89R15624 PRL-F     By: Hughes S.B. No. 29       A BILL TO BE ENTITLED   AN ACT   relating to business entities.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 1.002(55-a), Business Organizations   Code, is amended to read as follows:                (55-a)  "National securities exchange" means:                      (A)  an exchange registered as a national   securities exchange under Section 6, Securities Exchange Act of   1934 (15 U.S.C. Section 78f); or                       (B)  a stock exchange that:                             (i)  has its principal office in this state;   and                            (ii)  has received approval by the   securities commissioner under Subchapter C, Chapter 4005,   Government Code.          SECTION 2.  Subchapter B, Chapter 1, Business Organizations   Code, is amended by adding Section 1.056 to read as follows:          Sec. 1.056.  LAWS GOVERNING FORMATION, INTERNAL AFFAIRS, AND   GOVERNANCE OF DOMESTIC ENTITY.  (a)  The plain meaning of the text   of this code may not be supplanted, contravened, or modified by the   laws or judicial decisions of any other state.          (b)  The managerial officials of a domestic entity, in   exercising their powers with respect to the domestic entity, may   consider the laws and judicial decisions of other states and the   practices observed by entities formed in those other states.  The   failure or refusal of a managerial official to consider, or to   conform the exercise of the managerial official's powers to, the   laws, judicial decisions, or practices of another state does not   constitute or imply a breach of this code or of any duty existing   under the laws of this state.          SECTION 3.  Section 2.115(b), Business Organizations Code,   is amended to read as follows:          (b)  The governing documents of a domestic entity [may   require], consistent with applicable state and federal   jurisdictional requirements, may require:                (1)  that any internal entity claims shall be brought   only in a court in this state; and                (2)  that one or more courts in this state having   jurisdiction shall serve as the exclusive forum and venue for any   internal entity claims.          SECTION 4.  Subchapter B, Chapter 2, Business Organizations   Code, is amended by adding Section 2.116 to read as follows:          Sec. 2.116.  WAIVER OF TRIAL BY JURY. (a)  In this section,   "internal entity claim" has the meaning assigned by Section 2.115.          (b)  The governing documents of a domestic entity may contain   an enforceable waiver of the right to a jury trial concerning any   internal entity claim, regardless of whether the applicable   governing document is signed by the members, owners, officers, or   governing persons.          (c)  A waiver of jury trial in the governing documents of a   domestic entity shall be a knowing and informed waiver of a person   who:                (1)  voted for or affirmatively ratified the governing   document containing the waiver;                 (2)  acquired an equity security of the domestic entity   at a time at which the waiver was included in the governing   documents; or                (3)  is otherwise shown by evidence satisfactory to an   appropriate court to have knowingly and informedly consented or   acquiesced to the waiver.          SECTION 5.  Section 4.051, Business Organizations Code, is   amended to read as follows:          Sec. 4.051.  GENERAL RULE.  (a)  A filing instrument   submitted to the secretary of state takes effect on filing, except   as permitted by Section 4.052 or as provided by the provisions of   this code that apply to the entity making the filing or other law.          (b)  Subject to Subsection (c), a revised filing instrument,   curing the deficiencies in the initial rejected filing instrument   identified by the secretary of state, is considered filed as of the   date of the delivery to the secretary of state of the initial   rejected filing instrument and takes effect as specified in this   subchapter if the revised filing instrument:                (1)  is delivered to the secretary of state not later   than the 10th business day following the date on which the notice of   rejection is mailed by the secretary of state;                (2)  is found to be acceptable by the secretary of   state; and                (3)  is the first revised filing instrument.          (c)  Subsection (b) applies to a filing instrument that   creates or forms a new domestic entity or amends the name of an   existing domestic entity only if:                (1)  the name of the new domestic entity or the amended   name of the existing domestic entity, as applicable, was reserved   under Subchapter C, Chapter 5, or was registered under Subchapter   D, Chapter 5, with the secretary of state by or on behalf of the   filer on or before the date the initial rejected filing instrument   is delivered to the secretary of state; and                 (2)  the name reservation or registration remains in   effect at least until the revised filing instrument delivered to   the secretary of state under Subsection (b) takes effect.          SECTION 6.  