Texas Aims to Challenge Delaware’s Corporate Dominance with New Legislation
Texas is set to enhance its appeal for corporate incorporations as Governor Greg Abbott prepares to sign new legislation aimed at clarifying corporate decision-making rules and shareholder resolutions. This move follows the successful relocations of Tesla and SpaceX to Texas, driven by Elon Musk’s advocacy, and comes at a time when major corporations are reevaluating their ties to Delaware, historically the go-to state for incorporation.
The forthcoming legislation is designed to strengthen Texas’ new business courts and positions the state as a viable alternative to Delaware, especially as companies like Meta Platforms and Pershing Square Capital Management express concerns over the predictability of Delaware’s corporate laws. The measures are backed by a coalition of business groups, including the Texas Stock Exchange and Texans for Lawsuit Reform, emphasizing the need for a stable legal environment amid rising activism from Delaware courts.
Among the key provisions, one bill formalizes the business judgment rule, safeguarding corporate leaders from shareholder challenges unless investors can prove otherwise. Additionally, new regulations will tighten the requirements for shareholders seeking to access corporate records or initiate derivative suits, mandating that they hold at least 3% of a company’s voting shares.
As part of broader efforts to strengthen corporate protections, Abbott will also promote a ballot measure for voters to ban financial transaction taxes, a concern that has previously led to reversals in states like Illinois and New York.
The push comes as the New York Stock Exchange and Nasdaq Inc. announce plans to expand operations in Texas, signaling a shift in the public equity market landscape. With the Texas Stock Exchange gearing up to launch next year, backed by major financial players, Texas is ambitiously positioning itself as a new hub for corporate activity.
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