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.

Big Changes in Texas Business Laws!

Hey there, folks in Texas! Exciting news is coming your way from Austin, where Governor Greg Abbott has just signed Senate Bill 29 (SB 29) into law on May 14, 2025. What’s this all about? Well, this new bill is shaking things up in the world of business governance, especially for public companies. If you’re a business owner or just someone who cares about the Texas economy, you’ll want to pay attention!

A New Era for Corporations

So, what exactly does SB 29 do? This legislation marks a significant shift in how businesses operate in Texas, and it’s geared at making our beloved state a powerhouse for corporations. First things first, it limits the ability of minority equity holders to bring derivative lawsuits against companies. In simple terms, this means that shareholders looking to make claims against the company will have to follow some stricter guidelines.

Understanding the Business Judgment Rule

One of the major highlights of SB 29 is that it codifies the business judgment rule. Now, this rule is a big deal because it protects directors from personal liability, as long as they make business decisions in good faith. This gives directors the confidence they need to make decisions without constantly looking over their shoulders!

The Burdens and Shields

With this new law, the burden of proof is on plaintiffs (that’s the folks bringing the lawsuit) when it comes to claims of breach of fiduciary duty. In simpler terms, if shareholders want to accuse someone of misconduct or fraud, they will now need to provide specific details and plead with particularity. This means it’s not just a “he said, she said” situation anymore.

More Protections for Corporations

Another exciting aspect is that these protections apply automatically to corporations, LLCs, and partnerships that are listed on a national stock exchange. Non-listed entities have the option to adopt these protections voluntarily—talk about flexibility! Plus, SB 29 has measures in place to protect corporations from what’s called meritless derivative actions. This is a huge win for businesses that often find themselves bogged down by frivolous lawsuits.

Streamlined Legal Processes

Here’s where it gets even better: the law allows Texas corporations to choose a specific venue for internal claims and allows them to waive jury trials through their bylaws. That’s right, businesses can now take charge of how they handle their legal matters!

Access to Records and Voting Power

But wait, there’s more! SB 29 also limits access to corporate books and records. This means that emails and similar communications typically won’t be considered corporate records, giving businesses additional privacy. It also clarifies that requests for these documents can’t be used as a substitute for actual discovery in certain legal actions.

When it comes to voting rights, corporations are now able to waive class-by-class voting requirements. This means they can conduct votes as a single class, simplifying the voting process and making it easier to get things done.

Texas vs. Delaware: The Corporate Showdown

This landmark legislation isn’t just a random change; it’s part of a broader strategy to position Texas as a competitive alternative to Delaware for corporate charters. With reduced litigation risk and streamlined dispute processes, Texas is stepping up to attract corporations looking for a more favorable landscape. The establishment of the Texas Business Court back in 2023 to handle complex business disputes is a testament to this effort.

Legal experts are buzzing with excitement over these developments. They believe that SB 29 could significantly enhance Texas’s appeal as a state for incorporation, granting businesses more robust governance and stronger legal shields against litigation.

Why This Matters

In conclusion, Senate Bill 29 is setting the stage for a new era of business governance in Texas. By creating a more favorable environment for corporations, Texas is not just trying to keep up with the competition; it’s aiming to lead the pack! Whether you’re an entrepreneur, an investor, or simply a Texan who loves watching the Lone Star State grow, these changes are something to cheer about!

Significant Changes in Texas Business Legislation