The Comprehensive Reference Guide for Directors and Officers: 2025 Amendments to the Texas Corporate Statute

Client Alert  |  July 7, 2025


Texas has adopted important amendments to its corporate statute. This reference guide summarizes the key changes and what they mean for directors and officers.

Texas has recently taken meaningful steps to further enhance its appeal as an attractive home for corporations and their operations. Among the most significant recent initiatives were a set of amendments to the Texas Business Organizations Code (TBOC) enacted during the 89th Texas legislature, whose regular session concluded on June 2, 2025. This reference guide examines the four bills passed by the legislature that resulted in the most significant amendments to the TBOC from a corporate governance perspective – Senate Bill 29Senate Bill 1057Senate Bill 2411 and Senate Bill 2337 (together, the “2025 TBOC Amendments”). The 2025 TBOC Amendments are aimed at limiting litigation risks and potential liabilities for directors and officers, improving the regulatory framework governing interactions between proxy advisory firms and shareholders, and providing additional certainty in corporate formalities, while balancing the interests of boards of directors, management and shareholders.

This reference guide provides (1) a summary of the four principal impacts on directors and officers of the 2025 TBOC Amendments, (2) an overview of the new proxy advisor firm regulatory law, and (3) a summary chart of the key statutory provisions introduced by the 2025 TBOC Amendments.

It is important to note that certain provisions of the amended TBOC automatically apply and certain other provisions require action by the corporation to opt in. As such, we have provided an application guide in the summary chart at the end of this reference guide.

In addition, it is important to note that several provisions do not go into effect until September 1, 2025. An asterisk (*) denotes that a provision of the amended TBOC takes effect on
September 1, 2025.


I.     FOUR KEY IMPLICATIONS FOR DIRECTORS AND OFFICERS
    

      1.     Enhanced Protections for Directors and Officers

The 2025 TBOC Amendments provide the following enhanced protections for directors and officers of a Texas corporation:

  • Codification of the Business-Judgment Rule (New TBOC Section 21.419): Directors and officers of a Texas corporation that (a) is publicly traded or (b) has opted into new TBOC Section 21.419 (the “BJR Statute”) in its certificate of formation or bylaws are presumed to act (i) in good faith, (ii) on an informed basis, (iii) in furtherance of the interests of the corporation, and (iv) in obedience to applicable law and the corporation’s governing documents. A plaintiff bears the burden of rebutting these presumptions, and must plead with particularity that the alleged breach by the director or officer constitutes fraud, intentional misconduct, an ultra vires act, or a knowing violation of law. This protection is in addition to any existing statutory or common law defenses.
  • Protection for Conflicts of Interest (Amended TBOC Section 21.418): The 2025 TBOC Amendments provide additional protections for certain activities involving conflicts of interest. Under amended TBOC Section 21.418(f), directors and officers of a corporation that (a) is publicly traded or (b) opts into the BJR Statute are shielded from any cause of action brought by the corporation or shareholders for a breach of duty with respect to the making, authorizing or performing of a contract or transaction because the director or officer had an interest in the transaction unless the cause of action is permitted by the BJR Statute; meaning the act or omission was a breach of the person’s duties and the breach involved fraud, intentional misconduct, ultra vires acts, or knowing violations of law. This new provision is complementary to the statutory protection already provided under Section 21.418(b) of the TBOC for transactions involving conflicts of interests that were approved by an independent committee, by shareholders, or conducted on fair terms, in accordance with the requirements of the statute.
  • Expanded Exculpation (Amended TBOC Section 7.001):* The 2025 TBOC Amendments permit a corporation to exculpate officers from liability for money damages for acts or omissions taken in their capacity as officers to the same extent already permitted for directors. To adopt this protection for its officers, the corporation must make an affirmative election in its certificate of formation to provide for exculpation. Exculpation cannot be provided for breaches of the duty of loyalty, intentional misconduct or a knowing violation of applicable law, transactions from which the officer received an improper benefit, or statutory violations.
  • Court Opinions on Director Independence (Amended TBOC Sections 21.416 and 4161): A board of a Texas corporation that (a) is publicly traded or (b) opts into the BJR Statute may petition the Texas Business Court (or other district court with proper jurisdiction if not a Business Court) for a binding determination on the independence of the directors on a committee formed to review and approve transactions involving directors, officers or controlling shareholders. The corporation must notify shareholders that it has filed the petition (e.g., by filing a Form 8-K with the SEC). The court may not hold the preliminary hearing until at least 10 days after the date notice is given. Following expedited proceedings to determine appropriate legal counsel to represent the corporation and its shareholders (excluding the controlling shareholder), the court will conduct an evidentiary hearing and render a binding determination regarding the independence of the directors on the committee. The finding of the court regarding the committee members’ independence is “dispositive” absent facts not presented to the court.
  • Texas Law Governs, No Obligation to Follow Other States’ Practices (New TBOC Section 1.057): New Section 1.057 of the TBOC affirms that directors and officers of a Texas corporation may, but are not required to, consider the laws, judicial decisions, or business practices of other states in exercising their powers. The statute further clarifies that a failure to consider or conform to such out-of-state authorities does not constitute or imply a breach of the TBOC or any duty under Texas law. The statute also provides that the provisions of the TBOC may not be supplanted, contravened, or modified by the laws or judicial decisions of another state. This provision underscores Texas’ intent to establish and preserve a distinct and self-governing body of corporate law, independent of other jurisdictions.

