By Byron F. Egan

This article is part three of six articles in the “DExit to Texas: What You Need to Know About Reincorporating in the Lone Star State” series, which covers why Delaware companies are considering redomiciling in Texas and the primary differences between the two states.

Texas’s 2025 amendments to the Texas Business Organizations Code (TBOC) introduced several shareholder- and transaction-related rules that differ meaningfully from Delaware’s Delaware General Corporation Law (DGCL). Below are six areas where companies and investors will likely notice the biggest statutory differences when considering a reincorporation from Delaware to Texas.

Shareholder Books and Records Requests

Texas gives inspection rights only to longer-term or larger holders. A shareholder who has held shares for at least six months, or who holds at least 5% of the outstanding shares, may inspect specified books and records for a proper purpose by making a written demand under TBOC Section 21.218. The available records generally do not extend to emails, text messages, or similar electronic communications unless those communications themselves effectuated a corporate action. Delaware, by contrast, permits any stockholder to seek inspection for a proper purpose, and the Court of Chancery may order broader production in appropriate circumstances.

For corporations with securities listed on a national exchange, Texas also narrows what qualifies as a “proper purpose.” A demand is not for a proper purpose if the corporation reasonably determines the demand is connected to (i) an active or pending derivative proceeding or (ii) an active or pending civil lawsuit in which the corporation and the requesting shareholder are, or are expected to be, adversarial named parties.

Shareholder Proposals: Higher Bars in Texas

The 2025 TBOC amendments also raise the bar for shareholder proposals at nationally listed entities. Under TBOC Section 21.373, a shareholder (or group) must meet each of the following requirements to submit a proposal for a shareholder vote:

• Own at least $1 million in market value or 3% of the entity’s voting stock.
• Maintain that ownership for at least six months before—and during—the shareholder meeting.
• Solicit holders of at least 67% of the voting power on the proposal.

Charter Amendments

Texas generally requires a higher vote to amend the certificate of formation: approval by at least two-thirds of the outstanding shares, unless the certificate specifies a different threshold (but not less than a majority). Delaware typically requires only a majority of the outstanding shares, unless the certificate of incorporation sets a higher threshold.

Fundamental Business Transaction Approvals

Texas also typically requires at least two-thirds of the outstanding shares to approve fundamental transactions, such as mergers, interest exchanges, conversions, and sales of all or substantially all assets, subject to any different voting threshold specified in the certificate of formation (but not less than a majority of the shares entitled to vote).

Affiliated Business Combinations

Both states have anti-takeover statutes to restrict certain business combinations with large shareholders, but they define the triggering owner and the exceptions differently. Texas generally restricts a publicly held corporation from engaging in a business combination with an “affiliated shareholder” (a beneficial owner of 20% or more of the outstanding voting shares) for three years after the acquisition date, unless (i) the board approved the combination before the acquisition or (ii) two-thirds of the non-affiliated outstanding voting shares approve the combination at a meeting called for that purpose. Delaware’s analogous statute generally uses a 15% threshold to define an “interested stockholder” and provides different exceptions.

Appraisal Rights

Texas provides dissent (appraisal) rights for shareholders entitled to vote on certain major transactions, such as mergers, statutory conversions, statutory share exchanges, and sales of all or substantially all of the corporation’s assets, when shareholder approval is required. However, shareholders of listed companies (or companies held by at least 2,000 holders) generally do not have appraisal rights in a merger or conversion if specified conditions are met, including receipt of substantially equivalent consideration. Delaware’s appraisal-rights regime is similar in overall structure but includes its own exceptions and “market-out” limitations.

Limitations on Director Liability

Texas permits (but does not require) a certificate of formation to eliminate or limit a director’s or officer’s liability to the corporation for certain conduct, subject to key exceptions, such as breaches of the duty of loyalty; acts or omissions not in good faith involving intentional misconduct or knowing violations of law; transactions involving improper benefits; and conduct for which liability is expressly imposed by statute. Delaware’s DGCL Section 102(b)(7) is broadly similar, but it contains additional carve-outs, including limitations relating to unlawful dividends and expanded officer liability in actions by or in the right of the corporation.

Takeaway

Texas’s framework can be more restrictive for certain shareholder actions (like inspection demands and proposals) while also requiring higher voting thresholds for core corporate actions. Companies considering a DExit should evaluate how these differences interact with their current shareholder base, governance profile, and litigation risk.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For more information, please contact Byron F. Egan or a member of the Corporate & Securities practice.

Meet Byron

Byron F. Egan regularly handles business combinations of corporations, limited liability companies, and partnerships, including mergers and acquisitions, purchases and sales of stock, and other equity interests, and sales and exchanges of assets. He also handles the related entity governance and structure issues. In 2025, Byron published the fifth edition of EGAN ON ENTITIES: Corporations, Partnerships and Limited Liability Companies in Texas, a treatise on Texas, Delaware and other entity laws. Byron is the only attorney to have received the Burton Award for Legal Achievement four times and is consistently recognized among the top corporate and M&A lawyers in Texas by several publications.

Byron has consistently been recognized by Who’s Who Legal for over 15 years, including as a “Recommended” attorney in M&A and Corporate Governance and as a “Thought Leader” for M&A. He has also been named among The Best Lawyers in America since 1993 in the areas of Corporate Compliance Law, Corporate Governance Law, Corporate Law, and Mergers and Acquisitions Law.