HB15 - Relating to the formation, governance, and internal management of domestic entities.

  89R22293 PRL-F     By: Meyer, Leach, Schofield, Anchía, H.B. No. 15       Longoria, et al.     Substitute the following for H.B. No. 15:     By:  Leach C.S.H.B. No. 15       A BILL TO BE ENTITLED   AN ACT   relating to the formation, governance, and internal management of   domestic entities.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 1.002(55-a), Business Organizations   Code, is amended to read as follows:                (55-a)  "National securities exchange" means :                       (A)   an exchange registered as a national   securities exchange under Section 6, Securities Exchange Act of   1934 (15 U.S.C. Section 78f) ; or                         (B)  a stock exchange that:                               (i)     has its principal office in this state;   and                             (ii)     has received approval by the   securities commissioner under Subchapter C, Chapter 4005,   Government Code .          SECTION 2.  Subchapter B, Chapter 1, Business Organizations   Code, is amended by adding Section 1.056 to read as follows:           Sec.   1.056.     LAWS GOVERNING FORMATION, INTERNAL AFFAIRS, AND   GOVERNANCE OF DOMESTIC ENTITY.   The managerial officials of a   domestic entity, in exercising their powers with respect to the   domestic entity, may consider the laws and judicial decisions of   other states and the practices observed by entities formed in those   other states.   The failure or refusal of a managerial official to   consider, or to conform the exercise of the managerial official's   powers to, the laws, judicial decisions, or practices of another   state does not constitute or imply a breach of this code or of any   duty existing under the laws of this state.          SECTION 3.  Section 2.115(b), Business Organizations Code,   is amended to read as follows:          (b)  The governing documents of a domestic entity [ may   require ], consistent with applicable state and federal   jurisdictional requirements, may require:                 (1)   that any internal entity claims shall be brought   only in a court in this state ; and                 (2)     that one or more courts in this state having   jurisdiction shall serve as the exclusive forum and venue for any   internal entity claims .          SECTION 4.  Subchapter B, Chapter 2, Business Organizations   Code, is amended by adding Section 2.116 to read as follows:           Sec.   2.116.     WAIVER OF TRIAL BY JURY. (a)   In this section,   "internal entity claim" has the meaning assigned by Section 2.115.           (b)     The governing documents of a domestic entity may contain   a waiver of the right to a jury trial concerning any internal entity   claim.           (c)     In a lawsuit asserting an internal entity claim, a   waiver of the right to a jury trial contained in the governing   documents of a domestic entity is enforceable, regardless of   whether the applicable governing document is signed by the members,   owners, officers, or governing persons.           (d)     A person asserting an internal entity claim is   considered to have been informed of the waiver of the right to a   jury trial contained in the governing documents and to have   knowingly waived the right in the action if the person:                 (1)     voted for or affirmatively ratified the governing   document containing the waiver; or                 (2)     acquired an equity security of the domestic entity   or a predecessor to the entity at a time at which the waiver was   included in the governing documents of the domestic entity or a   predecessor to the entity, as applicable.           (e)     Nothing in this section prevents an entity from showing   that a person asserting an internal entity claim knowingly and   informedly waived the right to a jury trial by any evidence   satisfactory to the court having jurisdiction, including by the   person's consent or acquiescence to the waiver contained in the   governing documents.          SECTION 5.  Section 21.218, Business Organizations Code, is   amended by amending Subsection (b) and adding Subsections (b-2) and   (b-3) to read as follows:          (b)  On written demand stating a proper purpose, a holder of   shares of a corporation for at least six months immediately   preceding the holder's demand, or a holder of at least five percent   of all of the outstanding shares of a corporation, is entitled to   examine and copy, at a reasonable time at the corporation's   principal place of business or other location approved by the   corporation and the holder, the corporation's books, records of   account, minutes, share transfer records, and other records,   whether in written or other tangible form, if the records are   [ record is ] reasonably related to and appropriate to examine and   copy for that proper purpose.   For purposes of this subsection, the   records of the corporation shall not include e-mails, text messages   or similar electronic communications, or information from social   media accounts unless the particular e-mail, communication, or   social media information effectuates an action by the corporation.           (b-2)     This subsection applies only to a corporation that has   a class or series of voting shares listed on a national securities   exchange or that has made an affirmative election to be governed by   Section 21.419.   