BUSINESS ORGANIZATIONS CODE
CHAPTER 21. FOR-PROFIT CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
§ 21.001. APPLICABILITY OF CHAPTER. This chapter
applies only to a:
(1) domestic for-profit corporation formed under this
code; and
(2) foreign for-profit corporation that is
transacting business in this state, regardless of whether the
foreign corporation is registered to transact business in this
state.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.002. DEFINITIONS. In this chapter:
(1) "Authorized share" means a share of any class the
corporation is authorized to issue.
(2) "Board of directors" includes each person who is
authorized to perform the functions of the board of directors under
a shareholders' agreement as authorized by this chapter.
(3) "Cancel," with respect to an authorized share of a
corporation, means the restoration of an issued share to the status
of an authorized but unissued share.
(4) "Consuming assets corporation" means a
corporation that:
(A) is engaged in the business of exploiting
assets subject to depletion or amortization;
(B) states in its certificate of formation that
it is a consuming assets corporation;
(C) includes the phrase "a consuming assets
corporation" as part of its official corporate name and gives the
phrase equal prominence with the rest of the corporate name on the
financial statements and certificates of ownership of the
corporation; and
(D) includes in each of the certificates of
ownership of the corporation the sentence, "This corporation is
permitted by law to pay dividends out of reserves that may impair
its stated capital."
(5) "Corporation" or "domestic corporation" means a
domestic for-profit corporation subject to this chapter.
(6)(A) "Distribution" means a transfer of property,
including cash, or issuance of debt, by a corporation to its
shareholders in the form of:
(i) a dividend on any class or series of its
outstanding shares;
(ii) a purchase or redemption, directly or
indirectly, of any of its own shares; or
(iii) a payment by the corporation in
liquidation of all or a portion of its assets.
(B) The term does not include:
(i) a split-up or division of the issued
shares of a class of a corporation into a larger number of shares
within the same class that does not increase the stated capital of
the corporation; or
(ii) a transfer of the corporation's own
shares or rights to acquire its own shares.
(7) "Foreign corporation" means a for-profit
corporation formed under the laws of a jurisdiction other than this
state.
(8) "Investment Company Act" means the Investment
Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as amended.
(9) "Net assets" means the amount by which the total
assets of a corporation exceed the total debts of the corporation.
(10) "Share dividend" means a dividend by a
corporation that is payable in authorized but unissued shares or
treasury shares of the corporation. The term does not include:
(A) an amendment to the corporation's
certificate of formation to change the shares of a class or series,
with or without par value, into the same or a different number of
shares of the same or a different class or series, with or without
par value; or
(B) a split-up or division of the issued shares
of a class of a corporation into a larger number of shares within
the same class that does not increase the stated capital of the
corporation.
(11) "Stated capital" means the sum of:
(A) the par value of all shares of the
corporation with par value that have been issued;
(B) the consideration, as expressed in terms of
United States dollars, determined by the corporation in the manner
provided by Section 21.160 for all shares of the corporation
without par value that have been issued, except that part, but not
all, of the consideration that:
(i) has been actually received; and
(ii) the board, by resolution adopted not
later than the 60th day after the date of issuance of those shares,
has allocated to surplus; and
(C) an amount not included in Paragraphs (A) and
(B) that has been transferred to stated capital of the corporation,
on the payment of a share dividend or on adoption by the board of
directors of a resolution directing that all or part of surplus be
transferred to stated capital, minus each reduction made as
permitted by law.
(12) "Surplus" means the amount by which the net
assets of a corporation exceed the stated capital of the
corporation.
(13) "Treasury shares" means shares of a corporation
that have been issued, and subsequently acquired by the
corporation, that belong to the corporation and that have not been
canceled. The term does not include shares held by a corporation in
a fiduciary capacity, whether directly or through a trust or
similar arrangement.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
§ 21.051. NO PROPERTY RIGHT IN CERTIFICATE OF
FORMATION. A shareholder of a corporation does not have a vested
property right resulting from the certificate of formation,
including a provision in the certificate of formation relating to
the management, control, capital structure, dividend entitlement,
purpose, or duration of the corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.052. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
OF FORMATION. (a) To adopt an amendment to the certificate of
formation of a corporation as provided by Subchapter B, Chapter 3,
the board of directors of the corporation shall:
(1) adopt a resolution stating the proposed amendment;
and
(2) follow the procedures prescribed by Sections
21.053-21.055.
(b) The resolution may incorporate the proposed amendment
in a restated certificate of formation that complies with Section
3.059.
(c) The certificate of amendment must be filed in accordance
with Chapter 4 and takes effect as provided by Subchapter B, Chapter
3.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.053. ADOPTION OF AMENDMENT BY BOARD OF
DIRECTORS. If a corporation does not have any issued and
outstanding shares, the board of directors may adopt a proposed
amendment to the corporation's certificate of formation by
resolution without shareholder approval.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.054. ADOPTION OF AMENDMENT BY SHAREHOLDERS. If a
corporation has issued and outstanding shares:
(1) a resolution described by Section 21.052 must also
direct that the proposed amendment be submitted to a vote of the
shareholders at a meeting; and
(2) the shareholders must approve the proposed
amendment in the manner provided by Section 21.055.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.055. NOTICE OF AND MEETING TO CONSIDER PROPOSED
AMENDMENT. (a) Each shareholder of record entitled to vote shall
be given written notice containing the proposed amendment or a
summary of the changes to be effected within the time and in the
manner provided by this code for giving notice of meetings to
shareholders. The proposed amendment or summary may be included in
the notice required to be provided for an annual meeting.
(b) At the meeting, the proposed amendment shall be adopted
only on receiving the affirmative vote of shareholders entitled to
vote required by Section 21.364.
(c) An unlimited number of amendments may be submitted for
adoption by the shareholders at a meeting.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.056. RESTATED CERTIFICATE OF FORMATION. (a) A
corporation may adopt a restated certificate of formation as
provided by Subchapter B, Chapter 3, by following the same
procedures to amend its certificate of formation under Sections
21.052-21.055, except that shareholder approval is not required if
an amendment is not adopted.
(b) The restated certificate of formation shall be filed in
accordance with Chapter 4 and takes effect as provided by
Subchapter B, Chapter 3.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.057. BYLAWS. (a) The board of directors of a
corporation shall adopt initial bylaws.
(b) The bylaws may contain provisions for the regulation and
management of the affairs of the corporation that are consistent
with law and the corporation's certificate of formation.
(c) A corporation's board of directors may amend or repeal
bylaws or adopt new bylaws unless:
(1) the corporation's certificate of formation or this
code wholly or partly reserves the power exclusively to the
corporation's shareholders; or
(2) in amending, repealing, or adopting a bylaw, the
shareholders expressly provide that the board of directors may not
amend, repeal, or readopt that bylaw.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.058. DUAL AUTHORITY. Unless the certificate of
formation or a bylaw adopted by the shareholders provides otherwise
as to all or a part of a corporation's bylaws, a corporation's
shareholders may amend, repeal, or adopt the corporation's bylaws
regardless of whether the bylaws may also be amended, repealed, or
adopted by the corporation's board of directors.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.059. ORGANIZATION MEETING. (a) This section does
not apply to a corporation created as a result of a conversion or
merger the plan of which states the bylaws and names the officers of
the corporation.
(b) After the filing of a certificate of formation takes
effect, an organization meeting shall be held at the call of the
majority of the initial board of directors or the persons named in
the certificate of formation under Section 3.007(a)(4) for the
purpose of adopting bylaws, electing officers, and transacting
other business.
(c) Not later than the third day before the date of the
meeting, the directors or other persons calling the meeting shall
send notice of the time and place of the meeting to each other
director or person named in the certificate of formation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER C. SHAREHOLDERS' AGREEMENTS
§ 21.101. SHAREHOLDERS' AGREEMENT. (a) The
SHAREHOLDERS of a corporation may enter into an agreement that:
(1) restricts the discretion or powers of the board of
directors;
(2) eliminates the board of directors and authorizes
the business and affairs of the corporation to be managed, wholly or
partly, by one or more of its SHAREHOLDERS or other persons;
(3) establishes the individuals who shall serve as
directors or officers of the corporation;
(4) determines the term of office, manner of selection
or removal, or terms or conditions of employment of a director,
officer, or other employee of the corporation, regardless of the
length of employment;
(5) governs the authorization or making of
distributions whether in proportion to ownership of shares, subject
to Section 21.303;
(6) determines the manner in which profits and losses
will be apportioned;
(7) governs, in general or with regard to specific
matters, the exercise or division of voting power by and between the
SHAREHOLDERS, directors, or other persons, including use of
disproportionate voting rights or director proxies;
(8) establishes the terms of an agreement for the
transfer or use of property or for the provision of services between
the corporation and another person, including a shareholder,
director, officer, or employee of the corporation;
(9) authorizes arbitration or grants authority to a
shareholder or other person to resolve any issue about which there
is a deadlock among the directors, SHAREHOLDERS, or other persons
authorized to manage the corporation;
(10) requires winding up and termination of the
corporation at the request of one or more SHAREHOLDERS or on the
occurrence of a specified event or contingency, in which case the
winding up and termination of the corporation will proceed as if all
of the SHAREHOLDERS had consented in writing to the winding up and
termination as provided by Subchapter K; or
(11) otherwise governs the exercise of corporate
powers, the management of the business and affairs of the
corporation, or the relationship among the SHAREHOLDERS, the
directors, and the corporation as if the corporation were a
partnership or in a manner that would otherwise be appropriate only
among partners and not contrary to public policy.
