The bill, H.B. No. 872, introduces a new provision in the Business Organizations Code regarding the burden of proof in derivative proceedings initiated by shareholders. Specifically, it establishes that in cases where a shareholder alleges that a corporation's act or omission involved improper consideration of environmental, social, and governance (ESG) criteria, the burden of proof will rest on the corporation. The corporation must demonstrate that the act or omission was in its best interest, thereby shifting the responsibility from the shareholder to the corporation in these specific circumstances.

Additionally, the bill clarifies that the new burden of proof applies only to actions commenced on or after the effective date of the Act, which is set for September 1, 2025. Any actions initiated before this date will continue to be governed by the existing law. This legislative change aims to enhance accountability for corporations regarding their decision-making processes related to ESG factors.

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