News Summary
The Texas House of Representatives has passed House Bill 40, a significant legislative change for businesses in Texas. The bill expands the jurisdiction of the Texas Business Court, lowers the amount-in-controversy requirement from $10 million to $5 million, and welcomes new types of cases including intellectual property matters. Additionally, the Business Court can now handle arbitration matters. As Texas positions itself as a competitive alternative to Delaware for corporate governance, businesses are encouraged to adapt to these new legal frameworks starting September 2025.
Texas Expands Business Court Jurisdiction with House Bill 40
On May 13, 2025, the Texas House of Representatives passed House Bill 40 (HB 40), which expands the jurisdiction and operational framework of the Texas Business Court. The bill was approved by a vote of 99–40 and has been signed by Governor Abbott, set to take effect on September 1, 2025.
HB 40 builds on a previously established initiative in 2023 aimed at creating a specialized venue for complex business litigation within the state. A key feature of this legislation is that it makes the Business Court more accessible to corporate litigants by lowering the amount-in-controversy requirement from $10 million to $5 million. By reducing this threshold, the law allows parties involved in disputes to aggregate claims, thereby meeting the $5 million requirement more easily.
In addition to adjusting the financial threshold, HB 40 expands the types of cases that the Business Court can review. Previously, the court’s jurisdiction was somewhat limited, particularly concerning intellectual property claims and cases involving trade secrets, neither of which were under its purview. Now, such cases have been formally included, allowing for a broader range of corporate disputes to be addressed in this venue.
The new law further clarifies the Business Court’s authority regarding arbitration matters, granting it the ability to enforce arbitration agreements, appoint arbitrators, and review arbitral awards. This expansion improves the court’s operational framework, making it a more comprehensive option for corporate governance disputes.
Context and Implications
The passage of HB 40 comes at a time when Delaware’s status as the leading state for corporate incorporation and governance is being challenged. Delaware’s Chancery Court has faced criticism, particularly from institutional investors who have raised concerns about the court’s efficiency and cost implications. Some studies indicate that attorney fees in Delaware have become burdensome, prompting a reevaluation of its corporate litigation landscape.
By positioning Texas as a more attractive venue for business-related disputes, this legislation may draw corporations seeking a more favorable legal environment. Lawmakers are optimistic that such reforms will increase Texas’s appeal amidst ongoing scrutiny of Delaware. The revised framework not only aims to benefit corporate litigants but also encourages them to reassess their governance documents to ensure they align with the new laws, increasing their potential to utilize the Business Court effectively.
HB 40 is part of a broader legislative trend. It follows the recent approval of Senate Bill 29 (SB 29), which also expanded the Business Court’s jurisdiction over corporate governance matters. Together, these legislative actions represent a significant shift in the landscape of corporate litigation within Texas, reflecting a proactive approach to enhance business practices in the state.
In concluding remarks on the implications of HB 40, it can be noted that the changes in jurisdictional standards will necessitate that corporate parties engage in compliance checks and updates to their governance policies. As Texas continues to evolve as a potential center for corporate litigation, the legal community and corporations alike will need to stay informed of the legislative landscape to navigate these adjustments effectively.
Deeper Dive: News & Info About This Topic
- National Law Review: Texas Governor Signs HB 40
- Vinson & Elkins: Potential Changes to Texas Business Courts
- Jackson Walker: Insights on Texas Business Court Exculpation Clause
- Norton Rose Fulbright: What is a Qualified Transaction in the Texas Business Court
- News 13: Texas Changes to Lure Business Amid Dexit Concern
- Wikipedia: Texas
- Google Search: Texas business court
- Google Scholar: Texas business litigation
- Encyclopedia Britannica: Texas
- Google News: Texas business court changes
Author: STAFF HERE GEORGETOWN
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