Elon Musk wanted $56 Billion and at first it seemed that Delaware said “no.”  Meanwhile other states have moved aggressively to attract incorporations on the private and public levels.  Although Musk moved his company to Texas, the main competitor for the incorporation business has been Nevada.

This summer the Harvard Law School Forum on Corporate Governance issue a paper (not written by Harvard) suggesting for a variety of reasons that Delaware ought to be the jurisdiction of choice for incorporating, particularly if you plan to go public; but that even at the LLC level (LLCs never can go public) Delaware ought to be the jurisdiction of choice.  Separately, my firm’s corporate law office in Delaware just today held a meeting describing how Delaware has altered its case law to permit disputes involving Delaware entities to use more freely the nonjudicial routes to resolve internal corporate disputes (greater use of arbitration, greater flexibility to provide for alternate tribunals and methodology pursuant to Charter and By-Law regimens).

The most significant response from Delaware was a statutory amendment to codify the favorable “business judgment rule” as a safe harbor for corporate transaction involing conflicted directors and control stockholders if reasonable procedural steps are taken.  If internal votes of disinterested parties approve a transaction, the Courts no longer will apply a standard that nonetheless will hold management to a separate review for “entire fairness.”

For LLCs, Delaware does permit specific provisions delegating decisional power to control directors or equity holders, setting internal governance standards.  And these kinds of considerations are as applicable to start-ups as they are to established businesses, so the general tradition of forming start-ups in Delaware, in part to attract capital, remains a viable decision.