Administrative & Regulatory – Page 22

Who Owns the Policy vs. Who Owns the Proceeds? The Distinction Matters During Bankruptcy

One of the most important assets of a debtor’s estate in bankruptcy often is insurance purchased by the debtor before bankruptcy arises, to protect the company’s business, assets, and leaders. Insurance assets can be particularly key when the debtor’s estate faces liabilities from mass-tort suits and claims, securities and other claims relating to management of the entity before bankruptcy. However, questions often arise about who is entitled to the insurance. Is the debtor (and its trustee) entitled to recover and use the insurance? Or, under the terms of the relevant insurance policy, or policies, are others entitled to payments owed by the insurance?
In addressing these issues, bankruptcy courts often have distinguished between ownership of the policy itself and, under the terms of the policy, the insureds who are entitled to the benefit of the “insurance proceeds.” This issue typically arises with regard to liability insurance and can arise with regard to a variety of types of liability coverages, including commercial general liability (CGL) and directors and officers (D&O) liability coverage. First-party insurance, in contrast, applies to protect assets and exposures of the company, putting it outside of the reach of this issue of ownership of insurance-policy proceeds.
Thus, during bankruptcy, litigation may arise about who owns the insurance policy and who owns, or is entitled to payment of, the policy’s “proceeds.” Determining whether the proceeds from a liability insurance policy often turns on interpretation of policy provisions which, when analyzed, are relevant to resolution of this issue and, thus, present classic insurance-coverage issues. D&O policies typically purchased by companies often present challenging questions because they provide different types of coverage to different entities and individuals. A primary purpose of D&O insurance, of course, is to protect individual directors and officers of the company and other individual insureds, and the existence of such insurance helps ensure that qualified people are willing to serve on company boards and as officers (and, depending on who the D&O policy defines “insured,” as employees) of the company. Resolution of this issue depends on the nature of the liability faced and by whom, as well as numerous insurance factors, like the type of insurance and the policy language at issue.
Who Owns the Policy?
The bankruptcy estate is broadly defined to include “all legal or equitable interests of the debtor in property as of the commencement of the case.”[1] Courts generally consider a debtor’s insurance policy as part of the estate. However, owning the policy as an asset does not automatically determine who receives the proceeds. The key question typically addressed by bankruptcy courts is “whether the debtor would have a right to receive and keep those proceeds when the insurer paid on a claim.”[2] If “the debtor has no legally cognizable claim to the insurance proceeds, [then] those proceeds are not part of the estate.”[3] This inquiry often depends on the nature of the policy and the specific provisions governing the parties’ interests in the payment of policy proceeds. Ultimately, whether the policy proceeds are considered part of the bankruptcy estate depends on the type of policy and who was intended under the insurance policy to benefit from it. Consequently, most courts distinguish between the insurance policies themselves and the proceeds from those policies.
Who Owns the Proceeds?
Whether insurance policy proceeds are considered property of the debtor’s estate depends on who is entitled to the proceeds when the insurer pays the claim. Generally, insurance proceeds paid directly to a debtor are deemed property of the estate. Examples of these “first party” coverages include collision, life, and fire policies where the debtor is the beneficiary. If the proceeds from these policies are payable to the debtor rather than a third party, they are recognized as property of the estate.[4] Conversely, policy proceeds are not considered property of the debtor’s estate when they are not payable to the debtor.[5]
Who Owns D&O Policy Proceeds?
The question often arises in the context of D&O insurance, which is designed to protect individual directors, officers, and other individual insureds; and, under many policies, the debtor company itself against securities claims, fiduciary breach claims, and other similar claims. Indeed, D&O insurance provides its most important protection during bankruptcy, as the debtor company’s ability to indemnify individual insureds may be impaired due to financial constraints or prohibited by bankruptcy law.
D&O insurance policies typically offer three types of coverage:

Side A: Covers losses arising from claims against individual directors and officers that is not indemnified by the company, either by reason of insolvency or because the company is not permitted to indemnify.
Side B: Reimburses the company indemnification paid on behalf of individual directors and officers arising from claims against those individuals.
Side C: Provides direct coverage to the company for securities claims and sometimes some other kinds of claims.

