Summer is nearly here, and many business owners are planning time away from the office. But before or after that vacation, owners might want to look at company agreements that haven’t kept up with growth. Changes may be needed because of expanded intellectual property (IP), a larger workforce, or the increased value of the business itself.
Growth is generally good for the company. But the agreements a business has with employees and third parties may no longer protect its interests well enough. New practices might be needed to keep sensitive information confidential. This article focuses on changes a majority owner can make to provide better protection for company secrets, limit the scope of fiduciary duties for management, and create buy-sell agreements that let the owner redeem minority investors’ shares.
Why company IP needs stronger legal protection
A company’s continued success often depends on its intellectual property — including confidential information and trade secrets. That IP may have grown through new patents, exclusive licenses, or further development of trade secrets. As these assets expand, the majority owner needs to check whether the legal agreements protecting them have kept pace.
The company must determine if stronger confidentiality agreements with employees and third parties are necessary. It also needs to confirm whether current employment or contractor agreements sufficiently protect the company’s IP. Creating or changing protocols for protecting confidential information is another essential step.
To protect IP from misuse by insiders, the company needs confidentiality agreements with officers, employees, and agents. These agreements should describe the IP in meaningful detail — without revealing the secrets themselves — because courts give more weight to specific descriptions. Employee training on confidential information should also be referenced, since it shows the business intentionally disclosed its secrets to workers for legitimate business purposes.
The more extensive a company’s IP becomes, the more likely it will be shared with third parties. Vendors, advisors, and clients who get access to confidential information need to sign non-disclosure agreements (NDAs). If a business discloses confidential information to third parties without protections, that unprotected disclosure can waive its claim that the information is confidential.
Noncompete limits and the problem of after-the-fact restrictions
Disclosing IP to employees gives the company a legal basis to require noncompete provisions in their employment agreements. But for current employees who already work without noncompete restrictions, it may not be possible to bind them to enforceable restrictive covenants after the fact. Instead, the business will need those employees to sign confidentiality agreements or NDAs that prevent unauthorized use of IP.
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Securing NDAs and confidentiality agreements is only part of the process. Companies also need specific protocols to maintain secrecy. These include limiting access to confidential information to those with a need to know, marking documents as confidential, and regularly training employees on how to protect business-sensitive information.
Texas law changes give owners new options on fiduciary duties
The Texas Legislature made important amendments during 2025 to the Texas Business Organizations Code (TBOC). These changes, found in TBOC Section 101.401, could have major impacts on the fiduciary duties owed by directors, officers, and managers of private companies. Owners of existing private Texas companies now have the opportunity to opt into these changes, which permit restricting or even eliminating fiduciary duties for those who run the business, or limiting the liability of management team members.
On one hand, limiting fiduciary duties may give directors and managers more freedom in how they operate. For example, managers could more freely enter into transactions with affiliated companies that benefit the business but also provide returns for them with interests in both companies. On the other hand, potential investors may be reluctant to provide capital if these changes are implemented. Sophisticated investors will likely insist that fiduciary duties apply before they agree to make a substantial investment.
Buy-sell agreements and getting the valuation right
Buy-sell agreements (BSAs) serve the interests of both majority owners and minority investors. They can be created after the fact, even if not adopted when the investment was made. For majority owners, BSAs provide a redemption right to acquire a minority partner’s interest if consolidation is needed or if the minority partner becomes disruptive. For minority investors, the BSA ensures they can monetize their ownership interest when they decide to exit.
As the company grows, the majority owner needs to review the BSA’s valuation formula. Depending on the language used, the formula may produce a result that varies widely from the actual fair market value. If the BSA isn’t updated, there’s a risk the original formula could produce a valuation unfavorable to the majority owner.
Majority owners who have guided their companies to growth deserve a relaxing summer getaway. The long summer days are also a good time to consider upgrading company agreements to better protect the business. Strengthening agreements that guard confidential information, revising governance documents to limit fiduciary duty exposure, and improving buy-sell agreements to ensure accurate valuations will better position both the company and its majority owner for continued growth — and offer more protection if storms arise later.
