Delaware has introduced legislation aimed at reinforcing its position as the leading state for corporate incorporation by offering litigation safe harbors for transactions involving controlling shareholders. These proposals limit shareholder litigation by allowing deals approved by independent director committees or disinterested shareholders to avoid fiduciary duty claims—streamlining the process and reducing ambiguity for corporate boards. The changes include modifications to Sections 144 and 220 of the Delaware General Corporation Law, reducing liability exposure and restricting shareholder access to corporate records. Critics have dubbed the legislation the “Billionaire’s Bill,” arguing that it weakens investor protections and may favor insiders over ordinary shareholders.
Meanwhile, Texas is mounting a direct challenge by adopting corporate reforms designed to attract incorporations from Delaware. Texas enacted Senate Bill 29, codifying the business judgment rule to protect directors’ decisions made in good faith, limiting derivative lawsuits by requiring shareholders to hold a certain percentage of stock before suing, and narrowing access to books and records. House Bill 15 and SB 1057 further elevate thresholds for shareholder litigation and proposal rights, pushing Texas toward a more management-friendly regime. Texas also has established a business court system and plans to provide advisory opinions confirming director independence for transactions, an innovation aimed at offering certainty akin to Delaware’s legal apparatus.
Delaware’s latest reforms are widely seen as a response to what companies call “DExit,” a growing trend of large firms—including Tesla, Dropbox, and Roblox—voting or moving to reincorporate outside Delaware due to perceived unpredictability in its courts. While Delaware still hosts a significant share of U.S. public companies, it faces growing pressure as Texas and Nevada position themselves as viable alternatives for strategic advantage.
The corporate governance strategies behind these competing legislative moves reflect broader policy frameworks: Delaware leans on its long-standing legal prestige and technical amendments to preserve stability, while Texas offers structural flexibility, clear statutory protections, and lower litigation risk for entrenched management and large shareholders.
These jurisdictional battles raise fundamental questions about where corporations choose to call home. Delaware remains dominant in case law and familiarity, yet critics argue that its recent approach sacrifices transparency and shareholder rights. Texas presents a legal model that prioritizes management deference and streamlined disputes, appealing to founders and controllers seeking a business-friendly environment.
Going forward, the outcome of Delaware’s legislation and Texas’s statutory innovations could significantly influence corporate formation trends. If Texas and similar states continue attracting departures, Delaware may be forced into further legislative and judicial recalibrations. Conversely, if Delaware maintains its depth of precedent and judicial sophistication, it could retain its preeminence despite growing competition.