      2.     Limitations on Litigation-Related Matters

The 2025 TBOC Amendments create several new limitations on certain litigation-related matters involving a Texas corporation:

  • Minimum Share Ownership Requirements for Derivative Claims (Amended TBOC Section 21.552): A Texas corporation that (a) is publicly traded or (b) has at least 500 shareholders and has elected to opt into the BJR Statute may impose a requirement that shareholders must own up to 3% of the corporation’s outstanding shares before they can initiate a derivative claim. This ownership threshold may be set forth in the certificate of formation or the bylaws.
  • Waiver of Jury Trial (Amended TBOC Section 2.116): A Texas corporation may include in its certificate of formation or bylaws a waiver of the right to a jury trial for any “internal entity claims.” Internal entity claims include, for example, derivative claims alleging the directors of a corporation breached their fiduciary duties. Such waivers are enforceable even if not individually signed by owners, officers, or governing persons. A person is considered to have knowingly waived the right to a jury trial if they voted for or ratified the document containing the waiver, acquired stock at, or continued to hold stock in a corporation with a class of its equity securities listed on a national securities exchange after, a time in which the waiver was included in the certificate of formation or bylaws.
  • Elimination of Plaintiff’s Attorney’s Fees for Disclosure Suits (Amended TBOC Section 21.561): Under Texas law, upon conclusion of a derivative proceeding, the court may order that a Texas corporation pay the plaintiff’s attorney’s fees if the derivative action resulted in a “substantial benefit to the corporation.” Under the amendments, a substantial benefit to a corporation does not include additional or amended disclosures made to shareholders (e.g., supplements to a proxy statement for a merger), regardless of materiality.
  • Limitations on Shareholder Inspection Rights (Amended Section 21.218): The amendments clarify and, in some respects, limit, the ability of shareholders to inspect corporate records of a Texas corporation. Emails, text messages and social media communications are excluded from corporate records to which shareholders can access under the statute’s provisions, unless those records effectuate an action by the corporation. Furthermore, a Texas corporation that (a) is publicly traded or (b) opts in to the BJR Statute may deny inspection demands from shareholders with ongoing or expected litigation involving the corporation or derivative proceedings involving the shareholders or its affiliates. These changes do not impair the shareholders’ right to obtain discovery of records from the corporation in an active or pending lawsuit.

