Texas SB 29 Gave Small Company Owners New Tools, But Only If Your Company Agreement Asks for Them
By Hari Nathan Kalyan, Managing Attorney, Warren Kalyan.
Five Key Takeaways
- Most of SB 29 is optional. The 2025 changes to the Texas Business Organizations Code mostly do nothing for a small company unless its governing documents turn them on.
- The new tools cover the points owners fight about. A business judgment presumption, exclusive forum clauses, jury waivers, inspection limits, and duty waivers in LLCs all touch who controls what and where a dispute happens.
- Think before you adopt. A forum clause that points to a court that cannot hear your dispute, or a jury waiver someone later challenges, can cause problems of its own.
- The buy sell clause decides most closely held fights. Define triggers, price, payment terms, and a way to break a tie while everyone still gets along.
- Read your documents next to each other. If the answer to any key question is "we never looked," an amendment signed by all owners now costs far less than a fight later.
If you own part of a Texas LLC or a small corporation, you probably signed your governing documents years ago and filed them away. That is normal. It is also a problem, because Texas changed the rules in 2025 and most of the new tools do nothing unless your documents turn them on.
Why This Matters
Senate Bill 29 was signed on May 14, 2025 and took effect right away. Most of the press coverage focused on public companies and the Texas Business Court. But the bill reaches every Texas entity, and several of its pieces matter to a three owner LLC or a family held corporation. Owner disputes in small companies are rarely about a grand theory. They are about who controls the books, who can sue whom, where the fight happens, and what an exiting owner gets paid. SB 29 touches each of those points.
A note on timing. SB 29 is more than a year old, so it is not a brand new development. We are writing about it now because we keep seeing companies that formed or restated their documents before 2025 and never revisited them.
What the Law Does
Based on the law firm summaries we reviewed, here are the pieces most relevant to smaller companies.
First, a codified business judgment rule. The statute presumes that directors and officers act in good faith, on an informed basis, in the company's interest, and in line with the law and the governing documents. A person suing has to overcome that presumption by showing something like fraud, intentional misconduct, or a knowing violation of law. For corporations, the summaries say the presumption applies automatically to companies listed on a national exchange, and others can adopt it through their governing documents. For LLCs, the same pattern appears to hold. The presumption applies if the company is listed, or if the company agreement adopts it. A small company that wants the protection should say so in writing.
Second, exclusive forum clauses. A Texas entity may name a specific Texas court, including the Texas Business Court, as the only place for internal entity claims such as derivative suits and owner disputes. Nobody gets this by default. The documents have to adopt it. Think hard before you do. The Business Court has jurisdiction thresholds, and a small dispute may not qualify. A forum clause that points to a court that cannot hear your case causes problems of its own.
Third, jury waivers. Governing documents may waive a jury trial for internal entity claims. One summary says the waiver can bind a person who voted for the document or who buys or keeps an equity interest after it is adopted. The same summary notes that someone may challenge a waiver as not knowing and voluntary. So treat it as a strategic choice, not a boilerplate add on. Some owners want a judge. Others want twelve neighbors.
Fourth, books and records and derivative suit limits. The summaries describe narrower inspection rights, including limits on demands for emails and text messages unless the communication itself carried out a company action, and an optional ownership floor of up to 3 percent for derivative suits. These provisions appear aimed mainly at public companies and corporations that opt in. We could not confirm from the sources we reviewed that every one of them applies the same way to LLCs. In a company where three owners each hold a third, a 3 percent floor would do little anyway. Your own agreement is where the real inspection rules should live.
Fifth, duty waivers in LLCs. Texas already lets an LLC company agreement expand, restrict, or eliminate duties, subject to limits. SB 29 sits on top of that freedom. If your agreement says nothing, you may be relying on defaults you never read.
The Buy Sell Problem Sits Underneath All of It
Governance clauses get the attention, but the clause that decides most closely held fights is the buy sell provision. One Texas practitioner article we reviewed makes the point that Texas LLC law is built around the contract. A minority owner who signs a loose buy sell takes on the risk, because Texas does not hand out a general oppression remedy to fix a bad deal. We would confirm that point against current case law before relying on it, but the practical lesson holds. Draft the exit terms while everyone still likes each other.
A good buy sell answers these questions in plain words.
What triggers a buyout? Death, disability, divorce, a breach, a desire to leave, or a deadlock.
How do we set the price? Name a valuation date, name how you pick the appraiser, and say whether discounts for minority status or lack of marketability apply. If you leave valuation as "fair market value" with no definition, you have bought yourself a lawsuit.
How does the buyer pay? Insurance, a secured note, bank financing, or some mix. State the deadline and what happens on default.
How do we break a tie? Equal owners need a deadlock tool, whether that is mediation, a neutral third party, or a structured buy sell offer.
What We Would Do Now
Pull your certificate of formation, your company agreement or bylaws, and any side agreements between owners. Read them next to each other. Then ask five questions. Does the document adopt the business judgment presumption, or do you want it to? Do you want an exclusive forum clause, and would a real dispute fit that court? Do you want a jury waiver? Do the inspection rights match how you actually want information shared? And does the buy sell work if an owner dies or walks away tomorrow?
If the answer to any of those is "we never looked," that is the project. An amendment signed by all owners now costs far less than a fight later.
A Closing Word
SB 29 did not rewrite how small companies run. It handed them a menu. Warren Kalyan helps founders and owners in Texas, New York, and beyond choose the right entity, draft company agreements and buy sell provisions, and update older documents so they match how the business actually works.
Is your company agreement due for a read?
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General information only, not legal advice for your specific situation.
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