Director
An individual elected by shareholders to serve on the board of directors of a Texas corporation, with statutory and common-law authority to manage or direct the management of the corporation's business and affairs.
A director is an individual elected by shareholders to serve on the board of directors of a Texas corporation, with statutory and common-law authority to manage or direct the management of the corporation's business and affairs. Directors owe fiduciary duties to the corporation; their conduct is protected by the business judgment rule when made within the rule's parameters.
The default management authority
§ 21.401(a) provides that, except as provided by Section 21.101 (shareholders' agreements) or Subchapter O (close corporations), the board of directors exercises or authorizes the exercise of the corporation's powers and directs the management of its business and affairs.
Qualifications, election, removal
A director must be an individual, meaning a natural person. § 1.002(16), (38). Unless the certificate of formation or bylaws provide otherwise, a director need not be a Texas resident or a shareholder, and those documents may set other qualifications. § 21.402. The board may consist of one or more directors. § 21.403. Directors are elected by shareholders at each annual meeting (§ 21.405). Under § 21.409, unless the certificate of formation or bylaws provide otherwise, shareholders may remove a director with or without cause at a meeting called for that purpose, by a majority of the shares entitled to vote in the director's election. Directors on a staggered board may be removed only for cause unless the certificate provides otherwise, and cumulative voting limits partial removals.
Fiduciary duties
A director owes fiduciary duties to the corporation, not to individual shareholders, under Texas common law. The three components are duty of care, duty of loyalty, and duty of obedience. Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014); Sneed v. Webre, 465 S.W.3d 169 (Tex. 2015). The duty of loyalty, in the Texas Supreme Court's words, "includes the dedication of [the director's] uncorrupted business judgment for the sole benefit of the corporation." Ritchie, 443 S.W.3d at 868 (quoting Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567 (Tex. 1963)).
Reliance on experts
A director, in good faith and with ordinary care, may rely on information, opinions, reports, or statements prepared or presented by officers or employees, legal counsel, accountants, investment bankers, or other persons with professional expertise. § 3.102. This statutory reliance protection materially affects the duty of care analysis.
Charter exculpation
Under § 7.001, the certificate of formation may eliminate or limit a director's personal liability for monetary damages for an act or omission in the director's capacity as a director, except for liability for breach of the duty of loyalty, an act or omission not in good faith that breaches a duty or involves intentional misconduct or a knowing violation of law, a transaction from which the director received an improper benefit, or an act or omission for which a statute expressly provides liability. This tracks Delaware DGCL § 102(b)(7).
Interested-director transactions
Under § 21.418, a contract or transaction between the corporation and one or more of its directors or officers, or an entity in which one of them is a managerial official or has a financial interest, is valid and not void or voidable because of that interest if (a) the material facts are disclosed to or known by the board or a committee and a majority of the disinterested directors or committee members approves it in good faith, (b) the material facts are disclosed to or known by the shareholders entitled to vote and they specifically approve it in good faith, or (c) the transaction is fair to the corporation when authorized, approved or ratified.
The codified business judgment rule (§ 21.419)
Effective May 14, 2025, § 21.419 (added by SB 29) sets statutory presumptions, often described as a codified business judgment rule, for directors and officers of Texas corporations with a class or series of voting shares listed on a national securities exchange and of corporations whose governing documents elect to be governed by it. For directors of corporations governed by § 21.419: (1) directors are presumed to have acted in good faith, on an informed basis, in furtherance of the corporation's interests, and in obedience to law and governing documents; (2) the presumptions are rebuttable, but rebuttal alone is insufficient, the plaintiff must additionally prove breach of duty involving fraud, intentional misconduct, ultra vires, or knowing violation of law; (3) pleading must be with particularity; (4) the protections apply across the duty of care, duty of loyalty, and duties pertaining to interested-party transactions. See Business Judgment Rule.
Texas Business Court jurisdiction
Director fiduciary-duty disputes are within the jurisdiction of the Texas Business Court when the amount in controversy exceeds $5 million. Tex. Gov't Code § 25A.004(b), as amended by HB 40 effective September 1, 2025. If a party is a publicly traded company, the Business Court has that jurisdiction regardless of the amount in controversy. § 25A.004(c). The jurisdiction is concurrent with the district courts.
Texas director practice in 2026 is a substantially different field than it was in 2014 (pre-Ritchie v. Rupe) or in early 2025 (pre-SB 29). The combination of Ritchie's limitation on shareholder oppression, the contractual flexibility of shareholders' agreements under Subchapter C, charter exculpation under § 7.001, indemnification flexibility under Chapter 8, the codified business judgment rule under § 21.419, the derivative-action ownership thresholds under § 21.552(a)(3), and the Texas Business Court's specialized jurisdiction has made Texas law markedly more protective of directors than it was before 2025. Directors of Texas corporations that have opted into § 21.419 face a meaningfully different liability landscape than directors of corporations that have not opted in.