There’s been a lot of talk about a potential public company exodus from Delaware, and while there have certainly been some noisy and high-profile departures, the question remains – is there really a broad DExit movement? This recent A&O Shearman article suggests that while this question doesn’t have a clear “yes” or “no” answer at this point, there’s plainly no stampede underway to exit The First State:
Notwithstanding the noise around a so-called “DExit,” the available data reveals a more nuanced reality. During the 2025 proxy season, boards and shareholders exhibited heightened—though hardly runaway—interest in revisiting the choice of Delaware as a corporate domicile. By mid-2025, at least 29 companies had proposals involving Delaware: 18 proposals to leave, 11 to enter.29 The outbound proposals are concentrated among issuers with controlling or highly concentrated ownership structures, a group particularly attuned to shifts in Delaware’s corporate jurisprudence.
Nevada is so far the chief beneficiary of DExit-motivated moves. Between 2024 and mid-2025, a wave of high-profile names— including Tripadvisor, Dropbox, Roblox, Andreessen Horowitz, AMC Networks, MSG Sports, MSG Entertainment, Neuralink, Sphere Entertainment, The Trade Desk, Pershing Square, Jade Biosciences, Tempus AI, XOMA Royalty, Fidelity National Financial, and Affirm Holdings—opted to reincorporate in Nevada.
The July 2025 announcement by Andreessen Horowitz proved especially influential: the firm not only announced its own shift but publicly urged its portfolio companies to follow suit, citing: (a) a perceived rise in subjectivity within the Delaware Court of Chancery; (b) the costs and delays inherent in Delaware litigation; (c) heightened personal exposure for directors; and (d) the relative clarity and breadth of Nevada’s codified business judgment rule.
The article also notes that while Texas trails Nevada, it’s been gaining momentum, noting that by September 2025, Tesla, SpaceX, Zion Oil & Gas, and Dillard’s had completed moves from Delaware to Texas, and that other large-caps, including Walmart and Meta, are evaluating a potential move to The Lone Star State. Still, these moves only represent a “tiny fraction” of Delaware’s corporate base, and the article points out that it still hosts two-thirds of the Fortune 500, and that more than 80% of 2024 IPOs selected Delaware as their jurisdiction of incorporation.
If you work with a company that’s considering moving forward with an IPO next year, you should check out this Cooley blog addressing five common IPO pitfalls and how to avoid them. Here’s an excerpt from the blog’s discussion of how to avoid inconsistent financial reporting adjustments:
You may hear us recommending to late-stage private companies gearing up for an IPO to assess their annual and quarterly financial statement closing timeline readiness and begin preparing their audited financial statements as early as possible. The financial statements included in the Form S-1 registration statement must adhere to strict accounting principles and disclosure requirements, and not having them public company-ready can be a source of delay for the IPO. Not only will audited financial statements (and any required acquired company financials) be needed in order to confidentially submit a draft registration statement to the SEC, but also, the accountants will have to provide comfort on all financial information ultimately included in the final prospectus.
Other potential IPO pitfalls addressed in the blog are the challenges of preparing disclosures illustrating potential growth, understated or missing risk disclosures, the use of jargon, and evolving SEC compliance needs.
In a speech last week at The Brookings Institute, SEC Commissioner Caroline Crenshaw didn’t pull any punches when it came to expressing her dismay about the agency’s current direction. Here’s an excerpt:
Unfortunately, recently, my voice has become one of ubiquitous dissent. It has been unsettling to see how precipitously one Commission is willing to undo the work of the Commission that came before it—all without a single notice-and-comment rulemaking to date. I’m concerned that the fundamental precepts upon which our markets have been built—tenets that have, by and large, kept our markets safe for both issuers and investors alike—are being eroded.
I fear that the very core of our intricate market structure is under attack. And instead of safeguarding our markets for investors to fund their retirements in safe and sustainable ways, we are moving in a direction where markets start to look like casinos. The problem with casinos, of course, is that in the long run the house always wins.
