The recent amendment to the Texas Business Code, encapsulated in Texas Senate Bill 29, has drawn attention from corporate litigators with its pivotal changes to corporate litigation practices in the state. This legislation authorizes Texas corporations to establish a minimum ownership threshold, which cannot exceed 3%, thus restricting certain minority shareholders from initiating derivative litigation. Additionally, it empowers companies to mandate that all internal disputes be resolved in a designated venue, such as a business court, and permits the waiver of jury trials for these disputes.
Furthermore, the law introduces a unique provision allowing corporations to secure court approval on the legality of insider transactions before a shareholder files a derivative suit. This gives companies the chance to seek judicial opinions on the independence of directors involved in such transactions. While this measure could potentially decrease derivative litigation in Texas, it also raises numerous procedural queries, particularly regarding the dynamics of conducting evidentiary hearings or discovery processes. Addressing these questions could significantly shape the legal landscape for corporate governance in the state.
For a deeper insight into these legal updates, refer to the full text of the article on Texas Lawyer.