VERNON'S TEXAS CIVIL STATUTES
CHAPTER 9. NON-PROFIT, COOPERATIVE, RELIGIOUS AND CHARITABLE
Art. 1396-1.01. Short Title, Captions, Parts, Articles, Sections,
Subsections and Paragraphs
A. This Act shall be known and may be cited as the "Texas Non-Profit
Corporation Act."
B. The division of this Act into Parts, Articles, Sections,
Subsections, and Paragraphs and the use of captions in connection
therewith are solely for convenience and shall have no legal effect
in construing the provisions of this Act.
C. This Act has been organized and subdivided in the following
manner:
(1) The Act is divided into Parts, containing groups of related
Articles. Parts are numbered consecutively with cardinal numbers.
(2) The Act is also divided into Articles, numbered consecutively
with Arabic numerals.
(3) Articles are divided into Sections. The Sections within each
Article are numbered consecutively with capital letters.
(4) Sections are divided into Subsections. The Subsections within
each Section are numbered consecutively with Arabic numerals
enclosed in parentheses.
(5) Subsections are divided into Paragraphs. The Paragraphs within
each Subsection are numbered consecutively with lower case letters
enclosed in parentheses.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 1.01.
Art. 1396-1.02. Definitions
A. As used in this Act, unless the context otherwise requires, the
term:
(1) "Corporation" or "domestic corporation" means a corporation not
for profit subject to the provisions of this Act, except a foreign
corporation.
(2) "Foreign corporation" means a corporation not for profit
organized under laws other than the laws of this State.
(3) "Non-Profit Corporation" is the equivalent of "not for profit
corporation" and means a corporation no part of the income of which
is distributable to its members, directors, or officers.
(4) "Articles of incorporation" means the original or restated
articles of incorporation and all amendments thereto.
(5) "By-laws" means the code or codes of rules adopted for the
regulation or management of the corporation, irrespective of the
name or names by which such rules are designated.
(6) "Member" means one having membership rights in a corporation in
accordance with the provisions of its articles of incorporation or
its by-laws.
(7) "Board of Directors" means the group of persons vested with the
management of the affairs of the corporation, irrespective of the
name by which such group is designated.
(8) "President" means that officer designated as "president" in the
articles of incorporation or by-laws of a corporation, or that
officer authorized, in the articles of incorporation, the by-laws,
or otherwise, to perform the functions of the principal executive
officer, irrespective of the name by which he may be designated, or
that committee of persons authorized, in the articles of
incorporation, the by-laws, or otherwise, to perform the functions
of the principal executive officer.
(9) "Vice-president" means that officer designated as
"vice-president" in the articles of incorporation or the by-laws of
a corporation, or that officer or committee of persons authorized,
in the articles of incorporation, the by-laws, or otherwise, to
perform the duties of the president upon the death, absence, or
resignation of the president or upon his inability to perform the
duties of his office, irrespective of the name by which he, or they,
may be designated.
(10) "Secretary" means that officer designated as "secretary" in
the articles of incorporation or the by-laws of a corporation, or
that officer or committee of persons authorized, in the articles of
incorporation, the by-laws, or otherwise, to perform the functions
of secretary, irrespective of the name by which he, or they, may be
designated.
(11) "Treasurer" means that officer designated as "treasurer" in
the articles of incorporation or the by-laws of a corporation, or
that officer or committee of persons authorized, in the articles of
incorporation, the by-laws, or otherwise, to perform the functions
of a treasurer, irrespective of the name by which he, or they, may
be designated.
(12) "Insolvency" means inability of a corporation to pay its debts
as they become due in the usual course of its affairs.
(13) "Verified" means subscribed and sworn to under the sanction of
an oath, or such affirmation as is by law equivalent to an oath,
made before an officer authorized to administer oaths.
(14) "Director" means a member of the board of directors of a
corporation organized under this Act.
(15) "Ordinary care" means the care that an ordinarily prudent
person in a similar position would exercise under similar
circumstances.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 1.02. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 1, eff. Jan. 1, 1994.
Art. 1396-2.01. Purposes
A. Except as hereinafter in this Article expressly excluded
herefrom, non-profit corporations may be organized under this Act
for any lawful purpose or purposes, which purposes shall be fully
stated in the articles of incorporation. Such purpose or purposes
may include, without being limited to, any one or more of the
following: charitable, benevolent, religious, eleemosynary,
patriotic, civic, missionary, educational, scientific, social,
fraternal, athletic, aesthetic, agricultural and horticultural;
and the conduct of professional, commercial, industrial, or trade
associations; and animal husbandry. Subject to the provisions of
Chapter 2, Title 83, of the Revised Civil Statutes of Texas, 1925,
and of such Chapter or any part thereof as it may hereafter be
amended, a corporation may be organized under this Act if any one or
more of its purposes for the conduct of its affairs in this State is
to organize laborers, working men, or wage earners to protect
themselves in their various pursuits.
(1) Charitable corporations may be formed for the purpose of
operating a Dental Health Service Corporation which service
corporation will manage and coordinate the relationship between the
contracting dentist, who will perform the dental services, and the
patient who will receive such services where such patient is a
member of a group which has contracted with the Dental Health
Service Corporation to provide dental care to members of that
group. An application for a charter under this Section shall have
attached as exhibits (1) an affidavit by the applicants that not
less than thirty percent (30%) of the dentists legally engaged in
the practice of dentistry in this state together with their names
and addresses have signed contracts to perform the required dental
services for a period of not less than one (1) year, after
incorporation, and (2) a certification by the Texas State Board of
Dental Examiners that the applicant incorporators are reputable
citizens of the State of Texas and are of good moral character and
that the corporation sought to be formed will be in the best
interest of the public health. A corporation formed hereunder
shall have not less than twelve (12) directors, nine (9) of whom
shall be dentists licensed by the Texas State Board of Dental
Examiners to practice dentistry in this state and be actively
engaged in the practice of dentistry in this state. A corporation
formed hereunder shall maintain not less than thirty percent (30%)
of the number of dentists actually engaged in the practice of
dentistry in this state as participating or contracting dentists,
and shall file with the Texas State Board of Dental Examiners each
September the names and addresses of all contracting or
participating dentists. A corporation formed hereunder shall not
(1) prevent any patient from selecting the licensed dentist of his
choice to render dental services to him, (2) deny any licensed
dentist the right to participate as a contracting dentist to
perform the dental services contracted for by the patient, (3)
discriminate among patients or licensed dentists regarding payment
or reimbursement for the cost of performing dental services
provided the dentist is licensed to perform the dental service, or
(4) authorize any person to regulate, interfere, or intervene in
any manner in the diagnosis or treatment rendered by a licensed
dentist to his patient. A corporation formed hereunder may require
the attending dentist to provide a narrative oral or written
description of the dental services rendered for the purpose of
determining benefits or providing proof of treatment. Diagnostic
aids used in the course of treatment may be requested by the
corporation, but may not be required for any purpose.
B. This Act shall not apply to any corporation, nor may any
corporation be organized under this Act or obtain authority to
conduct its affairs in this State under this Act:
(1) If any one or more of its purposes for the conduct of its affairs
in this State is expressly forbidden by any law of this State.
(2) If any one or more of its purposes for the conduct of its affairs
in this State is to engage in any activity which cannot lawfully be
engaged in without first obtaining a license under the authority of
the laws of this State to engage in such activity and such license
cannot lawfully be granted to a corporation, except as provided by
Subsection C.
(3) If any one or more of its purposes for the conduct of its affairs
in this State is to organize Group Hospital Service, Rural Credit
Unions, Agricultural and Livestock Pools, Mutual Loan
Corporations, Co-operative Credit Associations, Farmers'
Co-operative Societies, Co-operative Marketing Act Corporations,
Rural Electric Co-operative Corporations, Telephone Co-operative
Corporations, or fraternal organizations operating under the lodge
system and heretofore or hereafter incorporated under Articles 1399
through 1407, both inclusive, of Revised Civil Statutes of Texas,
1925.
(4) If any one or more of its purposes for the conduct of its affairs
in this State is to operate a bank under the banking laws of this
State or to operate an insurance company of any type or character
that operates under the insurance laws of this State.
C. Doctors of medicine and osteopathy licensed by the Texas State
Board of Medical Examiners and podiatrists licensed by the Texas
State Board of Podiatric Medical Examiners may organize a
non-profit corporation under this Act that is jointly owned,
managed, and controlled by those practitioners to perform a
professional service that falls within the scope of practice of
those practitioners and consists of:
(1) carrying out research in the public interest in medical
science, medical economics, public health, sociology, or a related
field;
(2) supporting medical education in medical schools through grants
or scholarships;
(3) developing the capabilities of individuals or institutions
studying, teaching, or practicing medicine, including podiatric
medicine;
(4) delivering health care to the public; or
(5) instructing the public regarding medical science, public
health, hygiene, or a related matter.
D. When doctors of medicine, osteopathy, and podiatry organize a
non-profit corporation that is jointly owned by those
practitioners, the authority of each of the practitioners is
limited by the scope of practice of the respective practitioners
and none can exercise control over the other's clinical authority
granted by their respective licenses, either through agreements,
articles of incorporation, bylaws, directives, financial
incentives, or other arrangements that would assert control over
treatment decisions made by the practitioner. The Texas State
Board of Medical Examiners and the Texas State Board of Podiatric
Medical Examiners continue to exercise regulatory authority over
their respective licenses.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 201. Amended by Acts
1961, 57th Leg., p. 959, ch. 418, Sec. 1; Acts 1983, 68th Leg., p.
142, ch. 36, Sec. 1, eff. Aug. 29, 1983; Acts 1989, 71st Leg., ch.
