A growing number of companies are rethinking where they call home, and some are choosing to leave Delaware for Texas, a trend that’s picked up the nickname “Dexit.” With the launch of the Texas Business Court in the fall of 2024 and a more flexible corporate environment, Texas is increasingly being considered as a new alternative for businesses looking for predictability, efficiency, and lower costs.
Here are 10 key things to understand about the shift.
1. “Dexit” reflects a real movement away from Delaware.
For decades, Delaware has been the default choice for incorporation. But rising franchise taxes, increasing regulatory complexity, and new options in states like Texas have prompted companies to reconsider. “Dexit” captures this shift toward jurisdictions that promote a more business‑friendly climate.
2. Texas has created a specialized Business Court.
One driver of the trend is the Texas Business Court, designed specifically to handle certain complex business disputes. Judges appointed to the statewide court are appointed by the governor, not elected, and must have at least 10 years’ experience practicing complex civil business litigation, practicing business transaction law, serving as a civil judge in Texas, or a combination of those three activities. Appeals from the Business Court are exclusively heard by the recently created Fifteenth Court of Appeals, and the Business Court is required to provide a written opinion in connection with a dispositive ruling if requested by any party.
3. The court aims to deliver more efficient and predictable litigation.
The Business Court’s structure is intended to reduce delays, promote consistency in rulings, and develop a clearer body of case law. These are factors companies value when assessing litigation risk.
4. Texas has codified the business judgment rule.
Texas has taken the extra step of codifying the business judgment rule, giving directors and officers a strong presumption of acting in good faith. This reduces the threat of second‑guessing through litigation and provides boards with more confidence in making strategic decisions.
5. Companies litigating in Texas don’t need separate local counsel.
For businesses operating or incorporating in Texas, it’s helpful to know that litigators in the state can handle disputes directly in the Texas Business Court. That eliminates the need to hire additional local counsel and allows for more seamless coordination between corporate and litigation teams.
6. Texas offers meaningful tax advantages.
From a corporate perspective, taxes are a major part of the story. Texas has no state income tax, and its franchise tax is significantly more favorable than Delaware’s. For many companies, the savings are substantial and recurring.
7. Texas provides governance flexibility for companies.
Texas corporate law gives boards and management more room to tailor governance structures. Companies can set ownership thresholds for who may bring shareholder litigation, adopt stronger protective provisions in their bylaws, and customize governance in ways Delaware often restricts. For many businesses, that flexibility is a major advantage.
8. Compliance in Texas can be simpler and less costly.
Delaware’s franchise taxes have risen steadily, and its annual reporting requirements have become increasingly complex. Texas offers a lighter compliance burden, reducing administrative time and legal spend, which may attract companies looking to streamline operations.
9. Reincorporation still requires careful planning.
Even with the advantages, companies need to consider timing, contractual obligations, and regulatory requirements before making the move. Major transactions like financings or M&A deals can affect the ideal timing. Credit agreements, shareholder agreements, and joint venture documents may require notice or consent. And public companies must update SEC disclosures, proxy materials, and governance frameworks.
10. Experienced legal counsel is an important part of navigating a potential transition.
If your board is evaluating a move to Texas, experienced legal counsel will be invaluable throughout the transition, helping with every stage from entity conversion and redomiciling filings to updating governance documents, structuring tax considerations, preparing regulatory filings, and drafting board and shareholder materials.
As with any major corporate decision, timing and execution matter. If your company is considering a move and you would like to discuss these considerations, please reach out to your regular Thompson Coburn contact.
