Coinbase says it will leave Delaware, following Elon Musk to Texas
In a significant shift for the cryptocurrency landscape, Coinbase has announced its decision to leave Delaware and reincorporate in Texas, citing the latter state as an increasingly attractive hub for innovative companies. This move comes amid a broader trend of businesses reassessing their corporate homes, sparked in part by recent legal developments in Delaware that have raised concerns about the state’s business-friendliness. Coinbase’s Chief Legal Officer, Paul Grewal, articulated these sentiments in a column for The Wall Street Journal, emphasizing that Delaware’s unpredictable court rulings have left companies like Coinbase with little choice but to seek a more stable environment for their operations.
Delaware has long been regarded as a corporate haven, with nearly 2 million businesses, including over half of all publicly traded companies, choosing to incorporate there. However, a series of controversial court decisions, particularly from Delaware’s Chancery Court, have led companies to question the predictability and safety of their legal frameworks. Grewal pointed to the recent legal challenges faced by notable figures like Elon Musk, who relocated both Tesla and SpaceX to Texas after a Delaware court invalidated his substantial pay package. This trend has seen a growing number of firms, such as VC firm Andreessen Horowitz, Roblox, and Dropbox, also exiting Delaware for states like Texas and Nevada, which are positioning themselves as more business-friendly alternatives.
Texas’s appeal lies in its recent legislative changes, which aim to provide a more predictable legal environment for corporations. The passage of Senate Bill 29, which modernizes the Texas Business Organizations Code, empowers corporate directors and officers to make decisions without the fear of unpredictable legal challenges. This, coupled with the establishment of the Texas Business Court system, creates a legal ecosystem that promises strong protections and efficient dispute resolution. As Coinbase embarks on this new chapter, it reflects a growing sentiment among businesses seeking stability and support in a rapidly evolving marketplace. Meanwhile, Delaware officials are actively working to retain corporations by addressing their concerns, indicating that the competition for corporate allegiance is far from over.
Coinbase announced last week that it plans to rescind job offers and freeze hiring indefinitely.
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Coinbase says it is leaving Delaware and will reincorporate in Texas.
Texas has become “an increasingly attractive hub” for companies like Coinbase, the company says.
Elon Musk sparked an exodus from Delaware last year after a court ruled against his pay package.
Coinbase is joining an ever-growing list of companies bidding farewell to Delaware.
The
cryptocurrency exchange
has filed paperwork with the Securities and Exchange Commission to leave Delaware and reincorporate in Texas, its chief legal officer, Paul Grewal, wrote in a column on Wednesday in The Wall Street Journal.
Texas has become “an increasingly attractive hub for innovative companies like ours,” Grewal wrote. “It’s a shame that it has come to this, but Delaware has left us with little choice.”
Delaware has long been considered one of the country’s most business-friendly states. Nearly 2 million businesses call Delaware their legal home, including more than half of all publicly traded companies, according to the Delaware Secretary of State.
However, a series of Delaware court rulings has made some companies question just how hospitable the state really is for corporations.
“Delaware’s Chancery Court in recent years has been rife with unpredictable outcomes,” Grewal wrote.
Tesla CEO
Elon Musk
sparked an exodus from the state last year, reincorporating both
SpaceX and Tesla
in Texas, after a Delaware court sided with minority shareholders to void his proposed $56 billion pay package. Now based in Texas, Tesla shareholders approved
a $1 trillion pay package,
tied to some lofty benchmarks, earlier this month. Texas law makes it more difficult for shareholders to file lawsuits against a company and its directors.
VC firm Andreessen Horowitz, Roblox, and Dropbox, and Bill Ackman’s Pershing Square Capital have all left Delaware in the last year. Many of them have gone to Nevada, which, like Texas, has styled itself as more business-friendly in recent years.
For Coinbase, Texas offered more “predictability,” Grewal wrote.
“Senate Bill 29 modernized the Texas Business Organizations Code to codify the business-judgment rule, which rightly empowers directors and officers to make the business decisions they need to innovate,” Grewal wrote, referring to new legislation that gives companies more predictability in corporate governance disputes. “This bill, together with the establishment of the Texas Business Court system, gives companies a business-friendly legal ecosystem with strong protections and efficient dispute resolution.”
Coinbase did not immediately respond to a request for comment from Business Insider.
For its part, Delaware has sought to reassure corporations still incorporated in the state. Those companies account for a substantial portion of the state’s revenue.
“Any company thinking about leaving, we’re actively reaching out, we’re talking to them, we’re understanding what the issues are and understanding what ways we can do better,” Gov.
Matt Meyer told Business Insider
in February. “And for those entities that have already made the decision to leave, we’re going to continue to work hard to earn their trust and hopefully to have them come back.”
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Eric
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