Texas Law · Board Fundamentals

Texas Business Organizations Code Chapter 22: What HOA & Condo Boards Must Know

Nearly every Texas community association is a nonprofit corporation governed by Chapter 22 of the Texas Business Organizations Code. The Property Code tells you what your board can do; Chapter 22 tells you how to be a corporation while you do it.

The Bottom Line

The vast majority of Texas community associations — whether residential HOAs governed by Property Code Chapter 209 or condominiums governed by Property Code Chapter 82 — are organized as Texas nonprofit corporations under Title 2, Chapter 22 of the Business Organizations Code (TBOC). That means two statutes operate in parallel: the Property Code tells the board what it can do as an HOA or condominium association; Chapter 22 tells the board how to function as a corporation. Chapter 22 supplies the fiduciary-duty standard, the indemnification framework, the director-immunity framework, the member-rights framework, and the corporate-housekeeping rules (registered agent, annual filings, books and records, dissolution). A board that masters the Property Code but neglects Chapter 22 is governing on half a foundation. This article is the executive-level orientation to the half that gets less attention.

Operational Context: Two Statutes, One Board

Texas community-association governance lives at the intersection of two statutory schemes. The community-association statutes — Property Code Chapter 209 (residential subdivisions), Chapter 82 (condominiums), and certain pre-1994 condominium provisions under former Chapter 81 — establish what the association is and what it does in the community. The Business Organizations Code — specifically Title 2, Chapter 22 governing nonprofit corporations — establishes how the entity is organized as a Texas corporation. Both apply at the same time. When the two conflict on a matter governed by both, the more specific provision typically controls, but the operating posture is “comply with both,” not “pick one.”

Chapter 22 is the source of the fiduciary duties that govern every board decision, the indemnification rights that protect every director, the corporate immunity that limits personal liability for ordinary mistakes, and the housekeeping obligations (registered agent, annual reports, books and records) that keep the association in good standing. Boards that ignore Chapter 22 tend to learn its requirements expensively — from a process server, a forfeited corporate charter, or a Plaintiff’s attorney who has noticed the registered agent address hasn’t been updated since 2009.

Confirming Your Association Is Subject to Chapter 22

Most Texas community associations were originally formed under the predecessor Texas Non-Profit Corporation Act (Article 1396) and became subject to Chapter 22 of the Business Organizations Code on January 1, 2010, when the BOC fully replaced the older corporate statutes. The Articles of Incorporation (often filed in the 1970s, 1980s, or 1990s) typically reference the predecessor act; the association nonetheless operates under Chapter 22 today.

To confirm corporate status:

• Pull the Articles of Incorporation (and any amendments) from the Texas Secretary of State’s SOSDirect or the original recorded set in the association’s records.
• Check the entity’s current status on the Comptroller’s Taxable Entity Search and the Secretary of State’s entity search.
• Verify the registered agent and registered office shown on file are current.
• Confirm the most recent Texas franchise-tax filings and any required Public Information Reports (PIRs) are current.

A small number of older condominium associations are unincorporated condominium associations under former Texas condominium law. These are governed by Chapter 82 (or former Chapter 81) but not by Chapter 22. Boards in this category should confirm status with counsel before relying on Chapter 22 protections.

Director Fiduciary Duties Under TBOC §§ 22.221 and 22.235

The core fiduciary standard for Texas nonprofit-corporation directors is set out in TBOC § 22.221 and the related immunity provisions in § 22.235. A director discharges duties properly when the director acts:

1. In good faith;
2. With ordinary care; and
3. In a manner the director reasonably believes to be in the best interest of the corporation.

A person seeking to establish director liability must prove that the director did not act in good faith, with ordinary care, or in a manner reasonably believed to be in the best interest of the corporation. A director who acts in compliance with this standard is not liable to the corporation, a member, or any other person for an action taken or omitted.

Practically, this standard tracks the common-law duties of care (informed, prudent decision-making) and loyalty (acting for the association rather than for personal benefit) and operates alongside the duty of obedience (acting within the governing-document and statutory authority). The duties are not displaced by the corporate form; they are reinforced by it.

Chapter 22 also clarifies what a director is not: a director is not a trustee with respect to the corporation or property held by the corporation, even property subject to donor restrictions. The standard is the corporate director’s reasonable-care standard — not the higher trustee’s standard.

The Business Judgment Rule, Texas Style

Texas courts apply a robust version of the business judgment rule. Decisions made by directors who act in good faith, on an informed basis, and within the scope of their authority are protected from judicial second-guessing. A reviewing court does not substitute its judgment for the board’s on substantive matters; the inquiry focuses on whether the directors complied with the fiduciary standard described above. This protection is one of the most important practical features of corporate governance for unpaid volunteer directors, and it is the structural reason most director claims do not survive summary judgment when the procedural record is clean.

