V04 · Texas Corporate Law
Effective Sep 1, 2025Texas House Bill 40: the Business Court expansion.
HB 40 reshapes the Texas Business Court along four dimensions: it lowers the amount-in-controversy threshold from $10 million to $5 million, permits aggregation of joined-party claims to satisfy the floor, broadens the court's jurisdictional scope, and — institutionally the most consequential change — removes the sunset provision for the six initially unfunded Business Court divisions, allowing future legislatures to fund them rather than abolishing them by default.
Executive summary
The four-prong amendment to the Texas Business Court.
The Texas Business Court was created by HB 19 in the 88th Legislature (2023), operational September 1, 2024, as a specialized corporate-law venue staffed by gubernatorially-appointed judges with statutorily-prescribed corporate-law expertise. The 89th Legislature's HB 40 amended the original HB 19 framework on four substantively independent dimensions, taken together substantially expanding the court's reach and stabilizing its long-term institutional position.
The four prongs should not be collapsed into a single "threshold-reduction bill" framing. While the $10M→$5M reduction is the headline-friendliest change and the easiest to describe to non-specialists, it is not the institutionally most consequential of the four. Sunset removal — the third prong — preserves the court's structural option to expand without legislative re-authorization for each unfunded division. That is a long-horizon move whose payoff materializes over the next decade as the court's caseload grows.
The four prongs
What HB 40 changed.
All four prongs took effect on the same date (September 1, 2025). They operate independently of one another but together substantially expand the Business Court's institutional reach.
Prong 1 · amount in controversy
$10M→$5M threshold reduction.
For most qualifying corporate disputes, the amount-in-controversy threshold to access the Business Court is now $5 million rather than $10 million. The change doubles the population of disputes potentially eligible to be filed in the Business Court rather than in district court. This is the most-visible change in the amendment, and the most-discussed in early secondary coverage.
Prong 2 · aggregation
Joined-party claim aggregation.
A dispute with multiple joined parties may satisfy the $5 million amount-in-controversy floor by aggregating the claim amounts across the joined parties, rather than requiring each individual claim to clear the threshold independently. Aggregation substantially expands the court's reach in multi-party disputes that under the HB 19 framework would have been split between Business Court and district court.
Prong 3 · sunset removal · most consequential
Six unfunded divisions: sunset eliminated.
HB 19 created eleven Business Court divisions but funded only five at creation. The six initially unfunded divisions were subject to a sunset provision that would have abolished them by default if not funded and authorized by September 1, 2026. HB 40 removes the sunset provision, allowing future legislatures to fund the six divisions through ordinary appropriations rather than under a deadline-driven re-authorization rule. Institutionally, this is the most consequential of the four prongs — it preserves the court's structural capacity to expand at the legislature's discretion.
Prong 4 · jurisdictional expansion
Broader subject-matter jurisdiction.
HB 40 broadens Business Court subject-matter jurisdiction in additional ways beyond the threshold and aggregation changes. Categories of disputes that were borderline-eligible under the HB 19 framework are now within the court's scope. The full inventory of jurisdictional expansions is the subject of practitioner secondary coverage; the primary statutory text is the authoritative source.
Pre-HB-40 (HB 19 baseline) vs post-HB-40 (effective Sept 1, 2025)
| Dimension | HB 19 baseline (2023–2025) | HB 40 revision (enacted 89th Leg. 2025; statutory effective date Sept 1, 2025; § 72 application rule reaches actions commenced on or after Sept 1, 2024) |
|---|---|---|
| Amount-in-controversy threshold | $10 million (Tex. Gov't Code § 25A.004(d)) | $5 million (HB 40 amendment to § 25A.004(d)) |
| Aggregation of joined-party claims | Each claim must independently clear $10M floor | Joined-party claim aggregation permitted to satisfy $5M floor (HB 40 amendment to § 25A.004(i)) |
| Six unfunded divisions (2nd, 5th, 6th, 7th, 9th, 10th) | Subject to sunset under Tex. Gov't Code § 25A.003(n) and HB 19 § 6(b); abolished by default if not funded by Sept 1, 2026 | Sunset repealed. HB 40 repeals § 25A.003(n) and HB 19 § 6(b); the six divisions persist statutorily and may be funded by future legislatures via ordinary appropriations. |
| Subject-matter jurisdiction | TBOC actions, UCC, Texas Securities Act, M&A disputes, derivative actions, § 21.218 books-and-records, fiduciary-duty internal-entity claims | Broader. HB 40 adds clarifying language and expands borderline-eligible categories. Practitioner secondary coverage maps the additions to specific paragraph-level amendments. |
| Application rule | HB 19 generally applicable to civil actions commenced on or after Sept 1, 2023; divisions operational Sept 1, 2024 | HB 40 § 72: the HB 40 amendments apply only to civil actions commenced on or after September 1, 2024. Actions commenced before that date continue under HB 19 framework. |
Lane-specific § 25A.004(d) threshold
The amount-in-controversy floor differs by case-type lane. Tex. Gov't Code § 25A.004(d), as amended by HB 40, establishes a tiered floor: $5 million for the principal commercial-and-corporate lanes, with potentially different floors for specifically-enumerated case categories. Counsel should consult the codified statute (capitol.texas.gov / statutes.capitol.texas.gov) for the operative floor in any given subject-matter category before filing.
