By: Barrientos S.B. No. 1498
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the regulation of persons who represent or advise
1-2 others in the buying or selling of a business; providing a criminal
1-3 penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 132A, Revised Statutes, is amended by
1-6 adding Article 9103 to read as follows:
1-7 Art. 9103. REGULATION OF BUSINESS BROKERS
1-8 Sec. 1. DEFINITIONS. In this article:
1-9 (1) "Business broker" means a person who performs
1-10 business brokerage services.
1-11 (2) "Business brokerage services" means services
1-12 rendered while functioning as an intermediary through a fiduciary
1-13 relationship to a person buying or selling a business, including
1-14 any aspect relating to the buying or selling of any business,
1-15 business assets, or securities of a business, subject to Section
1-16 12, The Securities Act (Article 581-12, Vernon's Texas Civil
1-17 Statutes), to accomplish the sale of the business, whether or not
1-18 the business is active, inactive, or proposed.
1-19 (3) "Commission" means the Texas Commission of
1-20 Licensing and Regulation.
1-21 (4) "Commissioner" means the commissioner of licensing
1-22 and regulation.
1-23 (5) "Council" means the Business Brokers Advisory
2-1 Council.
2-2 (6) "Department" means the Texas Department of
2-3 Licensing and Regulation.
2-4 (7) "Person" includes a corporation, organization,
2-5 government or governmental subdivision or agency, business trust,
2-6 estate, trust, partnership, association, and any other legal
2-7 entity.
2-8 Sec. 2. REGISTRATION REQUIRED; REPRESENTATIONS. (a) A
2-9 person may not perform business brokerage services for compensation
2-10 unless the person is an individual licensed as a business broker
2-11 under this article.
2-12 (b) A person may not represent that the person is a business
2-13 broker or authorized to perform business brokerage services for
2-14 compensation unless the person is licensed under this article.
2-15 Sec. 3. EXEMPTIONS. This article does not apply to:
2-16 (1) an individual acting under a general power of
2-17 attorney unless the individual represents that the individual is a
2-18 business broker;
2-19 (2) an individual licensed to practice law in this
2-20 state;
2-21 (3) an individual who merely introduces parties to a
2-22 business opportunity transaction but is not involved in the
2-23 negotiation of the sale or purchase of the business or its assets
2-24 or securities;
2-25 (4) an employee of a business owner or of an
3-1 affiliated or subsidiary company of a business owner if the
3-2 employee performs business brokerage services solely for the
3-3 benefit of the business owner or for a partnership, joint venture,
3-4 or corporation in which the business owner owns an interest and
3-5 that functions as a buyer or seller; or
3-6 (5) a public employee or officer who provides
3-7 assistance to a business owner in the course of the public
3-8 employee's or officer's duties.
3-9 Sec. 4. VOLUNTARY LICENSING. An individual who is exempt
3-10 from licensing under Section 3 of this article may apply for and
3-11 obtain a license under this article if the individual meets the
3-12 requirements imposed by Sections 5 and 6(a) of this article. An
3-13 individual exempt from licensing under this article who elects to
3-14 be licensed under this article is subject to this article.
3-15 Sec. 5. ELIGIBILITY FOR LICENSE. To be eligible to obtain a
3-16 license as a business broker under this article, a person must:
3-17 (1) be an individual at least 18 years of age;
3-18 (2) hold a high school diploma or an equivalent
3-19 credential;
3-20 (3) pay the fees required by the commission;
3-21 (4) establish a place of business in this state or
3-22 designate an agent for service of legal process who is a resident
3-23 of this state;
3-24 (5) complete at least 15 classroom hours of
3-25 educational courses approved by the commissioner, at least four
4-1 hours of which must include instruction on law and legal issues in
4-2 this state related to business brokerage services; and
4-3 (6) meet any additional qualifications required by
4-4 this article or by the commissioner in the exercise of the
4-5 commissioner's authority under this article or under Article 9100,
4-6 Revised Statutes.
4-7 Sec. 6. APPLICATION FOR AND ISSUANCE OF LICENSE; TERM.
