News Summary
Governor Greg Abbott has signed Senate Bill 29 into law in Texas, introducing the Business Judgment Rule to enhance corporate governance. This legislation will protect corporate directors from personal liability, enabling them to make decisions confidently. The law aims to improve the business climate by reducing frivolous lawsuits and encouraging investment. With stricter requirements for legal claims and limitations on shareholder litigation, Texas is poised to become a more attractive destination for businesses. As companies like Nasdaq establish regional operations in Texas, this law reinforces the state’s commitment to creating a vibrant corporate ecosystem.
Texas Governor Signs Senate Bill 29 to Enhance Corporate Governance
On May 14, 2025, Texas Governor Greg Abbott signed Senate Bill 29 (SB 29), a significant piece of legislation aimed at improving corporate governance within the state. The new law codifies the Business Judgment Rule, which protects corporate directors from personal liability when making business decisions in good faith and with reasonable care.
SB 29 is designed to provide enhanced legal predictability in corporate governance disputes, making Texas a more competitive jurisdiction for business growth and incorporation. Following its approval by the Texas Legislature on May 7, 2025, Nasdaq, a global leader in financial markets, announced its support for the legislation. The company views SB 29 as a milestone that will foster a more favorable corporate governance environment in Texas.
Key Provisions of Senate Bill 29
The legislation establishes new standards for public companies and corporations that opt to adopt the Business Judgment Rule. A notable requirement includes that plaintiffs must substantiate their claims for breaches of fiduciary duty with greater specificity. This aims to reduce frivolous lawsuits and enhance the legal landscape for businesses operating in Texas.
Additionally, SB 29 introduces measures intended to limit shareholder litigation. One of the provisions stipulates a minimum ownership threshold of 3% of corporate stock as a requirement for shareholders to initiate derivative lawsuits against public companies. This aims to deter excessive legal actions that can burden corporations.
The bill also allows companies to restrict shareholder requests for access to corporate books and records during ongoing litigation, further tightening the legal framework around business operations. Moreover, corporations can now specify exclusive venues for internal entity claims within their governance documents and opt to waive jury trials.
Impact on Business Growth in Texas
With the signing of SB 29, Texas is positioning itself as a leading destination for corporate formation, aspiring to rival Delaware’s long-established corporate governance framework. Nasdaq has been actively expanding its presence in Texas, with the opening of a new regional headquarters in Dallas aimed at serving its Texas-based clients more effectively. Currently, Nasdaq supports over 200 listed companies in the state and generates over $750 million in revenue from Texas and the broader Southeast region.
Nasdaq’s partnerships with approximately 800 local clients, out of a total of 2,000 clients in the Southeast, underscore its commitment to facilitating an environment that encourages robust business operations. The anticipated benefits of SB 29 are expected to create a climate where companies may confidently make decisional capital investments, alleviating concerns regarding excessive legal repercussions.
Conclusion
Senate Bill 29 marks a transformative step for corporate governance in Texas, aimed at alleviating legal uncertainties for businesses while promoting growth and innovation. By enhancing protections for corporate directors and establishing clearer guidelines for shareholder litigation, the legislation serves to further solidify Texas’s appeal as a prime location for corporate growth, ultimately aligning with the mission of Nasdaq to promote fair, efficient, and accessible capital markets.
Deeper Dive: News & Info About This Topic
- Nasdaq: Senate Bill 29 and Corporate Governance
- Wikipedia: Corporate Governance
- National Law Review: Texas Business-Friendly Governance Law
- Google Search: Texas Senate Bill 29
- KVUE: Abbott Signs Bills to Attract Businesses
- Encyclopedia Britannica: Business Law
- GuruFocus: Nasdaq Applauds Senate Bill 29 Signing
- Google News: Texas Corporate Law
