Texas Introduces Major Corporate Governance Reforms to Attract Businesses
May 14, 2025 – Austin, TX – In a significant legislative shift, Governor Greg Abbott has signed Senate Bill 29 (SB 29) into law, transforming corporate governance for public companies in Texas. This reform, which limits the ability of minority equity holders to file derivative lawsuits, is designed to foster a more business-friendly environment and align Texas with other competitive jurisdictions like Delaware.
The new law mandates a minimum ownership threshold of 3% for equity holders to initiate derivative claims, addressing concerns about litigation from small stake investors. Additionally, SB 29 codifies the long-standing Texas Supreme Court principle known as the business judgment rule, which protects directors and officers from liability for decisions made in good faith aimed at benefiting the company.
The legislation also introduces enhanced litigation management tools, allowing Texas entities to designate exclusive venues for internal disputes and waive jury trials in their governing documents, thereby streamlining conflict resolution processes.
These changes are part of a broader strategy to position Texas as a favorable alternative for corporate charters, especially following high-profile legal battles like Elon Musk’s dispute in Delaware related to Tesla’s compensation. Musk’s relocation of his companies’ legal headquarters to Texas in 2024 has intensified this competitive push.
Complementing SB 29, Senate Bill 1058 exempts Texas-listed exchanges from certain franchise taxes starting January 1, 2026. Furthermore, House Joint Resolution 4 proposes a constitutional amendment to protect stock exchange transactions from taxation, heading to voters in November 2025.
For businesses contemplating the benefits of chartering in Texas, it is essential to reassess governing documents in light of these reforms. Companies are encouraged to monitor upcoming constitutional amendments and seek guidance on exploiting these strategic opportunities for reduced litigation risk and taxation.
For insights into how SB 29 and related developments may affect your business, consult a local Dykema attorney.
Note: The image is for illustrative purposes only and is not the original image of the presented article.
