News Summary
Governor Greg Abbott has signed Senate Bill 29 into law, aimed at transforming Texas into a top destination for businesses. The legislation modernizes the Texas Business Organizations Code, introducing enhanced liability protections, shifting the burden of proof in derivative actions, and minimizing frivolous lawsuits. With new thresholds for shareholder claims and provisions to reduce venue shopping, Texas is positioning itself as a business-friendly environment, encouraging corporations to establish or relocate their operations in the Lone Star State.
Texas Governor Greg Abbott Signs Senate Bill 29, Reforming Business Governance and Liability Rules to Attract Corporations
On May 14, 2025, Texas Governor Greg Abbott signed Senate Bill 29 (SB 29) into law, a significant legislative move aimed at modernizing the Texas Business Organizations Code (TBOC) to make Texas more attractive for corporations looking to incorporate or redomicile. This bill introduces substantial changes to existing regulations concerning corporations, limited partnerships, and limited liability companies.
SB 29, taking effect immediately, includes several critical updates. Key provisions provide enhanced liability protections and streamlined corporate governance processes. One of the most notable reforms is the codification of the business judgment rule, which assumes that corporate directors make decisions in good faith and in the corporation’s best interests. The rule applies to corporations that have a class or series of voting shares listed on a national securities exchange or have opted to be governed by this rule.
Under the new law, a director or officer of a corporation is presumed to act in good faith and informed compliance with laws, unless proven otherwise by the claimant in derivative actions. The burden of proof is shifted to the claimant, who must demonstrate a breach of fiduciary duties involving fraud, intentional misconduct, or knowing violations of law.
SB 29 also extends similar presumptive protections to governing persons of limited partnerships and limited liability companies, allowing limited liability companies to eliminate any duties, including fiduciary duties, in their company agreements. Moreover, limited partners can now eliminate duties of loyalty, care, and good faith in their partnership agreements. These amendments are designed to reduce litigation risks and deter equity holders from suing management after unfavorable decisions.
Publicly traded corporations now have the option to establish a minimum ownership threshold of up to 3% for shareholders to initiate derivative claims, targeting a decrease in strike lawsuits by ensuring that activist shareholders have a genuine stake in the corporation before raising claims. Additionally, SB 29 allows domestic entities to designate specific Texas courts for internal entity claims, reducing the chances of venue shopping.
New provisions enable companies to include a waiver for the right to a jury trial in their governing documents concerning internal entity claims. The law also stipulates that emails, text messages, and social media communications are generally exempt from equity holders’ requests for corporate records unless they are related to corporate actions. Furthermore, corporations can refuse requests for books and records tied to ongoing derivative proceedings.
In terms of voting rights, SB 29 permits Texas corporations to waive separate voting requirements in certain circumstances, facilitating the ability for all classes of stock to vote as one. The law also paves the way for Texas corporations to pre-petition the Texas Business Court to determine the independence of directors in transactions involving potential conflicts of interest, with court findings of independence deemed ‘dispositive’ unless new facts arise.
Importantly, the legislation specifies that corporations cannot recover attorneys’ fees solely for additional or amended disclosures made to equity holders during derivative actions. It clarifies that fiduciary duties cannot be eliminated for corporate directors and officers, aiming to balance the interests of shareholders and management.
SB 29 emerged after obtaining a supermajority vote in both chambers of the Texas Legislature, signaling a strong bipartisan agreement on the need for these reforms. The law represents Texas’s strategic move to position itself as a premier jurisdiction for business formation, reflecting ongoing economic growth and competitiveness in the corporate sector.
Deeper Dive: News & Info About This Topic
- National Law Review: Texas Business Organizations Code Key Amendments Under SB 29
- Foley: Passage of Senate Bill 29 Positions Texas as a Leading State for Incorporations
- Norton Rose Fulbright: Senate Bill 29 on Track to Further Texas’ Push as a Business Hub
- Wikipedia: Texas Business Organizations Code
- Google Search: Texas 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.
