By: Schwertner, Kolkhorst S.B. No. 2340

(In the Senate - Filed March 12, 2025; March 25, 2025, read first time and referred to Committee on Business & Commerce; May 5, 2025, reported adversely, with favorable Committee Substitute by the following vote: Yeas 7, Nays 4; May 5, 2025, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 2340 By: Campbell

A BILL TO BE ENTITLED

AN ACT

relating to examination of the records of filing entities and foreign filing entities by the attorney general; creating a criminal offense.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 12.153, Business Organizations Code, is amended to read as follows:

Sec. 12.153. AUTHORITY TO EXAMINE MANAGEMENT OF ENTITY. (a) The attorney general may investigate the organization, conduct, and management of a filing entity or foreign filing entity and determine if the entity has been or is engaged in acts or conduct in violation of:

(1) its governing documents; or

(2) any law of this state.

(b) The investigation authority under Subsection (a) includes the authority to:

(1) 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

(2) examine under oath any person in connection with the investigation.

SECTION 2. Section 12.155, Business Organizations Code, is amended to read as follows:

Sec. 12.155. FORFEITURE OF BUSINESS PRIVILEGES. (a) Except as provided by Subsection (b), a [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, without regard to whether the record is located in this or another state, forfeits the right of the entity to do business in this state, and the entity's registration or certificate of formation shall be revoked or terminated.

(b) A foreign filing entity or a filing entity that fails or refuses to comply with Subsection (a) 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:

(1) 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

(2) the petition is not filed for purpose of delay.

SECTION 3. Subchapter B, Chapter 12, Business Organizations Code, is amended by adding Section 12.1561 to read as follows:

Sec. 12.1561. CRIMINAL PENALTY. (a) A person commits an offense if, with intent to avoid, evade, or prevent compliance wholly or partly with this subchapter, the person:

(1) removes, conceals, or withholds a record;

(2) destroys, mutilates, or alters a record; or

(3) falsifies a record.

(b) An offense under this section is a misdemeanor punishable by:

(1) a fine not to exceed $5,000;

(2) confinement in jail for a term not to exceed one year; or

(3) both such fine and confinement.

SECTION 4. Subchapter B, Chapter 12, Business Organizations Code, is amended by adding Section 12.157 to read as follows:

Sec. 12.157. PETITION. (a) A filing entity or foreign filing entity may file a petition to extend the return date for production of a record requested in writing under Section 12.152 or to modify or set aside a written request made under that section. The petition must state good cause and must be filed:

(1) in a district court in:

(A) Travis County; or

(B) any county in this state in which the petitioner does business or maintains its principal office; and

(2) not later than the earlier of:

(A) the return date specified in the request to examine made under Section 12.152; or

(B) the 20th day after the date of service.

(b) A person on whom a demand is served under this subchapter shall comply with the terms of the demand unless otherwise provided by court order.

(c) When a petition is filed in the district court of an appropriate county under this section, the court shall 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. Section 12.156, Business Organizations Code, is repealed.

SECTION 6. 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. 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. 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. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2025.

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