Reincorporating a California corporation to a Delaware corporation

Authored by Bryan Springmeyer Bryan Springmeyer is a California corporate attorney who represents startup companies. The information on this page should not be construed as legal advice.

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"Reincorporation" is a categorical term for various transactions that result in a business entity moving to a different state and/or switching entity types. It's common in our practice to reincorporate in Delaware in order to accept venture capital money, since those investors have a strong preference for Delaware corporate law to apply to their portfolio companies. While reincorporation can involve simple a statutory mechanism called a conversion, California does not offer a conversion statute for outbound corporations. Presumably this is intentional (to make it tougher for corporations to leave the State), since California does provide the statute for other entity types.

Without a conversion statute for the outbound California corporation, the reincorporation to a Delaware corporation is usually structured as a merger. A new Delaware corporation is formed as a subsidiary of the California corporation, then the parent California corporation merges into the subsidiary Delaware corporation with a pro rata issuance of shares from the Delaware corporation to the prior shareholders of the California corporation.

UPDATE: As of January 1, 2023, California will allow California corporations to convert into corporations of other states, assuming that other state has an inbound conversion statute for corporations. Delaware does, so reincorporations from California corporations to Delaware corporations have become simpler to accomplish.

Related Pages:

Reincorporating in Delaware
Where Should I Incorporate? California versus Delaware
Why Startups Incorporate in Delaware
LLC Member Dissenter's Rights in Reorganizations
Starting/Registering a Delaware Corporation in California