TX SB 29 and minority shareholder rights impact

On Wednesday, May 14, 2025, Texas Governor Greg Abbott signed Senate Bill 29 (SB 29) into law.

With the goal of furthering the State’s objective of becoming a friendlier business forum for corporate entities, SB 29 has positioned Texas as potentially more friendly to boards of directors than Delaware when it comes to one of the more discussed areas of corporate governance: the rights of minority shareholders. SB 29 targets minority shareholder derivative suits by amending the applicable procedural safeguards of the Texas Business Organizations Code. Specifically, SB 29 implements the following:

• An enforceable waiver of the right to jury trial concerning any derivative claim if contained in corporate charter, and construing any vote for or affirmative ratification of a corporate charter containing such waiver as a knowing and informed waiver;
• Prohibiting books and records inspections for public companies if reasonably determined that the request is in connection with active or future derivative or civil suits where the entity is expected to be named an adversarial party, along with excluding e-mails, text messages or similar electronic communications, plus information from social media accounts, from a company’s records, unless they unless effectuate an action taken by the company;
• Restricting a public company shareholder from instituting or maintaining a derivative proceeding if they fail to meet the required ownership threshold identified in the company’s certificate of formation or bylaws, not to exceed three percent of the company’s outstanding shares;
• An ability for a company to seek a determination, at the start of a derivative proceeding, that directors serving on a special committee are independent and disinterested with respect to the derivative proceeding’s allegations; and
• A clarification that a substantial benefit to a company does not include additional or amended disclosures made to its shareholders, regardless of materiality, within the context of attorney’s fees following the termination of a derivative proceeding.

SB 29 continues the push by the Texas Legislature to substantiate Texas as pro-business and an increasingly desirable destination for companies to incorporate and call home.