Texas Business Organizations Code 7.001 – Limitation of Liability of Governing Person
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(a) Subsections (b) and (c) apply to:
(1) a domestic entity other than a partnership or limited liability company;
(2) another organization incorporated or organized under another law of this state; and
(3) to the extent permitted by federal law, a federally chartered bank, savings and loan association, or credit union.
(b) The certificate of formation or similar instrument of an organization to which this section applies may provide that a governing person of the organization is not liable, or is liable only to the extent provided by the certificate of formation or similar instrument, to the organization or its owners or members for monetary damages for an act or omission by the person in the person’s capacity as a governing person.
Terms Used In Texas Business Organizations Code 7.001
- Association: means an entity governed as an association under Title 6 or 7. See Texas Business Organizations Code 1.002
- Certificate of formation: means :
(A) the document required to be filed with the filing officer under Chapter 3 to form a filing entity; and
(B) if appropriate, a restated certificate of formation and all amendments of an original or restated certificate of formation. See Texas Business Organizations Code 1.002 - Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Domestic: means , with respect to an entity, that the entity is formed under this code or the entity's internal affairs are governed by this code. See Texas Business Organizations Code 1.002
- Entity: means a domestic entity or foreign entity. See Texas Business Organizations Code 1.002
- General partnership: means a partnership governed as a general partnership under Chapter 152. See Texas Business Organizations Code 1.002
- Governing person: means a person serving as part of the governing authority of an entity. See Texas Business Organizations Code 1.002
- Law: means , unless the context requires otherwise, both statutory and common law. See Texas Business Organizations Code 1.002
- Limited liability company: means an entity governed as a limited liability company under Title 3 or 7. See Texas Business Organizations Code 1.002
- Limited partnership: means a partnership that is governed as a limited partnership under Title 4 and that has one or more general partners and one or more limited partners. See Texas Business Organizations Code 1.002
- Organization: means a corporation, limited or general partnership, limited liability company, business trust, real estate investment trust, joint venture, joint stock company, cooperative, association, bank, insurance company, credit union, savings and loan association, or other organization, regardless of whether the organization is for-profit, nonprofit, domestic, or foreign. See Texas Business Organizations Code 1.002
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Partnership: means an entity governed as a partnership under Title 4. See Texas Business Organizations Code 1.002
- Person: means an individual or a corporation, partnership, limited liability company, business trust, trust, association, or other organization, estate, government or governmental subdivision or agency, or other legal entity, or a protected series or registered series of a domestic limited liability company or foreign entity. See Texas Business Organizations Code 1.002
- Statute: A law passed by a legislature.
(c) Subsection (b) does not authorize the elimination or limitation of the liability of a governing person to the extent the person is found liable under applicable law for:
(1) a breach of the person’s duty of loyalty, if any, to the organization or its owners or members;
(2) an act or omission not in good faith that:
(A) constitutes a breach of duty of the person to the organization; or
(B) involves intentional misconduct or a knowing violation of law;
(3) a transaction from which the person received an improper benefit, regardless of whether the benefit resulted from an action taken within the scope of the person’s duties; or
(4) an act or omission for which the liability of a governing person is expressly provided by an applicable statute.
(d) The liability of a governing person may be limited or eliminated:
(1) in a general partnership by its partnership agreement to the same extent Subsections (b) and (c) permit the limitation or elimination of liability of a governing person of an organization to which those subsections apply and to the additional extent permitted under Chapter 152;
(2) in a limited partnership by its partnership agreement to the same extent Subsections (b) and (c) permit the limitation or elimination of liability of a governing person of an organization to which those subsections apply and to the additional extent permitted under Chapter 153 and, to the extent applicable to limited partnerships, Chapter 152; and
(3) in a limited liability company by its certificate of formation or company agreement to the same extent Subsections (b) and (c) permit the limitation or elimination of liability of a governing person of an organization to which those subsections apply and to the additional extent permitted under Section 101.401.