(b) A SHAREHOLDERS' agreement authorized by this section
must be:
(1) contained in:
(A) the certificate of formation or bylaws if
approved by all of the SHAREHOLDERS at the time of the agreement;
or
(B) a written agreement that is:
(i) signed by all of the SHAREHOLDERS at the
time of the agreement; and
(ii) made known to the corporation; and
(2) amended only by all of the SHAREHOLDERS at the time
of the amendment, unless the agreement provides otherwise.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.102. TERM OF AGREEMENT. A SHAREHOLDERS' agreement
under this subchapter is valid for 10 years, unless the agreement
provides otherwise.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.103. DISCLOSURE OF AGREEMENT; RECALL OF CERTAIN
CERTIFICATES. (a) The existence of an agreement authorized by
this subchapter shall be noted conspicuously on the front or back of
each certificate for outstanding shares or on the information
statement required for uncertificated shares by Section 3.205.
(b) The disclosure required by this section must include the
sentence, "These shares are subject to the provisions of a
shareholders' agreement that may provide for management of the
corporation in a manner different than in other corporations and
may subject a shareholder to certain obligations or liabilities not
otherwise imposed on shareholders in other corporations."
(c) A corporation that has outstanding shares represented
by certificates at the time the shareholders of the corporation
enter into an agreement under this subchapter shall recall the
outstanding certificates and issue substitute certificates that
comply with this subchapter.
(d) The failure to note the existence of the agreement on
the certificate or information statement does not affect the
validity of the agreement or an action taken pursuant to the
agreement.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.104. EFFECT OF SHAREHOLDERS' AGREEMENT. A
SHAREHOLDERS' agreement that complies with this subchapter is
effective among the SHAREHOLDERS and between the SHAREHOLDERS and
the corporation even if the terms of the agreement are inconsistent
with this code.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.105. RIGHT OF RESCISSION; KNOWLEDGE OF PURCHASER
OF SHARES. (a) A purchaser of shares who does not have knowledge
at the time of purchase of the existence of a SHAREHOLDERS'
agreement authorized by this subchapter is entitled to rescind the
purchase.
(b) A purchaser is considered to have knowledge of the
existence of the SHAREHOLDERS' agreement for purposes of this
section if:
(1) the existence of the agreement is noted on the
certificate or information statement for the shares as required by
Section 21.103; and
(2) with respect to shares that are not represented by
a certificate, the information statement noting existence of the
agreement is delivered to the purchaser not later than the time the
shares are purchased.
(c) An action to enforce the right of rescission authorized
by this section must be commenced not later than the earlier of:
(1) the 90th day after the date the existence of the
shareholder agreement is discovered; or
(2) the second anniversary of the purchase date of the
shares.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.106. AGREEMENT LIMITING AUTHORITY OF AND
SUPPLANTING BOARD OF DIRECTORS; LIABILITY. (a) A SHAREHOLDERS'
agreement authorized by this subchapter that limits the discretion
or powers of the board of directors or supplants the board of
directors relieves the directors of, and imposes on a person in whom
the discretion or powers of the board of directors or the management
of the business and affairs of the corporation is vested, liability
for an act or omission of the person in accordance with Subsection
(b).
(b) A person on whom liability for an act or omission is
imposed under this section is liable in the same manner and to the
same extent as a director on whom liability for an act or omission
is imposed by this code or other law.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.107. LIABILITY OF SHAREHOLDER. The existence of or
a performance under a SHAREHOLDERS' agreement authorized by this
subchapter is not a ground for imposing personal liability on a
shareholder for an act or obligation of the corporation by
disregarding the separate existence of the corporation or
otherwise, even if the agreement or a performance under the
agreement:
(1) treats the corporation as if the corporation were
a partnership or in a manner that otherwise is appropriate only
among partners;
(2) results in the corporation being considered a
partnership for purposes of taxation; or
(3) results in failure to observe the corporate
formalities otherwise applicable to the matters governed by the
agreement.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.108. PERSONS ACTING IN PLACE OF SHAREHOLDERS. An
organizer or a subscriber for shares may act as a shareholder with
respect to a SHAREHOLDERS' agreement authorized by this subchapter
if no shares have been issued when the agreement is signed.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.109. AGREEMENT NOT EFFECTIVE. (a) A
SHAREHOLDERS' agreement authorized by this subchapter ceases to be
effective when shares of the corporation are:
(1) listed on a national securities exchange or
similar system;
(2) quoted on an interdealer quotation system of a
national securities association or successor system; or
(3) regularly traded in a market maintained by one or
more members of a national or affiliated securities association.
(b) If a corporation does not have a board of directors and
an agreement of the SHAREHOLDERS of the corporation entered into
under this subchapter ceases to be effective, a board of directors
shall be instituted or reinstated to govern the corporation in the
manner provided by Section 21.710(c).
(c) If a SHAREHOLDERS' agreement that ceases to be effective
is contained in or referred to by the certificate of formation or
bylaws of a corporation, the board of directors of the corporation
may adopt an amendment to the certificate of formation or bylaws,
without shareholder action, to delete the agreement and any
references to the agreement.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER D. SHARES, OPTIONS, AND CONVERTIBLE SECURITIES
§ 21.151. NUMBER OF AUTHORIZED SHARES. A corporation
may issue the number of authorized shares stated in the
corporation's certificate of formation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.152. CLASSES AND SERIES OF SHARES. (a) A
corporation's certificate of formation may divide the corporation's
authorized shares into one or more classes and may divide one or
more classes into one or more series. The certificate of formation
must designate each class and series of authorized shares to
distinguish that class and series from any other class or series.
(b) Shares of the same class must be of the same par value or
be without par value, as stated in the certificate of formation.
(c) Shares of the same class must be identical in all
respects unless the shares have been divided into one or more
series. If the shares of a class have been divided into one or more
series, the shares may vary between series, but all shares of the
same series will be identical in all respects.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.153. DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
RIGHTS OF A CLASS OR SERIES. (a) Each class or series of
authorized shares of a corporation must have the designations,
preferences, limitations, and relative rights, including voting
rights, stated in the corporation's certificate of formation.
(b) The certificate of formation may limit or deny the
voting rights of, or provide special voting rights for, the shares
of a class or series or the shares of a class or series held by a
person or class of persons to the extent the limitation, denial, or
provision is not inconsistent with this code.
(c) A designation, preference, limitation, or relative
right, including a voting right, of a class or series of shares of a
corporation may be made dependent on facts not contained in the
certificate of formation, including future acts of the corporation,
if the manner in which those facts will operate on the designation,
preference, limitation, or right is clearly and expressly stated in
the certificate of formation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.154. CERTAIN OPTIONAL CHARACTERISTICS OF
SHARES. (a) Subject to Section 21.153, if authorized by the
corporation's certificate of formation, a corporation may issue
shares that:
(1) are redeemable, at the option of the corporation,
shareholder, or other person or on the occurrence of a designated
event, subject to Sections 21.303 and 21.304;
(2) entitle the holders of the shares to cumulative,
noncumulative, or partially cumulative distributions;
(3) have preferences over any or all other classes or
series of shares with respect to payment of distributions;
(4) have preferences over any or all other classes or
series of shares with respect to the assets of the corporation on
the voluntary or involuntary winding up and termination of the
corporation;
(5) are exchangeable, at the option of the
corporation, shareholder, or other person or on the occurrence of a
designated event, for shares, obligations, indebtedness, evidence
of ownership, rights to purchase securities of the corporation or
one or more other entities, or other property or for a combination
of those rights, assets, or obligations, subject to Section 21.303;
and
(6) are convertible into shares of any other class or
series, at the option of the corporation, shareholder, or other
person or on the occurrence of a designated event.
(b) Shares without par value may not be converted into
shares with par value unless:
(1) at the time of conversion, the part of the
corporation's stated capital represented by the shares without par
value is at least equal to the aggregate par value of the shares to
be converted; or
(2) the amount of any deficiency computed under
Subdivision (1) is transferred from surplus to stated capital.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.155. SERIES OF SHARES ESTABLISHED BY BOARD OF
DIRECTORS. (a) If expressly authorized by the corporation's
certificate of formation and subject to the certificate of
formation, the board of directors of a corporation may establish
series of unissued shares of any class by setting and determining
the designations, preferences, limitations, and relative rights,
including voting rights, of the shares of the series to be
established to the same extent that the designations, preferences,
limitations, or relative rights could be stated if fully specified
in the certificate of formation.
(b) To establish a series if authorized by the certificate
of formation, the board of directors must adopt a resolution
specifying the designations, preferences, limitations, and
relative rights, including voting rights, of the series to be
established or specifying any designation, preference, limitation,
or relative right that is not set and determined by the certificate
of formation.
(c) If the certificate of formation does not expressly
restrict the board of directors from increasing or decreasing the
number of unissued shares of a series to be established under
Subsection (a), the board of directors may increase or decrease the
number of shares in each series to be established, except that the
board of directors may not decrease the number of shares in a
particular series to a number that is less than the number of shares
in that series that are issued at the time of the decrease.
