BILL ANALYSIS C.S.H.B. 4115 By: Meyer Trade, Workforce & Economic Development Committee Report (Substituted) BACKGROUND AND PURPOSE U.S. Securities Exchange Commission rules allow company shareholders with special interests to propose issues that all company shareholders must consider, and those rules require public companies to include shareholder proposals alongside management's proposals in proxy materials for shareholder meetings. The bill author has informed the committee that the rules set low ownership thresholds, enabling shareholders to submit proposals that can create an additional burden on companies and other shareholders. Further, while state law governs what can be voted on at these meetings, the federal rules influence what appears in proxy materials. C.S.H.B. 4115 seeks to address this issue by establishing a requirement for certain eligible corporations that any shareholder has to own a meaningful amount of shares in the corporation before forcing other shareholders to vote on the shareholder's proposal. CRIMINAL JUSTICE IMPACT It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS C.S.H.B. 4115 amends the Business Organizations Code to set out provisions relating to the submission and approval of a proposal by shareholders of an applicable nationally listed corporation that makes an affirmative election to be governed by the bill's provisions under an amendment to the corporation's governing documents. The bill requires such a corporation to provide notice to shareholders of the proposed adoption of such an amendment in any proxy statement provided to shareholders preceding the amendment's adoption. C.S.H.B. 4115 requires a shareholder or group of shareholders, subject to the corporation's governing documents, to satisfy the following criteria in order to submit a proposal on a matter to the shareholders for approval at a meeting of shareholders: hold an amount of voting shares of the corporation, determined as of the date of submission of the proposal, equal to at least $1 million in market value or three percent of the corporation's voting shares; hold those required shares for a continuous period of at least six months before the date of the meeting and throughout the entire duration of the meeting; and solicit the holders of shares representing at least 67 percent of the voting power of shares entitled to vote on the proposal. This requirement expressly does not apply to director nominations and procedural resolutions that are ancillary to the conduct of the meeting. C.S.H.B. 4115 defines "nationally listed corporation" as a corporation that satisfies the following criteria: has a class of equity securities registered under applicable provisions of the federal Securities Exchange Act of 1934; is admitted to listing on a national securities exchange; and either has its principal office in Texas or is admitted to listing on a stock exchange that has its principal office in Texas and has received approval by the securities commissioner under applicable Government Code provisions. The bill defines "voting shares" as shares that entitle the holders of the shares to vote on a proposal. EFFECTIVE DATE September 1, 2025. COMPARISON OF INTRODUCED AND SUBSTITUTE While C.S.H.B. 4115 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill. Whereas the introduced version specified that a corporation subject to the bill's provisions is formed under state law, the substitute does not include this specification. Additionally, whereas the introduced required an applicable corporation to provide notice to shareholders in its proxy statement of its amendment to governing documents to opt into the bill's provisions, the substitute requires an applicable corporation to provide notice to shareholders of the proposed adoption of such an amendment in any proxy statement provided to shareholders preceding the amendment's adoption. Furthermore, whereas the introduced required the shareholder or group of shareholders, in order to submit a matter for approval at a shareholder meeting, to hold no less than the lesser of $1,000,000 in market value of the corporation's securities entitled to vote on the proposal, measured at the date of submission of the proposal, or three percent of such securities, the substitute requires the shareholder or group of shareholders, for that submission, to hold an amount of the corporation's voting shares, determined as of the date of the proposal's submission, equal to at least $1 million in market value or three percent of the corporation's voting shares. The substitute accordingly includes definitions absent from the introduced for "nationally listed corporation" and "voting shares." The substitute omits the provision of the introduced that prohibited the shareholders of an applicable corporation from voting on any matter submitted to a meeting of shareholders by a shareholder unless the proposal has been submitted in compliance with or is exempt from the bill's provisions.
BILL ANALYSIS
# BILL ANALYSIS
C.S.H.B. 4115
By: Meyer
Trade, Workforce & Economic Development
Committee Report (Substituted)
C.S.H.B. 4115
By: Meyer
Trade, Workforce & Economic Development
Committee Report (Substituted)
BACKGROUND AND PURPOSE U.S. Securities Exchange Commission rules allow company shareholders with special interests to propose issues that all company shareholders must consider, and those rules require public companies to include shareholder proposals alongside management's proposals in proxy materials for shareholder meetings. The bill author has informed the committee that the rules set low ownership thresholds, enabling shareholders to submit proposals that can create an additional burden on companies and other shareholders. Further, while state law governs what can be voted on at these meetings, the federal rules influence what appears in proxy materials. C.S.H.B. 4115 seeks to address this issue by establishing a requirement for certain eligible corporations that any shareholder has to own a meaningful amount of shares in the corporation before forcing other shareholders to vote on the shareholder's proposal.
CRIMINAL JUSTICE IMPACT It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS C.S.H.B. 4115 amends the Business Organizations Code to set out provisions relating to the submission and approval of a proposal by shareholders of an applicable nationally listed corporation that makes an affirmative election to be governed by the bill's provisions under an amendment to the corporation's governing documents. The bill requires such a corporation to provide notice to shareholders of the proposed adoption of such an amendment in any proxy statement provided to shareholders preceding the amendment's adoption. C.S.H.B. 4115 requires a shareholder or group of shareholders, subject to the corporation's governing documents, to satisfy the following criteria in order to submit a proposal on a matter to the shareholders for approval at a meeting of shareholders: hold an amount of voting shares of the corporation, determined as of the date of submission of the proposal, equal to at least $1 million in market value or three percent of the corporation's voting shares; hold those required shares for a continuous period of at least six months before the date of the meeting and throughout the entire duration of the meeting; and solicit the holders of shares representing at least 67 percent of the voting power of shares entitled to vote on the proposal. This requirement expressly does not apply to director nominations and procedural resolutions that are ancillary to the conduct of the meeting. C.S.H.B. 4115 defines "nationally listed corporation" as a corporation that satisfies the following criteria: has a class of equity securities registered under applicable provisions of the federal Securities Exchange Act of 1934; is admitted to listing on a national securities exchange; and either has its principal office in Texas or is admitted to listing on a stock exchange that has its principal office in Texas and has received approval by the securities commissioner under applicable Government Code provisions. The bill defines "voting shares" as shares that entitle the holders of the shares to vote on a proposal.
