TheCorporateCounsel.net

Last month, Meredith blogged about the ongoing kerfuffle over whether Delaware corporations should consider reincorporating in another jurisdiction. In that blog, she cited a Wilson Sonsini memo pointing out that one of the big factors that might prompt a corporation to remain in Delaware is the ability to access the Delaware judiciary’s corporate law expertise.  According to a recent blog from Keith Bishop, one newly converted Nevada corporation appears to want to keep that access:

I was doubly surprised to come across the following provision in the articles of incorporation of a corporation that had recently converted from a Delaware corporation to a Nevada corporation:

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders . . . (iv) any action to interpret, apply, enforce or determine the validity of these Articles of Incorporation or the Bylaws . . .

The corporation’s preference to have a Delaware court interpret and apply Nevada law is one reason that Keith was “doubly surprised” by this provision. More importantly for companies that might be interested in this kind of “Nevada-ware” alternative, the other reason for his surprise was the failure of the articles to include at least one Nevada court as a forum for internal actions, which is required by Nevada’s statute.

By the way, I’m very pleased with myself for the “Nevada-ware” moniker, which I think I’ve coined. It will be interesting to see if other companies that opt to move away from Delaware try to figure out ways to take the parts of Delaware they like with them as they move to their new homes. Anyway, if Nevada-ware corporations become a thing, just remember you heard it here first.

– John Jenkins