Generally, D&O policy proceeds are not considered property of the debtor’s estate if they benefit only the directors, officers, and individual insureds (e.g., Side A coverage only). Courts have also found that, because the debtor did not have a “direct interest” in Side A or Side B coverage proceeds, those proceeds were not property of the estate.[6]
Other courts have determined that Side B proceeds can be considered property of the debtor if the coverage limits have been or could be depleted by indemnification requests, potentially leaving the company without coverage for future indemnification demands. These courts have found that Side B insurance proceeds were property of the estate.[7] However, if the covered indemnification “has not occurred, is hypothetical, or speculative,” courts may find that the policy proceeds are not property of the estate.[8]
With respect to Side C coverage, courts have found that policy proceeds from entity coverage are property of the estate.[9] This is not surprising because the debtor can easily be said to have an interest in the proceeds as an insured under the policy. Other courts have taken a broader view, asserting that a bankruptcy estate includes any assets that enhance the value of the Estate. Thus, as long as the policy includes Side B or Side C coverage, the policy proceeds meet the “fundamental test” because the bankruptcy estate is worth more with the insurance policy than without it.[10]
Trustees Can’t Settle Company’s Lawsuit Against Former CEO
One recent decision from the U.S. Court of Appeals for the Fourth Circuit, In re Levine, No. 23-1349, 2025 WL 610303 (4th Cir. Feb. 26, 2025), shows how disputes about ownership and control of D&O insurance claims can play out in practice. Levine involved a “tale of two bankruptcies and two adversary actions,” where the Fourth Circuit ruled that the separate bankruptcy trustees for a debtor company and its former CEO could not settle the company’s fraud claims against the CEO using insurance proceeds from a D&O policy purchased by the company before bankruptcy.[11] In affirming dismissal of an adversary declaratory action addressing this issue on jurisdictional grounds, the Fourth Circuit offered insightful commentary on the purpose and intent of D&O liability policies and their treatment in bankruptcy proceedings.
First, the company’s purchase of the D&O policy did not grant the company “first-party” status or standing to sue. The policy was “activated,” the Fourth Circuit concluded, because the company sued the CEO. In that scenario, only the CEO was considered an insured under the policy, not the company.
Second, the trustee sought to recover defense costs in the adversary proceeding against the CEO for fraud. The trustee tried to leverage the “wasting” policy—namely, that defense costs were eroding the policy’s available limits—to support his standing argument. The court ruled that the trustee’s “fear” was not enough.
Third, while the insurance policy itself could be considered an asset of the estate, according to the Fourth Circuit, courts “routinely” find that, when a D&O policy provides direct coverage to the directors and officers (as was the case here), the policy proceeds are not considered property of the debtor company’s estate.
Ultimately, the court emphasized that the purpose of D&O coverage is to protect individuals, like the CEO, from incurring liability as directors and officers of the debtor and to ensure that potential losses incurred as a result of their service in such capacities remain separate from their personal finances. Consequently, courts “regularly” recognize that the benefits provided to these individuals by D&O policies “cannot be stripped from them by a bankruptcy trustee.” As a result, the trustee had no claim to the right of consent to settlement under the policy.
Conclusion
The Fourth Circuit’s decision underscores the importance of Side A coverage to protect directors, officers, and individual insureds when an insolvent company is unable or unwilling to indemnify them for the defense costs and potential liability they face due to their service to the company.
In case of bankruptcy, Side A D&O coverage may be the only protection standing between an individual director or officer and personal exposure. For that reason, preserving scarce insurance limits for the benefit of individual insureds is paramount. This can be accomplished in a number of ways. The simplest perhaps is just buying more insurance in the form of higher limits in the company’s existing “Side ABC” policy covering both the company and its directors and officers. Another pathway is to purchase “dedicated” Side A-only limits, which can be used exclusively to protect individuals when the company is unable or unwilling to indemnify them or advance their legal fees and costs.
Side A-only limits are often provided automatically or with payment of additional premium in existing D&O policy forms, but often times they are better secured in entirely separate, standalone policies. Those standalone policies often provide other benefits, like fewer exclusions, more coverage, and better terms no available under traditional Side ABC forms. Working closely with experienced risk professionals, including insurance brokers, consultants, and outside coverage counsel can help companies place, renew, and modify insurance programs with an eye towards providing effective protection for insured executives that responds as expected at the point of claim. While insurance considerations are important during bankruptcy proceedings, the best time to start ensuring the effectiveness of insurance protection is long before insolvency arises.
[1] 11 U.S.C. § 541(a).
[2] Houston v. Edgeworth (In re Edgeworth ), 993 F.2d 51, 55 (5th Cir. 1993).
[3] Id. at 56.
[4] In re Endoscopy Ctr. of S. Nevada, LLC, 451 B.R. 527, 544 (Bankr. D. Nev. 2011).
[5] In re Allied Digital Techs., Corp., 306 B.R. 505, 512 (Bankr. D. Del. 2004).
[6] See, e.g., In re Youngstown Osteopathic Hosp. Ass’n, 271 B.R. 544, 548-550 (Bankr. N.D. Ohio 2002).
[7] In re Leslie Fay Cos., Inc., 207 B.R. 764, 785 (Bankr. S.D.N.Y. 1997).
[8] In re Allied Digital Techs. Corp., 306 B.R. 505, 512 (Bankr. D. Del. 2004).
[9] In re Sacred Heart Hosp. of Norristown, 182 B.R. 413, 420 (Bankr. E.D. Pa. 1995).
[10] Circle K Corp. v. Marks (In re Circle K Corp.), 121 B.R. 257 (Bankr. D. Ariz. 1990).
[11] In re Levine, No. 23-1349, 2025 WL 610303 (4th Cir. Feb. 26, 2025).

