By: Hughes, et al. 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
a waiver of the right to a jury trial concerning any internal entity
claim.
(c) In a lawsuit asserting an internal entity claim, a
waiver of the right to a jury trial contained in the governing
documents of a domestic entity is enforceable, regardless of
whether the applicable governing document is signed by the members,
owners, officers, or governing persons.
(d) A person asserting an internal entity claim is
considered to have been informed of the waiver of the right to a
jury trial contained in the governing documents and to have
knowingly waived the right in the action if the person:
(1) voted for or affirmatively ratified the governing
document containing the waiver; or
(2) acquired an equity security of the domestic entity
or any predecessor to the entity at, or continued to hold an equity
security of a domestic entity that has one or more classes of equity
securities listed on a national securities exchange after, a time
at which the waiver was included in the governing documents.
(e) Nothing in this section prevents an entity from showing
that a person asserting an internal entity claim knowingly and
informedly waived the right to a jury trial by any evidence
satisfactory to the court having jurisdiction, including by the
person's consent or acquiescence to the waiver contained in the
governing documents.
SECTION 5. 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 effectuates 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 6. Section 21.364, Business Organizations Code, is
amended by amending Subsections (d) and (e) and adding Subsection
(e-1) to read as follows:
(d) Unless an amendment to the certificate of formation is
undertaken by the board of directors under Section 21.155, separate
voting by a class or series of shares of a corporation is required
for approval of an amendment to the certificate of formation that
would result in:
(1) the increase or decrease of the aggregate number
of authorized shares of the class or series, except that the number
of authorized shares of any class or series may be increased or
decreased, but not below the number of shares of the class or series
then outstanding, by the affirmative vote of the holders of a
majority of the stock of the corporation entitled to vote, as
provided by:
(A) the certificate of formation; or
(B) an amendment of the certificate of formation
that:
(i) authorized the shares of the class or
series;
(ii) was adopted before the issuance of any
shares of the class or series; or
(iii) was authorized by one or more
resolutions adopted by the affirmative vote of the holders of a
majority of the shares of the class or series;
(2) the increase or decrease of the par value of the
shares of the class or series, including changing shares with par
value into shares without par value or changing shares without par
value into shares with par value;
(3) effecting an exchange, reclassification, or
cancellation of all or part of the shares of the class or series;
(4) effecting an exchange or creating a right of
exchange of all or part of the shares of another class or series
into the shares of the class or series;
(5) the change of the designations, preferences,
limitations, or relative rights of the shares of the class or
series;
(6) the change of the shares of the class or series,
with or without par value, into the same or a different number of
shares, with or without par value, of the same class or series or
another class or series;
(7) the creation of a new class or series of shares
with rights and preferences equal, prior, or superior to the shares
of the class or series;
(8) increasing the rights and preferences of a class
or series with rights and preferences equal, prior, or superior to
the shares of the class or series;
(9) increasing the rights and preferences of a class
or series with rights or preferences later or inferior to the shares
of the class or series in such a manner that the rights or
preferences will be equal, prior, or superior to the shares of the
class or series;
(10) dividing the shares of the class into series and
setting and determining the designation of the series and the
variations in the relative rights and preferences between the
shares of the series;
(11) the limitation or denial of existing preemptive
rights or cumulative voting rights of the shares of the class or
series;
(12) canceling or otherwise affecting the dividends on
the shares of the class or series that have accrued but have not
been declared; or
(13) the inclusion or deletion from the certificate of
formation of provisions required or permitted to be included in the
certificate of formation of a close corporation under Subchapter O.
(e) Except as provided by Subsection (e-1), the [The] vote
required under Subsection (d) by a class or series of shares of a
corporation is required notwithstanding that shares of that class
or series do not otherwise have a right to vote under the
certificate of formation.
(e-1) If the certificate of formation provides that any vote
required by Subsection (d) shall be as a single class and without
separate voting by class or series, then shares of a class or series
that do not otherwise have a right to vote under the certificate of
formation shall be treated as having no votes in the vote as a
single class.
SECTION 7. Section 21.365(b), Business Organizations Code,
is amended to read as follows:
(b) With respect to a matter for which the affirmative vote
of the holders of a specified portion of the shares of a class or
series is required by this code, the certificate of formation may
provide that:
(1) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares of that class
or series is required for action of the holders of shares of that
class or series on that matter; and
(2) notwithstanding any other provision of this code,
all classes or series of stock shall only be entitled to vote as a
single class or series, and separate voting by class or series is
not required, for the purpose of approving any matter, including in
connection with any fundamental action or fundamental business
transaction.
SECTION 8. 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 9. 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 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) A petition under Subsection (a) shall be filed in the
business court unless the corporation's principal place of business
in this state is located in a county not contained within an
operating division of the business court, in which case the
petition may be filed in a district court in the county in which the
corporation's principal place of business in this state is located.
