Texas Senate Bill SB1971

Texas 2019 - 86th Regular

Caption

Relating to domestic corporations and other domestic entities.

Impact

The changes proposed under SB1971 support the efficiency and effectiveness of corporate governance by allowing voting agreements that provide a clearer framework for decision-making among shareholders. The provisions facilitate smoother transitions of ownership and enhance the enforceability of agreements that govern the behavior of shareholders, potentially leading to more cohesive corporate actions. By ensuring that future owners are bound by previously established voting agreements, the bill mitigates the risk of disputes and confusion that may arise during ownership transfers.

Summary

Senate Bill 1971 amends the Business Organizations Code in Texas to include various provisions related to domestic corporations and other domestic entities. The bill primarily focuses on voting agreements among owners of domestic entities, stating that these agreements can be entered into independently of the governing documents. Additionally, it outlines the enforcement of such agreements, ensuring they are binding on all subsequent owners if they acknowledge the agreement in writing or have prior knowledge of its existence at the time of transfer. The underlying goal is to provide greater flexibility and clarity in corporate governance, particularly in voting rights among shareholders.

Sentiment

The sentiment surrounding SB1971 appears to be largely positive among corporate practitioners and stakeholders interested in refining corporate governance processes. Supporters argue that such measures streamline procedures for organizational control and decision-making. The unanimous votes it received during its passage in both the Senate and House (Yeas 31, Nays 0 in the Senate and Yeas 144, Nays 0 in the House) highlight a strong bipartisan consensus that recognizes the bill's importance for improving the functionality and clarity of corporate regulations in Texas.

Contention

While the bill garnered broad support, some opponents raised concerns regarding the potential implications of binding future owners to agreements they did not negotiate. Critics voiced apprehensions about preserving fair participation in corporate governance for all stakeholders, particularly minority shareholders who might find themselves bound by agreements they were unaware of or had no part in establishing. Nonetheless, the bill's proponents argue that it balances flexibility and enforceability while ensuring protecting the interests of all shareholders.