An Update on DExit, from the Corporate Census

An update on DExit, from the Corporate Census

Despite fears that Delaware’s recent judicial and legislative turmoil would trigger a corporate “DExit,” new formation data show the opposite: Delaware experienced a sharp increase in corporate incorporations in 2025, both absolutely and relative to other states.

The Specter of DExit

Is Delaware now in decline? This question became urgent with Tornetta v. Musk, a case upsetting the pay package of Tesla’s founder and influential shareholder, Elon Musk.[1] Three weeks later came Vice Chancellor Laster’s Moelis opinion constraining the power of shareholder agreements.[2] This latter opinion was criticized by some influential law firms and their clients as potentially undermining accepted market practices.[3] The Council of the Corporation Law Section of the Delaware Bar Association Counsel of the Corporate Law Section of Delaware bar association promptly proposed overturning Moelis by statute, which the legislature promptly did.[4] The legislature later substantially overturned the controlling shareholder jurisprudence undergirding Tornetta.[5]

These opinions and legislative responses have been controversial, and on both sides of the controversy is a worry that firms may flee Delaware if it mishandles this pivotal moment. For almost two years, the Delaware bar and corporate commentators have been watching public company reincorporations. Yet private companies represent the great majority of Delaware corporations – and about two thirds of Delaware’s chartering revenue. Any serious account of DExit must therefore look beyond public company migrations.[6]

The Corporate Census

The Corporate Census is a draft paper and accompanying dataset that tracks entity formation in the United States.[7] It presents a near-complete dataset of entity formations—including corporations, LLCs, and other business forms—for all U.S. states, dating back to the nation’s founding. It allows entity-by-entity, week-by-week, analyses and comparisons across states. The database includes about 100 million formations and allows for granular, longitudinal analysis of state popularity, entity-type trends, and legal or economic shocks.

Can the Corporate Census tell us whether the judiciary was triggering a flight from Delaware or, instead, whether the legislative backlash threatens to cause what it hopes to prevent? The Moelis opinion was decided on February 23, 2024, setting in motion a trend of cases and judicial responses. An earlier draft of the Corporate Census contained only six weeks of post-Moelis data, and so was unlikely to teach much about Delaware’s prospects.  The current version of the Corporate Census ends in October of 2025.  This gives almost two years post-Moelis to analyze changes in this period.

What the Census has to say about DExit

Amid fears of decline, 2025 was a period of monumental growth for Delaware.

Figure 1 shows week-by-week incorporation numbers for Delaware, as a percentage of all the nation’s new formations that week. A dotted line indicates Moelis.[8] About 30% more Delaware corporations formed in 2025 than in 2024, greatly exceeding the prior trendline. This, while national incorporation levels remained flat.

Figure 1

This was an absolute increase, not driven by a decline in formation in other states. While Delaware averaged 1090 new corporations per week in 2020-24, that number increased by 309 in 2025. [9] The rest of the nation as a whole enjoyed no statistically significant increase in corporate formation, nor did any other state individually. Plainly, something happened in 2024 or was anticipated for 2025 that rendered Delaware more attractive as a site of formation in 2025.

What explains the jump? One interpretation is that would-be incorporators approved of SB21 and SB313. These laws were intended to restore confidence in Delaware law after several 2024 judicial opinions arguably upset market expectations. Yet the jump in incorporations begins prior to the late February 2025 announcement of SB 21 and substantially after the March 2024 passage of SB 313. While it is certainly possible that the increase reflects a lagged response to SB 313, or perhaps a preemptive response to the legislative currents that led to SB21, the timing does not immediately commend itself to that explanation.

Figure 2

Another possibility is that events external to Delaware law drove a run-up in Delaware corporate formations. For example, President Donald J. Trump won the general election on November 5, 2024 and took office on January 20, 2025. Perhaps Delaware corporations were expected to be especially useful under his administration. Further research is required to disaggregate causation.[10] Week-by-week variation in corporate formations includes a lot of noise, and no theory currently predicts how quickly entity formations will respond to shocks.

Even with causation unclear, the data are plainly incompatible with the most alarmist theories of DExit. The new statutes are either welcomed by incorporators or else not so bad as to offset whatever other forces are now increasing incorporation. When the great mass of corporate formations is considered, Delaware has substantially increased both its absolute and relative number of incorporations in the last year.

Conclusion

Delaware occupies a distinctive place in American corporate federalism. Recent changes in Delaware law – both judicial and statutory – raised questions about Delaware’s attractiveness going forward. Many onlookers have predicted a decline in Delaware’s prominence. Such pessimistic predictions currently lack foundation. Indeed, 2025 appears to have been one of Delaware’s best incorporation years. The data plainly falsify the most pessimistic predictions.

The reasons for this rise remain debatable, as do the prospects for continued growth. The Corporate Census provides an empirical foundation for evaluating DExit—and for grounding future debates about state competition in corporate law.

This post is based on an article available for download here.