(c) 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.
(d) The corporation shall give notice to the corporation's
shareholders that:
(1) a petition has been filed under this section;
(2) identifies the court in which the petition is
filed and provides the case number for the proceeding;
(3) identifies counsel designated to act on behalf of
the corporation and its shareholders, other than the controlling
shareholder, director, or officer involved in the transaction; and
(4) the shareholders, other than the controlling
shareholder, director, or officer involved in the transaction, have
the right to participate in the proceeding in person or through
counsel.
(e) If the corporation has a class of its shares listed on a
national securities exchange, the notice required by Subsection (d)
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 78a et seq.), and any rules promulgated under that Act.
(f) Not earlier than the 10th day after the date the notice
required under Subsection (d) 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:
(1) object to counsel designated by the corporation in
the petition on the ground that the designated counsel is
insufficiently independent and disinterested; or
(2) request designation by the court as the
appropriate legal counsel.
(g) After the court determines the appropriate legal
counsel under Subsection (f), 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 (f) 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.
(h) The court's determination that the directors are
independent and disinterested under Subsection (g) 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 10. 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 11. 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 effectiveness or
applicability of a provision contained in the certificate of
formation or similar instrument of a corporation limiting monetary
liability of a governing person.
SECTION 12. 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 13. 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 a corporation that has made an
affirmative election to be governed by Section 21.419 and has 500 or
more shareholders, 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 14. Section 21.554, Business Organizations Code, is
amended by amending Subsection (b) and adding Subsections (c), (d),
(e), (f), (g), (h), and (i) to read as follows:
(b) The court shall appoint a panel under Subsection (a)(3)
if the court 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 be a
director. 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 having jurisdiction to make a finding 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) If a derivative proceeding has been instituted, a
petition under Subsection (c) shall be filed in the court in which
the proceeding was instituted. If no derivative proceeding has
been instituted, a petition under Subsection (c) shall be filed in
the business court unless the corporation's principal place of
business in this state is located in a county not contained within
an operating division of the business court, in which case the
petition may be filed in a district court in the county in which the
corporation's principal place of business in this state is located.
(e) The corporation must serve a copy of the petition on the
shareholder filing the derivative proceeding or making the demand.
(f) Unless extended for good cause, a court in which a
petition under Subsection (c) is filed must conduct an evidentiary
hearing on the petition on or before the 45th day after the date the
petition is filed.
(g) A shareholder on whom a petition is served under
Subsection (e) is entitled to be served with all notices and papers
filed in the action and to intervene in the action to challenge the
petition. Unless good cause is shown, a shareholder who is not
already a party to the action must intervene not later than the
seventh day before the date the petition is heard by the court.
(h) Unless extended for good cause, not later than the 75th
day after the date the petition is filed, the court shall sign an
order stating whether the directors are independent and
disinterested.
(i) A court's finding 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 15. 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 16. 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 17. Subchapter F, Chapter 101, Business
Organizations Code, is amended by adding Section 101.256 to read as
follows:
Sec. 101.256. PRESUMPTIONS FOR GOVERNING PERSONS OF CERTAIN
LIMITED LIABILITY COMPANIES. (a) This section applies only to a
limited liability company that has:
(1) a class or series of voting membership interests
listed on a national securities exchange; or
(2) included in its company agreement a statement
affirmatively electing to be governed by this section.
(b) In taking or declining to take any action on any matters
of a limited liability company's business, a governing person or
officer, and each affiliate or associate of a governing person or
officer, is presumed to act in good faith and in compliance with:
(1) the person's or officer's duties required under
the governing documents of the limited liability company or common
law; and
(2) the governing documents of the limited liability
company.
(c) Neither a limited liability company nor any of the
company's members has a cause of action against a governing person
or officer or any affiliate or associate of a governing person or
officer of the company as a result of any act or omission in the
person's capacity as a governing person or officer of the company
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 act or omission of the governing person
or officer or affiliate or associate of a governing person or
officer constituted a breach of one or more of the person's duties
as a governing person or officer to the extent the duty has not been
modified or eliminated through an affirmative election contained in
the governing documents as permitted by this chapter; 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 governing person or
officer 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 governing person or officer of any domestic entity,
including any limited liability company 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 effectiveness or
applicability of a provision contained in the certificate of
formation or company agreement or similar instrument of a limited
liability company limiting monetary liability of a governing person
or officer.
SECTION 18. Section 101.401, Business Organizations Code,
is amended to read as follows:
Sec. 101.401. EXPANSION, [OR] RESTRICTION, OR ELIMINATION
OF DUTIES AND LIABILITIES. The company agreement of a limited
liability company may expand, [or] restrict, or eliminate any
duties, including fiduciary duties, and related liabilities that a
member, manager, officer, or other person has to the company or to a
member or manager of the company.
