76R13417 E
By Bosse H.B. No. 2681
Substitute the following for H.B. No. 2681:
By Solomons C.S.H.B. No. 2681
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to adoption of the Texas Business Organizations Code;
1-3 providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. ADOPTION OF CODE. The Texas Business
1-6 Organizations Code is adopted to read as follows:
1-7 TEXAS BUSINESS ORGANIZATIONS CODE
1-8 TITLE 1. GENERAL PROVISIONS
1-9 CHAPTER 1. DEFINITIONS AND OTHER GENERAL PROVISIONS
1-10 SUBCHAPTER A. DEFINITIONS AND PURPOSE
1-11 Sec. 1.001. PURPOSE. The purpose of this code is to make
1-12 the law encompassed by this code more accessible and understandable
1-13 by:
1-14 (1) rearranging the statutes into a more logical
1-15 order;
1-16 (2) employing a format and numbering system designed
1-17 to facilitate citation of the law and to accommodate future
1-18 expansion of the law;
1-19 (3) eliminating repealed, duplicative, expired,
1-20 executed, and other ineffective provisions; and
1-21 (4) restating the law in modern American English to
1-22 the greatest extent possible.
1-23 Sec. 1.002. DEFINITIONS. In this code:
1-24 (1) "Affiliate" means a person who controls, is
2-1 controlled by, or is under common control with another person.
2-2 (2) "Associate," when used to indicate a relationship
2-3 with a person, means:
2-4 (A) a domestic or foreign entity or organization
2-5 for which the person is:
2-6 (i) an officer or governing person; or
2-7 (ii) a beneficial owner of 10 percent or
2-8 more of a class of voting ownership interests or similar securities
2-9 of the entity or organization;
2-10 (B) a trust or estate in which the person has a
2-11 substantial beneficial interest or for which the person serves as
2-12 trustee or in a similar fiduciary capacity;
2-13 (C) the person's spouse or a relative of the
2-14 person related by consanguinity or affinity who resides with the
2-15 person; or
2-16 (D) a governing person or an affiliate or
2-17 officer of the person.
2-18 (3) "Association" means an entity governed as an
2-19 association under Title 6 or 7. The term includes a cooperative
2-20 association, nonprofit association, joint stock association and
2-21 professional association.
2-22 (4) "Assumed name" means a name adopted for use by a
2-23 person. The term includes an assumed name filed under Chapter 36,
2-24 Business & Commerce Code.
2-25 (5) "Business" means a trade, occupation, profession,
2-26 or other commercial activity.
2-27 (6) "Certificate of formation" means:
3-1 (A) the document required to be filed with the
3-2 secretary of state under Chapter 3 to form a filing entity; and
3-3 (B) if appropriate, a restated certificate of
3-4 formation and all amendments of an original or restated certificate
3-5 of formation.
3-6 (7) "Certificate of ownership" means an instrument
3-7 evidencing an ownership interest or membership interest in an
3-8 entity.
3-9 (8) "Certificated ownership interest" means an
3-10 ownership interest of a domestic entity represented by a
3-11 certificate issued in bearer or registered form.
3-12 (9) "Contribution" means a tangible or intangible
3-13 benefit that a person transfers to an entity in consideration for
3-14 an ownership interest in the entity or otherwise in the person's
3-15 capacity as an owner or a member. The benefit includes cash,
3-16 services rendered, a contract for services to be performed, a
3-17 promissory note or other obligation of a person to pay cash or
3-18 transfer property to the entity, or securities or other interests
3-19 in or obligations of an entity, but does not include cash or
3-20 property received by the entity:
3-21 (A) with respect to a promissory note or other
3-22 obligation to the extent that the agreed value of the note or
3-23 obligation has previously been included as a contribution; or
3-24 (B) that the person intends to be a loan to the
3-25 entity.
3-26 (10) "Conversion" means:
3-27 (A) the continuance of a domestic entity as a
4-1 foreign entity of any type;
4-2 (B) the continuance of a foreign entity as a
4-3 domestic entity of any type; or
4-4 (C) the continuance of a domestic entity of one
4-5 type as a domestic entity of another type.
4-6 (11) "Converted entity" means an entity resulting from
4-7 a conversion.
4-8 (12) "Converting entity" means an entity as the entity
4-9 existed before the entity's conversion.
4-10 (13) "Cooperative" or "cooperative association" means
4-11 an association governed as a cooperative association under
4-12 Chapter 251.
4-13 (14) "Corporation" means an entity governed as a
4-14 corporation under Title 2 or 7. The term includes a for-profit
4-15 corporation, nonprofit corporation, and professional corporation.
4-16 (15) "Debtor in bankruptcy" means a person who is the
4-17 subject of:
4-18 (A) an order for relief under the United States
4-19 bankruptcy laws (Title 11, United States Code); or
4-20 (B) a comparable order under a:
4-21 (i) successor statute of general
4-22 applicability; or
4-23 (ii) federal or state law governing
4-24 insolvency.
4-25 (16) "Digital signature" means an electronic
4-26 identifier intended by the person using it to have the same force
4-27 and effect as the use of a manual signature.
5-1 (17) "Director" means an individual who serves on the
5-2 board of directors of a foreign or domestic corporation.
5-3 (18) "Distribution" means a transfer of property,
5-4 including cash, from an entity to an owner or member of the entity
5-5 in the owner's or member's capacity as an owner or member. The
5-6 term includes a dividend, a redemption or purchase of an ownership
5-7 interest, or a liquidating distribution.
5-8 (19) "Domestic" means, with respect to an entity, that
5-9 the entity is formed under this code or the entity's internal
5-10 affairs are governed by this code.
5-11 (20) "Domestic entity" means an organization formed
5-12 under or the internal affairs of which are governed by this code.
5-13 (21) "Domestic entity subject to dissenters' rights"
5-14 means a domestic entity the owners of which have rights of dissent
5-15 and appraisal under this code or the governing documents of the
5-16 entity.
5-17 (22) "Effective date of this code" means January 1,
5-18 2002. The applicability of the Code is governed by Title 8.
5-19 (23) "Entity" means a domestic entity or foreign
5-20 entity.
5-21 (24) "Filing entity" means a domestic entity that is a
5-22 corporation, limited partnership, limited liability company,
5-23 professional association, cooperative, or real estate investment
5-24 trust.
5-25 (25) "Filing instrument" means an instrument,
5-26 document, or statement that is required or authorized by this code
5-27 to be filed by or for an entity with the filing officer in
6-1 accordance with Chapter 4.
6-2 (26) "Filing officer" means:
6-3 (A) with respect to an entity other than a real
6-4 estate investment trust, the secretary of state; or
6-5 (B) with respect to a real estate investment
6-6 trust, the county clerk of the county in which the real estate
6-7 investment trust's principal office is located in this state.
6-8 (27) "For-profit association" means an association
6-9 other than a nonprofit association.
6-10 (28) "For-profit corporation" means a corporation
6-11 other than a nonprofit corporation or professional corporation.
6-12 (29) "For-profit entity" means an entity other than a
6-13 nonprofit entity.
6-14 (30) "Foreign" means, with respect to an entity, that
6-15 the entity is formed under, and the entity's internal affairs are
6-16 governed by, the laws of a jurisdiction other than this state.
6-17 (31) "Foreign entity" means an organization formed
6-18 under, and the internal affairs of which are governed by, the laws
6-19 of a jurisdiction other than this state.
6-20 (32) "Foreign filing entity" means a foreign entity
6-21 that registers or is required to register as a foreign entity under
6-22 Chapter 9.
6-23 (33) "Foreign governmental authority" means a
6-24 governmental official, agency, or instrumentality of a jurisdiction
6-25 other than this state.
6-26 (34) "Foreign nonfiling entity" means a foreign entity
6-27 that is not a foreign filing entity.
7-1 (35) "Fundamental business transaction" means a
7-2 merger, interest exchange, conversion, or sale of all or
7-3 substantially all of an entity's assets.
7-4 (36) "General partner" means:
7-5 (A) each partner in a general partnership; or
7-6 (B) a person who is admitted to a limited
7-7 partnership as a general partner in accordance with the governing
7-8 documents of the limited partnership.
7-9 (37) "General partnership" means a partnership
7-10 governed as a general partnership under Title 4. The term includes
7-11 a registered limited liability partnership.
7-12 (38) "Governing authority" means a person or group of
7-13 persons who are entitled to manage and direct the affairs of an
7-14 entity under this code and the governing documents of the entity,
7-15 except that if the governing documents of the entity or this code
7-16 divide the authority to manage and direct the affairs of the entity
7-17 among different persons or groups of persons according to different
7-18 matters, "governing authority" means the person or group of persons
7-19 entitled to manage and direct the affairs of the entity with
7-20 respect to a matter under the governing documents of the entity or
7-21 this code. The term includes the board of directors of a
7-22 corporation or other persons authorized to perform the functions of
7-23 the board of directors of a corporation, the general partners of a
7-24 general partnership or limited partnership, the managers of a
7-25 limited liability company that is managed by managers, the members
7-26 of a limited liability company that is managed by members who are
7-27 entitled to manage the company, the board of directors of a
8-1 cooperative association, and the trust managers of a real estate
8-2 investment trust. The term does not include an officer who is
8-3 acting in the capacity of an officer.
8-4 (39) "Governing documents" means:
8-5 (A) in the case of a domestic entity:
8-6 (i) the certificate of formation for a
8-7 domestic filing entity or the document or agreement under which a
8-8 domestic nonfiling entity is formed; and
8-9 (ii) the other documents or agreements
8-10 adopted by the entity under this code to govern the formation or
8-11 the internal affairs of the entity; or
8-12 (B) in the case of a foreign entity, the
8-13 instruments, documents, or agreements adopted under the law of its
8-14 jurisdiction of formation to govern the formation or the internal
8-15 affairs of the entity.
8-16 (40) "Governing person" means a person serving as part
8-17 of the governing authority of an entity.
8-18 (41) "Individual" means a natural person.
8-19 (42) "Insolvency" means the inability of a person to
8-20 pay the person's debts as they become due in the usual course of
8-21 business or affairs.
8-22 (43) "Insolvent" means a person who is unable to pay
8-23 the person's debts as they become due in the usual course of
8-24 business or affairs.
8-25 (44) "Interest exchange" means the acquisition of an
8-26 ownership or membership interest in a domestic entity as provided
8-27 by Subchapter B, Chapter 10. The term does not include a merger or
9-1 conversion.
9-2 (45) "Internal Revenue Code" means the Internal
9-3 Revenue Code of 1986, as amended. The term includes corresponding
9-4 provisions of subsequent federal tax laws.
9-5 (46) "Jurisdiction of formation" means:
9-6 (A) in the case of a domestic filing entity,
9-7 this state;
9-8 (B) in the case of a foreign filing entity, the
9-9 jurisdiction in which the entity's certificate of formation or
9-10 similar organizational instrument is filed; or
9-11 (C) in the case of a foreign or domestic
9-12 nonfiling entity:
9-13 (i) the jurisdiction the laws of which are
9-14 chosen in the entity's governing documents to govern its internal
9-15 affairs if that jurisdiction bears a reasonable relation to the
9-16 owners or members or to the domestic or foreign nonfiling entity's
9-17 business and affairs under the principles of this state that
9-18 otherwise would apply to a contract among the owners or members; or
9-19 (ii) if Subparagraph (i) does not apply,
9-20 the jurisdiction in which the entity has its chief executive
9-21 office.
9-22 (47) "Law" means, unless the context requires
9-23 otherwise, both statutory and common law.
9-24 (48) "License" means a license, certificate of
9-25 registration, or other legal authorization.
9-26 (49) "Limited liability company" means an entity
9-27 governed as a limited liability company under Title 3.
10-1 (50) "Limited partner" means a person who has been
10-2 admitted to a limited partnership as a limited partner as provided
10-3 by:
10-4 (A) in the case of a domestic limited
10-5 partnership, Chapter 153; or
10-6 (B) in the case of a foreign limited
10-7 partnership, the laws of its jurisdiction of formation.
10-8 (51) "Limited partnership" means a partnership
10-9 governed as a limited partnership under Title 4. The term includes
10-10 a registered limited liability limited partnership.
10-11 (52) "Manager" means a person designated as a manager
10-12 of a limited liability company that is not managed by members of
10-13 the company.
10-14 (53) "Managerial official" means an officer or a
10-15 governing person.
10-16 (54) "Member" means:
10-17 (A) in the case of a limited liability company,
10-18 a person who has membership rights in the limited liability company
10-19 under its governing documents;
10-20 (B) in the case of a nonprofit corporation, a
10-21 person who has membership rights in the nonprofit corporation under
10-22 its governing documents;
10-23 (C) in the case of a cooperative association, a
10-24 member of a nonshare or share association;
10-25 (D) in the case of a nonprofit association, a
10-26 person who has membership rights in the nonprofit association under
10-27 its governing documents; or
11-1 (E) in the case of a professional association, a
11-2 person who has membership rights in the professional association
11-3 under its governing documents.
11-4 (55) "Membership interest" means a member's interest
11-5 in an entity.
11-6 (56) "Merger" means:
11-7 (A) the division of a domestic entity into two
11-8 or more new domestic entities or other organizations or into a
11-9 surviving domestic entity and one or more new domestic or foreign
11-10 entities or non-code organizations; or
11-11 (B) the combination of one or more domestic
11-12 entities with one or more domestic entities or non-code
11-13 organizations resulting in:
11-14 (i) one or more surviving domestic
11-15 entities or non-code organizations;
11-16 (ii) the creation of one or more new
11-17 domestic entities or non-code organizations; or
11-18 (iii) one or more surviving domestic
11-19 entities or non-code organizations and the creation of one or more
11-20 new domestic entities or non-code organizations.
11-21 (57) "Non-code organization" means an organization
11-22 other than a domestic entity.
11-23 (58) "Nonfiling entity" means a domestic entity that
11-24 is not a filing entity. The term includes a domestic general
11-25 partnership, nonprofit association, and joint stock company.
11-26 (59) "Nonprofit association" means an association
11-27 governed as a nonprofit association under Chapter 252.
12-1 (60) "Nonprofit corporation" means a corporation
12-2 governed as a nonprofit corporation under Chapter 22.
12-3 (61) "Nonprofit entity" means an entity that is a
12-4 nonprofit corporation, nonprofit association, or other entity that
12-5 is organized solely for one or more of the purposes specified by
12-6 Section 2.002.
12-7 (62) "Officer" means an individual elected, appointed,
12-8 or designated as an officer of an entity by the entity's governing
12-9 authority or under the entity's governing documents.
12-10 (63) "Organization" means a corporation, limited or
12-11 general partnership, limited liability company, business trust,
12-12 real estate investment trust, joint venture, joint stock company,
12-13 cooperative, association, bank, insurance company, credit union,
12-14 savings and loan association, or other organization, regardless of
12-15 whether the organization is for-profit, nonprofit, domestic or
12-16 foreign.
12-17 (64) "Owner" means:
12-18 (A) with respect to a foreign or domestic
12-19 for-profit corporation or real estate investment trust, a
12-20 shareholder;
12-21 (B) with respect to a foreign or domestic
12-22 partnership, a partner;
12-23 (C) with respect to a foreign or domestic
12-24 limited liability company or association, a member; or
12-25 (D) with respect to another foreign or domestic
12-26 entity, an owner of an equity interest in that entity.
12-27 (65) "Ownership interest" means an owner's interest in
13-1 an entity. The term includes the owner's share of profits and
13-2 losses or similar items and the right to receive distributions.
13-3 The term does not include an owner's right to participate in
13-4 management.
13-5 (66) "Parent entity" or "parent organization" means an
13-6 entity or organization that:
13-7 (A) owns at least 50 percent of the ownership or
13-8 membership interest of a subsidiary; or
13-9 (B) possesses at least 50 percent of the voting
13-10 power of the owners or members of a subsidiary.
13-11 (67) "Partner" means a limited partner or general
13-12 partner.
13-13 (68) "Partnership" means an entity governed as a
13-14 partnership under Title 4.
13-15 (69) "Partnership interest" means a partner's interest
13-16 in a partnership. The term includes the partner's share of profits
13-17 and losses or similar items and the right to receive distributions.
13-18 The term does not include a partner's right to participate in
13-19 management.
13-20 (70) "Party to the merger" means a domestic entity or
13-21 non-code organization that under a plan of merger is divided or
13-22 combined by a merger. The term does not include a domestic entity
13-23 or non-code organization that is not to be divided or combined into
13-24 or with one or more domestic entities or non-code organizations,
13-25 regardless of whether ownership interests of the entity are to be
13-26 issued under the plan of merger.
13-27 (71) "President" means the:
14-1 (A) individual designated as president of an
14-2 entity under the entity's governing documents; or
14-3 (B) officer or committee of persons authorized
14-4 to perform the functions of the principal executive officer of an
14-5 entity without regard to the designated name of the officer or
14-6 committee.
14-7 (72) "Professional association" means an association
14-8 (as distinguished from either a partnership or a corporation) that
14-9 is:
14-10 (A) formed for the purpose of providing the
14-11 professional service of medicine, osteopathy, or podiatry; and
14-12 (B) governed as a professional entity under
14-13 Title 7.
14-14 (73) "Professional corporation" means a corporation
14-15 that is:
14-16 (A) formed for the purpose of providing a
14-17 professional service that by law a corporation governed by Title 2
14-18 is prohibited from rendering; and
14-19 (B) governed as a professional entity under
14-20 Title 7.
14-21 (74) "Professional entity" means a professional
14-22 association, professional corporation, or professional limited
14-23 liability company.
14-24 (75) "Professional individual," with respect to a
14-25 professional entity, means an individual who is licensed to provide
14-26 in this state or another jurisdiction the same professional service
14-27 as rendered by that professional entity.
15-1 (76) "Professional limited liability company" means a
15-2 limited liability company formed for the purpose of providing a
15-3 professional service and governed as a professional entity under
15-4 Title 7.
15-5 (77) "Professional service" means any type of service
15-6 that requires, as a condition precedent to the rendering of the
15-7 service, the obtaining of a license in this state, including the
15-8 personal service rendered by an architect, attorney, certified
15-9 public accountant, dentist, physician, public accountant, or
15-10 veterinarian.
15-11 (78) "Property" includes tangible and intangible
15-12 property and an interest in that property.
15-13 (79) "Real estate investment trust" means an entity
15-14 governed as a real estate investment trust under Title 5.
15-15 (80) "Registered limited liability partnership" means
15-16 a partnership governed as a registered limited liability
15-17 partnership under Title 4.
15-18 (81) "Registered limited liability limited
15-19 partnership" means a partnership governed as a registered limited
15-20 liability partnership and a limited partnership under Title 4.
15-21 (82) "Sale of all or substantially all of the assets"
15-22 means the sale, lease, exchange, or other disposition, other than a
15-23 pledge, mortgage, deed of trust, or trust indenture unless
15-24 otherwise provided by the certificate of formation, of all or
15-25 substantially all of the property and assets of a domestic entity
15-26 that is not made in the usual and regular course of the entity's
15-27 business without regard to whether the disposition is made with the
16-1 goodwill of the business. The term does not include a transaction
16-2 that results in the entity directly or indirectly:
16-3 (A) continuing to engage in one or more
16-4 businesses; or
16-5 (B) applying a portion of the consideration
16-6 received in connection with the transaction to the conduct of a
16-7 business that the entity engages in after the transaction.
16-8 (83) "Secretary" means the:
16-9 (A) individual designated as secretary of an
16-10 entity under the entity's governing documents; or
16-11 (B) officer or committee of persons authorized
16-12 to perform the functions of secretary of an entity without regard
16-13 to the designated name of the officer or committee.
16-14 (84) "Share" means a unit into which the ownership
16-15 interest in a corporation is divided, regardless of whether the
16-16 share is certificated or uncertificated.
16-17 (85) "Shareholder" or "holder of shares" means the
16-18 person in whose name shares issued by a corporation are registered
16-19 in the share transfer records maintained by the corporation.
16-20 (86) "Signature" means any symbol executed or adopted
16-21 by a person with present intention to authenticate a writing.
16-22 Unless the context requires otherwise, the term includes a digital
16-23 signature and a facsimile of a signature.
16-24 (87) "Subscriber" means a person who agrees with or
16-25 makes an offer to an entity to purchase by subscription an
16-26 ownership interest in the entity.
16-27 (88) "Subscription" means an agreement between a
17-1 subscriber and an entity, or a written offer made by a subscriber
17-2 to an entity before or after the entity's formation, in which the
17-3 subscriber agrees or offers to purchase a specified ownership
17-4 interest in the entity.
17-5 (89) "Subsidiary" means an entity or organization at
17-6 least 50 percent of:
17-7 (A) the ownership or membership interest of
17-8 which is owned by a parent entity or parent organization; or
17-9 (B) the voting power of which is possessed by a
17-10 parent entity or parent organization.
17-11 (90) "Treasurer" means the:
17-12 (A) individual designated as treasurer of an
17-13 entity under the entity's governing documents; or
17-14 (B) officer or committee of persons authorized
17-15 to perform the functions of treasurer of an entity without regard
17-16 to the designated name of the officer or committee.
17-17 (91) "Trustee" means a person who serves as a trustee
17-18 of a trust, including a real estate investment trust.
17-19 (92) "Uncertificated ownership interest" means an
17-20 ownership interest in a domestic entity that is not represented by
17-21 an instrument and is transferred by:
17-22 (A) amendment of the governing documents of the
17-23 entity; or
17-24 (B) registration on books maintained by or on
17-25 behalf of the entity for the purpose of registering transfers of
17-26 ownership interests.
17-27 (93) "Vice president" means the:
18-1 (A) individual designated as vice president of
18-2 an entity under the governing documents of the entity; or
18-3 (B) officer or committee of persons authorized
18-4 to perform the functions of the president of the entity on the
18-5 death, absence, or resignation of the president or on the inability
18-6 of the president to perform the functions of office without regard
18-7 to the designated name of the officer or committee.
18-8 (94) "Writing" or "written" means an embodiment in a
18-9 tangible medium of expression, now known or later developed, of
18-10 words, letters, characters, numbers, symbols, figures, or other
18-11 textual information sufficiently permanent or stable to permit it
18-12 to be perceived, reproduced, or otherwise communicated, directly or
18-13 with the aid of a machine or device, for a period of more than
18-14 transitory duration. Unless the context requires otherwise, the
18-15 term:
18-16 (A) includes stored or transmitted electronic
18-17 data and transmissions and reproductions of writings; and
18-18 (B) does not include sound or video recordings
18-19 of speech other than transcriptions that are otherwise writings.
18-20 Sec. 1.003. DISINTERESTED PERSON. (a) For purposes of this
18-21 code, a person is disinterested with respect to the approval of a
18-22 contract, transaction, or other matter or to the consideration of
18-23 the disposition of a claim or challenge relating to a contract,
18-24 transaction, or particular conduct, if the person or the person's
18-25 associate:
18-26 (1) is not a party to the contract or transaction or
18-27 materially involved in the conduct that is the subject of the claim
19-1 or challenge; and
19-2 (2) does not have a material financial interest in the
19-3 outcome of the contract or transaction or the disposition of the
19-4 claim or challenge.
19-5 (b) For purposes of Subsection (a), a person is not
19-6 materially involved in a contract or transaction that is the
19-7 subject of a claim or challenge and does not have a material
19-8 financial interest in the outcome of a contract or transaction or
19-9 the disposition of a claim or challenge solely because:
19-10 (1) the person was nominated or elected as a governing
19-11 person by a person who is:
19-12 (A) interested in the contract or transaction;
19-13 or
19-14 (B) alleged to have engaged in the conduct that
19-15 is the subject of the claim or challenge;
19-16 (2) the person receives normal fees or customary
19-17 compensation, reimbursement for expenses, or benefits as a
19-18 governing person of the entity;
19-19 (3) the person has a direct or indirect equity
19-20 interest in the entity;
19-21 (4) the entity has, or its subsidiaries have, an
19-22 interest in the contract or transaction or was affected by the
19-23 alleged conduct;
19-24 (5) the person or an associate of the person receives
19-25 ordinary and reasonable compensation for reviewing, making
19-26 recommendations regarding, or deciding on the disposition of the
19-27 claim or challenge; or
20-1 (6) in the case of a review by the person of the
20-2 alleged conduct that is the subject of the claim or challenge:
20-3 (A) the person is named as a defendant in the
20-4 derivative proceeding regarding the matter or as a person who
20-5 engaged in the alleged conduct; or
20-6 (B) the person, acting as a governing person,
20-7 approved, voted for, or acquiesced in the act being challenged if
20-8 the act did not result in a material personal or financial benefit
20-9 to the person and the challenging party fails to allege particular
20-10 facts that, if true, raise a significant prospect that the
20-11 governing person would be held liable to the entity or its owners
20-12 or members as a result of the conduct.
20-13 Sec. 1.004. INDEPENDENT PERSON. (a) For purposes of this
20-14 code, a person is independent with respect to considering the
20-15 disposition of a claim or challenge regarding a contract or
20-16 transaction, or particular or alleged conduct, if the person:
20-17 (1) is disinterested;
20-18 (2) either:
20-19 (A) is not an associate, or member of the
20-20 immediate family, of a party to the contract or transaction or of a
20-21 person who is alleged to have engaged in the conduct that is the
20-22 subject of the claim or challenge; or
20-23 (B) is an associate to a party or person
20-24 described by Paragraph (A) that is an entity if the person is an
20-25 associate solely because the person is a governing person of the
20-26 entity or of the entity's subsidiaries or associates;
20-27 (3) does not have a business, financial, or familial
21-1 relationship with a party to the contract or transaction, or with
21-2 another person who is alleged to have engaged in the conduct, that
21-3 is the subject of the claim or challenge that could reasonably be
21-4 expected to materially and adversely affect the judgment of the
21-5 person in favor of the party or other person with respect to the
21-6 consideration of the matter; and
21-7 (4) is not shown, by a preponderance of the evidence,
21-8 to be under the controlling influence of a party to the contract or
21-9 transaction that is the subject of the claim or challenge or of a
21-10 person who is alleged to have engaged in the conduct that is the
21-11 subject of the claim or challenge.
21-12 (b) For purposes of Subsection (a), a person does not have a
21-13 relationship that could reasonably be expected to materially and
21-14 adversely affect the judgment of the person regarding the
21-15 disposition of a matter that is the subject of a claim or challenge
21-16 and is not otherwise under the controlling influence of a party to
21-17 a contract or transaction that is the subject of a claim or
21-18 challenge or that is alleged to have engaged in the conduct that is
21-19 the subject of a claim or challenge solely because:
21-20 (1) the person has been nominated or elected as a
21-21 governing person by a person who is interested in the contract or
21-22 transaction or alleged to be engaged in the conduct that is the
21-23 subject of the claim or challenge;
21-24 (2) the person receives normal fees or similar
21-25 customary compensation, reimbursement for expenses, or benefits as
21-26 a governing person of the entity;
21-27 (3) the person has a direct or indirect equity
22-1 interest in the entity;
22-2 (4) the entity has, or its subsidiaries have, an
22-3 interest in the contract or transaction or was affected by the
22-4 alleged conduct;
22-5 (5) the person or an associate of the person receives
22-6 ordinary and reasonable compensation for reviewing, making
22-7 recommendations regarding, or deciding on the disposition of the
22-8 claim or challenge; or
22-9 (6) the person, an associate of the person, other than
22-10 the entity or its associates, or an immediate family member has a
22-11 continuing business relationship with the entity that is not
22-12 material to the person, associate, or family member.
22-13 Sec. 1.005. CONSPICUOUS INFORMATION. In this code, required
22-14 information is conspicuous if the information is placed in a manner
22-15 or displayed using a font that provides or is intended to provide
22-16 notice to a reasonable person affected by the information.
22-17 Required information in a document is conspicuous if the font used
22-18 for the information is capitalized, boldfaced, italicized, or
22-19 underlined or larger or of a different color than the remainder of
22-20 the document.
22-21 Sec. 1.006. SYNONYMOUS TERMS. To the extent not
22-22 inconsistent with the provisions of the constitution and other
22-23 statutes or codes wherein such terms may be found, and as the
22-24 context requires, in this code or any other statute or code of this
22-25 state:
22-26 (1) a reference to "articles of incorporation,"
22-27 "articles of organization," "certificate of limited partnership,"
23-1 and "charter" includes a "certificate of formation";
23-2 (2) a reference to "authorized capital stock" includes
23-3 "authorized shares";
23-4 (3) a reference to "capital stock" includes
23-5 "authorized and issued shares," "issued share," and "stated
23-6 capital";
23-7 (4) a reference to a "certificate of registration,"
23-8 "certificate of authority," and "permit to do business" includes
23-9 "registration";
23-10 (5) a reference to "stock" and "shares of stock"
23-11 includes "shares";
23-12 (6) a reference to "stockholder" includes
23-13 "shareholder"; and
23-14 (7) a reference to "no par stock" includes "shares
23-15 without par value."
23-16 Sec. 1.007. SIGNING OF DOCUMENT OR OTHER WRITING. For
23-17 purposes of this code, a writing has been signed by a person when
23-18 the writing includes the person's signature. A transmission or
23-19 reproduction of a writing signed by a person is considered signed
23-20 by that person for purposes of this code.
23-21 Sec. 1.008. SHORT TITLES. (a) The provisions of this code
23-22 as described by this section may be cited as provided by this
23-23 section.
23-24 (b) The provisions of Title 2 and the provisions of Title 1
23-25 to the extent applicable to corporations may be cited as the "Texas
23-26 Corporation Law."
23-27 (c) The provisions of Chapters 20 and 21 and the provisions
24-1 of Title 1 to the extent applicable to for-profit corporations may
24-2 be cited as the "Texas For-Profit Corporation Law."
24-3 (d) The provisions of Chapters 20 and 22 and the provisions
24-4 of Title 1 to the extent applicable to nonprofit corporations may
24-5 be cited as the "Texas Nonprofit Corporation Law."
24-6 (e) The provisions of Title 3 and the provisions of Title 1
24-7 to the extent applicable to limited liability companies may be
24-8 cited as the "Texas Limited Liability Company Law."
24-9 (f) The provisions of Chapters 151, 152, and 154 and the
24-10 provisions of Title 1 to the extent applicable to general
24-11 partnerships may be cited as the "Texas General Partnership Law."
24-12 (g) The provisions of Chapters 151, 153, and 154 and the
24-13 provisions of Title 1 to the extent applicable to limited
24-14 partnerships may be cited as the "Texas Limited Partnership Law."
24-15 (h) The provisions of Title 5 and the provisions of Title 1
24-16 to the extent applicable to real estate investment trusts may be
24-17 cited as the "Texas Real Estate Investment Trust Law."
24-18 (i) The provisions of Chapter 251 and the provisions of
24-19 Title 1 to the extent applicable to cooperative associations may be
24-20 cited as the "Texas Cooperative Association Law."
24-21 (j) The provisions of Title 7 and the provisions of Titles
24-22 1, 2, and 3 to the extent applicable to professional entities may
24-23 be cited as the "Texas Professional Entities Law."
24-24 (k) The provisions of Chapter 252 may be cited as the
24-25 "Uniform Unincorporated Nonprofit Association Act."
24-26 (l) The provisions of Chapters 301 and 302 and the
24-27 provisions of Chapters 20 and 21 and Title 1 to the extent
25-1 applicable to professional associations may be cited as the "Texas
25-2 Professional Association Law."
25-3 (m) The provisions of Chapters 301 and 303 and the
25-4 provisions of Chapters 20 and 21 and Title 1 to the extent
25-5 applicable to professional corporations may be cited as the "Texas
25-6 Professional Corporation Law."
25-7 (n) The provisions of Chapters 301 and 304 and the
25-8 provisions of Titles 1 and 3 to the extent applicable to
25-9 professional limited liability companies may be cited as the "Texas
25-10 Professional Limited Liability Company Law."
25-11 Sec. 1.009. DOLLARS AS MONETARY UNITS. Unless the context
25-12 requires otherwise, a value or amount that is required by this code
25-13 to be stated in monetary terms must be stated in United States
25-14 dollars. Currency that is not specified is considered to be in
25-15 United States dollars.
25-16 (Sections 1.010-1.050 reserved for expansion)
25-17 SUBCHAPTER B. CODE CONSTRUCTION
25-18 Sec. 1.051. CONSTRUCTION OF CODE. Chapter 311, Government
25-19 Code (Code Construction Act), applies to the construction of each
25-20 provision in this code except as otherwise expressly provided by
25-21 this code.
25-22 Sec. 1.052. REFERENCE IN LAW TO STATUTE REVISED BY CODE. A
25-23 reference in a law to a statute or a part of a statute revised by
25-24 this code is considered to be a reference to the part of this code
25-25 that revises that statute or part of that statute.
25-26 Sec. 1.053. APPLICABILITY TO FOREIGN AND INTERSTATE AFFAIRS.
25-27 This code applies to the conduct of affairs with foreign countries
26-1 and the other states of the United States only to the extent
26-2 permitted under the United States Constitution.
26-3 Sec. 1.054. RESERVATION OF POWER. The legislature at all
26-4 times has the power to amend, repeal or modify this code and to
26-5 prescribe regulations, provisions, and limitations as the
26-6 legislature considers advisable. The regulations, provisions, and
26-7 limitations are binding on any entity subject to this code.
26-8 (Sections 1.055-1.100 reserved for expansion)
26-9 SUBCHAPTER C. DETERMINATION OF APPLICABLE LAW
26-10 Sec. 1.101. DOMESTIC FILING ENTITIES. The law of this state
26-11 governs the formation and internal affairs of an entity if the
26-12 entity's formation occurs when a certificate of formation filed in
26-13 accordance with Chapter 4 takes effect.
26-14 Sec. 1.102. FOREIGN FILING ENTITIES. If the formation of an
26-15 entity occurs when a certificate of formation or similar instrument
26-16 filed with a foreign governmental authority takes effect, the law
26-17 of the state or other jurisdiction in which that foreign
26-18 governmental authority is located governs the formation and
26-19 internal affairs of the entity.