4-8 (a) An applicant for licensure must file an application with the
4-9 department on a printed form prescribed by the commissioner. The
4-10 application must be accompanied by a nonrefundable application fee
4-11 and a license fee that shall be refunded if the commissioner does
4-12 not approve the application.
4-13 (b) The commissioner shall approve or deny an initial
4-14 application not later than the 31st day after the date on which the
4-15 department receives the application.
4-16 (c) The commissioner shall issue to each applicant who
4-17 qualifies for licensing under this article the appropriate license.
4-18 Except as otherwise provided by the commission, a license is valid
4-19 for two years from the date of issuance.
4-20 Sec. 7. RENEWAL OF LICENSE. (a) On the timely receipt of
4-21 the required renewal fee, the commissioner shall issue to an
4-22 eligible licensed business broker a certificate of renewal of
4-23 license that is valid for two years after the date of issuance.
4-24 (b) The commissioner by rule shall require that a licensee
4-25 seeking renewal of a license complete during the two years
5-1 preceding the date of renewal a minimum of 15 classroom hours of
5-2 continuing education courses, recognized by the commissioner, as a
5-3 prerequisite to the renewal. The rules must require that at least
5-4 four of the 15 hours required include instruction on law and legal
5-5 issues in this state related to business brokerage services.
5-6 (c) If an individual's license has expired, the individual
5-7 may renew the license not later than the 30th day after the date of
5-8 expiration by paying the unpaid renewal fee plus a late license
5-9 renewal fee. An individual may not renew an expired license later
5-10 than the 30th day after the date of expiration but may obtain a new
5-11 license by complying with the requirements for an original license.
5-12 Sec. 8. WAIVER OF REQUIREMENTS FOR APPLICANT LICENSED OUT OF
5-13 STATE. The commissioner may waive any licensing requirement for an
5-14 applicant who holds a valid registration certificate or license
5-15 issued by another state that has requirements that were, on the
5-16 date of the registration or licensing, substantially equal to the
5-17 licensing requirements of this state. An applicant for licensing
5-18 under this section shall apply in the same manner as any other
5-19 applicant and shall furnish the department with documents and other
5-20 evidence substantiating the applicant's qualifications as required
5-21 by the department.
5-22 Sec. 9. GENERAL POWERS AND DUTIES OF COMMISSIONER. (a) The
5-23 commissioner by rule shall adopt and shall enforce standards of
5-24 practice, conduct, and ethics for licensees.
5-25 (b) The commissioner by rule shall recognize appropriate
6-1 continuing education programs for licensees under this article.
6-2 The commissioner may recognize a private provider of an educational
6-3 program or course if the provider:
6-4 (1) applies with the department on a printed form
6-5 prescribed by the commissioner;
6-6 (2) pays a nonrefundable application fee established
6-7 by the commission; and
6-8 (3) pays an educational provider's fee established by
6-9 the commission that shall be refunded if the commissioner does not
6-10 recognize the provider's educational program or course offering.
6-11 (c) The commissioner by rule may adopt and authorize the use
6-12 of standard forms for the use of licensed business brokers to
6-13 facilitate the buying and selling of businesses and reduce
6-14 controversies while providing safeguards adequate to protect the
6-15 interests of the principals to a transaction.
6-16 (d) In the best interests of the public the commissioner by
6-17 rule may require a business broker to use contract forms adopted by
6-18 the commissioner. The commissioner may not prohibit a business
6-19 broker from using a contract form binding the sale, exchange,
6-20 option, lease, or rental of an interest in property that has been
6-21 prepared by the property owner or prepared by an attorney and
6-22 required by the property owner.
6-23 Sec. 10. UNAUTHORIZED PRACTICE OF LAW. (a) The
6-24 commissioner shall suspend or revoke a license granted under this
6-25 article on proof that the licensee, if not licensed and authorized
7-1 to practice law in this state, for a consideration, reward, or
7-2 pecuniary benefit, present or anticipated, direct or indirect, or
7-3 in connection with or as a part of the licensee's employment,
7-4 agency, or fiduciary relationship as a licensee:
7-5 (1) drew a deed, note, deed of trust, will, or other
7-6 written instrument that may transfer or otherwise affect the title
7-7 to or an interest in property, except as provided by Subsection (b)
7-8 of this section; or
7-9 (2) advised or counseled a person as to the validity
7-10 or legal sufficiency of an instrument or as to the validity of
7-11 title to property.
