In recent years, Texas has emerged as a prime destination for businesses seeking to relocate or establish their headquarters, with five Fortune 100 companies (Tesla, Oracle, Chevron, McKesson and Caterpillar), among many others, making the move. Despite increasing headquarters relocation, Delaware still retains the crown as the top state for incorporations due to its established legal framework and favorable business laws.
However, growing activism among Delaware courts, coupled with aggressive pro-relocation moves by the Texas Legislature, has contributed to the rise of a “DExit” movement, with businesses increasingly looking to move not only their headquarters, but their state of incorporation from Delaware to Texas.
In this article, we will look at several recent developments in Texas and Delaware in the fight to attract and keep businesses.
Texas Moves to Become America’s New Corporate Capital
Amid Delaware’s scramble to retain its corporate dominance, Texas is executing a deliberate legislative and judicial campaign to position itself as the premier destination for American businesses. Through a suite of recent reforms — including House Bill 4934, House Bill 5 and Senate Bill 29 — Texas is not only courting high-growth companies with economic incentives but also reshaping its legal infrastructure to rival Delaware’s well-established Chancery Court system.
Central to this strategy was the creation of specialized business courts (which opened for business Sept. 1, 2024) designed to provide consistent, expert adjudication of complex commercial disputes. Our firm filed the first ever case in the Texas Business Courts regarding a complex contract dispute and have been impressed with the forum.
Already asserting influence, the Texas Business Court recently issued a high-profile ruling in Primexx Energy v. Primexx Energy Corporation, signaling how the state intends to offer both legal predictability and a favorable forum for corporate litigation. Together, these developments represent a calculated bid to attract businesses seeking a more modern, responsive and cost-effective alternative to Delaware’s aging model.
Now with the Texas Business Courts formed to provide the procedural mechanism for business, the Texas Legislature is using the 2025 legislative session to push for substantive reforms for business.
A Legislative Push to Codify Business-Friendly Reforms
The Texas Legislature has been gearing up and laying the groundwork for its pro-business transformation for years.
In early 2023, Texas enacted two key legislative moves aimed at reducing the cost of entry and expansion for companies. House Bill 4934 eliminated first-year filing fees for new business entities, immediately lowering the barrier to incorporation and signaling Texas’s intent to compete with Delaware on affordability. Just two months later, House Bill 5 introduced a statewide property tax abatement program for qualifying corporate investments, offering long-term incentives for companies relocating or expanding in Texas. These early reforms set the stage for a broader, more ambitious legislative push that would soon follow — culminating in the creation of specialized business courts and a wave of legal changes designed to attract and retain high-value corporate activity.
On Feb. 27, Texas legislators introduced Senate Bill 29/House Bill 15, acting as another significant step in Texas’s efforts to become the most attractive state for corporate incorporation. This proposed legislation is designed to offer businesses greater legal certainty and protection against opportunistic litigants.
One of the bill’s most important provisions is the codification of the business judgment rule (which is already part of Texas common law), which protects corporate directors from liability for decisions made in good faith and with reasonable care. This rule has come under attack in Delaware, with some recent decisions suggesting potential dilution, raising concerns among corporations about the predictability of the legal environment. By codifying this rule, Texas offers greater clarity and stability for businesses looking to incorporate within the state.
Senate Bill 29 additionally proposes that corporations may identify a minimum ownership threshold for derivative lawsuits as long as the threshold does not exceed 3 percent of the outstanding shares of the corporation. This reform seeks to reduce the financial burden on companies facing meritless lawsuits filed by shareholders with minimal shares in the company. The bill also prohibits the recovery of attorneys’ fees in derivative lawsuits where the outcome is a disclosure-only settlement, further discouraging frivolous litigation by shareholder activists.
There are a series of other pro-business protections within the proposed legislation — from creating the option for a preliminary judicial determination of director independence to permitting venue provisions mandating that Texas Business Courts serve as the exclusive forum for internal corporate disputes — to promote a more specialized and sophisticated legal environment for businesses. Taken together, these reforms reflect Texas’s clear goal: to offer a predictable, pro-business environment for corporations. By increasing legal certainty, reducing legal risks and enhancing corporate protections, Texas is positioning itself as a compelling alternative to Delaware, where recent decisions have raised concerns about the stability of its legal environment.
