To stem the recent tide of high-profile corporate "DExit" moves, Delaware has enacted Substitute 1 to Senate Bill 21 (SB 21) to amend the Delaware General Corporation Law (DGCL) effective March 25, 2025. To lure more corporations from Delaware, Nevada passed Assembly Bill No. 239 (AB 239) on May 30, 2025 and Assembly Joint Resolution No.8 (AJR8) and Texas enacted House Bill 19 (HB 19) on September 1, 2024, House Bill 29 (HB 29) effective May 14, 2025 and House Bill 40 (HB 40) which is effective September 1, 2025.
Each of these measures try to reduce burdens from aggressive stockholder litigation, provide more liability protection for directors, officers and controlling stockholders and in general make each state more attractive for corporations. Below are some of the pertinent state-by-state revisions.
Specialized Business Courts
- Delaware: Delaware's longstanding dominance for corporate domicile has largely stemmed from its having a specialty court, the Delaware Court of Chancery, for resolving stockholder and other disputes. Delaware has not made any changes here.
- Texas: To put Texas on the same playing field, HB 19 created the Texas Business Court, which is a specialized forum to hear certain commercial disputes with judges appointed by the Texas governor. This Court has the same powers as Texas state courts, including the power to issue injunctions. HB 29 amended the Texas Business Organizations Code (TBOC) to allow Texas companies to specify the Texas Business Court (or another particular court in Texas) as the exclusive venue for resolving internal disputes. HB 40 expands the Court's jurisdiction (1) from $10 million claims to $5 million in a series of related transactions and (2) to include intellectual property, trade secret and arbitration enforcement cases.
- Nevada: The Nevada legislature enacted AJR 8 which proposes to amend the Nevada Constitution to authorize the establishment of a specialized business court consisting of 3 or more judges appointed by the Nevada governor. If the constitutional reform is approved, the proposed business court would have exclusive original jurisdiction to hear disputes involving stockholder rights, mergers and acquisitions, director fiduciary duties and commercial disputes between business entities. However, amending the Nevada Constitution involves many steps so the amendment will not be put to a referendum until 2027 at the earliest.
Waiver of Trial by Jury
- Delaware: Delaware has also been attractive to corporations because the Delaware Court of Chancery can try cases without a jury. That ability has not changed.
- Texas: To compete with Delaware, Texas in SB 29 amended the TBOC to allow Texas corporations to include a waiver of jury trials in their governing documents (i.e., certificate of formation or bylaws) for internal disputes between a corporation and its stockholders. Such waiver is only effective under Texas constitutional law if made on an informed and knowing basis and to provide certainty here SB 19 describes how a waiver is made on an informed and knowing basis.
- Nevada: Nevada's AB 239 amends the Nevada Revised Statutes (NRSR) to permit Nevada corporations to include a provision in their articles of incorporation requiring that all internal and disputes be tried by a judge, not jury.
Safe harbor for Director and Stockholder Transactions
- Delaware: SB 21 amended DGCL section 144 to provide a safe harbor for director or officer transactions and controlling stockholder transactions. The amendments shield these transactions if (1) the material facts of the relationship or transaction are disclosed to all members of the board or a committee of the board comprising at least 2 disinterested directors; (2) the transaction is approved or ratified by the majority of the votes of disinterested stockholders; or (3) the transaction is fair as to the corporation and its stockholders. Stockholder advocates have launched a state constitutional challenge to these amendments .
- Nevada: Nevada's AB 239 amends the NRR to (1) make clear that the only fiduciary duty owed by a controlling stockholder is to refrain from exerting undue influence over any director or officer in order to induce him or her to breach a fiduciary duty; (2) create a presumption that a controlling stockholder is not in breach of its fiduciary duty in connection with a transaction where the transaction was authorized by a disinterested committee of the board; and (3) state that a controlling stockholder cannot be liable to a corporation or its stockholders or creditors unless they somehow rebut this presumption.
- Texas: While the TOBC already provides a safe harbor from liability for conflicted director or officer transactions, SB 29 raises the bar by providing that directors and officers are presumed to have taken action in good faith, on an informed basis, in furtherance of the interests of the corporation, and in compliance with the law and the corporations governing documents. To rebut this presumption, a plaintiff must prove that the act or omission was a breach of fiduciary duties, and involved fraud, intentional misconduct, acting outside the corporation's purpose, or a knowing violation of law.
Stockholder Inspection
- Delaware: Under the DGCL, stockholders may inspect the books and records of the corporation. SB 21 amended DGCL section 220 to (1) clarify that a stockholder must conduct inspections in good faith, with a purpose reasonably related to the stockholder's interest as stockholder; (2) provide that corporations may impose reasonable confidentiality restrictions, limit the use and distribution of records and redact irrelevant information; and (3) limit "books and records" to include corporate governance documents (certificate of incorporation and bylaws), board and committee minutes, financial statements, correspondence to shareholders within the past 3 years and director and officer independence questionnaires.
- Nevada: Under the NRS, only those stockholders who hold at least 15% of a Nevada corporation's stock can inspect the books and records of the corporation. Nevada has not changed this rule but could make further reform to limit these rights to align with Delaware and Texas.
- Texas: Under the TBOC, a shareholder of a Texas corporation that holds least 5% of the outstanding stock or has been a shareholder for at least 6 months can inspect corporate books and records. SB 29 amends the TBOC to limit what constitutes "books and records" by excluding e-mails, text messages and similar electronic communications as well as information from social media accounts, unless those records effectuate an action taken by the corporation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