(d) To increase or decrease the number of shares of a series
under Subsection (c), the board of directors must adopt a
resolution setting and determining the new number of shares of each
series in which the number of shares is increased or decreased. If
the number of shares of a series is decreased, the shares by which
the series is decreased will resume the status of authorized but
unissued shares of the class of shares from which the series was
established, unless otherwise provided by the certificate of
formation or the terms of the class or series.
(e) If no shares of a series established by board resolution
under Subsection (b) are outstanding because no shares of that
series have been issued or no issued shares of that series remain
outstanding, the board of directors by resolution may delete the
series from the certificate of formation and delete any reference
to the series contained in the certificate of formation. Unless
otherwise provided by the certificate of formation, the shares of
any series deleted from the certificate of formation under this
section shall resume the status of authorized but unissued shares
of the class of shares from which the series was established.
(f) If no shares of a series established by resolution of
the board of directors under Subsection (b) are outstanding because
no shares of that series have been issued, the board of directors
may amend the designations, preferences, limitations, and relative
rights, including voting rights, of the series or amend any
designation, preference, limitation, or relative right that is not
set and determined by the certificate of formation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.156. ACTIONS WITH RESPECT TO SERIES OF
SHARES. (a) To effect an action authorized under Section 21.155,
the corporation must file with the secretary of state a statement
that contains:
(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 setting and determining the
designations, preferences, limitations, and relative rights of the
series;
(3) if the statement relates to an increase or
decrease in the number of shares of a series, a copy of the
resolution setting 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 deletion of a
series of shares and all references to the series from the
certificate of formation, a copy of the resolution deleting the
series and all references to the series from the certificate of
formation;
(5) if the statement relates to the amendment of
designations, preferences, limitations, or relative rights of
shares of a series that was previously established by resolution of
the board of directors, a copy of the resolution in which the
amendment is specified;
(6) the date of the adoption of the resolution; and
(7) a statement that the resolution was adopted by all
necessary action on the part of the corporation.
(b) On the filing of a statement described by Subsection
(a), the following resolutions will become an amendment of the
certificate of formation, as appropriate:
(1) the resolution establishing and designating the
series and setting and determining the designations, preferences,
limitations, and relative rights of the series;
(2) the resolution setting the new number of shares of
each series in which the number of shares is increased or decreased;
(3) the resolution deleting a series and all
references to the series from the certificate of formation; or
(4) the resolution amending the designations,
preferences, limitations, and relative rights of a series.
(c) An amendment of the certificate of formation under this
section is not subject to the procedure to amend the certificate of
formation contained in Subchapter B.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.157. ISSUANCE OF SHARES. (a) Except as provided
by Section 21.158, a corporation may issue shares for consideration
if authorized by the board of directors of the corporation.
(b) Shares may not be issued until the consideration,
determined in accordance with this subchapter, has been paid or
delivered as required in connection with the authorization of the
shares. When the consideration is paid or delivered:
(1) the shares are considered to be issued;
(2) the subscriber or other person entitled to receive
the shares is a shareholder with respect to the shares; and
(3) the shares are considered fully paid and
nonassessable.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.158. ISSUANCE OF SHARES UNDER PLAN OF MERGER OR
CONVERSION. (a) A converted corporation under a plan of
conversion or a corporation created by a plan of merger may issue
shares for consideration if authorized by the plan of conversion or
plan of merger, as appropriate.
(b) A corporation may issue shares in the manner provided by
and for consideration specified under a plan of merger or plan of
conversion.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.159. TYPES OF CONSIDERATION FOR SHARES. Shares
with or without par value may be issued for the following types of
consideration:
(1) a tangible or intangible benefit to the
corporation;
(2) cash;
(3) a promissory note;
(4) services performed or a contract for services to
be performed;
(5) a security of the corporation or any other
organization; and
(6) any other property of any kind or nature.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.160. DETERMINATION OF CONSIDERATION FOR
SHARES. (a) Subject to Subsection (b), consideration to be
received for shares must be determined:
(1) by the board of directors;
(2) by a plan of conversion, if the shares are to be
issued by a converted corporation under the plan; or
(3) by a plan of merger, if the shares are to be issued
under the plan by a corporation created under the plan.
(b) If the corporation's certificate of formation reserves
to the shareholders the right to determine the consideration to be
received for shares without par value, the shareholders shall
determine the consideration for those shares before the shares are
issued. The board of directors may not determine the consideration
for shares under this subsection.
(c) A corporation may dispose of treasury shares for
consideration that may be determined by the board of directors.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.161. AMOUNT OF CONSIDERATION FOR ISSUANCE OF
CERTAIN SHARES. (a) Consideration to be received by a
corporation for the issuance of shares with par value may not be
less than the par value of the shares.
(b) The part of the surplus of a corporation that is
transferred to stated capital on the issuance of shares as a share
distribution is considered to be the consideration for the issuance
of those shares.
(c) The consideration received by a corporation for the
issuance of shares on the conversion or exchange of its
indebtedness or shares is:
(1) the principal of, and accrued interest on, the
indebtedness exchanged or converted, or the stated capital on the
issuance of the shares;
(2) the part of surplus, if any, transferred to stated
capital on the issuance of the shares; and
(3) any additional consideration paid to the
corporation on the issuance of the shares.
(d) The consideration received by a corporation for the
issuance of shares on the exercise of rights or options is:
(1) any consideration received by the corporation for
the rights or options; and
(2) any consideration received by the corporation for
the issuance of shares on the exercise of the rights or options.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.162. VALUE AND SUFFICIENCY OF CONSIDERATION. In
the absence of fraud in the transaction, the judgment of the board
of directors, the shareholders, or the party approving the plan of
conversion or the plan of merger, as appropriate, is conclusive in
determining the value and sufficiency of the consideration received
for the shares.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.163. ISSUANCE AND DISPOSITION OF FRACTIONAL SHARES
OR SCRIP. (a) A corporation may:
(1) issue fractions of a share, either certificated or
uncertificated;
(2) arrange for the disposition of fractional
interests by persons entitled to the interests;
(3) pay cash for the fair value of fractions of a share
determined when the shareholders entitled to receive the fractions
are determined; or
(4) subject to Subsection (b), issue scrip in
registered or bearer form that entitles the holder to receive a
certificate for a full share or an uncertificated full share on the
surrender of the scrip aggregating a full share.
(b) The board of directors may issue scrip:
(1) on the condition that the scrip will become void if
not exchanged for certificated or uncertificated full shares before
a specified date;
(2) on the condition that the shares for which the
scrip is exchangeable may be sold by the corporation and the
proceeds from the sale of the shares may be distributed to the
holders of scrip; or
(3) subject to any other condition the board of
directors may determine advisable.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.164. RIGHTS OF HOLDERS OF FRACTIONAL SHARES OR
SCRIP. (a) A holder of a certificated or uncertificated
fractional share is entitled to exercise voting rights, receive
distributions, and make a claim with respect to the assets of the
corporation in the event of winding up and termination.
(b) A holder of a certificate for scrip is not entitled to
exercise voting rights, receive distributions, or make a claim with
respect to the assets of the corporation in the event of winding up
and termination unless the scrip provides for those rights.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.165. SUBSCRIPTIONS. (a) A corporation may accept
a subscription by notifying the subscriber in writing.
(b) A subscription to purchase shares in a corporation in
the process of being formed is irrevocable for six months if the
subscription is in writing and signed by the subscriber, unless the
subscription provides for a longer or shorter period or all of the
other subscribers agree to the revocation of the subscription.
(c) A written subscription entered into after the
corporation is formed is a contract between the subscriber and the
corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.166. PREFORMATION SUBSCRIPTION. (a) The
corporation may determine the payment terms of a preformation
subscription unless the payment terms are specified by the
subscription. The payment terms may authorize payment in full on
acceptance or by installments.
(b) Unless the subscription provides otherwise, a
corporation shall make calls placed to all subscribers of similar
interests for payment on preformation subscriptions uniform as far
as practicable.
(c) After the corporation is formed, if a subscriber fails
to pay any installment or call when due, a corporation may:
(1) collect in the same manner as any other debt the
amount due on any unpaid preformation subscription; or
(2) forfeit the subscription if the installment or
call remains unpaid for 20 days after written notice to the
subscriber.
(d) Although the forfeiture of a subscription terminates
all the rights and obligations of the subscriber, the corporation
may retain any amount previously paid on the subscription.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.167. COMMITMENT TO PURCHASE SHARES. (a) A person
who contemplates the acquisition of shares in a corporation may
commit to act in a specified manner with respect to the shares after
the acquisition, including 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.
(b) A written commitment entered into under Subsection (a)
is a contract between the shareholder and the corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.168. STOCK RIGHTS, OPTIONS, AND CONVERTIBLE
INDEBTEDNESS. (a) Except as provided by the corporation's
certificate of formation and regardless of whether done in
connection with the issuance and sale of any other share or security
of the corporation, a corporation may create and issue:
(1) rights or options that entitle the holders to
purchase or receive from the corporation shares of any class or
series or other securities; and
(2) indebtedness convertible into shares of any class
or series of the corporation or other securities of the
corporation.