1039, Sec. 4.07, eff. Sept. 1, 1989; Acts 1999, 76th Leg., ch. 813,
Sec. 2, eff. Aug. 30, 1999; Acts 2003, 78th Leg., ch. 534, Sec. 1,
eff. June 20, 2003.
Art. 1396-2.02. General Powers
A. Subject to the provisions of Sections B and C of this Article,
each corporation shall have power:
(1) To have perpetual succession by its corporate name, unless a
limited period of duration is stated in its articles of
incorporation. Notwithstanding the articles of incorporation, the
period of duration for any corporation incorporated before August
10, 1959, is perpetual if all fees and franchise taxes have been
paid as provided by law.
(2) To sue and be sued, complain and defend, in its corporate name.
(3) To have a corporate seal which may be altered at pleasure, and
to use the same by causing it, or a facsimile thereof, to be
impressed on, affixed to, or in any manner reproduced upon,
instruments of any nature required to be executed by its proper
officers.
(4) To purchase, receive, lease, or otherwise acquire, own, hold,
improve, use, or otherwise deal in and with, real or personal
property, or any interest therein, wherever situated, as the
purposes of the corporation shall require, or as shall be donated to
it.
(5) To sell, convey, mortgage, pledge, lease, exchange, transfer,
and otherwise dispose of all or any part of its property and assets.
(6) To lend money to and otherwise assist its employees and
officers, but not its directors, if the loan or assistance may
reasonably be expected to benefit, directly or indirectly, the
corporation providing the assistance. Loans made to officers must
be:
(a) made for the purpose of financing the principal residence of the
officer; or
(b) made during the first year of that officer's employment, in
which case the original principal amount may not exceed 100 percent
of the officer's annual salary; or
(c) made in any subsequent year, in which case the original
principal amount may not exceed 50 percent of the officer's annual
salary.
(7) To purchase, receive, subscribe for, or otherwise acquire, own,
hold, vote, use, employ, mortgage, lend, pledge, sell or otherwise
dispose of, and otherwise use and deal in and with, shares or other
interests in, or obligations of, other domestic or foreign
corporations, whether for profit or not for profit, associations,
partnerships, or individuals, or direct or indirect obligations of
the United States or of any other government, state, territory,
government district, or municipality, or of any instrumentality
thereof.
(8) To make contracts and incur liabilities, borrow money at such
rates of interest as the corporation may determine, issue its
notes, bonds, and other obligations, and secure any of its
obligations by mortgage or pledge of all or any of its property,
franchises, and income.
(9) To lend money for its corporate purposes, invest and reinvest
its funds, and take and hold real and personal property as security
for the payment of funds so loaned or invested.
(10) To conduct its affairs, carry on its operations, and have
officers and exercise the powers granted by this Act in any state,
territory, district, or possession of the United States, or any
foreign country.
(11) To elect or appoint officers and agents of the corporation for
such period of time as the corporation may determine and define
their duties and fix their compensation.
(12) To make and alter by-laws, not inconsistent with its articles
of incorporation or with the laws of this State, for the
administration and regulation of the affairs of the corporation.
(13) To make donations for the public welfare or for charitable,
scientific, or educational purposes and in time of war to make
donations in aid of war activities.
(14) To cease its corporate activities and terminate its existence
by voluntary dissolution.
(15) Whether included in the foregoing or not, to have and exercise
all powers necessary or appropriate to effect any or all of the
purposes for which the corporation is organized.
(16) Any religious, charitable, educational, or eleemosynary
institution organized under the laws of this State may acquire,
own, hold, mortgage, and dispose of and invest its funds in real and
personal property for the use and benefit and under the discretion
of, and in trust for any convention, conference or association
organized under the laws of this State or another state with which
it is affiliated, or which elects its board of directors, or which
controls it, in furtherance of the purposes of the member
institution.
(17) To pay pensions and establish pension plans and pension trusts
for all of, or class, or classes of its officer and employees, or
its officers or its employees.
(18) To deliver money to a scholarship fund for rural students.
B. Nothing in this Article grants any authority to officers or
directors of a corporation for the exercise of any of the foregoing
powers, inconsistent with limitations on any of the same which may
be expressly set forth in this Act or in the articles of
incorporation or by-laws or in any other laws of this State.
Authority of officers and directors to act beyond the scope of the
purpose or purposes of a corporation is not granted by any
provisions of this Article.
C. Nothing in this Article shall be deemed to authorize any action
in violation of the Anti-Trust Laws of this State or of any of the
provisions of Chapter 4 of Title 32 of Revised Civil Statutes of
Texas, 1925, as now existing or hereafter amended.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.02. Amended by Acts
1977, 65th Leg., p. 837, ch. 313, Sec. 1, eff. Aug. 29, 1977; Acts
1979, 66th Leg., p. 174, ch. 96, Sec. 1, eff. May 2, 1979; Acts
1989, 71st Leg., ch. 1199, Sec. 1, eff. Aug. 28, 1989; Acts 1997,
75th Leg., ch. 904, Sec. 5, eff. Sept. 1, 1997.
Art. 1396-2.03. Defense of Ultra Vires
A. Lack of capacity of a corporation shall never be made the basis
of any claim or defense at law or in equity.
B. No act of a corporation and no conveyance or transfer of real or
personal property to or by a corporation shall be invalid by reason
of the fact that such act, conveyance or transfer was beyond the
scope of the purpose or purposes of the corporation as expressed in
its articles of incorporation or by reason of limitations on
authority of its officers and directors to exercise any statutory
power of the corporation, as such limitations are expressed in the
articles of incorporation, but that such act, conveyance or
transfer was, or is, beyond the scope of the purpose or purposes of
the corporation as expressed in its articles of incorporation or
inconsistent with any such expressed limitations of authority, may
be asserted:
(1) In a proceeding by a member against the corporation to enjoin
the doing of any act or acts or the transfer of real or personal
property by or to the corporation. If the unauthorized act or
transfer sought to be enjoined is being, or is to be, performed or
made pursuant to any contract to which the corporation is a party,
the court may, if all of the parties to the contract are parties to
the proceedings and if it deems the same to be equitable, set aside
and enjoin the performance of such contract, and in so doing may
allow to the corporation or to the other parties to the contract, as
the case may be, compensation for the loss or damage sustained by
either of them which may result from the action of the court in
setting aside and enjoining the performance of such contract, but
anticipated profits to be derived from the performance of the
contract shall not be awarded by the court as part of the loss or
damage sustained.
(2) In a proceeding by the corporation, whether acting directly or
through a receiver, trustee, or other legal representative, or
through members in a representative suit, against the incumbent or
former officers or directors of the corporation for exceeding their
authority.
(3) In a proceeding by the Attorney General, as provided in this
Act, to dissolve the corporation, or in a proceeding by the Attorney
General to enjoin the corporation from performing unauthorized
acts, or to enforce divestment of real property acquired or held
contrary to the laws of this State.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.03.
Art. 1396-2.04. Corporate Name
A. The corporate name shall conform to the following requirements:
(1) It shall not contain any word or phrase which indicates or
implies that it is organized for any purpose other than one or more
of the purposes contained in its articles of incorporation.
(2) It shall not be the same as, or deceptively similar to, the name
of any domestic corporation, whether for profit or not for profit,
existing under the laws of this State, or the name of any foreign
corporation, whether for profit or not for profit, authorized to
transact business or conduct affairs in this State, or a name the
exclusive right to which is, at the time, reserved in the manner
provided by the Texas Business Corporation Act, or the name of a
corporation which has in effect a registration of its corporate
name as provided in the Texas Business Corporation Act; provided
that a name may be similar if written consent is obtained from the
existing corporation having the name deemed to be similar, or the
person, or corporation, for whom the name deemed to be similar is
reserved or registered in the office of the Secretary of State.
(3) It shall not contain the word "lottery."
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.04. Amended by Acts
1991, 72nd Leg., 1st C.S., ch. 6, Sec. 11A(b).
Art. 1396-2.04A. Reserved Name
A. The exclusive right to the use of a corporate name may be
reserved by:
(1) a person intending to organize a corporation under this Act;
(2) a domestic corporation intending to change its name;
(3) a foreign corporation intending to apply for a certificate of
authority to conduct affairs in this State;
(4) a foreign corporation authorized to conduct affairs in this
State and intending to change its name; or
(5) a person intending to organize a foreign corporation and
intending to have that corporation apply for a certificate of
authority to conduct affairs in this State.
B. An application for name reservation or transfer of the exclusive
use of a specified corporate name is subject to the procedures and
period prescribed by Article 2.06, Texas Business Corporation Act.
Added by Acts 1993, 73rd Leg., ch. 733, Sec. 2, eff. Jan. 1, 1994.
Art. 1396-2.05. Registered Office and Registered Agent
Each corporation shall have and continuously maintain in this
State:
(1) A registered office which may be, but need not be, the same as
its principal office.
(2) A registered agent, which agent may be an individual resident in
this State whose business office is identical with such registered
office, or a domestic corporation, whether for profit or not for
profit, or a foreign corporation, whether for profit or not for
profit, authorized to transact business or to conduct its affairs
in this State which has a business office identical with such
registered office.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.05. Amended by Acts
1979, 66th Leg., p. 213, ch. 120, Sec. 1, eff. May 9, 1979; Acts
1993, 73rd Leg., ch. 733, Sec. 3, eff. Jan. 1, 1994.
Art. 1396-2.06. Change of Registered Office or Agent
A. A corporation may change its registered office or change its
registered agent, or both, upon filing in the office of the
Secretary of State a statement setting forth:
(1) The name of the corporation.
(2) The post-office address of its then registered office.
(3) If the post-office address of its registered office is to be
changed, the post-office address to which the registered office is
to be changed.
(4) The name of its then registered agent.
(5) If its registered agent is to be changed, the name of its
successor registered agent.