California Leaders Move to Support Energy Storage

Our previous post[1] covered the introduction of A.B. 303 (Addis), the “Battery Energy Safety and Accountability Act”, following a catastrophic fire at one of the world’s largest battery energy storage facilities located in Moss Landing, California, starting on January 16, 2025. As we explained, that bill, proposed as an urgency statute, would significantly curtail the authority of both local agencies and the California Energy Commission (CEC) to site new energy storage facilities and would likely result in significant adverse consequences for meeting California’s clean energy goals.
At the time A.B. 303 was introduced, several clean energy media outlets and industry groups including the California Energy Storage Alliance (CESA), expressed concerns with the bill as proposed, especially its failure to distinguish between the older technology and safety standards in place at the time the Moss Landing facility was developed in 2019 and those applicable to battery facilities currently under development, which use newer and safer technology and are also subject to State law requirements to prepare an Emergency Response Plan under Senate Bill (S.B.) 38 (Laird), adopted in 2023. To date, A.B. 303 has not yet received a hearing or a vote.
In the immediate aftermath of the Moss Landing fire, Governor Newsom called for an investigation into the incident, which the California Public Utilities Commission (CPUC) Safety and Enforcement Division (SED) subsequently initiated.[2] The California Department of Toxic Substances Control (DTSC) and several other agencies, including the Monterey County Health Department’s Environmental Health Bureau and the UC Cooperative Extension all conducted testing for water and soils contamination and found no significant impacts.[3] Meanwhile, the CPUC continued its effort to update General Order 167 to include standards for the maintenance and operation of storage facilities in accordance with S.B. 1383 (Hueso), adopted in 2022. These changes were adopted on March 13, 2025.
While these efforts were ongoing, little was said by the Governor or his Office of Business and Economic Development (GO-Biz), which has a dedicated Energy and Climate Unit, about the future of energy storage development in the state. Now, two months after the fire and over the course of just days, both Governor Newsom and Senator John Laird, author of SB 38 and a prominent member of the Senate and former California Secretary for Natural Resources, have made moves demonstrating their continued support for battery storage development in California.
First, on March 19, the Governor certified the first hybrid solar generation and storage facility, the Cornucopia Hybrid Project, as an Environmental Leadership Development Project (ELDP) subject to judicial streamlining pursuant to the “Jobs and Economic Improvement Through Environmental Leadership Act”, A.B. 900 (2011).[4] The Act was amended in 2023 by the adoption of S.B. 149 to expand the scope of projects eligible for certification to include wind, solar and battery energy storage projects as well as other transmission, water and transportation infrastructure projects.
In his certification order,[5] Governor Newsom found that the project would “invest in the California economy, create living wage jobs and help achieve California’s renewable energy generation goals.” The certification (not to be confused with certification under the CEC’s Opt-In Certification Program pursuant to A.B. 205 (2022)) affords the project streamlined judicial review by requiring state courts to resolve any CEQA challenge (including appeals) within 270 days after filing of the certified administrative record, to the extent feasible. Since the Act’s adoption in 2011, only 24 projects have received ELDP certification,[6] yet there are indications that the program works to streamline judicial review. Last year, the Yolo County Superior Court issued its order rejecting a CEQA challenge to the Sites Reservoir project, a certified ELDP, within just 148 days.[7]
In his press release announcing the certification, the Governor reconfirmed his commitment to clean energy development as well as grid reliability, stating: “In California, we’re in the ‘how’ business – we’re moving fast to achieve our world-leading clean energy goals. By fast-tracking critical projects like this one in Fresno, we’re creating good-paying jobs, cutting pollution, and building a cleaner, more reliable energy grid to serve Californians for generations.”[8]
Two days later, on March 21, Senator Laird issued his proposed battery energy storage safety bill, S.B. 283. Intended to ensure “future BESS facilities adhere to the highest fire safety standards, protecting first responders, local communities, and the integrity of our renewable energy transition”, S.B. 283 would require that National Fire Protection Association (NFPA) standards for energy storage systems (NFPA 855[9]) apply to any facility certified by the CEC pursuant to its Opt-In Certification Program, and that the state Building Codes Standards Commission and the State Fire Marshall review and consider the most recently published edition of NFPA 855 for incorporation into the state Fire Code in the next update adopted after July 1, 2026. The bill also requires that energy storage developers consult with local fire authorities to address facility design, assess potential risks and integrate emergency response plans, and that safety inspections be conducted by local fire officials or the State Fire Marshal, at the developer’s cost, after construction and prior to operation of a storage facility. In his press release, Senator Laird also stated that “As the bill moves forward, SB 283 will be amended to prohibit the development of BESS in indoor combustible buildings.”
Meanwhile, continuing the State’s theme of progressing BESS development post-Moss Landing, on March 26, GO-Biz plans to hold a webinar to “discuss challenges and best practices in permitting BESS project” and to develop a “toolkit of resources for local jurisdictions to use when permitting renewable energy projects across the State.”[10]
While battery storage is likely to continue to remain controversial in the near term, these actions demonstrate State leadership’s commitment to continued progress towards clean energy transition goals, including battery storage. With prudent legislative action to ensure projects are designed to meet (and actually do meet) the highest safety standards available, California can continue to move towards a safer and cleaner future.
FOOTNOTES
[1] Understanding AB 303: Potential Impacts for California BESS Project Development | Real Estate, Land Use & Environmental Law Blog.
[2] California investigating Moss Landing fire; proposes more battery plant safety
[3] As reported by the California Certified Organic Farmers Moss Landing Update – CCOF.org.
[4] Now codified at Public Resources Code section 21178 et seq.
[5] https://www.gov.ca.gov/wp-content/uploads/2025/03/Fresno-Cornucopia-certification.pdf.
[6] Judicial Streamlining – Office of Land Use and Climate Innovation.
[7] Sites Reservoir project clears hurdle thanks to streamlining law | Governor of California.
[8] Governor Newsom cuts red tape to accelerate Fresno clean energy project | Governor of California.
[9] NFPA 855 is the second edition (2023) of the Standard for the Installation of Stationary Energy Storage Systems.
[10] Join the GO-Biz Energy Unit for a webinar on March 26th, bringing together… | California Governor’s Office of Business and Economic Development (GO-Biz)
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FinCen Issues a Huge Reprieve Form Domestic Reporting Companies

