HB 1185: Delaware-Style Reform for Georgia Corporate Litigation

On May 11, 2026, Governor Brian Kemp signed House Bill 1185 into law. Sponsored by House Majority Leader Chuck Efstration (R-Mulberry), it is one of the most significant changes to Georgia corporate litigation in years. The bill's public summary describes it as one that "modernizes complex corporate litigation policies," but the text does considerably more than that — it imports several long-standing features of Delaware corporate law into Georgia, reshapes how and where internal disputes among owners of Georgia entities are litigated, and tightens the rules governing derivative actions and records inspections. It takes effect on July 1, 2026, and applies to claims initiated on or after that date.

The Statewide Business Court, in Brief

The Georgia State-wide Business Court was created by a 2018 constitutional amendment and began accepting cases on August 1, 2020 — the first new statewide court Georgia had created in more than a century. Sitting at the Nathan Deal Judicial Center in Atlanta, it hears complex commercial disputes under the UCC, the Georgia Business Corporation Code, the Georgia Uniform Securities Act of 2008, and other categories of high-stakes business-to-business litigation. Until now, it has been largely an optional forum. HB 1185 changes that.

A New Category: “Internal Entity Claims”

The bill creates a new statutory term — “internal entity claim” — that pulls together, under one umbrella, the categories of disputes the law now directs into the Business Court. As codified in new O.C.G.A. § 14-1-1, the term captures derivative actions, claims based on breach of duty by a director, officer, shareholder, member, or partner arising from the entity's internal affairs, valuation proceedings, and proceedings related to court-ordered inspection of records. It also expressly captures disclosure claims — actions challenging the sufficiency of an entity's disclosures — “regardless of whether such action, claim, or proceeding is characterized as derivative.” That language closes a loophole that plaintiffs have used elsewhere to relabel derivative claims as direct and escape procedural protections.

Forum Selection in Corporate Documents

The single most significant change in HB 1185 is the new authorization for Georgia entities to require, in their governing documents, that internal disputes be litigated in the Business Court. Corporations may now include a provision in their articles of incorporation (O.C.G.A. § 14-2-202(b)(6)) or bylaws (§ 14-2-206(c)) requiring “any or all internal entity claims” to be brought “solely and exclusively in the Georgia State-wide Business Court.” Limited partnerships and LLCs receive parallel treatment.

This is the same architecture that has made Delaware's Court of Chancery a dominant forum for corporate disputes. HB 1185 gives Georgia entities the same tool. The practical effect: a closely-held Georgia business that adopts a Business Court forum-selection clause can channel future fights between owners — squeeze-out claims, breach-of-fiduciary-duty claims, books-and-records demands, valuation disputes — into a specialized forum with experienced judges and a faster docket.

Anti-Strike-Suit Reforms

The bill also imports several reforms aimed at the kind of opportunistic litigation that has plagued public-company derivative practice elsewhere.

Disclosure-only settlements lose their fee-shifting hook. Under revised O.C.G.A. § 14-2-746, a court may order the corporation to pay the plaintiff's fees only if the derivative proceeding produced a “substantial benefit to the corporation.” HB 1185 adds a definition that excludes from “substantial benefit” any “additional or amended disclosures made to shareholders, regardless of materiality.” Delaware effectively shut down the disclosure-only settlement in 2016; Georgia has now followed.

Reciprocal fee-shifting is now available against derivative plaintiffs whose proceedings are “commenced or maintained without reasonable cause or for an improper purpose.”

Ownership thresholds for public-company derivative plaintiffs. Under revised O.C.G.A. § 14-2-741, a corporation with shares listed on a national securities exchange may set an ownership threshold — capped at 1% of outstanding shares — that a shareholder must meet to commence a derivative action. The same option is available to listed limited partnerships.

Records inspection rights are narrowed. A shareholder, limited partner, or LLC member can no longer satisfy the “proper purpose” requirement by pointing to a pending or contemplated derivative action — or to a pending or contemplated adversarial lawsuit between the requester and the entity. Inspection-related fee awards become discretionary rather than mandatory, and the court may shift fees against requesters who proceed in bad faith.

Procedural Mechanics

HB 1185 also rewrites the procedural rules in O.C.G.A. § 15-5A-4 governing how cases enter and leave the Business Court. The window for joint-consent removal is extended from 60 days to one year. A presumption that the case remains in the court of filing is added to the transfer analysis. And a new pathway is created for internal entity claims: when corporate governing documents require Business Court venue — or when the entity is a public company, a Regulation A Tier 2 issuer, a Regulation D issuer, or composed exclusively of accredited investors — internal entity claims move into the Business Court automatically, and the court cannot decline to accept them.

What Georgia Business Owners Should Do

For closely-held Georgia businesses, the new framework is a useful prompt to revisit governing documents and dispute architecture:

• Review your articles, bylaws, partnership agreement, or operating agreement. If a Business Court forum-selection clause makes sense for your business — and for many closely-held businesses with multiple owners, it will — now is the time to add one. The clause must be in place before a dispute arises to be effective.
• If your entity has done a Regulation D or Regulation A Tier 2 offering, or is composed solely of accredited investors, the Business Court is now available as an automatic forum for internal disputes even without a governing-document clause. That has implications for capital-raising and governance practices going forward.
• Existing or threatened disputes deserve a strategic review now. Because the bill applies only to claims initiated on or after July 1, 2026, timing and forum choices made between now and that date have real consequences.

At Rountree Leitman Klein & Geer, our litigation team handles closely-held business disputes, derivative actions, books-and-records demands, and complex commercial litigation throughout Georgia. If you have questions about how HB 1185 may affect your business or a pending matter, we are happy to talk it through. Schedule a consultation through the link below or call our Atlanta office.