Forming a Vassal Faction

Forming a Vassal Faction is an option that the Head of a House can undertake to divide their domain into smaller pieces in order to circumvent the Vassal Limit.

Codex
"Factions come into being either through rebellion, or by a powerful leader carving up their territory to make it more manageable.

When a vassal faction is formed, the leader chooses one of their rulers and grants them ownership over some other systems in their faction (note that the actions to form a vassal faction and transfer a system to their ownership are separate). This raises that ruler to the status of a leader themselves, although they remain a vassal. The master faction of the new vassal faction is immediately considered to have a legitimate claim to being the master of that faction."