EFFECTIVE DATE September 1, 2025.
COMPARISON OF INTRODUCED AND SUBSTITUTE While C.S.H.B. 4115 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill. Whereas the introduced version specified that a corporation subject to the bill's provisions is formed under state law, the substitute does not include this specification. Additionally, whereas the introduced required an applicable corporation to provide notice to shareholders in its proxy statement of its amendment to governing documents to opt into the bill's provisions, the substitute requires an applicable corporation to provide notice to shareholders of the proposed adoption of such an amendment in any proxy statement provided to shareholders preceding the amendment's adoption. Furthermore, whereas the introduced required the shareholder or group of shareholders, in order to submit a matter for approval at a shareholder meeting, to hold no less than the lesser of $1,000,000 in market value of the corporation's securities entitled to vote on the proposal, measured at the date of submission of the proposal, or three percent of such securities, the substitute requires the shareholder or group of shareholders, for that submission, to hold an amount of the corporation's voting shares, determined as of the date of the proposal's submission, equal to at least $1 million in market value or three percent of the corporation's voting shares. The substitute accordingly includes definitions absent from the introduced for "nationally listed corporation" and "voting shares." The substitute omits the provision of the introduced that prohibited the shareholders of an applicable corporation from voting on any matter submitted to a meeting of shareholders by a shareholder unless the proposal has been submitted in compliance with or is exempt from the bill's provisions.
BACKGROUND AND PURPOSE
U.S. Securities Exchange Commission rules allow company shareholders with special interests to propose issues that all company shareholders must consider, and those rules require public companies to include shareholder proposals alongside management's proposals in proxy materials for shareholder meetings. The bill author has informed the committee that the rules set low ownership thresholds, enabling shareholders to submit proposals that can create an additional burden on companies and other shareholders. Further, while state law governs what can be voted on at these meetings, the federal rules influence what appears in proxy materials. C.S.H.B. 4115 seeks to address this issue by establishing a requirement for certain eligible corporations that any shareholder has to own a meaningful amount of shares in the corporation before forcing other shareholders to vote on the shareholder's proposal.
CRIMINAL JUSTICE IMPACT
It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
C.S.H.B. 4115 amends the Business Organizations Code to set out provisions relating to the submission and approval of a proposal by shareholders of an applicable nationally listed corporation that makes an affirmative election to be governed by the bill's provisions under an amendment to the corporation's governing documents. The bill requires such a corporation to provide notice to shareholders of the proposed adoption of such an amendment in any proxy statement provided to shareholders preceding the amendment's adoption.
C.S.H.B. 4115 requires a shareholder or group of shareholders, subject to the corporation's governing documents, to satisfy the following criteria in order to submit a proposal on a matter to the shareholders for approval at a meeting of shareholders:
hold an amount of voting shares of the corporation, determined as of the date of submission of the proposal, equal to at least $1 million in market value or three percent of the corporation's voting shares;
hold those required shares for a continuous period of at least six months before the date of the meeting and throughout the entire duration of the meeting; and
solicit the holders of shares representing at least 67 percent of the voting power of shares entitled to vote on the proposal.
This requirement expressly does not apply to director nominations and procedural resolutions that are ancillary to the conduct of the meeting.
C.S.H.B. 4115 defines "nationally listed corporation" as a corporation that satisfies the following criteria:
has a class of equity securities registered under applicable provisions of the federal Securities Exchange Act of 1934;
is admitted to listing on a national securities exchange; and
either has its principal office in Texas or is admitted to listing on a stock exchange that has its principal office in Texas and has received approval by the securities commissioner under applicable Government Code provisions.
The bill defines "voting shares" as shares that entitle the holders of the shares to vote on a proposal.
EFFECTIVE DATE
September 1, 2025.
COMPARISON OF INTRODUCED AND SUBSTITUTE
While C.S.H.B. 4115 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.
Whereas the introduced version specified that a corporation subject to the bill's provisions is formed under state law, the substitute does not include this specification. Additionally, whereas the introduced required an applicable corporation to provide notice to shareholders in its proxy statement of its amendment to governing documents to opt into the bill's provisions, the substitute requires an applicable corporation to provide notice to shareholders of the proposed adoption of such an amendment in any proxy statement provided to shareholders preceding the amendment's adoption.
Furthermore, whereas the introduced required the shareholder or group of shareholders, in order to submit a matter for approval at a shareholder meeting, to hold no less than the lesser of $1,000,000 in market value of the corporation's securities entitled to vote on the proposal, measured at the date of submission of the proposal, or three percent of such securities, the substitute requires the shareholder or group of shareholders, for that submission, to hold an amount of the corporation's voting shares, determined as of the date of the proposal's submission, equal to at least $1 million in market value or three percent of the corporation's voting shares.
The substitute accordingly includes definitions absent from the introduced for "nationally listed corporation" and "voting shares."
The substitute omits the provision of the introduced that prohibited the shareholders of an applicable corporation from voting on any matter submitted to a meeting of shareholders by a shareholder unless the proposal has been submitted in compliance with or is exempt from the bill's provisions.