7-12 (b) Notwithstanding other law, the completion of a contract
7-13 form that binds the sale, exchange, option, lease, or rental of any
7-14 interest in property by a licensed business broker incident to the
7-15 performance of business brokerage services does not constitute the
7-16 unauthorized or illegal practice of law in this state if the form:
7-17 (1) is a standard form adopted for use by the
7-18 commissioner for the particular kind of transaction involved;
7-19 (2) was prepared by an attorney-at-law licensed by
7-20 this state and approved by the attorney for the particular kind of
7-21 transaction involved; or
7-22 (3) was prepared by the property owner or prepared by
7-23 an attorney and required by the property owner.
7-24 Sec. 11. DISCIPLINARY ACTION. The commissioner may deny,
7-25 suspend, or revoke a license, impose administrative sanctions and
8-1 penalties, or seek injunctive relief and civil penalties against a
8-2 licensee as provided by Sections 17 and 18, Article 9100, Revised
8-3 Statutes, if the licensee:
8-4 (1) violates this article or a rule applicable to the
8-5 licensee adopted under this article;
8-6 (2) is grossly incompetent in the performance of
8-7 business brokerage services;
8-8 (3) commits dishonest or fraudulent acts while
8-9 performing business brokerage services;
8-10 (4) violates the standards of ethics adopted under
8-11 this article; or
8-12 (5) while performing business brokerage services, is
8-13 guilty of:
8-14 (A) making a material misrepresentation or
8-15 failing to disclose to a potential purchaser any latent defect or
8-16 any false representation known to the licensee;
8-17 (B) making a false promise of a character likely
8-18 to influence, persuade, or induce any person to enter into a
8-19 contract or agreement when the licensee could not or did not intend
8-20 to keep the promise;
8-21 (C) pursuing a continued and flagrant course of
8-22 misrepresentation or making false promises through advertising or
8-23 otherwise;
8-24 (D) failing to make clear, to all parties to a
8-25 transaction, which party the licensee is acting for or receiving
9-1 compensation from more than one party except with the full
9-2 knowledge and consent of all parties;
9-3 (E) failing within a reasonable time to properly
9-4 account for or remit money coming into the licensee's possession
9-5 that belongs to others or commingling money belonging to others
9-6 with the licensee's own funds;
9-7 (F) paying a commission or fees to or dividing a
9-8 commission or fees with a person who is:
9-9 (i) not licensed under this article and
9-10 not exempt from licensing under this article; or
9-11 (ii) not licensed to sell businesses and
9-12 not exempt from licensing in another jurisdiction for compensation
9-13 for services as a business broker;
9-14 (G) failing to specify in a listing contract a
9-15 definite termination date that is not subject to prior notice;
9-16 (H) accepting, receiving, or charging an
9-17 undisclosed commission, rebate, or direct profit on expenditures
9-18 made for a principal;
9-19 (I) soliciting, selling, or offering for sale a
9-20 business under a scheme or program that constitutes a lottery or
9-21 deceptive practice;
9-22 (J) acting in the dual capacity of business
9-23 broker and undisclosed principal in a transaction;
9-24 (K) guaranteeing, authorizing, or permitting a
9-25 person to guarantee that future profits will result from a resale
10-1 of a business;
10-2 (L) placing a sign on property offering it for
10-3 sale without the written consent of the owner or the owner's
10-4 authorized agent;
10-5 (M) inducing or attempting to induce a party to
10-6 a contract of sale to break the contract for the purpose of
10-7 substituting a new contract;
10-8 (N) negotiating or attempting to negotiate the
10-9 sale or exchange of a business with an owner, knowing that the
10-10 owner had a written outstanding contract granting exclusive agency
10-11 in connection with the business to another business broker;
10-12 (O) offering a business for sale without the
10-13 knowledge and consent of the owner or the owner's authorized agent
10-14 or on terms other than those authorized by the owner or the owner's
10-15 authorized agent;
10-16 (P) publishing or causing to be published an
10-17 advertisement, including advertising by newspaper, radio,
10-18 television, or display, that is misleading or likely to deceive the
10-19 public, that in any manner tends to create a misleading impression,