(6) That the post-office address of its registered office and the
post-office address of the business office of its registered agent,
as changed, will be identical.
(7) That such change was authorized by its Board of Directors or by
an officer of the corporation so authorized by the Board of
Directors, or if the management of the corporation is vested in its
members pursuant to Article 2.14C of this Act, by the members.
B. The statement required by this Article shall be signed by the
corporation by an officer. The original and a copy of the statement
shall be delivered to the Secretary of State. If the Secretary of
State finds that such statement conforms to the provisions of this
Act, he shall, when all fees have been paid as prescribed by law:
(1) Endorse on the original and the copy the word "Filed" and the
month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to the corporation or its representative.
C. Upon such filing, the change of address of the registered office,
or the appointment of a new registered agent, or both, as the case
may be, shall become effective.
D. Any registered agent of a corporation may resign
(1) by giving written notice to the corporation at its last known
address
(2) and by giving written notice, in triplicate (the original and
two copies of the notice), to the Secretary of State within ten days
after mailing or delivery of said notice to the corporation. Such
notice shall include the last known address of the corporation and
shall include the statement that written notice of resignation has
been given to the corporation and the date thereof. Upon compliance
with the requirements as to written notice, the appointment of such
agent shall terminate upon the expiration of thirty (30) days after
receipt of such notice by the Secretary of State.
If the Secretary of State finds that such written notice conforms to
the provisions of this Act, he shall:
(1) Endorse on the original and both copies the word "filed" and the
month, day and year of the filing thereof.
(2) File the original in his office.
(3) Return one copy to such resigning registered agent.
(4) Return one copy to the corporation at the last known address of
the corporation as shown in such written notice.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.06. Amended by Acts
1969, 61st Leg., p. 2477, ch. 834, Sec. 1, 2; Acts 1979, 66th Leg.,
p. 213, ch. 120, Sec. 2, eff. May 9, 1979; Acts 1987, 70th Leg., ch.
93, Sec. 36, eff. Aug. 31, 1987.
Art. 1396-2.06A. Change of Address of Registered Agent
A. The location of the registered office in this State for a
corporation may be changed from one address to another by filing in
the office of the Secretary of State a statement setting forth:
(1) the name of the corporation represented by the registered
agent;
(2) the street address at which the registered agent has maintained
the registered office for that corporation;
(3) the new street address at which the registered agent will
maintain the registered office for that corporation; and
(4) a statement that notice of the change has been given to the
corporation in writing at least ten (10) days before the date of the
filing.
B. The statement required by this article shall be signed by the
registered agent or, if the agent is a corporation, by an officer of
the corporate agent on its behalf. If the registered agent is
simultaneously filing statements for more than one corporation,
each statement may contain facsimile signatures in the execution.
The original and one copy of the statement shall be delivered to the
Secretary of State. If the Secretary of State finds that the
statement conforms to this Act, the Secretary of State shall:
(1) endorse on the original and the copy the word "Filed," and the
month, day, and year of the filing;
(2) file the original in the Secretary of State's office; and
(3) return the copy to the registered agent.
C. The registered office of the corporation named in the statement
shall be changed to the new street address of the registered agent
on the filing of the statement by the Secretary of State.
Added by Acts 1993, 73rd Leg., ch. 733, Sec. 4, eff. Jan. 1, 1994.
Art. 1396-2.07. Service of Process on Corporation
A. The president and all vice-presidents of the corporation and the
registered agent of the corporation shall be agents of such
corporation upon whom any process, notice, or demand required or
permitted by law to be served upon the corporation may be served.
Where the chief executive function of a corporation is authorized
to be performed by a committee, service on any member of such
committee shall be deemed to be service on the president.
B. Whenever a corporation shall fail to appoint or maintain a
registered agent in this State, or whenever its registered agent
cannot with reasonable diligence be found at the registered office,
then the Secretary of State shall be an agent of such corporation
upon whom any such process, notice, or demand may be served.
Service on the Secretary of State of any process, notice, or demand
shall be made by delivering to and leaving with him, or with the
Assistant Secretary of State, or with any clerk having charge of the
corporation department of his office, duplicate copies of such
process, notice, or demand. In the event any such process, notice,
or demand is served on the Secretary of State, he shall immediately
cause one of the copies thereof to be forwarded by registered mail,
addressed to the corporation at its registered office. Any service
so had on the Secretary of State shall be returnable in not less
than thirty (30) days.
C. The Secretary of State shall keep a record of all processes,
notices, and demands served upon him under this Article, and shall
record therein the time of such service and his action with
reference thereto.
D. Service of process, notice, or demand required or permitted by
law to be served by a political subdivision of this state or by a
person, including another political subdivision or an attorney,
acting on behalf of a political subdivision in connection with the
collection of a delinquent ad valorem tax may be served on a
corporation whose corporate privileges are forfeited under Section
171.251, Tax Code, or is involuntarily dissolved under Article 7.01
of this Act by delivering the process, notice, or demand to any
officer or director of the corporation, as listed in the most recent
records of the secretary of state. If the officers or directors of
the corporation are unknown or cannot be found, service on the
corporation may be made in the same manner as service is made on
unknown shareholders under law. Notwithstanding any disability or
reinstatement of a corporation, service of process under this
section is sufficient for a judgment against the corporation or a
judgment in rem against any property to which the corporation holds
title.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.07. Amended by Acts
1999, 76th Leg., ch. 1481, Sec. 39, eff. Sept. 1, 1999.
Art. 1396-2.08. Members
A. A corporation may have one or more classes of members or may have
no members.
B. If the corporation has one or more classes of members, the
designation of such class or classes, the manner of election or
appointment, and the qualifications and rights of the members of
each class shall be set forth in the articles of incorporation or
by-laws.
C. If the corporation is to have no members, that fact shall be set
forth in the articles of incorporation.
D. A corporation may issue certificates, or cards, or other
instruments evidencing membership rights, voting rights or
ownership rights as may be authorized in the articles of
incorporation or in the by-laws.
E. The members of a non-profit corporation shall not be personally
liable for the debts, liabilities, or obligations of the
corporation.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.08. Amended by Acts
1961, 57th Leg., p. 653, ch. 302, Sec. 1.
Art. 1396-2.09. By-Laws
A. The initial by-laws of a corporation shall be adopted by its
board of directors or, if the management of the corporation is
vested in its members, by the members. The by-laws may contain any
provisions for the regulation and management of the affairs of the
corporation not inconsistent with law or the articles of
incorporation.
B. A corporation's board of directors may amend or repeal the
corporation's by-laws, or adopt new by-laws, unless:
(1) the articles of incorporation or this Act reserves the power
exclusively to the members in whole or in part;
(2) the management of the corporation is vested in its members; or
(3) the members in amending, repealing, or adopting a particular
by-law expressly provide that the board of directors may not amend
or repeal that by-law.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.09. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 5, eff. Jan. 1, 1994.
Art. 1396-2.10. Meetings of Members
A. If a corporation has members:
(1) Meetings of members shall be held at such place, either within
or without this State, as may be provided in the by-laws. In the
absence of any such provision, all meetings shall be held at the
registered office of the corporation in this State.
(2) An annual meeting of the members shall be held at such times as
may be provided in the by-laws, except that where the by-laws of a
corporation provide for more than one regular meeting of members
each year, an annual meeting shall not be required, and directors
may be elected at such meetings as the by-laws may provide. Failure
to hold the annual meeting at the designated time shall not work a
dissolution of the corporation. In the event the board of directors
fails to call the annual meeting at the designated time, any member
may make demand that such meeting be held within a reasonable time,
such demand to be made in writing by registered mail directed to any
officer of the corporation. If the annual meeting of members is not
called within sixty (60) days following such demand, any member may
compel the holding of such annual meeting by legal action directed
against said board, and all of the extraordinary writs of common law
and of courts of equity shall be available to such member to compel
the holding of such annual meeting. Each and every member is hereby
declared to have a justiciable interest sufficient to enable him to
institute and prosecute such legal proceedings.
(3) Special meetings of the members may be called by the president,
the board of directors, by members having not less than one-tenth
(1/10) of the votes entitled to be cast at such meeting, or such
other officers or persons as may be provided in the articles of
incorporation or by-laws.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.10.
Art. 1396-2.11. Notice of Members' Meetings
A. In the case of a corporation other than a church, written or
printed notice stating the place, day, and hour of the meeting and,
in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor
more than sixty (60) days before the date of the meeting, either
personally, by facsimile transmission, or by mail, by or at the
direction of the president, or the secretary, or the officers or
persons calling the meeting, to each member entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the member at
his address as it appears on the records of the corporation, with
postage thereon paid. If transmitted by facsimile, notice is
deemed to be delivered on successful transmission of the facsimile.
B. In the case of a corporation which is a church, notice of
meetings of members will be deemed sufficient if made by oral
announcement at a regularly scheduled worship service prior to such
meeting, or as otherwise provided in its articles of incorporation
or its by-laws.
C. The by-laws may provide that no notice of annual or regular
meetings shall be required.
D. If its by-laws so provide, a corporation having more than one
thousand (1,000) members at the time a meeting is scheduled or
called may give notice of such meeting by publication in any
newspaper of general circulation in the community in which the
principal office of such corporation is located.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.11. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 6, eff. Jan. 1, 1994.
Art. 1396-2.11A. Record Date for Determining Members Entitled to
Notice and Vote
A. The by-laws of a corporation may fix or provide the manner of
fixing a date as the record date for determining the members
entitled to notice of a members' meeting. If the by-laws do not fix
and do not provide for fixing the record date, the board of
directors may fix a future date as the record date. If a record date
is not fixed, members at the close of business on the business day
preceding the date on which notice is given, or if notice is waived,
at the close of business on the business day preceding the date of
the meeting, are entitled to notice of the meeting.
