DExit One Year Later: An Assessment of SB21, the Continuing Pace of Reincorporation and the Maturation of Texas as a Corporate Domicile

When I last addressed the so-called DExit phenomenon, Delaware’s General Assembly had just enacted Senate Bill 21 in response to the growing concern that public companies, prompted by a series of decisions from the Delaware Court of Chancery, most prominently Tornetta v. Musk, were reconsidering their historical preference for incorporation in Delaware. At that time, much of what could be said about the durability of SB 21 and the breadth of the reincorporation movement remained speculative. A year of additional data, two more proxy seasons of activity, and a definitive ruling from the Delaware Supreme Court now permit a more considered assessment.

This article offers an updated view of the DExit landscape. It examines the recent constitutional validation of SB 21, the continuing rate of reincorporation away from Delaware notwithstanding the legislative response, the considerable maturation of Texas as a credible peer jurisdiction, and the practical considerations that should inform any board’s analysis of corporate domicile.

Constitutional Validation of Senate Bill 21

On Feb. 27, 2026, the Delaware Supreme Court resolved the constitutional challenge that cast a shadow over transactions structured in reliance on SB 21 since its enactment. The plaintiffs argued that in tightening the safe harbors of Section 144 of the Delaware General Corporation Law and constraining the books-and-records demands available under Section 220, the legislature had impermissibly displaced the historic equitable jurisdiction of the Court of Chancery. The Delaware Supreme Court rejected that argument, holding that the General Assembly had acted within its constitutional authority. The decision was widely welcomed by the corporate bar and confirms that SB 21 will continue to govern the conduct of conflicted-transaction analysis and stockholder inspection rights in Delaware.

The significance of this ruling is considerable. Boards having spent the past year evaluating controlling-stockholder transactions, related-party arrangements, and similar matters under the new statutory framework may now do so with more confidence in the durability of the rules they have applied. Gov. Matt Meyer characterized the decision as a vindication of the legislative effort, observing that the number of entities maintaining their legal home in Delaware had increased throughout 2025. As to the narrower question of whether SB 21 has succeeded in restoring procedural clarity to the affected areas of Delaware corporate law, that observation is fair. The broader question of whether SB 21 has arrested the reincorporation movement is more complicated and warrants separate consideration.

Pace of Reincorporation

The data accumulated through the first quarter of 2026 demonstrates that the pace of public company reincorporation away from Delaware has not materially slowed since the enactment of SB 21. Between January 2024 and March 2026, approximately 49 Delaware-incorporated public corporations submitted re-domestication proposals to their stockholders. In 2025 alone, boards submitted 26 such proposals, of which 21 received stockholder approval by vote and an additional seven were approved by written consent. As of early 2026, further proposals were pending before stockholder meetings scheduled for the spring proxy season.

The most striking signal of the change is found in the IPO market. For the better part of a decade, Delaware was the chosen state of incorporation for approximately 80-93% of all U.S. initial public offerings. In 2025, that share fell to approximately 62%, with Nevada capturing approximately 17% and Texas approximately 4%. The chart below presents the 10-year trend.

Nevada has thus far attracted the largest concentration of reincorporating issuers, including Roblox, Andreessen Horowitz, AMC Networks, Madison Square Garden Entertainment, Pershing Square, Tempus AI, Affirm, and Fidelity National Financial. The reincorporations to Texas are arguably more consequential as a signal of where founder-led technology issuers may choose to incorporate going forward.  Coinbase Global completed its conversion to a Texas corporation on Dec. 15, 2025, having received approval from approximately 78% of its voting power. The public statements accompanying the Coinbase reincorporation, in which the company observed that Delaware “no longer has a monopoly on corporate law” and praised the “efficiency, predictability, and fairness” of the Texas framework, were significant for their direct language and the issuer making them.