I think Commissioner Crenshaw raises some valid concerns about the potential downsides of the current SEC’s swashbuckling approach to regulatory initiatives. That being said, she doesn’t exhibit a lot of self-awareness about how things have gotten to this point. Commissioner Crenshaw may bemoan her current status as a dissenter, but she was solidly in the majority when the SEC under Chair Gensler rammed through an unprecedentedly burdensome regulatory agenda that prioritized the views of activists and advocacy groups & paid little attention to the issuer community, while simultaneously carrying out an enforcement program that was long on novelty and sometimes short on fairness.
If you keep that recent history in mind, it’s not surprising that the SEC has moved quickly and aggressively in the opposite direction. After all, “elections have consequences, yada, yada, yada. . .” and the agency’s likely agenda under Trump 2.0 was pretty plain for everyone to see. Still, financial regulation is too important to be as politicized as it has become, so I don’t think it’s in anyone’s interest to continue to engage in a regulatory tit-for-tat with each change in administrations.
Unfortunately, my guess is that this kind of tit-for-tat is likely to continue at the SEC for the foreseeable future. As I’ve said before, I think much of the problem stems from legislative gridlock and its effect on how the party in power uses federal agencies to further its agenda. When you factor the likelihood of the SCOTUS overturning Humphrey’s Executor and President Trump’s apparent unwillingness to fill Democratic vacancies on the SEC into the equation, the ideal of the SEC as a relatively non-partisan financial regulator seems even more like a pipe dream.
If you need another sign that the SEC has done a 180-degree turn in its approach to crypto, check out this new Investor Bulletin onCrypto Asset Custody Basics for Retail Investors issued by the Office of Investor Education and Assistance. As with most of these things, it’s definitely “Crypto Custody 101.” For example, here’s an excerpt discussing the difference between self-custody and third-party custody:
Self vs. Third-Party Custody
You also need to decide whether you want to manage your crypto assets on your own (self-custody) or if you prefer to have a third-party manage your crypto assets (third-party custody). Hot and cold crypto wallet options exist for both self and third-party custody.
Self-Custody: With self-custody, you control your crypto assets and are responsible for managing the private keys to any of your crypto wallets. With self-custody, you have sole control over the access to your crypto assets’ private keys. Self-custody also means that you have sole responsibility for the security of your crypto assets’ private keys. If your crypto wallets are lost, stolen, damaged, or hacked, you may permanently lose access to your crypto assets.
I guess the only “basic” that the SEC may have omitted from its discussion of self-custody is the risk that if you opt for that approach, you face a non-zero chance of being tortured and murdered for the keys to your crypto wallet.
Here’s something that my colleague Zach Barlow blogged over on The AI Counsel Blog:
Back in July, members of Congress proposed a prohibition on state AI regulation. Ultimately, these efforts failed, and the proposed ban died in the Senate. Now, just in time for the holidays, the “ghost of moratoriums past” is back. This time, the ban takes the form of an executive order (EO). The President signed EO 14179 last week. This EO seeks to combat state-level AI regulations in several ways.
It establishes an AI litigation task force targeting state AI regulations deemed unconstitutional by the administration.
It withholds Broadband Equity Access and Deployment (BEAD) non-deployment funds from states with “onerous AI laws.”
It directs the FCC and Special Advisor for AI and Crypto to determine if the government should create a federal AI reporting and disclosure standard to preempt state disclosure laws.
It tasks the Special Advisor for AI and Crypto and the Assistant to the President for Science and Technology with developing congressional legislation for a uniform Federal AI policy that would preempt other state AI laws.