(b) A right, option, or indebtedness described by this
section shall be evidenced in the manner approved by the board of
directors.
(c) Subject to the certificate of formation, a right or
option described by this section must state the terms on which, the
time within which, and any consideration for which the shares may be
purchased or received from the corporation on the exercise of the
right or option.
(d) Subject to the certificate of formation, convertible
indebtedness described by this section must state the terms and
conditions on which, the time within which, and the conversion
ratio at which the indebtedness may be converted into shares.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.169. TERMS AND CONDITIONS OF RIGHTS AND
OPTIONS. (a) The terms and conditions of rights or options may
include restrictions or conditions that:
(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); or
(2) invalidate or void the rights or options held by a
person or transferee described by Subdivision (1).
(b) Rights or options created or issued before the effective
date of this code that comply with this section and are not in
conflict with other provisions of this code are ratified.
(c) Unless otherwise provided under the terms of rights or
options or the agreement or plan under which the rights or options
are issued, 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.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.170. CONSIDERATION FOR RIGHTS, OPTIONS, AND
CONVERTIBLE INDEBTEDNESS. (a) In the absence of fraud in the
transaction, the judgment of the board of directors of a
corporation as to the adequacy of the consideration received for
rights, options, or convertible indebtedness is conclusive.
(b) A corporation may issue rights or options to its
shareholders, officers, consultants, independent contractors,
employees, or directors without consideration if, in the judgment
of the board of directors, the issuance of the rights or options is
in the interests of the corporation.
(c) The consideration for shares having a par value, other
than treasury shares, and issued on the exercise of the rights or
options may not be less than the par value of the shares.
(d) A privilege of conversion may not be conferred on, or
altered with respect to, any indebtedness that would result in the
corporation receiving less than the minimum consideration required
to be received on issuance of the shares.
(e) The consideration for shares issued on the exercise of
rights, options, or convertible indebtedness shall be determined as
provided by Section 21.161.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.171. TREASURY SHARES. (a) Treasury shares are
considered to be issued shares and not outstanding shares.
(b) Treasury shares may not be included in the total assets
of a corporation for purposes of determining the net assets of a
corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.172. EXPENSES OF ORGANIZATION, REORGANIZATION, AND
FINANCING OF CORPORATION. A corporation may pay or authorize to be
paid from the consideration received by the corporation as payment
for the corporation's shares the reasonable charges and expenses of
the organization or reorganization of the corporation and the sale
or underwriting of the shares without rendering the shares not
fully paid and nonassessable.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.173. SUPPLEMENTAL REQUIRED RECORDS. In addition
to the books and records required to be kept under Section 3.151, a
corporation shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, a
record of:
(1) the original issuance of shares issued by the
corporation;
(2) each transfer of those shares that have been
presented to the corporation for registration of transfer;
(3) the names and addresses of all past shareholders
of the corporation; and
(4) the number and class or series of shares issued by
the corporation held by each current and past shareholder.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER E. SHAREHOLDER RIGHTS AND RESTRICTIONS
§ 21.201. REGISTERED HOLDERS AS OWNERS. Except as
otherwise provided by this code and subject to Chapter 8, Business &
Commerce Code, a corporation may consider the person registered as
the owner of a share in the share transfer records of the
corporation at a particular time, including a record date set under
Section 6.101 or 6.102 or Subchapter H, as the owner of that share
at that time for purposes of:
(1) voting the share;
(2) receiving distributions on the share;
(3) transferring the share;
(4) receiving notice, exercising rights of dissent,
exercising or waiving a preemptive right, or giving proxies with
respect to that share;
(5) entering into agreements with respect to that
share in accordance with Section 6.251, 6.252, or 21.210; or
(6) any other shareholder action.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.202. DEFINITION OF SHARES. In Sections
21.203-21.208, "shares" includes a security:
(1) that is convertible into shares; or
(2) that carries a right to subscribe for or acquire
shares.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.203. NO STATUTORY PREEMPTIVE RIGHT UNLESS PROVIDED
BY CERTIFICATE OF FORMATION. (a) Except as provided by Section
21.208, a shareholder of a corporation does not have a preemptive
right under this subchapter to acquire the corporation's unissued
or treasury shares except to the extent provided by the
corporation's certificate of formation.
(b) If the certificate of formation includes a statement
that the corporation "elects to have a preemptive right" or a
similar statement, Section 21.204 applies to a shareholder except
to the extent the certificate of formation expressly provides
otherwise.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.204. STATUTORY PREEMPTIVE RIGHTS. (a) If the
shareholders of a corporation have a preemptive right under this
subchapter, the shareholders have a preemptive right to acquire
proportional amounts of the corporation's unissued or treasury
shares on the decision of the corporation's board of directors to
issue the shares. The preemptive right granted under this
subsection is subject to uniform terms and conditions prescribed by
the board of directors to provide a fair and reasonable opportunity
to exercise the preemptive right.
(b) No preemptive right exists with respect to:
(1) shares issued or granted as compensation to a
director, officer, agent, or employee of the corporation or a
subsidiary or affiliate of the corporation;
(2) 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;
(3) shares authorized in the corporation's certificate
of formation that are issued not later than the 180th day after the
effective date of the corporation's formation; or
(4) shares sold, issued, or granted by the corporation
for consideration other than money.
(c) A holder of a share of a class without general voting
rights but with a preferential right to distributions of profits,
income, or assets does not have a preemptive right with respect to
shares of any class.
(d) A holder of a share of a class with general voting rights
but without preferential rights to distributions of profits,
income, or assets does not have a preemptive right with respect to
shares of any class with preferential rights to distributions of
profits, income, or assets unless the shares with preferential
rights are convertible into or carry a right to subscribe for or
acquire shares without preferential rights.
(e) For a one-year period after the date the shares have
been offered to shareholders, shares subject to preemptive rights
that are not acquired by a shareholder may be issued to a person at a
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
shareholder's preemptive rights.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.205. WAIVER OF PREEMPTIVE RIGHT. (a) A
shareholder may waive a preemptive right granted to the
shareholder.
(b) A written waiver of a preemptive right is irrevocable
regardless of whether the waiver is supported by consideration.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.206. LIMITATION ON ACTION TO ENFORCE PREEMPTIVE
RIGHT. (a) An action brought against a corporation, the board of
directors or an officer, shareholder, or agent of the corporation,
or an owner of a beneficial interest in shares of the corporation
for the violation of a preemptive right of a shareholder must be
brought not later than the earlier of:
(1) the first anniversary of the date written notice
is given to each shareholder whose preemptive right was violated;
or
(2) the fourth anniversary of the latest of:
(A) the date the corporation issued the shares,
securities, or rights;
(B) the date the corporation sold the shares,
securities, or rights; or
(C) the date the corporation otherwise
distributed the shares, securities, or rights.
(b) The notice required by Subsection (a)(1) must:
(1) be sent to the holder at the address for the holder
as shown on the appropriate records of the corporation; and
(2) inform the holder that the issuance, sale, or
other distribution of shares, securities, or rights violated the
holder's preemptive right.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.207. DISPOSITION OF SHARES HAVING PREEMPTIVE
RIGHTS. The transferee or successor of a share that has been
transferred or otherwise disposed of by a shareholder of a
corporation whose preemptive right to acquire shares in the
corporation has been violated does not acquire the preemptive
right, or any right or claim based on the violation, unless the
previous shareholder has assigned the preemptive right to the
transferee or successor.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.208. PREEMPTIVE RIGHT IN EXISTING
CORPORATION. Subject to the certificate of formation, a
shareholder of a corporation incorporated before the effective date
of this code has a preemptive right to acquire unissued or treasury
shares of the corporation to the extent provided by Sections
21.204, 21.206, and 21.207. After the effective date of this code,
a corporation may limit or deny the preemptive right of the
shareholders of the corporation by amending the corporation's
certificate of formation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.209. TRANSFER OF SHARES AND OTHER
SECURITIES. Except as otherwise provided by this code, the shares
and other securities of a corporation are transferable in
accordance with Chapter 8, Business & Commerce Code.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.210. RESTRICTION ON TRANSFER OF SHARES AND OTHER
SECURITIES. ( a) A restriction on the transfer or registration of
transfer of a security may be imposed by:
(1) the corporation's certificate of formation;
(2) the corporation's bylaws;
(3) a written agreement among two or more holders of
the securities; or
(4) a written agreement among one or more holders of
the securities and the corporation if:
(A) the corporation files a copy of the agreement
at the principal place of business or registered office of the
corporation; and
(B) the copy of the agreement is subject to the
same right of examination by a shareholder of the corporation, in
person or by agent, attorney, or accountant, as the books and
records of the corporation.