26-20 Sec. 1.103. ENTITIES NOT FORMED BY FILING INSTRUMENT. If
26-21 the formation of an entity does not occur when a certificate of
26-22 formation or similar instrument filed with the secretary of state
26-23 or with a foreign governmental authority takes effect, the law
26-24 governing the entity's formation and internal affairs is the law of
26-25 the entity's jurisdiction of formation.
26-26 Sec. 1.104. LAW APPLICABLE TO LIABILITY. The law of the
26-27 jurisdiction that governs an entity as determined under Sections
27-1 1.101-1.103 applies to the liability of an owner, a member, or a
27-2 managerial official of the entity in the capacity as an owner, a
27-3 member, or a managerial official for an obligation, including a
27-4 debt or other liability, of the entity for which the owner, member,
27-5 or managerial official is not otherwise liable by contract or under
27-6 provisions of law other than this code.
27-7 Sec. 1.105. INTERNAL AFFAIRS. For purposes of this code,
27-8 the internal affairs of an entity include:
27-9 (1) the rights, powers, and duties of its governing
27-10 authority, governing persons, officers, owners, and members; and
27-11 (2) matters relating to its membership or ownership
27-12 interests.
27-13 Sec. 1.106. ORDER OF PRECEDENCE. (a) This title applies to
27-14 all domestic entities and foreign entities to the extent provided
27-15 by this title.
27-16 (b) Each title of this code, other than this title, applies
27-17 to a different type of entity to the extent provided by that title.
27-18 (c) If a provision of this title conflicts with a provision
27-19 in another title of this code, the provision of the other title
27-20 supersedes the provision of this title.
27-21 CHAPTER 2. PURPOSES AND POWERS
27-22 OF DOMESTIC ENTITY
27-23 SUBCHAPTER A. PURPOSES OF DOMESTIC ENTITY
27-24 Sec. 2.001. GENERAL SCOPE OF PERMISSIBLE PURPOSES. A
27-25 domestic entity has any lawful purpose or purposes, unless
27-26 otherwise provided by this code.
27-27 Sec. 2.002. PURPOSES OF NONPROFIT ENTITY. The purpose or
28-1 purposes of a domestic nonprofit entity may include one or more of
28-2 the following purposes:
28-3 (1) serving charitable, benevolent, religious,
28-4 eleemosynary, patriotic, civic, missionary, educational,
28-5 scientific, social, fraternal, athletic, aesthetic, agricultural,
28-6 and horticultural purposes;
28-7 (2) operating or managing a professional, commercial,
28-8 or trade association or labor union;
28-9 (3) providing animal husbandry; or
28-10 (4) operating on a nonprofit cooperative basis for the
28-11 benefit of its members.
28-12 Sec. 2.003. PROHIBITED PURPOSES. A domestic entity may not:
28-13 (1) engage in a business or activity that:
28-14 (A) is expressly unlawful or prohibited by a law
28-15 of this state;
28-16 (B) cannot lawfully be engaged in by that entity
28-17 under state law; or
28-18 (C) may not be engaged in by an entity without
28-19 first obtaining a license under the laws of this state to engage in
28-20 that business or activity and a license cannot lawfully be granted
28-21 to the entity; or
28-22 (2) operate as a:
28-23 (A) bank;
28-24 (B) trust company;
28-25 (C) savings association;
28-26 (D) insurance company;
28-27 (E) railroad company;
29-1 (F) cemetery organization; or
29-2 (G) abstract or title company governed by
29-3 Chapter 9, Insurance Code.
29-4 Sec. 2.004. LIMITATION ON PURPOSES OF PROFESSIONAL ENTITY.
29-5 A professional entity may engage in only:
29-6 (1) one type of professional service, unless the
29-7 entity is expressly authorized to provide more than one type of
29-8 professional service under state law regulating the professional
29-9 services; and
29-10 (2) services ancillary to that type of professional
29-11 service.
29-12 Sec. 2.005. LIMITATION IN GOVERNING DOCUMENTS. The
29-13 governing documents of a domestic entity may contain limitations on
29-14 the entity's purposes.
29-15 (Sections 2.006-2.100 reserved for expansion)
29-16 SUBCHAPTER B. POWERS OF DOMESTIC ENTITY
29-17 Sec. 2.101. GENERAL POWERS. Except as otherwise provided by
29-18 this code, a domestic entity has the same powers as an individual
29-19 to take action necessary or convenient to carry out its business
29-20 and affairs. Except as otherwise provided by this code, the powers
29-21 of a domestic entity include the power to:
29-22 (1) sue, be sued, and defend suit in the entity's
29-23 business name;
29-24 (2) have and alter a seal and use the seal or a
29-25 facsimile of it by impressing, affixing, or reproducing it;
29-26 (3) acquire, receive, own, hold, improve, use, and
29-27 deal in and with property or an interest in property;
30-1 (4) sell, convey, mortgage, pledge, lease, exchange,
30-2 and otherwise dispose of property;
30-3 (5) make contracts and guarantees;
30-4 (6) incur liabilities, borrow money, issue notes,
30-5 bonds, or other obligations, which may be convertible into, or
30-6 include the option to purchase, other securities or ownership
30-7 interests in the entity, and secure its obligations by mortgaging
30-8 or pledging its property, franchises, or income;
30-9 (7) lend money, invest its funds, and receive and hold
30-10 property as security for repayment;
30-11 (8) acquire its own bonds, debentures, or other
30-12 evidences of indebtedness or obligations;
30-13 (9) acquire its own ownership interests, regardless of
30-14 whether redeemable, and hold the ownership interests as treasury
30-15 ownership interests or cancel or dispose of the ownership
30-16 interests;
30-17 (10) be a promoter, organizer, owner, partner, member,
30-18 associate, or manager of an organization;
30-19 (11) acquire, receive, own, hold, vote, use, pledge,
30-20 and dispose of ownership interests in or securities issued by
30-21 another person;
30-22 (12) conduct its business, locate its offices, and
30-23 exercise the powers granted by this code to further its purposes,
30-24 in or out of this state;
30-25 (13) lend money to, and otherwise assist, its
30-26 managerial officials, owners, members, or employees as necessary or
30-27 appropriate;
31-1 (14) elect or appoint officers and agents of the
31-2 entity, establish the length of their terms, define their duties,
31-3 and fix their compensation;
31-4 (15) pay pensions and establish pension plans, pension
31-5 trusts, profit-sharing plans, bonus plans, and incentive plans for
31-6 managerial officials, owners, members, or employees or former
31-7 managerial officials, owners, members, or employees;
31-8 (16) indemnify and maintain liability insurance for
31-9 managerial officials, owners, members, employees, and agents of the
31-10 entity or the entity's affiliate;
31-11 (17) adopt and amend governing documents for managing
31-12 the affairs of the entity subject to applicable law;
31-13 (18) make donations for the public welfare or for a
31-14 charitable, scientific, or educational purpose;
31-15 (19) voluntarily wind up its business and activities
31-16 and terminate its existence;
31-17 (20) transact business or take action that will aid
31-18 governmental policy; and
31-19 (21) take other action necessary or appropriate to
31-20 further the purposes of the entity.
31-21 Sec. 2.102. ADDITIONAL POWERS OF NONPROFIT ENTITY OR
31-22 INSTITUTION. To effect its purposes, a domestic nonprofit entity
31-23 or institution formed for a religious, charitable, educational, or
31-24 eleemosynary purpose may acquire, own, hold, mortgage, and dispose
31-25 of and invest its funds in property for the use and benefit of,
31-26 under the discretion of, and in trust for a convention, conference,
31-27 or association organized under the laws of this state or another
32-1 state with which it is affiliated or by which it is controlled.
32-2 Sec. 2.103. POWER TO INCUR INDEBTEDNESS. (a) Unless
32-3 otherwise provided by its governing documents or this code, a
32-4 domestic entity may create indebtedness for any consideration the
32-5 entity considers appropriate, including:
32-6 (1) cash;
32-7 (2) property;
32-8 (3) a contract to receive property;
32-9 (4) a debt or other obligation of the entity or of
32-10 another person;
32-11 (5) services performed or a contract for services to
32-12 be performed; or
32-13 (6) a direct or indirect benefit realized by the
32-14 entity.
32-15 (b) In the absence of fraud in the transaction, the judgment
32-16 of the governing authority of a domestic entity as to the value of
32-17 the consideration received by the entity for indebtedness is
32-18 conclusive.
32-19 (c) For purposes of this section, a domestic entity is
32-20 treated as part of the entity creating indebtedness if the domestic
32-21 entity is directly or indirectly or wholly or partly owned by that
32-22 entity.
32-23 (d) This section does not apply to indebtedness created by a
32-24 for-profit entity that is incurred by reason of the authorization
32-25 or payment of a distribution.
32-26 Sec. 2.104. POWER TO MAKE GUARANTIES. (a) In this section,
32-27 "guaranty" means a mortgage, pledge, security agreement, or other
33-1 agreement making the domestic entity or its assets secondarily
33-2 liable for another person's contract, security, or other
33-3 obligation.
33-4 (b) Unless otherwise provided by its governing documents or
33-5 this code, a domestic entity may:
33-6 (1) make a guaranty on behalf of a parent, subsidiary,
33-7 or affiliate of the entity; or
33-8 (2) make a guaranty of the indebtedness of another
33-9 person if the guaranty may reasonably be expected directly or
33-10 indirectly to benefit the entity.
33-11 (c) For purposes of Subsection (b)(2), a decision by the
33-12 governing authority of the domestic entity that a guaranty may
33-13 reasonably be expected to benefit the entity is conclusive and not
33-14 subject to attack by any person, except:
33-15 (1) a guaranty may not be enforced by a person who
33-16 participated in a fraud on the domestic entity resulting in the
33-17 making of the guaranty or by a person who had notice of that fraud
33-18 at the time the person acquired rights under the guaranty;
33-19 (2) a proposed guaranty may be enjoined at the request
33-20 of an owner of the domestic entity on the ground that the guaranty
33-21 cannot reasonably be expected to benefit the domestic entity; or
33-22 (3) the domestic entity, whether acting directly or
33-23 through a receiver, trustee, or other legal representative, or
33-24 through an owner on behalf of the domestic entity, may bring suit
33-25 for damages against the managerial officials, owners, or members
33-26 who authorized the guaranty on the ground that the guaranty could
33-27 not reasonably be expected to benefit the domestic entity.
34-1 (d) This section does not:
34-2 (1) apply to a domestic entity governed by the
34-3 Insurance Code; or
34-4 (2) authorize a domestic entity that is not governed
34-5 by the Insurance Code to engage in a business or transaction
34-6 regulated by the Insurance Code.
34-7 Sec. 2.105. STATED POWERS IN SUBCHAPTER SUFFICIENT. A
34-8 domestic entity is not required to state any of the powers provided
34-9 to the entity by this subchapter in its governing documents.
34-10 Sec. 2.106. LIMITATION ON POWERS. (a) This subchapter does
34-11 not authorize a domestic entity or a managerial official of a
34-12 domestic entity to exercise a power in a manner inconsistent with a
34-13 limitation on the purposes or powers of the entity contained in its
34-14 governing documents, this code, or other law of this state.
34-15 (b) This code does not authorize any action in violation of
34-16 the antitrust laws of this state.
34-17 Sec. 2.107. CERTIFICATED INDEBTEDNESS; MANNER OF ISSUANCE;
34-18 SIGNATURE AND SEAL. (a) Except as otherwise provided by the
34-19 governing documents of the domestic entity, this code, or other
34-20 law, on the issuance by a domestic entity of a bond, debenture, or
34-21 other evidence of indebtedness in certificated form, the seal of
34-22 the entity, if the entity has adopted a seal, may be a facsimile
34-23 that may be engraved or printed on the certificate.
34-24 (b) Except as otherwise provided by the governing documents
34-25 of the domestic entity, this code, or other law, if a security
34-26 described by Subsection (a) is authenticated with the manual
34-27 signature of an authorized officer of the domestic entity or an
35-1 authorized officer or representative, to the extent permitted by
35-2 law, of a transfer agent or trustee appointed or named by an
35-3 indenture of trust or other agreement under which the security is
35-4 issued, the signature of any officer of the domestic entity may be
35-5 a facsimile signature.
35-6 (c) A security described by Subsection (a) that contains the
35-7 manual or facsimile signature of a person who is no longer an
35-8 officer when the security is delivered by the entity may be
35-9 adopted, issued, and delivered by the entity in the same manner and
35-10 to the same extent as if the person had remained an officer of the
35-11 entity.
35-12 CHAPTER 3. FORMATION AND GOVERNANCE
35-13 SUBCHAPTER A. FORMATION, EXISTENCE, AND CERTIFICATE
35-14 OF FORMATION
35-15 Sec. 3.001. FORMATION AND EXISTENCE OF FILING ENTITIES. (a)
35-16 Subject to the other provisions of this code, to form a filing
35-17 entity, a certificate of formation complying with Sections 3.003,
35-18 3.004, and 3.005 must be filed in accordance with Chapter 4.
35-19 (b) The filing of a certificate of formation described by
35-20 Subsection (a) may be included in a filing under Chapter 10.
35-21 (c) The existence of a filing entity commences when the
35-22 filing of the certificate of formation takes effect as provided by
35-23 Chapter 4.
35-24 (d) Except in a proceeding by the state to terminate the
35-25 existence of a filing entity, an acknowledgment of the filing of a
35-26 certificate of formation issued by the filing officer is conclusive
35-27 evidence of:
36-1 (1) the formation and existence of the filing entity;
36-2 (2) the satisfaction of all conditions precedent to
36-3 the formation of the filing entity; and
36-4 (3) the authority of the filing entity to transact
36-5 business in this state.
36-6 Sec. 3.002. FORMATION AND EXISTENCE OF NONFILING ENTITIES.
36-7 The requirements for the formation of and the determination of the
36-8 existence of a nonfiling entity are governed by the title of this
36-9 code that applies to that entity.
36-10 Sec. 3.003. DURATION. A domestic entity exists perpetually
36-11 unless otherwise provided in the governing documents of the entity.
36-12 A domestic entity may be terminated in accordance with this code or
36-13 the Tax Code.
36-14 Sec. 3.004. ORGANIZERS. (a) Any person having the capacity
36-15 to contract for the person or for another may be an organizer of a
36-16 filing entity.
36-17 (b) Each organizer of a filing entity must sign the
36-18 certificate of formation of the filing entity, except that:
36-19 (1) each general partner must sign the certificate of
36-20 formation of a domestic limited partnership; and
36-21 (2) each trust manager must sign and acknowledge
36-22 before an officer who is authorized by law to take acknowledgment
36-23 of a deed the certificate of formation of a domestic real estate
36-24 investment trust.
36-25 Sec. 3.005. CERTIFICATE OF FORMATION. (a) The certificate
36-26 of formation must state:
36-27 (1) the name of the filing entity being formed;
37-1 (2) the type of filing entity being formed;
37-2 (3) for filing entities other than limited
37-3 partnerships, the purpose or purposes for which the filing entity
37-4 is formed, which may be stated to be or include any lawful purpose
37-5 for that type of entity;
37-6 (4) the period of duration, if the entity is not
37-7 formed to exist perpetually;
37-8 (5) the street address of the initial registered
37-9 office of the filing entity and the name of the initial registered
37-10 agent of the filing entity at the office;
37-11 (6) the name and address of each:
37-12 (A) organizer for the filing entity, unless the
37-13 entity is formed under a plan of conversion or merger;
37-14 (B) general partner, if the filing entity is a
37-15 limited partnership; or
37-16 (C) trust manager, if the filing entity is a
37-17 real estate investment trust;
37-18 (7) if the filing entity is formed under a plan of
37-19 conversion or merger, a statement to that effect and, if formed
37-20 under a plan of conversion, the name, address, date of formation,
37-21 prior form of organization, and jurisdiction of formation of the
37-22 converting entity; and
37-23 (8) any other information required by this code to be
37-24 included in the certificate of formation for the filing entity.
37-25 (b) The certificate of formation may contain other
37-26 provisions not inconsistent with law relating to the organization,
37-27 ownership, governance, business, or affairs of the filing entity.
38-1 (c) Except as provided by Section 3.004, Chapter 4 governs
38-2 the signing and filing of a certificate of formation for a domestic
38-3 entity.
38-4 Sec. 3.006. FILINGS IN CASE OF MERGER OR CONVERSION. (a)
38-5 If a new domestic entity is formed under a plan of conversion or
38-6 merger, the certificate of formation of the entity must be filed
38-7 with the certificate of conversion or merger under Section
38-8 10.155(a) or 10.153(a). The certificate of formation is not
38-9 required to be filed separately under Section 3.001.
38-10 (b) The formation and existence of a domestic filing entity
38-11 that is a converted entity in a conversion or that is to be created
38-12 under a plan of merger takes effect and commences on the
38-13 effectiveness of the conversion or merger, as appropriate.
38-14 (Sections 3.007-3.050 reserved for expansion)
38-15 SUBCHAPTER B. AMENDMENTS AND RESTATEMENTS OF
38-16 CERTIFICATE OF FORMATION
38-17 Sec. 3.051. RIGHT TO AMEND CERTIFICATE OF FORMATION. (a) A
38-18 filing entity may amend its certificate of formation.
38-19 (b) An amended certificate of formation may contain only
38-20 provisions that:
38-21 (1) would be permitted at the time of the amendment if
38-22 the amended certificate of formation were a newly filed original
38-23 certificate of formation; or
38-24 (2) effect a change, exchange, reclassification, or
38-25 cancellation in the membership or ownership interests or the rights
38-26 of owners or members of the filing entity.
38-27 Sec. 3.052. PROCEDURES TO AMEND CERTIFICATE OF FORMATION.
39-1 (a) The procedure to adopt an amendment to the certificate of
39-2 formation is as provided by the title of this code that applies to
39-3 the entity.
39-4 (b) A filing entity that amends its certificate of formation
39-5 shall sign and file, in the manner required by Chapter 4, a
39-6 certificate of amendment complying with Section 3.053 or a restated
39-7 certificate of formation complying with Section 3.057.
39-8 Sec. 3.053. CERTIFICATE OF AMENDMENT. A certificate of
39-9 amendment for a filing entity must state:
39-10 (1) the name of the filing entity;
39-11 (2) the type of the filing entity;
39-12 (3) for each provision of the certificate of formation
39-13 that is added, altered, or deleted, an identification by reference
39-14 or description of the added, altered, or deleted provision and, if
39-15 the provision is added or altered, a statement of the text of the
39-16 amended or added provision;
39-17 (4) that the amendment or amendments have been
39-18 approved in the manner required by this code and the governing
39-19 documents of the entity; and
39-20 (5) any other matter required by the provisions of
39-21 this code applicable to the filing entity to be in the certificate
39-22 of amendment.
39-23 Sec. 3.054. EFFECT OF FILING OF CERTIFICATE OF AMENDMENT.
39-24 (a) An amendment to a certificate of formation takes effect when
39-25 the filing of the certificate of amendment takes effect as provided
39-26 by Chapter 4.
39-27 (b) An amendment to a certificate of formation does not
40-1 affect:
40-2 (1) an existing cause of action in favor of or against
40-3 the entity for which the certificate of amendment is sought;
40-4 (2) a pending suit to which the entity is a party; or
40-5 (3) an existing right of a person other than an
40-6 existing owner.
40-7 (c) If the name of an entity is changed by amendment, an
40-8 action brought by or against the entity in the former name of the
40-9 entity does not abate because of the name change.
40-10 Sec. 3.055. RIGHT TO RESTATE CERTIFICATE OF FORMATION. (a)
40-11 A filing entity may restate its certificate of formation.
40-12 (b) An amendment effected by a restated certificate of
40-13 formation must comply with Section 3.051(b).
40-14 Sec. 3.056. PROCEDURES TO RESTATE CERTIFICATE OF FORMATION.
40-15 (a) The procedure to adopt a restated certificate of formation is
40-16 governed by the title of this code that applies to the entity.
40-17 (b) A filing entity that restates its certificate of
40-18 formation shall sign and file, in the manner required by Chapter 4,
40-19 a restated certificate of formation and accompanying statements
40-20 complying with Section 3.057.
40-21 Sec. 3.057. RESTATED CERTIFICATE OF FORMATION. (a) A
40-22 restated certificate of formation must accurately state the text of
40-23 the previous certificate of formation, regardless of whether the
40-24 certificate of formation is an original, corrected, or restated
40-25 certificate, and include:
40-26 (1) each previous amendment to the certificate being
40-27 restated that is carried forward; and
41-1 (2) each new amendment to the certificate being
41-2 restated.
41-3 (b) A restated certificate of formation may omit:
41-4 (1) the name and address of each organizer other than
41-5 the name and address of each general partner of a limited
41-6 partnership or trust manager of a real estate investment trust; and
41-7 (2) any other information that may be omitted under
41-8 the provisions of this code applicable to the filing entity.
41-9 (c) A restated certificate of formation that does not make
41-10 new amendments to the certificate of formation being restated must
41-11 be accompanied by:
41-12 (1) a statement that the restated certificate of
41-13 formation accurately states the text of the certificate of
41-14 formation being restated, as amended, restated, and corrected,
41-15 except for information omitted under Subsection (b); and
41-16 (2) any other information required by other provisions
41-17 of this code applicable to the filing entity.
41-18 (d) A restated certificate of formation that makes new
41-19 amendments to the certificate of formation being restated must:
41-20 (1) be accompanied by a statement that each new
41-21 amendment has been made in accordance with this code;
41-22 (2) identify by reference or description each added,
41-23 altered, or deleted provision;
41-24 (3) be accompanied by a statement that each amendment
41-25 has been approved in the manner required by this code and the
41-26 governing documents of the entity;
41-27 (4) be accompanied by a statement that the restated
42-1 certificate of formation:
42-2 (A) accurately states the text of the
42-3 certificate of formation being restated and each amendment to the
42-4 certificate of formation being restated that is in effect, as
42-5 further amended by the restated certificate of formation; and
42-6 (B) does not contain any other change in the
42-7 certificate of formation being restated except for information
42-8 omitted under Subsection (b); and
42-9 (5) include any other information required by the
42-10 title of this code applicable to the entity.
42-11 Sec. 3.058. EFFECT OF FILING OF RESTATED CERTIFICATE OF
42-12 FORMATION. (a) A restated certificate of formation takes effect
42-13 when the filing of the restated certificate of formation takes
42-14 effect as provided by Chapter 4.
42-15 (b) On the date the restated certificate of formation takes
42-16 effect, the original certificate of formation and each prior
42-17 amendment or restatement of the certificate of formation is
42-18 superseded and the restated certificate of formation is the
42-19 effective certificate of formation.
42-20 (c) Sections 3.054(b) and (c) apply to an amendment effected
42-21 by a restated certificate of formation.
42-22 (Sections 3.059-3.100 reserved for expansion)
42-23 SUBCHAPTER C. GOVERNING PERSONS AND OFFICERS
42-24 Sec. 3.101. RIGHTS OF GOVERNING PERSONS IN CERTAIN CASES.
42-25 (a) In discharging a duty or exercising a power, a governing
42-26 person, including a governing person who is a member of a
42-27 committee, may, in good faith and with ordinary care, rely on
43-1 information, opinions, reports, or statements, including financial
43-2 statements and other financial data, concerning a domestic entity
43-3 or another person and prepared or presented by:
43-4 (1) an officer or employee of the entity;
43-5 (2) legal counsel;
43-6 (3) a public accountant;
43-7 (4) an investment banker;
43-8 (5) a person who the governing person reasonably
43-9 believes possesses professional expertise in the matter; or
43-10 (6) a committee of the governing authority of which
43-11 the governing person is not a member.
43-12 (b) A governing person may not in good faith rely on the
43-13 information described by Subsection (a) if the governing person has
43-14 knowledge of a matter that makes the reliance unwarranted.
43-15 (c) A governing person held liable on a claim is entitled to
43-16 contribution from each of the other governing persons held liable
43-17 on the same claim, as appropriate to achieve equity.
43-18 Sec. 3.102. OFFICERS. (a) Officers of a domestic entity
43-19 may be elected or appointed in accordance with the governing
43-20 documents of the entity or by the governing authority of the entity
43-21 unless prohibited by the governing documents.
43-22 (b) An officer of an entity shall perform the duties in the
43-23 management of the entity and has the authority as provided by the
43-24 governing documents of the entity or the governing authority that
43-25 elects or appoints the officer.
43-26 (c) A person may simultaneously hold any two or more offices
43-27 of an entity unless prohibited by this code or the governing
44-1 documents of the entity.
44-2 Sec. 3.103. REMOVAL OF OFFICERS. (a) Unless otherwise
44-3 provided by the governing documents of a domestic entity, an
44-4 officer may be removed for or without cause by the governing
44-5 authority or as provided by the governing documents of the entity.
44-6 The removal of an officer does not prejudice any contract rights of
44-7 the person removed.
44-8 (b) Election or appointment of an officer does not by itself
44-9 create contract rights.
44-10 Sec. 3.104. RIGHTS OF OFFICERS IN CERTAIN CASES. (a) In
44-11 discharging a duty or exercising a power, an officer of a domestic
44-12 entity may, in good faith and ordinary care, rely on information,
44-13 opinions, reports, or statements, including financial statements
44-14 and other financial data, concerning the entity or another person
44-15 and prepared or presented by:
44-16 (1) another officer or an employee of the entity;
44-17 (2) legal counsel;
44-18 (3) a public accountant;
44-19 (4) an investment banker; or
44-20 (5) a person who the officer reasonably believes
44-21 possesses professional expertise in the matter.
44-22 (b) An officer may not in good faith rely on the information
44-23 described by Subsection (a) if the officer has knowledge of a
44-24 matter that makes the reliance unwarranted.
44-25 (Sections 3.105-3.150 reserved for expansion)
44-26 SUBCHAPTER D. RECORDKEEPING
44-27 Sec. 3.151. BOOKS AND RECORDS FOR ALL FILING ENTITIES.
45-1 (a) Each filing entity shall keep:
45-2 (1) books and records of accounts;
45-3 (2) minutes of the proceedings of the owners or
45-4 members or governing authority of the filing entity and committees
45-5 of the owners or members or governing authority of the filing
45-6 entity;
45-7 (3) at its registered office or principal place of
45-8 business, or at the office of its transfer agent or registrar, a
45-9 record of:
45-10 (A) the original issuance of ownership or
45-11 membership interests issued by the entity; and
45-12 (B) each transfer of the issued ownership or
45-13 membership interests that have been presented to the entity for
45-14 registration or transfer; and
45-15 (4) other books and records as required by the title
45-16 of this code governing the entity.
45-17 (b) The records required by Subsection (a)(3) must state:
45-18 (1) the name and address of each past and current
45-19 owner or member of the entity;
45-20 (2) the number, amount, or percentage and class or
45-21 series of ownership or membership interests issued by the entity
45-22 held by each past and current owner or member; and
45-23 (3) if different, the number of votes to which each is
45-24 entitled.
45-25 (c) The books, records, minutes, and ownership or membership
45-26 transfer records of any entity may be in written form or another
45-27 form capable of being converted into written form within a
46-1 reasonable time.
46-2 (d) The records required by Subsection (a)(2) need not be
46-3 maintained by a partnership or a limited liability company to the
46-4 extent such entities are not required by the governing documents to
46-5 maintain minutes of proceedings.
46-6 Sec. 3.152. GOVERNING PERSON'S RIGHT OF INSPECTION. (a) A
46-7 governing person may examine the entity's books and records
46-8 maintained under Section 3.151 and other books and records of the
46-9 entity for a purpose reasonably related to the governing person's
46-10 service as a governing person.
46-11 (b) A court may require an entity to open the books and
46-12 records of the entity, including the books and records maintained
46-13 under Section 3.151, to permit a governing person to inspect, make
46-14 copies of, or take extracts from the books and records on a showing
46-15 by the governing person that:
46-16 (1) the person is a governing person of the entity;
46-17 (2) the person demanded to inspect the entity's books
46-18 and records;
46-19 (3) the person's purpose for inspecting the entity's
46-20 books and records is reasonably related to the person's service as
46-21 a governing person; and
46-22 (4) the entity refused the person's good faith demand
46-23 to inspect the books and records.
46-24 (c) A court may award a governing person attorney's fees and
46-25 any other proper relief in a suit to require an entity to open its
46-26 books and records under Subsection (b).
46-27 Sec. 3.153. RIGHT OF EXAMINATION BY OWNER OR MEMBER. Each
47-1 owner or member of an entity may examine the books and records of
47-2 an entity maintained under Section 3.151 and other books and
47-3 records of the entity to the extent provided by the governing
47-4 documents of the entity and the title of this code governing the
47-5 entity.
47-6 (Sections 3.154-3.200 reserved for expansion)
47-7 SUBCHAPTER E. CERTIFICATES REPRESENTING OWNERSHIP INTEREST
47-8 Sec. 3.201. CERTIFICATED OR UNCERTIFICATED OWNERSHIP
47-9 INTEREST. (a) Ownership interests in a domestic entity may be
47-10 certificated or uncertificated.
47-11 (b) The ownership interests in a for-profit corporation,
47-12 real estate investment trust, or professional corporation must be
47-13 certificated unless the governing documents of the entity or a
47-14 resolution adopted by the governing authority of the entity states
47-15 that the ownership interests are uncertificated. If a domestic
47-16 entity changes the form of its ownership interests from
47-17 certificated to uncertificated, a certificated ownership interest
47-18 subject to the change becomes an uncertificated ownership interest
47-19 only after the certificate is surrendered to the domestic entity.
47-20 (c) Ownership interests in a domestic entity, other than a
47-21 domestic entity described by Subsection (b), are uncertificated
47-22 unless this code or the governing documents of the domestic entity
47-23 state that the interests are certificated.
47-24 Sec. 3.202. FORM AND VALIDITY OF CERTIFICATES; ENFORCEMENT
47-25 OF ENTITY'S RIGHTS. (a) A certificated ownership interest in a
47-26 domestic entity may contain an impression of the seal of the
47-27 entity, if any. A facsimile of the entity's seal may be printed or
48-1 lithographed on the certificate.
48-2 (b) If a domestic entity is authorized to issue ownership
48-3 interests of more than one class or series, each certificate
48-4 representing ownership interests that is issued by the entity must
48-5 conspicuously state on the front or back of the certificate:
48-6 (1) the designations, preferences, limitations, and
48-7 relative rights of the ownership interests of each class or series
48-8 to the extent they have been determined and the authority of the
48-9 governing authority to make those determinations as to subsequent
48-10 series; or
48-11 (2) that the information required by Subdivision (1)
48-12 is stated in the domestic entity's governing documents and that the
48-13 domestic entity, on written request to the entity's principal place
48-14 of business or registered office, will provide a free copy of that
48-15 information to the record holder of the certificate.
48-16 (c) A certificate representing ownership interests must
48-17 state on the front of the certificate:
48-18 (1) that the domestic entity is organized under the
48-19 laws of this state;
48-20 (2) the name of the person to whom the certificate is
48-21 issued;
48-22 (3) the number and class of ownership interests and
48-23 the designation of the series, if any, represented by the
48-24 certificate; and
48-25 (4) if the ownership interests are shares, the par
48-26 value of each share represented by the certificate, or a statement
48-27 that the shares are without par value.
49-1 (d) A certificate representing ownership interests that is
49-2 subject to a restriction, placed by or agreed to by the domestic
49-3 entity under this subchapter, on the transfer or registration of
49-4 the transfer of the ownership interests must:
49-5 (1) conspicuously state or provide a summary of the
49-6 restriction on the front of the certificate;
49-7 (2) state the restriction on the back of the
49-8 certificate and conspicuously refer to that statement on the front
49-9 of the certificate; or
49-10 (3) conspicuously state on the front or back of the
49-11 certificate that a restriction exists pursuant to a specified
49-12 document and:
49-13 (A) that the domestic entity, on written request
49-14 to the entity's principal place of business, will provide a free
49-15 copy of the document to the certificate record holder; or
49-16 (B) if the document has been filed in accordance
49-17 with this code, that the document:
49-18 (i) is on file with the secretary of state
49-19 or, in the case of a real estate investment trust, with the county
49-20 clerk of the county in which the real estate investment trust's
49-21 principal place of business is located; and
49-22 (ii) contains a complete statement of the
49-23 restriction.
49-24 (e) A domestic entity that fails to provide to the record
49-25 holder of a certificate within a reasonable time a document as
49-26 required by Subsection (d)(3)(A) may not enforce the entity's
49-27 rights under the restriction imposed on the certificated ownership
50-1 interests.
50-2 Sec. 3.203. SIGNATURE REQUIREMENT. (a) The managerial
50-3 official or officials of a domestic entity authorized by the
50-4 governing documents of the entity to sign certificated ownership
50-5 interests of the entity must sign any certificate representing an
50-6 ownership interest in the entity.
50-7 (b) A certificated ownership interest that contains the
50-8 manual or facsimile signature of a person who is no longer a
50-9 managerial official of a domestic entity when the certificate is
50-10 issued may be issued by the entity in the same manner and with the
50-11 same effect as if the person had remained a managerial official.
50-12 Sec. 3.204. DELIVERY REQUIREMENT. A domestic entity shall
50-13 deliver a certificate representing a certificated ownership
50-14 interest to which the owner is entitled.
50-15 Sec. 3.205. NOTICE FOR UNCERTIFICATED OWNERSHIP INTEREST.
50-16 (a) Except as provided by Subsection (c) and in accordance with
50-17 Chapter 8, Business & Commerce Code, after issuing or transferring
50-18 an uncertificated ownership interest, a domestic entity shall
50-19 notify the owner of the ownership interest in writing of any
50-20 information required under this subchapter to be stated on a
50-21 certificate representing the ownership interest.
50-22 (b) Except as otherwise expressly provided by law, the
50-23 rights and obligations of the owner of an uncertificated ownership
50-24 interest are the same as the rights and obligations of the owner of
50-25 a certificated ownership interest of the same class and series.
50-26 (c) A domestic entity is not required to send a notice under
50-27 Subsection (a) if:
51-1 (1) the required information is included in the
51-2 governing documents of the entity; and
51-3 (2) the owner of the uncertificated ownership interest
51-4 is provided with a copy of the governing documents.