Expanded Business Courts Lay the Foundation for Texas’ Pro-Business Edge
Starting in September 2024, Texas Business Courts have already seen over 105 cases filed among the five divisions. Strong demand for the sophistication and promptness of the business courts has resulted in many lawyers attempting to find loopholes to bring cases to a business court or its dedicated court of appeals, the newly created Fifteenth District Court of Appeals.
Recently introduced House Bill 40 seeks to expand the jurisdiction of the courts by lowering the amount in controversy requirement from $10 million to $5 million for external business disputes (e.g., breach of contract, business torts, etc.), while the amount in controversy requirement for internal business disputes remains the same ($5 million or $0 if publicly traded company). House Bill 40 also adds to its subject-matter jurisdiction intellectual property lawsuits, noncompetes and insurance actions arising out of fundamental business transactions like mergers and acquisitions.
In another significant development, Judge Bill Whitehill of the First Division of the Texas Business Court in Dallas recently issued a 79-page opinion in Primexx Energy v. Primexx Energy Corporation clarifying the fiduciary duties owed by a general partner to a limited partner. The ruling emphasizes Texas’s commitment to clarity and predictability in business law by upholding the plain wording of company agreements and the principle that courts should not add to contracts entered into by sophisticated parties.
The court’s decision interpreted the duties of care and loyalty under Chapters 152 and 153 of the Texas Business Organizations Code, ruling that the terms of the agreement should govern the duties of the partners, as long as the contract is clear. The court refused to impose a general fiduciary duty when the agreement’s terms were unambiguous, particularly when the contract resulted from negotiations between sophisticated parties with experienced counsel. The ruling affirmed that the agreement serves as the baseline for determining the parties’ responsibilities, subject only to the Texas Business Organizations Code’s minimum requirements.
By honoring the explicit language of the agreement and refusing to rewrite its provisions, the court reinforced the principle of contractual freedom. This decision further establishes Texas as a jurisdiction that values clarity and minimizes judicial interference in business dealings. For companies seeking a forum state with predictable and reliable legal frameworks, this ruling makes Texas an even more attractive option for incorporation.
Delaware Legislature’s Reaction to DExit
In an effort to combat Texas’s achievements,Delaware has recently ramped up its legislative efforts to bolster its reputation as a business-friendly state with the enactment of Senate Bill 21 to stem the tide of corporate DExits. Signed into law in March, this legislative package has considerable impact on shareholder derivative litigation.
The legislative package introduces safe harbor procedures for transactions involving officers, directors and controlling stockholders with potential conflicts of interest; adds a definition of “controlling stockholder” to include those who either (1) own half the company’s shares or (2) own a third of the company’s shares and serve in a managerial role; and lightens the burdens on companies who receive “books and records” requests by reducing the window of production to the preceding three years and being more limited in scope on what documents can be obtained.
The new legislation reflects Delaware’s responsive approach, adapting its corporate laws to meet the evolving needs of modern businesses in light of recent Delaware courts’ perceived anti-business rulings. As other states, namely Texas, advance their own pro-business reforms, Delaware’s updated legislation underscores its intent to stay ahead in the race to attract and retain businesses through targeted legal improvements.
Conclusion
These recent legal and legislative developments are part of a broader strategy by Texas to enhance its appeal as a business hub. Beyond legislative reforms and appealing court decisions, the country has witnessed a recent shift in the environment for corporate headquarters and the financial industry with the formation of the Texas Stock Exchange and Nasdaq’s relocation of its regional headquarters to Dallas, as well as the aforementioned moves, among many others, of large companies’ headquarters.
Due to Texas’s business-friendly legal environment, coupled with its strong economic advantages and infrastructure, Texas is accelerating its efforts to become the new top choice for corporate incorporation.
R. Heath Cheek is a partner, Nathan Cox is a senior associate and Mackenzie Jackson is an associate with Bell Nunnally. They can be reached at hcheek@bellnunnally.com, ncox@bellnunnally.com, and marnold@bellnunnally.com, respectively.