HBA-ALS, ATS, JRA H.B. 2681 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2681 By: Bosse Business & Industry 3/28/1999 Introduced BACKGROUND AND PURPOSE The Business Organizations Code (Code) is a joint project of the Business Law Section of the State Bar of Texas with the assistance of the Office of the Texas Secretary of State and the Texas Legislative Council. The Code has been under development since 1995. The code is not proposed as a component of the Legislative Council's continuing statutory revision program, but the council did provide drafting and other assistance to the Business Law Section. The Code includes both substantive and nonsubstantive provisions, but is generally a nonsubstantive revision of comparable provisions found in the Texas Business Corporation Act, Texas Non-Profit Corporation Act, Texas Miscellaneous Corporation Laws Act, Texas Limited Liability Company Act, Texas Revised Limited Partnership Act, Texas Real Estate Investment Trust Act, Texas Uniform Unincorporated Nonprofit Associations Act, Texas Professional Corporation Act, Texas Professional Associations Act, the Texas Revised Partnership Act, the Cooperative Associations Act, and other existing provisions of Texas statutes governing domestic entities. The effective date of the Code is January 1, 2002, to permit the 77th Texas Legislature to make any changes or corrections deemed to be necessary and to allow for time to educate and inform all interested parties. The Code generally does not apply to an entity existing before January 1, 2006, unless the entity expressly elects to adopt the Code as its governing statute. Codification of the business organization statutes is one of the last steps in the overall codification of Texas statutes. The Code is in lieu of a Legislative Council revision of the statutes codified. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. ADOPTION OF CODE. Adopts the Texas Business Organizations Code, as follows: TEXAS BUSINESS ORGANIZATIONS CODE TITLE 1. GENERAL PROVISIONS CHAPTER 1. DEFINITIONS AND OTHER GENERAL PROVISIONS SUBCHAPTER A. DEFINITIONS AND PURPOSE Sec. 1.001. PURPOSE. Sets forth the purpose of this code. Sec. 1.002. DEFINITIONS. Defines "affiliate," "associate," "association," "assumed name," "business," "certificate of formation," "certificate of ownership," "certificated ownership interest," "contribution," "conversion," "converted entity," "converting entity," "cooperative," "corporation," "debtor in bankruptcy," "digital signature," "director," "distribution," "domestic," "domestic entity," "domestic entity subject to dissenters' rights," "effective date of this code," "entity," "filing entity," "filing instrument," "filing officer," "for-profit association," "for-profit corporation," "for-profit entity," "foreign," "foreign entity," "foreign filing entity," "foreign governmental authority," "foreign nonfiling entity," "fundamental business transaction," "general partner," "general partnership," "governing authority," "governing documents," "governing person," "individual," "insolvency," "insolvent," "interest exchange," "Internal Revenue Code," "jurisdiction of formation," "law," "license," "limited liability company," "limited partner," "limited partnership," "manager," "managerial official," "member," "membership interest," "merger," "non-code organization," "nonfiling entity," "nonprofit association," "nonprofit corporation," "nonprofit entity," "officer," "organization," "owner," "ownership interest," "parent entity," "partner," "partnership," "partnership interest," "party to the merger," "president," "professional association," "professional corporation," "professional entity," "professional individual," "professional limited liability company," "professional service," "property," "real estate investment trust," "registered limited liability partnership," "registered limited liability limited partnership," "sale of all or substantially all of the assets," "secretary," "share," "shareholder" or "holder of shares," "signature," "subscriber," "subscription," "subsidiary," "treasurer," "trustee," "uncertified ownership interest," "vice president," and "writing" or "written." Sec. 1.003. DISINTERESTED PERSON. (a) Provides that for purposes of this code, a person is disinterested with respect to the approval of, consideration of, or disposition of a claim or challenge relating to a contract, transaction, or other matter if the person or the person's associate is not a party to the contract or transaction or materially involved in the conduct that is the subject of the claim or challenge and does not have a material financial interest in the outcome of the contract or transaction or the disposition of the claim or challenge. (b) Sets forth situations which do not solely constitute material involvement in a contract or transaction that is the subject of the claim or challenge or material financial interest in the outcome of the contract or transaction or the disposition of the claim or challenge. Sec. 1.004. INDEPENDENT PERSON. (a) Sets forth the conditions which must exist for a person to be considered independent with respect to considering the disposition of a claim or challenge regarding a contract or transaction, or particular or alleged conduct. (b) Sets forth situations which do not solely constitute a conflict of interest. Sec. 1.005. CONSPICUOUS INFORMATION. Provides that, in this code, information is conspicuous if it provides or is intended to provide notice to a reasonable person affected by the information. Provides that required information is conspicuous if it is capitalized, boldfaced, italicized, underlined, or larger or of a different color than the remainder of the document. Sec. 1.006. SYNONYMOUS TERMS. Provides, for purposes of this code, that "articles of incorporation," "articles of organization," "certificate of limited partnership," and "charter" includes a "certificate of formation"; "authorized capital stock" includes "authorized shares"; "capital stock" includes "authorized and issued shares," "issued share," and "stated capital"; "certificate of registration," "certificate of authority," and "permit to do business" includes "registration"; "stock" and "shares of stock" includes "shares"; "stockholder" includes "shareholder"; and "no par stock" includes "shares without par value." Sec. 1.007. SIGNING OF DOCUMENT OR OTHER WRITING. Provides, for purposes of this code, that a writing has been signed by a person when the writing includes the person's signature and that a transmission or reproduction of a writing signed by a person is considered signed by that person. Sec. 1.008. SHORT TITLES. (a) Authorizes the provisions of this code as described by this section to be cited as provided by this section. (b) Authorizes the provisions of Title 2 and the provisions of Title 1 to the extent applicable to corporations to be cited as the "Texas Corporation Law." (c) Authorizes the provisions of Chapters 20 and 21 and the provisions of Title 1 to the extent applicable to for-profit corporations to be cited as the "Texas For-Profit Corporation Law." (d) Authorizes the provisions of Chapters 20 and 22 and the provisions of Title 1 to the extent applicable to nonprofit corporations to be cited as the "Texas NonProfit Corporation Law." (e) Authorizes the provisions of Title 3 and the provisions of Title 1 to the extent applicable to limited liability companies to be cited as the "Texas Limited Liability Company Law." (f) Authorizes the provisions of Chapters 151, 152, and 154 and the provisions of Title 1 to the extent applicable to general partnerships to be cited as the "Texas General Partnership Law." (g) Authorizes the provisions of Chapters 151, 152, and 153 and the provisions of Title 1 to the extent applicable to limited partnerships to be cited as the "Texas Limited Partnership Law." (h) Authorizes the provisions of Title 5 and the provisions of Title 1 to the extent applicable to real estate investment trusts to be cited as the "Texas Real Estate Investment Trust Law." (i) Authorizes the provisions of Chapter 251 and the provisions of Title 1 to the extent applicable to cooperative associations to be cited as the "Texas Cooperative Association Law." (j) Authorizes the provisions of Title 7 and the provisions of Titles 1, 2, and 3 to the extent applicable to cooperative association to be cited as the "Texas Professional Entities Law." (k) Authorizes the provisions of Chapter 252 to be cited as the "Uniform Unincorporated Nonprofit Associations Act." (l) Authorizes the provisions of Chapters 301 and 302 and the provisions of Chapters 20 and 21 and Title 1 to the extent applicable to professional associations to be cited as the "Texas Professional Association Law." (m) Authorizes the provisions of Chapters 301 and 303 and the provisions of Chapters 20 and 21 and Title 1 to the extent applicable to professional corporations to be cited as the "Texas Professional Corporations Law." (n) Authorizes the provisions of Chapters 301 and 304 and the provisions of Titles 1 and 3 to the extent applicable to professional limited liability companies to be cited as the "Texas Professional Limited Liability Company Law." Sec. 1.009. DOLLARS AS MONETARY UNITS. Provides that a value or amount required by this code to be stated in monetary terms must be stated in United States dollars and is considered to be in United States dollars if not specified. SUBCHAPTER B. CODE CONSTRUCTION Sec. 1.051. CONSTRUCTION OF CODE. Makes Chapter 311 (Code Construction Act), Government Code, applicable to the construction of each provision in this code unless expressly provided otherwise in this code. Sec. 1.052. REFERENCE IN LAW TO STATUTE REVISED BY CODE. Provides that a reference in law to a statute or a part of a statute revised by this code is considered to be a reference to the part of this code that revised that statute or part of that statute. Sec. 1.053. APPLICABILITY TO FOREIGN AND INTERSTATE AFFAIRS. Makes this code applicable to the conduct of affairs with foreign countries and the other states of the United States only to the extent permitted under the United States Constitution. Sec. 1.054. RESERVATION OF POWER. Provides that the legislature at all times has the power to prescribe binding regulations, provisions, and limitations on any entity governed by this code as the legislature considers advisable. SUBCHAPTER C. DETERMINATION OF APPLICABLE LAW Sec. 1.101. DOMESTIC FILING ENTITIES. Provides that the law of this state governs the formation and internal affairs of an entity if the entity's formation occurs when a certificate of formation filed in accordance with Chapter 4 (Filings) takes effect. Sec. 1.102. FOREIGN FILING ENTITIES. Provides that if the formation of an entity occurs when a certificate of formation or similar instrument is filed with a foreign governmental authority takes effect, the law of the state or other jurisdiction in which that foreign governmental authority is located governs the formation and internal affairs of the entity. Sec. 1.103. ENTITIES NOT FORMED BY FILING INSTRUMENT. Provides that the law of an entity's jurisdiction of formation governs the entity's formation and internal affairs if the formation of the entity does not occur when a certificate of formation or similar instrument filed with the secretary of state or with a foreign governmental authority takes effect. Sec. 1.104. LAW APPLICABLE TO LIABILITY. Makes the law of the jurisdiction that governs an entity as determined under Sections 1.101-1.103 applicable to the liability of an owner, member, or managerial official of the entity operating in the person's respective capacities for an obligation, including a debt or other liability, of the entity for which the person is not otherwise liable by contract or under provision of law other than this code. Sec. 1.105. INTERNAL AFFAIRS. Provides that, for the purposes of this code, the internal affairs on an entity include the rights, powers, and duties of its governing authority, governing persons, officers, owners, and members and matters relating to its membership or ownership interests. Sec. 1.106. ORDER OF PRECEDENCE. Provides that this title applies to all domestic entities and foreign entities to the extent provided by this title. Provides that each title of this code, other than this title, applies to a different type of entity to the extent provided by the appropriate title. Provides that if a provision of this title conflicts with a provision in another title of this code, the provision of the other title supersedes the provision of this title. CHAPTER 2. PURPOSES AND POWERS OF DOMESTIC ENTITY SUBCHAPTER A. PURPOSES OF DOMESTIC ENTITY Sec. 2.001. GENERAL SCOPE OF PERMISSIBLE PURPOSES. Provides that a domestic entity has any lawful purpose or purposes, unless otherwise provided by this code. Sec. 2.002. PURPOSES OF NONPROFIT ENTITY. Sets forth the purposes a domestic nonprofit entity may have. Sec. 2.003. PROHIBITED PURPOSES. Prohibits a domestic entity from engaging in business or activity that is prohibited by state law, unlawful without a license and a license cannot be lawfully granted to the entity, or from operating as a bank, trust company, savings association, state regulated insurance company, railroad company, cemetery organization, or abstract or title company governed by Chapter 9 (Texas Title Insurance Act), Insurance Code. Sec. 2.004. LIMITATION ON PURPOSES OF PROFESSIONAL ENTITY. Authorizes a professional entity to engage in only one type of professional service, unless expressly authorized to provide more than one type, and ancillary services. Sec. 2.005. LIMITATION IN GOVERNING DOCUMENTS. Authorizes the governing documents of a domestic entity to contain limitations on the entity's purpose. SUBCHAPTER B. POWERS OF DOMESTIC ENTITY Sec. 2.101. GENERAL POWERS. Provides that, except as otherwise provided by this code, a domestic entity has the same powers as an individual to take action necessary or convenient to carry out its business and affairs. Sets forth the powers of a domestic entity. Sec. 2.102. ADDITIONAL POWERS OF NONPROFIT ENTITY OR INSTITUTION. Authorizes a domestic nonprofit entity or institution formed for a religious, charitable, educational, or eleemosynary purpose to acquire, own, hold, mortgage, and dispose of and invest its funds in property for the use and benefit of, under the discretion of, and in trust for a convention, conference, or association organized under the laws of this state or another state with which it is affiliated or by which it is controlled. Sec. 2.103. POWER TO INCUR INDEBTEDNESS. Authorizes a domestic entity to create indebtedness for any consideration the entity considers appropriate, unless otherwise provided by its governing documents or this code. Provides that the judgment of the governing authority of a domestic entity as to the value of the consideration received by the entity for indebtedness is conclusive in the absence of fraud in the transaction. Provides that a domestic entity is treated as part of the entity creating indebtedness if it is directly or wholly or partly owned by that entity. Provides that this section does not apply to indebtedness created by a for-profit entity for the authorization or payment of a distribution. Sec. 2.104. POWER TO MAKE GUARANTIES. (a) Defines "guaranty" in this section. (b) Authorizes a domestic entity to make a guaranty on behalf of a parent, subsidiary, or affiliate of the entity or make a guaranty of the indebtedness of another person if the guaranty may reasonably be expected to benefit the entity, unless otherwise provided by its governing documents or this code. (c) Provides that a decision by the governing authority of the domestic entity that a guaranty may reasonably be expected to benefit the entity is conclusive and not subject to attack by any person, with certain exceptions. (d) Provides that this section does not apply to a domestic entity governed by the Insurance Code or authorize a domestic entity that is not governed by the Insurance Code to engage in a business or transaction regulated by the Insurance Code. Sec. 2.105. STATED POWERS IN SUBCHAPTER SUFFICIENT. Provides that a domestic entity is not required to state any of the powers provided to the entity by this subchapter in its governing documents. Sec. 2.106. LIMITATION ON POWERS. Provides that this subchapter does not authorize a domestic entity or a managerial official of a domestic entity to exercise a power in a manner inconsistent with a limitation on the purposes or powers of the entity contained in its governing documents, this code, or other law of this state, nor does it authorize any violation of this state's antitrust laws. Sec. 2.107. CERTIFICATED INDEBTEDNESS; MANNER OF ISSUANCE; SIGNATURE AND SEAL. Authorizes the seal of an entity, if the entity has adopted a seal, to be a facsimile that may be engraved or printed on the certificate of indebtedness. Authorizes the signature of any officer of the domestic entity used to authenticate such a certificate to be a facsimile signature. Authorizes such a certificate that contains the manual or facsimile signature of person who is no longer an officer when the certificate is delivered to be adopted, issued, and delivered as though the person remained an officer. CHAPTER 3. FORMATION AND GOVERNANCE SUBCHAPTER A. FORMATION, EXISTENCE, AND CERTIFICATE OF FORMATION Sec. 3.001. FORMATION AND EXISTENCE OF FILING ENTITIES. Provides that a certificate of formation complying with Sections 3.003, 3.004, and 3.005 must be filed in accordance with Chapter 4 to form a filing entity, subject to the other provisions of this code. Authorizes the filing of such a certificate of formation to be included in a filing under Chapter 10. Provides that the existence of a filing entity commences when the filing of the certificate of formation takes effect as provided by Chapter 4. Provides that an acknowledgment of the filing of a certificate of formation issued by the filing officer is conclusive evidence of the formation and existence of the filing entity, the satisfaction of all preceding conditions, and the authority of the filing entity to transact business in this state. Sec. 3.002. FORMATION AND EXISTENCE OF NONFILING ENTITIES. Provides that the requirements for the formation of and the determination of the existence of a nonfiling entity are governed by the title of this code that applies to that entity. Sec. 3.003. DURATION. Provides that a domestic entity exists perpetually unless otherwise provided in the governing documents of the entity. Authorizes the termination of a domestic entity in accordance with this code or the Tax Code. Sec. 3.004. ORGANIZERS. Authorizes any person having the capacity to contract for the person or for another to be an organizer of a filing entity. Provides that each organizer of a filing entity must sign the certificate of formation of the filing entity, except that each general partner must sign the certificate of formation of a domestic limited partnership and each trust manager must sign and acknowledge it before an authorized officer. Sec. 3.005. CERTIFICATE OF FORMATION. Sets forth the information that the certificate of formation must contain. Authorizes the certificate to contain other provisions not inconsistent with law. Provides that Chapter 4 governs the signing and filing of a certificate of formation for a domestic entity, except as provided by Section 3.004. Sec. 3.006. FILINGS IN CASE OF MERGER OR CONVERSION. Provides that a certificate of formation of the entity must be filed with the certificate of conversion or merger if a new domestic entity is former under such a plan. Provides that such a domestic filing entity takes effect and commences on the effectiveness of the conversion or merger. SUBCHAPTER B. AMENDMENTS AND RESTATEMENTS OF CERTIFICATE OF FORMATION Sec. 3.051. RIGHT TO AMEND CERTIFICATE OF FORMATION. Authorizes a filing entity to amend its certificate of formation. Provides that an amended certificate of formation may only contain provisions that would be permitted if it were a newly filed original certificate of formation or that effect a change, exchange, reclassification, or cancellation in the membership or ownership interests or the rights of owners or members of the filing entity. Sec. 3.052. PROCEDURE TO AMEND CERTIFICATE OF FORMATION. Provides that the procedure to adopt an amendment to the certificate of formation is as provided by the title of this code that applies to the entity. Requires a filing entity that amends its certificate of formation to sign and file a certificate of amendment complying with Section 3.053 or a restated certificate of formation complying with Section 3.057. Sec. 3.053. CERTIFICATE OF AMENDMENT. Sets forth the information that a certificate of amendment must contain. Sec. 3.054. EFFECT OF FILING OF CERTIFICATE OF AMENDMENT. Provides that an amendment to a certificate of formation takes effect when the filing takes effect. Provides that an amendment to a certificate does not affect an existing cause of action in favor or against that entity, a pending suit to which the entity is a party, or an existing right of a person other than an existing owner, regardless of whether the name of the entity is changed by the amendment. Sec. 3.055. RIGHT TO RESTATE CERTIFICATE OF FORMATION. Authorizes a filing entity to restate its certificate of formation. Provides that an amendment effected by a restated certificate of formation must comply with Section 3.051(b). Sec. 3.056. PROCEDURES TO RESTATE CERTIFICATE OF FORMATION. Provides that the procedure to adopt a restated certificate of formation is governed by the title of this code that applies to the entity. Requires a filing entity that restates its certificate of formation to sign and file a restated certificate and accompanying statements complying with Section 3.057. Sec. 3.057. RESTATED CERTIFICATE OF FORMATION. Sets forth the information that a restated certificate of formation must contain. SUBCHAPTER C. GOVERNING PERSONS AND OFFICERS Sec. 3.101. RIGHTS OF GOVERNING PERSONS IN CERTAIN CASES. Authorizes a governing person who is a member of a committee, in discharging a duty or exercising a power, to rely on information, opinions, reports, or statements, including financial statements and other financial data, concerning a domestic entity or another person and prepared or presented by an officer or employee of the entity, legal counsel, a public accountant, an investment banker, a person who the governing person reasonably believes possesses professional expertise in the matter, or a committee of the governing authority of which the governing person is not a member, unless the governing person has knowledge of a matter that makes the reliance unwarranted. Entitles a governing person held liable on a claim to a contribution from each of the other governing persons held liable on the same claim. Sec. 3.102. OFFICERS. Authorizes officers of a domestic entity to be elected or appointed in accordance with the governing documents or the governing authority of the entity unless prohibited by the governing documents. Requires an officer to perform the duties in the management of the entity and establishes that the officer has the authority provided by the governing documents or governing authority of the entity. Authorizes a person to simultaneously hold any two or more offices of an entity unless prohibited by this code or the governing documents of an entity. Sec. 3.103. REMOVAL OF OFFICERS. Authorizes an officer to be removed for or without cause by the governing authority. Provides that the removal of an officer does not prejudice any of the officer's contract rights. Provides that election or appointment of an officer does not by itself create contract rights. Sec. 3.104. RIGHTS OF OFFICERS IN CERTAIN CASES. Authorizes an officer of a domestic entity, in discharging a duty or exercising a power, to rely on information, opinions, reports, or statements, including financial statements and other financial data, concerning the entity or another person and prepared or presented by an officer or employee of the entity, legal counsel, a public accountant, an investment banker, or a person who the officer reasonably believes possesses professional expertise in the matter, unless the officer has knowledge of a matter that makes the reliance unwarranted. SUBCHAPTER D. RECORDKEEPING Sec. 3.151. BOOKS AND RECORDS FOR ALL FILING ENTITIES. Sets forth the books and records each filing entity is required to keep, the information such books and records must contain, and the form in which they must be kept. Sec. 3.152. GOVERNING PERSON'S RIGHT OF INSPECTION. Authorizes a governing person to examine the entity's books and records for a purpose reasonably related to the governing person's service as a governing person. Authorizes a court to require an entity to open the books and records to permit a governing person to inspect, make copies of, or take extracts from the books and records on a showing by the governing person that the entity refused the governing person's reasonable demand to inspect the books and records. Authorizes the court to award a governing person attorney's fees and any other proper relief in such a suit. Sec. 3.153. RIGHT OF EXAMINATION BY OWNER OR MEMBER. Authorizes each owner or member of an entity to examine the books and records of an entity to the extent provided by the governing documents of the entity and the title of this code governing the entity. SUBCHAPTER E. CERTIFICATES REPRESENTING OWNERSHIP INTEREST Sec. 3.201. CERTIFICATED OR UNCERTIFICATED OWNERSHIP INTEREST. Authorizes ownership interests in a domestic entity to be certificated or uncertificated. Provides that the ownership interests in a for-profit corporation, real estate investment trust, or professional corporation must be certificated unless the governing documents of the entity or a resolution adopted by the governing authority of the entity states that the ownership interests are uncertificated. Provides that, if a domestic entity changes the form of its ownership interests from certificated to uncertificated, a certificated ownership interest subject to the change becomes an uncertificated ownership interest only after the certificate is surrendered to the domestic entity. Provides that ownership interests are uncertificated unless specified otherwise. Sec. 3.202. FORM AND VALIDITY OF CERTIFICATES; ENFORCEMENT OF ENTITY'S RIGHTS. (a) Authorizes a certificated ownership interest in a domestic entity to contain an impression or a facsimile of the entity's seal. (b) Provides that, if a domestic entity is authorized to issue ownership interests of more than one class or series, each certificate representing ownership interests that is issued by the entity must conspicuously state on the front or back of the certificate the designations, preferences, limitations, and relative rights of each class or series, that the information is stated in the entity's governing documents, and that a free copy of the information will be provided upon request. (c) Provides that a certificate representing ownership interests must state on the front of the certificate that the domestic entity is organized under the laws of this state; the name of the person to whom the certificate is issued; the number and class of ownership interests and the designation of the series, if any, represented by the certificate; and the par value of each share represented by the certificate if the ownership interests are shares, or a statement that the shares are without par value. (d) Provides that a certificate representing ownership interests that is subject to a restriction, placed by or agreed to by the domestic entity under this subchapter, on the transfer or registration of the transfer of the ownership interests must state certain information relating to the restriction on the certificate. (e) Prohibits a domestic entity that fails to provide to the record holder of a certificate within a reasonable time a copy of the restricting document from enforcing the entity's rights under the restriction imposed on the certificated ownership interests. (f) Provides that a certificate representing shares of a corporation in which any provision of the certificate of formation, bylaws, resolution of the board of directors or shareholders, or agreement restricting the transfer of shares has been incorporated by reference as provided by Section F, Article 2.19, Texas Business Corporation Act, before September 1, 1975, is not invalidated or affected by the repeal of that section. Prohibits an incorporation by reference as provided by Section F, Article 2,19, Texas Business Corporation Act, from being used on a certificate issued on or after September 1, 1975, without regard to the form of issuance. Sec. 3.203. SIGNATURE REQUIREMENT. Provides that the authorized managerial official or officials of a domestic entity must sign any certificate representing an ownership interest in the entity. Authorizes a certificated ownership interest that is signed by a person who is no longer a managerial official when the certificate is issued to be issued in the same manner and with the same effect as if the person had remained a managerial official. Sec. 3.204. DELIVERY REQUIREMENT. Requires a domestic entity to deliver a certificate representing a certificated ownership interest to which the owner is entitled. Sec. 3.205. NOTICE FOR UNCERTIFICATED OWNERSHIP INTEREST. Requires a domestic entity, after issuing or transferring an uncertificated ownership interest, to notify the owner of the ownership interest in writing of any information required under this subchapter to be stated on a certificate representing the ownership interest, except as provided by Subsection (c) and in accordance with Chapter 8, Business & Commerce Code. Provides that an owner of an uncertificated ownership interest has the same rights and obligations as an owner of a certificated ownership interest of the same class and series. Provides that a domestic entity is not required to send a notice under this section if the required information is included in the governing documents of the entity and the owner is provided with a copy of such documents. CHAPTER 4. FILINGS SUBCHAPTER A. GENERAL PROVISIONS Sec. 4.001. SIGNATURE AND DELIVERY. Requires a filing instrument be signed by a person authorized by this code to act on behalf of the entity and delivered to the secretary of state, but does not require the production of evidence of such authorization. Sec. 4.002. ACTION BY SECRETARY OF STATE. Requires the secretary of state, upon finding that the filing conforms to applicable provisions of this code and applicable rules adopted under Section 12.001, and that all required fees have been paid, to accept the instrument into the filing system, assign the instrument a date of filing, and deliver a written or electronic acknowledgment of filing to the entity. Requires the secretary of state to return to the entity duplicate copies with the month, date, and year of filing, and the word "Filed" on them. Sec. 4.003. FILING OR ISSUANCE OF REPRODUCTION OR FACSIMILE. Authorizes the filing or issuance of a photostatic, facsimile, electronic, or similar reproduction of an original filing instrument, signature, acknowledgment of filing, or communication in place of an original filing instrument, an original signature on a filing instrument, or an original acknowledgment of filing or other written communication from the secretary of state relating to a filing instrument. Sec. 4.004. TIME FOR FILING. Requires an entity to promptly file each required filing instrument. Sec. 4.005. CERTIFICATES AND CERTIFIED COPIES. Requires a court, public office, or official body to accept a certificate issued by the secretary of state or a certified copy of a filing instrument accepted for filing by the secretary of state as prima facie evidence of the facts stated in the certificate or instrument. Authorizes a court, public office, or official body to record such a certificate or certified copy. Requires a court, public office, or official body to accept a certificate issued under an official seal by the secretary of state as to the existence or nonexistence of facts that related to an entity that would not appear from a certified copy of a filing instrument as prima facie evidence of the existence or nonexistence of the facts stated in the certificate. Sec. 4.006. FORMS ADOPTED BY SECRETARY OF STATE. Authorizes the secretary of state to adopt forms for a filing instrument or report required to be filed with the secretary of state, but does not require the use of such forms. Sec. 4.007. LIABILITY FOR FALSE FILING INSTRUMENTS. Authorizes a person to recover damages, court costs, and reasonable attorney's fees if the person incurs a loss due to a filed filing instrument that constitutes an offense under Section 4.008 or the person reasonable relies on a false statement or omission of material fact in a filed filing instrument. Authorizes the person to recover from each person who signed the filing instrument, directed the signing and filing of the instrument, or entity that authorized the filing instrument knowing that it was false or omitted facts. Sec. 4.008. OFFENSE; PENALTY. Provides that the signing of a filing instrument which contains a false statement or the omission of a material fact with the intent of filing the filing instrument with the secretary of state is a Class A misdemeanor unless the person's intent is to defraud or harm another, in which case, the offense is a state jail felony. Sec. 4.009. FILINGS BY REAL ESTATE INVESTMENT TRUST. Provides that a filing instrument relating to a real estate investment trust must be filed with the county clerk of the county of the principal place of business in Texas of the real estate investment trust. Makes this chapter applicable to a filing by a real estate investment trust, except that in relation to such a filing a reference in this chapter to the secretary of state is considered to be a reference to the county clerk of the county in which the real estate investment trust's principal place of business is located. SUBCHAPTER B. WHEN FILINGS TAKE EFFECT Sec. 4.051. Provides that a filing instrument takes effect upon filing with the secretary of state. Sec. 4.052. DELAYED EFFECTIVENESS OF CERTAIN FILINGS. Provides that a filing instrument may become effective at a specified time and date subsequent to the date of filing by the secretary of state or upon the occurrence of a future event or fact. Sec. 4.053. CONDITIONS FOR DELAYED EFFECTIVENESS. Sets forth the information required to be included and time limitations for a filing instrument which is to take effect at a time subsequent to its filing by the secretary of state. Sec. 4.054. DELAYED EFFECTIVENESS ON FUTURE EVENT OR FACT. Provides that a filed filing instrument that is to become effective upon the occurrence of a future event or fact takes effect on the date and time at which the last specified event or fact occurs or the date and time at which a condition is satisfied or waived. Sec. 4.055. STATEMENT OF EVENT OR FACT. Provides that a subsequent statement of the event's or fact's occurrence must be filed with the secretary of state within 90 days of filing a filing instrument that is to take effect upon the occurrence of a future event or fact. Sec. 4.056. FAILURE TO FILE A STATEMENT. Provides that the filing instrument does not take effect if the subsequent statement of the event's or fact's occurrence is not filed. Sec. 4.057. ABANDONMENT BEFORE EFFECTIVENESS. Authorizes the parties to a filing instrument to abandon it prior to its effectiveness upon filing a certificate of abandonment with the secretary of state. Sets forth the information the certificate must contain. Prohibits the filing of the certificate, if in the interim prior to filing the certificate of abandonment the name of an entity that is a party to the action or transaction becomes the same as or deceptively similar to the name of another existing entity unless the entity changes its name in the manner required by this code. Sec. 4.058. DELAYED EFFECTIVENESS NOT PERMITTED. Prohibits the delay of the effect of certain filing instruments. Sec. 4.059. ACKNOWLEDGMENT OF FILING WITH DELAYED EFFECTIVENESS. Provides that an acknowledgment of filing issued or other action taken by the secretary of state affirming the filing of a filing instrument that has a specific delayed effective date must state the date and time at which the instrument takes effect. Provides that an acknowledgment of filing issued or other action taken by the secretary of state affirming the filing of a filing instrument the effect of which is delayed until the occurrence of a future even or fact must state that the effective date and time of the filing instrument is conditioned on the occurrence of a future event or fact as described in the filing instrument or otherwise indicate that the effective date is condition on the occurrence of a future event or fact. SUBCHAPTER C. CORRECTION AND AMENDMENT Sec. 4.101. CORRECTION OF FILINGS. Authorizes a filed filing instrument to be corrected by filing a certificate of correction with the secretary of state. Sec. 4.102. LIMITATION ON CORRECTION OF FILINGS. Prohibits a certificate of correction from altering, adding, or deleting language such that the filing instrument does not conform to this code. Sec. 4.103. CERTIFICATE OF CORRECTION. Sets forth the information which must be included on a certificate of correction to be filed with the secretary of state. Sec. 4.104. FILING CERTIFICATE OF CORRECTION. Requires the certificate of correction be filed with the secretary of state and requires the secretary of state to deliver to the entity an acknowledgment of the filing. Sec. 4.105. EFFECT OF CERTIFICATE OF CORRECTION. Provides that the filed filing instrument is considered to have been corrected on the date the filing instrument was originally filed, except as to a party that is adversely affected by the correction, in which case, the filing instrument is considered corrected as of the date of filing of the certificate of correction. Provides that an acknowledgment of filing applies to the corrected filing instrument as of the date the corrected filing instrument is considered to have been filed. Sec. 4.106. AMENDMENT OF FILINGS. Authorizes a filing entity to amend or supplement a filing instrument the entity has filed, to the extent permitted by the title relating to such entity. SUBCHAPTER D. FILING FEES Sec. 4.151. FILING FEES: ALL ENTITIES. Requires the secretary of state to collect various filing fees. Sec. 4.152. FILING FEES: FOR-PROFIT CORPORATION. Requires the secretary of state to collect various filing fees for instruments filed by or for a for-profit corporation. Sec. 4.153. FILING FEES: NONPROFIT CORPORATIONS. Requires the secretary of state to collect various filing fees for instruments filed by or for a nonprofit corporation. Sec. 4.154. FILING FEES: LIMITED LIABILITY COMPANIES. Requires the secretary of state to collect the same filing fees for instrument filed by or for a limited liability company as specified for for-profit corporations. Sec. 4.155. FILING FEES: LIMITED PARTNERSHIPS. Requires the secretary of state to collect various filing fees for instrument filed by or for a limited partnership. Sec. 4.156. FILING FEES: PROFESSIONAL ASSOCIATIONS. Requires the secretary of state to collect various filing fees for instruments filed by a professional association. Sec. 4.157. FILING FEES: PROFESSIONAL CORPORATIONS. Requires the secretary of state to collect the same filing fees for instrument filed by or for a professional corporation as specified for for-profit corporations. Sec. 4.158. FILING FEES: GENERAL PARTNERSHIPS. Requires the secretary of state to collect various filing fees for instruments filed by or for a general partnership. SUBCHAPTER E. ANNUAL REPORT Sec. 4.201. APPLICABILITY OF SUBCHAPTER. Makes this subchapter applicable only to for-profit corporations, whether domestic or foreign. Sec. 4.202. ANNUAL REPORT. Requires each domestic entity or foreign entity registered to transact business in this state and subject to this subchapter to file an annual report on a prescribed form with the secretary of state. Sets forth the information that the report must include. Provides that the annual report must be filed within a year of the entity's formation or registration and be signed by an authorized officer or agent certifying that the information is current and that any reported change in the required information has been authorized. Requires the secretary of state to index the filing of any additional report received and make the information in the report part of the official record. Requires the entity to send copies of the report to certain people. Provides that an entity that reports a change to its registered office or registered agent under this section is not required to file an amendment to its certificate of formation or application for registration. Establishes a fee for filing an annual report. Provides that an entity that does not file an annual report is subject to termination or revocation of its registration to transact business. Sec. 4.203. ACTION BY SECRETARY OF STATE. Authorizes the secretary of state to provide entities with copies of the report form and a notice that the report is due, but provides that the secretary of state's failure to do so does not extend the deadlines or excuse the entity's failure to file the annual report. Requires the secretary of state to index the filing of the report and update their records on receipt of a report and the required fees. Sec. 4.204. EFFECT OF FAILURE TO FILE ANNUAL REPORT. Provides that an entity forfeits its right to transact business in this state if it fails to file the required annual report within 30 days of the deadline. Provides that a forfeiture under this section is without judicial ascertainment. Requires the secretary of state to note a forfeiture on an entity's record. Requires notice of the forfeiture to be mailed to the entity. Prohibits the entity or the entity's successor or assignee from maintaining an action, suit, or proceeding a court of this state unless the right of the entity to transact business is revived. Provides that forfeiture does not impair the validity of a contract or act of the entity or prevent the entity from defending an action, suit, or proceeding in a court of this state. Sec. 4.205. REVIVAL OF RIGHT TO TRANSACT BUSINESS. Provides that an entity may be relieved from the forfeiture of its rights to transact business by filing the required report with 120 days of the notice of forfeiture with the filing fee and a late filing fee. Requires the secretary of state to revive the right of such an entity to transact business in this state and note the revival and date of revival on the entity's records. Sec. 4.206. INVOLUNTARY TERMINATION OR REVOCATION OF CERTIFICATE OR REGISTRATION AFTER FORFEITURE. Authorizes the secretary of state to involuntarily terminate an entity or revoke the registration of a foreign entity if the entity forfeits its right to transact business in this state and fails to revive that right. Provides that such termination takes place without judicial ascertainment. Requires the secretary of state to note the termination or revocation and change the status of the entity to inactive. Sec. 4.207. REINSTATEMENT AFTER TERMINATION OR REVOCATION. Provides that an entity may be reinstated by filing the report with the filing fee, a late filing fee, and a reinstatement filing fee. Requires the secretary of state to reinstate the certificate of formation or registration of an entity without judicial ascertainment, change the status of the entity to active, and note the reinstatement on the entity's record if the entity pays the required fees. Requires the secretary of state to require the entity to adopt an available name if the name of entity is not available at the time of reinstatement. Sec. 4.208. DISCLAIMER OF STATUS. Authorizes a person whose name is included in an annual report and who is not a managerial official on the date of the report to file a disclaimer of the person's status as shown on the report, which has no effect on any issue of personal liability during the period that the person was a managerial official, and requires the secretary of state to record the statement. CHAPTER 5. NAMES OF ENTITIES; REGISTERED AGENTS AND REGISTERED OFFICES SUBCHAPTER A.GENERAL PROVISIONS Sec. 5.001. EFFECT ON RIGHTS UNDER OTHER LAW. Provides that the filing of a certificate of formation, application for registration, or an application for reservation or registration of a name by a filing entity or foreign filing entity does not authorize the use of a name in violation of the rights of another to the name and requires the secretary of state to provide a notice to this effect upon the formation or registration of a filing entity or foreign filing entity and upon the registration or reservation of an entity name. SUBCHAPTER B. GENERAL PROVISIONS RELATING TO NAMES OF ENTITIES Sec. 5.051. ASSUMED NAME. Authorizes a domestic entity or a foreign entity having authority to do business in this state to transact business under an assumed name. Provides that the requirements of this subchapter do not apply to an assumed name set forth in a certificate filed under Chapter 36 (Assumed Business or Professional Name), Business & Commerce Code. Sec. 5.052. UNAUTHORIZED PURPOSE IN NAME PROHIBITED. Prohibits a filing entity or foreign filing entity from having a name that contains any word or phrase that indicates that it is formed for a purpose it is not authorized by law to pursue. Sec. 5.053. IDENTICAL AND DECEPTIVELY SIMILAR NAMES PROHIBITED. Prohibits a filing entity or foreign filing entity from having a name that is the same as or deceptively similar to the name of another existing filing entity or foreign filing entity registered to transact business, or a name registered or reserved by a filing entity or foreign filing entity. Provides that a similar name may be used if consent is granted by an existing entity having a similar name. Sec. 5.054. NAME OF CORPORATION, FOREIGN CORPORATION, OR PROFESSIONAL CORPORATION. Provides that a word indicative of incorporated status or its abbreviation must be contained in the name of a for-profit corporation, foreign corporation, or professional corporation. Sec. 5.055. NAME OF LIMITED PARTNERSHIP OR FOREIGN LIMITED PARTNERSHIP. Provides that a word indicative of status as a limited partnership or its abbreviation must be contained in the name of a limited partnership or foreign limited partnership. Prohibits the name of a limited partnership from containing a word or phrase that indicates or implies that it is a corporation or the name of a limited partner. Provides that the name must comply with Title 4. Sec. 5.056. NAME OF LIMITED LIABILITY COMPANY OR FOREIGN LIMITED LIABILITY COMPANY. Provides that a phrase indicative of status as a limited liability company or its abbreviation must be contained in the name of a limited liability company, but does not require a limited liability company formed before September 1, 1993, to change its name to comply with this section. Sec. 5.057. NAME OF COOPERATIVE ASSOCIATION. Provides that the name of a cooperative association must contain the word cooperative or an abbreviation of the word. Sec. 5.058. NAME OF PROFESSIONAL ASSOCIATION. Provides that a word or phrase indicative of status as a professional association or its abbreviation must be contained in the name of a professional association. Sec. 5.059. NAME OF PROFESSIONAL LIMITED LIABILITY COMPANY. Provides that a word or phrase indicative of status as a professional limited liability company or its abbreviation must be contained in the name of a professional limited liability company. Sec. 5.060. NAME OF PROFESSIONAL ENTITY; CONFLICTS WITH OTHER LAW OR ETHICAL RULE. Provides that the name of a professional entity must be consistent with a law or rule of professional ethics governing a person providing the professional service through the entity. Sec. 5.061. NAME CONTAINING "LOTTO" OR "LOTTERY" PROHIBITED. Prohibits a filing entity or foreign filing entity from having a name that contains the word "lotto" or "lottery." Sec. 5.062. VETERANS ORGANIZATIONS; UNAUTHORIZED USE OF NAME. Prohibits a filing entity from having a name that could reasonably be understood to imply that the organization is created by or for the benefit of war veterans or their families and from containing any of the specified restricted words or abbreviations of such words unless written approval or permission for the use of the name is obtained from a congressionally recognized veterans organization having a name containing the same words or abbreviations. Provides that if no congressionally recognized organization exists, permission must be obtained from the state commander of the organization that is created by or for the benefit of war veterans or their families. SUBCHAPTER C. RESERVATION OF NAMES Sec. 5.101. APPLICATION FOR RESERVATION OF NAME. Authorizes a person to file an signed application and filing fee with the secretary of state to reserve the exclusive use of a name. Sec. 5.102. RESERVATION OF CERTAIN NAMES PROHIBITED; EXCEPTIONS. Prohibits the secretary of state from reserving an entity name that is the same as or deceptively similar to the name of an existing filing entity or registered foreign filing entity, or a name reserved or registered to a filing entity or foreign filing entity without the written consent of the person or entity having the similar name. Sec. 5.103. ACTION ON APPLICATION. Requires the secretary of state to reserve an eligible name for an applicant. Sec. 5.104. DURATION OF RESERVATION OF NAME. Requires the secretary of state to reserve the name for 121 days after the date of filing or until the date the applicant files a written notice of withdrawal with the secretary of state, whichever is earlier. Sec. 5.105. RENEWAL OF RESERVATION. Authorizes a person to renew a name reservation for successive 120-day periods if the person makes a new application and pays the required fee for reservation of the name within 30 days preceding the expiration of an effective reservation. Sec. 5.106. TRANSFER OF RESERVATION OF NAME. Authorizes a person to transfer a reserved name by filing a notice of transfer with the secretary of state. Provides that the notice must be signed by the person for whom the name is reserved and state the name and address of the person to whom the reservation is to be transferred. SUBCHAPTER D. REGISTRATION OF NAMES Sec. 5.151. APPLICATION BY CERTAIN ENTITIES FOR REGISTRATION OF NAME. Authorizes a bank, trust company, savings association, or insurance company, or a foreign filing entity not registered to do business under this code to register its name under this subchapter. Sec. 5.152. APPLICATION FOR REGISTRATION OF NAME. Provides that an organization must file an application to register a name stating that the organization validly exists and is doing business, briefly stating the organization's business, setting out the name of the organization, the name of the jurisdiction under whose laws the organization is formed, and the date the organization was formed, and pay any required filing fee. Sec. 5.153. CERTAIN REGISTRATIONS PROHIBITED; EXCEPTIONS. Prohibits the secretary of state from registering a name that is the same as or deceptively similar to the name of an existing filing entity or registered foreign filing entity, or a name reserved or registered to a filing entity or foreign filing entity without the written consent of the person or entity having the similar name. Provides an exception for a bank, trust company, savings association, or insurance company that has been in continuous existence from a date that precedes the date the conflicting name was filed with the secretary of state. Sec. 5.154. DURATION OF REGISTRATION OF NAME. Provides that the name registration is effective until one year after the application was accepted for filing or until the date the entity files a written notice of withdrawal with the secretary of state, whichever is earlier. Sec. 5.155. RENEWAL OF REGISTRATION. Authorizes a person to renew the person's registration of its name for successive one-year periods if a new application for registration of the name is made within 90 days of the expiration of an effective registration. SUBCHAPTER E. REGISTERED AGENTS AND REGISTERED OFFICES; SERVICE OF PROCESS Sec. 5.201. DESIGNATION AND MAINTENANCE OF REGISTERED AGENT AND REGISTERED OFFICE. Requires each filing entity and foreign filing entity to designate and maintain a registered agent and registered office address in this state. Defines a registered agent and sets forth the requirements of a registered agent and a registered office. Sec. 5.202. CHANGE BY ENTITY TO REGISTERED OFFICE OR REGISTERED AGENT. Authorizes an entity to change its registered office, registered agent, or both, by filing a statement with the secretary of state. Sets forth the information that must be provided in the statement. Provides that the statement is effective as an amendment to the appropriate provision of the filing entity's certificate of formation or the foreign filing entity's registration on acceptance of the statement. Sec. 5.203. CHANGE BY REGISTERED AGENT TO NAME OR ADDRESS OF REGISTERED OFFICE. Authorizes a registered agent of a filing entity or foreign filing entity to change its address or name, or both, by filing a statement with the secretary of state. Sets forth the information that must be provided in the statement. Provides that the statement is effective as an amendment to the appropriate provision of the filing entity's certificate of formation or the foreign filing entity's registration on acceptance of the statement. Authorizes a registered agent to file a statement that relates to more than one entity. Sec. 5.204. RESIGNATION OF REGISTERED AGENT. Authorizes a registered agent to resign by giving notice to the represented entity and the appropriate filing officer. Specifies where notice to the entity should be sent. Provides that notice to the filing officer must be given within 11 days of notice to the entity. Provides that the appointment of the registered agent terminates upon notice to the entity and filing officer and that termination is effective on the 31st day after the secretary of state receives the notice. Requires the filing officer to notify the entity of the registered agent's resignation and file the resignation. Sec. 5.205. FAILURE TO DESIGNATE REGISTERED AGENT. Provides that the secretary of state is an agent of a filing entity or foreign filing entity for purposes of effecting service of process, notice or demand on an entity under circumstances where the entity fails to appoint or maintain a registered agent in this state. Sec. 5.206. SERVICE ON SECRETARY OF STATE. Sets forth the procedure for effecting service on the secretary of state. Sec. 5.207. ACTION BY SECRETARY OF STATE. Requires the secretary of state, upon receipt of service of process in compliance with Sec. 5.206, to immediately send one of the copies of the process, notice, or demand to the named entity to the most recent address of the entity on file by certified mail, with return receipt requested. Sec. 5.208. REQUIRED RECORDS OF SECRETARY OF STATE. Requires the secretary of state to maintain a record of each process, notice, or demand served on the secretary under the provisions of the subchapter and record the time when each service on the secretary was made and each related subsequent action taken by the secretary. Sec. 5.209. AGENT FOR SERVICE OF PROCESS, NOTICE, OR DEMAND AS MATTER OF LAW. Sets forth persons within a domestic or foreign entity who are considered agents for the purpose of service of process, notice or demand as a matter of law. Sec. 5.210. OTHER MEANS OF SERVICE NOT PRECLUDED. Provides that this chapter does not preclude other means of service of process, notice, or demand on a domestic or foreign entity as provided by other law. CHAPTER 6. MEETINGS, NOTICES, RECORD DATES, VOTING, AND WRITTEN CONSENTS TO ACTION SUBCHAPTER A. MEETINGS Sec. 6.001. LOCATION OF MEETINGS. Authorizes the location of meetings of a domestic entity to be set by the entity's governing documents, the agreement of all persons entitled to notice of the meeting, or the person calling the meeting, and establishes the entity's registered or principal office as the default location. Sec. 6.002. ALTERNATIVE FORMS OF MEETINGS. Authorizes meetings to occur by conference telephone or other communications equipment if everyone participating can communicate with each other. Sec. 6.003. PARTICIPATION CONSTITUTES PRESENCE. Provides that anyone participating in a meeting is considered to be present unless that person is participating for the purpose of objecting to the meeting because it was not lawfully called or convened. Sec. 6.004. OWNERSHIP OR MEMBERSHIP MEETING LIST FOR CERTAIN ENTITIES. Makes this section applicable a domestic for-profit corporation, a domestic nonprofit corporation, and certain domestic limited liability companies and domestic limited partnerships. Requires an officer or agent of the entity who is in charge of the entity's ownership or membership records to prepare a list containing certain information about each owner or member entitled to vote not later than 11 days before each meeting. Provides that the original ownership or membership transfer records are prima facie evidence of the persons entitled to vote. Provides that failure to comply with this section does not affect the validity of any action taken at a meeting. SUBCHAPTER B. NOTICE OF MEETINGS Sec. 6.051. GENERAL NOTICE REQUIREMENTS. Provides that notice of a meeting must be determined by the governing authority of the entity and state the date, time and location of the meeting. Provides that, if mailed, notice is considered to be delivered when deposited in the United States mail, or if sent by fax or electronic message, when the transmission is successful. Sec. 6.052. WAIVER OF NOTICE. Provides that notice is not required if the person entitled to notice waives notice in writing or if the person participates in the meeting. Sec. 6.053. EXCEPTION. Provides an exception to the notice requirements if two consecutive notices or payments of distribution or interest on securities have been returned undeliverable or if the person is considered a lost security holder under 15 U.S.C. Section 78a et seq., as amended (Securities Exchange Act). Provides that an action taken or a meeting held without giving notice to a person not entitled to notice has the same force and effect as if notice had been given to the person. Authorizes a certificate or other document filed with the secretary of state as a result of a meeting held or action taken by a filing entity without giving notice of the meeting or action to a person not entitle to notice under this section to state that notice was given to each person entitled to notice. SUBCHAPTER C. RECORD DATES Sec. 6.101. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN CONSENT TO ACTION. Authorizes an entity's governing documents to fix the record date or provide a method by which the record date may be fixed to determine who is entitled to notice of a meeting, vote at a meeting, receive a distribution, and receive notice for any other purpose that requires consent. Prohibits the date from being earlier than the 60th day before the date the action requiring the determination of owners or members is taken. Authorizes the governing authority to provide for the closing of the ownership or membership transfer records for up to 60 days to determine the owners or members for this purpose. Provides that, if the owners or members are not otherwise determined under this section, the record date is the date on which notice of the meeting is mailed or the governing authority adopts the resolution declaring a distribution. Provides that the record date for determining a meeting applies to any adjournment of a meeting unless the determination has been made through the closing of the ownership or membership transfer records and the stated period of closing has expired. Sec. 6.102. RECORD DATE FOR WRITTEN CONSENT TO ACTION. Authorizes the governing authority to provide a record date for determining the owners or members entitled to written consent to action without a meeting unless a record date has already been provided for that action. Prohibits the record date from being earlier than the date the governing authority adopts the resolution providing for the record date. Provides that, if no record date has been fixed and no prior action of the governing authority is required, it will be the first date that the written consent identifying the action taken is delivered to the entity. Provides that if no record date has been fixed by the governing authority and prior action of the governing authority is required, the record date will be the date the governing authority adopts a resolution taking the prior action. Sec. 6.103. RECORD DATE FOR SUSPENDED DISTRIBUTIONS. Defines "distribution." Requires a distribution to be payable to the owner or member as of the record date determined for that distribution. Authorizes the right to a distribution to be transferred by contract, by operation of law, or under the laws of descent and distribution. SUBCHAPTER D. VOTING OF INTERESTS Sec. 6.151. MANNER OF VOTING OF INTERESTS. Provides that, subject to other provisions of this code, voting of interests is governed by an entity's governing documents. Sec. 6.152. VOTING OF INTERESTS OWNED BY ENTITY. Prohibits ownership interests owned by the issuer of the interests from being voted at any meeting and from being included in determining at any time the total number of outstanding interests. Provides that this section does not preclude a domestic or foreign entity from voting an ownership interest held or controlled by the entity in a fiduciary capacity or for which the entity otherwise exercises voting power in a fiduciary capacity. Sec. 6.153. VOTING OF INTERESTS OWNED BY ANOTHER ENTITY. Authorizes ownership interests in one entity owned by another entity to be voted by the person authorized in the owning entity's governing documents or governing authority if the governing documents do not provide for the manner of voting. Sec. 6.154. VOTING OF INTERESTS IN AN ESTATE OR TRUST. Authorizes an administrator, executor, guardian, or conservator of an estate who holds an ownership interest as part of the estate to vote the interest without transferring the interest into the person's name. Authorizes an ownership interests in the name of the trust to be voted by the trustee. Sec. 6.155. VOTING OF INTERESTS BY RECEIVER. Authorizes a receiver to vote an ownership interest standing in the name of the receiver and to vote an ownership interest held by or under the control of the receiver without transferring the interest into the receiver's name if authorized by the court order appointing the receiver. Sec. 6.156. VOTING OF PLEDGED INTERESTS. Authorizes a pledged ownership interest to be voted by the owner until the interest is transferred into the pledgee's name and the pledgee after the transfer. SUBCHAPTER E. ACTION BY WRITTEN CONSENT Sec. 6.201. UNANIMOUS WRITTEN CONSENT TO ACTION. Authorizes actions taken at any meeting of the owners or members of an entity, or the governing authority or committee thereof to be taken by unanimous written consent. Provides that a unanimous written consent has the same effect as a unanimous vote at a meeting and may be stated as having that effect in instruments filed with the secretary of state. Sec. 6.202. