Delaware has long worn the crown as America’s corporate capital. Yet over the past decade, a new trend has emerged, and that crown has started to shift. Long known as the energy capital and hub of scientific innovation, Texas has become a magnet for investment and corporate growth; more than 2.9 million business entities are incorporated or registered in Texas as of January 1, 2025—up more than 125,000 year-over-year and almost double the number a decade ago. Coupled with the recent amendments to the Texas Business Organizations Code (“TBOC”), Texas has signaled its sustained bid to retain and continue attracting companies.

With an eye toward making Texas the preferred launchpad for novel and existing businesses, the 2025 amendments found in the bipartisan Senate Bill 29 (“SB 29”); Senate Bill 1057 (“SB 1057”); and Senate Bill 2411 (“SB 2411”), among others, are no routine tune-up. These changes codify common-law rules, extend and expand protections to officers and directors, and offer sharper tools to manage risk and litigation costs. With all three of these new laws in effect as of September 1, 2025, Texas entities and their corporate counsel should act quickly to enjoy their full benefit.

Fortifying the Command Structure: Strengthened Protections for Directors and Officers

For decades, Texas officers and directors relied on the common-law business judgment rule to shield decisions made in the honest exercise of their discretion.¹ SB 29 codifies the business-judgment rule and adds four statutory presumptions in the newly-created section 21.419: that officers and directors are presumed to act 1) in good faith; 2) on an informed basis; 3) in furtherance of the corporation’s interests; and 4) in obedience to law and the corporation’s governing documents.² While directors and officers of publicly traded organizations automatically enjoy the benefits of section 21.419, privately owned organizations must opt in to obtain those presumptions, which supplement—rather than displace—other defenses, immunities, or privileges available to managerial officials or the entity.³ Thus, plaintiffs alleging breaches of fiduciary duties against directors and officers subject to section 21.419 must clear several hurdles. These claimants must rebut at least one section 21.419(c) presumption, and they must allege and prove a breach constituting fraud, intentional misconduct, an ultra vires act, or a knowing law violation.

Complementing section 21.419 and the existing 21.418(b) (conflicted-transaction safe harbors), SB 29’s amendments to section 21.418(f) protect against claims arising from duties relating to the making, authorizing, or performing of a contract or transaction unless section 21.419 would allow such a claim.⁴ And SB 29 adds section 1.056, which confirms that a managerial official’s refusal or failure to conform their powers to another jurisdiction’s law or practice is not, by itself, a breach of the TBOC or any duty existing under Texas law.⁵ For limited liability companies (“LLCs”) and publicly traded limited partnerships (“LPs”), SB 29 goes further. Amended section 101.401 empowers LLCs to expand, restrict, or eliminate any duties—including fiduciary duties—owed by members, managers, officers, or others.⁶ And amendments to section 152.002(e) likewise allow publicly traded LPs to eliminate the statutory duties of loyalty, care, and good faith. In contrast, SB 29 did not change the prohibition on corporations eliminating or limiting the duties of loyalty and good faith.⁷

Separately, SB 2411 amends section 7.001 to extend exculpation to all “managerial official[s].” To use these protections, an entity must elect and specify the exculpated officials in its certificate of formation or other similar organizational instrument. But exculpation cannot apply to 1) breaches of the duty of loyalty; 2) an act not taken in good faith that either constitutes a breach of duty or involves intentional misconduct or knowing violation of law; 3) transactions from which the managerial official received an improper benefit; or 4) express statutory violations.⁸

Firing on All Engines: Modernizing Corporate Governance in Texas

Protection from liability attracts business, but so do efficient procedures and modern statutes. Through SB 29, SB 2411, and SB 1057, the Legislature delivered practical updates that reduce costs and delay and align governance with modern technology and practices.

