DExit: The Reincorporation Decision — A Guide for Investors

The domicile question is no longer academic. It is a boardroom decision with real capital markets consequences. Akin’s capital markets, public company advisory and litigation teams have combined their expertise to create this three-part series that delves into the background, issues and considerations for stakeholders to assess when considering reincorporating outside of Delaware. The first part of this limited series is an article in which Akin provides insights into reincorporation from a board of director’s perspective: how and what a board should consider regarding a potential reincorporation, including mechanical considerations and potential obstacles to reincorporating successfully. In this second article, Akin examines reincorporation using an investor’s lens: how and what an investor should consider when evaluating reincorporation proposals.

Executive Summary

Given recent amendments to relevant key states’ corporate laws, there has been an uptick in companies seeking to move their corporate home from Delaware to other states, including Texas – the so-called “DExit” decision. In 2025, 18 companies proposed reincorporating out of Delaware, with 13 seeking to move to Nevada and two looking to move to Texas.¹ Glass Lewis reports that it evaluated 29 reincorporation proposals during the 2025 proxy season, representing a 70.6% increase from 2024.² In 2024 and 2023, Glass Lewis evaluated 17 and 20 proposals, respectively.³ Furthermore, according to statistics published by Analysis Group, Inc., while Delaware remains the primary jurisdiction for companies going public, accounting for roughly 80-90% of initial public offerings (IPO) between 2022 and the first half of 2025, its IPO share declined during 2025, to roughly 75% for large companies with market capitalization above $250 million (excluding special purpose acquisition companies (SPACs))⁴.

For investors, reincorporation proposals are governance events requiring rigorous scrutiny. The destination jurisdiction, specific provisions adopted and proposal design (i.e., how the proposal is presented for consideration) affect the balance between board flexibility and shareholder accountability. For example, mandatory arbitration provisions eliminate potential class actions; beneficial holding thresholds may operate to bar institutional investors from bringing derivative claims against directors and officers; and restricted books-and-records access arguably reduces transparency. Taken together, these governance provisions can diminish meaningful opportunities for investors to hold companies and their boards of directors accountable.

Key Takeaways for Investors

A meaningful number of public companies have either already reincorporated outside of Delaware or announced their intention to seek shareholder approval to do so. Key considerations for investors when faced with examining a company’s potential reincorporation, include:

• Engage counsel early to evaluate, understand and protect their equity rights and to assess risks associated with reincorporating in the destination jurisdiction that may affect the long-term prospects of their investment.
• Work with counsel to evaluate the specific governance features being adopted or preserved, which should be summarized in the proxy statement containing the reincorporation proposal.
• Distinguish between reincorporations that preserve existing rights and those that bundle those efforts with features that reduce shareholder rights.
• Understand the effects of mandatory arbitration, including when coupled with minimum shareholder derivative litigation thresholds, which can represent reductions in shareholder rights and should be evaluated holistically.

How Did We Get Here and Why Should Investors Care?

For investors, DExit is no longer a theoretical debate about Delaware’s jurisdictional dominance. It is now a recurring proxy-season issue that requires a vote-by-vote assessment of whether a reincorporation proposal preserves shareholder rights or reallocates power toward boards, controllers, founders and management. Prior to 2023, reincorporation was a rare event. Beginning in 2024 and accelerating through 2025 following the issuance of the United States Securities and Exchange Commission’s (SEC) September 2025 policy statement regarding mandatory shareholder arbitration provisions, as well as legislative enactments in Delaware, Nevada and Texas, the volume of reincorporation proposals increased, creating a measurable trend. During the entirety of 2025, companies submitted 26 reincorporation proposals for shareholder approval; by mid-April 2026, Texas had already surpassed its full-year 2025 total.

The early DExit wave was heavily concentrated among controlled or founder-led issuers, where voting outcomes were often effectively predetermined. That pattern matters because investors often had limited practical ability to block the move and therefore needed to focus on disclosure, proposal design and post-reincorporation accountability.

