Happy New Year!
Texas has a number of new laws going into effect in 2022 (and one honorable mention). This is my ranking of the top new business laws going into effect in 2022. My criteria pretty much boiled down to what I thought was interesting, what will impact my clients the most, and how broad the change will be in general.
I've done the same for California here.
5. Apprenticeship tax refunds (SB 1524)
SB 1524 adds Tex. Tax Code section 151.4292, which creates a pilot program for tax refunds to businesses that have a qualified apprenticeship program. The new law authorizes the Executive Director of the Texas Workforce Commission to certify up to 100 apprenticeship programs and, if the number of applicants exceeds that number, to establish merit-based criteria for selecting persons to certify. Tax Code section 151.4292(h).
The goal is to incentivize the establishment of apprenticeship programs throughout the state.
This section went into effect on January 1, 2022. You can find the text here.
4. Business address to be included on certificate of formation (HB 3131)
Previously, Texas did not require that the certificates of formation for corporations, LLCs, LPs, etc. include the entity's business address. This information is now required. Do not forget to include the entity's address, as it is now a formality explicitly required by Tex. Bus. Orgs. Code section 3.005.
This section went into effect on January 1, 2022. You can find the text here.
3. Liability of seller of securities to buyer (SB 1280)
SB 1280 amends Tex. Gov. Code section 4008.051. Texas provides a private cause of action to buyers of securities if the seller violates particular Tex. Gov. Code provisions. SB 1280 removes several of the provisions from that list, narrowing the private cause of action. For example, the following no longer trigger that liability: the permit requirements of Tex. Gov. Code section 4003.002, the statement of financial condition and income statement requirements of Tex. Gov. Code section 4003.003, and not falling within the exceptions of Tex. Gov. Code section 4003.004.
This amendment took effect on January 1, 2022. You can find the text here.
2. Series, Protected Series, or Registered Series (SB 1523)
Texas, along with about 15 other states, allows for the formation of series LLCs. Beginning in 2022, the series in series LLCs will be categorized as 1) a series, 2) a protected series, or 3) a registered series.
A simple series is one that already exists or is otherwise not a protected or registered series. A protected series is one formed according to new Tex. Bus. Orgs. Code section 101.602, but that is not registered with the Texas Secretary of State. A registered series is one formed according to new Tex. Bus. Orgs. Code section 101.602, but that is registered with the Texas Secretary of State.
This categorization looks to me like a sliding scale to aid in potential veil piercing (which is difficult in Texas). But the creation of the registered series serves the purpose of creating a public filing. That is, potential creditors, lenders, investors, etc. will be able to check and make sure that the series is properly registered.
This goes into effect on June 1, 2022. You can read the new statute here.
1. Changes to Texas mechanic's lien laws (HB 2237)
Texas has substantially changed its mechanic's lien laws. These changes deserve a post of their own, but below are a few of the major changes.
Purported Original Contractors – Tex. Prop. Code section 53.001 adds a definition for "purported original contractor." This refers to an original contractor who is controlled by or can control (by, for example, stock ownership) the owner, or who was engaged by the owner for improvements without a good faith intention that the purported original contractor perform. HB 2237 amends Tex. Prop. Code section 53.026 ("Sham Contract") to allow a contractor in direct contractual relationship with a purported original contractor to file mechanic's liens as though they were a direct contractor.
Notices – Tex. Prop. Code section 53.003 no longer allows notices to be sent by registered mail. Notices must be served in person, sent by certified mail, or sent by traceable private mail service. If you send a notice by registered mail, you are forfeiting your lien rights.
Single Deadline for Notices – Tex. Prop. Code section 53.056 now requires subcontractors to provide notice to the owner and the original contractor by the 15th day of the third month after the month in which labor or materials were provided for non-residential projects. Previously, subcontractors had to give notice to the original contractor by the 15th day of the second month thereafter, and to the original contractor and the owner by the 15th day of the third month thereafter. There is now only one deadline.
Statute of Limitations for Foreclosing a Lien – The new statute of limitation for foreclosing a mechanic's lien is the first anniversary of the last day a claimant may file the lien affidavit under Section 53.052. Tex. Prop. Code section 53.158.
Again, this overhaul is extensive, probably deserving of its own post. These are just four of the numerous changes that went into effect on January 1, 2022. You can find the full text of HB 2237 here.
Honorable Mention: Business Courts in Texas? (HB 1875)
Several states have established specialized business court systems. The idea is that a lot of issues that arise within corporations, LLCs, etc. require a specialized system of adjudication. The gold standard is Delaware's Chancery Court, but other states have seen some success with them as well. There's a map here that shows which states have specialized business courts (or, like California, have divisions for complex litigation).
With that background, Texas legislators have introduced legislation establishing a business court system for decades now. HB 1875 is the latest attempt to establish specialized business court system in Texas. HB 1875 also establishes a business court of appeal. Appeals of the business appellate court would be heard by the Texas Supreme Court.
I may post a more detailed analysis of HB 1875 in the future if it looks like there is any chance of it passing (though Gov. Abbott does seem to support the idea). But right now, it seems more like a solution looking for a problem than anything else. You can read the text here.
Conclusion
This list is of course non-exhaustive. There are a number of others statutes and regulations going into effect in 2022 in Texas, largely related to taxes. It's a good idea to check in with your business attorney to see if any changes may affect your business.
Happy 2022!
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