News Summary
Governor Greg Abbott has signed Senate Bill 29 into law, aimed at enhancing liability protections for business managers in Texas. The law introduces a new ‘business judgment rule’ which favors corporate directors by assuming they act in good faith. Shareholders now bear the burden of proof in legal actions against these officials. Additionally, LLCs and limited partnerships can adopt this new rule, promoting a more favorable business environment. This legislative shift positions Texas as a competitive alternative to Delaware for corporate charters.
Texas Governor Greg Abbott has signed a landmark piece of legislation, Senate Bill 29 (SB 29), which will enhance liability protections for business managers in the state. The new law, which takes effect on September 1, 2025, is designed to provide a more favorable environment for businesses, particularly public companies, but also extends protective measures to private companies. These developments are part of Texas’s strategic effort to attract corporate entities, drawing a direct comparison with Delaware as a preferred venue for corporate charters.
SB 29 amends the Texas Business Organizations Code (TBOC) with several key provisions aimed at safeguarding corporate directors and officers, referred to as Managerial Officials, from claims of mismanagement. The legislation establishes a new statutory “business judgment rule”, which presumes that Managerial Officials have acted in good faith and in compliance with relevant laws and governing documents. This presumption shifts the burden of proof onto shareholders seeking to challenge managerial decisions, requiring them to provide evidence of fraud, intentional misconduct, or violations of law.
The new legal framework does not displace existing common law protections afforded to Managerial Officials. However, companies may choose to adhere to the previous business judgment rule, which offers slightly less comprehensive protections. The provision also extends to transactions involving Managerial Officials, including real estate leases with the corporation. Corporations can request local business courts to verify that committee members comply with TBOC standards when engaged in interested transactions.
Under SB 29, Texas corporations will gain the ability to shield their officers from certain monetary damages—a safeguard that previously applied only to directors. Furthermore, limited liability companies (LLCs) and limited partnerships can also adopt a statutory business judgment rule following the new amendments. This inclusion alleviates uncertainty in cases of governance disputes, permitting these entities to waive fiduciary duties at their discretion.
Recently, Texas has established the Texas Business Court, which commenced operations on September 1, 2024. This specialized court is designed to manage complex commercial disputes and influence corporate law interpretations. The creation of the court complements the provisions in SB 29, streamlining the legal processes involved in corporate governance and underlining Texas’s commitment to creating a conducive business climate.
The overarching motivation behind SB 29 and the Texas Business Court is to position Texas competitively alongside Delaware, which has long been seen as the leading state for corporate charters. With these new legal reforms, Texas aims to draw businesses by reducing litigation risks and clarifying internal dispute resolution processes. In an era where there is increased judicial scrutiny over corporate governance practices in various states, including Delaware, these legislative changes reflect a broader trend toward enhancing corporate governance across the United States.
As Texas bolsters its business environment through this new legislation, corporate boards will be empowered to make decisions without the constant fear of litigation. The enhanced protections for Managerial Officials are expected to facilitate more confident decision-making, which is essential for fostering business growth and stability in the region. These changes indicate Texas’s proactive stance in attracting and retaining corporate entities, potentially shifting the balance of corporate registrations away from traditional hubs.
With its comprehensive approach to corporate governance reform, Texas is setting the stage for a more robust and favorable business climate, ultimately aiming to lead the nation in attracting companies looking for a secure and supportive legal framework.
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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.
