By Byron F. Egan

This article is part one 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.

The Big Picture

A growing number of companies are leaving Delaware and reincorporating in Texas, a movement colloquially known as “DExit.” Inspired by “Brexit,” the term describes a transaction in which a company exits Delaware as its state of formation and redomiciles in another state, most often Texas or Nevada. High-profile companies such as Tesla, Inc., Coinbase Global, Inc., SpaceX, Dillard’s, Inc., ArcBest Corporation, and Dell Technologies, Inc. have already made or announced their move.

How Did We Get Here?

Recent Delaware Court of Chancery decisions have created unease among corporate boards and executives, unsettling decades of predictability in case outcomes. Tornetta v. Musk, 310 A.3d 430 (Del. Ch. 2024), a case upsetting the pay package of Tesla’s founder, Elon Musk, was considered by many in the business community to be judicial overreach. Shortly thereafter came the Moelis opinion, West Palm Beach Firefighters’ Pension Fund v. Moelis & Co., 311 A.3d 809 (Del. Ch. 2024), which constrained the power of shareholder agreements. These decisions sent a powerful signal to corporations that the Delaware courts will intervene in matters historically viewed as outside their discretion.

Why Texas?

Companies considering a move to Texas often point to four key advantages in their SEC filings.

First, many of these companies already have substantial operations in Texas and only nominal operations in Delaware, so it is logical to incorporate in the state where their governing laws are made and adjudicated.

Second, the Texas Business Court, which began hearing cases in 2024, offers a sophisticated forum for significant business disputes. The court is staffed by judges appointed by the Governor who have at least 10 years of relevant experience in complex civil business litigation or business transaction law.

Third, recent amendments to the Texas Business Organizations Code (“TBOC”) provide greater certainty for corporate decision-making by codifying Texas’s already strong deference to the business judgment of independent directors through a new statutory presumption for listed Texas corporations. And the TBOC was amended to allow corporations to include jury trial waivers in their governing documents to designate a specific Texas court as the exclusive forum for internal entity claims. DExit companies cite these amendments as reducing the risks and costs associated with frivolous litigation.

Fourth, companies may realize meaningful cost savings. Delaware derives significant revenue from its franchise tax, which for some companies can amount to $250,000 solely due to being incorporated in Delaware, in addition to Delaware income tax. Texas, by contrast, does not impose a tax based on an entity’s equity capitalization and does not have a corporate income tax. Texas’s margin tax is based on the entity’s revenues from its Texas operations.

How It Works

There are two ways a company can redomicile in Texas. The first is a statutory “conversion,” in which a Delaware entity files articles of conversion and becomes an entity formed under—and governed by—Texas law. The second is a statutory “merger,” in which the entity merges into a newly formed Texas subsidiary organized under the TBOC, with the Texas entity surviving. In either case, the outcome is the same: the company’s internal affairs are no longer governed by Delaware law, and no transfer of assets is required. The process requires approval from the entity’s directors and shareholders, along with filings with the secretaries of state in both Texas and Delaware.

Takeaway

DExit is not just a trend. It reflects a broader reassessment of governance, cost structures, and litigation environments. For companies with meaningful Texas ties, reincorporation can align legal domicile with operational reality while offering tangible governance and tax advantages. Boards and general counsels should approach the domicile question the way they approach any other strategic decision: with in-depth analysis, clear understanding of their specific risk profile, and advice from experienced corporate counsel who understand both the departing and receiving jurisdictions.

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.