BILL ANALYSIS

 

 

Senate Research Center	C.S.S.B. 2340
89R25631 PRL-F	By: Schwertner
	Business & Commerce
	4/30/2025
	Committee Report (Substituted)

 

 

 

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.

 

(Original Author's/Sponsor's Statement of Intent)

 

C.S.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 the attorney general, a statement or report in writing, under oath or otherwise, as 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 Subchapter B (Attorney General), 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 a person on whom a demand is served under this subchapter to comply with the terms of the demand unless otherwise provided by court order.

 

(c) Requires the district court of an appropriate county, when a petition is filed in the court under this section, to have jurisdiction to hear and determine the matter presented and to enter any order required to carry into effect the provisions of this subchapter.

 

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.