Relating to choice of law and assignment or acquisition of claims and demands in connection with certificated and uncertificated securities.
SB 1239 amends the Texas Business & Commerce Code to address how Texas law applies to certain certificated and uncertificated securities, especially those issued by a foreign state. The bill provides that if a security is later found invalid under the issuer’s local law, the law chosen in the security documents will govern the consequences of that invalidity, including the enforceability of the security and the rights and remedies of purchasers.
The bill also expands the rights that a purchaser acquires when buying a security issued by a foreign state. Unless the parties agree otherwise in writing, the purchaser may acquire the transferor’s claims and demands for damages, rescission, and enforcement rights against the issuer and related parties such as trustees, depositaries, underwriters, and guarantors, including claims that arose before the transfer. It further bars issuers and related parties from using the purchaser’s intent to litigate or enforce rights as a defense or as the basis for a claim against the purchaser, except where another statute specifically allows it.
SB 1239 also changes Texas law on choice-of-law provisions and amendments for foreign-state securities in qualified transactions. It makes a governing-law choice, and any later change to that governing law, apply retroactively to all issues relating to the security unless the parties agree otherwise in writing. It also allows such securities to be amended, under their terms, to permit non-unanimous amendments and to select a different governing law, with those amendments likewise applying retroactively unless otherwise agreed.
The bill’s practical effect is to strengthen the enforceability and transferability of claims tied to foreign sovereign or foreign-state securities and to reduce uncertainty about which jurisdiction’s law controls. It affects the Texas Business & Commerce Code, particularly provisions governing securities and commercial transactions, and it may be especially relevant to investors, issuers, trustees, depositaries, underwriters, and other parties involved in cross-border or sovereign debt instruments.
The overall sentiment around the bill appears strongly favorable. It passed the Senate unanimously and the House by a large bipartisan margin, indicating broad support for clarifying securities law and protecting purchasers’ rights in these transactions. The main point of potential contention is the bill’s retroactive application of governing-law choices and amendments, along with the broad assignment of claims to purchasers, which could affect litigation strategy and the rights of issuers and other obligated parties; however, the recorded votes suggest limited opposition.
SB 1239 amends Chapter 8 and Chapter 271 of the Texas Business & Commerce Code. It adds rules for securities issued by a foreign state, including how invalidity is handled under a chosen governing law, what claims and demands transfer to a purchaser, and limits on defenses based on a purchaser’s intent to enforce rights. It also authorizes retroactive application of governing-law selections and certain amendments in qualified transactions, unless the parties agree otherwise in writing. The bill primarily affects purchasers of foreign-state securities, issuers, trustees, depositaries, underwriters, guarantors, and other parties to those instruments.
The bill appears to have enjoyed broad support throughout the legislative process. It passed the Senate 30-0 and the House 136-10, with a few members present not voting, suggesting a generally favorable view of the measure across party lines. The lack of committee transcript material limits insight into detailed debate, but the vote margins indicate that lawmakers largely agreed with the bill’s goal of clarifying securities law and protecting market participants.
The most notable issues are the bill’s retroactive effect and its expansion of transferable claims in connection with foreign-state securities. Those provisions could be viewed as favoring purchasers and litigation rights over issuers and other obligated parties, especially because the bill prevents certain defenses based on a purchaser’s intent to enforce claims. Even so, the recorded floor votes show only modest opposition, so any controversy appears limited and did not prevent passage.