Gaxos.ai Inc. lists its corporate headquarters as Roseland, New Jersey, but like many companies it is incorporated in Delaware. Last week, it joined several other companies that are proposing to reincorporate in Nevada. In preliminary proxy materials filed with the Securities and Exchange Commission last week, the company provided several reasons for proposing the move, including:

• Tax Savings: "We anticipate that, if we remain a Delaware corporation, for tax year 2024, our Delaware franchise taxes will continue to be $200,000 (based on our current capital structure and assets). If we reincorporate in Nevada, our annual fees will consist of an annual business license fee of $500, an annual domestic agent representation fee of $175, and an annual fee based on the number of authorized shares and their par value, currently equal to $300."
• Attraction of management:"[R]eincorporation may help us attract and retain qualified management by reducing the risk of lawsuits being filed against the Company and its directors and officers."
• Flexibility: "[A] reincorporation in Nevada will provide certain corporate flexibility in connection with certain corporate transactions, including reverse stock splits, as discussed below under “Comparative Rights of Stockholders under Delaware and Nevada Law."

The company' preliminary proxy statement also notes some potential disadvantages, including:

• Less Predictability: "While Nevada also has encouraged incorporation in that state and has adopted comprehensive, modern and flexible statutes that it periodically updates and revises to meet changing business needs, because Nevada case law concerning the effects of its statutes and regulations is more limited, the Company and its stockholders may experience less predictability with respect to the legality of certain corporate affairs and transactions and stockholders’ rights to challenge them, to the extent Nevada’s statutes do not provide a clear answer and a Nevada court must make a determination."
• Investor unease: "In addition, underwriters and other members of the financial services industry may be less willing and able to assist the Company with capital-raising programs because they might perceive Nevada’s laws as being less flexible or developed than those of Delaware. Certain investment funds, sophisticated investors and brokerage firms may likewise be less comfortable and less willing to invest in a corporation incorporated in a jurisdiction other than Delaware whose corporate laws may be less understood or perceived to be unresponsive to stockholder rights."
• Ability to take certain actions without stockholder approval: "[A] reincorporation in Nevada will provide certain corporate flexibility in connection with certain corporate transactions, including reverse stock splits, whereby our Board of Directors may be able to take certain actions without the need for stockholder approval . . .".

According to the preliminary proxy statement, the reincorporation, if approved by the stockholders, will be effected by a conversion pursuant to Delaware and Nevada law.