While points three and four may suggest that the federal government will regulate AI, that may not be the case. These policies are being put forward for the express purpose of preemption. This would allow the federal government to lodge legal challenges against state laws on the grounds that it has the sole authority to regulate. However, the EO itself is likely to face challenges. Last month, when the EO was in draft form, Crowell gave this analysis, arguing that it faced an uphill battle in part because:
“Federal preemption by executive decree is not a generally accepted practice under the U.S. Constitution and prevalent theories of separation of powers. Courts are usually “even more reluctant” to find state laws preempted based on mere regulations as opposed to statutes, and the U.S. Supreme Court has held recently that the anti-commandeering principles of the Tenth Amendment bar the federal government from prohibiting a state from legislating in a particular sector.”
So the future of EO 14179 is uncertain. We’ll be looking to the courts to see how the administration’s litigation against states plays out. Additionally, we’ll likely see legal challenges flowing the other way as states sue to block the EO’s enforcement.
We cover SEC disclosure and corporate governance risks here, but if you’re on the front lines of risk management for AI, cyber, and other emerging technologies, be sure to subscribe to our AI Counsel Blog, where we roll up our sleeves and address some of the more granular issues that legal and compliance personnel are confronting when trying to manage the risks of emerging technologies.
Earlier this year, we blogged about the DOJ’s decision to prioritize tariff evasion in its white collar enforcement program. This Sidley memo says that the DOJ has been true to its word, with enforcement initiatives demonstrating its willingness to pursue trade and tariff-evasion misconduct through the False Claims Act (FCA), wire fraud, money laundering, and smuggling statutes, as well as under the Foreign Corrupt Practices Act when dealing with corrupt interactions with foreign customs officials. This excerpt summarizes the DOJ’s recent enforcement activities:
Recent DOJ actions underscore an increasingly active enforcement pipeline focused on customs- and tariff-evasion schemes, including matters involving customs brokers and other intermediaries. In 2024 and 2025, notable civil and criminal trade and customs fraud cases range from a large FCA settlement with a corporation to a criminal indictment of multiple individuals and companies alleged to have used fraudulent documents, shell companies, bribes to public officials, and kickbacks to Mexican drug cartels to smuggle billions of dollars’ worth of goods from the United States into Mexico, defrauding Mexico out of hundreds of millions of dollars’ worth of duties owed.
The memo also notes that the DOJ has relaunched its trade fraud task force, increased whistleblower incentives, and has used its data analytics capabilities to identify potential cases.
Today’s first blog mentioned the DOJ’s use of the False Claims Act to target tariff evasion. With its draconian penalties and the ability of private plaintiffs to assert qui tam claims on the government’s behalf, the False Claims Act has long been a formidable weapon in the DOJ’s arsenal. However, recent federal court decisions have called into question the constitutionality of the statute’s qui tam provisions.
Last year, in Zafirov v. Florida Medical Associates (MD. Fla. 10/24), Judge Kathryn Mizelle held that the FCA’s qui tam mechanism allowing violated the Appointments Clause because it allowed private plaintiffs to exercise executive power on behalf of the United States without being properly appointed. This recent Polsinelli memo says that a concurring opinion in a recent 5th Cir. decision endorsed Judge Mizelle’s conclusion:
Notably, in a concurring opinion, Judge James C. Ho. . . urged the court to revisit “serious constitutional problems” with the qui tam provisions. The Fifth Circuit previously affirmed the constitutionality of the FCA’s qui tam structure in Riley v. St. Luke’s Episcopal Hosp. Nonetheless, Judge Ho called on the Fifth Circuit to reconsider Riley. Judge Ho reiterated Judge Mizelle’s reasoning in Zafirov and emphasized that relators exercise executive authority on behalf of the U.S. without appointment or accountability to the President, raising separation-of-powers concerns under Article II.
Judge Ho’s opinion echoed Justice Thomas’s dissent and Justice Kavanaugh’s concurrence (joined by Justice Barrett) in United States ex rel. Polansky v. Executive Health Res., Inc., which questioned whether allowing private relators to litigate on behalf of the country is consistent with the Constitution’s separation of powers.
