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 the business and affairs of a corporation must be managed under the direction of, and subject to the authority of, the board of directors, except as provided in the corporation's certificate of formation, bylaws, or a shareholders' agreement.
Qualifications, election, removal
A director must be a natural person at least 18 years of age. § 21.402. Directors need not be Texas residents and need not be shareholders. A Texas corporation must have at least one director. § 21.403. Directors are elected by shareholders at each annual meeting (§ 21.405). Under § 21.409, a director may be removed with or without cause by holders of a majority of shares entitled to vote.
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 Texas Supreme Court reformulated the duty of loyalty as "the dedication of [the director's] uncorrupted business judgment for the sole benefit of the corporation."
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 duty of loyalty, intentional misconduct, knowing violation of law, unauthorized distributions, or improper personal benefit. 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 is not void or voidable solely because of the director's interest if the material facts are disclosed and (a) the transaction is approved by a majority of disinterested directors, (b) approved by holders of a majority of shares, or (c) the transaction is fair to the corporation.
The codified business judgment rule (§ 21.419)
Effective May 14, 2025, § 21.419 (added by SB 29) provides codified business judgment rule protections for directors of Texas for-profit corporations whose shares are listed on a national securities exchange and corporations that opt in. 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. For directors of publicly-traded Texas corporations, the Business Court has jurisdiction regardless of amount in controversy.
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 § 8.003, 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 produced a Texas corporate-governance environment that is substantially friendlier to directors than at any prior point in Texas corporate history. 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.