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.
AUSTIN, Texas – On May 14, 2025, Texas Governor Greg Abbott signed Senate Bill 29 (SB 29) into law, marking a notable transformation in the state’s business governance, especially impacting public companies. The legislation aims to attract corporations by limiting the capacity of minority equity holders to initiate derivative lawsuits against companies they invest in.
Among the primary features of SB 29 is the codification of the business judgment rule, which grants directors immunity from personal liability for decisions made in good faith. This arrangement shifts the burden of proof to plaintiffs, requiring them to substantiate claims of breach of fiduciary duty with particularity, particularly if those claims involve allegations of intentional misconduct or fraud.
Additionally, the protections under the business judgment rule automatically extend to corporations, limited liability companies (LLCs), and partnerships listed on a national stock exchange. Non-listed entities, meanwhile, have the option to voluntarily adopt these protective measures.
Key Provisions of SB 29
SB 29 introduces multiple provisions aimed at streamlining corporate governance and reducing litigation risk. The law establishes safeguards against meritless derivative actions, thus enabling Texas corporations to stipulate exclusive venues for internal claims and permit the waiving of jury trials through their bylaws. This flexibility is anticipated to accelerate the resolution of disputes within corporations while also stabilizing their governance structures.
Moreover, the new law restricts access to corporate books and records, clarifying that emails and comparable communications are not considered corporate records. The law emphasizes that requests for such documents cannot be utilized to supplant discovery in certain legal proceedings. Additionally, it allows corporations to waive class-by-class voting requirements, allowing votes to be conducted as a single class.
Legislative Support and Immediate Implementation
The passage of SB 29 reflects strong legislative backing, garnering a two-thirds majority vote in both chambers of the Texas Legislature. This overwhelming support enabled the law to take immediate effect upon the governor’s signature, allowing for swift implementation of its provisions.
Texas’s Competitive Positioning
Through the implementation of SB 29, Texas aims to bolster its position as a competitive alternative to Delaware for corporate charters. By appealing to companies seeking enhanced corporate governance frameworks and reduced litigation risks, Texas positions itself as an attractive destination for incorporation. Legal experts indicate that the reforms introduced by SB 29 could enhance Texas’ appeal by providing corporations with better governance structures and robust legal protections against litigation.
The establishment of the Texas Business Court in 2023, designed to manage complex business disputes, further complements the pro-business legal landscape Texas seeks to create. These reforms and subsequent legal frameworks are indicative of Texas’s strategic objectives to attract businesses and promote a favorable economic environment.
Conclusion
The enactment of Senate Bill 29 signifies an ambitious initiative by Texas to create a legal and financial environment conducive to corporate growth. By streamlining corporate governance rules and minimizing litigation exposure, Texas is positioning itself as an appealing option for companies considering incorporation within the United States. The implications of this reform could reverberate throughout the business community, illustrating Texas’s commitment to enhancing its pro-business stance and welcoming new entities to its jurisdiction.
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
