Business Corporation Act
Part 2.
Art. 2.01. Purposes
A. Except as hereinafter in this Article excluded herefrom,
corporations for profit may be organized under this Act for any
lawful purpose or purposes. Corporations for the purpose of
operating non-profit institutions, including but not limited to
those devoted to charitable, benevolent, religious, patriotic,
civic, cultural, missionary, educational, scientific, social,
fraternal, athletic, or aesthetic purposes, may not adopt or be
organized under this Act.
B. No corporation may adopt this Act or be organized under this Act
or obtain authority to transact business in this State under this
Act:
(1) If any one or more of its purposes for the transaction of
business in this State is expressly prohibited by any law of this
State.
(2) If any one or more of its purposes for the transaction of
business in this State is to engage in any activity which cannot
lawfully be engaged in without first obtaining a license under the
authority of the laws of this State to engage in such activity and
such a license cannot lawfully be granted to a corporation.
(3) If among its purposes for the transaction of business in this
State, there is included, however worded, a combination of the two
businesses listed in either of the following:
(a) The business of raising cattle and owning land therefor, and the
business of operating stockyards and of slaughtering,
refrigerating, canning, curing or packing meat. Owning and
operating feed lots and feeding cattle shall not be considered as
engaging in "the business of raising cattle and owning land
therefor" within the purview of this paragraph of this subsection.
(b) The business of engaging in the petroleum oil producing
business in this State and the business of engaging directly in the
oil pipe line business in this State: provided, however, that a
corporation engaged in the oil producing business in this State
which owns or operates private pipe lines in and about its
refineries, fields or stations or which owns stock of corporations
engaged in the oil pipe line business shall not be deemed to be
engaging directly in the oil pipe line business in this State; and
provided that any corporation, or group of corporations acting in
partnership or other combination with other corporations, engaged
as a common carrier in the pipe line business for transporting oil,
oil products, gas, carbon dioxide, salt brine, fuller's earth,
sand, clay, liquefied minerals or other mineral solutions, shall
have all of the rights and powers conferred by Sections 111.019
through 111.022, Natural Resources Code.
(4) If any one or more of its purposes is to operate any of the
following:
(a) Banks, (b) trust companies, (c) building and loan associations
or companies, (d) insurance companies of every type and character
that operate under the insurance laws of this State, and corporate
attorneys in fact for reciprocal or inter-insurance exchanges, (e)
railroad companies, (f) cemetery companies, (g) cooperatives or
limited cooperative associations, (h) labor unions, (i) abstract
and title insurance companies whose purposes are provided for and
whose powers are prescribed by Chapter 9 of the Insurance Code of
this State.
C. A company may be incorporated under this Article or under Chapter
1, Title 112, Revised Statutes, if the company:
(1) operates a railroad passenger service by contracting with a
railroad corporation or other company; and
(2) does not construct, own, or maintain a railroad track.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1486, ch. 545, Sec. 2, eff. Aug. 27, 1973;
Acts 1977, 65th Leg., p. 2690, ch. 871, Sec. 3, eff. Sept. 1, 1977;
Acts 1981, 67th Leg., p. 2489, ch. 650, Sec. 1, eff. Aug. 31, 1981;
Acts 1989, 71st Leg., ch. 971, Sec. 2, eff. Aug. 28, 1989.
Art. 2.02. General Powers
A. Subject to the provisions of Sections B and C of this Article,
each corporation shall have power:
(1) To have perpetual succession by its corporate name unless a
limited period of duration is stated in its articles of
incorporation. Notwithstanding the articles of incorporation, the
period of duration for any corporation incorporated before
September 6, 1955, is perpetual if all fees and franchise taxes have
been paid as provided by law.
(2) To sue and be sued, complain and defend, in its corporate name.
(3) To have a corporate seal which may be altered at pleasure, and
to use the same by causing it, or a facsimile thereof, to be
impressed on, affixed to, or in any manner reproduced upon,
instruments of any nature required to be executed by its proper
officers.
(4) To purchase, receive, lease, or otherwise acquire, own, hold,
improve, use and otherwise deal in and with, real or personal
property, or any interest therein, wherever situated, as the
purposes of the corporation shall require.
(5) To sell, convey, mortgage, pledge, lease, exchange, transfer
and otherwise dispose of all or any part of its property and assets.
(6) To lend money to, and otherwise assist, its employees,
officers, and directors if such a loan or assistance reasonably may
be expected to benefit, directly or indirectly, the lending or
assisting corporation.
(7) To purchase, receive, subscribe for, or otherwise acquire, own,
hold, vote, use, employ, mortgage, lend, pledge, sell or otherwise
dispose of, and otherwise use and deal in and with, shares or other
interests in, or obligations of, other domestic or foreign
corporations, associations, partnerships, or individuals, or
direct or indirect obligations of the United States or of any other
government, state, territory, government district, or
municipality, or of any instrumentality thereof.
(8) To purchase or otherwise acquire its own bonds, debentures, or
other evidences of its indebtedness or obligations; to purchase or
otherwise acquire its own unredeemable shares and hold those
acquired shares as treasury shares or cancel or otherwise dispose
of those acquired shares; and to redeem or purchase shares made
redeemable by the provisions of its articles of incorporation.
(9) To make contracts and incur liabilities, borrow money at such
rates of interest as the corporation may determine, issue its
notes, bonds, and other obligations, and secure any of its
obligations by mortgage or pledge of all or any of its property,
franchises, and income.
(10) To lend money for its corporate purposes, invest and reinvest
its funds, and take and hold real and personal property as security
for the payment of funds so loaned or invested.
(11) To conduct its business, carry on its operations, and have
offices and exercise the powers granted by this Act, within or
without this State.
(12) To elect or appoint officers and agents of the corporation for
such period of time as the corporation may determine, and define
their duties and fix their compensation.
(13) To make and alter bylaws, not inconsistent with its articles of
incorporation or with the laws of this State, for the
administration and regulation of the affairs of the corporation.
(14) To make donations for the public welfare or for charitable,
scientific, or educational purposes.
(15) To transact any lawful business which the board of directors
shall find will be in aid of government policy.
(16) To indemnify directors, officers, employees, and agents of the
corporation and to purchase and maintain liability insurance for
those persons.
(17) To pay pensions and establish pension plans, pension trusts,
profit sharing plans, stock bonus plans, and other incentive plans
for any or all of, or any class or classes of, its directors,
officers, or employees.
(18) To be an organizer, partner, member, associate, or manager of
any partnership, joint venture, or other enterprise, and to the
extent permitted by any other jurisdiction to be an incorporator of
any other corporation of any type or kind.
(19) To cease its corporate activities and terminate its existence
by voluntary dissolution.
(20) To renounce, in its articles of incorporation or by action of
its board of directors, an interest or expectancy of the
corporation in, or an interest or expectancy of the corporation in
being offered an opportunity to participate in, specified business
opportunities or specified classes or categories of business
opportunities that are presented to the corporation or one or more
of its officers, directors, or shareholders.
(21) Whether included in the foregoing or not, to have and exercise
all powers necessary or appropriate to effect any or all of the
purposes for which the corporation is organized.
B. Nothing in this Article grants any authority to officers or
directors of a corporation for the exercise of any of the foregoing
powers, inconsistent with limitations on any of the same which may
be expressly set forth in this Act or in the articles of
incorporation or in any other laws of this State. Authority of
officers and directors to act beyond the scope of the purpose or
purposes of a corporation is not granted by any provision of this
Article.
C. Nothing contained in this Article shall be deemed to authorize
any action in violation of the Anti-Trust Laws of this State, as now
existing or hereafter amended.
Acts 1955, 64th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1967, 60th Leg., p. 1718, ch. 657, Sec. 2, eff. June 17, 1967;
Acts 1973, 63rd Leg., p. 1486, ch. 545, Sec. 3, eff. Aug. 27, 1973;
Acts 1979, 66th Leg., p. 175, ch. 96, Sec. 2, eff. May 2, 1979; Acts
1983, 68th Leg., p. 3140, ch. 540, Sec. 1, eff. Aug. 29, 1983; Acts
1987, 70th Leg., ch. 93, Sec. 2, eff. Aug. 31, 1987; Acts 1987, 70th
Leg., ch. 93, Sec. 2, eff. Aug. 31, 1987; Acts 1993, 73rd Leg., ch.
215, Sec. 2.02, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 2, eff. Sept.
1, 2003.
Art. 2.02-1. Power to Indemnify and to Purchase Indemnity
Insurance; Duty to Indemnify
A. In this article:
(1) "Corporation" includes any domestic or foreign predecessor
entity of the corporation in a merger, conversion, or other
transaction in which some or all of the liabilities of the
predecessor are transferred to the corporation by operation of law
and in any other transaction in which the corporation assumes the
liabilities of the predecessor but does not specifically exclude
liabilities that are the subject matter of this article.
(2) "Director" means any person who is or was a director of the
corporation and any person who, while a director of the
corporation, is or was serving at the request of the corporation as
a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or
domestic corporation, employee benefit plan, other enterprise, or
other entity.
(3) "Expenses" include court costs and attorneys' fees.
(4) "Official capacity" means
(a) when used with respect to a director, the office of director in
the corporation, and
(b) when used with respect to a person other than a director, the
elective or appointive office in the corporation held by the
officer or the employment or agency relationship undertaken by the
employee or agent in behalf of the corporation, but
(c) in both Paragraphs (a) and (b) does not include service for any
other foreign or domestic corporation or any employee benefit plan,
other enterprise, or other entity.
(5) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such
an action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit, or proceeding.
B. A corporation may indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding because the person is or was a director only if it is
determined in accordance with Section F of this article that the
person:
(1) conducted himself in good faith;
(2) reasonably believed:
(a) in the case of conduct in his official capacity as a director of
the corporation, that his conduct was in the corporation's best
interests; and
(b) in all other cases, that his conduct was at least not opposed to
the corporation's best interests; and
(3) in the case of any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful.
C. Except to the extent permitted by Section E of this article, a
director may not be indemnified under Section B of this article in
respect of a proceeding:
(1) in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity; or
(2) in which the person is found liable to the corporation.
