The Supreme Court of Texas, in In re UMTH General Services, L.P. et al.,[1] held that claims against a third party advisor for breaches of fiduciary duty to an entity and its shareholders were claims of the entity, and that shareholders could only bring derivative, and not direct, claims. The decision clarifies the limits of shareholder capacity in suits involving corporate advisors and reinforces the principle that fiduciary duties owed to a corporation run to the shareholders collectively, not individually, and that references to an entity “and its shareholders” should be read as to the shareholders collectively and not individual shareholders. In light of recent Texas reforms concerning derivative litigation,[2] this confirms Texas’s “corporate framework” ensuring that third parties “[do] business with an entity run by its board of directors in procedurally predictable ways without risk of exposure to suits brought by shareholders who attempt to bypass statutory safeguards by... Read the complete article here...© 2025 Foley & Lardner LLP
The Texas Supreme Court Clarifies Limits of Shareholder Capacity in Fiduciary Duty Claims Against Corporate Advisors
