Texas has adopted new rules that allow companies incorporated in the state to set a stock ownership requirement for investors who want to file derivative lawsuits against boards and codify the business judgment rule to eliminate liability for directors and officers for actions shown to have been taken in good faith and in the best interests of the company.
“We expect the change will dramatically reduce the number of derivative claims for Texas corporations that implement a 3% minimum ownership threshold,” Bracewell’s Will Anderson told Agenda. “As more companies move to adopt these changes, we may ultimately see the markets play a role in determining the requirements that strike the best balance.”
“The changes to Texas corporate law, including the codification of the Business Judgment Rule, will result in companies considering Texas as a jurisdiction of choice,” Bracewell’s Andy Monk said. “Delaware is no longer the default — Texas is now a credible alternative.”
