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2023 Texas Legislative Update on Amendments to Texas Business Organizations Code
This article summarizes several bills that were passed by the Texas Legislature in its 2023 Regular Session and that amend the Texas Business Organizations Code (the “TBOC”). There are many other bills that were passed affecting business law, so this article should not be viewed as containing a listing of all business-related bills. The article contains summaries only and should not be relied on as a complete description of any bill or portion thereof.
Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
This article discusses fiduciary duties, some history regarding fiduciary duties in Texas, and fiduciary duties with respect to LLCs.
Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990's have impacted the analysis of fiduciary duties in the business organizations context. The duties of general partners are now defined by statutory provisions that delineate the duties without referring to them as “fiduciary” duties and specifically provide that partners shall not be held to the standard of a trustee. Whether limited partners in a limited partnership have fiduciary duties is not wellsettled, but the new Business Organizations Code (“BOC”) clarifies that a limited partner does not owe the duties of a general partner solely by reason of being a limited partner. While the fiduciary duties of directors are still principally defined by common law, various provisions of the corporate statutes are relevant to the application of fiduciary duty concepts in the corporate context. Because limited liability companies (LLCs) are a relatively recent phenomenon and the Texas LLC statutes do not specify duties of managers and members, there is some uncertainty with regard to the duties in this area, but the LLC statutes allude to or imply the existence of duties, and managers in a manager-managed LLC and members in a member-managed LLC should expect to be held to fiduciary duties similar to the duties of corporate directors or general partners. In each type of entity, the governing documents may vary (at least to some extent) the duties and liabilities of managerial or governing persons. The power to define duties, eliminate liability, and provide for indemnification is addressed somewhat differently in the statutes governing the various forms of business entities.