51-5 CHAPTER 4. FILINGS
51-6 SUBCHAPTER A. GENERAL PROVISIONS
51-7 Sec. 4.001. SIGNATURE AND DELIVERY. (a) A filing
51-8 instrument must be:
51-9 (1) signed by a person authorized by this code to act
51-10 on behalf of the entity in regard to the filing instrument; and
51-11 (2) delivered to the secretary of state in person or
51-12 by mail, courier, facsimile or electronic transmission, or any
51-13 other comparable form of delivery.
51-14 (b) A person authorized by this code to sign a filing
51-15 instrument for an entity is not required to show evidence of the
51-16 person's authority as a requirement for filing.
51-17 Sec. 4.002. ACTION BY SECRETARY OF STATE. (a) If the
51-18 secretary of state finds that a filing instrument delivered under
51-19 Section 4.001 conforms to the provisions of this code that apply to
51-20 the entity and to applicable rules adopted under Section 12.001 and
51-21 that all required fees have been paid, the secretary of state
51-22 shall:
51-23 (1) file the instrument by accepting it into the
51-24 filing system adopted by the secretary of state and assigning the
51-25 instrument a date of filing; and
51-26 (2) deliver a written or electronic acknowledgment of
51-27 filing to the entity or its representative.
52-1 (b) If a duplicate copy of the filing instrument is
52-2 delivered to the secretary of state, on accepting the filing
52-3 instrument, the secretary of state shall return the duplicate copy,
52-4 endorsed with the word "Filed" and the month, day, and year of
52-5 filing, to the entity or its representative with the acknowledgment
52-6 of filing.
52-7 Sec. 4.003. FILING OR ISSUANCE OF REPRODUCTION OR FACSIMILE.
52-8 (a) A photographic, photostatic, facsimile, electronic, or similar
52-9 reproduction of a filing instrument, signature, acknowledgment of
52-10 filing, or communication may be filed or issued in place of:
52-11 (1) an original filing instrument;
52-12 (2) an original signature on a filing instrument; or
52-13 (3) an original acknowledgment of filing or other
52-14 written communication from the secretary of state relating to a
52-15 filing instrument.
52-16 (b) To the extent any filing or action on a filing conforms
52-17 to this subchapter, a filing instrument or an acknowledgment of
52-18 filing issued by the secretary of state is not required to be on
52-19 paper or to be reduced to printed form.
52-20 Sec. 4.004. TIME FOR FILING. Unless this code prescribes a
52-21 specific period for filing, an entity shall promptly file each
52-22 filing instrument that this code requires the entity to file.
52-23 Sec. 4.005. CERTIFICATES AND CERTIFIED COPIES. (a) A
52-24 court, public office, or official body shall accept a certificate
52-25 issued as provided by this code by the secretary of state or a copy
52-26 of a filing instrument accepted by the secretary of state for
52-27 filing as provided by this code that is certified by the secretary
53-1 of state as prima facie evidence of the facts stated in the
53-2 certificate or instrument.
53-3 (b) A court, public office, or official body may record a
53-4 certificate or certified copy described by Subsection (a).
53-5 (c) A court, public office, or official body shall accept a
53-6 certificate issued under an official seal by the secretary of state
53-7 as to the existence or nonexistence of facts that relate to an
53-8 entity that would not appear from a certified copy of a filing
53-9 instrument as prima facie evidence of the existence or nonexistence
53-10 of the facts stated in the certificate.
53-11 Sec. 4.006. FORMS ADOPTED BY SECRETARY OF STATE. (a) The
53-12 secretary of state may adopt forms for a filing instrument or a
53-13 report authorized or required by this code to be filed with the
53-14 secretary of state.
53-15 (b) A person is not required to use a form adopted by the
53-16 secretary of state unless this code expressly requires use of that
53-17 form.
53-18 Sec. 4.007. LIABILITY FOR FALSE FILING INSTRUMENTS. (a) A
53-19 person may recover damages, court costs, and reasonable attorney's
53-20 fees if the person incurs a loss and:
53-21 (1) the loss is caused by a filed filing instrument
53-22 that constitutes an offense under Section 4.008; or
53-23 (2) the person reasonably relies on:
53-24 (A) a false statement of material fact in a
53-25 filed filing instrument; or
53-26 (B) the omission in a filed filing instrument of
53-27 a material fact required by this code to be included in the
54-1 instrument.
54-2 (b) A person may recover under Subsection (a) from:
54-3 (1) each person who signed the filing instrument and
54-4 knew when the instrument was signed of the false statement or
54-5 omission;
54-6 (2) any managerial official of the entity who directed
54-7 the signing and filing of the filing instrument who knew or should
54-8 have known when the instrument was signed or filed of the false
54-9 statement or omission; or
54-10 (3) the entity that authorizes the filing of the
54-11 filing instrument.
54-12 Sec. 4.008. OFFENSE; PENALTY. (a) A person commits an
54-13 offense if the person signs or directs the filing of a filing
54-14 instrument that the person knows is materially false with intent
54-15 that the filing instrument be delivered on behalf of an entity to
54-16 the secretary of state for filing.
54-17 (b) An offense under this section is a Class A misdemeanor
54-18 unless the actor's intent is to defraud or harm another, in which
54-19 event the offense is a state jail felony.
54-20 Sec. 4.009. FILINGS BY REAL ESTATE INVESTMENT TRUST. (a) A
54-21 filing instrument relating to a real estate investment trust must
54-22 be filed with the county clerk of the county in which the real
54-23 estate investment trust's principal place of business is located.
54-24 (b) Subject to other state law governing the requirements
54-25 for filing instruments with a county clerk, this chapter applies to
54-26 a filing by a real estate investment trust, except that in relation
54-27 to such a filing a reference in this chapter to the secretary of
55-1 state is considered to be a reference to the county clerk of the
55-2 county in which the real estate investment trust's principal place
55-3 of business is located.
55-4 (Sections 4.010-4.050 reserved for expansion)
55-5 SUBCHAPTER B. WHEN FILINGS TAKE EFFECT
55-6 Sec. 4.051. GENERAL RULE. A filing instrument submitted to
55-7 the secretary of state takes effect on filing, except as permitted
55-8 by Section 4.052 or as provided by the provisions of this code that
55-9 apply to the entity making the filing or other law.
55-10 Sec. 4.052. DELAYED EFFECTIVENESS OF CERTAIN FILINGS.
55-11 Except as provided by Section 4.058, a filing instrument may take
55-12 effect after the time the instrument would otherwise take effect as
55-13 provided by this code for the entity filing the instrument and:
55-14 (1) at a specified date and time; or
55-15 (2) on the occurrence of a future event or fact,
55-16 including an act of any person.
55-17 Sec. 4.053. CONDITIONS FOR DELAYED EFFECTIVENESS. (a) The
55-18 date and time at which a filing instrument takes effect is delayed
55-19 if the instrument clearly and expressly states, in addition to any
55-20 other required statement or information:
55-21 (1) the specific date and time at which the instrument
55-22 takes effect; or
55-23 (2) if the instrument takes effect on the occurrence
55-24 of a future event or fact that may occur:
55-25 (A) the manner in which the event or fact will
55-26 cause the instrument to take effect; and
55-27 (B) the date of the 90th day after the date the
56-1 instrument is signed.
56-2 (b) If a filing instrument is to take effect on a specific
56-3 date and time other than that provided by this code:
56-4 (1) the date may not be later than the 90th day after
56-5 the date the instrument is signed; and
56-6 (2) the specific time at which the instrument is to
56-7 take effect may not be specified as "12:00 a.m." or "12:00 p.m."
56-8 Sec. 4.054. DELAYED EFFECTIVENESS ON FUTURE EVENT OR FACT.
56-9 A filing instrument that is to take effect on the occurrence of a
56-10 future event or fact, other than the passage of time, and for which
56-11 the statement required by Section 4.055 is filed within the
56-12 prescribed time, takes effect on the date and time at which the
56-13 last specified event or fact occurs or the date and time at which a
56-14 condition is satisfied or waived.
56-15 Sec. 4.055. STATEMENT OF EVENT OR FACT. An entity that
56-16 files a filing instrument that takes effect on the occurrence of a
56-17 future event or fact, other than the passage of time, must sign and
56-18 file as provided by Subchapter A, not later than the 90th day after
56-19 the date the filing instrument is filed, a statement that:
56-20 (1) confirms that each event or fact on which the
56-21 effect of the instrument is conditioned has been satisfied or
56-22 waived; and
56-23 (2) states the date and time on which the condition
56-24 was satisfied or waived.
56-25 Sec. 4.056. FAILURE TO FILE STATEMENT. (a) If the effect
56-26 of a filing instrument is conditioned on the occurrence of a future
56-27 event or fact, other than the passage of time, and the statement
57-1 required by Section 4.055 is not filed before the expiration of the
57-2 prescribed time, the filing instrument does not take effect. This
57-3 section does not preclude the filing of a subsequent filing
57-4 instrument required by this code to make the event or transaction
57-5 evidenced by the original filing instrument effective.
57-6 (b) If the effect of a filing instrument is conditioned on
57-7 the occurrence of a future event or fact, other than the passage of
57-8 time, and the specified event or fact does not occur and is not
57-9 waived, the parties to the filing instrument must sign and file a
57-10 certificate of abandonment as provided by Section 4.057.
57-11 Sec. 4.057. ABANDONMENT BEFORE EFFECTIVENESS. (a) The
57-12 parties to a filing instrument may abandon the filing instrument if
57-13 the instrument has not taken effect.
57-14 (b) To abandon a filing instrument the parties to the
57-15 instrument must file with the filing officer a certificate of
57-16 abandonment.
57-17 (c) A certificate of abandonment must:
57-18 (1) be signed on behalf of each entity that is a party
57-19 to the action or transaction by the person authorized by this code
57-20 to act on behalf of the entity;
57-21 (2) state the nature of the filing instrument to be
57-22 abandoned, the date of the instrument, and the parties to the
57-23 instrument; and
57-24 (3) state that the filing instrument has been
57-25 abandoned in accordance with the agreement of the parties.
57-26 (d) On the filing of the certificate of abandonment, the
57-27 action or transaction evidenced by the original filing instrument
58-1 is abandoned and may not take effect.
58-2 (e) If in the interim before a certificate of abandonment is
58-3 filed, the name of an entity that is a party to the action or
58-4 transaction becomes the same as or deceptively similar to the name
58-5 of another entity already on file or reserved or registered under
58-6 this code, the filing officer may not file the certificate of
58-7 abandonment unless the entity by or for whom the certificate is
58-8 filed changes its name in the manner provided by this code for that
58-9 entity.
58-10 Sec. 4.058. DELAYED EFFECTIVENESS NOT PERMITTED. The effect
58-11 of the following filing instruments may not be delayed:
58-12 (1) a reservation of name as provided by Subchapter C,
58-13 Chapter 5;
58-14 (2) a registration of name as provided by Subchapter
58-15 D, Chapter 5;
58-16 (3) a statement of event or fact as provided by
58-17 Section 4.055; or
58-18 (4) a certificate of abandonment as provided by
58-19 Section 4.057.
58-20 Sec. 4.059. ACKNOWLEDGMENT OF FILING WITH DELAYED
58-21 EFFECTIVENESS. (a) An acknowledgment of filing issued or other
58-22 action taken by the secretary of state affirming the filing of a
58-23 filing instrument that has a specific delayed effective date must
58-24 state the date and time at which the instrument takes effect.
58-25 (b) An acknowledgment of filing issued or other action taken
58-26 by the secretary of state affirming the filing of a filing
58-27 instrument the effect of which is delayed until the occurrence of a
59-1 future event or fact must:
59-2 (1) state that the effective date and time of the
59-3 filing instrument is conditioned on the occurrence of a future
59-4 event or fact as described in the filing instrument; or
59-5 (2) otherwise indicate that the effective date and
59-6 time of the instrument is conditioned on the occurrence of a future
59-7 event or fact.
59-8 (Sections 4.060-4.100 reserved for expansion)
59-9 SUBCHAPTER C. CORRECTION AND AMENDMENT
59-10 Sec. 4.101. CORRECTION OF FILINGS. (a) A filing instrument
59-11 that has been filed with the secretary of state that is an
59-12 inaccurate record of the event or transaction evidenced in the
59-13 instrument, that contains an inaccurate or erroneous statement, or
59-14 that was defectively or erroneously signed, sealed, acknowledged,
59-15 or verified may be corrected by filing a certificate of correction.
59-16 (b) A certificate of correction must be signed by the person
59-17 authorized by this code to act on behalf of the entity.
59-18 Sec. 4.102. LIMITATION ON CORRECTION OF FILINGS. A filing
59-19 instrument may be corrected to contain only those statements that
59-20 this code authorizes or requires to be included in the original
59-21 instrument. A certificate of correction may not alter, add, or
59-22 delete a statement that by its alteration, addition, or deletion
59-23 would have caused the secretary of state to determine the filing
59-24 instrument did not conform to this code at the time of filing.
59-25 Sec. 4.103. CERTIFICATE OF CORRECTION. The certificate of
59-26 correction must:
59-27 (1) state the name of the entity;
60-1 (2) identify the filing instrument to be corrected by
60-2 description and date of filing with the secretary of state;
60-3 (3) identify the inaccuracy, error, or defect to be
60-4 corrected; and
60-5 (4) state in corrected form the portion of the filing
60-6 instrument to be corrected.
60-7 Sec. 4.104. FILING CERTIFICATE OF CORRECTION. The
60-8 certificate of correction shall be filed with and acted on by the
60-9 secretary of state as provided by Subchapter A. On filing, the
60-10 secretary of state shall deliver to the entity or its
60-11 representative an acknowledgment of the filing.
60-12 Sec. 4.105. EFFECT OF CERTIFICATE OF CORRECTION. (a) After
60-13 the secretary of state files the certificate of correction, the
60-14 filing instrument is considered to have been corrected on the date
60-15 the filing instrument was originally filed, except as provided by
60-16 Subsection (b).
60-17 (b) As to a person who is adversely affected by the
60-18 correction, the filing instrument is considered to have been
60-19 corrected on the date the certificate of correction is filed.
60-20 (c) An acknowledgment of filing or a similar instrument
60-21 issued by the secretary of state before a filing instrument is
60-22 corrected, with respect to the effect of filing the original filing
60-23 instrument, applies to the corrected filing instrument as of the
60-24 date the corrected filing instrument is considered to have been
60-25 filed under this section.
60-26 Sec. 4.106. AMENDMENT OF FILINGS. A filing instrument that
60-27 an entity files with the secretary of state may be amended or
61-1 supplemented to the extent permitted by the provisions of this code
61-2 that apply to that entity.
61-3 (Sections 4.107-4.150 reserved for expansion)
61-4 SUBCHAPTER D. FILING FEES
61-5 Sec. 4.151. FILING FEES: ALL ENTITIES. The secretary of
61-6 state shall impose the following fees:
61-7 (1) for filing a certificate of correction, $15;
61-8 (2) for filing an application for reservation or
61-9 registration of a name, $40;
61-10 (3) for filing a notice of transfer of a name
61-11 reservation or registration, $15;
61-12 (4) for filing an application for renewal of
61-13 registration of a name, $40;
61-14 (5) for filing a certificate of merger or conversion,
61-15 other than a filing on behalf of a nonprofit corporation, $300
61-16 plus, with respect to a merger, any fee imposed for filing a
61-17 certificate of formation for each newly created filing entity or,
61-18 with respect to a conversion, the fee imposed for filing a
61-19 certificate of formation for the converted entity; and
61-20 (6) for preclearance of a filing instrument, $50.
61-21 Sec. 4.152. FILING FEES: FOR-PROFIT CORPORATION. For a
61-22 filing by or for a for-profit corporation, the secretary of state
61-23 shall impose the following fees:
61-24 (1) for filing a certificate of formation, $300;
61-25 (2) for filing a certificate of amendment, $150;
61-26 (3) for filing an application of a foreign corporation
61-27 for registration to transact business in this state, $750;
62-1 (4) for filing an application of a foreign corporation
62-2 for an amended registration to transact business in this state,
62-3 $150;
62-4 (5) for filing a restated certificate of formation and
62-5 accompanying statement, $300;
62-6 (6) for filing a statement of change of registered
62-7 office, registered agent, or both, $15;
62-8 (7) for filing a statement of change of name or
62-9 address of a registered agent, $15, except that the maximum fee for
62-10 simultaneous filings by a registered agent for more than one
62-11 corporation may not exceed $750;
62-12 (8) for filing a statement of resolution establishing
62-13 one or more series of shares, $15;
62-14 (9) for filing a statement of cancellation of
62-15 redeemable shares, $15;
62-16 (10) for filing a statement of cancellation of
62-17 re-acquired shares, $15;
62-18 (11) for filing a statement of reduction of stated
62-19 capital, $15;
62-20 (12) for filing a certificate of winding up and
62-21 termination, $40;
62-22 (13) for filing a certificate of withdrawal of a
62-23 foreign corporation, $15;
62-24 (14) for filing a certificate from the home state of a
62-25 foreign corporation that the corporation no longer exists in that
62-26 state, $15;
62-27 (15) for filing a bylaw or agreement restricting
63-1 transfer of shares or securities other than as an amendment to the
63-2 certificate of formation, $15;
63-3 (16) for filing an application for reinstatement of a
63-4 certificate of formation or registration as a foreign corporation
63-5 following forfeiture under the Tax Code, $75;
63-6 (17) for filing an application for reinstatement of a
63-7 corporation or registration as a foreign corporation after
63-8 involuntary dissolution or revocation, $75; and
63-9 (18) for filing any instrument as provided by this
63-10 code for which this section does not expressly provide a fee, $15.
63-11 Sec. 4.153. FILING FEES: NONPROFIT CORPORATIONS. For a
63-12 filing by or for a nonprofit corporation, the secretary of state
63-13 shall impose the following fees:
63-14 (1) for filing a certificate of formation, $25;
63-15 (2) for filing a certificate of amendment, $25;
63-16 (3) for filing a certificate of merger or
63-17 consolidation, without regard to whether the surviving or new
63-18 corporation is a domestic or foreign corporation, $50;
63-19 (4) for filing a statement of change of a registered
63-20 office, registered agent, or both, $5;
63-21 (5) for filing a certificate of dissolution, $5;
63-22 (6) for filing an application of a foreign corporation
63-23 for registration to conduct affairs in this state, $25;
63-24 (7) for filing an application of a foreign corporation
63-25 for an amended registration to conduct affairs in this state, $25;
63-26 (8) for filing a certificate of withdrawal of a
63-27 foreign corporation, $5;
64-1 (9) for filing a restated certificate of formation and
64-2 accompanying statement, $50;
64-3 (10) for filing a statement of change of name or
64-4 address of a registered agent, $15, except that the maximum fee for
64-5 simultaneous filings by a registered agent for more than one
64-6 corporation may not exceed $250;
64-7 (11) for filing a report under Chapter 21, $5;
64-8 (12) for filing a report under Chapter 21 to reinstate
64-9 a corporation's right to conduct affairs in this state, $5, plus a
64-10 late fee in the amount of $5 or in the amount of $1 for each month
64-11 or part of a month that the report remains unfiled, whichever
64-12 amount is greater, except that the late fee may not exceed $25;
64-13 (13) for filing a report under Chapter 21 to reinstate
64-14 a corporation or registration following involuntary termination or
64-15 revocation, $25; and
64-16 (14) for filing any instrument of a domestic or
64-17 foreign corporation as provided by this code for which this section
64-18 does not expressly provide a fee, $5.
64-19 Sec. 4.154. FILING FEES: LIMITED LIABILITY COMPANIES. For
64-20 a filing by or for a limited liability company, the secretary of
64-21 state shall impose the same fee as the filing fee for a similar
64-22 instrument under Section 4.152.
64-23 Sec. 4.155. FILING FEES: LIMITED PARTNERSHIPS. For a filing
64-24 by or for a limited partnership, the secretary of state shall
64-25 impose the following fees:
64-26 (1) for filing a certificate of formation or an
64-27 application for registration as a foreign limited partnership,
65-1 $750;
65-2 (2) for filing a certificate of amendment or an
65-3 amendment of registration of a foreign limited partnership, $150;
65-4 (3) for filing a restated certificate of formation,
65-5 $300;
65-6 (4) for filing a statement for change of registered
65-7 office, registered agent, or both, $15;
65-8 (5) for filing a statement of change of name or
65-9 address of a registered agent, $15, except that the maximum fee for
65-10 simultaneous filings by a registered agent for more than one
65-11 limited partnership may not exceed $750;
65-12 (6) for filing a certificate of winding up and
65-13 termination, $40;
65-14 (7) for filing a certificate of withdrawal of a
65-15 foreign limited partnership, $15;
65-16 (8) for filing a certificate of reinstatement of a
65-17 limited partnership or registration as a foreign limited
65-18 partnership after involuntary termination or revocation under
65-19 Chapter 11 or Chapter 9, $75;
65-20 (9) for filing a periodic report required under
65-21 Chapter 153, $50;
65-22 (10) for reviving a limited partnership's right to
65-23 transact business under Chapter 153, $50 plus a late fee in an
65-24 amount equal to the lesser of:
65-25 (A) $25 for each month or part of a month that
65-26 elapses after the date of the notice of forfeiture; or
65-27 (B) $100;
66-1 (11) for reinstatement of a certificate of formation
66-2 or registration under Chapter 153, $50 plus a late fee of $100 and
66-3 a reinstatement fee of $75;
66-4 (12) for filing any document required or permitted to
66-5 be filed for a registered limited liability partnership, the
66-6 secretary of state shall impose the same fee as the filing fee for
66-7 a general partnership under Section 4.158. For purposes of
66-8 calculation of the filing fee, all references to partners in
66-9 Section 4.158 as applied to limited partnerships mean general
66-10 partners only;
66-11 (13) for filing any instrument as provided by this
66-12 code for which this section does not expressly provide a fee, $15.
66-13 Sec. 4.156. FILING FEES: PROFESSIONAL ASSOCIATIONS. For a
66-14 filing by or for a professional association, the secretary of state
66-15 shall impose the following fees:
66-16 (1) for filing a certificate of formation or an
66-17 application for registration as a foreign professional association,
66-18 $750;
66-19 (2) for filing an annual statement, $35; and
66-20 (3) for filing any other instrument, the fee provided
66-21 for the filing of a similar instrument under Section 4.152.
66-22 Sec. 4.157. FILING FEES: PROFESSIONAL CORPORATIONS. For a
66-23 filing by or for a professional corporation, the secretary of state
66-24 shall impose the same fee as the filing fee for a similar
66-25 instrument under Section 4.152.
66-26 Sec. 4.158. FILING FEES: GENERAL PARTNERSHIPS. For a
66-27 filing by or for a general partnership, the secretary of state
67-1 shall impose the following fees:
67-2 (1) for filing a registered limited liability
67-3 partnership application, $200 for each partner;
67-4 (2) for filing a registered limited liability
67-5 partnership renewal application, $200 for each partner on the date
67-6 of renewal;
67-7 (3) for filing a statement of foreign qualification by
67-8 a foreign limited liability partnership, $200 for each partner in
67-9 this state, except that the maximum fee may not exceed $750;
67-10 (4) for filing a renewal of registration by a foreign
67-11 limited liability partnership, $200 for each partner in this state,
67-12 except that the maximum fee may not exceed $750;
67-13 (5) for filing a certificate of amendment, $10;
67-14 (6) for filing a certificate of amendment to increase
67-15 the number of partners, $10, plus $200 for each partner in this
67-16 state added by amendment not to exceed $750; and
67-17 (7) for filing any other filing instrument, the filing
67-18 fee imposed for a similar instrument under Section 4.155.
67-19 CHAPTER 5. NAMES OF ENTITIES; REGISTERED AGENTS
67-20 AND REGISTERED OFFICES
67-21 SUBCHAPTER A. GENERAL PROVISIONS
67-22 Sec. 5.001. EFFECT ON RIGHTS UNDER OTHER LAW. (a) The
67-23 filing of a certificate of formation by a filing entity under this
67-24 code, an application for registration by a foreign filing entity
67-25 under this code, or an application for reservation or registration
67-26 of a name under this chapter does not authorize the use of a name
67-27 in this state in violation of a right of another under:
68-1 (1) the Trademark Act of 1946, as amended (15 U.S.C.
68-2 Section 1051 et seq.);
68-3 (2) Chapter 16 or 36, Business & Commerce Code; or
68-4 (3) common law.
68-5 (b) The secretary of state shall deliver a notice that
68-6 contains the substance of Subsection (a) to each of the following:
68-7 (1) a filing entity that files a certificate of
68-8 formation under this code;
68-9 (2) a foreign filing entity that registers under this
68-10 code;
68-11 (3) a person that reserves a name under Subchapter C;
68-12 and
68-13 (4) a person that registers a name under Subchapter D.
68-14 (Sections 5.002-5.050 reserved for expansion)
68-15 SUBCHAPTER B. GENERAL PROVISIONS RELATING TO NAMES OF ENTITIES
68-16 Sec. 5.051. ASSUMED NAME. A domestic entity or a foreign
68-17 entity having authority to transact business in this state may
68-18 transact business under an assumed name by filing an assumed name
68-19 certificate in accordance with Chapter 36, Business & Commerce
68-20 Code. The requirements of this subchapter do not apply to an
68-21 assumed name set forth in an assumed name certificate filed under
68-22 that chapter.
68-23 Sec. 5.052. UNAUTHORIZED PURPOSE IN NAME PROHIBITED. A
68-24 filing entity or a foreign filing entity may not have a name that
68-25 contains any word or phrase that indicates or implies that the
68-26 entity is engaged in a business that the entity is not authorized
68-27 by law to pursue.
69-1 Sec. 5.053. IDENTICAL AND DECEPTIVELY SIMILAR NAMES
69-2 PROHIBITED. (a) A filing entity may not have a name, and a
69-3 foreign filing entity may not register to transact business in this
69-4 state under a name, that is the same as, or that the secretary of
69-5 state determines to be deceptively similar or similar to:
69-6 (1) the name of another existing filing entity;
69-7 (2) the name of a foreign filing entity that is
69-8 registered under Chapter 9;
69-9 (3) a name that is reserved under Subchapter C; or
69-10 (4) a name that is registered under Subchapter D.
69-11 (b) Subsection (a) does not apply if the other entity or the
69-12 person for whom the name is reserved or registered, as appropriate,
69-13 consents in writing to the use of the similar name.
69-14 Sec. 5.054. NAME OF CORPORATION, FOREIGN CORPORATION, OR
69-15 PROFESSIONAL CORPORATION. (a) The name of a corporation or
69-16 foreign corporation must contain:
69-17 (1) the word "company," "corporation," "incorporated,"
69-18 or "limited"; or
69-19 (2) an abbreviation of one of those words.
69-20 (b) Subsection (a) does not apply to a nonprofit corporation
69-21 or foreign nonprofit corporation.
69-22 (c) In lieu of a word or abbreviation required by Subsection
69-23 (a), the name of a professional corporation may contain the phrase
69-24 "professional corporation" or an abbreviation of the phrase.
69-25 Sec. 5.055. NAME OF LIMITED PARTNERSHIP OR FOREIGN LIMITED
69-26 PARTNERSHIP. (a) The name of a limited partnership or foreign
69-27 limited partnership must contain:
70-1 (1) the word "limited";
70-2 (2) the phrase "limited partnership"; or
70-3 (3) an abbreviation of that word or phrase.
70-4 (b) The name of the limited partnership may not contain a
70-5 word or phrase that indicates or implies that the partnership is a
70-6 corporation.
70-7 (c) The name of a limited partnership that is a registered
70-8 limited liability limited partnership must comply with Chapter 153.
70-9 Sec. 5.056. NAME OF LIMITED LIABILITY COMPANY OR FOREIGN
70-10 LIMITED LIABILITY COMPANY. (a) The name of a limited liability
70-11 company or a foreign limited liability company doing business in
70-12 this state must contain:
70-13 (1) the phrase "limited liability company" or "limited
70-14 company"; or
70-15 (2) an abbreviation of one of those phrases.
70-16 (b) A limited liability company formed before September 1,
70-17 1993, the name of which complied with the laws of this state on the
70-18 date of formation but does not comply with this section is not
70-19 required to change its name.
70-20 Sec. 5.057. NAME OF COOPERATIVE ASSOCIATION. (a) The name
70-21 of a cooperative association must contain:
70-22 (1) the word "cooperative"; or
70-23 (2) an abbreviation of that word.
70-24 (b) A domestic or foreign entity may use the word
70-25 "cooperative" in its name to the extent permitted by Section
70-26 251.502.
70-27 Sec. 5.058. NAME OF PROFESSIONAL ASSOCIATION. The name of a
71-1 professional association must contain:
71-2 (1) the word "associated," "associates," or
71-3 "association";
71-4 (2) the phrase "professional association"; or
71-5 (3) an abbreviation of one of those words or that
71-6 phrase.
71-7 Sec. 5.059. NAME OF PROFESSIONAL LIMITED LIABILITY COMPANY.
71-8 The name of a professional limited liability company must contain:
71-9 (1) the phrase "professional limited liability
71-10 company"; or
71-11 (2) an abbreviation of that phrase.
71-12 Sec. 5.060. NAME OF PROFESSIONAL ENTITY; CONFLICTS WITH
71-13 OTHER LAW OR ETHICAL RULE. The name of a professional entity must
71-14 be consistent with a statute or regulation that governs a person
71-15 who provides a professional service through the professional
71-16 entity, including a rule of professional ethics.
71-17 Sec. 5.061. NAME CONTAINING "LOTTO" OR "LOTTERY" PROHIBITED.
71-18 A filing entity or a foreign filing entity may not have a name that
71-19 contains the word "lotto" or "lottery."
71-20 Sec. 5.062. VETERANS ORGANIZATIONS; UNAUTHORIZED USE OF
71-21 NAME. (a) Subject to Subsection (b), a filing entity may not have
71-22 a name that:
71-23 (1) reasonably implies that the entity is created by
71-24 or for the benefit of war veterans or their families; and
71-25 (2) contains the word or phrase, or any variation or
71-26 abbreviation of:
71-27 (A) "veteran";
72-1 (B) "legion";
72-2 (C) "foreign";
72-3 (D) "Spanish";
72-4 (E) "disabled";
72-5 (F) "war"; or
72-6 (G) "world war."
72-7 (b) The prohibition in Subsection (a) does not apply to a
72-8 filing entity with a name approved in writing by:
72-9 (1) a congressionally recognized veterans organization
72-10 with a name containing the same word or phrase, or variation or
72-11 abbreviation, contained in the filing entity's name; or
72-12 (2) if a veterans organization described by
72-13 Subdivision (1) does not exist, the state commander of the:
72-14 (A) American Legion;
72-15 (B) Disabled American Veterans of the World War;
72-16 (C) Veterans of Foreign Wars of the United
72-17 States;
72-18 (D) United Spanish War Veterans; or
72-19 (E) Veterans of the Spanish-American War.
72-20 (Sections 5.063-5.100 reserved for expansion)
72-21 SUBCHAPTER C. RESERVATION OF NAMES
72-22 Sec. 5.101. APPLICATION FOR RESERVATION OF NAME. (a) Any
72-23 person may file an application with the secretary of state to
72-24 reserve the exclusive use of a name under this chapter.
72-25 (b) The application must be:
72-26 (1) accompanied by any required filing fee; and
72-27 (2) signed by the applicant or by the agent or
73-1 attorney of the applicant.
73-2 Sec. 5.102. RESERVATION OF CERTAIN NAMES PROHIBITED;
73-3 EXCEPTIONS. (a) The secretary of state may not reserve a name
73-4 that is the same as, or that the secretary of state considers
73-5 deceptively similar or similar to:
73-6 (1) the name of an existing filing entity;
73-7 (2) the name of a foreign filing entity that is
73-8 registered under Chapter 9;
73-9 (3) a name that is reserved under this subchapter; or
73-10 (4) a name that is registered under Subchapter D.
73-11 (b) Subsection (a) does not apply if the other entity or the
73-12 person for whom the name is reserved or registered, as appropriate,
73-13 consents in writing to the subsequent reservation of the similar
73-14 name.
73-15 Sec. 5.103. ACTION ON APPLICATION. If the secretary of
73-16 state determines that the name specified in the application is
73-17 eligible for reservation, the secretary shall reserve that name for
73-18 the exclusive use of the applicant.
73-19 Sec. 5.104. DURATION OF RESERVATION OF NAME. The secretary
73-20 of state shall reserve the name for the applicant until the earlier
73-21 of:
73-22 (1) the 121st day after the date the application is
73-23 accepted for filing; or
73-24 (2) the date the applicant files with the secretary
73-25 of state a written notice of withdrawal of the reservation.
73-26 Sec. 5.105. RENEWAL OF RESERVATION. A person may renew the
73-27 person's reservation of a name under this subchapter for successive
74-1 120-day periods if, during the 30-day period preceding the
74-2 expiration of that reservation, the person:
74-3 (1) files a new application to reserve the name; and
74-4 (2) pays the required filing fee.
74-5 Sec. 5.106. TRANSFER OF RESERVATION OF NAME. (a) A person
74-6 may transfer the person's reservation of a name by filing with the
74-7 secretary of state a notice of transfer.
74-8 (b) The notice of transfer must:
74-9 (1) be signed by the person for whom the name is
74-10 reserved; and
74-11 (2) state the name and address of the person to whom
74-12 the reservation is to be transferred.
74-13 (Sections 5.107-5.150 reserved for expansion)
74-14 SUBCHAPTER D. REGISTRATION OF NAMES
74-15 Sec. 5.151. APPLICATION BY CERTAIN ENTITIES FOR REGISTRATION
74-16 OF NAME. An organization that is authorized to do business in this
74-17 state as a bank, trust company, savings association, or insurance
74-18 company, or that is a foreign filing entity not registered to do
74-19 business in this state under this code, may apply to register its
74-20 name under this subchapter.
74-21 Sec. 5.152. APPLICATION FOR REGISTRATION OF NAME. (a) To
74-22 register a name under this subchapter, an organization must file an
74-23 application with the secretary of state.
