Major changes to Texas Business Organizations Code enacted during this summer’s legislative session provide unprecedented protection for management decisions and business disputes – but only if you amend your governing documents to “opt in” to these new protections.
What Changed and Why It Matters
Three significant pieces of legislation – Senate Bills 29, 1057, and 2411 – have fundamentally strengthened legal protections for Texas businesses. SB 29 – part of Lieutenant Governor Dan Patrick's “Top 40 Priority Bills”, took immediate effect on May 14, 2025, due to supermajority passage. SB 1057 and 2411 become effective September 1, 2025.
These new Texas laws create enhanced legal shields for management decisions, streamline dispute resolution, and allow customized governance structures.
The catch? Texas follows a "permissive transition model," which means most existing businesses must opt in to receive these benefits.
Public companies receive some of these protections automatically, but privately held companies – which include most small and mid-sized Texas businesses – must proactively amend their governing documents to access these benefits.
Every day without updated documents means missed protections and unnecessary exposure to legal risks that can now be eliminated.
Six Business Protections Now Available in Texas
1. Business Judgment Rule Protection
This creates a legal presumption that your business decisions were made in good faith, shifting the burden of proof from you to anyone challenging your decisions.
How it used to work: Management had to prove they acted in good faith and in the company's best interests.
How it works now: Courts presume directors, officers, and LLC managers acted appropriately. Challengers must prove fraud, intentional misconduct, or knowing law violations.
Why it matters: Think of this as a legal shield protecting tough business decisions. Even if a decision doesn't work out perfectly, as long as you acted in good faith with reasonable information, the law presumes you did the right thing.
2. Jury Trial Waivers for Internal Disputes
Business disputes can now be heard by expert business judges rather than lay juries when you include jury trial waivers in your governing documents.
What this means: Complex corporate law disputes get decided by judges who understand business operations and can streamline cases, rule out irrelevant issues early, and focus on actual legal violations rather than business decisions that simply didn't work out.
Why it matters: Business judges have specialized expertise in corporate law concepts that lay juries may struggle with, leading to more predictable and informed outcomes.
3. Fiduciary Duty Modifications (LLCs and Limited Partnerships Only)
Under SB 29, Texas LLCs and limited partnerships (LPs) can now explicitly modify or eliminate certain fiduciary duties through their governing documents, including duties of loyalty, care, and good faith. This provision applies exclusively to LLCs and limited partnerships (not corporations).
What this enables: Management can pursue competing opportunities or engage in self-interested transactions if properly disclosed and authorized in the company agreement or partnership agreement.
Why it matters: This flexibility allows businesses to capitalize on opportunities and talent that might otherwise create legal exposure, especially if properly structured with transparency requirements or other guardrails.
Additionally, LLCs and LPs are empowered to operate more like contractual arrangements, enabling sophisticated business structures. By contrast, corporations remain subject to traditional fiduciary duty requirements, maintaining a distinction between the entity types.
4. Texas Forum Selection for Business Disputes
You can now require that internal business disputes be resolved exclusively in Texas courts.
What this means: Your business disputes get heard by Texas judges familiar with Texas business law, rather than being dragged into unfamiliar jurisdictions.
Why it matters: Combined with jury trial waivers, this gives Texas businesses more control over how internal disputes are resolved.
5. Officer Exculpation (effective September 1, 2025)
Under SB 2411 (effective September 1, 2025), officers can now receive the same liability protections that directors have traditionally enjoyed.
What this means: Your corporate officers can be protected from monetary damages for breaches of duty of care, while maintaining accountability for bad faith conduct, conflicts of interest, and breaches of loyalty duties.
Why it matters: Partnerships and LLCs can now adopt the same protections available to corporations. This extends crucial liability protection to the people running your day-to-day operations, not just board members.
6. Enhanced Record Inspection Privacy
The new law excludes emails, texts, and social media communications from a shareholder’s right to inspect records unless they "effectuate company action."
What this means: Significant privacy protection for sensitive business communications that aren't formal business records.
