(The Center Square) \u2013\u00a0Companies are continuing to leave Delaware, redomiciling in other states, referred to as DEXIT.\u00a0<\/p>\n
More recently, Fortune 500 companies have been making high profile announcements to redomicile in Texas, leading a DEXIT to Texas movement.\u00a0<\/p>\n
Companies are also redomiciling in Nevada and other business friendly states \u2013 a trend that began in earnest after the Delaware Court of Chancery invalidated Elon Musk\u2019s $56 billion Tesla compensation package in January 2024. Since then, business proxy statements requesting that shareholders support reincorporating in other states have generally cited five key reasons, according to an analysis published<\/a> by Harvard Law School Forum on Corporate Governance.<\/p>\n They include reduced legal exposure, a state\u2019s rule-based system creating government certainty and limiting judicial activism, cost savings, closer proximity to business operations and attracting and retaining a talented workforce.<\/p>\n The analysis found that DEXIT businesses said other state statutes minimize director liability whereas Delaware\u2019s legal environment encourages \u201cunmeritorious and costly\u201d litigation against controlled companies. Rule-based systems in Nevada and Texas, for example, also create governance certainty and limit judicial interpretation contrasted with challenges they\u2019ve faced in Delaware, companies argue. They also cite \u201csubstantial cost savings,\u201d including one company comparing a $250,000+ franchise tax in Delaware to an annual $500 business license fee in Nevada.<\/p>\n Dallas, Texas-based Jackson Walker LLP Partner Byron Egan explains,<\/a> \u201cTexas is a frequently considered a DEXIT destination because it is considered to be a business-friendly state with a newly formed Business Court, amended Texas Business Organizations Code and favorable state taxes.\u201d\u00a0<\/p>\n Gov. Greg Abbott and the Texas legislature have also \u201ccapitalized on executives\u2019 frustrations with the Delaware Chancery Court,\u201d he argues, by establishing Texas\u2019 new business court. The court, which began hearing cases in 2024, is often cited by companies as a top reason for redomiciling, including by Exxon Mobil, Tesla, Dell Technologies, Coinbase, among others, The Center Square reported.<\/a><\/p>\n Another reason businesses cite is the Delaware Court of Chancery\u2019s support of so-called Environmental Social Governance policies, which are banned in Texas.\u00a0<\/p>\n In 2021, Abbott signed SB 13 into law after state lawmakers expressed concerns that prominent financial institutions and investment funds were targeting the Texas oil and gas industry to financially penalize them in favor of alternative energy. The law prohibits certain state agencies from investing funds in financial companies taking \u201cany action that is, solely or primarily, intended to penalize, inflict economic harm on or limit commercial relations with [an energy company that] does not commit or pledge to meet environmental standards beyond applicable federal and state law.\u201d<\/p>\n The Texas Comptroller\u2019s Office has a divestment list and over the years, companies altered their policies to comply with state law, The Center Square reported.<\/a> Under the Trump administration, multiple large banks also withdrew from a United Nations-led Net Zero Alliance in January 2025. They\u2019d held firm on their ESG policies even after 19 state attorneys general, including Texas, launched investigations into them for alleged deceptive trade practices connected to ESG. They began dropping them after the Trump administration banned ESG policies, The Center Square reported.<\/a><\/p>\n Two years earlier, former Attorney General Bill Barr argued<\/a> Delaware was \u201ctrying hard to drive aways corporations\u201d through ESG and other policies embraced by the Delaware Court of Chancery. He also pointed to other blue states \u201cusing ESG to inject the progressive political agenda on climate, race, and other issues into corporate governance\u201d causing negative economic outcomes.<\/p>\n Delaware Court of Chancery Judge J. Travis Laster responded in a public rebuke<\/a>, criticizing Barr and arguing some stockholder-director duty \u201cversions justify ESG as a means of promoting stockholder value.\u201d\u00a0<\/p>\n ESG and other policies like so-called Diversity, Equity and Inclusion (DEI) were also cited by companies as reasons to look for an alternative<\/a> to the New York Stock Exchange. They have since found it in the Texas Stock Exchange, the only national securities exchange built and headquartered in Texas.\u00a0<\/p>\n Texas now has more financial services employees than New York City, the Partnership for New York City notes<\/a>, citing Texas\u2019 \u201ccombined tax advantages, legal modernization, workforce growth, and aggressive economic development tools to attract headquarters, talent, and capital” as advantages.<\/p>\n The Texas Stock Exchange has attracted businesses nationwide while also supporting economic growth in 11 southern states in the Boom Belt, The Center Square reported<\/a>. Texas this year also surpassed California with having the most<\/a> Fortune 500 headquarters.\u00a0<\/p>\n As \u201cDelaware has squandered its inheritance,\u201d Texas\u2019 \u201cY\u2019all Street will reduce barriers for businesses and refocus on core investment principles instead of ESG and DEI mandates,\u201d Abbott said.<\/p>\n