New Texas Law Provides Powerful New Protections for Companies & Their Directors

Texas recently took a bold step to reinforce its business-friendly reputation, as Governor Greg Abbott signed Senate Bill 29 (SB 29) into law on May 14, 2025. This groundbreaking bill, effective immediately, significantly strengthens the legal framework governing corporations and partnerships—potentially making Texas one of the most attractive jurisdictions in the country for business formation, operations, and investment.

Here's why SB 29 matters for your business, your shareholders, and your future.

More Certainty, Less Risk: Texas Codifies the Business Judgment Rule

One of SB 29’s biggest impacts is the codification of the Business Judgment Rule, a longstanding legal doctrine designed to protect corporate leaders from personal liability for good-faith decisions.

Previously, directors and officers often hesitated when making strategic business decisions—especially bold or innovative ones—due to fears of potential lawsuits alleging breaches of fiduciary duties. This hesitation could cost businesses opportunities to grow, innovate, and attract investment. SB 29 directly addresses this issue.

What Exactly Does This Mean?

Under the new Texas statute (TBOC Section 21.419), corporate leaders are now presumed to act:

To overcome this presumption and hold directors liable, plaintiffs must specifically prove fraud, intentional misconduct, an ultra vires act, or knowing legal violations. By setting this high bar, Texas ensures that legitimate business decisions won't automatically trigger costly litigation—freeing corporate leadership to confidently pursue growth and innovation.

In short, Texas now encourages corporate leaders to boldly do what they're supposed to do: lead.

Limiting Derivative Claims to Protect Businesses

Another notable aspect of SB 29 involves enhanced protections against derivative shareholder suits—often used by activist shareholders to exert pressure, sometimes unfairly, on corporations.

Shareholders owning less than 3% of a corporation’s stock (in certain corporations) can no longer initiate derivative suits.

Plaintiffs’ lawyers are now restricted from obtaining fees if the only outcome is additional corporate disclosures.

These changes drastically reduce frivolous and costly lawsuits, empowering your corporation to focus more on operations and growth.

Additional Notable Provisions

Stronger Liability Protections for Limited Partnerships

Limited partnerships may now expressly limit fiduciary duties (including loyalty, care, and good faith obligations) through their partnership agreements, significantly enhancing flexibility and risk management.

Clarified and Restricted Shareholder Information Rights

SB 29 also curbs overly intrusive shareholder demands for electronic communications such as emails or text messages, ensuring only meaningful corporate actions trigger disclosure requirements.

Mandatory Venue and Jury Trial Waivers

Corporations can now designate specific Texas courts as exclusive venues for governance disputes and can adopt enforceable jury trial waivers—potentially streamlining litigation and cutting related costs significantly.

Common Misconceptions About the New Law

Despite widespread enthusiasm, SB 29 has already sparked confusion. Here are two myths worth quickly debunking:

Myth: Directors can now act recklessly without consequences.

Truth: SB 29 only protects good-faith, informed decisions. Fraudulent or knowingly illegal actions remain fully actionable.

Myth: Shareholders are now powerless.

Truth: Shareholders still retain significant oversight and governance rights, including the ability to challenge clearly improper actions or violations of fiduciary duties that meet the statute's stricter standard.

What Should Your Company Do Next?

SB 29 represents an exciting new era in Texas corporate law, offering clearer guidance, more legal certainty, and enhanced protection for directors and officers. But to leverage these new rules effectively, your company should consider:

Reviewing and updating corporate bylaws or partnership agreements to align with new legal protections.

Proactively educating directors and officers on these crucial governance shifts.

Evaluating how these enhanced protections can strategically benefit your company’s growth initiatives and risk management strategies.

Why Hopkins Centrich?

At Hopkins Centrich, we're committed to helping Texas companies navigate and leverage these significant legal developments. With deep experience in corporate governance, shareholder rights, and business litigation, our attorneys provide the proactive counsel your business needs to thrive in this new landscape.

Whether you’re restructuring, reviewing governance procedures, or facing potential litigation, our team ensures you’re fully informed, strategically prepared, and legally protected.

Questions About How SB 29 Affects Your Business?

Don’t leave this to chance. The rules of business governance in Texas just changed dramatically—and that can be exceptionally good news for your company.

Contact Hopkins Centrich today. We’ll make sure your business stays compliant, protected, and primed for growth.