The contrast between the periods preceding and following the Tornetta decision is pronounced. From 2020 through 2023, public company reincorporation away from Delaware was a rare event, generally limited to a handful of issuers each year and frequently driven by company-specific considerations. Beginning in 2024 and accelerating sharply through 2025, the volume of such transactions increased to a level that warrants treatment as a recognizable institutional trend rather than an aggregation of isolated decisions.

Maturation of Texas as a Corporate Domicile

The most significant institutional development of the past eighteen months, in my view, has been the considerable maturation of Texas as a corporate domicile capable of serving as a genuine peer to Delaware. Several of my partners at Foley & Lardner were directly involved in the legislative effort that produced Senate Bill 29, the comprehensive corporate-law package enacted by the Texas legislature in 2025, and the resulting statutory framework reflects serious and considered drafting rather than the mere appropriation of Delaware concepts.

Principal features of the Texas framework deserve attention. First, the legislature codified the business judgment rule, providing statutory support for the deference traditionally afforded to good faith board decisions. Second, the legislature authorized corporations to establish ownership thresholds for the maintenance of derivative litigation, providing a meaningful procedural constraint on the kind of speculative stockholder suits that have generated extreme cost and uncertainty under Delaware practice. Third, the Texas Business Court, which convened in September 2024, has provided issuers with a specialized commercial forum staffed by judges selected for their substantive expertise in business and corporate matters. Fourth, the absence of a Texas state corporate income tax and the comparatively predictable cost profile of Texas franchise taxation present an important economic contrast to the Delaware franchise tax schedule, particularly at the upper end applicable to large issuers.

Profile of the Reincorporating Issuer

The data available establishes that DExit is largely confined to a particular category of issuer. Of the public companies that have submitted re-domestication proposals between January 2024 and March 2026, the substantial majority have been founder-led or controlled corporations operating in the innovative technology sector of the economy (including crypto, artificial intelligence, biotechnology, digital marketing, cloud computing, and e-commerce). This proxy season has begun to see some movement by public corporations without a controlling stockholder or dominant founder to redomesticate to Texas, with both Exxon Mobil and Dell submitting such proposals to their shareholders at the time of the article’s publication. Although Exxon is a New Jersey, and not a Delaware, corporation, its redomestication to Texas is being noted by many Delaware corporations and may be seen as an early indication of nonfounder company interest in Texas as a domicile.

The aggregate impact on Delaware therefore appears more concentrated than the volume of press coverage might suggest.

A parallel observation should also be considered. Delaware experienced a real increase in new entity formations during 2025, with growth in both absolute terms and relative to competing jurisdictions. Private companies, representing many Delaware incorporations and approximately two-thirds of Delaware’s franchise revenue, continue to select Delaware. DExit at this time represents a durable phenomenon affecting a specific and limited class of issuers, with expansion to a broader corporate base likely to be influenced by the reactions to the Dell and Exxon moves.

An Assessment of Senate Bill 21

Senate Bill 21 may be described as having succeeded with respect to its principal legal objectives while leaving unaddressed certain economic and structural concerns that have continued to drive reincorporation. The amendments to Section 144 have restored a measure of procedural clarity to controlling-stockholder transactions and have substantially limited the entire-fairness exposure that follows from a deficiency in any one of the procedural protections previously imposed by the Court of Chancery. The amendments to Section 220 have similarly constrained the use of books-and-records demands as a vehicle for pre-litigation discovery. With the Delaware Supreme Court having now upheld the legislation, these reforms may be relied upon as durable features of Delaware corporate practice.

The legislation did not, however, address two factors that have continued to motivate reincorporation. The first is the Delaware franchise tax, which can impose a meaningful annual cost on large issuers and which several reincorporating companies have expressly cited in their public filings. The proxy materials filed by AMC Networks and Madison Square Garden Entertainment in connection with their respective Nevada reincorporations illustrate this point, as does the Coinbase information statement, which also expressed concern with the absence of bright-line standards in Delaware corporate adjudication. Delaware state government is highly dependent upon the franchise tax to fund itself. Texas and Nevada are not. So higher franchise taxes can be expected in Delaware.

