On May 14th, Governor Greg Abbott signed SB 29 into law, further cementing Texas as a highly desirable jurisdiction for entity formations and corporate reorganizations. SB 29 adopts several significant changes to the Business Organizations Code, focusing on the formation, governance, and internal management of domestic entities. Some of the highlights include:
1. National Securities Exchange Definition:
- Expands the definition to include stock exchanges with their principal office in Texas and approved by the state securities commissioner.
2. Laws Governing Domestic Entities:
- Managerial officials may consider the laws and judicial decisions of other states and the practices observed by entities formed in those states. Failure to do so does not imply a breach of duty under Texas law.
3. Internal Entity Claims:
- Governing documents may require that internal entity claims be brought only in Texas courts and designate specific Texas courts as the exclusive forum for such claims.
4. Waiver of Trial by Jury:
- Governing documents may include a waiver of the right to a jury trial for internal entity claims, enforceable even if not signed by members, owners, officers, or governing persons.
5. Examination of Corporate Records:
- The records of a corporation subject to shareholder examination EXCLUDE emails, text messages, and social media posts unless they effectuate corporate actions.
- A written shareholder demand is not for a proper purpose if made in connection with an active or pending derivative proceeding or civil lawsuit
6. Voting on Amendments to Certificate of Formation:
- Separate voting by class or series of shares is required for certain amendments, with specific provisions for voting as a single class.
7. Independent and Disinterested Directors:
- Corporations can form committees of independent and disinterested directors to review transactions involving controlling shareholders, directors, or officers. Courts can determine the independence and disinterest of these directors.
8. Good Faith Presumptions for Directors and Officers:
- Directors and officers are presumed to act in good faith, on an informed basis, in furtherance of the corporation’s interests, and in obedience to the law and governing documents. Shareholders must rebut these presumptions to bring a cause of action.
9. Derivative Proceedings:
- Shareholders must meet specific ownership thresholds to institute derivative proceedings. Courts can appoint independent and disinterested panels to review such proceedings.
10. Limited Liability Companies (LLCs):
- Similar presumptions and provisions apply to LLCs, including the ability to expand, restrict, or eliminate duties and liabilities in the company agreement.
11. Partnerships:
- Partnerships traded on a national securities exchange can eliminate certain duties in the partnership agreement. Presumptions for compliance by managerial officials are established.
SB 29 became effective upon signing by the Governor.
You can read the text of SB 29 here: Bill Text: TX SB29 | 2025-2026 | 89th Legislature | Engrossed | LegiScan
You can read Governor Abbott’s press release announcing the enactment of SB 29 and other business friendly legislation here: Governor Abbott Signs Pro-Growth Business Legislation Into Law | Office of the Texas Governor | Greg Abbott
