www.loubar.org 6 Louisville Bar Briefs PROFESSIONAL EXCELLENCE Challenging Delaware: Texas’ Rise in Company Formations Drew Teague For more than 120 years, Delaware was the premiere state for corporate laws. Long a tax haven for business with favorable laws, its grip on serving as the go-to state for company creation is slipping. There is a new contender in the ring, and that’s Texas. Delaware’s Rise In the 1890s, New Jersey began enacting laws to let businesses just do business as they pleased. These laws allowed compa- nies to own stock, form for any purpose and set the duration of the company. Dela- ware took notice. New Jersey was raising a significant amount of money from the corporate filing fees, and franchise taxes it was collecting raised enough to pay off the state debt and abolish property taxes, as detailed by The New York Times. Delaware, another small state, copied New Jersey, but with an important change. Delaware enacted its General Corporation Law in 1899 (the “1899 Law”), which began its rise as the go-to state for company cre- ation. The key difference from New Jersey? It charged lower fees. The 1899 Law allowed anyone to form a company within the state, so long as they paid a fee and filed the company’s articles of incorporation. It also helped lower taxes for companies on their capital without requiring the company to have their headquarters in the state. At the time, New Jersey was chal- lenging Delaware in its corporate laws, but in the 1910s, a split arose. Delaware began to hit its stride in 1913. By 1920, New Jersey had repealed its 1890s corporate reforms, and Delaware was there to take over in the corporate space. Why does it matter where a company is formed? Its state law governs the company’s governance, and that is the state law applied by courts. Over the past century, Delaware’s Court of Chancery (the “Chancery Court”) has developed case law for corporate gov- ernance and per its website, it “is widely recognized as the nation’s preeminent form for determination of disputes involving the internal affairs of thousands upon thousands of Delaware corporations and other business entities through which a vast amount of the world’s commercial affairs is conducted.” The Chancery Court has one Chancellor and six Vice Chancellors, appointed for 12-year terms. There are no juries involved in mat- ters before the Chancery Court. As of January 2025, Delaware was home to more than 2,000,000 companies, includ- ing more than two-thirds of Fortune 500 companies. The state’s strong tax-friendly structure and the Chancery Court’s exper- tise has created a strong company-friendly environment. Lenders Prefer Delaware Given this history, the laws and the Chan- cery Court, Delaware is the preferred state of formation in Commercial Mortgage- Backed Securities, commonly known as CMBS, loans. Most lenders who provide CMBS loans require their borrowers to be a Delaware limited liability company, which provides certainty for the investors. Other non-CMBS lenders or balance-sheet lenders generally require it as well, but can be more flexible depending on the loan amount or if the borrower will include a Delaware limited liability company as the non-Delaware bor- rower’s sole member, which would provide many of the same protections. AAPI Heritage Month AAPI Heritage Month AAPI attorneys remain underrepresented in firm leadership and the judiciary. Amplify AAPI colleagues' work, seek out AAPI-authored legal scholarship and examine your recruitment pipeline with fresh eyes. ✦ Tip: Move from mentorship to active sponsorship — advocate for a colleague's advancement by name. Mental Health Awareness Month Attorneys face some of the highest rates of depression and anxiety of any profession. The Health & Wellness Committee encourages open, honest conversation, because wellbeing is a professional priority, not a sidebar. ✦ Tip: Name KYLAP out loud at your next team meeting — not just buried in a benefits packet. Jewish American Heritage Month Jewish American attorneys and jurists have played historic roles in civil rights, labor law and constitutional law. Recognition and calendar awareness are simple, meaningful acts of inclusion. ✦ Tip: Check for religious observance conflicts before scheduling depositions or firm events. Military Appreciation Month Veteran attorneys bring discipline and a distinct perspective to the profession. Non-traditional career paths — including military service — are credentials, not red flags on a resume. ✦ Tip: Review how your firm evaluates candidates with unconventional career timelines. Diversity and Inclusion Committee Corner Awareness months give us a common starting point and a shared language for equity work that matters year-round. May is one of the richest months on the diversity calendar - a meaningful opportunity to reflect on who we serve and how we show up. May 2026 Mental Health Awareness Jewish American Heritage Military Appreciation Month ✦ This Month, Try This ✦ Sponsor, not just mentor, a colleague from an underrepresented background. Audit your calendar for religious and cultural conflicts before finalizing events. Name KYLAP in a team meeting — leaders who talk about it change the culture around them. Reconsider what a non-traditional career path actually signals about a candidate. By the Numbers Only 5% of U.S. attorneys identify as Asian American, though AAPI Americans make up nearly 6% of the population. Representation in law starts with intentional action. Source: ABA Profile of the Legal Profession Questions or ideas? Contact the DEI Committee through Lisa Murray at [email protected] (Continued on next page) “ While Delaware has been the go-to for more than a century, other states are making pushes to take over as a strong state for company formations.