Indemnification Under TBOC Subchapter K (§§ 22.151 et seq. via Chapter 8 Reference)

Chapter 22 incorporates the indemnification framework of TBOC Chapter 8 for nonprofit corporations. The framework permits (and in some cases requires) the corporation to indemnify directors, officers, and other agents against expenses (including attorney’s fees), judgments, settlements, and other liabilities incurred in connection with a proceeding to which they are a party by reason of their service.

Mandatory indemnification applies when the director or officer is wholly successful, on the merits or otherwise, in defense of the proceeding. Permissive indemnification — where the corporation may indemnify but is not required to — applies in a broader range of circumstances, subject to a determination that the indemnification is permissible under the statute and consistent with the bylaws.

Most well-drafted association bylaws contain an indemnification article that incorporates these statutory rights and sometimes expands them within the statutory ceiling. D&O insurance is the practical mechanism that funds indemnification — the corporation’s reimbursement obligation is meaningless if the corporation lacks the cash to honor it, which is exactly the gap Side B of the D&O policy fills.

Director Immunity: Statutory and Common-Law Layers

Texas community-association directors are protected by multiple layers of liability protection:

• TBOC § 22.235 — the core nonprofit-corporation director immunity provision tied to the fiduciary-compliance standard above.
• Texas Charitable Immunity and Liability Act (Texas Civil Practice & Remedies Code Chapter 84) — volunteer director immunity for certain charitable organizations, subject to gross-negligence and intentional-misconduct exceptions.
• Federal Volunteer Protection Act (42 U.S.C. §§ 14501–14505) — limited federal immunity for volunteers of qualifying nonprofit organizations, with significant exclusions.
• The business judgment rule — common-law protection against substantive second-guessing of good-faith, informed decisions.
• D&O insurance — contractual protection that pays defense costs and indemnification regardless of whether immunity applies.

Each layer is independent. The director who is procedurally clean under Chapter 22, who complies with the volunteer-immunity statutes, who acts within the business judgment rule, and who is covered by adequate D&O insurance has four lines of defense against personal exposure. The director who relies on only one or two of these protections has a thinner margin than they probably realize.

Member Rights Under Chapter 22

Chapter 22 grants association members — in the community-association context, the lot or unit owners — a set of statutory rights that overlay the rights granted under the Property Code:

• Right to vote on matters reserved to members by the certificate of formation, the bylaws, or the statute.
• Right to inspect books and records for a proper purpose, including financial records and member rosters (TBOC § 22.351). The Property Code records-access framework in § 209.005 supplements but does not displace the Chapter 22 right.
• Right to a list of members in advance of a member meeting, for purposes related to that meeting.
• Right to attend member meetings and (under the bylaws) participate as the bylaws provide.
• Right to enforce certain corporate obligations, including in some cases derivative claims, subject to the procedural restrictions of TBOC Subchapter I (Chapter 22).

Member-rights challenges are increasingly common in Texas association practice, particularly around records access, candidate solicitation (Property Code § 209.00593), and election procedure. Boards should expect that any procedurally novel question will be litigated by some owner, somewhere, eventually.

Corporate Housekeeping: The Boring Part That Matters Most

Chapter 22 imposes a set of corporate-existence obligations that boards often delegate entirely to the manager — until something fails. The director’s job is to verify these obligations are met:

How Chapter 22 Interacts with the Property Code

The two statutes work together, but they answer different questions:

Why This Matters

Chapter 22 is the structural backbone of director protection. The fiduciary-duty standard, the indemnification framework, and the director-immunity provisions are what make volunteer board service feasible. A board that doesn’t understand Chapter 22 is relying on protections it can’t articulate — which is generally how protections get forfeited.

Corporate housekeeping failures produce disproportionate harm. A lapsed registered agent, a missed franchise filing, an unrecorded amendment — each is a small administrative matter that can produce outsized consequences. Forfeiture of corporate privileges, in particular, can expose directors to personal liability for corporate debts during the forfeiture period.

Member-rights claims are increasing. Owner-side counsel in Texas has become more sophisticated about layering Property Code claims (records access, hearing rights, election procedure) with TBOC claims (book-and-record inspection, derivative claims, ultra vires challenges). Boards that operate cleanly under both statutes have a stronger defensive posture.

Insurance carriers expect Chapter 22 compliance. D&O underwriting frequently considers corporate good standing, registered agent status, and indemnification provisions. A community in administrative disarray pays more for less coverage.

Best-Practice Guidance

1. Run an annual corporate-status check.

The secretary (or counsel) should pull the entity status from the Comptroller and Secretary of State each year and confirm the registered agent, registered office, and entity status are current. This is a ten-minute check that prevents a category of disasters.