B. The by-laws of a corporation may fix or provide the manner of
fixing a date as the record date for determining the members
entitled to vote at a members' meeting. If the by-laws do not fix
and do not provide for fixing a record date, the board may fix a
future date as the record date. If a record date is not fixed,
members on the date of the meeting who are otherwise eligible to
vote are entitled to vote at the meeting.
C. The by-laws may fix or provide the manner for fixing a date as the
record date for the purpose of determining the members entitled to
exercise any rights regarding any other lawful action. If the
by-laws do not fix and do not provide for fixing a record date, the
board of directors may fix in advance a record date. If a record
date is not fixed, members at the close of business on the date on
which the board of directors adopts the resolution relating to the
record date, or the 60th day before the date of the other action,
whichever is later, are entitled to exercise those rights.
D. A record date fixed under this section may not be more than sixty
(60) days before the date of the meeting or action that requires the
determination of the members.
E. A determination of members entitled to notice of or to vote at a
members' meeting is effective for any adjournment of the meeting
unless the board fixes a new date for determining the right to
notice or the right to vote. The board must fix a new date for
determining the right to notice or the right to vote if the meeting
is adjourned to a date more than ninety (90) days after the record
date for determining members entitled to notice of the original
meeting.
Added by Acts 1993, 73rd Leg., ch. 733, Sec. 7, eff. Jan. 1, 1994.
Art. 1396-2.11B. Voting Members' List for Meeting
A. After fixing a record date for the notice of a meeting, a
corporation shall prepare an alphabetical list of the names of all
its voting members who are entitled to notice of the meeting. The
list must show the address and number of votes each voting member is
entitled to cast at the meeting. The corporation shall maintain,
through the time of the members' meeting, a list of members who are
entitled to vote at the meeting but are not entitled to notice of
the meeting. This list shall be prepared on the same basis and be
part of the list of voting members.
B. Not later than two (2) business days after the date notice is
given of a meeting for which a list was prepared, as provided by
Section A of this article, and continuing through the meeting, the
list of voting members must be available for inspection by any
member entitled to vote at the meeting for the purpose of
communication with other members concerning the meeting at the
corporation's principal office or at a reasonable place identified
in the meeting notice in the city where the meeting will be held. A
voting member or voting member's agent or attorney is entitled on
written demand to inspect and, subject to the limitations of
Section B, Article 2.23, of this Act to copy the list at a
reasonable time and at the member's expense during the period it is
available for inspection.
C. The corporation shall make the list of voting members available
at the meeting, and any voting member or voting member's agent or
attorney is entitled to inspect the list at any time during the
meeting or any adjournment.
Added by Acts 1993, 73rd Leg., ch. 733, Sec. 7, eff. Jan. 1, 1994.
Art. 1396-2.12. Quorum of Members
A. Unless otherwise provided in the articles of incorporation or in
the by-laws, members holding one-tenth of the votes entitled to be
cast, represented in person or by proxy, shall constitute a quorum.
The vote of the majority of the votes entitled to be cast by the
members present, or represented by proxy at a meeting at which a
quorum is present, shall be the act of the members meeting, unless
the vote of a greater number is required by law, the articles of
incorporation, or the by-laws.
B. In the absence of an express provision to the contrary in the
articles of incorporation or the by-laws, a church incorporated
prior to the effective date of this Act shall be deemed to have
provided in its articles of incorporation or its by-laws that
members present at a meeting, notice for which shall have been duly
given, shall constitute a quorum.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.12.
Art. 1396-2.13. Voting of Members
A. Each member, regardless of class, shall be entitled to one (1)
vote on each matter submitted to a vote of the members, except to
the extent that the voting rights of members of any class or classes
are limited, enlarged, or denied by the articles of incorporation
or the by-laws.
B. A member may vote in person or, unless the articles of
incorporation or the by-laws otherwise provide, may vote by proxy
executed in writing by the member or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months
from the date of its execution, unless otherwise provided in the
proxy. Each proxy shall be revocable unless expressly provided
therein to be irrevocable, and in no event shall it remain
irrevocable for more than eleven (11) months. Where directors or
officers are to be elected by members, the by-laws may provide that
such elections may be conducted by mail, by facsimile transmission,
or by any combination of the two.
C. At each election for directors every member entitled to vote at
such election shall have the right to vote, in person or by proxy,
for as many persons as there are directors to be elected and for
whose election he has a right to vote, or, if expressly authorized
by the articles of incorporation, to cumulate his vote by giving one
candidate as many votes as the number of such directors multiplied
by his vote shall equal, or by distributing such votes on the same
principle among any number of such candidates. Any member who
intends to cumulate his votes as herein authorized shall give
written notice of such intention to the secretary of the
corporation on or before the day preceding the election at which
such member intends to cumulate his votes.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.13. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 8, eff. Jan. 1, 1994.
Art. 1396-2.14. Board of Directors
A. The affairs of a corporation shall be managed by a board of
directors. Directors need not be residents of this State or members
of the corporation unless the articles of incorporation or the
by-laws so require. The articles of incorporation or the by-laws
may prescribe other qualifications for directors.
B. Boards of directors of religious, charitable, educational, or
eleemosynary institutions may be affiliated with, elected and
controlled by a convention, conference or association organized
under the laws of this State or another state, whether incorporated
or unincorporated, whose membership is composed of
representatives, delegates, or messengers from any church or other
religious association.
C. The articles of incorporation of a corporation may vest the
management of the affairs of the corporation in its members. If the
corporation has a board of directors, it may limit the authority of
the board of directors to whatever extent as may be set forth in the
articles of incorporation or by-laws. Except for a church
organized and operating under a congregational system, was
incorporated before January 1, 1994, and has the management of its
affairs vested in its members, a corporation shall be deemed to have
vested the management of the affairs of the corporation in its board
of directors in the absence of an express provision to the contrary
in the articles of incorporation or the by-laws.
D. The board of directors may be designated by any name appropriate
to the customs, usages, or tenets of the corporation.
E. The board of directors of a corporation may be elected (in whole
or in part) by one or more associations or corporations, organized
under the laws of this State or another state if (1) the articles of
incorporation or the by-laws of the former corporation so provide,
and (2) the former corporation has no members with voting rights.
F. The articles of incorporation or the by-laws may provide that any
one or more persons may be ex-officio members of the board of
directors. A person designated as an ex-officio member of the board
of directors is entitled to notice of and to attend meetings of the
board of directors. The ex-officio member is not entitled to vote
unless otherwise provided in the articles of incorporation or the
by-laws. An ex-officio member of the board of directors who is not
entitled to vote does not have the duties or liabilities of a
director as provided in this Act.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.14. Amended by Acts
1967, 60th Leg., p. 1716, ch. 656, Sec. 1, eff. June 17, 1967; Acts
1993, 73rd Leg., ch. 733, Sec. 9, eff. Jan. 1, 1994.
Art. 1396-2.15. Number, Election, Classification, and Removal of
Directors
A. The number of directors of a corporation shall be not less than
three (3). Subject to such limitation, the number of directors
shall be fixed by, or in the manner provided in, the articles of
incorporation or the by-laws, except as to the number constituting
the initial board of directors, which number shall be fixed by the
articles of incorporation. The number of directors may be
increased or decreased from time to time by amendment to, or in the
manner provided in, the articles of incorporation or the by-laws,
but no decrease shall have the effect of shortening the term of any
incumbent director. The number of directors may not be decreased to
fewer than three (3). In the absence of a by-law or a provision of
the articles of incorporation fixing the number of directors or
providing for the manner in which the number of directors shall be
fixed, the number of directors shall be the same as the number
constituting the initial board of directors as fixed by the
articles of incorporation.
B. The directors constituting the initial board of directors shall
be named in the articles of incorporation and shall hold office
until the first annual election of directors or for such other
period as may be specified in the articles of incorporation or the
by-laws. Thereafter, directors shall be elected, appointed, or
designated in the manner and for the terms provided in the articles
of incorporation or the by-laws. If the method of election,
designation, or appointment is not provided in the articles of
incorporation or by-laws, the directors, other than the initial
directors, shall be elected by the board of directors. In the
absence of a provision in the articles of incorporation or the
by-laws fixing the term of office, a director shall hold office
until the next annual election of directors and until his successor
shall have been elected, appointed, or designated and qualified.
C. Directors may be divided into classes and the terms of office of
the several classes need not be uniform. Unless removed in
accordance with the provisions of the articles of incorporation or
the by-laws, each director shall hold office for the term for which
he is elected, appointed, or designated and until his successor
shall have been elected, appointed, or designated and qualified.
D. A director may be removed from office pursuant to any procedure
therefor provided in the articles of incorporation or by-laws. In
the absence of a provision providing for removal, a director may be
removed from office, with or without cause, by the persons entitled
to elect, designate, or appoint the director. If the director was
elected to office, removal requires an affirmative vote equal to
the vote necessary to elect the director.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.15. Amended by Acts
1989, 71st Leg., ch. 801, Sec. 45, eff. Aug. 28, 1989; Acts 1993,
73rd Leg., ch. 733, Sec. 10, eff. Jan. 1, 1994.
Art. 1396-2.16. Vacancies
A. Unless otherwise provided in the articles of incorporation or
the by-laws, any vacancy occurring in the board of directors shall
be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the board of directors. A
director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office.
B. Any directorship to be filled by reason of an increase in the
number of directors shall be filled by election at an annual meeting
or at a special meeting of members called for that purpose. If a
corporation has no members, or no members having the right to vote
thereon, such directorship shall be filled as provided in the
articles of incorporation or the by-laws.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.16.
Art. 1396-2.17. Quorum and Voting Directors
A. A quorum for the transaction of business by the board of
directors shall be whichever is less:
(1) A majority of the number of directors fixed by the bylaws, or in
the absence of a bylaw fixing the number of directors, a majority of
the number of directors stated in the articles of incorporation, or
(2) Any number, not less than three, fixed as a quorum by the
articles of incorporation or the bylaws.
