BUSINESS ORGANIZATIONS CODE
CHAPTER 23. SPECIAL-PURPOSE CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
§ 23.001. DETERMINATION OF APPLICABLE LAW. (a) A
corporation created under this chapter or under a special statute
outside this code, to the extent not inconsistent with a special
statute regarding a particular corporation, is governed by:
(1) Title 1 and Chapter 21, if the corporation is
organized for profit; and
(2) Title 1 and Chapter 22, if the corporation is
organized not for profit.
(b) If a special statute does not contain any provision
regarding a matter provided for in Title 1 or Chapter 21 or 22, or if
the special statute specifically provides that the general laws for
corporations supplement the statute, to the extent consistent with
the special statute:
(1) Title 1 and Chapter 21 apply to a corporation
organized for profit; and
(2) Title 1 and Chapter 22 apply to a corporation
organized not for profit.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.002. APPLICABILITY OF FILING REQUIREMENTS. Except
as otherwise provided by the special statute, a document to be filed
with the secretary of state under a special statute shall be
executed and filed in accordance with Chapter 4.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.003. DOMESTIC CORPORATION ORGANIZED UNDER SPECIAL
STATUTE. A corporation organized under a special statute other
than this code is not considered a "domestic corporation" formed
under this code, although this code may apply to the corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER B. BUSINESS DEVELOPMENT CORPORATIONS
§ 23.051. DEFINITIONS. In this subchapter:
(1) "Corporation" means a business development
corporation organized under this subchapter.
(2) "Financial institution" means a banking
corporation or trust company, savings and loan association,
governmental agency, insurance company, or related corporation,
partnership, foundation, or other institution engaged primarily in
lending or investing funds.
(3) "Loan limit" means the maximum amount permitted to
be outstanding at one time on loans made by a member to a
corporation.
(4) "Member" means a financial institution authorized
to do business in this state that undertakes to lend money to a
corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.052. ORGANIZERS. Subject to The Securities Act
(Article 581-1 et seq., Vernon's Texas Civil Statutes), 25 or more
persons, the majority of whom must be residents of this state, may
form a business development corporation to promote, develop, and
advance the prosperity and economic welfare of this state.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.053. PURPOSES. (a) A business development
corporation may be organized as a:
(1) for-profit corporation under Chapter 21; or
(2) nonprofit corporation under Chapter 22.
(b) The business development corporation must be organized
to:
(1) promote, stimulate, develop, and advance the
business prosperity and economic welfare of this state and the
residents of this state;
(2) encourage and assist, through loans, investments,
or other business transactions, new business and industry in this
state;
(3) rehabilitate and assist existing industry in this
state;
(4) stimulate and assist in the expansion of business
activity that will tend to promote the business development and
maintain the economic stability of this state, provide maximum
opportunities for employment, encourage thrift, and improve the
standard of living of the residents of this state;
(5) cooperate and act in conjunction with other public
or private organizations in the promotion and advancement of
industrial, commercial, agricultural, and recreational
developments in this state; or
(6) provide financing for the promotion, development,
and conduct of business activity in this state.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.054. POWERS. (a) The powers of a corporation
include, in addition to the powers conferred on the corporation by
Chapters 2 and 21 or 22, as applicable, the power to:
(1) elect, appoint, and employ officers, agents, and
employees;
(2) make contracts and incur liabilities for a purpose
of the corporation;
(3) borrow money on a secured or unsecured basis to
carry out a purpose of the corporation;
(4) issue for the purpose of borrowing money a bond,
debenture, note, or other evidence of indebtedness, whether secured
or unsecured;
(5) secure an evidence of indebtedness by mortgage,
pledge, deed of trust, or other lien on a property, franchise,
right, or privilege of the corporation, or any part of or interest
in those items, without securing shareholder or member approval;
(6) make a secured or unsecured loan and establish and
regulate the terms and conditions of that loan and the charges for
interest or service connected with that loan;
(7) purchase, receive, hold, lease, or otherwise
acquire, and sell, convey, transfer, lease, or otherwise dispose
of, property and exercise those rights and privileges incidental
and appurtenant to the acquisition or disposal of the property and
to the use of the property, including any property acquired by the
corporation periodically in the satisfaction of a debt or
enforcement of an obligation;
(8) acquire improved or unimproved real property to
construct an industrial plant or other business establishment on
the property or dispose of the real property for the construction of
an industrial plant or other business establishment;
(9) acquire, construct or reconstruct, alter, repair,
maintain, operate, sell, convey, transfer, lease, or otherwise
dispose of an industrial plant or business establishment;
(10) protect the corporation's position as creditor by
acquiring the goodwill, business, rights, property, including a
share, bond, debenture, note, other evidence of indebtedness, other
asset, or any part of an asset or interest in an asset, of a person
to whom the corporation loaned money and assume, undertake, or pay
an obligation, debt, or liability of the person;
(11) mortgage, pledge, or otherwise encumber any
property, right, or thing of value, acquired under Subdivision (7),
(8), (9), or (10), as security for the payment of a part of the
purchase price;
(12) promote the establishment of local development
corporations in the various communities of this state, enter into
agreements with those local development corporations, and
cooperate with, assist, or otherwise encourage the local
foundations; and
(13) participate with a properly authorized federal
lending agency in the making of loans.