D. The termination of a proceeding by judgment, order, settlement,
or conviction, or on a plea of nolo contendere or its equivalent is
not of itself determinative that the person did not meet the
requirements set forth in Section B of this article. A person shall
be deemed to have been found liable in respect of any claim, issue
or matter only after the person shall have been so adjudged by a
court of competent jurisdiction after exhaustion of all appeals
therefrom.
E. A person may be indemnified under Section B of this article
against judgments, penalties (including excise and similar taxes),
fines, settlements, and reasonable expenses actually incurred by
the person in connection with the proceeding; but if the person is
found liable to the corporation or is found liable on the basis that
personal benefit was improperly received by the person, the
indemnification (1) is limited to reasonable expenses actually
incurred by the person in connection with the proceeding and (2)
shall not be made in respect of any proceeding in which the person
shall have been found liable for willful or intentional misconduct
in the performance of his duty to the corporation.
F. A determination of indemnification under Section B of this
article must be made:
(1) by a majority vote of the directors who at the time of the vote
are not named defendants or respondents in the proceeding,
regardless of whether the directors not named defendants or
respondents constitute a quorum;
(2) by a majority vote of a committee of the board of directors, if:
(a) the committee is designated by a majority vote of the directors
who at the time of the vote are not named defendants or respondents
in the proceeding, regardless of whether the directors not named
defendants or respondents constitute a quorum; and
(b) the committee consists solely of one or more of the directors
not named as defendants or respondents in the proceeding;
(3) by special legal counsel selected by the board of directors or a
committee of the board by vote as set forth in Subsection (1) or (2)
of this section; or
(4) by the shareholders in a vote that excludes the shares held by
directors who are named defendants or respondents in the
proceeding.
G. Authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as the
determination that indemnification is permissible, except that if
the determination that indemnification is permissible is made by
special legal counsel, authorization of indemnification and
determination as to reasonableness of expenses must be made in the
manner specified by Subsection (3) of Section F of this article for
the selection of special legal counsel. A provision contained in
the articles of incorporation, the bylaws, a resolution of
shareholders or directors, or an agreement that makes mandatory the
indemnification permitted under Section B of this article shall be
deemed to constitute authorization of indemnification in the manner
required by this section even though such provision may not have
been adopted or authorized in the same manner as the determination
that indemnification is permissible.
H. A corporation shall indemnify a director against reasonable
expenses incurred by him in connection with a proceeding in which he
is a named defendant or respondent because he is or was a director
if he has been wholly successful, on the merits or otherwise, in the
defense of the proceeding.
I. If, in a suit for the indemnification required by Section H of
this article, a court of competent jurisdiction determines that the
director is entitled to indemnification under that section, the
court shall order indemnification and shall award to the director
the expenses incurred in securing the indemnification.
J. If, upon application of a director, a court of competent
jurisdiction determines, after giving any notice the court
considers necessary, that the director is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, whether or not he has met the requirements set forth
in Section B of this article or has been found liable in the
circumstances described by Section C of this article, the court may
order the indemnification that the court determines is proper and
equitable; but if the person is found liable to the corporation or
is found liable on the basis that personal benefit was improperly
received by the person, the indemnification shall be limited to
reasonable expenses actually incurred by the person in connection
with the proceeding.
K. Reasonable expenses incurred by a present director who was, is,
or is threatened to be made a named defendant or respondent in a
proceeding may be paid or reimbursed by the corporation, in advance
of the final disposition of the proceeding and without the
determination specified in Section F of this article or the
authorization or determination specified in Section G of this
article, after the corporation receives a written affirmation by
the director of his good faith belief that he has met the standard
of conduct necessary for indemnification under this article and a
written undertaking by or on behalf of the director to repay the
amount paid or reimbursed if it is ultimately determined that he has
not met that standard or if it is ultimately determined that
indemnification of the director against expenses incurred by him in
connection with that proceeding is prohibited by Section E of this
article. Notwithstanding any authorization or determination
specified in this article, reasonable expenses incurred by a former
director or officer, or a present or former employee or agent of the
corporation, who was, is, or is threatened to be made a named
defendant or respondent in a proceeding may be paid or reimbursed by
the corporation, in advance of the final disposition of the
proceeding, on any terms the corporation considers appropriate. A
provision contained in the articles of incorporation, the bylaws, a
resolution of shareholders or directors, or an agreement that makes
mandatory the payment or reimbursement permitted under this section
shall be deemed to constitute authorization of that payment or
reimbursement.
L. The written undertaking required by Section K of this article
must be an unlimited general obligation of the director but need not
be secured. It may be accepted without reference to financial
ability to make repayment.
M. A provision for a corporation to indemnify or to advance expenses
to a director who was, is, or is threatened to be made a named
defendant or respondent in a proceeding, whether contained in the
articles of incorporation, the bylaws, a resolution of shareholders
or directors, an agreement, or otherwise, except in accordance with
Section R of this article, is valid only to the extent it is
consistent with this article as limited by the articles of
incorporation, if such a limitation exists.
N. Notwithstanding any other provision of this article, a
corporation may pay or reimburse expenses incurred by a director in
connection with his appearance as a witness or other participation
in a proceeding at a time when he is not a named defendant or
respondent in the proceeding.
O. An officer of the corporation shall be indemnified as, and to the
same extent, provided by Sections H, I, and J of this article for a
director and is entitled to seek indemnification under those
sections to the same extent as a director. A corporation may
indemnify and advance expenses to an officer, employee, or agent of
the corporation to the same extent that it may indemnify and advance
expenses to directors under this article. A determination of
indemnification for an employee or agent of the corporation is not
required to be made in accordance with Section F of this article.
P. A corporation may indemnify and advance expenses to persons who
are not or were not officers, employees, or agents of the
corporation but who are or were serving at the request of the
corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, employee benefit plan, other enterprise,
or other entity to the same extent that it may indemnify and advance
expenses to directors under this article.
Q. A corporation may indemnify and advance expenses to an officer,
employee, agent, or person identified in Section P of this article
and who is not a director to such further extent, consistent with
law, as may be provided by its articles of incorporation, bylaws,
general or specific action of its board of directors, or contract or
as permitted or required by common law.
R. A corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director,
officer, employee, or agent of the corporation or who is or was
serving at the request of the corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation,
employee benefit plan, other enterprise, or other entity, against
any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person, whether or
not the corporation would have the power to indemnify him against
that liability under this article. If the insurance or other
arrangement is with a person or entity that is not regularly engaged
in the business of providing insurance coverage, the insurance or
arrangement may provide for payment of a liability with respect to
which the corporation would not have the power to indemnify the
person only if including coverage for the additional liability has
been approved by the shareholders of the corporation. Without
limiting the power of the corporation to procure or maintain any
kind of insurance or other arrangement, a corporation may, for the
benefit of persons indemnified by the corporation, (1) create a
trust fund; (2) establish any form of self-insurance; (3) secure
its indemnity obligation by grant of a security interest or other
lien on the assets of the corporation; or (4) establish a letter of
credit, guaranty, or surety arrangement. The insurance or other
arrangement may be procured, maintained, or established within the
corporation or with any insurer or other person deemed appropriate
by the board of directors regardless of whether all or part of the
stock or other securities of the insurer or other person are owned
in whole or part by the corporation. In the absence of fraud, the
judgment of the board of directors as to the terms and conditions of
the insurance or other arrangement and the identity of the insurer
or other person participating in an arrangement shall be conclusive
and the insurance or arrangement shall not be voidable and shall not
subject the directors approving the insurance or arrangement to
liability, on any ground, regardless of whether directors
participating in the approval are beneficiaries of the insurance or
arrangement.
S. Any indemnification of or advance of expenses to a director in
accordance with this article shall be reported in writing to the
shareholders with or before the notice or waiver of notice of the
next shareholders' meeting or with or before the next submission to
shareholders of a consent to action without a meeting pursuant to
Section A, Article 9.10, of this Act and, in any case, within the
12-month period immediately following the date of the
indemnification or advance.
T. For purposes of this article, the corporation is deemed to have
requested a director to serve as a trustee, employee, agent, or
similar functionary of an employee benefit plan whenever the
performance by him of his duties to the corporation also imposes
duties on or otherwise involves services by him to the plan or
participants or beneficiaries of the plan. Excise taxes assessed
on a director with respect to an employee benefit plan pursuant to
applicable law are deemed fines. Action taken or omitted by a
director with respect to an employee benefit plan in the
performance of his duties for a purpose reasonably believed by him
to be in the interest of the participants and beneficiaries of the
plan is deemed to be for a purpose which is not opposed to the best
interests of the corporation.
U. The articles of incorporation of a corporation may restrict the
circumstances under which the corporation is required or permitted
to indemnify a person under Section H, I, J, O, P, or Q of this
article.
Added by Acts 1983, 68th Leg., p. 3143, ch. 540, Sec. 2, eff. Aug.
29, 1983. Amended by Acts 1985, 69th Leg., ch. 128, Sec. 1, eff. May
20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 3, eff. Aug. 31, 1987;
Acts 1989, 71st Leg., ch. 801, Sec. 2, eff. Aug. 28, 1989; Acts
1997, 75th Leg., ch. 375, Sec. 2, eff. Sept. 1, 1997.
Sec. F amended by Acts 2003, 78th Leg., ch. 238, Sec. 3, eff. Sept.
1, 2003; Sec. K amended by Acts 2003, 78th Leg., ch. 238, Sec. 3,
eff. Sept. 1, 2003; Sec. O amended by Acts 2003, 78th Leg., ch. 238,
Sec. 3, eff. Sept. 1, 2003.
Art. 2.04. Defense of Ultra Vires
A. Lack of capacity of a corporation shall never be made the basis
of any claim or defense at law or in equity.