B. Directors present by proxy may not be counted toward a quorum.
C. The act of the majority of the directors present in person or by
proxy at a meeting at which a quorum is present shall be the act of
the board of directors, unless the act of a greater number is
required by the articles of incorporation or the bylaws.
D. A director may vote in person or (if the articles of
incorporation or the bylaws so provide) by proxy executed in
writing by the director. No proxy shall be valid after three months
from the date of its execution. Each proxy shall be revocable
unless expressly provided therein to be irrevocable, and unless
otherwise made irrevocable by law.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.17. Amended by Acts
1967, 60th Leg., p. 1716, ch. 656, Sec. 2, eff. June 17, 1967.
Art. 1396-2.18. Committees
A. If the articles of incorporation or the bylaws so provide, the
board of directors, by resolution adopted by a majority of the
directors in office, may designate one or more committees, which,
to the extent provided in such resolution, in the articles of
incorporation, or in the bylaws, shall have and exercise the
authority of the board of directors in the management of the
corporation. Each such committee shall consist of two or more
persons, a majority of whom are directors; the remainder, if the
articles of incorporation or the bylaws so provide, need not be
directors. The designation of such committees and the delegation
thereto of authority shall not operate to relieve the board of
directors, or any individual director, of any responsibility
imposed upon it or him by law. Any non-director who becomes a
member of any such committee shall have the same responsibility
with respect to such committee as a director who is a member
thereof.
B. Other committees not having and exercising the authority of the
board of directors in the management of the corporation may be
designated and appointed by a resolution adopted by a majority of
the directors at a meeting at which a quorum is present, or by the
president thereunto authorized by a like resolution of the board of
directors or by the articles of incorporation or by the by-laws.
Membership on such committees may, but need not be, limited to
directors.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.18. Amended by Acts
1967, 60th Leg., p. 1716, ch. 656, Sec. 3, eff. June 17, 1967.
Art. 1396-2.19. Place and Notice of Directors' Meetings
A. Meetings of the board of directors, regular or special, may be
held either within or without this State.
B. Regular meetings of the board of directors may be held with or
without notice as prescribed in the by-laws. Special meetings of
the board of directors shall be held upon such notice as is
prescribed in the by-laws. Attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting is
not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of
the board of directors need be specified in the notice or waiver of
notice of such meeting, unless required by the by-laws.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.19.
Art. 1396-2.20. Officers
A. The officers of a corporation shall consist of a president and a
secretary and may also consist of one or more vice-presidents, a
treasurer, and such other officers and assistant officers as may be
deemed necessary, each of whom shall be elected or appointed at such
time and in such manner and for such terms not exceeding three (3)
years as may be prescribed in the articles of incorporation or the
by-laws. In the absence of any such provisions, all officers shall
be elected or appointed annually by the board of directors, or, if
the management of the corporation is vested in its members, by the
members. Any two or more offices may be held by the same person,
except the offices of president and secretary. A committee duly
designated may perform the functions of any officer and the
functions of any two or more officers may be performed by a single
committee, including the functions of both president and secretary.
B. The officers of a corporation may be designated by such other or
additional titles as may be provided in the articles of
incorporation or the by-laws.
C. In the case of a corporation which is a church, it shall not be
necessary that there be officers as provided herein, but such
duties and responsibilities may be vested in the board of directors
or other designated body in any manner provided for in the articles
of incorporation or the by-laws.
D. In the discharge of a duty imposed or power conferred on an
officer of a corporation, the officer may in good faith and with
ordinary care rely on information, opinions, reports, or
statements, including financial statements and other financial
data, concerning the corporation or another person, that were
prepared or presented by:
(1) one or more other officers or employees of the corporation,
including members of the board of directors;
(2) legal counsel, public accountants, or other persons as to
matters the officer reasonably believes are within the person's
professional or expert competence; or
(3) in the case of religious corporations, religious authorities
and ministers, priests, rabbis, or other persons whose position or
duties in the religious organization the officer believes justify
reliance and confidence and whom the officer believes to be
reliable and competent in the matters presented.
E. An officer is not relying in good faith as required by Section D
of this article if the officer has knowledge concerning the matter
in question that makes reliance otherwise permitted by Section D of
this article unwarranted.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.20. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 11, eff. Jan. 1, 1994.
Art. 1396-2.21. Removal of Officers
A. Any officer elected or appointed may be removed by the persons
authorized to elect or appoint such officer whenever in their
judgment the best interests of the corporation will be served
thereby. The removal of an officer shall be without prejudice to
the contract rights, if any, of the officer so removed. Election or
appointment of an officer or agent shall not of itself create
contract rights.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.21.
Art. 1396-2.22. Officer Liability
(a) An officer is not liable to the corporation or any other person
for an action taken or omission made by the officer in the person's
capacity as an officer unless the officer's conduct was not
exercised:
(1) in good faith;
(2) with ordinary care; and
(3) in a manner the officer reasonably believes to be in the best
interest of the corporation.
(b) This article shall not affect the liability of the corporation
for an act or omission of the officer.
Added by Acts 2001, 77th Leg., ch. 727, Sec. 1, eff. Sept. 1, 2001.
Art. 1396-2.22A. Power to Indemnify and to Purchase Indemnity
Insurance; Duty to Indemnify
A. In this article:
(1) "Corporation" includes any domestic or foreign predecessor
entity of the corporation in a merger, consolidation, or other
transaction in which the liabilities of the predecessor are
transferred to the corporation by operation of law and in any other
transaction in which the corporation assumes the liabilities of the
predecessor but does not specifically exclude liabilities that are
the subject matter of this article.
(2) "Director" means any person who is or was a director of the
corporation and any person who, while a director of the
corporation, is or was serving at the request of the corporation as
a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise.
(3) "Expenses" includes court costs and attorneys' fees.
(4) "Official capacity" means:
(a) when used with respect to a director, the office of director in
the corporation; and
(b) when used with respect to a person other than a director, the
elective or appointive office in the corporation held by the
officer or the employment or agency relationship undertaken by the
employee or agent in behalf of the corporation; but
(c) in both Paragraphs (a) and (b) does not include service for any
other foreign or domestic corporation or any partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or
other enterprise.
(5) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such
an action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit, or proceeding.
B. A corporation may indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding because the person is or was a director only if it is
determined in accordance with Section F of this article that the
person:
(1) conducted himself in good faith;
(2) reasonably believed:
(a) in the case of conduct in his official capacity as a director of
the corporation, that his conduct was in the corporation's best
interests; and
(b) in all other cases, that his conduct was at least not opposed to
the corporation's best interests; and
(3) in the case of any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful.
C. Except to the extent permitted by Section E of this article, a
director may not be indemnified under Section B of this article in
respect of a proceeding:
(1) in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity; or
(2) in which the person is found liable to the corporation.
D. The termination of a proceeding by judgment, order, settlement,
or conviction or on a plea of nolo contendere or its equivalent is
not of itself determinative that the person did not meet the
requirements set forth in Section B of this article. A person shall
be deemed to have been found liable in respect of any claim, issue
or matter only after the person shall have been so adjudged by a
court of competent jurisdiction after exhaustion of all appeals
therefrom.
E. A person may be indemnified under Section B of this article
against judgments, penalties (including excise and similar taxes),
fines, settlements, and reasonable expenses actually incurred by
the person in connection with the proceeding; but if the person is
found liable to the corporation or is found liable on the basis that
personal benefit was improperly received by the person, the
indemnification (1) is limited to reasonable expenses actually
incurred by the person in connection with the proceeding, and (2)
shall not be made in respect of any proceeding in which the person
shall have been found liable for willful or intentional misconduct
in the performance of his duty to the corporation.
F. A determination of indemnification under Section B of this
article must be made:
(1) by a majority vote of a quorum consisting of directors who at
the time of the vote are not named defendants or respondents in the
proceeding;
(2) if such a quorum cannot be obtained, by a majority vote of a
committee of the board of directors, designated to act in the matter
by a majority vote of all directors, consisting solely of two or
more directors who at the time of the vote are not named defendants
or respondents in the proceeding;
(3) by special legal counsel selected by the board of directors or a
committee of the board by vote as set forth in Subsection (1) or (2)
of this section, or, if such a quorum cannot be obtained and such a
committee cannot be established, by a majority vote of all
directors; or
(4) by the members in a vote that excludes the vote of directors who
are named defendants or respondents in the proceeding.
G. Authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as the
determination that indemnification is permissible, except that if
the determination that indemnification is permissible is made by
special legal counsel, authorization of indemnification and
determination as to reasonableness of expenses must be made in the
manner specified by Subsection (3) of Section F of this article for
the selection of special legal counsel. A provision contained in
the articles of incorporation, the bylaws, a resolution of members
or directors, or an agreement that makes mandatory the
indemnification permitted under Section B of this article shall be
deemed to constitute authorization of indemnification in the manner
required by this section even though such provision may not have
been adopted or authorized in the same manner as the determination
that indemnification is permissible.
H. A corporation shall indemnify a director against reasonable
expenses incurred by him in connection with a proceeding in which he
is a named defendant or respondent because he is or was a director
if he has been wholly successful, on the merits or otherwise, in the
defense of the proceeding.
I. If, in a suit for the indemnification required by Section H of
this article, a court of competent jurisdiction determines that the
director is entitled to indemnification under that section, the
court shall order indemnification and shall award to the director
the expenses incurred in securing the indemnification.
