BONUS: New Texas Business Judgment Rule: Senate Bill 29

Sunday, August 10, 2025

In this episode of Talk Law Radio, host Todd Marquardt delves into the recent changes brought about by Senate Bill 29, which became effective on May 14, 2025. This bill includes the codification of the business judgment rule into the Texas Business Organizations Code, a significant development for business owners and directors.

The business judgment rule, which has been relied upon since 1878, protects directors from liability for honest, discretionary decisions made in the corporation's interest, even if those decisions are negligent or imprudent, as long as there is no fraud, bad faith, or gross negligence involved. Previously, this rule was only applied defensively after a business was sued, but now it is explicitly written into the Texas law.

The new codification presumes that directors and officers act in good faith, on an informed basis, in furtherance of the corporation's interests, and in obedience to the law and the corporation's governing documents. This presumption can only be rebutted if it is proven that the director's or officer's actions involved fraud, intentional misconduct, an ultra vires act, or a knowing violation of the law.
Senate Bill 29 aims to provide statutory clarity and certainty for business decision-makers, encouraging more companies to operate in Texas and boosting economic development and job creation. Governor Abbott and Senator Bryan Hughes have both expressed their support for the bill, highlighting its potential to attract businesses and provide a stable legal environment for corporate governance.

Business owners are advised to review their certification of formation, operating agreements, bylaws, and minutes with a qualified attorney to ensure compliance with the new law and to identify any necessary changes or amendments.

Marquardt Law Firm sponsors the show and is offering a business deficiencies checklist by emailing [email protected] include business checklist in the subject line.

Attorney Todd Marquardt brings you insightful topics every Saturday morning, but he's not stopping there! Join Todd every Sunday afternoon at 4:30pm for a special bonus segment! He addresses trending and specific topics in more detail with a professional perspective.

The mission of Talk Law Radio is to help you discover your legal issue blind spots by listening to me talk about the law on the radio. The state bar of Texas is the state agency that governs attorney law licenses. The State Bar wants attorneys to inform the public about the law but does not want us to attempt to solve your individual legal problems upon the basis of general information. Instead, contact an attorney like Todd A. Marquardt at Marquardt Law Firm, P.C. to discuss your specific facts and circumstances of your unique situation.

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