B. No act of a corporation and no conveyance or transfer of real or
personal property to or by a corporation shall be invalid by reason
of the fact that such act, conveyance or transfer was beyond the
scope of the purpose or purposes of the corporation as expressed in
its articles of incorporation or by reason of limitations on
authority of its officers and directors to exercise any statutory
power of the corporation, as such limitations are expressed in the
articles of incorporation, but that such act, conveyance or
transfer was, or is, beyond the scope of the purpose or purposes of
the corporation as expressed in its articles of incorporation or
inconsistent with any such expressed limitations of authority, may
be asserted:
(1) In a proceeding by a shareholder against the corporation to
enjoin the doing of any act or acts or the transfer of real or
personal property by or to the corporation. If the unauthorized act
or transfer sought to be enjoined is being, or is to be, performed
or made pursuant to any contract to which the corporation is a
party, the court may, if all of the parties to the contract are
parties to the proceeding and if it deems the same to be equitable,
set aside and enjoin the performance of such contract, and in so
doing may allow to the corporation or to the other parties to the
contract, as the case may be, compensation for the loss or damage
sustained by either of them which may result from the action of the
court in setting aside and enjoining the performance of such
contract, but anticipated profits to be derived from the
performance of the contract shall not be awarded by the court as a
part of loss or damage sustained.
(2) In a proceeding by the corporation, whether acting directly or
through a receiver, trustee, or other legal representative, or
through shareholders in a representative suit, against the
incumbent or former officers or directors of the corporation for
exceeding their authority.
(3) In a proceeding by the Attorney General, as provided in this
Act, to dissolve the corporation, or in a proceeding by the Attorney
General to enjoin the corporation from transacting unauthorized
business, or to enforce divestment of real property acquired or
held contrary to the laws of this State.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Art. 2.05. Corporate Name; Use of Assumed Names
A. The Corporate name shall conform to the following requirements:
(1) It shall contain the word "corporation," "company," or
"incorporated," or shall contain an abbreviation of one of such
words, and shall contain such additional words as may be required by
law.
(2) It shall not contain any word or phrase which indicates or
implies that it is organized for any purpose other than one or more
of the purposes contained in its articles of incorporation.
(3) It shall not be the same as, or deceptively similar to, the name
of any domestic corporation, limited partnership, or limited
liability company existing under the laws of this State, or the name
of any foreign corporation, non-profit corporation, limited
partnership, or limited liability company authorized to transact
business in this State, or a name the exclusive right to which is,
at the time, reserved in the manner provided in this Act or any
other statute providing for reservation of names by a limited
partnership or limited liability company, or the name of a
corporation, limited partnership, or limited liability company
which has in effect a registration of its company name as provided
in this Act or any other applicable law; provided that a name may be
similar if written consent is obtained from the existing
corporation, limited partnership, or limited liability company
having the name deemed to be similar or the person for whom the name
deemed to be similar is reserved in the office of the Secretary of
State.
(4) It shall not contain the word "lottery."
B. Any domestic or foreign corporation having authority to transact
business in this State may do so under an assumed name by filing an
assumed name certificate in the manner prescribed by law. The
assumed name may, but is not required to, comply with the
requirements of Section A(1) of this Article.
C. The filing of articles of incorporation under Part Three of this
Act, an application to reserve a specified Corporate name under
Article 2.06 of this Act, or an application to register a Corporate
name by a foreign corporation under Article 2.07 of this Act does
not authorize the use of a Corporate name in this State in violation
of the rights of another under the federal Trademark Act of 1946 (15
U.S.C., Section 1051 et seq.), the Texas trademark law (Chapter 16,
Business & Commerce Code), the Assumed Business or Professional
Name Act (Chapter 36, Business & Commerce Code), or the common law.
The Secretary of State shall deliver to each newly organized
corporation, applicant for reservation of a Corporate name, and
newly registered foreign corporation a notice containing the
substance of this section.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1987, 70th Leg., ch. 283, Sec. 1, eff. Aug. 31, 1987; Acts
1991, 72nd Leg., 1st C.S., ch. 6, Sec. 11A(a); Acts 1993, 73rd
Leg., ch. 215, Sec. 2.03, eff. Sept. 1, 1993; Acts 1997, 75th Leg.,
ch. 375, Sec. 3, eff. Sept. 1, 1997.
Art. 2.06. Reserved Name
A. The exclusive right to the use of a corporate name may be
reserved by:
(1) Any person intending to organize a corporation under this Act.
(2) Any domestic corporation intending to change its name.
(3) Any foreign corporation intending to make application for a
certificate of authority to transact business in this State.
(4) Any foreign corporation authorized to transact business in this
State and intending to change its name.
(5) Any person intending to organize a foreign corporation and
intending to have such corporation make application for a
certificate of authority to transact business in this State.
B. The reservation shall be made by filing with the Secretary of
State an application to reserve a specified corporate name,
executed by the applicant or the attorney or agent thereof. If the
Secretary of State finds that the name is available for corporate
use, he shall reserve the same for the exclusive use of the
applicant for a period of one hundred and twenty (120) days.
C. The right to the exclusive use of a specified corporate name so
reserved may be transferred to any other person or corporation by
filing in the office of the Secretary of State a notice of such
transfer, executed by the applicant for whom the name was reserved,
and specifying the name and address of the transferee.
D. Any person for whom a specified corporate name has been reserved
pursuant to Section B of this article may, during the period for
which such name is reserved, terminate such reservation by filing
with the Secretary of State an application for cancellation of
reservation of corporate name, together with the applicable fee.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1997, 75th Leg., ch. 375, Sec. 4, eff. Sept. 1, 1997.
Art. 2.07. Registered Name
A. Any corporation organized for the purpose of operating a bank,
trust company, building and loan association or company, insurance
company currently holding a valid certificate of authority to do
business in the State of Texas, and any foreign corporation not
authorized to transact business in this State may register its
corporate name under this Act, provided its corporate name is not
the same as, or deceptively similar to, the name of any domestic
corporation existing under the laws of this State or the name of any
foreign corporation authorized to transact business in this State
or any corporate name reserved or registered under this Act.
Provided, however, that any bank, trust company, building and loan
association, or insurance company will not be prohibited from
registering its corporate name even if the corporate name may be
deemed to be the same as or deceptively similar to an otherwise
authorized corporate name, if such bank, trust company, building
and loan association, or insurance company was duly organized on,
and in continual existence from, a date preceding the date the
conflicting corporate name was authorized by the Secretary of State
under this Act.
B. Such registration shall be made by:
(1) Filing with the Secretary of State:
(a) An application for registration executed by the corporation by
an officer thereof, setting forth the name of the corporation, the
state or territory under the laws of which it is incorporated, the
date of its incorporation, a statement that it is carrying on or
doing business, and a brief statement of the business in which it is
engaged, and
(b) A certificate setting forth that such corporation is in good
standing under the laws of the state or territory wherein it is
organized, executed by the Secretary of State of such state or
territory or by such other official as may have custody of the
records pertaining to corporations, and
(2) Paying to the Secretary of State the required registration fee.
C. Such registration shall be effective for a period of one year
from the date on which the application for registration is filed,
unless voluntarily withdrawn by the filing of a written notice
thereof with the Secretary of State.
1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts
1967, 60th Leg., p. 1718, ch. 657, Sec. 3, eff. June 17, 1967; Acts
1985, 69th Leg., ch. 391, Sec. 1, eff. Aug. 26, Sec. 1985.
Art. 2.08. Renewal of Registered Name
A. A corporation which has in effect a registration of its corporate
name may renew such registration from year to year by filing
annually an application for renewal in the manner prescribed for
the filing of an original application. Such renewal application
shall be filed during the ninety (90) days preceding the expiration
date of the then current registration.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Art. 2.09. Registered Office and Registered Agent
A. Each corporation shall have and continuously maintain in this
State:
(1) A registered office which may be, but need not be, the same as
its place of business.
(2) A registered agent, which agent may be either an individual
resident in this State or a domestic corporation, or other entity
organized under the laws of this state or authorized to transact
business in this State that has a business office identical with
each such registered office that is generally open during normal
business hours to accept service of process and otherwise perform
the functions of a registered agent.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 4, eff. Sept.
1, 2003.
Art. 2.10. Change of Registered Office or Registered Agent
A. A corporation may change its registered office or change its
registered agent, or both, upon filing in the office of the
Secretary of State a statement setting forth:
(1) The name of the corporation.
(2) The post-office address of its then registered office.
(3) If the post-office address of its registered office is to be
changed, the post-office address to which the registered office is
to be changed.
(4) The name of its then registered agent.
(5) If its registered agent is to be changed, the name of its
successor registered agent.
(6) That the post-office address of its registered office and the
post-office address of the business office of its registered agent,
as changed, will be identical.
(7) That such change was authorized by its Board of Directors or by
an officer of the corporation so authorized by the Board of
Directors.
B. The statement required by this article shall be executed on
behalf of the corporation by an officer. The original and a copy of
the statement shall be delivered to the Secretary of State. If the
Secretary of State finds that such statement conforms to the
provisions of this Act, he shall, when the appropriate filing fee is
paid as prescribed by law:
(1) Endorse on the original and the copy the word "Filed," and the
month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to the corporation or its representative.
C. Upon such filing, the change of address of the registered office,
or the appointment of a new registered agent, or both, as the case
may be, shall become effective.
D. Any registered agent of a corporation may resign
(1) by giving written notice to the corporation at its last known
address
(2) and by giving written notice, in duplicate (the original and one
copy of the notice), to the Secretary of State within ten days after
mailing or delivery of said notice to the corporation. Such notice
shall include the last known address of the corporation and shall
include the statement that written notice of resignation has been
given to the corporation and the date thereof. Upon compliance with
the requirements as to written notice, the appointment of such
agent shall terminate upon the expiration of thirty (30) days after
receipt of such notice by the Secretary of State.
If the Secretary of State finds that such written notice conforms to
the provisions of this Act, he shall:
(1) Endorse on the original and the copy the word "filed" and the
month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to such resigning registered agent.
(4) Notify the corporation of the resignation of the registered
agent.
No fee shall be required to be paid for the filing of a resignation
under this section.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1969, 61st Leg., p. 2483, ch. 835, Sec. 1, 2, eff. June 18,
1969; Acts 1979, 66th Leg., p. 222, ch. 120, Sec. 23, eff. May 9,
1979; Acts 1981, 67th Leg., p. 838, ch. 297, Sec. 12, eff. Aug. 31,
1981; Acts 1983, 68th Leg., p. 684, ch. 158, Sec. 1, eff. May 20,
1983; Acts 1985, 69th Leg., ch. 128, Sec. 2, eff. May 20, 1985.
