Coinbase has officially initiated its departure from Delaware, submitting paperwork to the Securities and Exchange Commission for a reincorporation in Texas. This strategic shift was articulated by the company’s chief legal officer, Paul Grewal, in a recent column for The Wall Street Journal. He emphasized Texas as an increasingly appealing hub for innovative companies, adding, “It’s a shame that it has come to this, but Delaware has left us with little choice.”
Delaware has historically been hailed as one of the most business-friendly states in the country, housing nearly 2 million businesses, including more than half of all publicly traded companies, based on information from the Delaware Secretary of State. However, recent court rulings in Delaware have begun to raise eyebrows among corporations, prompting questions regarding the state’s business climate.
Grewal highlighted that Delaware’s Chancery Court has become known for its unpredictable outcomes in recent years. This uncertainty has contributed to a broader trend of corporate migration away from the state. High-profile figures, such as Tesla CEO Elon Musk, ignited this trend last year when he decided to reincorporate both Tesla and SpaceX in Texas following a Delaware court ruling that voided a significant pay package he had proposed. Just recently, Tesla’s shareholders approved an impressive $1 trillion pay package under Texas governance.
The trend has been corroborated by other notable departures from Delaware, including venture capital firm Andreessen Horowitz, gaming platform Roblox, and cloud storage service Dropbox, all of which have sought refuge in friendlier jurisdictions such as Nevada and Texas.
Texas has emerged as a beacon for corporations seeking more stability and clarity in governance. Grewal pointed to Senate Bill 29, which modernized the Texas Business Organizations Code, as a key factor in Coinbase’s move. This legislation empowers corporate directors and officers to make essential business decisions with reduced fear of litigation, thereby fostering an environment conducive to innovation. Coupled with the establishment of the Texas Business Court system, these legal changes offer companies a more predictable and supportive framework for resolving corporate disputes.
Although Coinbase has not immediately responded to requests for further comments, the reaction from Delaware has been a concerted effort to retain its corporate residents. State officials have acknowledged the significant revenue generated from businesses incorporated in Delaware and have expressed a commitment to engaging with companies contemplating departure. Governor Matt Meyer indicated in February that the state is actively reaching out to understand grievances and find ways to improve.
As the trend of corporate departures continues, the implications for Delaware’s business reputation and the long-standing narrative of its corporate friendliness remain to be seen.