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT. Authorizes the owners or members of an entity to take action by written consent signed by the minimum number of owners or members that would be necessary to take that action at a meeting if authorized by the governing documents. Provides that all the signed written consents must be delivered to the entity within 60 days of the date that the first signature was obtained. Requires the entity to promptly notify each owner or member who does not sign a consent of the action taken. Sec. 6.203. DELIVERY OF LESS THAN UNANIMOUS WRITTEN CONSENT. Sets forth the manner of delivery and address of each written consent. Sec. 6.204. FILINGS WITH FILING OFFICER. Provides that a certificate or document filed with the secretary of state must state that the action was taken by written consent rather than a vote. Sec. 6.205. ADVANCE NOTICE NOT REQUIRED. Provides that advance notice is not required if action is taken by written consent. SUBCHAPTER F. VOTING TRUSTS AND VOTING AGREEMENTS Sec. 6.251. VOTING TRUSTS. Authorizes any number of owners to enter into a written voting trust agreement to confer on a trustee the right to vote or otherwise represent ownership or membership interests of the entity. Requires an ownership or membership interest that is the subject of such an agreement to be transferred to the named trustee. Requires a copy of the agreement to be deposited with the entity and provides that it is subject to examination by an owner or any holder of an interest in the voting trust. Sec. 6.252. VOTING AGREEMENTS. Authorizes any number of owners to enter into a written voting agreement to provide the manner of voting of the ownership interests of the entity. Provides that such an agreement is not part of the governing documents of the entity. Requires a copy of the agreement to be deposited with the entity and provides that it is subject to examination by any owner. Provides that the agreement is enforceable against the parties to the agreement and their successors if the ownership certificates subject to the agreement reference the agreement or if notice is sent to the subsequent holders. Provides that the agreement is enforceable against any person other than a transferee for value who acquires actual knowledge of the existence of the agreement. Provides that the agreement is not enforceable against a transferee for value who does not have actual knowledge of the agreement at the time of the transfer, or any subsequent transferee, without regard to value, if the voting agreement is not noted as required. Provides that Section 6.251 does not apply to a voting agreement entered into under this section. CHAPTER 7. LIABILITY Sec. 7.001. SEPARATE LEGAL ENTITY APART FROM OWNERS OR MEMBERS. Provides that a domestic entity is legally separate from its owners or members for all purposes. Sec. 7.002. LIMITATION OF LIABILITY FOR CONTRACTUAL OR RELATED OBLIGATION. Prohibits an owner, member, subscriber, or affiliate from being held liable to the domestic entity for any contractual obligation or relationship unless an actual fraud is being perpetrated for personal benefit or unless as otherwise provided by this chapter. Provides that this limitation on liability of an owner, member, subscriber or affiliate of a domestic entity is exclusive and preempts any liability under common law or otherwise. Sec. 7.003. IMMUNITY FROM LIABILITY FOR FAILURE TO OBSERVE FORMALITY. Limits the liability of an owner, member, subscriber, or affiliate of a domestic entity for its contractual or other obligations because the entity failed to observe a formality required by its governing documents or this code or in taking action thereunder. Sec. 7.004. LIMITATION OF LIABILITY OF MANAGERIAL OFFICIAL FOR DEBTS AND CONTRACTS. Limits the liability of a person for a domestic entity's debt or breach of contract, solely because the person is, or is considered to be, an owner, member, managerial official, or has been authorized to participate in its management, unless otherwise provided by this code. Sec. 7.005. LIABILITY OF OWNER, MEMBER, OR MANAGERIAL OFFICIAL FOR TORT. Limits the liability of a person for a domestic entity's tortious act or omission solely because the person is, or the entity considers the person to be, an owner, member, or managerial official of the entity, except as provided by this code. Sec. 7.006. IMPUTED LIABILITY OF OWNER, MEMBER, OR MANAGERIAL OFFICIAL. Provides that liability is not imputed to a person for a tortious act or omission by another owner, member, managerial official, or person for which the entity is liable solely because the person is, or is considered to be, an owner, member, managerial official, or has been authorized to participate in a domestic entity's management, except as provided by this code. Sec. 7.007. PLEDGEES AND TRUSTS. Prohibits a pledgee or other holder of an ownership or membership interest from being held personally liable as an owner or member of the interest. Prohibits an executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditor, or receiver from being held personally liable as an owner or subscriber of an ownership interest. Provides that the property being administered by such a person is subject to liability of an owner or subscriber of an ownership interest. Sec. 7.008. ASSERTION OF CLAIMS. Authorizes a person who is, or is considered to be, an owner, member, or managerial official of a domestic entity to assert a claim against the entity. Authorizes the entity to assert a claim against any such person. Sec. 7.009. EFFECT OF JUDGMENT OR ORDER AGAINST DOMESTIC ENTITY. Provides that a judgment or order by a court or other governmental entity against a domestic entity is not a judgment or order against a person who is, or is considered to be, an owner, member or managerial official of the entity, unless otherwise provided in the judgment or order. Sec. 7.010. CLAIM NOT ABATED BY CHANGE OF OWNERSHIP, MEMBERSHIP, OR MANAGEMENT. Provides that a claim for relief against a domestic entity does not abate solely because there has been a change in the entity's owners, members, managerial officials, or persons authorized to manage it. Sec. 7.011. EXCEPTIONS TO LIMITATIONS. Provides that a partner is a general partnership or registered limited liability partnership or a general partner in a limited partnership or registered limited liability partnership may be held liable for the obligations of the partnership; a limited partner may be held liable as a general partner of a limited partnership; an owner of or subscriber in a domestic entity shall pay to the domestic entity the full amount of consideration that the owner or subscriber agreed to pay for an ownership interest in the domestic entity; an owner may be required to make a capital contribution to a domestic entity as provided by this code and the governing documents of the domestic entity; and nothing in this chapter limits the liability of person who agrees to be personally liable or is otherwise liable. Sec. 7.012. LIMITATION OF LIABILITY OF GOVERNING PERSON: DOMESTIC ENTITY, CERTAIN OTHER ORGANIZATIONS, CERTAIN FEDERAL FINANCIAL INSTITUTIONS. Authorizes a domestic entity, other than a partnership, or any of certain other non-code organizations to adopt provisions in its governing documents that generally exonerate or further limit liability of a governing person for monetary damages to the entity, or its owners or members, for the governing person's acts or omissions in that capacity. Provides that this does not authorizes the entity to eliminate or limit such liability to the extent the person has breached a duty of loyalty, took action or omitted to act not in good faith in such a way that it breached some other duty owed to the entity or involved intentional misconduct or knowing violation of the law, has received an improper benefit, or is otherwise made liable by statute. Sec. 7.013. LIMITATION UNDER GOVERNING DOCUMENTS OF PARTNERSHIPS AND LIMITED LIABILITY COMPANIES. Authorizes a partnership or limited liability company to modify the duties, including fiduciary duties, of its managerial officials, owners or other persons in its governing documents. CHAPTER 8 . INDEMNIFICATION AND INSURANCE SUBCHAPTER A. GENERAL PROVISIONS Sec. 8.001. DEFINITIONS. Defines "delegate," "enterprise," "expenses," "former governing person," "official capacity," "predecessor enterprise," "proceeding," "representative," and "respondent." Sec. 8.002. APPLICATION OF CHAPTER. Provides that this chapter does not apply to general partnerships and limited liability companies. Authorizes the governing documents of these enterprises to adopt provisions of this chapter or to contain enforceable provisions relating to indemnification, advancement of expenses, or insurance or other arrangements to indemnify or hold harmless a governing person. SUBCHAPTER B. MANDATORY AND COURT-ORDERED INDEMNIFICATION Sec. 8.051. MANDATORY INDEMNIFICATION. Requires an enterprise to indemnify an existing or former governing person for expenses incurred in a proceeding in which the person is a respondent because of that status if the person is wholly successful in defense of the proceeding. Requires the court to order indemnification, if a governing person is entitled to indemnification, and award to the person the expenses incurred in securing the indemnification. Sec. 8.052. COURT-ORDERED INDEMNIFICATION. Authorizes a court to order indemnification of an existing or former governing person or delegate, on that person's application, if the court determines that the person is fairly and reasonably entitled to indemnification, whether or not the person satisfies the requirements of Section 8.101, but is limited to reasonable expenses if the person is found liable to the enterprise or because the person improperly received a personal benefit. SUBCHAPTER C. PERMISSIVE INDEMNIFICATION AND ADVANCEMENT OF EXPENSES Sec. 8.101. PERMISSIVE INDEMNIFICATION. (a) Authorizes an enterprise to indemnify an existing or former governing person or delegate who was, is, or is threatened to be made a respondent in a proceeding under Section 8.102 if it is determined that the person acted in good faith and reasonably believed that the person's conduct in official capacity was in the enterprise's best interests or, in any other case, was not opposed to the enterprise's best interests and did not have, in the case of a criminal proceeding, reasonable cause to believe that the conduct was unlawful; that the expenses are reasonable; and that the indemnification should be paid. (b) Provides that an action taken or omitted by a governing person or delegate with respect to an employee benefit plan in performing the person's duty for an enterprise reasonably believed by the person to be in the interest of the participants and beneficiaries of the plan is not opposed to the best interests of the enterprise. (c) Provides that action taken or omitted by a delegate to another enterprise for a purpose reasonably believed by the delegate to be in the interest of the other enterprise or its owner is not opposed to the interests of the first enterprise. (d) Provides that a person does not fail to meet these standards solely because of the termination of a proceeding by judgment, order, settlement, conviction or nolo contendere plea. Sec. 8.102. GENERAL SCOPE OF PERMISSIVE INDEMNIFICATION. (a) Authorizes an enterprise to indemnify an existing or former governing person or delegate against a judgment, penalty, settlement, fine, or excise tax against the person regarding an employee benefit plan and reasonable expenses actually incurred in the proceeding. (b) Limits indemnification of a person who is found liable to the enterprise or is found liable because of improperly receiving a personal benefit to reasonable expenses and bars indemnification if the person is found liable for wilful or intentional misconduct in performance of duty to the enterprise, breach of duty of loyalty to the enterprise or any act or omission not in good faith that constituted breach of duty to the enterprise. (c) Provides that a person is considered to have been found liable only if the liability is established by an order and all appeals of the order are exhausted or foreclosed by law. (d) Prohibits indemnification or advancement of expenses that conflicts with a restriction in the enterprise's governing documents. Sec. 8.103. MANNER FOR DETERMINING PERMISSIVE INDEMNIFICATION. Sets forth the manner in which a determination under Section 8.101(a) must be made. Requires special legal counsel, if the special legal counsel determines that a person meets the standard under Section 8.101(a), to determine whether the amount of expenses is reasonable, but provides that the council may not determine whether indemnification should be paid. Provides that a provision contained in the governing documents of the enterprise, a resolution of the owners, members, or board of directors, or an agreement that requires indemnification of a person who meets the basic standard of Section 8.101(a)(1) constitutes a determination under Section 8.101(a)(3) that indemnification should be paid even though the provision may not have been adopted in the same way as the determinations required under Section 8.101(a). Sec. 8.104. ADVANCEMENT OF EXPENSES. Authorizes an enterprise to advance or reimburse reasonable expenses of an existing or former governing person or delegate who is or is threatened to be made a respondent in a proceeding, subject to certain provisions and restrictions. Sec. 8.105. PERMISSIVE INDEMNIFICATION OF AND ADVANCEMENT OF EXPENSES TO PERSONS OTHER THAN GOVERNING PERSONS. (a) Authorizes an enterprise to indemnify and advance expenses to a person who is not a governing person, including an officer, employee, agent or delegate, as provided by the governing documents, general or specific action of the governing persons, resolution of the owners or members, contract or common law, notwithstanding any other provision of this chapter. Requires an enterprise to indemnify and advance expenses to an officer to the same extent it is required to indemnify and advance expenses to a governing person. Authorizes a person who is not a governing person to seek indemnification or advancement of expenses to the same extent as a governing person. Sec. 8.106. PERMISSIVE INDEMNIFICATION OF AND REIMBURSEMENT OF EXPENSES TO WITNESSES. Authorizes an enterprise to pay or reimburse reasonable expenses incurred by a governing person, officer, employee, agent, delegate, or other person in connection with that person's appearance as a witness or other participation in a proceeding at a time when the person is not a respondent in the proceeding. SUBCHAPTER D. LIABILITY INSURANCE; REPORTING REQUIREMENTS Sec. 8.151. INSURANCE AND OTHER ARRANGEMENTS. (a) Authorizes an enterprise to obtain and maintain insurance or another arrangement to indemnify or hold harmless an existing or former governing person, delegate, officer, employee or agent against any liability asserted against and incurred by the person in that capacity or arising out of the person's status in that capacity. (b) Authorizes the insurance or other arrangement to insure against such liability, whether or not the enterprise otherwise would have power to indemnify against that liability. (c) Authorizes insurance or another arrangement that involves self-insurance or an agreement to indemnify with the enterprise or with a person not regularly engaged in the insurance business to provide for payment of a liability outside the enterprise's power to indemnify only with the approval of the owners or members of the enterprise. (d) Authorizes an enterprise, in addition to obtaining insurance or other arrangement, to create a trust fund, self-insure, contract to indemnify, grant security, or establish a letter of credit, guaranty or surety arrangement for the benefit of a person to be indemnified. (e) Authorizes insurance or other arrangement to be obtained and maintained within the enterprise or with any insurer or with any other person considered appropriate by the governing authority, regardless of whether the enterprise owns an interest in the insurer or other person. (f) Makes conclusive the governing authority's decision as to insurance or other arrangement and protects governing persons from liability for approving it even though they may be beneficiaries of it. Sec. 8.152. REPORTS OF INDEMNIFICATION AND ADVANCES. Requires that an enterprise submit a written report any indemnification or advance paid to its governing persons before the notice or waiver of notice of the next meeting, but not later than one year after the date of the indemnification or advance. CHAPTER 9. FOREIGN ENTITIES SUBCHAPTER A. REGISTRATION Sec. 9.001. FOREIGN ENTITIES REQUIRED TO REGISTER. Provides that a foreign entity that would be required to file a certificate of formation if it were formed in this state, or that affords limited liability to owners or members under the law of its jurisdiction of formation, to file an application for and maintain registration with the secretary of state to transact business in Texas. Sec. 9.002. FOREIGN ENTITIES NOT REQUIRED TO REGISTER. Provides that a foreign entity not described by Section 9.001 may transact business in this state without registration with the secretary of state, but does not relieve the foreign entity from the duty to comply with applicable registration requirements under other law. Provides that foreign entities authorized to transact business in this state by other state law are not required to register under this chapter. Provides that a foreign unincorporated nonprofit association is not required to register under this chapter. Sec. 9.003. PERMISSIVE REGISTRATION. Authorizes a foreign entity that is eligible under other law of this state to register to transact business in this state to register under this chapter unless prohibited by the other law. Provides that registration under this chapter confers only the authority provided by this chapter. Sec. 9.004. REGISTRATION PROCEDURE. Provides that a foreign filing entity registers by filing an application for registration as provided by Chapter 4. Sets forth the requirements for the registration application. Authorizes a foreign filing entity to register regardless of any differences between the law of the entity's jurisdiction of formation and those of this state applicable to the governing of the internal affairs or to the liability of an owner, member, or managerial official. Sec. 9.005. EFFECT OF REGISTRATION. Provides that the registration takes effect when the application is filed and remains in effect until terminated, withdrawn or revoked. Provides that the acknowledgment issued by the secretary of state is evidence of the authority of the foreign entity to transact business in this state, except in a proceeding to revoke the registration. Sec. 9.006. AMENDMENTS TO REGISTRATION. Provides that a foreign filing entity must amend its registration if its name or purpose has changed. Authorizes a foreign entity to amend its original application by filing an amendment of registration. Provides that an amendment to reflect the change of name or purpose must be filed within 90 days following the change. Sec. 9.007. VOLUNTARY WITHDRAWAL OF REGISTRATION. (a) Authorizes a foreign filing entity to withdraw its registration at any time by filing a certificate of withdrawal. (b) Sets forth the information which must be included on a withdrawal certificate. (c) Provides that if the foreign filing entity is a foreign professional corporation, foreign for-profit corporation, or foreign limited liability company it must file a certificate from the comptroller that all franchise taxes have been paid. (d) Requires a certificate that evidences the termination to be filed with the secretary of state if the existence or separate existence of a foreign filing entity registered in this state terminates. (e) Provides that the registration of the foreign filing entity terminates when a certificate of withdrawal is filed. (f) Provides that, if the address stated in a certificate of withdrawal changes, the foreign filing entity must promptly amend the certificate of withdrawal. (g) Provides that a certificate of withdrawal does not terminate the authority of the secretary of state to accept service of process on the foreign filing entity with respect to causes of action arising out of the transaction of business in this state. Sec. 9.008. REVOCATION OF REGISTRATION BY COURT ACTION. Authorizes the attorney general to apply to a court to revoke the registration of foreign entities under specified circumstances. Provides that only a Travis County district court or a district court of the county in which a foreign filing entity's registered office is located has jurisdiction of such a suit. Provides that venue is in either court. Requires the clerk of the court to file a certified copy of the order of revocation with the secretary of state who is required to file a certificate of revocation and deliver it to the foreign filing entity. Provides that the certificate of revocation must state the cause of the revocation. Provides that the revocation takes effect on the date the court issues the order of revocation. Sec. 9.009. REVOCATION OF REGISTRATION BY STATE ACTION. Authorizes the secretary of state to revoke the registration of a foreign entity under specified circumstances after notice and an opportunity to correct the entity's failure. Requires the secretary of state to file a certificate of revocation and deliver it to the foreign entity. Sets forth the information the certificate of revocation must contain. Provides that the revocation takes effect on the date the certificate is filed. Sec. 9.010. REINSTATEMENT. Requires the secretary of state to reinstate the registration of an entity that has been revoked when the entity has corrected the circumstances that led to the revocation or when the secretary of state determines that the circumstances did not exist at the time of revocation. Provides that the registration of an entity that is reinstated within three years of revocation is considered to have been registered at all times during the period of revocation. Sec. 9.011. NAME CHANGE OF FOREIGN ENTITY. Provides that the registration of a foreign entity must be suspended if it has changed its name to a name that would not be available for its use in Texas. Provides that the registration is suspended until the entity files an amendment to its registration to change its name to a name that is available to it under the laws of this state. Sec. 9.012. TRANSACTING BUSINESS OR MAINTAINING COURT PROCEEDING WITHOUT REGISTRATION. Authorizes a court on application of the attorney general to enjoin a foreign entity from transacting business in this state if the entity is not registered or the entity's registration is obtained under false pretenses. Prohibits a foreign entity from maintaining legal action in this state that arises out of the transaction of business in this state unless the entity is registered as required. Specifies that the validity of any contract or act of the entity is not affected by the failure to register and that the entity is not prevented from defending a legal action in this state. Specifies that an owner, member, or managerial official of the entity is not liable by contract or under other provisions of law for failure of the entity to register. Sec. 9.013. CIVIL PENALTY. Imposes civil penalties on a foreign filing entity for failure to register, including all fees and taxes that would have been imposed by law on the entity had the entity registered when first required and any applicable penalties and interest for failure to pay those fees and taxes. Authorizes the attorney general to bring suit to recover amounts due under this section. Sec. 9.014. VENUE. Authorizes a suit under Section 9.012 or 9.013 to be brought in Travis County in addition to any other venue authorized by law. Sec. 9.015. LATE FILING FEE. Authorizes the secretary of state to collect a late filing fee equal to the registration fee for the entity for each year of delinquency if an entity has transacted business in this state for more than 90 days without a certificate of authority. Authorizes the secretary to condition the effectiveness of a registration on the payment of the late filing fee. Sec. 9.016. REQUIREMENTS OF OTHER LAW. Provides that this chapter does not excuse a foreign entity from complying with requirements under other laws. Sec. 9.017. INVOLUNTARY REVOCATION OF REGISTRATION BY STATE ACTION; NOTIFICATION OF ATTORNEY GENERAL. Requires the secretary of state to simultaneously notify the attorney general and a foreign filing entity if the secretary of state determines that cause exists for the judicial revocation of the foreign filing entity's registration. Requires the secretary of state to maintain a record of the date notice is mailed. Requires a court to accept a certificate stating the grounds for judicial revocation and the mailing of the notice for revocation as prima facie evidence of such. Sec. 9.018. ACTION TO REVOKE REGISTRATION. Requires the attorney general to file an action against a foreign filing entity in the name of the state to revoke the registration of a foreign filing entity if the entity does not cure the problems for which revocation was sought within 30 days of the notification under Section 9.017 and the attorney general determines that cause exists for revocation. Requires such an action to be abated if the filing entity cures the problems before judgment is rendered and pays the costs of the action. Sec. 9.019. APPLICATION FOR STAY OF JUDGMENT. Authorizes a foreign filing entity to make an application for stay of judgment to allow the entity the opportunity to cure the problems when the entity obtains a finding that the problems for which the entity was found guilty were not wilful or the result of a failure to take reasonable precautions. Requires the court to stay an entry of judgment for no longer than 60 days after the date the court's findings are made pursuant to Section 9.018, to dismiss the action if the problems are cured and the costs of the action paid, and to enter a final judgment if the problems are not cured within the time prescribed. Sec. 9.020. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF FINDINGS BY APPEALS COURT. Requires an appellate court that affirms a trial court's findings against a foreign filing entity under this section to remand the case to the trial court to grant the entity an opportunity to cure after affirmation of findings by an appellate court if the foreign filing entity did not make an application for stay of the entry of the judgement, the appellate court is satisfied that the appeal was taken in good faith, the appellate court finds that the problems are capable of being cured, and the foreign entity has prayed for the opportunity to cure its problems in the appeal. Requires the appellate court to determine the length of time, not to exceed 60 days, to be given to the foreign entity to cure its problems. Requires the trial court to dismiss the action if the foreign entity cures its problems and pays all court costs. Requires the revocation to become final if the foreign entity does not cure its problems within the prescribed period. Sec. 9.021. VENUE. Requires the attorney general to bring an action for the involuntary revocation of the registration of a foreign filing entity in a district court of the county in which the filing entity is located or a district court of Travis County. Sec. 9.022. PROCESS IN STATE ACTION. Requires citation in an action for the involuntary revocation of the registration of a foreign filing entity to be issued and served as provided by law. Sec. 9.023. PUBLICATION OF NOTICE. Requires citation by publication when service is returned not found and sets forth procedures for such service. Sec. 9.024. FILING OF DECREE OF REVOCATION AGAINST FOREIGN FILING ENTITY. Requires the clerk of a court to file a certified copy of a judicial decree with the secretary of state when a court has entered a decree revoking a foreign entity's registration to transact business. Prohibits a fee from being charged for such a filing. SUBCHAPTER B. BUSINESS, RIGHTS, AND OBLIGATIONS Sec. 9.051. BUSINESS OF FOREIGN ENTITY. Prohibits a foreign entity from conducting in this state a business or activity that is not permitted to be transacted by a corresponding domestic entity, unless authorized by other law of this state. Sec. 9.052. RIGHTS AND PRIVILEGES. Provides that a foreign entity enjoys the same, but no greater, rights and privileges than a corresponding domestic entity. Sec. 9.053. OBLIGATIONS AND LIABILITIES. Provides that the owners, members, and managerial officials of a foreign entity are subject to the same duties, restrictions, penalties and liabilities imposed on those persons of a corresponding domestic entity. Sec. 9.054. RIGHT OF FOREIGN FILING ENTITY TO PARTICIPATE IN THE BUSINESS OF CERTAIN DOMESTIC ENTITIES. Provides that a foreign filing entity can exercise its ownership or membership rights in a domestic entity even though not registered to transact business in this state. SUBCHAPTER C. DETERMINATION OF TRANSACTING BUSINESS IN THIS STATE Sec. 9.101. ACTIVITIES NOT CONSTITUTING TRANSACTING BUSINESS IN THIS STATE. Lists those activities that do not constitute transaction of business in this state. Sec. 9.102. OTHER ACTIVITIES. Provides that the list provided in Section 9.101 is not exclusive. SUBCHAPTER E. MISCELLANEOUS PROVISIONS Sec. 9.201. APPLICABILITY OF THIS CODE TO CERTAIN FOREIGN ENTITIES. Makes the provisions regarding foreign registration, including filing procedures, applicable to entities granted authority to transact business under a special statute if the statute specifically provides or to supplement any special statute to the extent not inconsistent with the provisions of the statute. CHAPTER 10. MERGERS, INTEREST EXCHANGES, AND CONVERSIONS Sec. 10.001. ADOPTION OF PLAN OF MERGER. (a) Authorizes a domestic entity to effect a merger and provides that it must be set forth in a plan of merger. (b) Provides that, to effect a merger, the governing authority of each domestic entity that is a party to the merger must act on the plan of merger in the manner prescribed by this code. (c) Provides that, if one or more non-code organizations is a party to the merger or is to be created by the merger, each non-code organization must take all required action and the merger must be permitted by the law of the state or country under whose law each non-code organization is incorporated or organized, or each non-code organization's governing documents. Provides that each non-code organization must comply with the applicable laws under which it is incorporated or organized and its governing documents. (d) Prohibits an organization from merging if an owner or member of that entity will become personally liable, without that person's consent, for a liability or other obligation of any other person as a result of the merger. Sec. 10.002. PLAN OF MERGER: REQUIRED PROVISIONS. Sets forth the information that a plan of merger must include. Sec. 10.003. CONTENTS OF PLAN OF MERGER: MORE THAN ONE SUCCESSOR. Sets forth the information that a plan of merger must include if more than one organization is to survive or be created by the plan of the merger. Sec. 10.004. PLAN OF MERGER: PERMISSIVE PROVISIONS. Sets forth the information that a plan of merger may include. Sec. 10.005. CREATION OF HOLDING COMPANY BY MERGER. Defines "direct or indirect wholly owned subsidiary" and "holding company" in this section. Authorizes a domestic entity to restructure the ownership structure to create a holding company structure without the approval of the owners or members in specified cases. Provides that the governing documents of the surviving entity must require that an act or transaction by or involving the surviving entity that requires the approval of the owners or members must also require the approval of the owners or members of the holding company by the same vote. Authorizes the governing documents of the surviving entity to change the classes and series of ownership or membership interests and the number of interests that the surviving entity is authorized to issue. Provides that provisions contained in Section 21.606 continue to apply to the holding company. Provides that an owner or member of a domestic entity involved in a merger does not solely by reason of the merger become an owner or member of the holding company. Provides that the ownership or membership interests of the holding company are represented by the certificates if the name of the holding company is the same as the name of the domestic entity. Sec. 10.006. SHORT FORM MERGER. Authorizes and sets forth the requirements for effecting a "short-form" merger where one entity owns more than 90% of the voting ownership interest in another entity. Sec. 10.007. EFFECTIVENESS OF MERGER. Provides that a merger takes effect at the time provided by the plan of merger or otherwise agreed to by the parties, except that a merger that requires a filing under Subchapter D takes effect on the acceptance of the filing of the certificate of merger by the secretary of state or county clerk. Sec.10.008. EFFECT OF MERGER. (a) Provides that when a merger takes effect the separate existence of each domestic entity ceases; all rights, title, and interests to all real estate and other property owned by each organization is allocated to and vested in one or more of the surviving or new organizations; all liabilities and obligations of each organization are allocated to one or more surviving or new organizations, which become the primary obligors; any pending proceeding against any organization may be continued as if the merger did not occur or an organization to which the liability, obligation, asset, or right is allocated to and vested in may be substituted in the proceeding; the governing documents of each surviving domestic entity are amended to the extent provided by the plan of the merger; each new entity whose certificate of formation is included in the plan of merger is formed as a domestic entity; ownership and membership interests that are to be converted or exchanged are converted or exchanged; and the surviving or new organization named as primarily obligated to pay the fair value of an ownership or membership interest is the primary obligor for that payment. (b) Provides that, if the plan of merger does not provide for af any property, liability, or obligation, unallocated property is owned in undivided interest by, or the liability or obligation is the joint and several liability and obligation of, each of the surviving and new organizations, pro rata to the total number of surviving and new organizations. (c) Provides that, if a surviving organization in a merger is not a domestic entity, the surviving organization is considered to have appointed the secretary of state in this state as its service of process in an enforcement proceeding and to have agreed to promptly pay to the dissenting owners or members of each domestic entity that is a party to the merger the amount to which they are entitled. (d) Requires a surviving organization that is not a domestic entity to register to transact business in this state if the entity is required to register for that purpose by another provision of this code. Sec. 10.009. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP MERGERS. (a) Provides that a partner of a domestic partnership that is a party to a merger does not become liable as a result of the merger for the liability or obligation of another person party to the merger unless the partner consents. (b) Provides that a partner of a domestic partnership that is a party to a merger who remains in or enters a partnership is treated as an incoming partner when the merger takes effect for purposes of determining liability. (c) Authorizes a former partner, if a partnership merges with an organization, who becomes an owner or member of the surviving organization to bind the surviving organization to a transaction as before the merger in certain circumstances. (d) Provides that, if a partnership is formed under a merger, the existence of the partnership takes effect with the merger. (e) Requires a partner in a domestic partnership that is a party to a merger but does not survive to be treated as a partner who withdrew from the nonsurviving domestic partnership as of the effective date of the merger. Sec. 10.010. SPECIAL PROVISIONS APPLYING TO NONPROFIT ENTITY MERGERS. Prohibits a domestic nonprofit entity from merging into another entity if the domestic nonprofit entity would lose or impair its charitable status. Authorizes one or more domestic for-profit entities or non-code organization to merge into one or more domestic nonprofit entities that continue as the surviving entity or entities. Prohibits a domestic nonprofit entity from merging into a foreign for-profit entity if the domestic entity does not continue as the surviving entity. Authorizes one or more domestic nonprofit entities and non-code organization to merge into one or more foreign nonprofit entities that continue as the surviving entity or entities. SUBCHAPTER B. EXCHANGES OF INTERESTS Sec. 10.051. INTEREST EXCHANGES. Authorizes one or more domestic entities or noncode organizations to adopt a plan of exchange for the purpose of acquiring all of the outstanding ownership or membership interests of one or more classes or series of one or more domestic entities. Provides that to make an interest exchange the governing authority of each domestic entity involved must act on a plan of exchange and, if required, the owners and members must approve the plan, and each acquiring domestic entity must take all required action. Provides that a non-code organization must take all required action to acquire ownership or member ship interests. Provides that, if one or more non-code organizations issues ownership or membership interests, the issuance must be permitted by the laws under which they are incorporated. Prohibits a plan of exchange from being effected if any owner or member of an entity that is a party to the exchange becomes personally liable without the person's consent for the liabilities or obligation of any other person. Sec. 10.052. PLAN OF EXCHANGE: REQUIRED PROVISIONS. Sets forth the information a plan of exchange must include. Sec. 10.053. PLAN OF EXCHANGE: PERMISSIVE PROVISIONS. Authorizes a plan of exchange to include any other provisions not required by Section 10.052 relating to the interest exchange. Sec. 10.054. EFFECTIVENESS OF EXCHANGE. Provides that an interest exchange takes effect at the time provided in the plan of exchange or otherwise agreed to by the parties, except that an interest exchange that requires a filing under Subchapter D takes effect on the acceptance of the filing of the certificate of exchange by the secretary of state or county clerk. Sec. 10.055. GENERAL EFFECT OF INTEREST EXCHANGE. Provides that when an interest exchange takes effect the ownership or membership interest of each acquired organization is exchanged as provided in the plan of exchange, and the former owners are entitled to only the rights provided in the certificate of exchange or, if applicable, a right to receive the fair value for the ownership or membership interests provided under Subchapter H. Provides that the acquiring organization has all rights, title, and interests with respect to the ownership or membership interest to be acquired by it, subject to the provisions of the certificate of exchange. SUBCHAPTER C. CONVERSIONS Sec. 10.101. CONVERSION OF DOMESTIC ENTITIES. Authorizes a domestic entity to convert into a different type of domestic entity or a non-code organization by adopting a plan of conversion. Sets forth the procedures and requirements for a conversion. Sec. 10.102. CONVERSION OF NON-CODE ORGANIZATION. Authorizes a non-code organization to convert into a domestic entity by adopting a plan of conversion. Sets forth the procedures and requirements for a conversion. Sec. 10.103. PLAN OF CONVERSION: REQUIRED PROVISIONS. Sets forth the information a plan of conversion must include. Sec. 10.104. PLAN OF CONVERSION: PERMISSIVE PROVISIONS. Authorizes a plan of conversion to include other provisions relating to the conversion that are not inconsistent with law. Sec. 10.105. EFFECTIVENESS OF CONVERSION. Provides that a conversion takes effect at the time provided in the plan of conversion or otherwise agreed to by the parties, except that a conversion that requires a filing under Subchapter D takes effect on the acceptance of the filing of the certificate of conversion by the secretary of state or county clerk. Sec. 10.106. GENERAL EFFECT OF CONVERSION. Provides that when a conversion takes effect the converting entity continues to exist without interruption in the organizational form of the converted entity; all rights, title, and interests to all property owned by the converting entity continue to be owned by the converted entity; all liabilities and obligations of the converting entity continues to be liabilities and obligations of the converted entity; rights of creditors to or against the previous owners may be enforced as if a conversion had not occurred; proceedings pending by or against the entity or its owners may be continued by or against the converted entity; ownership or membership interests to be converted are converted; an owner's or member's liabilities and obligations take effect to the extent that the person agrees, was liable before the conversion, or becomes liable under the conversion; and the converted entity, if it is a non-code organization, is considered to have appointed the secretary of state in this state as its agent for service of process in an enforcement proceeding and agreed to pay the dissenting owners or members the amount to which they are entitled. Sec. 10.107. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP CONVERSIONS. Provides that if a partnership is formed under a plan of conversion, the existence of the partnership as a partnership begins and the designated owners or members become partners when the conversion takes effect. SUBCHAPTER D. CERTIFICATE OF MERGER, EXCHANGE, OR CONVERSION Sec. 10.151. CERTIFICATE OF MERGER AND EXCHANGE. Sets forth the requirements for a certificate of merger or exchange to become effective. Sets forth the information a certificate of merger or exchange must include. Authorizes a certificate of merger to constitute a certificate of exchange if it contains the information required for a certificate of exchange. Sec. 10.152. CERTIFICATE OF MERGER: SHORT FORM MERGER. Provides that a certificate of merger under Section 10.006 is required to be signed only by an officer or other authorized representative of the parent organization. Sets forth the information which must be included in the certificate. Sec. 10.153. FILING OF CERTIFICATE OF MERGER OR EXCHANGE. Provides that, if a certificate of merger or exchange must be filed, it and the certificate of formation of each filing entity formed under the merger must filed with the secretary of state in accordance with Chapter 4. Provides that, if a domestic real estate investment trust is a party to the merger or if an ownership interest in such a trust is to be acquired, the certificate of merger or exchange must be filed with the county clerk of the county in which the trust's principal place of business in this state is located in accordance with Chapter 4. Provides that if a domestic real estate investment trust is created under the merger, the certificate of formation of the trust must also be filed with the county clerk in accordance with Chapter 4. Sec. 10.154. CERTIFICATE OF CONVERSION. Provides that a certificate of conversion must filed after approval of a plan of conversion to become effective if any domestic entity that is a party to the conversion or is created by the conversion is a filing entity. Provides that a certificate must be signed and include the plan of conversion certifying certain information and a statement that the plan of conversion has been approved. Sec. 10.155. FILING OF CERTIFICATE OF CONVERSION. Provides that, if a certificate of conversion must be filed, it and the certificate of formation of each filing entity formed under the conversion must filed with the secretary of state in accordance with Chapter 4. Provides that, if the converting entity is a domestic real estate investment trust, the certificate of conversion must be filed with the county clerk of the county in which the trust's principal place of business in this state is located in accordance with Chapter 4. Provides that if a domestic real estate investment trust is created under the conversion, the certificate of formation of the trust must also be filed with the county clerk in accordance with Chapter 4. Sec. 10.156. ACCEPTANCE OF CERTIFICATE FOR FILING. Prohibits the filing officer from accepting a certificate of merger, exchange, or conversion for filing if it does not conform to law or if the required franchise taxes have not been paid. SUBCHAPTER E. ABANDONMENT OF MERGER, EXCHANGE, OR CONVERSION Sec. 10.201. ABANDONMENT OF PLAN OF MERGER, EXCHANGE, OR CONVERSION. Authorizes a plan of merger, interest exchange, or conversion to be abandoned after its approval before it takes effect without action by the owners or members. Sec. 10.202. ABANDONMENT AFTER FILING. Authorizes a merger, interest exchange, or conversion to be abandoned after the certificate has been filed. Provides that a certificate is not required if no filing is required to make the merger, exchange, or conversion effective. Sec. 10.203. ABANDONMENT IF NO FILING REQUIRED. Provides that a merger, interest exchange, or conversion is abandoned when and on the terms provided by the plan of merger or governing authority if no filing is required. SUBCHAPTER F. PROPERTY TRANSFERS AND DISPOSITIONS Sec. 10.251. GENERAL POWER OF DOMESTIC ENTITY TO SELL, LEASE, OR CONVEY PROPERTY. Authorizes a domestic entity to transfer and convey an interest in its property with or without the goodwill of the entity, on any terms and conditions and for any consideration, and be evidenced by a deed, assignment, or other instrument with or without the seal of the entity. Authorizes a domestic entity to grant a pledge, mortgage, deed of trust, or trust indenture with respect to an interest in property of the entity with or without the seal of the entity. Sec. 10.252. NO APPROVAL REQUIRED FOR CERTAIN DISPOSITIONS OF PROPERTY. Provides that a sale, lease, assignment, conveyance, pledge, mortgage, deed of trust, trust indenture, or other transfer of an interest in real property or other property made by a domestic entity does not require the approval of the governing authority, members, or owners of the entity, except as otherwise provided in this code or in the governing documents of the domestic entity, or specific limitations established by the governing authority. Sec. 10.253. RECORDING INSTRUMENT CONVEYING REAL PROPERTY OF DOMESTIC ENTITY. Authorizes a deed or other instrument executed by a domestic entity that conveys an interest in real property to be recorded in the same manner and with the same effect as similar instruments if it is signed and acknowledged by an authorized person. Provides that such document constitutes prima facie evidence that the sale or conveyance was authorized under this code and the governing documents of the entity. Sec. 10.254. DISPOSITION OF PROPERTY NOT A MERGER OR CONVERSION; LIABILITY. Provides that a disposition of the property of a domestic entity is not a merger or conversion for any purpose. Prohibits a person acquiring such property from being held responsible or liable for a liability of the transferring domestic entity that is not expressly assumed by the person. SUBCHAPTER G. BANKRUPTCY REORGANIZATION Sec. 10.301. REORGANIZATION UNDER BANKRUPTCY AND SIMILAR LAWS. Sets forth the actions a designated individual acting on behalf of a domestic entity that is being reorganized under a federal statute is authorized to take to carry out the plan of reorganization, without action by or notice to the domestic entity's governing authority, owners, or members. Provides that such actions take effect on entry of the order approving the plan of reorganization or on a specified date, without further action of the domestic entity. Sec. 10.302. SIGNING OF DOCUMENTS. Authorizes a designated individual acting on behalf of a domestic entity that is being reorganized under a federal statute to sign a certificate of amendment or restated certificate of formation, a certificate of merger or exchange, a certificate of termination, a statement of change of registered office or registered agent or both, or a certificate of conversion, each of which must contain certain information. Sec. 10.303. REORGANIZATION WITH OTHER ENTITIES. Sets forth the applicable laws, procedures, and information required in a certificate of merger or exchange if a domestic entity or non-code organization that is not being reorganized under federal statute merges or exchanges an interest with a domestic entity that is being reorganized under a federal statute. Sec. 10.304. RIGHT OF DISSENT AND APPRAISAL EXCLUDED. Provides that an owner or member of a domestic entity being reorganized under a federal statute does not have a right to dissent and appraisal under this code except as provided by the plan of reorganization. Sec. 10.305. AFTER FINAL DECREE. Provides that this subchapter does not apply after the entry of a final decree in a reorganization case. Sec. 10.306. CHAPTER CUMULATIVE OF OTHER CHANGES. Provides that this chapter does not preclude other changes in a domestic entity or its ownership or membership interests or securities by a plan of reorganization ordered by a court under a federal statute. SUBCHAPTER H. RIGHTS OF DISSENTING OWNERS Sec. 10.351. APPLICABILITY OF SUBCHAPTER. Provides that this subchapter does not apply to a fundamental business transaction of a domestic entity if, immediately before the effective date of the transaction, all of the ownership interests of the entity otherwise entitled to rights to dissent and appraisal under this code are held by one owner or only by the owners who approved the transaction. Provides that this subchapter applies only to a domestic entity subject to dissenters' rights. Sec. 10.352. DEFINITIONS. Defines "dissenting owner" and "responsible organization" in this subchapter. Sec. 10.353. FORM AND VALIDITY OF NOTICE. Provides that notice under this subchapter must be in writing and be mailed, hand delivered, or delivered by courier or electronic transmission. Provides that failure to provide notice as required by this subchapter does not invalidate any action taken. Sec. 10.354. RIGHTS OF DISSENT AND APPRAISAL. Entitles an owner of an ownership interest in a domestic entity subject to dissenters' rights to dissent from certain specified actions and to obtain the fair value of that ownership interest through an appraisal. Prohibits an owner from dissenting from a plan of merger or conversion in which there is a single surviving or new domestic entity or non-code organization, or from a plan of exchange if certain conditions exist. Sec. 10.355. NOTICE OF RIGHT OF DISSENT AND APPRAISAL. Requires a domestic entity subject to dissenters' rights that takes or proposes to take an action regarding which an owner has a right to dissent and obtain an appraisal to notify each affected owner of the owner's rights if the action or proposed action is submitted to a vote at a meeting or approval is obtained by written consent. Requires such an entity that proposes to effect a short form merger to notify the owners who have a right to dissent to the merger not later than the 10th day after the effective date of the merger. Sets forth the requirements for the notice. Sec. 10.356. PROCEDURE FOR DISSENT BY OWNERS AS TO ACTIONS; PERFECTION OF RIGHT OF DISSENT AND APPRAISAL. Authorizes an owner of an ownership interest of a domestic entity subject to dissenters' rights who has the right to dissent and appraisal from any of the actions referred to in Section 10.354 to exercise that right only with respect to an ownership interest that is not voted in favor of the action and only by complying with the procedures specified in this subchapter. Sets forth the procedures for perfecting the owner's rights of dissent and appraisal. Provides that an owner who does not make a demand within the period required is bound by the action and is not entitled to exercise the rights of dissent and appraisal. Provides that an owner must submit to the responsible organization any certificates representing the ownership interest to which the demand relates within 20 days of making the demand and that failure to do so terminates the demand unless a court directs otherwise. Prohibits a dissenting owner from bringing suit to recover the value of the ownership interest or money damages relating to the action if the entity satisfies the requirements of this subchapter and the owner fails to perfect the right of dissent. Sec. 10.357. WITHDRAWAL OF DEMAND FOR FAIR VALUE OF OWNERSHIP INTEREST. Prohibits an owner from withdrawing a demand for the payment of the fair value of an ownership interest without the consent of the responsible organization before payment has been made or a petition has been filed. Sec. 10.358. RESPONSE BY ORGANIZATION TO NOTICE OF DISSENT AND DEMAND FOR FAIR VALUE BY DISSENTING OWNER. Requires a responsible organization to respond to a dissenting owner in writing within 20 days of the demand. Requires the organization, if it accepts the amount claimed, to pay the amount demanded within 90 days if the owner delivers proof of ownership to the responsible organization. Requires the organization, if it rejects the amount claimed, to provide an estimate of the fair value of the ownership interest and an offer to pay the estimated amount to the owner, which must remain open for at least 60 days. Requires the organization to pay the offered amount within 60 days if the owner accepts the offer. Sec. 10.359. RECORD OF DEMAND FOR FAIR VALUE OF OWNERSHIP INTEREST. Requires a responsible organization to note the record receipt of a demand for payment from any dissenting owner. Provides that, if an ownership interest is transferred as payment, a new certificate representing that ownership must contain a reference to the demand and the name of the original dissenting owner of the ownership interest. Sec. 10.360. RIGHTS OF TRANSFEREE OF CERTAIN OWNERSHIP INTEREST. Provides that such a transfer does not confer on the new owner additional rights with respect to the responsible organization following the transfer. Sec. 10.361. PROCEEDING TO DETERMINE FAIR VALUE OF OWNERSHIP INTEREST AND OWNERS ENTITLED TO PAYMENT; APPOINTMENT OF APPRAISERS. Authorizes a dissenting owner to file a petition requesting a finding and determination of the fair value of owner's ownership interests if the organization rejects the amount demanded and the dissenting owner and the organization are unable to reach an agreement within the prescribed period. Sets forth the procedures and requirements for filing such a petition. Sec. 10.362. COMPUTATION AND DETERMINATION OF FAIR VALUE OF OWNERSHIP INTEREST. Provides that the fair value of an ownership interest is the fair value on the date preceding the date of the action that is the subject of the appraisal. Provides that any appreciation or depreciation in the value occurring in anticipation of the proposed action or as a result of the action must be specifically excluded. Provides that consideration must be given to the value of the organization as a going concern without including any payment for a control premium or minority discount or limitation placed on the rights and preferences of those ownership interests. Prohibits the use of the determination of the fair value of an ownership interest for a purpose other than this subchapter or for determining the fair value of another ownership interest. Sec. 10.363. POWERS AND DUTIES OF APPRAISER; APPRAISAL PROCEDURES. Provides that an appraiser appointed under Section 10.361 has the power and authority that is granted by the court in the order appointing the appraiser and that may be conferred by a court to a master in chancery. Requires the appraiser to determine the fair value of an ownership interest of an owner adjudged by the court to be entitled to payment for such and file with the court a report of that determination. Entitles the appraiser to examine the books and records of a responsible organization and authorizes the appraiser to conduct appropriate investigations. Authorizes a dissenting owner to submit evidence and relevant information to the appraiser. Requires the clerk of the court appointing the appraiser to provide notice of the filing of the report to each dissenting owner and the responsible organization. Sec. 10.364. OBJECTION TO APPRAISAL; HEARING. Authorizes a dissenting owner or a responsible organization to object to the appraisal report. Requires the court to hold a hearing to determine the fair value of the ownership interest and to require the responsible organization to pay the determined value with interest. Requires the responsible organization to immediately pay the amount of the judgment to the holder of an uncertificated ownership interest and to the holder of a certificated interest on proof of ownership. Provides that the dissenting owner does not have an interest in the ownership interest for which payment is made or in the responsible organization with respect to that interest. Sec. 10. 365. COURT COSTS; COMPENSATION FOR APPRAISER. Entitles an appraiser to a reasonable fee payable from court costs. Requires all court costs to be allocated between the responsible organization and the dissenting owners in a fair and equitable manner. Sec. 10.366. STATUS OF OWNERSHIP INTEREST HELD OR FORMERLY HELD BY DISSENTING OWNER. Requires an ownership interest of an organization acquired by a responsible organization, in the case of a merger, conversion, or interest exchange, to be held or disposed of as provided in the plan of merger, conversion, or interest exchange. Authorizes such an interest to be held or disposed of in the same manner as other ownership interests acquired by an organization or held in its treasury in all other cases. Provides that an owner that has demanded payment for the owner's ownership interest is not entitled to vote or exercise any other rights except to receive payment or bring an action to obtain relief on the ground that the action which the demand relates would be or was fraudulent. Prohibits an ownership interest for which payment has been demanded from being considered outstanding for purposes of any subsequent vote or action. Sec. 10.367. RIGHTS OF OWNERS FOLLOWING TERMINATION OF RIGHT OF DISSENT. Sets forth the situations which result in the termination of the rights of a dissenting owner and the consequences of such termination. Sec. 10.368. EXCLUSIVITY OF REMEDY OF DISSENT AND APPRAISAL. Provides that the right of an owner of an ownership interest to dissent from an action and obtain the fair value of the interest is the exclusive remedy for recovery of the value of the ownership interest or money damages to the owner with respect to the ownership interest and the owner's right in the organization with respect to a fundamental business transaction. SUBCHAPTER Z. MISCELLANEOUS PROVISIONS Sec. 10.901. CREDITORS; ANTITRUST. Provides that this code does not affect, nullify, or repeal the antitrust laws or abridge any right or rights of any creditor under existing laws. Sec. 10.902. NONEXCLUSIVITY. Provides that this chapter does not limit the power of a domestic entity or non-code organization to acquire all or part of the ownership or membership interests of one or more classes or series of a domestic entity through a voluntary exchange or otherwise. CHAPTER 11. WINDING UP AND TERMINATION OF DOMESTIC ENTITY SUBCHAPTER A. GENERAL PROVISIONS Sec. 11.001. DEFINITIONS. Defines "claim," "event requiring a winding up," "existing claim," "terminated entity," "voluntary decision to wind up," "voluntary winding up," and "winding up" in this chapter. SUBCHAPTER B. WINDING UP OF DOMESTIC ENTITY Sec. 11.051. EVENT REQUIRING WINDING UP OF DOMESTIC ENTITY. Provides that the events that require the winding up of a domestic entity are the expiration of the entity's period of duration, a voluntary decision to wind up, an event specified in the governing documents, an event specified in this code, and a court decree. Sec. 11.052. WINDING UP PROCEDURES. Requires the domestic entity to cease carrying on its business, notify its claimants, collect and sell its property, and perform other acts required to wind up its business and affairs, as soon as reasonably practicable. Sec. 11.053. PROPERTY APPLIED TO DISCHARGE LIABILITIES AND OBLIGATIONS. Requires a domestic entity to apply and distribute its property to discharge the entity's liabilities or to make adequate provision for the discharge of the liabilities. Provides that, if the property is not sufficient to discharge all liabilities, the entity must apply the property to the extent possible to the just and equitable discharge of liabilities or make adequate provision for such discharge. Requires distributions to be made to the entity's owners after all liabilities are discharged or adequately provided for. Authorizes a domestic entity to continue its business in whole or in part, including delaying the disposition of the entity's property, only for the limited period necessary to avoid unreasonable loss of the entity's property or business. Sec. 11.054. COURT SUPERVISION OF WINDING UP PROCESS. Authorizes a court to supervise the winding up, appoint a person to carry out the winding up, and make other orders regarding a winding up on application of an entity or its owner or member. Sec. 11.055. COURT ACTION OR PROCEEDING DURING WINDING UP. Authorizes a domestic entity to continue a court action during the winding up process. SUBCHAPTER C. TERMINATION OF DOMESTIC ENTITY Sec. 11.101. CERTIFICATE OF TERMINATION FOR FILING ENTITY. Provides that the filing entity must file a certificate of termination upon completion of the winding up process and specifies the information a certificate of termination must contain. Sec. 11.102. EFFECTIVENESS OF TERMINATION OF FILING ENTITY. Provides that the existence of an entity terminates on the filing of the certificate of formation. Sec. 11.103. NOTICE OF TERMINATION TO OWNERS OR MEMBERS OF NONFILING ENTITY. Requires a nonfiling entity to send written notice of termination to its owners or members on completion of the winding up process and sets forth the information the notice must contain. Sec. 11.104. EFFECTIVENESS OF TERMINATION OF NONFILNG ENTITY. Provides that the existence of a nonfiling entity terminates on the mailing of the notice to its owners or members. SUBCHAPTER D. REVOCATION AND CONTINUATION Sec. 11.151. REVOCATION OF VOLUNTARY WINDING UP. Authorizes a domestic entity to revoke a voluntary decision to wind up in the manner specified in the title governing the entity. Authorizes the entity to continue its business following such a revocation. Sec. 11.152. CONTINUATION OF BUSINESS WITHOUT WINDING UP. Authorizes a domestic entity to cancel the event requiring winding up within one year after an event requiring winding up specified either in the governing documents or this code. Authorizes a domestic entity to extend its period of duration within three years after the expiration by amending its governing documents. Prohibits a domestic entity to cancel an even requiring winding up and continue its business if the action is prohibited by the entity's governing documents or this code. Authorizes a domestic entity to cancel an event requiring winding up if the action is not prohibited by its governing documents and is expressly authorized by this code. Authorizes the domestic entity to continue its business on cancellation of an event requiring winding up. SUBCHAPTER E. REINSTATEMENT OF TERMINATED ENTITY Sec. 11.201. CONDITIONS FOR REINSTATEMENT. Sets forth conditions under which a terminated entity may be reinstated. Sec. 11.202. PROCEDURES FOR REINSTATEMENT. Provides that an entity must complete the procedures specified in the title of this code governing the domestic entity no later than the third anniversary of the termination to be reinstated. Provides that the owners, members, governing persons, or other persons must approve the reinstatement. Requires the entity to file a certificate of reinstatement before the third anniversary of the termination. Sets forth the information a certificate of reinstatement must contain. Sec. 11.203. USE OF NAME SIMILAR TO PREVIOUSLY REGISTERED NAME. Prohibits the secretary of state from accepting for filing a certificate of reinstatement if the filing entity's name is the same as or deceptively similar to a reserved or registered name. Sec. 11.204. EFFECTIVENESS OF REINSTATEMENT OF NONFILING ENTITY. Provides that reinstatement of a terminated nonfiling entity takes effect on the approval required by Section 11.202. Sec. 11.205. EFFECTIVENESS OF REINSTATEMENT OF FILING ENTITY. Provides that the reinstatement of a terminated filing entity takes effect on the filing of the entity's certificate of reinstatement. Sec. 11.206. EFFECT OF REINSTATEMENT. Provides that a reinstated entity is subject to the provisions of this chapter requiring winding up and termination and that reinstatement does not revoke or cancel a prior event requiring winding up. Provides that the existence of a reinstated terminated entity is considered to have continued without interruption from the date of termination and authorizes the terminated entity to carry on its business as if the termination had not occurred. SUBCHAPTER F. INVOLUNTARY TERMINATION OF FILING ENTITY BY SECRETARY OF STATE Sec. 11.251. TERMINATION OF FILING ENTITY BY SECRETARY OF STATE. Authorizes the secretary of state to terminate a filing entity's existence for failure to timely file a required report, pay a fee or penalty, or maintain a registered agent or office if the entity does not remedy its failure within 90 days of being notified of the failure by the secretary of state. Sec. 11.252. CERTIFICATE OF TERMINATION. Authorizes the secretary of state to terminate a filing entity's existence by issuing and delivering to the filing entity at its registered office or principal place of business a certificate of termination stating that the filing entity has been involuntarily terminated and the date and cause of the termination. Sec. 11.253. REINSTATEMENT AFTER INVOLUNTARY TERMINATION. Requires the secretary of state to reinstate a filing entity that corrects the circumstances that led to its involuntary termination and files an appropriate application for reinstatement. Provides that a filing entity reinstated before the third anniversary of its involuntary termination is considered to have continued in existence without interruption from the date of termination. SUBCHAPTER G. JUDICIAL WINDING UP AND TERMINATION Sec. 11.301. GROUNDS CONSTITUTING INVOLUNTARY WINDING UP AND TERMINATION OF FILING ENTITY BY STATE ACTION. Sets forth the grounds upon which a court may enter a decree requiring winding up of a filing entity's business and terminating its existence as a result of state action. Sec. 11.302. NOTIFICATION OF CAUSE OF ACTION BY SECRETARY OF STATE. Sets forth the procedures that must be followed by the secretary of state in notifying the attorney general and the filing entity of facts relating to the cause for the winding up and termination. Sec. 11.303. FILING OF ACTION BY ATTORNEY GENERAL. Requires the attorney general to file an action against the filing entity in the name of the state seeking a winding up and termination if the cause for winding up and termination is not cured within 30 days after the date the notice is mailed to the filing entity. Sec. 11.304. CURE BEFORE FINAL JUDGEMENT. Requires an action to be abated if the entity cures the problems and pays the costs of the action. Sec. 11.305. JUDGMENT REQUIRING WINDING UP AND TERMINATION. Requires a court to enter a judgment no earlier than the fifth day after the court finds that proper grounds exist for winding up and termination. Sec. 11.306. APPLICATION FOR STAY OF JUDGMENT. Authorizes a filing entity to file a sworn application for stay of entry of the judgment to permit it to cure the problems. Provides that the stay lasts no longer than 60 days after the date of the courts findings that a stay is appropriate. Requires the court to dismiss the action if the problems are cured during this stay and to enter final judgment requiring a winding up of the filing entity's business that are not cured during the stay. Sec. 11.307. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF FINDINGS BY APPEALS COURT. Requires an appellate court that affirms a trial court's findings against a filing entity under this subchapter to remand the case to the trial court to grant the entity an opportunity to cure its problems if did not make an application for stay of the entry of the judgement, the appellate court is satisfied that the appeal was taken in good faith, the appellate court finds that the problems are capable of being cured, and the entity has prayed for the opportunity to cure its problems in the appeal. Requires the appellate court to determine the length of time, not to exceed 60 days, to be given to the entity to cure its problems. Requires the trial court to dismiss the action if the entity cures its problems and pays all court costs. Requires the revocation to become final if the entity does not cure its problems within the prescribed period. Sec. 11.308. JURISDICTION AND VENUE. Requires the attorney general to bring an action for involuntary winding up and termination of a filing entity in a district court of the county where the registered office or principal place of business of the filing entity in this state is located or a Travis County district court. Provides that this court has jurisdiction over the action. Sec. 11.309. PROCESS IN STATE ACTION. Requires a citation in an action for the involuntary winding up and termination of a filing entity to be issued and served as provided by law. Sec. 11.310. PUBLICATION OF NOTICE. Requires the attorney general to publish a notice in a newspaper in the county in which the registered office of the filing entity in this state is located if process is returned not found. Sets forth information the notice must contain. Provides that notice must be published at least once a week for two consecutive weeks. Authorizes one notice to cover multiple entities. Prohibits a default judgment from being taken before the 31st day after the attorney general sends a copy of the notice to the filing entity at its registered office. Sec. 11.311. ACTION ALLOWED AFTER EXPIRATION OF FILING ENTITY'S DURATION. Provides that the expiration of a filing entity's period of duration creates no vested right in an owner or creditor to prevent an action by the attorney general under this subchapter. Sec. 11.312. COMPLIANCE BY TERMINATED ENTITY. Requires a filing entity subject to a court decree requiring winding up to comply with the requirements of the decree and Subchapter B to the extent it does not conflict with the decree. Sec. 11.313. TIMING OF TERMINATION. Authorizes a court to terminate the existing of a filing entity by decree when the court considers it necessary or advisable or on completion of the winding up process. Sec. 11.314. INVOLUNTARY WINDING UP AND TERMINATION IN PRIVATE ACTIONS. Provides that a district court in the county in which the registered office or principal place of business of a domestic partnership or limited liability is located has jurisdiction to order the winding up and termination of the partnership or limited liability company on application by a partner in the partnership if the court determines the economic purpose of the partnership is likely to be unreasonably frustrated or another partner has engaged in conduct making it unreasonably practical to carry on the business in partnership with that partner. Authorizes application for either type of entity to also be made by an owner if the court determines it is not reasonably practical to carry on the entity's business in conformity with its governing documents. Sec. 11.315. FILING OF DECREE OF TERMINATION AGAINST FILING ENTITY. Requires the clerk of a court entering a decree terminating a filing entity to file the decree in accordance with Chapter 4 at no charge. SUBCHAPTER H. CLAIMS RESOLUTION ON TERMINATION Sec. 11.351. LIABILITY OF TERMINATED ENTITY. Provides that a terminated entity is liable for an existing claim. Sec. 11.352. DEPOSIT WITH COMPTROLLER OF AMOUNT DUE OWNERS AND CREDITORS WHO ARE UNKNOWN OR CANNOT BE LOCATED. Provides that a terminated entity must reduce to cash the portion of its assets distributable to unknown or unlocatable creditors or owners. Requires money from the liquidated assets to be deposited with the comptroller together with a statement containing specified information. Sec. 11.353. DISCHARGE OF LIABILITY OF PERSON RESPONSIBLE FOR LIQUIDATION. Provides that a person responsible for liquidating a filing entity's assets will be released from further liability with respect to money deposited with the comptroller. Sec. 11.354. PAYMENT FROM ACCOUNT BY COMPTROLLER. Sets forth the requirements for a person to claim money deposited with the comptroller within seven years after the deposit. Sec. 11.355. NOTICE OF ESCHEAT; ESCHEAT. Requires the comptroller to publish in a newspaper in Travis County a notice of the proposed escheat of the money deposited with the comptroller if no claimant has proved a right to the money. Sets forth the information which the notice must contain. Provides that the money becomes the property of the state if no one properly claims the money within 60 days after the notice is published. Sec. 11.356. LIMITED SURVIVAL AFTER TERMINATION. Provides that a terminated entity continues in existence for three years for certain purposes. Prohibits a terminated entity from continuing its existence for the purpose of continuing the business for which it was formed unless it is reinstated. Provides that the terminated entity survives beyond the three-year period to defend or prosecute an existing claim and to distribute its property. Sec. 11.357. GOVERNING PERSONS OF ENTITY DURING LIMITED SURVIVAL. Requires the governing persons of the terminated entity at the time of termination to continue to manage the affairs during the three-year survival period. Provides that the duties and liabilities of the governing persons are the same as before the termination. Sec. 11.358. ACCELERATED PROCEDURE FOR EXISTING CLAIM RESOLUTION. Authorizes a terminated entity to shorten the period for resolving an existing claim against the entity through a specified notice procedure. Sets forth the information which a notice must contain. Provides that a person must present the claim in writing to the terminated entity. Authorizes the terminated entity receiving a claim to reject the claim by sending a notice containing specified information. Sec. 11.359. EXTINGUISHMENT OF AN EXISTING CLAIM. Provides that an existing claim by or against a terminated entity is extinguished unless it is brought within three years after the filing of the entity's certificate of termination, if it is a filing entity, or within three years of the date of notice. Authorizes a person's claim against the entity to be terminated earlier if the entity fails to properly make a claim or fails to bring an action on a rejected claim before 180 days after the rejection and the third anniversary of the effective date of the termination. SUBCHAPTER I. RECEIVERSHIP Sec. 11.401. CODE GOVERNS. Authorizes a receiver to be appointed for a domestic entity or for its property or business only as provided for and on the conditions set forth in this Code. Sec. 11.402. JURISDICTION TO APPOINT RECEIVER. Provides that a court has jurisdiction over the property of a domestic or foreign entity located in this state. Provides that a district court in the county in which the registered office or principal place of business of a domestic entity is located has jurisdiction to appoint a receiver for the property and business of the entity or to order the liquidation of the property and business of a domestic entity. Sec. 11.403. APPOINTMENT OF RECEIVER FOR SPECIFIC PROPERTY. Authorizes the court having jurisdiction over specific property to appoint a receiver in certain actions if specified conditions are satisfied. Provides that the court appointing a receiver has and shall retain exclusive jurisdiction over the specific property placed in receivership. Requires the court to determine the rights of the parties in the property or its proceeds. Requires the receivership to be terminated immediately, the management of the domestic entity to be restored to its managerial officials, and the property redelivered if the condition necessitating the appointment of a receiver under this section is remedied. Sec. 11.404. APPOINTMENT OF RECEIVER TO REHABILITATE DOMESTIC ENTITY. Authorizes a court to appoint a receiver for a domestic entity's property and business if certain matters are established by an owner or member of the domestic entity or by a creditor of the entity. Provides that the receivership must be terminated if the condition necessitating the appointment of the receiver is remedied. Sec. 11.405. APPOINTMENT OF RECEIVER TO LIQUIDATE DOMESTIC ENTITY; LIQUIDATION. Authorizes a court to order the liquidation of the property and business of the domestic entity and to appoint a receiver to effect the liquidation under certain conditions. Provides that the receivership must be terminated if the condition necessitating the appointment of the receiver is remedied. Sec. 11.406. RECEIVERS: QUALIFICATIONS, POWERS, AND DUTIES. Provides that a receiver must be either an individual U.S. citizen or an entity authorized to act as a receiver, must give a bond required by the court, and has the power to sue and other powers and duties provided by other laws applicable to receivers and as stated in the order appointing the receiver. Authorizes a foreign filing entity to be a receiver if it is registered to transact business in this state. Sec. 11.407. COURT-ORDERED FILING OF CLAIMS. Authorizes a court to require all claimants of a domestic entity in receivership to file with the court clerk or the receiver a sworn proof of the claims and sets forth the procedures for the filing of claims. Authorizes a court to bar a claimant who fails to file proof of claim from participating in a distribution of the property of a domestic entity, but prohibits it from ordering or effecting a discharge of the claim or claimant. Sec. 11.408. SUPERVISING COURT; JURISDICTION; AUTHORITY. Authorizes the supervising court to pay the receiver or the receiver's attorney from the property of the domestic entity that is in receivership. Provides that the court appointing the receiver has exclusive jurisdiction over the domestic entity and all of its property, regardless of where the property is located. Sec. 11.409. ANCILLARY RECEIVERSHIPS OF FOREIGN ENTITIES. Authorizes a district court in the county in which the registered office of a foreign entity doing business in this state is located to appoint an ancillary receiver for the property and business of the entity if the court determines circumstances require the appointment. Provides that the receiver serves ancillary to a receiver acting under orders of an out of state court having appropriate jurisdiction to appoint that receiver. Sec. 11.410. RECEIVERSHIP FOR ALL PROPERTY AND BUSINESS OF FOREIGN ENTITY. Authorizes a district court to appoint a receiver for all the property in and outside this state of a foreign entity doing business in this state and its business if the court determines that circumstances require the appointment. Requires the appointing court to convert the receivership to an ancillary receivership if a court in another state has ordered a receivership of all property and business of the entity and the appointing court determines the ancillary receivership is appropriate. Sec. 11.411. GOVERNING PERSONS AND OWNERS NOT NECESSARY PARTIES DEFENDANT. Provides that governing persons and owners or members of a domestic entity are not necessary parties to an action for receivership or liquidation of the property and business of a domestic entity unless relief is sought against those persons individually. Sec. 11.412. DECREE OF INVOLUNTARY TERMINATION. Requires the court, in an action to liquidate the property and business of a domestic entity, to enter a decree terminating the entity and provides that the entity ceases to exist when the expenses of the action and all obligations and liabilities of the domestic entity have been paid or adequately provided for and all of the entity's remaining property has been distributed to its owners and members or, if the entity's property is not sufficient to discharge such expenses, obligations and liabilities, when all the property of the entity has been applied toward their payment. CHAPTER 12. ADMINISTRATIVE POWERS SUBCHAPTER A. SECRETARY OF STATE Sec. 12.001. AUTHORITY OF SECRETARY OF STATE. Authorizes the secretary of state to adopt procedural rules for the filing of instruments under the provisions of this code. Provides that the secretary of state has the power and authority reasonably necessary to enable the secretary to perform the duties imposed on the secretary under this code. Sec. 12.002. INTERROGATORIES BY SECRETARY OF STATE. Authorizes the secretary of state to issue interrogatories to require a filing entity or foreign filing entity to provide further information to determine whether the entity has complied with the provisions of this code. Sets forth the time within which the interrogatory must be answered, and the action to be taken by the secretary of state when written answers disclose a violation of this code or the when the entity fails to provide answers to the interrogatory. Sec. 12.003. INFORMATION DISCLOSED BY INTERROGATORIES. Provides that the interrogatory and the answer to the interrogatory are subject to disclosure under the provisions of Chapter 552 (Public Information Act), Government Code. Sec. 12.004. APPEALS FROM SECRETARY OF STATE. Requires the secretary of state to provide written notification within 11 days of the delivery of a filing instrument if the secretary of state determines that a filing instrument cannot be filed. Authorizes a de novo judicial appeal of the secretary of state's disapproval, establishes venue in Travis county, and sets forth the information to be provided in the petition. Authorizes the final order or judgment entered by the district court in review of any rule or decision of the secretary of state to be appealed as in other civil actions. SUBCHAPTER B. ATTORNEY GENERAL Sec. 12.151. AUTHORITY OF ATTORNEY GENERAL TO EXAMINE BOOKS AND RECORDS. Authorizes the attorney general to examine, inspect, and make copies of any of the books and records of a filing entity or foreign filing entity. Sec. 12.152. REQUEST TO EXAMINE. Requires the attorney general to make a written request to a managerial official of the entity to examine the business of a filing entity or foreign filing entity. Sec. 12.153. AUTHORITY TO EXAMINE MANAGEMENT OF ENTITY. Authorizes the attorney general to examine the management and conduct of a domestic or foreign filing entity to determine whether the entity has been or is engaged in acts in violation of its governing documents or in violation of any law of this state. Sec. 12.154. AUTHORITY TO DISCLOSE INFORMATION. Provides that information held by the attorney general and derived in the course of an examination of the entity's records or documents is not public information and is not subject to Chapter 552, Government Code, and prohibits its disclosure except in the course of certain administrative or judicial proceedings in which the state is a party. Sec. 12.155. FORFEITURE OF BUSINESS PRIVILEGES. Provides that failure to permit the attorney general to examine or take copies of a record of the entity forfeits an entity's right to do business in the state and requires the cancellation or forfeiture of the entity's certificate of formation or registration. Sec. 12.156. CRIMINAL PENALTY. Provides that the failure or refusal of a managerial official or other authorized individual managing the affairs of an entity to permit the attorney general to make an investigation of the entity or take copies of a record of the entity is a Class B misdemeanor. SUBCHAPTER C. ENFORCEMENT LIEN Sec. 12.201. LIEN FOR LAW VIOLATIONS. Provides that the state has a lien on all property of a filing entity or foreign filing entity in this state upon the filing of a suit by the attorney general for the violation of a law of this state for which violation a fine, penalties, or forfeiture of the entity's formation or registration is provided. SUBCHAPTER D. ENFORCEMENT PROCEEDINGS Sec. 12.251. RECEIVER. Requires a court in which a suit is pending to terminate a filing entity's certificate of formation or a foreign filing entity's registration to appoint a receiver for the property and business of an entity in this state if the entity commences the process of winding up its business or a judgement is rendered against it. Authorizes the court to appoint a receiver for the entity if the interest of the state requires the appointment. Sec. 12.252. FORECLOSURE. Authorizes the attorney general to bring suit to foreclose a lien created by this chapter and provides procedures for citation in such suit when the entity is dissolved or has had its formation instrument or registration terminated by a judgment. Sec. 12.253. ACTION AGAINST INSOLVENT ENTITY. Requires the attorney general to bring an action to forfeit an entity's formation instrument or registration when the attorney general is convinced that a filing entity or foreign filing entity is insolvent. Sec. 12.254. SUITS BY DISTRICT OR COUNTY ATTORNEY. Requires a district or county attorney to bring suit under Sections 12.252 and 12.253 when directed to do so by the attorney general. Sec. 12.255. PERMISSION TO SUE. Provides that the attorney general, or a district or county attorney, must obtain permission to sue an entity under the provisions of Sections 12.252 or 12.253 by obtaining the leave of the judge of the court in which the suit would be filed. Sec. 12.256. EXAMINATION AND NOTICE. Requires a judge to examine the petition and facts before granting leave to sue. Entitles the entity proceeded against to 10 days notice before the day set for the hearing. Sec. 12.257. DISMISSAL OF ACTION. Requires the dismissal of an action under Section 12.253 or 12.258 if the entity, through its owners or members, reduces its indebtedness so that it is not insolvent. Requires the respondent to pay the costs of the dismissed suit. Sec. 12.258. LIQUIDATION OF INSOLVENT ENTITY. Authorizes a court hearing a proceeding under Section 12.253 to appoint a receiver for the entity and its property to liquidate the insolvent entity. Authorizes the court to continue the existence of the entity for three years, and for additional reasonable time as necessary to accomplish the purposes of this subchapter. Sec. 12.259. EXTRAORDINARY REMEDIES; BOND. Provides that this state has a right to the remedies of a writ of attachment, garnishment, sequestration, or injunction, without bond, to aid in the enforcement of the state's rights. Sec. 12.260. ABATEMENT OF SUIT. Provides that the dissolution or forfeiture of a filing entity's formation instrument or the cancellation of a foreign filing entity's registration does not abate an action by the state for a fine, penalty, or forfeiture against the entity. Sec. 12.261. PROVISIONS CUMULATIVE. Provides that the rights and remedies provided by the chapter are cumulative and do not affect any other right or remedy provided by law. TITLE 2. CORPORATIONS CHAPTER 20. GENERAL PROVISIONS Sec. 20.001. REQUIREMENT THAT FILING INSTRUMENT BE SIGNED BY OFFICER. Provides that a filing instrument of a corporation must be signed by an officer of the corporation. Sec. 20.002. ULTRA VIRES ACTS. Prohibits the lack of capacity of a corporation from being the basis of any claim or defense at law or in equity. Provides that an act of a corporation or a transfer of property by or to a corporation is not invalid because the act or transfer was beyond the scope of the purpose of the corporation or inconsistent with a limitation on an officer or director's authority to exercise a statutory power of the corporation. Authorizes such an act or transfer to be asserted in certain proceedings. Authorizes the court to set aside and enjoin the performance of the contract if the unauthorized act or transfer sought to be enjoined is being or is to be performed or made under a contract to which the corporation is a party and if each party to the contract is a party to the proceeding. Authorizes the court to award compensation as appropriate. CHAPTER 21. FOR-PROFIT CORPORATIONS SUBCHAPTER A. GENERAL PROVISIONS Sec. 21.001. APPLICABILITY OF CHAPTER. Makes this chapter applicable only to domestic for-profit corporations formed under this code and to foreign for-profit corporations that transact business in the State of Texas, whether or not the foreign corporation is registered to transact business in the State of Texas. Sec. 21.002. DEFINITIONS. Defines "authorized share," "board of directors," "cancel," "consuming assets corporation," "corporation" or "domestic corporation," "distribution," "foreign corporation," "Investment Company Act," "net assets," "share distribution," "stated capital," "surplus," and "treasury shares." Sec. 21.003. PERMISSABLE PURPOSE OF CORPORATION RELATED TO RAILROADS. Authorizes corporations to engage in certain activities relating to the construction and maintenance of railways, notwithstanding Section 2.003(2)(E). Sec. 21.004. PROHIBITED ACTIVITIES. Prohibits corporations from operating a cooperative association, limited cooperative association, or labor union, or transacting a combination of the businesses of raising cattle and owning land for the raising of cattle, other than operating and owning feed lots and feeding cattle, and operating stockyards and slaughtering, refrigerating, canning, curing, or packing meat. Sec. 21.005. NONPROFIT CORPORATIONS. Prohibits corporations formed to operate a nonprofit institution from forming as a for-profit corporation under this chapter. Sec. 21.006. ADDITIONAL POWERS OF CERTAIN PIPELINE BUSINESSES. Provides that a corporation or a partnership or other combination of corporations engaged in certain pipeline business have all the rights and powers conferred on a common carrier by Sections 111.019-111.022 (Right of Eminent Domain; Costs of Relocation of Property; Limitations on the Powers of Eminent Domain in Certain Situations; Restoration of Property; Pipeline Easements; Pipeline on Public Stream or Highway; Pipeline Under Railroad, Street Railroad, or Canal; Right to Use Street or Alley in City or Town), Natural Resources Code. SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS Section 21.051. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF FORMATION. Sets forth information that must be included in a certificate of formation of a corporation in addition to the information required for all filing entities by Section 3.005. Sets forth information that must be included, with respect to each class of share, in a certificate of formation of a corporation. Sets forth information that must be included in a certificate of formation of a corporation that elects to become a close corporation in accordance with Subchapter O. Provides that a provision contained in such a certificate must be preceded by a statement that the provision is subject to the corporation remaining a close corporation. Sec. 21.052. NO PROPERTY RIGHT IN CERTIFICATE OF FORMATION. Provides that a certificate of formation (certificate) does not grant a shareholder of a corporation any vested property right. Sec. 21.053. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF FORMATION. Requires the board of directors of a corporation (board), in order to adopt an amendment to the certificate, to adopt a resolution stating the proposed amendment and follow the procedures prescribed by this section and Sections 21.054-21.057. Authorizes a resolution to incorporate the proposed amendment in a restated certificate of formation that complies with Section 3.057. Sec. 21.054. ADOPTION OF AMENDMENT BY BOARD OF DIRECTORS. Authorizes a board to adopt a proposed amendment to a corporation's certificate by resolution without shareholder approval if the corporation does not have any issued or outstanding shares. Sec. 21.055. ADOPTION OF AMENDMENT BY SHAREHOLDERS. Provides that a resolution proposing to adopt an amendment to a corporation's certificate must also direct that the proposed amendment be submitted to a vote of the shareholders at a meeting, and that the shareholders approve the proposed amendment in the manner provided by Section 21.056, if a corporation has issued shares. Sec. 21.056. NOTICE OF AND MEETING TO CONSIDER PROPOSED AMENDMENT. Requires each shareholder of record entitled to vote to be given written notice, conforming to the requirements of the code, containing the proposed amendment or a summary of the changes. Authorizes the proposed amendment or summary to be included in the notice required to be provided for an annual meeting. Requires the proposed amendment to be adopted, at the meeting, only on receiving the affirmative vote of shareholders entitled to vote required by Section 21.364. Authorizes an unlimited number of amendments to be submitted for adoption by the shareholders at a meeting. Sec. 21.057. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF AMENDMENT. (a) Provides that a certificate of amendment for a corporation must state if the amendment provides for an exchange, reclassification, or cancellation of issued shares, the manner in which the exchange, reclassification, or cancellation of the issued shares will be effected if the manner is not specified in the amendment, and, if the amendment effects a change in the amount of stated capital, the manner in which the change in the amount of stated capital is effected and the amount of stated capital expressed in dollar terms as changed by the amendment. (b) Requires an officer of the corporation to sign the certificate of amendment on behalf of the corporation. Authorizes a majority of the directors to sign the certificate of amendment on behalf of the corporation if shares of the corporation have not been issued and the certificate of amendment is adopted by the board of directors. (c) Requires the certificate of amendment to be filed in accordance with Chapter 4 and provides that the certificate of amendment takes effect as provided by Subchapter B, Chapter 3. Sec. 21.058. RESTATED CERTIFICATE OF FORMATION. (a) Authorizes a corporation to adopt a restated certificate of formation (restated certificate), by following the same procedures to amend its certificate, except that shareholder approval is not required if an amendment is not adopted. (b) Requires an officer to sign the restated certificate on behalf of the corporation. Authorizes the majority of the board to sign the restated certificate on behalf of the corporation if shares of the corporation have not been issued and the restated certificate is adopted by the board. (c) Authorizes a restated certificate to update the current number of directors and the names and addresses of the persons serving as directors. (d) Requires the restated certificate to be filed with Chapter 4 and provides that the certificate of amendment takes effect as provided by Subchapter B, Chapter 3. Sec. 21.059. BYLAWS. Requires a board to adopt initial bylaws. Authorizes the bylaws to contain provisions for the regulation and management of affairs of the corporation that are consistent with law and the corporation's certificate. Authorizes a board to amend or repeal bylaws or adopt new bylaws unless the corporation's certificate or this code reserves the power exclusively to the corporation's shareholders, or, in amending, repealing, or adopting a bylaw, the shareholders expressly provide that the board is prohibited from amending, repealing, or readopting that bylaw. Sec. 21.060. DUAL AUTHORITY. Authorizes a corporation's shareholders to amend, repeal, or adopt the corporation the corporation's bylaws regardless of whether the bylaws may also be amended, repealed, or adopted by the corporation's board, unless the certificate or a bylaw adopted by the shareholders provide otherwise as to all or a part of a corporation's bylaws. Sec. 21.061. ORGANIZATION MEETING. (a) Provides that this section does not apply to a corporation created as a result of a conversion or merger the plan of which states the bylaws and names the officers of a corporation. (b) Requires an organizational meeting to be held, after the filing of a certificate takes effect, at the call of the majority of the initial board or the persons named in the certificate, to adopt bylaws, elect officers, and transact other business. (c) Requires the directors or other persons calling the meeting to mail notice of the meeting's time and place to each other director or person named in the certificate by the fourth day before the date of the meeting. SUBCHAPTER C. SHAREHOLDERS' AGREEMENTS Sec. 21.101. SHAREHOLDERS' AGREEMENT. Authorizes the shareholders of a corporation to enter into a shareholder agreement. Enumerates the range of activities authorized to be covered by an agreement. An agreement can: _restrict the discretion or powers of the board of directors; _eliminate the board of directors and authorize the business and affairs of the corporation to be managed, wholly or partly, by one or more of its shareholders or other persons; _establish the individuals who shall serve as directors or officers of the corporation; _determine the term of office, manner of selection or removal, or terms or conditions of employment of a director, officer, or other employee of the corporation, regardless of the length of employment; _govern the authorization or making of distributions whether in proportion to ownership of shares, subject to Section 21.303; _determine the manner in which profits and losses will be apportioned; _govern, in general or with regard to specific matters, the exercise or division of voting power by and between the shareholders, directors, or other persons, including use of disproportionate voting rights or director proxies; _establish the terms of an agreement for the transfer or use of property or for the provision of services between the corporation and another person, including a shareholder, director, officer, or employee of the corporation; _authorize arbitration or grant authority to a shareholder or other person to resolve any issue about which there is a deadlock among the directors, shareholders, or other persons authorized to manage the corporation; _require winding up and termination of the corporation at the request of one or more shareholders or on the occurrence of a specified event or contingency, in which case the winding up and termination of the corporation will proceed as if all of the shareholders had consented in writing to the winding up and termination as provided by Subchapter K; or _otherwise govern the exercise of corporate powers, the management of the business and affairs of the corporation, or the relationship among the shareholders, the directors, and the corporation as if the corporation were a partnership or in a manner that would otherwise be appropriate only among partners and not contrary to public policy. (b) Provides that a shareholders' agreement authorized by this section must be contained in the certificate or bylaws if approved by all of the shareholders at the time of the agreement, or a written agreement that is signed by all of the shareholders at the time of the agreement and made known to the corporation, and amended only by all of the shareholders at the time of the amendment, unless the agreement provides otherwise. Sec. 21.102. TERM OF AGREEMENT. Provides that a shareholders' agreement is valid for 10 years, unless the agreement provides otherwise. Sec. 21.103. DISCLOSURE OF AGREEMENT; RECALL OF CERTAIN CERTIFICATES. (a) Requires the existence of a shareholder agreement to be noted conspicuously on the front or back of each certificate of outstanding shares or on the information statement required for uncertificated shares by section 3.205. (b) Describes the statement required to be included on the disclosure required by this subsection. (c) Requires a corporation that has outstanding shares represented by certificates at the time the shareholders of the corporation enter into an agreement to recall the outstanding certificates and issue substitute certificates. (d) Provides that the failure to note the existence of the agreement on the certificate or information statement does not affect the validity of the agreement or an action taken pursuant to the agreement. Sec. 21.104. EFFECT OF SHAREHOLDERS' AGREEMENT. Provides that a shareholders' agreement that complies with this subchapter is effective among the shareholders and between the corporation even if the terms of the agreement are inconsistent with this code. Sec. 21.105. KNOWLEDGE OF PURCHASER OF SHARES. (a) Entitles a purchaser of shares who does not have knowledge at the time of purchase of the existence of a shareholders' agreement to rescind the purchase. (b) Provides that a purchaser is considered to have knowledge of the existence of the shareholders' agreement for purposes of this section if the existence of the agreement is noted on the certificate or information statement for shares as required by Section 21.103, and if, with respect to shares that are not represented by a certificate, the information statement noting existence of the agreement is delivered to the purchaser by the time the shares are purchased. (c) Provides that an action to enforce the right of rescission authorized by this section must be commenced by the earlier of the 90th day after the date the existence of the shareholder agreement is discovered, or the second anniversary of the purchase date of the shares. Sec. 21.106. AGREEMENT LIMITING AUTHORITY OF AND SUPPLANTING BOARD OF DIRECTORS; LIABILITY. (a) Provides that a shareholders' agreement that limits the discretion or powers of the board or supplants the board relieves the directors of, and imposes on a person in whom the discretion or powers of the board or the management of the business and affairs of the corporation is vested, liability for an act or omission of the person. (b) Provides that a person on whom liability for an act or omission is imposed is liable in the same manner and to the same extent as a director on whom liability for an act or omission is imposed by this code or other law. Sec. 21.107. LIABILITY OF SHAREHOLDER. Provides that the existence of or a performance under a shareholders' agreement is not a ground for imposing personal liability on a shareholder for an act or obligation of the corporation by disregarding the separate existence of the corporation or otherwise. Applies this non-ground to an agreement or a performance under the agreement which treats the corporation as if the corporation were a partnership or in a manner that is otherwise appropriate only among partners; results in the corporation being considered a partnership for purposes of taxation; or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement. Sec. 21.108. PERSONS ACTING IN PLACE OF SHAREHOLDERS. Authorizes an organizer or a subscriber for shares to act as a shareholder with respect to a shareholders' agreement if no shares have been issued when the agreement is signed. Sec. 21. 109. AGREEMENT NOT EFFECTIVE. (a) Provides that a shareholders' agreement ceases to be effective when shares of the corporation are publicly-traded securities. (b) Requires a board to be instituted or reinstated if a corporation does not have a board and a shareholders' agreement ceases to be effective. (c) Authorizes the board, if an ineffective shareholder's agreement is contained in or referred to by the certificate or bylaws, to adopt an amendment to the certificate or bylaws, without shareholder action, to delete the agreement and any references to the agreement. SUBCHAPTER D. SHARES, OPTIONS, AND CONVERTIBLE SECURITIES Sec. 21.151. NUMBER OF AUTHORIZED SHARES. Authorizes a corporation to issue the number of shares stated in the corporation's certificate. Sec. 21. 152. CLASSES AND SERIES OF SHARES. (a) Authorizes a corporation's certificate to divide the corporation's authorized shares into one or more classes. Authorizes a corporation's certificate to divide one or more classes of authorized shares into or more series. Provides that the certificate must designate each class and series of authorized shares to distinguish that class and series from any other class or series. (b) Provides that shares of the same class must be of the same par value or be without par value, as stated in the certificate. (c) Provides that shares of the same class must be identical in all respects unless the shares have been divided into one or more series. Authorizes the shares of a class, if they have been divided into one or more series, to vary between series. Provides that all shares of the same series will be identical in all respects. Sec. 21.153. DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RIGHTS OF A CLASS OR SERIES. (a) Provides that each class or series of authorized shares of a corporation must have the designations, preferences, limitations, and relative rights, including voting rights, stated in the corporation's certificate. (b) Authorizes the certificate to limit or deny the voting rights of, or provide special voting rights for, the shares of a class or series or the shares of a class or series held by a person or class of persons to the extent the limitation, denial, or provision is not inconsistent with this code. (c) Authorizes the making of a designation, preference, limitation, or relative right of a class or series of shares to be dependent on facts not contained in the certificate, if their operation is clearly and expressly stated in the certificate. Sec. 21.154. CERTAIN OPTIONAL CHARACTERISTICS OF SHARES. Enumerates a non-exclusive list of the types of preferences and rights that a class or series of shares may have. Prohibits the conversion of shares without par value into shares with par value unless at the time of conversion, the part of the corporation's stated capital represented by the shares without par value is at least equal to the aggregate par value of the shares to be converted, or the amount of any deficiency is transferred from surplus to stated capital. Provides that shares may be redeemed, exchanged, or converted at the option of the corporation, shareholder, or other person or on the occurrence of a designated event. Sec. 21.155. SERIES OF SHARES ESTABLISHED BY BOARD OF DIRECTORS. (a) Authorizes the board to establish series of unissued shares of any class by setting and determining the designations, preferences, limitations, and relative rights, including voting rights, of the shares of the series to be established if expressly authorized by the corporations certificate and subject to the certificate. (b) Specifies the procedure needed to be followed by the board to establish a series if authorized by the certificate of formation. (c) Authorizes the board to increase or decrease the number of shares in each series to be established, if the certificate of formation does not expressly restrict the board from increasing or decreasing the number of unissued shares of a series to be established under Subsection (a). Prohibits the board from decreasing the number of shares in a particular series to a number that is less than the number of shares in that series that are issued at the time of the decrease. (d) Specifies the procedure needed to be followed by the board to increase or decrease the number of shares of a series under Subsection (c). (e) Authorizes the board of directors by resolution to delete the series from the certificate of formation, if no shares of a series established by board resolution under Subsection (b) are outstanding because no shares of that series have been issued or no issued shares of that series remain outstanding, and delete any reference to the series contained in the certificate of formation. (f) Authorizes the board of directors to amend the designations, preferences, limitations, and relative rights of the series or amend any designation, preference, limitation, or relative right that is not set and determined by the certificate of formation, if no shares of a series established by resolution of the board of directors are outstanding because no shares of that series have been issued. Sec. 21.156. ACTIONS WITH RESPECT TO SERIES OF SHARES. Provides that to effect an action authorized under Section 21.155, the corporation must file with the secretary of state a statement that contains the enumerated information. Provides that on the filing of a statement, the enumerated resolutions will become an amendment of the certificate of formation, as appropriate. Provides that an amendment of the certificate of formation is not subject to the procedure to amend the certificate of formation contained in Subchapter B. Sec. 21.157. ISSUANCE OF SHARES. Authorizes a corporation, except as provided by Section 21.158, to issue shares for consideration if authorized by the board of directors of the corporation. Prohibits shares from being issued until the consideration has been received by the corporation. When the consideration is received the shares are issued, the subscriber or other person entitled to receive the shares is a shareholder with respect to the shares, and the shares are considered fully paid and nonassessable. Sec. 21.158. ISSUANCE OF SHARES UNDER PLAN OF MERGER OR CONVERSION. Authorizes a converted corporation under a plan of conversion or a corporation created by a plan of merger to issue shares for consideration if authorized by the plan of conversion or plan of merger, as appropriate. Authorizes a corporation to issue shares in the manner provided by and for consideration specified under a plan of merger or plan of conversion. Sec. 21.159. TYPES OF CONSIDERATION FOR SHARES. Authorizes shares with or without par value be issued for the enumerated types of consideration. Sec. 21.160. DETERMINATION OF CONSIDERATION FOR SHARES. Provides that consideration to be received for shares must be determined by the enumerated entities. Requires the shareholders, if the corporation's certificate of formation reserves to the shareholders the right to determine the consideration to be received for shares without par value, to determine the consideration for those shares before the shares are issued. Prohibits the board of directors from determining the consideration for shares. Authorizes a corporation to dispose of treasury shares for consideration that may be determined by the board of directors. Sec. 21.161. AMOUNT OF CONSIDERATION FOR ISSUANCE OF CERTAIN SHARES. Prohibits consideration from being received by a corporation for the issuance of shares with par value from being less than the par value of the shares. Provides that the part of the surplus of a corporation that is transferred to stated capital on the issuance of shares as a share distribution is considered to be the consideration for the issuance of those shares. Provides that the consideration received by a corporation for the issuance of shares on the conversion or exchange of its indebtedness or shares is the enumerated items. Provides that the consideration received by a corporation for the issuance of shares on the exercise of rights or options is the enumerated considerations. Sec. 21.162. VALUE AND SUFFICIENCY OF CONSIDERATION. Provides that in the absence of fraud in the transaction, the judgment of the board of directors, the shareholders, or the party approving the plan of conversion or the plan of merger, as appropriate, is conclusive in determining the value and sufficiency of the consideration received for the shares. Sec. 21.163. ISSUANCE AND DISPOSITION OF FRACTIONAL SHARES OR SCRIP. Authorizes a corporation to perform the enumerated actions. Authorizes the board of directors to issue scrip on the enumerated information. Sec. 21.164. RIGHTS OF HOLDERS OF FRACTIONAL SHARES OR SCRIP. Provides that a holder of a certificated or uncertificated fractional share is entitled to perform the specified actions. Provides that a holder of a certificate for scrip is not entitled to perform the specified actions. Sec. 21.165. SUBSCRIPTIONS. Authorizes a corporation to accept a subscription by notifying the subscriber in writing. Provides that a subscription to purchase shares in a corporation in the process of being formed is irrevocable for six months if the subscription is in writing and signed by the subscriber, unless the subscription provides for a longer or shorter period or all of the other subscribers agree to the revocation of the subscription. Provides that a written subscription entered into after the corporation is formed is a contract between the subscriber and the corporation. Sec. 21.166. PREFORMATION SUBSCRIPTION. Authorizes the corporation to determine the payment terms of a preformation subscription unless the payment terms are specified by the subscription. Authorizes the payment terms to authorize payment in full on acceptance or by installments. Requires a corporation, unless the subscription provides otherwise, to make calls placed to all subscribers of similar interests for payment on preformation subscriptions uniform as far as practicable. Authorizes a corporation, after it is formed, to perform the enumerated actions. Authorizes the corporation, although the forfeiture of a subscription terminates all the rights and obligations of the subscriber, to retain any amount previously paid on the subscription. Sec. 21.167. COMMITMENT TO PURCHASE SHARES. Authorizes a person who contemplates the acquisition of shares in a corporation to commit to act in a specified manner with respect to the shares after the acquisition. Provides that the commitment must be in writing and be signed by the person acquiring the shares to be binding. Provides that the commitment continues for a six-month period unless the commitment provides for a longer or shorter period. Provides that a written commitment entered into is a contract between the shareholder and the corporation. Sec. 21.168. STOCK RIGHTS, OPTIONS, AND CONVERTIBLE INDEBTEDNESS. Authorizes a corporation, except as provided by the corporation's certificate of formation and regardless of whether done in connection with the issuance and sale of any other share or security of the corporation, to create and issue the enumerated items. Requires a right, option, or indebtedness to be evidenced in the manner approved by the board of directors. Provides that subject to the certificate of formation, a right or option or convertible indebtedness must state the terms on which, the time within which, and any consideration for which the shares are authorized to be purchased or received from the corporation on the exercise of the right or option. Sec. 21.169. TERMS AND CONDITIONS OF RIGHTS AND OPTIONS. Authorizes the terms and conditions of rights or options to include the enumerated restrictions or conditions. Provides that rights or options created or issued before the effective date of this code that comply with this section and are not in conflict with other provisions of this code are ratified. Provides that unless otherwise provided under the terms of rights or options or the agreement or plan under which the rights or options are issued, the authority to grant, amend, redeem, extend, or replace the rights or options on behalf of a corporation is vested exclusively in the board of directors of the corporation, except that a bylaw is prohibited from requiring the board to grant, amend, redeem, extend, or replace the rights or options. Sec. 21.170. CONSIDERATION FOR RIGHTS, OPTIONS, AND CONVERTIBLE INDEBTEDNESS. Provides that in the absence of fraud in the transaction, the judgment of the board of directors of a corporation as to the adequacy of the consideration received for rights, options, or convertible indebtedness is conclusive. Authorizes a corporation to issue rights or options to its shareholders, officers, consultants, independent contractors, employees, or directors without consideration if, in the judgment of the board of directors, the issuance of the rights or options is in the interests of the corporation. Prohibits the consideration for shares having a par value, other than treasury shares, and issued on the exercise of the rights or options from being less than the par value of the shares. Prohibits a privilege of conversion from being conferred on, or altered with respect to, any indebtedness that would result in the corporation receiving less than the minimum consideration required to be received on issuance of the shares. Requires the consideration for shares issued on the exercise of rights, options, or convertible indebtedness to be determined as provided by Section 21.161. Sec. 21.171. TREASURY SHARES. Provides that treasury shares are considered to be issued shares and not outstanding shares. Prohibits treasury shares from being included in the total assets of a corporation for purposes of determining the net assets of a corporation. Sec. 21.172. EXPENSES OF ORGANIZATION, REORGANIZATION, AND FINANCING OF CORPORATION. Authorizes a corporation to pay or authorize to be paid from the consideration received by the corporation as payment for the corporation's shares the reasonable charges and expenses of the organization or reorganization of the corporation and the sale or underwriting of the shares without rendering the shares not fully paid and nonassessable. SUBCHAPTER E. SHAREHOLDER RIGHTS AND RESTRICTIONS Sec. 21.201. REGISTERED HOLDERS AS OWNERS. Authorizes a corporation, except as otherwise provided by this code and subject to Chapter 8 (Investment Securities), Business & Commerce Code, to consider the person registered as the owner of a share in the share transfer records of the corporation at a particular time as the owner of that share at that time for the enumerated purposes Sec. 21.202. DEFINITION OF SHARES. Defines, for Sections 21.203-21.207, "shares." Sec. 21.203. NO STATUTORY PREEMPTIVE RIGHT UNLESS PROVIDED BY CERTIFICATE OF FORMATION. Provides that except as provided by Section 21.208, a shareholder of a corporation does not have a preemptive right to acquire the corporation's unissued or treasury shares except to the extent provided by the corporation's certificate of formation. Provides that if the certificate of formation includes a statement that the corporation "elects to have a preemptive right" or a similar statement, Section 21.204 applies to a shareholder except to the extent the certificate of formation expressly provides otherwise. Sec. 21.204. STATUTORY PREEMPTIVE RIGHTS. (a) Provides that if the shareholders of a corporation have a preemptive right, the shareholders have a preemptive right to acquire proportional amounts of the corporation's unissued or treasury shares on the decision of the corporation's board of directors to issue the shares. Provides that the preemptive right granted is subject to uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the preemptive right. (b) Provides that no preemptive right exists with respect to the enumerated shares. (c) Provides that a holder of a share of a class without general voting rights but with a preferential right to distributions of profits, income, or assets does not have a preemptive right with respect to shares of any class. (d) Provides that a holder of a share of a class with general voting rights but without preferential rights to distributions of profits, income, or assets does not have a preemptive right with respect to shares of any class with preferential rights to distributions of profits, income, or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights. (e) Authorizes shares subject to preemptive rights that are not acquired by a shareholder, for a one-year period after the date the shares have been offered to shareholders, to be issued to a person at a consideration set by the corporation's board of directors that is not lower than the consideration set for the exercise of preemptive rights. Provides that an offer at a lower consideration or after the expiration of the period is subject to the shareholder's preemptive rights. Sec. 21.205. WAIVER OF PREEMPTIVE RIGHT. Authorizes a shareholder to waive a preemptive right granted to the shareholder. Provides that a written waiver of a preemptive right is irrevocable regardless of whether the waiver is supported by consideration. Sec. 21.206. LIMITATION ON ACTION TO ENFORCE PREEMPTIVE RIGHT. Provides that an action brought against a corporation, the board of directors or an officer, shareholder, or agent of the corporation, or an owner of a beneficial interest in shares of the corporation for the violation of a preemptive right of a shareholder must be brought by a certain date. Provides that the notice must meet the specified requirements. Sec. 21.207. DISPOSITION OF SHARES HAVING PREEMPTIVE RIGHTS. Provides that the transferee or successor of a share that has been transferred or otherwise disposed of by a shareholder of a corporation whose preemptive right to acquire shares in the corporation has been violated does not acquire the preemptive right, or any right or claim based on the violation, unless the previous shareholder has assigned the preemptive right to the transferee or successor. Sec. 21.208. PREEMPTIVE RIGHT IN EXISTING CORPORATION. Provides that subject to the certificate of formation, a shareholder of a corporation incorporated before the effective date of this code has a preemptive right to acquire unissued or treasury shares of the corporation to the extent provided by Sections 21.204, 21.206, and 21.207. Authorizes a corporation, after the effective date of this code, to limit or deny the preemptive right of the shareholders of the corporation by amending the corporation's certificate of formation. Sec. 21.209. TRANSFER OF SHARES AND OTHER SECURITIES. Provides that except as otherwise provided by this code, the shares and other securities of a corporation are transferable in accordance with Chapter 8, Business & Commerce Code. Sec. 21.210. RESTRICTION ON TRANSFER OF SHARES AND OTHER SECURITIES. Authorizes a restriction on the transfer or registration of transfer of a security to be imposed by the enumerated entities. Provides that a restriction is not valid with respect to a security issued before the restriction has been adopted, unless the holder of the security voted in favor of the restriction or is a party to the agreement imposing the restriction. Sec. 21.211. VALID RESTRICTIONS ON TRANSFER. Provides that notwithstanding Sections 21.210 and 21.213, a restriction placed on the transfer or registration of transfer of a security of a corporation is valid if the restriction reasonably meets any of the enumerated conditions. Sec. 21.212. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF SHARES OR OTHER SECURITIES. (a) Authorizes a corporation that has adopted a bylaw or is a party to an agreement that restricts the transfer of the shares or other securities of the corporation to file with the secretary of state, in accordance with Chapter 4, a copy of the bylaw or agreement. Specifies the provisions for the statement attached to the copy. (b) Provides that after a copy of the bylaw or agreement is filed with the secretary of state, the bylaws or agreement restricting the transfer of shares or other securities is a public record, and the fact that the statement has been filed is authorized to be stated on a certificate representing the restricted shares or securities if required by Section 3.202. (c) Authorizes a corporation that is a party to an agreement restricting the transfer of the shares or other securities of the corporation to make the agreement part of the corporation's certificate of formation without restating the provisions of the agreement in the certificate of formation by amending the certificate of formation. Requires the certificate of amendment, if the agreement alters any provision of the certificate of formation, to identify the altered provision by reference or description. Provides that if the agreement is an addition to the certificate of formation, the certificate of amendment must state that fact. (d) Specifies the provision for the certificate of amendment. Sec. 21.213. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF CERTAIN SECURITIES. (a) Provides that a restriction placed on the transfer or registration of the transfer of a security of a corporation is specifically enforceable against the holder, or a successor or transferee of the holder, provided that the restriction is reasonable and noted conspicuously on the certificate or other instrument representing the security, or with respect to an uncertificated security, the restriction is reasonable and a notation of the restriction is contained in the notice sent with respect to the security under Section 3.205. (b) Provides that unless noted conspicuously on the certificate with respect to a certificate or other instrument or an uncertificated security, an otherwise enforceable restriction is ineffective against a transferee for value without actual knowledge of the restriction at the time of the transfer or against a subsequent transferee, regardless of whether the transfer is for value. Provides that a restriction is specifically enforceable against a person other than a transferee for value from the time the person acquires actual knowledge of the restriction's existence. Sec. 21.214. JOINT OWNERSHIP OF SHARES. (a) Authorizes a corporation, if shares are registered on the books of a corporation in the names of two or more persons as joint owners with the right of survivorship and one of the owners dies, to record on its books and effect the transfer of the shares to a person, including the surviving joint owner, and to pay any distributions made with respect to the shares, as if the surviving joint owner was the absolute owner of the shares. Provides that the recording and distribution authorized by this subsection must be made after the death of a joint owner and before the corporation receives actual written notice that a party other than a surviving joint owner is claiming an interest in the shares or distribution. (b) Provides that the discharge of a corporation from liability under Section 21.216 and the transfer of full legal and equitable title of the shares does not affect, reduce, or limit any cause of action existing in favor of an owner of an interest in the shares or distributions against the surviving owner. Sec. 21.215. LIABILITY FOR DESIGNATING OWNER OF SHARES. Prohibits a corporation or an officer, director, employee, or agent of the corporation from being held liable for considering a person to be the owner of a share for a purpose described by Section 21.201, regardless of whether the person possesses a certificate for that share. Sec. 21.216. LIABILITY REGARDING JOINT OWNERSHIP OF SHARES. Provides that a corporation that transfers shares or makes a distribution to a surviving joint owner under Section 21.214 before the corporation has received a written claim for the shares or distribution from another person, is discharged from liability for the transfer or payment. Sec. 21.217. LIABILITY OF ASSIGNEE OR TRANSFEREE. Prohibits an assignee or transferee of certificated shares, uncertificated shares, or a subscription for shares in good faith and without knowledge that full consideration for the shares or subscription has not been paid, from being held personally liable to the corporation or a creditor of the corporation for an unpaid portion of the consideration. Sec. 21.218. EXAMINATION OF RECORDS. (a) Provides that in this section, a holder of a beneficial interest in a voting trust entered into under Section 6.251 is a holder of the shares represented by the beneficial interest. (b) Entitles an owner of outstanding shares of a corporation, subject to the governing documents and on written demand stating a proper purpose, for at least six months immediately preceding the owner's demand, or a holder of at least five percent of all of the outstanding shares of a corporation, to examine and copy, at a reasonable time, the corporation's relevant books, records of account, minutes, and share transfer records. Authorizes the examination to be conducted in person or through an agent, accountant, or attorney. (c) Sets forth that this section does not impair the power of a court, on the presentation of proof of proper purpose by a beneficial or record holder of shares, to compel the production for examination by the holder of the books and records of accounts, minutes, and share transfer records of a corporation, regardless of the period during which the holder was a beneficial holder or record holder and regardless of the number of shares held by the person. Sec. 21.219. ANNUAL AND INTERIM STATEMENTS OF CORPORATION. Requires a corporation, on written request of a shareholder of the corporation, to mail to the shareholder the annual statements of the corporation for the last fiscal year that contain in reasonable detail the corporation's assets and liabilities and the results of the corporation's operations, and the most recent interim statements, if any, that have been filed in a public record or other publication. Requires the corporation to be allowed a reasonable time to prepare the annual statements. Sec. 21.220. PENALTY FOR FAILURE TO PREPARE VOTING LIST. Provides that an officer or agent of a corporation who is in charge of the corporation's share transfer records and who does not prepare the list of owners, keep the list on file for a 10-day period, or produce and keep the list available for inspection at the annual meeting as required by Sections 6.004 and 21.354 is liable to an owner who suffers damages because of the failure for the damage caused by the failure. Sec. 21.221. PENALTY FOR FAILURE TO PROVIDE NOTICE OF MEETING. Provides that if an officer or agent of a corporation is unable to comply with the duties prescribed by Sections 6.004 and 21.354 because the officer or agent did not receive notice of a meeting of owners within a sufficient time before the date of the meeting, the corporation, rather than the officer or agent, is liable to an owner who suffers damages because of the failure for the extent of the damage caused by the failure. Sec. 21.222. PENALTY FOR REFUSAL TO PERMIT EXAMINATION OF CERTAIN RECORDS. (a) Provides that a corporation that refuses to allow a person to examine and make copies of account records, minutes, and share transfer records under Section 21.218 is liable to the owner for any cost or expense, including attorney's fees, incurred in enforcing the owner's rights under Section 21.218. Provides that the liability imposed on a corporation under this subsection is in addition to any other damages or remedy afforded to the owner by law. (b) Specifies a defense to an action brought under this section. SUBCHAPTER F. REDUCTIONS IN STATED CAPITAL; CANCELLATION OF TREASURY SHARES Sec. 21.251. REDUCTION OF STATED CAPITAL BY REDEMPTION OR PURCHASE OF REDEEMABLE SHARES. (a) Provides that at the time a corporation redeems or purchases the redeemable shares of the corporation, the redemption or purchase has the effect of canceling the shares, so a statement of cancellation must be filed in accordance with Chapter 4 and Section 21.252, and restoring the shares to the status of authorized but unissued shares, unless the corporation's certificate of formation provides that shares may not be reissued after the shares are redeemed or purchased by the corporation. (b) Provides that if the corporation is prohibited from reissuing the shares by the certificate of formation following a redemption or purchase under Subsection (a), the filing of the statement of cancellation operates as an amendment to the certificate of formation and reduces the number of shares of the class that the corporation is authorized to issue by the number of shares canceled. (c) Provides that if shares redeemed or purchased by a corporation under Subsection (a) constitute all of the outstanding shares of a particular class of shares and the certificate of formation provides that the shares of the class, when redeemed and repurchased, may not be reissued, the filing of the statement of cancellation operates as an amendment to the certificate of formation by deleting all references to the class of shares and reduces the classes of shares the corporation is authorized to issue accordingly. Sec. 21.252. CONTENTS AND FILING OF STATEMENT OF CANCELLATION OF CERTAIN REDEEMABLE SHARES. (a) Specifies the provisions for the statement of cancellation required by Section 21.251. (b) Provides that the filing of the statement of cancellation has the effect of reducing the stated capital of the corporation by an amount equal to that part of the stated capital that was, at the time of the cancellation, represented by the canceled shares. (c) Sets forth that this section does not prohibit a cancellation of shares or a reduction of stated capital in any other manner permitted by law. Sec. 21.253. CANCELLATION OF TREASURY SHARES. (a) Authorizes a corporation, by resolution of the board of directors of the corporation, to cancel all or part of the corporation's treasury shares at any time. (b) Specifies the provisions of a statement of cancellation for a corporation that cancels all or part of the treasury shares of the corporation. (c) Requires the stated capital of the corporation, upon the filing of a statement of cancellation, to be reduced by that part of the stated capital that was, at the time of the cancellation, represented by the canceled shares, and the canceled shares to be restored to the status of authorized but unissued shares. (d) Sets forth that this section does not prohibit a cancellation of shares or a reduction of stated capital in any other manner permitted by law. Sec. 21.254. PROCEDURES FOR REDUCTION OF STATED CAPITAL BY BOARD OF DIRECTORS. (a) Authorizes the stated capital of the corporation, if all or part of the stated capital of a corporation is represented by shares without par value, to be reduced in the manner provided by this section. (b) Specifies the provisions for the resolution that is required to be adopted by the board of directors. (c) Requires each shareholder of record entitled to vote on the reduction of stated capital to be given written notice stating that the purpose or one of the purposes of the meeting is to consider the matter of reducing the stated capital of the corporation in the amount and manner proposed by the board of directors. Requires the notice to be given in the time and manner provided by this code for giving notice of shareholders' meetings. (d) Provides that the affirmative vote of the holders of at least the majority of the shares entitled to vote on the matter is required for approval of the resolution proposing the reduction of stated capital. Sec. 21.255. STATEMENT OF REDUCTION OF STATED CAPITAL BY BOARD. (a) Specifies the provisions of a statement filed on behalf of the corporation, when a reduction of the stated capital of a corporation has been approved by the shareholders under Section 21.254. (b) Requires the stated capital of the corporation, upon the filing of the statement, to be reduced in the manner provided by the statement. Sec. 21.256. RESTRICTION ON REDUCTION OF STATED CAPITAL. Prohibits the stated capital of a corporation from being reduced under this subchapter if the amount of the aggregate stated capital of the corporation would be reduced to an amount equal to or less than the sum of a certain amount. SUBCHAPTER G. DISTRIBUTIONS AND SHARE DIVIDENDS Sec. 21.301. DEFINITIONS. Defines "distribution limit," with respect to a distribution made by a corporation, "distribution limit," with respect to a distribution that is a purchase or redemption of its own shares by an investment company, and "investment company" in this subsection. Sec. 21.302. AUTHORITY FOR DISTRIBUTIONS. Authorizes the board of directors of a corporation to authorize a distribution and authorizes the corporation to make a distribution, subject to Section 21.303. Sec. 21.303. LIMITATIONS ON DISTRIBUTIONS. (a) Prohibits a corporation from making a distribution that violates the corporation's certificate of formation. (b) Prohibits a corporation, unless the distribution is made in compliance with Chapter 11, from making a distribution that will cause the corporation to become insolvent, or exceeds the distribution limit. Sec. 21.304. REDEMPTIONS. (a) Authorizes a distribution by a corporation that involves a redemption of outstanding redeemable shares of the corporation subject to redemption to be related to any or all of those shares. (b) Requires the shares to be redeemed, if less than all of the outstanding redeemable shares of a corporation subject to redemption are to be redeemed, to be selected for redemption in accordance with the corporation's certificate of formation, or ratably or by lot in the manner prescribed by resolution of the corporation's board of directors, if the certificate of formation does not specify how shares are to be selected for redemption. (c) Provides that a redemption of redeemable shares takes effect by call and written notice of the redemption of the shares. Sec. 21.305. NOTICE OF REDEMPTION. (a) Specifies the provision stated in a notice of redemption of redeemable shares of a corporation. (b) Requires the notice of redemption to be given to each holder of redeemable shares being called no later than 21 days or earlier than 60 days before the date set for redemption. (c) Provides that a notice that is mailed is considered to have been given when the notice is deposited in the United States mail, with postage prepaid, addressed to the shareholder at the shareholder's address as it appears on the share transfer records of the corporation. (d) Authorizes a corporation to give the transfer agent described irrevocable instructions to give or complete the notice of redemption. Sec. 21.306. DEPOSIT OF MONEY FOR REDEMPTION. (a) Authorizes a corporation to deposit, after the date the notice of redemption is sent and before the day after the date set for redemption of redeemable shares of the corporation, with a bank or trust company in this or another state of the United States an amount sufficient to redeem the shares. Provides that the amount must be deposited as a trust fund. (b) Provides that, unless the corporation's certificate of formation provides otherwise, if a corporation deposits money and gives payment instructions in accordance with Subsection (a) and Section 21.307(b): (1) the shares called for redemption are considered redeemed, and distributions on those shares cease to accrue on and after the date set for redemption; and (2) the deposit constitutes full payment of the shares called for redemption to the holders of the shares on and after the date set for redemption. (c) Provides that the shares called for redemption are not considered outstanding, unless the certificate of formation provides otherwise, after the date a deposit is made and instructions are given, and the holders of the shares cease to be shareholders of the shares and have no right with respect to the shares other than: (1) the right to receive payment of the redemptive price of the shares without interest from the bank or trust company; and (2) any right to convert those shares. (d) Requires a bank or trust company receiving a deposit under this section to pay to the corporation on demand the balance of the amount deposited if one or more holders of the shares called for redemption do not claim for redemption the amount deposited by the sixth anniversary of the date of the deposit, unless the certificate of formation provides otherwise, after which the bank or trust company is relieved of all responsibility to the holders with respect to the amount deposited. Sec. 21.307. PAYMENT OF REDEEMED SHARES. (a) Requires payment of a certificated share to be made only on the surrender of the respective share certificate. (b) Authorizes a corporation to give a transfer agent irrevocable instructions to pay the redemptive price to the respective holders of the shares, on or after the date set for redemption of redeemable shares, as evidenced by a list of shareholders certified by an officer of the corporation. Sec. 21.308. PRIORITY OF DISTRIBUTIONS. (a) Provides that a corporation's indebtedness that arises as a result of the declaration of a distribution and a corporation's indebtedness issued in a distribution are at parity with the corporation's indebtedness to its general, unsecured creditors, except as provided by Subsection (b) or (c). (b) Requires that the indebtedness described by Subsection (a) be subordinated to the extent required by an agreement binding on the corporation, with respect to indebtedness issued in a distribution, as provided by the corporation. (c) Requires that the indebtedness described by Subsection (a) be secured to the extent required by an agreement binding on the corporation. Sec. 21.309. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM SURPLUS. (a) Authorizes a corporation, by resolution of the board of directors of the corporation, to: (1) create a reserve out of the surplus of the corporation; or (2) designate or allocate in any manner a part or all of the corporation's surplus for a proper purpose. (b) Authorizes a corporation to increase, decrease, or abolish a reserve, designation, or allocation in the manner provided by Subsection (a). Sec. 21.310. AUTHORITY FOR SHARE DISTRIBUTIONS. Authorizes the board of directors of a corporation to authorize a share distribution and the corporation to pay a share distribution subject to Section 21.311. Sec. 21.311. LIMITATIONS ON SHARE DISTRIBUTIONS. Prohibits a corporation from paying a share distribution in authorized but unissued shares of any class if: (1) the share distribution will violate the corporation's certificate of formation; (2) the surplus of the corporation is less than the amount required to be transferred to stated capital at the time the share distribution is paid; or (3) the share distribution will be paid to a holder of shares of any other class or series, unless the corporation's certificate of formation provides for the distribution, or payment is authorized by the holders of at least a majority of the outstanding shares of the class or series in which the payment is to be made. Sec. 21.312. VALUE OF SHARES ISSUED AS SHARE DISTRIBUTIONS. (a) Requires a share distribution payable in authorized but unissued shares with par value to be issued at the par value of the respective share. (b) Requires a share distribution payable in authorized but unissued shares without par value to be issued at the value set by the board of directors on the date the share distribution is authorized. Sec. 21.313. TRANSFER OF SURPLUS FOR SHARE DISTRIBUTIONS. (a) Requires an amount of surplus designated by the corporation's board of directors that is not less than the aggregate par value of the shares issued as a share distribution to be transferred to stated capital, on the date a share distribution payable in authorized but unissued shares with par value is paid by a corporation. (b) Requires that an amount of surplus equal to the aggregate value set by the corporation's board of directors with respect to shares under Section 21.312(b) be transferred to stated capital, on the date a share distribution payable in authorized but unissued shares without par value is paid by a corporation. Sec. 21.314. DETERMINATION OF SOLVENCY, NET ASSETS, STATED CAPITAL, AND SURPLUS. (a) Provides that, for purposes of this subchapter, the determination of whether a corporation is or would be insolvent and the determination of the value of a corporation's net assets, stated capital, or surplus and each of the components of net assets, stated capital, or surplus may be based on certain enumerated standards. (b) Provides that Subsection (a) does not apply to the computation of the Texas franchise tax or any other tax imposed on a corporation under the laws of this state. Sec. 21.315. DATE OF DETERMINATION OF SOLVENCY, NET ASSETS, STATED CAPITAL, AND SURPLUS. (a) Requires that a determination of whether a corporation is or would be made insolvent by a distribution or share distribution or a determination of the value of a corporation's net assets, stated capital, or surplus, or each component of net assets, stated capital, or surplus, be made at certain specified times, for purposes of this subchapter. (b) Provides that a distribution is considered to have been made, at the option of the corporation, for purposes of this section when: (1) the indebtedness or obligation is incurred or the provision or other contract is made or takes effect, as appropriate; (2) the indebtedness or obligation is paid; or (3) the shares are redeemed, exchanged, or acquired. Sec. 21.316. LIABILITY OF DIRECTORS FOR WRONGFUL DISTRIBUTIONS. (a) Provides that the directors of a corporation who vote for or assent to a distribution by the corporation that is prohibited by Section 21.303 are liable to the corporation for the amount by which the distribution exceeds the amount permitted by that section to be distributed. (b) Provides that a director is not liable for all or part of the excess amount if a distribution of that amount would have been permitted by Section 21.303 after the date the director authorized the distribution. (c) Provides that a director is not jointly and severally liable under Subsection (a) if, in voting for or assenting to the distribution, the director meets certain specified conditions. (d) Provides that the liability imposed under Subsection (a) is the only liability of a director to the corporation or its creditors for authorizing a distribution that is prohibited by Section 21.303. (e) Provides that this section and Section 21.317 do not limit any liability imposed under Chapter 24, Business & Commerce Code, or the United States Bankruptcy Code. Sec. 21.317. STATUTE OF LIMITATIONS ON ACTION FOR WRONGFUL DISTRIBUTION. Prohibits an action from being brought against a director of a corporation under Section 21.316 after the second anniversary of the date the alleged act giving rise to the liability occurred. Sec. 21.318. CONTRIBUTION FROM CERTAIN SHAREHOLDERS AND DIRECTORS. (a) Provides that director who is held liable for a claim asserted under Section 21.316 is entitled to receive contributions from shareholders who accepted or received the wrongful distribution knowing that it was prohibited by Section 21.303 in proportion to the amount received by the shareholders. (b) Provides that a director who is liable for a claim asserted under Section 21.316 is entitled to receive contributions from each of the other directors who are liable with respect to that claim in an amount appropriate to achieve equity. (c) Provides that the liability provided by Subsection (a) is the only liability of a shareholder to the corporation or a creditor of the corporation for accepting or receiving a distribution by the corporation that is prohibited by Section 21.303. SUBCHAPTER H. SHAREHOLDER MEETINGS; VOTING AND QUORUM Sec. 21.351. ANNUAL MEETING. (a) Requires that an annual meeting of the shareholders of a corporation be held at a time that is stated in or set in accordance with the corporation's bylaws. (b) Authorizes a court in the county in which the principal executive office of the corporation is located, on the application of a shareholder who has previously submitted a written request to the corporation that an annual meeting be held, to order a meeting to be held if the annual meeting is not held or written consent instead of the annual meeting is not executed within any 13-month period, unless the meeting is not required to be held under Section 21.655. (c) Provides that the failure to hold an annual meeting at the designated time does not result in the winding up or termination of the corporation. Sec. 21.352. SPECIAL MEETINGS. (a) Authorizes a special meeting of the shareholders of a corporation to be called by the president, the board of directors, or any other person authorized to call special meetings, or the holders of at least the specified amount stock by the certificate of formation or bylaws of the corporation. (b) Provides that the record date for determining which shareholders of the corporation are entitled to call a special meeting is the date the first shareholder signs the notice of that meeting, unless stated in or set in accordance with the bylaws. (c) Provides that the only business that may be conducted at a special meeting of the shareholders is business that is within the purposes described in the notice. Sec. 21.353. NOTICE OF MEETING. (a) Requires a written notice of a meeting in to be given to each shareholder entitled to vote at the meeting not later than the 10th day and not earlier than the 60th day before the date of the meeting, to be given at the direction of the president, secretary, or other person calling the meeting. (b) Provides that the notice of a special meeting must contain a statement regarding the purpose or purposes of the meeting. Sec. 21.354. INSPECTION OF VOTING LIST. (a) Requires the list of shareholders entitled to vote at the meeting to be subject to inspection by a shareholder during regular business hours, and produced and kept open at the meeting. (b) Provides that the original share transfer records are prima facie evidence of which shareholders are entitled to inspect the list. Sec. 21.355. CLOSING OF SHARE TRANSFER RECORDS. Requires share transfer records that are closed for the purpose of determining which shareholders are entitled to receive notice of a meeting of shareholders to remain closed for at least 10 days immediately preceding the date of the meeting. Sec. 21.356. RECORD DATE FOR WRITTEN CONSENT TO ACTION. Provides that the record date provided in accordance with Section 6.102(a) may not be more than 10 days after the date on which the board of directors adopts the resolution setting the record date. Sec. 21.357. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN CONSENT TO ACTION. Provides that the record date provided by the directors in accordance with Section 6.101 must be at least 10 days before the date on which the particular action requiring the determination of shareholders is to be taken. Sec. 21.358. QUORUM. (a) Provides that the holders of the majority of the shares entitled to vote at a meeting of the shareholders of a corporation that are present or represented by proxy at the meeting are a quorum for the consideration of a matter to be presented at that meeting. (b) Provides that the certificate of formation of a corporation may provide that a quorum is present only if the holders of a specified portion of the shares that is greater than the majority of the shares entitled to vote are represented at the meeting in person or by proxy, or the holders of a specified portion of the shares that is less than the majority but not less than one-third of the shares entitled to vote are represented at the meeting in person or by proxy. (c) Authorizes the shareholders to conduct business properly brought before the meeting until the meeting is adjourned, and provides that the subsequent withdrawal from the meeting of a shareholder or the refusal of a shareholder present at or represented by proxy at the meeting to vote does not negate the presence of a quorum at the meeting. (d) Provides that the shareholders of the corporation at a meeting at which a quorum is not present may adjourn the meeting until the time and to the place as may be determined by a vote of the holders of the majority of the shares who are present or represented by proxy at the meeting. Sec. 21.359. VOTING IN ELECTION OF DIRECTORS. (a) Requires the directors of a corporation to be elected by a plurality of the votes cast by the holders of shares entitled to vote in the election of directors at a meeting of shareholders at which a quorum is present. (b) Authorizes the certificate of formation or bylaws of a corporation to provide that a director of a corporation shall be elected only if the director receives: (1) the vote of the holders of a specified portion, but not less than the majority, of the shares entitled to vote in the election of directors; (2) the vote of the holders of a specified portion, but not less than the majority, of the shares entitled to vote in the election of directors and represented in person or by proxy at a meeting of shareholders at which a quorum is present; or (3) the vote of the holders of a specified portion, but not less than the majority, of the votes cast by the holders of shares entitled to vote in the election of directors at a meeting of shareholders at which a quorum is present. Sec. 21.360. NO CUMULATIVE VOTING RIGHT UNLESS AUTHORIZED. Provides that a shareholder does not have the right to cumulate the shareholder's vote in the election of directors, except as provided by Section 21.361 or 21.362. Sec. 21.361. CUMULATIVE VOTING IN ELECTION OF DIRECTORS. (a) Provides that under specified conditions at each election of directors of the corporation each shareholder entitled to vote at the election is entitled to: (1) vote the number of shares owned by the shareholder for as many candidates as there are directors to be elected and for whose election the shareholder is entitled to vote; or (2) cumulate votes by giving one candidate as many votes as the total of the number of the directors multiplied by the shareholder's shares; or distributing the votes among one or more candidates using the same principle. (b) Provides that cumulative voting permitted by the certificate of formation is permitted only in an election of directors in which a shareholder who intends to cumulate votes has given written notice of that intention to the secretary of the corporation on or before the day preceding the date of the election at which the shareholder intends to cumulate votes. (c) Authorizes all shareholders entitled to vote cumulatively to cumulate their votes if a shareholder gives the notice required by Subsection (b). Sec. 21.362. CUMULATIVE VOTING RIGHT IN CERTAIN CORPORATIONS. Provides that a shareholder of a corporation incorporated before the effective date of this code has the right to cumulatively vote the number of shares the shareholder owns in the election of directors to the extent permitted and in the manner provided by Section 21.361. Authorizes a corporation to limit or deny a shareholder's right to cumulatively vote shares at any time after the effective date of this code by amending its certificate of formation. Sec. 21.363. VOTING ON MATTERS OTHER THAN ELECTION OF DIRECTORS. (a) Provides that with respect to a matter other than the election of directors or a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by this code, the affirmative vote of the holders of the majority of the shares entitled to vote on, and who voted for, against, or expressly abstained with respect to, the matter at a shareholders' meeting of a corporation at which a quorum is present is the act of the shareholders. (b) Provides that with respect to a matter other than the election of directors or a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by this code, the certificate of formation or bylaws of a corporation may provide that the act of the shareholders of the corporation is subject to certain specified conditions. Sec. 21.364. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION. (a) Provides that in this section, a "fundamental action" means an amendment of a certificate of formation, voluntary winding up and termination, or revocation of voluntary winding up and termination. (b) Provides that, except as otherwise provided by this code or the certificate of formation or bylaws of a corporation in accordance with Section 21.363, the vote required for approval of a fundamental action by the shareholders is the affirmative vote of the holders of at least two-thirds of the outstanding shares entitled to vote on the fundamental action. (c) Provides that if a class or series of shares is entitled to vote as a class on a fundamental action, the vote required for approval of the action by the shareholders is the affirmative vote of the holders of at least two-thirds of the outstanding shares in each class or series of shares entitled to vote on the action as a class and at least two-thirds of the outstanding shares otherwise entitled to vote on the action. Requires shares entitled to vote as a class to be entitled to vote only as a class unless otherwise entitled to vote on each matter submitted to the shareholders generally or otherwise provided by the certificate of formation. (d) Provides that unless an amendment to the certificate of formation is undertaken by the board of directors under Section 21.155, separate voting by a class or series of shares of a corporation is required for approval of an amendment to the certificate of formation that would result in the enumerated changes in shares. (e) Provides that unless otherwise provided by the certificate of formation, if the holders of the outstanding shares of a class that is divided into series are entitled to vote as a class on a proposed amendment that would affect equally all series of the class, other than a series in which no shares are outstanding or a series that is not affected by the amendment, the holders of the separate series are not entitled to separate class votes. (f) Provides that the adoption of certain proposed amendments to the certificate of formation do not require the approval of the holders of the outstanding shares of a class or series. Sec. 21.365. CHANGES IN VOTE REQUIRED FOR CERTAIN MATTERS. (a) Authorizes the certificate of formation, with respect to a matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by this code, to provide that the affirmative vote of the holders of a specified portion, but not less than the majority, of the shares entitled to vote on that matter is required for shareholder action on that matter. (b) Authorizes the certificate of formation, with respect to a matter for which the affirmative vote of the holders of a specified portion of the shares of a class or series is required by this code, to provide that the affirmative vote of the holders of a specified portion, but not less than the majority, of the shares of that class or series is required for action of the holders of shares of that class or series on that matter. (c) Prohibits the provision, if a provision of the certificate of formation provides that the affirmative vote of the holders of a specified portion that is greater than the majority of the shares entitled to vote on a matter is required for shareholder action on that matter, from being amended, directly or indirectly, without the same affirmative vote unless otherwise provided by the certificate of formation. (d) Prohibits the provision, if a provision of the certificate of formation provides that the affirmative vote of the holders of a specified portion that is greater than the majority of the shares of a class or series is required for shareholder action on a matter, from being amended, directly or indirectly, without the same affirmative vote unless otherwise provided by the certificate of formation. Sec. 21.366. NUMBER OF VOTES PER SHARE. (a) Requires each outstanding share, regardless of class, except as provided by the certificate of formation of a corporation or this code, to be entitled to one vote on each matter submitted to a vote at a shareholders' meeting. (b) Provides that each reference in this code, unless expressly stated otherwise, to a specified portion of the shares with respect to that matter refers to the portion of the votes entitled to be cast with respect to the shares under the certificate of formation, if the certificate of formation provides for more or less than one vote per share on a matter for all of the outstanding shares or for the shares of a class or series. Sec. 21.367. VOTING IN PERSON OR BY PROXY. Authorizes a shareholder to vote in person or by proxy executed in writing by the shareholder. Provides that a telegram, telex, cablegram, electronic message, or similar transmission by the shareholder, or a photographic, photostatic, facsimile, or similar reproduction of a writing executed by the shareholder, is considered an execution in writing for purposes of this section. Sec. 21.368. TERM OF PROXY. Provides that a proxy is not valid after 11 months after the date the proxy is executed unless otherwise provided by the proxy. Sec. 21.369. REVOCABILITY OF PROXY. Sets forth that "proxy coupled with an interst" includes the appointment of enumerated persons as proxy. Provides that a proxy is revocable unless the proxy form conspicuously states that the proxy is irrevocable, and the proxy is coupled with an interest. Sec. 21.370. ENFORCEABILITY OF PROXY. (a) Provides that an irrevocable proxy is specifically enforceable against the holder of shares or any successor or transferee of the holder if the proxy is noted conspicuously on the certificate representing the shares subject to the proxy, or in the case of uncertificated shares, notation of the proxy is contained in the notice sent under Section 3.205 with respect to the shares subject to the proxy. (b) Provides that an irrevocable proxy that is otherwise enforceable is ineffective against a transferee for value without actual knowledge of the existence of the irrevocable proxy at the time of the transfer or against a subsequent transferee, regardless of whether the transfer is for value, unless the proxy is noted conspicuously on the certificate representing the shares subject to the proxy, and, in the case of uncertificated shares, notation of the proxy is contained in the notice sent under Section 3.205 with respect to the shares subject to the proxy. (c) Requires an irrevocable proxy to be specifically enforceable against a person who is not a transferee for value from the time the person acquires actual knowledge of the existence of the irrevocable proxy. Sec. 21.371. PROCEDURES IN BYLAWS RELATING TO PROXIES. Authorizes a corporation to establish in the corporation's bylaws procedures consistent with this code for determining the validity of proxies and determining whether shares that are held of record by a bank, broker, or other nominee are represented at a meeting of shareholders. Authorizes the procedures to incorporate rules of and determinations made by a stock exchange or self-regulatory organization regulating the corporation or that bank, broker, or other nominee. Sec. 21.372. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT. Authorizes the shareholders of a corporation to act with less than unanimous written consent in the manner provided by Section 6.202 if action by less than unanimous written consent is authorized by the corporation's certificate of formation or a bylaw adopted by the corporation's shareholders. SUBCHAPTER I. BOARD OF DIRECTORS Sec. 21.401. MANAGEMENT BY BOARD OF DIRECTORS. Requires the board of directors of a corporation, except as provided by Section 21.101 or Subchapter O, to exercise or authorize the exercise of the powers of the corporation, and manage the business and affairs of the corporation. Authorizes a director, in discharging the duties of director under this code or otherwise and in considering the best interests of the corporation, to consider the long-term and short-term interests of the corporation and the shareholders of the corporation, including the possibility that those interests may be best served by the continued independence of the corporation. Sec. 21.402. BOARD MEMBER ELIGIBILITY REQUIREMENTS. Provides that a person is not required to be a resident of this state or a shareholder of the corporation to serve as a director, unless the certificate of formation or bylaws of the corporation provide otherwise. Authorizes the certificate of formation or bylaws to prescribe other qualifications for directors. Sec. 21.403. NUMBER OF DIRECTORS. Authorizes the board of directors of a corporation to consist of one or more directors. Requires the corporation's certificate of formation to set the number constituting the initial board of directors. Requires the certificate of formation or bylaws of the corporation to set the number constituting each subsequent board of directors or provide for the manner in which the number of directors is determined. Authorizes the number of directors to be increased or decreased by amendment to, or as provided by, the certificate of formation or bylaws. Prohibits a decrease in the number of directors from shortening the term of an incumbent director. Provides that, if the certificate of formation or bylaws do not set the number constituting the board of directors or provide for the manner in which the number of directors must be determined, the number of directors will be the same as the number constituting the initial board of directors as set by the certificate of formation. Sec. 21.404. DESIGNATION OF INITIAL BOARD OF DIRECTORS. Provides that the certificate of formation of a corporation must state the names and addresses of the members of the initial board of directors of the corporation. Sec. 21.405. ELECTION OF BOARD OF DIRECTORS. Requires the holders of shares entitled to vote in the election of directors to elect directors for the term provided under Section 21.407, except as provided by Section 21.408, at the first annual meeting of shareholders of a corporation and at each subsequent annual meeting of shareholders. Authorizes a corporation's certificate of formation to provide that the holders of a class or series of shares or a group of classes or series of shares are entitled to elect one or more directors of the corporation. Sec. 21.406. VOTING BY DIRECTORS. Authorizes the certificate of formation of a corporation to provide that directors elected by the holders of a class or series of shares or by a group of classes or series of shares entitled to elect one or more directors, as provided by Section 21.405, are entitled to cast more or less than one vote on specified matters. Provides that unless expressly stated otherwise, each reference in this code or in a corporation's certificate of formation or bylaws to a specified portion of the directors means the portion of the votes entitled to be cast by the directors to which the reference applies. Sec. 21.407. TERM OF OFFICE. Requires a director to hold office, unless otherwise provided, from the date the director is elected and qualified or named in the corporation's certificate of formation until the next annual meeting of shareholders and until the director's successor is elected and qualified. Sec. 21.408. SPECIAL TERMS OF OFFICE. (a) Authorizes the certificate of formation or bylaws of a corporation to provide that all or some of the board of directors may be divided into two or three classes. Requires the two or three classes to include the same or a similar number of directors as each other class. (b) Sets forth the expiration of the terms of office of directors constituting the first, second, and third class. (c) Requires the shareholders to elect a number of directors equal to the number of the class of directors whose terms expire at the time of the meeting, if the certificate of formation or bylaws provide for staggered terms of directors. Requires the directors elected at an annual meeting to hold office until the second succeeding annual meeting, if there are two classes, or until the third succeeding annual meeting, if there are three classes. (d) Provides that, unless provided by the certificate of formation or a bylaw adopted by the shareholders, staggered terms for directors must be effected at a meeting of shareholders at which directors are elected. Prohibits staggered terms for directors from being effected if any shareholder has the right to cumulate votes for the election of directors and the board of directors consists of fewer than nine members. (e) Requires the directors elected by the holders of a class or series of shares or a group of classes or series of shares in accordance with the certificate of formation to hold office for the terms specified by the certificate of formation. Sec. 21.409. REMOVAL OF DIRECTORS. (a) Authorizes the shareholders of the corporation to remove a director or the entire board of directors of the corporation, with or without cause, at a meeting called for that purpose, by a vote of the holders of a specified portion, but not less than the majority, of the shares entitled to vote at an election of directors. (b) Authorizes only the holders of shares of that class, series, or group to vote on the removal of a director elected by the holders of shares of that class, series, or group, if the certificate of formation entitles the holders to elect one or more directors. (c) Prohibits a director from being removed if the votes cast against the removal would be sufficient to elect the director if cumulatively voted at an election of the entire board of directors, or if there are classes of directors, at an election of the class of directors of which the director is a part. (d) Prohibits a director, in the case of a corporation the directors of which serve staggered terms, from being removed except for cause unless the certificate of formation provides otherwise. Sec. 21.410. VACANCY. (a) Authorizes a vacancy occurring in the initial board of directors before the issuance of shares to be filled by the affirmative vote or written consent of the majority of the incorporators or by the affirmative vote of the majority of the remaining directors, even if the majority of the remaining directors constitutes less than a quorum of the board of directors. (b) Authorizes a vacancy occurring in the board of directors after the issuance of shares to be filled by election at an annual or special meeting of shareholders called for that purpose or by the affirmative vote of the majority of the remaining directors, even if the majority of directors constitutes less than a quorum of the board of directors. (c) Provides that the term of a director elected to fill a vacancy occurring in the board of directors, including the initial directors, is the unexpired term of the director's predecessor in office. (d) Authorizes a vacancy to be filled because of an increase in the number of directors to be filled by election at an annual or special meeting of shareholders called for that purpose or by the board of directors for a term of office continuing only until the next election of one or more directors by the shareholders, except as provided by Subchapter (e). Prohibits the board of directors from filling more than two vacancies created by an increase in the number of directors during a period between two successive annual meetings of shareholders. (e) Authorizes a vacancy in the board of directors of the corporation or a newly created vacancy in the board of directors that the certificate of formation entitles the holders of a class or series of shares or group of classes or series of shares to elect to be filled only by the affirmative vote of the majority of the directors then in office elected by the class, series, or group, by the sole remaining director elected in that manner, or by the affirmative vote of the holders of the outstanding shares of the class, series, or group, unless otherwise authorized by a corporation's certificate of formation Sec. 21.411. NOTICE OF MEETING. Authorizes regular meetings of the board of directors of a corporation to be held with or without notice as prescribed by the corporation's bylaws. Requires special meetings of the board of directors to be held with notice as prescribed by the bylaws. Provides that a notice of a board meeting is not required to specify the business to be transacted at the meeting or the purpose of the meeting, unless required by the bylaws. Sec. 21.412. WAIVER OF NOTICE. Provides that if the bylaws of a corporation require notice of a meeting to be given to a director, a written waiver of the notice signed by the director entitled to the notice, before or after the meeting, is equivalent to the giving of the notice. Provides that the attendance of a director at a board meeting constitutes a waiver of notice of the meeting, unless the director attends the meeting for the express purpose of objecting to the transaction of business at the meeting because the meeting has not been lawfully called or convened. Provides that a waiver of notice of a board meeting is not required to specify the business to be transacted at the meeting or the purpose of the meeting unless required by the bylaws. Sec. 21.413. QUORUM. (a) Provides that a quorum of the board of directors is the majority of the number of directors set or established in the manner provided by the certificate of formation or bylaws of a corporation unless the laws of this state, the certificate of formation, or the bylaws require a different number or portion. Prohibits the certificate of formation and the bylaws to provide that less than one-third of the number of directors constitutes a quorum. Sec. 21.414. DISSENT TO ACTION. Sets forth the enumerated actions of a director that otherwise presumes a director of a corporation who is present at a meeting of the board of directors at which action has been taken is presumed to have assented to the action taken. Prohibits a director who voted in favor of an action to dissent to the action. Sec. 21.415. ACTION BY DIRECTORS. (a) Provides that an act of a majority of the directors present at a meeting at which a quorum is present is the act of the board of directors of a corporation, unless the act of a greater number is required by the certificate of formation or bylaws of the corporation or by this code. (b) Provides that a written consent stating the action taken and signed by all members of the board of directors also is an act of the board of directors,unless otherwise provided by the certificate of formation or bylaws. Sec. 21.416. COMMITTEES OF BOARD OF DIRECTORS. (a) Authorizes the board of directors of the corporation, by resolution adopted by the majority of the entire board of directors, if authorized by the certificate of formation or bylaws of a corporation, to designate: (1) committees composed of one or more directors; or (2) directors as alternate members of committees to replace absent or disqualified committee members at a committee meeting, subject to any limitations imposed by the board of directors. (b) Provides that the committee has the authority of the board of directors, to the extent provided by the resolution designating a committee or the certificate of formation or bylaws and subject to Subsection (c). (c) Prohibits a committee of the board of directors from: (1) amending the certificate of formation, except as otherwise provided by this subsection: (2) proposing a reduction of stated capital under specified sections; (3) approving a plan of merger, share exchange, or conversion of the corporation; (4) recommending to shareholders the sale, lease, or exchange of all or substantially all of the property and assets of the corporation not made in the usual and regular course of its business; (5) recommending to the shareholders a voluntary winding up and termination or a revocation of a voluntary winding up and termination; (6) amending, altering, or repealing the bylaws or adopt new bylaws; (7) filling vacancies on the board of directors; (8) filling vacancies on or designate alternate members of a committee of the board of directors; (9) filling a vacancy to be filled because of an increase in the number of directors; (10) electing or removing officers of the corporation or members or alternate members of a committee of the board of directors; (11) setting the compensation of the members or alternate members of a committee of the board of directors; or (12) altering or repealing a resolution of the board of directors that states that it may not be amended or repealed by a committee of the board of directors. (d) Authorizes a committee of the board of directors to authorize a distribution or the issuance of shares under certain conditions. (e) Authorizes the board of directors to remove a member of a committee appointed by the board if the board determines the removal is in the best interests of the corporation. Provides that the removal of the member will be without prejudice to any contract rights of the person removed. Specifies that the appointment of a member of a committee does not create contract rights. (f) Provides that the designation and delegation of authority to a committee of the board of directors does not relieve the board of directors or a director of responsibility imposed by law. Sec. 21.417. ELECTION OF OFFICERS. Requires the board of directors of a corporation to elect a president and a secretary at the time and in the manner prescribed by the corporation's bylaws. Requires other officers of the board of directors to be elected in accordance with Section 3.102. Sec. 21.418. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED DIRECTORS AND OFFICERS. (a) Applies this section only to a contract or transaction between a corporation and: (1) one or more of the corporation's directors or officers; or (2) an entity or other organization in which one or more of certain corporation's directors or officers. (b) Provides that an otherwise valid contract or transaction is valid, notwithstanding certain conditions enumerated by this subsection. (c) Authorizes common or interested directors of a corporation to be included in determining the presence of a quorum at a meeting of the corporation's board of directors, or a committee of the board of directors, that authorizes the contract or transaction. SUBCHAPTER J. FUNDAMENTAL BUSINESS TRANSACTIONS Sec. 21.451. DEFINITIONS. Defines "participating shares," "shares," and "voting shares." Sec. 21.452. APPROVAL OF MERGER. (a) Provides that a corporation that is a party to the merger under Chapter 10 must approve the merger by complying with this section. (b) Requires the board of directors of the corporation to adopt a resolution as specified by this subsection. (c) Requires the plan of merger, except as otherwise provided by this subchapter or Chapter 10, to be submitted to the shareholders of the corporation for approval as provided by this subchapter. Authorizes the board of directors to place conditions on the submission of the plan of merger to the shareholders. (d) Requires the board of directors, if the board of directors approves a plan of merger required to be approved by the shareholders of the corporation but does not adopt a resolution recommending that the plan of merger be approved by the shareholders, to communicate to the shareholders the reason for the board's determination to submit the plan of merger without a recommendation. (e) Requires the shareholders of the corporation, except as provided by Chapter 10 or Sections 21.457-21.459, to approve the plan of merger as provided by this subchapter. Sec. 21.453. APPROVAL OF CONVERSION. (a) Provides that a corporation must approve a conversion under Chapter 10 by complying with this section. (b) Requires the board of directors of the corporation to adopt a resolution that approves the plan of conversion and: (1) recommends that the plan of conversion be approved by the shareholders of the corporation; or (2) directs that the plan of conversion be submitted to the shareholders for approval without recommendation if the board of directors determines for any reason not to recommend approval of the plan of conversion. (c) Requires the plan of conversion to be submitted to the shareholders of the corporation for approval as provided by this subchapter. Authorizes the board of directors to place conditions on the submission of the plan of conversion to the shareholders. (d) Requires the board of directors, if the board of directors approves a plan of conversion but does not adopt a resolution recommending that the plan of conversion be approved by the shareholders of the corporation, to communicate to the shareholders the reason for the board's determination to submit the plan of conversion without a recommendation. (e) Requires the shareholders of the corporation to approve the plan of conversion as provided by this subchapter, except as provided by Sections 21.457-21.459. Sec. 21.454. APPROVAL OF INTEREST EXCHANGE. (a) Provides that a corporation the shares of which are to be acquired in an interest exchange under Chapter 10 must approve the interest exchange by complying with this section. (b) Requires the board of directors to adopt a resolution that approves the plan of exchange and: (1) recommends that the plan of exchange be approved by the shareholders of the corporation; or (2) directs that the plan of exchange be submitted to the shareholders for approval without recommendation if the board of directors determines for any reason not to recommend approval of the plan of exchange. (c) Requires the plan of exchange to be submitted to the shareholders of the corporation for approval as provided by this subchapter. Authorizes the board of directors to place conditions on the submission of the plan of exchange to the shareholders. (d) Requires the board of directors to communicate to the shareholders the reason for the board's determination to submit the plan of exchange to shareholders without a recommendation, if the board of directors approves a plan of exchange but does not adopt a resolution recommending that the plan of exchange be approved by the shareholders of the corporation. (e) Requires the shareholders of the corporation to approve the plan of exchange as provided by this subchapter, except as provided by Sections 21.457-21.459. Sec. 21.455. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF ASSETS. (a) Provides that a sale, lease, pledge, mortgage, assignment, transfer, or other conveyance of an interest in real property or other assets of the corporation does not require the approval or consent of the shareholders of the corporation unless the transaction constitutes a sale of all or substantially all of the assets of the corporation, except as provided by the certificate of formation of a domestic corporation. (b) Provides that a corporation must approve the sale of all or substantially all of its assets by complying with this section. (c) Requires the board of directors of the corporation to adopt a resolution that approves the sale of all or substantially all of the assets of the corporation and: (1) recommends that the sale of all or substantially all of the assets of the corporation be approved by the shareholders of the corporation; or (2) directs that the sale of all or substantially all of the assets of the corporation be submitted to the shareholders for approval without recommendation if the board of directors determines for any reason not to recommend approval of the sale. (d) Requires the resolution proposing the sale of all or substantially all of the assets of the corporation to be submitted to the shareholders of the corporation for approval as provided by this subchapter. Authorizes the board of directors to place conditions on the submission of the proposed sale to the shareholders. (e) Requires the board of directors to communicate to the shareholders the reason for the board's determination to submit the proposed sale to shareholders without a recommendation, if the board of directors approves the sale of all or substantially all of the assets of the corporation but does not adopt a resolution recommending that the proposed sale be approved by the shareholders of the corporation. (f) Requires the shareholders of the corporation to approve the sale of all or substantially all of the assets of the corporation as provided by this subchapter. Authorizes the board of directors to abandon the sale of all or substantially all of the assets of the corporation, subject to the rights of a third party under a contract relating to the assets, without further action or approval by the shareholders, after the approval of the sale by the shareholders.. Sec. 21.456. GENERAL PROCEDURE FOR SUBMISSION TO SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION. (a) Requires a corporation, if a fundamental business transaction involving the corporation is required to be submitted to the shareholders of the corporation under this subchapter, to notify each shareholder of the corporation that the fundamental business transaction is being submitted to the shareholders for approval as required by this subchapter, regardless of whether the shareholder is entitled to vote on the matter. (b) Requires the notice required by Subsection (a) to contain or be accompanied by a copy or summary of the plan of merger, conversion, or interest exchange, as appropriate, if the fundamental business transaction is a merger, conversion, or interest exchange. (c) Provides that if the fundamental business transaction is to be considered at a meeting of the shareholders of the corporation, the notice of the meeting must: (1) be given not later than the 21st day before the date of the meeting; and (2) state that the purpose, or one of the purposes, of the meeting is to consider the fundamental business transaction. (d) Provides that if the fundamental business transaction is being submitted to shareholders by written consent, the notice required by Subsection (a) must: (1) be given not later than the 21st day before the date the fundamental business transaction takes effect; and (2) state that the purpose, or one of the purposes, of the solicitation of written consents from the shareholders is to receive approval for the fundamental business transaction. Sec. 21.457. GENERAL VOTE REQUIREMENT FOR APPROVAL OF FUNDAMENTAL BUSINESS TRANSACTION. (a) Provides that the affirmative vote of the holders of at least two-thirds of the outstanding shares of the corporation entitled to vote on a fundamental business transaction is required to approve the transaction, except as provided by this code or the certificate of formation or bylaws of a corporation in accordance with Section 21.363.. (b) Establishes that shares of a class or series that are not otherwise entitled to vote on matters submitted to shareholders generally will not be entitled to vote for the approval of a fundamental business transaction, unless provided by the certificate of formation or Section 21.458. (c) Provides that in addition to the vote required under Subsection (a), the affirmative vote of the holders of at least two-thirds of the outstanding shares in each class or series of shares entitled to vote on the fundamental business transaction as a class or series is required to approve the transaction, except as provided by this code, if a class or series of shares of a corporation is entitled to vote on a fundamental business transaction as a class or series. (d) Specifies that, unless required by the certificate of formation, approval of a merger by shareholders is not required under this code for a corporation that is a party to the plan of merger unless that corporation is also a party to the merger. Sec. 21.458. CLASS VOTING REQUIREMENTS FOR CERTAIN FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Specifies that separate voting by a class or series of shares of a corporation is required for approval of a plan of merger or conversion under certain conditions described by this subsection. (b) Specifies that separate voting by a class or series of shares of a corporation is required for approval of a plan of exchange if shares of that class or series are to be exchanged under the terms of the plan of exchange, or that class or series is entitled under the certificate of formation to vote as a class on the plan of exchange. (c) Specifies that separate voting by a class or series of shares of a corporation is required for approval of a sale of all or substantially all of the assets of a corporation if that class or series of shares is entitled under the certificate of formation to vote as a class on the sale of the corporation's assets. Sec. 21.459. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Provides that a plan of merger is not required to be approved by the shareholders of a corporation, unless required by the corporation's certificate of formation, if : (1) the corporation is the sole surviving corporation in the merger; (2) the certificate of formation of the corporation following the merger will not differ from the corporation's certificate of formation before the merger; (3) immediately after the effective date of the merger, each shareholder of the corporation whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations, and relative rights; (4) the sum of the voting power of the number of voting shares outstanding immediately after the merger and the voting power of securities that may be acquired on the conversion or exercise of securities issued under the merger does not exceed by more than 20 percent the voting power of the total number of voting shares of the corporation that are outstanding immediately before the merger; and (5) the sum of the number of participating shares that are outstanding immediately after the merger and the number of participating shares that may be acquired on the conversion or exercise of securities issued under the merger does not exceed by more than 20 percent the total number of participating shares of the corporation that are outstanding immediately before the merger. (b) Provides that a plan of merger effected under Section 10.005 or 10.006 does not require the approval of the shareholders of the corporation, unless required by the certificate of formation. Sec. 21.460. RIGHTS OF DISSENT AND APPRAISAL. Establishes that a shareholder of a domestic corporation has the rights of dissent and appraisal under Subchapter H, Chapter 10, with respect to a fundamental business transaction. SUBCHAPTER K. WINDING UP AND TERMINATION Sec. 21.501. APPROVAL OF VOLUNTARY WINDING UP AND REINSTATEMENT OR REVOCATION OF VOLUNTARY WINDING UP. Requires a corporation to approve a voluntary winding up in accordance with Chapter 11, a reinstatement in accordance with Section 11.202, or revocation of a voluntary winding up in accordance with Section 11.151 by complying with one of the procedures prescribed by this subchapter. Sec. 21.502. CERTAIN PROCEDURES RELATING TO WINDING UP. Provides that a corporation must follow one of the procedures set forth in this section, to approve a voluntary winding up, a reinstatement, or a revocation of a voluntary winding up. Sec. 21.503. MEETING OF SHAREHOLDERS; NOTICE. (a) Requires each shareholder of record entitled to vote at a meeting described by Section 21.502 to be given written notice stating that the purpose or one of the purposes of the meeting is to consider the winding up, reinstatement, or revocation of the voluntary winding up of the corporation. Requires the notice to be given in the time and manner provided by this code for the giving of notice of shareholders' meetings. (b) Requires a vote of shareholders entitled to vote at the meeting to be taken on the resolution to wind up, reinstate, or revoke the winding up of the corporation. Provides that the resolution must be approved on receipt of the affirmative vote required by Section 21.364. SUBCHAPTER L. DERIVATIVE PROCEEDINGS Sec. 21.551. DEFINITIONS. Defines "derivative proceeding" and "shareholder." Sec. 21.552. STANDING TO BRING PROCEEDING. Prohibits a shareholder from instituting or maintaining a derivative proceeding unless: (1) the shareholder was a shareholder of the corporation at the time of the act or omission complained of, or became a shareholder by operation of law from a person that was a shareholder at the time of the act or omission complained of; and (2) the shareholder fairly and adequately represents the interests of the corporation in enforcing the right of the corporation. Sec. 21.553. DEMAND. Prohibits a shareholder from instituting a derivative proceeding until the 91st day after the date a written demand is filed with the corporation requesting that the corporation take suitable action. Provides three exceptions to the 90-day period that allows a derivative proceeding to go forward. Sec. 21.554. DETERMINATION BY DIRECTORS OR INDEPENDENT PERSONS. Provides that the determination of how to proceed on allegations made in a demand or petition relating to a derivative proceeding must be made by: _an affirmative vote of the majority of the independent and disinterested directors present at a meeting of the board at which interested directors are not present at the time of the vote if the independent and disinterested directors constitute a quorum of the board; _an affirmative vote of the majority of a committee consisting of two or more independent and disinterested directors appointed by an affirmative vote of the majority of one or more independent and disinterested directors present at a meeting of the board, regardless of whether the independent and disinterested directors constitute a quorum of the board; or _a panel of one or more independent and disinterested persons appointed by the court on a motion by the limited liability company listing the names of the persons to be appointed and stating that, to the best of the limited liability company's knowledge, the persons to be appointed are disinterested and qualified to make the determinations contemplated by Section 101.458. (b) Requires the court to appoint the panel if it finds that the persons recommended by the corporation are independent and disinterested and are otherwise qualified with respect to expertise, experience, independent judgment, and other factors considered appropriate by it under the circumstances to make the determinations. Prohibits a person appointed by the court to the panel from being held liable to the corporation or its shareholders for an action taken or omission made by the person in that capacity, except for acts or omissions constituting fraud or wilful misconduct. Sec. 21.555. STAY OF PROCEEDING. (a) Requires the court to stay a derivative proceeding, if the domestic or foreign corporation that is the subject of a derivative proceeding commences an inquiry into the allegations made in a demand or petition and the person or group of persons described by Section 21.554 is conducting an active review of the allegations in good faith, until the review is completed and a determination is made by the person or group regarding what further action, if any, should be taken. (b) Requires the domestic or foreign corporation, in order to obtain a stay, to provide the court with a written statement agreeing to advise the court and the shareholder making the demand of the determination promptly on the completion of the review of the matter. Authorizes the review, on motion, of a stay every 60 days for the continued necessity of the stay. (c) Authorizes the renewal of the stay, if the review and determination made by the person or group is not completed before the 61st day after the date on which the court orders the stay, for one or more additional 60-day periods if the domestic or foreign corporation provides the court and the shareholder with a written statement of the status of the review and the reasons why a continued extension of the stay is necessary. Sec. 21.556. DISCOVERY. (a) Requires the discovery conducted by a shareholder after the filing of the derivative proceeding, if a domestic or foreign corporation proposes to dismiss a derivative proceeding under Section 21.558, to be limited to facts relating to whether the person or group of persons described by Section 21.558 is independent and disinterested, the good faith of the inquiry and review by the person or group, and the reasonableness of the procedures followed by the person or group in conducting the review. (b) Prohibits the expansion of this type of discovery from including a fact or substantive matter regarding the act, omission, or other matter that is the subject matter of the derivative proceeding. Authorizes the expansion of the scope of discovery if the court determines after notice and hearing that a good faith review of the allegations for purposes of Section 21.558 has not been made by an independent and disinterested person or group in accordance with that section. Sec. 21.557. TOLLING OF STATUTE OF LIMITATIONS. Provides that filing a written demand with the corporation under Section 21.553 tolls the statute of limitations on the claim until the earlier of the 91st day after the date of the demand or the 31st day after the date the corporation advises the shareholder that the demand has been rejected or the review has been completed. Sec. 21.558. DISMISSAL OF DERIVATIVE PROCEEDING. (a) Requires a court to dismiss a derivative proceeding on a motion by the corporation if the person or group of persons described by Section 21.554 determines in good faith that continuation of the derivative proceeding is not in the best interests of the corporation. (b) Requires the burden of proof, in determining whether the requirements of Subsection (a) have been met, to fall on either the plaintiff shareholder under three circumstances or the corporation in any other circumstance. Sec. 21.559. PROCEEDING INSTITUTED AFTER DEMAND REJECTED. Provides that in the case where a derivative proceeding is instituted after a demand is rejected the petition must allege with particularity the facts that establish that the rejection was not made in accordance with the requirements of Sections 21.554 and 21.558. Sec. 21.560. DISCONTINUANCE OR SETTLEMENT. Prohibits the discontinuation or settlement of a derivative proceeding without court approval. Requires the court to direct that notice be given to the affected shareholders if it determines that a proposed discontinuance or settlement may substantially affect the interests of other shareholders. Sec. 21.561. PAYMENT OF EXPENSES. Defines "expenses" for purposes of this section. Authorizes the court, on termination of a derivative proceeding, to order either the domestic or foreign company or the plaintiff to pay the expenses of its adversary, depending on which party the court finds has benefitted from the proceeding. Authorizes the court, on termination of a derivative proceeding, to order a party to pay the expenses incurred by another party relating to the filing of a pleading, motion, or other paper if the court finds the pleading, motion, or other paper legally insufficient in fact or law or if used for an improper purpose. Sec. 21.562. APPLICATION TO FOREIGN CORPORATIONS. Provides that in a derivative proceeding brought in the right of a foreign corporation the matters covered by this subchapter are governed by the laws of the foreign corporation's place of organization, except for Sections 21.555, 21.560, and 21.561, which are procedural provisions and do not relate to the internal affairs of the foreign corporation. Provides that in the case of matters relating to a foreign corporation under Section 21.554, a reference to a person or group of persons described by that section refers to a person or group entitled under the laws of the foreign corporation's place of organization to review and dispose of a derivative proceeding. Requires the governance of the standard of review of a decision made by the person or group to dismiss the derivative proceeding by the laws of the foreign corporation's place of organization. Sec. 21.563. CLOSELY HELD CORPORATION. Defines "closely held corporation" for purposes of this section. Specifies that Sections 21.552-21.559 do not apply to a closely held corporation, except that a court is authorized to treat a derivative proceeding brought by a shareholder of a closely held corporation as a direct action brought by the shareholder for the shareholder's own benefit, and that a recovery in a direct or derivative proceeding by a shareholder is authorized to be paid directly to the plaintiff or to the corporation if necessary to protect the interests of creditors or other shareholders of the corporation. SUBCHAPTER M. AFFILIATED BUSINESS COMBINATIONS Sec. 21.601. DEFINITIONS. Defines "issuing public corporation," "person," "share acquisition date," "subsidiary," and "voting share" for purposes of this subchapter. Sec. 21.602. AFFILIATED SHAREHOLDER. (a) Defines an "affiliated shareholder" for purposes of this subchapter. Sec. 21.603. BENEFICIAL OWNER OF SHARES OR SIMILAR SECURITIES. Defines an "beneficial owner of shares or similar securities" for purposes of this section. Sec. 21.604. BUSINESS COMBINATION. Sets forth the activities the results of which constitute a business combination. Sec. 21.605. CONTROL. Establishes the definition of "control of another person." Sec. 21.606. THREE-YEAR MORATORIUM ON CERTAIN BUSINESS COMBINATIONS. Establishes a three-year moratorium on business combinations between an issuing public corporation and an affiliated shareholder unless the combination is approved by the board of directors of the issuing public corporation before the affiliated shareholder's acquisition date or by two-thirds of the shareholders of the issuing public corporation not less than six months after the acquisition date. Sec. 21.607. APPLICATION OF MORATORIUM. Sets forth the circumstances under which the three-year moratorium imposed by Section 21.606 is inapplicable. Sec. 21.608. EFFECT ON OTHER ACTIONS. Provides that Subchapter M does not affect the validity of or prevent any action other than a business combination and that the board of directors does not have any liability based on whether an election is made or not made under Subchapter M. Sec. 21.609. CONFLICTING PROVISIONS. Provides that Subchapter M controls over any conflicting provision elsewhere in this code. SUBCHAPTER N. PROVISIONS RELATING TO INVESTMENT COMPANIES Sec. 21.651. DEFINITION. Defines "investment company." Sec. 21.652. ESTABLISHING CLASS OR SERIES OF SHARES; CHANGE IN NUMBER OF SHARES. Authorizes the board of directors of an investment company to take certain actions with respect to creating classes and series of shares and increasing and decreasing the number of shares within a class or series that are in addition to those permitted elsewhere in this code. Sets forth procedures and requirements for doing so. Sec. 21.653. REQUIRED STATEMENT RELATING TO SHARES. Requires the investment company to file a statement concerning a modification of any class or series of shares by the board of directors of an investment company. Sets forth the information the statement must contain. Sec. 21.654. TERM OF OFFICE OF DIRECTORS. Requires the director of an investment company to serve the term for which the director is elected until a successor is elected and qualified. Sec. 21.655. MEETINGS OF SHAREHOLDERS. Provides that, if provided in the certificate of formation or bylaws, an investment company is not required to hold annual meetings of shareholders or elect directors in a year in which an election is not required by the Investment Company Act. SUBCHAPTER O. CLOSE CORPORATION Sec. 21.701. DEFINITIONS. Defines "close corporation," "close corporation provision," "ordinary corporation," and "shareholders' agreement." Sec. 21.702. APPLICABILITY OF SUBCHAPTER. Provides that Subchapter O applies only to close corporations and that the remaining provisions of this chapter apply to close corporations to the extent not inconsistent with Subchapter O. Sec. 21.703. FORMATION OF CLOSE CORPORATIONS. Requires that a close corporation be formed in accordance with Chapter 3 and Sections 21.051 and 21.704. Sec. 21.704. SUPPLEMENTAL PROVISION FOR CERTIFICATE OF FORMATION. Provides that, in addition to other provisions required or permitted in a close corporation's certificate of formation, its original, amended, or restated certificate of formation must contain the words "This corporation is a close corporation." Sec. 21.705. ADOPTION OF AMENDMENT FOR CLOSE CORPORATION STATUS. Authorizes an ordinary corporation to become a close corporation and provides that an amendment adopting close corporation status must be approved by all of the shareholders. Sec. 21.706. ADOPTION OF CLOSE CORPORATION STATUS THROUGH MERGER, SHARE EXCHANGE, OR CONVERSION. Authorizes a surviving or new corporation resulting from a merger or conversion, or a corporation that acquires a corporation in an interest exchange, to become a close corporation. Provides that a plan of merger, exchange, or conversion adopting close corporation status to be approved by all of the shareholders. Sec. 21.707. EXISTING CLOSE CORPORATION. Makes this section applicable to an existing corporation that elected to become a close corporation before the effective date of this code, and provides that the existing agreement among the shareholders is considered to be a shareholders' agreement. Provides that any share certificate representing shares of the close corporation issued or delivered after the effective date of this code must conform with Section 21.732. Sec. 21.708. TERMINATION OF CLOSE CORPORATION STATUS. Authorizes a close corporation to terminate its status by filing a statement of termination, amending the certificate of formation to delete the statement that it is a close corporation, engaging in a merger, interest exchange, or conversion unless the plan provides that the surviving or new corporation will continue as or become a close corporation, or instituting a judicial proceeding to enforce a provision providing for termination. Sec. 21.709. STATEMENT TERMINATING CLOSE CORPORATION STATUS; FILING; NOTICE. Provides that a time or event specified in a close corporation provision requiring termination of close corporation status will have the effect of terminating that status. Provides that after the time or occurrence of the event, a statement of termination of close corporation status must be signed by an officer on behalf of the close corporation and filed with the secretary of state. Sets forth the information which a statement terminating close corporation status must contain. Requires the corporation to deliver or mail a copy of the statement to each shareholder. Sec. 21.710. EFFECT OF TERMINATION OF CLOSE CORPORATION STATUS. Sets forth the effects of termination of close corporation status on the corporation. Sec. 21.711. SHAREHOLDERS' MEETING TO ELECT DIRECTORS. Requires a shareholders' meeting to be called promptly after termination of a close corporation status for the purpose of electing directors. Sec. 21.712. TERM OF DIRECTORS. Requires a director succeeding to the management of the corporation to serve until the next annual meeting and until a successor is elected and qualifies. Requires the shareholders to act as directors until directors are elected. Sec. 21.713. MANAGEMENT. Requires a close corporation to be managed by a board of directors in the same manner an ordinary corporation would be managed or in the manner provided by the close corporation's certificate of formation or by a shareholders' agreement of the close corporation. Sec. 21.714. SHAREHOLDERS' AGREEMENT. Authorizes the shareholders to enter into one or more shareholders' agreements, which may regulate certain affairs of a close corporation or the relationships among the shareholders. Sec. 21.715. EXECUTION OF SHAREHOLDERS' AGREEMENT. Requires a shareholders' agreement to be executed by each shareholder at the time of execution, whether or not the shareholder has voting power, in an existing close or ordinary corporation, and by each subscriber to the corporation's shares in a close corporation that is being formed. Sec. 21.716. ADOPTION OF AMENDMENT OF SHAREHOLDERS' AGREEMENT. Authorizes the adoption of an amendment to the shareholders' agreement of a close corporation only by the written consent of each person who would be required to execute the shareholders' agreement if it were being executed originally at the time of adoption of the amendment, whether or not the person has voting power in the close corporation. Sec. 21.717. DELIVERY OF SHAREHOLDERS' AGREEMENT. Requires the close corporation to deliver a complete copy of a shareholders' agreement to certain affected persons and provides that failure to deliver the agreement does not invalidate the shareholders' agreement. Sec. 21.718. STATEMENT OF OPERATION AS CLOSE CORPORATION. Requires a close corporation that conducts its business and affairs under a shareholders' agreement to file a statement of operation with the secretary of state. Sets forth the information which the statement must contain. Requires the statement to be executed by an officer on behalf of the corporation. Provides that the fact that the close corporation conducts its business and affairs under a shareholders' agreement becomes a matter of public record on the filing of the statement. Sec. 21.719. VALIDITY AND ENFORCEABILITY OF SHAREHOLDERS' AGREEMENT. Provides that a shareholders' agreement is enforceable and valid despite the fact that it eliminates the board of directors, imposes restrictions on the authority of the board of directors, or treats the affairs of the close corporation as if it were a partnership. Authorizes a close corporation, any of its shareholders, or any party to a shareholders' agreement to seek to enforce the shareholders' agreement. Sec. 21.720. PERSONS BOUND BY SHAREHOLDERS' AGREEMENT. Provides that a shareholders' agreement that is executed as provided in Section 21.715 is binding on all shareholders and assignees of shares, regardless of whether such shareholder or assignee had knowledge of the shareholders' agreement. Sec. 21.721. DELIVERY OF COPY OF SHAREHOLDERS' AGREEMENT TO TRANSFEREE. Requires a shareholder of a close corporation to deliver a copy of the shareholders' agreement before making a transfer of shares but makes clear that the failure to do so does not invalidate the enforceability of the shareholders' agreement. Sec. 21.722. EFFECT OF REQUIRED STATEMENT ON SHARE CERTIFICATE AND DELIVERY OF SHAREHOLDERS' AGREEMENT. Provides that each holder of or other person claiming an interest in shares of a close corporation is presumed to have knowledge of a close corporation provision that exists at the time of transfer if a certificate representing those shares contains the statement required by Section 21.732 and the shareholders' agreement was delivered as required by Section 21.717. Sec. 21.723. PARTY NOT BOUND BY SHAREHOLDERS' AGREEMENT ON CESSATION; LIABILITY. Provides that a person ceases to be a party to and bound by a shareholders agreement when the person ceases to be a shareholder unless the person's attempted cessation was in violation of Section 21.721 of the shareholders' agreement or the shareholders' agreement provides to the contrary. Provides that cessation as a party to the agreement or as a shareholder does not relieve a person of the liability the person may have incurred for breach of the shareholders' agreement. Sec. 21.724. TERMINATION OF SHAREHOLDERS' AGREEMENT. Provides that a shareholders' agreement terminates when the close corporation terminates its status as a close corporation. Provides that all or part of the agreement is valid and enforceable to the extent permitted for an ordinary corporation by this chapter or other law if provided by the shareholders' agreement. Sec. 21.725. CONSEQUENCES OF MANAGEMENT BY PERSONS OTHER THAN BOARD OF DIRECTORS. Makes Sections 21.726-21.729 applicable only to close corporations that are not managed solely by the board of directors but are instead at least partly managed by shareholders or other persons. Sec. 21.726. SHAREHOLDERS CONSIDERED DIRECTORS. Provides that shareholders of a corporation described by Section 21.725 are considered to be directors for purposes of applying a provision of this chapter, other than a provision relating to the election and removal of directors. Provides that a requirement that an instrument filed with a governmental agency contain a statement that a specified action has been taken by the board of directors is satisfied by a statement that the corporation is a close corporation with no board of directors and the action was approved by the shareholders or the person empowered to manage the business and affairs under an agreement. Sec. 21.727. LIABILITY OF SHAREHOLDERS. Provides that the shareholders of a corporation described by Section 21.725 are subject to any liability imposed on a director of a corporation, in connection with the exercise of managerial acts or omissions by the shareholders or other persons who manage the close corporation. Sec. 21.728. MODE AND EFFECT OF TAKING ACTION BY SHAREHOLDERS AND OTHERS. Provides that actions normally taken by the board of directors of a corporation may or shall be taken by the shareholders of a corporation described in Sec. 21.725 at a meeting or without a meeting as permitted by the shareholders's agreement, Subchapter O, or Chapter 21. Provides that an action is binding on a close corporation if the action is taken after a majority vote or unanimous consent. Sec. 21.729. LIMITATION OF SHAREHOLDER'S LIABILITY. Provides that a shareholder of a close corporation described by Section 21.725 is not liable with respect to any matter approved by the shareholders or other persons who manage the corporation pursuant to the shareholders' agreement if the shareholder did not have the right to vote on the matter or dissented from and did not vote for such matter. Sec. 21.730. LACK OF FORMALITIES; TREATMENT AS PARTNERSHIP. Prohibits the fact that a close corporation fails to follow the normal formalities observed by most corporations from being used to impose personal liability on the shareholders, invalidate the shareholders' agreement, or affect the status of the close corporation as a corporation. Sec. 21.731. OTHER AGREEMENTS AMONG SHAREHOLDERS PERMITTED. Provides that Sections 21.713-21.730 do not prohibit or impair any other agreement between shareholders of an ordinary corporation permitted by law. Sec. 21.732. CLOSE CORPORATION SHARE CERTIFICATES. Sets forth supplemental information which must be included on certificates that represent shares of a close corporation and provides that the failure to include such information does not affect the close corporation's status as such. Sec. 21.733. BYLAWS OF CLOSE CORPORATION. Provides that a close corporation does not need to adopt bylaws if provisions required by law to be contained in the bylaws are contained in the certificate of formation or a shareholders' agreement. Requires a close corporation that does not have bylaws when it terminates its status as a close corporation to immediately adopt bylaws. SUBCHAPTER P. JUDICIAL PROCEEDINGS RELATING TO CLOSE CORPORATION Sec. 21.751. DEFINITIONS. Defines "court," "custodian," "provisional director," and "shareholder." Sec. 21.752. PROCEEDINGS AUTHORIZED. Authorizes a close corporation to institute a proceeding intended to enforce a close corporation provision, appoint a provisional director, or appoint a custodian for the corporation, in addition to any other judicial proceedings that may be brought by a corporation. Sec. 21.753. NOTICE; INTERVENTION. Requires that notice of the institution of a proceeding be give to the close corporation, if the corporation is not a plaintiff, and to each shareholder who is not a plaintiff in the manner prescribed by law and consistent with due process of law as directed by the court. Authorizes the close corporation or a shareholder of the close corporation to intervene in the proceeding. Sec. 21.754. PROCEEDING NONEXCLUSIVE. Provides that the right of a close corporation or a shareholder thereof to institute a judicial proceeding is in addition to any other lawful right or remedy available to the plaintiff. Sec. 21.755. UNAVAILABILITY