SECTION 19. Section 101.451(3), Business Organizations
Code, is amended to read as follows:
(3) "Member" includes:
(A) a person who is a member or is an assignee of
a membership interest or a person who beneficially owns a
membership interest through a voting trust or a nominee on the
person's behalf; and
(B) two or more members described by Paragraph
(A) acting in concert under an informal or formal agreement or
understanding with respect to a derivative proceeding.
SECTION 20. Section 101.452(a), Business Organizations
Code, is amended to read as follows:
(a) Subject to Subsection (b), a member may not institute or
maintain a derivative proceeding unless:
(1) the member:
(A) was a member of the limited liability company
at the time of the act or omission complained of; or
(B) became a member by operation of law
originating from a person that was a member at the time of the act or
omission complained of; [and]
(2) the member fairly and adequately represents the
interests of the limited liability company in enforcing the right
of the limited liability company; and
(3) for a limited liability company with membership
interests listed on a national securities exchange or that has made
an affirmative election to be governed by Section 101.256 and has
500 or more members, at the time the derivative proceeding is
instituted, the member beneficially owns a number of the membership
interests sufficient to meet the required ownership threshold to
institute a derivative proceeding in the right of the limited
liability company identified in the limited liability company's
certificate of formation or company agreement, provided that the
required ownership threshold does not exceed three percent of the
outstanding membership interests of the limited liability company.
SECTION 21. Section 101.461, Business Organizations Code,
is amended by adding Subsection (c) to read as follows:
(c) For purposes of Subsection (b), a substantial benefit to
the limited liability company does not include additional or
amended disclosures made to the members, regardless of materiality.
SECTION 22. Section 101.502, Business Organizations Code,
is amended by amending Subsection (a) and adding Subsections (a-1),
(a-2), and (a-3) to read as follows:
(a) Unless otherwise provided by the governing documents of
a limited liability company, a [A] member of a limited liability
company or an assignee of a membership interest in a limited
liability company, on written demand stating a proper purpose, is
entitled to examine and copy at a reasonable time at the limited
liability company's principal office identified under Section
101.501(c) or another location approved by the limited liability
company and the member or assignee, any records of the limited
liability company, whether in written or other tangible form, which
are reasonably related to and appropriate to examine and copy for
that proper purpose. For purposes of this subsection, the records
of the limited liability company 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 effectuates an action by the limited
liability company.
(a-1) This subsection applies only to a limited liability
company that has a class or series of voting membership interests
listed on a national securities exchange or that has made an
affirmative election to be governed by Section 101.256. For
purposes of Subsection (a), a written demand may be made only by a
member or an assignee that has held the membership interest for at
least six months immediately preceding the member's or assignee's
demand.
(a-2) This subsection applies only to a limited liability
company that has a class or series of voting membership interests
listed on a national securities exchange or that has made an
affirmative election to be governed by Section 101.256 or Section
101.401. For purposes of Subsection (a), a written demand shall not
be for a proper purpose if the limited liability company reasonably
determines that the demand is in connection with:
(1) an active or pending derivative proceeding in the
right of the limited liability company under Subchapter J that is or
is expected to be instituted or maintained by the member or assignee
or the member's or assignee's affiliate; or
(2) an active or pending civil lawsuit to which the
company, or its affiliate, and the member or assignee, or the
member's or assignee's affiliate, are or are expected to be
adversarial named parties.
(a-3) Subsection (a-2) does not impair any rights of the
member or assignee or the member's or assignee's affiliate to obtain
discovery of records from the limited liability company in:
(1) a civil lawsuit described by Subsection (a-2)(2);
or
(2) the derivative proceeding subject to Section
101.456.
SECTION 23. Section 152.002, Business Organizations Code,
is amended by adding Subsection (e) to read as follows:
(e) This subsection applies only to a limited partnership
that has a class or series of voting limited partnership interests
listed on a national securities exchange or that has included in its
governing documents a statement affirmatively electing to be
governed by this subsection. Notwithstanding Subsection (b)(2),
(3), or (4), a partnership agreement may eliminate any or all of the
duty of loyalty under Section 152.205, the duty of care under
Section 152.206, and the obligation of good faith under Section
152.204(b), to the extent the governing documents of the
partnership include a statement affirmatively electing to do so
under this subsection.
SECTION 24. Subchapter D, Chapter 153, Business
Organizations Code, is amended by adding Section 153.163 to read as
follows:
Sec. 153.163. PRESUMPTIONS FOR GENERAL PARTNERS AND
OFFICERS OF CERTAIN LIMITED PARTNERSHIPS. (a) This section
applies only to a limited partnership that has:
(1) a class or series of voting limited partnership
interests 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 limited partnership's business, any general partner of the
limited partnership, including any director, officer, member, or
other affiliate of the general partner, is presumed to act in good
faith and in compliance with:
(1) the person's duties required under this code,
common law, and the partnership agreement of the partnership; and
(2) the partnership agreement of such limited
partnership.
