News Summary
Texas has enacted two significant laws, Senate Bills 29 and 1057, aimed at enhancing the state’s business-friendly environment. These reforms provide legal protections for corporate directors, streamline shareholder lawsuits, and introduce minimum ownership requirements for shareholders proposing changes. As Texas positions itself as an attractive destination for corporations, business leaders express optimism about potential job creation and economic growth.
Texas is taking significant steps to cultivate a more business-friendly environment with the recent enactment of Senate Bills 29 and 1057. Signed into law by Governor Greg Abbott on May 14 and May 19, 2025, respectively, these bills aim to enhance the state’s appeal for corporations and minimize litigation risks for shareholders.
Senate Bill 29 (S.B. 29) introduces notable changes to the Texas Business Organizations Code (TBOC), which provides the regulatory framework for corporations and other legal entities in Texas. The most prominent feature of S.B. 29 is the codification of the business judgment rule. This rule offers increased protections for corporate directors and officers against shareholder lawsuits, assuming they acted in good faith and in the best interests of the corporation unless evidence proves otherwise. This presumption is automatically applicable to public corporations, while private corporations can choose to “opt-in” through internal governance documents.
Furthermore, S.B. 29 revises existing provisions regarding conflict of interest transactions, allowing corporate boards to form committees comprised of independent directors for the review and approval of these transactions. In a move to limit shareholder litigation, companies may now enforce a minimum ownership threshold of up to 3% of outstanding shares before a shareholder can initiate a derivative lawsuit. Additionally, the bill restricts shareholders’ abilities to make books and records demands if there are active derivative proceedings connected to those requests. The law further stipulates that emails, texts, and social media communications cannot be demanded unless they relate directly to corporate actions.
Other key provisions in S.B. 29 include the clarification that any additional disclosures made to shareholders will not count as a “substantial benefit” that warrants reimbursement of litigation costs. The law also allows companies to waive the right to a jury trial for internal entity claims and designate Texas courts as exclusive forums for such disputes. Furthermore, it removes the separate class and series voting requirements, providing companies with greater flexibility in determining their voting structures.
Senate Bill 1057 (S.B. 1057) complements S.B. 29 by allowing public companies with connections to Texas to adopt minimum ownership requirements for shareholders seeking to submit proposals. This new mechanism aligns with the overall aim of promoting corporate governance practices that encourage investment while potentially attracting businesses from other states, notably Delaware.
The implications of these new laws are multifaceted. Texas legislators assert that these reforms are integral in a broader strategy to solidify the state’s competitive edge as a desirable location for businesses, effectively enticing corporations to consider relocating to Texas. The expectation is that these measures will significantly promote the formation of new entities within the state and may even drive existing companies from other states to redomicile in Texas. As noted by observers, the business community is optimistic, with anticipation that the new laws will translate into increased job opportunities and enhanced investment across various sectors of the Texas economy.
Texas has long been viewed as a favorable environment for businesses, but with these legislative updates, the state is proactively positioning itself as a top choice for corporate investment. Governor Abbott has emphasized Texas’s status as the “reigning and undisputed champion for doing business,” reflecting a collective goal among Texas lawmakers and industry leaders to create a climate that incentivizes corporate growth.
As the Texas economy continues to thrive, the introduction of S.B. 29 and S.B. 1057 marks a pivotal moment in the state’s ongoing efforts to enhance its attractiveness for businesses of all sizes and sectors. With these legislative changes, Texas move closer to realizing its ambitions of becoming a premier hub for corporate activity and investment.
Deeper Dive: News & Info About This Topic
- Semafor: Texas Business Law Overhaul
- National Law Review: Texas Corporate Law Reforms
- ABC 13: Texas THC Ban Economic Consequences
- Encyclopedia Britannica: Law
- KVUE: Texas Governor Signs Business Bills
