Texas Senate Bill 29: the TBOC rule-of-code overhaul.

Section 21.419 applies automatically to Texas for-profit corporations with voting securities listed on a national securities exchange, and to other Texas for-profit corporations that opt in through their governing documents. It establishes a presumption that directors and officers act (i) in good faith, (ii) on an informed basis, (iii) in furtherance of the corporation's interests, and (iv) in obedience to applicable law and the corporation's governing documents.

To rebut the presumption, a claimant must (1) rebut one or more of the § 21.419(b) presumptions; (2) prove that the director's or officer's act or omission constituted a breach of duty; and (3) prove the breach involved fraud, intentional misconduct, an ultra-vires act, or a knowing violation of law. Allegations of fraud, intentional misconduct, ultra vires acts, or knowing violations of law must be pleaded with particularity under § 21.419(e). The pleading-with-particularity requirement is analogous to — though distinct from — Rule 9(b) of the Federal Rules of Civil Procedure, which requires fraud to be pleaded with particularity in federal court (the closer comparator than the PSLRA's securities-fraud regime, which addresses scienter and misleading statements rather than state-law fiduciary breaches). The requirement substantially raises the threshold for surviving a motion to dismiss.

The interaction between § 21.419's pleading-with-particularity standard and Texas Rule of Civil Procedure 91a (motion-to-dismiss practice) will be developed over the first wave of post-SB-29 derivative litigation. Defense-bar practitioners anticipate that § 21.419 will substantially reduce the proportion of derivative complaints that survive motion-to-dismiss practice in covered Texas corporations.

SB 29's procedural architecture distinguishes two analytically separate questions: (i) before a transaction is consummated, can the corporation get a definitive judicial determination that the committee considering it is independent and disinterested? (ii) after a derivative demand is made, can the corporation get an accelerated evidentiary hearing on independence? Section 21.4161 addresses the first; section 21.554 addresses the second.

§ 21.4161 · prospective, pre-transaction independence-and-disinterestedness determination

Section 21.4161 permits a Texas corporation to file a petition in the appropriate Texas court for a determination, in advance of a contemplated transaction, that the directors appointed to a committee are independent and disinterested with respect to the contemplated transaction. That finding is dispositive on the independence-and-disinterestedness question, absent newly-presented facts. The doctrinal effect is to allow the corporation to lock in the independence prong of business-judgment review prospectively, rather than relying on retrospective entire-fairness adjudication after the transaction has closed and a stockholder challenge is filed.

This is a substantial structural innovation. The Delaware Chancery framework permits motion-to-dismiss arguments based on the existence of an independent committee, but does not provide a mechanism for definitively establishing independence before the transaction occurs. Section 21.4161 fills that gap. For deal planners, the practical implication is that significant controller transactions in Texas-incorporated firms may now move through a pre-transaction independence-determination filing as standard practice.

§ 21.554 · retrospective, post-demand

Section 21.554 operates after a derivative demand has been served. If the corporation elects to petition the court — it may do so after a derivative demand has been served — the court must hold an evidentiary hearing within 45 days of the petition filing date and issue a determination within 75 days of the petition filing date (each extendable for good cause). The court's finding on independence and disinterestedness is dispositive on the independence and disinterestedness question, absent newly-presented facts. The petition is permissive on the corporation's side; the deadlines bind the court once the petition is filed.

The 45-day hearing / 75-day determination timetable is one of the fastest procedural schedules in any state derivative-action statute. For comparison, Delaware Chancery's typical motion-to-dismiss timetable in a derivative action runs 12–18 months from filing through decision. Section 21.554 compresses the most procedurally important question — the independence of the demand-evaluating committee — to a roughly 11-week window.

Both, not one or the other

Section 21.4161 and section 21.554 are not alternative procedures. They address different doctrinal moments. Section 21.4161 is the prospective tool used during transaction planning. Section 21.554 is the retrospective tool used after a stockholder demand. A Texas corporation in a controller transaction will often use both: 21.4161 prospectively to lock in independence pre-closing, and 21.554 retrospectively if a derivative demand is then filed.

Texas's parallel to Delaware SB 21's § 220 reform is the TBOC § 21.218 narrowing. For qualifying corporations, certain e-mails, text messages, social-media communications, and litigation-adjacent demands are excluded from the scope of inspectable books-and-records on a § 21.218 demand. The narrowing is intended to address the same litigation phenomenon Delaware addressed: stockholder books-and-records demands operating, in practice, as broad pre-discovery vehicles.

