Texas’s Attempt to Compete with Delaware

Delaware derives substantial economic benefits from attracting incorporation business. Other states have sought to receive a share of these economic benefits. Texas is among them. Part I of this article will consider Texas’s attempt to copy Delaware’s enabling philosophy.

It will conclude that, although the Texas courts have not always shared Delaware’s enabling view, the Texas legislature has historically done its best to place Texas on a par with Delaware in terms of its enabling philosophy of corporate governance. In recent times, the Texas legislature has actually outdone the Delaware legislature in creating a pro-managerial corporate environment. Part II of this article will consider Texas’s attempt to create specialized business tribunals to deal with corporate matters in an effort to create a professional business judiciary that will rival Delaware’s. This part will conclude that the creation of these tribunals is a step in the right direction but will not necessarily place the Texas courts on the same level as Delaware’s.  The real problem with competing with Delaware for incorporation business involves the third of Delaware’s basic advantages. Delaware has well developed bodies of law in most important corporate areas.

Despite its status as the second most populous state in the country, Texas has a relative dearth of corporate caselaw when compared to Delaware. Part III of this article will demonstrate that there are significant areas where Texas caselaw provides little or no guidance. This Delaware advantage will take significant time to overcome, if it can ever be overcome. Thus, there is reason to question whether Texas, or any other state, can successfully compete with Delaware to become the incorporation jurisdiction of choice.