Section 21.218, Business Organizations Code, is   amended by amending Subsection (b) and adding Subsections (b-2) and   (b-3) to read as follows:          (b)  On written demand stating a proper purpose, a holder of   shares of a corporation for at least six months immediately   preceding the holder's demand, or a holder of at least five percent   of all of the outstanding shares of a corporation, is entitled to   examine and copy, at a reasonable time at the corporation's   principal place of business or other location approved by the   corporation and the holder, the corporation's books, records of   account, minutes, share transfer records, and other records,   whether in written or other tangible form, if the records are   [record is] reasonably related to and appropriate to examine and   copy for that proper purpose.  For purposes of this subsection, the   records of the corporation shall not include e-mails, text messages   or similar electronic communications, or information from social   media accounts unless the particular e-mail, communication, or   social media information affects an action by the corporation.          (b-2)  This subsection applies only to a corporation that has   a class or series of voting shares listed on a national securities   exchange or that has made an affirmative election to be governed by   Section 21.419.  For purposes of Subsection (b), a written demand   shall not be for a proper purpose if the corporation reasonably   determines that the demand is in connection with:                (1)  an active or pending derivative proceeding in the   right of the corporation under Subchapter L that is or is expected   to be instituted or maintained by the holder or the holder's   affiliate; or                 (2)  an active or pending civil lawsuit to which the   corporation, or its affiliate, and the holder, or the holder's   affiliate, are or are expected to be adversarial named parties.          (b-3)  Subsection (b-2) does not impair any rights of:                (1)  the holder or the holder's affiliate to obtain   discovery of records from the corporation in:                      (A)  a civil lawsuit described by Subsection   (b-2)(2); or                      (B)  the derivative proceeding subject to Section   21.556; or                (2)  the holder to obtain a court order to compel   production of records of the corporation for examination by the   holder as provided by Subsection (c).          SECTION 7.  Section 21.416, Business Organizations Code, is   amended by adding Subsection (g) to read as follows:          (g)  This subsection applies only to a corporation that has a   class or series of voting shares listed on a national securities   exchange or that has made an affirmative election to be governed by   Section 21.419.  The board of directors may adopt resolutions that   authorize the formation of a committee of independent and   disinterested directors to review and approve transactions,   whether or not contemplated at the time of the committee's   formation or a petition under Section 21.4161, involving the   corporation or any of its subsidiaries and a controlling   shareholder, director, or officer.          SECTION 8.  Subchapter I, Chapter 21, Business Organizations   Code, is amended by adding Section 21.4161 to read as follows:          Sec. 21.4161.  DETERMINATION OF INDEPENDENT AND   DISINTERESTED DIRECTORS. (a)  A corporation that adopts a   resolution to authorize the formation of a committee of independent   and disinterested directors under Section 21.416(g) may petition a   court having appropriate jurisdiction to hold an evidentiary   hearing to determine whether the directors appointed to the   committee are independent and disinterested with respect to any   transactions involving the corporation or any of its subsidiaries   and a controlling shareholder, director, or officer.          (b)  In the petition, the corporation shall designate legal   counsel to act on behalf of the corporation and its shareholders,   other than the controlling shareholder, director, or officer   involved in the transaction, and shall give notice to the   shareholders of the designated counsel and the petition.          (c)  If the corporation has a class of its shares listed on a   national securities exchange, the notice required by Subsection (b)   may be provided through the filing of a current report with the   United States Securities and Exchange Commission in accordance with   the requirements of the Securities Exchange Act of 1934 (15 U.S.C.   Section 78 et seq.), and any rules promulgated under that Act.          (d)  Promptly after receiving a petition, and not earlier   than the 10th day after the date the notice required under   Subsection (b) is given, the court shall hold a preliminary hearing   to determine the appropriate legal counsel to represent the   corporation and its shareholders, other than the controlling   shareholder, director, or officer involved in the transaction,   whether or not the same as the legal counsel identified in the   petition. Any other legal counsel representing a shareholder,   other than the controlling shareholder, director, or officer   involved in the transaction, may participate in the hearing to   request designation by the court as the appropriate legal counsel.          (e)  After the court determines the appropriate legal   counsel under Subsection (d), the court shall promptly hold an   evidentiary hearing as to whether the directors on the committee   are independent and disinterested with respect to transactions   involving the corporation or any of its subsidiaries and a   controlling shareholder, director, or officer. The appropriate   legal counsel determined under Subsection (d) and legal counsel for   the corporation may participate in the hearing.  After hearing and   reviewing the evidence presented, the court shall make its   determination as to whether the directors on the committee are   independent and disinterested.          (f)  The court's determination that the directors are   independent and disinterested under Subsection (e) shall be   dispositive in the absence of facts, not presented to the court,   constituting evidence sufficient to prove that one or more of those   directors is not independent and disinterested with respect to a   particular transaction involving the corporation or any of its   subsidiaries and a controlling shareholder, director, or officer.          SECTION 9.  Section 21.418, Business Organizations Code, is   amended by adding Subsection (f) to read as follows:          (f)  This subsection applies only to a corporation that has a   class or series of voting shares listed on a national securities   exchange or has made an affirmative election to be governed by   Section 21.419.  Regardless of whether the conditions of Subsection   (b) are satisfied, neither the corporation nor any of the   corporation's shareholders will have a cause of action against any   director or officer for breach of duty with respect to the making,   authorization, or performance of the contract or transaction   because the director or officer had the relationship or interest   described by Subsection (a) or took any of the actions authorized by   Subsection (d) unless the cause of action is permitted by Section   21.419.           SECTION 10.  Subchapter I, Chapter 21, Business   Organizations Code, is amended by adding Section 21.419 to read as   follows:          Sec. 21.419.  PRESUMPTIONS FOR DIRECTORS AND OFFICERS OF   CERTAIN CORPORATIONS. (a)  This section applies only to a   corporation that has:                (1)  a class or series of voting shares listed on a   national securities exchange; or                 (2)  included in its governing documents a statement   affirmatively electing to be governed by this section.          (b)  In taking or declining to take any action on any matters   of a corporation's business, a director or officer is presumed to   act:                (1)  in good faith;                (2)  on an informed basis;                (3)  in furtherance of the interests of the   corporation; and                (4)  in obedience to the law and the corporation's   governing documents.          (c)  Neither a corporation nor any of the corporation's   shareholders has a cause of action against a director or officer of   the corporation as a result of any act or omission in the person's   capacity as a director or officer unless:                (1)  the claimant rebuts one or more of the   presumptions established by Subsection (b); and                (2)  it is proven by the claimant that:                      (A)  the director's or officer's act or omission   constituted a breach of one or more of the person's duties as a   director or officer; and                      (B)  the breach involved fraud, intentional   misconduct, an ultra vires act, or a knowing violation of law.           (d)  The presumptions established by this section:                (1)  are in addition to any legal presumption arising   under common law or this code, in favor of any managerial official   of a corporation to which this section applies; and                (2)  do not abrogate, preempt, or lessen any other   defense, presumption, immunity, or privilege under other   constitutional, statutory, case, or common law or rule provisions,   in favor of any managerial official of any domestic entity,   including any corporation to which this section does not apply.          (e)  In alleging fraud, intentional misconduct, an ultra   vires act, or a knowing violation of the law under Subsection   (c)(2)(B), a party must state with particularity the circumstances   constituting the fraud, intentional misconduct, ultra vires act, or   knowing violation of law.          (f)  This section does not limit the effect of a provision   contained in the certificate of formation or similar instrument of   a corporation limiting monetary liability of a governing person as   permitted by Section 7.001.          SECTION 11.  Section 21.551(2), Business Organizations   Code, is amended to read as follows:                (2)  "Shareholder" includes:                      (A)  a shareholder as defined by Section 1.002;                      (B)  [or] a beneficial owner whose shares are held   in a voting trust or by a nominee on the beneficial owner's behalf;   or                       (C)  two or more shareholders acting in concert   under an informal or formal agreement or understanding with respect   to a derivative proceeding.          SECTION 12.  