In a prior post, I explored whether Texas could challenge Delaware’s century-long dominance in corporate law. The Texas Legislature has since provided a compelling answer. On May 14, 2025, Governor Greg Abbott signed Senate Bill 29 (SB 29), a transformative overhaul of the Texas Business Organizations Code (TBOC), following its passage with supermajorities in both legislative chambers.¹Paired with the Texas Business Court, operational since September 2024, SB 29 positions Texas as a formidable rival to Delaware.² In a new paper, I put these developments into context and argue that Texas is poised to disrupt Delaware’s preeminence.³

From New Jersey to Delaware . . . to Texas?

Corporate law dominance is not static.  In the early 20th century, New Jersey was on top with permissive statutes and reliable courts until Governor Woodrow Wilson’s 1913 reforms triggered a corporate exodus.⁴ Delaware capitalized on this misstep, combining a flexible General Corporation Law with a specialized Court of Chancery and establishing a model of statutory innovation and judicial expertise that persists today.⁵

Texas is now replicating this “two-step” strategy. In 2023, House Bill 19 (HB 19) created the Texas Business Court, staffed with judges experienced in complex commercial litigation.⁶ In 2025, SB 29 modernized Texas’s corporate law, offering robust protections and procedural clarity.⁷ Together, these reforms provide corporations with predictability, efficiency, and a business-friendly legal ecosystem, mirroring Delaware’s historical formula.

Senate Bill 29: Key Reforms to Attract Corporations

SB 29 addresses corporate governance pain points, making Texas an attractive domicile:⁸

• Statutory Business Judgment Rule (BJR). Section 419 presumes directors and officers act in good faith and in the corporation’s interests, a presumption rebuttable only by proving fraud, intentional misconduct, a knowing violation of law, or an ultra vires act, with claims requiring particularity.⁹ This offers stronger protection than Delaware’s common law business judgment rule, which may shift to entire fairness scrutiny.¹⁰
• Derivative Litigation Controls. Public companies may require plaintiffs in derivative suits to own up to 3 percent of outstanding shares, and courts can certify director independence early, reducing frivolous suits. Disclosure-only settlements now require material benefits to justify payment of legal fees.¹¹
• Forum Selection and Jury Waivers. Corporations can mandate that any internal equity claims be brought in Texas courts, including the business court.¹²
• Additional Reforms. SB 29 limits books-and-records demands and allows class-by-class voting waivers, aligning with modern capital structures.¹³

Passed with a two-thirds supermajority in each house of the legislature, most provisions took effect immediately for exchange-listed entities, with opt-in options for others.¹⁴

The Texas Business Court: Early Precedent Signals Predictability

Legislation requires judicial reinforcement. The Texas Business Court, operational in Dallas, Houston, Austin, San Antonio, and Fort Worth, is delivering. In Primexx Energy Opportunity Fund, LP v. Primexx Energy Corp., the court upheld a drag-along right, rejecting fiduciary-duty challenges to a negotiated agreement.¹⁵ This decision, issued within months of the court’s launch, underscores a commitment to contractual freedom and predictability, qualities that made Delaware’s Court of Chancery a gold standard.¹⁶

Why Texas Stands Out

Previous attempts by other states to rival Delaware’s dominance in corporate law have faltered, but Texas is poised to succeed.¹⁷

