Three weeks before closing, the certificate of incorporation went into the data room with a single state name on its first line: Delaware. The founder’s question that morning was no longer “should we incorporate in Delaware” but “do we have to”. Over the past two years a series of listed companies have left Delaware for Nevada or Texas. A choice reflexive for a decade is open to argument again. Seen from Turkey it is narrower and sharper: the state of incorporation is picked once, during the flip-up, and changing it later costs several times what getting it right at the outset would have.
Settling the question by comparing filing fees is the common mistake. A state of incorporation is not a cost line; it is a choice of dispute regime. Against what standard is a director’s conduct measured, which door does a minority holder knock on, how is a transaction between founder and company cleansed? Those three answers decide far more than any annual fee.
What makes the comparison awkward is that all three states have touched their rules within the past two years. Delaware wrote a statutory safe harbour for conflicted transactions; Texas built a separate business court and moved director protection into the statute itself. A comparison drawn up three years ago no longer holds.
What holds Delaware in place is its court, not its fee schedule
Delaware’s weight in corporate law comes largely from one institution: the Court of Chancery. A court sitting without a jury, hearing equity disputes and doing nothing else for decades produces case law that reads, on the investor side, as predictability. What a company buys by incorporating under the Delaware General Corporation Law is less the statute than the accumulated answer to how it behaves at the edges.
Speed comes with it: disputes where days matter — a change of control, the composition of the board — can be heard on an expedited basis by a bench that knows the terrain. Mid-round, that saves the closing timetable.
For the founder the consequence shows up at the negotiating table. A US fund’s standard document set assumes a Delaware C corporation; the “state of incorporation” line in a term sheet gets filled in, not negotiated. Propose a different state and the fund’s counsel reads the papers from scratch, which adds days to the closing.
For a founder based in Turkey the contrast is starker. In a Turkish joint stock company (anonim şirket) corporate disputes do not land before a single specialist court, and the strongest tool a minority holder usually has is dissolution for just cause under article 531 of the Turkish Commercial Code (Türk Ticaret Kanunu, TTK) — the nuclear option. Delaware resolves the same tension with far finer instruments.
The two areas Senate Bill 21 rewrote
Delaware rewrote two areas through Senate Bill 21, signed on 25 March 2025 and effective the same day. The first is DGCL § 144: a safe harbour for interested director and controlling stockholder transactions. Where a transaction is approved by a committee of disinterested directors, or supported by the informed and uncoerced vote of disinterested stockholders, the company’s footing in later litigation is markedly firmer.
The second is DGCL § 220, which narrowed books and records inspection to a defined list: the certificate of incorporation and bylaws, minutes for the last three years, financial statements for the last three years, and independence questionnaires. To reach emails and messages a stockholder must produce clear and convincing evidence. Asking for everything first and sorting it out later became a good deal more expensive.
In an early-stage company the instances are familiar: the founder lending to the company, the company buying services from another entity the founder owns, a transfer to which the controlling holder is a party. These sit at the centre of any fiduciary duty argument and can now be cleansed procedurally — provided the procedure is real: the committee’s disinterestedness must exist in fact, the minutes must carry the terms and the alternatives weighed, and what goes before the approving body must be complete.
Is Texas a genuine alternative?
Texas became a serious proposition in two steps. HB 19 (88th Legislature, 2023) created the Texas Business Courts, which began operating on 1 September 2024 and opened a separate route for commercial disputes. Senate Bill 29 followed, signed on 14 May 2025 and effective immediately, shifting the balance on the director side appreciably.
- The business judgment rule was codified. For listed companies and entities that elect into the regime, a good-faith business decision of the board is protected by the statute itself.
- Jury waiver became possible. A waiver of jury trial may be adopted for claims relating to the company’s internal affairs, making the outcome of a damages claim easier to predict.
- Books and records requests were narrowed. Emails, messages and social media communications fall outside such requests unless they caused the company to take an action.
- A derivative suit threshold may be set. Share ownership required to bring a derivative claim can be fixed at up to 3%, which on a dispersed cap table narrows standing.
On the director side the picture looks cleaner than Delaware’s. But a rule sitting in a statute is not a rule whose boundaries hundreds of decisions have drawn, and the Business Courts are still a young bench. Nor does the shareholder rights schedule on the fund’s side absorb that narrowing — the negotiation simply gets longer.
None of this can be freely engineered in the articles of association (esas sözleşme) of a Turkish joint stock company. The mandatory provisions principle in TTK article 340 shuts the door on deviations the statute does not expressly permit; there is no equivalent of a jury waiver, and the inspection regime is drawn by the code. Clauses you write comfortably on the US side do not travel to the company that stays in Turkey.
The one question to answer before choosing Nevada
Two points carry weight in the Nevada discussion. The protection afforded to directors and officers differs from Delaware’s, and from the founder-director seat that difference looks attractive. Against it, there is no body of commercial case law as deep as the Court of Chancery’s, so reading in advance how a rule applies to unusual facts is harder.
The question to ask is this: if a conflict arises here, who will be on the other side of it? For a founder holding the board and the majority, broad protection is good news; for an incoming investor the same breadth is a risk to be priced. From Turkey it weighs more still, because you are already defending a cross-border group and would now also have to explain “why Nevada” to an investment committee.
Is franchise tax really a decision criterion?
Delaware franchise tax is computed under two methods and the company pays the lower. Under the Authorized Shares Method, 5,000 shares or fewer costs 175 USD, 5,001–10,000 shares 250 USD, and each additional 10,000 shares 85 USD thereafter. The Assumed Par Value Capital Method carries a minimum of 400 USD. Both methods are capped at 200,000 USD. Non-exempt domestic corporations also pay a 50 USD annual report fee, and the filing is due by 1 March each year.
That line item costs less than an hour of negotiation; building a decision on it is a mistake. The real cost appears when you move: a board resolution and stockholder approval, separate consent from the preferred holders under most document sets, the option plan and share ledger (pay defteri) entries redone, the company’s identity updated across banking and customer contracts. That a series of listed companies has walked this path does not make the exercise cheap early on.
The part of the Turkish structure that travels
In a flip-up the hard part usually finishes on the Turkish side, not the American one. Transfer of shares in a limited liability company (limited şirket) requires general assembly approval under TTK article 595, and in a joint stock company transfer restrictions in the articles can limit a transfer within the framework of TTK article 493. Setting a signing timetable without reading those two provisions is the classic way to lose weeks at closing.
The second item is the board seat. In Delaware the investor’s seat is secured by the stockholders’ agreement; in a Turkish joint stock company the route to the same result is a right of representation on the board granted to a share group under TTK article 360 and written into the articles of association. A promise living only in a contract does not carry the weight of a right visible on the register.
Third, the choice of state lightens nothing on the Turkish side. Picking Nevada or Texas does not change the books, general assembly, profit distribution or employment obligations of the subsidiary that stays in Turkey, nor remove the need to put the intra-group service relationship on a written contract at a defensible price. Where the US parent sits does not shorten that list.
Take the decision in this order: work out who the company will raise from in the next two years, ask which state that investor’s document set is drafted around, and look at the fee schedule last. For a structure that prioritises founder-director protection and will stay closed to outside capital, Texas or Nevada can be defended; for a company opening to outside investors Delaware remains the option with the least friction. Whichever way it goes, put the reasoning in writing at incorporation — it is the first thing you will be asked in diligence three years later.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
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Share transfers, capital increases, board structuring, governance.
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Incorporation, founder agreements, ESOP, term sheets, regulatory matters.
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Delaware C-Corp, flip-up structures, SAFE/convertible notes, 83(b).
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