O frabjous day! the Financial Crimes Enforcement Network (FinCEN) late last Friday issued an interim final rule that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act (CTA). Here is the FinCEN’s summary:
In that interim final rule, FinCEN revises the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements.
Thus, through this interim final rule, all entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report any U.S. persons as beneficial owners, and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.
Upon the publication of the interim final rule, the following deadlines apply for foreign entities that are reporting companies:

Reporting companies registered to do business in the United States before the date of publication of the IFR must file BOI reports no later than 30 days from that date.
Reporting companies registered to do business in the United States on or after the date of publication of the IFR have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.

The CTA has been proven to be a costly disaster that has imposed unnecessary costs on small businesses that are no doubt cheering Friday’s announcement.

Texas Legislature Proposes Amendments to Texas Business Organizations Code

On February 27, 2025, a significant bill affecting entities organized under Texas law was filed in the Texas Legislature as Senate Bill 29 by Senator Bryan Hughes and as House Bill 15 by Representative Morgan Meyer. The Senate and House bills are currently identical and are referred to herein as the “Bill.” The Bill proposes a series of amendments to the Texas Business Organizations Code (“TBOC”) that apply to domestic Texas entities. Most of the amendments are applicable to Texas corporations, including in particular Texas corporations having shares listed on a national securities exchange. The authors of the Bill believe the amendments would reinforce corporate governance protections in Texas and reduce the risk of opportunistic shareholder litigation.
These reforms follow the commencement of operation of specialized Business Courts in Texas last fall and coincide with ongoing efforts to develop a new Texas-based stock exchange in Dallas. Together, these initiatives signal an ongoing commitment in Texas to providing a business-friendly jurisdiction that offers a stable legal environment for corporate governance and investment.
Many of the provisions of the Bill are tailored for publicly traded companies listed on a national securities exchange. The Bill would expand the definition of “national securities exchange” to include exchanges registered with the Securities and Exchange Commission as well as any stock exchange with its principal office in Texas that has received approval to operate by the Texas Securities Commissioner. [Bill Section 1; Amending TBOC Section 1.002(55-a).]
We discuss other key provisions of the Bill below.
Other states’ laws governing internal affairs and governance
The Bill provides that although a Texas entity’s managerial officials, in exercising their powers, may consider the laws and judicial decisions of other states and the practices observed by entities formed in other states, the failure to do so does not constitute or imply a breach of the TBOC or of any duty arising under Texas law. In fact, the Bill is clear that the plain meaning of the text of the TBOC “may not be supplanted, contravened, or modified by the laws or judicial decisions of any other state.” [Bill Section 2; Adding TBOC Section 1.056.]
Choice of forum and waiver of jury trial
The Bill would amend the TBOC to clarify that a domestic entity’s governing documents may require that one or more courts in Texas having jurisdiction shall serve as the exclusive forum and venue for any internal entity claims. [Bill Section 3; Amending TBOC Section 2.115(b).] For purposes of the TBOC, an “internal entity claim” means a claim of any nature, including a derivative claim in the right of an entity, that is based on, arises from or relates to the internal affairs of the entity [TBOC Sec. 2.115(a)].
The Bill would also add a new section to the TBOC to permit the governing documents of a Texas entity to contain an enforceable waiver of the right to jury trial if specified conditions are satisfied. Some commentators have questioned whether such a provision would be found to be constitutional because the Texas Constitution provides that the right to jury trial “shall remain inviolate.” In an attempt to satisfy the standards established in prior Texas case law for enforceable jury trial waivers, the Bill affirmatively states that a person’s waiver of jury trial is knowing and informed if the person (1) voted for or affirmatively ratified the governing document containing the waiver, (2) acquired an equity security in the entity when the waiver was included in the governing documents, or (3) is shown by evidence in a court proceeding to have knowingly and informedly consented or acquiesced to the waiver. [Bill Section 4; Adding TBOC Section 2.116.]
Codification of the business judgment rule
The Bill seeks to codify the business judgment rule in Texas by stating that, in the case of a Texas for-profit corporation having shares listed on a national securities exchange or affirmatively electing in its governing documents to be governed by this new provision, directors are presumed to act (1) in good faith, (2) on an informed basis, (3) in furtherance of the interests of the corporation, and (4) in a manner consistent with the law and the corporation’s governing documents. Neither the corporation nor its shareholders would have a cause of action against the corporation’s officers and directors unless one or more of the four preceding presumptions are rebutted by the claimant and the claimant proves both a breach of duty and that the breach involved fraud, intentional misconduct, an ultra vires act or a knowing violation of law. In any legal proceeding, the claimant must state with particularity the circumstances constituting the fraud, intentional misconduct, ultra vires act or knowing violation of law. The provision expressly states that it is not intended to affect any exculpation of monetary liability included in the corporation’s certificate of formation pursuant to TBOC Section 7.001. The Bill would also apply the same standards to any claims against directors or officers for breach of duty as a result of their authorization or performance of any conflict-of-interest contract or transaction with an interested director or officer under the TBOC’s interested person statute, if the corporation has shares listed on a national securities exchange or elects to be governed by the new business judgment rule provision. [Bill Sections 9 and 10; Adding TBOC Sections 21.418(f) and 21.419.]