Art. 2.10-1. Change of Address of Registered Agent
A. The location of the registered office in Texas for a corporation,
domestic or foreign, may be changed from one address to another upon
filing in the office of the Secretary of State a statement setting
forth:
(1) The name of the corporation represented by such registered
agent.
(2) The address at which such registered agent has maintained the
registered office for said corporation.
(3) The new address at which such registered agent will thereafter
maintain the registered office for said corporation.
(4) A statement that notice of the change has been given to said
corporation in writing at least ten (10) days prior to such filing.
B. The statement required by this article shall be signed by the
registered agent, or, if said agent is a corporation, by an officer
of such corporate agent on its behalf. If the registered agent is
simultaneously filing statements as to more than one corporation,
each such statement may contain facsimile signatures in the
execution. The original and one copy of the statement shall be
delivered to the Secretary of State. If the Secretary of State
finds that such statement conforms to the provisions of this Act, he
shall:
(1) Endorse on the original and the copy the word "Filed," and the
month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to such registered agent.
C. The registered office of the corporation named in such statement
shall be changed to the new address of the registered agent upon the
filing of such statement by the Secretary of State.
Added by Acts 1967, 60th Leg., p. 1719, ch. 657, Sec. 4, eff. June
17, 1967. Amended by Acts 1979, 66th Leg., p. 223, ch. 120, Sec. 24,
eff. May 9, 1979; Acts 1983, 68th Leg., p. 685, ch. 158, Sec. 2,
eff. May 20, 1983; Acts 1987, 70th Leg., ch. 93, Sec. 4, eff. Aug.
31, 1987.
Art. 2.11. Service of Process on Corporation
A. The president and all vice presidents of the corporation and the
registered agent of the corporation shall be agents of such
corporation upon whom any process, notice, or demand required or
permitted by law to be served upon the corporation may be served.
B. Whenever a corporation shall fail to appoint or maintain a
registered agent in this State, or whenever its registered agent
cannot with reasonable diligence be found at the registered office,
then the Secretary of State shall be an agent of such corporation
upon whom any such process, notice, or demand may be served.
Service on the Secretary of State of any process, notice, or demand
shall be made by delivering to and leaving with him, or with the
Assistant Secretary of State, or with any clerk having charge of the
corporation department of his office, duplicate copies of such
process, notice, or demand. In the event any such process, notice,
or demand is served on the Secretary of State, he shall immediately
cause one of the copies thereof to be forwarded by registered mail,
addressed to the corporation at its registered office. Any service
so had on the Secretary of State shall be returnable in not less
than thirty (30) days.
C. The Secretary of State shall keep a record of all processes,
notices and demands served upon him under this Article, and shall
record therein the time of such service and his action with
reference thereto.
D. Service of process, notice, or demand required or permitted by
law to be served by a political subdivision of this state or by a
person, including another political subdivision or an attorney,
acting on behalf of a political subdivision in connection with the
collection of a delinquent ad valorem tax may be served on a
corporation whose corporate privileges are forfeited under Section
171.251, Tax Code, or is involuntarily dissolved under Article 7.01
of this Act by delivering the process, notice, or demand to any
officer or director of the corporation, as listed in the most recent
records of the secretary of state. If the officers or directors of
the corporation are unknown or cannot be found, service on the
corporation may be made in the same manner as service is made on
unknown shareholders under law. Notwithstanding any disability or
reinstatement of a corporation, service of process under this
section is sufficient for a judgment against the corporation or a
judgment in rem against any property to which the corporation holds
title.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1999, 76th Leg., ch. 1481, Sec. 40, eff. Sept. 1, 1999.
Art. 2.12. Authorized Shares
A. Each corporation may issue the number of shares stated in its
articles of incorporation. Such shares may be divided into one or
more classes, any or all of which classes may consist of shares with
par value or shares without par value, as shall be stated in the
articles of incorporation. Any such class of shares may be divided
into one or more series, as shall be stated in the articles of
incorporation. All shares of the same class shall be of the same
par value or be without par value. Unless the shares of a class have
been divided into series, all shares of the same class shall be
identical in all respects. If the shares of a class have been
divided into series, shares of the same class may vary between
series, but all shares of the same series shall be identical in all
respects. Any such class or series of shares shall be so designated
as to distinguish the shares of that class or series from the shares
of all other classes and series. Any such class or series shall
have such designations, preferences, limitations, and relative
rights, including voting rights, as shall be stated in the articles
of incorporation. The articles of incorporation may limit or deny
the voting rights of, or provide special voting rights for, the
shares of any class or series to the extent that such limitation,
denial, or provision is not inconsistent with the provisions of
this Act. Any of the designations, preferences, limitations, and
relative rights, including voting rights, of any class or series of
shares may be made dependent upon facts ascertainable outside the
articles of incorporation, which facts may include future acts of
the corporation, provided that the manner in which such facts shall
operate upon the designations, preferences, limitations, and
relative rights, including voting rights, of such class or series
of shares is clearly and expressly set forth in the articles of
incorporation.
B. Without being limited to the authority herein contained, a
corporation, when so provided in its articles of incorporation, may
issue shares of one or more classes or series:
(1) Redeemable, subject to compliance by the corporation with
Articles 2.38 and 4.08 of this Act, at the option of the
corporation, the shareholder or another person or upon the
occurrence of a designated event.
(2) Entitling the holders thereof to cumulative, noncumulative, or
partially cumulative dividends.
(3) Having preference over any other class, classes or series of
shares as to the payment of dividends.
(4) Having preference in the assets of the corporation over any
other class, classes or series of shares upon the voluntary or
involuntary liquidation of the corporation.
(5) Exchangeable, subject to compliance by the corporation with
Article 2.38 of this Act, at the option of the corporation, the
shareholder or another person or upon the occurrence of a
designated event, for shares, obligations, indebtedness, evidence
of ownership, rights to purchase securities or other securities of
the corporation or one or more other domestic or foreign
corporations or other entities or for other property or for any
combination of the foregoing.
(6) Convertible at the option of the corporation, the shareholder
or another person or upon the occurrence of a designated event, into
shares of any other class or series, but shares without par value
shall not be converted into shares with par value unless that part
of the stated capital of the corporation represented by such shares
without par value is, at the time of conversion, at least equal to
the aggregate par value of the shares into which shares without par
value are to be converted or the amount of any such deficiency is
transferred from surplus to stated capital.
C. (1) The board of directors of a corporation registered as an
open-end company under the Investment Company Act may:
(a) establish classes of shares and series of unissued shares of any
class by fixing and determining the designations, preferences,
limitations, and relative rights, including voting rights, of the
shares of any class or series so established to the same extent that
the designations, preferences, limitations, and relative rights
could be stated if fully set forth in the articles of incorporation;
and
(b) increase or decrease the aggregate number of shares or the
number of shares of, or eliminate and remove from the articles of
incorporation, a class or series of shares that the corporation has
authority to issue, unless a provision has been included in the
articles of incorporation of the corporation after September 1,
1993, expressly prohibiting those actions by the board of
directors. The board of directors may not:
(i) decrease the number of shares within a class or series to less
than the number of shares of that class or series that are then
outstanding; or
(ii) eliminate or remove from the articles of incorporation any
reference to any class or series of which shares are then
outstanding.
To establish a class or series, the board of directors shall adopt a
resolution setting forth the designation of the class or series and
fixing and determining the designations, preferences, limitations,
and relative rights, including voting rights, of the class or
series. In order to increase or decrease the number of shares of,
or eliminate and remove from the articles of incorporation any
reference to, a class or series of shares, the board of directors
shall adopt a resolution fixing and determining the new number of
shares of each class or series in which the number of shares is
increased or decreased or eliminating the class or series and
removing references to the class or series from the articles of
incorporation. The shares of any eliminated series shall resume
the status of authorized but unissued shares of the class of shares
from which the series was established unless otherwise provided in
the resolution or the articles of incorporation.
(2) Before the first issuance of any shares of a class or series
established or increased or decreased by resolution adopted by the
board of directors under Subsection (1) of this section, and in
order to eliminate from the articles of incorporation a class or
series of shares and all references to the class or series contained
in the articles, the corporation shall file with the Secretary of
State a statement setting forth:
(a) the name of the corporation;
(b) if the statement relates to the establishment of a class or
series of shares, a copy of the resolution establishing and
designating the class or series and fixing and determining the
preferences, limitations, and relative rights of the class or
series;
(c) if the statement relates to an increase or decrease in the
number of shares of any class or series, a copy of the resolution
fixing and determining the new number of shares of each class or
series in which the number of shares is increased or decreased;
(d) if the statement relates to the elimination of a class or series
of shares and to the removal of all references to the class or
series from the articles of incorporation, a copy of the resolution
eliminating the class or series and removing all references to the
class or series from the articles of incorporation;
(e) the date of adoption of the resolution; and
(f) that the resolution was duly adopted by all necessary action on
the part of the corporation.
(3) The statement shall be executed on behalf of the corporation by
an officer. The original and a copy of the statement shall be
delivered to the Secretary of State. If the Secretary of State
finds that the statement conforms to law, when the appropriate
filing fee is paid as provided by law, the Secretary of State shall:
(a) endorse on the original and the copy the word "Filed," and the
month, day, and year of the filing of the statement;
(b) file the original in the Secretary of State's office; and
(c) return the copy to the corporation or its representative.
(4) On the filing of a statement by the Secretary of State, the
resolution establishing and designating the class or series and
fixing and determining the preferences, limitations, and relative
rights of the class or series, the resolution fixing the new number
of shares of each class or series in which the number of shares is
increased or decreased, or the resolution eliminating a class or
series and all references to the class or series from the articles
of incorporation, as appropriate, becomes an amendment of the
articles of incorporation. An amendment of the articles of
incorporation effected as provided by this Article is not subject
to the procedure to amend the articles contained in Article 4.02 of
this Act.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1488, ch. 545, Sec. 6, eff. Aug. 27, 1973;
Acts 1985, 69th Leg., ch. 128, Sec. 3, eff. May 20, 1985; Acts 1987,
70th Leg., ch. 93, Sec. 5, eff. Aug. 31, 1987; Acts 1989, 71st Leg.,
ch. 801, Sec. 3, eff. Aug. 28, 1989; Acts 1991, 72nd Leg. ch. 901,
Sec. 1, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec.