(b) A restriction imposed under Subsection (a) is not valid
with respect to a security issued before the restriction has been
adopted, unless the holder of the security voted in favor of the
restriction or is a party to the agreement imposing the
restriction.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.211. VALID RESTRICTIONS ON
TRANSFER. Notwithstanding Sections 21. 210 and 21.213, a
restriction placed on the transfer or registration of transfer of a
security of a corporation is valid if the restriction reasonably:
(1) obligates the holder of the restricted security to
offer a person, including the corporation or other holders of
securities of the corporation, an opportunity to acquire the
restricted security within a reasonable time before the transfer;
(2) obligates the corporation, to the extent provided
by this code, or another person to purchase securities that are the
subject of an agreement relating to the purchase and sale of the
restricted security;
(3) requires the corporation or the holders of a class
of the corporation's securities to consent to a proposed transfer
of the restricted security or to approve the proposed transferee of
the restricted security for the purpose of preventing a violation
of law;
(4) prohibits the transfer of the restricted security
to a designated person or group of persons and the designation is
not manifestly unreasonable;
(5) maintains the status of the corporation as an
electing small business corporation under Subchapter S of the
Internal Revenue Code;
(6) maintains a tax advantage to the corporation; or
(7) maintains the status of the corporation as a close
corporation under Subchapter O.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.212. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF
SHARES OR OTHER SECURITIES. (a) A corporation that has adopted a
bylaw or is a party to an agreement that restricts the transfer of
the shares or other securities of the corporation may file with the
secretary of state, in accordance with Chapter 4, a copy of the
bylaw or agreement and a statement attached to the copy that:
(1) contains the name of the corporation;
(2) states that the attached copy of the bylaw or
agreement is a true and correct copy of the bylaw or agreement; and
(3) states that the filing has been authorized by the
board of directors or, in the case of a corporation that is managed
in some other manner under a shareholders' agreement, by the person
empowered by the agreement to manage the corporation's business and
affairs.
(b) After a statement described by Subsection (a) is filed
with the secretary of state, the bylaws or agreement restricting
the transfer of shares or other securities is a public record, and
the fact that the statement has been filed may be stated on a
certificate representing the restricted shares or securities if
required by Section 3.202.
(c) A corporation that is a party to an agreement
restricting the transfer of the shares or other securities of the
corporation may make the agreement part of the corporation's
certificate of formation without restating the provisions of the
agreement in the certificate of formation by amending the
certificate of formation. If the agreement alters any provision of
the certificate of formation, the certificate of amendment shall
identify the altered provision by reference or description. If the
agreement is an addition to the certificate of formation, the
certificate of amendment must state that fact.
(d) The certificate of amendment must:
(1) include a copy of the agreement restricting the
transfer of shares or other securities;
(2) state that the attached copy of the agreement is a
true and correct copy of the agreement; and
(3) state that inclusion of the certificate of
amendment as part of the certificate of formation has been
authorized in the manner required by this code to amend the
certificate of formation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.213. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF
CERTAIN SECURITIES. (a) A restriction placed on the transfer or
registration of the transfer of a security of a corporation is
specifically enforceable against the holder, or a successor or
transferee of the holder, if:
(1) the restriction is reasonable and noted
conspicuously on the certificate or other instrument representing
the security; or
(2) with respect to an uncertificated security, the
restriction is reasonable and a notation of the restriction is
contained in the notice sent with respect to the security under
Section 3.205.
(b) Unless noted in the manner specified by Subsection (a)
with respect to a certificate or other instrument or an
uncertificated security, an otherwise enforceable restriction is
ineffective against a transferee for value without actual knowledge
of the restriction at the time of the transfer or against a
subsequent transferee, regardless of whether the transfer is for
value. A restriction is specifically enforceable against a person
other than a transferee for value from the time the person acquires
actual knowledge of the restriction's existence.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.214. JOINT OWNERSHIP OF SHARES. (a) If 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 and one of
the owners dies, the corporation may record on its books and effect
the transfer of the shares to a person, including the surviving
joint owner, and pay any distributions made with respect to the
shares, as if the surviving joint owner was the absolute owner of
the shares. The recording and distribution authorized by this
subsection must be made after the death of a joint owner and before
the corporation receives actual written notice that a party other
than a surviving joint owner is claiming an interest in the shares
or distribution.
(b) The discharge of a corporation from liability under
Section 21.216 and the transfer of full legal and equitable title of
the shares does not affect, reduce, or limit any cause of action
existing in favor of an owner of an interest in the shares or
distributions against the surviving owner.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.215. LIABILITY FOR DESIGNATING OWNER OF SHARES. A
corporation or an officer, director, employee, or agent of the
corporation may not be held liable for considering the person who is
registered as the owner of a share in the share transfer records of
the corporation at a particular time to be the owner of the share at
that time for a purpose described by Section 21.201, regardless of
whether the person possesses a certificate for that share.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.216. LIABILITY REGARDING JOINT OWNERSHIP OF
SHARES. A corporation that transfers shares or makes a
distribution to a surviving joint owner under Section 21.214 before
the corporation has received a written claim for the shares or
distribution from another person is discharged from liability for
the transfer or payment.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.217. LIABILITY OF ASSIGNEE OR TRANSFEREE. An
assignee or transferee of certificated shares, uncertificated
shares, or a subscription for shares in good faith and without
knowledge that full consideration for the shares or subscription
has not been paid may not be held personally liable to the
corporation or a creditor of the corporation for an unpaid portion
of the consideration.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.218. EXAMINATION OF RECORDS. (a) In this
section, a holder of a beneficial interest in a voting trust entered
into under Section 6.251 is a holder of the shares represented by
the beneficial interest.
(b) Subject to the governing documents and on written demand
stating a proper purpose, a holder of shares of a corporation for at
least six months immediately preceding the holder's demand, or a
holder of at least five percent of all of the outstanding shares of
a corporation, is entitled to examine and copy, at a reasonable
time, the corporation's relevant books, records of account,
minutes, and share transfer records. The examination may be
conducted in person or through an agent, accountant, or attorney.
(c) This section does not impair the power of a court, on the
presentation of proof of proper purpose by a beneficial or record
holder of shares, to compel the production for examination by the
holder of the books and records of accounts, minutes, and share
transfer records of a corporation, regardless of the period during
which the holder was a beneficial holder or record holder and
regardless of the number of shares held by the person.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.219. ANNUAL AND INTERIM STATEMENTS OF
CORPORATION. (a) On written request of a shareholder of the
corporation, a corporation shall mail to the shareholder:
(1) the annual statements of the corporation for the
last fiscal year that contain in reasonable detail the
corporation's assets and liabilities and the results of the
corporation's operations; and
(2) the most recent interim statements, if any, that
have been filed in a public record or other publication.
(b) The corporation shall be allowed a reasonable time to
prepare the annual statements.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.220. PENALTY FOR FAILURE TO PREPARE VOTING
LIST. An officer or agent of a corporation who is in charge of the
corporation's share transfer records and who does not prepare the
list of owners, keep the list on file for a 10-day period, or
produce and keep the list available for inspection at the annual
meeting as required by Sections 21.354 and 21.372 is liable to an
owner who suffers damages because of the failure for the damage
caused by the failure.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.221. PENALTY FOR FAILURE TO PROVIDE NOTICE OF
MEETING. If an officer or agent of a corporation is unable to
comply with the duties prescribed by Sections 21.354 and 21.372
because the officer or agent did not receive notice of a meeting of
owners within a sufficient time before the date of the meeting, the
corporation, rather than the officer or agent, is liable to an owner
who suffers damages because of the failure for the extent of the
damage caused by the failure.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.222. PENALTY FOR REFUSAL TO PERMIT EXAMINATION OF
CERTAIN RECORDS. (a) A corporation that refuses to allow a person
to examine and make copies of account records, minutes, and share
transfer records under Section 21.218 is liable to the shareholder
for any cost or expense, including attorney's fees, incurred in
enforcing the shareholder's rights under Section 21.218. The
liability imposed on a corporation under this subsection is in
addition to any other damages or remedy afforded to the shareholder
by law.
(b) It is a defense to an action brought under this section
that the person suing:
(1) has, within the two years preceding the date the
action is brought, sold or offered for sale a list of shareholders
or of holders of voting trust certificates in consideration for
shares of the corporation or any other corporation;
(2) has aided or abetted a person in procuring a list
of shareholders or of holders of voting trust certificates for the
purpose described by Subdivision (1);
(3) has improperly used information obtained through a
prior examination of the books and account records, minutes, or
share transfer records of the corporation or any other corporation;
or
(4) was not acting in good faith or for a proper
purpose in making the person's request for examination.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.223. LIMITATION OF LIABILITY FOR
OBLIGATIONS. (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 of such a holder, owner, or
subscriber of the corporation, may not be held liable to the
corporation or its obligees with respect to:
(1) the shares, other than the obligation to pay to the
corporation the full amount of consideration, fixed in compliance
with Sections 21.157-21.162, for which the 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, beneficial owner, subscriber, or affiliate is or
was the alter ego of the corporation or on the basis of actual or
constructive fraud, a sham to perpetrate a fraud, or other similar
theory; or
(3) any obligation of the corporation on the basis of
the failure of the corporation to observe any corporate formality,
including the failure to:
(A) comply with this code or the articles of
incorporation or bylaws of the corporation; or
(B) observe any requirement prescribed by this
code or the articles of incorporation or bylaws of the corporation
for acts to be taken by the corporation or its directors or
shareholders.
