One of the current hot topics is corporate and securities law is whether Delaware companies should reincorporate in other states, particularly in the states of Nevada or Texas. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, examines the state of incorporation of the new Texas Stock Exchange, which, surprisingly, turns out to be Delaware. I would like to thank Sarah for allowing me to publish her article on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.
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On April 4, 2025, the Texas Stock Exchange (TXSE) filed its registration to become a National Securities Exchange under Section 6 of the Securities Exchange Act of 1934 (“Section 6”). This provision is foundational for ensuring that national securities exchanges operate in a manner that supports market integrity, investor protection, and regulatory compliance. TXSE will be all digital and, as required under Section 6 its filing with the SEC articulates the rules of the exchange, trading, discipline of members, prevention of fraud and manipulation, listing and delisting criteria and governance structure.
What I found most interesting is that TXSE is incorporated in Delaware (for now). As has been previously reported by the D&O Diary, Delaware Senate Bill 21(SB 21) was signed into law by the Governor on March 25, 2025. Among many other things, SB 21 amended Sections 144 and 220 of Delaware General Corporation Law in order to provide safe harbor procedures for interested transactions involving controlling shareholders, directors or officers, and to restrict the materials subject to shareholder inspection pursuant to books and records requests.
While Law360 reported that it was told in a statement “TXSE is moving its incorporation to Texas and is currently working through the board and shareholder process,” why TXSE did not do so in the first place is telling. More likely than not, the known of Delaware is trumping the unknown of Texas for TXSE. While in the past couple of years Texas has been moving quickly to become an attractive state for incorporation through legislative initiatives, the lack of developed case law and novel corporate-friendly statutes, may be causing hesitation.
On June 2023, Governor Greg Abbott signed legislation creating a new set of specialized trial courts to handle certain types of complex business disputes (“Business Courts”), and a new intermediate court of appeals to hear appeals from those courts (“15th Court of Appeals”). The Business Courts would share jurisdiction with the district courts over certain commercial disputes, including certain cases in which the amount in controversy exceeds $5 million, including derivative proceedings, breach of fiduciary duty actions, and certain securities actions and in which the amount in controversy exceeds $10 million and the claims arise out of a transaction.
While the construction of the dedicated Business Courts creates a streamlined process for disputes that may arise out of Securities Act violations, what judges will be sitting on the Texas Business Court bench? Notably, the Delaware Chancery is over 200 years old and “has determined disputes involving the internal affairs of the thousands upon thousands of Delaware corporations and other business entities.” Its judges have overseen litigation involving established exchanges like NYSE and NASDAQ, numerous times and have extensive Securities Act subject matter expertise. The unknown precedent and decision making process by a less experienced Texas judiciary may be too much uncertainty for a newly created exchange.
Another step that Texas has taken to make its state an attractive alternative to Delaware for incorporation was made in February 27, 2025 when Senator Bryan Hughes (R-Tyler) filed Senate Bill 29 (SB 29). SB 29 proposed several corporate reforms that, if enacted would amend the Texas Business Organizations Code to provide greater clarity and predictability regarding judicial review of corporate decision-making. The bill would formally codify the business judgement rule into Texas law and shift the burden of proof in fiduciary duty claims to the plaintiff. SB29 also allows for waiver of jury trials for internal disputes and also restricts books and records requests.
And while Texas SB 29 on its face is very company-friendly, the bill has not yet been passed or tested. To be fair, Delaware SB 21 has also not been tested by a Chancery Court. However, at least two companies have reincorporated in Delaware since the beginning of the year*, providing anecdotal evidence that companies feel comfortable that corporate-friendly provisions of Delaware SB 21 may be upheld by the Delaware Chancery.
*Correction: My original post indicated that TempusAI and Roblox were reincorporating in Delaware. This was a typo; both companies signaled an intention to incorporate outside of Delaware. Two companies that have signaled intent to reincorporate in Delaware in the last couple of months are CSLM Holdings Inc. (FUSE) and PowerUp Acquisition Corp. I want to thank Anthony Rickey at Margrave Law LLC for bringing my attention to this initial error.
While Texas’ tax structure and regulatory environment (lack thereof) has made it an attractive place to do business; its untested court system may make it less attractive for incorporation. TXSE picking Delaware over Texas is a prime example. Given that the Texas Business Court started taking cases in September 2024, there is no precedent yet.
And while we are talking about state of incorporation for new stock exchanges, location does impact D&O underwriting decisions. Pricing based upon potential exposure to shareholder derivative suits or length of litigation based upon the judiciary experience with securities litigation may need to vary by state. We will just have to wait and watch for court decisions and the passage of SB 29. Oh and if TXSE will reincorporate in Texas sooner rather than later.
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