News Summary
Governor Greg Abbott has signed Senate Bill 29 into law, aimed at transforming Texas into a top destination for businesses. The legislation modernizes the Texas Business Organizations Code, introducing enhanced liability protections, shifting the burden of proof in derivative actions, and minimizing frivolous lawsuits. With new thresholds for shareholder claims and provisions to reduce venue shopping, Texas is positioning itself as a business-friendly environment, encouraging corporations to establish or relocate their operations in the Lone Star State.
Texas Takes Bold Steps to Woo Businesses with New Legislation
In a strategic effort to attract more businesses, Texas Governor Greg Abbott has signed Senate Bill 29 into law, a transformative measure aimed at modernizing the Texas Business Organizations Code (TBOC). This new legislation, effective immediately, is designed to enhance the state’s appeal for corporations considering incorporation or redomiciliation in Texas. With significant revisions affecting corporate governance, limited partnerships, and limited liability companies, the bill represents a pivotal change for the state’s business climate.
Key Changes Unveiled
Senate Bill 29 introduces several enhanced liability protections and streamlined corporate governance protocols that have long been anticipated by many businesses. Notably, the bill codifies the business judgment rule, which provides a legal presumption that corporate directors are acting in good faith and in the best interests of their companies. This important protection is specifically available to corporations that either have voting shares listed on a national securities exchange or those that choose to adopt this rule within their governing documents.
Shifting the Burden of Proof
One of the critical changes in the law is the adjustment in derivative actions, shifting the burden of proof to the claimant. Under this new framework, individuals bringing claims must demonstrate that there was a breach of fiduciary duty involving serious misconduct, such as fraud or intentional illegal actions. This amendment aims to curtail frivolous lawsuits and provide management with a fairer opportunity to defend their actions against scrutiny.
Fostering a Business-Friendly Environment
The legislation emphasizes Texas’s commitment to creating a more business-friendly environment. Under the new law, limited liability companies (LLCs) can waive nearly all responsibilities in their agreements, including fiduciary duties. Limited partnerships can similarly opt out of obligations related to loyalty and care. This shift is engineered to minimize litigation risks, making it more challenging for interested parties to launch lawsuits against management following suboptimal performance.
New Thresholds for Shareholder Claims
Additionally, the law allows publicly traded corporations to set a minimum ownership threshold of up to 3% for shareholders wishing to initiate derivative claims. This stipulation aims to significantly decrease the number of frivolous lawsuits that result from activist shareholders, ensuring that only those with a substantial stake in the company can bring forth claims and contributing to a more efficient legal process.
Say Goodbye to Venue Shopping
Senate Bill 29 also addresses the issue of venue shopping. It grants domestic entities the option to select specific Texas courts as the exclusive venue for internal claims. This provision helps eliminate confusion regarding where legal disputes will be adjudicated, fostering a more straightforward business environment.
A Few Other Notable Changes
Furthermore, the legislation introduces significant modifications to how requests for corporate records are managed. Unrelated emails, texts, and social media messages will not be easily obtainable unless they are directly related to corporate actions. This change is designed to protect corporations from unwarranted scrutiny and the potential exposure of sensitive information.
In addition, corporations have the capability to bypass certain voting requirements, allowing for more rapid decision-making when necessary. They can also seek prior consultations with the Texas Business Court to verify the independence of directors involved in conflicting transactions, adding clarity to such scenarios.
The Bigger Picture
Overall, the enactment of Senate Bill 29 illustrates Texas’s proactive approach to enhancing its status as a premier jurisdiction for businesses. Striking a balance between safeguarding shareholders’ interests and providing management with the ability to operate effectively, this law is poised to attract both new enterprises and encourage existing companies to solidify their operations in Texas. The overarching goal of this legislative change is to cultivate a more welcoming and secure environment for businesses, ensuring that the Lone Star State remains a beacon of economic opportunity.
Deeper Dive: News & Info About This Topic
- National Law Review: Texas Business Organizations Code Key Amendments Under SB 29
- Foley: Passage of Senate Bill 29 Positions Texas as a Leading State for Incorporations
- Norton Rose Fulbright: Senate Bill 29 on Track to Further Texas’ Push as a Business Hub
- Wikipedia: Texas Business Organizations Code
- Google Search: Texas Senate Bill 29
Author: STAFF HERE AUSTIN WRITER
The AUSTIN STAFF WRITER represents the experienced team at HEREAustinTX.com, your go-to source for actionable local news and information in Austin, Travis County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as SXSW, Austin City Limits Music Festival, Formula 1 United States Grand Prix, and the Austin Film Festival. Our coverage extends to key organizations like the Greater Austin Chamber of Commerce and Visit Austin, plus leading businesses in technology, automotive, and retail that power the local economy such as Dell Technologies, Tesla, and Apple. As part of the broader HERE network, including HERECollegeStation.com, HEREDallas.com, HEREHouston.com, and HERESanAntonio.com, we provide comprehensive, credible insights into Texas's dynamic landscape.