The 2026 proxy season suggests that reincorporation proposals may no longer be limited to controlled or founder-led issuers, with non-controlled companies (e.g., ExxonMobil and ArcBest) also submitting reincorporation proposals to shareholders. This shift changes the investor’s calculus: institutional votes can determine whether a reincorporation succeeds, and voting guidelines must now distinguish between right-preserving proposals and proposals that bundle reincorporation with governance-reducing features.

The investor takeaway is straightforward: every reincorporation proposal is now a governance event. Investors should evaluate not only the destination jurisdiction, but also the specific package of rights being preserved, modified or eliminated; whether the company is controlled or widely held; whether the proposal is made cleanly (i.e., not bundled with other governance-related proposals); whether arbitration, derivative thresholds, forum provisions or inspection limitations are bundled into the move; and whether any company assurances included in the proxy solicitation materials will be binding in the charter or bylaws.

The Competitive Landscape: Delaware, Texas, Nevada and the Cayman Islands

While companies historically have incorporated in Delaware, Texas and Nevada are among the key states that have been attracting companies in the DExit movement. Each destination jurisdiction offers a distinct package of board-friendly provisions. The chart below provides an investor-focused assessment of what each jurisdiction’s governance regime means for shareholder rights and remedies, followed by a more detailed breakdown of the relevant jurisdictional differences.

Comparative Jurisdiction Summary

Texas: What Investors Should Consider

Texas’s Senate Bill (SB) 29 offers (and was explicitly designed to offer) boards of directors predictability and protection. For some investors, the same provisions could raise accountability concerns:

• Derivative suit threshold (up to 3%). In addition to codifying the business judgment presumption (see below), SB 29 also establishes a derivative suit threshold reflecting a potentially meaningful obstacle for shareholders seeking to pursue derivative claims. For instance, for a company with a $5 billion market capitalization, a 3% derivative suit threshold translates into a minimum $150 million stake in the company. As a result, the threshold effectively bars all but the largest single investors from bringing derivative claims challenging conflicted transactions, self-dealing or corporate waste.
• Restricted books and records. SB 29 exempts email, text messages and social media content from shareholder inspection. By comparison, Delaware’s amended law still permits discovery of informal communications upon compelling need. As a result, SB 29 limits ability to uncover misconduct.
• Jury trial waivers; Limited Judicial Precedent. The Texas Constitution guarantees the right to a jury trial. The Texas Supreme Court has not addressed whether a charter or bylaw waiver constitutes a knowing and voluntary waiver of a right that is constitutional. Legal uncertainty is a risk factor for both sides. Relatedly, the limited and evolving state of the Texas Business Court’s case law presents competing considerations. For boards, the opportunity to shape emerging interpretations of the Texas Business Court may be attractive; however, for investors, the absence of a deep body of precedent creates uncertainty that Delaware’s two-century track record largely eliminates.
• Exclusive forum provisions. SB 29 is intended to funnel disputes to Texas Business Court, which was launched September 2024 with limited precedent. As a result, investors face an unfamiliar venue with untested doctrines.
• Pre-transaction independence determinations. SB 29’s mechanism allowing corporations to obtain a pre-transaction judicial determination of director independence provides efficiency and certainty arguments for boards but eliminates may concern investors’ typical preference for post-hoc judicial review as an essential check on potential or actual conflicts.
• Codified business judgment presumption. Combined with the derivative suit threshold, this presumption may materially narrow avenues for challenging conflicted transactions, including entire fairness scrutiny for controlling-shareholder transactions.
• No attorney’s fees for disclosure-only settlements. SB 29 prohibits recovery of attorney’s fees when a dispute results solely in supplemental or amended disclosures. Some observers believe this limitation is likely to deter what proponents characterize as non-substantive derivative lawsuits; however, investor advocates are concerned that this restriction eliminates an important accountability mechanism.

