Texas Governor Signs Major Business Law Overhaul

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Texas Business Law Transformation

News Summary

Texas Governor Greg Abbott has signed Senate Bill 29 into law, amending the Texas Business Organizations Code to enhance legal protections and reduce litigation risks for businesses. Key features include the introduction of the Business Judgment Rule, limitations on shareholder litigation, and the establishment of the Texas Business Court to address larger corporate disputes. The legislation aims to position Texas as a favorable hub for business operations, providing clearer governance structures and increased legal certainty. These reforms are expected to attract corporations seeking a business-friendly environment.

Big Changes in Texas Business Laws: Governor Abbott Signs Senate Bill 29

In a significant move that is destined to shake up the corporate landscape, Texas Governor Greg Abbott has officially signed Senate Bill 29 into law. This bill, which sailed through the Texas Legislature on May 7, 2025, is set to transform how business entities navigate the state’s legal waters. With this new legislation, Texas is positioning itself as a go-to destination for businesses looking to form and operate.

What’s the Buzz About Senate Bill 29?

So, what exactly does this bill do? Well, it amends various provisions of the Texas Business Organizations Code (TBOC), and those changes are all about making Texas a more appealing place for business activity. The aims of SB 29 are pretty straightforward: enhance legal certainty, lower the litigation exposure for corporate leaders, and make sure Texas law governs internal disputes among corporations.

Legal Protections for Corporate Leaders

One of the standout features of this bill is the introduction of the Business Judgment Rule. This rule acts as a safety net for corporate directors, shielding them from personal liability as long as they are acting in good faith and with the corporation’s best interests in mind. This vital protection applies not only to public companies listed on national trades but also to any corporations that choose to take advantage of it. Talk about a win for corporate governance!

Setting the Stage for Business Disputes

For larger corporations, particularly those with legal battles involving public companies or controversies exceeding $5 million, future lawsuits will find their home in the new Texas Business Court. This dedicated court aims to streamline and resolve business disputes, making the process more efficient and less daunting for all involved parties.

Changes for Shareholders and Partnerships

Now, let’s talk about shareholders. SB 29 limits shareholder litigation by putting a cap on who can initiate proceedings against public companies. If a shareholder owns less than 3% of corporate stock, starting a derivative lawsuit is off the table. This change is likely to deter frivolous lawsuits while also curbing the potential for litigation abuse. Additionally, plaintiffs’ attorneys won’t be able to recover fees in derivative cases that only result in a bit more shareholder transparency.

On the partnership front, SB 29 introduces fascinating options. Limited partnerships can now choose to eliminate the duties of loyalty, care, and good faith in their partnership agreements. This amendment opens new doors for how partnerships can operate, allowing for greater flexibility.

Tackling Internal Governance Issues

One of the other provisions allows corporations to form committees made up of independent directors to oversee transactions involving insiders, which adds another layer of protection for businesses. These decisions can be adjudicated within the Texas Business Court, reinforcing the bill’s focus on legal clarity.

What’s Next for Texas?

But wait, there’s more! Additional legislation is on the horizon to expand the jurisdiction of the Texas Business Court even further. This means that the reforms initiated by SB 29 are just the tip of the iceberg. Lawmakers are keen to provide Texas with a competitive edge, especially in terms of business-friendly environments that have long been dominated by states like Delaware.

Overall, the changes brought on by SB 29 show promise in enhancing governance and reducing litigation risks for businesses. With these new laws in place, Texas is not just trying but actively working to make its mark in the corporate world.

In Conclusion

The reforms ushered in by SB 29 could fundamentally alter how companies incorporate and operate in Texas, particularly for public corporations. The focus on streamlined resolutions, reduced risks, and increased legal protections makes this an exciting time for the Texas business community. With an eye on attracting more corporations, Texas is certainly laying down the groundwork to secure its place as a premier business destination.