1. Massive Economic Scale.  Texas is the eighth-largest economy in the world, with a GDP surpassing $2.8 trillion – more than that of countries like Canada, South Korea, and Russia.¹⁸ The state’s unparalleled growth, low regulatory burden, and robust labor force have made it a magnet for corporate relocations. Texas is not pursuing incorporations simply to collect franchise tax revenue – less than 1 percent of its annual budget comes from such fees.¹⁹ Rather, Texas seeks to align its legal infrastructure with its status as a national and global economic powerhouse.
2. Built-In Market and Headquarters.  Texas is the corporate home of more Fortune 500 companies than any other state – including major players in energy, healthcare, technology, and logistics – creating a natural constituency for Texas-based incorporations without requiring relocation of corporate operations.²⁰ Texas already serves as the de facto business headquarters for dozens of companies incorporated elsewhere, often in Delaware. This disconnect has become increasingly inefficient and legally risky for some companies, as noted by MercadoLibre..
3. Unified Reforms. The recent enactment of Senate Bill 29 and the launch of the Texas Business Court in 2024 reflect a cohesive legislative and judicial ²¹ Unlike other states that created fragmented systems or lacked follow-through, Texas is building a vertically integrated legal regime: a specialized court, modern statutory protections, codified business judgment rule, and judicial safeguards for directors and officers – all aligned to foster a reliable and predictable governance environment.
4. Delaware’s Increasing Uncertainty. The Delaware Court of Chancery’s recent decisions – most notably in Tornetta, Moelis, and TripAdvisor – have triggered fears of judicial unpredictability, heightened fiduciary scrutiny, and expanded use of the entire fairness standard.²² While these trial court rulings disrupted longstanding governance expectations, the Delaware Supreme Court or General Assembly has, in each instance, intervened – either by reversing or narrowing the decisions or by enacting remedial legislation.²³ This cycle of judicial action followed by legislative or appellate reversal has amplified concerns about Delaware’s legal stability and predictability. In contrast, Texas offers a streamlined, proactive approach: the codification of director protections through Senate Bill 29, coupled with the creation of the Texas Business Court, reflects a deliberate strategy to foster legal certainty, not reactive patchwork.

Implications for Corporate Stakeholders

• Redomestication Decisions. SB 29’s provisions could lower D&O insurance costs and litigation expenses.²⁴
• Transactional Efficiency. Jury waivers and exclusive forum clauses appeal to private equity and SPAC sponsors seeking predictable dispute resolution.²⁵
• Investor Confidence. Institutional investors may initially approach Texas charters cautiously.  Consistent judicial opinions and transparent judge selection would build trust.²⁶

Next Steps for Texas

To sustain its momentum, Texas must:²⁷

1. Enhance Judicial Capacity. Increase the number of judges and court staff to ensure Delaware-like speed and accessibility.²⁸
2. Commit to Statutory Evolution. Regularly update the TBOC to address emerging issues like ESG and AI, as Delaware does annually.²⁹

Conclusion

Texas’ SB 29 and the Texas Business Court could improve on Delaware’s previously winning formula of legal clarity and judicial expertise and shift the corporate law landscape. Whether it overtakes Delaware depends on sustained investment in judicial and administrative infrastructure, but Texas has emerged as a serious contender. Boards and investors should now include Texas in their governance and domicile evaluations.

ENDNOTES

¹S.B.  29,  89th  Leg.,  Reg.  Sess.  (Tex.  2025)  (signed  into  law  May  14,  2025,  effective immediately for certain provisions), https://capitol.texas.gov/tlodocs/89R/billtext/html/SB00029F. htm; see also Foley & Lardner LLP, Passage of Senate Bill 29 Positions Texas as a Leading State for Incorporations (May 15, 2025), https://www.foley.com/insights/publications/2025/05/ passage-senate-bill-29-positions-texas-leading-state-incorporations/.

²H.B. 19, 88th Leg., Reg. Sess. (Tex. 2023) (codified at Tex. Gov’t Code Ann. § 25A.001 et seq.) (establishing the Texas Business Court).

³Shane Goodwin, The Texas Two-Step: Rewriting the Rules in the Battle for Corporate Domicile (Apr. 2025) (unpublished working paper), available at SSRN, https://ssrn.com/abstract=5232964.

⁴Christopher Grandy, New Jersey Corporate Chartermongering, 1875–1929, 49 J. Econ. Hist. 677, 681 (1989) (detailing New Jersey’s rise and fall due to regulatory shifts).

⁵Jill E. Fisch, The Peculiar Role of the Delaware Courts in the Competition for Corporate Charters, 68 Cin. L. Rev. 1061, 1064–65 (2000) (crediting Delaware’s judicial infrastructure for its dominance).

⁶Tex. Gov’t Code Ann. § 25A.008(a) (West 2024) (requiring judges to have at least 10 years of relevant experience).

⁷S.B. 29, supra note 2 (amending multiple TBOC provisions to enhance managerial protections and streamline litigation).

⁸Gibson Dunn, Texas Overhauls Business Organizations Code with SB 29: Key Changes for Entity Governance, Entity Administration, and Shareholder Rights (May 15, 2025), https://www.gibsondunn.com/texas-overhauls-business-organizations-code-with-sb-29-key-changes-for-entity-governance-entity-administration-and-shareh (summarizing SB 29’s major provisions).

⁹Tex. Bus. Orgs. Code Ann. § 21.419(b)–(c) (West 2025) (codifying the BJR and setting high pleading standards).

