Lone Star Governance: Recent Amendments to the Texas Corporate Statute

I. INTRODUCTION

Texas, a state known for its independence and innovation, has recently taken steps to make the state an even more attractive home for American corporations. One of the most impactful steps was adoption of a set of sweeping changes to the Texas Business Organizations Code (“TBOC”) during the 89th Texas Legislature, whose session ran from January 14 to June 2, 2025. This article examines the four bills passed by the Legislature that resulted in the most significant amendments to the TBOC from a corporate governance perspective – SB 29, SB 1057, SB 2411 and, potentially, SB 2337. The amendments to Texas’ corporate statute resulting from these bills were designed to place limitations on litigation risk for, and liabilities of, officers and directors, to manage relations with shareholders and proxy advisory firms, and to provide additional certainty in corporate formalities.

II. Senate Bill 29

SB 29 includes consequential changes affecting corporate governance, governing authority liability, shareholder rights and the internal management of Texas corporations organized under the TBOC. SB 29 was signed into law on May 14, 2025, and the amendments to the TBOC became effective immediately.

A. Codification of the Business Judgment Rule and Protection for Conflicts of Interest

A central feature of the amendments effected by SB 29 is the codification of the Business Judgment Rule (“BJR Statute”). Specifically, the amendments to TBOC Section 21.419 codify the presumption that directors, officers and other managerial officials of corporations acted in compliance with their duties. To take advantage of this presumption, the Texas corporation must be publicly traded or must opt in to TBOC Section 21.419 in its certificate of formation. (more…)