Nevada: Investor Considerations

Nevada’s corporate regime provides some of the broadest statutory protections available for directors and officers among domestic jurisdictions:

• D&O liability as opt-out default. D&Os are protected (i.e., presumed to have acted in good faith), unless a plaintiff rebuts that presumption, proves that the director or officer breached his or her fiduciary duties, and shows such breach involved intentional misconduct, fraud or a knowing violation of law. Unlike Delaware’s §102(b)(7) (which is opt-in), this protective measure is automatic. Boards need not act to benefit from the protection.
• Limited §220 inspection equivalent. Shareholders seeking informal discovery of corporate records face a 15% holder-support threshold, thereby rendering Nevada’s §220 inspection analog effectively unavailable to most institutional investors. In addition, the provisions of the Nevada statute do not apply to any corporation that “furnishes to its stockholders a detailed, annual financial statement or any corporation that has filed during the preceding 12 months all reports required to be filed pursuant to Section 13 or Section 15(d) of the Securities Exchange Act.”⁵
• AB 239 safe harbors. Legislation enacted in 2025 established safe harbors for conflicted transactions involving controlling shareholders, potentially limiting the scrutiny such transactions receive.
• Business court immaturity. A business court pilot program was introduced on June 29, 2026, in Nevada’s Eighth Judicial District Court. That said, Nevada does not have an established corporate law precedent comparable to Delaware’s more than two centuries of institutional history and a substantially deeper body of corporate judicial precedent.

Cayman Islands: SPACs and de-SPACs in Focus

The Cayman Islands remain relevant to the reincorporation discussion, particularly in the SPAC market. Of the 26 reincorporation proposals submitted to shareholders during the second half of 2025, 10 involved SPACs or other business combination transactions, and seven of those moved from the Cayman Islands to Delaware as part of the de-SPAC process. The Cayman Islands raise some nettlesome issues for investors in relation to incorporation and reincorporation issues. For instance, for investors, these transactions underscore that a company’s jurisdiction of incorporation can materially affect shareholder rights, remedies and governance protections. The flow of companies from the Cayman Islands to Delaware reflects a perception among many market participants that Delaware offers a more developed body of corporate law and stronger investor protections⁶.

As companies evaluate moves away from the Cayman Islands to Delaware, or to other jurisdictions such as Texas or Nevada, investors should assess whether the proposed reincorporation preserves, enhances or weakens existing shareholder protections, including fiduciary duty standards, litigation rights, inspection rights and mechanisms for holding directors and officers accountable.

Evaluating Individual Reincorporation Proposals

Controlled vs. Widely Held Companies

The reincorporation risk profile differs materially based on the ownership structure of the company in question:

• Controlled/founder-led companies. Historically, the majority of reincorporation proposals (55% in early 2025, declining to 29% in the second half of 2025) have involved controlled or founder-led companies. In these cases, approval may be a foregone conclusion regardless of minority opposition. For instance, several high-profile controlled companies have been considering moving to Texas, thereby illustrating the unique controlled-company dynamic whereby a dual-class voting structure means the founder(s) can approve a reincorporation unilaterally. On that basis, focus investor engagement on provision design rather than vote outcome.
• Widely held companies. The 2026 proxy season’s expansion of reincorporation proposals to non-controlled companies (e.g., ExxonMobil and ArcBest) means investor votes are decisive. Shareholder leverage is real, with investors using such leverage to demand that certain shareholder rights be preserved.

Proposal Design: Bundling vs. Preservation

The success or failure of a reincorporation proposal at the shareholder vote stage depends significantly on the positions taken by proxy advisory firms⁷ and institutional investors. Relatedly, many reincorporation proposals are not necessarily binary. In other words, while a company may reincorporate in Texas, it also may determine to opt out of certain of that state’s board-friendly protections (e.g., adopting a minimum ownership threshold for derivative claims). This point also intersects with the SEC’s unbundling requirements. Exchange Act Rule 14a-4(a)(3) requires the form of proxy to “identify clearly and impartially each separate matter intended to be acted upon,” and Rule 14a-4(b)(1) requires shareholders to be given a means to vote on each separate matter. The SEC staff has stated that, as a general matter, multiple material matters should not be bundled into a single proposal where the individual matters would require shareholder approval if presented on a standalone basis.

On that basis, investors should factor these dynamics into their analysis and planning from the outset and recent experience provides instructive contrasts.