10-20 or that fails to identify the person causing the advertisement to
10-21 be published as a licensed business broker;
10-22 (Q) having knowingly withheld from or inserted
10-23 in a statement of account or invoice a statement that made the
10-24 account or invoice inaccurate in a material way;
10-25 (R) publishing or circulating an unjustified or
11-1 unwarranted threat of legal proceedings or other action;
11-2 (S) establishing an association, by employment
11-3 or otherwise, with an unlicensed person who is expected or required
11-4 to act as a business broker or aiding or abetting or conspiring
11-5 with a person to circumvent the requirements of this article;
11-6 (T) failing or refusing on demand to furnish
11-7 copies of a document pertaining to a transaction dealing with
11-8 business brokerage to a person whose signature is affixed to the
11-9 document;
11-10 (U) conduct that constitutes dishonest dealings,
11-11 bad faith, or untrustworthiness; or
11-12 (V) discriminating against an owner or potential
11-13 owner on the basis of race, color, religion, sex, national origin,
11-14 or ancestry, including directing a prospective business buyer
11-15 interested in equivalent businesses to a different business area
11-16 according to the race, color, religion, sex, national origin, or
11-17 ancestry of the potential owner.
11-18 Sec. 12. CRIMINAL PENALTY. (a) A person commits an offense
11-19 if the person performs or offers to perform business brokerage
11-20 services for compensation and the person is not licensed under this
11-21 article.
11-22 (b) A person commits an offense if the person represents
11-23 that the person is a business broker, agent, counselor, advisor, or
11-24 representative, knowing that the person is required to be licensed
11-25 under this article and is not licensed.
12-1 (c) An offense under this section is a Class B misdemeanor.
12-2 Sec. 13. FUNDS RECEIVED BY DEPARTMENT. (a) The department
12-3 shall receive and account for all fees collected or money derived
12-4 under this article.
12-5 (b) The department shall deposit all money received under
12-6 this article to the credit of the general revenue fund in the state
12-7 treasury not later than the third working day after the date the
12-8 money is received.
12-9 Sec. 14. BUSINESS BROKER-LAWYER COMMITTEE. (a) The
12-10 Business Broker-Lawyer Committee is established. The committee is
12-11 composed of six members, three of whom are appointed by the
12-12 commission and three who are members of the State Bar of Texas
12-13 appointed by the president of the State Bar of Texas. The members
12-14 of the committee hold office for staggered terms of six years, with
12-15 the terms of one commission appointee and one State Bar appointee
12-16 expiring February 1 of each odd-numbered year. Each member holds
12-17 office until the member's successor is appointed. A vacancy for
12-18 any cause shall be filled for the expired term by the agency making
12-19 the original appointment. Appointments to the committee shall be
12-20 made without regard to race, creed, sex, religion, or national
12-21 origin.
12-22 (b) The Business Broker-Lawyer Committee shall advise the
12-23 commissioner in the adoption of rules on contract forms under
12-24 Section 9(d) of this article.
12-25 Sec. 15. BUSINESS BROKERS ADVISORY COUNCIL--ORGANIZATION AND
13-1 ADMINISTRATION. (a) The Business Brokers Advisory Council is
13-2 composed of six members appointed by the commission, two of whom
13-3 are public members and four of whom are business broker members.
13-4 To be eligible for appointment as a business broker member, the
13-5 member must:
13-6 (1) be licensed under this article to engage in
13-7 business brokerage services;
13-8 (2) subscribe to a code of professional conduct or
13-9 ethics;
13-10 (3) be a resident of this state for the five years
13-11 preceding the date of the appointment; and
13-12 (4) have performed business brokerage services as the
13-13 individual's primary occupation continuously for the five years
13-14 preceding the date of the appointment.
13-15 (b) An individual is not eligible for appointment as a
13-16 member of the council if the individual is required to register
13-17 with the secretary of state under Chapter 305, Government Code.
13-18 (c) Before March 1 of each year, the members of the council
13-19 shall elect one member to serve as presiding officer of the council
13-20 until the last day of February of the following year.
