Texas Bar Journal • September 2025

The Legislative Update

Business Law

Written by Daryl B. Robertson

This article summarizes several bills passed by the Texas Legislature during its 2025 regular session that affect business law and does not purport to describe all passed bills in this area. This article contains summaries only and should not be relied on as a complete description of any bill. All bills are effective September 1, 2025, unless otherwise noted.

Entity Governance Bill

SB 29 adds new entity governance provisions to the Texas Business Organizations Code (TBOC) that apply to Texas entities. This bill has garnered national attention and became effective May 14, 2025. Some highlights of SB 29 are summarized below:

  • Authorizes a domestic entity to include in its governing documents a waiver of jury trial concerning internal entity claims (that is, claims involving the internal affairs of the entity).

  • Entity governing documents can specify an exclusive forum and venue for internal entity claims.

  • For a publicly traded corporation, records inspections are not allowed if the requesting shareholder has any pending litigation or derivative proceeding with the corporation.

  • Authorizes advance court determinations of independent and disinterested status of directors in the context of shareholder derivative actions or conflict of interest transactions.

  • The officers and directors of a Texas corporation having voting shares listed on a national securities exchange or electing in its governing documents to be governed by this new provision will be entitled to a presumption that they—“in taking or declining to take any action on any matters of a corporation’s business”—acted in good faith, on an informed basis, in furtherance of the corporation’s interests and in obedience to the law and the corporation’s governing documents, which could be viewed as a codification of a version of the so-called “business judgment rule” for corporations. Neither the corporation nor any shareholder has a cause of action against the officer or director unless the claimant rebuts at least one of the presumptions and proves fraud, intentional misconduct, an ultra vires act or knowing violation of law. Somewhat similar provisions are added for limited liability companies and limited partnerships as well.

  • Authorizes a publicly traded Texas corporation (or an electing Texas corporation with 500 or more shareholders) to establish in its governing documents an ownership threshold for shareholder derivative actions, with the threshold not to exceed 3% of its outstanding shares.

  • Eliminates awards of attorneys’ fees to a plaintiff for a settlement in a derivative proceeding on behalf of Texas corporations, LLCs, or limited partnerships based only on amending disclosures to owners.

  • Clarifies existing Texas law by authorizing a Texas limited partnership or LLC to eliminate the duties of members, partners, managers, and officers in its governing documents.

Omnibus Package of TBOC Amendments

SB 2411 makes an array of substantive and clarifying technical amendments to the TBOC covering various topics. Most of the substantive amendments effected by SB 2411 are summarized below.

  • Authorizes notice of an action by less than unanimous written consent of owners of a Texas entity to the nonconsenting owners through a publicly available electronic resource.

  • Authorizes Texas corporations, and other organizations to which TBOC Sec. 7.001(b)(c) applies, to include provisions in the certificate of formation that exculpate officers from monetary liability for breaches of duty of due care to the same extent that governing persons can be exculpated.

  • Specifies that a properly adopted plan of conversion may authorize additional entity action to be taken by the converted entity without further approvals being required.

  • Specifies that for-profit and nonprofit Texas corporations may retroactively ratify a transaction that was ineffective because of a failure to file with the Texas secretary of state a filing instrument that was required to complete the effectiveness of the transaction.

  • Simplifies the information required for a certificate of validation and limits the circumstances under which a certificate of validation must be filed under the ratification provisions for for-profit and nonprofit corporations.

  • Authorizes the directors of a for-profit corporation, without shareholder approval, to effect certain amendments to the corporation’s certificate of formation, including forward and reverse stock splits, subject to specified conditions.

  • Authorizes the governing authority to approve a plan, agreement, instrument, or other document in substantially final form and subsequently to ratify, with retroactive effect, the final form of such document before the effectiveness of the filing of such document, or a certificate referencing it, with the secretary of state.

  • Recognizes that owners in a domestic entity that is party to a merger or interest exchange may appoint a representative to represent them in enforcing the plan of merger or exchange.