During the 2026 proxy season, ArcBest Corporation’s proposal to reincorporate in Texas passed, while Texas Capital Bancshares’ proposal failed. Each of Glass Lewis and the Institutional Shareholder Services (ISS) recommended that shareholders vote against these proposals; as a result, the key differentiator appears to have been how the proposals were presented to shareholders for approval. For instance, ArcBest affirmatively opted out of SB 29’s derivative suit ownership threshold and shareholder proposal limitations, preserving existing shareholder rights, while Texas Capital Bancshares bundled its proposal with an advisory vote to raise the shareholder proposal threshold to 3% of outstanding shares. A potential lesson for investors is therefore both legal and practical: demand that companies present reincorporation as a clean proposal, and that any governance-modifying or shareholder-rights reducing proposals be presented separately, consistent with the SEC’s unbundling framework.

Potential Reincorporation Sensitivities

Additionally, investors evaluating reincorporation proposals should be mindful that these transactions are unfolding against a politically charged backdrop. In recent years, proxy voting practices of large institutional investors and asset managers have become the subject of heightened scrutiny from policymakers, regulators and state officials, particularly with respect to corporate governance and environmental, social and governance (ESG)-related matters. As a result, voting outcomes on reincorporation proposals may reflect a broader mix of governance, fiduciary, legal and reputational considerations than would have been the case historically.

This dynamic may be particularly relevant for high-profile reincorporations involving Texas or Nevada, where debates regarding corporate law, shareholder rights and state competition for incorporations have increasingly intersected with broader political and regulatory discussions. While investors should continue to focus on the substantive merits of a proposed reincorporation, including its impact on shareholder rights, fiduciary accountability, litigation remedies and long-term value creation, they also should recognize that the surrounding voting environment may influence how both issuers and institutional shareholders approach these transactions.

Practical Guidance: What Investors Should Do

Investors evaluating a reincorporation proposal should:

• Update voting guidelines to address reincorporation proposals by jurisdiction and governance effect.
• Consistent with SEC rules, ensure a rights comparison table is included in company disclosures.
• Scrutinize whether the proposal is made “on a clear day” (i.e., when the proposal is made proactively for business reasons, rather than reactively to avert potential legal liability or scrutiny), and whether independent directors lead the process.
• Consider challenging bundled proposals that combine reincorporation with material reductions in shareholder rights.
• Assess whether arbitration, jury-waiver, forum-selection or derivative-threshold provisions are included and how they interact.
• Engage early with companies considering a move and coordinate stewardship, legal and portfolio-management review.

Conclusion

DExit is not a referendum on Delaware alone. It is a referendum on corporate-law predictability, shareholder litigation, founder and controller flexibility, board authority and investor rights. For investors, the right response is not automatic opposition, but careful review of whether the move preserves an appropriate balance between board flexibility and shareholder accountability. The 2026 proxy season demonstrates that investors have leverage and that well-designed engagement changes outcomes. The new default is not Texas or Nevada. The new default is that domicile deserves a board-level answer and a thoughtful, investor-level response.

1 See, e.g., Glass Lewis “The State of the US Reincorporation in 2025: The Growing Threat and Reality of ‘DEXIT’” and Glass Lewis “Proxy Season Review 2025 – Executive Summary”.

2 Id.

3 Id.

4 See, e.g., Analysis Group “DExit: Reincorporation Data Seem to Support the Hype” (republished by The Harvard Law School Forum on Corporate Governance).

5 See, e.g., Analysis Group “DExit: Reincorporation Data Seem to Support the Hype” (republished by The Harvard Law School Forum on Corporate Governance).

6 We note that the Council of Institutional Investors has recommended that companies avoid incorporating or reincorporating in jurisdictions that diminish shareholder rights. See Section 1.8 of the Council of Institutional Investors’ Policies on Corporate Governance.

7 It is worth noting that the major proxy advisory firms have been subject to increasingly close scrutiny from policymakers, regulators, investors and other stakeholders recently. This scrutiny has led some to question the influence these firms continue to have in the marketplace; however, at this time, we believe it is important for companies, boards, management and investors to continue engaging with these firms in order to avoid creating unnecessary issues with a reincorporation proposal.