BILL ANALYSIS

 

 

Senate Research Center

S.B. 2340

89R14100 PRL-F

By: Schwertner

 

Business & Commerce

 

4/23/2025

 

As Filed

 

 

 

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

 

The Texas Business Organizations Code provides authority for the attorney general to investigate the organization, conduct, and management of corporations registered in Texas, but does not provide what that authority includes or judicial review.

 

S.B. 2340 would clearly outline what is included in the attorney general's authority to investigate corporations registered in Texas to include the ability to conduct pre-suit oral depositions and require sworn answers to written questions. Additionally, the bill provides a safe harbor for entities that timely, and in good faith, seek judicial review of the attorney general's request to examine. Clarifying that only those individuals who take intentional acts to avoid, evade, or prevent compliance with an investigation violate criminal law; providing for a civil penalty. The bill adds a new section that provides for judicial review of a request to examine information under the attorney general's authority to investigate.

 

As proposed, S.B. 2340 amends current law relating to examination of the records of filing entities and foreign filing entities by the attorney general and creates a criminal offense.

 

RULEMAKING AUTHORITY

 

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

 

SECTION BY SECTION ANALYSIS

 

SECTION 1. Amends Section 12.153, Business Organizations Code, as follows:

 

Sec. 12.153. AUTHORITY TO EXAMINE MANAGEMENT OF ENTITY. (a) Creates this subsection from existing text and makes no further changes.

 

(b) Provides that the investigation authority under Subsection (a) (relating to authorizing the attorney general to investigate the organization, conduct, and management of a filing entity or foreign filing entity) includes the authority to require the filing entity or foreign filing entity to file, on a form prescribed by rule of the attorney general, a written sworn statement or report attesting to all the facts and circumstances the attorney general considers necessary with regard to the investigation and examine under oath any person in connection with the investigation.

 

SECTION 2. Amends Section 12.155, Business Organizations Code, as follows:

 

Sec. 12.155. FORFEITURE OF BUSINESS PRIVILEGES. (a) Creates this subsection from existing text. Creates an exception under Subsection (b).

 

(b) Provides that a foreign filing entity or a filing entity that fails or refuses to comply with Subsection (a) (relating to a foreign filing entity or a filing entity that fails or refuses to permit the attorney general to examine or make copies of a record) does not forfeit the right of the entity to do business in this state, and the entity's registration or certificate of formation is not subject to revocation or termination if the entity timely files a petition under Section 12.157 and the court finds the entity has a good faith reason for refusing to permit the attorney general to examine or make copies of specified records under Subsection (a) and the petition is not filed for purpose of delay.

 

SECTION 3. Amends Subchapter B, Chapter 12, Business Organizations Code, by adding Section 12.1561, as follows:

 

Sec. 12.1561. CRIMINAL PENALTY. (a) Provides that a person commits an offense if, with intent to avoid, evade, or prevent compliance wholly or partly with this subchapter, the person removes, conceals, or withholds a record, destroys, mutilates, or alters a record, or falsifies a record.

 

(b) Provides that an offense under this section is a misdemeanor punishable by a fine not to exceed $5,000, confinement in jail for a term not to exceed one year, or both such fine and confinement.

 

SECTION 4. Amends Subchapter B, Chapter 12, Business Organizations Code, by adding Section 12.157, as follows:

 

Sec. 12.157. PETITION. (a) Authorizes a filing entity or foreign filing entity to file a petition to extend the return date for production of a record requested in writing under Section 12.152 (Request to Examine) or to modify or set aside a written request made under that section. Requires that the petition state good cause and be filed in a district court in Travis County or any county in this state in which the petitioner does business or maintains its principal office and not later than the earlier of certain dates.

 

(b) Requires the district court in which the petition is filed to expedite the proceeding. Requires the district court to hold a hearing on the matter not later than the 60th day after the date the petition is filed. Provides that, if the district court fails to hold a hearing on the matter before that date, the relief requested by the petitioner in the petition is considered denied. Provides that the denial of relief as specified by this subsection is considered a final order entered by the court.

 

(c) Provides that failure to comply with any final order entered by a district court under this section is punishable as contempt.

 

SECTION 5. Repealer: Section 12.156 (Criminal Penalty), Business Organizations Code.

 

SECTION 6. Provides that the repeal by this Act of Section 12.156, Business Organizations Code, does not apply to an offense committed under that section before the effective date of the repeal. Provides that an offense committed before the effective date of the repeal is governed by that section as it existed on the date the offense was committed, and the former law is continued in effect for that purpose. Provides that, for purposes of this section, an offense was committed before the effective date of the repeal if any element of the offense occurred before that date.

 

SECTION 7. Effective date: upon passage or September 1, 2025.