In the preliminary proxy statement for its 2026 annual meeting of shareholders, Exxon Mobil Corp. (NYSE: XOM) proposes that shareholders approve a plan to reincorporate the company in Texas, which would end its 144-year legal domicile in New Jersey. Exxon is one of the largest U.S. public companies to propose changing its state of incorporation, which highlights the growing appeal of Texas as the state of incorporation for public companies as a result of recent developments in Texas.
Exxon’s Proposed Redomestication Isn’t Texas’s First Rodeo
While Exxon is one of the largest public companies to propose redomestication to Texas to date, several other public companies have successfully obtained shareholder approval for redomestication to Texas in the last few years. A majority of the public companies that have reincorporated in Texas, such as Tesla, Inc., Dillard’s, Inc. and Coinbase Inc., have been founder-led or controlled companies. Those companies tend to have concentrated voting power, which in turn enables the controlling shareholder to leverage significant control over or influence company decisions. They also tend to face higher risk of corporate-litigation, making them particularly focused on the laws and courts of their state of legal domicile. Exxon’s move, in contrast, underscores a growing contingent of non-controlled companies—such as ArcBest Corporation (“ArcBest”) and Texas Capital Bancshares, Inc. (“TCBI”)—that have also proposed to reincorporate in Texas. Exxon’s stated reasons include seeking deference to board’s decisions, reducing frivolous litigation, and aligning state of incorporation with its operational and management footprint. These reasons illustrate why non-controlled companies may find Texas’s updated governance framework appealing.
Because reincorporation requires shareholder approval, the boards of many non-controlled companies are also making meaningful efforts to engage with shareholders prior to soliciting a vote in order to garner support from a diffuse shareholder group that may not be familiar with similarities and differences between Texas state corporate law and the state of the company’s incorporation (often, Delaware, but in Exxon’s case, New Jersey).
Why Texas Will Continue to Draw More Attention for Reincorporations in 2026
While Exxon proposes to redomicile from New Jersey, most companies considering redomiciling currently are domiciled in Delaware. For many decades, Delaware has been the default jurisdiction for most U.S. public companies because of its flexible corporate laws and a highly-respected judiciary and corporate bar. Recent court rulings, perceived by some observers as altering the state’s traditional deference to board decisions, have prompted certain boards to reassess whether Delaware remains the best fit for their particular needs, particularly as others states such as Texas and Nevada continue to change their corporate and judicial systems to accommodate highly-sophisticated businesses.
Texas has recently drawn attention as a competitive option for reincorporation thanks to its creation of a specialized business court, the arrival of additional stock exchanges and financial institutions to Dallas, and the adoption of business‑focused legislation.
Here are five factors that boards may consider as they evaluate incorporation options. This analysis is descriptive, not prescriptive. Each company should weigh how, and whether, these and other considerations apply to its particular circumstances.
Shareholder Proposal Thresholds and Potential Reductions in Proxy‑Season Activity
Effective September 1, 2025, Texas SB 1057 established stricter ownership thresholds for shareholders to submit proxy proposals. Texas corporations[1] that either have their principal office in Texas or are listed on a Texas stock exchange can opt into the threshold, which establishes that shareholder proposals may only be submitted by shareholders who hold at least $1 million in market value or 3% of the corporation’s shares entitled to vote on the proposal; have held such shares continuously for six months prior to the shareholder meeting; and solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote on the proposal (the “shareholder proposal threshold”).
As more non‑controlled companies explore reincorporation, boards have taken different approaches to navigating Texas’s shareholder proposal threshold. For instance, ArcBest has expressly opted out of the Texas shareholder proposal threshold in its charter and will require a future charter amendment to adopt the shareholder proposal threshold. Taking the middle ground, Exxon rejected the shareholder proposal threshold but did not place limits on itself to adopt the threshold in the future. On the other hand, TCBI put the shareholder proposal threshold to an advisory shareholder vote concurrently with, and contingent on, the shareholder vote to approve redomestication. These three approaches demonstrate a hesitancy on the part of non-controlled companies to adopt Texas corporate statutes that could be viewed as weakening shareholder rights in comparison to laws of their current state of incorporation.
Why it matters: The shareholder proposal threshold may curb low‑stakes activism and focus board time on material proposals, reducing distraction and compliance overhead in the proxy season. Nevertheless, the shareholder proposal threshold may prove unpopular with institutional holders, who may believe that shareholder rights are weakened as a result rather than protected through the reduction of distraction and cost.
Litigation Procedures and the Business Judgment Rule
Though Texas case law has never acknowledged heightened standards such as “entire fairness” or “enhanced scrutiny,” Texas revised the Texas Business Organizations Code to codify the business judgment rule, which better insulates officers and directors from actions taken in good faith for the benefit of the corporation. The codification of the business judgment rule makes it unlikely that Texas courts will review actions under either heightened standard.
Under Texas corporate law, companies may draft their governance documents to designate Texas courts as the exclusive forum and venue for resolving internal entity claims. The Texas Business Court began hearing cases in September 2024, and judges on the Texas Business Court are appointed based on their expertise with business disputes. Texas entities may waive the right to a jury trial for any internal affairs claim in their governing documents.
