SB 29 modifies key provisions of the Texas Business Organizations Code to reinforce Texas's authority over domestic business entities and strengthen the state's position as a hub for corporate governance. The bill clarifies the definition of a "national securities exchange" to include exchanges based in Texas that are approved by the Texas Securities Commissioner, broadening the scope of eligible exchanges under state law and encouraging the development of in-state financial markets.
The legislation introduces a new Section 1.056 that expressly establishes the primacy of Texas law in governing the formation, internal affairs, and governance of domestic entities. It provides that the plain meaning of the Texas Business Organizations Code cannot be overridden by the laws or judicial rulings of other states. However, it allows managerial officials to voluntarily consider laws or practices from other states without imposing a duty to do so, thereby enhancing legal clarity and reducing potential out-of-state influence on Texas business operations.
Additionally, the bill amends Section 2.115 to affirm that business governing documents may require internal legal disputes (referred to as "internal entity claims") to be resolved exclusively in Texas courts, provided such requirements comply with jurisdictional standards. Complementing this provision, the new Section 2.116 allows these documents to include a waiver of the right to a jury trial for internal claims, provided the waiver is knowing, voluntary, and legally valid. These changes give business owners more control over dispute resolution processes and contribute to a more predictable legal environment for entities formed in Texas.
The Committee Substitute for SB 29 represents a streamlined and more targeted version of the originally filed bill. While both versions share a core emphasis on reinforcing Texas’s authority over domestic business entities and clarifying jurisdictional governance, the originally filed version included an expansive slate of reforms to corporate law—particularly in the areas of director liability, shareholder rights, and derivative litigation procedures.
In contrast, the Committee Substitute omits numerous provisions that would have significantly reshaped the internal affairs doctrine and legal protections for corporate officers and directors. For example, the filed version established legal presumptions favoring directors and officers of public corporations, shielding them from liability unless shareholders could overcome heightened burdens of proof—such as demonstrating fraud or knowing violations of law. This section was entirely removed in the substitute version, possibly due to concerns about limiting shareholder oversight and litigation rights.
Additionally, the filed bill proposed raising the bar for shareholders to bring derivative suits by allowing corporations to set minimum ownership thresholds and empowering courts to pre-approve the independence of internal review committees. It also narrowed the scope of corporate records shareholders could inspect, excluding emails, texts, and social media communications unless tied directly to corporate action. None of these litigation-related provisions were retained in the Committee Substitute, suggesting a strategic retreat from potentially controversial reforms in favor of consensus-driven, jurisdictional clarifications.
Ultimately, the Committee Substitute focuses on a narrower but still meaningful objective: bolstering Texas’s legal autonomy in corporate governance. It allows Texas-based entities to assert exclusive forum provisions and enforce waivers of jury trials in their governing documents—steps that enhance predictability and local control without inviting the broader legal and political scrutiny that accompanied the original bill's more sweeping reforms.
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Sen. Bryan Hughes
