Delaware Keeps Business Filing Edge As Texas Starts Fast Service

Over the last few years, a debate has unfolded about whether a number of corporations are fleeing Delaware for competing states such as Texas, Nevada, and others because of recent corporate law developments. Practitioners, law professors, and corporate constituencies have dubbed it “DExit.”

Changes in the laws and policies of these competing states make them more attractive as a domicile for companies, with Tesla making the noisiest withdrawal. That includes the recent announcement of the “Texas Express” service from Texas Secretary of State Jane Nelson for business filings, which warrants a comparison to the services currently provided by the Delaware Division of Corporations.

Although the Texas Express service now offers quicker turnaround times for corporate filings, it still doesn’t offer the highly expedited services offered by the Delaware Division of Corporations.

Texas vs. Delaware

For various reasons, expedited delivery or processing of corporate documents is often needed. Waiting days or weeks for documents to be processed can cause difficulties for those forming businesses quickly or during fast-moving mergers.

For that reason, Delaware has long provided highly expedited processing of corporate filings — offering certification of filed documents in as quickly as an hour. This is only one of the many benefits touted by those who believe the state will continue to hold its prominence in the corporate world.

Now, companies will be able to get a similar service from Texas. The creation of the Texas Express service, announced on July 14, provides same-day or next-day service. Texas Express can provide same-day processing of business filings for an additional fee of $750 per document, and next-day processing for a fee of $500 per document — in addition to the ordinary filing fees. The intent may be to emulate a similar level of service provided by the Delaware Division of Corporations for processing business filings.

While this announcement is an improvement for Texas entities, the Delaware Division of Corporations provides a superior level of speed, responsiveness, efficiency, and cost.

For example, it doesn’t appear that Texas offers the one-hour service that Delaware offers. In Delaware, one can confirm the formation of an entity or receive confirmation of a filing within a matter of hours. The Delaware Division of Corporations will process the request within the requested time (such as one hour) and a filer can request a confirmation email.

Delaware also offers more options for expedited filings, with the most expedited services offered by Delaware being unavailable in Texas. For the two services — same-day and next-day — which are also offered in Texas, Delaware still proves to be less expensive, and easier to actually file.

The Delaware Division of Corporations provides several options to allow entities to request expedited service both for corporate filings or for uniform commercial code filings for a fee in addition to the normal filing fee.

While Delaware offers one-hour service, which can be requested for $1,000, it appears that the same level of expedited service is unavailable in Texas. Delaware also provides two-hour service for an additional fee of $500; Texas doesn’t offer two-hour service. Texas also announced that it will charge an additional fee for same day-service and next-day service, which Delaware already provides.

For practitioners in a fast-moving situation, even more impressive is the cut-off time for the receipt of filings by the Delaware Division of Corporations. One-hour service can be completed if the filing is received by 9 p.m. ET, andtwo-hour service can be accomplished if the filing is received by 7 p.m. ET. Same-day service requires receipt only before 2 p.m. ET. In contrast, Texas requires submission by noon for both same-day and next-day service.

Ease of access is another major difference between Texas and Delaware. Here, Delaware again proves itself to be more user-friendly. While the Texas Business Express service requires that same-day and next-day filings must be submitted in person, the Delaware Division of Corporations allows electronic requests via its website.

To use the new Texas Express service, Texas filers must present themselves in person to the Texas agency or send a courier with their documents, while Delaware filers can easily complete the request from their desks or phones.

Delaware still provides superior and faster business filing services that better suit the needs of today’s businesses, as proven by its efficient and responsive service that causes the majority of the Fortune 500 and nearly 70% of new US initial public offerings to choose Delaware as their corporate domicile.

Delaware has long been known for its business friendly policies, and the Division of Corporations’ prompt and efficient services are just one part of that ecosphere. Key for practitioners is the flexibility provided by the Division of Corporations’ remote filing system, its later filing cut-off times, and its ability to certify filings in as little as one hour. These advantages are invaluable to practitioners and will serve to keep Delaware as a leader in corporate law.

While the Texas Secretary of State is making great strides in implementing its new Texas Express offering, it still doesn’t beat the efficiency of service offered by the Delaware Division of Corporations.

Originally published by Bloomberg Law.