“That would create a solid, strong, responsive and timely business court,” Aguilar said.

However, Nevada Supreme Court Chief Justice Douglas Herndon announced in May that the justices would look at creating a business court with sitting district court judges who are exclusively assigned to business law cases. Herndon said he would ask the court to create a commission to study the issue and have the court operational within a year.

“We can address the timeliness and efficiency of judicial review of business cases, eliminate the need to amend the constitution and the uncertainty associated with waiting years to see if the resolution gets approved,” Herndon said in a statement.

Meanwhile, Aguilar said the bipartisan passage of AB239, which added corporation-friendly business laws, will help Nevada persuade companies to incorporate their businesses in the state. 

The secretary of state’s office also received funding to improve and eventually replace the antiquated SilverFlume system, which allows businesses to form limited liability companies (LLCs) and conduct business with the state online.

By improving the process, Aguilar said Nevada could slice into Delaware’s $2 billion in annual taxes and fees the state collects from incorporated businesses. 

“If we could take 5 percent or 10 percent of their market share, that would be a significant bump to Nevada,” Aguilar said. “Imagine if we could put another $100 million or $200 million into the general fund.”

In February, Aguilar celebrated a ruling by the Delaware Supreme Court allowing TripAdvisor to convert its incorporation to Nevada. Dropbox had previously announced it would incorporate in Nevada because of an “increasingly litigious environment in Delaware.”

Aguilar credited the improvements in the office’s technology and business-friendly environment to not only getting companies to incorporate in Nevada, but also relocate their corporate headquarters.

“The more innovative [and] transparent technology we have, the better off Nevada is to attract businesses to come here,” he said. 

Billionaire Elon Musk had advocated both Texas and Nevada as better options for incorporation after a Delaware judge struck down his shareholder-approved $56 billion compensation package from Tesla. Musk's businesses have also changed their incorporation locations: Tesla and SpaceX relocated to Texas, while Neuralink moved to Nevada.

Oklahoma also took action to get in the mix, as the Republican-led Legislature sanctioned the creation of business courts in its two most populous counties, a move the governor said would help Oklahoma become the most business-friendly state.

"This is an area in which states, in many ways, are behaving like businesses," said Robert Ahdieh, dean of the Texas A&M University School of Law. "Delaware is selling something. Texas is selling something that they hold out to be better. So it is very much a comparative exercise."

Concerns about a 'Dexit'

Since 2024, several billion-dollar companies including TripAdvisor and DropBox have relocated to Nevada. More than a dozen others, including the AMC theater chain and video game developer Roblox Corporation, have announced plans to incorporate there this year. Latin American e-commerce giant MercadoLibre filed a request for shareholders to approve a Texas relocation in April, citing Delaware's "less predictable" decision-making process — a common thought among exiting companies.

Amid concerns about more companies reincorporating elsewhere in a so-called "Dexit," Delaware passed its own legislation to help protect its status as the corporate capital, limiting shareholders' access to records and increasing protections for leadership. Opposition dubbed it "the Billionaire's Bill."

"Ultimately, I think the damage is done because businesses successfully undermined shareholder rights in Delaware," said Corey Frayer, director of investor protection at Consumer Federation of America, who argues that the Delaware bill was a rash acquiescence to "Dexit" concerns.

However, some business law experts, like Ahdieh, say the average shareholder is focused on increasing their returns and does not care about shareholder power or where the company is incorporated.

Delaware Gov. Matt Meyer has vowed to win back companies that leave, arguing his state's experience "beats going to Vegas and rolling the dice."

Less predictability

Companies flock to Delaware for its well-respected Court of Chancery, a sophisticated and separate forum focusing on equity, corporate and business law. This incorporation machine generates $2.2 billion annually, about one-third of the state's operating budget.

There is comfort in working in the familiarity of Delaware law, said Ahdieh, but that predictability has come into question in the last decade as corporate leaders grew unhappy over losing precedent-setting court decisions governing corporate conflicts of interest.

Widener University Commonwealth Law School professor Christian Johnson acknowledged a shift in Delaware but said reincorporating elsewhere might be "a bit of an overreaction." Although a few big-name companies have moved, there are still more than 2 million legal entities incorporated in Delaware, including two-thirds of the Fortune 500.

Statutes in Texas and Nevada may appear more flexible, but they have not been extensively tested, and their courts are not as experienced working with the larger entities that favor Delaware, Johnson said.

Protections in Texas

In May, Texas Gov. Greg Abbott signed legislation providing greater securities for corporate officers and adding restrictions to shareholder records requests. The bill also allows corporations to require an ownership threshold, no more than 3 percent in outstanding shares, before a shareholder can initiate a derivative lawsuit, typically on behalf of the company and against its own board or directors.

Restrictions on who can initiate such lawsuits are not uncommon, but Texas' implementation imposes a "far higher barrier than the norm," Ahdieh said.

Consumer advocates worry the changes endanger shareholder and investor protections by giving owners and directors more protection against lawsuits that could hold them accountable if they violate their fiduciary duty.

For businesses, the changes mean potentially saving millions of dollars in shareholder lawsuit settlements and legal fees by mitigating the likelihood of those costly cases reaching court. For the states, attracting companies means millions in business activity and revenue from regulatory filing and court case fees and taxes.

New courts

Eyeing a piece of that, Oklahoma is on pace to establish its recently approved business courts in 2026.

"I'm trying to take down Delaware," said Oklahoma Gov. Kevin Stitt, a Republican. "We want to be the most business-friendly state."

Nevada wants to compete, too. It has run business dockets in Washoe and Clark counties since 2001, and it's in the state's interest to expand operations considering its fast-growing economy and population, said Benjamin Edwards, a University of Nevada, Las Vegas law professor who studies business and securities law.

But he said it could take decades to build up a court comparable to Delaware, which has a valuable reputation for handling cases relatively quickly.

In March, Edwards told the Nevada Current he didn’t believe Nevada’s efforts would cause a “Dexit,” but would influence new companies and businesses to incorporate in the Silver State.

“I don’t think Delaware will stop growing anytime soon,” Edwards said.

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Associated Press reporter Marc Levy in Harrisburg, Pennsylvania, contributed to this report.