Ratification

Ratification is the act by which a corporation, through its board of directors, shareholders, or both, retroactively approves a defective or unauthorized corporate act, curing the defect and giving the act binding effect. Texas codified a comprehensive ratification regime in 2015.

What may be ratified

Under § 21.901, a "defective corporate act" includes any act that would have been within the power of the corporation but was, at the time, void or voidable due to a failure of authorization. Examples: shares issued in excess of the number authorized, board action without quorum, shareholder votes without proper notice.

Procedure (§§ 21.903–21.907, 21.911)

The board of directors must adopt resolutions stating the defective act, the date of the act, the nature of the defect, and the proposed ratification. Shareholder approval of the ratification is required if the code, the governing documents, or a plan or agreement to which the corporation is a party would have required shareholder approval of the act when it was taken, or of that type of act when the board ratifies, subject to the exceptions in § 21.905. A shareholder meeting on the ratification requires at least 20 days' notice to holders of valid and putative shares, voting or not. § 21.906(a). After ratification, notice goes to the same classes of holders, including holders as of the time of the defective act whose identity and address can be determined from the corporation's records. § 21.911.

Effect of ratification (§§ 21.909–21.910)

From the validation effective time, the ratified act may not be treated as ineffective, void or voidable because of the failure of authorization identified in the resolutions, and the effect is retroactive to the time of the act. Ratified putative shares are treated as outstanding from their original issue date. The ratification remains subject to a court proceeding under § 21.914, and a claim that it should not take effect, or should take effect only on conditions, must be filed within 120 days after the later of the validation effective time or the post-ratification notice. § 21.917. Some filing failures, such as a missing certificate of formation, conversion or merger, cannot be ratified retroactively. § 21.902(b).

Court action (§§ 21.914–21.917)

The corporation, a successor entity, a director, a record or beneficial holder of valid or putative shares, or another person substantially and adversely affected by a ratification may ask the district court to determine the validity of a defective corporate act, whether or not it has been ratified. A business court with jurisdiction over the claim has concurrent jurisdiction. § 1.056 (as added by S.B. 2411, 2025). The court has broad discretion to fashion appropriate relief.