(b) A corporation may approve an application for a loan
under Subsection (a)(6) only if the applicant demonstrates that:
(1) the applicant applied for the loan through
ordinary banking channels; and
(2) the loan has been refused by at least two banks or
other financial institutions.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.055. STATEWIDE OPERATION. A corporation organized
under this subchapter is a state development company as defined by
Section 103, Small Business Investment Act of 1958 (15 U.S.C.
Section 662), as amended, or similar federal legislation, and may
operate on a statewide basis.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.056. CERTIFICATE OF FORMATION. (a) The
certificate of formation of a corporation must state:
(1) the name of the corporation;
(2) the purpose or purposes for which the corporation
is organized as required by Section 23.053; and
(3) any other information required by:
(A) Chapter 4; and
(B) Chapter 21 or 22, as applicable.
(b) The name of a corporation must include the words
"Business Development Corporation."
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.057. MANAGEMENT BY BOARD OF DIRECTORS; NUMBER OF
DIRECTORS. (a) The organization, control, and management of a
corporation are vested in a board of directors. The board must
consist of not fewer than 15 and not more than 21 directors.
(b) The board of directors may exercise any power of the
corporation not conferred on the shareholders or members by law or
by the corporation's bylaws.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.058. ELECTION OR APPOINTMENT OF
DIRECTORS. (a) The incorporators of a corporation shall name the
directors constituting the initial board of directors of the
corporation. Directors other than the initial directors shall be
elected at each annual meeting of the corporation. If an annual
meeting is not held at the time designated by the bylaws of the
corporation, the directors shall be elected at a special meeting
held in lieu of the annual meeting.
(b) At an annual meeting or special meeting held in lieu of
the annual meeting, the members of the corporation shall elect
two-thirds of the directors, and the shareholders of the
corporation shall elect the remaining directors.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.059. TERM OF OFFICE; VACANCY. (a) A director of
a corporation holds office until the next annual election of
directors and until a successor is elected and qualified, unless
the director is removed at an earlier date in accordance with the
corporation's bylaws.
(b) A vacancy in the office of a director elected by the
members shall be filled by the directors elected by the members, and
a vacancy in the office of a director elected by the shareholders
shall be filled by the directors elected by the shareholders.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.060. OFFICERS. The board of directors of a
corporation shall appoint a president, a treasurer, and any other
agent or officer of the corporation and shall fill each vacancy
other than a vacancy on the board.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.061. PARTICIPATION AS OWNER. (a) An individual,
corporation, or other organization authorized to conduct business
in this state, including a public utility company, insurance and
casualty company, or foreign corporation licensed to do business in
this state, or a trust may acquire, purchase, hold, sell, assign,
transfer, mortgage, pledge, or otherwise dispose of a bond,
security, or other evidence of indebtedness created by, or shares
of, the corporation.
(b) An owner of shares of the corporation may exercise any
right, power, or privilege of that ownership, including the right
to vote.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.062. FINANCIAL INSTITUTION AS MEMBER OF
CORPORATION. (a) A financial institution may become a member of a
corporation and may make loans to the corporation as provided by
this chapter.
(b) A financial institution may request membership in the
corporation by applying to the corporation's board of directors in
the manner prescribed by the board. Membership in the corporation
takes effect on the board's acceptance of the application.
(c) A financial institution that is a member of a
corporation may acquire, purchase, hold, sell, assign, transfer,
mortgage, pledge, or otherwise dispose of a bond, security, or
other evidence of indebtedness created by, or a share of, the
corporation. As owner of shares of the corporation, a financial
institution may exercise any right, power, or privilege of that
ownership, including the right to vote. A member of a corporation
may not acquire shares of the corporation in an amount greater than
10 percent of the member's loan limit. The amount of shares of the
corporation that a member may acquire is in addition to the amount
of shares of corporations that the member may otherwise acquire.