OF JUDICIAL PROCEEDING. Prohibits a shareholder of a close corporation from instituting a judicial proceeding before exhausting any non-judicial remedy set forth in a close corporation provision regarding dispute resolution unless irreparable harm will result before a non-judicial remedy is exhausted. Prohibits a shareholder of a close corporation from instituting a proceeding seeking damages or other monetary relief if the shareholder is entitled to dissent and receive the fair value of the shares under this code or a shareholders' agreement. Sec. 21.756. JUDICIAL PROCEEDING TO ENFORCE CLOSE CORPORATION PROVISION. Requires a court to enforce a provision of a close corporation provision without regard to whether there is an adequate remedy at law. Authorizes the court to enforce the provision by any fair and equitable means, including damages, specific performance, the appointment of a provisional director, custodian, or receiver, the liquidation of the assets of the corporation, and the termination of close corporation status. Prohibits the court from ordering termination of close corporation status unless no other remedy at law is adequate and the size, nature of the business, or number of or relationship between the shareholders is such as to make the continuation of close corporation status wholly impractical. Sec. 21.757. LIQUIDATION; INVOLUNTARY WINDING UP AND TERMINATION; RECEIVERSHIP. Prohibits a court from ordering liquidation, involuntary termination, or receivership when a shareholder is entitled to wind up and terminate a close corporation under a shareholders' agreement, unless no other remedy at law is adequate. Sec. 21.758. APPOINTMENT OF PROVISIONAL DIRECTOR. Requires a court to appoint a provisional director for the corporation upon presentation of proof that the persons empowered to manage the corporation are so divided, with respect to the management of the business and affairs of the corporation, that the business and affairs are not being conducted in a manner that is to the general advantage of the shareholders. Requires the provisional director to be an impartial person and authorizes the court to determine any further qualifications. Requires the provisional director to serve until removed by court order or by a vote of the requisite majority of directors or shareholders as provided in the relevant close corporation provisions. Sec. 21.759. RIGHTS AND POWERS OF PROVISIONAL DIRECTOR. Provides that a provisional director has all the rights and powers of a duly elected director or a shareholder, if the shareholders have been empowered to manage the business under a shareholders' agreement. Sec. 21.760. COMPENSATION OF PROVISIONAL DIRECTOR. Requires that the compensation of a provisional director be determined by agreement between the director and the close corporation. Authorizes the court to set the compensation in the absence of agreement or in the case of a disagreement between the director and the corporation. Sec. 21.761. APPOINTMENT OF CUSTODIAN. Requires the court to appoint a custodian for the corporation upon presentation of proof that the shareholders are so divided as not to be able to elect successor directors to replace those whose terms have expired or would have expired upon qualification of a successor, that the business of the corporation is so divided with respect to their views on the management of the business and affairs of the corporation that the votes or consents required to take action on behalf of the corporation cannot be obtained and any deadlock remedy provision has failed, or that the plaintiff or intervenor has the right to wind up and terminate the corporation under a shareholders' agreement. Provides that the custodian must comply with the qualifications required to serve as a receiver under Section 11.406. Sec. 21.762. POWERS AND DUTIES OF CUSTODIAN. Provides that a custodian has the same powers and duties as granted to a receiver appointed under Sections 11.404-11.406 of this code. Requires the custodian to continue the business of the corporation and prohibits the custodian to liquidate the corporation except as provided by court order or Section 21.761(a)(3). Sec. 21.763. TERMINATION OF CUSTODIANSHIP. Requires that the custodianship be immediately terminated and management of the corporation be returned to the shareholders, directors, or other persons empowered to manage the corporation's business, as appropriate, if the condition requiring the appointment of the custodian is remedied through means other than winding up and termination. SUBCHAPTER Q. MISCELLANEOUS PROVISIONS Sec. 21.801. SHARES AND OTHER SECURITIES ARE PERSONAL PROPERTY. Provides that shares and other securities of a corporation are personal property, except as otherwise provided by this code. Sec. 21.802. DELINQUENT TAX. Prohibits a corporation that is delinquent in the payment of any tax owed under Chapter 171, Tax Code, from being awarded a contract by the state or granted a license or permit by the state. Sec. 21.803. SUPPLEMENTAL INFORMATION FOR APPLICATION FOR REGISTRATION BY FOREIGN CORPORATIONS. Set forth the information which must be stated in a foreign corporation's application for registration to be filed with the secretary of state in addition to the information required by Section 9.004. CHAPTER 22. NONPROFIT CORPORATIONS SUBCHAPTER A. GENERAL PROVISIONS Sec. 22.001. DEFINITIONS. Defines "board of directors," "bylaws," "corporation," "foreign corporation," "nonprofit corporation," and "ordinary care." Sec. 22.002. APPLICABILITY TO CERTAIN INSURANCE ASSOCIATIONS AND COMPANIES. Makes this chapter applicable to a local mutual aid association, statewide mutual assessment company, burial association, and county mutual insurance company, to the extent consistent with the Insurance Code, with certain exceptions. SUBCHAPTER B. PURPOSES AND POWERS Sec. 22.051. GENERAL PURPOSES. Authorizes a nonprofit corporation to be formed for any lawful purpose. Sec. 22.052. ORGANIZED LABOR. Authorizes a nonprofit corporation to be formed to organize laborers, workers, or wage earners. Sec. 22.053. DENTAL HEALTH SERVICE CORPORATION. Authorizes a charitable corporation to be formed to operate a dental health service corporation. Sets forth the information which must be attached as an exhibit to an application for a charter under this section. Provides that a dental health service corporation must have a certain number of licensed dentists as directors. Requires a dental health service corporation to maintain at least 30 percent of the dentists engaged in the practice of dentistry in this state as participating or contracting dentists. Requires the corporation to file the names and addresses of each participating or contracting dentist annually in September with the State Board of Dental Examiners. Prohibits a dental health service corporation from engaging in certain activities. Authorizes a dental health service corporation to provide a description of the service provided to determine benefits or provide proof of treatment. Authorizes a corporation to request but not require diagnostic aids used in the course of treatment. Sec. 22.054. PROHIBITED ACTIVITIES. Prohibits a corporation from being organized or register under this chapter to organize a group hospital service, rural credit union, agricultural and livestock pool, mutual loan corporation, co-operative credit association, farmers' co-operative society, co-operative marketing corporation, rural electric co-operative corporation, telephone co-operative corporation, fraternal organization under the lodge system, and water supply corporations. Sec. 22.055. DIVIDENDS PROHIBITED. Prohibits a corporation created under this chapter from paying dividends or distributing income to its members, directors, or officers. Sec. 22.056. AUTHORIZED BENEFITS AND DISTRIBUTIONS. Authorizes a corporation to pay reasonable compensation for services rendered, confer benefits upon its members in conformity with its purposes, and make distributions to members as permitted under this chapter upon winding up and termination. Sec. 22.057. POWER TO ASSIST EMPLOYEE OR OFFICER. Prohibits a corporation from making loans to its directors and restricts the authority of the corporation to make loans to officers to specified circumstances and amounts. Sec. 22.058. POWER OF CERTAIN CORPORATIONS TO SERVE AS TRUSTEE. Authorizes the corporation described Section 170(c) or 501(c)(3), Internal Revenue Code, in limited circumstances, to serve as the trustee of a trust of which the corporation is a beneficiary, or benefiting another similar organization. Sec. 22.059. STANDARD TAX PROVISIONS FOR CERTAIN CHARITABLE CORPORATIONS; POWER TO EXCLUDE. Provides that the certificate of formation of each corporation that is a private foundation is considered to contain certain language regarding distributions, self-dealing, excess business holdings and investments in accordance with the Internal Revenue Code unless the certificate is amended to exclude the language. SUBCHAPTER C. FORMATION AND GOVERNING DOCUMENTS Sec. 22.101. INCORPORATION OF CERTAIN ORGANIZATIONS. Authorizes a religious society, a charitable, benevolent, literary, or social association, or a church to incorporate with the consent of a majority of its members. Sec. 22.102. SUPPLEMENTAL REQUIREMENTS FOR CERTIFICATE OF FORMATION. Sets forth the information which must be included in a certification of incorporation, in addition to the information required by Section 3.005. Sec. 22.103. BYLAWS. Requires the corporation's board of directors, or members if the corporation is member-managed, to adopt bylaws for the regulation of management of the affairs of the corporation not inconsistent with law of the certificate of formation. Authorizes the board of directors to amend or repeal they bylaws unless the certificate of formation or this chapter reserves the power to the members, management is vested in the members, or the bylaws expressly provide that the directors may not amend or repeal the bylaws. Sec. 22.104. INCONSISTENCY BETWEEN CERTIFICATE OF FORMATION AND BYLAW. Provides that a provision of a certificate of formation of a corporation that is inconsistent with a bylaw controls over the bylaw, except for a change in the number of directors, unless the certificate of formation provides that such a change may be made only by amendment to the certificate. Sec. 22.105. ORGANIZATION MEETING. Requires the incorporators or directors to call and give notice of an organizational meeting of the board of directors for the purpose of adopting bylaws, electing officers, and such other purposes as may come before the meeting. Requires the incorporators to call and give notice of an organizational meeting of the members if the corporation is member-managed. Sec. 22.106. DUTY OF CERTAIN CORPORATION TO AMEND CERTIFICATE OF FORMATION. Provides that a corporation is not required to amend its certificate to contain the information required by Section 3.005 or 22.102 if it existed on May 12, 1959. Sec. 22.107. RESTATED CERTIFICATE OF FORMATION FOR CERTAIN CHURCHES. Provides that any restated certificate of formation for a church with management of the church vested in the membership must include that information regardless of whether it was required to be included in original certificate of formation. Sec. 22.108. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF FORMATION BY MEMBERS HAVING VOTING RIGHTS. Sets forth the procedure for amending the certificate of formation when there are members having voting rights. Sec. 22.109. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF FORMATION BY MANAGING MEMBERS. Sets forth the procedure for amendment when the management of the affairs of the corporation is vested in the corporation's members under Section 22.202. Sec. 22.110. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF FORMATION BY BOARD OF DIRECTORS. Sets forth the procedure for amendment by the board of directors when the corporation has no members or no members having voting rights, or for limited purposes without membership approval. Sets forth the types of amendments which may be made. SUBCHAPTER D. MEMBERS Sec. 22.151. MEMBERS. Authorizes a nonprofit corporation to have one or more classes of members or no members. Provides that such designation of classes must be included in the certificate of formation or bylaws. Authorizes a nonprofit corporation to issue instruments evidencing membership, voting or ownership rights. Sec. 22.152. IMMUNITY FROM LIABILITY. Provides that the members are not personally liable for the debts, liabilities, or obligations of the corporation. Sec. 22.153. ANNUAL MEETING. Requires a corporation to have an annual meeting of the members as fixed in the bylaws unless the bylaws require more than one regular meeting of members each year. Sec. 22.154. FAILURE TO CALL ANNUAL MEETING. Authorizes a member to demand the corporation to hold an annual meeting, and authorizes legal action to compel the holding of such annual meeting. Provides that the failure to hold an annual meeting does not result in a winding up and termination of the corporation. Sec. 22.155. SPECIAL MEETING OF MEMBERS. Authorizes special meetings of the corporation to be called by the president, board of directors, by members having not less than one-tenth of the voting rights, and other officers or persons as authorized in the certificate of formation or bylaws. Sec. 22.156. NOTICE OF MEETING. Requires a corporation, other than a church, to provide written or printed notice of a meeting to each member entitled to vote stating the time and place of the meeting, and in the case of a special meeting, the purpose of the meeting. Provides that notice of members of a church is considered sufficient if announced at a regularly scheduled worship service or as otherwise provided in the certificate of formation or bylaws. Sec. 22.157. SPECIAL BYLAWS AFFECTING NOTICE. Authorizes a corporation to adopt a bylaw that provides that notice of an annual or regular meeting is not required. Authorizes a corporation with more than 1,000 members, if permitted by the bylaws, to provide notice of the meeting through publication. Sec. 22.158. PREPARATION AND INSPECTION OF LIST OF VOTING MEMBERS. Requires a corporation, after fixing a record date for a meeting, to prepare a list of voting members identifying those members entitled to notice and those members not entitled to notice of the meeting. Provides that the list must be available for inspection and copying by any member entitled to vote not later than two business days after notice is given, and must also be available at the meeting. Sec. 22.159. QUORUM OF MEMBERS. Provides that, unless otherwise provided in the certificate of formation or bylaws, members holding one-tenth of the votes constitute a quorum. Provides that a vote of the majority of the votes entitled to be cast is an act of the members unless a greater vote is required by law, the certificate of formation, or the bylaws. Provides that, in the case of a church formed prior to May 12, 1959, the members present at a meeting shall constitute a quorum. Sec. 22.160. VOTING OF MEMBERS. Entitles each member to one vote except to the extent that voting rights are limited, denied, or enlarged by the certificate of formation or bylaws. Authorizes members to vote by proxy unless the certificate of formation or bylaws otherwise provide. Provides that a proxy is revocable and expires 11 month after the date of its execution. Prohibits a proxy from being irrevocable for longer than 11 months. Sec. 22.161. ELECTION OF OFFICERS OR DIRECTORS. Sets forth procedures for electing directors and officers of the corporation. Sec. 22.162. GREATER VOTING REQUIREMENTS UNDER CERTIFICATE OF FORMATION. Provides that, if a greater voting requirement for actions of members is required in the corporation's certificate of formation than is required by this chapter with respect to an action to be taken by the members, the certificate of formation controls. Sec. 22.163. RECORD DATE FOR DETERMINATION OF MEMBERS. Sets forth the procedures for fixing the record date for determining members entitled to vote at a meeting. SUBCHAPTER E. MANAGEMENT Sec. 22.201. MANAGEMENT BY BOARD OF DIRECTORS. Provides that the affairs of a corporation are managed by a board of directors and authorizes the board to be designated by any name. Sec. 22.202. MANAGEMENT BY MEMBERS. Authorizes a corporation to vest management in its members. Authorizes the certificate of formation or bylaws to limit the authority of the board. Provides that a corporation is considered to have vested management in its board of directors in the absence of a provision in the certificate of formation or bylaws, unless the corporation is a church operating under a congregational system incorporated before January 1, 1994, and is member-managed. Sec. 22.203. BOARD MEMBER ELIGIBILITY REQUIREMENTS. Provides that a director is not required to be a resident of this state or a member of the corporation unless the certificate or bylaws of the corporation imposes that requirement. Authorizes the certificate or bylaws to prescribe other qualifications for directors. Sec. 22.204. NUMBER OF DIRECTORS. Prohibits a corporation from having less than three directors. Requires the number of directors to be set and otherwise fixed in the manner provided in the certificate of formation or bylaws. Provides that the number of the initial board of directors be set by the certificate of formation. Authorizes the number of directors to be increased or decreased by amendment to the certificate of formation or bylaws. Sec. 22.205. DESIGNATION OF INITIAL BOARD OF DIRECTORS. Provides that the certificate of formation name the initial directors. Sec. 22.206. ELECTION OR APPOINTMENT OF BOARD OF DIRECTORS. Provides that directors, other than the initial directors, are elected, appointed, or designated in the manner and for the terms specified in the certificate of formation or bylaws. Sec. 22.207. ELECTION AND CONTROL BY CERTAIN ENTITIES. Authorizes the board of directors of a religious, charitable, educational, or eleemosynary corporation to be affiliated with, elected, and controlled by an incorporated or unincorporated convention, conference, or association organized under the law of this or another state. Authorizes the board of directors of a corporation to be wholly or partly elected by one or more association or corporations organized under the law of this or another state if the certificate of formation or bylaws of the corporation provide for that election and the corporation has no members with voting rights. Sec. 22.208. TERM OF OFFICE. Provides that the term of the initial directors is until the first annual election of directors or for the period specified in the certificate of formation or bylaws. Provides that other directors hold office for the term provided in the certificate of formation or bylaws. Provides that a director holds office until a successor is elected, appointed, or designated and qualified, unless otherwise provided. Sec. 22.209. CLASSIFICATION OF DIRECTORS. Authorizes a corporation to divide directors into classes. Provides that the terms of office of each class are not required to be uniform. Sec. 22.210. EX OFFICIO MEMBER OF BOARD. Authorizes a corporation to have ex officio members of the board. Entitles such members to notice of board meetings and to attend meetings but not to have voting rights unless entitled under the certificate of formation or bylaws. Provides that, if the member does not have voting rights, the member does not have the duties or liabilities of a director. Sec. 22.211. REMOVAL OF DIRECTOR. Authorizes a corporation to remove an director from office in the manner provided in the certificate of formation or bylaws. Provides that, in the absence of a provision for removal, a director may be removed from office, with or without cause, by the persons entitled to elect, designate, or appoint the director. Sec. 22.212. VACANCY. Requires a corporation to fill a vacancy in the board of directors by affirmative vote of a majority of the remaining directors. Authorizes a directorship created by reason of an increase in the number of directors to be filled at an election at an annual or special meeting of the members, or, if no members have voting rights, in the manner provided in the certificate of formation or bylaws. Sec. 22.213. QUORUM. Provides that a quorum of directors is a majority of the directors fixed by the bylaws, stated in the certificate of formation, or three, whichever is less. Prohibits directors present by proxy from being counted toward a quorum. Sec. 22.214. ACTION BY DIRECTORS. Provides that the act of the majority of the directors at a meeting at which a quorum is present is the act of the board of directors unless the certificate of formation requires the vote or concurrence of a greater number. Sec. 22.215. VOTING IN PERSON OR BY PROXY. Authorizes a director to vote by proxy if authorized in the certificate of formation or bylaws and the proxy is executed in writing. Sec. 22.216. TERM AND REVOCABILITY OF PROXY. Provides that a proxy expires three months after the date the proxy is signed and is revocable unless otherwise provided by the proxy or made irrevocable by law. Sec. 22.217. VOTING REQUIREMENTS UNDER CERTIFICATE OF FORMATION. Provides that if the certificate of formation requires the vote or concurrence of a greater proportion of directors than is required by this chapter, the certificate of formation controls. Sec. 22.218. NOTICE OF MEETING; WAIVER OF NOTICE. Sets forth the requirements for notice for a directors' meeting. Sec. 22.219. MANAGEMENT COMMITTEE. Authorizes a corporation by resolution of the board of directors to designate one or more committees consisting of at least two members to have and exercise the authority of the board of directors in the management of the corporation. Provides that the majority of the persons on the committee must be directors. Provides that designation of a committee does not relieve the board or an individual member of the board from any responsibility imposed by law. Provides that a committee member who is not a director has the same responsibility with respect to the committee as a member who is also a director. Sec. 22.220. OTHER COMMITTEES. Authorizes the establishment of committees for purposes other than exercising the authority of the board of directors. Provides that committee membership may be limited to directors. Sec. 22.221. ACTION WITHOUT MEETING OF DIRECTORS OR COMMITTEE. Authorizes action by directors or committees without a meeting if consent is signed by a sufficient number of directors or committee members as would be necessary to take action at a meeting and meets other requirements for consent. Sec. 22.222. GENERAL STANDARDS FOR DIRECTORS. Requires a director to discharge the director's duties in good faith, with ordinary care, and in a manner that the director reasonably believes to be in the best interest of the corporation, and puts the burden of proof on any person seeking to establish otherwise. Sec. 22.223. DIRECTOR'S GOOD FAITH RELIANCE ON CERTAIN INFORMATION. Authorizes a director of a religious corporation to rely in good faith on information presented by a religious authority, or a minister, priest, rabbi or other person whose position or duties in the corporation justifies reliance or confidence. Sec. 22.224. ROLE AS TRUSTEE. Provides that a director does not have the duties of a trustee of a trust with respect to the corporation or property held or administered by the corporation. Sec. 22.225. DELEGATION OF INVESTMENT AUTHORITY. Authorizes the directors to delegate investment authority. Sec. 22.226. LOAN TO DIRECTOR PROHIBITED. Prohibits a corporation from making a loan to a director and provides that a director or officer who participates in making the loan is jointly and severally liable to the corporation for the amount of the loan until the loan is repaid. Sec. 22.227. DIRECTOR LIABILITY FOR CERTAIN DISTRIBUTIONS OF ASSETS. Provides that the directors who vote for or assent to a distribution of assets other than in payment of the corporation's debts in certain circumstances are jointly and severally liable to the corporation for the value of the assets distributed, to the extent that the debt, obligation, or liability is not paid and discharged. Provides that the director is not liable if the director relied in good faith and with ordinary care on information under Section 3.101 of this code. Sec. 22.228. DISSENT TO ACTION. Provides that a director who is present at a meeting is assumed to have assented to the action unless the director's dissent is entered in the minutes, the director files a written dissent with the secretary at the meeting, or sends the dissent to the secretary immediately following the meeting. Sec. 22.229. RELIANCE ON WRITTEN OPINION OF ATTORNEY. Provides that a director is not liable under Section 22.225 or 22.226 if, in the exercise of ordinary care, the director acted in good faith and in reliance on the written opinion of an attorney. Sec. 22.230. RIGHT TO CONTRIBUTION. Entitles a director to seek contributions if held liable on a claim from those persons who accepted or received the distribution knowing the distribution to have been made in violation of Section 22.225 or 22.226. Sec. 22.231. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED DIRECTORS, OFFICERS, AND MEMBERS. Makes this section applicable to contracts or transactions between a corporation and a director, officer, or member of the corporation, as well as between an organization in which a director, officer, or member of the corporation is also a director, officer, or member of the organization or has a financial interest in the organization. Provides that an otherwise valid contract or transaction between a corporation and an interested party is valid if certain disclosure and approval procedures are followed. Sec. 22.232. OFFICERS. Requires that the officers of a corporation consist of a president and secretary and such other officers as deemed necessary by the directors, or prescribed in the certificate of formation or bylaws. Prohibits the offices of president and secretary from being held by the same person and authorizes a properly designated committee to perform the functions of an officer. Sec. 22.233. ELECTION OF APPOINTMENT OF OFFICERS. Requires the officers of a corporation to be elected or appointed in the manner and for the terms prescribed by the certificate of formation or bylaws. Prohibits the term of an officer from exceeding three years. Provides that the officers are elected or appointed by the board of directors, or the members if management is vested in the members, in the absence of a provision to the contrary in the certificate or bylaws. Sec. 22.234. APPLICATION TO CHURCH. Provides that a church is not required to have officers as provided by this subchapter and authorizes the duties and responsibilities of the officers to be vested in the board of directors or other designated body in the manner provided in the certificate of formation or bylaws. Sec. 22.235. OFFICER'S GOOD FAITH RELIANCE ON CERTAIN INFORMATION. Authorizes an officer of a religious corporation to rely in good faith on information presented by a religious authority, or a minister, priest, rabbi, or other person whose position or duties in the corporation justifies reliance or confidence. SUBCHAPTER F. FUNDAMENTAL BUSINESS TRANSACTIONS Sec. 22.251. APPROVAL OF MERGER BY MEMBERS HAVING VOTING RIGHTS. Provides that a plan of merger, after approval of a resolution to merge by the board of directors, must be adopted at a meeting of members having voting rights and receive at least two-thirds of the votes of the members present in person or by proxy at the meeting. Sec. 22.252. APPROVAL OF MERGER BY MANAGING MEMBERS. Provides that a plan of merger must be adopted at an annual, regular, or special meeting of the members when management of the affairs of the corporation is vested in its members. Provides that the merger must receive at least two-thirds of the votes of the members present in person or by proxy at the meeting. Sec. 22.253. APPROVAL OF MERGER BY BOARD OF DIRECTORS. Requires the board of directors to approve the plan of merger if the corporation has no members or no members entitled to vote. Requires the plan of merger to be adopted by a vote of the majority of the directors in office. Sec. 22.254. SURVIVING FOREIGN CORPORATION IN MERGER. Requires a foreign corporation that is the surviving or new corporation in a merger to comply with the provisions of this code applicable to foreign corporations and to file an agreement with the secretary of state. Sec. 22.255. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF ASSETS BY MEMBERS HAVING VOTING RIGHTS. Provides that the board, to approve a sale of the corporation's assets with members having voting rights, must adopt a resolution recommending the sale and directing that the resolution be submitted to a vote at an annual or special meeting of the members having voting rights. Requires written notice that informs the members that a purpose of the meeting is to consider the sale of the corporation's assets to be given to each member entitled to vote at the meeting. Authorizes the members, at the meeting, to authorize the sale and to set, or authorize the board to set, the terms and conditions, including the price, of the sale. Specifies that at least two-thirds of the votes entitled to be cast are required to authorize the sale, except that if any class of members is entitled to vote on the recommendation as a class, the authorization also requires at least two-thirds of the votes entitled to be cast by those members present. Authorizes the board to abandon the sale after the members authorize a sale, subject to the rights of third parties under any contracts relating to the sale, without further action or approval by members. Sec. 22.256. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF ASSETS BY MANAGING MEMBERS. Provides that a resolution authorizing a sale of the assets of a corporation that is managed by its members must be submitted to a vote at an annual, regular, or special meeting of the members to be adopted. Requires notice that informs the members that a purpose of the meeting is to consider the sale of the corporation's assets to be given to each member entitled to vote at the meeting, except as otherwise provided by the certificate or bylaws of the corporation. Authorizes the members, at the meeting, to authorize the sale and to set, or authorize one or more members to set, the terms and conditions, including the price, of the sale. Provides that the authorization requires at least two-thirds of the votes of members present at the meeting. Sec. 22.257. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF ASSETS BY BOARD OF DIRECTORS. Authorizes the sale of the assets of a corporation that has no members or has no members with voting rights to be permitted to proceed on receiving the affirmative vote of the majority of the directors in office, unless otherwise provided by the corporation's certificate. Authorizes the sale of the assets of an insolvent corporation to proceed on receiving the affirmative vote of the majority of the directors in office. Sec. 22.258. PLEDGE, MORTGAGE, DEED OF TRUST, OR TRUST INDENTURE. (a) Authorizes the board, except as otherwise provided by Subsection (b) or by the corporation's certificate, to authorize a pledge, mortgage, deed of trust, or trust indenture, and provides that an authorization or consent of members is not required for the validity of the transaction or for any sale under the terms of the transaction (b) Authorizes the members of a corporation that they manage to authorize a pledge, mortgage, deed of trust, or trust indenture for a sale of the corporation's assets, and provides that an authorization by the board is not required for the validity of the transaction or for any sale under the terms of the transaction. SUBCHAPTER G. WINDING UP AND TERMINATION Sec. 22.301. APPROVAL OF VOLUNTARY WINDING UP AND TERMINATION BY MEMBERS HAVING VOTING RIGHTS. Provides that, to approve a voluntary winding up and termination of a corporation with members having voting rights, a corporation's board must adopt a resolution recommending that the corporation be wound up and terminated and directing that the question be submitted to a vote at an annual or special meeting of the members having voting rights. Requires written notice that informs the members that a purpose of the meeting is to consider the advisability of winding up and terminating the corporation to be given to each member entitled to vote at the meeting. Requires the adoption of a resolution to wind up and terminate the corporation to take effect on receiving at least two-thirds of the votes entitled to be cast by those members present, except that if any class of members is entitled to vote on the resolution as a class by the certificate or bylaws of the corporation, the resolution may be adopted only on also receiving at least two-thirds of the class members' votes entitled to be cast. Sec. 22.302. APPROVAL OF VOLUNTARY WINDING UP AND TERMINATION BY MANAGING MEMBERS. Provides that, to approve a voluntary winding up and termination of a corporation with members that manage the corporation, a resolution to voluntarily wind up and terminate the corporation must be submitted to a vote at an annual, regular, or special meeting of members. Requires notice that informs the members that a purpose of the meeting is to consider the advisability of winding up and terminating the corporation to be given to each member. Requires the adoption of a resolution to wind up and terminate the corporation on receiving at least two-thirds of the votes of members present at the meeting. Sec. 22.303. APPROVAL OF VOLUNTARY WINDING UP AND TERMINATION BY BOARD OF DIRECTORS. Requires that the winding up and termination of the corporation, if a corporation has no members or has no members with voting rights, be authorized at a meeting of the corporation's board of directors on the adoption of a resolution to wind up and terminate by the affirmative vote of the majority of the directors in office. Sec. 22.304. APPLICATION AND DISTRIBUTION OF PROPERTY. (a) Requires the application and distribution of all property remaining after all liabilities and obligations are paid, satisfied, and discharged to proceed in the following order: _property held by the corporation on a condition requiring return, transfer, or conveyance because of the winding up or termination is required to be returned, transferred, or conveyed in accordance with that requirement; and _unless otherwise provided by the corporation's certificate, the remaining property of the corporation to be distributed only for tax-exempt purposes to one or more organizations that are exempt under federal law, under a plan of distribution. (b) Requires a district court of the county in which the corporation's principal office is located to distribute to one or more organizations exempt under federal law, the property of the corporation remaining after a distribution of property under the plan of distribution. Sec. 22.305. DISTRIBUTION PLAN. Authorizes a corporation in the process of winding up to adopt a plan for distribution of property. Requires a corporation to adopt a plan for distribution of property to authorize a transfer or conveyance of assets for which this chapter requires a plan of distribution. Sec. 22.306. APPROVAL OF DISTRIBUTION PLAN BY MEMBERS HAVING VOTING RIGHTS. Provides that, to adopt a plan providing for the distribution of property of a corporation with members having voting rights, a corporation's board must adopt a resolution recommending a plan of distribution and directing that the proposed plan be submitted to a vote at an annual or special meeting of the members. Requires written notice that informs the members that the proposed plan of distribution or a summary of the plan to be given to each member entitled to vote at the meeting. Requires the adoption of the proposed plan of distribution to take effect on receiving at least two-thirds of the votes entitled to be cast by those members present, except that if any class of members is entitled to vote on the resolution as a class by the certificate or bylaws of the corporation, the proposed plan may be adopted only on also receiving at least two-thirds of the class members' votes entitled to be cast. Sec. 22.307. APPROVAL OF DISTRIBUTION PLAN BY MANAGING MEMBERS. Provides that, to adopt a proposed plan providing for the distribution of property of a corporation with members that manage the corporation, the plan must be submitted to a vote at an annual, regular, or special meeting of the members. Requires notice that informs the members that the proposed plan of distribution or a summary of the plan to be given to each member. Requires the adoption of the proposed plan of distribution on receiving at least two-thirds of the votes of members present at the meeting. Sec. 22.308. APPROVAL OF DISTRIBUTION PLAN BY BOARD OF DIRECTORS. Requires that a plan of distribution, if a corporation has no members or has no members with voting rights, be authorized at a meeting of the corporation's board on receiving the affirmative vote of the majority of the directors in office. Sec. 22.309. APPROVAL OF REINSTATEMENT OR REVOCATION OF VOLUNTARY WINDING UP BY MEMBERS HAVING VOTING RIGHTS. Provides that, approve a reinstatement or a revocation of the voluntary winding up of a corporation with members having voting rights under Section 11.151 or 11.201, a corporation's board must adopt a resolution recommending the reinstatement or the revocation of the voluntary winding up and directing that the question be submitted to a vote at an annual or special meeting of the members of the corporation having voting rights. Requires written notice that informs the members that a purpose of the meeting is to consider the advisability of the reinstatement or the revocation of the voluntary winding up to be given to each member entitled to vote at the meeting. Requires the adoption of the resolution to reinstate or to revoke the voluntary winding up to take effect on receiving at least two-thirds of the votes entitled to be cast by those members present, except that if any class of members is entitled to vote on the resolution as a class by the certificate or bylaws of the corporation, the proposed plan may be adopted only on also receiving at least two-thirds of the class members' votes entitled to be cast. Sec. 22.310. APPROVAL OF REINSTATEMENT OR REVOCATION OF VOLUNTARY WINDING UP BY MANAGING MEMBERS. Provides that, to adopt a resolution approving the reinstatement or the revocation of the voluntary winding up of a corporation with members that manage the corporation, a resolution approving the reinstatement or the revocation of the voluntary winding up of a corporation must be submitted to a vote at an annual, regular, or special meeting of members. Requires notice that informs the members that a purpose of the meeting is to consider the reinstatement or the revocation of the voluntary winding up to be given to each member. Requires the adoption of the resolution on receiving at least two-thirds of the votes of members present at the meeting. Sec. 22.311. APPROVAL OF REINSTATEMENT OR REVOCATION OF VOLUNTARY WINDING UP BY BOARD OF DIRECTORS. Requires that a resolution to reinstate or to revoke the voluntary winding up of the corporation, if a corporation has no members or has no members with voting rights, be authorized at a meeting of the corporation's board on receiving the affirmative vote of the majority of the directors in office. Sec. 22.312. CERTIFICATE OF TERMINATION. Sets forth the statements required to be contained in a corporation's certificate of termination. Sec. 22.313. SUPPLEMENTAL PROVISIONS FOR JURISDICTION OF COURT TO LIQUIDATE PROPERTY AND BUSINESS OF CORPORATION AND RECEIVERSHIPS. Sets forth the supplemental provisions that apply to nonprofit corporations when a court has ordered distribution of property. Sec. 22.314. LIMITED SURVIVAL AFTER NATURAL EXPIRATION. Authorizes a corporation that was terminated by the expiration of the period of its duration, during the three-year period following the date of termination, to amend the corporation's certificate of formation. Provides that an act or contract of a terminated corporation during a period within which the corporation could have extended the corporation's existence under this section is not invalidated by the expiration of the period of duration. SUBCHAPTER H. FOREIGN CORPORATIONS Sec. 22.351. SUPPLEMENTAL INFORMATION FOR APPLICATION FOR REGISTRATION. Specifies the information needed to be stated on a foreign corporation's application for registration filed with the secretary of state. Sec. 22.352. SUPPLEMENTAL INFORMATION FOR WITHDRAWAL OF REGISTRATION. Provides that a foreign corporation's certificate of withdrawal must state that payment or provision for payment has been made to any known creditor or claimant, and that there is no suit pending or threatened against the corporation in any court in this state or adequate provision has been made for the satisfaction of any judgment, order, or decree that may be entered against the corporation in a pending suit. SUBCHAPTER I. RECORDS AND REPORTS Sec. 22.401. MEMBER'S RIGHT TO INSPECT BOOKS AND RECORDS. Entitles a member of a corporation to examine and copy the books and records of the corporation relevant to that purpose on written demand stating the purpose of the demand. Sec. 22.402. FINANCIAL RECORDS AND ANNUAL REPORTS. Requires a corporation to maintain current and accurate financial records in accordance with generally accepted accounting practices. Requires the board to annually prepare or approve a financial report for the corporation for the preceding year based on the financial records. Specifies that the report must conform to accounting standards as adopted by the American Institute of Certified Public Accountants and enumerates the information needed to be included in the report. Sec. 22.403. AVAILABILITY OF FINANCIAL INFORMATION FOR PUBLIC INSPECTION. Requires a corporation to keep records, books, and annual reports at the corporation's registered or principal office in this state for at least three years after the close of the fiscal year. Requires the corporation to make these documents available to the public for inspection and copying at the corporation's registered or principal office. Authorizes the corporation to charge a reasonable fee for preparing a copy of a record or report. Sec. 22.404. FAILURE TO MAINTAIN FINANCIAL RECORD OR PREPARE ANNUAL REPORT; OFFENSE. Creates an offense punishable as a Class B misdemeanor if a corporation fails to maintain a financial record, prepare an annual report, or make the record or report available to the public. Sec. 22.405. EXEMPTIONS FROM CERTAIN REQUIREMENTS RELATING TO FINANCIAL RECORDS AND ANNUAL REPORTS. Provides that Sections 22.402, 22.403, and 22.404 do not apply to the enumerated organizations. Sec. 22.406. CORPORATIONS ASSISTING STATE AGENCIES. Defines "state agency" for purposes of this section. Provides that the books and records of a corporation designed to assist a state agency are subject to audit at the discretion of the state auditor. Requires these types of corporations to file with the secretary of state a copy of the report of financial activity if no board member, officer, or employee of the dedicated state agency sits on the corporation's borad in other than an ex officio capacity. Sec. 22.407. REPORT OF DOMESTIC AND FOREIGN CORPORATIONS. Authorizes the secretary of state to require a domestic corporation or a foreign corporation registered to conduct affairs in this state to file a report not more than once every four years, and sets forth the information to be contained in the report and the required form to be used. Requires an officer, or trustee, if applicable, to sign the report. Sec. 22.408. NOTICE REGARDING REPORT. Requires the secretary of state to send written notice that the four-year report is due. Sets forth the information to be contained in the report. Requires the secretary of state to include with the notice two copies of a report form to be prepared and filed. Sec. 22.409. DELIVERY AND FILING OF REPORT. Provides that a copy of the report must be filed with the secretary of state by the 30th day after the notice is mailed. Sec. 22.410. FAILURE TO FILE REPORT. Provides that a domestic or foreign corporation that fails to file a report when the report is due forfeits its right to conduct affairs in this state. Provides that the forfeiture takes effect, without judicial action, when the secretary of state enters on the record of the corporation the words "right to conduct affairs forfeited" and the date of forfeiture. Sec. 22.411. NOTICE OF FORFEITURE. Requires that the notice of forfeiture be mailed to the corporation's registered agent or to the corporation. Sec. 22.412. EFFECT OF FORFEITURE. Prohibits the corporation from maintaining an action, suit, or proceeding in a court of this state and a successor or assignee of the corporation from maintaining an action, suit, or proceeding in a court of this state on a right, claim, or demand arising from the conduct of affairs by the corporation in this state, unless the right of the corporation to conduct affairs in this state is revived. Provides that this section does not affect the right of an assignee of the corporation. Provides that the forfeiture of the right to conduct affairs in this state does not impair the validity of a contract or act of the corporation or prevent the corporation from defending an action, suit, or proceeding in a court of this state. Sec. 22.413. REVIVAL OF RIGHT TO CONDUCT AFFAIRS. Authorizes a corporation to relieve itself from a forfeiture by filing the required report, accompanied by the revival fee, by the 120th day after mailing the forfeiture notice. Requires the secretary of state, if the corporation timely files the form, accompanied by the fee, to revive the right of the corporation to conduct affairs in this state, cancel the words regarding the forfeiture on the corporation's record, and endorse on that record the word "revived" and the date of revival. Sec. 22.414. FAILURE TO REVIVE; TERMINATION OR REVOCATION. Provides that the failure of a corporation that has forfeited its right to conduct affairs in this state to revive that right is grounds for the involuntary termination of the domestic corporation or for the revocation of the foreign corporation's registration to transact business in this state. Provides that the termination or revocation takes effect, without judicial action, when the secretary of state enters on the corporation's record filed in the office of the secretary of state the word "forfeited" and the date of forfeiture, and cites this chapter as authority for that forfeiture. Sec. 22.415. REINSTATEMENT. Authorizes the relief of a corporation that has been terminated or the registration of which has been revoked by filing the required report, accompanied by the filing fee for the report, if the corporation has paid all required fees, taxes, penalties, and interest due. Requires the secretary of state to reinstate the certificate of formation or registration without judicial action, cancel the word "forfeited" on the record, and endorse on the record kept in the secretary's office relating to the corporation the words "set aside" and the date of the reinstatement when the report is filed and the filing fee is paid to the secretary of state. SUBCHAPTER J. CHURCH BENEFITS BOARDS Sec. 22.451. DEFINITION. Defines "church benefits board" for purposes of this section. Sec. 22.452. PENSIONS AND BENEFITS. Authorizes a domestic or foreign nonprofit corporation formed for a religious purpose to provide for the support and payment of benefits and pensions to the ministers, teachers, employees, trustees, directors, or other functionaries of the corporation or organizations controlled by or affiliated with the corporation and the spouse, children, dependents, or other beneficiaries of those persons. Sec. 22.453. CONTRIBUTIONS. Authorizes a church benefits board to provide for the collection of contributions and other payments to assist in providing pensions and benefits, and the creation, maintenance, investment, management, and disbursement of necessary annuities, endowments, reserves, or other funds for the collection of contributions and other payments to assist in providing pensions and benefits. Sec. 22.454. POWER TO ACT AS TRUSTEE. Authorizes a church benefits board to act as a trustee and agent. Sec. 22.455. DOCUMENTS AND AGREEMENTS. Authorizes a church benefits board to provide to a program participant a certificate or agreement of participation, a debenture, or an indemnification agreement. Sec. 22.456. INDEMNIFICATION. Authorizes a church benefits board, or an affiliate wholly owned by the board, to agree to indemnify against damage or risk of loss a minister, teacher, employee, trustee, functionary, or director affiliated with the board or a family member, dependent, or beneficiary of one of those persons, as well as a church or a convention, conference, or association of churches or an organization that is controlled by or affiliated with the board or with a church or a convention, conference, or association of churches. Sec. 22.457. PROTECTION OF BENEFITS. Provides that money or other benefits provided to a participant or a beneficiary under a plan or program provided by or through a church benefits board are not subject to execution, attachment, garnishment, or other process. Prohibits the appropriation or application as part of a judicial, legal, or equitable process or operation of a law of money or other benefits provided to a participant or a beneficiary under a plan or program provided by or through a church benefits board. Sec. 22.458. ASSIGNMENT OF BENEFITS. Provides that an assignment or transfer or an attempt to make an assignment or transfer by a beneficiary of money, benefits, or other rights under a plan or program is void if the plan or program contains a provision prohibiting the assignment or other transfer without the written consent of the church benefits board and the beneficiary assigns or transfers or attempts to make an assignment or transfer without that consent. Sec. 22.459. INSURANCE CODE NOT APPLICABLE. Specifies that the Insurance Code does not apply to a church benefits board or a program, plan, benefit, or activity of the board or a person affiliated with the board. CHAPTER 23. SPECIAL-PURPOSE CORPORATIONS SUBCHAPTER A. GENERAL PROVISIONS Sec. 23.001. DETERMINATION OF APPLICABLE LAW. Provides that a corporation created under this chapter or under a special statute outside this code is governed by Title 1 and Chapter 21, if the corporation is organized for profit, and Title 1 and Chapter 22, if the corporation is organized not for profit. Sec. 23.002. APPLICABILITY OF FILING REQUIREMENTS. Requires that a document to be filed with the secretary of state under a special statute be executed and filed in accordance with Chapter 4, except as otherwise provided by the special statute Sec. 23.003. DOMESTIC CORPORATION ORGANIZED UNDER SPECIAL STATUTE. Provides that a corporation organized under a special statute is not considered to be a "domestic corporation" formed under this code. SUBCHAPTER B. BUSINESS DEVELOPMENT CORPORATIONS Sec. 23.051. DEFINITIONS. Defines "corporation," "financial institution," "loan limit," and "member." Sec. 23.052. INCORPORATORS. Authorizes 25 or more persons, the majority of whom must be residents of this state, to form a business development corporation to promote, develop, and advance the prosperity and economic welfare of this state. Sec. 23.053. PURPOSES. Authorizes the organization of a business development corporation as a for-profit corporation under Chapter 21 or nonprofit corporation under Chapter 22. Specifies the purposes for which a business development corporation must be organized. Sec. 23.054. POWERS. Enumerates the powers conferred upon a business development corporation. Sec. 23.055. STATEWIDE OPERATION. Specifies that a business development corporation organized is a state development company as defined by federal law. Authorizes a business development corporation to operate on a statewide basis. Sec. 23.056. CERTIFICATE OF FORMATION. Sets forth the requirements of a business development corporation's certificate of formation. Provides that the name of a corporation must include the words "Business Development Corporation." Sec. 23.057. MANAGEMENT BY BOARD OF DIRECTORS; NUMBER OF DIRECTORS. Provides that the organization, control, and management of a corporation are vested in a board of directors. Provides that the board must consist of not less than 15 and not more than 21 directors. Authorizes the board to exercise any power of the corporation not conferred on the shareholders or members by law or by the corporation's bylaws. Sec. 23.058. ELECTION OR APPOINTMENT OF DIRECTORS. Requires the incorporators to name the directors constituting the initial board. Requires directors other than the initial directors to be elected at each annual meeting of the corporation. Requires the directors, if an annual meeting is not held at the time designated by the bylaws, to be elected at a special meeting held in lieu of the annual meeting. Requires the members of the corporation to elect two-thirds of the directors and the shareholders to elect the remaining directors at an annual meeting or special meeting held in lieu of the annual meeting. Sec. 23.059. TERM OF OFFICE; VACANCY. Provides that a director holds office until the next annual election of directors and until a successor is elected and qualified, unless the director is removed at an earlier date in accordance with the corporation's bylaws. Requires directors elected by the members to fill a vacancy in the office of a director elected by the member. Requires directors elected by the shareholders to fill a vacancy in the office of a director elected by shareholders. Sec. 23.060. OFFICERS. Requires the board to appoint a president, a treasurer, and any other agent or officer of the corporation and to fill each vacancy other than a vacancy on the board. Sec. 23.061. PARTICIPATION AS OWNER. Authorizes an individual, corporation, or other organization authorized to conduct business in this state to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of a bond, security, or other evidence of indebtedness created by, or shares of, the corporation. Authorizes an owner of shares to exercise any right, power, or privilege stemming from the ownership of shares, including the right to vote. Sec. 23.062. FINANCIAL INSTITUTION AS MEMBER OF CORPORATION. (a) Authorizes a financial institution to become a member of a corporation and to make loans to the corporation as provided by this chapter. (b) Authorizes a financial institution to request membership in the corporation by applying to the corporation's board in the manner prescribed by the board. Provides that membership takes effect on the board's acceptance of the application. (c) Authorizes a financial institution that is a member of the corporation to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of a bond, security, or other evidence of indebtedness created by, or a share of, the corporation. Authorizes a financial institution, as owner of shares, to exercise any right, power, or privilege of that ownership, including the right to vote. Prohibits a member from acquiring shares in an amount greater than 10 percent of the member's loan limit. Provides that the amount of shares that a member may acquire is in addition to the amount of shares of corporations that the member may otherwise acquire. (d) Prohibits a financial institution that is not a member of the corporation from acquiring any of its shares. Sec. 23.063. WITHDRAWAL OF MEMBER. Authorizes a member, on written notice to the corporation's board, to withdraw from a corporation on the date stated in the notice. Provides that the withdrawal date must be at least six months after the date notice is given under this subsection. Provides that a member is not obligated to make a loan to the corporation in conformance to a call made after the member's withdrawal from the corporation, but requires a member to fulfill any obligation that has accrued or for which a commitment has been made before the withdrawal date. Sec. 23.064. POWERS OF SHAREHOLDERS AND MEMBERS. Enumerates the powers of shareholders and members, authorizing them to _determine the number of directors and elect the directors as provided by Section 23.058; _make, amend, and repeal bylaws of the corporation; or _exercise any other power of the corporation that is conferred on the shareholders and members by the bylaws. Sec. 23.065. VOTING BY SHAREHOLDER OR MEMBER. Provides that each shareholder has one vote, in person or by proxy, for each share held by the shareholder. Provides that each member has one vote in person or by proxy. Provides that a member with a loan limit that exceeds $1,000 has one additional vote, in person or by proxy, for each additional $1,000 the member may have outstanding on loans to the corporation at any one time as determined under Section 23.068. Sec. 23.066. LOAN TO CORPORATION. Requires a member to make a loan to a corporation, when called on by the corporation to do so, on those terms and conditions periodically approved by the board of directors. Requires that loan to be evidenced by a bond, debenture, note, or other evidence of indebtedness of the corporation that is freely transferable at any time and accrues interest at a minimum rate of one-fourth of one percent more than the interest rate determined by the board to be the prime rate prevailing on the date of issuance on unsecured commercial loans. Sec. 23.067. PROHIBITED LOAN. Prohibits a member from making a loan to a corporation if, immediately after the loan would be made, the total amount of the corporation's obligations would exceed 50 times its capital. Provides that the corporation's capital includes the amount of its outstanding shares, whether common or preferred, and its earned or paid-in surplus, for purposes of this section. Sec. 23.068. LOAN LIMITS. (a) Requires the establishment of a loan limit at the $1,000 amount nearest to the amount computed in accordance with this section. (b) Prohibits the total amount outstanding on loans made to a corporation by a member at any one time, when added to the amount of the investment in the shares then held by the member, from exceeding: _20 percent of the total amount then outstanding on loans to the corporation by all members, including outstanding amounts validly called for a loan but not yet loaned; or _an amount equal to the lesser of $750,000 or two percent of a commercial bank's or trust company's capital and surplus; _an amount equal to one percent of the total outstanding loans made by a savings and loan association; _an amount equal to one percent of the capital and unassigned surplus of a stock insurance company other than a fire insurance company; _an amount equal to one percent of the unassigned surplus of a mutual insurance company other than a fire insurance company; _an amount equal to one-tenth of one percent of a fire insurance company's assets; or _the limits approved by the board for a government pension fund or other financial institution. (c) Requires each call made by the corporation to be prorated among its members in substantially the same proportion that the adjusted loan limit of each member bears to the aggregate of the adjusted loan limits of all members, subject to Subsection (b). (d) Provides that a member' adjusted loan limit is the amount of the member's loan limit, reduced by the balance of outstanding loans made by the member to the corporation and the investment in shares held by the member at the time of the call, for purposes of Subsection (c). Sec. 23.069. SURPLUS. Requires a corporation to set apart as earned surplus a minimum of 10 percent of its net earnings each year until the surplus, with any unimpaired surplus paid in, is equal to one-half of the amount paid in on the shares then outstanding. Requires the surplus to be kept to secure against losses and contingencies. Requires the surplus, if it becomes impaired, to be reimbursed in the manner provided for its accumulation. Requires the board to determine net earnings and surplus after providing for the required reserves as the directors consider advisable. Provides that a good faith determination of net earnings and surplus by the directors under this section is conclusive. Sec. 23.070. DEPOSITORY. Authorizes a corporation to deposit its funds in a banking institution that has been designated as a depository by a vote of the majority of the directors present at an authorized meeting of the board, excluding a director who is an officer or director of the designated depository. Prohibits the corporation from receiving money on deposit. Sec. 23.071. ANNUAL REPORT; PROVISION OF REQUIRED INFORMATION. Requires a corporation to annually report its condition to the banking commissioner and the Texas Department of Insurance. Requires a corporation to provide any information that is periodically required by the secretary of state. SUBCHAPTER C. GRAND LODGES Sec. 23.101. FORMATION. (a) Authorizes an institution or order, by resolution or other consent of its members, to incorporate under this subchapter if the institution or order is: _the grand lodge of Texas, Ancient, Free and Accepted Masons; _the Grand Royal Arch Chapter of Texas; _the Grand Commandery of Knights Templars of Texas; _the grand lodge of the Independent Order of Odd Fellows of Texas; or _another similar institution or order organized for charitable or benevolent purposes. (b) Requires a corporation formed under this subchapter to file a certificate in accordance with Chapter 4 that complies with this subchapter. Sec. 23.102. APPLICABILITY OF CHAPTER 22. Provides that Chapter 22 applies to a corporation formed under this subchapter if this subchapter does not contain any provision regarding a matter provided for in Chapter 22. Sec. 23.103. DURATION. Authorizes a grand body that incorporates under this subchapter to provide in its certificate for the expiration of its corporate powers at the end of a stated number of years. Provides that the grand body has perpetual existence if its certificate does not provide for its duration. Authorizes the grand body, by its corporate name, to have perpetual succession of its officers and members. Sec. 23.104. SUBORDINATE LODGES. Provides that the incorporation of a grand body includes each of its subordinate lodges or bodies holding a warrant or charter under the grand body. Provides that a subordinate body has all of the rights of other corporations under and by the name given to the grand body in the warrant or charter issued to the grand body. Requires the charter of the grand body to provide for those rights. Provides that a subordinate body is subject to the jurisdiction and control of its respective grand body, and authorizes the revocation of the subordinate body's warrant or charter by the grand body. Sec. 23.105. TRUSTEES AND DIRECTORS. Authorizes a grand body and its subordinate to elect trustees and directors or to appoint trustees or directors from among their officers. Sec. 23.106. FRANCHISE TAXES. Provides that a corporation formed under this subchapter is not subject to or required to pay a franchise tax, except that a corporation is exempt from the franchise tax imposed by Chapter 171, Tax Code, only if it is exempted by that chapter. Sec. 23.107. GENERAL POWERS. Authorizes a grand body and its subordinate to take action as directed or provided by law in the case of other corporations and to make constitutions and bylaws to govern their affairs. Sec. 23.108. AUTHORITY REGARDING PROPERTY. Authorizes a grand body or subordinate body to acquire and hold property as necessary or convenient for a site on which to erect a building for the use and occupancy of the body and to erect homes and schools for members' widows or orphans or elderly, disabled, or indigent members. Authorizes a grand body or subordinate body to sell or mortgage the property. Provides that a conveyance must be executed by the presiding officer and attested to by the secretary with the seal. Provides that a subordinate body's authority to sell or to mortgage property is subject to the conditions periodically prescribed or established by its grand body. Sec. 23.109. AUTHORITY REGARDING LOANS. Authorizes a grand body incorporated under this subchapter to loan money held and owned by the grand body for charitable purposes, for the endowment of any of its institutions, or otherwise, and to secure loans by taking and receiving liens on real property or by another method elected by it. Authorizes a grand body to become a purchaser of real property and hold title to property if the real property is secured by a lien and sold. Sec. 23.110. WINDING UP AND TERMINATION OF SUBORDINATE BODY. Provides that all property and rights existing in the subordinate body pass to and vest in its grand body on the winding up and termination of the subordinate body, subject to the payment of any debt owed by the subordinate body. Provides that the grand body is not liable for an amount greater than the actual cash value of the subordinate body's effects or authority, notwithstanding a grand body's liability for the debt of a subordinate body under this section. TITLE 3. LIMITED LIABILITY COMPANIES CHAPTER 101. LIMITED LIABILITY COMPANIES SUBCHAPTER A. GENERAL PROVISIONS Sec. 101.001. DEFINITIONS. Defines "assignee," "company," and "company agreement" for purposes of this title. SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS Sec. 101.051. SUPPLEMENTAL INFORMATION FOR CERTIFICATE OF FORMATION. Provides that the certificate of formation of a limited liability company (LLC) must state whether the company will or will not have managers. If the company will have managers, the name and address of each initial manager is required. If the company will not have managers, the name and address of each initial member of the company is required. All this information is in addition to the information required by Section 3.005. Sec. 101.052. CERTAIN PROVISIONS CONTAINED IN CERTIFICATE OF FORMATION. Authorizes the alternative inclusion, as provided by Section 3.005(b), in an LLC's certificate of any provision that may be contained in its company agreement. Provides that a reference in this title to the company agreement of an LLC includes any provision contained in its certificate instead of the company agreement as provided by this section. Sec. 101.053. COMPANY AGREEMENT. Provides that an LLC's company agreement governs the relations among its members, managers, and officers, assignees of its membership interests, the company itself, and other internal affairs of the company, except as provided by Section 101.054. Provides that this title and the provisions of Title 1 applicable to an LLC govern the internal affairs of the company to the extent that its agreement does not otherwise provide. Authorizes the waiver or modification, in an LLC's agreement, of a provision of this title or Title 1 that is applicable to a limited liability company, except as provided by Section 101.054. Sec. 101.054. WAIVER OR MODIFICATION OF CERTAIN STATUTORY PROVISIONS PROHIBITED; EXCEPTIONS. (a) Prohibits the waiver or modification, in an LLC's agreement, of the following provisions, except as provided by this section: _this section; _Section 101.051, 101.055, 101.101(b), 101.206, 101.502, or 101.551; _Chapter 1, if the provision is used to interpret a provision or define a word or phrase contained in a section listed in this subsection; _Chapter 2, other than Section 2.104(c)(2), 2.104(c)(3), or 2.106; _Chapter 3, other than Subchapters C and E; or _Chapter 4, 5, 7, 10, 11, or 12. (b) Authorizes the waiver or modification, in an LLC's agreement, of a provision listed in Subsection (a) if the provision that is waived or modified authorizes the LLC to waive or modify the provision in its governing documents. (c) Authorizes the modification, in an LLC's agreement, of a provision listed in Subsection (a) if the provision that is modified specifies the person or group of persons entitled to approve a modification or the vote or other method by which a modification is required to be approved. (d) Authorizes the waiver or modification, in an LLC's agreement, of a provision in this title or in that part of Title 1 applicable to an LLC that grants a right to a person, other than a member, manager, officer, or assignee of a membership interest in an LLC, only if the person consents in writing to the waiver or modification. Sec. 101.055. AMENDMENT OF COMPANY AGREEMENT. Authorizes the amendment of an LLC's agreement only if each member of the company consents to the amendment. SUBCHAPTER C. MEMBERSHIP Sec. 101.101. MEMBERS REQUIRED. Authorizes an LLC to have one or more members. Provides that an LLC must have at least one member, except as provided by this section. Provides that an LLC that has managers is not required to have any members during a reasonable period between the date the company is formed and the date the first member is admitted to the company. Provides that an LLC is not required to have any members during the period between the date the continued membership of the last remaining member of the company is terminated and the date the agreement to continue the company described by Section 101.551 is executed. Sec. 101.102. QUALIFICATION FOR MEMBERSHIP. Authorizes a person to be a member of or acquire a membership interest in an LLC unless the person lacks capacity apart from this code. Provides that a person is not required, as a condition to becoming a member of or acquiring a membership interest in an LLC, to make a contribution to the company, otherwise pay cash or transfer property to the company, or assume an obligation to make a contribution or otherwise pay cash or transfer property to the company. Sec. 101.103. EFFECTIVE DATE OF MEMBERSHIP. Provides that a person who acquires a membership interest in an LLC in connection with its formation becomes a member on the date the company is formed if the person is named as an initial member in the company's certificate. Provides that a person who acquires a membership interest in an LLC during its formation but who is not named as an initial member in the company's certificate becomes a member on the latest of the date the company is formed, the date stated in the company's records as the date the person becomes a member, or, if the company's records do not state the date the person becomes a member, the date that person's admission to the company is first reflected in its records. Provides that a person who, after the formation of an LLC, acquires directly or is assigned a membership interest in the company becomes a member on approval of the company's governing authority. Sec. 101.104. CLASSES OR GROUPS OF MEMBERS OR MEMBERSHIP INTERESTS. (a) Authorizes an LLC's agreement to establish within the company classes or groups of one or more members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights, and to provide for the manner of establishing within the company additional classes or groups of one or more members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights. (b) Authorizes the statement, in the LLC agreement, of the rights, powers, and duties of additional classes or groups of one or more members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights. Authorizes the statement, at the time the class or group is established, of the rights, powers, and duties of additional classes or groups of one or more members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights. (c) Authorizes the establishment of additional classes or groups of members or membership interests only by the adoption of an amendment to the company agreement if the LLC agreement does not provide for the manner of establishing classes or groups of members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights. (d) Authorizes the seniority of the rights, powers, or duties of any class or group of members or membership interests of an LLC to the rights, powers, or duties of any other class or group of members or membership interests in the company, including a previously established class or group. Sec. 101.105. ISSUANCE OF MEMBERSHIP INTERESTS AFTER FORMATION OF COMPANY. Authorizes an LLC, after its formation, to issue membership interests to any person, including an existing member of the company, with the approval of the governing authority of the company, and, if the issuance of a membership interest requires the establishment of a new class or group of members or membership interests, establish a new class or group. Sec. 101.106. NATURE OF MEMBERSHIP INTEREST. (a) Provides that a membership interest in an LLC is personal property. Provides that a member or an assignee of a membership interest does not have an interest in any specific property of the company. Sec. 101.107. WITHDRAWAL OR EXPULSION OF MEMBER PROHIBITED. Prohibits a member from withdrawing or being expelled from the company. Sec. 