Texas Just Got a Little More Business Friendly

During the 2025 legislative session, the Texas legislature enacted several new laws aimed at making the state more predictable for businesses targeted by shareholder lawsuits. These changes come in the wake of several high profile shareholder suits alleging board malfeasance aimed at large public companies in other jurisdictions.

Codification of Business Judgment Rule: This rule protects corporate officers and others charged with governance from being second-guessed by courts when making business judgments. The law establishes a safe harbor consisting of several criteria that creates the presumption that an action by the corporation was taken in the best interest of shareholders and was not a breach of fiduciary duty.

Ownership Thresholds for Derivative Claims: Companies can now adopt ownership thresholds that must be met before a shareholder can pursue a derivative lawsuit. This means that minority shareholders may not have the right to individually sue over matters of corporate governance.

Protection from Meritless Lawsuits: The bill includes reforms to shield businesses from frivolous lawsuits, including limiting attorney’s fees in certain cases. Additionally, the law clarifies that e-mails and other electronic communications are not “books and records” and requires that such materials be obtained in discovery and not in response to “books and records” requests by shareholders.

Special Litigation Committees: Companies can seek an declaratory judgement from a judge regarding the independence of directors serving on special committees. 

Exclusive Venue for Disputes: Corporations can specify in their governing documents that the Texas Business Court or other Texas court will serve as the exclusive venue for resolving disputes, ensuring Texas law applies. 

Thinking of forming a new business in Texas or seeking counsel for your existing business? Contact us to discuss your needs.