Section 21.552(a), Business Organizations   Code, is amended to read as follows:          (a)  Subject to Subsection (b), a shareholder may not   institute or maintain a derivative proceeding unless:                (1)  the shareholder:                      (A)  was a shareholder of the corporation at the   time of the act or omission complained of; or                      (B)  became a shareholder by operation of law   originating from a person that was a shareholder at the time of the   act or omission complained of; [and]                (2)  the shareholder fairly and adequately represents   the interests of the corporation in enforcing the right of the   corporation; and                (3)  for a corporation with common shares listed on a   national securities exchange or that has made an affirmative   election to be governed by Section 21.419, at the time the   derivative proceeding is instituted, the shareholder beneficially   owns a number of the common shares sufficient to meet the required   ownership threshold to institute a derivative proceeding in the   right of the corporation identified in the corporation's   certificate of formation or bylaws, provided that the required   ownership threshold does not exceed three percent of the   outstanding shares of the corporation.          SECTION 13.  Section 21.554, Business Organizations Code, is   amended by amending Subsection (b) and adding Subsections (c), (d),   (e), and (f) to read as follows:          (b)  The court shall appoint a panel under Subsection (a)(3)   if the court determines [finds] that the individuals recommended by   the corporation are independent and disinterested and are otherwise   qualified with respect to expertise, experience, independent   judgment, and other factors considered appropriate by the court   under the circumstances to make the determinations.  An individual   appointed by the court to a panel under this section may not be held   liable to the corporation or the corporation's shareholders for an   action taken or omission made by the individual in that capacity,   except for an act or omission constituting fraud or wilful   misconduct.          (c)  Before the corporation's determination of how to   proceed on the allegations under Subsection (a), the corporation   may petition the court in which the derivative proceeding has been   instituted, or a court having proper jurisdiction if no derivative   proceeding has been instituted, to request a determination as to   whether the directors identified or appointed under Subsection   (a)(1) or (2) are independent and disinterested with respect to the   allegations made in the demand.          (d)  For purposes of Subsection (c), if a derivative   proceeding was not instituted, the corporation must promptly   deliver a copy of the petition to the shareholder making the demand   who will have the right, if promptly exercised, to challenge the   petition before the court makes its determination.          (e)  After hearing and reviewing the evidence presented, the   court shall make its determination as to whether the directors are   independent and disinterested.          (f)  A court's determination that the directors or   individuals are independent and disinterested under this section   shall be dispositive in the absence of discovery of facts, not   presented to the court, constituting evidence sufficient to prove   that one or more of those directors or individuals are not   independent and disinterested.          SECTION 14.  Section 21.561, Business Organizations Code, is   amended by adding Subsection (c) to read as follows:          (c)  For purposes of Subsection (b), a substantial benefit to   the corporation does not include additional or amended disclosures   made to the shareholders, regardless of materiality.           SECTION 15.  Section 21.562(a), Business Organizations   Code, is amended to read as follows:          (a)  In a derivative proceeding brought in the right of a   foreign corporation, the matters covered by this subchapter are   governed by the laws of the jurisdiction of formation of the foreign   corporation, except for Sections 21.555, 21.560, and 21.561, which   with respect to foreign corporations are procedural provisions and   do not relate to the internal affairs of the foreign corporation,   unless applying the laws of the jurisdiction of formation of the   foreign corporation requires otherwise with respect to Section   21.555.          SECTION 16.  (a)  Section 4.051, Business Organizations   Code, as amended by this Act, applies only to a filing instrument   submitted to the secretary of state on or after the effective date   of this Act. A filing instrument submitted to the secretary of   state before the effective date of this Act is governed by the law   in effect on the date the filing instrument was submitted, and the   former law is continued in effect for that purpose.          (b)  Sections 21.552(a) and 21.561, Business Organizations   Code, as amended by this Act, apply only to a derivative proceeding   instituted on or after the effective date of this Act.  A derivative   proceeding instituted before the effective date of this Act is   governed by the law in effect on the date the proceeding was   instituted, and the former law is continued in effect for that   purpose.          SECTION 17.  This Act takes effect immediately if it   receives a vote of two-thirds of all the members elected to each   house, as provided by Section 39, Article III, Texas Constitution.     If this Act does not receive the vote necessary for immediate   effect, this Act takes effect September 1, 2025.