J. If, upon application of a director, a court of competent
jurisdiction determines, after giving any notice the court
considers necessary, that the director is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, whether or not he has met the requirements set forth
in Section B of this article or has been found liable in the
circumstances described by Section C of this article, the court may
order the indemnification that the court determines is proper and
equitable; but if the person is found liable to the corporation or
is found liable on the basis that personal benefit was improperly
received by the person, the indemnification shall be limited to
reasonable expenses actually incurred by the person in connection
with the proceeding.
K. Reasonable expenses incurred by a director who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding may be paid or reimbursed by the corporation, in advance
of the final disposition of the proceeding and without the
determination specified in Section F of this article or the
authorization or determination specified in Section G of this
article, after the corporation receives a written affirmation by
the director of his good faith belief that he has met the standard
of conduct necessary for indemnification under this article and a
written undertaking by or on behalf of the director to repay the
amount paid or reimbursed if it is ultimately determined that he has
not met that standard or if it is ultimately determined that
indemnification of the director against expenses incurred by him in
connection with that proceeding is prohibited by Section E of this
article. A provision contained in the articles of incorporation,
the bylaws, a resolution of members or directors, or an agreement
that makes mandatory the payment or reimbursement permitted under
this section shall be deemed to constitute authorization of that
payment or reimbursement.
L. The written undertaking required by Section K of this article
must be an unlimited general obligation of the director but need not
be secured. It may be accepted without reference to financial
ability to make repayment.
M. A provision for a corporation to indemnify or to advance expenses
to a director who was, is, or is threatened to be made a named
defendant or respondent in a proceeding, whether contained in the
articles of incorporation, the bylaws, a resolution of members or
directors, an agreement, or otherwise, except in accordance with
Section R of this article, is valid only to the extent it is
consistent with this article as limited by the articles of
incorporation, if such a limitation exists.
N. Notwithstanding any other provision of this article, a
corporation may pay or reimburse expenses incurred by a director in
connection with his appearance as a witness or other participation
in a proceeding at a time when he is not a named defendant or
respondent in the proceeding.
O. An officer of the corporation shall be indemnified as, and to the
same extent, provided by Sections H, I, and J of this article for a
director and is entitled to seek indemnification under those
sections to the same extent as a director. A corporation may
indemnify and advance expenses to an officer, employee, or agent of
the corporation to the same extent that it may indemnify and advance
expenses to directors under this article.
P. A corporation may indemnify and advance expenses to a person who
is not or was not an officer, employee, or agent of the corporation
but who is or was serving at the request of the corporation as a
director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise
to the same extent that it may indemnify and advance expenses to
directors under this article.
Q. A corporation may indemnify and advance expenses to an officer,
employee, agent, or person identified in Section P of this article
and who is not a director to such further extent, consistent with
law, as may be provided by its articles of incorporation, bylaws,
general or specific action of its board of directors, or contract or
as permitted or required by common law.
R. (1) A corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent
of the corporation or who is or was serving at the request of the
corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise
against any liability asserted against him and incurred by him in
such a capacity or arising out of his status as such a person,
whether or not the corporation would have the power to indemnify him
against that liability under this article.
(2)(a) In addition to the powers described in Subsection (1), a
corporation may purchase, maintain, or enter into other
arrangements on behalf of any person who is or was a director,
officer, or trustee of the corporation against any liability
asserted against him and incurred by him in such capacity or arising
out of his status as such a person, whether or not the corporation
would have the power to indemnify him against that liability under
this article.
(b) If the other arrangement is with a person or entity that is not
regularly engaged in the business of providing insurance coverage,
the arrangement may provide for payment of a liability with respect
to which the corporation would not have the power to indemnify a
person only if coverage for that liability has been approved by the
corporation's members, if the corporation has members.
(c) Without limiting the power of the corporation to procure or
maintain any kind of other arrangement, a corporation, for the
benefit of persons described in Subsection (2)(a) may:
(i) create a trust fund;
(ii) establish any form of self-insurance;
(iii) secure its indemnity obligation by grant of a security
interest or other lien on the assets of the corporation; or
(iv) establish a letter of credit, guaranty, or surety arrangement.
(d) For the limited purposes of Subsection (2) of this section only,
any liability indemnification arrangement, other than coverage
through an insurance carrier, is not considered to be the business
of insurance under the Insurance Code, including the Texas Property
and Casualty Insurance Guaranty Act (Article 21.28-C, Vernon's
Texas Civil Statutes), or any other law of this state.
(3) The insurance may be procured or maintained with an insurer, or
the other arrangement may be procured, maintained, or established
within the corporation or with any insurer or other person
considered appropriate by the board of directors, regardless of
whether all or part of the stock or other securities of the insurer
or other person are owned in whole or part by the corporation. In
the absence of fraud, the judgment of the board of directors as to
the terms and conditions of the insurance or other arrangement and
the identity of the insurer or other person participating in an
arrangement is conclusive, and the insurance or arrangement is not
voidable and does not subject the directors approving the insurance
or arrangement to liability, on any ground, regardless of whether
directors participating in the approval are beneficiaries of the
insurance or arrangement.
S. Any indemnification of or advance of expenses to a director in
accordance with this article shall be reported in writing to the
members of the corporation with or before the notice or waiver of
notice of the next meeting of members or with or before the next
submission to members of a consent to action without a meeting
pursuant to Section A, Article 1396-9.10 of this Act and, in any
case, within the 12-month period immediately following the date of
the indemnification or advance.
T. For purposes of this article, the corporation is deemed to have
requested a director to serve an employee benefit plan whenever the
performance by him of his duties to the corporation also imposes
duties on or otherwise involves services by him to the plan or
participants or beneficiaries of the plan. Excise taxes assessed
on a director with respect to an employee benefit plan pursuant to
applicable law are deemed fines. Action taken or omitted by him
with respect to an employee benefit plan in the performance of his
duties for a purpose reasonably believed by him to be in the
interest of the participants and beneficiaries of the plan is
deemed to be for a purpose which is not opposed to the best
interests of the corporation.
U. The articles of incorporation of a corporation may restrict the
circumstances under which the corporation is required or permitted
to indemnify a person under Section H, I, J, O, P, or Q of this
article.
Added by Acts 1985, 69th Leg., ch. 128, Sec. 30, eff. May 20, 1985.
Amended by Acts 1989, 71st Leg., ch. 801, Sec. 46, eff. Aug. 28,
1989; Acts 1989, 71st Leg., ch. 1199, Sec. 2, eff. Aug. 28, 1989.
Art. 1396-2.23. Books and Records
A. Each corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of its
members, board of directors, and committees having any authority of
the board of directors and shall keep at its registered office or
principal office in this State a record of the names and addresses
of its members entitled to vote.
B. A member of a corporation, on written demand stating the purpose
of the demand, has the right to examine and copy, in person or by
agent, accountant, or attorney, at any reasonable time, for any
proper purpose, the books and records of the corporation relevant
to that purpose, at the expense of the member.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.23. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 12, eff. Jan. 1, 1994.
Art. 1396-2.23A. Financial Records and Annual Reports
A. A corporation shall maintain current true and accurate financial
records with full and correct entries made with respect to all
financial transactions of the corporation, including all income and
expenditures, in accordance with generally accepted accounting
practices.
B. Based on these records, the board of directors shall annually
prepare or approve a report of the financial activity of the
corporation for the preceding year. The report must conform to
accounting standards as promulgated by the American Institute of
Certified Public Accountants and must include a statement of
support, revenue, and expenses and changes in fund balances, a
statement of functional expenses, and balance sheets for all funds.
C. All records, books, and annual reports of the financial activity
of the corporation shall be kept at the registered office or
principal office of the corporation in this state for at least three
years after the closing of each fiscal year and shall be available
to the public for inspection and copying there during normal
business hours. The corporation may charge for the reasonable
expense of preparing a copy of a record or report.
D. A corporation that fails to maintain financial records, prepare
an annual report, or make a financial record or annual report
available to the public in the manner prescribed by this article is
guilty of a Class B misdemeanor.
E. This article does not apply to:
(1) a corporation that solicits funds only from its members;
(2) a corporation which does not intend to solicit and receive and
does not actually raise or receive contributions from sources other
than its own membership in excess of $10,000 during a fiscal year;
(3) a career school or college that has received a certificate of
approval from the Texas Workforce Commission, a public institution
of higher education and foundations chartered for the benefit of
such institutions or any component part thereof, a private or
independent institution of higher education as defined by Section
61.003, Education Code, a postsecondary educational institution
with a certificate of authority to grant a degree issued by the
Texas Higher Education Coordinating Board, or an elementary or
secondary school;
(4) religious institutions which shall be limited to churches,
ecclesiastical or denominational organizations, or other
established physical places for worship at which religious services
are the primary activity and such activities are regularly
conducted;
(5) a trade association or professional society whose income is
principally derived from membership dues and assessments, sales, or
services;
(6) any insurer licensed and regulated by the Texas Department of
Insurance;
(7) an alumni association of a public or private institution of
higher education in this state, provided that such association is
recognized and acknowledged by the institution as its official
alumni association.
Added by Acts 1977, 65th Leg., p. 1947, ch. 773, Sec. 1, eff. Jan. 1,
1978. Amended by Acts 1993, 73rd Leg., ch. 733, Sec. 13, eff. Jan.
1, 1994.
Sec. E amended by Acts 2003, 78th Leg., ch. 238, Sec. 42, eff. Sept.
1, 2003; Acts 2003, 78th Leg., ch. 364, Sec. 2.31, eff. Sept. 1,
2003; Acts 2003, 78th Leg., ch. 817, Sec. 8.45, eff. Sept. 1, 2003.
Art. 1396-2.23B. Corporations Assisting State Agencies
A. In this Article state agency means:
(1) a board, commission, department, office, or other entity that
is in the executive branch of state government and that was created
by the constitution or a statute of the State, including an
institution of higher education as defined by Section 61.003, Texas
Education Code, as amended;
(2) the legislature or a legislative agency; or
(3) the Supreme Court, the Court of Criminal Appeals, a court of
appeals, or the State Bar of Texas or another state judicial agency.