13-21 (d) Members of the council serve for staggered three-year
13-22 terms with the terms of two members expiring February 1 of each
13-23 year. In the event of a vacancy during a member's term, the
13-24 commission shall appoint to fill the unexpired part of the term a
13-25 replacement who meets the qualifications of the vacated office.
14-1 (e) A member of the council is not entitled to receive
14-2 compensation for serving as a member. A member is entitled to
14-3 reimbursement for reasonable expenses incurred in performing duties
14-4 as a member, subject to applicable limitations in the General
14-5 Appropriations Act.
14-6 (f) The council shall meet at least semiannually at the call
14-7 of the presiding officer or at the call of a majority of its
14-8 members. A decision of the council is not effective unless it
14-9 receives the affirmative vote of at least four members.
14-10 Sec. 16. BUSINESS BROKERS ADVISORY COUNCIL--POWERS. The
14-11 council shall advise the commission and the commissioner and make
14-12 recommendations on:
14-13 (1) the standards of practice, conduct, and ethics for
14-14 licensees to be adopted under this article;
14-15 (2) amounts for fees set under this article;
14-16 (3) contents for a license examination, if any, and
14-17 standards of acceptable performance;
14-18 (4) guidelines for approving continuing education
14-19 programs and educational courses for licensees that are offered,
14-20 sponsored, or accepted by any public or recognized private
14-21 provider, including:
14-22 (A) the Texas Association of Business Brokers;
14-23 (B) the State Bar of Texas;
14-24 (C) the Texas Real Estate Commission;
14-25 (D) the Texas Society of Certified Public
15-1 Accountants;
15-2 (E) any institution of higher education that
15-3 meets program and accreditation standards comparable to public
15-4 institutions of higher education as determined by the Texas Higher
15-5 Education Coordinating Board; and
15-6 (F) a nonprofit voluntary trade association,
15-7 institute, or organization whose membership is primarily composed
15-8 of persons who represent practitioners of business brokerage and
15-9 that:
15-10 (i) has written requirements of experience
15-11 and examination as a prerequisite for an individual's membership or
15-12 for granting professional designation to its members;
15-13 (ii) requires its members to subscribe to
15-14 a code of professional conduct or ethics; and
15-15 (iii) is approved in writing by the
15-16 commissioner; and
15-17 (5) educational requirements for initial and renewal
15-18 applicants.
15-19 SECTION 2. Section 12, The Securities Act (Article 581-12,
15-20 Vernon's Texas Civil Statutes), is amended to read as follows:
15-21 Sec. 12. REGISTRATION OF PERSONS SELLING. A. Except as
15-22 provided by Subsection B of this section and <in> Section 5 of this
15-23 Act, no person, firm, corporation or dealer shall, directly or
15-24 through agents or salesmen, offer for sale, sell or make a sale of
15-25 any securities in this state without first being registered as in
16-1 this Act provided. No salesman or agent shall, in behalf of any
16-2 dealer, sell, offer for sale, or make sale of any securities within
16-3 the state unless registered as a salesman or agent of a registered
16-4 dealer under the provisions of this Act.
16-5 B. Notwithstanding any other provision of this Act, a person
16-6 licensed under Article 9103, Revised Statutes, is not required to
16-7 register as a dealer, agent, or salesman to engage in business
16-8 brokerage services, as defined by that article, if the person acts
16-9 as a broker between and among principals for the sale in a single
16-10 transaction of a majority of the stock or equity securities of
16-11 privately held businesses incidental to a privately negotiated
16-12 purchase agreement under which the managerial control of the
16-13 business will devolve upon the purchases or purchasers.
