bill extends fraud rule to LLC and partnership stakes

The text as introduced · 392 words

90R4326 PRL-D

By: Landgraf
H.B. No. 727

A BILL TO BE ENTITLED

AN ACT

relating to fraud in transactions involving a business ownership

interest.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. The heading to Section 27.01, Business &

Commerce Code, is amended to read as follows:

Sec. 27.01. FRAUD IN REAL ESTATE AND BUSINESS OWNERSHIP

INTEREST [ STOCK ] TRANSACTIONS.

SECTION 2. Section 27.01, Business & Commerce Code, is

amended by amending Subsection (a) and adding Subsection (a-1) to

read as follows:

(a) In this section:

(1) "Business ownership interest" means:

(A) stock in a corporation or joint stock

company; or

(B) an ownership interest in a for-profit entity,

including a membership interest or partnership interest.

(2) "For-profit entity," "membership interest,"

"ownership interest," and "partnership interest" have the meanings

assigned by Section 1.002, Business Organizations Code.

(a-1) Fraud in a transaction involving real estate or a

business ownership interest [ stock in a corporation or joint stock

company ] consists of : [ a ]

(1) a false representation of a past or existing

material fact, when the false representation is :

(A) made to a person for the purpose of inducing

that person to enter into a contract; and

(B) relied on by that person in entering into

that contract; or

(2) a false promise to do an act, when the false

promise is :

(A) material;

(B) made with the intention of not fulfilling it;

(C) made to a person for the purpose of inducing

that person to enter into a contract; and

(D) relied on by that person in entering into

that contract.

SECTION 3. (a) The change in law made by this Act to Section

27.01, Business & Commerce Code, applies only to a claim brought

under that section that is:

(1) based on a false representation or false promise

made on or after the effective date of this Act; and

(2) related to a contract entered into on or after the

effective date of this Act.

(b) A claim brought under Section 27.01, Business & Commerce

Code, to which Subsection (a) of this section does not apply is

governed by the law in effect immediately before the effective date

of this Act, and that law is continued in effect for that purpose.

SECTION 4. This Act takes effect September 1, 2027.