(d) A financial institution that is not a member of the
corporation may not acquire any shares of the corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.063. WITHDRAWAL OF MEMBER. (a) On written notice
to the corporation's board of directors, a member may withdraw from
a corporation on the date stated in the notice. The date of a
member's withdrawal must be at least six months after the date
notice is given under this subsection.
(b) A member is not obligated to make a loan to the
corporation pursuant to a call made after the date of the member's
withdrawal from the corporation, but a member shall fulfill any
obligation that has accrued or for which a commitment has been made
before the withdrawal date.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.064. POWERS OF SHAREHOLDERS AND MEMBERS. The
shareholders and members of a corporation may:
(1) determine the number of directors and elect the
directors as provided by Section 23.058;
(2) make, amend, and repeal bylaws of the corporation;
or
(3) exercise any other power of the corporation that
is conferred on the shareholders and members by the bylaws.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.065. VOTING BY SHAREHOLDER OR MEMBER. (a) Each
shareholder of a corporation has one vote, in person or by proxy,
for each share held by the shareholder.
(b) Each member of a corporation has one vote in person or by
proxy.
(c) A member with a loan limit that exceeds $1,000 has one
additional vote, in person or by proxy, for each additional $1,000
the member may have outstanding on loans to the corporation at any
one time as determined under Section 23.068.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.066. LOAN TO CORPORATION. (a) When called on by a
corporation to make a loan to the corporation, a member of the
corporation shall make the loan on those terms and conditions
periodically approved by the board of directors.
(b) A loan made to the corporation by a member shall be
evidenced by a bond, debenture, note, or other evidence of
indebtedness of the corporation that:
(1) is freely transferable at any time; and
(2) accrues interest at a rate of not less than
one-fourth of one percent more than the rate of interest determined
by the board of directors to be the prime rate prevailing on the
date of issuance on unsecured commercial loans.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.067. PROHIBITED LOAN. (a) A member may not make a
loan to a corporation if, immediately after the loan would be made,
the total amount of the obligations of the corporation would exceed
50 times the capital of the corporation.
(b) For purposes of this section, the capital of the
corporation includes the amount of the outstanding shares of the
corporation, whether common or preferred, and the earned or paid-in
surplus of the corporation.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.068. LOAN LIMITS. (a) A loan limit shall be
established at the $1,000 amount nearest to the amount computed in
accordance with this section.
(b) The total amount outstanding on loans made to a
corporation by a member at any one time, when added to the amount of
the investment in the shares of the corporation then held by the
member, may not exceed:
(1) 20 percent of the total amount then outstanding on
loans to the corporation by all members, including outstanding
amounts validly called for a loan but not yet loaned; or
(2) the following limit, to be determined as of the
time the member becomes a member of the corporation, or at any time
requested by a member on the basis of the audited balance sheet of
the member at the close of its fiscal year immediately preceding its
application for membership or, in the case of an insurance company,
its last annual statement to the Texas Department of Insurance:
(A) an amount equal to the lesser of $750,000 or
two percent of the capital and surplus of a commercial bank or trust
company;
(B) an amount equal to one percent of the total
outstanding loans made by a savings and loan association;
(C) an amount equal to one percent of the capital
and unassigned surplus of a stock insurance company other than a
fire insurance company;
(D) an amount equal to one percent of the
unassigned surplus of a mutual insurance company other than a fire
insurance company;
(E) an amount equal to one-tenth of one percent
of the assets of a fire insurance company; or
(F) the limits approved by the board of directors
of the corporation for a government pension fund or other financial
institution.
(c) Subject to Subsection (b), each call made by the
corporation shall be prorated among the members of the corporation
in substantially the same proportion that the adjusted loan limit
of each member bears to the aggregate of the adjusted loan limits of
all members.
(d) For purposes of Subsection (c), the adjusted loan limit
of a member is the amount of the member's loan limit, reduced by the
balance of outstanding loans made by the member to the corporation
and the investment in shares of the corporation held by the member
at the time of the call.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.069. SURPLUS. (a) A corporation shall set apart
as earned surplus not less than 10 percent of the corporation's net
earnings each year until the surplus, with any unimpaired surplus
paid in, is equal to one-half of the amount paid in on the shares
then outstanding. The surplus shall be kept to secure against
losses and contingencies. If the surplus becomes impaired, the
surplus shall be reimbursed in the manner provided for its
accumulation.
