By Noah Speck, Michael F. Meskill, & Emily Leitch

Texas Senate Bill 1057, which became effective September 1, 2025, adds new Section 21.373 to the Texas Business Organizations Code (“TBOC”). This new Section of the TBOC creates a framework that governs when and how shareholders of “nationally listed corporations” may submit matters for a shareholder vote, provided that the corporation affirmatively elects to be governed by this Section of the TBOC.

Definition of “Nationally Listed Corporation”

Section 21.373 of the TBOC applies only to a “nationally listed corporation,” which is defined as a corporation that:

• has a class of equity securities registered under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”);
• is admitted to trading on a national securities exchange; and
• either maintains its principal office in Texas or is listed on a Texas-headquartered exchange approved by the Texas Securities Commissioner.

Importantly, Section 21.373 of the TBOC applies to a corporation only if it makes an affirmative election to be governed by this Section through an amendment to its Certificate of Formation or Bylaws.

Section 21.002(5) of the TBOC defines a “corporation” as a “domestic for-profit corporation subject to this chapter,” which indicates that nationally listed corporations only include corporations incorporated in Texas.

Mandatory Proxy Disclosures

Before adopting the amendment to its governing documents that opts a nationally listed corporation into Section 21.373 of the TBOC, the corporation must include notice of the proposed amendment in a proxy statement provided to shareholders.

Additionally, in any proxy statement provided to shareholders, a nationally listed corporation that has opted into Section 21.373 of the TBOC must describe (i) the process by which a shareholder, or group of shareholders, may submit a proposal and (ii) how shareholders may contact one another to aggregate their holdings for purposes of satisfying the applicable share ownership threshold.

Eligibility to Submit a Proposal

Once a nationally listed corporation is subject to Section 21.373 of the TBOC, a shareholder, or a group of shareholders acting together, may submit a proposal for approval at a meeting of shareholders only if all of the below conditions are satisfied.

The shareholders, or group of shareholders, must:

• hold at least (i) $1 million in market value of voting shares or (ii) 3% of the outstanding voting shares, determined on the date the proposal is submitted;
• hold the requisite shares continuously for a minimum of six months before the meeting date and retain the shares throughout the meeting; and
• solicit the holders of shares that collectively represent at least 67% of the voting power entitled to vote on the proposal.

Exceptions
The eligibility requirements described above do not apply to:

• director nominations; or
• procedural resolutions ancillary to the conduct of the meeting.

Comparison of Section 21.373 of the TBOC to Rule 14a-8 under the Exchange Act

Section 21.373 of the TBOC is similar to Rule 14a-8 under the Exchange Act (“Rule 14a-8”) in that they both address the submission of shareholder proposals for a vote at a meeting of shareholders. However, there are some key differences, which include the following:

• Section 21.373 of the TBOC addresses the requirements a shareholder must satisfy to submit a proposal for approval at a shareholders’ meeting, while Rule 14a-8 addresses the requirements a shareholder must satisfy to have its proposal included in the corporation’s proxy statement for the shareholders’ meeting.
• The ownership thresholds of Rule 14a-8 are significantly lower than those of Section 21.373 of the TBOC, although Section 21.373 of the TBOC has a shorter holding period. More specifically, Rule 14a-8 requires that a shareholder hold at least $2,000, $15,000, or $25,000 in market value of the corporation’s securities entitled to vote on the proposal for a continuous period of three years, two years, or one year, respectively.
• Although Section 21.373 of the TBOC has a significantly higher ownership threshold, a group of shareholders may aggregate holdings for purposes of satisfying the threshold. Rule 14a-8 expressly prohibits shareholders from aggregating holdings for purposes of meeting the requisite ownership threshold.
• Section 21.373 of the TBOC further requires that the shareholder solicits the holders of shares representing at least 67 percent of the voting power of shares entitled to vote on the proposal. Rule 14a-8 has no such solicitation requirement.

These differences raise legal questions regarding how a shareholder proposal should be treated with respect to a shareholder of a nationally listed corporation that has opted into Section 21.373 of the TBOC if the shareholder (i) satisfies all of the requirements of Rule 14a-8 (and the corporation has no basis under Rule 14a-8 to exclude the proposal) but (ii) does not satisfy all of the requirements of Section 21.373 of the TBOC. One of the purposes of Section 21.373 of the TBOC seems to be to enable corporations to combat proxy abuse by imposing more stringent requirements on shareholders seeking to submit proposals at shareholders’ meetings, even when such requirements are stricter than under Rule 14a-8. This suggests that a corporation may be able to exclude a shareholder proposal satisfying all of the requirements of Rule 14a-8 if all of the requirements of Section 21.373 of the TBOC are not met (assuming the corporation is a nationally listed corporation that has validly opted into Section 21.373 of the TBOC).

Jackson Walker’s Capital Markets Practice Group is available to assist public companies, boards, and investors in navigating Section 21.373 of the TBOC, including in connection with preparing requisite governance documents and managing shareholder engagement strategies.

This alert is for informational purposes only, does not constitute legal advice, and does not establish an attorney-client relationship. For specific guidance, please contact a member of Jackson Walker’s Capital Markets Practice Group.

Meet Noah

Noah Speck is a corporate attorney who represents both public and private companies in a wide variety of corporate matters. His practice is focused on mergers and acquisitions, securities, and corporate finance. Noah has been involved in several multimillion-dollar transactions across an impressive range of industries. He is also experienced in negotiating and drafting commercial agreements.

Meet Mike

Michael F. Meskill‘s practice focuses on securities, mergers and acquisitions, corporate governance matters, and general corporate law. Michael represents buyers and sellers in public and private M&A transactions, issuers, underwriters, and investors in public and private debt and equity offerings, and companies and special board committees in corporate governance matters.

Meet Emily

Emily Leitch counsels clients in multibillion-dollar transactions, focusing on corporate governance, securities compliance, and disclosure obligations for energy, oil and gas, power, and renewables companies. Her capital-markets work encompasses equity and debt offerings, high-yield deals, and IPOs, where she represents underwriters, issuers, and SPACs in public and private financings. Emily also guides clients through mergers, acquisitions, and private-equity investments, delivering pragmatic, results-oriented advice.