Relating to the formation, governance, and internal management of domestic entities.

89(R) SB 29 - Enrolled version - Bill Text

S.B. No. 29

AN ACT

relating to the formation, governance, and internal management of

domestic 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. 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) This section sets out certain presumptions concerning

compliance by directors and officers with their duties to a

domestic corporation, including the duty of care and duty of

loyalty as those duties pertain to transactions with interested

persons.

(c)

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.

(d)

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 (c); 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.

(e) 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.

(f)

In alleging fraud, intentional misconduct, an ultra

vires act, or a knowing violation of the law under Subsection

(d)(2)(B), a party must state with particularity the circumstances

constituting the fraud, intentional misconduct, ultra vires act, or

knowing violation of law.

(g)

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 a class or series of voting

membership interests listed on a national securities exchange.

Nothing in this subsection prohibits a limited liability company

from adopting, in its company agreement, a provision that

duplicates the effect of this section, regardless of whether the

limited liability company has a class or series of voting

membership interests listed on a national securities exchange.

(b) This section sets out certain presumptions concerning

compliance by managerial officials with their duties, if any, to a

domestic limited liability company, including any duties that

pertain to transactions with interested persons.

(c)

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

common law or the governing documents of the limited liability

company; and

(2)

the governing documents of the limited liability

company.

(d)

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 (c); 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.

(e) 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.

(f)

In alleging fraud, intentional misconduct, an ultra

vires act, or a knowing violation of the law under Subsection

(d)(2)(B), a party must state with particularity the circumstances

constituting the fraud, intentional misconduct, ultra vires act, or

knowing violation of law.

(g)

This section does not limit the effectiveness or

applicability of a provision contained in the certificate of

formation or company agreement 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 101.461, 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 20. Section 101.502(a), Business Organizations

Code, is amended 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 or the company agreement expressly states

otherwise.

SECTION 21. Section 152.002, Business Organizations Code,

is amended by adding Subsection (e) to read as follows:

(e)

Notwithstanding Subsection (b)(2), (3), or (4), a

partnership agreement of a limited partnership 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 partnership agreement

expressly provides so.

SECTION 22. Subchapter A, Chapter 152, Business

Organizations Code, is amended by adding Section 152.006 to read as

follows:

Sec.

152.006.

CERTAIN PROVISIONS APPLICABLE TO

PARTNERSHIPS TRADED ON A NATIONAL SECURITIES EXCHANGE. (a)

The

provisions of Sections 152.002(e) and 153.163 apply only to a

partnership that has a class or series of partnership interests

listed on a national securities exchange.

(b)

This section may not be construed as prohibiting any

partnership from adopting, in its partnership agreement,

provisions that duplicate the effect of Sections 152.002(e) and

153.163, regardless of whether the partnership has a class or

series of partnership interests listed on a national securities

exchange.

SECTION 23. 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 sets

out certain presumptions concerning compliance by managerial

officials with their duties, if any, to a domestic limited

partnership, including any duties that pertain to transactions with

interested persons.

(b)

In taking or declining to take any action on any matters

of a limited partnership's business, any managerial official of the

limited partnership, including any director, officer, member, or

other affiliate or managerial official 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 managerial

official 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

managerial official or as an officer or director or other

managerial official or affiliate 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 act or omission of the managerial

official or any director, officer, member, or other affiliate or

managerial official of the general partner 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 by the partnership agreement 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 partnership agreement

of a partnership limiting monetary liability of a managerial

official.

SECTION 24. 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 25. Section 153.552(a), Business Organizations

Code, is amended 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 or the partnership agreement expressly states

otherwise.

SECTION 26. 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 27. 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.

______________________________

______________________________

President of the Senate

Speaker of the House

I hereby certify that S.B. No. 29 passed the Senate on

April 3, 2025, by the following vote: Yeas 30, Nays 1; and that

the Senate concurred in House amendments on May 7, 2025, by the

following vote: Yeas 30, Nays 1.

______________________________

Secretary of the Senate

I hereby certify that S.B. No. 29 passed the House, with

amendments, on May 2, 2025, by the following vote: Yeas 109,

Nays 7, two present not voting.

______________________________

Chief Clerk of the House

Approved:

______________________________

Date

______________________________

Governor