A lawsuit filed in Delaware in April against the travel site Tripadvisor and its majority shareholder is highlighting what may be a growing trend: companies seeking to shift their incorporations to Nevada to avoid Delaware’s more stringent and entrenched legal standards.
Maffei, CFO at Oracle ORCL and then Microsoft MSFT in the 1990s and 2000s, is chairman and chief executive of Liberty Media, which is parent to SiriusXM SIRI and Live Nation Entertainment LYV . He is also chairman and CEO of Liberty TripAdvisor Holdings Inc. LTRPA , which owns a controlling stake in Tripadvisor Inc.
That’s because Nevada has become a “no-liability corporate safe haven,” following legislative actions that have eliminated protections for shareholders by freeing directors and officers from liability arising from the operation and supervision of their companies, the suit alleges. TripAdvisor and Liberty TripAdvisor’s recently published proxy statements lay out the rationale for reincorporating in Nevada.
“Tripadvisor and Liberty TripAdvisor Holdings tell shareholders in proxy statements that reincorporating in Nevada would save the companies $250,000 a year in Delaware fees, without mentioning how modest this figure is as a proportion of annual revenue.” “These interests may present such persons with actual or potential conflicts of interest. Our Board of Directors was aware of these interests and considered them, among other matters, in reaching the decision to approve the plan of conversion and the conversion and recommend that our stockholders vote in favor of the conversion proposal,” it says.
Benjamin Edwards, associate professor of law at the William S. Boyd School of Law the University of Nevada, Las Vegas, said Delaware is the clear leader in state incorporation law and has been for more than 100 years. “It has a very deep body of case law, a lot of precedent and in the business world, it’s a common tongue that almost everybody understands.”