74-24 (b) The application must:
74-25 (1) state that the organization validly exists and is
74-26 doing business;
74-27 (2) contain a brief statement of the nature of the
75-1 organization's business;
75-2 (3) set out:
75-3 (A) the name of the organization;
75-4 (B) the name of the jurisdiction under whose
75-5 laws the organization is formed; and
75-6 (C) the date the organization was formed; and
75-7 (4) be accompanied by any required filing fee.
75-8 Sec. 5.153. CERTAIN REGISTRATIONS PROHIBITED; EXCEPTIONS.
75-9 (a) The secretary of state may not register a name that is the
75-10 same as, or that the secretary of state determines to be
75-11 deceptively similar or similar to:
75-12 (1) the name of an existing filing entity;
75-13 (2) the name of a foreign filing entity that is
75-14 registered under Chapter 9;
75-15 (3) a name that is reserved under Subchapter C; or
75-16 (4) a name that is registered under this subchapter.
75-17 (b) Subsection (a) does not apply if:
75-18 (1) the other entity or the person for whom the name
75-19 is reserved or registered, as appropriate, consents in writing to
75-20 the registration of the similar name; or
75-21 (2) the applicant is a bank, trust company, savings
75-22 association, or insurance company that has been in continuous
75-23 existence from a date that precedes the date the conflicting name
75-24 is filed with the secretary of state.
75-25 Sec. 5.154. DURATION OF REGISTRATION OF NAME. The
75-26 registration of a name under this subchapter is effective until the
75-27 earlier of:
76-1 (1) the first anniversary of the date the application
76-2 is accepted for filing; or
76-3 (2) the date the entity files with the secretary of
76-4 state a written notice of withdrawal of the registration.
76-5 Sec. 5.155. RENEWAL OF REGISTRATION. A person may renew the
76-6 person's registration of a name under this subchapter for
76-7 successive one-year periods if, during the 90-day period preceding
76-8 the expiration of that registration, the person:
76-9 (1) files a new application to register the name; and
76-10 (2) pays the required filing fee.
76-11 (Sections 5.156-5.200 reserved for expansion)
76-12 SUBCHAPTER E. REGISTERED AGENTS AND REGISTERED OFFICES;
76-13 SERVICE OF PROCESS
76-14 Sec. 5.201. DESIGNATION AND MAINTENANCE OF REGISTERED AGENT
76-15 AND REGISTERED OFFICE. (a) Each filing entity and each foreign
76-16 filing entity shall designate and continuously maintain in this
76-17 state:
76-18 (1) a registered agent; and
76-19 (2) a registered office.
76-20 (b) The registered agent:
76-21 (1) is an agent of the entity on whom may be served
76-22 any process, notice, or demand required or permitted by law to be
76-23 served on the entity;
76-24 (2) may be:
76-25 (A) an individual who is a resident of this
76-26 state; or
76-27 (B) a domestic entity or a foreign entity that
77-1 is registered to do business in this state; and
77-2 (3) must maintain a business office at the same
77-3 address as the entity's registered office.
77-4 (c) The registered office:
77-5 (1) must be located at a street address where process
77-6 may be personally served on the entity's registered agent;
77-7 (2) is not required to be a place of business of the
77-8 filing entity or foreign filing entity; and
77-9 (3) may not be solely a mailbox service or a telephone
77-10 answering service.
77-11 Sec. 5.202. CHANGE BY ENTITY TO REGISTERED OFFICE OR
77-12 REGISTERED AGENT. (a) A filing entity or foreign filing entity
77-13 may change its registered office, its registered agent, or both by
77-14 filing a statement of the change in accordance with Chapter 4.
77-15 (b) The statement must contain:
77-16 (1) the name of the entity;
77-17 (2) the name of the entity's registered agent;
77-18 (3) the street address of the entity's registered
77-19 agent;
77-20 (4) if the change relates to the registered agent, the
77-21 name of the entity's new registered agent;
77-22 (5) if the change relates to the registered office,
77-23 the street address of the entity's new registered office;
77-24 (6) a recitation that the change specified in the
77-25 statement is authorized by the entity; and
77-26 (7) a recitation that the street address of the
77-27 registered office and the street address of the registered agent's
78-1 business are the same.
78-2 (c) On acceptance of the statement by the filing officer,
78-3 the statement is effective as an amendment to the appropriate
78-4 provision of:
78-5 (1) the filing entity's certificate of formation; or
78-6 (2) the foreign filing entity's registration.
78-7 Sec. 5.203. CHANGE BY REGISTERED AGENT TO NAME OR ADDRESS OF
78-8 REGISTERED OFFICE. (a) The registered agent of a filing entity or
78-9 a foreign filing entity may change its name, its address as the
78-10 address of the entity's registered office, or both by filing a
78-11 statement of the change in accordance with Chapter 4.
78-12 (b) The statement must be signed by the registered agent, or
78-13 a person authorized to sign the statement on behalf of the
78-14 registered agent, and must contain:
78-15 (1) the name of the entity represented by the
78-16 registered agent;
78-17 (2) the name of the entity's registered agent and the
78-18 address at which the registered agent maintained the entity's
78-19 registered office;
78-20 (3) if the change relates to the name of the
78-21 registered agent, the new name of that agent;
78-22 (4) if the change relates to the address of the
78-23 registered office, the new address of that office; and
78-24 (5) a recitation that written notice of the change was
78-25 given to the entity at least 10 days before the date the statement
78-26 is filed.
78-27 (c) On acceptance of the statement by the filing officer,
79-1 the statement is effective as an amendment to the appropriate
79-2 provision of:
79-3 (1) the filing entity's certificate of formation; or
79-4 (2) the foreign filing entity's registration.
79-5 (d) A registered agent may file a statement under this
79-6 section that applies to more than one entity.
79-7 Sec. 5.204. RESIGNATION OF REGISTERED AGENT. (a) A
79-8 registered agent of a filing entity or a foreign filing entity may
79-9 resign as the registered agent by giving notice to that entity and
79-10 to the appropriate filing officer.
79-11 (b) Notice to the entity must be given to the entity at the
79-12 address of the entity most recently known by the agent.
79-13 (c) Notice to the filing officer must be given before the
79-14 11th day after the date notice under Subsection (b) is mailed or
79-15 delivered and must include:
79-16 (1) the address of the entity most recently known by
79-17 the agent;
79-18 (2) a statement that written notice of the resignation
79-19 has been given to the entity; and
79-20 (3) the date on which that written notice of
79-21 resignation was given.
79-22 (d) On compliance with Subsections (b) and (c), the
79-23 appointment of the registered agent terminates. The termination is
79-24 effective on the 31st day after the date the secretary of state
79-25 receives the notice.
79-26 (e) If the filing officer finds that a notice of resignation
79-27 received by the filing officer conforms to Subsections (b) and (c),
80-1 the filing officer shall:
80-2 (1) notify the entity of the registered agent's
80-3 resignation; and
80-4 (2) file the resignation in accordance with Chapter 4,
80-5 except that a fee is not required to file the resignation.
80-6 Sec. 5.205. FAILURE TO DESIGNATE REGISTERED AGENT. The
80-7 secretary of state is an agent of an entity for purposes of service
80-8 of process, notice, or demand on the entity if:
80-9 (1) the entity is a filing entity or a foreign filing
80-10 entity and:
80-11 (A) the entity fails to appoint or does not
80-12 maintain a registered agent in this state; or
80-13 (B) the registered agent of the entity cannot
80-14 with reasonable diligence be found at the registered office of the
80-15 entity; or
80-16 (2) the entity is a foreign filing entity and:
80-17 (A) the entity's registration to do business
80-18 under this code is revoked; or
80-19 (B) the entity transacts business in this state
80-20 without being registered as required by Chapter 9.
80-21 Sec. 5.206. SERVICE ON SECRETARY OF STATE. (a) Service on
80-22 the secretary of state under Section 5.205 is effected by:
80-23 (1) delivering to the secretary duplicate copies of
80-24 the process, notice, or demand; and
80-25 (2) accompanying the copies with any fee required by
80-26 law, including this code or the Government Code, for:
80-27 (A) maintenance by the secretary of a record of
81-1 the service; and
81-2 (B) forwarding by the secretary of the process,
81-3 notice, or demand.
81-4 (b) Notice on the secretary of state under Subsection (a) is
81-5 returnable in not less than 30 days.
81-6 Sec. 5.207. ACTION BY SECRETARY OF STATE. (a) After
81-7 service in compliance with Section 5.206, the secretary of state
81-8 shall immediately send one of the copies of the process, notice, or
81-9 demand to the named entity.
81-10 (b) The notice must be:
81-11 (1) addressed to the most recent address of the entity
81-12 on file with the secretary of state; and
81-13 (2) sent by certified mail, with return receipt
81-14 requested.
81-15 Sec. 5.208. REQUIRED RECORDS OF SECRETARY OF STATE. The
81-16 secretary of state shall keep a record of each process, notice, or
81-17 demand served on the secretary under this subchapter and shall
81-18 record:
81-19 (1) the time when each service on the secretary was
81-20 made; and
81-21 (2) each subsequent action of the secretary taken in
81-22 relation to that service.
81-23 Sec. 5.209. AGENT FOR SERVICE OF PROCESS, NOTICE, OR DEMAND
81-24 AS MATTER OF LAW. For the purpose of service of process, notice,
81-25 or demand:
81-26 (1) the president and each vice president of a
81-27 domestic or foreign corporation is an agent of that corporation;
82-1 (2) each general partner of a domestic or foreign
82-2 limited partnership and each partner of a domestic or foreign
82-3 general partnership is an agent of that partnership;
82-4 (3) each manager of a manager-managed domestic or
82-5 foreign limited liability company and each member of a
82-6 member-managed domestic or foreign limited liability company is an
82-7 agent of that limited liability company;
82-8 (4) each person who is a governing person of a
82-9 domestic or foreign entity, other than an entity listed in
82-10 Subdivisions (1)-(3), is an agent of that entity; and
82-11 (5) each member of a committee of a nonprofit
82-12 corporation authorized to perform the chief executive function of
82-13 the corporation is an agent of that corporation.
82-14 Sec. 5.210. OTHER MEANS OF SERVICE NOT PRECLUDED. This
82-15 chapter does not preclude other means of service of process,
82-16 notice, or demand on a domestic or foreign entity as provided by
82-17 other law.
82-18 CHAPTER 6. MEETINGS, NOTICES, RECORD DATES, VOTING, AND
82-19 WRITTEN CONSENTS TO ACTION
82-20 SUBCHAPTER A. MEETINGS
82-21 Sec. 6.001. LOCATION OF MEETINGS. (a) Meetings of the
82-22 owners or members of a domestic entity may be held at locations in
82-23 or outside the state as:
82-24 (1) provided by or fixed in accordance with the
82-25 governing documents of the domestic entity; or
82-26 (2) agreed to by all persons entitled to notice of the
82-27 meeting.
83-1 (b) If the location of meetings of the owners or members of
83-2 the entity is not established under Subsection (a), the owners or
83-3 members may hold meetings only at the registered office of the
83-4 entity in this state or the principal office of the entity.
83-5 (c) The governing persons of a domestic entity, or a
83-6 committee of the governing persons, may hold meetings in or outside
83-7 the state as:
83-8 (1) provided by or fixed in accordance with:
83-9 (A) the governing documents of the domestic
83-10 entity; or
83-11 (B) the person calling the meeting; or
83-12 (2) as agreed to by all persons entitled to notice of
83-13 the meeting.
83-14 Sec. 6.002. ALTERNATIVE FORMS OF MEETINGS. Subject to this
83-15 code and the governing documents of a domestic entity, the owners,
83-16 members, or governing persons of the entity, or a committee of the
83-17 owners, members, or governing persons, may hold meetings by using a
83-18 conference telephone or other communications equipment if the
83-19 telephone or other equipment permits each person participating in
83-20 the meeting to communicate with all other persons participating in
83-21 the meeting.
83-22 Sec. 6.003. PARTICIPATION CONSTITUTES PRESENCE. A person
83-23 participating in a meeting is considered present at the meeting,
83-24 unless the participation is for the express purpose of objecting to
83-25 the transaction of business at the meeting on the ground that the
83-26 meeting has not been lawfully called or convened.
83-27 Sec. 6.004. OWNERSHIP OR MEMBERSHIP MEETING LIST FOR CERTAIN
84-1 ENTITIES. (a) This section applies to:
84-2 (1) a domestic for-profit corporation;
84-3 (2) a domestic nonprofit corporation; and
84-4 (3) a domestic limited liability company and a
84-5 domestic limited partnership, if the limited liability company or
84-6 partnership has a class of ownership interests registered under
84-7 Section 12(b) or (g), Securities Exchange Act of 1934, as amended
84-8 (15 U.S.C. Section 78l(b) or (g)).
84-9 (b) Not later than the 11th day before the date of each
84-10 meeting of the owners or members of an entity, an officer or agent
84-11 of the entity who is in charge of the entity's ownership or
84-12 membership records shall prepare an alphabetical list of the owners
84-13 or members entitled to vote at the meeting or at any adjournment of
84-14 the meeting. The list of owners or members must:
84-15 (1) state:
84-16 (A) the address of each owner or member;
84-17 (B) the type of ownership or membership interest
84-18 held by each owner or member;
84-19 (C) the number, amount, or percentage of
84-20 ownership or membership interests held by each owner or member; and
84-21 (D) the number of votes that each owner or
84-22 member is entitled to if the number of votes is different from the
84-23 number, amount, or percentage of ownership or membership interests
84-24 stated under Paragraph (C); and
84-25 (2) be kept on file at the registered office or
84-26 principal executive office of the entity for at least 10 days
84-27 before the date of the meeting.
85-1 (c) The original ownership or membership transfer records of
85-2 an entity are prima facie evidence of the owners or members of the
85-3 entity entitled to vote at the meeting.
85-4 (d) Failure to comply with this section does not affect the
85-5 validity of any action taken at a meeting of the owners or members
85-6 of an entity.
85-7 (Sections 6.005-6.050 reserved for expansion)
85-8 SUBCHAPTER B. NOTICE OF MEETINGS
85-9 Sec. 6.051. GENERAL NOTICE REQUIREMENTS. (a) Subject to
85-10 this code and the governing documents of an entity, notice of a
85-11 meeting of the owners, members, or governing persons of the entity,
85-12 or a committee of the owners, members, or governing persons, must:
85-13 (1) be given in the manner determined by the governing
85-14 authority of the entity; and
85-15 (2) state:
85-16 (A) the date and time of the meeting; and
85-17 (B) the location of the meeting or, if the
85-18 meeting is held by using a conference telephone or other
85-19 communications equipment, the form of communication used for the
85-20 meeting.
85-21 (b) Subject to this code or the governing documents of an
85-22 entity, notice of a meeting that is:
85-23 (1) mailed is considered to be delivered on the date
85-24 notice is deposited in the United States mail with postage paid in
85-25 an envelope addressed to the person at the person's address as it
85-26 appears on the ownership or membership records of the entity; and
85-27 (2) transmitted by facsimile or electronic message is
86-1 considered to be delivered when the facsimile or electronic message
86-2 is successfully transmitted.
86-3 Sec. 6.052. WAIVER OF NOTICE. (a) Notice of a meeting is
86-4 not required to be given to an owner, member, or governing person
86-5 of a domestic entity, or a member of a committee of the owners,
86-6 members, or governing persons, entitled to notice under this code
86-7 or the governing documents of the entity if the person entitled to
86-8 notice signs a written waiver of notice of the meeting, regardless
86-9 of whether the waiver is signed before or after the time of the
86-10 meeting.
86-11 (b) If a person entitled to notice of a meeting participates
86-12 in the meeting, the person's participation constitutes a waiver of
86-13 notice of the meeting unless the person participates in the meeting
86-14 solely to object to the transaction of business at the meeting on
86-15 the ground that the meeting was not lawfully called or convened.
86-16 Sec. 6.053. EXCEPTION. (a) Notice of a meeting is not
86-17 required to be given to an owner or member of a filing entity
86-18 entitled to notice under this code or the governing documents of
86-19 the entity if either of the following is mailed to the person
86-20 entitled to notice of the meeting to the person's address as it
86-21 appears on the ownership or membership transfer records of the
86-22 entity and is returned undeliverable:
86-23 (1) notice of two consecutive annual meetings and
86-24 notice of any meeting held during the period between the two annual
86-25 meetings; or
86-26 (2) all, but in no event less than two, payments of
86-27 distribution or interest on securities during a 12-month period if
87-1 the payments are sent by first class mail.
87-2 (b) Notice of a meeting is not required to be given to an
87-3 owner or member entitled to notice under this code or the governing
87-4 documents of a filing entity the notice requirements of which are
87-5 subject to the Securities Exchange Act of 1934, as amended (15
87-6 U.S.C. Section 78a et seq.), if the person entitled to notice of
87-7 the meeting is considered a lost security holder under that Act and
87-8 the regulations adopted under that Act.
87-9 (c) An action taken or a meeting held without giving notice
87-10 to a person not entitled to notice under this section has the same
87-11 force and effect as if notice had been given to the person.
87-12 (d) A certificate or other document filed with the secretary
87-13 of state as a result of a meeting held or an action taken by a
87-14 filing entity without giving notice of the meeting or action to a
87-15 person not entitled to notice under this section may state that
87-16 notice of the meeting or action was given to each person entitled
87-17 to notice.
87-18 (e) Notice of a meeting must be given to a person not
87-19 entitled to notice of the meeting under this section if the person
87-20 delivers to the entity a written notice of the person's address.
87-21 (Sections 6.054-6.100 reserved for expansion)
87-22 SUBCHAPTER C. RECORD DATES
87-23 Sec. 6.101. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
87-24 CONSENT TO ACTION. (a) Subject to this code, the governing
87-25 documents of a domestic entity may provide the record date, or the
87-26 manner of determining the record date, for:
87-27 (1) determining the owners or members of the entity
88-1 entitled to:
88-2 (A) receive notice of a meeting of the owners or
88-3 members;
88-4 (B) vote at a meeting of the owners or members
88-5 or at any adjournment of a meeting; or
88-6 (C) receive a distribution from the entity other
88-7 than a distribution involving a purchase or redemption by the
88-8 entity of the entity's own securities; or
88-9 (2) any other proper purpose other than for
88-10 determining the owners or members entitled to consent to action
88-11 without a meeting of the owners or members.
88-12 (b) Subject to this code and the governing documents of a
88-13 domestic entity, the governing authority of the entity, in advance,
88-14 may provide a record date for determining the owners or members of
88-15 the entity, except that the date may not be earlier than the 60th
88-16 day before the date the action requiring the determination of
88-17 owners or members is taken.
88-18 (c) Subject to this code and the governing documents of a
88-19 domestic entity, the governing authority of the entity may provide
88-20 for the closing of the ownership or membership transfer records of
88-21 the entity for a period of not longer than 60 days to determine the
88-22 owners or members of the entity for a purpose described by
88-23 Subsection (a).
88-24 (d) If the owners or members of an entity are not otherwise
88-25 determined under this section, the record date for determining the
88-26 owners or members of an entity is the date on which:
88-27 (1) notice of the meeting is mailed to the owners or
89-1 members entitled to notice of the meeting; or
89-2 (2) with respect to a distribution, other than a
89-3 distribution involving a purchase or redemption by the domestic
89-4 entity of any of its own securities, the governing authority adopts
89-5 the resolution declaring the distribution.
89-6 (e) The record date for a meeting applies to any adjournment
89-7 of the meeting unless:
89-8 (1) the owners or members entitled to vote are
89-9 determined under Subsection (c); and
89-10 (2) the period during which the transfer records are
89-11 closed expires.
89-12 Sec. 6.102. RECORD DATE FOR WRITTEN CONSENT TO ACTION.
89-13 (a) Subject to this code and the governing documents of an entity,
89-14 the governing authority of the entity may provide the record date
89-15 for determining the owners or members of the entity entitled to
89-16 written consent to action without a meeting of the owners or
89-17 members unless a record date is provided under Section 6.101 for
89-18 that action. The record date may not be earlier than the date the
89-19 governing authority adopts the resolution providing for the record
89-20 date.
89-21 (b) Subject to this code and the governing documents of an
89-22 entity, the record date for determining the owners or members of
89-23 the entity entitled to written consent to action without a meeting
89-24 of the owners or members is the date a signed written consent to
89-25 action stating the action taken or proposed to be taken is first
89-26 delivered to the entity if:
89-27 (1) the governing authority of the entity does not
90-1 provide a record date under Subsection (a); and
90-2 (2) prior action by the governing authority is not
90-3 required under this code.
90-4 (c) Subject to this code or the governing documents of an
90-5 entity, the record date for determining the owners or members of
90-6 the entity entitled to written consent to action without a meeting
90-7 of the owners or members is at the close of business on the date
90-8 the governing authority of the entity adopts a resolution taking
90-9 prior action if:
90-10 (1) the governing authority does not provide a record
90-11 date under Subsection (a); and
90-12 (2) prior action by the governing authority is
90-13 required by this code.
90-14 Sec. 6.103. RECORD DATE FOR SUSPENDED DISTRIBUTIONS.
90-15 (a) In this section, "distribution" includes a distribution that:
90-16 (1) was payable to an owner or member but not paid and
90-17 was held in suspension by the entity making the distribution; or
90-18 (2) is paid or delivered by the entity making the
90-19 distribution into an escrow account or to a trustee or custodian.
90-20 (b) A distribution made by a domestic entity shall be
90-21 payable by the entity, or an escrow agent, trustee, or custodian of
90-22 the distribution, to the owner or member determined on the record
90-23 date for the distribution as provided by this subchapter.
90-24 (c) The right to a distribution under this section may be
90-25 transferred by contract, by operation of law, or under the laws of
90-26 descent and distribution.
90-27 (Sections 6.104-6.150 reserved for expansion)
91-1 SUBCHAPTER D. VOTING OF OWNERSHIP INTERESTS
91-2 Sec. 6.151. MANNER OF VOTING OF INTERESTS. Subject to this
91-3 code, voting of interests of a domestic entity must be conducted in
91-4 the manner provided by the governing documents of the entity.
91-5 Sec. 6.152. VOTING OF INTERESTS OWNED BY ENTITY.
91-6 (a) Except as provided by Subsection (b), an ownership interest
91-7 owned by the entity that is the issuer of the interest, or by its
91-8 direct or indirect subsidiary, may not be:
91-9 (1) directly or indirectly voted at a meeting; or
91-10 (2) included in determining at any time the total
91-11 number of outstanding ownership interests of the entity.
91-12 (b) This section does not preclude a domestic or foreign
91-13 entity from voting an ownership interest, including an interest in
91-14 the entity, held or controlled by the entity in a fiduciary
91-15 capacity or for which the entity otherwise exercises voting power
91-16 in a fiduciary capacity.
91-17 Sec. 6.153. VOTING OF INTERESTS OWNED BY ANOTHER ENTITY. An
91-18 ownership interest in an entity owned by another entity, whether a
91-19 domestic or foreign entity, may be voted by the officer, agent, or
91-20 proxy as authorized by:
91-21 (1) the governing documents of the entity that owns
91-22 the interest; or
91-23 (2) the governing authority of the entity that owns
91-24 the interest, if the governing documents do not provide for the
91-25 manner of voting.
91-26 Sec. 6.154. VOTING OF INTERESTS IN AN ESTATE OR TRUST.
91-27 (a) An administrator, executor, guardian, or conservator of an
92-1 estate who holds an ownership interest as part of the estate may
92-2 vote the interest without transferring the interest into the
92-3 person's name.
92-4 (b) An ownership interest in the name of a trust may be
92-5 voted in person or by proxy by:
92-6 (1) the trustee; or
92-7 (2) a person authorized to act on behalf of the trust
92-8 by the trust agreement or the trustee.
92-9 Sec. 6.155. VOTING OF INTERESTS BY RECEIVER. (a) A
92-10 receiver may vote an ownership interest standing in the name of the
92-11 receiver.
92-12 (b) A receiver may vote an ownership interest held by or
92-13 under the control of the receiver without transferring the interest
92-14 into the receiver's name if the court appointing the receiver
92-15 authorizes the receiver to vote the interest.
92-16 Sec. 6.156. VOTING OF PLEDGED INTERESTS. A pledged
92-17 ownership interest may be voted by:
92-18 (1) the owner of the pledged interest until the
92-19 interest is transferred into the pledgee's name; and
92-20 (2) the pledgee after the pledged interest is
92-21 transferred into the pledgee's name.
92-22 (Sections 6.157-6.200 reserved for expansion)
92-23 SUBCHAPTER E. ACTION BY WRITTEN CONSENT
92-24 Sec. 6.201. UNANIMOUS WRITTEN CONSENT TO ACTION. (a) This
92-25 section applies to any action required or authorized to be taken
92-26 under this code or the governing documents of a filing entity at an
92-27 annual or special meeting of the owners or members of the entity or
93-1 at a regular, special, or other meeting of the governing authority
93-2 of the entity or a committee of the governing authority.
93-3 (b) The owners or members or the governing authority of a
93-4 filing entity, or a committee of the governing authority, may take
93-5 action without holding a meeting, providing notice, or taking a
93-6 vote if each person entitled to vote on the action signs a written
93-7 consent or consents stating the action taken.
93-8 (c) A written consent described by Subsection (b) has the
93-9 same effect as a unanimous vote at a meeting.
93-10 (d) A filing instrument filed with the filing officer may
93-11 state that an action approved by written consent or consents has
93-12 the effect of an approval by a unanimous vote at a meeting.
93-13 Sec. 6.202. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT.
93-14 (a) This section applies to any action required or authorized to
93-15 be taken under this code or the governing documents of an entity at
93-16 an annual or special meeting of the owners or members of the
93-17 entity.
93-18 (b) Except as provided by this code, the governing documents
93-19 of an entity may authorize the owners or members of the entity to
93-20 take action without holding a meeting, providing notice, or taking
93-21 a vote if owners or members of the entity having at least the
93-22 minimum number of votes that would be necessary to take the action
93-23 that is the subject of the consent at a meeting, in which each
93-24 owner or member entitled to vote on the action is present and
93-25 votes, sign a written consent or consents stating the action taken.
93-26 (c) A written consent or consents described by Subsection
93-27 (b) must include the date each owner or member signed the consent
94-1 and is effective to take the action that is the subject of the
94-2 consent only if the consent or consents are delivered to the entity
94-3 not later than the 60th day after the date the earliest dated
94-4 consent is delivered to the entity as required by Section 6.203.
94-5 (d) The entity shall promptly notify each owner or member
94-6 who does not sign a consent as provided by Subsection (b) of the
94-7 action that is the subject of the consent.
94-8 Sec. 6.203. DELIVERY OF LESS THAN UNANIMOUS WRITTEN CONSENT.
94-9 (a) A written consent signed by an owner or member of an entity as
94-10 provided by Section 6.202 must be delivered by hand or certified
94-11 or registered mail, return receipt requested, to:
94-12 (1) the entity's registered office or principal
94-13 executive office or place of business; or
94-14 (2) the managerial official or agent of the entity
94-15 having custody of the entity's records of meetings of owners or
94-16 members.
94-17 (b) A consent delivered to an entity's principal executive
94-18 office or place of business under Subsection (a)(1) must be
94-19 addressed to the chief managerial official of the entity or, if the
94-20 entity does not have a chief managerial official, the governing
94-21 authority of the entity.
94-22 Sec. 6.204. ADVANCE NOTICE NOT REQUIRED. Advance notice is
94-23 not required to be given to take an action by written consent as
94-24 provided by this subchapter.
94-25 (Sections 6.205-6.250 reserved for expansion)
94-26 SUBCHAPTER F. VOTING TRUSTS AND VOTING AGREEMENTS
94-27 Sec. 6.251. VOTING TRUSTS. (a) Except as provided by this
95-1 code or the governing documents, any number of owners of an entity
95-2 may enter into a written voting trust agreement to confer on a
95-3 trustee the right to vote or otherwise represent ownership or
95-4 membership interests of the entity.
95-5 (b) An ownership or membership interest that is the subject
95-6 of a voting trust agreement described by Subsection (a) shall be
95-7 transferred to the trustee named in the agreement for purposes of
95-8 the agreement.
95-9 (c) A copy of a voting trust agreement described by
95-10 Subsection (a) shall be deposited with the entity at the entity's
95-11 principal executive office or registered office and is subject to
95-12 examination by:
95-13 (1) an owner, whether in person or by the owner's
95-14 agent or attorney, in the same manner as the owner is entitled to
95-15 examine the books and records of the entity; and
95-16 (2) a holder of a beneficial interest in the voting
95-17 trust, whether in person or by the holder's agent or attorney, at
95-18 any reasonable time for any proper purpose.
95-19 Sec. 6.252. VOTING AGREEMENTS. (a) Except as provided by
95-20 this code or the governing documents, any number of owners of an
95-21 entity, or any number of owners of the entity and the entity
95-22 itself, may enter into a written voting agreement to provide the
95-23 manner of voting of the ownership interests of the entity. A
95-24 voting agreement entered into under this subsection is not part of
95-25 the governing documents of the entity.
95-26 (b) A copy of a voting agreement entered into under
95-27 Subsection (a):
96-1 (1) shall be deposited with the entity at the entity's
96-2 principal executive office or registered office; and
96-3 (2) is subject to examination by an owner, whether in
96-4 person or by the owner's agent or attorney, in the same manner as
96-5 the owner is entitled to examine the books and records of the
96-6 entity.
96-7 (c) A voting agreement entered into under Subsection (a) is
96-8 specifically enforceable against the holder of an ownership
96-9 interest that is the subject of the agreement, and any successor or
96-10 transferee of the holder, if:
96-11 (1) the voting agreement is noted conspicuously on the
96-12 certificate representing the ownership interests; or
96-13 (2) a notation of the voting agreement is contained in
96-14 a notice sent by or on behalf of the entity, if the ownership
96-15 interest is not represented by a certificate.
96-16 (d) Except as provided by Subsection (e), a voting agreement
96-17 entered into under Subsection (a) is specifically enforceable
96-18 against any person other than a transferee for value who acquires
96-19 actual knowledge of the existence of the agreement.
96-20 (e) An otherwise enforceable voting agreement entered into
96-21 under Subsection (a) is not enforceable against a transferee for
96-22 value without actual knowledge of the existence of the agreement at
96-23 the time of the transfer, or any subsequent transferee, without
96-24 regard to value, if the voting agreement is not noted as required
96-25 by Subsection (c).
96-26 (f) Section 6.251 does not apply to a voting agreement
96-27 entered into under Subsection (a).
97-1 CHAPTER 7. LIABILITY
97-2 Sec. 7.001. SEPARATE LEGAL ENTITY APART FROM OWNERS OR
97-3 MEMBERS. A domestic entity is legally separate from its owners or
97-4 members for all purposes.
97-5 Sec. 7.002. LIMITATION OF LIABILITY FOR CONTRACTUAL OR
97-6 RELATED OBLIGATION. (a) Except as provided by this chapter or the
97-7 governing documents of a domestic entity, an owner, member,
97-8 subscriber, or affiliate of the domestic entity may not be held
97-9 liable to the domestic entity or its obligees for any obligation or
97-10 claim arising from or relating to a contract or contractual
97-11 relationship entered into between the domestic entity and an
97-12 obligee or for the benefit of an obligee.
97-13 (b) Subsection (a) applies notwithstanding that:
97-14 (1) the owner, member, subscriber, or affiliate is or
97-15 was the alter ego of the domestic entity or otherwise would be
97-16 liable under a similar theory under common law; or
97-17 (2) the claim or obligation is based on actual or
97-18 constructive fraud, a sham to perpetrate a fraud, or other similar
97-19 theory.
97-20 (c) Subsection (a) does not prevent or limit the liability
97-21 of an owner, member, subscriber, or affiliate to an obligee if the
97-22 obligee demonstrates that the owner, member, subscriber, or
97-23 affiliate, as appropriate, for the primary purpose of providing a
97-24 direct personal benefit to the owner, member, subscriber, or
97-25 affiliate, caused the entity to be used to perpetrate an actual
97-26 fraud on the obligee.
97-27 (d) The liability of an owner, member, subscriber, or
98-1 affiliate of a domestic entity for an obligation or claim limited
98-2 by Subsection (a) is exclusive and preempts any liability under
98-3 common law or otherwise.
98-4 Sec. 7.003. IMMUNITY FROM LIABILITY FOR FAILURE TO OBSERVE
98-5 FORMALITY. An owner, member, subscriber, or affiliate of a
98-6 domestic entity is not obligated to the domestic entity or its
98-7 obligees for a contractual or other obligation of the domestic
98-8 entity because the domestic entity failed to observe a formality,
98-9 including:
98-10 (1) the failure to comply with this code or the
98-11 governing documents of the domestic entity; or
98-12 (2) the failure of the domestic entity, or its
98-13 governing persons, owners, members, subscribers, or affiliates, to
98-14 take an action as required by this code or the governing documents
98-15 of the domestic entity.
98-16 Sec. 7.004. LIMITATION OF LIABILITY OF MANAGERIAL OFFICIAL
98-17 FOR DEBTS AND CONTRACTS. Except as otherwise provided by this code
98-18 or other statutes, a person is not liable for a domestic entity's
98-19 debt or for a domestic entity's breach of contract solely because
98-20 the person:
98-21 (1) is a managerial official of the domestic entity;
98-22 (2) is authorized to participate in the management of
98-23 the domestic entity; or
98-24 (3) is considered by the domestic entity to be a
98-25 managerial official of the domestic entity.
98-26 Sec. 7.005. LIABILITY OF OWNER, MEMBER, OR MANAGERIAL
98-27 OFFICIAL FOR TORT. Except as otherwise provided by this code or
99-1 other law, a person is not liable for a domestic entity's tortious
99-2 act or omission solely because the person:
99-3 (1) is an owner, member, or managerial official of the
99-4 domestic entity;
99-5 (2) is authorized to participate in the management of
99-6 the domestic entity; or
99-7 (3) is considered by the domestic entity to be an
99-8 owner, member, or managerial official of the domestic entity.