Restrictions on Shareholder Proposals

SB 1057 applies to any “nationally listed corporation,” which means a Texas for-profit corporation that: (1) has a class of equity securities registered under Section 12(b) of the Securities Exchange Act of 1934; (2) is admitted to listing on a national securities exchange; and (3) either (A) has its principal office in Texas or (B) is admitted to listing on a stock exchange that has its principal office in Texas and has received approval by the Texas Securities Commissioner to act as a securities exchange under provisions of Subchapter C of Texas Government Code Chapter 4005.

A nationally listed corporation may opt into the new provisions by amending its governing documents. Any shareholder of such a corporation is prohibited from submitting a proposal for consideration at a meeting of shareholders unless the shareholder (or group of shareholders):

  1. owns at least the lesser of $1 million of market value of voting shares or 3% of the corporation’s voting shares;

  2. has owned and continues to own those shares for at least six months prior to and through the shareholders meeting; and

  3. solicits holders of at least 67% of the voting shares to vote on the proposal.

Director nominations and ancillary procedural resolutions would not be subject to this ownership threshold.

Proxy Advisor Regulation

SB 2337 purports to apply to any “proxy advisory service” provided by a “proxy advisor” to owners of any publicly traded for-profit corporation, LLC, partnership, or other business entity that (1) is organized or created under Texas law; (2) has its principal place of business in Texas; or (3) is a foreign entity proposing to become a domestic Texas entity by merger, conversion, or otherwise.

Pursuant to SB 2337, if a proxy advisory service is not provided “solely in the financial interest of” the owners of the publicly traded entity, the proxy advisor must make specific disclosures to the recipient of the services and the affected publicly traded entity and on the proxy advisor’s website. A proxy advisory service is not provided solely in the financial interest of owners if it (1) involves a voting recommendation against the board’s recommendation on an owner-sponsored proposal and does not include a written economic analysis of the financial impact of the proposal on owners; (2) is wholly or partly based on nonfinancial factors, such as environmental, social, and governance (ESG) or diversity, equity, and inclusion principles, social credit or sustainability scores, and other similar criteria; (3) is not based solely on financial factors and subordinates the owners’ financial interests to other objectives; or (4) advises against a company proposal to elect a governing person unless the proxy advisor affirmatively states that the proxy advisory service solely considered the financial interests of the owners in making such advice.

A violation of the new provisions would be deemed to be a deceptive trade practice actionable under Subchapter E of Texas Business and Commerce Code Chapter 17.

Texas Business Court

HB 40 made several amendments to the Texas Business Court authorizing statute and numerous amendments to other Texas statutes to reference the Business Court. For further details, see the summary under “Texas Judiciary.”

Restrictions on Covenants Not to Compete for Physicians and Health Care Practitioners

SB 1318 amends Chapter 15 of the Texas Business and Commerce Code (TBCC) to impose new restrictions on covenants not to compete for physicians and certain health care practitioners. Noncompete covenants cannot last longer than one year after date of termination and cannot extend beyond a five-mile radius from the location of the primary practice of the physician or health care practitioner.

Terminating Fraudulent Financing Statements

SB 2221 amends TBCC Chapter 9 to provide procedures by which a debtor named in a fraudulent financing statement can provide a sworn affidavit to all the secured parties named therein and obtain its termination. A secured party has the ability to challenge the affidavit and have the financing statement reinstated through specified court proceedings.

Secretary of State Filing Fees and Veteran-Owned Businesses

HB 346 amends the Government Code to allow the Texas secretary of state to prescribe fee amounts for expedited commercial and entity records searches or filings. These fees were previously limited to $15 for financing statements and
$25 for entity filings. The bill also amends the Tax Code to remove the expiration date for exemptions from the franchise tax and certain filing fees for veteran-owned businesses, making those exemptions permanent.

daryl robertsonDARYL B. ROBERTSON has more than 30 years of experience in business and mergers and acquisitions transactions, entity formation and restructuring, REITs and corporate finance, and securities law. He is chair of the Business Code Committee of the State Bar of Texas Business Law Section, which regularly drafts amendments to the Texas Business Organizations Code, and is a former chair of the Business Law Section. He received his J.D. from Harvard Law School and his B.A. from Duke University.