¹⁰Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955 (Del. 1985) (applying enhanced scrutiny in certain contexts).

¹¹Tex. Bus. Orgs. Code Ann. §§ 21.552(a)(3), 21.4161, 21.561(c) (West 2025) (implementing ownership thresholds, independence certifications, and settlement restrictions).

¹²Tex. Bus. Orgs. Code Ann. §§ 2.115(b)(2), 2.116(b) (West 2025) (authorizing exclusive forum clauses and jury waivers); cf. Del. Code Ann. tit. 8, § 115 (2024) (permitting forum selection but not jury waivers).

¹³Tex. Bus. Orgs. Code Ann. § 21.4011 (West 2025) (restricting inspection rights); id. § 21.457 (permitting voting waivers).

¹⁴S.B. 29, supra note 2 (noting immediate effect for certain entities due to supermajority passage).

¹⁵Primexx Energy Opportunity Fund, LP v. Primexx Energy Corp., No. 24-BC01B-0010, slip op. at 12–15 (Tex. Bus. Ct. Apr. 15, 2025) (enforcing contractual terms and emphasizing statutory fidelity).

¹⁶Jill E. Fisch, supra note 5 (noting Delaware’s reliance on judicial respect for private ordering).

¹⁷Ofer Eldar & Lorenzo Magnolfi, Dexit: The End of Delaware’s Dominance in Corporate Law?, SSRN 5–7 (Oct. 25, 2024), https://papers.ssrn.com/sol3/papers.cfm?abstract id=4909689 (identifying Texas as a credible challenger to Delaware).

¹⁸U.S. Bureau of Economic Analysis, Gross Domestic Product by State, 2023, https://www.bea.gov/

¹⁹Texas Comptroller of Public Accounts, Sources of Revenue, Fiscal 2023.

²⁰Texas Economic Development Corporation, Why Texas? (2023), https://businessintexas.com/ why-texas/.

²¹Foley & Lardner LLP, Texas Business Court Could Make Litigation Faster, More Efficient, https://www.velaw.com/insights/texas-business-court-could-make-litigation-faster-more-efficient/.

²²Tornetta v. Musk, 300 A.3d 431, 468–69 (Del. Ch. 2024) (invalidating Elon Musk’s $55.8 billion compensation package under entire fairness); In re Moelis & Co. Stockholder Litig., 312 A.3d 835, 863–70 (Del. Ch. 2024) (applying entire fairness to governance restrictions unilaterally imposed by a minority controller); Palkon ex rel. TripAdvisor v.Maffei, C.A. No. 2023-0039-JTL, at *1–2 (Del. Ch. Feb. 20, 2025) (denying MTD and raising significant questions about board independence in dual-class share transactions).

²³See, e.g., S.B. 313 (Del. Gen. Assemb. 2025) (clarifying controller status and contractual governance terms in response to Moelis); see also Delaware Supreme Court review of Tornetta (May 2025), reversing in part and limiting retroactive application.

²⁴MercadoLibre, Inc., Preliminary Proxy Statement (Schedule 14A), at 61 (Apr. 18, 2025), https://www.sec.gov/ix?doc=/Archives/edgar/data/1099590/000109959025000016/mITS-20250418.htm (noting tax and litigation cost benefits).

²⁵Gibson Dunn, supra note 7 (highlighting appeal to dealmakers).

²⁶Lucian A. Bebchuk & Assaf Hamdani, Vigorous Race or Leisurely Walk: Reconsidering the Competition over Corporate Charters, 112 Yale L.J. 553, 558–60 (2002) (noting investor sensitivity to jurisdictional shifts).

²⁷Goodwin, supra note 4, at 50–56 (outlining strategic recommendations).

²⁸Texans for Lawsuit Reform Foundation, The Case for Specialized Business Courts in Texas (2023), https://www.tlrfoundation.org/foundation papers/the-case-for-specialized-business-courts-in-texas/ (advocating for robust judicial resources).

²⁹Robert J. Rhee, Why Delaware Dominates Corporate Law, 117 Nw. U. L. Rev. 1065, 1080 (2023) (noting Delaware’s frequent statutory updates).

This post comes to us from Professor Shane Goodwin at Southern Methodist University. It is based on his recent article, “The Texas Two-Step: Rewriting the Rules in the Battle for Corporate Domicile,” available here.