For purposes of Subsection (b), a written demand   shall not be for a proper purpose if the corporation reasonably   determines that the demand is in connection with:                 (1)     an active or pending derivative proceeding in the   right of the corporation under Subchapter L that is or is expected   to be instituted or maintained by the holder or the holder's   affiliate; or                   (2)     an active or pending civil lawsuit to which the   corporation, or its affiliate, and the holder, or the holder's   affiliate, are or are expected to be adversarial named parties.           (b-3)  Subsection (b-2) does not impair any rights of:                 (1)     the holder or the holder's affiliate to obtain   discovery of records from the corporation in:                       (A)     a civil lawsuit described by Subsection   (b-2)(2); or                       (B)     the derivative proceeding subject to Section   21.556; or                 (2)     the holder to obtain a court order to compel   production of records of the corporation for examination by the   holder as provided by Subsection (c).          SECTION 6.  Section 21.416, Business Organizations Code, is   amended by adding Subsection (g) to read as follows:           (g)     This subsection applies only to a corporation that has a   class or series of voting shares listed on a national securities   exchange or that has made an affirmative election to be governed by   Section 21.419.   The board of directors may adopt resolutions that   authorize the formation of a committee of independent and   disinterested directors to review and approve transactions,   whether or not contemplated at the time of the committee's   formation or a petition under Section 21.4161, involving the   corporation or any of its subsidiaries and a controlling   shareholder, director, or officer.          SECTION 7.  Subchapter I, Chapter 21, Business Organizations   Code, is amended by adding Section 21.4161 to read as follows:           Sec.   21.4161.     DETERMINATION OF INDEPENDENT AND   DISINTERESTED DIRECTORS. (a)   A corporation that adopts a   resolution to authorize the formation of a committee of independent   and disinterested directors under Section 21.416(g) may petition a   court having jurisdiction to hold an evidentiary hearing to   determine whether the directors appointed to the committee are   independent and disinterested with respect to any transactions   involving the corporation or any of its subsidiaries and a   controlling shareholder, director, or officer.           (b)     A petition under Subsection (a) shall be filed in the   business court unless the corporation's principal place of business   in this state is located in a county not contained within an   operating division of the business court, in which case the   petition may be filed in a district court in the county in which the   corporation's principal place of business in this state is located.           (c)     In the petition, the corporation shall designate legal   counsel to act on behalf of the corporation and its shareholders,   other than the controlling shareholder, director, or officer   involved in the transaction.           (d)     The corporation shall give notice to the corporation's   shareholders that:                 (1)  a petition has been filed under this section;                 (2)     identifies the court in which the petition is   filed and provides the case number for the proceeding;                 (3)     identifies counsel designated to act on behalf of   the corporation and its shareholders, other than the controlling   shareholder, director, or officer involved in the transaction; and                 (4)     the shareholders, other than the controlling   shareholder, director, or officer involved in the transaction, have   the right to participate in the proceeding in person or through   counsel.           (e)     If the corporation has a class of its shares listed on a   national securities exchange, the notice required by Subsection (d)   may be provided through the filing of a current report with the   United States Securities and Exchange Commission in accordance with   the requirements of the Securities Exchange Act of 1934 (15 U.S.C.   Section 78a et seq.), and any rules promulgated under that Act.           (f)     Not earlier than the 10th day after the date the notice   required under Subsection (d) is given, the court shall hold a   preliminary hearing to determine the appropriate legal counsel to   represent the corporation and its shareholders, other than the   controlling shareholder, director, or officer involved in the   transaction, whether or not the same as the legal counsel   identified in the petition. Any other legal counsel representing a   shareholder, other than the controlling shareholder, director, or   officer involved in the transaction, may participate in the hearing   to:                 (1)     object to counsel designated by the corporation in   the petition on the ground that the designated counsel is   insufficiently independent and disinterested; or                 (2)     request designation by the court as the   appropriate legal counsel.           (g)     After the court determines the appropriate legal   counsel under Subsection (f), the court shall promptly hold an   evidentiary hearing as to whether the directors on the committee   are independent and disinterested with respect to [Text truncated for display. Full text available on Congress.gov.]