99-9 Sec. 7.006. IMPUTED LIABILITY OF OWNER, MEMBER, OR
99-10 MANAGERIAL OFFICIAL. Except as otherwise provided by this code, a
99-11 tortious act or omission of an owner, member, managerial official,
99-12 or other person for which a domestic entity is liable is not
99-13 imputed to another person solely because the person:
99-14 (1) is an owner, member, or managerial official of the
99-15 domestic entity;
99-16 (2) is authorized to participate in the management of
99-17 the domestic entity; or
99-18 (3) is considered by the domestic entity to be an
99-19 owner, member, or managerial official of the domestic entity.
99-20 Sec. 7.007. PLEDGEES AND TRUSTS. (a) A pledgee or other
99-21 holder of an ownership or membership interest as collateral may not
99-22 be held personally liable as an owner or member of the interest.
99-23 (b) An executor, administrator, conservator, guardian,
99-24 trustee, assignee for the benefit of creditors, or receiver may not
99-25 be held personally liable as an owner or subscriber of an ownership
99-26 interest. The property being administered by an executor,
99-27 administrator, conservator, guardian, trustee, assignee, or
100-1 receiver is subject to liability of an owner or subscriber of an
100-2 ownership interest.
100-3 Sec. 7.008. ASSERTION OF CLAIMS. (a) An owner, member, or
100-4 managerial official of a domestic entity or a person considered to
100-5 be an owner, member, or managerial official of a domestic entity by
100-6 the domestic entity may assert a claim in the manner provided by
100-7 this code or other law against the domestic entity.
100-8 (b) A domestic entity may assert a claim in the manner
100-9 provided by this code or other law against:
100-10 (1) an owner, member, or managerial official of the
100-11 domestic entity; or
100-12 (2) a person considered by the domestic entity to be
100-13 an owner, member, or managerial official of the domestic entity.
100-14 Sec. 7.009. EFFECT OF JUDGMENT OR ORDER AGAINST DOMESTIC
100-15 ENTITY. Unless otherwise provided by the judgment or order, a
100-16 judgment or order of a court or other governmental entity against a
100-17 domestic entity is not a judgment or order against:
100-18 (1) an owner, member, or managerial official of the
100-19 domestic entity; or
100-20 (2) a person considered by the domestic entity to be
100-21 an owner, member, or managerial official of the domestic entity.
100-22 Sec. 7.010. CLAIM NOT ABATED BY CHANGE OF OWNERSHIP,
100-23 MEMBERSHIP, OR MANAGEMENT. A claim for relief against a domestic
100-24 entity does not abate solely because of a change in:
100-25 (1) the owners, members, or managerial officials of
100-26 the domestic entity; or
100-27 (2) the persons authorized to manage the domestic
101-1 entity.
101-2 Sec. 7.011. EXCEPTIONS TO LIMITATIONS. (a) A partner in a
101-3 general partnership or registered limited liability partnership or
101-4 a general partner in a limited partnership or registered limited
101-5 liability limited partnership may be held liable for the
101-6 obligations of the partnership as provided by Title 4.
101-7 (b) A limited partner may be held liable as a general
101-8 partner of a limited partnership as provided by Title 4.
101-9 (c) An owner of or subscriber in a domestic entity whose
101-10 subscription has been accepted shall pay to the domestic entity the
101-11 full amount of consideration established in compliance with this
101-12 code and that the owner or subscriber agreed to pay for an
101-13 ownership interest in the domestic entity.
101-14 (d) An owner may be required to make a capital contribution
101-15 to a domestic entity as provided by this code and the governing
101-16 documents of the domestic entity.
101-17 (e) Nothing in this chapter limits the liability of a person
101-18 who:
101-19 (1) expressly assumes, guarantees, or otherwise agrees
101-20 to be personally liable to an obligee of a domestic entity; or
101-21 (2) is otherwise liable for the obligation to an
101-22 obligee of a domestic entity under this code or other applicable
101-23 statute, including a statute relating to fraudulent transfer and
101-24 conveyance.
101-25 Sec. 7.012. LIMITATION OF LIABILITY OF GOVERNING
101-26 PERSON: DOMESTIC ENTITY, CERTAIN OTHER ORGANIZATIONS, CERTAIN
101-27 FEDERAL FINANCIAL INSTITUTIONS. (a) This section applies to:
102-1 (1) a domestic entity other than a partnership or
102-2 limited liability company;
102-3 (2) an entity, association, or other organization
102-4 incorporated or organized under another law of this state; and
102-5 (3) to the extent permitted by federal law, a
102-6 federally chartered bank, savings and loan association, or credit
102-7 union.
102-8 (b) The certificate of formation of an entity to which this
102-9 section applies may provide that a governing person of the entity
102-10 is not liable, or is liable only to the extent provided by the
102-11 certificate of formation, to the entity or its owners or members
102-12 for monetary damages for an act or omission by the person in the
102-13 person's capacity as a governing person.
102-14 (c) Subsection (b) does not authorize the elimination or
102-15 limitation of the liability of a governing person to the extent the
102-16 person is found liable under applicable law for:
102-17 (1) a breach of the person's duty of loyalty, if any,
102-18 to the entity or its owners or members;
102-19 (2) an act or omission not in good faith that:
102-20 (A) constitutes a breach of duty of the person
102-21 to the entity; or
102-22 (B) involves intentional misconduct or a knowing
102-23 violation of law;
102-24 (3) a transaction from which the person received an
102-25 improper benefit, regardless of whether the benefit resulted from
102-26 an action taken within the scope of the person's duties; or
102-27 (4) an act or omission for which the liability of a
103-1 governing person is expressly provided by an applicable statute.
103-2 Sec. 7.013. LIMITATION UNDER GOVERNING DOCUMENTS OF
103-3 PARTNERSHIPS AND LIMITED LIABILITY COMPANIES. Subject to this
103-4 code, the governing documents of a partnership or limited liability
103-5 company may modify the duties, including fiduciary duties,
103-6 obligations, and liabilities, of a managerial official, owner, or
103-7 other person to the partnership or limited liability company and
103-8 its owners and managerial officials.
103-9 CHAPTER 8. INDEMNIFICATION AND INSURANCE
103-10 SUBCHAPTER A. GENERAL PROVISIONS
103-11 Sec. 8.001. DEFINITIONS. In this chapter:
103-12 (1) "Delegate" means a person who is serving or who
103-13 has served as a representative of an enterprise at the request of
103-14 that enterprise at another enterprise. A person is a delegate to
103-15 an employee benefit plan if the performance of the person's
103-16 official duties to the enterprise also imposes duties on or
103-17 otherwise involves service by the person to the plan or
103-18 participants in or beneficiaries of the plan.
103-19 (2) "Enterprise" means a domestic entity or an
103-20 organization subject to this chapter, including a predecessor
103-21 domestic entity or organization.
103-22 (3) "Expenses" includes court costs and attorney's
103-23 fees. The term does not include a judgment, a penalty, a
103-24 settlement, a fine, or an excise or similar tax or an excise tax
103-25 assessed against the person regarding an employee benefit plan.
103-26 (4) "Former governing person" means a person who was a
103-27 governing person of an enterprise.
104-1 (5) "Official capacity" means:
104-2 (A) with respect to a governing person, the
104-3 office of the governing person in the enterprise or the exercise of
104-4 authority by or on behalf of the governing person under this code
104-5 or the governing documents of the enterprise; and
104-6 (B) with respect to a person other than a
104-7 governing person, the elective or appointive office, if any, in the
104-8 enterprise held by the person or the relationship undertaken by the
104-9 person on behalf of the enterprise.
104-10 (6) "Predecessor enterprise" means a sole
104-11 proprietorship or organization that is a predecessor to an
104-12 enterprise in:
104-13 (A) a merger, conversion, consolidation, or
104-14 other transaction in which the liabilities of the predecessor
104-15 enterprise are transferred or allocated to the enterprise by
104-16 operation of law; or
104-17 (B) any other transaction in which the
104-18 enterprise assumes the liabilities of the predecessor enterprise
104-19 and the liabilities that are the subject matter of this chapter are
104-20 not specifically excluded.
104-21 (7) "Proceeding" means:
104-22 (A) a threatened, pending, or completed action
104-23 or other proceeding, whether civil, criminal, administrative,
104-24 arbitrative, or investigative;
104-25 (B) an appeal of an action or proceeding
104-26 described by Paragraph (A); and
104-27 (C) an inquiry or investigation that could lead
105-1 to an action or proceeding described by Paragraph (A).
105-2 (8) "Representative" means a person serving as a
105-3 partner, director, officer, venturer, proprietor, trustee,
105-4 employee, or agent of an enterprise or serving a similar function
105-5 for an enterprise.
105-6 (9) "Respondent" means a person named as a respondent
105-7 or defendant in a proceeding.
105-8 Sec. 8.002. APPLICATION OF CHAPTER. (a) Except as provided
105-9 by Subsection (b), this chapter does not apply to a:
105-10 (1) general partnership; or
105-11 (2) limited liability company.
105-12 (b) The governing documents of a general partnership or
105-13 limited liability company may adopt provisions of this chapter or
105-14 may contain enforceable provisions relating to:
105-15 (1) indemnification;
105-16 (2) advancement of expenses; or
105-17 (3) insurance or another arrangement to indemnify or
105-18 hold harmless a governing person.
105-19 (Sections 8.003-8.050 reserved for expansion)
105-20 SUBCHAPTER B. MANDATORY AND COURT-ORDERED INDEMNIFICATION
105-21 Sec. 8.051. MANDATORY INDEMNIFICATION. (a) An enterprise
105-22 shall indemnify a governing person or former governing person
105-23 against reasonable expenses actually incurred by the person in
105-24 connection with a proceeding in which the person is a respondent
105-25 because the person is or was a governing person if the person is
105-26 wholly successful, on the merits or otherwise, in the defense of
105-27 the proceeding.
106-1 (b) A court that determines, in a suit for indemnification,
106-2 that a governing person is entitled to indemnification under this
106-3 section shall order indemnification and award to the person the
106-4 expenses incurred in securing the indemnification.
106-5 Sec. 8.052. COURT-ORDERED INDEMNIFICATION. (a) On
106-6 application of a governing person, former governing person, or
106-7 delegate and after notice is provided as required by the court, a
106-8 court may order an enterprise to indemnify the person to the extent
106-9 the court determines that the person is fairly and reasonably
106-10 entitled to indemnification in view of all the relevant
106-11 circumstances.
106-12 (b) This section applies without regard to whether the
106-13 governing person, former governing person, or delegate applying to
106-14 the court satisfies the requirements of Section 8.101 or has been
106-15 found liable:
106-16 (1) to the enterprise; or
106-17 (2) because the person improperly received a personal
106-18 benefit, without regard to whether the benefit resulted from an
106-19 action taken in the person's official capacity.
106-20 (c) The indemnification ordered by the court under this
106-21 section is limited to reasonable expenses if the governing person,
106-22 former governing person, or delegate is found liable:
106-23 (1) to the enterprise; or
106-24 (2) because the person improperly received a personal
106-25 benefit, without regard to whether the benefit resulted from an
106-26 action taken in the person's official capacity.
106-27 Sec. 8.053. LIMITATIONS IN GOVERNING DOCUMENTS. (a) The
107-1 certificate of formation of an enterprise may restrict the
107-2 circumstances under which the enterprise must or may indemnify a
107-3 person under this subchapter.
107-4 (b) The written partnership agreement of a limited
107-5 partnership may restrict the circumstances in the same manner as
107-6 the certificate of formation under subsection (a).
107-7 (Sections 8.054-8.100 reserved for expansion)
107-8 SUBCHAPTER C. PERMISSIVE INDEMNIFICATION AND
107-9 ADVANCEMENT OF EXPENSES
107-10 Sec. 8.101. PERMISSIVE INDEMNIFICATION. (a) An enterprise
107-11 may indemnify a governing person, former governing person, or
107-12 delegate who was, is, or is threatened to be made a respondent in a
107-13 proceeding to the extent permitted by Section 8.102 if it is
107-14 determined in accordance with Section 8.103 that:
107-15 (1) the person:
107-16 (A) acted in good faith;
107-17 (B) reasonably believed:
107-18 (i) in the case of conduct in the person's
107-19 official capacity, that the person's conduct was in the
107-20 enterprise's best interests; and
107-21 (ii) in any other case, that the person's
107-22 conduct was not opposed to the enterprise's best interests; and
107-23 (C) in the case of a criminal proceeding, did
107-24 not have a reasonable cause to believe the person's conduct was
107-25 unlawful;
107-26 (2) with respect to expenses, the amount of expenses
107-27 is reasonable; and
108-1 (3) indemnification should be paid.
108-2 (b) Action taken or omitted by a governing person or
108-3 delegate with respect to an employee benefit plan in the
108-4 performance of the person's duties for a purpose reasonably
108-5 believed by the person to be in the interest of the participants
108-6 and beneficiaries of the plan is for a purpose that is not opposed
108-7 to the best interests of the enterprise.
108-8 (c) Action taken or omitted by a delegate to another
108-9 enterprise for a purpose reasonably believed by the delegate to be
108-10 in the interest of the other enterprise or its owners or members is
108-11 for a purpose that is not opposed to the best interests of the
108-12 enterprise.
108-13 (d) A person does not fail to meet the standard under
108-14 Subsection (a)(1) solely because of the termination of a proceeding
108-15 by:
108-16 (1) judgment;
108-17 (2) order;
108-18 (3) settlement;
108-19 (4) conviction; or
108-20 (5) a plea of nolo contendere or its equivalent.
108-21 Sec. 8.102. GENERAL SCOPE OF PERMISSIVE INDEMNIFICATION.
108-22 (a) Except as provided by Subsection (d) and subject to Subsection
108-23 (b), an enterprise may indemnify a governing person, former
108-24 governing person, or delegate against a judgment, penalty,
108-25 settlement, or fine, including an excise or similar tax or an
108-26 excise tax assessed against the person regarding an employee
108-27 benefit plan, and against reasonable expenses actually incurred by
109-1 the person in connection with a proceeding.
109-2 (b) Indemnification under this subchapter of a person who is
109-3 found liable to the enterprise or is found liable because the
109-4 person improperly received a personal benefit:
109-5 (1) is limited to reasonable expenses actually
109-6 incurred by the person in connection with the proceeding; and
109-7 (2) may not be made in relation to a proceeding in
109-8 which the person has been found liable for:
109-9 (A) wilful or intentional misconduct in the
109-10 performance of the person's duty to the enterprise;
109-11 (B) breach of the person's duty of loyalty owed
109-12 to the enterprise; or
109-13 (C) an act or omission not committed in good
109-14 faith that constitutes a breach of a duty owed by the person to the
109-15 enterprise.
109-16 (c) A governing person, former governing person, or delegate
109-17 is considered to have been found liable in relation to a claim,
109-18 issue, or matter only if the liability is established by an order,
109-19 including a judgment or decree of a court, and all appeals of the
109-20 order are exhausted or foreclosed by law.
109-21 (d) Notwithstanding any other provision of this chapter, an
109-22 enterprise may not indemnify or advance expenses to a person if the
109-23 indemnification or advancement conflicts with a restriction in the
109-24 enterprise's governing documents.
109-25 Sec. 8.103. MANNER FOR DETERMINING PERMISSIVE
109-26 INDEMNIFICATION. (a) Except as provided by Subsections (b) and
109-27 (c), the determinations required under Section 8.101(a) must be
110-1 made by:
110-2 (1) a majority vote of a quorum composed of the
110-3 governing persons who at the time of the vote are disinterested and
110-4 independent;
110-5 (2) if a quorum described by Subdivision (1) cannot be
110-6 obtained, a majority vote of a committee of the board of directors
110-7 of the enterprise designated to act in the matter by a majority
110-8 vote of the governing persons and composed of at least one
110-9 governing person who at the time of the vote is disinterested and
110-10 independent;
110-11 (3) special legal counsel selected by the board of
110-12 directors of the enterprise, or selected by a committee of the
110-13 board of directors, by vote in accordance with Subdivision (1) or
110-14 (2) or, if a quorum described by Subdivision (1) cannot be obtained
110-15 and a committee described by Subdivision (2) cannot be established,
110-16 by a majority vote of the governing persons of the enterprise;
110-17 (4) the owners or members of the enterprise in a vote
110-18 that excludes the ownership or membership interests held by each
110-19 governing person who is not disinterested and independent; or
110-20 (5) a unanimous vote of the owners or members of the
110-21 enterprise.
110-22 (b) If special legal counsel determines under Subsection
110-23 (a)(3) that a person meets the standard under Section 8.101(a)(1),
110-24 the special legal counsel shall determine whether the amount of
110-25 expenses is reasonable under Section 8.101(a)(2) but may not
110-26 determine whether indemnification should be paid under Section
110-27 8.101(a)(3). The determination whether indemnification should be
111-1 paid must be made in a manner specified by Subsection (a)(1), (2),
111-2 (4), or (5).
111-3 (c) A provision contained in the governing documents of the
111-4 enterprise, a resolution of the owners, members, or board of
111-5 directors, or an agreement that requires the indemnification of a
111-6 person who meets the standard under Section 8.101(a)(1) constitutes
111-7 a determination under Section 8.101(a)(3) that indemnification
111-8 should be paid even though the provision may not have been adopted
111-9 or authorized in the same manner as the determinations required
111-10 under Section 8.101(a). The determinations required under Sections
111-11 8.101(a)(1) and (2) must be made in a manner provided by Subsection
111-12 (a).
111-13 Sec. 8.104. ADVANCEMENT OF EXPENSES. (a) An enterprise may
111-14 pay or reimburse reasonable expenses incurred by a governing
111-15 person, former governing person, or delegate who was, is, or is
111-16 threatened to be made a respondent in a proceeding in advance of
111-17 the final disposition of the proceeding without making the
111-18 determinations required under Section 8.101(a) after the enterprise
111-19 receives:
111-20 (1) a written affirmation by the person of the
111-21 person's good faith belief that the person has met the standard of
111-22 conduct necessary for indemnification under this chapter; and
111-23 (2) a written undertaking by or on behalf of the
111-24 person to repay the amount paid or reimbursed if the final
111-25 determination is that the person has not met that standard or that
111-26 indemnification is prohibited by Section 8.102.
111-27 (b) A provision in the governing documents of the
112-1 enterprise, a resolution of the owners, members, or governing
112-2 authority, or an agreement that requires the payment or
112-3 reimbursement permitted under this section authorizes that payment
112-4 or reimbursement after the enterprise receives an affirmation and
112-5 undertaking described by Subsection (a).
112-6 (c) The written undertaking required by Subsection (a)(2)
112-7 must be an unlimited general obligation of the person but need not
112-8 be secured and may be accepted by the enterprise without regard to
112-9 the person's ability to make repayment.
112-10 (d) An enterprise may not advance expenses to or reimburse
112-11 expenses of a person if the advancement or reimbursement conflicts
112-12 with a restriction in the enterprise's governing documents.
112-13 Sec. 8.105. INDEMNIFICATION OF AND ADVANCEMENT OF EXPENSES
112-14 TO PERSONS OTHER THAN GOVERNING PERSONS. (a) Notwithstanding any
112-15 other provision of this chapter but subject to subsection (d) and
112-16 to the extent consistent with other law, an enterprise may
112-17 indemnify and advance expenses to a person who is not a governing
112-18 person, including an officer, employee, agent, or delegate, as
112-19 provided by:
112-20 (1) the enterprise's governing documents;
112-21 (2) general or specific action of the enterprise's
112-22 board of directors;
112-23 (3) resolution of the enterprise's owners or members;
112-24 (4) contract; or
112-25 (5) common law.
112-26 (b) An enterprise shall indemnify and advance expenses to an
112-27 officer to the same extent that indemnification or advancement of
113-1 expenses is required under this chapter for a governing person.
113-2 (c) A person described by Subsection (a) may seek
113-3 indemnification or advancement of expenses from an enterprise to
113-4 the same extent that a governing person may seek indemnification or
113-5 advancement of expenses under this chapter.
113-6 (d) The certificate of formation of an enterprise may
113-7 restrict the circumstances under which the enterprise must or may
113-8 indemnify a person under this Section. The written partnership
113-9 agreement of a limited partnership may restrict the circumstances
113-10 in the same manner as the certificate of formation of the limited
113-11 partnership.
113-12 Sec. 8.106. PERMISSIVE INDEMNIFICATION OF AND REIMBURSEMENT
113-13 OF EXPENSES TO WITNESSES. Notwithstanding any other provision of
113-14 this chapter, an enterprise may pay or reimburse reasonable
113-15 expenses incurred by a governing person, officer, employee, agent,
113-16 delegate, or other person in connection with that person's
113-17 appearance as a witness or other participation in a proceeding at a
113-18 time when the person is not a respondent in the proceeding.
113-19 (Sections 8.107-8.150 reserved for expansion)
113-20 SUBCHAPTER D. LIABILITY INSURANCE;
113-21 REPORTING REQUIREMENTS
113-22 Sec. 8.151. INSURANCE AND OTHER ARRANGEMENTS.
113-23 (a) Notwithstanding any other provision of this chapter, an
113-24 enterprise may purchase or procure or establish and maintain
113-25 insurance or another arrangement to indemnify or hold harmless an
113-26 existing or former governing person, delegate, officer, employee,
113-27 or agent against any liability:
114-1 (1) asserted against and incurred by the person in
114-2 that capacity; or
114-3 (2) arising out of the person's status in that
114-4 capacity.
114-5 (b) The insurance or other arrangement established under
114-6 Subsection (a) may insure or indemnify against the liability
114-7 described by Subsection (a) without regard to whether the
114-8 enterprise otherwise would have had the power to indemnify the
114-9 person against that liability under this chapter.
114-10 (c) Insurance or another arrangement that involves
114-11 self-insurance or an agreement to indemnify made with the
114-12 enterprise or a person that is not regularly engaged in the
114-13 business of providing insurance coverage may provide for payment of
114-14 a liability with respect to which the enterprise does not otherwise
114-15 have the power to provide indemnification only if the insurance or
114-16 arrangement is approved by the owners or members of the enterprise.
114-17 (d) For the benefit of persons to be indemnified by the
114-18 enterprise, an enterprise may, in addition to purchasing or
114-19 procuring or establishing and maintaining insurance or another
114-20 arrangement:
114-21 (1) create a trust fund;
114-22 (2) establish any form of self-insurance, including a
114-23 contract to indemnify;
114-24 (3) secure the enterprise's indemnity obligation by
114-25 grant of a security interest or other lien on the assets of the
114-26 enterprise; or
114-27 (4) establish a letter of credit, guaranty, or surety
115-1 arrangement.
115-2 (e) Insurance or another arrangement established under this
115-3 section may be purchased or procured or established and maintained:
115-4 (1) within the enterprise; or
115-5 (2) with any insurer or other person considered
115-6 appropriate by the governing authority, regardless of whether all
115-7 or part of the stock, securities, or other ownership interest in
115-8 the insurer or other person is owned in whole or in part by the
115-9 enterprise.
115-10 (f) The governing authority's decision as to the terms of
115-11 the insurance or other arrangement and the selection of the insurer
115-12 or other person participating in an arrangement is conclusive. The
115-13 insurance or arrangement is not voidable and does not subject the
115-14 governing persons approving the insurance or arrangement to
115-15 liability, on any ground, regardless of whether the governing
115-16 persons participating in approving the insurance or other
115-17 arrangement are beneficiaries of the insurance or arrangement.
115-18 This subsection does not apply in case of actual fraud.
115-19 Sec. 8.152. REPORTS OF INDEMNIFICATION AND ADVANCES.
115-20 (a) An enterprise shall report in writing to the owners or members
115-21 of the enterprise an indemnification of or advance of expenses to a
115-22 governing person.
115-23 (b) Subject to Subsection (c), the report must be made with
115-24 or before the notice or waiver of notice of the next meeting of the
115-25 owners or members of the enterprise and before the next submission
115-26 to the owners or members of a consent to action without a meeting.
115-27 (c) The report must be made not later than the first
116-1 anniversary of the date of the indemnification or advance.
116-2 CHAPTER 9. FOREIGN ENTITIES
116-3 SUBCHAPTER A. REGISTRATION
116-4 Sec. 9.001. FOREIGN ENTITIES REQUIRED TO REGISTER. (a) To
116-5 transact business in this state, a foreign entity must register
116-6 under this chapter if the entity:
116-7 (1) is a foreign corporation, foreign limited
116-8 partnership, foreign limited liability company, foreign business
116-9 trust, foreign real estate investment trust, foreign cooperative,
116-10 foreign public or private limited company, or another foreign
116-11 entity, the formation of which, if formed in this state, would
116-12 require the filing under Chapter 3 of a certificate of formation;
116-13 or
116-14 (2) affords limited liability under the law of its
116-15 jurisdiction of formation for any owner or member.
116-16 (b) A foreign entity described by Subsection (a) must
116-17 maintain the entity's registration while transacting business in
116-18 this state.
116-19 Sec. 9.002. FOREIGN ENTITIES NOT REQUIRED TO REGISTER.
116-20 (a) A foreign entity not described by Section 9.001(a) may
116-21 transact business in this state without registering under this
116-22 chapter.
116-23 (b) Subsection (a) does not relieve a foreign entity from
116-24 the duty to comply with applicable requirements under other law to
116-25 file or register.
116-26 (c) A foreign entity is not required to register under this
116-27 chapter if other state law authorizes the entity to transact
117-1 business in this state.
117-2 (d) A foreign unincorporated nonprofit association is not
117-3 required to register under this chapter.
117-4 Sec. 9.003. PERMISSIVE REGISTRATION. A foreign entity that
117-5 is eligible under other law of this state to register to transact
117-6 business in this state, but that is not registered under that law,
117-7 may register under this chapter unless that registration is
117-8 prohibited by the other law. The registration under this chapter
117-9 confers only the authority provided by this chapter.
117-10 Sec. 9.004. REGISTRATION PROCEDURE. (a) A foreign filing
117-11 entity registers by filing an application for registration as
117-12 provided by Chapter 4.
117-13 (b) The application must state:
117-14 (1) the entity's name and, if that name would not
117-15 comply with Chapter 5, a name that complies with Chapter 5 under
117-16 which the entity will transact business in this state;
117-17 (2) the entity's type;
117-18 (3) the entity's jurisdiction of formation;
117-19 (4) the date of the entity's formation;
117-20 (5) that the entity exists as a valid foreign filing
117-21 entity of the stated type under the laws of the entity's
117-22 jurisdiction of formation;
117-23 (6) for a foreign entity other than a foreign limited
117-24 partnership:
117-25 (A) each business or activity that the entity
117-26 proposes to pursue in this state, which may be stated to be any
117-27 lawful business or activity under the law of this state; and
118-1 (B) that the entity is authorized to pursue the
118-2 same business or activity under the laws of the entity's
118-3 jurisdiction of formation;
118-4 (7) the date the foreign entity began or will begin to
118-5 transact business in this state;
118-6 (8) the address of the principal office of the foreign
118-7 filing entity;
118-8 (9) the address of the initial registered office and
118-9 the name and the address of the initial registered agent for
118-10 service of process that Chapter 5 requires to be maintained;
118-11 (10) the name and address of each of the entity's
118-12 governing persons; and
118-13 (11) that the secretary of state is appointed the
118-14 agent of the foreign filing entity for service of process under the
118-15 circumstances provided by Section 5.205.
118-16 (c) A foreign filing entity may register regardless of any
118-17 differences between the law of the entity's jurisdiction of
118-18 formation and of this state applicable to the governing of the
118-19 internal affairs or to the liability of an owner, member, or
118-20 managerial official.
118-21 Sec. 9.005. EFFECT OF REGISTRATION. (a) The registration
118-22 of a foreign entity is effective when the application filed under
118-23 Chapter 4 takes effect. The registration remains in effect until
118-24 the registration terminates, is withdrawn, or is revoked.
118-25 (b) Except in a proceeding to revoke the registration, the
118-26 secretary of state's issuance of an acknowledgment that the entity
118-27 has filed an application is conclusive evidence of the authority of
119-1 the foreign filing entity to transact business in this state under
119-2 the entity's name or under another name stated in the application,
119-3 in accordance with Section 9.004(b)(1).
119-4 Sec. 9.006. AMENDMENTS TO REGISTRATION. (a) A foreign
119-5 filing entity must amend its registration to change its name or the
119-6 business or activity stated in its application for registration if
119-7 the name or business or activity has changed.
119-8 (b) A foreign filing entity may amend its application for
119-9 registration by filing an application for amendment of registration
119-10 as provided by Chapter 4.
119-11 (c) The application for amendment must be filed on or before
119-12 the 91st day following the date of the change.
119-13 Sec. 9.007. VOLUNTARY WITHDRAWAL OF REGISTRATION. (a) A
119-14 foreign filing entity registered in this state may withdraw the
119-15 entity's registration at any time by filing a certificate of
119-16 withdrawal as provided by Chapter 4.
119-17 (b) A certificate of withdrawal must state:
119-18 (1) the name of the foreign filing entity as
119-19 registered in this state;
119-20 (2) the type of entity and the entity's jurisdiction
119-21 of formation;
119-22 (3) the address of the principal office of the foreign
119-23 filing entity;
119-24 (4) that the foreign filing entity no longer is
119-25 transacting business in this state;
119-26 (5) that the foreign filing entity:
119-27 (A) revokes the authority of the entity's
120-1 registered agent in this state to accept service of process; and
120-2 (B) consents that service of process in any
120-3 action, suit, or proceeding stating a cause of action arising in
120-4 this state during the time the foreign filing entity was
120-5 authorized to transact business in this state may be made on the
120-6 foreign filing entity by serving the secretary of state;
120-7 (6) an address to which the secretary of state may
120-8 mail a copy of any process against the foreign filing entity served
120-9 on the secretary of state; and
120-10 (7) that any money due or accrued to the state has
120-11 been paid or that adequate provision has been made for the payment
120-12 of that money.
120-13 (c) A certificate from the comptroller that all franchise
120-14 taxes have been paid must be filed with the certificate of
120-15 withdrawal in accordance with Chapter 4 if the foreign filing
120-16 entity is a foreign professional corporation, foreign for-profit
120-17 corporation, or foreign limited liability company.
120-18 (d) If the existence or separate existence of a foreign
120-19 filing entity registered in this state terminates because of
120-20 dissolution, termination, merger, conversion, or other
120-21 circumstances, a certificate by an authorized governmental official
120-22 of the entity's jurisdiction of formation that evidences the
120-23 termination shall be filed with the secretary of state.
120-24 (e) The registration of the foreign filing entity in this
120-25 state terminates when a certificate of withdrawal under this
120-26 section or a certificate evidencing termination under Subsection
120-27 (d) is filed.
121-1 (f) If the address stated in a certificate of withdrawal
121-2 under Subsection (b)(6) changes, the foreign filing entity must
121-3 promptly amend the certificate of withdrawal to update the address.
121-4 (g) A certificate of withdrawal does not terminate the
121-5 authority of the secretary of state to accept service of process on
121-6 the foreign filing entity with respect to a cause of action arising
121-7 out of business or activity in this state.
121-8 Sec. 9.008. REVOCATION OF REGISTRATION BY COURT ACTION.
121-9 (a) On application of the attorney general, a court may revoke the
121-10 registration of the foreign filing entity if:
121-11 (1) the entity did not comply with a condition to the
121-12 issuance of the entity's certificate of authority or an amendment
121-13 to the certificate;
121-14 (2) the entity's registration or any amendment to the
121-15 entity's application for registration was procured by fraud;
121-16 (3) a misrepresentation of a material matter was made
121-17 in an application, report, affidavit, or other document the entity
121-18 submitted as required by law;
121-19 (4) the entity has continued to transact business
121-20 beyond the scope of the purpose or purposes expressed in the
121-21 entity's application for registration; or
121-22 (5) the public interest requires revocation because:
121-23 (A) the entity has been convicted of a felony or
121-24 a high managerial agent of the entity has been convicted of a
121-25 felony committed in the conduct of the entity's affairs;
121-26 (B) the entity or the high managerial agent has
121-27 engaged in a persistent course of felonious conduct; and
122-1 (C) revocation is necessary to prevent future
122-2 felonious conduct of the same character.
122-3 (b) Only a district court of Travis County or a district
122-4 court of the county in which a foreign filing entity's registered
122-5 office is located has jurisdiction of a suit under Subsection (a).
122-6 Venue is in either court.
122-7 (c) The clerk of the court that revokes the registration
122-8 shall file with the secretary of state a certified copy of the
122-9 order of revocation.
122-10 (d) When a copy of an order of revocation is filed with the
122-11 secretary of state, the secretary of state shall:
122-12 (1) file a certificate of revocation; and
122-13 (2) deliver a certificate of revocation by regular or
122-14 certified mail to the foreign filing entity at its registered
122-15 office or principal place of business.
122-16 (e) The certificate of revocation must state the cause of
122-17 the revocation.
122-18 (f) The revocation of a foreign filing entity's registration
122-19 under this section takes effect on the date the court issues the
122-20 order of revocation.
122-21 (g) Sections 9.017-9.020 do not apply to Subsection (a)(5).
122-22 Sec. 9.009. REVOCATION OF REGISTRATION BY STATE ACTION.
122-23 (a) If it appears to the secretary of state that, with respect to
122-24 a foreign filing entity, a circumstance described by Subsection (b)
122-25 exists, the secretary of state may notify the entity of the
122-26 circumstance by mail or certified mail addressed to the foreign
122-27 filing entity at the entity's registered office or principal place
123-1 of business as shown on the records of the secretary of state.
123-2 (b) The secretary of state may revoke a foreign filing
123-3 entity's registration if the secretary of state finds that the
123-4 entity has failed to, and, before the 91st day after the date
123-5 notice was mailed, has not corrected the entity's failure to:
123-6 (1) file a report within the period required by law or
123-7 to pay a fee or penalty prescribed by law when due and payable;
123-8 (2) maintain a registered agent or registered office
123-9 in this state as required by law;
123-10 (3) amend its registration when required by law; or
123-11 (4) pay a fee required in connection with a filing, or
123-12 payment of the fee was dishonored when presented by the state for
123-13 payment.
123-14 (c) If revocation of a registration is required, the
123-15 secretary of state shall:
123-16 (1) file a certificate of revocation; and
123-17 (2) deliver a certificate of revocation by regular or
123-18 certified mail to the foreign filing entity at its registered
123-19 office or principal place of business.
