News Summary
Texas has enacted significant reforms to its business regulations with the passage of Senate Bill 29 (SB 29), aimed at making the state more attractive for business incorporation. The new laws establish a more protective legal framework for directors and officers, streamline legal processes, and create a predictable environment for businesses to thrive. With increased powers for boards and limitations on frivolous lawsuits, Texas is positioning itself as a competitive alternative to Delaware for companies looking to incorporate.
Texas has enacted comprehensive amendments to its Business Organizations Code, marking a significant shift in its approach to business regulation. On May 14, 2025, Governor Greg Abbott signed Senate Bill 29 (SB 29), a legislative initiative designed to enhance Texas’s attractiveness as a destination for business incorporation. Amid ongoing competition with Delaware, particularly following that state’s recent pro-management reforms spurred by the “DExit” movement, Texas aims to create a more favorable legal landscape for companies operating within its borders.
The reforms introduced in SB 29 are tailored to foster a predictable and business-friendly environment. Critical provisions include the codification of the business judgment rule, which grants directors and officers a strong presumption that they are acting in good faith for the vested interests of the company. This offers legal protections that could potentially limit lawsuits against corporate leaders when making decisions that may be contested by shareholders.
Moreover, shareholders attempting to challenge business decisions will now be required to present allegations of fraud, misconduct, or legal violations with greater specificity, thus raising the bar for initiating litigation. The reforms enable corporate boards to form independent subcommittees to handle conflicts of interest more effectively and to seek court declaratory judgments regarding their independence. Such rulings from the court will be binding unless contrary evidence of significant nature emerges, which could assist in mitigating disputes involving conflicts.
Another notable change is the stipulation that internal claims, including derivative lawsuits, must be filed exclusively in Texas courts. Additionally, governing documents of Texas entities will have the capability to incorporate enforceable waivers of jury trials for internal claims without the necessity of obtaining individual signatures. These measures are expected to streamline judicial processes and reduce uncertainties related to corporate governance.
Emails, texts, and social media content will not be included as part of corporate records unless they directly pertain to corporate actions, thereby simplifying record-keeping requirements. Furthermore, the law restricts inspection rights during ongoing litigation or derivative proceedings, potentially limiting the opportunities for shareholders to access sensitive information during disputes.
Public companies, or those with a shareholder base exceeding 500 individuals that choose to adopt the business judgment rule, will now have the ability to set minimum ownership thresholds of up to 3% for derivative actions. This aims to curb a surge of lawsuits initiated by minority shareholders, alleviating the burden on companies facing low-value suits seeking merely additional corporate disclosures.
In addition to SB 29, Governor Abbott signed SB 1057 shortly afterward, imposing stricter conditions on shareholder proposals for publicly listed corporations with connections to Texas, further distinguishing Texas’s business landscape. This may potentially lead to legal challenges as stakeholders navigate these newly instituted regulations.
These legal reforms were bolstered by the earlier establishment of the Texas Business Court, which commenced operations on September 1, 2024. The court aims to manage complex commercial legal matters more efficiently, aligning with the state’s efforts to bolster its reputation as a business-friendly jurisdiction.
By implementing SB 29 and accompanying measures, Texas seeks to minimize costs linked to defending against frivolous lawsuits while simultaneously reinforcing the good faith decisions of corporate officers and directors. Such legislative actions reflect a broader trend observed in multiple states striving to attract businesses by offering more favorable regulatory environments.
Overall, these sweeping changes present a fundamentally different business landscape in Texas, designed to better compete with established jurisdictions like Delaware, thereby reinforcing the state’s position as an attractive hub for incorporation and business operations.
Deeper Dive: News & Info About This Topic
- Akin Gump: Texas Enacts New Pro-Business Law
- Wikipedia: Texas Business Organizations Code
- Dykema: Corporate Law Overhaul in Texas
- Google Search: Texas business law reforms
- National Law Review: Texas Adopts Significant Corporate Law Reforms
- Encyclopedia Britannica: Business
- Vinson & Elkins: Texas Corporate Governance Reforms
- Semafor: Texas Business Law Overhaul
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.
