News Summary
Texas Governor Greg Abbott has signed Senate Bill 29 into law, amending the Texas Business Organizations Code to enhance legal protections and reduce litigation risks for businesses. Key features include the introduction of the Business Judgment Rule, limitations on shareholder litigation, and the establishment of the Texas Business Court to address larger corporate disputes. The legislation aims to position Texas as a favorable hub for business operations, providing clearer governance structures and increased legal certainty. These reforms are expected to attract corporations seeking a business-friendly environment.
Texas Strengthens Business Laws with New Legislation
On May 14, 2025, Texas Governor Greg Abbott officially signed into law Senate Bill 29 (SB 29), a transformative piece of legislation aimed at enhancing the state’s business environment. The bill, which passed the Texas Legislature on May 7, 2025, amends various provisions of the Texas Business Organizations Code (TBOC) with the intent of making Texas a more appealing destination for both entity formation and corporate governance.
The primary goals of SB 29 are to enhance legal certainty for businesses, reduce the litigation exposure for corporate leaders, and ensure that Texas law governs internal governance disputes. Crucially, the bill codifies the Business Judgment Rule, which protects corporate directors from personal liability as long as they act in good faith and prioritize the corporation’s best interests. This protection applies to public companies listed on national exchanges, as well as any corporations that choose to adopt this framework.
Key Provisions of SB 29
Among the bill’s notable provisions are several changes aimed at streamlining legal proceedings and liability issues for companies operating within Texas:
- The establishment of the Texas Business Court to handle future lawsuits involving public companies or controversies exceeding $5 million.
- Limited partnerships may now eliminate duties of loyalty, care, and obligation of good faith in their partnership agreements.
- Restrictions on shareholder litigation by prohibiting those holding less than 3% of corporate stock from initiating derivative proceedings against public companies.
- Plaintiffs’ counsel are restricted from recovering attorney’s fees in derivative cases resulting only in additional disclosures to shareholders.
- The introduction of independent director committees will review insider transactions, which can be processed through the Texas Business Court.
- Limits on requests for corporate books and records, precluding access to communications such as emails and social media unless they relate directly to corporate actions.
- Corporations can now designate specific courts in Texas as exclusive locations for internal governance claims.
- The option to include jury waiver provisions in corporate governing documents, enforceable against individuals who ratify those changes.
Implications for Texas Businesses
SB 29 is anticipated to reshape the landscape of corporate governance and litigation for companies incorporated in Texas, particularly public corporations. The reforms are designed to compete directly with Delaware’s corporate law, which has long been recognized for providing an established business-friendly environment.
An additional piece of legislation is on the horizon, which aims to expand the jurisdiction of the Texas Business Court and further complement the initiatives initiated by SB 29. Furthermore, the bill extends similar protections to limited liability companies and limited partnerships through newly established statutory provisions.
Background Context
Lawmakers believe that the changes put forth in SB 29 will significantly streamline the resolution of business disputes, reassuring corporate leaders and attracting more companies to establish operations in Texas. As the state seeks to bolster its economic footing amid competitive corporate law landscapes, such legislative reforms represent a proactive approach to stimulate growth and innovation within the local economy.
The emphasis on legal certainty and reduction of litigation risks points towards a future where Texas could emerge as a top choice for businesses looking to incorporate and operate within a supportive legal framework, potentially influencing a wave of companies to shift their corporate headquarters or operations to the Lone Star State.
Deeper Dive: News & Info About This Topic
- Foley: Newly Filed Legislation Positions Texas as Leading State for Incorporations
- Norton Rose Fulbright: Senate Bill 29 on Track to Further Texas Push as Business Hub
- National Law Review: Texas Governor Signs New Business-Friendly Governance Law
- Business Insider: Texas Bills Are Big Wins for Business and Activist Investors
- Wikipedia: Texas Business Organizations Code
