In Guillaume v. Armstrong, Judge Andrea Bouressa of the Texas Business Court’s First Division addressed an important choice-of-law question: When a corporation reincorporates from Delaware to Texas, which state’s law governs a shareholder’s ability to bring derivative claims based on conduct that occurred before the reincorporation?
In Guillaume v. Armstrong, Judge Andrea Bouressa of the Texas Business Court’s First Division addressed an important choice-of-law question: When a corporation reincorporates from Delaware to Texas, which state’s law governs a shareholder’s ability to bring derivative claims based on conduct that occurred before the reincorporation?
The Court held that Texas law governs the shareholder’s authority to bring suit, even when the underlying claims arose under Delaware law.
Background
Coinbase Global, Inc. reincorporated from Delaware to Texas in December 2025. In April 2026, a shareholder filed a derivative action alleging wrongdoing by Coinbase’s directors and officers between 2021 and 2023, when the company was still incorporated in Delaware.
The shareholder did not make a pre-suit demand on Coinbase’s board of directors. Instead, he alleged that demand would have been futile under Delaware law, which permits shareholders to proceed without demand in certain circumstances.
Texas law, however, requires a pre-suit demand and does not recognize a demand-futility exception. The defendants specially excepted to the petition, arguing that Texas law governed because Coinbase was a Texas corporation when the shareholder filed suit.
The Court’s Rulings
Judge Bouressa agreed that Texas law governed the shareholder’s authority to bring the derivative action, regardless of which state’s law governed the underlying claims.
Applying the internal affairs doctrine, the Court explained:
The internal affairs doctrine, as a general principle, subjects various acts and omissions to review according to the law of the state of incorporation as of the date they (do or do not) occur. Consequently, whether an officer or director had authority to engage in a particular act will be adjudicated according to the law of the state of incorporation at the time the officer or director engaged in that act. By that same reasoning, a shareholder’s authority to engage in a particular act—namely, the institution of a suit to assert rights belonging to the corporation—presents an indistinguishable circumstance, which this Court finds should be governed by the law of the state of incorporation at the time the shareholder engages in that act.
Id. ¶ 17.
The Court also rejected the shareholder’s reliance on Coinbase’s regulatory filings, which represented that reincorporation would not adversely affect shareholders’ ability to bring derivative claims arising before the conversion. The Court found no basis to conclude that these representations displaced Texas’s statutory demand requirement:
And by statute, a pre-suit demand is required, without exception.
Id. ¶ 22.
Because the shareholder had not made a pre-suit demand, the Court concluded:
Here, it is undisputed that Plaintiff made no pre-suit demand. Consequently, under Texas law, Plaintiff cannot prosecute his derivative suit on behalf of the Texas corporation and this action must be dismissed.
Id. ¶ 23.
The Court dismissed the action without prejudice.
Takeaways
The decision provides important guidance for corporations reincorporating in Texas, particularly those moving from Delaware.
The law governing a shareholder’s authority to bring a derivative action is determined by the corporation’s state of incorporation when suit is filed, not when the alleged misconduct occurred. Thus, even if Delaware law governs the merits of claims arising before reincorporation, Texas law governs the shareholder’s ability to assert those claims derivatively after the corporation becomes a Texas entity.
The ruling also reinforces a significant distinction between Texas and Delaware law: unlike Delaware, Texas does not permit shareholders to avoid the statutory pre-suit demand requirement by alleging demand futility.
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 Chris Bankler or a member of the Trial & Appellate Litigation practice.
Meet Chris
Chris Bankler focuses on the resolution of disputes for businesses and financial institutions. He counsels clients through the process of complex business litigation, including general business disputes, fraud claims, breach of fiduciary duty cases, and complex business bankruptcy litigation. He has served as litigation counsel in more than 100 cases in state and federal courts, as well as FINRA and AAA arbitrations.