Nevada v. Delaware

Nevada corporate law has become a central focus of corporate America. Nevada has emerged as Delaware's principal competitor, second only to Delaware in out-of-state incorporations and a top destination for firms leaving Delaware. The competitive pressure is evident: Delaware reduced its scrutiny of self-dealing transactions, and Texas incorporated elements of Nevada's broad exculpation. Whether or not Delaware maintains its dominance, Nevada’s rise is already transforming American corporate law.

This Article demonstrates that Nevada corporate law virtually forecloses shareholder litigation, contradicting claims by Nevada officials and commentators that its divergence from Delaware is modest. Analyzing Nevada's provisions as a whole, it exposes an overlooked, preclusive interaction: shareholders must plead intentional wrongdoing to survive dismissal, yet Nevada uniquely bars access to the books and records needed to meet it. Dismissal turns not on the merit of these suits but on whether the requisite intent happens to surface independently—through a public board rupture, a parallel fraud or other proceeding. Nevada's legislature has repeatedly amended its corporate law, positioning the state as more protective than Delaware. Recently in response to Delaware's S.B. 21 Nevada adopted A.B. 239—a far more potent measure whose controller exculpation and other changes leave virtually no scrutiny of self-dealing.

The Article analyzes the fragile market for corporate law and the risk of cascading degradation. As Delaware moves closer to Nevada's standards to retain incorporations, barriers to leaving Delaware fall and its competitive advantage erodes. Other states, like Texas, are already joining, threatening to accelerate a race to the bottom. These findings require a reassessment of the costs and benefits of federal intervention in corporate law, including novel approaches such as adopting Delaware's fiduciary-duty standards as federal minimums or requiring majority-of-the-minority shareholder approval for reincorporations.