Sec. 21.563. CLOSELY HELD CORPORATION. (a) In this section, "closely held corporation" means a corporation that has:
(1) fewer than 35 shareholders; and
(2) no shares listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national securities association.
(b) Sections 21.552-21.560 do not apply to a derivative proceeding by a shareholder of a closely held corporation against a present or former director, officer, or shareholder of the corporation. In the event the shareholder also asserts a claim in the derivative proceeding against a person who is not a present or former director, officer, or shareholder, this subsection applies only to a claim in the derivative proceeding against a present or former director, officer, or shareholder.
(c) If Sections 21.552-21.560 do not apply because of Subsection (b) and if justice requires:
(1) a derivative proceeding brought by a shareholder of a closely held corporation may be treated by a court as a direct action brought by the shareholder for the shareholder's own benefit; and
(2) a recovery in a direct or derivative proceeding by a shareholder may be paid directly to the plaintiff or to the corporation if necessary to protect the interests of creditors or other shareholders of the corporation.
(d) Other provisions of state law govern whether a shareholder has a direct cause of action or right to sue a director, officer, or shareholder, and this section may not be construed to create that direct cause of action or right to sue.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 688 (H.B. 1737), Sec. 84, eff. September 1, 2007.
Acts 2019, 86th Leg., R.S., Ch. 899 (H.B. 3603), Sec. 12, eff. September 1, 2019.
Acts 2025, 89th Leg., R.S., Ch. 199 (S.B. 2411), Sec. 30, eff. September 1, 2025.
SUBCHAPTER M. AFFILIATED BUSINESS COMBINATIONS
Notes of Decisions
Sneed v. Webre, 465 S.W.3d 169 (Tex. 2015).
· cites it 2× “3d at 880-81 (emphasis added) (citing Tex. Bus. Orgs. Code § 21.563). This legislatively imposed ease of court accessibility enables shareholders of closely held corporations to bring derivative actions “without having to prove that they ‘fairly and adequately represent ] the…”
Webre v. Sneed, 358 S.W.3d 322 (Tex. App. 2011).
· cites it 2× “See Tex. Bus. Orgs.Code Ann. §§ 21.551, 21.552 (Vernon 2010).”
Cardiac Perfusion Servs., Inc. & Michael Joubran v. Randall Hughes, 436 S.W.3d 790 (Tex. 2014).
“”); see also Tex. Bus. Orgs. Code § 21.563(c). Although we express no opinion on whether Hughes may successfully pursue such a claim under the facts of this case, justice requires that we remand to provide him an opportunity to do so.”
In Re Est. of Robert S. Castleman v. . (Tex. App. 2025).
· cites it 5× “See TEX. BUS. ORGS. CODE ANN. § 21.563(c). Castleman therefore contends that the trial court did not abuse its discretion when it held “it was proper for Castleman to recover directly against the Youngs individually, as opposed to CYC as the Youngs’ [sic] had argued.”
In Re Marty Berry & Axis Midstream Holdings, LLC v. the State of Texas (Tex. App. 2025).
· cites it 4× “, and LDMA Limited Partnership operate as closely held entities—and Defendants have concealed information and refused to share requested information with Lawrence—an officer, director, and shareholder—about the operations of the Berry Entities, justice requires treating this…”
In Re Marty Berry & Axis Midstream Holdings, LLC v. the State of Texas (Tex. App. 2025).
· cites it 4× “, and LDMA Limited Partnership operate as closely held entities—and Defendants have concealed information and refused to share requested information with Lawrence—an officer, director, and shareholder—about the operations of the Berry Entities, justice requires treating this…”
In Re Marty Berry & Axis Midstream Holdings, LLC v. the State of Texas (Tex. App. 2025).
· cites it 4× “, and LDMA Limited Partnership operate as closely held entities—and Defendants have concealed information and refused to share requested information with Lawrence—an officer, director, and shareholder—about the operations of the Berry Entities, justice requires treating this…”
In Re Marty Berry & Axis Midstream Holdings, LLC v. the State of Texas (Tex. App. 2025).
· cites it 3× “, and LDMA Limited Partnership operate as closely held entities—and Defendants have concealed information and refused to share requested information with Lawrence—an officer, director, and shareholder—about the operations of the Berry Entities, justice requires treating this…”
In Re Marty Berry & Axis Midstream Holdings, LLC v. the State of Texas (Tex. App. 2025).
· cites it 3× “, and LDMA Limited Partnership operate as closely held entities—and Defendants have concealed information and refused to share requested information with Lawrence—an officer, director, and shareholder—about the operations of the Berry Entities, justice requires treating this…”
— Tex. Bus. Orgs. Code § 21.563(a) — 9 cases
— Tex. Bus. Orgs. Code § 21.563(b) — 1 case
— Tex. Bus. Orgs. Code § 21.563(c) — 7 cases
Cardiac Perfusion Servs., Inc. & Michael Joubran v. Randall Hughes, 436 S.W.3d 790 (Tex. 2014).
“”); see also Tex. Bus. Orgs. Code § 21.563(c). Although we express no opinion on whether Hughes may successfully pursue such a claim under the facts of this case, justice requires that we remand to provide him an opportunity to do so.”
— Tex. Bus. Orgs. Code § 21.563(c)(1) — 8 cases
In Re Est. of Robert S. Castleman v. . (Tex. App. 2025).
“See TEX. BUS. ORGS. CODE ANN. § 21.563(c). Castleman therefore contends that the trial court did not abuse its discretion when it held “it was proper for Castleman to recover directly against the Youngs individually, as opposed to CYC as the Youngs’ [sic] had argued.”
H. Jonathan Cooke, Individually & on Behalf of Escrow Partners Dallas, L.P. Escrow Partners Dallas, GP, Inc. Escrow Partners Houston, L.P. Escrow Partners Houston, GP. Inc. Escrow Partners Austin, L.P. Escrow Partners Austin, GP, Inc. Escrow Partners San Antonio, L.P. Escrow Partners San Antonio, GP, Inc. Title Partners, L.L.P. North Am. Mgmt., L.L.P. TJ Partners I, LLC & TJ Partners II, LLC v. Robert C. Karlseng Karlseng Law Firm, P.C. Ashley Brigham Patten Patten & Karlseng Law Firm, P.C. Jacques Yves LeBlanc & LeBlanc, Patten & Karlseng Law Firm, P.C. (Tex. App. 2019).
— Tex. Bus. Orgs. Code § 21.563(c)(2) — 2 cases
In Re Est. of Robert S. Castleman v. . (Tex. App. 2025).
“See TEX. BUS. ORGS. CODE ANN. § 21.563(c). Castleman therefore contends that the trial court did not abuse its discretion when it held “it was proper for Castleman to recover directly against the Youngs individually, as opposed to CYC as the Youngs’ [sic] had argued.”
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