Inspection of books and records
The Bill would amend the shareholder inspection rights provisions of the TBOC to clarify that a shareholder making a demand to inspect a Texas for-profit corporation’s books and records is not entitled to review emails, text messages or similar electronic communications, or information from social media accounts, unless the information affects an action by the corporation. Further, building on the existing statutory principle that a shareholder is not permitted to make a books and records demand for an improper purpose, the Bill would provide that, in the case of a corporation having shares listed on a national securities exchange or electing in its governing documents to be governed by the business judgment rule provisions, a written inspection demand will not be for a proper purpose if the corporation reasonably determines that the demand is in connection with a derivative proceeding that has been instituted or is expected to be instituted by the demanding holder or the holder’s affiliate, or if the demand is in connection with an active or pending civil lawsuit in which the demanding holder or the holder’s affiliate is or is expected to be an adversarial named party. [Bill Section 4, Amending TBOC Section 21.218.]
Advance determinations of independent and disinterested directors
The Bill would permit the board of directors of a Texas for-profit corporation having shares listed on a national securities exchange to adopt resolutions that authorize the formation of a committee of independent and disinterested directors to review and approve transactions, whether or not contemplated at the time of the committee’s formation, involving the corporation or any of its subsidiaries and a controlling shareholder, director or officer. In a novel new provision, the corporation adopting such a resolution would be able to petition a court of appropriate jurisdiction to hold an evidentiary hearing to validate the status of committee members as independent and disinterested.
There are various procedural provisions regarding this process that are beyond the scope of this alert. However, importantly, the new provision states that the court’s determination that the directors are independent and disinterested is dispositive in the absence of facts, not presented to the court, constituting evidence sufficient to prove that one or more of the directors is not independent and disinterested with respect to a particular transaction. Accordingly, the corporation may be able to avoid in subsequent litigation issues of whether directors are independent and disinterested. [Bill Sections 7 and 8; Adding TBOC Sections 21.416(g) and 21.4161.] The Bill also adds to the TBOC provisions governing shareholder derivative proceedings similar provisions that would authorize a court to make an advance dispositive determination as to whether the directors who are involved in making a decision whether to pursue a derivative action claim on behalf of the corporation are disinterested and independent. [Bill Section 13; Amending TBOC Section 21.554.]
Derivative litigation
The Bill would amend the TBOC to provide, for a Texas for-profit corporation having common shares listed on a national securities exchange or electing to be governed by the new business judgment rule provision, that a shareholder may not institute or maintain a derivative proceeding on behalf of the corporation unless the shareholder beneficially owns, at the time of instituting the derivative proceeding, a number of common shares to meet the required ownership threshold to institute a derivative proceeding in the right of the corporation as specified in the corporation’s certificate of formation or bylaws. However, that required ownership threshold may not exceed 3 percent of the corporation’s outstanding shares. [Bill Section 12; Adding TBOC Section 21.552(a)(3).] For these purposes, a “shareholder” can be a holder of record, a beneficial owner, or under a proposed amendment, two or more shareholders acting in concert. [Bill Section 11, Amending Section 21.551(2)(c).]
Disclosure-only settlements
Section 21.561 of the TBOC specifies certain circumstances in which a plaintiff’s attorneys may be awarded fees and expenses in a derivative proceeding, including the condition that the court finds the proceeding has resulted in a substantial benefit to the corporation. The Bill would amend this section of the TBOC to provide that a substantial benefit does not include “additional or amended disclosures made to shareholders, regardless of materiality.” [Bill Section 14; Adding TBOC Section 21.561(c).]
Status of Bill
The full text of SB 29 is available here. HB 15 is an identical companion bill. During the week of March 10, 2025, the Bill was heard in the Senate State Affairs Committee, which is chaired by Senator Hughes, and in the House Judiciary & Civil Jurisprudence Committee. The Bill was left pending in both Committees, and there was no significant testimony at the hearings in opposition to the Bill. Accordingly, the prospects for passage of the Bill by the Texas Legislature appear to be positive. However, the Bill has attracted a negative fiscal note from the Office of Texas Secretary of State, which estimates that the cost of implementing the amendments to TBOC Section 4.051 would be $1,752,965 for fiscal year 2026 and $513,040 annually for each fiscal year thereafter. If passed, the Bill would take effect on September 1, 2025, unless adopted by a two-thirds vote in both the Senate and House, in which case it would become immediately effective. In any case, any existing derivative proceedings would be grandfathered under pre-existing laws after the Bill’s amendments take effect.

FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons, Sets New Deadlines for Foreign Companies

On March 21, 2025 the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act (CTA).
Going forward, only foreign companies (not U.S. companies owned by non-U.S. persons) that have registered to do business in the U.S. will be required to comply with the CTA.
Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report any U.S. persons as beneficial owners, and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.
The following deadlines apply for foreign entities that are reporting companies:

Reporting companies registered to do business in the United States before March 21, 2025, must file BOI reports no later than 30 days from that date.
Reporting companies registered to do business in the United States on or after March 21, 2025, have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.

Potential Rollback of Biden’s Climate Policies Targets Billions in Clean Energy Projects

According to media reports, Energy Department officials are compiling a list of clean energy projects, awarded billions of dollars, that could be overturned by the Trump administration in what may become the most significant rollback of the Biden administration’s climate policies to date.
The list, requested by Trump administration officials and expected to be completed any day, includes projects funded through the Inflation Reduction Act, bipartisan infrastructure law, and regular appropriations, according to the Politico report. Projects or programs that have spent less than 45 percent of their allocated or awarded funding reportedly are subject to review.
According to the published report, the initial list of projects recommended for elimination includes:

$8 billion for hydrogen hubs;
$7 billion for carbon capture hubs;
$6.3 billion for industrial demonstrations;
$500 million for long-duration energy storage;
$133 million for the Liftoff program for accelerating new technology development; and $50 million for distributed energy programs.

While we are watching the situation closely, the Trump Administration has yet to comment on the Politico report or the specifics of such a list of targeted projects. However, the administration and Congressional Republicans already have targeted Environmental Protection Agency (EPA) grants and funding allocated by the Biden Administration. Days ago, a Congressional committee asked interim EPA Administrator Lee Zeldin for a briefing on grants and funding awarded by the agency under the Biden Administration.
If you are a private company, nonprofit or university that has received a guaranteed loan, grant, or contract that has been identified for elimination:

FIRST – Look to the four corners of the agreement with the Federal government to understand the terms that define available remedies.
SECOND – Take administrative action as directed by the agreement or other legal provisions (the Code of Federal Regulations, Federal Acquisition Regulations).
THIRD – Consider challenging it in court, while weighing the political considerations against business realities.
FOURTH – Maintain detailed documentation of the cost and time impacts associated with any modifications or terminations of agreements.
FIFTH – Communicate with your subcontractors and suppliers about potential impacts.

Additionally, it may be prudent to consider direct advocacy before Congress and the Administration, leveraging memberships in trade associations or directly engaging with elected officials.

CTA 2.0 – FinCEN Limits CTA’s Reporting Requirements to Certain Non-U.S. Entities and Non-U.S. Individuals

The Financial Crimes Enforcement Network (FinCEN) issued an interim final rule on March 21, 2025, that eliminates the Corporate Transparency Act (CTA) reporting requirements for U.S. entities and U.S. individuals. The rule is effective upon its publication in the federal register; however, the interim final rule may be updated following a sixty-day comment period.
FinCEN’s press release provided the following summary of the impact of the interim final rule:
“Thus, through this interim final rule, all entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report any U.S. persons as beneficial owners and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.”
Non-U.S. entities that meet the definition of “reporting company” are generally (1) formed in a non-U.S. jurisdiction and (2) registered with a U.S. jurisdiction to do business in such jurisdiction. These non-U.S. entities will have thirty days from the later of (i) the date of publication of the interim final rule in the federal register and (ii) the date of becoming registered to do business in a U.S. jurisdiction.
Removing the reporting obligations of U.S. entities and U.S. individuals substantially limits the number of required filings. By FinCEN’s own estimate in the interim final rule, it anticipates roughly 12,000 filings annually (over each of the first three years). In the final reporting rule in effect prior to the interim final rule, FinCEN estimated roughly 10,510,000 filings annually (over each of the first five years).

UK, France, and Switzerland Form International Anti-Corruption Prosecutorial Task Force to Combat Anti-Corruption

