Texas Takes a Bold Step Toward Enhanced Corporate Accountability
On July 13, 2025, Texas passed a landmark corporate law reform that mandates enhanced transparency in business ownership and operations. Senate Bill 38 (SB 38) was signed into law by Governor Greg Abbott and aims to close loopholes that have historically allowed businesses to hide ownership details behind complex corporate structures. The new law will require corporations, limited liability companies (LLCs), and other business entities to provide detailed ownership information to the Texas Secretary of State, a move expected to foster greater accountability in the business community.
Key Changes to Texas Business Organizations Code
SB 38 introduces several important provisions to the Texas Business Organizations Code (TBOC). One of the primary provisions requires that businesses disclose not only the names of key executives but also the identities of individuals who own or control 10% or more of the company’s shares. The law goes a step further by extending these transparency rules to businesses incorporated outside of Texas but doing business within the state. This will help ensure that foreign and out-of-state companies are held to the same transparency standards as Texas-based businesses.
In addition to corporate transparency, the law requires that this ownership information be made publicly available through an online database managed by the Texas Secretary of State. This move will allow consumers, investors, and regulators to track business interests more effectively, creating a level playing field for businesses operating within Texas.
The new law also applies to Limited Liability Companies (LLCs), which previously were not subject to such ownership disclosure requirements. LLCs are often used as vehicles to hide ownership information, making them a tool for those seeking to shield their business practices from public view. By applying the same disclosure rules to LLCs, the law seeks to address concerns about the abuse of these structures and ensure that Texas remains a business-friendly environment without sacrificing corporate integrity.
Business Implications and Compliance Challenges
While the new law is seen as a positive move toward promoting business ethics, it will come with increased compliance costs for Texas businesses. Corporate lawyers anticipate that businesses will need to revise their internal structures and reporting procedures to comply with the new rules, which could require hiring additional legal and compliance staff. However, the long-term benefits of greater transparency and reduced risks associated with hidden ownership should outweigh these costs.
For businesses, these new regulations are expected to increase investor confidence and encourage more ethical investments. The law’s emphasis on clear and enforceable regulations positions Texas as a forward-thinking state for corporations looking for a stable, transparent business climate.
Texas Leads the Way in Corporate Law Reform
SB 38 is part of a broader trend in corporate law reform across the United States, where states are adopting more stringent corporate governance standards to combat fraud and promote corporate responsibility. While Delaware has long been considered the gold standard for corporate law, Texas is increasingly emerging as a viable alternative. As more companies consider the benefits of relocating or incorporating in Texas, SB 38 could further cement the state’s reputation as a top destination for business operations.
With the implementation of this law, Texas is sending a clear message that it values corporate accountability, transparency, and ethical business practices. The future of corporate law in the state looks increasingly focused on creating a balance between fostering economic growth and ensuring that businesses adhere to high standards of conduct.
