Texas Enacts New Corporate Governance Law

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 Takes Big Steps for Business with New Corporate Governance Law

Dallas, Texas – In an exciting move for businesses across the Lone Star State, Governor Greg Abbott has officially signed Senate Bill 29 into law on May 14, 2025. This new legislation aims to enhance corporate governance by implementing the Business Judgment Rule, a measure designed to protect corporate directors from personal liability when they make decisions based on good intentions and reasonable care.

What is Senate Bill 29?

The crux of SB 29 is all about offering more legal clarity when it comes to corporate governance. By codifying the Business Judgment Rule into Texas law, this bill provides a boost of confidence for corporate directors, allowing them to seek out growth opportunities without constantly worrying about being sued. With the Business Judgment Rule in place, directors can be relieved from the jitters that come with decision-making, as it shields them from liability as long as they act in good faith.

This move not only aligns with Texas’ goal of being a competitive place for businesses to set up shop but also positions the state as a serious contender compared to established corporate hubs like Delaware. With legal predictability secured, companies can invest in capital and make strategic decisions with much less fear of protracted lawsuits.

The Practical Impact of the Legislation

SB 29 comes loaded with multiple features aimed at streamlining the corporate governance process. Public companies and those corporations that opt for the Business Judgment Rule can benefit significantly; they’ll now face stricter requirements for legal claims. Plaintiffs will have to provide clear evidence of any alleged breaches of fiduciary duty, fostering a more accountable and less frivolous legal environment.

Moreover, the law is designed to limit shareholder litigation, which can often overwhelm companies and deter them from making critical decisions. For instance, to initiate derivative lawsuits against public companies, shareholders will need to own at least 3% of the corporate stock. This move discourages smaller stakeholders from making claims that could stymie a company’s operations.

Streamline and Simplify

In addition, SB 29 allows corporations some breathing room when it comes to shareholder requests for access to corporate books and records during on-going lawsuits. It even gives companies the ability to choose exclusive venues for resolving disputes and waive jury trials in their governance documents, paving the way for streamlined internal resolutions.

The timing of this legislation couldn’t be more perfect. Nasdaq, already a critical player in the corporate landscape, has recently established its regional headquarters in Dallas. This move not only strengthens its ties to Texas but also serves as a hub for over 200 listed companies in the state, which generate an impressive $750 million in revenue. The financial exchange’s commitment sets the stage for a rich business ecosystem in Texas.

Looking Ahead

The anticipated benefits of SB 29 are plenty: it should encourage businesses to invest decisively, knowing that they aren’t at risk of excessive legal repercussions that might stem from their choices. The law supports a framework where Texas could become the go-to location for entrepreneurial ventures, thus attracting new businesses and fostering existing ones. Nasdaq’s partnerships with approximately 800 local clients in Texas further underscore the importance of this legislation in promoting a fair, efficient, and vibrant business environment.

In short, SB 29 marks a significant milestone in Texas’ journey to solidify its status as a premier business jurisdiction. This legislation is more than just a legal landmark; it’s a promise to foster a flourishing corporate landscape filled with innovation and growth.

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