B. The books and records of a corporation except a bona fide alumni
association are subject to audit at the discretion of the State
Auditor if both of the following obtain:
(1) the corporation's charter specifically dedicates the
corporation's activities to the benefit of a particular agency of
state government; and
(2) a board member, officer, or employee of the same agency of state
government sits on the board of directors of the corporation in
other than an ex officio, nonvoting, advisory capacity.
C. If the corporation's charter specifically dedicates the
corporation's activities to the benefit of a particular agency of
state government but the conditions in Section B of this Article do
not obtain, before the 90th day after the last day of the
corporation's fiscal year, the corporation shall file with the
Secretary of State a report for the preceding fiscal year
consisting of a copy of a report as described by Section B of
Article 2.23A of this Act (Article 1396-2.23A, Vernon's Texas Civil
Statutes).
Added by Acts 1983, 68th Leg., p. 4600, ch. 779, Sec. 1, eff. Aug.
29, 1983.
Art. 1396-2.24. Dividends Prohibited
A. No dividend shall be paid and no part of the income of a
corporation shall be distributed to its members, directors, or
officers. A corporation may pay compensation in a reasonable
amount to its members, directors, or officers for services
rendered, may confer benefits upon its members in conformity with
its purposes, and upon dissolution or final liquidation may make
distributions to its members, but only as permitted by this Act.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.24.
Art. 1396-2.25. Loans to Directors Prohibited
A. No loans shall be made by a corporation to its directors.
B. The directors of a corporation who vote for or assent to the
making of a loan to a director of the corporation, and any officer
or officers participating in the making of such loan, shall be
jointly and severally liable to the corporation for the amount of
such loan until repayment thereof.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.25. Amended by Acts
1989, 71st Leg., ch. 1199, Sec. 3, eff. Aug. 28, 1989.
Art. 1396-2.26. Liability of Directors in Certain Cases
A. In addition to any other liabilities imposed by law upon
directors of a corporation, the directors who vote for or assent to
any distribution of assets other than in payment of its debts, when
the corporation is insolvent or when such distribution would render
the corporation insolvent, or during the liquidation of the
corporation without the payment and discharge of or making adequate
provisions for all known debts, obligations and liabilities of the
corporation, shall be jointly and severally liable to the
corporation for the value of such assets which are thus
distributed, to the extent that such debts, obligations and
liabilities of the corporation are not thereafter paid and
discharged.
B. A director of a corporation who is present at a meeting of its
board of directors at which action was taken on such corporate
matter shall be presumed to have assented to such action unless his
dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of
the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in
favor of the action.
C. A director shall not be liable under Section A of this Article
if, in voting for or assenting to a distribution, the director:
(1) relied in good faith and with ordinary care on information,
opinions, reports, or statements, including financial statements
and other financial data, concerning the corporation or another
person that were prepared or presented by:
(a) one or more officers or employees of the corporation;
(b) legal counsel, public accountants, or other persons as to
matters the director reasonably believes are within the person's
professional or expert competence; or
(c) a committee of the board of directors of which the director is
not a member;
(2) acting in good faith and with ordinary care, considered the
assets of the corporation to be at least that of their book value;
or
(3) in determining whether the corporation made adequate provision
for payment, satisfaction, or discharge of all of its liabilities
and obligations as provided in Article 6.03 of this Act, relied 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 those liabilities or obligations.
D. A director shall not be liable under this Article if, in the
exercise of ordinary care, he acted in good faith and in reliance
upon the written opinion of an attorney for the corporation.
E. A director against whom a claim shall be asserted under this
Article and who shall be held liable thereon shall be entitled to
contribution from persons who accepted or received such
distribution knowing such distribution to have been made in
violation of this Article, in proportion to the amounts received by
them respectively.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.26. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 14, eff. Jan. 1, 1994.
Art. 1396-2.27. Charitable Corporations
A. Notwithstanding any provision in this Act or in the articles of
incorporation to the contrary (except as provided in Section B),
the articles of incorporation of each corporation which is a
private foundation described in Section 509 of the Internal Revenue
Code of 1986 shall be deemed to contain the following provisions:
"The corporation shall make distributions at such time and in such
manner as not to subject it to tax under Section 4942 of the
Internal Revenue Code of 1986; the corporation shall not engage in
any act of self-dealing which would be subject to tax under Section
4941 of the Code; the corporation shall not retain any excess
business holdings which would subject it to tax under Section 4943
of the Code; the corporation shall not make any investments which
would subject it to tax under Section 4944 of the Code; and the
corporation shall not make any taxable expenditures which would
subject it to tax under Section 4945 of the Code." With respect to
any such corporation organized prior to January 1, 1970, this
Section A shall apply only for its taxable years beginning on or
after January 1, 1972.
B. The articles of incorporation of any corporation described in
Section A may be amended to expressly exclude the application of
Section A, and in the event of such amendment, Section A shall not
apply to such corporation.
C. All references in this Article to "the Code" are to the Internal
Revenue Code of 1986, and all references in this Article to specific
sections of the Code include corresponding provisions of any
subsequent Federal tax laws.
Added by Acts 1971, 62nd Leg., p. 889, ch. 119, Sec. 1, eff. May 10,
1971. Amended by Acts 1993, 73rd Leg., ch. 733, Sec. 15, eff. Jan.
1, 1994.
Art. 1396-2.28. General Standards for Directors
A. A director shall discharge the director's duties, including the
director's duties as a member of a committee, in good faith, with
ordinary care, and in a manner the director reasonably believes to
be in the best interest of the corporation.
B. In the discharge of any duty imposed or power conferred on a
director, including as a member of a committee, the director may in
good faith rely on information, opinions, reports, or statements,
including financial statements and other financial data,
concerning the corporation or another person that were prepared or
presented by:
(1) one or more officers or employees of the corporation;
(2) legal counsel, public accountants, or other persons as to
matters the director reasonably believes are within the person's
professional or expert competence;
(3) a committee of the board of directors of which the director is
not a member; or
(4) in the case of religious corporations, religious authorities
and ministers, priests, rabbis, or other persons whose position or
duties in the religious organization the director believes justify
reliance and confidence and whom the director believes to be
reliable and competent in the matters presented.
C. A director is not relying in good faith, within the meaning of
this article, if the director has knowledge concerning a matter in
question that makes reliance otherwise permitted by this article
unwarranted.
D. A director is not liable to the corporation, any member, or any
other person for any action taken or not taken as a director if the
director acted in compliance with this article. A person seeking to
establish liability of a director must prove that the director has
not acted:
(1) in good faith;
(2) with ordinary care; and
(3) in a manner the director reasonably believes to be in the best
interest of the corporation.
E. A director is not deemed to have the duties of a trustee of a
trust with respect to the corporation or with respect to any
property held or administered by the corporation, including
property that may be subject to restrictions imposed by the donor or
transferor of the property.
Added by Acts 1993, 73rd Leg., ch. 733, Sec. 16, eff. Jan. 1, 1994.
Art. 1396-2.29. Delegation of Investment Authority
A. The board of directors of a corporation may:
(1) from time to time contract with investment counsel, trust
companies, banks, investment advisors, or investment managers; and
(2) confer on those advisors full power and authority to:
(a) purchase or otherwise acquire stocks, bonds, securities, and
other investments on behalf of the corporation; and
(b) sell, transfer, or otherwise dispose of any of the
corporation's assets and properties at a time and for a
consideration that the advisor deems appropriate.
B. The board of directors also may:
(1) confer on an advisor described by Section A of this article
other powers regarding the corporation's investments as the board
of directors deems appropriate; and
(2) authorize the advisor to hold title to any of the corporation's
assets and properties in its own name for the benefit of the
corporation or in the name of a nominee for the benefit of the
corporation.
C. The board of directors has no liability regarding any action
taken or omitted by an advisor engaged under this article if the
board of directors acted in good faith and with ordinary care in
selecting the advisor. The board of directors may remove or replace
the advisor, with or without cause, if they deem that action
appropriate or necessary.
Added by Acts 1993, 73rd Leg., ch. 733, Sec. 16, eff. Jan. 1, 1994.
Art. 1396-2.30. Interested Directors
A. A contract or transaction between a corporation and one or more
of its directors, officers, or members, or between a corporation
and any other corporation, partnership, association, or other
organization in which one or more of its directors, officers, or
members are directors, officers, or members, or have a financial
interest, is not void or voidable solely for that reason, solely
because the director, officer, or member is present at or
participates in the meeting of the board or committee of the board
or of the members that authorizes the contract or transaction, or
solely because the director's, officer's, or member's votes are
counted for that purpose, if:
(1) the material facts as to the relationship or interest and as to
the contract or transaction are disclosed or are known to the board
of directors, the committee, or the members, and the board,
committee, or members in good faith and with ordinary care
authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors or members, even though the
disinterested directors or members are less than a quorum;
(2) the material facts as to the relationship or interest and as to
the contract or transaction are disclosed or are known to the
members entitled to vote on the contract or transaction, and the
contract or transaction is specifically approved in good faith and
with ordinary care by vote of the disinterested members; or
(3) the contract or transaction is fair to the corporation when it
is authorized, approved, or ratified by the board of directors, a
committee of the board, or the members.
B. Common or interested directors or members may be counted in
determining the presence of a quorum at a meeting of the board of
directors, of a committee, or of the members that authorizes the
contract or transaction.
Added by Acts 1993, 73rd Leg., ch. 733, Sec. 16, eff. Jan. 1, 1994.
