SB1239

SB1239 changes which law governs certain securities disputes and which claims pass to a buyer of securities issued by a foreign state. “Certificated” means represented by a certificate; “uncertificated” means not represented by one. Much of the act is specifically limited to foreign-state securities, but its first rule about the consequences of an invalid security is not expressly limited that way. Signed May 30, 2025, it took effect September 1, 2025. Final law; Security definitions; Official history.

If a security is invalid: Existing law makes the issuer’s jurisdiction’s law govern validity. If a security is found invalid under that law, the new rule makes the issuer-agreed governing law for the security documents and related matters govern the consequences for issuer and purchaser, including enforceability and available rights/remedies. It does not simply declare an invalid security valid. Final law, section 1; Existing validity and choice-of-law rules.

Claims travel with foreign-state securities: Unless otherwise agreed in writing, a purchaser acquires the transferor’s specified claims, even if unknown at the time. These include damages or rescission claims against the issuer or another party to the security, damages claims involving trustees or depositaries under the issuing agreement, claims against underwriters or guarantors and other parties to the issuer’s obligations, and enforcement rights arising before the transfer. Rescission means seeking to undo the transaction. This supplements the existing general rule that a buyer acquires rights the transferor had or could transfer. Final law, section 2; Existing purchaser-rights rule.

An issuer or other obligated party generally cannot defeat such an obligation or claim—or bring a claim against the buyer—merely because the buyer or a relevant assignor/assignee intended to enforce the acquired rights through litigation or other lawful means. The act preserves assignments rules specifically provided by statute. It does not abolish every defense, guarantee recovery or remove foreign-government immunity. Final law, section 8.302(e).

Retroactive governing-law changes: For foreign-state securities in a “qualified transaction,” the stated governing law, including changes to it, applies retroactively to all issues relating to the security unless otherwise agreed in writing. The security may also be amended in accordance with its terms to permit amendments by less than unanimous consent and to choose another jurisdiction’s law; such an amendment applies retroactively unless the parties agree otherwise in writing. This is not permission to ignore the existing amendment terms. A qualified transaction involves at least $1 million in aggregate consideration or money/credit under the statutory definition; qualifying related, contemporaneous transactions with a common party can be combined. Final law, section 3; Qualified-transaction definition; Related-transaction rule.

“Foreign state” uses the federal definition, which includes political subdivisions and qualifying agencies or instrumentalities—not every privately owned overseas company. The definition imposes separate legal-person, government relationship/ownership and nationality conditions on an agency or instrumentality. Final law; Federal foreign-state definition.