Texas and Nevada Draw Companies From Delaware as Courts Set New Rules

Since mid-2024, a growing number of companies have moved their state of incorporation out of Delaware. Many of the destinations are Nevada and Texas, which Mayer Brown describes as sometimes seen as more business-friendly than Delaware. A company's state of incorporation determines which corporate statute and courts govern disputes over directors' conduct, so the choice affects shareholders as well as managers.

This explainer reviews the reincorporation counts, Texas's 2025 corporate law, a 2026 federal ruling on a Texas bylaw and the Delaware Supreme Court's February 2026 decision. The counts run through mid-2025, and the sources reviewed did not include full 2026 totals.

Where the reincorporations have gone

A governance blog summarizing data from the proxy adviser ISS counted 18 companies that proposed leaving Delaware through June 2025. Twelve proposed moving to Nevada, two to Florida, two to the Cayman Islands, and one each to Texas and Indiana. Over the same period, 10 companies moved into Delaware from other states.

The blog describes the 18 exits as proposals rather than completed moves. The figures reach this article secondhand, through the blog's summary, and the original ISS report was not reviewed.

The same blog reports that Delaware had 66 reincorporations into the state at its 2021 peak, compared with 10 in 2025 up to the post's date. It does not clearly say whether the 66 figure covers every reincorporation. These exit, inflow and reincorporation counts also measure different things over different periods.

Mayer Brown's January 14, 2026 review names Roblox, Dropbox, The Trade Desk, Simon Property Group, Coinbase, Tesla and Trump Media & Technology Group among companies that changed their state of incorporation. It says most chose Nevada or Texas, but it does not give each company's destination.

Texas's SB 29 and the business judgment rule

Texas Senate Bill 29 passed the Legislature on May 7, 2025. Governor Greg Abbott signed it on May 14, 2025, and according to Katten's analysis, it took effect immediately. The bill adds a new section, 21.419, to the Texas Business Organizations Code.

Under the new section, directors and officers are presumed to act in good faith, on an informed basis, in the corporation's interests, and in compliance with law and governing documents. A challenger must show a breach of duty involving fraud, intentional misconduct, an ultra vires act or a knowing violation of law to overcome that presumption. Katten notes that fraud claims must also be pleaded with particularity.

Katten says these business judgment rule provisions apply to companies listed on a national exchange and to other corporations that elect into them. It reports similar protections for LLCs and limited partnerships under two other sections.

The 3% stake requirement and a 2026 Southwest Airlines ruling

Katten reads SB 29 as barring shareholders who own less than 3% of a corporation's stock, alone or in groups, from bringing a derivative proceeding. In Katten's reading, the threshold applies to listed companies and to other corporations with 500 or more shareholders that opt into section 21.419. It applies to all future derivative suits.

Other summaries describe the threshold more broadly, so its scope needs checking against the enrolled bill. This review could not open the Texas Legislature's bill history page, so the statute text itself is not confirmed here.

The threshold has been tested in a case involving Southwest Airlines. According to Berman Tabacco, Southwest amended its bylaws to add the 3% requirement after a shareholder sent a demand letter and before a lawsuit was filed. On March 17, 2026, a federal court in Texas dismissed the derivative action with prejudice.

The court held that a demand letter does not institute a derivative proceeding, and that only filing a complaint does. The source does not give the case name or the bylaw amendment date, and it does not say whether the decision was appealed.

Delaware's answer: SB 21 safe harbors upheld

Delaware's own changes to its corporate code are also part of the record. In Rutledge v. Clearway Energy Group LLC, the Delaware Supreme Court upheld the Section 144 safe harbors added by SB 21. The decision, No. 248, 2025, was issued February 27, 2026, as a unanimous 37-page opinion, according to a Sidley summary.

The court rejected the argument that the safe harbors improperly limit the Court of Chancery's equity jurisdiction. Chancery still hears fiduciary duty claims and decides whether the safe harbor's prerequisites are met. The court also rejected a due process challenge to retroactive application. The statute covers acts and transactions on or before February 17, 2025, unless an action, proceeding or demand was already pending on that date.

The safe harbors cover transactions involving an interested director, officer, controller or control group, except going-private transactions. A transaction can be cleansed by approval from a special committee or disinterested directors, or by a majority of the minority stockholders. The safe harbor requires one path or the other, not both. Where the prerequisites are met, equitable relief and monetary damages are unavailable against the covered parties.

What the sources show about shareholder rights

The Texas and Delaware provisions share a structure. Each sets conditions that a shareholder or plaintiff must meet before a claim can proceed or liability can attach. Texas requires a minimum stake for derivative suits and a showing of fraud, intentional misconduct, an ultra vires act or a knowing violation of law to overcome the good-faith presumption. Delaware's safe harbors bar equitable relief and damages for covered transactions when one of the approval paths is used.

Companies have given their own reasons. Mayer Brown reports that Andreessen Horowitz said in July 2025 that it was reincorporating its primary business, AH Capital Management, from Delaware to Nevada. It cited growing uncertainty about judicial outcomes in Delaware and Nevada statutes it described as designed to protect companies, officers and directors.

The ISS-based blog lists the elimination of the annual Delaware franchise tax, flexibility and a statute-focused legal environment among reasons companies gave for choosing Nevada. The sources reviewed do not describe Nevada's current corporate statutes, its business court or its franchise tax rates, so this article does not compare those rules. The Mayer Brown review also does not address how the three states' laws affect shareholder litigation.

The sources did not provide full 2026 tallies, so the 2025 figures are the most recent counts available. The Southwest ruling is a single federal decision, and its appeal status was not confirmed.