SB29

More protection for business managers, with new limits on owner challenges

SB29 changes Texas business-entity governance, owner lawsuits, records access and voting rules. It was signed and took effect May 14, 2025. Some provisions apply broadly to Texas-formed entities; others apply only to exchange-listed businesses, corporations that elect coverage, or provisions adopted in company or partnership agreements. This is not a blanket immunity for every business manager. official history; final law.

The act expands “national securities exchange” to include a stock exchange with its principal office in Texas approved by the state securities commissioner, in addition to federally registered national exchanges. Managers may consider other states’ laws, decisions and business practices, but refusing to follow or consider them does not itself imply a breach of Texas law or duty. final law, Sections 1–2.

Forum selection and jury waivers

Governing documents may select one or more Texas courts as the exclusive forum and venue for internal-entity claims, subject to state and federal jurisdiction rules. Such claims concern the entity’s internal affairs and include claims brought on its behalf. The documents may also waive a jury trial, even without each owner or manager signing. final law, Sections 3–4; prior Section 2.115.

The act treats a claimant as informed and knowingly waiving a jury if the person voted for or ratified the document, acquired equity while the waiver was already in the documents, or continued holding equity in an exchange-listed entity after the waiver was included. Other evidence of knowing, informed consent or acquiescence may also establish waiver. These are internal-governance claims—not a waiver of every unrelated customer’s or employee’s jury rights. final law, Section 2.116.

Corporate directors and officers

For a corporation with listed voting shares, or one affirmatively electing coverage in its governing documents, directors and officers are presumed to act in good faith, on an informed basis, for the corporation’s interests, and in obedience to law and governing documents. A corporation or shareholder claiming a breach must rebut at least one presumption and prove a breach involving fraud, intentional misconduct, an act beyond legal authority (“ultra vires”), or a knowing violation of law. The alleged circumstances must be stated specifically. Other defenses and lawful monetary-liability limits remain available. final law, Section 21.419.

For those same corporations, a director/officer’s interest in a transaction is not by itself a basis for a breach-of-duty claim unless Section 21.419 permits the claim, even if the older conflict-transaction approval conditions are not satisfied. This does not mean every conflicted transaction is automatically fair or valid. final law, Section 21.418(f); prior Section 21.418.

Independent-director court proceedings

Covered corporations may create independent, disinterested committees to review transactions with controlling shareholders, directors or officers, including transactions not yet contemplated. A corporation may ask a court to determine the committee members’ independence. It must notify shareholders; listed corporations may use an SEC current report. Shareholders other than the involved controlling person may participate. At a preliminary hearing no earlier than 10 days after notice, the court determines appropriate counsel, and shareholders’ lawyers may challenge the corporation’s chosen counsel or seek designation themselves. An evidentiary hearing follows. final law, Sections 21.416(g) and 21.4161.

The independence finding is conclusive unless previously unpresented facts supply sufficient evidence against independence for the transaction. This is a finding about directors’ independence, not advance court approval of every future deal’s merits. The petition ordinarily belongs in the business court; if the Texas principal-place-of-business county is outside an operating division, the act allows the county’s district court. final law, Section 21.4161.

Claims brought on the corporation’s behalf

A derivative lawsuit is an owner’s suit enforcing a right belonging to the entity. A corporation with listed common shares, or an opt-in corporation with at least 500 shareholders, may put an ownership threshold in its certificate or bylaws for starting such a proceeding, capped at 3% of outstanding shares. It is not an automatic 3% requirement for every corporation. The act recognizes shareholders acting together under an agreement or understanding. Existing requirements for ownership at the time of the challenged conduct, subject to stated succession/conversion rules, and fair representation remain. final law, Sections 21.551–.552; prior Section 21.552.

Before deciding how to respond to derivative allegations, the corporation may seek a court finding on the decision-making directors’ independence. An existing lawsuit’s court handles the petition; otherwise the business-court/district-court rule applies. The shareholder must be served and may intervene. Unless extended for good cause, the hearing is due within 45 days and an order within 75 days; a shareholder not already a party generally must intervene at least seven days before the hearing. Findings are conclusive absent newly discovered, previously unpresented facts sufficient to disprove independence. Court-appointed independent panels may include directors; the existing fraud/willful-misconduct exception to panel-member liability protection remains. final law, Section 21.554.

For corporations, LLCs and limited partnerships, additional or amended disclosures to owners, however material, no longer count as a “substantial benefit” for the statutory award of the plaintiff’s derivative-litigation expenses, including attorney fees. This does not abolish every possible expense award. The special transition rule preserves prior law for corporate derivative proceedings instituted before May 14, 2025 with respect to the corporate standing and expense changes. For foreign corporations’ derivative cases, formation-jurisdiction law remains the general rule, with the specified Texas procedural exceptions. final law, Sections 15–16, 19, 24 and 26; prior Section 21.561; prior Section 101.461; prior Section 153.411.

Records access

Corporate shareholders retain the written proper-purpose demand route after six months’ ownership or with at least 5% of outstanding shares. But covered statutory records exclude emails, texts, similar electronic communications and social-media information unless the particular item carries out an entity action. For listed-voting-share or opt-in corporations, a demand is not for a proper purpose if the corporation reasonably determines it is connected with specified active, pending or expected litigation involving the holder/affiliate. The law expressly preserves court-compelled inspection and applicable lawsuit discovery, including existing derivative-discovery limits. final law, Section 21.218; prior Section 21.218; prior Section 21.556.

LLC and limited-partnership statutory inspection rights are made subject to their governing documents. The same electronic-communications exclusion applies, but their agreements may expressly provide otherwise. The final act does not extend the proposed six-month holding requirement or litigation-purpose exclusion to those entities. final law, Sections 101.502 and 153.552.

LLCs, limited partnerships and voting

An LLC agreement may expressly eliminate duties, including fiduciary duties and related liabilities, rather than only expand or restrict them. Listed-voting-interest LLCs receive similar presumptions and specifically pleaded misconduct requirements for covered managers/officers and affiliates; unlisted LLCs may adopt provisions duplicating their effect in the company agreement. The rule respects duties validly modified or eliminated rather than creating a duty where none exists. final law, Sections 101.256 and 101.401; prior Section 101.401.

The partnership provisions likewise establish presumptions for covered limited-partnership managers and related general-partner officials, with rebuttal, breach and specified misconduct requirements. A limited-partnership agreement may expressly eliminate the identified loyalty, care and good-faith duties under the new provisions. Section 152.006 directly applies these provisions to exchange-listed partnerships and says other partnerships are not prohibited from adopting provisions duplicating their effect. The final act does not simply erase all general-partnership duties. final law, Sections 152.002(e), 152.006 and 153.163.

A corporation’s certificate can provide for voting as a single class rather than separate classes or series, including fundamental transactions. Shares otherwise without voting rights remain nonvoting in that combined vote. The act also permits specified majority votes to increase or decrease authorized share counts under the stated certificate/amendment conditions, but never below shares already outstanding. These changes can reduce a class’s separate veto; they do not automatically amend every corporation’s certificate. final law, Sections 21.364–.365.