Why it matters: This limits fishing expeditions from parties in active litigation who might otherwise demand access to all your business communications. It also restricts record requests designed to gather information helpful to parties already in litigation.
These reforms represent Texas's aggressive push to challenge Delaware's dominance in corporate law. As part of the state's broader economic development strategy and in anticipation of the Texas Stock Exchange launch, the legislation positions Texas as a business-friendly jurisdiction with modern governance frameworks that address 21st-century business needs.
The Reality Check: Your Business Is Unnecessarily Exposed If You Don’t Act Now
Entities without updated governing documents face what can only be described as a parade of unnecessary risks and liabilities:
- Managers and officers remain personally exposed for good faith business decisions
- Disputes may be forced into unfavorable jurisdictions or before unpredictable juries
- Competing business opportunities could trigger fiduciary duty claims
For businesses that haven't yet amended their documents to opt into SB 29's protections (available since May 14, 2025), every day of delay means missed opportunities. The September 1 deadline for SB 2411's officer exculpation provisions adds additional urgency for comprehensive governance updates.
Which Texas Businesses Should Opt-In to these Business-Friendly Protections?
Adopting the new business protections enabled by SB 29 and SB 2411 are recommended for any multi-member entity in Texas:
- Any LLC or corporation (or PLLC, PC, or LLP) with multiple owners or shareholders
- Any entity considering bringing in additional owners or investors
- Corporations with multiple directors and shareholders
Even single-member entities planning future expansion should consider implementing these protections now. And as an entity with only one owner, you can implement changes to your governing documents immediately since only one person – you! – needs to approve amendments.
Is There a Deadline to Adopt These Protections?
While there's no legal deadline for implementation, every day of delay increases unnecessary legal exposure. Although SB 29's protections have been available since May 14, 2025, many businesses have not yet amended their governing documents to opt in.
Amend governing documents by late August 2025 to take full advantage of these protections by the September 1 effective date.
How Can Texas Business Opt-In to the New Business Protections?
Unless you are a publicly traded company, many of Texas's new, pro-business protections require you to amend your governing documents to include affirmative elections to be governed by the relevant sections of the Texas Business Organizations Code.
Such amendments must be voted for or otherwise ratified by members, owners, officers or governing persons according to your entity’s by-laws or governance process.
The specific amendments required vary by entity type and desired protections:
For Corporations, you must opt in for:
- Business judgment rule protection (if not publicly traded)
- Jury trial waivers for internal disputes
- Texas forum selection clauses
- Enhanced privacy protections
- Officer exculpation (effective September 1, 2025)
For LLCs and Limited Partnerships, you must opt in for:
- All of the above, PLUS fiduciary duty modifications (unique to these entity types)
Each protection requires specific language in your certificate of formation, bylaws, company agreement, or partnership agreement. Generic amendments won't suffice – the provisions must explicitly reference the relevant sections of the Texas Business Organizations Code.
Don't wait until you need these protections to put them in place. Most of these legal business protections are already available. The effective date for remaining protections is September 1, 2025. You can amend any time thereafter as well, but delay increases risk.
Frequently Asked Questions
Do these protections apply automatically to my Texas business?
No. Unless you're a publicly traded company (which receives some automatic protections), you must amend your governing documents to opt in.
What's the difference between SB 29, SB 1057, and SB 2411?
SB 29 contains most of the business liability protections and governance reforms discussed in this article and is already in effect. SB 1057 addresses shareholder proposals for public companies. SB 2411 adds officer exculpation. Both SB 1057 and 2411 are effective September 1, 2025.
Can Texas corporations waive fiduciary duties like LLCs?
No. Fiduciary duty waivers under SB 29 apply only to LLCs and limited partnerships. Corporations retain traditional fiduciary duty requirements.
What happens if I miss the September 1 date to amend?
You can still adopt these protections after September 1, 2025. However, you should take advantage of these business governance reforms and liability protections as soon as possible. There's no legal deadline, but delay increases risk.
