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November 1, 201506477000
Dissident Director Who Harms Corporation to Further Personal Objectives Violates Duty of Loyalty
Directors owe fiduciary duties to a corporation on whose Board of Directors (“Board”) they serve and effectively to all of its stockholders. The fiduciary duty of loyalty dictates that directors act in good faith and not allow their personal interests to prevail over those of the corporation. Thus, a director may not use confidential company information, or disclose it to third parties, for personal gain without authorization from his fellow directors. This principle is often memorialized in corporate policies
May 1, 2020Elizabeth S. Miller
Overview of Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s have impacted the analysis of fiduciary duties in the Texas 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 well-settled, but the Texas 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.
May 1, 2020Texas Journal of Business Law
49 Tex. J. Bus. L. 1 (2020)
This is the entire issue of the Journal in one (PDF) document.
April 1, 2020Patrick Muldoon
Remaining or Going Private: Traditional and New Rationales
The going private transaction has been popular in the past and will likely continue in popularity, given the number of startup “exits.” In the alternative, companies could continue to remain private, as venture capital funding and mega-rounds give companies a way to operate privately and their founders to retain control. Traditional rationales were centered around public speculation and filing or disclosure requirements. I suggest that new rationales include control by founder/CEOs, although it is hard to be sure. In the future, there could be new trends, less founder-centric companies, and more rationales for remaining, or going, private.
November 7, 2025Elizabeth S. Miller
Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s have impacted the analysis of fiduciary duties in the Texas 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 has been somewhat unsettled, but the Texas 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, and the Texas Supreme Court has now expressly acknowledged this principle. 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 the absence of provisions addressing duties in the company agreement. In each type of entity, the governing documents may vary (at least to some extent) the duties and liabilities of governing persons and other managerial officials. The power to define or reduce duties, eliminate liability, and provide for indemnification is addressed somewhat differently in the statutes governing the various forms of business entities.
March 20, 2025Howard Nirken
Fiduciary Duties of Governing Persons in Texas Business Entities
This set of slides describes the relationship and duties of the Board of Directors to corporation and how that affects corporate governance.
November 8, 202406477000, J. Machir Stull, Cliff Ernst
Divisive Mergers
These presentation slides discuss the statutes that govern divisions of entities in Texas and Delaware; the legal effect of division transactions; general tax implications; how creditors are affected inside and outside of bankruptcy; application of fraudulent transfer law; and discussion of relevant case law. The authors provide a sample Plan of Divisive Merger for use with Texas entities.
November 12, 202314071200
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.
November 11, 2022Melissa Donimirski
Business Divorce: I Hate You, I Love You – The Psychology of Litigating and Resolving Disputes Between Business Owners
A business divorce is generally understood to involve the legal separation of partners in a privately-held business.One of the hallmarks of business divorce as a practice area is that it exclusively involves privately held entities. As a result, these types of cases frequently involve the actual founders of the business, their immediate kin and/or longtime friends. Given the close relationships between those involved, business divorce disputes often involve a level of personal animosity and rancor that is more commonly seen in romantic breakups. Not only must a business divorce practitioner be aware of these dynamics in order to represent the client efficiently, but such issues may be more important to the client than a simply analysis of the bottom line. Moreover, a business divorce attorney may find herself acting as an amateur psychologist in advising a client who may want to focus on personal animosities instead of the big picture.
November 6, 202014071200, Robert Ford
Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s have impacted the analysis of fiduciary duties in the Texas 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 well-settled, but the Texas 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.
November 7, 2019TexasBarCLE
2019 Advanced Business Law Brochure
17th Annual Course Advanced Business Law November 7-8, 2019 Hilton Houston Westchase.
