October 10, 2025

Texas Emerges as a Business-Friendly Destination

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 has seen a notable shift in corporate incorporations as several businesses begin relocating their legal bases from Delaware to the Lone Star State. This movement follows significant reforms to the Texas Business Organizations Code (TBOC), aimed at creating a more business-friendly environment. The legislative changes, enacted under Senate Bill 29 on May 14, 2025, focus on enhancing corporate governance and reducing legal barriers that may deter companies from establishing themselves in Texas.

The reforms replace Delaware’s stringent legal standards with more favorable conditions for corporate directors and officers. Under the new TBOC, Texas strengthens protections against frivolous lawsuits, particularly in cases involving company sales and defensive actions. Unlike Delaware, which enforces enhanced scrutiny and entire fairness standards, Texas allows for a less cumbersome evaluative process regarding directors’ decisions.

Key provisions within the revised TBOC offer a significant shift in legal protections for corporate governance. Public companies can now enforce a requirement that shareholders must own up to three percent of their shares to initiate or continue a derivative lawsuit. This requirement is expected to discourage unmeritorious claims while still allowing room for legitimate grievances.

Additionally, Texas’s reform package allows most derivative lawsuits to settle or be discontinued without requiring court approval, thereby expediting judicial processes. It also allows companies to designate specific Texas courts, such as the newly established Texas Business Court, for resolving internal corporate disputes. This dedicated court, which was launched on September 1, 2024, aims to provide efficient handling of complex commercial cases.

Another significant change in the TBOC is the inclusion of jury trial waiver provisions in corporation governing documents. Companies can include clauses in their charters that allow them to waive their right to a jury trial, making it easier to navigate certain corporate legal issues without the unpredictability of jury verdicts.

Senate Bill 29 also codifies the business judgment rule, which shields directors and officers from liability as long as there are no specific allegations of fraud, misconduct, or violations of law. In addition, the legislation narrows the shareholder rights to inspect corporate records, excluding access to sensitive communications such as emails, text messages, and social media interactions, thus safeguarding privacy and corporate confidentiality.

Further reforms under Senate Bill 1057 empower Texas public companies to set stricter eligibility criteria for shareholder proposals, diverging from existing federal guidelines. Senate Bill 2411 updates the TBOC with technical adjustments, while Senate Bill 2337 introduces new disclosure requirements for proxy advisory firms concerning non-financial factors in their recommendations. However, enforcement of SB 2337 has encountered hurdles due to ongoing legal challenges that have led to temporary federal injunctions affecting major proxy advisory firms.

The legislative changes from Texas lawmakers follow recent corporate governance challenges that have drawn attention to Delaware’s legal framework. By making these substantial updates to its business laws, Texas aims to position itself as a competitive alternative for companies considering relocation from Delaware, pursuing a more favorable regulatory landscape.

This proactive approach by Texas is not only setting it apart from Delaware but is also reflective of an evolving corporate climate that seeks to balance the interests of shareholders with the need for managerial discretion and ensures efficient legal resolutions for modern businesses.

As Texas continues to enhance its corporate laws, it remains to be seen how these reforms will influence the ongoing shift in business registries and the implications for future corporate governance in both Texas and Delaware.

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Author: STAFF HERE GEORGETOWN

The GEORGETOWN STAFF WRITER represents the experienced team at HEREgeorgetown.com, your go-to source for actionable local news and information in Georgetown, Williamson 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 Red Poppy Festival, Georgetown Swirl, and Christmas Stroll. Our coverage extends to key organizations like the Georgetown Chamber of Commerce and the Downtown Georgetown Association, plus leading businesses in manufacturing and tourism that power the local economy such as local wineries and historic downtown shops. As part of the broader HERE network, including HEREaustin.com, HEREcollegestation.com, HEREdallas.com, HEREhouston.com, HEREgeorgetown.com, and HEREsanantonio.com, we provide comprehensive, credible insights into Texas's dynamic landscape.