(b) Subsection (a)(2) does not prevent or limit the
liability of a holder, beneficial owner, subscriber, or affiliate
if the obligee demonstrates that the holder, beneficial 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,
beneficial owner, subscriber, or affiliate.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.224. PREEMPTION OF LIABILITY. The liability of a
holder, beneficial owner, or subscriber of shares of a corporation,
or any affiliate of such a holder, owner, or subscriber of the
corporation, for an obligation that is limited by Section 21.223 is
exclusive and preempts any other liability imposed for that
obligation under common law or otherwise.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.225. EXCEPTIONS TO LIMITATIONS. Section 21.223 or
21.224 does not limit the obligation of a holder, beneficial owner,
subscriber, or affiliate to the obligee of the corporation if that
person:
(1) expressly assumes, guarantees, or agrees to be
personally liable to the obligee for the obligation; or
(2) is otherwise liable to the obligee for the
obligation under this code or other applicable statute.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.226. PLEDGEES AND TRUST ADMINISTRATORS. (a) A
pledgee or other holder of shares as collateral security is not
personally liable as a shareholder.
(b) An executor, administrator, conservator, guardian,
trustee, assignee for the benefit of creditors, or receiver is not
personally liable as a holder of or subscriber to shares of a
corporation.
(c) The estate and funds administered by an executor,
administrator, conservator, guardian, trustee, assignee for the
benefit of creditors, or receiver are liable for the full amount of
the consideration for which the shares were or are to be issued.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER F. REDUCTIONS IN STATED CAPITAL; CANCELLATION OF
TREASURY SHARES
§ 21.251. REDUCTION OF STATED CAPITAL BY REDEMPTION OR
PURCHASE OF REDEEMABLE SHARES. (a) At the time a corporation
redeems or purchases the redeemable shares of the corporation, the
redemption or purchase has the effect of:
(1) canceling the shares; and
(2) restoring the shares to the status of authorized
but unissued shares, unless the corporation's certificate of
formation provides that shares may not be reissued after the shares
are redeemed or purchased by the corporation.
(b) If the corporation is prohibited from reissuing the
shares by the certificate of formation following a redemption or
purchase under Subsection (a), the number of shares of the class
that the corporation is authorized to issue is reduced by the number
of shares canceled.
(c) If shares redeemed or purchased by a corporation under
Subsection (a) constitute all of the outstanding shares of a
particular class of shares and the certificate of formation
provides that the shares of the class, when redeemed and
repurchased, may not be reissued, the corporation may not issue any
additional shares of the class of shares.
(d) Upon the redemption or purchase of redeemable shares
under this section, the stated capital of the corporation shall be
reduced by that part of the stated capital that was, at the time of
the redemption or purchase, represented by those redeemable shares.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.252. CANCELLATION OF TREASURY SHARES. (a) A
corporation, by resolution of the board of directors of the
corporation, may cancel all or part of the corporation's treasury
shares at any time.
(b) Upon the cancellation of treasury shares, the stated
capital of the corporation shall be reduced by that part of the
stated capital that was, at the time of the cancellation,
represented by the canceled shares, and the canceled shares shall
be restored to the status of authorized but unissued shares.
(c) This section does not prohibit a cancellation of shares
or a reduction of stated capital in any other manner permitted by
law.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.253. PROCEDURES FOR REDUCTION OF STATED CAPITAL BY
BOARD OF DIRECTORS. (a) If all or part of the stated capital of a
corporation is represented by shares without par value, the stated
capital of the corporation may be reduced in the manner provided by
this section.
(b) The board of directors shall adopt a resolution that:
(1) states the amount of the proposed reduction of the
stated capital and the manner in which the reduction will be
effected; and
(2) directs that the proposed reduction be submitted
to a vote of the shareholders at an annual or special meeting.
(c) Each shareholder of record entitled to vote on the
reduction of stated capital shall be given written notice stating
that the purpose or one of the purposes of the meeting is to
consider the matter of reducing the stated capital of the
corporation in the amount and manner proposed by the board of
directors. The notice shall be given in the time and manner
provided by this code for giving notice of shareholders' meetings.
(d) The affirmative vote of the holders of at least the
majority of the shares entitled to vote on the matter is required
for approval of the resolution proposing the reduction of stated
capital.
(e) Upon the approval of the resolution by the shareholders,
the stated capital of the corporation shall be reduced as provided
in the resolution.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.254. RESTRICTION ON REDUCTION OF STATED
CAPITAL. The stated capital of a corporation may not be reduced
under this subchapter if the amount of the aggregate stated capital
of the corporation would be reduced to an amount equal to or less
than the sum of the:
(1) aggregate preferential amounts payable on all
issued shares with a preferential right to the assets of the
corporation in the event of voluntary winding up and termination;
and
(2) aggregate par value of all issued shares with par
value but no preferential right to the assets of the corporation in
the event of voluntary winding up and termination.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER G. DISTRIBUTIONS AND SHARE DIVIDENDS
§ 21.301. DEFINITIONS. In this subchapter:
(1) "Distribution limit," with respect to a
distribution made by a corporation, other than a distribution
described by Subdivision (2), means:
(A) the net assets of the corporation if the
distribution:
(i) is a purchase or redemption of its own
shares by a corporation that:
(a) is eliminating fractional shares;
(b) is collecting or compromising indebtedness owed by or to
the corporation; or
(c) is paying dissenting shareholders entitled to payment
for their shares under this code; or
(ii) is not the purchase or redemption of
its own shares by a consuming assets corporation; or
(B) the surplus of the corporation for a
distribution not described by Paragraph (A).
(2) "Distribution limit," with respect to a
distribution that is a purchase or redemption of its own shares by
an investment company the certificate of formation of which
provides that the company may purchase the company's own shares out
of stated capital, means the net assets of the investment company
rather than the surplus of the investment company.
(3) "Investment company" means a corporation
registered as an open-end company under the Investment Company Act.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.302. AUTHORITY FOR DISTRIBUTIONS. The board of
directors of a corporation may authorize a distribution and the
corporation may make a distribution, subject to Section 21.303.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.303. LIMITATIONS ON DISTRIBUTIONS. (a) A
corporation may not make a distribution that violates the
corporation's certificate of formation.
(b) Unless the distribution is made in compliance with
Chapter 11, a corporation may not make a distribution:
(1) if the corporation would be insolvent after the
distribution; or
(2) that exceeds the distribution limit.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.304. REDEMPTIONS. (a) A distribution by a
corporation that involves a redemption of outstanding redeemable
shares of the corporation subject to redemption may be related to
any or all of those shares.
(b) If less than all of the outstanding redeemable shares of
a corporation subject to redemption are to be redeemed, the shares
to be redeemed shall be selected for redemption:
(1) in accordance with the corporation's certificate
of formation; or
(2) ratably or by lot in the manner prescribed by
resolution of the corporation's board of directors, if the
certificate of formation does not specify how shares are to be
selected for redemption.
(c) A redemption of redeemable shares takes effect by call
and written notice of the redemption of the shares.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.305. NOTICE OF REDEMPTION. (a) A notice of
redemption of redeemable shares of a corporation must state:
(1) the class or series of shares or part of the class
or series of shares to be redeemed;
(2) the date set for redemption;
(3) the redemptive price; and
(4) the place at which the shareholders may obtain
payment of the redemptive price.
(b) The notice of redemption shall be sent to each holder of
redeemable shares being called not later than the 21st day or
earlier than the 60th day before the date set for redemption.
(c) A notice that is mailed is considered to have been sent
when the notice is deposited in the United States mail, with postage
prepaid, addressed to the shareholder at the shareholder's address
as it appears on the share transfer records of the corporation.
(d) A corporation may give the transfer agent described by
Section 21.306 irrevocable instructions to send or complete the
notice of redemption.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.306. DEPOSIT OF MONEY FOR REDEMPTION. (a) After
the date the notice of redemption required by Section 21.305 is sent
and before the day after the date set for redemption of redeemable
shares of the corporation, a corporation may deposit with a bank or
trust company in this or another state of the United States
appointed and acting as transfer agent for the corporation an
amount sufficient to redeem the shares called for redemption. The
amount must be deposited as a trust fund.
(b) Unless the corporation's certificate of formation
provides otherwise, if a corporation deposits money and gives
payment instructions in accordance with Subsection (a) and Section
21.307(b):
(1) the shares called for redemption are considered
redeemed, and distributions on those shares cease to accrue on and
after the date set for redemption; and
(2) the deposit constitutes full payment of the shares
called for redemption to the holders of the shares on and after the
date set for redemption.
(c) Unless the certificate of formation provides otherwise,
after the date a deposit is made and instructions are given under
this section and Section 21.307(b), the shares called for
redemption are not considered outstanding, and the holders of the
shares cease to be shareholders of the shares and have no right with
respect to the shares other than:
(1) the right to receive payment of the redemptive
price of the shares without interest from the bank or trust company;
and
(2) any right to convert those shares.
(d) Unless the certificate of formation provides otherwise,
a bank or trust company receiving a deposit under this section shall
pay to the corporation on demand the balance of the amount deposited
if one or more holders of the shares called for redemption do not
claim for redemption the amount deposited on or before the sixth
anniversary of the date of the deposit. After making a payment
under this subsection, the bank or trust company is relieved of all
responsibility to the holders with respect to the amount deposited.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.307. PAYMENT OF REDEEMED SHARES. (a) Payment of a
certificated share shall be made only on the surrender of the
respective share certificate.