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST. Authorizes the assignment, in whole or in part, of a membership interest. Provides that an assignment of a membership interest is not an event requiring the winding up of the company and does not entitle the assignee to participate in the management and affairs of the company, become a member of the company, or exercise any rights of a member of the company. Sec. 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF MEMBERSHIP INTEREST BEFORE MEMBERSHIP. (a) Entitles a person who is assigned a membership interest to: _receive any allocation of income, gain, loss, deduction, credit, or a similar item that the assignor is entitled to receive if the allocation of the item is assigned; _receive any distribution the assignor is entitled to receive if the distribution is assigned; _require, for any proper purpose, reasonable information or a reasonable account of the transactions of the company; and _make, for any proper purpose, reasonable inspections of the books and records of the company. (b) Entitles an assignee of a membership interest to become a member on the approval of the company's governing authority. (c) Provides that an assignee is not liable as a member of the company until the assignee becomes a member. Sec. 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF MEMBERSHIP INTEREST AFTER BECOMING MEMBER. (a) Provides that an assignee, after becoming a member of the company, is: _entitled, to the extent assigned, to the same rights and powers granted or provided to a member by the company agreement or this code; _subject to the same restrictions and liabilities placed or imposed on a member by the company agreement or this code; and _except as provided by Subsection (b), liable for the assignor's obligation to make contributions to the company. (b) Provides that an assignee, after becoming a member, is not obligated for a liability of the assignor that the assignee did not have knowledge of on the date the assignee became a member and could not be ascertained from the company agreement. Sec. 101.111. RIGHTS AND DUTIES OF ASSIGNOR OF MEMBERSHIP INTEREST. Provides that an assignor of a membership interest continues to be a member. Entitles an assignor of a membership interest to exercise any unassigned rights or powers of a member until the assignee becomes a member of the company. Provides that an assignor of a membership interest is not released from any liability arising from the assignor's membership interest, regardless of whether the assignee becomes a member of the company. Sec. 101.112. JUDGMENT CREDITOR; CHARGE OF MEMBERSHIP INTEREST. (a) Authorizes a court, on application by a judgment creditor of a member of an LLC or an assignee of a membership interest in an LLC, to charge the membership interest of the member or assignee, as appropriate, with payment of the unsatisfied amount of the judgment. Provides that the judgment creditor has only the rights of an assignee if a court charges a membership interest with payment of a judgment. Prohibits the construction of this section to deprive a member of an LLC or an assignee of a membership interest in an LLC of the benefit of any exemption laws applicable to the membership interest of the member or assignee. Sec. 101.113. PARTIES TO ACTIONS. Authorizes a member to be named as a party only in an action brought to enforce a right or liability of the member relating to the company. Sec. 101.114. REQUIREMENTS FOR ENFORCEABLE SUBSCRIPTION. Provides that a subscription to purchase a membership interest is enforceable only if the subscription is in writing and signed by the person making the subscription. SUBCHAPTER D. CONTRIBUTIONS Sec. 101.151. REQUIREMENTS FOR ENFORCEABLE PROMISE. Provides that a promise to make a contribution or otherwise pay cash or transfer property to an LLC is enforceable only if the promise is in writing and signed by the person making the promise. Sec. 101.152. ENFORCEABLE PROMISE NOT AFFECTED BY CHANGE IN CIRCUMSTANCES. Obligates a member to perform an enforceable promise to make a contribution or otherwise pay cash or transfer property to the company without regard to the member's death, disability, or other change in circumstances. Sec. 101.153. FAILURE TO PERFORM ENFORCEABLE PROMISE; CONSEQUENCES. (a) Obligates a member, or the member's legal representative or successor, who does not perform an enforceable promise to make a contribution, or to otherwise pay cash or transfer property to the company, at the request of the company, to pay in cash the agreed value of the contribution, as stated in the company agreement or its records required under Section 3.151, less any amount already paid for the contribution and the value of any property already transferred. (b) Authorizes the LLC agreement to provide that a member who does not perform an enforceable promise to make a contribution, or otherwise pay cash or transfer property to the company, may have the member's membership interest reduced; subordinated to other membership interests of nondefaulting members; redeemed or sold at a value determined by appraisal or other formula; or made the subject of a forced sale, forfeiture, a loan from other members in an amount necessary to satisfy the enforceable promise, or another penalty or consequence. Sec. 101.154. CONSENT REQUIRED TO RELEASE ENFORCEABLE OBLIGATION. Authorizes the release or settlement of a member's obligation, or of the member's legal representative's or successor's obligation, to make a contribution or otherwise pay cash or transfer property to the company, or to return cash or property to the company paid or distributed to the member in violation of this code or the company agreement, only by consent of each member of the company. Sec. 101.155. CREDITOR'S RIGHT TO ENFORCE CERTAIN OBLIGATIONS. Authorizes a creditor of an LLC who extends credit or otherwise acts in reasonable reliance on an enforceable obligation of a member that is released or settled to enforce the original obligation if the obligation is stated in a document that is signed by the member and not amended or canceled to evidence the release or settlement of the obligation. Sec. 101.156. REQUIREMENTS TO ENFORCE CONDITIONAL OBLIGATION. Authorizes the enforcement by an LLC or its creditor of a member's obligation that is subject to a condition. Provides that a member's conditional obligation under this section includes a contribution payable on a discretionary call of the LLC before the time the call occurs. SUBCHAPTER E. ALLOCATIONS AND DISTRIBUTIONS Sec. 101.201. ALLOCATION OF PROFITS AND LOSSES. Requires the allocation of an LLC's profits and losses to be made to each member according to the member's percentage or other interest in the company on the date of the allocation as stated in the company's records required under Sections 3.151 and 101.501. Sec. 101.202. DISTRIBUTION IN KIND. Entitles a member to receive or demand a distribution from the company only in the form of cash, regardless of the form of the member's contribution to the company. Sec. 101.203. SHARING OF DISTRIBUTIONS. Requires the distributions of an LLC's cash and other assets to be made to each member according to the agreed value of the member's contribution to the company as stated in the company's records required under Sections 3.151 and 101.501. Sec. 101.204. INTERIM DISTRIBUTIONS. Provides that a member, before the winding up of the company, is not entitled to receive a distribution from the company until its governing authority declares a distribution to each member or a class or group of members that includes the member. Prohibits a member, before the winding up of the company, from demanding a distribution from the company until its governing authority declares a distribution to each member or a class or group of members that includes the member. Sec. 101.205. DISTRIBUTION ON WITHDRAWAL. Entitles a member who validly exercises the member's right to withdraw from the company granted under the company agreement to receive, within a reasonable time after the withdrawal, the fair value of the member's interest in the company as determined on the date of withdrawal. Sec. 101.206. PROHIBITED DISTRIBUTION; DUTY TO RETURN. (a) Prohibits an LLC from making a distribution to a member if, immediately after making the distribution, the company's total liabilities, other than liabilities described by Subsection (b), exceed the fair value of its total assets. (b) Provides that, for purposes of Subsection (a), an LLC's liabilities do not include a liability related to the member's membership interest or, except as provided by Subsection (c), a liability for which the recourse of creditors is limited to specified property of the company. (c) Provides that, for purposes of Subsection (a), an LLC's assets include the fair value of property subject to a liability for which recourse of creditors is limited to specified property of the company only if the fair value of that property exceeds the liability. (d) Requires a member who receives a distribution from the company in violation of this section to return the distribution to the company if the member had knowledge of the violation. (e) Prohibits the construction of this section to affect the obligation of a member to return a distribution to the company under the company agreement or other state or federal law. Sec. 101.207. CREDITOR STATUS WITH RESPECT TO DISTRIBUTION. Provides that when a member is entitled to receive a distribution from the company, the member, with respect to the distribution, has the same status as a creditor of the company and is entitled to any remedy available to the creditor, subject to Sections 11.053 and 101.206. SUBCHAPTER F. MANAGEMENT Sec. 101.251. MEMBERSHIP. Provides that the governing authority of an LLC consists of the managers of the company, if the company's certificate of formation states that it will have one or more managers, or the members of the company, if the company's certificate states that it will not have managers. Sec. 101.252. MANAGEMENT BY GOVERNING AUTHORITY. Requires the governing authority to manage the business and affairs of the company as provided by the company agreement and this title and the provisions of Title 1 applicable to an LLC to the extent that the company agreement does not provide for the management of the company. Sec. 101.253. DESIGNATION OF COMMITTEES; DELEGATION OF AUTHORITY. Authorizes the governing authority, by resolution, to designate one or more committees of the governing authority consisting of one or more governing persons of the company, and, subject to any limitation imposed by the governing authority, a governing person to serve as an alternate member of a committee at a committee meeting from which a member of the committee is absent or disqualified. Authorizes a committee of the governing authority to exercise the authority of the governing authority as provided by the resolution designating the committee. Provides that the designation of a committee under this section does not relieve the governing authority of any responsibility imposed by law. Sec. 101.254. DESIGNATION OF AGENTS; BINDING ACTS. Provides that each governing person of an LLC and each officer or agent of an LLC vested with actual or apparent authority by the governing authority is an agent of the company for purposes of carrying out the company's business, except as provided by this title and Title 1. Provides that an act committed by an LLC's agent for the purpose of apparently carrying out the ordinary course of business of the company binds the company unless the agent does not have actual authority to act for the company and the person with whom the agent is dealing has knowledge of the agent's lack of actual authority. Provides that an act committed by an agent of a limited liability company that is not apparently for carrying out the ordinary course of business of the company binds the company only if the act is authorized in accordance with this title. Sec. 101.255. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED GOVERNING PERSONS OR OFFICERS. (a) Provides that this section applies only to a contract or transaction between an LLC and one or more of its governing persons or officers, or an entity or other organization in which one or more of its governing persons or officers is a managerial official or has a financial interest. (b) Provides that an otherwise valid contract or transaction is valid if the material facts as to the relationship or interest and as to the contract or transaction are disclosed to or known by: _the company's governing authority or a committee of the governing authority and the governing authority or committee in good faith authorizes the contract or transaction by the affirmative vote of the majority of the disinterested governing persons of the company, regardless of whether the disinterested governing persons constitute a quorum; or _if the company has managers, the members of the company, and the members in good faith approve the contract or transaction by a majority vote of all of the members; or _if the contract or transaction is fair to the company when the contract or transaction is authorized, approved, or ratified by the governing authority, a committee of the governing authority, or the members of the company. (c) Authorizes the inclusion of common or interested governing persons of an LLC to determine the presence of a quorum at a meeting of the company's governing authority, or of a committee of the governing authority that authorizes the contract or transaction. SUBCHAPTER G. MANAGERS Sec. 101.301. APPLICABILITY OF SUBCHAPTER. Provides that this subchapter applies only to an LLC that has one or more managers. Sec. 101.302. NUMBER AND QUALIFICATIONS. (a) Provides that an LLC's managers consist of one or more persons. Provides that the number of managers consists of the number of initial managers listed in the company's certificate of formation, but authorizes an amendment to, or as provided by, the company agreement to, increase or decrease the number of managers of a limited liability company, except that a decrease in the number of managers may not shorten the term of an incumbent manager. Provides that a manager is not required to be a resident of this state or member of the company. Sec. 101.303. TERM. Sets forth that a manager serves for the term, if any, for which the manager is elected and until the manager's successor is elected or until the death, resignation, or removal of the manager. Sec. 101.304. REMOVAL. Authorizes the removal of a manager, with or without cause, at a meeting of the company's members called for that purpose, subject to Section 101.306(a). Sec. 101.305. MANAGER VACANCY. Authorizes the filling of a managerial vacancy by the affirmative vote of the majority of the remaining managers, without regard to whether the remaining managers constitute a quorum, or, if the vacancy is a result of an increase in the number of managers, by an election at an annual or special meeting of the company's members called for that purpose, subject to Section 101.306(b). Provides that a person elected to fill a vacancy serves for the unexpired term of the person's predecessor. Sec. 101.306. ELECTION OF MANAGER BY CLASS OR GROUP. (a) Authorizes the removal of a manager from office only by the class or group that elected the manager if the company agreement entitles a class or group of members to elect one or more managers. (b) Provides that a vacancy in the position of a manager elected as provided by Subsection (a) may be filled only by a majority vote of the managers serving on the date the vacancy occurs who were elected by the class or group of members, or by a majority vote of the members of the class or group. Sec. 101.307. METHODS OF CLASSIFYING MANAGERS. Authorizes the establishment of other methods of classifying managers, including providing for managers who serve for staggered terms of office or terms that are not uniform, in the company agreement. SUBCHAPTER H. MEETINGS AND VOTING Sec. 101.351. APPLICABILITY OF SUBCHAPTER. Provides that this subchapter applies only to a meeting of and voting by an LLC's governing authority, an LLC's members if the members do not constitute the governing authority of the company, and a governing authority's committee. Sec. 101.352. GENERAL NOTICE REQUIREMENTS. (a) Requires that notice of a regular or special meeting of the governing authority or members, or a committee of the company's governing authority, be given in writing to each governing person, member, or committee member, as appropriate, and as provided by Section 6.051, except as provided by Subsection (b). (b) Requires that the notice provided by Subsection (a) be given by or at the direction of the governing authority not later than the 10th day or earlier than the 60th day before the date of the meeting if the members do not constitute the governing authority of the company. Provides that notice of a meeting required under this subsection must state the business to be transacted at the meeting or the purpose of the meeting if the meeting is a special meeting or a purpose of the meeting is to consider a matter described by Section 101.356. Sec. 101.353. QUORUM. Provides that a majority of all of the governing persons, members, or committee members of an LLC constitutes a quorum for the purpose of transacting business at a meeting of the governing authority, members, or committee of the company, as appropriate. Sec. 101.354. EQUAL VOTING RIGHTS. Provides that each governing person, member, or committee member has an equal vote at a meeting of the governing authority, members, or committee of the company, as appropriate. Sec. 101.355. ACT OF GOVERNING AUTHORITY, MEMBERS, OR COMMITTEE. Provides that the affirmative vote of the majority of the governing persons, members, or committee members present at a meeting at which a quorum is present constitutes an act of the governing authority, members, or committee of the company, as appropriate, except as provided by this title or Title 1. Sec. 101.356. VOTES REQUIRED TO APPROVE CERTAIN ACTIONS. (a) Authorizes an LLC's governing authority to approve an action of the company as provided by Section 101.355, except as provided by Subsections (b), (c), and (d) or other sections in this title (b) Provides that an LLC's action taken apparently not for carrying out the ordinary course of business of the company must be approved by the affirmative vote of the majority of the company's governing persons, except as provided by Subsections (c) and (d) or other sections in this title. (c) Provides that a fundamental business transaction of an LLC, or an action that would make it impossible for an LLC to carry out its ordinary business, must be approved by the affirmative vote of the majority of all of the company's governing persons or, if the company has no managers, the company's members, except as provided by Subsections (d) and (e) or other sections in this title. (d) Provides that an amendment to an LLC's certificate of formation must be approved by an affirmative vote of all of the company's governing persons and, if the company has no managers, the company's members, except as provided by Subsection (e) and other sections of this title. (e) Provides that a requirement that an LLC's action must be approved by the company's members does not apply during a reasonable period between the date the company is formed and the date the first member is admitted to the company. Sec. 101.357. MANNER OF VOTING. Authorizes a member of an LLC to vote in person or by a proxy executed in writing by the member. Authorizes a manager or committee member of an LLC, if authorized by the company agreement, to vote in person or by a proxy executed in writing by the governing person or committee member, as appropriate. Sec. 101.358. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT. Provides that this section applies only to an action required or authorized to be taken at an annual or special meeting of the governing authority, the members, or a committee of the governing authority of an LLC under this title, Title 1, or the governing documents of the company. Authorizes the taking of action without holding a meeting, providing notice, or taking a vote if a written consent or consents stating the action to be taken is signed by the number of governing persons, members, or committee members, as appropriate, necessary to have at least the minimum number of votes that would be necessary to take the action at a meeting at which each governing person, member, or committee member, as appropriate, entitled to vote on the action is present and votes. Sec. 101.359. RIGHTS OF DISSENT AND APPRAISAL. (a) Provides that an LLC is not a domestic entity subject to dissenters' rights, and that its members are not entitled to the rights of dissent and appraisal provided by Subchapter H, Chapter 10, with respect to an action of the company described by this title or Title 1, except as provided by Subsection (b). (b) Provides that an LLC is a domestic entity subject to dissenters' rights and its members are entitled to the rights of dissent and appraisal provided by Subchapter H, Chapter 10, if the rights of dissent and appraisal are conferred by a company agreement. SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION Sec. 101.401. EXPANSION OR RESTRICTION OF DUTIES AND LIABILITIES. Authorizes the expansion or restriction of duties, including fiduciary duties, and liabilities of a person relating to the company or to a member, manager, or officer of the company or an assignee of a membership interest in the company to be made by an LLC's company agreement. Sec. 101.402. PERMISSIVE INDEMNIFICATION, ADVANCEMENT OF EXPENSES, AND INSURANCE OR OTHER ARRANGEMENTS. Authorizes an LLC to indemnify a person, pay in advance or reimburse expenses incurred by a person and purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless a person. Defines "persons" for purposes of this section. SUBCHAPTER J. DERIVATIVE PROCEEDINGS Sec. 101.451. DEFINITIONS. Defines "derivative proceeding" and "member" for purposes of this subchapter: Sec. 101.452. STANDING TO BRING PROCEEDING. Prohibits a member of an LLC from instituting or maintaining a derivative proceeding unless: _the member was a member at the time of the act or omission complained of, or became a member by operation of law from a person that was a member at the time of the act or omission complained of; and _the member fairly and adequately represents the interests of the LLC in enforcing the right of the company. Sec. 101.453. DEMAND. (a) Prohibits a member from instituting a derivative proceeding until the 91st day after the date a written demand is filed with the LLC stating with particularity the act, omission, or other matter that is the subject of the claim or challenge and requesting that the company take suitable action. (b) Provides that the waiting period required by Subsection (a) before a derivative proceeding may be instituted is not required if the member has been previously notified that the demand has been rejected by the company, the company is suffering irreparable injury, or irreparable injury to the company would result by waiting for the expiration of the 90-day period. Sec. 101.454. DETERMINATION BY GOVERNING OR INDEPENDENT PERSONS. (a) Provides that the determination of how to proceed on allegations made in a demand or petition relating to a derivative proceeding must be made by: _an affirmative vote of the majority of the independent and disinterested governing persons present at a meeting of the governing authority at which interested governing persons are not present at the time of the vote if the independent and disinterested governing persons constitute a quorum of the governing authority; _an affirmative vote of the majority of a committee consisting of two or more independent and disinterested governing persons appointed by an affirmative vote of the majority of one or more independent and disinterested governing persons present at a meeting of the governing authority, regardless of whether the independent and disinterested governing persons constitute a quorum of the governing authority; or _a panel of one or more independent and disinterested persons appointed by the court on a motion by the limited liability company listing the names of the persons to be appointed and stating that, to the best of the limited liability company's knowledge, the persons to be appointed are disinterested and qualified to make the determinations contemplated by Section 101.458. (b) Requires the court to appoint the panel if it finds that the persons recommended by the LLC are independent and disinterested and are otherwise qualified with respect to expertise, experience, independent judgment, and other factors considered appropriate by it under the circumstances to make the determinations. Prohibits a person appointed by the court to the panel from being held liable to the LLC or its members for an action taken or omission made by the person in that capacity, except for acts or omissions constituting fraud or wilful misconduct. Sec. 101.455. STAY OF PROCEEDING. (a) Requires the court to stay a derivative proceeding, if the domestic or foreign LLC that is the subject of a derivative proceeding commences an inquiry into the allegations made in a demand or petition and the person or group of persons described by Section 101.454 is conducting an active review of the allegations in good faith, until the review is completed and a determination is made by the person or group regarding what further action, if any, should be taken. (b) Requires the domestic or foreign LLC, in order to obtain a stay, to provide the court with a written statement agreeing to advise the court and the member making the demand of the determination promptly on the completion of the review of the matter. Authorizes the review, on motion, of a stay every 60 days for the continued necessity of the stay. (c) Authorizes the renewal of the stay, if the review and determination made by the person or group is not completed before the 61st day after the date on which the court orders the stay, for one or more additional 60-day periods if the domestic or foreign LLC provides the court and the member with a written statement of the status of the review and the reasons why a continued extension of the stay is necessary. Sec. 101.456. DISCOVERY. (a) Requires the discovery conducted by a member after the filing of the derivative proceeding, if a domestic or foreign LLC proposes to dismiss a derivative proceeding under Section 101.458, to be limited to facts relating to whether the person or group of persons described by Section 101.458 is independent and disinterested, the good faith of the inquiry and review by the person or group, and the reasonableness of the procedures followed by the person or group in conducting the review. (b) Prohibits the expansion of this type of discovery from including a fact or substantive matter regarding the act, omission, or other matter that is the subject matter of the derivative proceeding. Authorizes the expansion of the scope of discovery if the court determines after notice and hearing that a good faith review of the allegations for purposes of Section 101.458 has not been made by an independent and disinterested person or group in accordance with that section. Sec. 101.457. TOLLING OF STATUTE OF LIMITATIONS. Provides that filing a written demand with the LLC under Section 101.453 tolls the statute of limitations on the claim until the earlier of the 91st day after the date of the demand or the 31st day after the date the LLC advises the member that the demand has been rejected or the review has been completed. Sec. 101.458. DISMISSAL OF DERIVATIVE PROCEEDING. (a) Requires a court to dismiss a derivative proceeding on a motion by the LLC if the person or group of persons described by Section 101.454 determines in good faith that continuation of the derivative proceeding is not in the best interests of the LLC. (b) Requires the burden of proof, in determining whether the requirements of Subsection (a) have been met, to fall on either the plaintiff member under three specified circumstances or the LLC in any other circumstance. Sec. 101.459. DEMAND. Provides that in a case where a derivative proceeding is instituted after a demand is rejected, the petition must allege with particularity facts that establish that the rejection was not made in accordance with the requirements of Sections 101.454 and 101.458. Sec. 101.460. DISCONTINUANCE OR SETTLEMENT. Prohibits the discontinuation or settlement of a derivative proceeding without court approval. Requires the court to direct that notice be given to the affected members if it determines that a proposed discontinuance or settlement may substantially affect the interests of other members. Sec. 101.461. PAYMENT OF EXPENSES. Defines "expenses" for purposes of this section. Authorizes the court, on termination of a derivative proceeding, to order either the domestic or foreign LLC or the plaintiff to pay the expenses of its adversary, depending on which party the court finds has benefitted from the proceeding. Authorizes the court, on termination of a derivative proceeding, to order a party to pay the expenses incurred by another party relating to the filing of a pleading, motion, or other paper if the court finds the pleading, motion, or other paper legally insufficient in fact or law or if used for an improper purpose. Sec. 101.462. APPLICATION TO FOREIGN LIMITED LIABILITY COMPANIES. Provides that in a derivative proceeding brought in the right of a foreign LLC the matters covered by this subchapter are governed by the laws of the foreign LLC's place of organization, except for Sections 101.455, 101.460, and 101.461, which are procedural provisions and do not relate to the internal affairs of the foreign LLC. Provides that in the case of matters relating to a foreign LLC under Section 101.454, a reference to a person or group of persons described by that section refers to a person or group entitled under the laws of the foreign LLC's place of organization to review and dispose of a derivative proceeding. Requires the governance of the standard of review of a decision made by the person or group to dismiss the derivative proceeding by the laws of the foreign LLC's place of organization. Sec. 101.463. CLOSELY HELD LIMITED LIABILITY COMPANY. Defines "closely held limited liability company" for purposes of this section. Specifies that Sections 101.452-101.459 do not apply to a closely held LLC, except that a court is authorized to treat a derivative proceeding brought by a member of a closely held LLC as a direct action brought by the member for the member's own benefit, and that a recovery in a direct or derivative proceeding by a member is authorized to be paid directly to the plaintiff or to the LLC if necessary to protect the interests of creditors or other members of the LLC. SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS Sec. 101.501. ADDITIONAL RECORDS REQUIRED. Enumerates the records required to be kept by an LLC at its principal domestic office or to be made available, at that office, to a person who submits a written request to examine the books and records of the company. Provides for an exception to the information required to be kept or made available at the domestic office. Specifies what is required to be kept by an LLC and made available to a member of the company at the LLC's registered office located in this state. Sec. 101.502. RIGHT TO EXAMINE RECORDS AND CERTAIN OTHER INFORMATION. (a) Authorizes a member or an assignee of a membership interest, or a representative of the member or assignee, on written request and for a proper purpose, to examine and copy at any reasonable time and at the member's or assignee's expense records required under Sections 3.151 and 101.501 and other business information. (b) Enumerates the documents that an LLC is required to provide to a member or an assignee of a membership interest, on written request by the member or assignee. SUBCHAPTER L. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS Sec. 101.551. ADDITIONAL EVENT REQUIRING WINDING UP. Provides that the termination of the continued membership of the last remaining member of an LLC is an event that requires the winding up of a domestic entity unless, by the 90th day after the termination, the legal representative or successor of the last remaining member agrees to continue the company and, from the date of the termination, to become a member of the company or nominate or delegate another person to become a member of the company. Sec. 101.552. PERSONS ELIGIBLE TO WIND UP COMPANY. Provides that the winding up of the company, unless a revocation as provided by Section 11.151 or a cancellation as provided by Section 11.152 occurs, must be carried out by the company's governing authority or one or more persons designated by the governing authority, if the event requiring the winding up is the termination of the continued membership of the last remaining member, the legal representative or successor of the last remaining member or one or more persons designated by the legal representative or successor, or a person appointed by the court to carry out the winding up. Sec. 101.553. APPROVAL OF VOLUNTARY WINDING UP, REVOCATION, CANCELLATION, OR REINSTATEMENT. Provides that a majority vote of all of the governing persons of an LLC and, if the LLC has managers, a majority vote of all of the members is required to approve a voluntary winding up of the company, a revocation of a voluntary decision to wind up, a cancellation of an event requiring the winding up of the company, or a reinstatement of a termination of the company. TITLE 4. PARTNERSHIPS CHAPTER 151. GENERAL PROVISIONS Sec. 151.001. DEFINITIONS. Defines "capital account," "foreign limited partnership," "majority-in-interest," and "partnership agreement." Sec. 151.002. KNOWLEDGE OF FACT. Provides that a person has knowledge of a fact only if the person has actual knowledge of the fact. Sec. 151.003. NOTICE OF FACT. Specifies when a person has notice of a fact. CHAPTER 152. GENERAL PARTNERSHIPS SUBCHAPTER A. GENERAL PROVISIONS Sec. 152.001. DEFINITIONS. Defines "event of withdrawal," "withdrawal," "event requiring winding up," "foreign limited liability partnership," "other partnership provisions," and "withdrawn partner." Sec. 152.002. EFFECT OF PARTNERSHIP AGREEMENT; NONWAIVABLE AND VARIABLE PROVISIONS. Provides that a partnership agreement governs the relations of the partners and between the partners and the partnership, except as provided by Subsection (b). Provides that this chapter and the other partnership provisions govern the relationship of the partners and between the partners and the partnership. Prohibits a partnership agreement or the partners from containing specified provisions and taking certain actions, respectively. Sec. 152.003. SUPPLEMENTAL PRINCIPLES OF LAW. Provides that the principles of law and equity and the other partnership provisions supplement this chapter, unless otherwise provided by this chapter or the other partnership provisions. Sec. 152.004. RULE OF STATUTORY CONSTRUCTION NOT APPLICABLE. Provides that the rule that a statute in derogation of the common law is to be strictly construed does not apply to this chapter or the other partnership provisions. Sec. 152.005. APPLICABLE INTEREST RATE. Provides that if an obligation to pay interest arises under this chapter and the rate is not specified, the interest rate is the rate specified by Section 302.002, Finance Code. SUBCHAPTER B. NATURE AND CREATION OF PARTNERSHIP Sec. 152.051. PARTNERSHIP DEFINED. Provides that in this section, "association" does not have the meaning of the term "association" under Section 1.002. Provides that except as provided by Subsection (c) and Section 152.053, an association of two or more persons to carry on a business for profit as owners creates a partnership, regardless of whether the persons intend to create a partnership or the association is called a "partnership," "joint venture," or other name. Establishes that an association or entity created under a law other than this title and the provisions of Title 1 applicable to partnerships and limited partnerships is not a partnership. Sec. 152.052. RULES FOR DETERMINING IF PARTNERSHIP IS CREATED. Specifies the factors indicating that persons have created a partnership. Specifies the circumstances, by themselves, that do not indicate that a person is a partner in the business. Provides that an agreement by the owners of a business to share losses is not necessary to create a partnership. Sec. 152.053. QUALIFICATIONS TO BE PARTNER; NONPARTNER'S LIABILITY TO THIRD PERSON. Authorizes a person to be a partner unless the person lacks capacity apart from this chapter. Provides that a person who is not a partner in a a third person under this chapter, except as provided by Sections 152.054 and 152.506. Sec. 152.054. FALSE REPRESENTATION OF PARTNERSHIP OR PARTNER. Provides that a false representation or conduct falsely indicating that a person is a partner with another person does not by itself create a partnership. Provides that a representation or other conduct indicating that a person is a partner in an existing partnership does not by itself make that person a partner in the partnership, if that person is not a partner in that existing partnership. SUBCHAPTER C. PARTNERSHIP PROPERTY Sec. 152.101. NATURE OF PARTNERSHIP PROPERTY. Provides that partnership property is not property of the partners. Provides that a partner or a partner's spouse does not have an interest in partnership property. Sec. 152.102. CLASSIFICATION AS PARTNERSHIP PROPERTY. (a) Establishes that property is partnership property if acquired in the name of the partnership, or in the name of one or more partners if the instrument transferring title indicates the person's capacity as a partner or the existence of a partnership, regardless of whether the name of the partnership is indicated. (b) Establishes that property is presumed to be partnership property if it is acquired with partnership property, regardless of whether the property is acquired as provided by Subsection (a). (c) Establishes that property acquired in the name of one or more partners is presumed to be the partner's property, regardless of whether the property is used for partnership purposes, if the instrument transferring title to the property does not indicate the person's capacity as a partner or the existence of a partnership and if the property is not acquired with partnership property. (d) Provides that for purposes of this section, property is acquired in the name of the partnership by a transferring it to the partnership in its name or to one or more partners in the partners' capacity in the partnership if the name of the partnership is indicated in the instrument transferring title to the property. SUBCHAPTER D. RELATIONSHIP BETWEEN PARTNERS AND BETWEEN PARTNERS AND PARTNERSHIPS Sec. 152.201. ADMISSION AS PARTNER. Provides that a person may become a partner only with the consent of all partners. Sec. 152.202. CREDITS OF AND CHARGES TO PARTNER. Provides that a partner is credited with an amount equal to the cash and the value of property that the partner contributes to a partnership and the partner's share of the partnership's profits. Provides that a partner is charged with an amount equal to the cash and the value of property distributed by the partnership to the partner and the partner's share of the partnership's losses. Entitles a partner to be credited with an equal share of the partnership's profits and to be chargeable with a share of the partnership's capital or operating losses in proportion to the partner's share of the profits. Sec. 152.203. RIGHTS AND DUTIES OF PARTNER. (a) Provides that a partner has equal rights in the management and conduct of the business of a partnership. Establishes that a partner's right to participate in the management and conduct of the business is not community property. (b) Authorizes a partner to use or possess partnership property on behalf of the partnership only. (c) Provides that a partner is not entitled to receive compensation for services performed for a partnership, except for reasonable compensation for services rendered in winding up partnership business. (d) Entitles a partner acting in the proper conduct of the business of the partnership or for the preservation of its business or property, who reasonably makes a payment or advance above the amount that the partner agreed to contribute or who reasonably incurs a liability, to be repaid and to receive interest from the date of the payment or advance or incurrence of the liability. Sec. 152.204. GENERAL STANDARDS OF PARTNER'S CONDUCT. (a) Sets forth that a partner owes to the partnership and the other partners a duty of loyalty and a duty of care. (b) Requires a partner to act in good faith and in a manner that the partner reasonably believes is in the best interest of the partnership in discharging duties to the partnership and the other partners under this code or under the partnership agreement and in exercising rights and powers in the conduct or winding up of the partnership business. (c) Provides that a partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner's conduct furthers the partner's own interest. (d) Establishes that a partner, in the capacity as partner, is not a trustee and is not held to the standards of a trustee. Sec. 152.205. PARTNER'S DUTY OF LOYALTY. Sets forth the elements of a partner's duty of loyalty to the partnership and the other partners. Sec. 152.206. PARTNER'S DUTY OF CARE. Sets forth the elements of a partner's duty of care to the partnership and the other partners. Sec. 152.207. STANDARDS OF CONDUCT APPLICABLE TO PERSON WINDING UP PARTNERSHIP BUSINESS. Provides that Sections 152.204-152.206 apply to a person who is winding up the partnership business as the personal or legal representative of the last surviving partner to the same extent as those sections apply to a partner. Sec. 152.208. AMENDMENT TO PARTNERSHIP AGREEMENT. Provides that a partnership agreement may be amended with the consent of all of the partners. Sec. 152.209. DECISION-MAKING REQUIREMENT. Provides that a difference arising in a matter in the ordinary course of the partnership business may be decided by a majority-in-interest of the partners. Provides that an act that is outside the partnership's ordinary course of business may be undertaken with the consent of all partners. Sec. 152.210. PARTNER'S LIABILITY TO PARTNERSHIP AND OTHER PARTNERS. Establishes that a partner is liable to a partnership and the other partners for breaching the partnership agreement or violating a duty owed to the partnership or other partners which harms the partnership or the partners. Sec. 152.211. REMEDIES OF PARTNERSHIP AND PARTNERS. Authorizes a partnership to maintain an action against a partner for breaching the partnership agreement or for violating a duty to the partnership which causes harm to the partnership. Authorizes a partner to maintain an action against the partnership or another partner for legal or equitable relief, including an accounting of partnership business, to enforce a right under the partnership agreement, enforce a specified right under this chapter, or enforce the rights and protect the interests of the partner, including rights and interests independent of the partnership relationship. Provides that the accrual of and a time limitation on a right of action for a remedy under this section is governed by other applicable law. Provides that a right to an accounting does not revive a claim barred by law. Sec. 152.212. BOOKS AND RECORDS OF PARTNERSHIP. Provides that in this section, "access" includes the opportunity to inspect and copy books and records during ordinary business hours. Requires a partnership to keep its books and records at its chief executive office. Requires a partnership to provide access to its books and records to a partner or a partner's agent or attorney. Requires the partnership to provide a former partner or a former partner's agent or attorney access to books and records of the period during which the former partner was a partner or for any other proper purpose with respect to another period. Authorizes a partnership to impose a reasonable charge to cover the costs of labor and materials for copies of furnished documents. Sec. 152.213. INFORMATION REGARDING PARTNERSHIP. Requires each partner and the partnership to furnish information concerning the partnership to specified individuals, upon request and to the extent just and reasonable. Provides that a legal representative of a deceased partner or of a partner who has a legal disability and an assignee are subject to the duties of a partner with respect to information made available. Sec. 152.214. CERTAIN THIRD-PARTY OBLIGATIONS NOT AFFECTED. Provides that Sections 152.201-152.203, 152.208, 152.209, 154.101-154.103, and 154.201 do not limit a partnership's obligations to another person under Sections 152.301 and 152.302. SUBCHAPTER E. RELATIONSHIP BETWEEN PARTNERS AND OTHER PERSONS Sec. 152.301. PARTNER AS AGENT. Provides that a partner is an agent of the partnership for business purposes. Sec. 152.302. BINDING EFFECT OF PARTNER'S ACTION. (a) Provides that an act of a partner, including executing an instrument in the partnership name, binds the partnership if the act is for apparently carrying on in the ordinary course the partnership business or the kind of business carried on by the partnership, unless a partner is not authorized to act for the partnership in a particular matter and the person with whom the partner is dealing knows that the partner lacks authority. (b) Provides that an act of a partner that is not apparently for carrying on in the ordinary course a business described by Subsection (a) binds the partnership only if authorized by the other partners. (c) Provides that a partner's conveyance of real property on behalf of the partnership, which is not otherwise binding on the partnership, binds the partnership if the property has been subsequently conveyed by the grantee or a person claiming through the grantee to be a holder for value without knowledge that the partner exceeded that partner's authority in making the conveyance. Sec. 152.303. LIABILITY OF PARTNERSHIP FOR CONDUCT OF PARTNER. Provides that a partnership is liable for loss or injury to a person, including a partner, or for a penalty caused by or incurred as a result of a wrongful act or omission or other actionable conduct of a partner while acting in the ordinary course of partnership business or with the partnership's authority. Provides that a partnership is liable for the loss of money or property of a person who is not a partner which is received in the course of the partnership's business and misapplied by a partner while in the custody of the partnership. Sec. 152.304. NATURE OF PARTNER'S LIABILITY. Provides that all partners are jointly and severally liable for a partnership debt or obligation unless otherwise agreed by the claimant or provided by law, except as otherwise provided by this section or Section 152.801(b). Provides that a person who is admitted as a partner into an existing partnership does not have personal liability for a partnership obligation that arises before the partner's admission, relates to an action taken or omission occurring before the partner's admission, or arises under a contract or commitment entered into before the partner's admission. Sec. 152.305. REMEDY. Provides that an action may be brought against a partnership and any or all of the partners in the same action or in separate actions. Sec. 152.306. ENFORCEMENT OF REMEDY. (a) Provides that a judgment against a partnership is not by itself a judgment against a partner. Authorizes the entering of a judgment against a partner who has been served with process in a suit against the partnership. (b) Authorizes a creditor to proceed against one or more partners or the partners' property to satisfy a judgment based on a claim that could have been successfully asserted against the partnership if certain conditions are met, except as provided by Subsection (c). (c) Provides that a creditor is not prohibited from proceeding directly against one or more partners or the partners' property without first seeking satisfaction from partnership property in specified circumstances. (d) Provides that this section does not limit the effect of Section 152.801 with respect to a registered limited liability partnership. Sec. 152.307. EXTENSION OF CREDIT IN RELIANCE ON FALSE REPRESENTATION. Provides that the rights of a person who extends credit in reliance on a representation described by Section 152.054 are not determined by this chapter and the other partnership provisions, and is determined by applicable law, including the law of estoppel, agency, negligence, fraud, and unjust enrichment. Provides that the rights and duties of a person who is held liable under Subsection (a) are determined by law other than the law described by Subsection (a). SUBCHAPTER F. TRANSFER OF PARTNERSHIP INTERESTS Sec. 152.401. TRANSFER OF PARTNERSHIP INTEREST. Authorizes a partner to transfer all or part of the partner's partnership interest. Sec. 152.402. GENERAL EFFECT OF TRANSFER. Provides that a transfer of all or part of a partner's partnership interest is not an event of withdrawal, does not by itself cause a winding up of the partnership business, and does not entitle the transferee to participate in the management or conduct of partnership business. Sec. 152.403. EFFECT OF TRANSFER ON TRANSFEROR. Provides that after the transfer, the transferor continues to have a partner's rights and duties which are not transferred. Sec. 152.404. RIGHTS AND DUTIES OF TRANSFEREE. (a) Entitles a transferee of a partner's partnership interest to receive, to the extent transferred, distributions to which the transferor would be entitled. (b) Entitles a transferee, in the event of winding up partnership business under Subchapter I, to receive to the extent transferred, the net amount otherwise distributable to the transferor. (c) Provides that the transferee is not liable as a partner solely as a result of the transfer, until the transferee becomes a partner. (d) Authorizes the transferee, for a proper purpose, to require reasonable information or an account of a partnership transaction and to make reasonable inspection of the partnership books. Authorizes a transferee, in the winding up of partnership business, to require an accounting from the date of the latest accounting agreed to by all of the partners. (e) Provides that a partnership is not required to give effect to a transferee's rights under this section and Sections 152.401, 152.402, and152.403 until it receives notice of the transfer. Sec. 152.405. POWER TO EFFECT TRANSFER OR GRANT OF SECURITY INTEREST. Provides that a partnership is not required to give effect to a transfer, assignment, or grant of a security interest prohibited by a partnership agreement. Sec. 152.406. EFFECT OF DEATH OR DIVORCE ON PARTNERSHIP INTEREST. (a) Provides, for purposes of this code, that: (1) on the divorce of a partner, the partner's spouse is a transferee of the partnership interest from the partner to the extent of the spouse's partnership interest; (2) on the death of a partner, the partner's surviving spouse, heir, legatee, or personal representative is a transferee of the partnership interest from the partner to the extent of their respective partnership interest; and (3) on the death of a partner's spouse, an heir, legatee, or personal representative of the spouse is a transferee of the partnership interest from the partner to the extent of their respective partnership interest. (b) Provides that an event described under Section 152.501 that occurs with respect to a partner's spouse is not an event of withdrawal. (c) Provides that this chapter does not impair an agreement for the purchase or sale of a partnership interest, including the death of an owner of the partnership interest. SUBCHAPTER G. WITHDRAWAL OF PARTNER Sec. 152.501. EVENTS OF WITHDRAWAL. Provides that person ceases to be a partner on the occurrence of an event of withdrawal. Establishes that an event of withdrawal of a partner occurs on specified dates, occurrences, and under specified circumstances. Sec. 152.502. EFFECT OF EVENT OF WITHDRAWAL ON PARTNERSHIP AND OTHER PARTNERS. Provides that a partnership continues after an event of withdrawal and affects the relationships among the withdrawn partner, the partnership, and the continuing partners as provided by specified sections. Sec. 152.503. WRONGFUL WITHDRAWAL; LIABILITY. Authorizes a partner to withdraw from the partnership and cease being a partner pursuant Section 152.501 any time before the occurrence of an event requiring a winding up of partnership business. Specifies the circumstances under which a partner's withdrawal is wrongful. Sec. 152.504. WITHDRAWN PARTNER'S POWER TO BIND PARTNERSHIP. Provides that an action of a withdrawn partner binds the partnership, if the transaction would bind the partnership before the person's withdrawal; the transaction occurs no later than the first anniversary of the date of the withdrawal; and the other party to the transaction does not have notice of the withdrawal, conducted business with the partnership within one year prior to the withdrawal date, and reasonably believed the withdrawn partner was a partner at the time of the transaction. Establishes that a withdrawn partner is liable to the partnership for a loss to the partnership that is incurred by the withdrawn partner and for which the partnership is liable under Subsection (a). Sec. 152.505. EFFECT OF WITHDRAWAL ON PARTNER'S EXISTING LIABILITY. (a) Specifies that the withdrawal of a partner does not discharge the partner's liability for an partnership obligation before withdrawal. (b) Provides that a deceased partner's estate is liable for an partnership obligation incurred while the deceased was a partner. (c) Provides that a withdrawn partner's liability that is incurred before withdrawal is discharged if agreed by the partner and a partnership creditor. (d) Provides that a withdrawn partner is discharged from a partnership obligation incurred before withdrawal if a creditor of the partnership has notice of a partner's withdrawal and agrees to a material alteration in the nature or time of payment of the obligation without the withdrawn partner's consent. Sec. 152.506. LIABILITY OF WITHDRAWN PARTNER TO THIRD PARTY. Provides that in the event that a partner withdraws in a circumstance that is not a winding up of partnership business, and a transaction was entered into by the partnership or a surviving partnership under Section 10.001 no later than the second anniversary of the date of the withdrawal, the withdrawn partner is liable to another party as a partner if the other party to the transaction: (1) does not have notice of the partner's withdrawal; and (2) reasonably believed that the withdrawn partner was a partner at the time of the transaction. SUBCHAPTER H. REDEMPTION OF WITHDRAWING PARTNER OR TRANSFEREE'S INTEREST Sec. 152.601. REDEMPTION IF PARTNERSHIP NOT WOUND UP. Provides that a withdrawn partner's partnership interest is automatically redeemed by the partnership as of the date of withdrawal in accordance with this subchapter if the withdrawal occurs under specified circumstances. Sec. 152.602. REDEMPTION PRICE. Establishes that the redemption price of a withdrawn partner's partnership interest is the fair value of the interest on the date of withdrawal. Specifies the redemption price of the partnership interest of a partner who wrongfully withdraws before the expiration of a definite term, the completion of a particular undertaking, or the occurrence of a specified event requiring a winding up of partnership business. Provides that interest is payable on the amount owed under this section. Sec. 152.603. CONTRIBUTION OBLIGATION. Provides that if a wrongfully withdrawing partner would have been required to make contributions to the partnership under Section 152.708 or 152.709 if an event requiring winding up of the partnership business had occurred at the time of withdrawal, the withdrawn partner is required to make contributions to the partnership in that amount and pay interest on the amount owed. Sec. 152.604. SETOFF FOR CERTAIN DAMAGES. Authorizes the partnership to offset damages for wrongfully withdrawing and all amounts owed by the withdrawn partner to the partnership, including interest, against the redemption price that is payable to the withdrawn partner. Sec. 152.605. ACCRUAL OF INTEREST. Provides that interest payable under Sections 152.602-152.604 accrues from the withdrawal date to the payment date. Sec. 152.606. INDEMNIFICATION FOR CERTAIN LIABILITY. Requires a partnership to indemnify a withdrawn partner against a partnership liability incurred before the date of withdrawal, except for a liability that is unknown to the partnership at the time or incurred by an act of the withdrawn partner under Sections 152.504 and 152.505. Provides that, for purposes of this section, a liability is unknown to the partnership if it is not known to a partner other than the withdrawn partner. Sec. 152.607. DEMAND OR PAYMENT OF ESTIMATED REDEMPTION. (a) Requires the partnership, if a deferred payment is not authorized under Section 152.608 and no agreement on the redemption price of a withdrawn partner's interest is reached before the 121st day after written demand for payment by either party, to take specified actions relating to the payment of the redemption amount to the withdrawn partner and written demand for payment, within 30 days after the expiration of the period. (b) Authorizes the partnership, if a deferred payment is authorized or a contribution or other amount is owed by the withdrawn partner to the partnership, to make a written offer to pay or deliver a written statement of demand for the amount it estimates to be the net amount owed which includes other terms of the obligation. (c) Provides that, upon request of the other party, the payment, offer, or demand must be accompanied or followed promptly by specified action. Sec. 152.608. DEFERRED PAYMENT ON WRONGFUL WITHDRAWAL. Provides that a partner who wrongfully withdraws before a definite term, the completion of an undertaking, or the occurrence of a specified event requiring a winding up, is not entitled to receive any portion of the redemption price until such conditions are met, unless the partner satisfies a court that earlier payment will not cause undue hardship to the partnership. Provides that deferred payment accrues interest. Authorizes the withdrawn partner to demonstrate to the court that security for a deferred payment is appropriate. Sec. 152.609. ACTION TO DETERMINE PARTNER'S REDEMPTION. (a) Authorizes a withdrawn partner or the partnership to maintain an action against the other party under Sections 152.210 and 152.211 to determine the terms of redemption of that partner's interest or other terms of the redemption obligations of either party. (b) Provides specified deadlines for the time in which an action must be commenced. (c) Requires the court to determine the terms of the redemption of the withdrawn partner's interest, any contribution obligation or setoff due, and accrued interest and to enter judgment for an additional payment or refund. (d) If deferred payment is authorized under Section 152.608, the court shall also determine the security for payment if requested to consider whether security is appropriate. (e) Authorizes the court to equitably assess specified damages against a party who failed to tender payment or make an offer to pay or to comply with the requirements of Section 152.607(c) or otherwise acted arbitrarily, vexatiously, or not in good faith. Sec. 152.610. DEFERRAL ON WINDING UP PARTNERSHIP. (a) Authorizes the partnership to defer paying the redemption price until the partnership makes a winding up distribution to the remaining partners if the partner withdraws under Section 152.501 and an specified event requiring winding up occurs no later than the 60th day after the date of withdrawal. (b) Establishes that the redemption price or contribution obligation is the amount the withdrawn partner would have received or contributed if the event requiring winding up had occurred at the time of the partner's withdrawal. Sec. 152.611. REDEMPTION OF TRANSFEREE'S PARTNERSHIP INTEREST. (a) Provides that a partnership must redeem the partnership interest of a transferee for its fair value if certain conditions are met. (b) Provides that the partnership must pay the transferee the cash amount that the partnership estimates to be the redemption price plus any accrued interest from the date of demand within a specified time period if an agreement for the redemption price is not reached before the 121st day after the date of a written demand. (c) Provides that upon request of the transferee, the payment must be accompanied or followed by specified income and liability statements. (d) Provides that if the payment is accompanied by written notice that it fully satisfies the partnership's obligations relating to the redemption of the transferee's interest, then the payment less interest is the redemption price, unless the transferee commences an action to determine the redemption price within a specified time period. Sec.152.612. ACTION TO DETERMINE TRANSFEREE'S REDEMPTION. (a) Authorizes a transferee to maintain an action against a partnership to determine the redemption price of the transferee's interest. (b) Requires the court to determine the redemption price of the transferee's interest and accrued interest and enter judgment for payment or refund. (c) Authorizes the court to assess reasonable and equitable attorney's fees and other specified fees and expenses against the partnership if the court finds that the partnership failed to make payment or acted arbitrarily, vexatiously, or not in good faith. (d) Authorizes the redemption of a transferee's interest under Sections 152.611 to be deferred by the court if the partnership establishes that the failure to defer will cause undue hardship to the partnership business. SUBCHAPTER I. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS Sec. 152.701. ADDITIONAL EVENTS REQUIRING WINDING UP. Specifies events that require winding up of a partnership, in addition to any event specified in Section 11.051. Sec. 152.702. EFFECT OF EVENT REQUIRING WINDING UP. Provides the partnership continues until the winding up of its business is completed, at which time the partnership is terminated and the relationship among the partners is changed as provided by this subchapter. Sec. 152.703. PERSONS ELIGIBLE TO WIND UP PARTNERSHIP BUSINESS. Provides that the partnership business may be wound up by the partners who have not withdrawn, the legal representative of the last surviving partner, or a person appointed by the court under this section. Authorizes a court, on application of a partner, a partner's legal representative or transferee, or a withdrawn partner whose interest is not redeemed under Section 152.608 and for good cause, to appoint a person to carry out the winding up and make an order, direction, or inquiry that the circumstances require. Sec. 152.704. RIGHTS AND DUTIES OF PERSON WINDING UP PARTNERSHIP BUSINESS. (a) Authorizes a person winding up a partnership's business to, in the name of and for and on behalf of the partnership, prosecute and defend a civil, criminal, or administrative suit; settle and close the partnership's business; dispose of and convey the partnership's property; satisfy or provide for the satisfaction of the partnership's liabilities; distribute to the partners any remaining property of the partnership; and perform any other act necessary for winding up. (b) Authorizes a person winding up a partnership's business to continue the partnership business wholly or partly, including delaying the disposition of partnership property, for a period that is necessary to avoid unreasonable loss of the partnership's property or business. Sec. 152.705. BINDING EFFECT OF PARTNER'S ACTION AFTER WIND UP. Provides that after an event occurs which requires winding up of the partnership business, a partnership is bound by a partner's act that is appropriate for winding up or would bind the partnership under Sections 152.301 and 152.302 before the event occurred, if the other party to the transaction does not have notice of the event requiring the winding up. Sec. 152.706. PARTNER'S LIABILITY TO OTHER PARTNERS AFTER WIND UP. Provides that after an event occurs requiring winding up of the partnership business, the losses which a partner must contribute under specified sections include losses from a liability incurred under Section 152.705, except as provided by this section. Provides that a partner who incurs a partnership liability by an act that is not appropriate for winding up and has notice that an event requiring a winding, is liable to the partnership for a loss arising from that liability. Sec. 152.707. DISPOSITION OF ASSETS. Requires partnership property, in winding up the partnership business, to be applied to its obligations to creditors, including partners who are creditors other than in a partner capacity. Requires that a surplus be applied to pay cash distributions to partners pursuant to their rights to distributions under Section 152.708. Sec. 152.708. SETTLEMENT OF ACCOUNTS. (a) Entitles each partner to a settlement of all partnership accounts on winding up the partnership business. (b) Sets forth procedures in settling accounts among the partners. (c) Provides that the profits and losses that result from the liquidation of the partnership property must be credited and charged to the partners' capital accounts. (d) Requires the partnership to distribute to a partner an amount equal to the positive balance in that partner's capital account. Requires a partner to contribute to the partnership the amount of the negative balance in the partner's capital account, except as provided by Section 152.304(b) or 152.801. Sec. 152.709. CONTRIBUTIONS TO DISCHARGE OBLIGATIONS. (a) Requires each partner to contribute the amount necessary to satisfy partnership obligations, excluding specified liabilities, in the same proportion that the partner shares partnership losses; requires the other partners, if a partner fails to contribute, to contribute the additional amount necessary to satisfy the partnership obligations in the proportions in which the partners share partnership losses; and authorizes a partner or partner's legal representative to recover specified amounts from the other partners or the estate of a deceased partner, except as provided by Sections 152.304(b) and 152.801, to the extent not taken into account in settling the accounts among partners under Section 152.708. (b) Provides that the estate of a deceased partner is liable for the partner's obligation to contribute to the partnership. (c) Specifies the persons authorized to enforce the obligation of a partner or the estate of a deceased partner to contribute to a partnership. Sec. 152.710. CONTINUATION OF PARTNERSHIP. Describes the circumstances in which a partnership created for a definite term or for a particular undertaking or for which the partnership agreement provides for winding upon the occurrence of a specified event. Specifies circumstances which constitute prima facie evidence of agreement by all partners to continue the business. Specifies circumstances which constitute prima facie evidence of an agreement to continue the partnership under Section 152.701(b). SUBCHAPTER J. REGISTERED LIMITED LIABILITY PARTNERSHIPS Sec. 152.801. LIABILITY OF PARTNER. (a) Provides that in this section, "representative" includes an agent, servant, or employee of a registered limited liability partnership. (b) Provides that a partner in a registered limited liability partnership is not individually liable, directly or indirectly, by contribution, indemnity, or otherwise, for a debt or partnership obligation incurred while the partnership is a registered limited liability partnership, except as provided by Subsection (c). (c) Provides that a partner in a registered limited liability partnership is individually liable, in the manner prescribed by Subsection (b), for a partnership debt or obligation arising from an error, an omission, negligence, incompetence, or malfeasance committed in the course of the partnership business by another partner or a partnership representative who is not working under the supervision or direction of the first partner, if the first partner: (1) was directly involved in the activity in which the error, omission, negligence, incompetence, or malfeasance was committed by the other partner or representative or if the first partner; or (2) had notice or knowledge of the error, omission, negligence, incompetence, or malfeasance by the other partner or representative at the time of occurrence and failed reasonably act to prevent or cure it. (d) Provide that Sections 2.101(a)(1), 152.305, and 152.306 do not limit the effect of Subsection (b) with respect to a registered limited liability partnership. (e) Provides that Subsections (b) and (c) do not affect the liability of a partnership to pay its debts and obligations from partnership property; the liability of a partner imposed by law or contract independently of the partner's status as a partner; or the manner in which service of citation or other civil process may be served in an action against a partnership. (f) Provides that this section controls over Chapter 152 and the other partnership provisions regarding the partner liability in a registered limited liability partnership, the chargeability of the partners' for the debts and obligations of the partnership, and the partners' obligations regarding contributions and indemnity. Sec. 152.802. REGISTRATION. (a) Sets forth the application requirements for a partnership to become a registered limited liability partnership. (b) Provides that the application must be signed by a majority-in-interest of the partners or one or more partners authorized by a majority-in-interest of the partners. (c) Provides that a partnership is registered as a registered limited liability partnership by the secretary of state when a completed initial or renewal application is filed in accordance with Chapter 4 or on a later date specified in the application. (d) Provides that a registration is not affected by subsequent changes in the partners of the partnership. (e) Provides that the registration of a limited liability partnership is effective until the first anniversary of the date of registration or a later effective date, unless the application is withdrawn or revoked at an earlier time or renewed. (f) Authorizes the withdrawal of a registration by filing a withdrawal notice with the secretary of state in accordance with Chapter 4. Provides that a withdrawal notice terminates the status of the partnership as a registered limited liability partnership from the date on which the notice is filed or a later date specified in the notice, but not later than the expiration date under Subsection (e). Specifies the information and signatures which must be contained in the withdrawal notice. (g) Authorizes the renewal of an effective registration before its expiration if application with the secretary of state is filed in accordance with Chapter 4. Provides that a renewal application continues an effective registration for one year after the date the registration would otherwise expire. Specifies the information and fees that must be included in the renewal application. (h) Authorizes the secretary of state to remove from its active records the registration of a partnership which has been withdrawn or revoked or expired and not been renewed. (i) Authorizes the secretary of state to revoke the filing of a document under this subchapter if the secretary of state determines that the filing fee for the document was paid by an instrument that was dishonored when presented for payment. Requires the secretary of state to return the document and give notice of revocation to the filing party by regular mail. Provides that the failure to give or receive notice does not invalidate the revocation. Provides that a revocation of a filing does not affect an earlier filing. (j) Provides that the secretary of state is not responsible for determining whether a partnership is in compliance with the requirements of Section 152.804(a). (k) Authorizes a document filed under this subchapter to be amended by filing articles of amendment with the secretary of state in accordance with Chapter 4. Specifies the information, fees, and signatures that must be contained in the articles of amendment. Sec. 152.803. NAME. Provides that the name of a registered limited liability partnership must contain the words "registered limited liability partnership" or the abbreviation "L.L.P." as the last word or letters of its name. Sec. 152.804. INSURANCE OR FINANCIAL RESPONSIBILITY. (a) Provides that a registered limited liability partnership must carry at least $100,000 of specified liability insurance or provide $100,000 specifically designated and segregated in the manner specified to be used for the satisfaction of judgments against the partnership for the kind of error, omission, negligence, incompetence, or malfeasance for which liability is limited by Section 152.801(c). (b) Prohibits the requirements of this section from being admissible against a registered limited liability partnership that is in compliance with Subsection (a) in determining liability relating to the debt or obligation in question or the damages in question. (c) Provides that if compliance with Subsection (a) is disputed, compliance must be determined separately from proceeding to determine the partnership debt or obligation in question; the amount of the debt or obligation; or partner liability for the debt or obligation, and the burden of proof is on the person claiming limitation of liability. Sec. 152.805. APPLICABILITY OF CERTAIN FILING PROVISIONS. Provides that Chapters 4 and 10 apply to a filing under this chapter with the secretary of state. Sec. 152.806. LIMITED PARTNERSHIP. Authorizes a limited partnership to become a registered limited liability partnership by complying with applicable provisions of Chapter 153. SUBCHAPTER K. FOREIGN LIMITED LIABILITY PARTNERSHIPS Sec. 152.901. GENERAL. Provides that a foreign limited liability partnership is subject to Section 2.101, with respect to its activities in this state, to the same extent as a domestic registered limited liability partnership. (b) Prohibits a foreign limited liability partnership from being denied a statement of foreign qualification due to a difference between the laws of the state under which the partnership is formed and the laws of this state. Sec. 152.902. NAME. Provides that the name of a foreign limited liability partnership must satisfy the requirements of the state of formation and end with the words "registered limited liability partnership" or "limited liability partnership" or the letters "R.L.L.P.," "L.L.P.," or "LLP." Sec. 152.903. ACTIVITIES NOT CONSTITUTING TRANSACTING BUSINESS. Provides that a foreign limited liability partnership is not considered to be transacting business in this state for purposes of this code because it carries on one or more of the activities in this state listed by Section 9.101. Sec. 152.904. REGISTERED AGENT. Requires a foreign limited liability partnership to maintain a registered office and registered agent in this state. Provides that a foreign limited liability partnership is subject to Sections 5.201 through 5.209 to the same extent as a foreign filing entity, for purposes of a registered office and registered agent. Sec. 152.905. STATEMENT OF FOREIGN QUALIFICATION. Provides that a foreign limited liability partnership must file a statement of foreign qualification with the secretary of state in accordance with Chapter 4 before it transacts business in this state. Specifies the information, items, fees, and signatures that must be included in the statement. Sec. 152.906. WITHDRAWAL OF REGISTRATION. Authorizes a registration to be withdrawn by filing in duplicate with the secretary of state a written withdrawal notice. Specifies the information and signatures that must be included in a withdrawal notice. Sec. 152.907. EFFECT OF WITHDRAWAL NOTICE. Provides that a withdrawal notice terminates the registration of the partnership as a foreign limited liability partnership as of the date the notice is filed or a later date specified in the notice, but not later than the expiration date under Section 152.905(f). Sec. 152.908. RENEWAL OF REGISTRATION. Authorizes the renewal of an effective registration by filing a statement of foreign qualification with the secretary of state before its expiration, in accordance with Chapter 4. Specifies the information, fees, and items that must be included in the statement. Sec. 152.909. ACTION BY SECRETARY OF STATE. Authorizes the secretary of state to remove from its active records a foreign limited liability partnership's registration which is withdrawn, revoked, or expired and not renewed. Authorizes the secretary of state to revoke the filing of a document under this subchapter if it determines that the filing fee was paid by an instrument that was dishonored when presented for payment. Requires the secretary of state to return the document and give notice of revocation to the filing party by regular mail. Provides that failure to give or receive notice under this section does not affect an earlier filing. Authorizes the secretary of state to provide a form for the statement of foreign qualification or renewal of registration. Sec. 152.910. EFFECT OF FAILURE TO QUALIFY. Provides that a foreign limited liability partnership that transacts business in this state without being registered is subject to Sections 9.011 and 9.012 to the same extent as a foreign filing entity. Provides that a partner of a foreign limited liability partnership is not liable for the partnership's debt or obligation solely because the partnership transacted business in this state without being registered. Sec. 152.911. AMENDMENT. Authorizes the amendment of a document filed under this subchapter by filing articles of amendment with the secretary of state in accordance with Chapter 4. Specifies the information and fees that must be included in the articles. Sec. 152.912. EXECUTION OF APPLICATION FOR AMENDMENT. Provides that the articles of amendment must be signed by a majority-in-interest of the partners or one or more partners authorized by a majority-in-interest of the partners. Sec. 152.913. EXECUTION OF STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED AGENT. Provides that a statement filed by a foreign limited liability partnership in accordance with Section 5.202 must be signed by a majority-in-interest of the partners or one or more partners authorized by a majority-in-interest of the partners. CHAPTER 153. LIMITED PARTNERSHIPS SUBCHAPTER A. GENERAL PROVISIONS Sec. 153.001. DEFINITION. Defines "other limited partnership provisions" for purposes of this chapter. Sec. 153.002. CONSTRUCTION. Requires this chapter and the other limited partnership provisions to be applied and construed to effect its general purpose to make the law uniform with respect to limited partnerships among states that have similar laws. Provides that the rule that a statute in derogation of the common law is to be strictly construed does not apply to this chapter and the other limited partnership provisions. Sec. 153.003. APPLICABILITY OF OTHER LAW. Provides that the applicable provisions of Chapters 152 and 154 governing partnerships that are not limited partnerships and the rules of law and equity govern in a case not provided for by this chapter and the other limited partnership provisions. SUBCHAPTER B. SUPPLEMENTAL PROVISIONS REGARDING CERTIFICATE OF FORMATION AND AMENDMENT TO CERTIFICATE Sec. 153.051. CERTIFICATE OF FORMATION. (a) Provides that in order to form a limited partnership the partners must enter into a partnership agreement and file a certificate of formation as provided by Chapter 3 and this section. (b) Authorizes the partners of a limited partnership agreement formed under Section 10.001 or 10.101 to include the partnership agreement required under Subsection (a) in the plan of merger or conversion. (c) Provides that a certificate of formation for a limited partnership must include the address of the principal office of the partnership in the United States where records are to be kept or made available under Section 153.551. (d) Establishes that a certificate of formation on file with the secretary of state is notice that the partnership is a limited partnership and of all other facts contained in the certificate as required by Section 3.005. Sec. 153.052. REQUIRED AMENDMENT TO CERTIFICATE OF FORMATION. (a) Requires a general partner to file a certificate of amendment upon the occurrence of a specified event within a certain time period. (b) Requires a general partner promptly amend a certificate of formation to make it accurate if the general partner becomes aware that a statement in the certificate was false when made or that a matter described in the certificate has changed, making the certificate false in any material respect. Sec. 153.053. DISCRETIONARY AMENDMENT TO CERTIFICATE OF FORMATION. (a) Authorizes the amendment of a certificate of formation at any time for a proper purpose, as determined by the general partners. (b) Authorizes a certificate of formation to be amended to state the name, mailing address, and street address of the business or residence of each person winding up the limited partnership's affairs under certain circumstances. (c) Requires each person winding up the limited partnership's affairs, if the certificate of formation is amended under Subsection (b), to execute and file the certificate of amendment. Provides that a person winding up the partnership's affairs is not subject to liability as a general partner because of the filing of the certificate of amendment. (d) Provides that a general partner who is not winding up the limited partnership's affairs is not required to execute and file a certificate of amendment as provided by this section. SUBCHAPTER C. LIMITED PARTNERS Sec. 153.101. ADMISSION OF LIMITED PARTNERS. (a) Provides that in the formation of a limited partnership, a person acquiring a limited partnership interest becomes a limited partner on the later of the date the limited partnership is formed or the date stated in the records of the limited partnership as the date that the person becomes a limited partner or, if that date is not in those records, the date that the person's admission is first reflected in the records of the limited partnership. (b) Provides that after a limited partnership is formed, a person who acquires a partnership interest directly from the limited partnership becomes a new limited partner by complying with the relevant admission provisions of the partnership agreement or by the written consent of all partners, if the partnership agreement does not contain such provisions. (c) Provides that after formation of a limited partnership, an assignee of a partnership interest becomes a new limited partner as provided by Section 153.253(a). (d) Authorizes a person to be a limited partner, unless the person lacks capacity apart from this chapter. Sec. 153.102. LIABILITY TO THIRD PARTIES. (a) Provides that a limited partner is not liable for the obligations of a limited partnership, unless the limited partner is also a general partner or the limited partner participates in the control of the business, except as provided by Subsection (c). (b) Provides that if the limited partner participates in the control of the business, the limited partner is liable only to a person who transacts business with the limited partnership while reasonably believing that the limited partner is a general partner based on the limited partner's conduct. (c) Provides that a limited partner who knowingly permits the limited partner's name to be used in the name of the limited partnership is liable to a creditor who extends credit to the partnership without actual knowledge that the limited partner is not a general partner, except under a circumstance permitted by Section 5.055(c). Sec. 153.103. ACTIONS NOT CONSTITUTING PARTICIPATION IN BUSINESS FOR LIABILITY PURPOSES. Specifies certain actions and exercises of power by a limited partner that do not constitute participation in the control of the business for purposes of this section and Sections 153.102, 153.104, and 153.105 stockholder of a corporate general partner. Sec. 153.104. ENUMERATION OF ACTIONS NOT EXCLUSIVE. Specifies that the enumeration in Section 153.103 does not mean that a limited partner who has acted or acts in another capacity or possesses or exercises another power constitutes participation by that limited partner in the control of the business of the limited partnership. Sec. 153.105. CREATION OF RIGHTS. Provides that Sections 153.102(c), 153.103, and 153.104 do not create rights of limited partners and that those rights may only be created by the certificate of formation, other sections of this chapter, or the other limited partnership provisions. Sec. 153.106. ERRONEOUS BELIEF OF CONTRIBUTOR BEING LIMITED PARTNER. Provides that except as provided by Section 153.109, a person who erroneously but in good faith believes that the person has made a contribution to and has become a limited partner in a limited partnership is not liable as a general partner or otherwise obligated because of making or attempting to make the contribution, receiving distributions from the partnership, or exercising the rights of a limited partner if, within a reasonable time after discovering the mistake, the person takes specified actions. Sec. 153.107. STATEMENT REQUIRED FOR LIABILITY PROTECTION. Provides that a statement filed under Section 153.106(2) must be entitled "Filing under Section 153.106(2), Business Organizations Code," and contain certain information and a specified statement. Provides that the statement is effective for 180 days. Authorizes the signing of a statement filed under Section 153.106(2) by more than one person claiming limited partnership status under this section and specified sections. Sec. 153.108. REQUIREMENTS FOR LIABILITY PROTECTION FOLLOWING EXPIRATION OF STATEMENT. (a) Provides that a person filing the statement has no further protection from liability, if a certificate described by Section 153.106(1) has not been filed before the expiration of the 180-day period. Provides that in order to be protected under Section 153.106, the person must take specified actions within a specified time period. (b) Provides that a person who brings an action within the applicable period which is diligently prosecuted to conclusion is protected from liability under Section 153.106(2) until the action is finally decided adversely to that person. (c) Provides that this section and Sections 153.102, 153.106, 153.107, and 153.109 do not protect a person from liability that arises under Sections 153.102-153.105. Sec. 153.109. LIABILITY OF ERRONEOUS CONTRIBUTOR. Provides that a person who makes a contribution in the circumstances described by Section 153.107(a) is liable as a general partner to a third party who transacts business with the partnership before an action taken under Section 153.107(a) if: (1) the contributor has knowledge or notice that no certificate is filed or that the certificate inaccurately refers to the contributor as a general partner; and (2) the third party reasonably believed, based on the contributor's conduct, that the contributor was a general partner at the time of the transaction and extended credit to the partnership in reasonable reliance on the credit of the contributor. Sec. 153.110. WITHDRAWAL OF LIMITED PARTNER. Authorizes a limited partner to withdraw from a limited partnership on the occurrence of an event specified in a written partnership agreement. Provides that the withdrawal of the partner must be made in accordance with that agreement. Sec. 153.111. DISTRIBUTION ON WITHDRAWAL. Entitles a withdrawing limited partner to receive, the fair value of that limited partner's interest in the limited partnership as of the date of withdrawal within a reasonable time after withdrawal, except as otherwise provided by specified sections or the partnership agreement,. Sec. 153.112. RECEIPT OF WRONGFUL DISTRIBUTION. Provides that a limited partner who receives a prohibited distribution under Section 153.210 is not required to return the distribution, unless the limited partner knew that the distribution was prohibited under that section. Provides that this subsection does not affect an obligation of the limited partner under the partnership agreement or other applicable law to return the distribution. Sec. 153.113. POWERS OF ESTATE OF LIMITED PARTNER WHO IS DECEASED OR INCAPACITATED. Authorizes a limited partner's executor, administrator, guardian, conservator, or other legal representative, in the event that the partner dies or is adjudged to be incapacitated in managing the limited partner's person or property, to exercise all of the partner's rights and powers in the settlement of the partner's estate or property, including the power of an assignee to become a limited partner under the partnership agreement. SUBCHAPTER D. GENERAL PARTNERS Sec. 153.151. ADMISSION OF ADDITIONAL GENERAL PARTNERS. Authorizes the admittance of additional general partners after a limited partnership is formed, in the manner provided in a written partnership agreement or with the written consent of all partners, if a written partnership agreement does not provide for the admission of additional general partners. Authorizes a person to be a general partner, unless the person lacks capacity apart from this chapter. Sec. 153.152. GENERAL POWERS AND LIABILITIES OF GENERAL PARTNER. Describes the rights, powers, limitations, and liabilities of a general partner of a limited partnership Sec. 153.153. POWERS AND LIABILITIES OF PERSON WHO IS BOTH GENERAL PARTNER AND LIMITED PARTNER. Describes the rights, powers, limitations, and liabilities of a person who is both a general partner and a limited partner of a limited partnership. Sec. 153.154. CONTRIBUTIONS BY AND DISTRIBUTIONS TO GENERAL PARTNER. Authorizes the general partner of a limited partnership to make contributions to, be allocated profits and losses of, and receive a distribution from the limited partnership as a general partner, a limited partner, or both. Sec. 153.155. WITHDRAWAL OF GENERAL PARTNER. Provides that a person ceases to be a general partner of a limited partnership on the occurrence of one or more specified events of withdrawal. Authorizes a general partner to withdraw at any time from a limited partnership and cease to be a general partner under Subsection (a) by giving written notice to the other partners. Sec. 153.156. NOTICE OF EVENT OF WITHDRAWAL. Requires a general partner who is subject to an event of withdrawal under Section 153.155(a)(4) or (5) due to the passage of the specified period, to notify the other partners of the event no later than the 30th day after the date on which the event occurred. Sec. 153.157. WITHDRAWAL OF GENERAL PARTNER IN VIOLATION OF PARTNERSHIP AGREEMENT. Provides that a general partner's withdrawal from a partnership for a definite term or particular undertaking before the expiration of that term or completion of that undertaking is a breach of the partnership agreement, unless otherwise provided by the partnership agreement. Sec. 153.158. EFFECT OF WITHDRAWAL. (a) Specifies the actions that may be taken by the general partner, partners, or limited partners, if a general partner ceases to be a general partner under Section 153.155. (b) Provides that the owner of the partnership interest of the withdrawn general partner has the status of an assignee under Subchapter F, Section 153.113, and Section 153.555 until an action described by Subsection (a) is taken. (c) Authorizes the reconstitution of the partnership if there are no remaining general partners following the withdrawal of a general partner. Sec. 153.159. CONVERSION OF PARTNERSHIP INTEREST AFTER WITHDRAWAL. Authorizes the limited partnership interest to be reduced pro rata with all other partners to provide compensation, an interest in the partnership, or both, to a replacement general partner, if the partners convert the partnership interest under Section 153.158(a)(1). Sec. 153.160. EFFECT OF CONVERSION OF PARTNERSHIP INTEREST. Authorizes the withdrawing general partner, after an amendment to the certificate of formation reflecting the general partner's withdrawal as a general partner is filed under Section 153.052, to vote as a limited partner in all matters, to the same extent as the members of the class of limited partners having the least voting rights with respect to the matter on which the vote is taken and prohibits the withdrawing general partner from voting on the admission and compensation of a general partner to replace the withdrawing partner. Provides that the general partner does not have voting rights if the general partner's withdrawal violates the partnership agreement. Sec. 153.161. LIABILITY OF GENERAL PARTNER FOR EVENT OF WITHDRAWAL. Provides that a general partner is not personally liable in the partner's capacity as a general partner for partnership debt incurred after that partner ceases to be a general partner under Section 153.155, unless the creditor reasonably believed that the partner remained a general partner at the time the debt was incurred, unless otherwise provided by a written partnership agreement and subject to the liability created under Section 153.157. Provides that a creditor of the partnership has reason to believe that a partner remains a general partner if the creditor meets specified criteria. Sec. 153.162. LIABILITY FOR WRONGFUL WITHDRAWAL. Authorizes the partnership to recover damages from a withdrawing general partner for breach of the partnership agreement, if the general partner's withdrawal from a limited partnership violates the partnership agreement. Specifies the manner in which a partnership is authorized to effect the recovery of damages. SUBCHAPTER E. FINANCES Sec. 153.201. FORM OF CONTRIBUTION. Authorizes a limited partner's contribution to consist of a tangible or intangible benefit to the limited partnership or other property of any kind or nature, including cash; a promissory note; services performed; a contract for services to be performed; and another interest in or security of the limited partnership, another domestic or foreign limited partnership, or other entity. Sec. 153.202. ENFORCEABILITY OF PROMISE TO MAKE CONTRIBUTION. (a) Provides that a promise by a limited partner to make a contribution to, or pay cash or transfer other property to a limited partnership is not enforceable unless the promise is in writing and signed by the limited partner. (b) Obligates a partner or the partner's legal representative or successor to the limited partnership to perform an enforceable promise to contribute to or pay cash or transfer other property to a limited partnership, notwithstanding the partner's death, disability, or other change in circumstances, except as otherwise provided by the partnership agreement. (c) Sets forth the obligations of a partner or a partner's legal representative or successor who does not make a contribution or other payment of cash or transfer of other property required by the enforceable promise. (d) Authorizes a partnership agreement to provide that the partnership interest of a partner who fails to make a payment of cash or transfer of other property to the partnership, whether as a contribution or with respect to a contribution previously made, required by an enforceable promise is subject to specified consequences. Sec. 153.203. RELEASE OF OBLIGATION TO PARTNERSHIP. Authorizes the compromise or release of an obligation of a partner or the legal representative or successor of a partner to make a specified contribution, transfer, or distribution in violation of this chapter or the partnership agreement if consented to by all of the partners, unless otherwise provided by the partnership agreement. Sec. 153.204. ENFORCEABILITY OF OBLIGATION. Authorizes a creditor of a limited partnership who extends credit or otherwise acts in reasonable reliance on an obligation described by Section 153.203 to enforce the original obligation under specified circumstances. Provides that a general partner remains liable to persons other than the partnership and the other partners, as provided by specified sections, notwithstanding the compromise or release. Sec. 153.205. ENFORCEABILITY OF CONDITIONAL OBLIGATION. Prohibits a conditional obligation from being enforced unless the conditions of the obligation have been satisfied or waived as to or by the applicable limited partner. Provides that a conditional obligation includes a contribution payable on a discretionary call of a limited partnership before the time the call occurs. Sec. 153.206. ALLOCATION OF PROFITS AND LOSSES. Requires the profits and losses of a limited partnership to be allocated among the partners in the manner provided by a written partnership agreement. Sets forth the manner in which the profits and losses are required to be allocated if a written partnership agreement does not provide for the allocation of profits and losses. Sec. 153.207. RIGHT TO DISTRIBUTION. Provides that when a partner becomes entitled to receive a distribution, the partner has the status of and is entitled to all remedies available to a creditor of the limited partnership, with respect to the distribution, subject to Sections 153.112, 153.210, and 153.506. Sec. 153.208. SHARING OF DISTRIBUTIONS. Sets forth the requirements for a distribution of cash or another asset of a limited partnership to a partner. Defines "return of capital" for purposes of this section. Sec. 153.209. INTERIM DISTRIBUTIONS. Entitles a partner to receive a distribution from a limited partnership to the extent and at the time or on the occurrence of an event specified in the partnership agreement before the partner withdraws from the partnership and the winding up of the partnership business, except as otherwise provided by specified sections. Sec. 153.210. LIMITATION ON DISTRIBUTION. Prohibits a limited partnership from making a distribution to a partner if immediately after giving effect to the distribution and despite any compromise of a claim referred to by Sections 153.203 and 153.204, all liabilities of the limited partnership, other than liabilities to partners with respect to their partnership interests and liabilities for which the recourse of creditors is limited to specified property of the limited partnership, exceed the fair value of the partnership assets. Requires that the fair value of property that is subject to a liability for which recourse of creditors is limited be included in the partnership assets for purposes of this subsection, only to the extent that the fair value of that property exceeds that liability. SUBCHAPTER F. PARTNERSHIP INTEREST Sec. 153.251. ASSIGNMENT OF PARTNERSHIP INTEREST. Provides that a partnership interest is assignable wholly or partly, and an assignment of a partnership interest does not dissolve a limited partnership; does not entitle the assignee to become, or to exercise rights or powers of, a partner; entitles the assignee to be allocated income, gain, loss, deduction, credit, or similar items and to receive distributions to which the assignor was entitled to the extent those items are assigned, except as otherwise provided by the partnership agreement. Sec. 153.252. RIGHTS OF ASSIGNOR. Provides that assignor partner continues to be a partner in the partnership until the assignee becomes a partner, except as otherwise provided by the partnership agreement. Authorizes the assignor partner to exercise any rights or powers of a partner, except to the extent those rights or powers are assigned. Authorizes the termination of a general partner's status as a general partner by the affirmative vote of a majority-in-interest of a limited partners if the general partner assigns of all of the general partner's rights as a general partner, except as otherwise provided by the partnership agreement. Sec. 153.253. RIGHTS OF ASSIGNEE. Authorizes an assignee of a partnership interest, including the partnership interest of a general partner, to become a limited partner if and to the extent that the partnership agreement provides or all partners consent. Provides that an assignee who becomes a limited partner, to the extent of the rights and powers assigned, has the rights and powers and is subject to the restrictions and liabilities of a limited partner under a partnership agreement and this code. Sec. 153.254. LIABILITY OF ASSIGNEE. Provides that an assignee does not have liability as a partner solely as a result of an assignment of a partnership interest in a limited partnership until the assignee becomes a partner. Provides that an assignee who becomes a limited partner is liable for the obligations of the assignor to make contributions under specified sections; is not obligated for liabilities unknown to the assignee at the time of becoming a limited partner and that could not be ascertained from a written partnership agreement; and is not liable for the obligations of the assignor under specified sections, unless otherwise provided by a written partnership agreement. Sec. 153.255. LIABILITY OF ASSIGNOR. Provides that an assignor of a partnership interest is not released from the assignor's liability to the limited partnership, regardless of whether the assignee becomes a limited partner. Sec. 153.256. CHARGE IN PAYMENT OF JUDGMENT CREDITOR. (a) Authorizes a court, on application by a judgment creditor of a partner or other owner of a partnership interest, to charge the partnership interest of the partner or other owner with payment of the unsatisfied amount of the judgment plus interest; appoint a receiver for the debtor partner's share of the partnership's profits and other money payable or that becomes payable to the debtor partner with respect to the partnership; and make other orders, directions, and inquiries that the circumstances of the case require. (b) Provides that, to the extent that the partnership interest is charged in the manner provided by Subsection (a), the judgment creditor has only the rights of an assignee of the partnership interest. (c) Authorizes the redemption of a partnership interest charged at any time before foreclosure, or purchase by specified partners if a sale is directed by the court, without constituting an event requiring winding up. (d) Provides that the remedies provided by Subsection (a) are exclusive of other remedies that may exist, including remedies under laws of this state applicable to partnerships without limited partners. Sec. 153.257. EXEMPTION LAWS APPLICABLE TO PARTNERSHIP INTEREST NOT AFFECTED. Provides that Section 153.256 does not deprive a partner of the benefit of an exemption law applicable to that partner's partnership interest. SUBCHAPTER G. REPORTS, RECORDS, AND INFORMATION Sec. 153.301. PERIODIC REPORT. Authorizes the secretary of state to require a domestic limited partnership or a foreign limited partnership registered to transact business in this state to file a report no more than once every four years. Sec. 153.302. FORM AND CONTENTS OF REPORT. Provides that the report must include specified information, be made on a form adopted by the secretary of state for that purpose, and be signed on behalf of the limited partnership by at least one general partner. Provides that the information contained in the report must be given as of the date of the execution of the report. Sec. 153.303. FILING FEE. Provides for the filing fee in Chapter 4. Sec. 153.304. DELIVERY OF REPORT. Provides that two copies of the report must be delivered to the secretary of state no later than the 30th day after the date on which notice is mailed. Sec. 153.305. ACTION BY SECRETARY OF STATE. Requires the secretary of state to send a notice that the report required by Section 153.301 is due. Provides that the report must be addressed and mailed to the limited partnership at specified locations. Requires the secretary of state to include with the notice copies of a report form to be prepared and filed as provided by this subchapter. Sec. 153.306. EFFECT OF FILING REPORT. Requires the secretary of state to perform specified actions regarding the filing of the report and updating records. Provides that the filing of a report does not relieve the limited partnership of the requirement to file a required amendment to the certificate of formation, except that the limited partnership is not required to file an amendment to change the information as specified in this section. Sec. 153.307. EFFECT OF FAILURE TO FILE REPORT. Provides that a domestic or foreign limited partnership forfeits the limited partnership's right to transact business in this state if it fails to file a report when it is due. Provides that a forfeiture under this section takes effect without judicial ascertainment. Requires the secretary of state to note that a right to transact business has been forfeited and the date of forfeiture in its records relating to the limited partnership. Sec. 153.308. NOTICE OF FORFEITURE OF RIGHT TO TRANSACT BUSINESS. Requires the mailing of notice of the forfeiture to the limited partnership at the registered office of the limited partnership, the last known address of the limited partnership, any other place of business of the limited partnership. Sec. 153.309. EFFECT OF FORFEITURE OF RIGHT TO TRANSACT BUSINESS. (a) Prohibits the limited partnership from maintaining an action, suit, or proceeding in a state court and prohibits a limited partnership's successor or assignee from maintaining an action, suit, or proceeding in a state court on a right, claim, or demand that arises from the transaction of business by the limited partnership in this state, unless the right is revived in accordance with Section 153.310 (b) Provides that the forfeiture of the right to transact business in this state does not impair the validity of a contract or act of the limited partnership or prevent the limited partnership from defending an action, suit, or proceeding in a court of this state. (c) Provides that this section and Sections 153.307 and 153.308 do not affect the liability of a limited partner to the limited partnership. Sec. 153.310. REVIVAL OF RIGHT TO TRANSACT BUSINESS. Authorizes a limited partnership that forfeits the right to transact business in this state to be relieved from the forfeiture by filing the required report with the filing fees with as specified time period. Requires the secretary of state, if a limited partnership complies with this section, to revive the right to transact business in this state, cancel the note regarding the forfeiture, and note the revival and the date of revival in its records. Sec. 153.311. CANCELLATION OF CERTIFICATE OR REGISTRATION AFTER FORFEITURE. Authorizes the secretary of state to cancel the certificate of a limited partnership, or the registration of a foreign limited partnership, if the limited partnership forfeits its right to transact business and fails to revive that right. Provides that the cancellation of the certificate or registration takes effect without judicial ascertainment. Requires the secretary of state to note the cancellation and the date of cancellation in its records relating to the limited partnership. Provides that, upon cancellation, the limited partnership's status is changed to inactive according to the records of the secretary of state. Provides that the change to inactive status does not affect the liability of a limited partner to the limited partnership. Sec. 153.312. REINSTATEMENT OF CERTIFICATE OR REGISTRATION. (a) Authorizes a limited partnership with a canceled certificate or registration to be relieved of the cancellation by filing the report required by Section 153.301, accompanied by the filing fees provided by Chapter 4. (b) Requires the secretary of state, if the limited partnership pays the fees required by Subsection (a), to reinstate the certificate or registration of the limited partnership without judicial ascertainment, change the limited partnership's status to active, and note the reinstatement in its records relating to the limited partnership. (c) Requires the secretary of state, if the name of the limited partnership is not available at the time of reinstatement, to require the limited partnership as a precondition to reinstatement to file an amendment to the partnership's certificate or application or in the case of a foreign limited partnership, amend its application to adopt an assumed name for use in this state. SUBCHAPTER H. LIMITED PARTNERSHIP AS REGISTERED LIMITED LIABILITY PARTNERSHIP Sec. 153.351. REQUIREMENTS. Provides that a limited partnership is a registered limited liability partnership and a limited partnership, if the partnership registers as a registered limited liability partnerships permitted by its partnership agreement or if its partnership agreement does not include a provision for becoming a registered limited liability partnership, with the consent of partners required to amend its partnership agreement; complies with Subchapter J, Chapter 152; and has as the last words or letters of its name the words "Limited Partnership" or the abbreviation "Ltd." followed by the words "registered limited liability partnership" or the abbreviation "L.L.P." Sec. 153.352. APPLICABILITY OF OTHER REQUIREMENTS. Provides that for purposes of applying Section 152.802 to a limited partnership an application to become a registered limited liability partnership or to withdraw a registration must be signed by at least one general partner and other references to a partner mean a general partner only. Sec. 153.353. LAW APPLICABLE TO PARTNERS. Provides that Section 152.801 applies to a general partner and to a limited partner who is liable under other provisions of this chapter for the debts or obligations of the limited partnership, if a limited partnership is a registered limited liability partnership. SUBCHAPTER I. DERIVATIVE ACTIONS Sec. 153.401. RIGHT TO BRING ACTION. Authorizes a limited partner to bring an action in a court on behalf of the limited partnership to recover a judgment in the limited partnership's favor, if all general partners with authority refused to bring the action or an effort to cause those general partners to bring the action is not likely to succeed. Sec. 153.402. PROPER PLAINTIFF. Sets forth the requirements that a plaintiff must meet to bring derivative action against the partnership. Sec. 153.403. PLEADING. Sets forth information that must be included in the complaint in a derivative action. Sec. 153.404. SECURITY FOR EXPENSES OF DEFENDANTS. Authorizes the court in a derivative action, to require the plaintiff to give security for the reasonable expenses incurred or expected to be incurred by a defendant in the action, including reasonable attorney's fees. Authorizes the court to increase or decrease the amount of the security on a showing that the security provided is inadequate or excessive. (c) Authorizes a plaintiff to file an affidavit in accordance with the Texas Rules of Civil Procedure if the plaintiff is unable to give security. (d) Requires the court to dismiss the suit without prejudice , if a plaintiff fails to give the security within a reasonable time set by the court, except as provided by Subsection (c). (e) Authorizes the court, on final judgment for a defendant and on a finding that suit was brought without reasonable cause against the defendant, to require the plaintiff to pay reasonable expenses, including reasonable attorney's fees, to the defendant, regardless of whether security has been required. Sec. 153.405. EXPENSES OF PLAINTIFF. Authorizes the court to award the plaintiff reasonable expenses and reasonable attorney's fees, and requires the court to direct the plaintiff to remit to a party identified by the court the remainder of the proceeds received by the plaintiff, if a derivative action is successful, wholly or partly, or if anything is received by the plaintiff because of a judgment, compromise, or settlement of the action or claim constituting a part of the action. SUBCHAPTER J. CANCELLATION OF CERTIFICATE OF FORMATION Sec. 153.451. CERTIFICATE OF CANCELLATION. (a) Requires that a certificate of formation be canceled by filing a certificate of cancellation with the secretary of state in accordance with Chapter 4 on the completion of the winding up of the partnership business, when there are no limited partners, or subject to Subsection (b), on a merger or conversion as provided by Chapter 10. (b) Provides that the articles of merger or conversion filed under Chapter 10 are sufficient, without a filing under this section, to cancel the certificate of formation of a nonsurviving limited partnership, if the limited partnership is not one of the surviving or resulting domestic limited partnerships or other entities in a merger or conversion. Sec. 153.452. CONTENTS OF CERTIFICATE OF CANCELLATION. Sets forth the information that is required to be contained in a certificate of cancellation. SUBCHAPTER K. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS Sec. 153.501. ADDITIONAL EVENTS REQUIRING WINDING UP. Sets forth events requiring the winding up of a limited partnership. Sec. 153.502. CONTINUATION WITHOUT WINDING UP. Authorizes the limited partnership to cancel an event requiring winding up if all remaining partners, or another group or percentage of partners as specified by the partnership agreement, agree in writing to continue the business of the limited partnership, no later than the 90th day after the event. Authorizes a limited partnership to revoke an event requiring winding up as specified in Section 153.501, if certain conditions are met. Provides that the appointment of one or more new general partners is effective from the date of withdrawal. Sec. 153.503. JUDICIAL DECREE. Authorizes a court, upon application by or for a partner, to decree the winding up and termination of a limited partnership if the court determines that the economic purpose of the limited partnership is likely to be unreasonably frustrated; another partner has engaged in conduct relating to the limited partnership business that makes it not reasonably practicable to carry on the business in limited partnership with that partner; or it is not reasonably practicable to carry on the business of the limited partnership in conformity with the partnership agreement. Sec. 153.504. WINDING UP PROCEDURES. Requires winding up a limited partnership's affairs as soon as reasonably practicable after an event requiring the winding up of a partnership, except as provided by the partnership agreement. Requires the winding up of the partnership's affairs to be accomplished by the general partners who have not wrongfully dissolved a limited partnership or if there are no general partners who have wrongfully dissolved the partnership, the limited partners or a person or a person chosen by the limited partners. Sec. 153.505. POWERS OF PERSON CONDUCTING WIND UP. Authorizes a person winding up the limited partnership's business in the name of and on behalf of the limited partnership, after an event requiring the winding up of the partnership and until the filing of a certificate of cancellation, to prosecute or defend a civil, criminal, or administrative suit; settle and close the limited partnership's business; dispose of and convey the limited partnership's property for cash, unless a written partnership agreement permits a transfer on noncash terms; discharge or make reasonable provision to pay the limited partnership's liabilities; and distribute to the partners any remaining assets of the limited partnership, unless a written partnership agreement provides otherwise. Provides that a power described by this section does not create a liability for a limited partner that did not exist before an action to wind up the business of the partnership was taken Sec. 153.506. DISPOSITION OF ASSETS. Specifies the manner in which a limited partnership's assets are required to be paid or transferred on the winding up of the partnership. SUBCHAPTER L. MISCELLANEOUS PROVISIONS Sec. 153.551. RECORDS. Sets forth specified records that a domestic limited partnership is required to maintain or make available in its principal office in the United States, within a specified time period. Requires the limited partnership to maintain its records in written form within in a reasonable time. Requires the limited partnership to keep in its registered office in this state and make available to a partner, on reasonable request, the street address of its principal office in the United States in which the records required by this section are maintained. Sec. 153.552. EXAMINATION OF RECORDS AND INFORMATION. (a) Authorizes a partner or an assignee of a partnership interest, upon written request stating a proper purpose, to examine and copy records required to be kept and other information regarding the business, affairs, and financial condition of the limited partnership. (b) Authorizes a partner or an assignee, at a reasonable time and at the partner's sole expense, to examine and copy the records requested under Subsection (a). (c) Requires the partnership to provide, without charge, to a requesting partner or assignee copies of the partnership agreement and certificate of formation and all amendments or restatements and any tax return described by Section 153.551(a)(2). (d) Provides that a request made under Subsection (c) must be made to a designated person under the partnership agreement or if there is no designation, a general partner at the partnership's principal office in the United States. Sec. 153.553. EXECUTION OF CERTAIN FILINGS. (a) Sets forth the execution requirements of a certificate required to be filed by a limited partnership with the secretary of state 153.053(b), 153.053(c), or 153.106(1), but provides that the certificate of amendment need not be signed by a withdrawing general partner. (b) Authorizes any person to sign a certificate or partnership agreement or amendment or restated certificate by an attorney in fact. Provides that a power of attorney relating to the signing of a certificate or partnership agreement or amendment or restated certificate by an attorney in fact is not required to be sworn to, verified, or acknowledged; is not required to be filed with the secretary of state; and is required to be retained with the partnership records under Sections 153.551 and 153.552. (c) Establishes that an execution of a certificate by a general partner or the execution of a written statement by a person under Section 153.106(2) is an oath or affirmation, under a penalty of perjury. Sec. 153.554. EXECUTION, AMENDMENT, OR CANCELLATION BY JUDICIAL ORDER. (a) Authorizes a person adversely affected by the failure or refusal of a person to execute or file a certificate as required by this chapter or to execute a partnership agreement, to petition a court to direct the execution or filing of the certificate or the execution of the partnership agreement, as appropriate. (b) Requires a court that finds that the execution or filing of a certificate is proper and that a person required to execute or file the certificate has failed or refused to execute or file the certificate, to order the secretary of state to record an appropriate certificate. (c) Provides that the judicial remedy described by Subsection (b) is not a limit on the rights of a person to file a written statement under Section 153.106(2). (d) Requires the court, upon a finding that the partnership agreement should be executed and that a person required to execute the partnership agreement has failed or refused to execute the agreement, to enter an order granting appropriate relief. (e) Requires a court, if the court enters an order in favor of the adversely affected person requesting relief under this section, to award to that person reasonable expenses, including reasonable attorney's fees. Sec. 153.555. PERMITTED TRANSFER IN CONNECTION WITH RACETRACK LICENSE. Provides that specified transfers relating to a limited partnership are not prohibited transfers under the Texas Racing Act. CHAPTER 154. PROVISIONS APPLICABLE TO BOTH GENERAL AND LIMITED PARTNERSHIPS SUBCHAPTER A. PARTNERSHIP INTERESTS Sec. 154.001. NATURE OF PARTNER'S PARTNERSHIP INTEREST. Provides that a partner's partnership interest is personal property for all purposes. Authorizes a partner's partnership interest to be community property under applicable law. Provides that a partner is not a co-owner of partnership property. Sec. 154.002. TRANSFER OF INTEREST IN PARTNERSHIP PROPERTY PROHIBITED. Provides that a partner does not have an interest that can be transferred, voluntarily or involuntarily, in partnership property. SUBCHAPTER B. PARTNERSHIP AGREEMENT Sec.154.101. CLASS OR GROUP OF PARTNERS. Authorizes a written partnership agreement to establish or provide for the future creation of additional classes or groups of one or more partners that have certain express relative rights, powers, and duties, including voting rights. Provides that the future creation of additional classes or groups may be expressed in the partnership agreement or at the time of creation of the class or group. Provides that the rights, powers, or duties of a class or group of partners may be senior to those partners of an existing class or group. Sec. 154.102. PROVISIONS RELATING TO VOTING. Authorizes a written partnership agreement that grants or provides for granting a right to vote to a partner to contain specified provisions relating to partnership voting. Sec. 154.103. NOTICE OF ACTION BY CONSENT WITHOUT A MEETING. Requires giving prompt notice of the taking of an action under a partnership agreement that may be taken without a meeting by consent of fewer than all of the partners to a partner who has not given written consent to the action. Defines "taking of an action." SUBCHAPTER C. PARTNERSHIP TRANSACTIONS AND RELATIONSHIPS Sec. 154.201. BUSINESS TRANSACTIONS BETWEEN PARTNER AND PARTNERSHIP. Authorizes a partner to lend money to and transact other business with the partnership, except as otherwise provided by the partnership agreement. Provides that a partner has the same rights and obligations with respect to those matters as a person who is not a partner, subject to applicable law. Sec. 154.202. EFFECT OF PARTNER CHANGE ON RELATIONSHIP BETWEEN PARTNERSHIP AND CREDITORS. Provides that a relationship between a partnership and its creditors is not affected by the withdrawal of a partner or addition of a new partner. Sec. 154.203. DISTRIBUTIONS IN KIND. Provides that a partner, regardless of the nature of the partner's contribution, is not entitled to demand or receive from a partnership a distribution in any form other than cash, except as provided by the partnership agreement. Prohibits compelling a partner to accept a disproportionate distribution of an asset in kind from a partnership under specified circumstances, except as provided by the partnership agreement . TITLE 5. BUSINESS TRUSTS CHAPTER 200. REAL ESTATE INVESTMENT TRUSTS SUBCHAPTER A. GENERAL PROVISIONS Sec. 200.001. DEFINITION. Defines "real estate investment trust." Sec. 200.002. APPLICABILITY OF CHAPTER. Provides that the provisions of Chapters 20 and 21 govern a matter to the extent that this chapter or Title 1 does not govern the matter. Provides that an unincorporated trust that does not meet the requirements of this chapter is an unincorporated association under Chapter 253. Sec. 200.003. CONFLICT WITH OTHER LAW. Provides that this chapter controls if there is conflict between this chapter and Chapters 20 and 21. Provides that Chapters 20 and 21 do not control over this chapter merely because a provision of Chapter 20 or 21 is more or less extensive, restrictive, or detailed than a similar provision of this chapter. Sec. 200.004. ULTRA VIRES ACTS. Prohibits the lack of capacity of a real estate investment trust from being the basis of any claim or defense at law or in equity. Provides that an act of a real estate investment trust or a transfer of property by or to a real estate investment trust is not invalid due to the occurrence of specified circumstances. Sets forth who may assert in a proceeding the fact that an act or transfer is beyond the scope of the expressed purpose or purposes of the real estate investment trust or is inconsistent with an expressed limitation on the authority of an officer or trust manager. Authorizes the court to set aside and enjoin the performance of the contract, if an unauthorized act or transfer that is sought to be enjoined if specified circumstances are met. Authorizes the court to award to the real estate investment trust or to another party to the contract compensation for loss or damage resulting from the action of the court in setting aside and enjoining the performance of the contract, excluding loss of anticipated profits. Sec. 200.005. SUPPLEMENTARY POWERS OF REAL ESTATE INVESTMENT TRUST. Authorizes a real estate investment trust to engage in activities mandated or authorized by specified regulations, subject to Section 2.106(a) and in addition to the powers specified in Section 2.101. Provides that this section does not authorize a real estate investment trust or an officer or trust manager of a real estate investment trust to exercise a power in a manner inconsistent with a limitation on the purposes or powers of the real estate investment trust contained in the trust's certificate of formation; this code; or another law of this state. SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS Sec. 200.051. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF FORMATION. Provides that for purposes of this code, the certificate of formation of a real estate investment trust is a declaration of trust. Authorizes the certificate of formation to be titled "declaration of trust" or "certificate of formation." Specifies the statements that must be stated in the the certificate of formation of a real estate investment trust. Sec. 200.052. NO PROPERTY RIGHT IN CERTIFICATE OF FORMATION. Provides that a shareholder of a real estate investment trust does not have a vested property right resulting from the certificate of formation, including a provision in the certificate of formation relating to the management, control, capital structure, dividend entitlement, purpose, or duration of the real estate investment trust. Sec. 200.053. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF FORMATION. Specifies the required by the trust managers to adopt an amendment to the certificate of formation of a real estate investment trust as provided by Subchapter B, Chapter 3, the trust managers. Authorizes the resolution to incorporate the proposed amendment in a restated certificate of formation that complies with Section 3.057. Sec. 200.054. ADOPTION OF AMENDMENT BY TRUST MANAGERS. Authorizes the trust managers to adopt a proposed amendment to the real estate investment trust's certificate of formation by resolution without shareholder approval, if a real estate investment trust does not have any issued and outstanding shares. Sec. 200.055. ADOPTION OF AMENDMENT BY SHAREHOLDERS. Describes the required acts that a resolution must direct, if a real estate investment trust has issued shares. Sec. 200.056. NOTICE OF AND MEETING TO CONSIDER PROPOSED AMENDMENT. Requires each shareholder of record entitled to vote to be given written notice containing the proposed amendment or a summary of the changes to be effected within the time and in the manner provided by this code for giving notice of meetings to shareholders. Authorizes the proposed amendment or summary to be included in the notice of an annual meeting. Requires a proposed amendment, if the proposed amendment is to be considered at an annual meeting, to be adopted only on receiving the affirmative vote of shareholders entitled to vote required by Section 200.261. Authorizes an unlimited number of amendments to submitted for adoption by the shareholders at a meeting. Sec. 200.057. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF AMENDMENT. Specifies items which must be stated in a certificate of amendment for a real estate investment trust. Requires an officer to sign the certificate of amendment on behalf of the real estate investment trust. Authorizes a majority of the trust managers to execute the certificate of amendment on behalf of the real estate investment trust, if shares of the real estate investment trust have not been issued and the certificate of amendment is adopted by the trust managers. Provides that the certificate of amendment must be filed in accordance with Chapter 4 and has the same effect as provided by Subchapter B, Chapter 3. Sec. 200.058. RESTATED CERTIFICATE OF FORMATION. Authorizes a real estate investment trust to adopt a restated certificate of formation, as provided by Subchapter B, Chapter 3, by following specified procedures. Requires an officer to sign the restated certificate of formation on behalf of the real estate investment trust. Authorizes a majority of the trust managers to execute the restated certificate of formation on behalf of the real estate investment trust, if shares of the real estate investment trust have not been issued and the restated certificate of formation is adopted by the trust managers. Authorizes a restated certificate of formation to be use to update the current number of trust managers and the names and addresses of the persons serving as trust managers. Sec. 200.059. BYLAWS. Requires the trust managers of a real estate investment trust to adopt initial bylaws. Authorizes the inclusion of provisions for the regulation and management of the affairs of the real estate investment trust that are consistent with law and the real estate investment trust's certificate of formation within the bylaws. Authorizes the trust managers of a real estate investment trust to amend or repeal bylaws or adopt new bylaws with specified exceptions. Sec. 200.060. DUAL AUTHORITY. Authorizes the shareholders of a real estate investment trust to amend, repeal, or adopt the bylaws of the real estate investment trust even if the bylaws may also be amended, repealed, or adopted by the trust managers of the real estate investment trust, unless the certificate of formation or a bylaw adopted by the shareholders provides otherwise as to all or a part of a real estate investment trust's bylaws. Sec. 200.061. ORGANIZATION MEETING. Requires the initial trust managers of the real estate investment trust to hold an organization meeting to adopt bylaws, electing officers, and transacting other business, after the real estate investment trust has been formed. Specifies notice requirements of an organization meeting. SUBCHAPTER C. SHARES Sec. 200.101. NUMBER. Authorizes a real estate investment trust to issue the number of shares stated in the real estate investment trust's certificate of formation. Sec. 200.102. CLASSIFICATION OF SHARES. Authorizes a real estate investment trust to provide in the real estate investment trust's certificate of formation specified information relating the classification of shares. Sec. 200.103. CLASSES OF SHARES ESTABLISHED BY TRUST MANAGERS. Authorizes a real estate investment trust to provide in the real estate investment trust's certificate of formation that the trust managers may periodically classify or reclassify any unissued shares in specified ways. Provides that, before issuing shares, the trust managers who perform as authorized by the certificate of formation an action described by this section, must file with the county clerk of the county of the principal place of business of the real estate investment trust a statement of designation that containing specified items. Sec. 200.104. TYPES OF CONSIDERATION FOR ISSUANCE OF SHARES. Authorizes the issuance of shares with or without par value by a real estate investment trust for the specified types of consideration. Sec. 200.105. ISSUANCE OF SHARES. Prohibits the issuance of shares until the consideration has been received. Sec. 200.106. DETERMINATION OF CONSIDERATION FOR SHARES. Requires the trust managers to determine the consideration to be received by a real estate investment trust for shares. Sec. 200.107. AMOUNT OF CONSIDERATION FOR ISSUANCE OF SHARES WITH PAR VALUE. Prohibits the consideration to be received by a real estate investment trust for the issuance of shares with par value from being less than the par value of the shares. Sec. 200.108. VALUE OF CONSIDERATION. Provides that in the absence of fraud in the transaction, the judgment of the trust managers or shareholders, as appropriate, is conclusive in determining the value of the consideration received for the shares. Sec. 200.109. LIABILITY OF ASSIGNEE OR TRANSFEREE. Prohibits an assignee or transferee of certificated shares, uncertificated shares, or a subscription for shares in good faith and without knowledge that full consideration for the shares or subscription has not been paid from being held personally liable to the real estate investment trust or a creditor of the real estate investment trust for an unpaid portion of the consideration. Sec. 200.110. SUBSCRIPTIONS. Authorizes a real estate investment trust to accept a subscription by notifying the subscriber in writing. Provides that a subscription to purchase shares in a real estate investment trust that is in the process of being formed is irrevocable for six months if the subscription is in writing and signed by the subscriber, unless the subscription provides for a longer or shorter period or all of the other subscribers agree to the revocation of the subscription. Provides that a written subscription entered into after the real estate investment trust is formed is a contract between the subscriber and the real estate investment trust. Sec. 200.111. PREFORMATION SUBSCRIPTION. Authorizes a real estate investment trust, after a real estate investment trust is formed to determine the payment terms of a preformation subscription unless the payment terms are specified by the subscription. Provides that the payment terms may authorize payment in full on acceptance or by installments. Requires a real estate investment trust to make calls placed to all subscribers of similar interests for payment on preformation subscriptions uniform as far as practicable, unless the subscription provides otherwise. Authorizes the real estate investment trust to collect as any other debt the amount due on any unpaid preformation subscription or forfeit the subscription on 20 days' written notice to the subscriber. Authorizes the real estate investment trust to retain any amount previously paid on the subscription even though the forfeiture of a subscription terminates all the rights and obligations of the subscriber. Sec. 200.112. COMMITMENT TO PURCHASE SHARES. Authorizes a person who contemplates the acquisition of shares in a real estate investment trust to commit to act in a specified manner with respect to the shares after the acquisition, including the voting of the shares or the retention or disposition of the shares. Provides that the commitment must be in writing and be signed by the person acquiring the shares to be binding. Provides that the commitment continues for a six-month period unless the commitment provides for a longer or shorter period. Provides that a written commitment entered into under this section is a contract between the shareholder and the real estate investment trust. SUBCHAPTER D. SHAREHOLDER RIGHTS AND RESTRICTIONS Sec. 200.151. REGISTERED HOLDERS AS OWNERS. Authorizes a real estate investment trust to consider the person registered as the owner of a share in the share transfer records of the real estate investment trust at a particular time, including a record date set under Section 6.102, as the owner of that share at that time for specified purposes, except as otherwise provided by specified law. Sec. 200.152. NO STATUTORY PREEMPTIVE RIGHT UNLESS SPECIFICALLY PROVIDED BY CERTIFICATE OF FORMATION. Provides that a shareholder of a real estate investment trust does not have a preemptive right to acquire securities except to the extent specifically provided by the certificate of formation. Sec. 200.153. TRANSFER OF SHARES AND OTHER SECURITIES. Provides that the shares and other securities of a real estate investment trust are transferable in accordance with Chapter 8, Business & Commerce Code, except as otherwise provided by this code. Sec. 200.154. RESTRICTION ON TRANSFER OF SHARES AND OTHER SECURITIES. (a) Authorizes the imposition of a restriction on the transfer or registration of transfer of a security by the real estate investment trust's certificate of formation, the real estate investment trust's bylaws, a written agreement among two or more holders of the securities, or a written agreement among one or more holders of the securities and the real estate investment trust if certain requirements are met. (b) Provides that a restriction imposed under Subsection (a) is not valid with respect to a security issued before the restriction has been adopted, unless the holder of the security voted in favor of the restriction or is a party to the agreement imposing the restriction. Sec. 200.155. VALID RESTRICTION ON TRANSFER. Provides that a restriction placed on the transfer or registration of transfer of a security of a real estate investment trust is valid if the restriction meets specified requirements, notwithstanding Sections 200.154 and 200.157. Sec. 200.156. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF SHARES OR OTHER SECURITIES. Authorizes a real estate investment trust to file with the county clerk of the county of the principal place of business of the real estate investment trust a copy of a bylaw or agreement that restricts the securities of the trust. Provides that the certificate representing the restricted shares or securities must state the fact of the filing if required by Section 3.202. Authorizes the trust to make the agreement restricting the transfer part of the certificate of formation by complying with this code or amending the certificate of formation. Sets forth the information which must be included in the certificate of amendment. Sec. 200.157. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF CERTAIN SECURITIES. Provides that a transfer restriction is specifically enforceable against the holder or a successor or transferee of the holder if the restriction is reasonable and noted conspicuously on the certificate representing the security or, with respect to uncertificated securities, noted in the notice sent with respect to the security under Section 3.205. Provides that the restriction is ineffective against a transferee for value without actual knowledge of the restriction's existence. Sec. 200.158. JOINT OWNERSHIP OF SHARES. Authorizes a real estate investment trust to transfer shares and pay distributions to a surviving joint owner when two or more persons are registered as joint owners of the shares and one owner dies. Prohibits the recording and distribution from being made after receipt of a written notice that a party other than the surviving joint owner is claiming an interest in the shares or distribution. Provides that any cause of action existing in favor of an owner of an interest in the shares or distribution against the surviving owner is not affected by the trust's discharge. Sec. 200.159. LIABILITY FOR DESIGNATING OWNER OF SHARES. Prohibits a real estate investment trust or its officer, trust manager, employee, or agent from being held liable for considering a registered owner to be the owner of a share for a purpose described by Section 200.151. Sec. 200.160. LIABILITY REGARDING JOINT OWNERSHIP OF SHARES. Provides that a real estate investment trust that transfers shares or makes a distribution to a surviving joint owner under Section 200.158 before receiving a written claim is discharged from liability. SUBCHAPTER E. DISTRIBUTIONS AND SHARE DIVIDENDS Sec. 200.201. AUTHORITY FOR DISTRIBUTIONS. Authorizes the trust managers to authorize a distribution and the real estate investment trust to make a distribution subject to Section 200.202 and any restriction in the certificate of formation. Sec. 200.202. LIMITATIONS ON DISTRIBUTIONS. Prohibits a real estate investment trust from making a distribution that causes the trust to become insolvent or that is more than the surplus of the trust. Authorizes a real estate investment trust to purchase or redeem its own shares under specified circumstances. Sec. 200.203. PRIORITY OF DISTRIBUTIONS. Provides that debt arising as a result of declaration of a distribution is general, unsecured debt unless subordinated or secured by agreement. Sec. 200.204. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM SURPLUS. Authorizes the trust managers to create a reserve out of the surplus or designate or allocate part of the real estate investment trust surplus for a proper purpose. Authorizes a trust to increase, decrease, or abolish a reserve, designation, or allocation in this manner. Sec. 200.205. AUTHORITY FOR SHARE DISTRIBUTIONS. Authorizes trust managers to make share distributions subject to Section 200.206 and any restrictions in the certificate of formation. Sec. 200.206. LIMITATIONS ON SHARE DISTRIBUTIONS. Prohibits a real estate investment trust from making a share distribution if its surplus is less than the amount required by Section 200.208 to be transferred to stated capital. Prohibits a share distribution of one class from being made on shares of another class unless the certificate of formation provides for the distribution or the share distribution is authorized by the shares of the shareholders in the distributed class. Sec. 200.207. VALUE OF SHARES ISSUED AS SHARE DISTRIBUTIONS. Requires a share distribution payable in authorized but unissued shares to be issued at the par value of the shares and such a distribution without par value to be issued at the value set by the trust managers when the share distribution is authorized. Sec. 200.208. TRANSFER OF SURPLUS FOR SHARE DISTRIBUTIONS. Requires a surplus of not less than the aggregate par value of the shares issued in a share distribution to be transferred to stated capital. Requires the amount of surplus transferred to stated capital with respect to shares without par value to be determined by the trust managers. Sec. 200.209. DETERMINATION OF SOLVENCY, NET ASSETS, STATED CAPITAL, AND SURPLUS. Authorizes the trust managers to determine the solvency of the real estate investment trust and its net assets, stated capital, or surplus to be based on certain financial statements, financial information, projections, fair valuations, or any combination of the foregoing. Sec. 200.210. DATE OF TERMINATION OF SURPLUS. Sets forth the dates on which the determination of the solvency of the real estate investment trust or its surplus is required to be made. Sec. 200.211. SPLIT-UP OR DIVISION OF SHARES. Authorizes the trust managers to split the shares of a class of the real estate investment trust without increasing the stated capital of the trust. SUBCHAPTER F. SHAREHOLDER MEETINGS; VOTING AND QUORUM Sec. 200.251. ANNUAL MEETING. Requires an annual meeting of shareholders to be held at the time stated in or set in accordance with the bylaws of the trust. Authorizes a shareholder, if the meeting is not held, to request to an officer or trust manager that the meeting be held within a reasonable time, and if it is not called within 60 days, authorizes a shareholder to bring a suit to compel the meeting to be held. Provides that each shareholder has an interest sufficient to institute a legal proceeding to compel a meeting. Provides that failure to hold a meeting does not effect a winding up or termination of the real estate investment trust. Sec. 200.252. SPECIAL MEETING. Authorizes a trust manager, an officer, or any other person authorized by the certificate of formation or bylaws and the holders of at least 10 percent of all the shares entitled to vote at the meeting to call a special meeting of shareholders. Authorizes the 10 percent shareholder requirement to be increased by the certificate of formation but prohibits it from exceeding 50 percent of the shares entitled to vote. Sec. 200.253. NOTICE OF MEETING. Requires a written notice to be given to shareholders entitled to vote at the meeting not later than 10 days and not earlier than 60 days before the date of the meeting. Provides that the notice must be given in person or by mail or at the direction of the person calling the meeting. Provides that the notice of a special meeting must state the purpose of the meeting. Sec. 200.254. CLOSING OF SHARE TRANSFER RECORDS. Requires the share transfer records to be closed in accordance with Section 6.101 at least 10 days immediately preceding the date of a meeting. Sec. 200.255. RECORD DATE FOR WRITTEN CONSENT TO ACTION. Prohibits the record date for the meeting from being more than 10 days after the date on which the trust managers adopt the resolution setting the record date. Sec. 200.256. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN CONSENT TO ACTION. Provides that the record date must be at least 10 days before the date on which the particular action requiring the determination of shareholders is to be taken. Sec. 200.257. QUORUM. Provides that a quorum for a shareholders meeting is the majority of the shares entitled to vote at a meeting. Authorizes the certificate of formation to provide that a quorum is present only if the holders of a specified portion of the shares that is greater than the majority of the shares, or a minority but not less than one third of the shares, entitled to vote are represented. Authorizes the shareholders present at a meeting to conduct business until the meeting is adjourned, and provides that a subsequent withdrawal of a shareholder does not negate the quorum. Authorizes the shareholders at a meeting where a quorum is not present to adjourn the meeting until a later time. Sec. 200.258. VOTING IN ELECTION OF TRUST MANAGERS. Requires trust managers to be elected by two-thirds of the votes cast by the holders of shares entitled to vote in the election of trust managers at a meeting at which a quorum is present, unless the certificate of formation or bylaws require otherwise. Authorizes the certificate or bylaws to provide for the vote of a different portion of the shares so long as it is not less than a majority of the shares. Provides that votes for trust managers are based on the number of shares owned by a shareholder unless cumulative voting is authorized in accordance with Section 200.259. Sec. 200.259. CUMULATIVE VOTING IN ELECTION OF TRUST MANAGERS. Provides that cumulative voting is allowed only if specifically authorized by the certificate of formation of a real estate investment trust. Provides that a shareholder who intends to cumulate votes must give prior written notice of that intention to the trust managers. Sec. 200.260. VOTING ON MATTERS OTHER THAN ELECTION OF TRUST MANAGERS. Provides that generally a matter other than the election of trust managers or for which a specified portion of the shares is required by this code must be approved by the affirmative vote of the holders of a majority of the shares entitled to vote and voting for, against, or expressly abstaining on the matter at a shareholders meeting at which a quorum is present. Authorizes the bylaws or certificate of formation of a real estate investment trust to provide that a matter other than the election of trust managers or for which a specified vote is required by this code may provide that the approval by shareholders is a specified portion but not less than a majority of the shares entitled to vote on the matter. Sec. 200.261. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION. Defines "fundamental action." Sets forth the votes required for approval of a fundamental action. Provides that separate voting by a class or series of shares of a real estate investment trust is required for approval of an certain amendments to the certificate of formation unless an amendment to the certificate of formation is undertaken by the trust managers. Specifies certain circumstances in which a separate vote of the holders of a series is not required. Sec. 200.262. CHANGES IN VOTE REQUIRED FOR CERTAIN MATTERS. Authorizes the certificate of formation to require the affirmative vote of the holders of a specified portion, but not less than a majority of the shares entitled to vote on a matter for which a specified vote is required by this code. Provides that this result also applies to separate votes by class. Prohibits these provisions from being amended without the affirmative vote of the same specified portion of the holders of the outstanding shares entitled to vote. Sec. 200.263. NUMBER OF VOTES PER SHARE. Entitles each share to one vote unless otherwise provided by the certificate of formation or this code. Sec. 200.264. VOTING IN PERSON OR BY PROXY. Authorizes a shareholder to vote by written proxy. Provides that a telegram, telex, cablegram, electronic message or similar transmission or a photographic, photostatic, facsimile or similar reproduction of a writing is considered an execution in writing for this purpose. Sec. 200.265. TERM OF PROXY. Provides that a proxy is not valid after 11 months after execution unless otherwise provided by the proxy. Sec. 200.266. REVOCABILITY OF PROXY. Defines "proxy coupled with an interest." Sec. 200.267. ENFORCEABILITY OF PROXY. Provides that an irrevocable proxy is specifically enforceable against successors or transferees of the holder if the proxy is noted conspicuously on the share certificate or the proxy is contained in the notice sent to the holder of uncertificated shares under Section 3.205. Provides that a proxy that is otherwise enforceable is ineffective against a transfer for value without actual knowledge of the proxy's existence at the time of transfer or against a subsequent transferee, regardless of whether the transfer is for value. Provides that the proxy is specifically enforceable against a person who is not a transferee for value from the time the person acquires actual knowledge of the existence of the irrevocable proxy. Sec. 200.268. PROCEDURES IN BYLAWS RELATING TO PROXIES. Authorizes a real estate investment trust to establish procedures in its bylaws for determining the validity of proxies and whether shares held of record by nominees are represented at a meeting. SUBCHAPTER G. BOARD OF MANAGERS Sec. 200.301. MANAGEMENT BY TRUST MANAGERS. Vests in the trust managers the powers necessary or appropriate to effectuate the real estate investment trusts' purposes and to manage the trust estate. Sec. 200.302. DESIGNATION OF TRUST MANAGERS. Requires the certificate of formation of the real estate investment trust to contain the name of each trust manager. Provides that the selection of a successor trust manager is considered to be an amendment to the certificate of formation. Sec. 200.303. TRUST MANAGER ELIGIBILITY REQUIREMENTS. Requires a trust manager to be an individual but not necessarily a resident of this state or a shareholder. Authorizes the certificate of formation or bylaws to prescribe other qualifications for trust managers. Sec. 200.304. NUMBER OF TRUST MANAGERS. Requires the certificate of formation to set the number constituting the initial trust managers and either the number of successor trust managers or provide for the manner in which the number is determined. Authorizes provisions regarding increases or decreases in the number to be contained in the certificate of formation or bylaws. Sec. 200.305. COMPENSATION. Entitles trust managers or officers to receive compensation set by or in the manner provided in the certificate of formation or bylaws or as determined by the trust managers, in the absence of such provision. Sec. 200.306. TERM OF TRUST MANAGER. Provides that a trust manager serves until the trust manager's successor is elected and authorizes the trust manager to serve consecutive terms. Sec. 200.307. STAGGERED TERMS OF TRUST MANAGERS. Authorizes the board of trust managers to be divided into two or three classes of the same or similar number of trust managers in each class. Sets forth the terms and requirements of the office of the trust managers in each class. Sec. 200.308. VACANCY. Authorizes the remaining trust managers, even if less than a quorum, to fill a vacancy occurring in the office of a trust manager. Authorizes the certificate of formation or bylaws to provide other procedures for filling vacancies. Sec. 200.309. NOTICE OF MEETING. Authorizes regular meetings to be held with or without notice but requires notices for special meetings of trust managers. Provides that the notice need not specify the business purpose of the meeting unless required by the bylaws. Sec. 200.310. QUORUM. Provides that a majority of the number of trust managers constitutes a quorum unless the certificate of formation or bylaws requires a greater number. Sec. 200.311. COMMITTEES OF TRUST MANAGERS. Authorizes the trust managers to establish committees of trust managers if authorized by the certificate of formation and bylaws. Provides that the committees have the authority provided by the resolution designating the committee or the certificate of formation and bylaws. Prohibits the committee from certain actions. Authorizes the committee to authorize a distribution or the issuance of shares if authorized in the resolution designating the committee or the certificate of formation. Provides that the designation and delegation of authority to a committee does not relieve a trust manager of responsibility imposed by law. Sec. 200.312. LIABILITY OF TRUST MANAGERS. Provides that a trust manager is jointly and severally liable to the real estate investment trust for the value of distributed assets which are distributed during the liquidation of the real estate investment trust without payment and discharge or the making of adequate provisions for the payment of all debts and other obligations of the trust. Provides that a trust manager who votes for or assents to the making of a loan to another trust manager or officer of the trust or the making of a loan secured by shares of the trust is jointly and severally liable to the trust for the loan amount until the loan is repaid. Provides that trust managers acting in good faith and with ordinary care are excused from liability for distributed assets if they relied on certain information and considered the assets of the trust to be valued at least at book value. Sec. 200.313. STATUTE OF LIMITATIONS ON CERTAIN ACTION AGAINST TRUST MANAGERS. Prohibits an action brought under Section 200.312 against a trust manager after the second anniversary of the date of the alleged act giving rise to the liability. Sec. 200.314. IMMUNITY FROM LIABILITY FOR PERFORMANCE OF DUTY. Prohibits a trust manager from being held liable to the trust for an act, omission, loss, damage or expense arising from the trust manager's duties except for willful misfeasance, willful malfeasance or gross negligence. Sec. 200.315. OFFICERS. Authorizes an officer to exercise all of the powers of a trust manager unless action by a trust manager is specified by this code or another applicable law. Provides that delegation of authority to an officer does not relieve a trust manager of responsibility imposed by law. SUBCHAPTER H. TRANSACTIONS AND COMPENSATION OF OFFICERS OR TRUST MANAGERS Sec. 200.351. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED TRUST MANAGERS AND OFFICERS. Makes this section applicable only to a contract or transaction between a real estate investment trust and one or more managers or officers or an entity or other organization in which one or more of the trust's trust managers or officer is a managerial official or has a financial interest. Provides that contracts or transactions between a real estate investment trust and an interested manager or officer are valid notwithstanding the trust manager's vote or participation in the meeting at which the contract is authorized if one of several approvals is obtained. Authorizes common or interested trust managers to be included in determining the presence of a quorum at a meeting of the trust manager, or a committee of the trust managers, that authorizes the contract or transaction. Sec. 200.352. INVESTMENTS. Provides that the trust managers and officers have complete discretion with respect to the investment of the trust estate unless the investment is contrary to this subchapter, the Internal Revenue Code, or regulations under the Internal Revenue Code relating to or governing real estate investment trusts. SUBCHAPTER I. FUNDAMENTAL BUSINESS TRANSACTIONS Sec. 200.401. DEFINITIONS. Defines "participating shares," "shares," and "voting shares." Sec. 200.402. APPROVAL OF MERGER. Sets forth the procedures for approval of a plan of merger by the trust managers and shareholders of the real estate investment trust. Provides that the plan of merger must be submitted to the shareholders for approval, except as provided by this subchapter or Chapter 10. Sec. 200.403. APPROVAL OF CONVERSION. Sets forth the procedures for approval of a plan of conversion by the trust managers and shareholders of the real estate investment trust. Provides that the plan of conversion must be submitted to the shareholders for approval, except as provided by this subchapter or Chapter 10. Sec. 200.404. APPROVAL OF INTEREST EXCHANGE. Sets forth the procedures for approval of a plan of interest exchange by the trust managers and shareholders of the real estate investment trust. Provides that the plan of exchange must be submitted to the shareholders for approval, except as provided by this subchapter or Chapter 10. Sec. 200.405. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF ASSETS. Sets forth the procedures for approval of a sale of all or substantially all of the assets of the real estate investment trust by the trust managers and shareholders of the real estate investment trust. Provides that the sale must be submitted to the shareholders for approval, except as provided by this subchapter or Chapter 10. Sec. 200.406. GENERAL PROCEDURE FOR SUBMISSION TO SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION. Requires a real estate investment trust to notify each shareholder if a fundamental business transaction is to be considered. Sets forth the information which must be contained in such a notice. Provides that the notice must be given at least 20 days before the meeting or the effective date of the transaction and state that the purpose, or one of the purposes, of the meeting is to consider the fundamental business transaction if the transaction is to be considered at a meeting of the shareholders or is being submitted to the shareholders for written consent, as appropriate. Sec. 200.407. GENERAL VOTE REQUIREMENT FOR APPROVAL OF FUNDAMENTAL BUSINESS TRANSACTION. Requires an affirmative vote by the holders of at least two-thirds of the outstanding shares entitled to vote for a fundamental business transaction to be approved. Authorizes the certificate of formation or bylaws to specify a different portion of the shares in accordance with Sec. 200.261. Requires the affirmative vote of at least two-thirds of the outstanding shares of each class or series of shares entitled to vote on the fundamental business transaction as a class or series in addition to two-thirds of the outstanding shares of the real estate trust. Provides that approval of a merger by shareholders is not required for a real estate investment trust that is a party to the plan of merger unless the real estate investment trust is also a party to the merger. Sec. 200.408. CLASS VOTING REQUIREMENTS FOR CERTAIN FUNDAMENTAL BUSINESS TRANSACTIONS. Requires a separate vote by a class or series of shares for approval of a plan of merger, plan of conversion, plan of exchange, or sale of all or substantially all of the shares of a real estate investment trust if the class or series of shares is entitled under the certificate of formation to vote as a class on the plan or sale. Sec. 200.409. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN FUNDAMENTAL BUSINESS TRANSACTIONS. Provides that approval by the shareholders of a real estate investment trust is not required if certain conditions are met. Provides that mergers effected under Section 10.005 or 10.006 do not require the approval of the shareholders. Sec. 200.410. RIGHTS OF DISSENT AND APPRAISAL. Provides that a shareholder of a domestic real estate investment trust has the rights of dissent and appraisal under Subchapter H, Chapter 10, with respect to a fundamental business transaction. SUBCHAPTER J. WINDING UP AND TERMINATION Sec. 200.451. APPROVAL OF VOLUNTARY WINDING UP. Provides that a real estate investment trust must approve a voluntary winding up by the affirmative vote of shareholders set forth in Section 200.262. Sec. 200.452. APPROVAL OF REINSTATEMENT OR REVOCATION OF VOLUNTARY WINDING UP. Authorizes a real estate investment trust to reinstate its existence or revoke a voluntary decision to wind up by the affirmative vote of the shareholders in accordance with Section 200.262. SUBCHAPTER K. MISCELLANEOUS PROVISIONS Sec. 200.501. EXAMINATION OF RECORDS. Entitles a shareholder of record of the real estate investment trust for at least six months or a shareholder of at least 5 percent of the outstanding shares to examine and copy the books and records. Provides that this section does not impair the power of a court to compel production for examination by the shareholder of such books and records. Sec. 200.502. JOINDER OF SHAREHOLDERS NOT REQUIRED. Provides that shareholders need not join in any sale, lease, mortgage or other disposition of the assets of the real estate investment trust. Sec. 200.503. TAX LAW REQUIREMENTS. Provides that a provision of this chapter is subject to the provisions of the Internal Revenue Code and the regulations promulgated thereunder with respect to real estate investment trusts which are attempting to qualify as real estate investment trusts under the Internal Revenue Code. TITLE 6. ASSOCIATIONS CHAPTER 251. COOPERATIVE ASSOCIATIONS SUBCHAPTER A. GENERAL PROVISIONS Sec. 251.001. DEFINITIONS. Defines "cooperative basis," "invested capital," "investment dividend," "membership capital," "net savings," "patronage dividend," and "savings returns." Sec. 251.002. APPLICABILITY OF NONPROFIT CORPORATION PROVISIONS. Provides that a provision of Title 1 and Chapters 20 and 22 governing nonprofit corporations apply to a cooperative association, but that this chapter controls over any conflicting provisions. Sec. 251.003. EXEMPTION. Exempts a corporation or association organized under or having a purpose prohibited under Title 2 or a law listed Sections 22.051-22.054 from the provisions of this chapter. SUBCHAPTER B. PURPOSES AND POWERS Sec. 251.051. PURPOSES. Sets forth the activities for which a person is authorized to incorporate a cooperative association. Prohibits a cooperative association from serving as a health maintenance organization, furnish medical or health care, or employ or contract with a health care provider in a manner prohibited by the statute under which the provider is licensed. Sec. 251.052. GENERAL POWERS. Authorizes a cooperative association to exercise the same powers and privileges as a nonprofit corporation and sets out specific powers of a cooperative association. Sec. 251.053. LIMITATION ON POWERS. Prohibits a cooperative association from engaging in health maintenance organizations or prepaid legal service corporations. Limits certain organizational expenses. SUBCHAPTER C. FORMATION Sec. 251.101. CERTIFICATE OF FORMATION. Sets out the information that must be specifically stated, in addition to the information required by Section 3.005, in the certificate of formation. Sec. 251.102. ORGANIZATIONAL MEETING. Requires that a cooperative association hold an organizational meeting after a certificate of formation is issued. Sec. 251.103. AMENDMENT OF CERTIFICATE OF FORMATION. Authorizes the board of directors of a cooperative association to propose an amendment to the certificate of formation by a two-thirds vote of the board members. Sets forth the manner by which the certificate of formation may be amended. Sec. 251.104. BYLAWS. Authorizes the bylaws to be adopted, amended or repealed by majority of the cooperative association's members voting unless the certificate of formation requires a greater majority. Sets out the information that the bylaws may contain. SUBCHAPTER D. MANAGEMENT Sec. 251.151. BOARD OF DIRECTORS. Provides that a cooperative association is managed by a board of directors in accordance with Chapter 22. Sets forth the composition of the board. Authorizes the bylaws to apportion the number of directors among the units and provide for the election of the directors by respective units to which the directors are apportioned. Authorizes an executive committee of the board of director to be elected in the manner and with the powers and duties specified by the certificate of formation or bylaws. Sec. 251.152. OFFICERS. Requires the directors to annually elect a president, one or more vice presidents, a secretary, and treasurer or a secretary/treasurer. Sec. 251.153. REMOVAL OF DIRECTORS AND OFFICERS. Authorizes a director or officer of a cooperative association to be removed from office in the manner provided by the certificate of formation or bylaws, or by a majority vote of the members voting at a regular or special meeting if the certificate or bylaws do not provide for the person's removal. Entitles the director or officer who is to be removed to be heard at the meeting. Provides that a vacancy on the board of directors caused by removal is filled in the manner that the bylaws establish for the election of directors. Sec. 251.154. REFERENDUM. Authorizes the certificate of formation or the bylaws to provide for a referendum on any action requested by at least 10 percent of the members or by at least a majority of the directors. Provides that if a referendum is authorized, the proposition being voted on must be submitted to the members within a specified time. Provides that a right of a third party that has vested between the time of the action and the time of the referendum is not impaired by the referendum results. SUBCHAPTER E. MEMBERSHIP Sec. 251.201. ELIGIBILITY AND ADMISSION. Authorizes a person to become a member only if the person meets the qualifications for eligibility stated in the certificate of formation or the bylaws. Sec. 251.202. EXPULSION. Authorizes a member to be expelled by the vote of a majority of the members voting at a meeting. Provides that the member in question must be given notice of the charges and is entitled to be heard at the meeting. Provides that, upon expulsion, the directors must purchase the member's holdings at par value if the purchase does not jeopardize the cooperative association's solvency. Sec. 251.203. SUBSCRIBERS. Provides that a person is a subscriber of the cooperative association if the person is eligible for membership and legally obligated to purchase a share or membership. Authorizes the certificate of formation or the bylaws to establish conditions under which voting rights or other membership rights are granted. Sec. 251.204. LIABILITY. Provides that a member or subscriber is not jointly or severally liable for a debt of the cooperative association. Provides that a subscriber is liable for any unpaid amount on the subscriber's membership certificate and a subscriber who assigns the subscriber's interest is liable with the assignee until the certificates are fully paid. SUBCHAPTER F. SHARES Sec. 251.251. SHARE AND MEMBERSHIP CERTIFICATES: ISSUANCE AND CONTENTS. Prohibits a cooperative association from issuing certificates until any par value has been paid in full. Provides that each certificate for membership capital must contain certain statements relating to the restrictions on transferability. Sec. 251.252. TRANSFER OF SHARES AND MEMBERSHIP; WITHDRAWAL. Requires a member who withdraws to offer to sell the member's membership certificates to the board of directors. Authorizes the directors to purchase the shares within 90 days of the offer and requires the directors to purchase the shares if a majority of the members so vote. Provides that an investor owning investor certificates must conform with the guidelines in the association's bylaws governing the conveyance of such certificates. Provides that, if an investor fails to comply with the bylaws, the cooperative association must repurchase the certificate by paying the investor the par value of the certificates plus all accrued investment dividends. Sec. 251.253. SHARE AND MEMBERSHIP CERTIFICATES; RECALL. Provides that the bylaws may authorize the board of directors to recall membership certificates of a member who fails to patronize the cooperative association and to reissue, cancel, or repurchase the certificates. Authorizes the bylaws to establish specific procedures, terms, and conditions for recalls and repurchases of investment certificates. Sec. 251.254. CERTIFICATES; ATTACHMENT. Exempts the minimum amount necessary for membership from attachment, execution, or garnishment for the debts of a member. Authorizes the directors, if a member's holdings are subject to attachment, execution or garnishment, to admit the purchaser to membership or purchase the holdings at par value. SUBCHAPTER G. MEETINGS AND VOTING Sec. 251.301. MEETINGS. Requires regular meetings of the members to be held at least once a year. Authorizes special meetings to be requested by a majority of directors or by at least 1/10th of the membership. Sec. 251.302. NOTICE OF SPECIAL MEETING. Requires the notice for special meetings to include the purpose of the meeting. Sec. 251.303. MEETINGS BY UNITS OF MEMBERSHIP. Authorizes the certificate of formation or bylaws to provide for meetings by units of the membership and for a method of transmitting the votes cast at unit meeting to the central meeting, for the method of representation of the membership by the election of delegates to the central meeting, or for a combination of both methods. Provides that, unless the bylaws state otherwise, meetings by a unit are called and held in the same manner as regular meetings. Sec. 251.304. ONE MEMBER--ONE VOTE. Provides that a member of a cooperative association has one vote unless the cooperative association includes another cooperative association or a group that is organized on a cooperative basis. Provides that any voting agreement that evades the one-member-one-vote rule is not enforceable. Sec. 251.305. NO PROXY. Provides that a member is not entitled to vote by proxy. Sec. 251.306. VOTING BY MAIL. Authorizes the certificate of formation or bylaws to provide for voting by mail. Sec. 251.307. VOTING BY MAIL OR BY DELEGATES. Provides that provisions applying to votes cast by members also apply to votes cast by mail or delegates. Prohibits a delegate from voting by mail. SUBCHAPTER H. CAPITAL AND NET SAVINGS Sec. 251.351. LIMITATIONS ON RETURN ON CAPITAL. Provides that an investment dividend of a cooperative association cannot be cumulative and cannot exceed 8 percent of investment capital unless bylaws state otherwise. Provides that total investment dividends distributed for a fiscal year cannot exceed 50 percent of the net savings for that year. Sec. 251.352. ALLOCATION AND DISTRIBUTION OF NET SAVINGS. Requires the directors to apportion the net savings, at least once a year, in the following order: (1) investment dividends may be paid on investment capital; (2) a portion of the remainder may be allocated to an educational fund, then to the general welfare of the members, and then to retained earnings; and (3) the remainder must be allocated in proportion to individual patronage. Authorizes the amount of savings returns for subscriber patrons to be distributed to the subscriber or accredited to the subscriber's account until the amount of capital subscribed for has been fully paid. SUBCHAPTER I. REPORTS AND RECORDS Sec. 251.401. RECORDKEEPING. Requires a cooperative association to keep books and records relating to its operations in accordance with standard accounting practices. Sec. 251.402. REPORTS TO MEMBERS. Requires a cooperative association to submit a written report to its members at the annual meeting and sets forth the information that must be contained in the annual report. Requires the directors to appoint a committee composed of members who are not principal bookkeepers, accountants, or employees of the association to review the report of the cooperative association. Sec. 251.403. ANNUAL REPORT OF FINANCIAL CONDITION. Requires cooperative associations with at least a hundred members or $20,000 in annual business to file a report of the association's financial condition stating specific information no later than 20 days after the close of business each year. Provides that the report must include a balance sheet and income and expense statement of the cooperative association. Requires a cooperative association with at least 300,000 members or $750,000 in annual business to file a copy of this report with the secretary of state. Provides that a person who verifies a report that contains materially false information commits an offense that is punishable by a fine, confinement, or both. Sec. 251.404. FAILURE TO FILE REPORT. Requires the secretary of state to send written notice within 60 days after the report becomes due to a cooperative association that fails to file. Authorizes the members of the cooperative association to send written notice of the requirement to the cooperative association if the cooperative association was required to file at its registered office but not with the secretary of state. Authorizes a member of the cooperative association or the attorney general to seek to compel the filing of the report if the cooperative association does not file within 60 days after receiving notice. SUBCHAPTER J. WINDING UP AND TERMINATION Sec. 251.451. VOLUNTARY WINDING UP AND LIQUIDATION. Authorizes a cooperative association to wind up and liquidate its affairs in accordance with Chapter 11 and Section 22.301. Requires three members of the cooperative association, designated as trustees, to act on the behalf of the cooperative association to pay debts, liquidate assets, and distribute assets upon being directed to wind up and liquidate. Sec. 251.452. EXECUTION OF CERTIFICATE OF TERMINATION. Requires an officer or one of the designated trustees to execute a certificate of termination. Sec. 251.453. DISTRIBUTION OF ASSETS. Requires the trustees to distribute the cooperative association's assets in a certain order. Sec. 251.454. INVOLUNTARY TERMINATION. Authorizes a suit for involuntary termination of a cooperative association to be instituted for the causes and prosecuted in the manner provided by Sec. 11.251 and requires the assets to be distributed in accordance with Section 251.453. SUBCHAPTER K. MISCELLANEOUS PROVISIONS Sec. 251.501. EXEMPTION FROM TAXES. Exempts a cooperative association from franchise tax and license fees. Provides that a cooperative association is exempt from the franchise tax imposed by Chapter 171, Tax Code, only if the cooperative association is exempt under that chapter. Sec. 251.502. USE OF NAME "COOPERATIVE." Authorizes only a cooperative association organized under this title, a group organized on a cooperative basis under another law, or a foreign corporation operating under a cooperative basis and authorized to do business in Texas to use the term "cooperative" or any abbreviation of that term. Provides that the misuse of this term is a misdemeanor that is punishable by a fine, confinement, or both. Authorizes the attorney general to sue to enjoin a violation of this section. Provides that, if a court determines that a person who used the term "cooperative" before September 1, 1975, is not organized on a cooperative basis but is authorized to continue to use the term, the business must place after its name the words "does not comply with the cooperative association law of Texas." Authorizes The University Cooperative Society, a domestic nonprofit corporation related to the University of Texas, to continue to use the word "cooperative" in its name. CHAPTER 252. UNINCORPORATED NONPROFIT ASSOCIATIONS Sec. 252.001. DEFINITIONS. Defines "member" and "nonprofit association." Sec. 252.002. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW AND EQUITY. Provides that the principals of law and equity supplement this chapter unless specifically displaced. Sec. 252.003. TERRITORIAL APPLICATION. Authorizes real and personal property in this state to be acquired, held, encumbered, and transferred by a nonprofit association, regardless of whether the nonprofit association or a member has any other relationship to this state. Sec. 252.004. REAL AND PERSONAL PROPERTY; NONPROFIT ASSOCIATION AS BENEFICIARY. Authorizes a nonprofit association to acquire, hold, encumber, and transfer an estate or interest in real and personal property in its name. Authorizes a nonprofit association to be a beneficiary of a trust, contract, or will. Sec. 252.005. STATEMENT OF AUTHORITY AS TO REAL PROPERTY. Authorizes a nonprofit association to execute and record a statement of authority to transfer an estate or interest in real property. Sets forth the information the statement of authority must include. Provides that it must be executed in the same manner as a deed by a person who is not the person authorized to transfer the estate or interest. Authorizes the county clerk to collect a recording fee. Provides that any amendment of the statement of authority must meet the requirements for execution and recording of the original statement. Provides that the authority of the person named is conclusive in favor of a person who gives value without notice that the person lacks authority if the record title to real property is in the name of a nonprofit association and the statement of authority is recorded. Sec. 252.006. LIABILITY IN TORT AND CONTRACT. Provides that a nonprofit association is a separate legal entity and a person is not liable for a nonprofit association's breach of contract or a tortious act or omission merely because the person is a member or is authorized to participate in the management of the nonprofit association. Provides that tortious acts or omissions of members are not imputed to a person merely because that person is a member or is authorized to participate in the management of the nonprofit association. Authorizes a member to assert a claim against a nonprofit association and a nonprofit association to assert a claim against a member. Sec. 252.007. CAPACITY TO ASSERT AND DEFEND; STANDING. Authorizes a nonprofit association to participate in a judicial, administrative, or other governmental proceeding, or an arbitration, mediation or any other form of alternative dispute resolution. Authorizes a nonprofit association to assert a claim in its own name on behalf of its members if one or more of the members has standing to assert the claim in the member's own right, the interests that the nonprofit association seeks to protect are germane to its purposes, and neither the claim asserted nor the relief requested requires the participation of a member. Sec. 252.008. EFFECT OF JUDGMENT OR ORDER. Provides that a judgment against the nonprofit association is not a judgment against a member. Sec. 252.009. DISPOSITION OF PERSONAL PROPERTY OF INACTIVE NONPROFIT ASSOCIATION. Authorizes a person in custody of property of a nonprofit association that has been inactive for at least three years to transfer the property to an individual specified in a document of the nonprofit association, and if no person is specified, to a nonprofit association pursuing broadly similar purposes, or to a government or governmental subdivision, agency or instrumentality. Provides that, if the nonprofit association is operating for a charitable, religious or educational purpose, then any distribution must be made to another nonprofit association or nonprofit corporation with similar purposes. Sec. 252.010. BOOKS AND RECORDS. Requires a nonprofit association to keep books and records and to make them available for inspection and copying to the members and the attorney general. Sec. 252.011. APPOINTMENT OF AGENT TO RECEIVE SERVICE OF PROCESS. Authorizes a nonprofit association to file with the secretary of state a statement appointing an agent authorized to receive service of process. Provides that the statement and any amendments must be signed by an authorized person of the nonprofit association and by the person appointed as agent. Authorizes the secretary of state to collect a filing fee. Provides that an amendment to a statement must meet the requirements for execution of the original statement. Authorizes a statement appointing an agent to be canceled by filing written notice of the cancellation containing specific information set forth in this section. Sec. 252.012. CLAIM NOT ABATED BY CHANGE. Provides that a claim for relief against a nonprofit association does not abate merely because of a change in the members or persons authorized to manage the affairs of the nonprofit association. Sec. 252.013. SUMMONS AND COMPLAINT; SERVICE. Provides that a summons and complaint must be served on an authorized agent, an officer, managing or general agent, or a person authorized to participate in the management of the affairs of a nonprofit association. Requires the nonprofit association to provide the names, current addresses, and telephone numbers of these individuals to the attorney general within 10 days of the attorney general's request. Sec. 252.014. UNIFORMITY OF APPLICATION AND CONSTRUCTION. Requires that this chapter be applied and construed to make this law uniform with respect to the subject of this chapter among the states enacting it. Sec. 252.015. TRANSITION CONCERNING REAL AND PERSONAL PROPERTY. Authorizes a fiduciary to transfer an estate or interest to a nonprofit association in its name, if before September 1, 1995, an interest in real or personal property was purportedly transferred to a nonprofit association, but under the law the interest was vested in a fiduciary. Authorizes the nonprofit association to require that the interest be transferred to it in its name. Sec. 252.016. SAVING CLAUSE. Provides that this chapter does not affect an action or proceeding begun or a right accrued before September 1, 1995. Sec. 252.017. EFFECT ON OTHER LAW. Provides that this chapter replaces existing law with respect to matters covered by this chapter but does not affect other law covering unincorporated nonprofit associations. CHAPTER 253. UNINCORPORATED JOINT STOCK COMPANIES OR ASSOCIATIONS Sec. 253. 001. APPLICABILITY OF CHAPTER. Provides that this chapter applies to an action by or against an unincorporated joint stock company or association or to an action for the enforcement of the liability of a stockholder of the company or association. Sec. 253.002. EFFECT OF CHAPTER. Provides that this chapter does not affect or impair the right of an unincorporated joint stock company or association to sue in the individual names of its stockholders or member or the right of a person to sue the individual stockholders or members. Sec. 253.003. CUMULATIVE REMEDIES. Provides that each remedy provided by this chapter is cumulative of other remedies in law. Sec. 253.004. SUIT IN NAME OF JOINT STOCK ASSOCIATION. Authorizes a domestic or foreign unincorporated joint stock company or association doing business in this state to sue or be sued in its own name. Provides that an individual stockholder or member of the company or association does not need to be a named party to the suit. Sec. 253.005. SERVICE OF CITATION. Authorizes citation to be served in an action against a joint stock company or association in the manner provided by Section 17.023, Civil Practice and Remedies Code. Authorizes service to be made on a stockholder or member of the company or association. Sec. 253.006. LIABILITY OF STOCKHOLDERS OR MEMBERS. Provides that a stockholder of an unincorporated joint stock company or association is liable to the same extent as a partner in general partnership under this code. Sec. 253.007. EXECUTION OF JUDGMENT. Provides that a judgement rendered against a joint stock company or association is binding on the joint property of all the stockholders or members of the company or association if service is only made on an officer or agent of the company and authorizes it to be enforced by execution. Provides that the judgment is not binding on the individual property of the stockholders or members and does not authorize execution against an individual. Provides that a judgment against a joint stock company or association is binding on the individual property of a stockholder or member who is served with citation and authorizes execution against the individual property only after execution against the joint property has been returned unsatisfied. TITLE 7. PROFESSIONAL ENTITIES CHAPTER 301. PROVISIONS RELATING TO PROFESSIONAL ENTITIES Sec. 301.001. APPLICABILITY OF TITLE. Provides that Title 7 applies only to professional entities and foreign professional entities. Provides that the title does not affect the professional relations between the professional and the professional's client or the legal remedies afforded a client against a professional for errors, omissions, negligence, incompetence, or malfeasance. Sec. 301.002. CONFLICTS OF LAW. Provides that this title prevails over conflicting provisions of Titles 1, 2, 3, or 4. Sec. 301.003. DEFINITION. Defines "permitted person" in this title. Sec. 301.004. AUTHORIZED PERSON. Provides that a person is authorized to act with respect to a professional association if the person is a professional individual and a professional corporation or a professional limited liability company if the person is a professional individual or organization. Sec. 301.005. ADDITIONAL INFORMATION REQUIRED IN CERTIFICATE OF FORMATION. Sets forth the supplemental information that is required to be included in a certificate of formation of a professional entity. Sec. 301.006. APPLICATION FOR REGISTRATION OF FOREIGN PROFESSIONAL ENTITY. Authorizes a foreign professional entity to register to transact business in Texas by filing an application for registration in accordance with Chapter 9. Authorizes the secretary of state to accept an application only if the name and the purpose of the entity comply with Title 7 and the chapters of Title 1 applicable to names and purposes. Provides that the application must state that the jurisdiction of formation of the foreign professional entity permits reciprocal admission of a Texas entity formed under this Code. Sec. 301.007. LICENSE REQUIRED TO PROVIDE PROFESSIONAL SERVICE. Authorizes a professional association or foreign professional association to provide a professional service in this state only through individuals who are licensed to perform the professional service, and authorizes other professional entities to provide services through authorized persons who render the same professional service as the professional entity. Prohibits an unlicensed individual from providing a professional service in this state under the guise of employment. Prohibits this section from being construed to prohibit a professional entity from employing individuals who do not ordinarily provide a professional service. Sec. 301.008. CERTAIN REQUIREMENTS TO BE OWNER, GOVERNING PERSON, OR OFFICER. Provides that an authorized person may be an owner of a professional entity or a governing person of a professional limited liability company, and a professional individual may be an officer of a professional entity or a governing person of a professional association or professional corporation. Sec. 301.009. DUTIES AND POWERS OF OWNER OF MANAGERIAL OFFICIAL WHO CEASES TO BE LICENSED; PURCHASE OF OWNERSHIP INTEREST. Requires a managerial official who ceases to be licensed to resign the person's position of employment and an owner who ceases to be licensed to relinquish the person's ownership interests. Requires a person who succeeds to an ownership interest to relinquish any financial interest in the entity if the person is not an authorized owner. Requires the professional entity to purchase or cause to be purchased, at a price provided in the governing documents or any applicable agreement, the interest of any person who is required to relinquish the person's financial interest. Authorizes a person who is required to relinquish the person's financial interest but who owns all of the outstanding shares to act as a managerial official for the entity for the purpose of winding up the affairs of the entity. Sec. 301.010. TRANSFER OF OWNERSHIP INTEREST. Authorizes the transfer of an ownership interest in a professional entity only to an owner, the entity, or a authorized person. Sec. 301.011. LIABILITY. Provides that a professional entity is jointly and severally liable for an error, omission, negligent or incompetent act, or malfeasance by an owner, managerial official, employee, or agent of the professional entity providing a professional service for the entity or during the course of the person's employment. Provides that such a person is not subject to the same liability imposed on the professional entity. Provides that if such a person is a professional organization the professional organization and the professional entity are jointly and severally liable. Sec. 301.012. EXEMPTION FROM SECURITIES LAWS. Exempts the sale, issuance, or offer to sell an ownership interest in a professional entity from state securities laws. CHAPTER 302. PROVISIONS RELATING TO PROFESSIONAL ASSOCIATIONS Sec. 302.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING FORPROFIT CORPORATIONS. Makes the provisions of Chapter 20 and 21 governing forprofit corporations applicable to professional associations. Sec. 302.002. CERTIFICATE OF FORMATION; ADDITIONAL REQUIREMENTS. Authorizes one or more persons licensed to practice medicine, osteopathy, or podiatry to form a professional association and sets forth the additional information which must be included in such a certificate of formation. Sec. 302.003. DURATION OF PROFESSIONAL ASSOCIATION. Provides that a professional association continues until certain conditions exist. Sec. 302.004. AMENDMENT OF CERTIFICATE OF FORMATION. Authorizes a professional association to amend its certificate of formation by following the procedures for amendment in Chapter 3 and the procedures in the certificate of formation. Provides that an amendment is not necessary to reflect a change in associates or membership interests. Sec. 302.005. ADOPTION OF BYLAWS; DELEGATION OF AUTHORITY. Authorizes the members to adopt bylaws for the association or to delegate the adoption to a governing authority. Sec. 302.006. GOVERNING AUTHORITY. Requires a professional association to be governed by a board of directors or executive committee. Sec. 302.007. MEMBERS' VOTING RIGHTS. Entitles each member to have the voting rights provided in the certificate of formation. Sec. 302.008. ELECTION OF OFFICERS. Requires a professional association to elect officers. Sec. 302.009. OFFICER AND GOVERNING AUTHORITY ELIGIBILITY REQUIREMENTS. Provides that only a member of the professional association is eligible to serve as an officer or governing person of a professional association and that the person is not required to be a governing person to serve as an officer. Provides that only a governing person is eligible to serve as the president of the association. Sec. 302.010. GENERAL POWERS, DUTIES, AND LIABILITIES. Provides that a professional association has the same powers, privileges, duties, restrictions, and liabilities as a for-profit corporation. Sec. 302.011. EMPLOYMENT OF AGENTS AND EMPLOYEES. Authorizes the officers of a professional association to employ agents or employees. Sec. 302.012. LIMITATION ON MEMBER'S POWER TO BIND ASSOCIATION. Provides that a member of a professional association is not entitled, merely by virtue of being a member, to the authority to bind the association. Sec. 302.013. DIVISION OF PROFITS. Requires the members of the association to divide the profits derived from the association in the manner provided by the governing documents of the association. Sec. 302.014. JOINT PRACTICE BY CERTAIN PROFESSIONALS. Authorizes persons licensed as doctors of medicine, doctors of osteopathy, or doctors of podiatry to jointly form and own a professional association only if a member of the association is appropriately licensed in this state. Authorizes a member of such a professional association to provide a professional service only if appropriately licensed in this state. Prohibits a member from exercising control over the conduct of another member who provides a different type of professional service for the association. Sec. 302.015. ANNUAL STATEMENT REQUIRED. Requires a professional association to file an annual report with the secretary of state and sets forth the contents of the statement. Sec. 302.016. WINDING UP AND TERMINATION; CERTIFICATE OF TERMINATION. Authorizes and sets forth the procedures for a professional association to wind up and terminate the association's business. CHAPTER 303. PROVISIONS RELATING TO PROFESSIONAL CORPORATIONS Sec. 303.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING FORPROFIT CORPORATIONS. Makes the provisions of Chapter 20 and 21 governing forprofit corporations applicable to professional corporations. Sec. 303.002. PROFESSIONAL CORPORATION NOT A PARTNERSHIP. Provides that a professional corporation is not a partnership. Sec. 303.003. GENERAL POWERS, DUTIES, AND LIABILITIES. Provides that a professional corporation has the same powers, privileges, duties, restrictions, and liabilities as a for-profit corporation. Sec. 303.004. AUTHORITY AND LIABILITY OF SHAREHOLDER. Provides that a shareholder of a corporation is not required to supervise the performance of duties by an officer or employee of the corporation, and is subject to the same liability as a shareholder of a for-profit corporation. Sec. 303.005. NOTICE OF RESTRICTION ON TRANSFER OF SHARES. Provides that any restriction on the transfer of shares of a professional corporation must be noted on each share certificate and incorporated by reference as provided by Chapter 21. Sec. 303.006. REDEMPTION OF SHARES; PRICE AND TERMS. Authorizes a professional corporation to redeem the shares of a shareholder at the price agreed upon or specified in the governing documents or an applicable agreement. Sec. 303.007. EXISTENCE OF PROFESSIONAL CORPORATION BEFORE WINDING UP AND TERMINATION. Provides that the existence of a professional corporation continues in spite of the death, incompetence, resignation, withdrawal, retirement, or expulsion of any shareholder; the transfer of shares to a new shareholder; or the occurrence of an event requiring the winding up of a partnership until winding up and termination is concluded. CHAPTER 304. PROVISIONS RELATING TO PROFESSIONAL LIMITED LIABILITY COMPANIES Sec. 304.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING LIMITED LIABILITY CORPORATIONS. Makes the provisions of Title 3 applicable to professional limited liability companies. TITLE 8. MISCELLANEOUS AND TRANSITION PROVISIONS CHAPTER 401. GENERAL PROVISIONS Sec. 401.001. DEFINITIONS. Defines "mandatory application date" and "prior law." CHAPTER 402. MISCELLANEOUS AND TRANSITION PROVISIONS Sec. 402.001. APPLICABILITY TO ENTITIES FORMED OR REGISTERED ON OR AFTER EFFECTIVE DATE. Provides that this code is applicable to a domestic entity formed on or after the effective date of this code and a foreign filing entity that is transacting business in this state and is not registered before the effective date of this code. Sec. 402.002. APPLICABILITY BEFORE MANDATORY APPLICATION DATE. Provides that this code only applies to a domestic entity formed before the mandatory application date or a foreign entity that has registered with the secretary of state before the mandatory application date that elected to be governed by this code. Provides that on or after the effective date of this code, the fees required by Chapter 4 apply to all filings made with the secretary of state. Sec. 402.003. ADOPTION OF CODE BY DOMESTIC ENTITY BEFORE MANDATORY APPLICATION DATE. Authorizes a domestic entity formed before the effective date of this code to voluntarily elect to adopt and become subject to this code by complying with the procedures to amend its governing documents, amending the governing documents and, if the domestic entity is a filing entity, filing with the secretary of state in accordance with Chapter 4 a certificate of amendment to its formation or restated certificate of formation that specifically states that the filing entity is electing to adopt this code and would cause its certificate of formation or restated certificate of formation to comply with this code. Authorizes this code and any required amendment to the governing documents to be adopted by the governing authority only in the manner provided for an amendment of the particular governing document if the amendment to the governing documents of the domestic entity that are necessary to conform the governing documents to this code would not require, under prior law, the vote or consent of the owners or members of the entity. Sec. 402.004. ADOPTION OF CODE BY FOREIGN ENTITY BEFORE MANDATORY APPLICATION DATE. Authorizes a foreign entity registered with the secretary of state to voluntarily elect to adopt and become subject to this code by filing with the secretary of state an amendment to its application for registration with respect to the adoption by the foreign entity of this code. Sec. 402.005. APPLICABILITY TO EXISTING ENTITIES ON MANDATORY APPLICATION DATE. Provides that after December 31, 2005, if a domestic entity formed before the effective date of this code or a foreign filing entity registered with the Secretary of State to transact business before the effective date of this code has not taken the action specified by Section 402.003 or 402.004 to elect to adopt this code, then the new law applies on or after the mandatory application date to such entities and the entity is not considered to have failed to comply with this code if the entity's certificate of formation does not comply with this code. Sec. 402.006. APPLICABILITY TO CERTAIN ACTS, CONTRACTS, AND TRANSACTIONS. Provides that, except as otherwise expressly provided by Title 8, all of the provisions of this code govern acts, contracts, or other transactions by an entity subject to this code or its governing authority, officers, owners, or members that occur on or after the mandatory application date. Provides that prior law governs acts, contracts, or transactions that occur before the mandatory application date. Sec. 402.007. INDEMNIFICATION. Provides that Chapter 8 of this code governs any proposed indemnification by a domestic entity after the mandatory application date, regardless of whether the events in which the indemnification is based occurred before or after the mandatory application date. Sec. 402.008. MEETING OF OWNERS AND MEMBERS; CONSENTS; VOTING OF INTERESTS. Provides that Chapter 6 of this code and any other applicable provision of this code should apply to meetings of owners or members held on or after the mandatory application date or action undertaken by owners or members under a written consent that takes effect on or after the mandatory application date. Provides that prior law applies to meeting of owners or members and to any vote cast at a meeting if the meeting was initially called for a date before the mandatory application date and notice of the meeting was given to owners or member entitled to vote at the meeting. Sec. 402.009. MEETINGS OF GOVERNING AUTHORITY AND COMMITTEES; CONSENTS. Provides that Chapter 6 and other applicable provisions of this code apply to a meeting of the governing authority or a committee of the governing authority held on or after the mandatory application date and action undertaken by the governing authority or committee thereof under written consent that takes effect on or after the mandatory application date. Provides that prior law applies to meeting of the governing authority or committee thereof and any vote cast at a meeting if the meeting was initially called for a date before the mandatory application date and notice of the meeting was given to governing persons entitled to vote at the meeting. Sec. 402.010. SALE OF ASSETS, MERGERS, REORGANIZATIONS, CONVERSIONS. Provides that Chapter 10 and other applicable provisions of this code apply to a transaction consummated after the mandatory application date, except that if a required approval of the outstanding ownership interest has been given before the mandatory application date or has been given after the mandatory application date at a meeting of owners or members initially called for a date before the mandatory application date, the transaction is governed by the prior law. Sec. 402.011. WINDING UP AND TERMINATION. Provides that Chapter 11 applies to actions for involuntary or judicial winding up and termination of an entity commenced after the mandatory application date or voluntary winding up and termination proceeding initiated by the governing authority, the terms of governing documents, or applicable law after the mandatory application date. Provides that prior law governs an action for involuntary or judicial winding that is pending on the mandatory application date or a proceeding for voluntary winding up and termination initiated before the mandatory application date. Sec. 402.012. REGISTRATION OF CERTAIN FOREIGN ENTITIES. Provides that a foreign entity that has transacted intrastate business in Texas before the mandatory application date and that is required by Chapter 9 to register to transact business is not subject to a direct or indirect penalty as a result of failure to register under Chapter 9 if the application for registration is filed not later than the 30th day after the mandatory application date. Sec. 402.013. CORPORATIONS AND OTHER ENTITIES UNDER SUSPENSION FOR NONFILING OF REQUIRED REPORTS OR PAYMENT OF TAXES; APPLICABILITY OF PRIOR LAW. Provides that, if the corporate or other similar rights, privileges, and powers of a corporation or other domestic entity have been suspended, and are still suspended immediately before the mandatory application date under prior law, this code applies to the corporation or other entity on the mandatory application date. Provides that, if the corporate or other similar rights of a corporation or other domestic filing entity have been suspended and are still suspended under the Tax Code immediately before the mandatory application date, the suspension continues to apply to the corporation or other entity until the rights, privileges, and powers are restored under the secretary of state under that code. Sec. 402.014. MAINTENANCE OF PRIOR ACTION. Provides that, except as expressly provided by Title 8, this code does not apply to an action or proceeding commenced before the mandatory application date. Provides that prior law applies to the action or proceeding. SECTION 2. CONFORMING AMENDMENT. Amends Part Eleven, Texas Business Corporation Act, by adding Article 11.02, as follows: Art. 11.02. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 3. CONFORMING AMENDMENT. Amends Article 1302-7.01 et seq., V.T.C.S. (Part Seven, Texas Miscellaneous Corporation Laws Act), by adding Article 7.09, as follows: Art. 7.09. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 4. CONFORMING AMENDMENT. Amends Article 1396-1.01 et seq., V.T.C.S. (Texas Non-Profit Corporation Act), by adding Article 11.02, as follows: Art.11.02. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 5. CONFORMING AMENDMENT. Amends Article 1396-50.01 et seq., V.T.C.S. (Cooperative Association Act), by adding Section 47, as follows: Sec. 47. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 6. CONFORMING AMENDMENT. Amends Article 1396-70.01 et seq., V.T.C.S. (Texas Uniform Unincorporated Nonprofit Association Act), by adding Section 19, as follows: Sec. 19. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 7. CONFORMING AMENDMENT. Amends Article 1528e, V.T.C.S. (Texas Professional Corporation Act), by adding Section 21, as follows: Sec. 21. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 8. CONFORMING AMENDMENT. Amends Article 1528f, V.T.C.S. (Texas Professional Association Act), by adding Section 27, as follows: Sec. 27. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 9. CONFORMING AMENDMENT. Amends Article 1528n, V.T.C.S. (Part Eight, Texas Limited Liability Company Act), by adding Article 8.13, as follows: Art. 8.13. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 10. CONFORMING AMENDMENT. Amends Article 6132a-1, V.T.C.S. (Article 13, Texas Revised Limited Partnership Act), by adding Section 13.10, as follows: Sec. 13.10. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 11. CONFORMING AMENDMENT. Amends Article 6132b-11.01 et seq., V.T.C.S. (Article XI, Texas Revised Partnership Act), by adding Section 11.05, as follows: Sec. 11.05. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 12. CONFORMING AMENDMENT. Amends Article 6138A., V.T.C.S. (Texas Real Estate Investment Trust Act), by adding Section 29.10, as follows: Sec. 29.10. APPLICABILITY; EXPIRATION. Provides that this Act does not apply to a corporation to which the Texas Business Organizations Code applies, except as provided by Title 8, Texas Business Organizations Code. Provides that this Act expires January 1, 2006. SECTION 13. Repealer: Articles 1399 (Lodges), 1400 (Lodges: Charter), 1401 (Lodges: Trustees), 1403 (Lodges: Property), 1404 (Lodges: Demise), 1405 (Lodges: Loans), 1406 (Existing Lodge), 1407 (Lodges: Tax), 1407a (Church Benefit Plans and Church Benefits Boards), 1525 (Drainage), 1526 ( Irrigation and Waterpower), 1527 (International Trading Corporations), 1527a (International Commerce Development Corporation; Foreign Trade Zone), 1528 (Ice Companies), 1528a (State Housing Law), 1528g (Business Development Corporations), and 1528h (Dealing in Acceptances), V.T.C.S. SECTION 14. Effective date: January 1, 2001. SECTION 15. Emergency clause.