2.04, eff. Sept. 1, 1993.
Art. 2.13. Series of Shares Established by Board of Directors
A. If the articles of incorporation shall expressly vest such
authority in the board of directors, then the board of directors
shall have authority to establish series of unissued shares of any
class by fixing and determining the designations, preferences,
limitations, and relative rights, including voting rights, of the
shares of any series so established to the same extent that such
designations, preferences, limitations, and relative rights could
be stated if fully set forth in the articles of incorporation, but
subject to and within the limitations set forth in the articles of
incorporation. In order to establish a series, where authority so
to do is contained in the articles of incorporation, the board of
directors shall adopt a resolution setting forth the designation of
the series and fixing and determining the designations,
preferences, limitations and relative rights, including voting
rights, thereof or so much thereof as shall not be fixed and
determined by the articles of incorporation.
B. If the articles of incorporation shall expressly vest authority
in the board of directors to establish series of unissued shares of
a class and do not expressly restrict the board of directors from
increasing or decreasing the number of shares of such a series, then
the board of directors shall have authority to increase or decrease
the number of shares within each such series; provided, however,
that the board of directors may not decrease the number of shares
within a series to less than the number of shares within such series
that are then issued.
In order to so increase or decrease the number of shares of a
series, the board of directors shall adopt a resolution fixing and
determining the new number of shares of each series in which the
number of shares is increased or decreased. In case the number of
shares of a series shall be so decreased, the shares by which the
series is decreased shall resume the status of authorized but
unissued shares of the class of shares from which such series was
established, unless otherwise provided in the articles of
incorporation or the terms of such class or series.
C. If the articles of incorporation shall expressly vest authority
in the board of directors to establish series of unissued shares,
then if no shares of a series established by resolution of the board
of directors are outstanding, either because none were issued or
because no issued shares of such series remain outstanding or held
as treasury shares, the board of directors shall have authority to
eliminate from the articles of incorporation such series and all
references to such series contained therein. In order to eliminate
such series and such references from the articles of incorporation,
the board of directors shall adopt a resolution eliminating such
series and all reference to such series from the articles of
incorporation. The shares of any such eliminated series shall
resume the status of authorized but unissued shares of the class of
shares from which such series was established, unless otherwise
provided in the articles of incorporation.
D. Prior to the issuance of any shares of a series established by
resolution adopted by the board of directors, and prior to the
issuance of any shares of a series in which the number of shares has
been increased or decreased by resolution adopted by the board of
directors, if such issuance is the first issuance of shares of such
series since such resolution was adopted, and in order to eliminate
from the articles of incorporation a series of shares and all
references to such series contained therein, the corporation shall
file with the Secretary of State a statement setting forth:
(1) The name of the corporation.
(2) If the statement relates to the establishment of a series of
shares, a copy of the resolution establishing and designating the
series and fixing and determining the preferences, limitations, and
relative rights thereof.
(3) If the statement relates to an increase or decrease in the
number of shares of any series, a copy of the resolution fixing and
determining the new number of shares of each series in which the
number of shares is increased or decreased.
(4) If the statement relates to the elimination of a series of
shares and all references thereto from the articles of
incorporation, a copy of the resolution eliminating such series and
all references to such series from the articles of incorporation.
(5) The date of adoption of such resolution.
(6) That such resolution was duly adopted by all necessary action on
the part of the corporation.
E. If the articles of incorporation expressly authorize the board
of directors to establish series of unissued shares of a class and
if no shares of a series established by resolution of the board of
directors have been issued, the board of directors may amend the
designations, preferences, limitations, and relative rights,
including voting rights, of the series, unless otherwise provided
in the articles of incorporation. To amend the designations,
preferences, limitations, and relative rights of a series, the
board of directors shall adopt a resolution amending the
designations, preferences, limitations, and relative rights of the
series. Before the issuance of any shares of the series, the
corporation shall file with the secretary of state a statement
setting forth:
(1) The name of the corporation.
(2) That no shares of the series have been issued.
(3) If the designation of the series is being changed, a statement
of the original designation and the new designation.
(4) A copy of the resolution amending the designations,
preferences, limitations, or relative rights of the series.
(5) The date of adoption of the resolution.
(6) That the resolution was adopted by all necessary action on the
part of the corporation.
F. A statement filed in accordance with Section D or E of this
article shall be executed on behalf of the corporation by an
officer. The original and a copy of the statement shall be
delivered to the Secretary of State. If the Secretary of State
finds that such statement conforms to law, he shall, when the
appropriate filing fee is paid as prescribed by law:
(1) Endorse on the original and the copy the word "Filed," and the
month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to the corporation or its representative.
G. Upon the filing of a statement described in Section D or E of this
article by the Secretary of State, the resolution establishing and
designating the series and fixing and determining the preferences,
limitations, and relative rights thereof, the resolution fixing the
new number of shares of each series in which the number of shares is
increased or decreased, the resolution eliminating a series and all
references to such series from the articles of incorporation, or
the resolution amending the preferences, limitations, and relative
rights of the series, as appropriate, shall become an amendment of
the articles of incorporation. The filing of the statement or the
filing of a restated certificate of incorporation under Article
4.07 of this Act does not prohibit the board of directors from
subsequently adopting a resolution as authorized by this article.
An amendment of the articles of incorporation effected pursuant to
this Article 2.13 is not subject to the procedure to amend the
articles of incorporation contained in Article 4.02 of this Act.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1489, ch. 545, Sec. 7, eff. Aug. 27, 1973;
Acts 1979, 66th Leg., p. 223, ch. 120, Sec. 25, eff. May 9, 1979;
Acts 1981, 67th Leg., p. 838, ch. 297, Sec. 13, eff. Aug. 31, 1981;
Acts 1985, 69th Leg., ch. 128, Sec. 4, eff. May 20, 1985; Acts 1987,
70th Leg., ch. 93, Sec. 6, eff. Aug. 31, 1987; Acts 1989, 71st Leg.,
ch. 801, Sec. 4, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901,
Sec. 2, eff. Aug. 26, 1991.
Sec. E amended by Acts 2003, 78th Leg., ch. 238, Sec. 5, eff. Sept.
1, 2003; Sec. F amended by Acts 2003, 78th Leg., ch. 238, Sec. 5,
eff. Sept. 1, 2003; Sec. G added by Acts 2003, 78th Leg., ch. 238,
Sec. 5, eff. Sept. 1, 2003.
Art. 2.14. Subscription for Shares
A. Unless otherwise provided therein, a subscription for shares of
a corporation to be organized may not be revoked within six (6)
months, except with the consent of all other subscribers.
B. Repealed by Acts 2003, 78th Leg., ch. 238, Sec. 44(1).
C. Acceptance of a subscription shall be effected by a resolution of
acceptance by the board of directors or by a written memorandum of
acceptance executed by one authorized by the board of directors and
delivered to the subscriber or his assignee.
D. Subscriptions for shares, whether made before or after the
organization of a corporation, shall be paid in full at such time,
or in such installments and at such times, as shall be determined by
the board of directors unless the payment terms are specified by the
subscription. Unless otherwise specified by the subscription, a
call made by the board of directors for payment on subscriptions
shall be uniform as to all shares of the same class or as to all
shares of the same series, as the case may be, as far as
practicable. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to
collect the amount due in the same manner as any debt due the
corporation or declare the subscription forfeited if the amount due
remains unpaid for a period of twenty (20) days after written demand
has been made therefor to the subscriber. If mailed, such written
demand shall be deemed to be made when deposited in the United
States mail in a sealed envelope addressed to the subscriber at his
last post office address known to the corporation, with postage
thereon prepaid. The effect of such declaration of forfeiture shall
be to terminate all the rights and obligations of the subscriber as
such, but the corporation may retain any amount previously paid on
the subscription.
E. Before acquiring shares in a corporation, a person may commit to
act in a specified manner with respect to the shares after the
acquisition, including with respect to the voting of the shares or
the retention or disposition of the shares. To be binding, the
commitment must be in writing and be signed by the person acquiring
the shares. A written commitment entered into under this section is
a contract between the shareholder and the corporation.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Sec. B repealed by Acts 2003, 78th Leg., ch. 238, Sec. 44(1), eff.
Sept. 1, 2003; Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec.
6, eff. Sept. 1, 2003; Sec. D amended by Acts 2003, 78th Leg., ch.
238, Sec. 6, eff. Sept. 1, 2003; Sec. E added by Acts 2003, 78th
Leg., ch. 238, Sec. 6, eff. Sept. 1, 2003.
Art. 2.14-1. Stock Rights, Options, and Convertible Indebtedness
A. Subject to any limitations in its articles of incorporation, a
corporation may create and issue, whether or not in connection with
the issuance and sale of any of its shares or other securities, (1)
rights or options entitling the holders thereof to purchase or
receive from the corporation any of its shares of any class, classes
or series or other securities and (2) indebtedness convertible into
any of its shares of any class, classes or series or other
securities.
B. The terms of rights or options may:
(1) prohibit or limit the exercise, transfer, or receipt of the
rights or options by certain persons or classes of persons,
including:
(a) a person who beneficially owns or offers to acquire a specified
number or percentage of the outstanding common shares, voting
power, or other securities of the corporation; or
(b) a transferee of a person described by Paragraph (a) of this
subsection; or
(2) invalidate the rights or options held by a person or transferee
described by Subsection (1) of this section.
C. Such rights, options or indebtedness shall be evidenced in such
manner as the board of directors shall approve and, subject to the
provisions of the articles of incorporation, shall set forth:
(1) in the case of rights or options, the terms upon which, the time
or times within which, and any consideration, including a formula
by which the consideration may be determined, for which such shares
may be purchased or received from the corporation upon the exercise
of any such right or option; or
(2) in the case of convertible indebtedness, the terms and
conditions upon which, the time or times within which, and the
conversion ratio or ratios at which, such indebtedness may be
converted into such shares.