SB 29 increases flexibility in share-class voting and modernizes record-keeping practices. Under the amended section 21.364(d), corporations may tailor voting across classes or series (including increases or decreases in the authorized shares of a class or series) and permit single class voting. The new section 21.364(e-1) confirms, if the certificate of formation provides votes shall be as a single class, nonvoting shares remain nonvoting.⁹ And the amended section 21.365(b) allows for the waiver of any class-by-class voting requirements to approve any matter, including any fundamental action or business transaction.¹⁰ The amended section 21.218(b-1) excludes social media posts, texts, and emails from records of the corporation unless they “effectuate[] an action by the corporation.” And for entities governed by or opting into section 21.419, the amended section 21.218(b-2) confirms a written demand sent in connection with an active or pending lawsuit (including a derivative suit) is not a proper purpose; the new subpart (b-3) preserves the right to obtain discovery, or a court order compelling the production, of such books and records.¹¹

SB 2411 makes other updates. It amends section 3.106 so boards of directors may approve documents in final or substantially final form and ratify them later.¹² Under the amended section 21.053(c), boards may—without shareholder approval—adopt amended certificates of formation to 1) remove provisions specifying the name and address of initial directors or organizers; or 2) effect a stock split or a reverse stock split if the corporation has only one class of undivided stock and the primary purpose is to maintain listing eligibility on a national securities exchange.¹³ Corporations may now also deliver notices of corporate actions by written consent that includes free, publicly accessible, non-subscription links to electronic copies of the required information (in lieu of hardcopies) under the amended section 6.202(d).¹⁴

SB 2411 further streamlines major transactions and shareholder proposals. Amended section 10.002(e) states that disclosure letters, schedules, or similar documents are not part of the plan of merger unless expressly stated otherwise, but they nonetheless have the effects provided in the plan of merger.¹⁵ The amended section 10.004 will also permit a merger plan to contain an irrevocable appointment of representatives vested with the sole and exclusive authority to act onbehalf of owners or members.¹⁶

Finally, SB 1057 provides that certain Texas-based public companies that opt in via section 21.373 can limit proposal-submission thresholds, including 1) proposals submitted by owners of at least $1 million (or 3%) of the voting shares held for the past 6 months and through the meeting on such proposals; and 2) for which the proponent solicited at least 67% of the voting shares.¹⁷

Eliminating Post-Launch Hazards: Additional Protections From Litigation and Complaints

Shareholder demands and derivative suits impose significant risks and costs, including investigations, unfavorable venues, distraction, and attorneys’ fees—not to mention potential liability. Delaware offers tools for its incorporated entities to manage those risks.¹⁸ And with the TBOC overhaul, Texas now has comparable, and sometimes broader, protection while preserving accountability.

SB 29 entitles corporations to petition Texas courts for upfront determinations of the independence and disinterestedness of certain committees. Similar to the special litigation committees under section 21.554, the amended section 21.416(g) allows a corporation to adopt resolutions to form a committee of independent and disinterested directors to review and approve transactions.¹⁹ And under a newly created section 21.4161, a corporation may petition the Texas Business Court (or, where applicable, a district court with competent jurisdiction) for a judicial determination that its committee is independent and disinterested. The court will then appoint counsel to represent the corporation and hold an evidentiary hearing at least 10 days after notifying shareholders. ²⁰ Similarly, the amended section 21.554 now permits a corporation—before deciding how to respond to derivative claims—to petition a competent court or the court presiding over the lawsuit to determine independence and disinterestedness of its special litigation committee; absent good cause, the court must hold an evidentiary hearing within 45 days after filing. Whether the petition is brought under section 21.4161 or 21.554, absent facts not presented to the court, its determination “shall be dispositive.”²¹

Affording greater protection than under Delaware law, SB 29 amends section 21.552(a) to further limit derivative claims. Corporations governed by section 21.419 may set in the certificate of formation or bylaws a minimum beneficial ownership interest threshold (up to 3% of the outstanding shares) before a shareholder can assert derivative claims. While all publicly traded corporations enjoy this benefit, any private corporation must also have at least 500 shareholders before adopting this framework.²²

