On July 9, 2025, Texas Governor Greg Abbott signed Senate Bill 29 (SB 29) into law, bringing major reforms to the state’s corporate governance framework. This landmark legislation is poised to enhance Texas’s standing as a premier jurisdiction for business formation and governance, challenging Delaware’s long-established dominance in corporate law. The new bill introduces a series of measures to foster corporate stability, streamline legal processes, and improve shareholder rights and protections.
Key Provisions of SB 29
SB 29 brings about several key changes to the Texas Business Organizations Code (TBOC), particularly in the areas of corporate governance, litigation, and dispute resolution. The bill codifies the business judgment rule into Texas law, which is designed to protect directors of corporations from personal liability for decisions made in good faith that result in negative outcomes. This provision, which has been widely followed in Delaware’s corporate law, is expected to give Texas-based companies greater confidence when making strategic decisions, knowing that they have robust legal protections against shareholder lawsuits.
Another important aspect of the new law is the restriction on derivative lawsuits filed by minority shareholders. SB 29 establishes clearer thresholds and procedural requirements for such lawsuits, effectively reducing the frequency of costly and time-consuming litigation that can stall corporate growth. These changes are designed to protect businesses from frivolous lawsuits while maintaining a mechanism for shareholders to hold directors accountable when appropriate.
In addition to these provisions, the bill also clarifies the process for resolving governance disputes within corporations. This includes making it easier for businesses to address conflicts between shareholders and management, especially in situations involving the allocation of corporate control or the restructuring of business operations.
Economic Impact and Attractiveness for Businesses
One of the driving forces behind SB 29 is Texas’s ambition to attract more businesses to incorporate in the state. Texas has long been a hub for businesses due to its favorable tax environment and growing economy, but with the introduction of these reforms, the state aims to make its legal framework even more attractive to corporate entities.
Legal professionals expect that the provisions of SB 29 will encourage more corporations, particularly large, publicly traded companies, to choose Texas as their home jurisdiction. With clearer governance structures and stronger protections for directors, Texas is positioning itself as a top choice for companies looking for a stable and business-friendly environment.
Additionally, SB 29’s emphasis on efficient and streamlined legal processes is expected to reduce the costs associated with corporate governance. Companies will be able to handle disputes more swiftly and with greater clarity, which will ultimately benefit shareholders, investors, and the broader Texas economy.
Looking Ahead: The Future of Corporate Law in Texas
Texas’s decision to enact SB 29 reflects its forward-thinking approach to business law. As more states and jurisdictions look to update their corporate governance rules, Texas’s reforms set an important precedent. Legal experts believe that other states may follow suit by adopting similar provisions, making SB 29 a model for future corporate governance frameworks.
For now, Texas businesses are set to benefit from a more efficient and predictable legal system, which will allow them to navigate corporate governance issues with greater ease. As a result, Texas will continue to attract both new startups and well-established corporations seeking a reliable and innovative jurisdiction.
