TripAdvisor’s Planned Nevada Move Puts Delaware in Tricky Spot

Bloomberg Law (May 11, 2023) Delaware’s Chancery Court is in the awkward position of deciding whether TripAdvisor can move its incorporation to Nevada, another state vying to be a business-friendly destination. Investors sued in late April to stop the anticipated move. The suit argues Greg Maffei is using his voting power and position as chairman of TripAdvisor’s parent Liberty TripAdvisor Holdings to relocate to a state whose “race to the bottom” laws will better protect company directors from investor suits. The Chancery Court will want to protect investors from corporate actions that appear rife with directors’ self-interest—as TripAdvisor and Liberty TripAdvisor shareholders allege. But the court also will have to balance that against perceptions Delaware is a “Hotel California,” where companies can never leave. Nevada has tried to position itself as a competitor to Delaware for companies’ incorporation, in part by providing more protections to officers and directors. Delaware companies can exculpate directors for breaching their duty of care, allowing them to evade personal liability for money damages, attorneys noted. Exculpation in Nevada is automatic and broader. In Nevada, shareholders also may find suing directors and inspecting corporate records more difficult. Still, it “would be quite extraordinary if Delaware were to say it’s a breach of fiduciary duty to incorporate in another state because that state’s laws are different than our state’s laws,” said Allen Matkins Leck Gamble Mallory & Natsis LLP attorney Keith Bishop. The shareholders are inviting Delaware to become the “Hotel California,” he wrote in a blog post last week. “Having attracted all of these publicly traded corporations, it would be somewhat ironic if it were to decide, you can check in but you can’t check out of Delaware and go to another state,” said Bishop, a former California commissioner of corporations who wrote a treatise about Nevada corporate law. Read More (subscription required)