123-20 (d) The certificate of revocation must state:
123-21 (1) that the foreign filing entity's registration has
123-22 been revoked; and
123-23 (2) the date and cause of the revocation.
123-24 (e) The revocation of a foreign filing entity's registration
123-25 under this section takes effect on the date the certificate of
123-26 revocation is filed.
123-27 Sec. 9.010. REINSTATEMENT. (a) The secretary of state
124-1 shall reinstate the registration of an entity that has been revoked
124-2 under Section 9.009 if the entity files an application for
124-3 reinstatement, accompanied by each amendment to the entity's
124-4 registration that is required by intervening events, including the
124-5 unavailability of the name the entity uses because of a filing made
124-6 since the revocation, and:
124-7 (1) the entity has corrected the circumstances that
124-8 led to the revocation and any other circumstances that may exist of
124-9 the types described by Section 9.009(b), including the payment of
124-10 fees, interest, or penalties; or
124-11 (2) the secretary of state finds that the
124-12 circumstances that led to the revocation did not exist at the time
124-13 of revocation.
124-14 (b) If a foreign filing entity's registration is reinstated
124-15 before the third anniversary of the revocation, the entity is
124-16 considered to have been registered or in existence at all times
124-17 during the period of revocation.
124-18 Sec. 9.011. NAME CHANGE OF FOREIGN ENTITY. If a foreign
124-19 entity authorized to conduct affairs in this state changes its name
124-20 to a name that would cause the entity to be denied an application
124-21 for registration under this subchapter, the entity's registration
124-22 must be suspended. An entity the registration of which has been
124-23 suspended under this section may conduct affairs in this state only
124-24 after the entity:
124-25 (1) changes its name to a name that is available to it
124-26 under the laws of this state; or
124-27 (2) otherwise complies with this chapter.
125-1 Sec. 9.012. TRANSACTING BUSINESS OR MAINTAINING COURT
125-2 PROCEEDING WITHOUT REGISTRATION. (a) On application by the
125-3 attorney general, a court may enjoin a foreign filing entity or the
125-4 entity's agent from transacting business in this state if:
125-5 (1) the entity is not registered in this state; or
125-6 (2) the entity's registration is obtained on the basis
125-7 of a false or misleading representation.
125-8 (b) A foreign filing entity or the entity's legal
125-9 representative may not maintain an action, suit, or proceeding in a
125-10 court of this state, brought either directly by the entity or in
125-11 the form of a derivative action in the entity's name, on a cause of
125-12 action that arises out of the transaction of business in this state
125-13 unless the foreign filing entity is registered in accordance with
125-14 this chapter. This subsection does not affect the rights of an
125-15 assignee of the foreign filing entity as:
125-16 (1) the holder in due course of a negotiable
125-17 instrument; or
125-18 (2) the bona fide purchaser for value of a warehouse
125-19 receipt, security, or other instrument made negotiable by law.
125-20 (c) The failure of a foreign filing entity to register does
125-21 not:
125-22 (1) affect the validity of any contract or act of the
125-23 foreign filing entity;
125-24 (2) prevent the entity from defending an action, suit,
125-25 or proceeding in a court in this state; or
125-26 (3) except as provided by Subsection (d), cause any
125-27 owner, member, or managerial official of the foreign filing entity
126-1 to become liable for the debts, obligations, or liabilities of the
126-2 foreign filing entity.
126-3 (d) Subsection (c)(3) does not apply to a general partner of
126-4 a foreign limited partnership.
126-5 Sec. 9.013. CIVIL PENALTY. (a) A foreign filing entity
126-6 that transacts business in this state and is not registered under
126-7 this chapter is liable to this state for a civil penalty in an
126-8 amount equal to all:
126-9 (1) fees and taxes that would have been imposed by law
126-10 on the entity had the entity registered when first required and
126-11 filed all reports required by law; and
126-12 (2) penalties and interest imposed by law for failure
126-13 to pay those fees and taxes.
126-14 (b) The attorney general may bring suit to recover amounts
126-15 due to this state under this section.
126-16 Sec. 9.014. VENUE. In addition to any other venue
126-17 authorized by law, a suit under Section 9.012 or 9.013 may be
126-18 brought in Travis County.
126-19 Sec. 9.015. LATE FILING FEE. The secretary of state may
126-20 collect from a foreign filing entity a late filing fee equal to the
126-21 registration fee for the entity for each year of delinquency if the
126-22 entity has transacted business in this state for more than 90 days.
126-23 The secretary may condition the effectiveness of a registration on
126-24 the payment of the late filing fee.
126-25 Sec. 9.016. REQUIREMENTS OF OTHER LAW. This chapter does
126-26 not excuse a foreign entity from complying with duties imposed
126-27 under other law, including other chapters of this code, relating to
127-1 filing or registration requirements.
127-2 Sec. 9.017. INVOLUNTARY REVOCATION OF REGISTRATION BY STATE
127-3 ACTION; NOTIFICATION OF ATTORNEY GENERAL. (a) If the secretary of
127-4 state determines that cause exists for judicial revocation of a
127-5 foreign filing entity's registration as provided by Section 9.008,
127-6 the secretary shall simultaneously notify the:
127-7 (1) attorney general of the name of the foreign filing
127-8 entity and the grounds for judicial revocation; and
127-9 (2) foreign filing entity by mail at its registered
127-10 office in this state:
127-11 (A) that the secretary of state has notified the
127-12 attorney general as provided by Subdivision (1); and
127-13 (B) of the grounds for judicial revocation of
127-14 the entity's registration.
127-15 (b) The secretary of state shall maintain a record of the
127-16 date notice is mailed under Subsection (a)(2).
127-17 (c) A court shall accept a certificate issued by the
127-18 secretary of state as to the grounds for judicial revocation of a
127-19 foreign filing entity's registration and the mailing of a notice
127-20 under Subsection (a)(2) as prima facie evidence of the grounds for
127-21 judicial revocation and the mailing of the notice.
127-22 Sec. 9.018. ACTION TO REVOKE REGISTRATION. (a) The
127-23 attorney general shall file an action against a foreign filing
127-24 entity in the name of the state seeking the revocation of the
127-25 entity's registration if:
127-26 (1) the entity does not cure the problems for which
127-27 revocation is sought before the 31st day after the date the notice
128-1 is mailed; and
128-2 (2) the attorney general determines that cause exists
128-3 for judicial revocation of the entity's registration under Section
128-4 9.008.
128-5 (b) An action filed by the attorney general under Subsection
128-6 (a) shall be abated if, before a district court renders judgment on
128-7 the action, the foreign filing entity:
128-8 (1) cures the problems for which revocation is sought;
128-9 and
128-10 (2) pays the costs of the action.
128-11 (c) If a district court finds in an action brought under
128-12 Subsection (a) that proper grounds exist under Section 9.008(a) for
128-13 revocation of the foreign filing entity's registration, the court
128-14 shall:
128-15 (1) make findings to that effect; and
128-16 (2) subject to Section 9.019, enter a judgment not
128-17 earlier than the fifth day after the date the court makes its
128-18 findings.
128-19 Sec. 9.019. APPLICATION FOR STAY OF JUDGMENT. (a) If, in
128-20 an action brought under this subchapter, a foreign filing entity
128-21 has proved by a preponderance of the evidence and obtained a
128-22 finding that the problems for which the foreign filing entity has
128-23 been found guilty were not wilful or the result of a failure to
128-24 take reasonable precautions, the entity may make a sworn
128-25 application to the court for a stay of entry of the judgment to
128-26 allow the foreign filing entity a reasonable opportunity to cure
128-27 the problems for which it has been found guilty. An application
129-1 made under this subsection must be made not later than the fifth
129-2 day after the date the court makes its findings under Section
129-3 9.018.
129-4 (b) After a foreign filing entity has made an application
129-5 under Subsection (a), a court shall stay the entry of the judgment
129-6 if the court is reasonably satisfied after considering the
129-7 application and evidence offered for or against the application
129-8 that the foreign filing entity:
129-9 (1) is able and intends in good faith to cure the
129-10 problems for which it has been found guilty; and
129-11 (2) has not applied for the stay without just cause.
129-12 (c) A court shall stay an entry of judgment under Subsection
129-13 (b) for the period the court determines is reasonably necessary to
129-14 afford the foreign filing entity the opportunity to cure its
129-15 problems if the entity acts with reasonable diligence. The court
129-16 may not stay the entry of the judgment for longer than 60 days
129-17 after the date the court's findings are made.
129-18 (d) The court shall dismiss an action against a foreign
129-19 filing entity that, during the period the action is stayed by the
129-20 court under this section, cures the problems for which revocation
129-21 is sought and pays all costs accrued in the action.
129-22 (e) If a court finds that a foreign filing entity has not
129-23 cured the problems for which revocation is sought within the period
129-24 prescribed by Subsection (c), the court shall enter final judgment
129-25 requiring revocation of the foreign filing entity's registration.
129-26 Sec. 9.020. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF
129-27 FINDINGS BY APPEALS COURT. (a) An appellate court that affirms a
130-1 trial court's findings against a foreign filing entity under this
130-2 subchapter shall remand the case to the trial court with
130-3 instructions to grant the foreign filing entity an opportunity to
130-4 cure the problems for which the entity has been found guilty if:
130-5 (1) the foreign filing entity did not make an
130-6 application to the trial court for stay of the entry of the
130-7 judgment;
130-8 (2) the appellate court is satisfied that the appeal
130-9 was taken in good faith and not for purpose of delay or with no
130-10 sufficient cause;
130-11 (3) the appellate court finds that the problems for
130-12 which the foreign filing entity has been found guilty are capable
130-13 of being cured; and
130-14 (4) the foreign filing entity has prayed for the
130-15 opportunity to cure its problems in the appeal.
130-16 (b) The appellate court shall determine the period, which
130-17 may not be longer than 60 days after the date the case is remanded
130-18 to the trial court, to be afforded to a foreign filing entity to
130-19 enable the foreign filing entity to cure its problems under
130-20 Subsection (a).
130-21 (c) The trial court to which an action against a foreign
130-22 filing entity has been remanded under this section shall dismiss
130-23 the action if, during the period prescribed by the appellate court
130-24 for that conduct, the foreign filing entity cures the problems for
130-25 which revocation is sought and pays all costs accrued in the
130-26 action.
130-27 (d) If a foreign filing entity has not cured the problems
131-1 for which revocation is sought within the period prescribed by the
131-2 appellate court under Subsection (b), the judgment requiring
131-3 revocation shall become final.
131-4 Sec. 9.021. VENUE. The attorney general shall bring an
131-5 action for the involuntary revocation of the registration of a
131-6 foreign filing entity under this subchapter in:
131-7 (1) a district court of the county in which the
131-8 registered office or principal place of business of the filing
131-9 entity in this state is located; or
131-10 (2) a district court of Travis County.
131-11 Sec. 9.022. PROCESS IN STATE ACTION. Citation in an action
131-12 for the involuntary revocation of a foreign filing entity's
131-13 registration under this subchapter shall be issued and served as
131-14 provided by law.
131-15 Sec. 9.023. PUBLICATION OF NOTICE. (a) If process in an
131-16 action under this subchapter is returned not found, the attorney
131-17 general shall publish notice in a newspaper in the county in which
131-18 the registered office of the foreign filing entity in this state is
131-19 located. The notice must contain:
131-20 (1) a statement of the pendency of the action;
131-21 (2) the title of the court;
131-22 (3) the title of the action; and
131-23 (4) the earliest date on which default judgment may be
131-24 entered by the court.
131-25 (b) Notice under this section must be published at least
131-26 once a week for two consecutive weeks beginning at any time after
131-27 the citation has been returned.
132-1 (c) The attorney general may include in one published notice
132-2 the name of each foreign filing entity against which an action for
132-3 involuntary revocation is pending in the same court.
132-4 (d) Not later than the 10th day after the date notice under
132-5 this section is first published, the attorney general shall mail a
132-6 copy of the notice to the appropriate foreign filing entity at the
132-7 foreign filing entity's registered office in this state. The
132-8 attorney general's record of the mailing of the notice is prima
132-9 facie evidence that notice was mailed under this section.
132-10 (e) Unless a foreign filing entity has been served with
132-11 citation, a default judgment may not be taken against the entity
132-12 before the 31st day after the date the notice is first published.
132-13 Sec. 9.024. FILING OF DECREE OF REVOCATION AGAINST FOREIGN
132-14 FILING ENTITY. (a) The clerk of a court that enters a decree
132-15 revoking the registration of a foreign filing entity shall file a
132-16 certified copy of the decree in accordance with Chapter 4.
132-17 (b) A fee may not be charged for the filing of a decree
132-18 under this section.
132-19 (Sections 9.025-9.050 reserved for expansion)
132-20 SUBCHAPTER B. BUSINESS, RIGHTS, AND OBLIGATIONS
132-21 Sec. 9.051. BUSINESS OF FOREIGN ENTITY. A foreign entity
132-22 may not conduct in this state a business or activity that is not
132-23 permitted by this code to be transacted by the domestic entity to
132-24 which it most closely corresponds, unless other law of this state
132-25 authorizes the entity to conduct the business or activity.
132-26 Sec. 9.052. RIGHTS AND PRIVILEGES. A foreign nonfiling
132-27 entity or a foreign filing entity registered under this chapter
133-1 enjoys the same but no greater rights and privileges as the
133-2 domestic entity to which it most closely corresponds.
133-3 Sec. 9.053. OBLIGATIONS AND LIABILITIES. Subject to this
133-4 code and other laws of this state and except as provided by
133-5 Subchapter C, Chapter 1, in any matter that affects the transaction
133-6 of intrastate business in this state, a foreign entity and each
133-7 member, owner, or managerial official of the entity is subject to
133-8 the same duties, restrictions, penalties, and liabilities imposed
133-9 on a domestic entity to which it most closely corresponds or on a
133-10 member, owner, or managerial official of that domestic entity.
133-11 Sec. 9.054. RIGHT OF FOREIGN FILING ENTITY TO PARTICIPATE IN
133-12 THE BUSINESS OF CERTAIN DOMESTIC ENTITIES. A vote cast or consent
133-13 provided by a foreign filing entity with respect to its ownership
133-14 or membership interest in a domestic entity of which the foreign
133-15 filing entity is a lawful owner or member, and the foreign filing
133-16 entity's participation in the management and control of the
133-17 business and affairs of the domestic entity to the extent of the
133-18 participation of other owners or members, are not invalidated if
133-19 the foreign filing entity does not register to transact business in
133-20 this state, subject to all law governing a domestic entity,
133-21 including the antitrust law of this state.
133-22 (Sections 9.055-9.100 reserved for expansion)
133-23 SUBCHAPTER C. DETERMINATION OF TRANSACTING BUSINESS
133-24 IN THIS STATE
133-25 Sec. 9.101. ACTIVITIES NOT CONSTITUTING TRANSACTING BUSINESS
133-26 IN THIS STATE. For purposes of this chapter, activities that do
133-27 not constitute transaction of business in this state include:
134-1 (1) maintaining or defending an action or suit or an
134-2 administrative or arbitration proceeding, or effecting the
134-3 settlement of:
134-4 (A) such an action, suit, or proceeding; or
134-5 (B) a claim or dispute to which the entity is a
134-6 party;
134-7 (2) holding a meeting of the entity's managerial
134-8 officials, owners, or members or carrying on another activity
134-9 concerning the entity's internal affairs;
134-10 (3) maintaining a bank account;
134-11 (4) maintaining an office or agency for:
134-12 (A) transferring, exchanging, or registering
134-13 securities the entity issues; or
134-14 (B) appointing or maintaining a trustee or
134-15 depositary related to the entity's securities;
134-16 (5) voting the interest of an entity the foreign
134-17 entity has acquired;
134-18 (6) effecting a sale through an independent
134-19 contractor;
134-20 (7) creating, as borrower or lender, or acquiring
134-21 indebtedness or a mortgage or other security interest in real or
134-22 personal property;
134-23 (8) securing or collecting a debt due the entity or
134-24 enforcing a right in property that secures a debt due the entity;
134-25 (9) transacting business in interstate commerce;
134-26 (10) conducting an isolated transaction that:
134-27 (A) is completed within a period of 30 days; and
135-1 (B) is not in the course of a number of
135-2 repeated, similar transactions;
135-3 (11) in a case that does not involve an activity that
135-4 would constitute the transaction of business in this state if the
135-5 activity were one of a foreign entity acting in its own right:
135-6 (A) exercising a power of executor or
135-7 administrator of the estate of a nonresident decedent under
135-8 ancillary letters issued by a court of this state; or
135-9 (B) exercising a power of a trustee under the
135-10 will of a nonresident decedent, or under a trust created by one or
135-11 more nonresidents of this state, or by one or more foreign
135-12 entities;
135-13 (12) regarding a debt secured by a mortgage or lien on
135-14 real or personal property in this state:
135-15 (A) acquiring the debt in a transaction outside
135-16 this state or in interstate commerce;
135-17 (B) collecting or adjusting a principal or
135-18 interest payment on the debt;
135-19 (C) enforcing or adjusting a right or property
135-20 securing the debt;
135-21 (D) taking an action necessary to preserve and
135-22 protect the interest of the mortgagee in the security; or
135-23 (E) engaging in any combination of transactions
135-24 described by this subdivision;
135-25 (13) investing in or acquiring, in a transaction
135-26 outside of this state, a royalty or other nonoperating mineral
135-27 interest; or
136-1 (14) the execution of a division order, contract of
136-2 sale, or other instrument incidental to ownership of a nonoperating
136-3 mineral interest.
136-4 Sec. 9.102. OTHER ACTIVITIES. The list provided by Section
136-5 9.101 is not exclusive of activities that do not constitute
136-6 transacting business in this state for the purposes of this code.
136-7 (Sections 9.103-9.150 reserved for expansion)
136-8 SUBCHAPTER D. MISCELLANEOUS PROVISIONS
136-9 Sec. 9.151. APPLICABILITY OF THIS CODE TO CERTAIN FOREIGN
136-10 ENTITIES. (a) Except as provided by a statute described by this
136-11 subsection, the provisions of this code governing a foreign entity
136-12 apply to a foreign entity registered or granted authority to
136-13 transact business in this state under:
136-14 (1) a special statute that does not contain a
136-15 provision regarding a matter provided for by this code with respect
136-16 to a foreign entity; or
136-17 (2) another statute that specifically provides that
136-18 the general law for the granting of a registration or certificate
136-19 of authority to the foreign entity to transact business in this
136-20 state supplements the special statute.
136-21 (b) Except as provided by a special statute described by
136-22 Subsection (a), a document required to be filed with the secretary
136-23 of state under the special statute must be signed and filed in
136-24 accordance with Chapter 4.
137-1 CHAPTER 10. MERGERS, INTEREST EXCHANGES,
137-2 CONVERSIONS AND SALES OF ASSETS
137-3 SUBCHAPTER A. MERGERS
137-4 Sec. 10.001. ADOPTION OF PLAN OF MERGER. (a) A domestic
137-5 entity may effect a merger by complying with the applicable
137-6 provisions of this code. A merger must be set forth in a plan of
137-7 merger.
137-8 (b) To effect a merger, the governing authority of each
137-9 domestic entity that is a party to the merger must act on, and, if
137-10 required by this code, the owners or members of the domestic entity
137-11 must approve, the plan of merger in the manner prescribed by this
137-12 code for the approval of mergers by the domestic entity.
137-13 (c) If one or more non-code organizations is a party to the
137-14 merger or is to be created by the plan of merger:
137-15 (1) to effect the merger each non-code organization
137-16 must take all action required by this code and its governing
137-17 documents;
137-18 (2) the merger must be permitted by:
137-19 (A) the law of the state or country under whose
137-20 law each non-code organization is incorporated or organized; or
137-21 (B) the governing documents of each non-code
137-22 organization if the documents are not inconsistent with the law
137-23 under which the non-code organization is incorporated or organized;
137-24 and
137-25 (3) in effecting the merger, each non-code
137-26 organization that is a party to the merger must comply with:
137-27 (A) the applicable laws under which it is
138-1 incorporated or organized; and
138-2 (B) the governing documents of the non-code
138-3 organization.
138-4 (d) An organization may not merge under this subchapter if
138-5 an owner or member of that entity that is a party to the merger
138-6 will, as a result of the merger, become personally liable, without
138-7 that owner's or member's consent, for a liability or other
138-8 obligation of any other person.
138-9 Sec. 10.002. PLAN OF MERGER: REQUIRED PROVISIONS. (a) A
138-10 plan of merger must include:
138-11 (1) the name of each organization that is a party to
138-12 the merger;
138-13 (2) the name of each organization that will survive
138-14 the merger;
138-15 (3) the name of each new organization that is to be
138-16 created by the plan of merger;
138-17 (4) a description of the organizational form of each
138-18 organization that is a party to the merger or that is to be created
138-19 by the plan of merger and the state or country where incorporated
138-20 or organized;
138-21 (5) the manner and basis of converting any of the
138-22 ownership or membership interests of each organization that is a
138-23 party to the merger into:
138-24 (A) ownership interests, membership interests,
138-25 obligations, rights to purchase securities, or other securities of
138-26 one or more of the surviving or new domestic organizations;
138-27 (B) cash;
139-1 (C) other property, including ownership
139-2 interests, membership interests, obligations, rights to purchase
139-3 securities, or other securities of any other person or entity; or
139-4 (D) any combination of the items described by
139-5 Paragraphs (A)-(C);
139-6 (6) the certificate of formation of each new domestic
139-7 entity to be created by the plan of merger;
139-8 (7) the governing documents of each non-code
139-9 organization that:
139-10 (A) is to survive the merger or to be created by
139-11 the plan of merger; and
139-12 (B) is an entity that is not:
139-13 (i) organized under the laws of any state
139-14 or the United States; or
139-15 (ii) required to file its certificate of
139-16 formation or similar document under which the entity is organized
139-17 with the appropriate governmental authority; and
139-18 (8) the address of the registered office and name of
139-19 each registered agent of the surviving or new organizations if a
139-20 registered office or agent is required by the laws under which the
139-21 surviving or new organizations are formed.
139-22 (b) An item required by Subsections (a)(6)-(8) may be
139-23 included in the plan of merger by an attachment or exhibit to the
139-24 plan.
139-25 (c) If the plan of merger provides for a manner and basis of
139-26 converting an ownership or membership interest that may be
139-27 converted in a manner or basis different than any other ownership
140-1 or membership interest of the same class or series of the ownership
140-2 or membership interest, the manner and basis of conversion must be
140-3 included in the plan of merger in the same manner as provided by
140-4 Subsection (a)(5).
140-5 Sec. 10.003. CONTENTS OF PLAN OF MERGER: MORE THAN ONE
140-6 SUCCESSOR. If more than one organization is to survive or to be
140-7 created by the plan of merger, the plan of merger must include:
140-8 (1) the manner and basis of allocating and vesting the
140-9 property of each organization that is a party to the merger among
140-10 one or more of the surviving or new organizations;
140-11 (2) the name of each surviving or new organization
140-12 that is primarily obligated for the payment of the fair value of an
140-13 ownership or membership interest of an owner or member of a
140-14 domestic entity that is a party to the merger and who may have a
140-15 right to, and complies with the requirements for, dissent and
140-16 appraisal under this code applicable to the domestic entity; and
140-17 (3) the manner and basis of allocating each liability
140-18 and obligation of each organization that is a party to the merger,
140-19 or adequate provisions for the payment and discharge of each
140-20 liability and obligation, among one or more of the surviving or new
140-21 organizations.
140-22 Sec. 10.004. PLAN OF MERGER: PERMISSIVE PROVISIONS. A plan
140-23 of merger may include:
140-24 (1) amendments to the governing documents of any
140-25 surviving organization;
140-26 (2) provisions relating to an interest exchange,
140-27 including a plan of exchange; and
141-1 (3) any other provisions relating to the merger that
141-2 are not required by this chapter.
141-3 Sec. 10.005. CREATION OF HOLDING COMPANY BY MERGER. (a) In
141-4 this section:
141-5 (1) "Direct or indirect wholly owned subsidiary"
141-6 means, with respect to a domestic entity, another domestic entity,
141-7 all of the outstanding voting ownership or membership interests of
141-8 which are owned by the domestic entity or by one or more other
141-9 domestic entities or non-code organizations, all of the outstanding
141-10 voting ownership or membership interests of which are owned by the
141-11 domestic entity or one or more other wholly owned domestic entities
141-12 or non-code organizations.
141-13 (2) "Holding company" means a domestic entity that,
141-14 from its organization until a merger takes effect, was at all times
141-15 a direct or indirect wholly owned subsidiary of the domestic entity
141-16 and the ownership or membership interests of which are issued in
141-17 the merger.
141-18 (b) A domestic entity may, without owner approval and
141-19 pursuant to a plan of merger, restructure the ownership structure
141-20 of that entity to create a holding company structure under this
141-21 chapter and the provisions of this code under which the entity was
141-22 formed. The approval of the owners or members of a domestic entity
141-23 of a plan of merger that creates a holding company is not required
141-24 if:
141-25 (1) approval is not otherwise required by the
141-26 governing documents of the domestic entity;
141-27 (2) the domestic entity merges with a direct or
142-1 indirect domestic wholly owned entity;
142-2 (3) after the merger the domestic entity or its
142-3 successor is a direct or indirect wholly owned entity of a holding
142-4 company;
142-5 (4) the domestic entity and the direct or indirect
142-6 wholly owned entity are the only parties to the merger;
142-7 (5) each ownership or membership interest of the
142-8 domestic entity that is outstanding preceding the merger is
142-9 converted in the merger into an ownership or membership interest of
142-10 the holding company having the same designations, preferences,
142-11 limitations, and relative rights as the ownership or membership
142-12 interest held by the owner or member in the domestic entity;
142-13 (6) the holding company is a domestic entity of the
142-14 same organizational form as the merging domestic entity;
142-15 (7) except as provided by Subsections (c) and (d), the
142-16 initial governing documents of the holding company contain
142-17 provisions identical to the governing documents of the domestic
142-18 entity preceding the merger;
142-19 (8) except as provided by Subsections (c) and (d), the
142-20 initial governing documents of the surviving entity contain
142-21 provisions identical to the governing documents of the domestic
142-22 entity preceding the merger;
142-23 (9) the governing persons of the domestic entity
142-24 become or remain the governing persons of the holding company when
142-25 the merger takes effect;
142-26 (10) the owners or members of the domestic entity will
142-27 not recognize gain or loss for United States federal income tax
143-1 purposes or any other tax benefit or attribute as determined by the
143-2 governing authority of the domestic entity; and
143-3 (11) the governing authority of the domestic entity
143-4 adopts a resolution approving the plan of merger.
143-5 (c) Subsections (b)(7) and (8) do not require identical
143-6 provisions regarding the incorporator or incorporators, the entity
143-7 name, the registered office and agent, the initial governing
143-8 persons, and the initial subscribers of ownership interests and
143-9 provisions contained in any amendment to the certificate as are
143-10 necessary to effect a change, exchange, reclassification, or
143-11 cancellation of ownership or membership interests, if the change,
143-12 exchange, reclassification, or cancellation was in effect preceding
143-13 the merger.
143-14 (d) Notwithstanding Subsection (b)(8):
143-15 (1) the governing documents of the surviving entity
143-16 must require that an act or transaction by or involving the
143-17 surviving entity that requires for its approval under this code the
143-18 approval of the owners or members of the merging domestic entity
143-19 must, by specific reference to this section, require the approval
143-20 of the owners or members of the holding company, or any successor
143-21 by merger, by the same vote as is required by this code and the
143-22 governing documents of the surviving entity; and
143-23 (2) the governing documents of the surviving entity
143-24 may change the classes and series of ownership or membership
143-25 interests and the number of ownership or membership interests that
143-26 the surviving entity is authorized to issue.
143-27 (e) To the extent the provisions contained in Section 21.606
144-1 apply to a domestic entity and its owners or members when a merger
144-2 takes effect under this section, those provisions continue to apply
144-3 to the holding company and its owners or members immediately after
144-4 the merger takes effect as though the holding company were the
144-5 domestic entity. All ownership or membership interests of the
144-6 holding company acquired in the merger, for purposes of Section
144-7 21.606, are considered to have been acquired at the time the
144-8 ownership or membership interest of the domestic entity converted
144-9 in the merger was acquired. Any owner or member who, preceding the
144-10 merger, was not an affiliated owner or member as described by
144-11 Section 21.606 does not solely by reason of the merger become an
144-12 affiliated owner or member of the holding company.
144-13 (f) If the name of a holding company immediately following
144-14 the effectiveness of a merger under this section is the same as the
144-15 name of the domestic entity preceding the merger, the ownership or
144-16 membership interests of the holding company into which the
144-17 ownership or membership interests of the domestic entity are merged
144-18 are represented by the certificates, if any, that previously
144-19 represented the ownership or membership interests in the domestic
144-20 entity.
144-21 Sec. 10.006. SHORT FORM MERGER. (a) A parent organization
144-22 that owns at least 90 percent of the outstanding ownership or
144-23 membership interests of each class and series of each of one or
144-24 more subsidiary organizations may merge with one or more of the
144-25 subsidiary organizations as provided by this section if:
144-26 (1) at least one of the parties to the merger is a
144-27 domestic entity and each other party is a domestic entity or
145-1 another non-code organization organized under the laws of a
145-2 jurisdiction that permits a merger of the type authorized by this
145-3 chapter; and
145-4 (2) the resulting organization is the parent
145-5 organization or an existing or new subsidiary organization.
145-6 (b) A merger of one or more subsidiary organizations into
145-7 the parent organization is required to be approved only by a
145-8 resolution adopted by the governing authority of the parent
145-9 organization authorizing the merger.
145-10 (c) If the parent organization is a domestic entity and the
145-11 parent organization will not survive the merger:
145-12 (1) the owners or members of the parent organization
145-13 must approve the merger in the manner under this code that a merger
145-14 by that domestic entity is approved; and
145-15 (2) action to approve the merger by a subsidiary
145-16 organization is not required.
145-17 (d) If the parent organization does not own all of the
145-18 outstanding ownership or membership interests of each class or
145-19 series of ownership or membership interests of each subsidiary
145-20 organization that is a party to the merger, the resolution of the
145-21 parent organization required by this section must describe the
145-22 terms of the merger, including the cash or other property,
145-23 including ownership or membership interests, obligations, rights to
145-24 purchase securities, or other securities of any person or entity or
145-25 any combination of the ownership or membership interests,
145-26 obligations, rights, or other securities, to be used, paid, or
145-27 delivered by the parent organization on surrender of each ownership
146-1 or membership interest of the subsidiary organizations not owned by
146-2 the parent organization.
146-3 (e) An entity is not disqualified from effecting a merger
146-4 under any other provision of this chapter because it qualifies for
146-5 a merger under this section.
146-6 Sec. 10.007. EFFECTIVENESS OF MERGER. Except as otherwise
146-7 provided by Subchapter B, Chapter 4, a merger takes effect at the
146-8 time provided by the plan of merger or otherwise agreed to by the
146-9 parties, except that a merger that requires a filing under
146-10 Subchapter D takes effect on the acceptance of the filing of the
146-11 certificate of merger by the secretary of state or county clerk, as
146-12 appropriate.
146-13 Sec. 10.008. EFFECT OF MERGER. (a) When a merger takes
146-14 effect:
146-15 (1) the separate existence of each domestic entity
146-16 that is a party to the merger, other than a surviving or new
146-17 domestic entity, ceases;
146-18 (2) all rights, title, and interests to all real
146-19 estate and other property owned by each organization that is a
146-20 party to the merger is allocated to and vested, subject to any
146-21 existing liens or other encumbrances on the property, in one or
146-22 more of the surviving or new organizations as provided in the plan
146-23 of merger without:
146-24 (A) reversion or impairment;
146-25 (B) any further act or deed; or
146-26 (C) any transfer or assignment having occurred;
146-27 (3) all liabilities and obligations of each
147-1 organization that is a party to the merger are allocated to one or
147-2 more of the surviving or new organizations in the manner provided
147-3 by the plan of merger;
147-4 (4) each surviving or new domestic organization to
147-5 which a liability or obligation is allocated under the plan of
147-6 merger is the primary obligor for the liability or obligation, and,
147-7 except as otherwise provided by the plan of merger or by law or
147-8 contract, no other party to the merger, other than a surviving
147-9 domestic entity or non-code organization liable or otherwise
147-10 obligated at the time of the merger, and no other new domestic
147-11 entity or non-code organization created under the plan of merger is
147-12 liable for the debt or other obligation;
147-13 (5) any proceeding pending by or against any domestic
147-14 entity or by or against any non-code organization that is a party
147-15 to the merger may be continued as if the merger did not occur, or
147-16 the surviving or new domestic entity or entities or the surviving
147-17 or new non-code organization or non-code organizations to which the
147-18 liability, obligation, asset, or right associated with that
147-19 proceeding is allocated to and vested in under the plan of merger
147-20 may be substituted in the proceeding;
147-21 (6) the governing documents of each surviving domestic
147-22 entity are amended to the extent provided by the plan of merger;
147-23 (7) each new filing entity whose certificate of
147-24 formation is included in the plan of merger under this chapter, on
147-25 meeting any additional requirements, if any, of this code for its
147-26 formation, is formed as a domestic entity under this code as
147-27 provided by the plan of merger;
148-1 (8) the ownership or membership interests of each
148-2 organization that is a party to the merger and that are to be
148-3 converted or exchanged, in whole or part, into ownership or
148-4 membership interests, obligations, rights to purchase securities,
148-5 or other securities of one or more of the surviving or new
148-6 organizations, into cash or other property, including ownership or
148-7 membership interests, obligations, rights to purchase securities,
148-8 or other securities of any organization, or into any combination of
148-9 these are converted and exchanged and the former owners or members
148-10 who held ownership or membership interests of each domestic entity
148-11 that is a party to the merger are entitled only to the rights
148-12 provided by the certificate of merger or, if applicable, any rights
148-13 to receive the fair value for the ownership or membership interests
148-14 previously held by them provided under this code; and
148-15 (9) notwithstanding Subdivision (4), the surviving or
148-16 new organization named in the plan of merger as primarily obligated
148-17 to pay the fair value of an ownership or membership interest under
148-18 Section 10.003(2) is the primary obligor for that payment and all
148-19 other surviving or new organizations are secondarily liable for
148-20 that payment.
