Texas Gov. Greg Abbott signed into law this week a bill that promotes predictability in corporate governance litigation.
The bill, which codifies the Business Judgment Rule Code, makes the state a more attractive and predictable jurisdiction for entity formation and governance, according to Katten, an international law firm. Further, it enhances legal certainty and reduces litigation exposure for corporate leaders, said Katten officials.
“SB 29 codifies the Business Judgment Rule — a common law doctrine that immunizes corporate directors from personal liability for decisions made in good faith, with reasonable care, and in the best interests of the corporation. The codification of this long-standing legal doctrine is intended to allow corporate decision makers to confidently deploy capital and focus on managing their businesses rather than worry about personal liability risks,” Katten wrote in an advisory.
Nasdaq commended the bill, which goes into effect immediately.
“Senate Bill 29 is a milestone for corporate governance in Texas,” Nasdaq Executive Vice Chairman Ed Knight said. “By embracing smart, innovation-focused regulation like SB 29, Texas is showing the world what it means to lead on economic growth and modern, clear governance principles,” said Ed Knight, Executive Vice Chairman of Nasdaq. “We commend Senator Bryan Hughes, Representative Morgan Meyer, and Governor Greg Abbott for advancing legislation that strengthens Texas’ position as a global center for capital formation.”
Knight joined Abbott, along with leadership from the Texas legislature, and other Texas business community leaders, at the signing ceremony.
“Texas is the reigning and undisputed champion for doing business in the United States of America,” Abbott said. “There is a difference between becoming a champion and repeating as a national champion year after year. To remain at the highest level requires constant innovation and improvement, and that is what we constantly work at to keep Texas as the best business climate in America. Senate Bill 29 provides business decision-makers the certainty that sound business judgments made in the best interest of shareholders will not be second-guessed by courts.”
Abbot said the legislation will solidify Texas’s status as a top state for doing business.
Nasdaq said SB 29 aligns with its mission to promote fair, efficient, and accessible capital markets. Further, it reinforces Texas as a destination for corporate formation and public company investment.
“At Nasdaq, we are honored to have been part of the Texas community for nearly two decades” Rachel Racz, senior vice president, head of listings for Texas, Southern U.S. and Latin America at Nasdaq, said. “We remain committed to advocating for our clients on both a federal and local level and supporting the bold Texas leadership that continues to power our state’s dynamic economy.”
Nasdaq has an expanding presence in Texas. The company recently announced the opening of a new regional headquarters in Dallas, serving as a Southeast hub. More than 200 companies listed on the Nasdaq are headquartered in the state.
The company generates over $750 million in revenues in Texas and the Southeast region of the United States