D. In the absence of fraud in the transaction, the judgment of the
board of directors as to the adequacy of the consideration received
for such rights, options, or indebtedness shall be conclusive;
provided that rights or options may be issued by a corporation to
its shareholders, employees, or directors without consideration
if, in the judgment of the board of directors, the issuance of those
rights or options is in the interests of the corporation. The
consideration to be received for any shares having a par value,
other than treasury shares, to be issued upon the exercise of such
rights or options shall not be less than the par value thereof. No
privilege of conversion shall be conferred upon, or altered in
respect to, any indebtedness that would result in receipt by the
corporation of less than the minimum consideration required to be
received upon issuance of the shares. The consideration for shares
issued upon the exercise of convertible indebtedness shall be that
provided in Section E of Article 2.15 of this Act. The
consideration for shares issued upon the exercise of rights or
options shall be that provided in Section F of Article 2.15 of this
Act.
E. Except as provided by Section F of this article, the authority to
grant, amend, redeem, extend, or replace the rights or options on
behalf of a corporation is vested exclusively in the board of
directors of the corporation. A bylaw may not require the board to
grant, amend, redeem, extend, or replace the rights or options.
F. The terms of the rights or options or the agreement or plan under
which the rights or options are issued may provide that the board of
directors may by resolution authorize one or more officers of the
corporation to do one or both of the following:
(1) designate officers and employees of the corporation or of any of
its subsidiaries to receive rights or options created by the
corporation; or
(2) determine the number of the rights or options to be received by
the officers and employees.
G. A resolution adopted under Section F of this article authorizing
an officer of the corporation to designate recipients of rights or
options shall specify the total number of rights or options the
officer may award. The board of directors may not authorize an
officer to designate himself or herself as a recipient of any rights
or options.
Added by Acts 1973, 63rd Leg., p. 1489, ch. 545, Sec. 8, eff. Aug.
27, 1973. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 5, eff.
Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 3, eff. Aug. 26,
1991.
Amended by Acts 2003, 78th Leg., ch. 238, Sec. 7, eff. Sept. 1,
2003.
Art. 2.15. Consideration for Shares
A. Shares having a par value may be issued for such consideration,
not less than the par value thereof, as shall be fixed from time to
time by the board of directors or, in the case of shares issued by a
converted entity, in the plan of conversion or, in the case of a
corporation created by a merger, in the plan of merger.
B. Shares without par value may be issued for such consideration, as
may be fixed:
(1) by the board of directors from time to time, unless the articles
of incorporation reserve to the shareholders the right to fix the
consideration, in which case, prior to the issuance of such shares,
the shareholders shall fix the consideration to be received for
such shares, by a vote of the holders of a majority of all shares
entitled to vote thereon;
(2) by a plan of conversion, in the case of shares to be issued
pursuant to the plan of conversion by a corporation that is a
converted entity; or
(3) by a plan of merger, in the case of shares to be issued pursuant
to the plan of merger by a corporation created pursuant to the plan
of merger.
C. Treasury shares may be disposed of by the corporation for such
consideration as may be fixed from time to time by the board of
directors.
D. That part of the surplus of a corporation which is transferred to
stated capital upon the issuance of shares as a share dividend shall
be deemed to be the consideration for the issuance of such shares.
E. In the event of the issuance of shares by a corporation upon the
conversion or exchange of its indebtedness or shares, the
consideration for the shares so issued shall be:
(1) The principal sum of, and accrued interest on, the indebtedness
so exchanged or converted, or the stated capital then represented
by the shares so exchanged or converted, and
(2) That part of surplus, if any, transferred to stated capital upon
the issuance of shares for the shares so exchanged or converted, and
(3) Any additional consideration paid to the corporation upon the
issuance of shares for the indebtedness or shares so exchanged or
converted.
F. In the event of the issuance of shares by a corporation upon the
exercise of rights or options entitling the holders thereof to
purchase or receive from the corporation any of its shares, the
consideration for the shares so issued shall be:
(1) The consideration, if any, received by the corporation for such
rights or options, and
(2) The consideration, if any, received by the corporation for the
issuance of shares upon the exercise of such rights or options.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1490, ch. 545, Sec. 9, eff. Aug. 27, 1973;
Acts 1989, 71st Leg., ch. 801, Sec. 6, eff. Aug. 28, 1989; Acts
1997, 75th Leg., ch. 375, Sec. 5, eff. Sept. 1, 1997.
Art. 2.16. Payment for Shares
A. The board of directors or, in the case of shares to be issued
pursuant to a plan of conversion by a corporation that is a
converted entity, the plan of conversion, or, in the case of shares
to be issued pursuant to a plan of merger by a corporation created
pursuant to the plan of merger, the plan of merger may authorize
shares to be issued for consideration consisting of any tangible or
intangible benefit to the corporation or other property of any kind
or nature, including cash, promissory notes, services performed,
contracts for services to be performed, other securities of the
corporation, or securities of any other corporation, domestic or
foreign, or other entity. In addition, shares may be issued
pursuant to a plan of conversion or plan of merger in the manner and
for such consideration as may be provided for in the plan of
conversion or plan of merger. Shares may not be issued until the
full amount of the consideration, fixed as provided by law, has been
paid or delivered as required in connection with the authorization
of the shares. When such consideration shall have been so paid or
delivered, the shares shall be deemed to have been issued and the
subscriber or shareholder entitled to receive such issue shall be a
shareholder with respect to such shares, and the shares shall be
considered fully paid and non-assessable.
B. In the absence of fraud in the transaction, the judgment of the
board of directors or the shareholders or the party or parties
approving the plan of conversion or the plan of merger, as the case
may be, as to the value and sufficiency of the consideration
received for shares shall be conclusive.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1971, 62nd Leg., p. 1173, ch. 276, Sec. 1, eff. May 19, 1971;
Acts 1983, 68th Leg., p. 3150, ch. 540, Sec. 4, eff. Aug. 29, 1983;
Acts 1991, 72nd Leg., ch. 901, Sec. 4, eff. Aug. 26, 1991; Acts
1997, 75th Leg., ch. 375, Sec. 6, eff. Sept. 1, 1997.
Art. 2.18. Expenses of Organization, Reorganization, and Financing
A. The reasonable charges and expenses of organization or
reorganization of a corporation, and the reasonable expenses of and
compensation for the sale or underwriting of its shares, may be paid
or allowed by such corporation out of the consideration received by
it in payment for its shares without thereby rendering such shares
not fully paid and non-assessable.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 1.
Art. 2.19. Certificates Representing Shares
A. A corporation shall deliver certificates representing shares to
which shareholders are entitled, or the shares of a corporation may
be uncertificated shares. Unless otherwise provided by the
articles of incorporation or bylaws, the board of directors of a
corporation may provide by resolution that some or all of any or all
classes and series of its shares shall be uncertificated shares,
provided that such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the
corporation. Certificates representing shares shall be signed by
such officer or officers as the bylaws of the corporation shall
prescribe, and may be sealed with the seal of the corporation or a
facsimile thereof. The signatures of such officer or officers as
the bylaws of the corporation shall prescribe upon a certificate
may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it
may be issued by the corporation with the same effect as if he were
such officer at the date of its issuance.
B. In the event a corporation is authorized to issue shares of more
than one class or series, each certificate representing shares
issued by such corporation (1) shall conspicuously set forth on the
face or back of the certificate a full statement of all the
designations, preferences, limitations, and relative rights of the
shares of each class or series to the extent they have been fixed
and determined and the authority of the board of directors to fix
and determine the designations, preferences, limitations, and
relative rights of subsequent series; or (2) shall conspicuously
state on the face or back of the certificate that (a) such a
statement is set forth in the articles of incorporation on file in
the office of the Secretary of State and (b) the corporation will
furnish a copy of such statement to the record holder of the
certificate without charge on written request to the corporation at
its principal place of business or registered office. In the event
a corporation has by its articles of incorporation limited or
denied the preemptive right of shareholders to acquire unissued or
treasury shares of the corporation, each certificate representing
shares issued by such corporation (1) shall conspicuously set forth
on the face or back of the certificate a full statement of the
limitation or denial of preemptive rights contained in the articles
of incorporation, or (2) shall conspicuously state on the face or
back of the certificate that (a) such a statement is set forth in
the articles of incorporation on file in the office of the Secretary
of State and (b) the corporation will furnish a copy of such
statement to the record holder of the certificate without charge on
request to the corporation at its principal place of business or
registered office.
C. Each certificate representing shares shall state upon the face
thereof:
(1) That the corporation is organized under the laws of this State.
(2) The name of the person to whom issued.
(3) The number and class of shares and the designation of the
series, if any, which such certificate represents.
(4) The par value of each share represented by such certificate, or
a statement that the shares are without par value.
D. In accordance with Chapter 8, Business & Commerce Code, a
corporation shall, after the issuance or transfer of uncertificated
shares, send to the registered owner of uncertificated shares a
written notice containing the information required to be set forth
or stated on certificates pursuant to this Act. Except as otherwise
expressly provided by law, the rights and obligations of the
holders of uncertificated shares and the rights and obligations of
the holders of certificates representing shares of the same class
and series shall be identical. No share shall be issued until the
consideration therefor, fixed as provided by law, has been fully
paid.
E. No requirement of this Act with respect to matters to be set
forth on certificates representing shares of a corporation shall
apply to or affect certificates outstanding, when such requirement
first becomes applicable to such certificates; but such
requirements shall apply to all certificates thereafter issued
whether in connection with an original issue of shares, a transfer
of shares or otherwise. No certificate representing shares in
which any provision of the articles of incorporation, or by-laws,
or resolution, or agreement restricting the transfer of shares,
shall have been incorporated by reference pursuant to the
provisions of Section F of this Article prior to its amendment shall
be invalidated or affected by such amendment; but such
incorporation by reference shall not be used on certificates
hereafter issued whether in connection with an original issue of
shares, a transfer of shares, or otherwise.
F. Repealed by Acts 1975, 64th Leg., p. 322, ch. 134, Sec. 22, eff.
Sept. 1, 1975.