148-21 (b) If the plan of merger does not provide for the
148-22 allocation and vesting of the right, title, and interest in any
148-23 particular real estate or other property or for the allocation of
148-24 any liability or obligation of any party to the merger, the
148-25 unallocated property is owned in undivided interest by, or the
148-26 liability or obligation is the joint and several liability and
148-27 obligation of, each of the surviving and new organizations, pro
149-1 rata to the total number of surviving and new organizations
149-2 resulting from the merger.
149-3 (c) If a surviving organization in a merger is not a
149-4 domestic entity, the surviving organization is considered to have:
149-5 (1) appointed the secretary of state in this state as
149-6 the organization's agent for service of process in a proceeding to
149-7 enforce any obligation of a domestic entity that is a party to the
149-8 merger; and
149-9 (2) agreed to promptly pay to the dissenting owners or
149-10 members of each domestic entity that is a party to the merger who
149-11 have the right of dissent and appraisal under this code the amount,
149-12 if any, to which they are entitled under this code.
149-13 (d) If the surviving organization in a merger is not a
149-14 domestic entity, the organization shall register to transact
149-15 business in this state if the entity is required to register for
149-16 that purpose by another provision of this code.
149-17 Sec. 10.009. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
149-18 MERGERS. (a) A partner of a domestic partnership that is a party
149-19 to a merger does not become liable as a result of the merger for
149-20 the liability or obligation of another person that is a party to
149-21 the merger unless the partner consents to becoming personally
149-22 liable by action taken in connection with the specific plan of
149-23 merger approved by the partner.
149-24 (b) A partner of a domestic partnership that is a party to a
149-25 merger who remains in or enters a partnership is treated as an
149-26 incoming partner in the partnership when the merger takes effect
149-27 for purposes of determining the partner's liability for a debt or
150-1 obligation of the partnership or partnerships that are parties to
150-2 the merger or to be created in the merger and in which the partner
150-3 was not a partner.
150-4 (c) If a partnership merges with an organization and,
150-5 because of the merger, no longer exists, a former partner who
150-6 becomes an owner or member of the surviving organization may, until
150-7 the first anniversary of the effective date of the merger, bind the
150-8 surviving organization to a transaction for which the owner or
150-9 member no longer has authority to bind the organization if the
150-10 transaction is one in which the actions by the owner or member as a
150-11 partner would have bound the partnership before the effective date
150-12 of the merger, and the other party to the transaction:
150-13 (1) does not have actual or constructive notice of the
150-14 merger;
150-15 (2) had done business with the terminated partnership
150-16 within one year preceding the effective date of the merger; and
150-17 (3) reasonably believes that the partner who was
150-18 previously an owner or member of the partnership that was merged
150-19 into the surviving organization and is now an owner or member of
150-20 the surviving organization has the authority to bind the surviving
150-21 organization to the transaction at the time of the transaction.
150-22 (d) If a partnership is formed under a plan of merger, the
150-23 existence of the partnership as a partnership begins when the
150-24 merger takes effect, and the persons to be partners become partners
150-25 at that time.
150-26 (e) A partner in a domestic partnership that is a party to
150-27 the merger but does not survive shall be treated as a partner who
151-1 withdrew from the nonsurviving domestic partnership as of the
151-2 effective date of the merger.
151-3 Sec. 10.010. SPECIAL PROVISIONS APPLYING TO NONPROFIT ENTITY
151-4 MERGERS. (a) A domestic nonprofit entity may not merge into
151-5 another entity if the domestic nonprofit entity would, because of
151-6 the merger, lose or impair its charitable status.
151-7 (b) One or more domestic for-profit entities or non-code
151-8 organizations may merge into one or more domestic nonprofit
151-9 entities that continue as the surviving entity or entities.
151-10 (c) A domestic nonprofit entity may not merge into a foreign
151-11 for-profit entity if the domestic entity does not continue as the
151-12 surviving entity.
151-13 (d) One or more domestic nonprofit entities and non-code
151-14 organizations may merge into one or more foreign nonprofit entities
151-15 that continue as the surviving entity or entities.
151-16 (Sections 10.011-10.050 reserved for expansion)
151-17 SUBCHAPTER B. EXCHANGES OF INTERESTS
151-18 Sec. 10.051. INTEREST EXCHANGES. (a) For the purpose of
151-19 acquiring all of the outstanding ownership or membership interests
151-20 of one or more classes or series of one or more domestic entities,
151-21 one or more domestic entities or non-code organizations may adopt a
151-22 plan of exchange.
151-23 (b) To make an interest exchange under this section:
151-24 (1) the governing authority of each domestic entity
151-25 the ownership or membership interests of which are to be acquired
151-26 in the interest exchange must act on a plan of exchange and, if
151-27 otherwise required by this code, the owners or members of the
152-1 domestic entity must approve the plan of exchange in the manner
152-2 provided by this code; and
152-3 (2) each acquiring domestic entity must take all
152-4 action that may otherwise be required by this code and its
152-5 governing documents to effect the exchange.
152-6 (c) If a non-code organization is to acquire ownership or
152-7 membership interests in the exchange, each non-code organization
152-8 must take all action that is required under the laws of the
152-9 organization's jurisdiction of formation and the organization's
152-10 governing documents to effect the exchange.
152-11 (d) If one or more non-code organizations as part of the
152-12 plan of exchange are to issue ownership or membership interests,
152-13 the issuance of the ownership or membership interests must be
152-14 permitted by the laws under which the non-code organizations are
152-15 incorporated or organized or not inconsistent with those laws.
152-16 (e) A plan of exchange may not be effected if any owner or
152-17 member of a domestic entity that is a party to the interest
152-18 exchange will, as a result of the interest exchange, become
152-19 personally liable, without the consent of the owner or member, for
152-20 the liabilities or obligations of any other person or organization.
152-21 Sec. 10.052. PLAN OF EXCHANGE: REQUIRED PROVISIONS. (a) A
152-22 plan of exchange must include:
152-23 (1) the name of each domestic entity the ownership or
152-24 membership interests of which are to be acquired;
152-25 (2) the name of each acquiring organization;
152-26 (3) if there is more than one acquiring organization,
152-27 the ownership or membership interests to be acquired by each
153-1 organization;
153-2 (4) the terms and conditions of the exchange; and
153-3 (5) the manner and basis of exchanging the ownership
153-4 or membership interests to be acquired for:
153-5 (A) ownership or membership interests,
153-6 obligations, rights to purchase securities, or other securities of
153-7 one or more of the acquiring organizations that is a party to the
153-8 plan of exchange;
153-9 (B) cash;
153-10 (C) other property, including ownership or
153-11 membership interests, obligations, rights to purchase securities,
153-12 or other securities of any other person or entity; or
153-13 (D) any combination of those items.
153-14 (b) The manner and basis of exchanging an ownership or
153-15 membership interest of an owner or member that is exchanged in a
153-16 manner or basis different from any other owner or member having
153-17 ownership or membership interests of the same class or series must
153-18 be included in the plan of exchange in the same manner as provided
153-19 by Subsection (a)(5).
153-20 Sec. 10.053. PLAN OF EXCHANGE: PERMISSIVE PROVISIONS. A
153-21 plan of exchange may include any other provisions not required by
153-22 Section 10.052 relating to the interest exchange.
153-23 Sec. 10.054. EFFECTIVENESS OF EXCHANGE. Except as otherwise
153-24 provided by Subchapter B, Chapter 4, an interest exchange takes
153-25 effect at the time provided in the plan of exchange or otherwise
153-26 agreed to by the parties, except that an interest exchange that
153-27 requires a filing under Subchapter D takes effect on the acceptance
154-1 of the filing of the certificate of exchange by the secretary of
154-2 state or county clerk, as appropriate.
154-3 Sec. 10.055. GENERAL EFFECT OF INTEREST EXCHANGE. When an
154-4 interest exchange takes effect:
154-5 (1) the ownership or membership interest of each
154-6 acquired organization is exchanged as provided in the plan of
154-7 exchange, and the former owners whose interests are exchanged under
154-8 the plan of exchange are entitled only to the rights provided in
154-9 the certificate of exchange or, if applicable, a right to receive
154-10 the fair value for the ownership or membership interests provided
154-11 under Subchapter H; and
154-12 (2) the acquiring organization has all rights, title,
154-13 and interests with respect to the ownership or membership interest
154-14 to be acquired by it subject to the provisions of the certificate
154-15 of exchange.
154-16 (Sections 10.056-10.100 reserved for expansion)
154-17 SUBCHAPTER C. CONVERSIONS
154-18 Sec. 10.101. CONVERSION OF DOMESTIC ENTITIES. (a) A
154-19 domestic entity may convert into a different type of domestic
154-20 entity or a non-code organization by adopting a plan of conversion.
154-21 (b) To effect a conversion, the converting entity must act
154-22 on and the owners or members of the domestic entity must approve a
154-23 plan of conversion in the same manner as prescribed by this code
154-24 for the adoption and approval of a plan of merger by a domestic
154-25 entity.
154-26 (c) A conversion may not take effect if the conversion is
154-27 prohibited by or inconsistent with the laws of the converted
155-1 entity's jurisdiction of formation, and the formation,
155-2 incorporation, or organization of the converted entity under the
155-3 plan of conversion must be effected in compliance with those laws
155-4 pursuant to the plan of conversion.
155-5 (d) At the time a conversion takes effect, each owner of the
155-6 converting entity, other than those who receive payment of their
155-7 ownership or membership interest under any applicable provisions of
155-8 this code relating to dissent and appraisal, has, unless otherwise
155-9 agreed to by that owner or member, an ownership or membership
155-10 interest in, and is the owner or member of, the converted entity.
155-11 (e) A domestic entity may not convert under this section if
155-12 an owner or member of the domestic entity, as a result of the
155-13 conversion, becomes personally liable, without the consent of the
155-14 owner or member, for a liability or other obligation of the
155-15 converted entity.
155-16 Sec. 10.102. CONVERSION OF NON-CODE ORGANIZATIONS. (a) A
155-17 non-code organization may convert into a domestic entity by
155-18 adopting a plan of conversion as provided by this section.
155-19 (b) To effect a conversion, the non-code organization must
155-20 take any action that may be required for a conversion under the
155-21 laws of the organization's jurisdiction of formation and the
155-22 organization's governing documents.
155-23 (c) The conversion must be permitted by the laws under which
155-24 the non-code organization is incorporated or organized or by its
155-25 governing documents, which may not be inconsistent with the laws of
155-26 the jurisdiction in which the non-code organization is incorporated
155-27 or organized.
156-1 Sec. 10.103. PLAN OF CONVERSION: REQUIRED PROVISIONS.
156-2 (a) A plan of conversion must include:
156-3 (1) the name of the converting entity;
156-4 (2) the name of the converted entity;
156-5 (3) a statement that the converting entity is
156-6 continuing its existence in the organizational form of the
156-7 converted entity;
156-8 (4) a statement of the type of entity that the
156-9 converted entity is to be and the converted entity's jurisdiction
156-10 of formation;
156-11 (5) the manner and basis of converting the ownership
156-12 or membership interests of the converting entity into ownership or
156-13 membership interests of the converted entity;
156-14 (6) any certificate of formation required to be filed
156-15 under this code if the converted entity is a filing entity; and
156-16 (7) the certificate of formation or similar
156-17 organizational document of the converted entity if the converted
156-18 entity is not a filing entity.
156-19 (b) An item required by Subsection (a)(6) or (7) may be
156-20 included in the plan of conversion by an attachment or exhibit to
156-21 the plan.
156-22 Sec. 10.104. PLAN OF CONVERSION: PERMISSIVE PROVISIONS. A
156-23 plan of conversion may include other provisions relating to the
156-24 conversion that are not inconsistent with law.
156-25 Sec. 10.105. EFFECTIVENESS OF CONVERSION. Except as
156-26 otherwise provided by Subchapter B, Chapter 4, a conversion takes
156-27 effect at the time provided by the plan of conversion or otherwise
157-1 agreed to by the parties, except that a conversion that requires a
157-2 filing under Subchapter D takes effect on the acceptance of the
157-3 filing of the certificate of conversion by the filing officer.
157-4 Sec. 10.106. GENERAL EFFECT OF CONVERSION. When a
157-5 conversion takes effect:
157-6 (1) the converting entity continues to exist without
157-7 interruption in the organizational form of the converted entity
157-8 rather than in the organizational form of the converting entity;
157-9 (2) all rights, title, and interests to all property
157-10 owned by the converting entity continues to be owned, subject to
157-11 any existing liens or other encumbrances on the property, by the
157-12 converted entity in the new organizational form without:
157-13 (A) reversion or impairment;
157-14 (B) further act or deed; or
157-15 (C) any transfer or assignment having occurred;
157-16 (3) all liabilities and obligations of the converting
157-17 entity continue to be liabilities and obligations of the converted
157-18 entity in the new organizational form without impairment or
157-19 diminution because of the conversion;
157-20 (4) the rights of creditors or other parties with
157-21 respect to or against the previous owners or members of the
157-22 converting entity in their capacities as owners or members in
157-23 existence when the conversion takes effect continue to exist as to
157-24 those liabilities and obligations and may be enforced by the
157-25 creditors and obligees as if a conversion had not occurred;
157-26 (5) a proceeding pending by or against the converting
157-27 entity or by or against any of the converting entity's owners or
158-1 members in their capacities as owners or members may be continued
158-2 by or against the converted entity in the new organizational form
158-3 and by or against the previous owners or members without a need for
158-4 substituting a party;
158-5 (6) the ownership or membership interests of the
158-6 converting entity that are to be converted into ownership or
158-7 membership interests of the converted entity as provided in the
158-8 plan of conversion are converted as provided by the plan, and if
158-9 the converting entity is a domestic entity, the former owners or
158-10 members of the domestic entity are entitled only to the rights
158-11 provided in the plan of conversion or a right of dissent and
158-12 appraisal under this code;
158-13 (7) if, after the conversion takes effect, an owner or
158-14 member of the converted entity as an owner or member is liable for
158-15 the liabilities or obligations of the converted entity, the owner
158-16 or member is liable for the liabilities and obligations of the
158-17 converting entity that existed before the conversion took effect
158-18 only to the extent that the owner or member:
158-19 (A) agrees in writing to be liable for the
158-20 liabilities or obligations;
158-21 (B) was liable, before the conversion took
158-22 effect, for the liabilities or obligations; or
158-23 (C) by becoming an owner or member of the
158-24 converted entity, becomes liable under other applicable law for the
158-25 existing liabilities and obligations of the converted entity; and
158-26 (8) if the converted entity is a non-code
158-27 organization, the converted entity is considered to have:
159-1 (A) appointed the secretary of state in this
159-2 state as its agent for service of process in a proceeding to
159-3 enforce any obligation or the rights of dissenting owners or
159-4 members of the converting domestic entity; and
159-5 (B) agreed that the converted entity will
159-6 promptly pay the dissenting owners or members of the converting
159-7 domestic entity the amount, if any, to which they are entitled
159-8 under this code.
159-9 Sec. 10.107. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
159-10 CONVERSIONS. If a partnership is formed under a plan of conversion
159-11 under this code, the existence of the partnership as a partnership
159-12 begins when the conversion takes effect, and the owners or members
159-13 designated to become the partners under the plan of conversion
159-14 become the partners at that time.
159-15 Sec. 10.108. SPECIAL PROVISIONS APPLYING TO NONPROFIT ENTITY
159-16 CONVERSIONS. A domestic nonprofit entity may not convert into a
159-17 for-profit entity.
159-18 (Sections 10.108-10.150 reserved for expansion)
159-19 SUBCHAPTER D. CERTIFICATE OF MERGER, EXCHANGE, OR CONVERSION
159-20 Sec. 10.151. CERTIFICATE OF MERGER AND EXCHANGE. (a) After
159-21 approval of a plan of merger or a plan of exchange as provided by
159-22 this code, a certificate of merger, which may also include an
159-23 exchange, or a certificate of exchange, as applicable, must be
159-24 filed for a merger or interest exchange to become effective if:
159-25 (1) for a merger:
159-26 (A) any domestic entity that is a party to the
159-27 merger is a filing entity; or
160-1 (B) any domestic entity to be created under the
160-2 plan of merger is a filing entity; or
160-3 (2) for an exchange, an ownership or membership
160-4 interest in any filing entity is to be acquired in the interest
160-5 exchange.
160-6 (b) If a certificate of merger or exchange is required to be
160-7 filed in connection with an interest exchange or a merger, other
160-8 than a merger under Section 10.006, the certificate must be signed
160-9 on behalf of each domestic entity and non-code organization that is
160-10 a party to the merger or exchange by an officer or other authorized
160-11 representative and must include:
160-12 (1) the plan of merger or exchange or a statement
160-13 certifying:
160-14 (A) the name of each domestic entity or non-code
160-15 organization that is a party to the merger or exchange;
160-16 (B) the name of each domestic entity or non-code
160-17 organization that is to be created by the plan of merger or
160-18 exchange;
160-19 (C) the name of the jurisdiction in which each
160-20 domestic entity or non-code organization named under Paragraph (A)
160-21 or (B) is incorporated or organized;
160-22 (D) for a merger, the amendments or changes to
160-23 the certificate of formation of each filing entity that is a party
160-24 to the merger, or if no amendments are desired to be effected by
160-25 the merger, a statement to that effect;
160-26 (E) that the certificate of formation of each
160-27 new filing entity to be created under the plan of merger or
161-1 exchange is being filed with the certificate of merger or exchange;
161-2 (F) that a signed plan of merger or exchange is
161-3 on file at the principal place of business of each surviving,
161-4 acquiring, or new domestic entity or non-code organization, and the
161-5 address of each principal place of business; and
161-6 (G) that a copy of the plan of merger or
161-7 exchange will be on written request furnished without cost by each
161-8 surviving, acquiring, or new domestic entity or non-code
161-9 organization to any owner or member of any domestic entity that is
161-10 a party to or created by the plan of merger or exchange and, for a
161-11 merger with multiple surviving domestic entities or non-code
161-12 organizations, to any creditor or obligee of the parties to the
161-13 merger at the time of the merger if a liability or obligation is
161-14 then outstanding;
161-15 (2) if approval of the owners or members of any
161-16 domestic entity that was a party to the plan of merger or exchange
161-17 is not required by this code, a statement to that effect; and
161-18 (3) a statement that the plan of merger or exchange
161-19 has been approved as required by the laws of the jurisdiction of
161-20 formation of each organization that is a party to the merger or
161-21 exchange and by the governing documents of those organizations.
161-22 (c) A certificate of merger may also constitute a
161-23 certificate of exchange if it contains the information required for
161-24 a certificate of exchange.
161-25 Sec. 10.152. CERTIFICATE OF MERGER: SHORT FORM MERGER. The
161-26 certificate of merger for a merger under Section 10.006 is required
161-27 to be signed only by an officer or other authorized representative
162-1 of the parent organization described by that section and must
162-2 include:
162-3 (1) the name of the parent organization, the name of
162-4 each subsidiary organization that is a party to the merger, and the
162-5 jurisdiction of formation of each named organization;
162-6 (2) the number of outstanding ownership interests of
162-7 each class or series of each subsidiary organization and the number
162-8 and percentage of ownership interests of each class or series owned
162-9 by the parent organization;
162-10 (3) a copy of the resolution adopted by the governing
162-11 authority of the parent organization authorizing the merger and the
162-12 date of the adoption of the resolution;
162-13 (4) if the surviving organization is not a domestic
162-14 entity, the address, including street number, if any, of its
162-15 registered or principal office in the organization's jurisdiction
162-16 of formation; or
162-17 (5) if the plan of merger is required to be approved
162-18 by the owners or members of the parent organization, the
162-19 information required by Section 10.151(b)(3).
162-20 Sec. 10.153. FILING OF CERTIFICATE OF MERGER OR EXCHANGE.
162-21 (a) If a certificate of merger or exchange is required to be
162-22 filed, the certificate of merger or exchange must be filed in
162-23 accordance with Chapter 4. The certificate of formation of each
162-24 filing entity that is to be formed under a plan of merger must also
162-25 be filed with the certificate of merger in accordance with Chapter
162-26 4. Except as provided by this section, the certificate must be
162-27 filed with the secretary of state.
163-1 (b) If a domestic real estate investment trust is a party to
163-2 the merger or if an ownership interest in a domestic real estate
163-3 investment trust is to be acquired in the interest exchange, the
163-4 certificate of merger or exchange must be filed in accordance with
163-5 Chapter 4 with the county clerk of the county in which the domestic
163-6 real estate investment trust's principal place of business in this
163-7 state is located.
163-8 (c) If a domestic real estate investment trust is to be
163-9 created under the plan of merger, the certificate of formation of
163-10 the domestic real estate investment trust must also be filed with
163-11 the certificate of merger in accordance with Chapter 4 with the
163-12 county clerk of the county in which the domestic real estate
163-13 investment trust's principal place of business in this state is
163-14 located.
163-15 Sec. 10.154. CERTIFICATE OF CONVERSION. (a) After approval
163-16 of a plan of conversion as provided by this code, a certificate of
163-17 conversion must be filed for the conversion to become effective if:
163-18 (1) any domestic entity that is a party to the
163-19 conversion is a filing entity; or
163-20 (2) any domestic entity to be created under the plan
163-21 of conversion is a filing entity.
163-22 (b) If a certificate of conversion is required to be filed
163-23 in connection with a conversion, the certificate must be signed on
163-24 behalf of the converting entity and must include:
163-25 (1) the plan of conversion or a statement certifying
163-26 the following:
163-27 (A) the name and jurisdiction of organization of
164-1 the converting entity;
164-2 (B) the organizational form of the converting
164-3 entity;
164-4 (C) that a signed plan of conversion is on file
164-5 at the principal place of business of the converting entity, and
164-6 the address of the principal place of business;
164-7 (D) that a signed plan of conversion will be on
164-8 file after the conversion at the principal place of business of the
164-9 converted entity, and the address of the principal place of
164-10 business; and
164-11 (E) that a copy of the plan of conversion will
164-12 be on written request furnished without cost by the converting
164-13 entity before the conversion or by the converted entity after the
164-14 conversion to any owner or member of the converting entity or the
164-15 converted entity; and
164-16 (2) a statement that the plan of conversion has been
164-17 approved as required by the laws of the jurisdiction of formation
164-18 and the governing documents of the converting entity.
164-19 Sec. 10.155. FILING OF CERTIFICATE OF CONVERSION. (a) If a
164-20 certificate of conversion is required to be filed, the certificate
164-21 of conversion must be filed in accordance with Chapter 4. If the
164-22 converted entity is a filing entity, the certificate of formation
164-23 of the filing entity must also be filed with the certificate of
164-24 conversion in accordance with Chapter 4. Except as provided by
164-25 this section, the certificate must be filed with the secretary of
164-26 state.
164-27 (b) If the converting entity is a domestic real estate
165-1 investment trust, the certificate of conversion must be filed in
165-2 accordance with Chapter 4 with the county clerk of the county in
165-3 which the converting entity's principal place of business in this
165-4 state is located.
165-5 (c) If the converted entity is a domestic real estate
165-6 investment trust, the certificate of formation of the converted
165-7 entity must also be filed with the certificate of conversion in
165-8 accordance with Chapter 4 with the county clerk of the county in
165-9 which the converted entity's principal place of business in this
165-10 state is located.
165-11 Sec. 10.156. ACCEPTANCE OF CERTIFICATE FOR FILING. The
165-12 filing officer may not accept a certificate of merger, exchange, or
165-13 conversion for filing if:
165-14 (1) the filing officer finds that the certificate of
165-15 merger, exchange, or conversion does not conform to law; or
165-16 (2) the required franchise taxes have not been paid or
165-17 the certificate of merger, exchange, or conversion does not provide
165-18 that one or more of the surviving, new, or acquiring organizations
165-19 or the converted entity is liable for the payment of the required
165-20 franchise taxes.
165-21 (Sections 10.157-10.200 reserved for expansion)
165-22 SUBCHAPTER E. ABANDONMENT OF MERGER, EXCHANGE, OR CONVERSION
165-23 Sec. 10.201. ABANDONMENT OF PLAN OF MERGER, EXCHANGE, OR
165-24 CONVERSION. After a merger, interest exchange, or conversion is
165-25 approved as provided by this code, and at any time before the
165-26 merger, interest exchange, or conversion takes effect, the plan of
165-27 merger, interest exchange, or conversion may be abandoned, subject
166-1 to any contractual rights, by any of the domestic entities that are
166-2 a party to the merger, interest exchange, or conversion, without
166-3 action by the owners or members, under the procedures provided by
166-4 the plan of merger, exchange, or conversion or, if no abandonment
166-5 procedures are provided, in the manner determined by the governing
166-6 authority.
166-7 Sec. 10.202. ABANDONMENT AFTER FILING. (a) If a
166-8 certificate of merger, exchange, or conversion has been filed, the
166-9 merger, interest exchange, or conversion may be abandoned prior to
166-10 its effectiveness in accordance with Section 4.057.
166-11 (b) A filing of a certificate of abandonment under Section
166-12 4.057 is not required for the abandonment of a merger, interest
166-13 exchange, or conversion if no filing is required under Subchapter D
166-14 to make the merger, interest exchange, or conversion effective.
166-15 Sec. 10.203. ABANDONMENT IF NO FILING REQUIRED. If no
166-16 filing is required by this chapter to abandon a merger, interest
166-17 exchange, or conversion, the merger, interest exchange, or
166-18 conversion is abandoned when and on the terms as provided in
166-19 accordance with the procedures provided by the plan of merger,
166-20 exchange, or conversion or, if no procedures are provided by the
166-21 plan, in the manner determined by the governing authority.
166-22 (Sections 10.204-10.250 reserved for expansion)
166-23 SUBCHAPTER F. PROPERTY TRANSFERS AND DISPOSITIONS
166-24 Sec. 10.251. GENERAL POWER OF DOMESTIC ENTITY TO SELL,
166-25 LEASE, OR CONVEY PROPERTY. (a) Subject to any approval required
166-26 by this code or the governing documents of the domestic entity, a
166-27 domestic entity may transfer and convey by sale, lease, assignment,
167-1 or another method an interest in property of the entity, including
167-2 real property. The transfer and conveyance may:
167-3 (1) be made with or without the goodwill of the
167-4 entity;
167-5 (2) be made on any terms and conditions and for any
167-6 consideration, which may consist wholly or partly of money or other
167-7 property, including an ownership interest in a domestic entity or
167-8 non-code organization; and
167-9 (3) be evidenced by a deed, assignment, or other
167-10 instrument of transfer or conveyance, with or without the seal of
167-11 the entity.
167-12 (b) Subject to any approval required by this code or the
167-13 governing documents of the domestic entity, a domestic entity may
167-14 grant a pledge, mortgage, deed of trust, or trust indenture with
167-15 respect to an interest in property of the entity, including real
167-16 property, with or without the seal of the entity.
167-17 Sec. 10.252. NO APPROVAL REQUIRED FOR CERTAIN DISPOSITIONS
167-18 OF PROPERTY. Except as otherwise provided by this code, the
167-19 governing documents of the domestic entity, or specific limitations
167-20 established by the governing authority, a sale, lease, assignment,
167-21 conveyance, pledge, mortgage, deed of trust, trust indenture, or
167-22 other transfer of an interest in real property or other property
167-23 made by a domestic entity does not require the approval of the
167-24 governing authority, members, or owners of the entity.
167-25 Sec. 10.253. RECORDING INSTRUMENT CONVEYING REAL PROPERTY OF
167-26 DOMESTIC ENTITY. (a) A deed or other instrument executed by a
167-27 domestic entity that conveys an interest in real property may be
168-1 recorded in the same manner and with the same effect as other
168-2 similar instruments if the instrument is signed and acknowledged
168-3 by:
168-4 (1) an officer, authorized attorney-in-fact, or other
168-5 authorized person of the entity; or
168-6 (2) in the case of a partnership or limited liability
168-7 company, a governing person of the entity.
168-8 (b) A deed or other instrument executed by a domestic entity
168-9 that conveys an interest in real property and that is recorded and
168-10 signed by an officer, authorized attorney-in-fact, or other
168-11 authorized person of the entity constitutes prima facie evidence
168-12 that the sale or conveyance that is the subject of the instrument
168-13 was authorized under this code and the governing documents of the
168-14 entity.
168-15 Sec. 10.254. DISPOSITION OF PROPERTY NOT A MERGER OR
168-16 CONVERSION; LIABILITY. (a) A disposition of all or part of the
168-17 property of a domestic entity, regardless of whether the
168-18 disposition requires the approval of the entity's owners or
168-19 members, is not a merger or conversion for any purpose.
168-20 (b) Except as otherwise expressly provided by another law, a
168-21 person acquiring property described by this section may not be held
168-22 responsible or liable for a liability or obligation of the
168-23 transferring domestic entity that is not expressly assumed by the
168-24 person.
168-25 (Sections 10.255-10.300 reserved for expansion)
168-26 SUBCHAPTER G. BANKRUPTCY REORGANIZATION
168-27 Sec. 10.301. REORGANIZATION UNDER BANKRUPTCY AND SIMILAR
169-1 LAWS. (a) A trustee appointed for a domestic entity that is being
169-2 reorganized under a federal statute, the designated officers of a
169-3 domestic entity being reorganized under a federal statute, or any
169-4 other individual designated by a court having jurisdiction of a
169-5 domestic entity being reorganized under a federal statute to act on
169-6 behalf of the domestic entity may, without action by or notice to
169-7 the domestic entity's governing authority, owners, or members, in
169-8 order to carry out a plan of reorganization ordered by a court
169-9 under the federal statute:
169-10 (1) amend or restate the domestic entity's certificate
169-11 of formation if the certificate of formation after amendment or
169-12 restatement contains only provisions required or permitted to be
169-13 contained in the certificate of formation;
169-14 (2) merge or exchange an interest with one or more
169-15 domestic entities or non-code organizations under a plan of merger
169-16 or exchange having any provision required or permitted by Sections
169-17 10.002, 10.003, 10.004, 10.005, 10.052, and 10.053;
169-18 (3) change the location of the domestic entity's
169-19 registered office, change its registered agent, and remove or
169-20 appoint any agent to receive service of process;
169-21 (4) alter, amend, or repeal the domestic entity's
169-22 governing documents other than filing instruments;
169-23 (5) constitute or reconstitute and classify or
169-24 reclassify the domestic entity's governing authority and name,
169-25 constitute, or appoint managerial officials in place of or in
169-26 addition to all or some of the managerial officials;
169-27 (6) sell, lease, exchange, or otherwise dispose of
170-1 all, or substantially all, of the domestic entity's property and
170-2 assets;
170-3 (7) authorize and fix the terms, manner, and
170-4 conditions of the issuance of bonds, debentures, or other
170-5 obligations, regardless of whether the obligation is convertible
170-6 into ownership interests of any class or bearing warrants or other
170-7 evidences of optional rights to purchase or subscribe for any
170-8 ownership interests of any class;
170-9 (8) wind up and terminate the entity's existence; or
170-10 (9) effect a conversion.
170-11 (b) An action taken under Subsection (a)(4) or (5) takes
170-12 effect on entry of the order approving the plan of reorganization
170-13 or on another effective date as may be specified, without further
170-14 action of the domestic entity, as and to the extent provided by the
170-15 plan of reorganization or the order approving the plan of
170-16 reorganization.
170-17 Sec. 10.302. SIGNING OF DOCUMENTS. A trustee appointed for
170-18 a domestic entity being reorganized under a federal statute, the
170-19 designated officers of a domestic entity being reorganized under a
170-20 federal statute, or any other individual designated by a court
170-21 having jurisdiction of a domestic entity being reorganized under a
170-22 federal statute may sign on behalf of a domestic entity that is
170-23 being reorganized:
170-24 (1) a certificate of amendment or restated certificate
170-25 of formation containing:
170-26 (A) the name of the domestic entity;
170-27 (B) each amendment or the restatement approved
171-1 by the court;
171-2 (C) the date of the court's order approving the
171-3 certificate of amendment or the restatement;
171-4 (D) the name of the court having jurisdiction,
171-5 file name, and case number of the reorganization case in which the
171-6 order was entered; and
171-7 (E) a statement that the court had jurisdiction
171-8 of the case under a federal statute;
171-9 (2) a certificate of merger or exchange containing:
171-10 (A) the name of the domestic entity;
171-11 (B) the part of the plan of reorganization that
171-12 contains the plan of merger or exchange approved by the court,
171-13 which must include the information required by Section 10.151(b) or
171-14 10.152, as applicable, but which is not required to include the
171-15 resolution of the governing authority referred to in Section
171-16 10.152;
171-17 (C) the date of the court's order approving the
171-18 plan of merger or consolidation;
171-19 (D) the name of the court having jurisdiction,
171-20 file name, and case number of the reorganization case in which the
171-21 order or decree was entered; and
171-22 (E) a statement that the court had jurisdiction
171-23 of the case under a federal statute;
171-24 (3) a certificate of termination containing:
171-25 (A) the name of the domestic entity;
171-26 (B) the information required by Sections
171-27 11.101(c)(1)-(4);
172-1 (C) the date of the court's order approving the
172-2 certificate of termination;
172-3 (D) a statement that the obligations of the
172-4 domestic entity, including debts and liabilities, have been paid or
172-5 discharged as provided by the plan of reorganization and the
172-6 remaining property and assets of the domestic entity have been
172-7 distributed as provided by the plan of reorganization;
172-8 (E) the name of the court having jurisdiction,
172-9 file name, and case number of the reorganization case in which the
172-10 order or decree was entered; and
172-11 (F) a statement that the court had jurisdiction
172-12 of the case under a federal statute;
172-13 (4) a statement of change of registered office or
172-14 registered agent, or both, containing:
172-15 (A) the name of the domestic entity;
172-16 (B) the information required by Section
172-17 5.202(b), as applicable, but not the information included in the
172-18 statement referred to in Section 5.202(b)(6);
172-19 (C) the date of the court's order approving the
172-20 statement of change of registered office or registered agent, or
172-21 both;
172-22 (D) the name of the court having jurisdiction,
172-23 file name, and case number of the reorganization case in which the
172-24 order or decree was entered; and
172-25 (E) a statement that the court had jurisdiction
172-26 of the case under a federal statute; or
172-27 (5) a certificate of conversion containing:
173-1 (A) the name of the domestic entity;
173-2 (B) the part of the plan of reorganization that
173-3 contains the plan of conversion approved by the court, which must
173-4 include the information required by Section 10.103;
173-5 (C) the date of the court's order or decree
173-6 approving the plan of conversion;
173-7 (D) the name of the court having jurisdiction,
173-8 file name, and case number of the reorganization case in which the
173-9 order was entered; and
173-10 (E) a statement that the court had jurisdiction
173-11 of the case under a federal statute.