On February 5, 2025, Attorney General Pamela Bondi issued a memo requiring DOJ’s Foreign Corrupt Practice Act (“FCPA”) Unit to “prioritize investigations related to foreign bribery that facilitates the criminal operations of cartels and Transnational Criminal Organizations (TCOs),” and to “shift focus away from investigations and cases that do not involve such a connection.” On February 10, 2025, the Trump administration issued an executive order directing a pause on initiation of new FCPA enforcement, a review of all existing FCPA investigations or enforcement, and updated guidelines or policies on new FCPA matters going forward.
On February 21, when we discussed the implications of these policy changes, we predicted that foreign regulators may step up enforcement to fill the perceived vacuum in domestic anti-corruption enforcement. On March 20, 2025, the UK’s Serious Fraud Office (SFO), France’s Parquet National Financier (PNF) and the Office of the Attorney General of Switzerland (OAG) formed the “International Anti-Corruption Prosecutorial Task Force” (the “Task Force”) to pool resources on strategic priorities, cooperation, and “operational collaboration.” The Task Force also stated that it would “invite other like-minded agencies” to join. Equipped with a Leaders’ Group, facilitating “the regular exchange of insight and strategy,” and a Working Group, for “devising proposals for co-operation on cases,” SFO Director Nick Ephgrave reported that the Task Force should help ensure “there is no daylight between our agencies,” preventing criminals from taking advantage of any potential gaps between partner enforcement authorities. While not in direct response to the administration’s recent shift in FCPA enforcement priorities as planning for the Task Force was already underway, the message is clear that the SFO, PNF, and OAG are seeking collaboration and partnership to most effectively and efficiently combat cross-border corruption, leaving the door open for other agencies to join.
The Task Force demonstrates a renewed commitment to tackling international bribery and corruption. Many of these foreign agencies, such as the French Anti-Corruption Agency (Agence française anticorruption or AFA), publish Guidelines in English that detail compliance policies, enforcement priorities, and objectives. Other countries also have enforceable anti-bribery and anti-corruption regulations. As we reported, compliance still matters and the Task Force is the latest demonstration of that fact. Companies operating in relevant jurisdictions should be mindful of these latest enforcement activities, their impact on cross-border investigations, and continue to evaluate and enhance their corporate compliance programs.

Trump Revokes Biden Federal Contractor Minimum Wage Mandate: What to Expect Next

Takeaways

President Trump has rescinded President Biden’s 2021 executive order increasing the minimum wage for employees of federal contractors.
The minimum wage is now $13.30 per hour for federal contractors covered by President Obama’s 2014 executive order, which remains in effect.
Trump’s action does not formally revoke a Department of Labor rule implementing Biden’s wage mandate. However, there is no longer a basis for enforcing the rule.

BREAKING NEWS: OFCCP to Revisit Previously Submitted Contractor Files

The Wall Street Journal is reporting newly appointed OFCCP Director Catherine Eschbach announced to OFCCP staff that the Agency will review federal contractor affirmative action plans previously submitted to the Agency for evidence of discriminatory employment practices. The report quotes Director Eschbach’s email to staffers in which she states
…most of what OFCCP had been doing was out of step, if not flat out contradictory, to our country’s laws, and all reform options are on the table.”

It is unclear at this time what form these reviews will take or which contractors may be under review.
Importantly, the plans under review were submitted to OFCCP under the prior Executive Order 11246 and before the current administration’s recent issuance of Executive Order 14173, revoking EO11246.
This is a developing story so stay turned for further details.

DEI Changes Could Leave Businesses Exposed to Discrimination Charges

The U.S. Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Justice (DOJ) are warning employers that certain “diversity, equity, and inclusion” (DEI) policies and training programs could violate Title VII of the Civil Rights Act of 1964 by discriminating against a person’s race, sex, or other protected characteristics in employment matters.
The EEOC and DOJ recently issued two technical assistance documents titled What You Should Know About DEI-Related Discrimination at Work and What to Do If You Experience Discrimination Related to DEI at Work, in which the EEOC explains that different treatment based on any protected characteristic can be discriminatory, and “there is no such thing as ‘reverse’ discrimination; there is only discrimination.” The EEOC goes on to state that it applies the same standard of proof to all race discrimination claims, regardless of the claimant’s race. This comes after President Trump announced that he is committed to ending “discrimination under DEI policies” and the practice of engaging in “blatant race-based and sex-based discrimination, including quotas.” These sentiments are echoed by EEOC Acting Chair Andrea Lucas. “Far too many employers defend certain types of race or sex preferences as good, provided they are motivated by business interests in ‘diversity, equity, or inclusion.’ But no matter an employer’s motive, there is no ‘good,’ or even acceptable, race or sex discrimination,” said Lucas.
WHAT EMPLOYER ACTIONS ARE UNLAWFUL?
The EEOC explained that an employer policy, program or initiative may be unlawful if it involves an employment action motivated by race, sex, or another protected characteristic. That includes: hiring; firing; promotions; demotions; compensation; fringe benefits; access to or exclusion from training (including training characterized as leadership development programs); access to mentoring, sponsorship, or workplace networking; internships (including internships labeled as “fellowships” or “summer associate” programs); selection for interviews, including placement or exclusion from a candidate “slate” or pool; and job duties or work assignments. This extends to workplace groups like Employee Resource Groups, Business Resource Groups, or other employee affinity groups that are based on members’ protected categories like women-only groups.
Notably, an employment action is unlawful even if race, sex, or another protected characteristic was just one factor contributing to the employer’s decision or action—it does not have to be the deciding factor. Additionally, client or customer preference is not a defense to race or color discrimination; business interests in diversity and equity, including perceived operational benefits or customer/client preference are not enough to allow race-motivated employment actions.
Employers should also be aware of potential hostile work environment claims. The EEOC states that employees may be able to plausibly allege that a diversity/DEI training creates a hostile work environment if they can show the training was discriminatory in its content, context, or application.
Finally, it is important to recognize that employees who oppose or complain about employer policies, trainings, or practices labeled as “DEI” can also be legally protected from retaliation.
POTENTIAL SUPREME COURT REVERSE DISCRIMINATION RULING
The Trump Administration’s approach to the standard of proof for reverse discrimination claims may soon be backed by the courts. On February 26, 2025, the U.S. Supreme Court heard oral arguments in Ames v. Ohio Department of Youth Services. In that case, a heterosexual woman alleged she was passed over for a promotion and later demoted in favor of a LGBTQ+ colleague. Ms. Ames stated she was discriminated against because she was not gay and made a claim of reverse discrimination. Legal precedent in some circuits require plaintiffs in reverse discrimination cases to meet a higher burden than that of a traditional discrimination case. Legal experts have predicted that the Court will find that reverse discrimination cases should be decided based on the same standard, which would make it easier to allege and prove reverse discrimination.
In light of these recent developments, reverse discrimination cases are expected to increase. Employers should review their policies, training programs, and hiring programs to ensure they are in compliance with the EEOC’s guidance and anticipated ruling in the Ames case.

