On May 11, 2026, Georgia Governor Brian Kemp signed HB 1185 into law, ushering in significant changes to Georgia’s statutory framework for shareholder disputes. With this landmark legislation, Georgia joins Delaware, Nevada, and Texas at the forefront of modernizing their approach to corporate governance.
Effective July 1, 2026, and applicable to all claims and proceedings initiated on or after that date, HB 1185 substantially expands the Georgia State-wide Business Court’s jurisdiction, strengthens procedural safeguards for derivative suits, cracks down on disclosure-only settlements, tightens shareholder inspection demands, and allows corporations to limit personal liability for corporate officers.
State-Wide Business Court Jurisdiction and Forum Selection
One of the most notable features of HB 1185 is the expansion of the Georgia State-wide Business Court’s jurisdiction over internal entity disputes. The new law broadly defines “internal entity claim” as encompassing derivative actions, fiduciary duty claims, valuation proceedings, records inspections, and disclosure challenges. Key changes include:
- Exclusive Forum Selection. Georgia corporations may now adopt provisions in their articles of incorporation or bylaws requiring internal entity claims to be brought solely and exclusively in the Business Court. Previously, Business Court jurisdiction effectively required agreement from both the corporation and the shareholder plaintiff for internal entity claims.
- Streamlined Removal. A new removal mechanism allows internal entity claims filed in superior court to be transferred directly to the Business Court when required by the corporation’s governing documents or under other specified circumstances.
- Extended Deadlines. The new law extends several key deadlines for Business Court litigation. Consensual removal petitions may now be filed within one year, up from 60 days, while single-party transfer petitions may be filed within 90 days, up from 60 days. The statute also shortens the objection window from 30 to 15 days. Additionally, the Business Court may no longer send internal entity claims back to superior court when the governing documents require them to be heard by the Business Court.
- Expanded Subject-Matter Jurisdiction. Business Court jurisdiction now expressly covers claims involving the internal affairs of businesses, including internal entity claims, valuation proceedings, compulsory purchase proceedings, and statutory close-corporation disputes.
Derivative Standing
HB 1185 allows public corporations to establish an ownership threshold of up to 1% of outstanding shares as a precondition for derivative standing. Under revised O.C.G.A. § 14-2-741, shareholders must meet this threshold at the time of the challenged act or omission. The same framework applies to publicly traded limited partnerships.Disclosure-Only Relief
HB 1185 provides that “additional or amended disclosures made to shareholders, regardless of materiality” do not constitute a “substantial benefit to the corporation” for purposes of awarding plaintiff’s attorneys’ fees in derivative proceedings. The rule also extends to limited partnership derivative actions. By eliminating the prospect of fee awards for disclosure-only relief, the law removes a key economic incentive for merger-objection suits that seek supplemental disclosures only.Corporate Books-and-Records Demands
HB 1185 tightens shareholder books-and-records inspection rights in three significant ways:- Narrowing “Proper Purpose.” A shareholder’s purpose is not proper if the shareholder has an active or pending derivative proceeding against the corporation or if the parties are adversaries in other civil litigation.
- Discretionary Cost-Shifting. Courts now have discretion (“may” rather than “shall”) to award costs to successful shareholders and may decline to do so if the corporation refused inspection in good faith.
- Reciprocal Fee-Shifting. If a court declines to order inspection, it may require the shareholder to pay the corporation’s costs when the demand was not made in good faith or for a proper purpose. Similar provisions apply to limited partnership and limited liability company (LLC) inspection claims.
Officer Exculpation
HB 1185 extends Georgia’s existing director exculpation framework to corporate officers. Under revised O.C.G.A. § 14-2-202(b)(4), articles of incorporation may now eliminate or limit officer liability for monetary damages. These protections continue to be subject to carve-outs for appropriation of business opportunities, intentional misconduct, knowing violations of law, liability for unlawful distributions, and transactions involving improper personal benefits.Takeaways
HB 1185 represents a significant development in Georgia corporate law, positioning the state alongside the leading jurisdictions reshaping their approach to shareholder litigation and corporate governance. The legislation provides Georgia corporations and their directors and officers with stronger legal protections and greater predictability, potentially increasing Georgia’s attractiveness to corporations.In light of these developments, Georgia corporations and their counsel should promptly assess whether to revise charters and bylaws to include forum selection provisions designating the Business Court as the exclusive venue for internal entity claims and expand exculpation protections to corporate officers. Public companies should also evaluate whether to adopt ownership thresholds for derivative standing, and new Georgia corporations should consider building these protections into their governing documents from the outset.
If you have any questions, or would like additional information, please contact one of the attorneys on our Securities Litigation team or one of the attorneys on our Capital Markets & Securities team.
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