Art. 1396-2.31. Power to Serve as Trustee
A. A corporation that is described by Section 501(c)(3) or 170(c),
Internal Revenue Code of 1986, or a corresponding provision of a
subsequent federal tax law, or a corporation listed by the Internal
Revenue Service in the Cumulative List of Organizations Described
in Section 170(c) of the Internal Revenue Code of 1986, I.R.S.
Publication 78, may serve as the trustee of a trust:
(1) of which the corporation is a beneficiary; or
(2) benefiting another organization described by one of those
sections of the Internal Revenue Code of 1986, or a corresponding
provision of a subsequent federal tax law, or listed by the Internal
Revenue Service in the Cumulative List of Organizations Described
in Section 170(c) of the Internal Revenue Code of 1986, I.R.S.
Publication 78.
B. Any corporation (or person or entity assisting such corporation)
described in this article shall have immunity from suit (including
both a defense to liability and the right not to bear the cost,
burden, and risk of discovery and trial) as to any claim alleging
that the corporation's role as trustee of a trust described in this
article constitutes engaging in the trust business in a manner
requiring a state charter as defined in Section 181.002(a)(9),
Finance Code. An interlocutory appeal may be taken if a court denies
or otherwise fails to grant a motion for summary judgment that is
based on an assertion of the immunity provided in this subsection.
Added by Acts 1995, 74th Leg., ch. 914, Sec. 21, eff. June 16, 1995.
Amended by Acts 1997, 75th Leg., ch. 769, Sec. 9, eff. June 17,
1997; Acts 1999, 76th Leg., ch. 344, Sec. 8.001, eff. May 29, 1999;
Acts 1999, 76th Leg., ch. 1073, Sec. 1, eff. June 18, 1999; Acts
2001, 77th Leg., ch. 1420, Sec. 6.030, eff. Sept. 1, 2001.
Art. 1396-3.01. Incorporators
A. Any natural person of the age of eighteen (18) years or more
without regard to the person's place of residence or domicile may
act as an incorporator of a corporation by signing the articles of
incorporation for such corporation and delivering the original and
a copy of the articles of incorporation to the Secretary of State.
B. Any religious society, charitable, benevolent, literary, or
social association, or church may incorporate under this Act with
the consent of a majority of its members, who shall authorize the
incorporators to execute the articles of incorporation.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.01. Amended by Acts
1979, 66th Leg., p. 214, ch. 120, Sec. 3, eff. May 9, 1979; Acts
1987, 70th Leg., ch. 93, Sec. 37, eff. Aug. 31, 1987.
Art. 1396-3.02. Articles of Incorporation
A. The articles of incorporation shall set forth:
(1) The name of the corporation.
(2) A statement that the corporation is a non-profit corporation.
(3) The period of duration, which may be perpetual.
(4) The purpose or purposes for which the corporation is organized.
(5) If the corporation is to have no members, a statement to that
effect.
(6) If management of the affairs of the corporation is to be vested
in its members, a statement to that effect.
(7) Any provision, not inconsistent with law, including any
provision which under this Act is required or permitted to be set
forth in the by-laws, which the incorporators elect to set forth in
the articles of incorporation for the regulation of the internal
affairs of the corporation.
(8) The street address of its initial registered office and the name
of its initial registered agent at such street address.
(9) The number of directors constituting the initial board of
directors, and the names and addresses of the persons who are to
serve as the initial directors unless the management of the
corporation is vested in its members, in which event a statement to
that effect shall be set forth.
(10) The name and street or post office address of each
incorporator.
(11) If the corporation is to be authorized on its dissolution to
distribute its assets in a manner other than as provided by Article
6.02(3) of this Act, a statement describing the manner of
distribution of the corporation's assets.
B. Provided that charters or articles of incorporation of
corporations existing on the effective date of this Act which do not
contain one or more of the requirements listed in the foregoing
Section need not be amended for the purpose of meeting such
requirements. Any subsequent amendment or restatement of the
articles of incorporation of such corporation shall include such
requirements, except that it shall not be necessary, in such
amended or restated articles, to include the information required
in Subsections (8), (9), and (10) of Section A.
C. It shall not be necessary to set forth in the articles of
incorporation any of the corporate powers enumerated in this Act.
D. Unless the articles of incorporation provide that a change in the
number of directors shall be made only by amendment to the articles
of incorporation, a change in the number of directors made by
amendment to the by-laws shall be controlling. In all other cases,
whenever a provision of the articles of incorporation is
inconsistent with a by-law, the provision of the articles of
incorporation shall be controlling.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.02. Amended by Acts
1965, 59th Leg., p. 1294, ch. 597, Sec. 1, eff. Aug. 30, 1965; Acts
1993, 73rd Leg., ch. 733, Sec. 17, eff. Jan. 1, 1994.
Art. 1396-3.03. Filing of Articles of Incorporation
A. The original and a copy of the articles of incorporation shall be
delivered to the Secretary of State. If the Secretary of State
finds that the articles of incorporation conform to law, he shall,
when all fees have been paid as required by law:
(1) Endorse on the original and the copy the word "Filed", and the
month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Issue a certificate of incorporation to which he shall affix the
copy.
B. The certificate of incorporation, together with the copy of the
articles of incorporation affixed thereto by the Secretary of State
shall be delivered to the incorporators or their representatives.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.03. Amended by Acts
1979, 66th Leg., p. 214, ch. 120, Sec. 4, eff. May 9, 1979.
Art. 1396-3.04. Effect of Issuance of Certificate of Incorporation
A. Upon the issuance of the certificate of incorporation, the
corporate existence shall begin, and such certificate of
incorporation shall be conclusive evidence that all conditions
precedent required to be performed by the incorporators have been
complied with, and that the corporation has been incorporated under
this Act, except as against the State in a proceeding for
involuntary dissolution.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.04.
Art. 1396-3.05. Organization Meeting
A. After the issuance of the certificate of incorporation, an
organization meeting of the board of directors named in the
articles of incorporation shall be held, either within or without
this State, at the call of the incorporators or the call of a
majority of the directors named in the articles of incorporation,
for the purpose of adopting by-laws, electing officers, and for
such other purposes as may come before the meeting. The
incorporators or directors calling the meeting shall give at least
three (3) days' notice thereof by mail to each director named in the
articles of incorporation, which notice shall state the time and
place of the meeting.
B. A first meeting of the members may be held at the call of the
directors, or a majority of them, upon at least three (3) days'
notice, for such purposes as shall be stated in the notice of the
meeting.
C. If the management of a corporation is vested in its members, the
organization meeting shall be held by the members upon the call of
any of the incorporators. The incorporators calling the meeting
shall (a) give at least three (3) days' notice by mail to each
member stating the time and place of the meeting, or shall (b) make
an oral announcement of the time and place of meeting at a regularly
scheduled worship service prior to such meeting if the corporation
is a church, or shall (c) give such notice of the meeting as may be
provided for in the articles of incorporation.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.05. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 18, eff. Jan. 1, 1994.
Art. 1396-4.01. Right to Amend Articles of Incorporation
A. A corporation may amend its articles of incorporation from time
to time, in any and as many respects as may be desired, so long as
its articles of incorporation as amended contain only such
provisions as are lawful under this Act.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.01.
Art. 1396-4.02. Procedure to Amend Articles of Incorporation
A. Amendments to the articles of incorporation may be made in the
following manner:
(1) Except as provided in Section A(4) of this article, where there
are members having voting rights, the board of directors shall
adopt a resolution setting forth the proposed amendment and
directing that it be submitted to a vote at a meeting of members
having voting rights, which may be either an annual or a special
meeting. Written or printed notice setting forth the proposed
amendment or a summary of the changes to be effected thereby shall
be given to each member entitled to vote at such meeting within the
time and in the manner provided in this Act for the giving of notice
of meetings of members. The proposed amendment shall be adopted
upon receiving at least two-thirds of the votes which members
present at such meeting in person or by proxy are entitled to cast,
unless any class of members is entitled to vote as a class thereon
by the terms of the articles of incorporation or of the by-laws, in
which event the proposed amendment shall not be adopted unless it
also receives at least two-thirds of the votes which the members of
each such class who are present at such meeting in person or by
proxy are entitled to cast.
(2) Where there are no members, no members having voting rights, or
in the case of an amendment under Section A(4) of this article, an
amendment shall be adopted at a meeting of the board of directors
upon receiving the vote of a majority of the directors in office.
(3) Where the management of the affairs of the corporation is vested
in the members pursuant to Article 2.14C of this Act, the proposed
amendment shall be submitted to a vote at a meeting of members which
may be an annual, a regular, or a special meeting. Except as
otherwise provided in the articles of incorporation or the by-laws,
notice setting forth the proposed amendment or a summary of the
changes to be effected thereby shall be given to the members within
the time and in the manner provided in this Act for the giving of
notice of meetings of members. The proposed amendment shall be
adopted upon receiving at least two-thirds of the votes of members
present at such meeting.
(4) Unless the articles of incorporation provide otherwise, the
board of directors of a corporation with members having voting
rights may adopt one or more of the following amendments to the
articles of incorporation without member approval:
(a) extend the duration of the corporation if it was incorporated
when limited duration was required by law;
(b) delete the names and addresses of the initial directors;
(c) delete the name and address of the initial registered agent or
registered office, if a statement of change is on file with the
Secretary of State; or
(d) change the corporate name by substituting the word
"corporation," "incorporated," "company," "limited," or the
abbreviation "corp.," "inc.," "co.," "ltd.," for a similar word or
abbreviation in the name, or by adding, deleting, or changing a
geographical attribution to the name.
B. Any number of amendments may be submitted and voted upon at any
one meeting.
Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.02. Amended by Acts
1993, 73rd Leg., ch. 733, Sec. 19, eff. Jan. 1, 1994.
Art. 1396-4.03. Articles of Amendment
A. The articles of amendment sh