May 19, 2017Allen Sparkman, Adrienne Randle Bond
Management Responsibilities of Governing Persons of Corporations and Limited Liability Companies
Although this paper will focus primarily on LLCs, it is worthwhile to consider the duties typically imposed on corporate directors, as the same duties show up in cases involving LLCs. Directors have a duty to discharge their responsibilities in accordance with the duty of care, the duty of loyalty, and the duty of obedience. The duty of care mandates that a director discharge his or her responsibilities with the care that an ordinarily prudent person would exercise in similar circumstances. Corporate statutes based on the Model Business Corporation Act use the phrase “an ordinarily prudent person in a like position would exercise under similar circumstances.”1 This statutory language allows a court to look to a particular organization rather than a hypothetical entity. Applying this standard, a court may consider the background, qualifications, and experience of a director and the role the director plays in the corporation when measuring the director’s conduct. The ordinarily prudent person standard is associated with tort-law and simple negligence, but in the corporate world, it has been incorporated into the duty of care and case law applies a gross negligence standard. Directors also usually enjoy the benefits of the business judgment rule. The duty of loyalty requires a director to act in good faith in what the director reasonably believes to be the best interests of the corporation and to not derive a personal profit or advantage at the expense of the corporation. The duty of loyalty comes into play if a director or officer wants to compete with the corporation or take an opportunity of the corporation for the director’s own benefit. The duty of obedience dictates that a director obey the law and the corporation’s organizational documents. Corporate statutes commonly provide a procedure for approval of a director’s conflicting interest transaction. Most corporate statutes now permit the corporation’s formation document to relieve directors from monetary liability for breaches of the duty of care. The provisions of the TBOC governing for-profit corporations (like the predecessor Texas Business Corporation Act) do not explicitly set forth or define the fiduciary duties of corporate directors; however, case law generally recognizes that directors owe a duty of obedience, a duty of care, and a duty of loyalty.
November 10, 2017Debra Gatison Hatter, Cody Dreibelbis
A Look at Board Duties and Conflicts for Corporations and LLCs
The world of corporate governance is experiencing a paradigm shift in recent years—with the movement away from a passive governing board and a rise in shareholder activism and shareholder democracy. This shift is marked by some inherent conflict-of-interest issues including (1) an increase in the number of constituent representatives on the board; (2) the rise of the influence of private equity; and (3) equity-interest owners demanding a right to nominate directors and managers.
November 10, 2017Justin M. Long
Fiduciary Duties of Directors in M&A Transactions
There are several landmark cases which define the duties of directors in DE and TX companies, including the duties of obedience, loyalty and care. Within the last five years, there have been a number of cases providing additional color.
May 21, 2016Elizabeth S. Miller
Overview of Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s 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 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.
November 18, 2016Byron F. Egan
Update On Fiduciary Duty For Privately Held Corporations and LLCs
These are the presentation slides.
May 17, 2015Adrienne Randle Bond
Drafting Considerations for Exculpation of Duties (Including Fiduciary) in LLC Agreements
This paper will discuss and set out suggested provisions for Texas LLC Agreements for exculpation of “Governing Persons” under the TBOC and in the LLC contractual provisions. This process has several component parts, including statutory provisions, common law directives and influences from Delaware law, as well as contractual “glosses” that have developed in practice for specific activities. In drafting an LLC Agreement, the practitioner must be cognizant of the actual statutory provisions governing the duties of Governing Persons, the case law that is developing about LLCs, as well as the statutorily permitted management structures unique to the LLC. The statutory provisions for LLCs on exculpation of Governing Persons are not the same as those in effect for either corporations or partnerships, so traditional exculpatory provisions cannot be directly copied. In addition to statutory formulations, and the growing body of case law on limited liability companies, common law on agency must be considered. Further, the management of the LLC as an entity can be accomplished by at least three separate groups, the members, the managers and the officers, depending on how one determines to organize the entity. Management contracts by affiliated entities add another level of complexity. The multiplicity of choices for daily management requires a translation of traditional corporate and partnership formulations. This paper will raise the questions and suggest possible responses in this ever fertile field of legal controversies.
May 17, 2015Elizabeth S. Miller
Overview of Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s 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 well- settled, but the 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.
