Delaware has long been the go-to state of incorporation for U.S. companies, including more than two-thirds of the Fortune 500. Recently, however, other states – chief among them, Nevada and Texas – have begun to chip away at Delaware’s once-cemented status as the preeminent corporate haven. In 2025, Delaware sought to stave off a corporate exodus by amending some of its corporate laws in business-friendly ways, but only time will tell whether (1) other Delaware laws, including laws potentially (or actually) prohibiting mandatory private arbitration of investor claims, and/or (2) the perception of Delaware courts as increasingly pro-plaintiff will continue to add fuel to the “DExit” fire.

The slow corrosion of Delaware’s once sparkling reputation begs the question: what is the allure of Nevada and Texas? Highlights include the following:

• Business judgment rule: Long hailed as the centerpiece of Delaware corporate law is Delaware’s “business judgment rule”: insulation from liability based on a rebuttable presumption that corporate directors act on an informed, good faith basis in the best interests of the company. Delaware detractors have bemoaned that the business judgment rule remains part of Delaware’s judicially created common law – not codified in a statute – leaving Delaware courts free to expand exceptions that have all but swallowed the rule. By contrast, Nevada and Texas have enshrined their own versions of the business judgment rule into law through statutes that (some say) leave courts less leeway to second-guess directors and impose liability on them.
  
  
• Shareholder “books and records” rights: Delaware broadly permits stockholders to inspect corporate books and records, a tool that stockholders often leverage to build lawsuits against corporate directors and officers (D&Os). Unlike Delaware, where the inspection right is not conditioned on the stockholder’s ownership of any specific percentage of the company’s shares, Nevada and Texas require stockholders to own at least 15% and 5% of the company’s shares, respectively. Nevada further shields corporations from having to respond to stockholder inspections at all when such corporations satisfy certain disclosure requirements. Texas likewise offers additional protections to corporations, including by permitting companies to forbid inspections undertaken for litigation-related purposes.
  
  
• Derivative litigation: Texas recently adopted legislation that permits a Texas corporation to impose a minimum ownership threshold of up to 3% of the company’s outstanding shares in order to bring a derivative lawsuit on behalf of the corporation. No such law exists in Delaware. Moreover, unlike Delaware, both Texas and Nevada appear to permit corporations to indemnify their D&Os for settlements and/or judgments in derivative lawsuits. This would dramatically reduce the risk of D&Os incurring non-indemnifiable loss, which Side A insurance covers.
  
  

Setting aside a few high-profile instances of corporations leaving Delaware for Nevada or Texas, “DExit” has not yet become a full-blown trend. As just one example, of the companies that went public in the U.S. via an initial public offering over the past three years with a market cap exceeding $250 million, more than 80% of them were incorporated in Delaware.¹

And still to be seen is the full scope of D&O insurance implications for insureds who incorporate or reincorporate in one of those two states – including whether such insureds can achieve favorable policy terms (coverage, pricing, etc.) based on reduced Side A exposure, and whether other aspects of such states’ laws that are potentially less favorable to insureds (including Texas’s laws concerning allocation) result in negative claim outcomes for companies and their D&Os.

An experienced broker can help insureds navigate these issues and optimize their coverage, regardless of the state of the company’s incorporation. If you have questions or are interested in coverage, please contact your Aon broker.

1 - DExit: Reincorporation Data Seem to Support the Hype