AH Capital Management (commonly known as Andreessen Horowitz), a California-based venture capital firm, has announced its decision to move its state of incorporation from Delaware to Nevada, citing rising legal uncertainty and concerns over recent judicial trends in Delaware’s Court of Chancery.

The firm explained the rationale behind the change, stating:

“It used to be a no-brainer: start a company, incorporate in Delaware. That is no longer the case due to recent actions by the Court of Chancery, which have injected an unprecedented level of subjectivity into judicial decisions, undermining the court’s reputation for unbiased expertise.”

AH Capital noted that Delaware’s longstanding appeal lay in its nonideological business courts and well-established legal framework, particularly the business judgment rule.

This principle assumes that corporate directors act in good faith and make informed decisions, offering them legal protection unless proven otherwise.

However, recent court decisions have significantly narrowed this protection, according to the firm, with growing scrutiny of director independence and board decisions such as granting equity to founders or approving moves to re-incorporate outside Delaware.

In one notable instance, a Delaware court initially blocked a company from relocating its incorporation before the decision was overturned by the state’s Supreme Court.

Although the Delaware Legislature has made recent amendments to address these concerns, AH Capital believes these actions do not go far enough.

The firm expressed concern that the current judicial approach may disadvantage startup founders and board members, particularly in the technology sector, by making them more vulnerable to costly litigation.

This legal uncertainty, they argue, places an additional burden on early-stage companies that need to conserve capital.

The firm also referenced the departure of other major technology companies, including Dropbox, Tripadvisor, and Tesla, as evidence of a broader reconsideration of Delaware’s role in corporate governance.

AH Capital pointed to Nevada’s legislative and judicial structure as offering greater certainty.

The state has codified the business judgment rule into statute, restricting courts from reshaping it through judicial interpretation.

The Nevada Supreme Court has confirmed that this statutory rule is the exclusive standard for evaluating director and officer liability, rejecting the use of more subjective doctrines.

Officers and directors are shielded from monetary damages unless a plaintiff can both overcome the presumption of good faith and demonstrate a breach involving intentional misconduct, fraud, or knowing legal violations.

Nevada law also limits the inspection rights of shareholders to those holding at least 15% of company stock, which AH Capital sees as a protection against speculative lawsuits.

In comparison, Delaware allows any shareholder to request access to corporate records for a proper purpose, a standard the firm considers too broad and open to abuse.

While acknowledging that Delaware’s Court of Chancery has historically been its primary advantage, AH Capital argued that this advantage has diminished.

Nevada is in the process of strengthening its own business courts.

New legislative measures such as AB 239 and AJR 8 were passed with bipartisan support and signed by state leaders from both parties.

These measures enable parties to waive jury trials in civil cases and propose a constitutional amendment that would allow the Governor to appoint judges to business courts, ensuring relevant experience in handling commercial matters.

“We could have made this move quietly, but we think it’s important for our stakeholders, and for the broader tech and VC communities, to understand why we’ve reached this decision,”

the firm said.

“As the largest VC firm in the country, we hope that our decision signals to our portfolio companies, as well as to prospective portfolio companies, that such concerns [about leaving Delaware] may be overblown.”

AH Capital Management confirmed that it will continue to invest in companies incorporated in Delaware.

However, the firm believes that Nevada offers a credible alternative for founders and boards seeking a more predictable and business-friendly legal environment.

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