      3.     Limitations on Shareholder Proposals (New TBOC Section 21.373)*

Under a new provision, “nationally listed corporations” may elect to adopt limitations on shareholder proposals. A “nationally listed corporation” is defined as a Texas corporation (a) with equity securities registered under Section 12(b) of the Securities Exchange Act of 1934, (b) that is listed on a national securities exchange, and (c) that has either (i) a principal office in Texas or (ii) a listing on a Texas-headquartered stock exchange approved by the Texas Securities Commissioner. Under Texas case law, a corporation’s “principal office” is where its officers direct, control, and coordinate activities.

If a corporation opts in to this provision, then, subject to the corporation’s governing documents, a shareholder or group seeking to submit a proposal must meet the following heightened requirements:

  • beneficially own at least $1 million in shares or 3% of the company’s voting shares;
  • hold such shares for at least six months prior to the shareholder meeting;
  • continue holding such shares through the duration of the meeting; and
  • solicit holders representing at least 67% of the voting power of shares entitled to vote.

These heightened requirements apply to proposals on any matter to be submitted to shareholders for approval at a meeting of shareholders, including proposals submitted under Exchange Act Rule 14a-8 and floor proposals under advance notice bylaws, other than director nominations and procedural resolutions that are “ancillary to the conduct of the meeting.”

A Texas corporation may implement these limitations in its certificate of formation or bylaws. Although the new provision does not require shareholder approval for such an amendment, it requires that any proxy statement issued before the amendment is adopted include  a description of the amendment. Once adopted, all proxy statements must include instructions regarding how shareholders may submit proposals and contact other shareholders to satisfy ownership thresholds.

      4.     Technical Transaction Execution Improvements for Approval of Mergers, Major Transactions and Related Actions (Amended TBOC Sections 3.106, 10.00210.004 and 10.104)*

The 2025 TBOC Amendments streamline the approval and administration of major business transactions, as summarized below:

  • authorizes the board of directors to approve corporate documents, including plans of merger, in final or “substantially final” form;
  • clarifies that disclosure letters, schedules, and similar documents delivered in connection with a plan of merger are not deemed part of a plan of merger unless expressly included, but still have the effect provided in the plan of merger;
  • allows plans of merger to designate representatives to act on behalf of owners or members with exclusive authority to enforce or settle post-closing rights, with such designations becoming irrevocable upon plan approval; and
  • allows plans of conversion to authorize additional post-conversion actions without further approvals beyond the plan’s adoption.


II.     PROXY ADVISOR DISCLOSURE REQUIREMENTS 
(TBOC New Chapter 6A)*

The 2025 TBOC Amendments add new Chapter 6A, titled “Proxy Advisory Services,” which will require proxy advisory firms to make new public disclosures when advising on votes involving certain companies with connections to Texas. Chapter 6A applies to any “proxy advisor,” which is defined as a person who, for compensation, provides a proxy advisory service to shareholders of a company or to other persons with authority to vote on behalf of shareholders of a company. For this purpose, a “company” includes any publicly traded corporation that (i) is incorporated in Texas, (ii) has its principal place of business in Texas, or (iii) is incorporated in another state and has made a proposal to redomesticate to Texas. “Proxy advisory services” are broadly defined and include, among other things, advice or recommendations on how to vote on proposals, proxy statement research or analysis, ratings or research regarding corporate governance, and development of voting recommendations or policies. The scope of proposals covered by the law includes all proposals that are included in the company’s proxy statement, whether made by the company or by shareholders, including director elections and executive compensation.

Disclosure obligations are triggered when a proxy advisory firm provides advice that:

  • is based in whole or in part on non-financial factors like ESG, DEI, sustainability, or social credit scores;
  • recommends a vote against the board’s position on shareholder proposals without a detailed financial analysis;
  • prioritizes non-financial goals over the financial interests of shareholders; and
  • recommends voting against a company-backed director nominee, unless the firm explicitly confirms it is based only on financial interests.