(b) A corporation may give a transfer agent described by
Section 21.306 irrevocable instructions to pay, on or after the
date set for redemption of redeemable shares, the redemptive price
to the respective holders of the shares as evidenced by a list of
shareholders certified by an officer of the corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.308. PRIORITY OF DISTRIBUTIONS. (a) Except as
provided by Subsection (b) or (c), a corporation's indebtedness
that arises as a result of the declaration of a distribution and a
corporation's indebtedness issued in a distribution are at parity
with the corporation's indebtedness to its general, unsecured
creditors.
(b) The indebtedness described by Subsection (a) shall be
subordinated to the extent required by an agreement binding on the
corporation on the date the indebtedness arises or if agreed to by
the person to whom the indebtedness is owed or, with respect to
indebtedness issued in a distribution, as provided by the
corporation.
(c) The indebtedness described by Subsection (a) shall be
secured to the extent required by an agreement binding on the
corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.309. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM
SURPLUS. (a) A corporation, by resolution of the board of
directors of the corporation, may:
(1) create a reserve out of the surplus of the
corporation; or
(2) designate or allocate in any manner a part or all
of the corporation's surplus for a proper purpose.
(b) A corporation may increase, decrease, or abolish a
reserve, designation, or allocation in the manner provided by
Subsection (a).
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.310. AUTHORITY FOR SHARE DIVIDENDS. The board of
directors of a corporation may authorize a share dividend and the
corporation may pay a share dividend subject to Section 21.311 and
any restriction in its certificate of formation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.311. LIMITATIONS ON SHARE DIVIDENDS. A
corporation may not pay a share dividend in authorized but unissued
shares of any class if:
(1) the surplus of the corporation is less than the
amount required by Section 21.313 to be transferred to stated
capital at the time the share dividend is made; or
(2) the share dividend will be made to a holder of
shares of any other class or series, unless:
(A) the corporation's certificate of formation
provides for the dividend; or
(B) the share dividend is authorized by the
holders of at least a majority of the outstanding shares of the
class or series in which the share dividend is to be made.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.312. VALUE OF SHARES ISSUED AS SHARE
DIVIDENDS. (a) A share dividend payable in authorized but
unissued shares with par value shall be issued at the par value of
the respective share.
(b) A share dividend payable in authorized but unissued
shares without par value shall be issued at the value set by the
board of directors when the share dividend is authorized.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.313. TRANSFER OF SURPLUS FOR SHARE
DIVIDENDS. (a) When a share dividend payable in authorized but
unissued shares with par value is made by a corporation, an amount
of surplus designated by the corporation's board of directors that
is not less than the aggregate par value of the shares issued as a
share dividend shall be transferred to stated capital.
(b) When a share dividend payable in authorized but unissued
shares without par value is made by a corporation, an amount of
surplus equal to the aggregate value set by the corporation's board
of directors with respect to shares under Section 21.312(b) shall
be transferred to stated capital.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.314. DETERMINATION OF SOLVENCY, NET ASSETS, STATED
CAPITAL, AND SURPLUS. (a) For purposes of this subchapter, the
determination of whether a corporation is or would be insolvent and
the determination of the value of a corporation's net assets,
stated capital, or surplus and each of the components of net assets,
stated capital, or surplus may be based on:
(1) financial statements of the corporation,
including financial statements that:
(A) include subsidiary corporations or other
corporations accounted for on a consolidated basis or on the equity
method of accounting; or
(B) present the financial condition of the
corporation in accordance with generally accepted accounting
principles;
(2) financial statements prepared using the method of
accounting used to file the corporation's federal income tax return
or using any other accounting practices and principles that are
reasonable under the circumstances;
(3) financial information, including condensed or
summary financial statements, that is prepared on the same basis as
financial statements described by Subdivision (1) or (2);
(4) projection, forecast, or other forward-looking
information relating to the future economic performance, financial
condition, or liquidity of the corporation that is reasonable under
the circumstances;
(5) a fair valuation or information from any other
method that is reasonable under the circumstances; or
(6) a combination of a statement, valuation, or
information authorized by this section.
(b) Subsection (a) does not apply to the computation of the
Texas franchise tax or any other tax imposed on a corporation under
the laws of this state.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.315. DATE OF DETERMINATION OF SOLVENCY, NET ASSETS,
STATED CAPITAL, AND SURPLUS. (a) For purposes of this
subchapter, a determination of whether a corporation is or would be
insolvent after a distribution or share dividend or a determination
of the value of a corporation's net assets, stated capital, or
surplus, or each component of net assets, stated capital, or
surplus, shall be made:
(1) on the date the distribution or share dividend is
authorized by the corporation's board of directors if the
distribution or share dividend is made not later than the 120th day
after the date of authorization; or
(2) if the distribution or share dividend is made more
than 120 days after the date of authorization:
(A) on the date designated by the corporation's
board of directors if the date so designated is not earlier than 120
days before the date the distribution or share dividend is made; or
(B) on the date the distribution or share
dividend is made if the corporation's board of directors does not
designate a date as described in Paragraph (A).
(b) For purposes of this section, a distribution that
involves:
(1) the incurrence by a corporation of indebtedness or
a deferred payment obligation is considered to have been made on the
date the indebtedness or obligation is incurred; or
(2) a requirement in the corporation's certificate of
formation or other contract of the corporation to redeem, exchange,
or otherwise acquire any of its own shares is considered to have
been made either on the date when the provision or other contract is
made or takes effect or on the date when the shares to be redeemed,
exchanged, or acquired are redeemed, exchanged, or acquired, at the
option of the corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.316. LIABILITY OF DIRECTORS FOR WRONGFUL
DISTRIBUTIONS. (a) Subject to Subsection (c), the directors of a
corporation who vote for or assent to a distribution by the
corporation that is prohibited by Section 21. 303 are jointly and
severally liable to the corporation for the amount by which the
distribution exceeds the amount permitted by that section to be
distributed.
(b) A director is not liable for all or part of the excess
amount if a distribution of that amount would have been permitted by
Section 21.303 after the date the director authorized the
distribution.
(c) A director is not jointly and severally liable under
Subsection (a) if, in voting for or assenting to the distribution,
the director:
(1) relies in good faith and with ordinary care on:
(A) the statements, valuations, or information
described by Section 21.314; or
(B) other information, opinions, reports, or
statements, including financial statements and other financial
data, concerning the corporation or another person that are
prepared or presented by:
(i) one or more officers or employees of the
corporation;
(ii) a legal counsel, public accountant,
investment banker, or other person relating to a matter the
director reasonably believes is within the person's professional or
expert competence; or
(iii) a committee of the board of directors
of which the director is not a member;
(2) acting in good faith and with ordinary care,
considers the assets of the corporation to be valued at least at
their book value; or
(3) in determining whether the corporation made
adequate provision for payment, satisfaction, or discharge of all
of the corporation's liabilities and obligations, as provided by
Sections 11.053 and 11.356, relies in good faith and with ordinary
care on financial statements of, or other information concerning, a
person who was or became contractually obligated to pay, satisfy,
or discharge some or all of the corporation's liabilities or
obligations.
(d) The liability imposed under Subsection (a) is the only
liability of a director to the corporation or its creditors for
authorizing a distribution that is prohibited by Section 21.303.
(e) This section and Sections 21.317 and 21.318 do not limit
any liability imposed under Chapter 24, Business & Commerce Code,
or the United States Bankruptcy Code.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.317. STATUTE OF LIMITATIONS ON ACTION FOR WRONGFUL
DISTRIBUTION. An action may not be brought against a director of a
corporation under Section 21.316 after the second anniversary of
the date the alleged act giving rise to the liability occurred.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.318. CONTRIBUTION FROM CERTAIN SHAREHOLDERS AND
DIRECTORS. (a) A director who is held liable for a claim asserted
under Section 21.316 is entitled to receive contributions from
shareholders who accepted or received the wrongful distribution
knowing that it was prohibited by Section 21.303 in proportion to
the amounts received by the shareholders.
(b) A director who is liable for a claim asserted under
Section 21.316 is entitled to receive contributions from each of
the other directors who are liable with respect to that claim in an
amount appropriate to achieve equity.
(c) The liability provided by Subsection (a) is the only
liability of a shareholder to the corporation or a creditor of the
corporation for accepting or receiving a distribution by the
corporation that is prohibited by Section 21.303, except for any
liability under Chapter 24, Business & Commerce Code, or the United
States Bankruptcy Code.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER H. SHAREHOLDERS' MEETINGS; VOTING AND QUORUM
§ 21.351. ANNUAL MEETING. (a) An annual meeting of the
SHAREHOLDERS of a corporation shall be held at a time that is stated
in or set in accordance with the corporation's bylaws.
(b) On the application of a shareholder who has previously
submitted a written request to the corporation that an annual
meeting be held, a court in the county in which the principal
executive office of the corporation is located may order a meeting
to be held if the annual meeting is not held or written consent
instead of the annual meeting is not executed within any 13-month
period, unless the meeting is not required to be held under Section
21.655.
(c) The failure to hold an annual meeting at the designated
time does not result in the winding up or termination of the
corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.352. SPECIAL MEETINGS. (a) A special meeting of
the SHAREHOLDERS of a corporation may be called by:
(1) the president, the board of directors, or any
other person authorized to call special meetings by the certificate
of formation or bylaws of the corporation; or
(2) the holders of the percentage of shares specified
in the certificate of formation, not to exceed 50 percent of the
shares entitled to vote or, if no percentage is specified, at least
10 percent of all of the shares of the corporation entitled to vote
at the proposed special meeting.