Framing discipline · per ERRATA-2026-05-19 Item 1
Do not describe HB 40 as "the threshold-reduction bill" or "the bill that lowered the Business Court threshold to $5M." Both framings are accurate but incomplete. The full inventory is threshold reduction + aggregation + sunset removal + jurisdictional expansion, and the sunset-removal prong is the most institutionally consequential of the four. SMU CGI canonical materials must surface all four.
The court itself
Texas Business Court structure.
The Texas Business Court is a state-level trial court of specialized jurisdiction. Judges are appointed by the Governor with advice and consent of the Senate, serve two-year terms, and must meet statutorily-prescribed qualifications including ten years of experience in complex business law, corporate transactions, or commercial litigation. The qualifications standard is structurally similar to (but procedurally distinct from) the qualifications for Delaware Vice-Chancellors.
The court operates as eleven divisions, with the five initially-funded divisions (the First, Third, Fourth, Eighth, and Eleventh Divisions) covering the most populous regions of Texas: Houston, Dallas, Austin, San Antonio, and Fort Worth. The six initially-unfunded divisions (now no longer subject to sunset under HB 40) cover the remaining geographic regions and will be funded if and when the legislature elects to do so.
Eligible matters
The Business Court hears actions arising under the Texas Business Organizations Code (Chapter 21 corporations, partnerships, LLCs), the Texas Uniform Commercial Code, certain Texas Securities Act matters, M&A and corporate-control transaction disputes, derivative actions, books-and-records demands under TBOC § 21.218, fiduciary-duty actions arising from internal-entity claims, and other specifically-enumerated categories of corporate-law dispute.
Appellate venue
Appeals from the Business Court go to the Fifteenth Court of Appeals, a new dedicated appellate court created alongside the Business Court itself. The Fifteenth Court of Appeals (created by the separate S.B. 1045 in the same 88th Legislature, not by HB 19) is gubernatorially appointed. Per Kelley v. Homminga, 2025 WL 826530 (Tex. Mar. 14, 2025) (per curiam), the Fifteenth Court's exclusive jurisdiction is limited to (1) Business Court appeals and (2) cases "involving the State" — cases brought by or against the State, state agencies, state universities, and state employees in their official capacities. It does not hear all administrative-agency appeals. The appellate-pipeline architecture mirrors Delaware's Court of Chancery / Delaware Supreme Court relationship in structural function while differing materially in appointment process and political-accountability framework.
Doctrinal context
Why HB 40 matters for the broader reform cycle.
HB 40 should be read as the institutional-venue companion to the substantive Texas reforms enacted in the same legislative session. SB 29 created the rules — the codified business-judgment rule (§ 21.419), the pre-transaction independence determination (§ 21.4161), the post-demand evidentiary hearing (§ 21.554), the § 21.552 dual-axis derivative threshold. SB 1057 added the opt-in shareholder-proposal threshold (§ 21.373). HB 40 expanded the Texas Business Court's capacity to adjudicate disputes arising under those new rules. The three statutes operate together: SB 29 + SB 1057 define the substantive doctrine; HB 40 secures the institutional venue.
For redomiciling firms, the Business Court's existence and HB 40's expansion are part of the competitive proposition Texas offers relative to Delaware Chancery. Delaware Chancery has been the dominant specialized corporate-law trial court in the United States for several decades. Texas's Business Court — staffed by experienced corporate-law judges, equipped with the specialized appellate pipeline through the Fifteenth Court of Appeals, and given expanded jurisdiction by HB 40 — is the most credible specialized-corporate-law venue any non-Delaware jurisdiction has built in modern memory. Whether it develops into a true competitive substitute for Chancery is the question the next decade of caseload data will answer.