2. Keep the registered agent live and reachable.

Many associations use a director, an officer, or the manager as registered agent. Each is fine until the person rotates off, retires, or changes address. Consider using a professional registered-agent service to eliminate the rotation risk.

3. File the PIR and franchise return on time.

Calendar the May franchise deadline (and any extensions filed). Confirm filing acceptance. The cost of a lapsed filing is far greater than the cost of timely compliance.

4. Bring the bylaws into alignment with current Chapter 22.

Many association bylaws still reference the pre-2010 Texas Non-Profit Corporation Act. A clean update brings the bylaws into alignment with current Chapter 22 cross-references — particularly the indemnification framework and the member-rights articles. Engage counsel for the amendment.

5. Adopt a written indemnification policy.

The statute permits indemnification within defined limits. The bylaws (or a stand-alone policy) should spell out the indemnification framework so directors and officers know what protections they have, and so the insurer has clear evidence of the obligations being insured.

6. Train directors on the § 22.221 standard.

“Good faith, ordinary care, reasonable belief in the best interest of the corporation” is a clean, memorable standard. Every new director should be able to recite it and explain what each element means in practice.

7. Document deliberation in minutes.

The business judgment rule and Chapter 22 immunity depend on a record showing that directors acted in good faith and on an informed basis. Clean minutes that reflect deliberation, reliance on professional advice where appropriate, and the rationale for the decision are the structural defense.

Common Mistakes & Pitfalls

Actionable Takeaways

1. Pull the Texas Secretary of State entity status and the Comptroller franchise status for the association; confirm current.
2. Verify the registered agent and registered office on file are current; update if stale.
3. Confirm the PIR and franchise return have been filed and accepted for the most recent period.
4. Review the bylaws for outdated statutory references; calendar a bylaws-modernization project with counsel if necessary.
5. Confirm the bylaws contain an indemnification article; if not, consider adding one within the statutory framework.
6. Train every new director on the § 22.221 fiduciary standard; include it in the onboarding packet.
7. Audit recent minutes for evidence of deliberation, professional-advice reliance, and decision rationale; tighten the practice if minutes are thin.
8. Confirm D&O policy alignment with the bylaws’ indemnification framework.

Related CIC-SC Resources

• Board Member Onboarding Toolkit
• The Business Judgment Rule — How It Protects HOA Boards
• Directors & Officers (D&O) Insurance — What It Covers and What It Doesn’t
• Texas Open Meetings Requirements Under § 209.0051
• HOA Records Retention Policy — What to Keep and For How Long
• Candidate Eligibility — Who Can Run for the HOA Board?
• Texas Candidate Solicitation Requirements Under § 209.00593
• Deed Restrictions vs. HOA Rules — Understanding the Difference

References & Sources

1. Common Interest Community Standards Council, Fundamentals of Association Management — chapter on Corporate Governance and Texas Compliance.
2. Texas Business Organizations Code, Title 2, Chapter 22 — Nonprofit Corporations.
3. TBOC § 22.221 — General Standards for Directors.
4. TBOC § 22.235 — Liability of Directors and Officers.
5. TBOC § 22.351 — Books and Records.
6. TBOC §§ 5.201–5.206 — Registered Agent and Registered Office.
7. TBOC Chapter 8 — Indemnification (incorporated by Chapter 22 for nonprofit corporations).
8. Texas Tax Code Chapter 171 — Franchise Tax and Public Information Report obligations.
9. Texas Civil Practice & Remedies Code Chapter 84 — Texas Charitable Immunity and Liability Act (volunteer director immunity).
10. Federal Volunteer Protection Act, 42 U.S.C. §§ 14501–14505.
11. Texas Property Code Chapter 209 — Texas Residential Property Owners Protection Act (governs HOA operations under the corporate framework).
12. Texas Property Code Chapter 82 — Texas Uniform Condominium Act.
13. Texas Secretary of State, Nonprofit Corporations resource page and SOSDirect entity search.
14. Texas Comptroller of Public Accounts, Taxable Entity Search.

Tags: Texas BOC Chapter 22 · nonprofit corporation · § 22.221 · § 22.235 · fiduciary duty · indemnification · director immunity · business judgment rule · registered agent · franchise tax · PIR · Texas HOA · Texas condominium

CICSC publishes this article for educational and informational purposes only. It is not legal, tax, accounting, engineering, insurance, or financial advice and does not establish an attorney-client relationship. Statutory references and operational frameworks are intended to support informed governance, not to substitute for advice from qualified legal counsel and other professional advisors familiar with your jurisdiction and your association's facts. CICSC, its authors, and its members assume no liability for actions taken in reliance on this content.