When these conditions apply, the proxy advisory firm must:

  • notify each client receiving the conflicting advice and the company that is the subject of the proposal;
  • disclose the reasoning behind each recommendation that is not solely based on shareholders’ financial interests, including “sacrificing investment returns or undertaking additional investment risk to promote one or more nonfinancial factors;” and
  • include a clear, publicly accessible statement on its website disclosing that its services include advice that is not based solely on the financial interests of shareholders.

“Materially Different” advice triggers additional disclosures. If a firm gives conflicting advice—such as (a) telling one client to vote for a proposal and another to vote against the same proposal or (b) advising a vote for or against a proposal in opposition to the recommendation of the company’s management when the client did not expressly request advice for a non-financial purpose, the advisor must, in addition to complying with the requirements above:

  • disclose that conflict to all clients, the company involved, and the Attorney General; and
  • clearly identify which advice is based solely on financial interests and which is not.

Chapter 6A provides that a violation of these new provisions would be a deceptive trade practice under the Texas Deceptive Trade Practices-Consumer Protection Act, which allows for broad-sweeping private and public rights of action. The statute also provides that the recipient of the proxy advisory services, the company subject to the proxy proposal, and any shareholder of the subject company can bring actions seeking injunctive relief or a declaratory judgment against the proxy advisor. The plaintiff is then required to give notice to the Attorney General, who may intervene in the action.


III.     2025 TBOC AMENDMENTS: SUMMARY OF KEY CHANGES

PROVISION

KEY CHANGES

APPLICATION / SCOPE

Senate Bill 29 (Amendments Effective May 14, 2025)

§ 21.419 – Business Judgment Rule (BJR)

 

Codifies BJR: acts of directors/officers are presumed (i) in good faith, (ii) informed, (iii) in the corporation’s best interests, and (iv) lawful. Rebuttal requires proof of (a) breach of duty and (b) fraud, intentional misconduct, ultra vires acts, or knowing violations of law. Does not limit monetary liability-limiting provisions in governing documents.

Automatically applies to any publicly traded Texas corporation; a non-publicly traded Texas corporation may Opt In by affirmatively electing in its certificate of formation or bylaws to be governed by this section. Applies in addition to any presumption under common law or the TBOC.

§ 21.418(f) – Related Party Transaction Approval

 

Shields directors/officers from shareholder breach of duty claims regarding interested transactions, unless the cause of action is permitted under § 21.419.

Automatically applies to any publicly traded Texas corporation; any other Texas corporation may Opt In by affirmatively electing in its certificate of formation or bylaws to be governed by § 21.419 – BJR Statute. Does not shield controlling stockholders.

§§ 21.416 & 21.4161 – Committees and Related Party Transactions

 

Allows Texas corporations to petition Texas Business Court (or in certain cases a district court) to determine if committee members reviewing related party transactions are “independent and disinterested.” The court’s determination is binding unless new facts arise. Requires notice of the petition to shareholders.

Automatically applies to any publicly traded Texas corporation; any other Texas corporation may Opt In by affirmatively electing in its certificate of formation or bylaws to be governed by § 21.419 – BJR Statute.

§ 21.552 – Limitations on Derivative Actions

 

Permits Texas corporations to impose a minimum ownership threshold (up to 3% of outstanding shares) to bring derivative actions. Must be in certificate of formation or bylaws.

Automatically applies to any publicly traded Texas corporation; any other Texas corporation with at least 500 shareholders may Opt In by affirmatively electing in its certificate of formation or bylaws to be governed by § 21.419 – BJR Statute.

§§ 2.115 & 2.116 – Jury Trial Waivers and Forum Selection

 

May (i) include waivers of jury trial for internal entity claims in certificate of formation or bylaws; and (ii) select an exclusive Texas forum and venue for internal entity claims.

A Texas corporation may Opt In by including such waiver in its certificate of formation or bylaws. Includes derivative actions.