(b) Unless stated in or set in accordance with the bylaws,
the record date for determining which SHAREHOLDERS of the
corporation are entitled to call a special meeting is the date the
first shareholder signs the notice of that meeting.
(c) Other than procedural matters, the only business that
may be conducted at a special meeting of the SHAREHOLDERS is
business that is within the purposes described in the notice
required by Section 21.353.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.353. NOTICE OF MEETING. (a) Except as provided by
Section 21.456, written notice of a meeting in accordance with
Section 6.051 shall be given to each shareholder entitled to vote at
the meeting not later than the 10th day and not earlier than the
60th day before the date of the meeting. Notice shall be given at
the direction of the president, secretary, or other person calling
the meeting.
(b) The notice of a special meeting must contain a statement
regarding the purpose or purposes of the meeting.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.354. INSPECTION OF VOTING LIST. (a) The list of
SHAREHOLDERS entitled to vote at the meeting prepared under Section
21.372 shall be:
(1) subject to inspection by a shareholder during
regular business hours; and
(2) produced and kept open at the meeting.
(b) The original share transfer records are prima facie
evidence of which SHAREHOLDERS are entitled to inspect the list.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.355. CLOSING OF SHARE TRANSFER RECORDS. Share
transfer records that are closed in accordance with Section 6.101
for the purpose of determining which SHAREHOLDERS are entitled to
receive notice of a meeting of SHAREHOLDERS shall remain closed for
at least 10 days immediately preceding the date of the meeting.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.356. RECORD DATE FOR WRITTEN CONSENT TO
ACTION. The record date provided in accordance with Section
6.102(a) may not be more than 10 days after the date on which the
board of directors adopts the resolution setting the record date.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.357. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
CONSENT TO ACTION. The record date provided by the directors in
accordance with Section 6.101 must be at least 10 days before the
date on which the particular action requiring the determination of
SHAREHOLDERS is to be taken.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.358. QUORUM. (a) Subject to Subsection (b), the
holders of the majority of the shares entitled to vote at a meeting
of the SHAREHOLDERS of a corporation that are present or
represented by proxy at the meeting are a quorum for the
consideration of a matter to be presented at that meeting.
(b) The certificate of formation of a corporation may
provide that a quorum is present only if:
(1) the holders of a specified portion of the shares
that is greater than the majority of the shares entitled to vote are
represented at the meeting in person or by proxy; or
(2) the holders of a specified portion of the shares
that is less than the majority but not less than one-third of the
shares entitled to vote are represented at the meeting in person or
by proxy.
(c) Unless provided by the certificate of formation or
bylaws of the corporation, after a quorum is present at a meeting of
SHAREHOLDERS, the SHAREHOLDERS may conduct business properly
brought before the meeting until the meeting is adjourned. The
subsequent withdrawal from the meeting of a shareholder or the
refusal of a shareholder present at or represented by proxy at the
meeting to vote does not negate the presence of a quorum at the
meeting.
(d) Unless provided by the certificate of formation or
bylaws, the SHAREHOLDERS of the corporation at a meeting at which a
quorum is not present may adjourn the meeting until the time and to
the place as may be determined by a vote of the holders of the
majority of the shares who are present or represented by proxy at
the meeting.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.359. VOTING IN ELECTION OF
DIRECTORS. (a) Subject to Subsection (b), directors of a
corporation shall be elected by a plurality of the votes cast by the
holders of shares entitled to vote in the election of directors at a
meeting of SHAREHOLDERS at which a quorum is present.
(b) The certificate of formation or bylaws of a corporation
may provide that a director of a corporation shall be elected only
if the director receives:
(1) the vote of the holders of a specified portion, but
not less than the majority, of the shares entitled to vote in the
election of directors;
(2) the vote of the holders of a specified portion, but
not less than the majority, of the shares entitled to vote in the
election of directors and represented in person or by proxy at a
meeting of SHAREHOLDERS at which a quorum is present; or
(3) the vote of the holders of a specified portion, but
not less than the majority, of the votes cast by the holders of
shares entitled to vote in the election of directors at a meeting of
SHAREHOLDERS at which a quorum is present.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.360. NO CUMULATIVE VOTING RIGHT UNLESS
AUTHORIZED. Except as provided by Section 21.361 or 21.362, a
shareholder does not have the right to cumulate the shareholder's
vote in the election of directors.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.361. CUMULATIVE VOTING IN ELECTION OF
DIRECTORS. (a) If expressly authorized by a corporation's
certificate of formation in general or with respect to a specified
class or series of shares or group of classes or series of shares
and subject to Subsections (b) and (c), at each election of
directors of the corporation each shareholder entitled to vote at
the election is entitled to:
(1) vote the number of shares owned by the shareholder
for as many candidates as there are directors to be elected and for
whose election the shareholder is entitled to vote; or
(2) cumulate votes by:
(A) giving one candidate as many votes as the
total of the number of the directors to be elected multiplied by the
shareholder's shares; or
(B) distributing the votes among one or more
candidates using the same principle.
(b) Cumulative voting permitted by the certificate of
formation is permitted only in an election of directors in which a
shareholder who intends to cumulate votes has given written notice
of that intention to the secretary of the corporation on or before
the day preceding the date of the election at which the shareholder
intends to cumulate votes.
(c) All SHAREHOLDERS entitled to vote cumulatively may
cumulate their votes if a shareholder gives the notice required by
Subsection (b).
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.362. CUMULATIVE VOTING RIGHT IN CERTAIN
CORPORATIONS. Except as provided by the corporation's certificate
of formation, a shareholder of a corporation incorporated before
the effective date of this code has the right to cumulatively vote
the number of shares the shareholder owns in the election of
directors to the extent permitted and in the manner provided by
Section 21.361. A corporation may limit or deny a shareholder's
right to cumulatively vote shares at any time after the effective
date of this code by amending its certificate of formation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.363. VOTING ON MATTERS OTHER THAN ELECTION OF
DIRECTORS. (a) Subject to Subsection (b), with respect to a
matter other than the election of directors or a matter for which
the affirmative vote of the holders of a specified portion of the
shares entitled to vote is required by this code, the affirmative
vote of the holders of the majority of the shares entitled to vote
on, and who voted for, against, or expressly abstained with respect
to, the matter at a SHAREHOLDERS' meeting of a corporation at which
a quorum is present is the act of the SHAREHOLDERS.
(b) With respect to a matter other than the election of
directors or a matter for which the affirmative vote of the holders
of a specified portion of the shares entitled to vote is required by
this code, the certificate of formation or bylaws of a corporation
may provide that the act of the SHAREHOLDERS of the corporation is:
(1) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on that matter;
(2) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on that matter and represented in person or by proxy at a
SHAREHOLDERS' meeting at which a quorum is present;
(3) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on, and who voted for or against, the matter at a SHAREHOLDERS'
meeting at which a quorum is present; or
(4) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on, and who voted for, against, or expressly abstained with
respect to, the matter at a SHAREHOLDERS' meeting at which a quorum
is present.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 21.364. VOTE REQUIRED TO APPROVE FUNDAMENTAL
ACTION. (a) In this section, a "fundamental action" means:
(1) an amendment of a certificate of formation;
(2) a voluntary winding up under Chapter 11;
(3) a revocation of a voluntary decision to wind up
under Section 11.151;
(4) a cancellation of an event requiring winding up
under Section 11.152; or
(5) a reinstatement under Section 11.202.
(b) Except as otherwise provided by this code or the
certificate of formation or bylaws of a corporation in accordance
with Section 21.363, the vote required for approval of a
fundamental action by the SHAREHOLDERS is the affirmative vote of
the holders of at least two-thirds of the outstanding shares
entitled to vote on the fundamental action.
(c) If a class or series of shares is entitled to vote as a
class or series on a fundamental action, the vote required for
approval of the action by the SHAREHOLDERS is the affirmative vote
of the holders of at least two-thirds of the outstanding shares in
each class or series of shares entitled to vote on the action as a
class or series and at least two-thirds of the outstanding shares
otherwise entitled to vote on the action. Shares entitled to vote
as a class or series shall be entitled to vote only as a class or
series unless otherwise entitled to vote on each matter submitted
to the SHAREHOLDERS generally or otherwise provided by the
certificate of formation.
(d) Unless an amendment to the certificate of formation is
undertaken by the board of directors under Section 21.155, separate
voting by a class or series of shares of a corporation is required
for approval of an amendment to the certificate of formation that
would result in:
(1) the increase or decrease of the aggregate number
of authorized shares of the class or series;
(2) the increase or decrease of the par value of the
shares of the class or series, including changing shares with par
value into shares without par value or changing shares without par
value into shares with par value;
(3) effecting an exchange, reclassification, or
cancellation of all or part of the shares of the class or series;
(4) effecting an exchange or creating a right of
exchange of all or part of the shares of another class or series
into the shares of the class or series;
(5) the change of the designations, preferences,
limitations, or relative rights of the shares of the class or
series;
(6) the change of the shares of the class or series,
with or without par value, into the same or a different number of
shares, with or without par value, of the same class or series or
another class or series;
(7)
