Texas is positioning itself as a serious challenger to Delaware for corporate incorporations with two landmark corporate law reforms. Effective September 1, 2025, Senate Bills SB 29 and SB 1057 introduce sweeping changes aimed at enhancing legal predictability, reducing litigation risks, and curbing shareholder activism. These changes are set to make Texas a more attractive, management-friendly jurisdiction for companies.
SB 29, effective immediately, codifies the Business Judgment Rule, offering directors and officers a presumption of good faith, informed decision-making and loyalty to the corporation. Shareholders now bear the burden of proving misconduct with specificity to overcome this presumption.
Meighan McGowan, head of US business development at Georgeson, notes: ‘The recent changes this year to Texas’ corporate law reduce legal risks for directors, limit shareholder inspection rights and demand justification for specific proxy advisor recommendations. These changes, in conjunction with the 2024 launch of the Texas Stock Exchange (TXSE), suggest that the state is pushing to attract more corporations.’
Meighan McGowan, Georgeson
William Bailey, MD of Market Intelligence at TXSE, echoed these sentiments describing the region as a ‘a long-time pro-business powerhouse’ in a feature on Texas with sister publication IR Impact.
In addition, SB 29 allows corporations to set minimum ownership thresholds for shareholders to bring derivative lawsuits (up to 3 percent) and excludes attorney fee recovery for lawsuits that result only in additional disclosures. These provisions, combined with exclusive forum options for internal disputes and restrictions on access to company records (like emails or social media), create a more streamlined governance environment.
SB 29 also introduces a new pre-transaction determination of director independence, allowing companies to seek judicial clearance on conflicts of interest before proceeding with business deals. Scott Barnard, partner at Akin Gump Strauss Hauer & Feld, explains: ‘We’re seeing limitations on shareholder actions, including expanded protections for officers and directors. The legislation also makes it harder to bring conflict-of-interest cases, offering more protection for businesses.’
SB 1057 introduces new restrictions on shareholder proposals. Nationally listed Texas-based corporations will require shareholders to meet stricter criteria before submitting proposals, including a minimum 3 percent ownership or $1mn in shares, held for at least six months, and support from 67 percent of other voting shareholders. This significantly raises the bar for activism.
Scott Barnard, Akin Gump Strauss Hauer & Feld
McGowan adds: ‘SB 1057 increases the ownership threshold for shareholder proposals. This change will likely reduce the number of proposals submitted, including those from minority shareholders, making it harder for activists to disrupt corporate operations.’
Indeed, an analysis of the 2025 proxy season by Georgeson revealed that under SB 1057 criteria, about 9 percent of shareholder proposals would have been excluded from Texas-based companies, according to McGowan.
These reforms raise questions about the balance between corporate management and shareholder rights. While the new rules offer significant protection for directors and officers, they limit opportunities for shareholder actions. Barnard explains: ‘You’ll see the pendulum swing back and forth. Historically, Delaware had swung towards shareholder rights, but Texas is pushing for a more pro-business stance with these changes. Shareholders now face additional hurdles to bring actions.’
However, Barnard acknowledges that Texas isn’t eliminating shareholder rights altogether. Shareholders can still take legal action, but they will need stronger justification for their claims. This shift is seen as a response to the perceived overreach in shareholder activism, particularly following Delaware’s Trulia opinion, which limited shareholder fee recovery for non-material disclosures.
One of the key features of Texas’s reforms is the introduction of Texas Business Courts in 2024, designed to handle corporate governance disputes more efficiently. Barnard notes that these courts could provide much-needed clarity on the application of the new laws: ‘There’s still uncertainty about how Texas business courts will interpret these changes, but their role will be key in establishing how this new law will be applied.’
The Texas Business Courts will operate with two levels of appellate review, as opposed to Delaware’s Court of Chancery, followed by direct appeals to the Delaware Supreme Court. Barnard suggests that while this system offers potential for more consistency, its full impact remains to be seen.
The success of these reforms in attracting corporations to Texas, as opposed to Delaware or Nevada, remains uncertain. While some companies are reincorporating in Texas, the numbers are still small. For instance, from January to June 2025, only one company chose Texas over Delaware.
Barnard concludes: ‘Texas is making a good start, but it will need time to see how the reforms play out. The state needs to refine some aspects of the law and give the business courts time to establish their track record.’
Boards of directors will need to adapt to these changes by reviewing their governance documents, including codifying the Business Judgment Rule and potentially waiving jury trials for internal disputes. ‘Boards should take a proactive approach and review their documents,’ Barnard recommends. ‘There are opportunities to amend governance structures, including adding exclusive forum provisions for Texas business courts.’
Texas’s corporate law reforms offer a bold, management-friendly approach to governance that challenges Delaware’s dominance. With stronger protections for directors, higher thresholds for shareholder activism and clearer judicial processes, Texas is positioning itself as an attractive option for corporate incorporations. Whether these changes will successfully lure businesses away from Delaware remains to be seen, but the Lone Star State has certainly set the stage for a more predictable and business-friendly legal environment.