Texas Senate bill by Sen. Schwertner clarifies business entity regulations and court roles

Passed bill authored by State Sen. Charles Schwertner aims to clarify governance and procedural aspects of business entities, streamline corporate management, and define the role of business courts under Texas law, according to the Texas Legislature website.

In the Senate, 10 Democrats and 20 Republicans voted in favor of the bill, while one Democrat opposed it.

Meanwhile, in the House, 57 Democrats and 79 Republicans voted in favor, while one Democrat and two Republicans voted against it.

Charles Schwertner introduced the bill in the Texas Senate on Wednesday, March 12, during the 89th regular legislative session.

Schwertner graduated from the University of Texas at Austin with a BS.

Schwertner, a Republican, was elected to the Texas State Senate in 2013 to represent the state’s 5th Senate district, replacing previous state senator Steve Ogden.

According to the Texas Legislature, the bill’s official text was summarized as follows: ‘Relating to business organizations’.

The following is our breakdown, based on the actual bill text, and may include interpretation to clarify its provisions.

In essence, this bill amends various sections of the Texas Business Organizations Code to clarify and streamline processes related to business entities. It defines the role of business courts in handling certain cases and specifies the governance of domestic entities by Texas laws, allowing consideration of other states’ practices without implying legal breach. The bill alters procedures for forming and managing corporations, including information required for for-profit and professional entities, and outlines filing fees and processes for domestic and foreign corporations. It addresses limitations on managerial liability, procedures for merging or converting entities, and ratification of defective corporate acts. Additional provisions include regulations for derivative proceedings and the governance structure within entities. The bill takes effect Sept. 1, 2025.

The bill received its final legislative approval on Wednesday, May 14, and was signed into law by Gov. Greg Abbott on Tuesday, May 27.

Bills in Texas go through a multi-step legislative process, including committee review, debates, and votes in both chambers before reaching a final decision. Each session, there are typically thousands of bills introduced, but only a portion successfully navigate the process to become law.

You can read more about the bills and other measures here.