Yesterday, we footnoted the 11 companies that have been targeted by activist investors interested in moving those companies state of incorporation to North Dakota, where a 2007 law is viewed as being more friendly than those in Delaware, where over 60% of Fortune 500 are currently incorporated. As we noted, all 11 companies are against those proposals.
But we found one company that is actually embracing the move to North Dakota: American Railcar Inc. (ARII), which on Friday, filed this preliminary proxy asking shareholders to vote on moving the company’s domicile from Delaware to North Dakota. The company’s board approved the move last Thursday, according to the filing. Here’s a snip:
The purpose of the Reincorporation is to enable the Company to reincorporate from Delaware to North Dakota and become subject to the North Dakota Publicly Traded Corporations Act. The North Dakota Publicly Traded Corporations Act provides a governance structure for publicly traded corporations that generally provides shareholders greater rights than they currently have under other state laws and, specifically, will afford shareholders of the Company greater statutory rights to involvement in the Company’s corporate governance process than they currently possess under the Delaware General Corporation Law…hese rights are intended to decrease management entrenchment and increase management accountability to shareholders. Accordingly, the board of directors believes that the Reincorporation is in the best interests of the Company and its shareholders and will help maximize shareholder value.
Of course, calling this a trend would be very premature because American Railcar isn’t the typical company incorporated in Delaware. It’s not exactly a big company or a household name — one could only imagine if Southwest Airlines (LUV), which is being targeted by activists to move to North Dakota, took this position. And, it happens to be controlled by billionaire activist investor Carl Icahn, who controls more than 50% of the voting shares, which as the proxy notes, makes it harder to take advantage of all that the North Dakota law has to offer.