The second factor that continued to motivate reincorporation is the broader litigation climate, in which fee-driven plaintiff practice continues to impose costs that SB 21 narrows but does not eliminate. Of note, the Corporation Law Council of the Delaware Bar ultimately recommended against any statutory cap on the attorneys’ fees that may be paid in derivative and other corporate litigation. This recommendation, if followed by the legislature, may show continued support for an active litigation environment in Delaware. SEC Chairman Paul Atkins has noticed this, commenting in a speech at the Weinberg Center in Delaware that Delaware is not only uninterested in reform, but instead, seems to embrace the litigation costs that abusive lawsuits impose on companies franchised in Delaware.

The pace of reincorporation in 2025 and into 2026 shows, in part, the persistence of these unaddressed factors. SB 21 has stabilized the legal environment for issuers that elect to remain in Delaware, but has not foreclosed a larger discussion about choice of state incorporation.

Counsel to Boards Considering the Question

The foregoing analysis suggests several considerations that should inform any board’s evaluation of corporate domicile in the present environment.

A decision to redomesticate from Delaware imposes significant costs, which include the preparation and circulation of proxy materials, the risk of stockholder rejection, and the possibility of litigation challenging the disclosure rationale advanced in support of the change. The plaintiffs bar has started to scrutinize re-domestication proxies looking at light justifications, and disclosures that emphasize generalized litigation concerns without identifying specific transactional or governance considerations. Any such decision should be made only after a careful review of both the costs and benefits of remaining in Delaware, and should avoid looking at corporation incorporation as a one-size-fits-all determination.

A board that elects to remain in Delaware should review its governance practices considering the SB 21 framework. The Section 144 safe harbors are available only to boards that have structured their committee composition, independence determinations, and disclosure protocols to invoke them. Counsel should be engaged to confirm that the company is positioned to obtain the benefits the legislation provides.

A board representing a company that is dissatisfied with the governance regime and litigation environment in Delaware should thoughtfully consider whether the benefits of incorporating within a different state outweigh the costs of transition. For such a company, the case for reincorporation in Texas is much stronger than it was eighteen months ago and warrants serious consideration on the merits. Nevada has also continued to evolve and remains an attractive jurisdiction especially for controlled or founder led companies. The combination of statutory predictability, the institutional development of the Texas Business Court, and the economic advantages of the Texas franchise tax structure has produced a very credible alternative for the appropriate corporate profile. In addition, recent reforms in Texas appear to reduce the litigation risk for a Texas corporation versus a Delaware corporation, although how the reforms play out in practice will continue to develop.

Nevertheless, Delaware is decades ahead of Texas (and Nevada) in the development of case law interpreting statutory rules and standards. The most important Texas corporate law case, Pennzoil v. Texaco, is controversial to this day. A huge and nuanced body of case law is in itself a major advantage of Delaware and a reason weighing in favor of continued domestication there.

Finally, the 2026 proxy season will provide the first comprehensive evidence of how boards and stockholders are responding to the new equilibrium created by the Delaware Supreme Court’s validation of SB 21, the operation of Texas Senate Bill 29, and the parallel reforms enacted in Nevada. The proposals filed and the votes cast will indicate whether the rate of reincorporation begins to moderate or continues at the pace observed through 2025.

The DExit phenomenon has some clarification in its second full year of activity. While Delaware retains its position as the dominant jurisdiction of incorporation for most American corporations, and the Delaware Supreme Court has now confirmed the validity of the principal legislative response to recent judicial developments, the proper characterization of the present moment is the emergence of a more genuinely competitive landscape in which the choice of corporate domicile has become a substantive question warranting careful analysis.

Reprinted with permission from the May 27, 2026, edition of the “Delaware Business Court Insider”© 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or [email protected]