News Summary
Texas is making significant changes to its business laws, attracting companies to relocate from Delaware. The updated Texas Business Organizations Code (TBOC) promotes management-friendly regulations, strengthens defenses against frivolous lawsuits, and streamlines procedures for derivative lawsuits, making Texas a competitive option for businesses seeking a more favorable legal environment.
Texas is emerging as a new hub for corporate incorporations, with numerous companies relocating their legal homes from Delaware following significant revisions to the Texas Business Organizations Code (TBOC) enacted in 2025. These changes are designed to make Texas a more attractive option for businesses, positioning the state as a competitive alternative to Delaware’s established corporate framework.
The overhauled TBOC introduces several reforms aimed at enhancing legal protections for corporate directors and officers. Among the key changes, the law strengthens defenses against frivolous lawsuits and establishes clearer standards for decision-making processes within corporations. Unlike Delaware, Texas does not impose heightened legal scrutiny, such as enhanced scrutiny or entire fairness, when reviewing directors’ decisions related to company sales or defensive actions. This more lenient legal environment is appealing to businesses looking to limit exposure to potential litigation.
Further supporting these reforms, public companies in Texas are allowed to require that shareholders own up to three percent of their shares before they can initiate or continue a derivative lawsuit. This significant adjustment could deter what many view as opportunistic legal actions by disgruntled shareholders. Moreover, most derivative lawsuits in Texas are no longer subject to court approval to settle or be dropped, streamlining corporate legal processes.
The recent legislative changes also promote the option for companies to designate specific Texas courts, such as the Texas Business Court, for resolving internal corporate disputes. The Texas Business Court was established on September 1, 2024, with the aim of addressing complex commercial matters in an efficient manner.
Other notable aspects of the TBOC reforms include provisions for jury trials in corporate cases. While Texas companies can opt to waive the right to a jury trial through their governing documents, they still retain the option to pursue this route if desired. Additionally, the reforms introduce a management-friendly governance structure, allowing for broader application of the business judgment rule under Section 21.419 of the TBOC. This section provides legal protections for directors and officers, limiting the ability to bring actions against them unless specific allegations of fraud, misconduct, or law violations are presented.
Senate Bill 29, signed by Governor Greg Abbott on May 14, 2025, has clarified governance rules favoring management and has reinforced the overall corporate law structure in Texas. It also includes provisions that narrow shareholder rights to inspect corporate records and allows companies to waive class voting for significant business transactions in their governing documents.
In an effort to facilitate more stringent governance, Senate Bill 1057 permits Texas public companies to set eligibility requirements for shareholder proposals that are stricter than those established by federal regulations. As part of the ongoing efforts to modernize corporate governance, Senate Bill 2411 was introduced to make technical adjustments to the TBOC, while Senate Bill 2337 aims to impose new disclosure requirements for proxy advisory firms with respect to non-financial factors.
Despite these reforms, the enforcement of SB 2337 has faced challenges, as recent federal injunctions temporarily halted its implementation against advisory firms such as ISS and Glass Lewis while legal disputes are resolved.
The sweeping changes to corporate law in Texas come in response to growing concerns about governance issues, particularly surrounding the longstanding dominance of Delaware in the corporate incorporation arena. By providing companies with a more favorable legal framework, Texas aims to attract businesses while enhancing its reputation as a robust environment for corporate governance. As these reforms take shape, the landscape for corporate incorporations is expected to evolve significantly, potentially shifting the balance of power from Delaware to Texas in the coming years.
Deeper Dive: News & Info About This Topic
- Venable: Key Updates for Texas Corporations
- Latham & Watkins: A New Era of Corporate Law in Texas
- Seyfarth: Texas Adopts Business-Friendly Amendments
- Wikipedia: Texas Business Organizations Code
- Google Search: Texas business law
Author: STAFF HERE COLLEGE WRITER
The COLLEGE STATION STAFF WRITER represents the experienced team at HERECollegeStation.com, your go-to source for actionable local news and information in College Station, Brazos County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Brazos Valley Fair & Rodeo, Chilifest, and Aggie Muster. Our coverage extends to key organizations like the Bryan-College Station Chamber of Commerce and United Way of the Brazos Valley, plus leading businesses in education, biotechnology, and retail that power the local economy such as Texas A&M University, Fujifilm Diosynth Biotechnologies, and H-E-B. As part of the broader HERE network, including HEREAustinTX.com, HEREDallas.com, HEREHouston.com, and HERESanAntonio.com, we provide comprehensive, credible insights into Texas's dynamic landscape.