(c) Neither a limited partnership nor any of the limited
partnership's partners has a cause of action against a general
partner of the limited partnership, including any director,
officer, member, or other affiliate of the general partner, as a
result of any act or omission in the person's capacity as a general
partner or as an officer or director of the general partner 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 general partner's or any director,
officer, member, or other affiliate of the general partner's act or
omission constituted a breach of one or more of the person's duties
as a general partner, director, or officer to the extent the duty
has not been modified or eliminated through an affirmative election
contained in the governing documents as permitted by this chapter;
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 general partner or
member or managerial official of a general partner 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 limited partnership 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 effectiveness or
applicability of a provision contained in the certificate of
formation or partnership agreement or similar instrument of a
partnership limiting monetary liability of a governing person.
SECTION 25. Section 153.401(2), Business Organizations
Code, is amended to read as follows:
(2) "Limited partner" means:
(A) a person who is a limited partner or is an
assignee of a partnership interest, including the partnership
interest of a general partner; and
(B) two or more limited partners described by
Paragraph (A) acting in concert under an informal or formal
agreement or understanding with respect to a derivative proceeding.
SECTION 26. Section 153.402(a), Business Organizations
Code, is amended to read as follows:
(a) Subject to Subsection (b), a limited partner may not
institute or maintain a derivative proceeding unless:
(1) the limited partner:
(A) was a limited partner of the limited
partnership at the time of the act or omission complained of; or
(B) became a limited partner by operation of law
originating from a person that was a limited partner or general
partner at the time of the act or omission complained of; [and]
(2) the limited partner fairly and adequately
represents the interests of the limited partnership in enforcing
the right of the limited partnership; and
(3) for a limited partnership with limited partnership
interests listed on a national securities exchange or that has made
an affirmative election to be governed by Section 152.002(e) or
Section 153.163 and has 500 or more limited partners, at the time
the derivative proceeding is instituted, the partner beneficially
owns a number of limited partnership interests sufficient to meet
the required ownership threshold to institute a derivative
proceeding in the right of the limited partnership identified in
the limited partnership's certificate of formation or partnership
agreement, provided that the required ownership threshold does not
exceed three percent of the outstanding limited partnership
interests of the limited partnership.
SECTION 27. Section 153.411, Business Organizations Code,
is amended by adding Subsection (c) to read as follows:
(c) For purposes of Subsection (b), a substantial benefit to
the limited partnership does not include additional or amended
disclosures made to the limited partners, regardless of
materiality.
SECTION 28. Section 153.552, Business Organizations Code,
is amended by amending Subsection (a) and adding Subsections (a-1)
and (a-2) to read as follows:
(a) Unless otherwise provided by the governing documents of
a limited partnership, on [On] written demand stating a proper
purpose, a partner or an assignee of a partnership interest in a
limited partnership is entitled to examine and copy, at a
reasonable time at the partnership's principal office identified
under Section 153.551 or other location approved by the partnership
and the partner or assignee, any records of the partnership,
whether in written or other tangible form, which are reasonably
related to and appropriate to examine and copy for that proper
purpose. For purposes of this subsection, the records of the
limited partnership 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 effectuates an action by the limited
partnership.
(a-1) This subsection applies only to a limited partnership
that has a class or series of voting limited partnership interests
listed on a national securities exchange or that has made an
affirmative election to be governed by Section 152.002(e) or
153.163. For purposes of Subsection (a), a written demand:
(1) may be made only by a limited partner or an
assignee that has held the limited partnership interest for at
least six months immediately preceding the limited partner's or
assignee's demand; and
(2) shall not be for a proper purpose if the limited
partnership reasonably determines that the demand is in connection
with:
(A) an active or pending derivative proceeding in
the right of the limited partnership under Subchapter I that is or
is expected to be instituted or maintained by the limited partner or
assignee or the limited partner's or assignee's affiliate; or
(B) an active or pending civil lawsuit to which
the partnership, or its affiliate, and the limited partner or
assignee, or the limited partner's or assignee's affiliate, are or
are expected to be adversarial named parties.
(a-2) Subsection (a-1) does not impair any rights of the
limited partner or assignee or the limited partner's or assignee's
affiliate to obtain discovery of records from the limited
partnership in:
(1) a civil lawsuit described by Subsection
(a-1)(2)(B); or
(2) the derivative proceeding subject to Section
153.406.
SECTION 29. Sections 21.552(a), 21.561, 101.452(a),
101.461, 153.402(a), and 153.411, 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 30. 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.