In June, Governor Abbott signed into law House Bill 40 (HB 40), which expanded the jurisdiction and operational framework of the Texas Business Court.
Texas has recently passed a succession of business-friendly laws, intending to convey the message that Texas is a welcome home for businesses. The business court was created in 2024, and subsequent laws have further clarified and refined what the court has the authority to do.
The Texas business lawyers at Fee, Smith & Sharp, LLP, believe businesses stand to benefit from the new laws and want to make sure there is awareness within the business community so appropriate adjustments can be made to take advantage of the recent legislation.
Texas Wants to Be a Big State for Business
For many years, Delaware was considered the happiest place in the US for businesses. With a long history of pro-business decisions, the legal environment was stable, and businesses could predict the outcome of legal disputes. However, in recent years, Delaware has soured on businesses. Other states, including Texas, have been more than willing to welcome the fallout.
Over the last decade, Texas has consistently attracted more corporate relocations and expansions than any other state, winning the annual Governor’s Cup award for an unprecedented 13th consecutive year in 2024. Already with no corporate income tax, lower operating costs, and other business-friendly incentives, Texas is committed to the prosperity and growth of businesses within the state by establishing a predictable regulatory environment.
The recent creation of the Texas Business Court was designed to resolve complex business disputes more efficiently and provide more consistent and predictable rulings. The business court consists of eleven divisions, five of which have been operational since September 1, 2024.
HB 40 Expands the Reach of the Texas Business Court
After handling nearly 100 cases in its first few months, the business court’s early experience revealed the need for legislative clarification regarding its jurisdiction, operations, and rules of procedure. This year, HB 40 aims to address this need.
In June, HB 40 became law and will take effect on September 1, 2025. HB 40 directs the Texas Supreme Court to establish rules for the “prompt, efficient, and final determination of business court jurisdiction” when an action is filed. The following are the primary changes Texas businesses need to be aware of.
Amount in Controversy Lowered
HB 40 lowered the amount in controversy necessary for business court jurisdiction from $10 million to $5 million. The legislation also added that a ‘qualified transaction’ for purposes of determining the amount in controversy could be a “series of related transactions” as opposed to a single transaction.
Business Court Subject Jurisdiction Broadened
The business court jurisdiction expanded to encompass intellectual property matters. These matters can include software, data security, biotechnology, and trade secrets. The business court can now also enforce an arbitration agreement, appoint an arbitrator, and review an arbitration award so long as the underlying matter is within the court’s jurisdiction.
Earlier Cases May be Transferred to Business Court
Civil actions filed before September 1, 2024, that are now within the jurisdiction of the business court may be transferred and heard by these new courts if the parties agree and the court grants permission. The Supreme Court will create the guidelines to be used in the business court’s decision to grant or deny the transfer.
Business Court Divisions Reauthorized
The Business Court divisions that correspond to the Second, Fifth, Sixth, Seventh, Ninth, and Tenth Administrative Judicial Regions (even though not yet operational) are set to be abolished on September 1, 2026, unless reauthorized by the legislature. The Legislature removed the abolition provisions, but the divisions won’t become operational until they receive funding via a future legislative appropriation.
Other Recent Legislation that Favors Business Development in Texas
Other recent laws are also making it more attractive for businesses to hang their hats in Texas. In May 2025, Senate Bill 29 (SB 29) became law, effective immediately. SB 29 establishes changes to the Business Organizations Code and enhances protections for corporations and their leaders.
Significantly, the new law codifies what is known in common law as the Business Judgment Rule. The Business Judgment Rule protects corporate directors from personal liability for decisions made in good faith, with reasonable care, and in the best interests of the corporation. SB 29 creates a rebuttable presumption that corporate directors and officers have acted or declined to act:
- In good faith
- On an informed basis
- In furtherance of the interests of the corporation
- In compliance with the laws and corporate governance
SB 29 also places some restrictions on the rights of shareholders to bring derivative actions and to request corporate records. The law further allows corporations to include enforceable provisions in their governing documents that waive jury trials and allow them to select the court used to resolve internal disputes.
How the New Laws Will Affect Businesses in Texas
The flurry of recent pro-business legislation is evidence of the Lone Star State’s commitment to creating a legal environment that fosters business growth and success. Many businesses can now have disputes resolved more efficiently in a specialized forum that better understands complex business transactions. Decisions will be more consistent. Outcomes of disputes will be more predictable. Businesses can worry less about litigation and spend more time conducting business.
At Fee, Smith & Sharp, LLP, our Texas business attorneys advise regional, national, and international business clients about changes in the laws affecting their businesses and what they need to do to adjust or how they can take advantage of the benefits. With a proven record of success, Fee, Smith & Sharp, LLP, is an indispensable business partner for promoting and preserving the rights of Texas businesses. From business formation to complex litigation, Fee, Smith & Sharp, LLP can help your business achieve its goals.
