Tripadvisor Permitted to Re-Incorporate in Nevada—But Shareholder Litigation Can Still Move Forward

According to a report from MSN, a judge from the Delaware Court of Chancery has agreed to permit Tripadvisor to re-incorporate in Nevada. However, in doing so, the court noted that ongoing shareholder disputes against the business can still move forward. Here, our West Palm Beach shareholder rights lawyer discusses the ruling and its implications in more detail.

Background: Tripadvisor Moving its State of Incorporation from Delaware to Nevada 

Tripadvisor is a U.S.-based internet-focused travel company. The business has been incorporated in Delaware. However, recently, it announced its intention to move its state of incorporation from Delaware to Nevada. After the company confirmed its intent to change its incorporation state, a group of shareholders filed a lawsuit to block the move. The shareholders argued that the company’s move from Delaware to Nevada would undermine shareholder interests and, as such, reduce the share price of the company. Many argue that the corporate laws in Delaware are more friendly to shareholders than are the corporate laws in Nevada.

 Court: Move Permissible, But Shareholders have a Right to Bring Claim

 Upon review, a judge in Delaware has ruled in favor of Tripadvisor and against the shareholders. The court determined that Tripadvisor has the legal authority to change its state of incorporation to Nevada. Doing so would not, inherently, undermine the rights of shareholders. In other words, the court declined to block the move. Tripadvisor will be permitted to relocate. However, the court declined to dismiss a corresponding shareholder lawsuit that was filed against the company on the grounds that their rights were undermined because Nevada has laws in place that are materially less favorable to shareholders. To be clear, that claim is still ongoing. The court did not weigh in on either 1) Whether Nevada’s corporate laws are actually less shareholder friendly, or 2) Whether a move to a less shareholder-friendly state is a breach of fiduciary duty or breach of contract.

Shareholders Would Have to Prove Damages Caused By Move

 While the Delaware Court of Chancery determined that shareholders have a right to sue Tripadvisor over its move from Delaware to Nevada, the court also emphasized that there is nothing inherently wrong with Tripadvisor’s decision. For shareholders to bring a successful claim in this case, they would need to establish that the move constitutes a breach of duty of care by corporate leadership and that they have suffered actual damages. Notably, the share price of Tripadvisor stock—which is listed on NASDAQ—is actually up substantially since the company announced its intent to change its  state of incorporation to Nevada. As such, it would be very difficult for shareholders to establish damages caused by the move at the current time.

 Contact Our West Palm Beach Shareholder Litigation Attorney Today

At Pike & Lustig, LLP, we are a business litigation law firm with extensive experience handling shareholder litigation. If you have any questions about a shareholder case, we are here as a legal resource. Call us now to arrange your confidential initial consultation. With an office in West Palm Beach, our firm provides shareholder representation throughout South Florida.

Source:

msn.com/en-us/money/companies/tripadvisor-can-reincorporate-in-nevada-delaware-judge-says-but-can-still-face-shareholder-lawsuit/ar-BB1iCbGt