News Summary
Governor Greg Abbott has signed Senate Bill 29 into law, transforming business governance in Texas. This bill limits minority equity holders’ ability to file lawsuits and codifies the business judgment rule, protecting directors from personal liability. SB 29 aims to enhance Texas’s competitiveness as a corporate hub by streamlining legal processes and offering increased protections for corporations. The legislation also empowers businesses in managing their internal legal matters while improving the overall governance structure.
Texas has taken a significant step in reforming its business governance with the signing of Senate Bill 29 (SB 29) by Governor Greg Abbott on May 14, 2025. This new legislation aims to attract corporations by altering the legal landscape for public companies operating within the state.
SB 29 introduces measures that notably limit the ability of minority equity holders to initiate derivative lawsuits against corporations. This significant restriction is designed to reduce the incidence of what the state considers meritless litigation. Under the new law, the burden of proof now rests with plaintiffs who seek to establish claims of breach of fiduciary duty. To advance such claims, shareholders must demonstrate with particularity that breaches involved intentional misconduct or fraud.
The bill codifies what is known as the business judgment rule, which protects corporate directors from personal liability when making business decisions in good faith. This protection extends automatically to corporations, limited liability companies (LLCs), and partnerships that are listed on a national stock exchange, while allowing non-listed entities the option to adopt these protections voluntarily.
In tandem with these changes, SB 29 includes provisions that shield corporations from frivolous derivative actions and empowers Texas corporations to establish exclusive venues for internal claims. Bylaws may also allow corporations to waive jury trials, streamlining the legal process for resolving disputes.
Additionally, the legislation imposes restrictions on access to corporate books and records, excluding emails and similar communications from being classified as corporate records. It clarifies that requests for these materials cannot substitute for discovery in certain legal actions, thus further consolidating corporate privacy.
Another notable aspect of SB 29 is the provision allowing corporations to waive class-by-class voting requirements, enabling votes to take place as a single class. This could simplify governance structures and enhance decision-making efficiency.
The passage of SB 29, which received a two-thirds majority vote in both legislative chambers, means the law took immediate effect following the governor’s endorsement. The enactment of this bill is part of a broader strategy aimed at solidifying Texas’s position as a competitive hub for corporate charters, particularly in light of its rivalry with Delaware, which has long been viewed as the premier state for incorporation.
In recent years, the establishment of the Texas Business Court in 2023 has further supported this effort by providing a specialized venue for handling complex business disputes. Together, these efforts indicate the state’s commitment to fostering a pro-business environment, providing companies with enhanced governance frameworks and legal protections against undue litigation risks.
Legal experts have noted that the changes instituted by SB 29 could make Texas a more attractive destination for businesses considering incorporation. The reforms are intended to offer better legal and financial advantages for companies, thereby encouraging more entities to consider moving their operations to Texas.
In summary, the signing of Senate Bill 29 marks a pivotal moment in Texas’s approach to business governance, aiming to bolster its economic landscape by attracting corporations with reduced litigation risks and an inclusive legal process. The implications of this reform could significantly impact how businesses operate within the state, promising a streamlined and favorable environment for corporate growth and development.
Deeper Dive: News & Info About This Topic
- Foley: Passage of Senate Bill 29
- Wikipedia: Texas
- KBTX: Texas A&M Economy Expert on Senate Bill 29
- Google Search: Texas business law changes
- Norton Rose Fulbright: Senate Bill 29 and Texas Business Hub
- Encyclopedia Britannica: Business
- Nasdaq: Support for Texas Senate Bill 29
- Google News: Texas Senate Bill 29