Texas also limits derivative litigation in several ways that can place decisions about derivative litigation into the hands of independent directors. First, Texas requires a demand on the corporation and does not allow the practice of pleading demand futility, which is permitted under Delaware law. Second, the decision of independent and disinterested directors regarding the claim is binding on Texas courts, whereas Delaware courts can override board decisions if the court determines the refusal was uninformed or made in bad faith. Third, Texas mandates deference to the decisions of committees of disinterested directors about company transactions with related parties, including controlling shareholders. When a committee is desirable to evaluate related party transactions, companies can choose to ask a court to preapprove the committee’s independence and disinterestedness. Assuming no important facts were withheld from the court, the advance confirmation of a committee’s disinterestedness significantly reduces the risk that plaintiffs will later bring or succeed in a claim challenging the committee’s disinterestedness or decisions. Finally, corporations in Texas that are publicly traded or have at least 500 shareholders may adopt a minimum share ownership percentage for shareholders not exceeding 3% in order to institute or maintain a derivative proceeding (the “derivative share ownership threshold”). Boards of companies looking to reincorporate have taken varied approaches to electing into Texas’s permitted ownership limitations on derivative lawsuits. In contrast to earlier controlled companies seeking to reincorporate, ArcBest and Exxon have expressly declined to establish the 3% threshold for derivative lawsuits, citing preservation of existing shareholder rights as the underlying rationale.
The establishment of the Texas Business Court, the codification of the business judgment rule, procedural differences in managing derivative claims, and the deference mandated for decisions of disinterest directors address litigation risks that affect all companies, even those without a dominant or controlling shareholder. Even though Texas has positioned itself as a strong alternative to Delaware, the Delaware Court of Chancery’s deep experience and extensive body of case law underscore the strength of Delaware’s reputation as a leading corporate law jurisdiction. It remains to be seen how the Texas Business Court will adjudicate certain corporate governance cases.
Why it matters: Texas’s litigation landscape can deter opportunistic suits and give boards confidence to take informed and disciplined risk. For controlled companies, absence of an “entire fairness” framework reduces litigation risk.
Simplified Class Voting Structures
Texas last year eliminated a requirement for separate votes by each class or series of shares for many corporate actions, including business combinations. The old rules limited flexibility for companies with multiple share classes by requiring mandatory, separate class voting rights on many matters including significant business transactions such as mergers. The 2025 amendments give Texas corporations more freedom to design voting rights for different classes or series of shares, including allowing voting as a single group and removing the requirement for separate class votes on major corporate actions.
Why it matters: This important, under-the-radar legal change should spur more reincorporation and initial public offerings in Texas, because it provides pre-public and public companies with a more flexible, streamlined capital framework, removing friction in pre-IPO structuring and promoting post-IPO transactional agility and aligning it with other leading corporate jurisdictions.
Cost Savings
Delaware imposes a relatively high franchise tax. By contrast, companies incorporated in Texas generally avoid Delaware’s annual franchise tax burden. Based on typical company profiles, the potential savings for small- or mid‑cap companies may average around $250,000 annually, though actual outcomes vary widely depending on capital structure and share count.
Why it matters: Franchise tax differences may be a relevant factor for some companies, particularly those that place a premium on reducing recurring administrative costs. These savings should be considered in light of the potential costs of effecting a reincorporation.
A Strong Operational Nexus To Texas
Some companies give strong consideration to Texas if they have substantial operational, financial, or managerial ties to the state. High‑profile examples of companies headquartered in Texas and now incorporated or proposing to incorporate there include Tesla and Exxon, though the circumstances of these companies may not be representative of other companies. Although Exxon notably has been incorporated in New Jersey for over a century, the company observes in its redomestication proposal that most senior corporate executives and all corporate functions have been based in Texas for the last 35 years.
Why it matters: Familiarity alone, to be sure, will not drive a move to Texas, but it might tip the scales. Companies with deep Texas roots can capture legal alignment and stakeholder goodwill by matching legal domicile to operational reality.
Conclusion
Reincorporation decisions are highly fact‑specific and require the careful exercise of a board’s judgment to determine what is in the best interests of the company and its stockholders. Exxon’s move may serve as a bellwether for other companies, especially non-controlled companies with large Texas operations, to explore new opportunities for reincorporation, but no single jurisdiction will be the right answer for every company.
The real story of 2026 may not be of a mass corporate migration, but of a marketplace waking up to the fact that it has meaningful options as different states consider how best to address the relative rights and obligations of companies, boards, managers and stockholders. After years of treating domicile selection as a default decision, boards now have a greater range of choices to accomplish their strategic goals.
[1] A public Texas corporation is a Texas corporation that “has a class or series of voting shares listed on a national securities exchange.” The TBOC defines a national securities exchange to be both a national securities exchange as defined under Section 6 of the Securities Exchange Act of 1934 (for example, NYSE and Nasdaq) as well as a stock exchange that has its principal office in Texas and has been approved under certain provisions of the Texas securities laws. Note that many public reporting companies are not listed on a national securities exchange or a Texas stock exchange and will not meet this definition.
