News Summary
Texas Governor Greg Abbott has signed a significant new law, Senate Bill 29, which enhances corporate governance and entrepreneurial opportunities in the state. The legislation introduces the Business Judgment Rule, protecting corporate directors from personal liability while making good faith decisions. This move aims to solidify Texas as a business-friendly environment, with new measures to reduce litigation risks and manage internal governance disputes. The adjustments are designed to maintain privacy for companies and streamline shareholder interactions, marking a notable shift in Texas’ corporate landscape.
Texas Governor Greg Abbott signed Senate Bill 29 (SB 29) into law on May 14, 2025, aimed at enhancing corporate governance and making the state a more attractive jurisdiction for businesses. This legislation was passed by the Texas Legislature on May 7, 2025, and is effective immediately, amending several provisions within the Texas Business Organizations Code (TBOC).
SB 29 introduces significant reforms that enhance legal certainty for entities formed in Texas while reducing litigation exposure for corporate leaders. One of the key aspects of the bill is the codification of the Business Judgment Rule. This rule protects corporate directors from personal liability when they make decisions in good faith, with reasonable care, and in the best interests of the corporation. This provision allows corporate decision-makers to focus on effectively managing their businesses without the constant worry of personal liability risks.
The reforms under SB 29 affect public companies listed on national exchanges and any corporation that opts to adopt the Business Judgment Rule into its governance practices. Furthermore, the legislation enables future lawsuits involving public companies or those with a controversy of at least $5 million to be litigated in the newly established Texas Business Court.
One of the notable changes introduced by SB 29 allows limited partnerships to eliminate their traditional duties of loyalty, care, and good faith under specific conditions delineated in their partnership agreements. Additionally, the law places limitations on shareholder litigation. Specifically, shareholders or groups that hold less than 3% of corporate stock are now prohibited from initiating derivative proceedings against public companies or those with over 500 shareholders. This reform is designed to curb abusive litigation practices that can burden businesses.
Under the new law, plaintiffs’ counsel cannot recover attorney’s fees in derivative actions when the only result is additional or amended disclosures to shareholders, irrespective of the disclosures’ materiality. To further strengthen corporate governance, the bill allows public corporations to form independent committees tasked with reviewing transactions involving insiders, and these corporations may seek Judicial review of committee members’ independence.
SB 29 also introduces restrictions on shareholder requests for company records, particularly emails and similar communications, unless they are directly related to corporate actions. Corporations now have the ability to limit access to books and records during ongoing litigation or derivative proceedings, thus providing an additional layer of protection against unwarranted inquiries.
In terms of venue for internal governance claims, the bill permits corporations to designate Texas-controlled courts as the exclusive venue. This aligns with the goal of making Texas a more business-friendly location by simplifying legal processes for corporations. Moreover, domestic entities can incorporate jury waiver provisions in their governing documents, which is enforceable against individuals who vote for or ratify such changes.
The author of SB 29, Senator Bryan Hughes, described the legislation as “groundbreaking.” It is anticipated that these detailed reforms will bolster business confidence in Texas and encourage more companies to establish their operations in the state. The passage of SB 29 signals a broader movement toward fostering a business-friendly climate within Texas, as additional legislative measures are being considered to expand the Texas Business Court’s jurisdiction and scope.
Overall, SB 29 represents a pivotal shift in corporate governance in Texas, aiming to attract new businesses while providing existing ones the legal framework necessary to operate effectively and with reduced risks.
Deeper Dive: News & Info About This Topic
- Nasdaq: Supports Texas Senate Bill 29
- Foley: Passage of Senate Bill 29
- KVUE: Texas Governor Abbott Signs Bills
- National Law Review: Texas Governor Signs New Business-Friendly Law
- GuruFocus: Nasdaq Applauds Signing of Senate Bill 29
Author: STAFF HERE COLLEGE WRITER
The COLLEGE STATION STAFF WRITER represents the experienced team at HERECollegeStation.com, your go-to source for actionable local news and information in College Station, Brazos County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Brazos Valley Fair & Rodeo, Chilifest, and Aggie Muster. Our coverage extends to key organizations like the Bryan-College Station Chamber of Commerce and United Way of the Brazos Valley, plus leading businesses in education, biotechnology, and retail that power the local economy such as Texas A&M University, Fujifilm Diosynth Biotechnologies, and H-E-B. As part of the broader HERE network, including HEREAustinTX.com, HEREDallas.com, HEREHouston.com, and HERESanAntonio.com, we provide comprehensive, credible insights into Texas's dynamic landscape.
