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 move to make Texas the go-to place for businesses, Governor Greg Abbott recently signed into law Senate Bill 29, which is set to shake up the business landscape across the Lone Star State. The new law, effective immediately, aims to modernize the Texas Business Organizations Code (TBOC) and attract more corporations to either incorporate or redomicile in Texas. With significant changes affecting corporations, limited partnerships, and limited liability companies, this legislation marks a transformative moment for the business community.
Key Changes Unveiled
So, what’s so special about Senate Bill 29? For starters, the bill brings in several enhanced liability protections and streamlined corporate governance measures that many businesses have been eagerly waiting for. One of the most significant additions is the codification of the business judgment rule. This rule assumes that corporate directors are making decisions in good faith and in the best interests of their companies. This protection isn’t available to just any corporation—only those with voting shares listed on a national securities exchange or those who specifically adopt this rule in their governing documents.
Shifting the Burden of Proof
The law introduces an essential change in derivative actions, where the burden of proof now shifts to the claimant. Those bringing these claims will have to show that there was a breach of fiduciary duty involving serious misconduct, such as fraud or intentional unlawful actions. This adjustment is designed to reduce frivolous lawsuits and give management a fairer shake when faced with scrutiny.
Fostering a Business-Friendly Environment
Texas is redefining what it means to protect businesses. Under the new bill, limited liability companies (LLCs) can now eliminate virtually all duties in their agreements, including fiduciary ones. Similarly, limited partnerships can opt out of duties like loyalty and care. This bold move is geared toward minimizing litigation risks, making it tougher for interested parties to sue management after a less-than-stellar performance.
New Thresholds for Shareholder Claims
There’s even more good news for businesses looking to operate in Texas. Publicly traded corporations can now establish a minimum ownership threshold of up to 3% for shareholders wanting to initiate derivative claims, thereby reducing the number of nuisance lawsuits stemmed from activist shareholders. This means that only those with a real stake in the company can bring claims, streamlining the process significantly.
Say Goodbye to Venue Shopping
SB 29 also aims to tackle the issue of venue shopping by allowing domestic entities to choose specific Texas courts as the exclusive forum for internal claims. This means less confusion about where legal disputes will be resolved, fostering a more efficient business environment.
A Few Other Notable Changes
Another fascinating aspect of this legislation is the way records requests will now be handled. Emails, texts, and even social media messages won’t be readily accessible unless they have direct implications for corporate actions. This provision protects corporations from unnecessary scrutiny and potential leaks of sensitive information.
Moreover, corporations can now avoid certain voting requirements, enabling them to act more swiftly when decisions need to be made. They can also approach the Texas Business Court in advance to determine the independence of directors involved in conflicted transactions, which brings more clarity to such situations.
The Bigger Picture
Overall, Senate Bill 29 is a calculated move on Texas’s part to position itself as a leading jurisdiction for businesses. With a careful balance between protecting shareholders’ interests and giving management the space to operate effectively, this law is set to encourage both new and existing companies to keep their roots firmly planted in Texas. It’s all about creating a friendlier and safer environment for business, ensuring that the Lone Star State continues to shine brightly as a hub of economic growth.
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