G. In the event any restriction on the transfer, or registration of
the transfer, of shares shall be imposed or agreed to by the
corporation, as permitted by this Act, each certificate
representing shares so restricted (1) shall conspicuously set forth
a full or summary statement of the restriction on the face of the
certificate, or (2) shall set forth such statement on the back of
the certificate and conspicuously refer to the same on the face of
the certificate, or (3) shall conspicuously state on the face or
back of the certificate that such a restriction exists pursuant to a
specified document and (a) that the corporation will furnish to the
record holder of the certificate without charge upon written
request to the corporation at its principal place of business or
registered office a copy of the specified document, or (b) if such
document is one required or permitted to be and has been filed under
this Act, that such specified document is on file in the office of
the Secretary of State and contains a full statement of such
restriction. Unless such document was on file in the office of the
Secretary of State at the time of the request, a corporation which
fails within a reasonable time to furnish the record holder of a
certificate upon such request and without charge a copy of the
specified document shall not be permitted thereafter to enforce its
rights under the restriction imposed on the shares represented by
such certificate.
H. Repealed by Acts 1975, 64th Leg., p. 322, ch. 134, Sec. 22, eff.
Sept. 1, 1975.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 2; Acts 1957, 55th Leg.,
p. 111, ch. 54, Sec. 2; Acts 1973, 63rd Leg., p. 1490, ch. 545, Sec.
10, eff. Aug. 27, 1973; Acts 1975, 64th Leg., p. 305, ch. 134, Sec.
2, 3, 22, eff. Sept. 1, 1975; Acts 1983, 68th Leg., p. 2565, ch.
442, Sec. 3, eff. Sept. 1, 1983; Acts 1985, 69th Leg., ch. 128, Sec.
6, eff. May 20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 7, eff.
Aug. 31, 1987; Acts 1991, 72nd Leg., ch. 901, Sec. 5, eff. Aug. 26,
1991.
Art. 2.20. Issuance of Fractional Shares or Scrip
A. A corporation may (1) issue fractions of a share, either
represented by a certificate or uncertificated, (2) arrange for the
disposition of fractional interests by those entitled thereto, (3)
pay in cash the fair value of fractions of a share as of the time
when those entitled to receive such fractions are determined, or
(4) issue scrip in registered or bearer form which shall entitle the
holder to receive a certificate for a full share or an
uncertificated full share upon the surrender of such scrip
aggregating a full share. A certificate for a fractional share or
an uncertificated fractional share shall, but scrip shall not
unless otherwise provided therein, entitle the holder to exercise
voting rights, to receive dividends thereon, and to participate in
any of the assets of the corporation in the event of liquidation.
The board of directors may cause scrip to be issued subject to the
condition that it shall become void if not exchanged for
certificates representing full shares or uncertificated full
shares before a specified date, or subject to the condition that the
shares for which such scrip is exchangeable may be sold by the
corporation and the proceeds thereof distributed to the holders of
scrip, or subject to any other conditions which the board of
directors may determine advisable.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1492, ch. 545, Sec. 11, eff. Aug. 27, 1973;
Acts 1983, 68th Leg., p. 2566, ch. 442, Sec. 4, eff. Sept. 1, 1983.
Art. 2.21. Liability of Subscribers and Shareholders
A. A holder of shares, an owner of any beneficial interest in
shares, or a subscriber for shares whose subscription has been
accepted, or any affiliate thereof or of the corporation, shall be
under no obligation to the corporation or to its obligees with
respect to:
(1) such shares other than the obligation, if any, of such person to
pay to the corporation the full amount of the consideration, fixed
in compliance with Article 2.15 of this Act, for which such shares
were or are to be issued;
(2) any contractual obligation of the corporation or any matter
relating to or arising from the obligation on the basis that the
holder, owner, subscriber, or affiliate is or was the alter ego of
the corporation, or on the basis of actual fraud or constructive
fraud, a sham to perpetrate a fraud, or other similar theory, unless
the obligee demonstrates that the holder, owner, subscriber, or
affiliate caused the corporation to be used for the purpose of
perpetrating and did perpetrate an actual fraud on the obligee
primarily for the direct personal benefit of the holder, owner,
subscriber, or affiliate; or
(3) any obligation of the corporation on the basis of the failure of
the corporation to observe any corporate formality, including
without limitation: (a) the failure to comply with any requirement
of this Act or of the articles of incorporation or bylaws of the
corporation; or (b) the failure to observe any requirement
prescribed by this Act or by the articles of incorporation or bylaws
for acts to be taken by the corporation, its board of directors, or
its shareholders.
B. The liability of a holder, owner, or subscriber of shares of a
corporation or any affiliate thereof or of the corporation for an
obligation that is limited by Section A of this article is exclusive
and preempts any other liability imposed on a holder, owner, or
subscriber of shares of a corporation or any affiliate thereof or of
the corporation for that obligation under common law or otherwise,
except that nothing contained in this article shall limit the
obligation of a holder, owner, subscriber, or affiliate to an
obligee of the corporation when:
(1) the holder, owner, subscriber, or affiliate has expressly
assumed, guaranteed, or agreed to be personally liable to the
obligee for the obligation; or
(2) the holder, owner, subscriber, or affiliate is otherwise liable
to the obligee for the obligation under this Act or another
applicable statute.
C. Any person becoming an assignee or transferee of certificated
shares or of uncertificated shares or of a subscription for shares
in good faith and without knowledge or notice that the full
consideration therefor has not been paid shall not be personally
liable to the corporation or its creditors for any unpaid portion of
such consideration.
D. An executor, administrator, conservator, guardian, trustee,
assignee for the benefit of creditors, or receiver shall not be
personally liable as a holder of or subscriber to shares of a
corporation, but the estate and funds in his hands shall be so
liable.
E. No pledgee or other holder of shares as collateral security shall
be personally liable as a shareholder.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1983, 68th Leg., p. 2566, ch. 442, Sec. 5, eff. Sept. 1, 1983;
Acts 1989, 71st Leg., ch. 217, Sec. 1, eff; Aug. 28, 1989; Acts
1989, 71st Leg., ch. 801, Sec. 7, eff. Aug. 28, 1989; Acts 1993,
73rd Leg., ch. 215, Sec. 2.05, eff. Sept; 1, 1993; Acts 1997, 75th
Leg., ch. 375, Sec. 7, eff; Sept; 1, 1997.
Art. 2.22. Transfer of Shares and Other Securities and Restrictions
on Transfer
A. The shares and other securities of a corporation shall be
personal property for all purposes and shall be transferable in
accordance with the provisions of Chapter 8--Investment
Securities--of the Business & Commerce Code, as amended, except as
otherwise provided in this Act.
B. A restriction on the transfer or registration of transfer of a
security, or on the amount of the corporation's securities that may
be owned by any person or group of persons, may be imposed by the
articles of incorporation, or by-laws, or a written agreement among
any number of the holders of such securities, or a written agreement
among any number of the holders and the corporation provided a
counterpart of such agreement shall be placed on file by the
corporation at its principal place of business or its registered
office and shall be subject to the same right of examination by a
shareholder of the corporation, in person or by agent, attorney or
accountant, as are the books and records of the corporation. No
restriction so imposed shall be valid with respect to any security
issued prior to the adoption of the restriction unless the holder of
the security voted in favor of the restriction or is a party to the
agreement imposing it.
C. Any restriction on the transfer or registration of transfer of a
security of a corporation, if reasonable and noted conspicuously on
the certificate or other instrument representing the security or,
in the case of an uncertificated security, if reasonable and if
notation of the restriction is contained in the notice sent
pursuant to Section D of Article 2.19 of this Act with respect to
the security, shall be specifically enforceable against the holder
of the restricted security or any successor or transferee of the
holder. Unless noted conspicuously on the certificate or other
instrument representing the security or, in the case of an
uncertificated security, unless notation of the restriction is
contained in the notice sent pursuant to Section D of Article 2.19
of this Act with respect to the security, a restriction, even though
otherwise enforceable, is ineffective against a transferee for
value without actual knowledge of the restriction at the time of the
transfer or against any subsequent transferee (whether or not for
value), but such a restriction shall be specifically enforceable
against any other person who is not a transferee for value from and
after the time that the person acquires actual knowledge of the
existence of the restriction.
D. In particular and without limiting the general power granted in
Sections B and C of this Article to impose reasonable restrictions,
a restriction on the transfer or registration of transfer of
securities of a corporation shall be valid if it reasonably:
(1) Obligates the holders of the restricted securities to offer to
the corporation or to any other holders of securities of the
corporation or to any other person or to any combination of the
foregoing, a prior opportunity, to be exercised within a reasonable
time, to acquire the restricted securities; or
(2) Obligates the corporation to the extent permitted by this Act or
any holder of securities of the corporation or any other person, or
any combination of the foregoing, to purchase the securities which
are the subject of an agreement respecting the purchase and sale of
the restricted securities; or
(3) Requires the corporation or the holders of any class of
securities of the corporation to consent to any proposed transfer
of the restricted securities or to approve the proposed transferee
of the restricted securities for the purpose of preventing
violations of federal or state laws; or
(4) Prohibits the transfer of the restricted securities to
designated persons or classes of persons, and such designation is
not manifestly unreasonable; or
(5) Maintains the status of the corporation as an electing small
business corporation under Subchapter S of the United States
Internal Revenue Code, maintains any other tax advantage to the
corporation, or maintains the status of the corporation as a close
corporation under Part Twelve of this Act; or
(6) Obligates the holder of the restricted securities to sell or
transfer an amount of restricted securities to the corporation, to
any other holders of securities of the corporation, or to any other
person or combination of persons; or
(7) Causes or results in the automatic sale or transfer of an amount
of restricted securities to the corporation, to any other holders
of securities of the corporation, or to any other person or
combination of persons.
E. A corporation that has adopted a bylaw, or is a party to an
agreement, restricting the transfer of its shares or other
securities may file such bylaw or agreement as a matter of public
record with the Secretary of State, as follows:
(1) The corporation shall file a copy of the bylaw or agreement in
the office of the Secretary of State together with an attached
statement setting forth:
(a) the name of the corporation;
(b) that the copy of the bylaw or agreement is a true and correct
copy of the same; and
(c) that such filing has been duly authorized by the board of
directors or, in the case of a close corporation that, in
conformance with Part Twelve of this Act, is managed in some other
manner pursuant to a shareholders' agreement, by the shareholders
or by the persons empowered by the agreement to manage its business
and affairs.