March 13, 2015Tyrone L. Haynes, Howard L. Steele Jr., Shreedhar R. Patel
Fiduciary Duties for Employees in Texas - A Moving Concept
For centuries, courts have required trustees to serve with the same devotion that they serve their own interests. This duty of loyalty, coupled with the hammer of restitution of any ill-gotten gain, has defined a very special relationship in the law: the fiduciary relationship. As Justice Cardozo famously penned in Meinhard v. Salmon, “[a] trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.”2 As time has passed, however, courts have created different standards and remedies for different fiduciaries. There are numerous theories that attempt to unify the concept of fiduciary law, i.e., economic, anti-economic, contractual, property based, unjust enrichment, reliance, unequal relationship, and power and 3discretion. In the end, however, there is no clear map that creates a simplistic black and white test for practitioners and judges in this equitable forest. Thus, the question for practitioners is when does an employee become a “fiduciary,” and thus, require the “punctilio of an honor” to the employer? The legal concept of fiduciary relationships first developed in England’s courts of chancery.4 These courts of equity traditionally resolved matters involving breach of trust or confidence.5 During this period, the courts had not yet adopted the term “fiduciary.” Indeed, the case law from the period describes fiduciary obligations with language typically used in trust matters. As the chancery courts became more sophisticated, however, “a standard technical vocabulary [gained] recognition.”6 As a result, the word “trust” became a narrowly defined term of art, which excluded the concept of fiduciary relationships. This created quite a quandary for late-eighteenth and early-nineteenth century practitioners, who were left to argue a branch of trust law, without using the term “trust.” Against this backdrop, the term “fiduciary” “was adopted to describe [those] situations which fell short of the now strictly-defined trust.”
March 7, 2014Elizabeth S. Miller
Governing Persons in Action: Overview of Fiduciary Duties, Excupation, and Indemnification in Texas Business Organizations Code
Statutory developments beginning in the 1990s 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 well- settled, but the 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.
May 25, 2014Adrienne Randle Bond
Fiduciary Duty Exculpation - Drafting Notes
These are the drafting notes from the author regarding this topic. Essentially, an outline of the topic.
May 24, 2014Elizabeth S. Miller
Overview of Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s 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 well-settled, but the 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.
May 23, 2013Byron Egan, Elizabeth Stone Miller
Shareholder and LLC Member Oppression in Texas
Since 1955, “oppressive” conduct by the directors or those in control of a corporation has been grounds for a shareholder to obtain a receivership to rehabilitate the corporation. TEX. BUS. CORP. ACT ANN. art. 7.05.A(1)(c) (expired); TEX. BUS. ORGS. CODE ANN. § 11.404(a)(1)(C). (An unsuccessful rehabilitative receivership can lead to a liquidating receivership; therefore, although “oppression” is not directly grounds for court-ordered liquidation, “oppression” can indirectly lead to a liquidating receivership. TEX. BUS. CORP. ACT ANN. art. 7.06.A(3) (expired); TEX. BUS. ORGS. CODE ANN. § 11.405(a)(3).) When the Texas Limited Liability Company Act was enacted in 1991, it incorporated by reference the receivership provisions of the Texas Business Corporation Act (TBCA). TEX. REV. CIV. STAT. ANN. art. 1528n, art. 8.12.A (expired). Section 11.404 of the Texas Business Organizations Code (TBOC) applies to partnerships (both general and limited) as well as corporations and limited liability companies (LLCs). (Interestingly, Section 11.404 of the TBOC dropped the reference to “those in control” and simply refers to “governing persons.” The “governing persons” of an entity include the board of directors of a corporation, the managers of a managermanaged LLC or members of a member-managed LLC, and general partners of a partnership; however, an owner of an entity (even a majority owner) would not fall within the definition of “governing person” if the owner is not also a member of the governing authority of the entity.
November 8, 2013Michael C. Holmes
Fiduciary Duties in Alternate Entities
Overview of Traditional Fiduciary Duties and Alternate Entities Relevant Delaware Statutes Governing Alternate Entities Relevant Texas Statutes Governing Alternate Entities Standard Contractual Provisions in Alternate Entity Agreements Delaware Supreme Court Cases
May 26, 2012Charles Henry Still
Director and Officer and Controlling Shareholder Duties and Liabilities Under Texas Law - Fiduciary Duties and Shareholder Oppression
The prior corporation laws and other entity statutes were codified in the Texas Business Organizations Code, which became effective for all Texas corporations on January 1, 2010. The Texas Business Corporation Act (“TBCA”) provisions referred to herein have been carried forward substantially in the Texas Business Organizations Code, which is referred to throughout as the “BOC” or the “Texas BOC”.