News Summary
Governor Greg Abbott has signed Senate Bill 29 into law, aimed at enhancing liability protections for business managers in Texas. The law introduces a new ‘business judgment rule’ which favors corporate directors by assuming they act in good faith. Shareholders now bear the burden of proof in legal actions against these officials. Additionally, LLCs and limited partnerships can adopt this new rule, promoting a more favorable business environment. This legislative shift positions Texas as a competitive alternative to Delaware for corporate charters.
Big Changes Coming to Business in Texas!
Texas has recently enacted Senate Bill 29 (SB 29), a significant law aimed at improving the business landscape within the state. Signed by Governor Greg Abbott, the new legislation will take effect on September 1, 2025, and introduces measures designed to encourage both large and small businesses to thrive in the Lone Star State.
What’s the Deal with SB 29?
This law amends the Texas Business Organizations Code (TBOC) to incorporate enhanced liability protections for business managers, with a focus on those leading public companies. However, private businesses will also benefit from these new provisions, particularly regarding claims related to breach of fiduciary duty.
A key element of SB 29 is the introduction of a new statutory “business judgment rule.” This rule provides a legal shield for corporate directors and officers, known as “Managerial Officials.” It operates under the presumption that these individuals make decisions in good faith, are well-informed, and consistently act in the corporation’s best interests. This change could lead to more confidence in corporate leadership decisions.
Putting the Burden of Proof on Shareholders
Under the new law, if a legal action is initiated against Managerial Officials, the responsibility falls on the shareholders to prove that these officials acted in bad faith. To pursue a case, shareholders must provide specific factual evidence including elements like fraud or intentional misconduct, which may fundamentally change the dynamics of corporate lawsuits.
Some Important Details
While SB 29 introduces new protections, existing common law protections will remain in effect. Some businesses might opt to maintain the previous, less rigorous business judgment rule as a means of preserving established practices. Moreover, those engaged in transactions with the corporation, such as real estate leasing, will also gain the same protections offered under this law. This enhancement aims to mitigate risks associated with various corporate dealings by providing a more secure framework.
Corporations can request confirmations from local business courts to verify that committee members involved in transactions meet the necessary TBOC standards, reinforcing trust in business interactions.
What About LLCs and Limited Partnerships?
Limited Liability Companies (LLCs) and limited partnerships are also included in these updates, now having the option to adopt the new statutory business judgment rule. Additionally, these entities can choose to outright waive their fiduciary duties, simplifying legal governance and potentially reducing litigation complications.
Why Is All This Happening?
These legislative changes reflect Texas’s broader ambition to compete with Delaware, the long-established leader in corporate charters. By reducing legal risks associated with corporate governance and enhancing clarity in internal dispute resolution processes, Texas aims to attract businesses seeking progressive legal environments. This shift is not solely about liability protection; it represents a strategic effort to cultivate a thriving economic landscape in Texas.
The transformations brought about by SB 29 are designed to foster a more business-friendly environment, enabling managers to make bold decisions without the looming threat of frequent litigation. This legal reform resonates as a significant move towards empowering Texas businesses and encouraging growth and innovation.
Wrapping It Up
In conclusion, Senate Bill 29 marks a pivotal shift in how business operations are governed in Texas. For business owners and prospective entrepreneurs, this could signal a valuable opportunity to navigate a landscape where protections and growth potential abound. As September 2025 approaches, it will be crucial for all stakeholders to stay informed and prepared for these imminent changes.
Deeper Dive: News & Info About This Topic
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- New York Times: Texas Incorporation vs. Delaware
- Vinson & Elkins: Texas Hold ‘Em: New Law for Proxy Advisors
- Google Search: Texas business law changes
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.
