The New Texas Business Court: A Challenge to Delaware’s Corporate Dominance?

For decades, Delaware has held the undisputed crown as the premier jurisdiction for business incorporations in the United States. With its well-developed corporate laws, business-friendly court system, and specialized Court of Chancery, Delaware has attracted corporations both domestically and internationally. However, Texas is now positioning itself as a serious competitor with the establishment of the Texas Business Court. Could this new development make Texas the “New Delaware” of incorporations?

What is the Texas Business Court?

The Texas Business Court is a newly created court system designed specifically to handle complex commercial disputes. Established by House Bill 19, signed into law in June 2023, the court is set to become operational in September 2024. The primary goal of the Texas Business Court is to streamline litigation for high-stakes business matters, reducing the burden on general civil courts and offering a more specialized approach to corporate legal disputes.

The court will have jurisdiction over business-related cases, including disputes involving publicly traded companies, high-value contract cases, shareholder disputes, and fiduciary duty claims. Judges in the Texas Business Court will be appointed by the governor and will have expertise in business law, ensuring a level of specialization similar to Delaware’s Court of Chancery.

How Texas is Competing with Delaware

While Delaware’s corporate dominance remains strong, Texas is making strategic moves to challenge its position. Here’s how:

1. Business-Friendly Environment: Texas already boasts a pro-business climate with no state income tax and a robust economy. The introduction of a specialized business court is another step toward attracting corporate entities.
2. Judicial Efficiency: The Texas Business Court aims to expedite corporate litigation, addressing one of the biggest challenges businesses face—delays in resolving legal disputes.
3. Specialized Judiciary: Like Delaware’s Court of Chancery, the Texas Business Court will be overseen by judges with extensive business law expertise. This is intended to create a more predictable and efficient legal process for corporate cases.
4. Appeal Process: Unlike Delaware’s Court of Chancery, which routes appeals through the Delaware Supreme Court, Texas will introduce a separate Business Court of Appeals, designed to handle corporate litigation efficiently.
5. Attracting Business Incorporations: Texas hopes that its new court system will make it an appealing alternative for businesses looking to incorporate. While Delaware has historically been the top choice, Texas’s strong economy and growing reputation as a business hub could shift the landscape.

Will Texas Overtake Delaware?

Although Texas is making a bold move, it faces significant challenges in dethroning Delaware. Delaware’s corporate law infrastructure has been refined over decades, and its Court of Chancery has established a track record of consistent, business-friendly rulings. Moreover, Delaware law is deeply embedded in the governance of publicly traded companies, making an immediate shift unlikely.

However, Texas has key advantages, including its economic growth, lower cost of doing business, and increasing appeal to corporations. If the Texas Business Court proves effective, more businesses may consider Texas for incorporation, especially those already headquartered there.

What This Means for Businesses

Companies now have more options when choosing where to incorporate. Businesses considering Texas should weigh factors such as the court’s efficiency, legal predictability, and potential cost savings. While Delaware remains the gold standard, Texas’s move signals a broader shift in the competitive landscape of corporate law.

For companies navigating these changes, having expert guidance is essential. International Business Company Formation, Inc. (IBCF) provides strategic support for business incorporations, entity management, and compliance services in both Delaware and Texas. Contact us to explore the best jurisdiction for your business needs.

Texas is entering the corporate law arena with ambitious goals. While it may not yet surpass Delaware, the Texas Business Court represents a significant step toward redefining business litigation and incorporation trends in the U.S. As more businesses evaluate their options, the corporate legal landscape may witness a shift that puts Texas on the map as a premier incorporation hub.