What is a flip?
A flip creates a new Delaware corporation, then has the foreign company's shareholders exchange their shares in the foreign entity for shares in the new Delaware parent. The foreign company typically survives as a wholly owned subsidiary, continuing to run local operations, employ local staff, or hold local contracts—while the Delaware parent becomes the entity that issues equity, signs financing documents, and holds IP going forward.
Why investors ask for it
US venture funds are generally structured to invest in Delaware C-corps: their fund documents, standard financing paperwork (SAFEs, NVCA-style preferred stock templates), option plans, and exit playbooks all assume one. Asking a lead investor to underwrite a foreign holding structure they don't recognize slows a round down or kills it before diligence starts. A completed flip removes that friction entirely.
What the process actually involves
- Formation: Incorporate the new Delaware parent and adopt standard governance documents (charter, bylaws, board consents).
- Share exchange: Foreign shareholders exchange their shares for Delaware parent shares under a share exchange or contribution agreement, typically preserving each shareholder's relative ownership.
- Cap table and vesting: Founder vesting, option pools, and any outstanding SAFEs or notes need to be mapped onto the new structure—this is usually the most negotiated part of the process.
- Regulatory and tax review: Depending on the founders' and investors' home countries, a flip can trigger local corporate approvals, exchange control filings, or tax consequences (for example, US tax rules under Section 351 governing tax-free exchanges, or foreign-side capital gains and reporting rules). This is jurisdiction-specific and should involve local counsel and a tax advisor in the founders' home country, not just US counsel.
- Ancillary agreements: IP assignment or license agreements between the Delaware parent and the operating subsidiary, intercompany services agreements, and updated employment or contractor agreements as needed.
What tends to slow it down
Flips get complicated when the foreign company already has outside investors with rights that need to be preserved or renegotiated, when local law requires regulatory approval to transfer shares abroad, or when the founders and investors are in different time zones and jurisdictions with their own counsel who all need to sign off on the same documents at once. None of this is a reason to avoid a flip—it's a reason to start the structuring conversation well before a term sheet has a signature deadline on it.
Restructuring into Delaware?
Nebo Legal has handled flips for founders and institutions across the Middle East, Central Asia, and North Africa, coordinating with local counsel where needed. Alex can help structure the exchange, clean up the cap table, and keep the round on schedule.
Book a callFAQ
Does the foreign company have to dissolve?
No. It usually continues to exist as a subsidiary of the new Delaware parent, which is often useful for local employment, contracts, or banking relationships.
How long does a flip take?
It varies widely based on the number of shareholders, whether local regulatory approval is required, and how many outside investors need to sign off—anywhere from a few weeks to a few months.
Do all shareholders have to participate?
Typically yes, for the resulting Delaware cap table to be clean; a shareholder who doesn't participate can create a messy minority stake in the old entity that investors will ask about in diligence.