(b) Net earnings and surplus shall be determined by the
board of directors after providing for the required reserves as the
directors consider advisable. A good faith determination of net
earnings and surplus by the directors under this subsection is
conclusive.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.070. DEPOSITORY. (a) A corporation may deposit
the corporation's funds in a banking institution that has been
designated as a depository by a vote of the majority of the
directors present at an authorized meeting of the board of
directors of the corporation, excluding a director who is an
officer or director of the designated depository.
(b) The corporation may not receive money on deposit.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.071. ANNUAL REPORT; PROVISION OF REQUIRED
INFORMATION. (a) A corporation shall annually make a report of
its condition to the banking commissioner and the Texas Department
of Insurance.
(b) A corporation shall provide any information that is
required by the secretary of state.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER C. GRAND LODGES
§ 23.101. FORMATION. (a) An institution or order, by
resolution or other consent of its members, may incorporate under
this subchapter if the institution or order is:
(1) the grand lodge of Texas, Ancient, Free and
Accepted Masons;
(2) the Grand Royal Arch Chapter of Texas;
(3) the Grand Commandery of Knights Templars of Texas;
(4) the grand lodge of the Independent Order of Odd
Fellows of Texas; or
(5) another similar institution or order organized for
charitable or benevolent purposes.
(b) A corporation formed under this subchapter shall file a
certificate of formation in accordance with Chapter 4 that complies
with this subchapter.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.102. APPLICABILITY OF CHAPTER 22. If this
subchapter does not contain any provision regarding a matter
provided for in Chapter 22, to the extent consistent with this
subchapter, Chapter 22 applies to a corporation formed under this
subchapter.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.103. DURATION. A grand body that incorporates
under this subchapter may provide in the grand body's certificate
of formation for the expiration of its corporate powers at the end
of a stated number of years. If the certificate of formation does
not provide for the duration of the grand body, the grand body has
perpetual existence. The grand body may by its corporate name have
perpetual succession of its officers and members.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.104. SUBORDINATE LODGES. (a) The incorporation
of a grand body includes each of its subordinate lodges or bodies
holding a warrant or charter under the grand body.
(b) A subordinate body has all of the rights of other
corporations under and by the name given to the grand body in the
warrant or charter issued to the grand body to which it is attached.
Those rights shall be provided for in the charter of the grand body.
(c) A subordinate body is subject to the jurisdiction and
control of its respective grand body, and the warrant or charter of
the subordinate body may be revoked by the grand body.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.105. TRUSTEES AND DIRECTORS. A grand body and a
subordinate of the grand body may elect trustees and directors or
may appoint trustees or directors from among their officers.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.106. FRANCHISE TAXES. A corporation formed under
this subchapter is not subject to or required to pay a franchise
tax, except that a corporation is exempt from the franchise tax
imposed by Chapter 171, Tax Code, only if the corporation is
exempted by that chapter.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.107. GENERAL POWERS. A grand body and a
subordinate of the grand body may take action as directed or
provided by law in the case of other corporations and may make
constitutions and bylaws to govern their affairs.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.108. AUTHORITY REGARDING PROPERTY. (a) A grand
body or subordinate body may acquire and hold property as necessary
or convenient for a site on which to erect a building for the use and
occupancy of the body and to erect homes and schools for members'
widows or orphans or elderly, disabled, or indigent members and may
sell or mortgage the property.
(b) A conveyance must be executed by the presiding officer
and attested to by the secretary with the seal.
(c) The authority of a subordinate body to sell or to
mortgage property is subject to the conditions periodically
prescribed or established by the grand body to which the
subordinate is attached.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.109. AUTHORITY REGARDING LOANS. (a) A grand body
incorporated under this subchapter may:
(1) loan money held and owned by the grand body for
charitable purposes, for the endowment of any of the institutions
of the grand body, or otherwise; and
(2) secure loans by taking and receiving liens on real
property or by another method elected by the grand body.
(b) On sale of real property secured by a lien, a grand body
may become the purchaser of the real property and hold title to the
property.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 23.110. WINDING UP AND TERMINATION OF SUBORDINATE
BODY. (a) On the winding up and termination of a subordinate body
attached to a grand body, all property and rights existing in the
subordinate body pass to and vest in the grand body to which it was
attached, subject to the payment of any debt owed by the subordinate
body.
(b) Notwithstanding a grand body's liability for the debt of
a subordinate body under Subsection (a), the grand body is not
liable for an amount greater than the actual cash value of the
subordinate body's effects or authority.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