(2) Such statement shall be executed on behalf of the corporation by
an officer. The original and a copy of the statement shall be
delivered to the Secretary of State with copies of such bylaw or
agreement restricting the transfer of shares or other securities
attached thereto. If the Secretary of State finds that such
statement conforms to law and the appropriate filing fee has been
paid as prescribed by law, he shall:
(a) endorse on the original and the copy the word "Filed", and the
month, day, and year of the filing thereof;
(b) file the original in his office; and
(c) return the copy to the corporation or its representative.
(3) After the filing of such statement by the Secretary of State,
the bylaw or agreement restricting the transfer of shares or other
securities shall become a matter of public record and the fact of
such filing shall be stated on any certificate representing the
shares or other securities so restricted if required by Section G,
Article 2.19, of this Act.
F. A corporation that is a party to an agreement restricting the
transfer of its shares or other securities may make such agreement
part of its articles of incorporation without restating the
provisions of such agreement therein by complying with the
provisions of Part Four of this Act for amendment of the articles of
incorporation. If such agreement shall alter any provision of the
original or amended articles of incorporation, the articles of
amendment shall identify by reference or description the altered
provision. If such agreement is to be an addition to the original
or amended articles of incorporation, the articles of amendment
shall state that fact. The articles of amendment shall have
attached thereto a copy of the agreement restricting the transfer
of shares or other securities, and shall state that the attached
copy of such agreement is a true and correct copy of the same and
that its inclusion as part of the articles of incorporation has been
duly authorized in the manner required by this Act to amend the
articles of incorporation.
G. When shares are registered on the books of a corporation in the
names of two or more persons as joint owners with the right of
survivorship, after the death of a joint owner and before the time
that the corporation receives actual written notice that parties
other than the surviving joint owner or owners claim an interest in
the shares or any distributions thereon, the corporation may record
on its books and otherwise effect the transfer of those shares to
any person, firm, or corporation (including that surviving joint
owner individually) and pay any distributions made in respect of
those shares, in each case as if the surviving joint owner or owners
were the absolute owners of the shares. A corporation permitting
such a transfer by and making any distribution to such a surviving
joint owner or owners before the receipt of written notice from
other parties claiming an interest in those shares or distributions
is discharged from all liability for the transfer or payment so
made; provided, however, that the discharge of the corporation
from liability and the transfer of full legal and equitable title of
the shares in no way affects, reduces, or limits any cause of action
existing in favor of any owner of an interest in those shares or
distributions against the surviving owner or owners.
H. A restriction on the transfer or the registration of a transfer
of the securities of a corporation, the amount of securities of a
corporation, or the amount of securities of a corporation that may
be owned by a person or group of persons for any of the following
purposes is conclusively presumed to be for a reasonable purpose:
(1) maintaining a local, state, federal, or foreign tax advantage
to the corporation or its shareholders, including:
(a) maintaining the corporation's status as an electing small
business corporation under Subchapter S of the Internal Revenue
Code of 1986;
(b) maintaining or preserving any tax attribute, including net
operating losses; or
(c) qualifying or maintaining the qualification of the corporation
as a real estate investment trust under the Internal Revenue Code of
1986 or regulations adopted under the Internal Revenue Code of
1986; or
(2) maintaining a statutory or regulatory advantage or complying
with a statutory or regulatory requirement under applicable local,
state, federal, or foreign law.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 3, 4; Acts 1967, 60th
Leg., p. 1719, ch. 657, Sec. 5, eff. June 17, 1967; Acts 1973, 63rd
Leg., p. 1493, ch. 545, Sec. 12, eff. Aug. 27, 1973; Acts 1975, 64th
Leg., p. 306, ch. 134, Sec. 4, 5, eff. Sept. 1, 1975; Acts 1979,
66th Leg., p. 223, ch. 120, Sec. 26, eff. May 9, 1979; Acts 1981,
67th Leg., p. 838, ch. 297, Sec. 14, eff. Aug. 31, 1981; Acts 1981,
67th Leg., p. 3113, ch. 818, Sec. 3, eff. Aug. 31, 1981; Acts 1985,
69th Leg., ch. 128, Sec. 7, eff. May 20, 1985; Acts 1987, 70th Leg.,
ch. 93, Sec. 8, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801,
Sec. 8, eff. Aug. 28, 1989.
Sec. B amended by Acts 2003, 78th Leg., ch. 238, Sec. 8, eff. Sept.
1, 2003; Sec. D amended by Acts 2003, 78th Leg., ch. 238, Sec. 8,
eff. Sept. 1, 2003; Sec. H added by Acts 2003, 78th Leg., ch. 238,
Sec. 8, eff. Sept. 1, 2003.
Art. 2.22-1. Shareholders' Preemptive Rights
A. Except as provided by Section F of this article, the shareholders
of a corporation shall not have a preemptive right to acquire
additional, unissued, or treasury shares of the corporation, or
securities of the corporation convertible into or carrying a right
to subscribe to or acquire shares, except to the extent provided by
the articles of incorporation or by agreement.
B. The articles of incorporation may provide that the shareholders
of a corporation shall have a preemptive right by including a
statement that the corporation "elects to have a preemptive right"
or a similar statement. Section C of this article applies to the
shareholders' preemptive right except as otherwise provided by the
articles of incorporation.
C. (1) If the shareholders of a corporation have a preemptive right
under this article, the shareholders have a preemptive right to
acquire proportional amounts of the corporation's additional
unissued or treasury shares, or securities of the corporation
convertible into or carrying a right to subscribe to or acquire
shares on the decision of the corporation's board of directors to
issue the shares.
(2) Unless otherwise provided in the articles of incorporation, no
preemptive right shall exist with respect to:
(a) shares issued or granted to a director, officer, agent, or
employee of the corporation or a subsidiary or affiliate of the
corporation;
(b) shares issued or granted to satisfy conversion or option rights
created to provide compensation to a director, officer, agent, or
employee of the corporation or a subsidiary or affiliate of the
corporation;
(c) shares authorized in the corporation's articles of
incorporation that are issued not later than the 180th day after the
effective date of the corporation's formation; or
(d) shares sold, issued, or granted by the corporation for
consideration other than money.
(3) Holders of shares of any class or series without general voting
rights but that is preferred as to distributions shall not be
entitled to any preemptive right.
(4) Holders of shares of any class or series with general voting
rights that is not preferred as to distributions shall not be
entitled to any preemptive right to shares of any class or series
that is preferred as to distributions or to any obligations, unless
the shares with preferential rights or obligations are convertible
into or carry a right to subscribe to or acquire shares without
preferential rights.
(5) The preemptive right shall be only an opportunity to acquire
shares or other securities under such uniform terms and conditions
as the board of directors may fix for the purpose of providing a
fair and reasonable opportunity for the exercise of such right.
(6) For a one-year period beginning on the date on which the shares
are offered to shareholders, shares subject to preemptive rights
that are not acquired by a shareholder may be issued to a person for
consideration set by the corporation's board of directors that is
not lower than the consideration set for the exercise of preemptive
rights. An offer at a lower consideration or after the expiration
of the period prescribed by this subsection is subject to the
shareholders' preemptive rights.
D. An action may not be brought against the corporation, its
directors, officers, or agents, any holder of shares or securities
of the corporation, or any owner of any beneficial interest in
shares or securities of the corporation on account of any violation
of any preemptive right of a shareholder to acquire any shares of
the corporation, or any securities of the corporation convertible
into or carrying a right to subscribe to or acquire shares, unless
such action is brought within the earlier of:
(1) One year after the date on which written notice is given to each
shareholder whose preemptive right was violated by the issuance,
sale, or other distribution of those shares or securities, which
notice shall be mailed to the shareholder at the address of the
shareholder as it appears on the share transfer records of the
corporation and shall inform the shareholder that the issuance,
sale, or other distribution of those shares or securities was in
violation of the preemptive right of the shareholder; and
(2) Four years after the date on which the corporation issued, sold,
or otherwise distributed those shares or securities or August 28,
1989, whichever is later.
E. In the event of a transfer or other disposition of shares by any
shareholder of a corporation whose preemptive right to acquire
shares of the corporation, or securities of the corporation
convertible into or carrying a right to subscribe to or acquire
shares, shall have been violated, the transferee or successor of
the shareholder shall not acquire the preemptive right, or any
right or claim based on that violation, unless the shareholder
shall have assigned the preemptive right to the transferee or
successor.
F. Subject to the articles of incorporation, shareholders of a
corporation incorporated before September 1, 2003, have a
preemptive right to acquire additional unissued or treasury shares
of the corporation, or securities of the corporation convertible
into or carrying a right to subscribe to or acquire shares, to the
extent provided by Sections C, D, and E of this article. After
September 1, 2003, a corporation may limit or deny the preemptive
right of the shareholders of the corporation by amending the
corporation's articles of incorporation.
G. A shareholder may waive a preemptive right granted to the
shareholder. A written waiver of a preemptive right is irrevocable
regardless of whether the waiver is supported by consideration.
Added by Acts 1973, 63rd Leg., p. 1494, ch. 545, Sec. 13, eff. Aug.
27, 1973. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 9, eff.
Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 6, eff. Aug. 26,
1991.
Amended by Acts 2003, 78th Leg., ch. 238, Sec. 9, eff. Sept. 1,
2003.
Art. 2.23. Bylaws
A. The initial bylaws of a corporation shall be adopted by its board
of directors.The bylaws may contain any provisions for the
regulation and management of the affairs of the corporation not
inconsistent with law or the articles of incorporation.
B. A corporation's board of directors may amend or repeal the
corporation's bylaws, or adopt new bylaws, unless:
(1) the articles of incorporation or this Act reserves the power
exclusively to the shareholders in whole or part; or
(2) the shareholders in amending, repealing, or adopting a
particular bylaw expressly provide that the board of directors may
not amend or repeal that bylaw.
C. Unless the articles of incorporation or a bylaw adopted by the
shareholders provides otherwise as to all or some portion of a
corporation's bylaws, a corporation's shareholders may amend,
repeal, or adopt the corporation's bylaws even though the bylaws
may also be amended, repealed, or adopted by its board of directors.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p.