16-14 SECTION 3. Section 3, The Real Estate License Act (Article
16-15 6573a, Vernon's Texas Civil Statutes), is amended to read as
16-16 follows:
16-17 Sec. 3. The provisions of this Act shall not apply to any of
16-18 the following persons and transactions, and each and all of the
16-19 following persons and transactions are hereby exempted from the
16-20 provisions of this Act:
16-21 (1) an attorney at law licensed in this state or in
16-22 any other state;
16-23 (2) an attorney in fact under a duly executed power of
16-24 attorney authorizing the consummation of a real estate transaction;
16-25 (3) a public official in the conduct of his official
17-1 duties;
17-2 (4) a person calling the sale of real estate by
17-3 auction under the authority of a license issued by this state
17-4 provided the person does not perform any other act of a real estate
17-5 broker or salesman as defined by this Act;
17-6 (5) a person acting under a court order or under the
17-7 authority of a will or a written trust instrument;
17-8 (6) a salesperson employed by an owner in the sale of
17-9 structures and land on which said structures are situated, provided
17-10 such structures are erected by the owner in the due course of his
17-11 business;
17-12 (7) an on-site manager of an apartment complex;
17-13 (8) transactions involving the sale, lease, or
17-14 transfer of any mineral or mining interest in real property;
17-15 (9) an owner or his employees in renting or leasing
17-16 his own real estate whether improved or unimproved;
17-17 (10) transactions involving the sale, lease, or
17-18 transfer of cemetery lots; <or>
17-19 (11) transactions involving the renting, leasing, or
17-20 management of hotels or motels; or
17-21 (12) an individual licensed as a business broker under
17-22 Article 9103, Revised Statutes, and performing business brokerage
17-23 services as defined in that article for a transaction in which the
17-24 value of real estate or an interest in real estate is less than 50
17-25 percent of the value of the total purchase price of the business.
18-1 SECTION 4. Section 18(b), Texas Appraiser Licensing and
18-2 Certification Act (Article 6573a.2, Vernon's Texas Civil Statutes),
18-3 is amended to read as follows:
18-4 (b) This Act does not prohibit:
18-5 (1) a real estate broker or salesman licensed under
18-6 The Real Estate License Act (Article 6573a, Vernon's Texas Civil
18-7 Statutes) but not licensed or certified under this Act from
18-8 performing an appraisal in a nonfederally related transaction; <or>
18-9 (2) the requirement of a real estate broker's or
18-10 salesman's license for an appraisal in nonfederally related
18-11 transactions by a person not licensed or certified under this Act;
18-12 or
18-13 (3) a business broker licensed under Article 9103,
18-14 Revised Statutes, but not licensed or certified under this Act,
18-15 from performing an appraisal of a business in connection with the
18-16 sale or purchase of the business in a nonfederally related
18-17 transaction.
18-18 SECTION 5. (a) In appointing the initial members of the
18-19 Business Broker-Lawyer Committee, the Texas Commission of Licensing
18-20 and Regulation and the president of the State Bar of Texas shall
18-21 each appoint one person to a term expiring February 1, 1995; one to
18-22 a term expiring February 1, 1997; and one to a term expiring
18-23 February 1, 1999.
18-24 (b) In appointing the initial members of the Business
18-25 Brokers Advisory Council, the Texas Commission of Licensing and
19-1 Regulation shall appoint two persons to terms expiring February 1,
19-2 1994; two to terms expiring February 1, 1995; and two to terms
19-3 expiring February 1, 1996.
19-4 SECTION 6. (a) A person who actively practiced the
19-5 occupation of business broker in this state for a continuous period
19-6 of at least six months preceding the effective date of this Act is
19-7 entitled to obtain a license under Article 9103, Revised Statutes,
19-8 as added by this Act, without fulfilling the educational
19-9 requirements prescribed by Section 5 of that article if the person
19-10 possesses the other qualifications required by that article and if,
19-11 before March 1, 1994, the person:
19-12 (1) submits an application as required by that
19-13 article; and
19-14 (2) pays the required license fee.
19-15 (b) The commissioner of licensing and regulation by rule may
19-16 establish the elements of active practice of the occupation of
19-17 business broker for purposes of this section.
19-18 SECTION 7. This Act takes effect September 1, 1993, except
19-19 that Section 1 of this Act, to the extent it prohibits performing
19-20 business brokerage services for compensation without a license,
19-21 takes effect January 1, 1994.
19-22 SECTION 8. The importance of this legislation and the
19-23 crowded condition of the calendars in both houses create an
19-24 emergency and an imperative public necessity that the
19-25 constitutional rule requiring bills to be read on three several
20-1 days in each house be suspended, and this rule is hereby suspended.