§ 21.218 – Inspection Rights

 

Publicly traded Texas corporations and Texas corporations that opt in to § 21.419 may deny inspection to shareholders involved in active/pending derivative proceedings or civil lawsuits. Excludes emails, texts, and social media from all corporate records subject to inspection rights unless they effectuate corporate action. Discovery rights remain intact.

Automatically applies to any publicly traded Texas corporation; any other Texas corporation may Opt In by affirmatively electing in its certificate of formation or bylaws to be governed by § 21.419 – BJR Statute.  

Senate Bill 1057 (Amendments Effective September 1, 2025)

§ 21.373 – Requirements for Shareholder Proposals

 

To submit a proposal, a shareholder/group must hold $1 million in market value or 3% of voting shares as of the date proposal is submitted, must have held the shares for at least six months and through the shareholder meeting, and must solicit at least 67% of voting power with respect to the proposal.

A “nationally listed corporation” may Opt In by affirmatively electing to include such requirements in its certificate of formation or bylaws and disclosed in proxy, together with certain instructional information. No shareholder approval required (unless added as an amendment to the certificate of formation).

Senate Bill 2411 (Amendments Effective September 1, 2025)

§ 7.001 – Officer Exculpation

 

Permits exculpation of officers for monetary damages to same extent as statutorily permitted for directors. Exclusions: breaches of loyalty, intentional misconduct, improper benefit, statutory violations.

A Texas corporation may Opt In by including such provision in its certificate of formation.

§§ 3.106, 10.002, 10.004, 10.104 – Approval of Forms, Plan of Merger, and Additional Administrative Changes

 

Authorizes approval of corporate documents (e.g., plan of merger) in final or substantially final form. Disclosure schedules are not part of the plan unless expressly included. Permits irrevocable appointment of representatives to enforce post-transaction rights.

Applies Automatically.

§ 1.057 – Texas Law Controls

Establishes that the TBOC’s plain meaning governs; the TBOC cannot be supplemented, contravened or modified by the case law or statutes from other states. Directors and officers of a Texas corporation may, but are not required to, consider the laws and practices of other states in exercising their powers. A failure to consider or conform to such out-of-state authorities does not constitute or imply a breach of the TBOC or any duty under Texas law.

Applies Automatically.

§ 21.561(c)– Excluding Attorney Fee Awards for Enhanced Disclosure

Prohibits the recovery of attorneys’ fees for “disclosure only” settlements in a derivative proceeding, regardless of materiality. Under Section 21.561(b), a shareholder plaintiff may not recover attorneys’ fees unless the court finds the proceeding has resulted in a substantial benefit to the corporation. New Section 21.561(c) provides that a substantial benefit does not include “additional or amended disclosures made to shareholders, regardless of materiality.”

Applies Automatically.

Senate Bill 2337 (Amendments Effective September 1, 2025)

(New Chapter) 6A.001, 6A.201-202 – Proxy Advisory Firm Regulation

 

Requires proxy advisors to provide certain disclosures to shareholders and the company if the proxy advisor makes recommendation or provides voting advice, where the advice/recommendation is based on non-financial factors or where the proxy advisor provides conflicting advice/recommendations to clients.

Applies Automatically to any publicly traded entity that (i) is organized or created in Texas, (ii) has its principal place of business in Texas or (iii) has made a proposal in its proxy statement to become a Texas entity.


The following Gibson Dunn lawyers prepared this update: Hillary H. Holmes, Gerald Spedale, Jonathan Whalen, and Patrick Cowherd.

Gibson Dunn’s Texas lawyers are available to assist with any questions you may have regarding these developments. To learn more, please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Securities Regulation & Corporate Governance practice group, or the authors:

Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)

Gerry Spedale – Houston (+1 346.718.6888, gspedale@gibsondunn.com)

Jonathan Whalen – Dallas (+1 214.698.3196, jwhalen@gibsondunn.com)

Patrick Cowherd – Houston (+1 346.718.6607, pcowherd@gibsondunn.com)

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials.  The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel.  Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.