To further limit litigation risk and liability, SB 29’s new section 2.116 confirms the enforceability of a jury trial waiver for internal entity claims even if the shareholder did not individually sign the waiver. If the corporation adopts the waiver, the shareholder is deemed to have knowingly waived this right if such person 1) voted for or ratified the document containing the waiver; or 2) acquired or continued to hold stock in the publiclytraded corporation after adoption of the waiver.²³ Further, the amendments to section 21.561(c) confirm disclosure-only settlements—regardless of materiality of the additional information—do not result in a substantial benefit to the corporation, precluding an award of attorneys’ fees on that basis under section 21.561(b).²⁴

Preparing for Launch: Practical Steps to Capitalize on the TBOC Amendments

Most of the impactful legislative changes to TBOC require affirmative action or opting-in to TBOC’s updated framework. Corporate counsel should explore:

•  whether an entity should opt into the business-judgment rule and presumptions in section 21.419;
• the benefits of fixing venue and waiving trial by jury for internal entity claims under sections 2.115(b) and 2.116;
• if ownership thresholds for shareholder proposals and derivative suits under sections 21.373 and 21.552(a) (3), respectively, are beneficial;
• whether appointing independent, disinterested directors to review and approve transactions (under section 21.4161) or serve on a special litigation committee (per section 21.554) would increase respect for corporate directors’ decisions;
• what additional managing officials qualify for exculpation provided by section 7.001;
• for LLCs, whether duties should be expanded, restricted, or eliminated under section 101.401; and
• for LPs, the potential value or risk of eliminating certain statutory, fiduciary duties under the section 152.002(e).

And if duties are altered or new exculpation, indemnification, or advancement is extended, corporate counsel should consider whether additional changes may be necessary to other contracts or governing documents (e.g., indemnification agreements, director and officer insurance coverage, Secretary of State forms). Once a plan is created, corporate counsel should draft original or amended articles of formation, bylaws, and all other governing documents and contracts necessary to adopt and effectuate the desired protections to ensure uniformity of corporate governance.

Corporate counsel should draft policies that match its client’s interests in the modern world. Consider excluding social posts, texts, and emails from corporate books and records unless such documents effectuate corporate action and drafting policies and procedures for rejecting demands for such documents tied to active or threats of litigation. Instead of mailing voluminous copies of disclosures, business entities should upload documents to a secure (but free and publicly accessible) resource, including URLs within written-consent notices. Corporate counsel should also refresh checklists for board approval of final or substantially final forms to include a follow up for later ratification under section 3.106, the non-integration of disclosure schedules unless expressly stated per section 10.002(e), and appointment of owner representatives under section 10.004.

Remember that amendments and committee appointments often require shareholder approval and that any plan to amend governing documents must allow sufficient time to obtain all necessary approvals. And these protections have little benefit unless used appropriately. Educating directors, officers, and other managerial officials on the additional protections and limitations of the 2025 TBOC amendments, the entity’s relevant corporate procedures, and the future potential risks will help ensure these new tools are used effectively and defensibly. Of course, to best advise their clients who incorporate, organize, or conduct business in Texas, corporate counsel must understand these significant changes and stay apprised of how courts interpret them and their actual, real-world impact on corporate governance and litigation outcomes.

Plotting the Path Forward: Will Texas Dethrone Delaware?

Overnight? No. But with a modernized TBOC, a specialized Texas Business Court, and a record-setting number of entities actively organized and registered here, Texas can credibly claim its status as a go-to jurisdiction for incorporation. Whether Texas truly unseats Delaware remains to be seen. But for corporate counsel and boardrooms alike, one thing remains clear: Texas has started the countdown, and if companies implement TBOC’s new protections and courts deliver predictable rulings, it could take the crown as corporate jurisdiction of choice.

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