EU CSDDD Under US Pressure: Some Insights on the PROTECT USA Act

The European Commission’s (EC) recent announcement of the Omnibus Simplification Proposals signals that it has heard the challenges and objections raised by companies affected by the new requirements of the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). But in the US, Senator Bill Hagerty (R-TN), a member of the Senate Banking Committee, has introduced legislation that could impose substantial challenges to CSDDD compliance for US companies.
As a reminder, the EC proposed amendments for the implementation and transposition deadlines of the CSRD and CSDDD, as well as amending the scope and requirements of the CSRD and CSDDD. But the Prevent Regulatory Overreach from Turning Essential Companies into Targets Act of 2025 (PROTECT USA Act)[1] proposed by Senator Hagerty targets “foreign sustainability due diligence regulation” such as the CSDDD, and would prohibit US companies from being forced to comply with the CSDDD. If enacted as currently drafted, US companies will be faced with a significant conflict in complying with the PROTECT USA Act and the CSDDD.
Further, the PROTECT USA Act intends to protect US companies from any enforcement action by the EU or its member states for non-compliance with the CSDDD. Section 5(a) of the PROTECT USA Act states: “No person may take any adverse action towards an entity integral to the national interests of the United States for action or inaction related to a foreign sustainability due diligence regulation.”[2] And § 5(b) prevents U.S. federal or state courts from enforcing any judgment by a foreign court relating to any foreign sustainability due diligence regulation “unless otherwise provided by an Act of Congress.”[3]
The PROTECT USA Act could apply to a significant number of US companies, defining “an entity integral to the national interest of the United States” as “any partnership, corporation, limited liability company, or other business entity that does business with any part of the Federal Government, including Federal contract awards or leases.”[4] It also includes entities:
[O]rganized under the laws of any State or territory within the United States, or of the District of Columbia, or under any Act of Congress or a foreign subsidiary of any such entity that—
(i) derives not less than 25 percent of its revenue from activities related to the extraction or production of raw materials from the earth, including—
(I) cultivating biomass (whether or not for human consumption);
(II) exploring or producing fossil fuels;
(III) mining; and
(IV) processing any material de-rived from an activity described in subclause (I), (II), or (III) for human use or benefit;
(ii) has a primary North American Industry Classification System code or foreign equivalent associated with the manufacturing sector; or
(iii) derives not less than 25 percent of its revenue from activities related to the mechanical, physical, or chemical transformation of materials, substances, or components into new products;
(iv) is engaged in—
(I) the production of arms or other products integral to the national defense of the United States; or
(II) the production, mining, or processing of any critical mineral.[4]
And the PROTECT USA Act has a catch-all that will apply to any entity “the President otherwise identifies as integral to the national interests of the United States.”[5]
The PROTECT USA Act builds on opposition to the CSDDD raised during the Biden Administration and, given the Republican majorities in both the US House and Senate, advances the argument that the CSDDD challenges US sovereignty. In a February 26, 2025 bicameral letter to Scott Bessent, the Secretary of the US Department of the Treasury and Kevin Hassett, the Director of the White House National Economic Council, legislators described the CSDDD as “a serious and unwarranted regulatory overreach, imposing significant economic and legal burdens on U.S. companies.”[6] Thus, the PROTECT USA Act may serve as an incentive to further limit the scope of the CSDDD.
We recently reviewed how companies should address CSRD requirements while the EC works through the Omnibus Simplification Proposals.[7] The PROTECT USA Act adds an additional layer of complexity for US companies in navigating the uncertainty of the EC’s legislative process along with the significant limits the PROTECT USA Act might present. SPB’s policy experts in the US and EU can support companies in making prudent business decisions in a rapidly changing legislative environment.

[1] https://www.hagerty.senate.gov/wp-content/uploads/2025/03/HLA25119.pdf
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] https://www.banking.senate.gov/imo/media/doc/csddd_letter_to_treasury-nec_draft_22525_zg.pdf.pdf
[7] https://natlawreview.com/article/what-should-companies-do-csrd-while-they-wait-eu-make-its-mind