Monday, August 17, 2015
The Endless Shareholder Agreement
Congratulations to the Texas legislature for authorizing the Endless Shareholder Agreement.
But for shareholder agreements adopted prior to September 1, 2015, there has been a trap for the unwary. Under Section 21.102 of the Texas Business Organizations Code (TBOC), shareholder agreements were only effective for ten years unless the agreement provided otherwise. Thanks to recently adopted S.B. No. 860, which amends Section 21.102 of the TBOC, however, the default assumption for shareholder agreements will flip on September 1, 2015. Shareholder agreements adopted after that date will be effective forever unless the shareholder agreement provides otherwise. Shareholder agreements adopted before that date will continue to be subject to the 10-year limit under the prior law, unless the agreement provides otherwise.
The new law is probably more consistent with shareholders expectations and is therefore a step forward for Texas business law.