Stewart Sterk, ‘Internal Affairs Revisited’

ABSTRACT
In the United States, businesses are free to choose where they incorporate. Delaware has long been the most popular choice because of its expert judiciary and well-developed body of corporate law. But in recent years, a number of high-profile businesses have chosen to reincorporate either offshore or in states that purport to be more deferential to management. These moves have increased the salience of the internal affairs doctrine, a choice-of-law doctrine whose origins are as much a product of history as of policy. That doctrine directs courts adjudicating claims about a corporation’s governance to apply the law of the state of incorporation.

This Article argues that courts should treat the internal affairs doctrine as a standard, not a rule. Courts should generally defer to the law of the state of incorporation, but they should consider the shareholder protection policies of states with a material interest in the corporation’s affairs. They should be open to applying a different state’s law in cases in which a business has reincorporated or incorporated abroad or operates exclusively in one state but has incorporated elsewhere. This approach is consistent with precedent because courts that express a more absolute conception of the doctrine typically do so when applying it would not frustrate the policies of a state more closely connected to the corporation.

Sterk, Stewart E, Internal Affairs Revisited (June 5, 2026), 48 Cardozo Law Review (forthcoming); Cardozo Legal Studies Research Paper No 2026-11.

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