Class Voting / Series Voting
The requirement that holders of a particular class or series of shares vote separately, as a class, on a specified matter. Substantially modified by SB 29 effective May 14, 2025, permitting Texas corporations to waive class and series voting in their certificates of formation.
Class voting (or series voting) is the requirement that the holders of a particular class or series of shares vote separately, as a class, on a specified matter. Where class voting is required, the matter must be approved by both the corporation's overall shareholder vote and the separate vote of each affected class, giving each class effective veto power over actions that disproportionately affect it.
The pre-SB 29 default
Before May 14, 2025, Texas required separate class or series voting for any "fundamental action" or "fundamental business transaction" affecting the class, including changes in authorized shares, mergers, conversions, and sales of substantially all assets. This produced significant transaction friction for venture-backed corporations with multiple preferred-stock series.
The SB 29 change (eff. May 14, 2025)
Under amended § 21.364(d)(1), Texas corporations may now waive separate class and series voting in their certificate of formation for any matter, including fundamental business transactions. The waiver may also extend to the increase or decrease of authorized shares of a class or series (subject to a floor at the number of outstanding shares of the class or series). § 21.364(d)(1).
Strategic significance
This change closes a long-standing gap between the TBOC and Delaware General Corporation Law § 242(b)(2). For venture-backed Texas corporations with multiple preferred-stock series, each with differing economic incentives in an acquisition scenario, the elimination of mandatory class voting reduces transactional veto risk and accelerates deal closings.
The waiver requires affirmative election in the certificate of formation; existing Texas corporations seeking the benefit must amend their certificates. The waiver is most relevant for venture-stage, growth-stage, and pre-IPO Texas corporations with complex preferred-stock structures. Closely-held corporations with single-class structures are unaffected.
Companion article: Raising Capital in Texas