Southwest is (and has long been) a Texas-incorporated company.

After Texas reformed its governance laws, Southwest adopted a bylaw requiring that derivative actions only be brought by shareholders with a minimum 3% stake.

Subsequently, an investor holding only 100 shares filed a derivative action in federal court, alleging that Southwest’s directors breached their fiduciary duties to the company when they abandoned Southwest’s “Bags Fly Free” policy in the wake of an activist intervention by Elliott Investment Management. (It’s a silly lawsuit, whatever). Southwest invoked the bylaw in its motion to dismiss.

The plaintiff offered a number of challenges to the Texas law, including that it was inapplicable to him because he served a demand before the law passed, and that the law was impermissibly retroactive as applied to his claim. In Gusinsky v. Reynolds, 3:25-cv-01816, the court rejected these.

The plaintiff also, however, alleged that Southwest’s directors breached their fiduciary obligations by adopting such a limit on derivative lawsuits in the first place, a claim that the court rejected because … the plaintiff did not have the 3% stake necessary to advance it.

More seriously, it’s worth noting that when plaintiffs in Delaware brought a facial challenge to…

(Previously.) Here is one company’s method for avoiding inclusion:

Service. They’re contesting service.

I’ve previously blogged a couple of times about SPVs as a vehicle for investing in private companies. They not only skirt the law regarding the number of investors a company can have before it is required to make public disclosures, but they also may layer on high fees and suspect valuations – and that’s if they aren’t outright fraudulent.

Anyway, I post because Bloomberg had a nice feature on this yesterday, pointing out both the risk of fraud, and simply the risk of losing one’s shirt.  (It references two lawsuits that have been filed in Delaware over these vehicles; if I’m right, one I blogged about before, and the other is this one, where a fund put $10 million into an SPV that was supposed to acquire SpaceX shares, and doesn’t seem to be able to get any financial reports.)

But even aside from actual fraud cases, the SPV may only have shares in another SPV that somewhere down the line has shares, and leaving aside valuation and fee questions, when the company does go public, those shares might be locked up and nontradeable for some period of time, leaving the SPVs holding illiquid investments that could…

ExxonMobil is a Texas corporation in all but name, with most senior corporate executives and all corporate functions based in the state for the last 35 years. Our global headquarters are

Sorry, Ben, I’m jumping on this one.

Exxon is proposing to move its domicile to Texas.

It’s an obvious move for Exxon; their headquarters are there so they’re not exposing themselves to lawsuits in a different venue, and they also perhaps expect, shall we say, a friendlier judicial reception in Texas.

But Exxon isn’t a Delaware company. It’s a New Jersey one, old school from when it was Standard Oil and New Jersey dominated the market for corporate charters. Right now, they’re the subject of a couple of lawsuits in New Jersey over their retail shareholding program, and they’re fighting to transfer those to Texas.

But Exxon doesn’t have a controlling shareholder; its shareholders are normie institutions like BlackRock and State Street.

Perhaps to placate them over the move, it’s explicitly not going to opt in to the Texas provisions that would allow ownership thresholds on shareholder proposals and derivative lawsuits – provisions that did not exist when, say, Tesla asked them to vote on a move.

But, it’s also not committing in the charter not to adopt those provisions in a unilateral director-passed bylaw in the future (compare, for example, ArcBest, which promised in the charter…

I begin with illegality. Under Delaware law, contracts “purport[ing] to require a board to act or not act in such a fashion as to limit the exercise of fiduciary duties” are “invalid and unenforceable.” In the merger context, a board may not “disable[] itself from exercising its own fiduciary obligations at a time when the board’s own judgment is most important, i.e., receipt of a subsequent superior offer.” For example, “[d]irectors cannot be precluded by the terms of an overly restrictive ‘no-shop’ provision from all consideration of possible better transactions.”64 Boards are required to bargain for effective fiduciary out clauses permitting them to discharge their managerial authority in fidelity to stockholders. When managerial authority is preserved, the Court will

Following up on January’s post on this topic, we have some updates. This is the list I’ve compiled so far.

Announced Moves as of February 26

We’ve got an additional seven entries since the last update with some multi-billion dollar companies announcing for Texas now, including ArcBest which came out today.

To make this easier to understand, I’ve recruited a couple of Research Assistants to help with data visualizations, so many thanks to Ethan Viator and Hunter Hawkins for helping pull these together. You can see my full data here with some notes for follow up from our two brave research assistants. I’ve also added a column to track disclosed…