The memo notes that if these views continue to gain traction among federal courts, the implications for government contractors would be significant, because the vast majority of FCA recoveries arise from qui tam actions. That outcome would be music to the ears of the US Chamber of Commerce, which has filed amicus briefs challenging the constitutionality of qui tam actions under the US and state constitutions in several recent cases.
Wilson Sonsini recently published a memo highlighting five key things you need to keep in mind when preparing your Form 10-K. Here’s an excerpt from the memo’s discussion of the need to refresh risk factor disclosures:
Risk factor updates should align with changes in other sections of the Form 10-K, including the Business section, MD&A, cybersecurity disclosures, and financial statement notes. If the company experienced an extraordinary event during the year, such as a merger, acquisition, significant divestiture, or other change in the business, it should consider whether updates to risk factors are needed to reflect the current state of the business. Hypothetical language in risk factors should be reviewed and updated to reflect actual developments and events, where applicable.
Other topics addressed in the memo include the need to refresh your MD&A disclosures, consider the implications of Staff comment letters, confirm your filer status, review your exhibit index, and carefully review your CEO and CFO certifications.
Yesterday, the SEC issued a Litigation Release announcing that it had filed a joint stipulation dismissing its high-profile cybersecurity disclosure enforcement action against SolarWinds and its CISO. The enforcement action followed a massive Russian cyberattack against the company and challenged alleged “hypothetical risk factor” disclosures and other statements that purported to describe the company’s cybersecurity practices and policies.
The case was notable for, among other things, the SEC’s unusual decision to bring charges against SolarWinds’ CISO and its argument that the company’s cybersecurity weaknesses represented internal accounting controls failures. The SEC took a big hit last year when a federal judge dismissed all of its claims against the company and its CISO with respect to statements made prior to the attack, and all but one claim relating to post-attack disclosures.
Earlier this year, the SEC and SolarWinds reached a tentative settlement of the case, but yesterday’s announcement apparently takes that off the table. Here’s what the Litigation Release had to say:
The U.S. Securities and Exchange Commission today filed a joint stipulation with Defendants SolarWinds Corporation and its Chief Information Security Officer, Timothy G. Brown, to dismiss, with prejudice, the Commission’s ongoing civil enforcement action. As stated in the joint stipulation, the Commission’s decision to seek dismissal is “in the exercise of its discretion” and “does not necessarily reflect the Commission’s position on any other case.”
The dismissal of the SolarWinds enforcement action coincides with the release of a Cornerstone Research Report finding that SEC enforcement proceedings against public companies declined significantly during the 2025 fiscal year. Check out Kevin LaCroix’s blog on “The D&O Diary” for more information on that report.
A recent Wilson Sonsini memo offers advice for boards and management on best practices for shareholder engagement and dealing with shareholder activism. Here’s an excerpt from the memo’s discussion of how to conduct a meeting with investors:
The company’s representatives should conduct the meeting and drive the discussion. Shareholders want to engage directly with the decisionmakers, so top management or a board member should be the company’s primary speakers. Throughout the meeting, the company will want to show that its participants have a strong command of the issues facing the company.
Although not mandatory, executives generally engage most in discussions related to their functional areas. For example, the CEO would concentrate on questions and discussion related to strategy and “big picture” items, the CFO would focus on financials, and the General Counsel would focus on governance. Throughout the meeting, it is important for the company’s participants to demonstrate competence, alignment, and engagement.
Approach the meeting as a discussion and not a negotiation. This means listening actively and soliciting feedback, and not being dismissive, defensive, or confrontational. It is natural for there to be issues on which the company and the shareholder disagree, but the company’s focus in the meeting should not be on trying to change the shareholder’s mind. Rather, the goal is to clearly and unemotionally communicate the company’s position, reasoning, and value creation strategy while also building credibility with shareholders.
Other engagement-related topics addressed by the memo include when to engage with shareholders, whether to engage with known activists, how to prepare for a meeting with shareholders, what legal issues to keep in mind, and what to do after engagement.
