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!
Hey there, folks! If you’re running a business in Texas or thinking about starting one, there’s some exciting news coming your way. Just recently, Governor Greg Abbott made waves by signing Senate Bill 29 (SB 29) into law, and it’s designed to shake things up for businesses in the Lone Star State. Effective September 1, 2025, this law is all about making Texas a more friendly place for corporations, both big and small!
What’s the Deal with SB 29?
So, what exactly does this new law bring to the table? Well, it amends the Texas Business Organizations Code (TBOC) to provide enhanced liability protections for business managers, particularly those at the helm of public companies. But let’s not overlook private businesses; they also stand to gain from these new protections against claims for breach of fiduciary duty.
One big feature of this law is the establishment of a new statutory “business judgment rule.” Now, you might be wondering why that matters. Simply put, this rule works like a shield for corporate directors and officers, referred to as “Managerial Officials.” It basically presumes that they are making decisions in good faith, are well-informed, and are always aiming to act in the best interests of the corporation. That’s a comforting thought for anyone in charge!
Putting the Burden of Proof on Shareholders
What’s even more interesting is that now, if there’s a legal action against these Managerial Officials, it’s up to the shareholders to prove that the officials were acting in bad faith. They’ve got to demonstrate specific facts, proving elements like fraud or intentional misconduct, to have a solid case. This could certainly shake up how lawsuits are handled in corporate settings!
Some Important Details
Now before you assume this law sweeps away all your traditional protections, it’s worth noting that existing common law protections will still be on the books. Some businesses might even want to stick with the older, slightly less robust business judgment rule for a while, just to keep things familiar.
Additionally, if you’re conducting deals with the corporation, such as leasing real estate, the same protections apply to you as well. That brings a whole new level of security to transactions that might have otherwise been risky. Plus, corporations will have the option to request confirmation from a local business court about whether committee members involved in these transactions meet TBOC standards.
What About LLCs and Limited Partnerships?
Don’t worry, we haven’t forgotten about Limited Liability Companies (LLCs) and limited partnerships! They’ll be joining the party as well, with the option to adopt this new statutory business judgment rule. And, guess what? These entities can finally waive their fiduciary duties outright, bringing clarity to governance lawsuits that often made things complicated.
Why Is All This Happening?
These changes are part of a broader strategy for Texas to compete with Delaware, which has been long regarded as the go-to state for corporate charters. By minimizing litigation risks and offering clearer internal dispute processes, Texas is positioning itself as a prime destination for businesses looking for a reliable home.
You see, the new legal landscape in Texas isn’t just about protecting directors and managers; it’s about fostering a business-friendly environment where companies can thrive. This is a win-win situation! With less fear of lawsuits hanging overhead, managers can make confident decisions that could propel their corporations to new heights.
Wrapping It Up
So there you have it, a brief overview of the exciting changes stemming from SB 29! If you’re a business owner or have plans to start one, it’s definitely a time to pay attention. Texas is making strides to create a landscape that not only protects the people running businesses but also encourages growth and innovation. Keep your eyes peeled for more updates—there’s a lot happening here in the great state of Texas!
Deeper Dive: News & Info About This Topic
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- New York Times: Texas Incorporation vs. Delaware
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- Google Search: Texas business law changes
Author: STAFF HERE HOUSTON TX WRITER
HOUSTON STAFF WRITER The HOUSTON STAFF WRITER represents the experienced team at HEREHouston.com, your go-to source for actionable local news and information in Houston, Harris 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 Houston Livestock Show and Rodeo, Art Car Parade, and Chevron Houston Marathon. Our coverage extends to key organizations like the Greater Houston Partnership and Houston Area Urban League, plus leading businesses in energy and healthcare that power the local economy such as ExxonMobil, Schlumberger, and Houston Methodist. As part of the broader HERE network, including HEREAustinTX.com, HERECollegeStation.com, HEREDallas.com, and HERESanAntonio.com, we provide comprehensive, credible insights into Texas's dynamic landscape.