Cross-reference to the SMU CGI Reincorporation Tracker
The SMU CGI Reincorporation Tracker's 22 Texas-firm subsites identify, for each redomiciling firm, the substantive Texas provisions (SB 29, SB 1057) that the firm has adopted via charter or bylaw amendment, and they cross-reference the institutional venue (HB 40-expanded Business Court + Fifteenth Court of Appeals) that will adjudicate disputes arising from those adoptions. The institutional-venue layer is part of why the per-firm redomiciliation decisions look the way they look.
Open questions
What the next decade of caseload data will show.
1. Will the Business Court develop a body of substantive corporate-law jurisprudence comparable to Delaware Chancery?
Building a specialized-court jurisprudence takes time and case volume. Delaware Chancery's modern doctrinal footprint emerged over decades. The Business Court, even with HB 40's expansion, will not produce a comparable body of jurisprudence in less than 10–15 years. The pacing question is the first-order open one.
2. Does the gubernatorial-appointment process produce judges of comparable specialized expertise to Delaware's?
The Texas Business Court statutory qualifications standard is high (ten years of complex business / corporate law experience), but the appointment process is necessarily different from Delaware's. The first cohort of Business Court judges' professional backgrounds, decisional output, and reversal rates from the Fifteenth Court of Appeals will define how the institutional question resolves over time.
3. Will the six unfunded divisions get funded?
HB 40's removal of the sunset preserves the option but does not require funding. Whether future legislatures fund the six remaining divisions depends on caseload growth, geographic distribution of business activity, and political will. The institutional optionality is real; the institutional commitment to that optionality remains to be tested.
4. Does the Fifteenth Court of Appeals develop into a meaningful corporate-law-specialist appellate court?
The appellate-pipeline architecture is the more novel structural feature. Delaware's appellate pipeline (Chancery → Supreme Court) is not specialized at the appellate level; the Delaware Supreme Court hears all matters. Texas's choice to create a dedicated specialized appellate court is structurally distinct. Whether that produces faster and more predictable corporate-law appellate decisions, or whether the appellate-specialization creates its own caseload-management challenges, is an open question over the first decade.
Primary sources
Where every footnote on this page points.
Per the SMU CGI primary-sources-only rule, every citation on this page hyperlinks the primary source.
- H.B. 40, 89th Leg., R.S. (Tex. 2025). Enrolled act. House first passed HB 40 May 13, 2025; conference committee report adopted by both chambers June 1, 2025 (final day of 89th Regular Session); signed by Governor Greg Abbott June 20, 2025; effective September 1, 2025. https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=HB40
- Tex. Gov't Code ch. 25A (post-HB 40). Codified statute: Texas Business Court enabling and operational framework. https://statutes.capitol.texas.gov/Docs/GV/htm/GV.25A.htm
- H.B. 19, 88th Leg., R.S. (Tex. 2023). Original enabling statute creating the Texas Business Court (codified at Tex. Gov't Code ch. 25A). Signed June 9, 2023; effective September 1, 2023; divisions operational September 1, 2024. HB 40 amends this framework. https://capitol.texas.gov/BillLookup/History.aspx?LegSess=88R&Bill=HB19
- S.B. 1045, 88th Leg., R.S. (Tex. 2023). Fifteenth Court of Appeals enabling statute. Codified at Tex. Gov't Code §§ 22.201(p), 22.220(d). The Fifteenth Court hears all Business Court appeals. https://capitol.texas.gov/tlodocs/88R/billtext/html/SB01045F.htm
- Tex. Const. art. V, § 6 (Fifteenth Court of Appeals). Constitutional authority for the new dedicated appellate court that hears Business Court appeals. https://statutes.capitol.texas.gov/Docs/CN/htm/CN.5.htm
Continue
Related treatments.
V04 · Texas
Texas SB 29 → the substantive doctrine
SB 29 creates the rules HB 40's expanded Business Court will apply. Codified business-judgment rule, exclusive Texas forum, jury-trial waivers, § 21.552 dual-axis derivative threshold.
V04 · Texas
Texas SB 1057 → opt-in shareholder-proposal threshold
The companion Texas reform — TBOC § 21.373 disjunctive $1M-or-3% threshold. The Business Court adjudicates disputes arising from opt-in adoption.
V03 · institutional venue
Texas Business Court
The specialized corporate-law venue that HB 40 expands. Sibling vertical with deeper procedural and operational treatment.