Texas's approach differs from Delaware's in two structural respects. First, § 21.218 narrows the scope of inspectable materials directly rather than enumerating accessible categories with a compelling-need escape valve for additional materials. Second, the qualifying-corporation framework is not opt-in by election; it applies as a matter of statutory text to corporations meeting the qualifying criteria. The practical operational implications of the two approaches will become measurable as the first wave of post-SB-29 inspection demands works through Texas courts.

The "national securities exchange" definition

SB 29's qualifying-corporation framework keys off the term national securities exchange as defined under Securities Exchange Act § 6 (15 U.S.C. § 78f) — principally NYSE, Nasdaq, NYSE American, Cboe BZX, and the other Commission-registered exchanges. The forthcoming Texas Stock Exchange (TXSE), which has filed its Form 1 with the SEC but as of mid-2026 is not yet operational, would be a national securities exchange upon SEC approval of its Form 1, at which point Texas-listed TXSE issuers would fall within the qualifying-corporation framework on the basis of their TXSE listing.

The cross-entity symmetry means a redomiciliation analysis that focuses only on the corporation-form provisions understates SB 29's scope. Texas-domiciled LLCs and limited partnerships — particularly large operating LLCs and master limited partnerships with active management committees — face a parallel governance-and-litigation transformation. The SMU CGI Reincorporation Tracker treats corporation-form reincorporations as the primary cohort; downstream research will need to address the LLC and LP cohorts separately.

§ 21.418(f) · interested-transaction liability gate

SB 29 added § 21.418(f), which routes interested-director-and-officer transactions through the § 21.419 business-judgment-rule framework: a transaction in which a director or officer has an interest is not voidable, and the interested party is not personally liable, if the procedural conditions of § 21.418 (disinterested-director approval, disinterested-shareholder approval, or fairness at the time of approval) are met. The provision integrates the interested-transaction framework with the codified BJR rather than treating them as parallel doctrines.

Transitional rule for derivative proceedings

SB 29 contains an explicit transitional rule for derivative proceedings: the new § 21.552(a)(3) threshold and the § 21.554 evidentiary-hearing framework apply only to derivative proceedings commenced on or after May 14, 2025 (the bill's effective date for the derivative-proceeding subchapter). Derivative proceedings filed before May 14, 2025 continue under the pre-SB-29 framework. The transitional rule is consequential for litigation that straddles the effective date; counsel must verify the commencement date against the filing record before assuming the SB 29 framework applies.

1. How does § 21.419's pleading-with-particularity standard interact with Texas Rule 91a?

The pleading-with-particularity requirement is a substantial procedural shift. The first wave of post-SB-29 motions to dismiss under Texas Rule 91a will set the operative threshold. Defense-bar practitioners anticipate a significant reduction in derivative-complaint survival rates; plaintiff-bar practitioners are developing pleading templates designed to satisfy the heightened standard.

2. Does the § 21.4161 pre-transaction determination meaningfully eliminate post-closing fiduciary exposure?

The statute provides that the court's pre-transaction determination is dispositive of the independence and disinterestedness questions, absent newly-presented facts. The first appellate-court application of "newly-presented facts" will define how much residual post-closing exposure remains.

3. How will the Texas Business Court and Fifteenth Court of Appeals develop SB 29 doctrine?

The Texas Business Court's jurisdictional scope was expanded by HB 40 (effective Sep 1, 2025). The Fifteenth Court of Appeals is the new dedicated appellate venue. The first decade of Texas Business Court and Fifteenth Court of Appeals decisions interpreting SB 29 will define the operative doctrinal contours.

4. How many firms adopt the § 21.552(a)(3) threshold, and at what value?

The provision permits any value at or below 3%. Will firms adopt the maximum 3%, or smaller thresholds (1%, 0.5%)? The adoption-tracker page surfaces the empirical record as it develops. Early adopters' threshold choices will set the market norm.

5. Will federal courts respect § 2.115 exclusive-forum provisions for federal-question internal-affairs claims?

The intersection of § 2.115 with federal-court jurisdiction over corporate-law claims is doctrinally unsettled. The relevant precedent (Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020)) developed in the Delaware context; the Texas equivalent will develop as § 2.115 provisions are litigated in federal courts.