173-12 Sec. 10.303. REORGANIZATION WITH OTHER ENTITIES. If a
173-13 domestic entity or non-code organization that is not being
173-14 reorganized under a federal statute merges or exchanges an interest
173-15 with a domestic entity that is being reorganized under a plan of
173-16 reorganization under a federal statute:
173-17 (1) Subchapters A, B, D, E, and H apply to the
173-18 domestic entity or non-code organization that is not being
173-19 reorganized to the same extent those subchapters would apply if the
173-20 domestic entity or non-code organization were merging or engaging
173-21 in an interest exchange with a domestic entity that is not being
173-22 reorganized, except as otherwise provided by the plan of
173-23 reorganization ordered by a court under the federal statute;
173-24 (2) Subchapter H applies to a subsidiary organization
173-25 that is not being reorganized to the same extent that subchapter
173-26 would apply if the subsidiary organization were merging with a
173-27 parent organization that is not being reorganized;
174-1 (3) on the receipt of all required authorization for
174-2 all action required by this code for each domestic entity that is a
174-3 party to the plan of merger or exchange that is not being
174-4 reorganized and all action by each domestic entity or non-code
174-5 organization that is a party to the plan of merger or exchange
174-6 required by the laws of the entity's or organization's jurisdiction
174-7 of formation and governing documents, a certificate of merger or
174-8 exchange shall be signed by each domestic entity or non-code
174-9 organization that is a party to the merger or exchange other than
174-10 the domestic entity that is being reorganized as provided by
174-11 Section 10.151 and on behalf of the domestic entity that is being
174-12 reorganized by the persons specified in Section 10.302;
174-13 (4) the certificate of merger or exchange must contain
174-14 the information required by Section 10.302(2);
174-15 (5) the certificate of merger or exchange must be
174-16 filed in the manner provided by Section 10.153; and
174-17 (6) on the acceptance for filing of the certificate of
174-18 merger or exchange in accordance with Subchapter D, the merger or
174-19 interest exchange, when effective, has the same effect as if it had
174-20 been adopted by unanimous action of the governing authority and
174-21 owners or members of the domestic entity being reorganized, and the
174-22 effectiveness of the merger or interest exchange is determined as
174-23 provided by Section 10.007 or 10.054.
174-24 Sec. 10.304. RIGHT OF DISSENT AND APPRAISAL EXCLUDED. An
174-25 owner or member of a domestic entity being reorganized under a
174-26 federal statute does not have a right to dissent and appraisal
174-27 under this code except as provided by the plan of reorganization.
175-1 Sec. 10.305. AFTER FINAL DECREE. This subchapter does not
175-2 apply after the entry of a final decree in a reorganization case
175-3 under a federal statute even though the court that renders the
175-4 decree may retain jurisdiction of the case for limited purposes
175-5 unrelated to consummation of the plan of reorganization.
175-6 Sec. 10.306. CHAPTER CUMULATIVE OF OTHER CHANGES. This
175-7 chapter does not preclude other changes in a domestic entity or its
175-8 ownership or membership interests or securities by a plan of
175-9 reorganization ordered by a court under a federal statute.
175-10 (Sections 10.307-10.350 reserved for expansion)
175-11 SUBCHAPTER H. RIGHTS OF DISSENTING OWNERS
175-12 Sec. 10.351. APPLICABILITY OF SUBCHAPTER. (a) This
175-13 subchapter does not apply to a fundamental business transaction of
175-14 a domestic entity if, immediately before the effective date of the
175-15 fundamental business transaction, all of the ownership interests of
175-16 the entity otherwise entitled to rights to dissent and appraisal
175-17 under this code are held by one owner or only by the owners who
175-18 approved the fundamental business transaction.
175-19 (b) This subchapter applies only to a "domestic entity
175-20 subject to dissenters' rights," as defined in Section 1.002. That
175-21 term includes a domestic for-profit corporation, professional
175-22 corporation, professional association, and real estate investment
175-23 trust.
175-24 Sec. 10.352. DEFINITIONS. In this subchapter:
175-25 (1) "Dissenting owner" means an owner of an ownership
175-26 interest in a domestic entity subject to dissenters' rights who:
175-27 (A) provides notice under Section 10.356; and
176-1 (B) complies with the requirements for
176-2 perfecting that owner's right to dissent under this subchapter.
176-3 (2) "Responsible organization" means:
176-4 (A) the organization responsible for:
176-5 (i) the provision of notices under this
176-6 subchapter; and
176-7 (ii) the primary obligation of paying the
176-8 fair value for an ownership interest held by a dissenting owner;
176-9 (B) with respect to a merger or conversion:
176-10 (i) for matters occurring before the
176-11 merger or conversion, the organization that is merging or
176-12 converting; and
176-13 (ii) for matters occurring after the
176-14 merger or conversion, the surviving or new organization that is
176-15 primarily obligated for the payment of the fair value of the
176-16 dissenting owner's ownership interest in the merger or conversion;
176-17 (C) with respect to an interest exchange, the
176-18 organization the ownership interests of which are being acquired in
176-19 the interest exchange; and
176-20 (D) with respect to the sale of all or
176-21 substantially all of the assets of an organization, the
176-22 organization the assets of which are to be transferred by sale or
176-23 in another manner.
176-24 Sec. 10.353. FORM AND VALIDITY OF NOTICE. (a) Notice
176-25 required under this subchapter:
176-26 (1) must be in writing; and
176-27 (2) may be mailed, hand delivered, or delivered by
177-1 courier or electronic transmission.
177-2 (b) Failure to provide notice as required by this subchapter
177-3 does not invalidate any action taken.
177-4 Sec. 10.354. RIGHTS OF DISSENT AND APPRAISAL. (a) Subject
177-5 to Subsection (b), an owner of an ownership interest in a domestic
177-6 entity subject to dissenters' rights, is entitled to:
177-7 (1) dissent from:
177-8 (A) a plan of merger to which the domestic
177-9 entity is a party if owner approval is required by this code and
177-10 the owner owns in the domestic entity an ownership interest that
177-11 was entitled to vote on the plan of merger;
177-12 (B) a sale of all or substantially all of the
177-13 assets of the domestic entity if owner approval is required by this
177-14 code and the owner owns in the domestic entity an ownership
177-15 interest that was entitled to vote on the sale;
177-16 (C) a plan of exchange in which the ownership
177-17 interest of the owner is to be acquired;
177-18 (D) a plan of conversion in which the domestic
177-19 entity is the converting entity if owner approval is required by
177-20 this code and the owner owns in the domestic entity an ownership
177-21 interest that was entitled to vote on the plan of conversion; or
177-22 (E) a plan of merger effected under Section
177-23 10.006 in which:
177-24 (i) the owner is entitled to vote on the
177-25 plan; or
177-26 (ii) the ownership interest of the owner
177-27 is converted or exchanged; and
178-1 (2) subject to compliance with the procedures set
178-2 forth in this subchapter, obtain the fair value of that ownership
178-3 interest through an appraisal.
178-4 (b) Notwithstanding Subsection (a), an owner may not dissent
178-5 from a plan of merger or conversion in which there is a single
178-6 surviving or new domestic entity or non-code organization, or from
178-7 a plan of exchange, if:
178-8 (1) the ownership interest held by the owner is part
178-9 of a class or series of ownership interests that are, on the record
178-10 date set for purposes of determining which owners are entitled to
178-11 vote on the plan of merger, conversion, or exchange, as
178-12 appropriate:
178-13 (A) listed on a national securities exchange or
178-14 a similar system;
178-15 (B) listed on the Nasdaq Stock Market or a
178-16 successor quotation system;
178-17 (C) designated as a national market security on
178-18 an interdealer quotation system by the National Association of
178-19 Securities Dealers, Inc., or a successor system; or
178-20 (D) held of record by at least 2,000 owners;
178-21 (2) the owner is not required by the terms of the plan
178-22 of merger, conversion, or exchange, as appropriate, to accept for
178-23 the owner's ownership interest any consideration that is different
178-24 from the consideration to be provided to any other holder of an
178-25 ownership interest of the same class or series as the ownership
178-26 interest held by the owner, other than cash instead of fractional
178-27 shares or interests the owner would otherwise be entitled to
179-1 receive; and
179-2 (3) the owner is not required by the terms of the plan
179-3 of merger, conversion, or exchange, as appropriate, to accept for
179-4 the owner's ownership interest any consideration other than:
179-5 (A) ownership interests of a domestic entity or
179-6 non-code organization of the same general organizational type that,
179-7 immediately after the effective date of the merger, conversion, or
179-8 exchange, as appropriate, will be part of a class or series of
179-9 ownership interests that are:
179-10 (i) listed on a national securities
179-11 exchange or authorized for listing on the exchange on official
179-12 notice of issuance;
179-13 (ii) approved for quotation as a national
179-14 market security on an interdealer quotation system by the National
179-15 Association of Securities Dealers, Inc., or a successor entity; or
179-16 (iii) held of record by at least 2,000
179-17 owners;
179-18 (B) cash instead of fractional ownership
179-19 interests the owner would otherwise be entitled to receive; or
179-20 (C) any combination of the ownership interests
179-21 and cash described by Paragraphs (A) and (B).
179-22 Sec. 10.355. NOTICE OF RIGHT OF DISSENT AND APPRAISAL.
179-23 (a) A domestic entity subject to dissenters' rights that takes or
179-24 proposes to take an action regarding which an owner has a right to
179-25 dissent and obtain an appraisal under Section 10.354 shall notify
179-26 each affected owner of the owner's rights under that section if:
179-27 (1) the action or proposed action is submitted to a
180-1 vote of the owners at a meeting; or
180-2 (2) approval of the action or proposed action is
180-3 obtained by written consent of the owners instead of being
180-4 submitted to a vote of the owners.
180-5 (b) If a domestic entity subject to dissenters' rights
180-6 effects or proposes to effect a merger under Section 10.006, the
180-7 responsible organization shall notify the owners who have a right
180-8 to dissent to the merger under Section 10.354 of their rights under
180-9 this subchapter not later than the 10th day after the effective
180-10 date of the merger.
180-11 (c) A notice required to be provided under Subsection (a) or
180-12 (b) must:
180-13 (1) be accompanied by a copy of this subchapter; and
180-14 (2) advise the owner of the location of the
180-15 responsible organization's principal executive offices to which a
180-16 notice required under Section 10.356(b)(2) may be provided.
180-17 (d) In addition to the requirements prescribed by Subsection
180-18 (c), a notice required to be provided under Subsection (a)(1) must
180-19 accompany the notice of the meeting to consider the action, and a
180-20 notice required under Subsection (a)(2) must be provided to:
180-21 (1) each owner who consents in writing to the action
180-22 before the owner delivers the written consent; and
180-23 (2) each owner who is entitled to vote on the action
180-24 and does not consent in writing to the action before the 11th day
180-25 after the date the action takes effect.
180-26 (e) Not later than the 10th day after the date an action
180-27 described by Subsection (a)(1) takes effect, the responsible
181-1 organization shall give notice that the action has been effected to
181-2 each owner who voted against the action and sent notice under
181-3 Section 10.356(b)(2).
181-4 Sec. 10.356. PROCEDURE FOR DISSENT BY OWNERS AS TO ACTIONS;
181-5 PERFECTION OF RIGHT OF DISSENT AND APPRAISAL. (a) An owner of an
181-6 ownership interest of a domestic entity subject to dissenters'
181-7 rights who has the right to dissent and appraisal from any of the
181-8 actions referred to in Section 10.354 may exercise that right to
181-9 dissent and appraisal only by complying with the procedures
181-10 specified in this subchapter. An owner's right of dissent and
181-11 appraisal under Section 10.354 may be exercised by an owner only
181-12 with respect to an ownership interest that is not voted in favor of
181-13 the action.
181-14 (b) To perfect the owner's rights of dissent and appraisal
181-15 under Section 10.354, an owner:
181-16 (1) with respect to the ownership interest for which
181-17 the rights of dissent and appraisal are sought:
181-18 (A) must vote against the action if the owner is
181-19 entitled to vote on the action and the action is approved at a
181-20 meeting of the owners; and
181-21 (B) may not consent to the action if the action
181-22 is approved by written consent; and
181-23 (2) must give to the responsible organization a notice
181-24 dissenting to the action that:
181-25 (A) is addressed to the president and secretary
181-26 of the responsible organization;
181-27 (B) demands payment of the fair value of the
182-1 ownership interests for which the rights of dissent and appraisal
182-2 are sought;
182-3 (C) provides to the responsible organization an
182-4 address to which a notice relating to the dissent and appraisal
182-5 procedures under this subchapter may be sent;
182-6 (D) states the number and class of the ownership
182-7 interests of the domestic entity owned by the owner and the fair
182-8 value of the ownership interests as estimated by the owner; and
182-9 (E) is delivered to the responsible organization
182-10 at its principal executive offices at the following time:
182-11 (i) before the action is considered for
182-12 approval, if the action is to be submitted to a vote of the owners
182-13 at a meeting;
182-14 (ii) not later than the 20th day after the
182-15 date the responsible organization sends to the owner a notice that
182-16 the action was approved by the requisite vote of the owners, if the
182-17 action is to be undertaken on the written consent of the owners; or
182-18 (iii) not later than the 20th day after
182-19 the date the responsible organization sends to the owner a notice
182-20 that the merger was effected, if the action is a merger effected
182-21 under Section 10.006.
182-22 (c) An owner who does not make a demand within the period
182-23 required by Subsection (b)(2)(E) is bound by the action and is not
182-24 entitled to exercise the rights of dissent and appraisal under
182-25 Section 10.354.
182-26 (d) Not later than the 20th day after the date an owner
182-27 makes a demand under this section, the owner must submit to the
183-1 responsible organization any certificates representing the
183-2 ownership interest to which the demand relates for purposes of
183-3 making a notation on the certificates that a demand for the payment
183-4 of the fair value of an ownership interest has been made under this
183-5 section. An owner's failure to submit the certificates within the
183-6 required period has the effect of terminating, at the option of the
183-7 responsible organization, the owner's rights to dissent and
183-8 appraisal under Section 10.354 unless a court, for good cause
183-9 shown, directs otherwise.
183-10 (e) If a domestic entity and responsible organization
183-11 satisfy the requirements of this subchapter relating to the rights
183-12 of owners of ownership interests in the entity to dissent to an
183-13 action and seek appraisal of those ownership interests, an owner of
183-14 an ownership interest who fails to perfect that owner's right of
183-15 dissent in accordance with this subchapter may not bring suit to
183-16 recover the value of the ownership interest or money damages
183-17 relating to the action.
183-18 Sec. 10.357. WITHDRAWAL OF DEMAND FOR FAIR VALUE OF
183-19 OWNERSHIP INTEREST. Unless the responsible organization consents
183-20 to the withdrawal of the demand, an owner may not withdraw a demand
183-21 for the payment of the fair value of an ownership interest made
183-22 under Section 10.356 before:
183-23 (1) payment for the ownership interest has been made
183-24 under Sections 10.358 and 10.361; or
183-25 (2) a petition has been filed under Section 10.361.
183-26 Sec. 10.358. RESPONSE BY ORGANIZATION TO NOTICE OF DISSENT
183-27 AND DEMAND FOR FAIR VALUE BY DISSENTING OWNER. (a) Not later than
184-1 the 20th day after the date a responsible organization receives a
184-2 demand for payment made by a dissenting owner in accordance with
184-3 Section 10.356, the responsible organization shall respond to the
184-4 dissenting owner in writing by:
184-5 (1) accepting the amount claimed in the demand as the
184-6 fair value of the ownership interests specified in the notice; or
184-7 (2) rejecting the demand and including in the response
184-8 the requirements prescribed by Subsection (c).
184-9 (b) If the responsible organization accepts the amount
184-10 claimed in the demand, the responsible organization shall pay the
184-11 amount not later than the 90th day after the date the action that
184-12 is the subject of the demand was effected if the owner delivers to
184-13 the responsible organization:
184-14 (1) endorsed certificates representing the ownership
184-15 interests if the ownership interests are certificated; or
184-16 (2) signed assignments of the ownership interests if
184-17 the ownership interests are uncertificated.
184-18 (c) If the responsible organization rejects the amount
184-19 claimed in the demand, the responsible organization shall provide
184-20 to the owner:
184-21 (1) an estimate by the responsible organization of the
184-22 fair value of the ownership interests; and
184-23 (2) an offer to pay the amount of the estimate
184-24 provided under Subdivision (1).
184-25 (d) An offer made under Subsection (c)(2) must remain open
184-26 for a period of at least 60 days from the date the offer is first
184-27 delivered to the dissenting owner.
185-1 (e) If a dissenting owner accepts an offer made by a
185-2 responsible organization under Subsection (c)(2) or if a dissenting
185-3 owner and a responsible organization reach an agreement on the fair
185-4 value of the ownership interests, the responsible organization
185-5 shall pay the agreed amount not later than the 60th day after the
185-6 date the offer is accepted or the agreement is reached, as
185-7 appropriate, if the dissenting owner delivers to the responsible
185-8 organization:
185-9 (1) endorsed certificates representing the ownership
185-10 interests if the ownership interests are certificated; or
185-11 (2) signed assignments of the ownership interests if
185-12 the ownership interests are uncertificated.
185-13 Sec. 10.359. RECORD OF DEMAND FOR FAIR VALUE OF OWNERSHIP
185-14 INTEREST. (a) A responsible organization shall note in the
185-15 organization's ownership interest records maintained under Section
185-16 3.151 the receipt of a demand for payment from any dissenting owner
185-17 made under Section 10.356.
185-18 (b) If an ownership interest that is the subject of a demand
185-19 for payment made under Section 10.356 is transferred, a new
185-20 certificate representing that ownership interest must contain:
185-21 (1) a reference to the demand; and
185-22 (2) the name of the original dissenting owner of the
185-23 ownership interest.
185-24 Sec. 10.360. RIGHTS OF TRANSFEREE OF CERTAIN OWNERSHIP
185-25 INTEREST. A transferee of an ownership interest that is the
185-26 subject of a demand for payment made under Section 10.356 does not
185-27 acquire additional rights with respect to the responsible
186-1 organization following the transfer. The transferee has only the
186-2 rights the original dissenting owner had with respect to the
186-3 responsible organization after making the demand.
186-4 Sec. 10.361. PROCEEDING TO DETERMINE FAIR VALUE OF OWNERSHIP
186-5 INTEREST AND OWNERS ENTITLED TO PAYMENT; APPOINTMENT OF APPRAISERS.
186-6 (a) If a responsible organization rejects the amount demanded by a
186-7 dissenting owner under Section 10.358 and the dissenting owner and
186-8 responsible organization are unable to reach an agreement relating
186-9 to the fair value of the ownership interests within the period
186-10 prescribed by Section 10.358(d), the dissenting owner or
186-11 responsible organization may file a petition requesting a finding
186-12 and determination of the fair value of the owner's ownership
186-13 interests in a court in:
186-14 (1) the county in which the organization's principal
186-15 office is located in this state; or
186-16 (2) the county in which the organization's registered
186-17 office is located in this state, if the organization does not have
186-18 a business office in this state.
186-19 (b) A petition described by Subsection (a) must be filed not
186-20 later than the 60th day after the expiration of the period required
186-21 by Section 10.358(d).
186-22 (c) On the filing of a petition by an owner under Subsection
186-23 (a), service of a copy of the petition shall be made to the
186-24 responsible organization. Not later than the 10th day after the
186-25 date a responsible organization receives service under this
186-26 subsection, the responsible organization shall file with the clerk
186-27 of the court in which the petition was filed a list containing the
187-1 names and addresses of each owner of the organization who has
187-2 demanded payment for ownership interests under Section 10.356 and
187-3 with whom agreement as to the value of the ownership interests has
187-4 not been reached with the responsible organization. If the
187-5 responsible organization files a petition under Subsection (a), the
187-6 petition must be accompanied by this list.
187-7 (d) The clerk of the court in which a petition is filed
187-8 under this section shall provide by registered mail notice of the
187-9 time and place set for the hearing to:
187-10 (1) the responsible organization; and
187-11 (2) each owner named on the list described by
187-12 Subsection (c) at the address shown for the owner on the list.
187-13 (e) The court shall:
187-14 (1) determine which owners have:
187-15 (A) perfected their rights by complying with
187-16 this subchapter; and
187-17 (B) become subsequently entitled to receive
187-18 payment for the fair value of their ownership interests; and
187-19 (2) appoint one or more qualified appraisers to
187-20 determine the fair value of the ownership interests of the owners
187-21 described by Subdivision (1).
187-22 (f) The court shall approve the form of a notice required to
187-23 be provided under this section. The judgment of the court is final
187-24 and binding on the responsible organization, any other organization
187-25 obligated to make payment under this subchapter for an ownership
187-26 interest, and each owner who is notified as required by this
187-27 section.
188-1 Sec. 10.362. COMPUTATION AND DETERMINATION OF FAIR VALUE OF
188-2 OWNERSHIP INTEREST. (a) For purposes of this subchapter, the fair
188-3 value of an ownership interest of a domestic entity subject to
188-4 dissenters' rights is the value of the ownership interest on the
188-5 date preceding the date of the action that is the subject of the
188-6 appraisal. Any appreciation or depreciation in the value of the
188-7 ownership interest occurring in anticipation of the proposed action
188-8 or as a result of the action must be specifically excluded from the
188-9 computation of the fair value of the ownership interest.
188-10 (b) In computing the fair value of an ownership interest
188-11 under this subchapter, consideration must be given to the value of
188-12 the organization as a going concern without including in the
188-13 computation of value any:
188-14 (1) payment for a control premium or minority discount
188-15 other than a discount attributable to the type of ownership
188-16 interests held by the dissenting owner; and
188-17 (2) limitation placed on the rights and preferences of
188-18 those ownership interests.
188-19 (c) The determination of the fair value of an ownership
188-20 interest made for purposes of this subchapter may not be used for
188-21 purposes of making a determination of the fair value of that
188-22 ownership interest for another purpose or of the fair value of
188-23 another ownership interest, including for purposes of determining
188-24 any minority or liquidity discount that might apply to a sale of an
188-25 ownership interest.
188-26 Sec. 10.363. POWERS AND DUTIES OF APPRAISER; APPRAISAL
188-27 PROCEDURES. (a) An appraiser appointed under Section 10.361 has
189-1 the power and authority that:
189-2 (1) is granted by the court in the order appointing
189-3 the appraiser; and
189-4 (2) may be conferred by a court to a master in
189-5 chancery as provided by Rule 171, Texas Rules of Civil Procedure.
189-6 (b) The appraiser shall:
189-7 (1) determine the fair value of an ownership interest
189-8 of an owner adjudged by the court to be entitled to payment for the
189-9 ownership interest; and
189-10 (2) file with the court a report of that
189-11 determination.
189-12 (c) The appraiser is entitled to examine the books and
189-13 records of a responsible organization and may conduct
189-14 investigations as the appraiser considers appropriate. A
189-15 dissenting owner or responsible organization may submit to an
189-16 appraiser evidence or other information relevant to the
189-17 determination of the fair value of the ownership interest required
189-18 by Subsection (b)(1).
189-19 (d) The clerk of the court appointing the appraiser shall
189-20 provide notice of the filing of the report under Subsection (b) to
189-21 each dissenting owner named in the list filed under Section 10.361
189-22 and the responsible organization.
189-23 Sec. 10.364. OBJECTION TO APPRAISAL; HEARING. (a) A
189-24 dissenting owner or responsible organization may object, based on
189-25 the law or the facts, to all or part of an appraisal report
189-26 containing the fair value of an ownership interest determined under
189-27 Section 10.363(b).
190-1 (b) If an objection to a report is raised under Subsection
190-2 (a), the court shall hold a hearing to determine the fair value of
190-3 the ownership interest that is the subject of the report. After
190-4 the hearing, the court shall require the responsible organization
190-5 to pay to the holders of the ownership interest the amount of the
190-6 determined value with interest, accruing from the 91st day after
190-7 the date the applicable action for which the owner elected to
190-8 dissent was effected until the date of the judgment.
190-9 (c) Interest under Subsection (b) accrues at the same rate
190-10 as is provided for the accrual of prejudgment interest in civil
190-11 cases.
190-12 (d) The responsible organization shall:
190-13 (1) immediately pay the amount of the judgment to a
190-14 holder of an uncertificated ownership interest; and
190-15 (2) pay the amount of the judgment to a holder of a
190-16 certificated ownership interest immediately after the certificate
190-17 holder surrenders to the responsible organization an endorsed
190-18 certificate representing the ownership interest.
190-19 (e) On payment of the judgment, the dissenting owner does
190-20 not have an interest in the:
190-21 (1) ownership interest for which the payment is made;
190-22 or
190-23 (2) responsible organization with respect to that
190-24 ownership interest.
190-25 Sec. 10.365. COURT COSTS; COMPENSATION FOR APPRAISER.
190-26 (a) An appraiser appointed under Section 10.361 is entitled to a
190-27 reasonable fee payable from court costs.
191-1 (b) All court costs shall be allocated between the
191-2 responsible organization and the dissenting owners in the manner
191-3 that the court determines to be fair and equitable.
191-4 Sec. 10.366. STATUS OF OWNERSHIP INTEREST HELD OR FORMERLY
191-5 HELD BY DISSENTING OWNER. (a) An ownership interest of an
191-6 organization acquired by a responsible organization under this
191-7 subchapter:
191-8 (1) in the case of a merger, conversion, or interest
191-9 exchange, shall be held or disposed of as provided in the plan of
191-10 merger, conversion, or interest exchange; and
191-11 (2) in any other case, may be held or disposed of by
191-12 the responsible organization in the same manner as other ownership
191-13 interests acquired by the organization or held in its treasury.
191-14 (b) An owner who has demanded payment for the owner's
191-15 ownership interest under Section 10.356 is not entitled to vote or
191-16 exercise any other rights of another owner with respect to the
191-17 ownership interest except the right to:
191-18 (1) receive payment for the ownership interest under
191-19 this subchapter; and
191-20 (2) bring an appropriate action to obtain relief on
191-21 the ground that the action to which the demand relates would be or
191-22 was fraudulent.
191-23 (c) An ownership interest for which payment has been
191-24 demanded under Section 10.356 may not be considered outstanding for
191-25 purposes of any subsequent vote or action.
191-26 Sec. 10.367. RIGHTS OF OWNERS FOLLOWING TERMINATION OF RIGHT
191-27 OF DISSENT. (a) The rights of a dissenting owner terminate if:
192-1 (1) the owner withdraws the demand under Section
192-2 10.356;
192-3 (2) the owner's right of dissent is terminated under
192-4 Section 10.356;
192-5 (3) a petition is not filed within the period required
192-6 by Section 10.361; or
192-7 (4) after a hearing held under Section 10.361, the
192-8 court adjudges that the owner is not entitled to elect to dissent
192-9 from an action under this subchapter.
192-10 (b) On termination of the right of dissent under this
192-11 section:
192-12 (1) the dissenting owner and all persons claiming a
192-13 right under the owner are conclusively presumed to have approved
192-14 and ratified the action to which the owner dissented and are bound
192-15 by that action;
192-16 (2) the owner's right to be paid the fair value of the
192-17 owner's ownership interests ceases and the owner's status as an
192-18 owner of those ownership interests is restored without prejudice in
192-19 any interim proceeding if the owner's ownership interests were not
192-20 canceled, converted, or exchanged as a result of the action or a
192-21 subsequent fundamental business transaction; and
192-22 (3) the dissenting owner is entitled to receive
192-23 dividends or other distributions made in the interim to owners of
192-24 the same class and series of ownership interests held by the owner
192-25 as if a demand for the payment of the ownership interests had not
192-26 been made under Section 10.356, subject to any change in or
192-27 adjustment to ownership interests because of the cancellation or
193-1 exchange of the ownership interests after the date a demand under
193-2 Section 10.356 was made pursuant to a fundamental business
193-3 transaction.
193-4 Sec. 10.368. EXCLUSIVITY OF REMEDY OF DISSENT AND APPRAISAL.
193-5 In the absence of fraud in the transaction, any right of an owner
193-6 of an ownership interest to dissent from an action and obtain the
193-7 fair value of the ownership interest under this subchapter is the
193-8 exclusive remedy for recovery of:
193-9 (1) the value of the ownership interest or money
193-10 damages to the owner with respect to the ownership interest; and
193-11 (2) the owner's right in the organization with respect
193-12 to a fundamental business transaction.
193-13 (Sections 10.369-10.900 reserved for expansion)
193-14 SUBCHAPTER Z. MISCELLANEOUS PROVISIONS
193-15 Sec. 10.901. CREDITORS; ANTITRUST. This code does not
193-16 affect, nullify, or repeal the antitrust laws or abridge any right
193-17 or rights of any creditor under existing laws.
193-18 Sec. 10.902. NONEXCLUSIVITY. This chapter does not limit
193-19 the power of a domestic entity or non-code organization to acquire
193-20 all or part of the ownership or membership interests of one or more
193-21 classes or series of a domestic entity through a voluntary exchange
193-22 or otherwise.
193-23 CHAPTER 11. WINDING UP AND TERMINATION OF DOMESTIC ENTITY
193-24 SUBCHAPTER A. GENERAL PROVISIONS
193-25 Sec. 11.001. DEFINITIONS. In this chapter:
193-26 (1) "Claim" means a right to payment, damages, or
193-27 property, whether liquidated or unliquidated, accrued or
194-1 contingent, matured or unmatured.
194-2 (2) "Event requiring a winding up" means an event
194-3 specified by Section 11.051.
194-4 (3) "Existing claim" with respect to an entity means:
194-5 (A) a claim against the entity that existed
194-6 before the entity's termination and is not barred by limitations;
194-7 or
194-8 (B) a contractual obligation incurred after
194-9 termination.
194-10 (4) "Terminated entity" means a domestic entity the
194-11 existence of which has been:
194-12 (A) terminated in a manner authorized or
194-13 required by this code, unless the entity has been reinstated in the
194-14 manner provided by this code; or
194-15 (B) forfeited pursuant to the Tax Code, unless
194-16 the forfeiture has been set aside.
194-17 (5) "Voluntary decision to wind up" means the
194-18 determination to wind up a domestic entity made by the domestic
194-19 entity or the owners, members, or governing authority of the
194-20 domestic entity in the manner specified by the title of this code
194-21 governing the domestic entity.
194-22 (6) "Voluntary winding up" means winding up as a
194-23 result of a voluntary decision to wind up.
194-24 (7) "Winding up" means the process of winding up the
194-25 business and affairs of a domestic entity as a result of the
194-26 occurrence of an event requiring winding up.
194-27 (Sections 11.002-11.050 reserved for expansion)
195-1 SUBCHAPTER B. WINDING UP OF DOMESTIC ENTITY
195-2 Sec. 11.051. EVENT REQUIRING WINDING UP OF DOMESTIC ENTITY.
195-3 Winding up of a domestic entity is required on:
195-4 (1) the expiration of the domestic entity's period of
195-5 duration, if not perpetual;
195-6 (2) a voluntary decision to wind up the domestic
195-7 entity;
195-8 (3) an event specified in the governing documents of
195-9 the domestic entity requiring the winding up, dissolution, or
195-10 termination of the domestic entity;
195-11 (4) an event specified in this code requiring the
195-12 winding up or termination of the domestic entity; or
195-13 (5) a decree by a court requiring the winding up or
195-14 dissolution of the domestic entity, rendered under this code or
195-15 other law.
195-16 Sec. 11.052. WINDING UP PROCEDURES. (a) Except as provided
195-17 by the title of this code governing the domestic entity, on the
195-18 occurrence of an event requiring winding up of a domestic entity,
195-19 unless the event requiring winding up is revoked under Section
195-20 11.151 or canceled under Section 11.152, the owners, members,
195-21 managerial officials, or other persons specified in the title of
195-22 this code governing the domestic entity shall, as soon as
195-23 reasonably practicable, wind up the business and affairs of the
195-24 domestic entity. The domestic entity shall:
195-25 (1) cease to carry on its business, except to the
195-26 extent necessary to wind up its business;
195-27 (2) except as provided by Title 4, send a written
196-1 notice of the winding up to each known claimant against the
196-2 domestic entity;
196-3 (3) collect and sell its property to the extent the
196-4 property is not to be distributed in kind to the domestic entity's
196-5 owners or members; and
196-6 (4) perform any other act required to wind up its
196-7 business and affairs.
196-8 (b) During the winding up process, the domestic entity may
196-9 prosecute or defend a civil, criminal or administrative action.
196-10 Sec. 11.053. PROPERTY APPLIED TO DISCHARGE LIABILITIES AND
196-11 OBLIGATIONS. (a) Except as provided by Subsection (b) and the
196-12 title of this code governing the domestic entity, a domestic entity
196-13 in the process of winding up shall apply and distribute its
196-14 property to discharge, or make adequate provision for the discharge
196-15 of, all of the domestic entity's liabilities and obligations.
196-16 (b) Except as provided by the title of this code governing
196-17 the domestic entity, if the property of a domestic entity is not
196-18 sufficient to discharge all of the domestic entity's liabilities
196-19 and obligations, the domestic entity shall:
196-20 (1) apply its property, to the extent possible, to the
196-21 just and equitable discharge of its liabilities and obligations,
196-22 including liabilities and obligations owed to owners or members,
196-23 other than for distributions; or
196-24 (2) make adequate provision for the application of the
196-25 property described by Subdivision (1).
196-26 (c) Except as provided by the title of this code governing
196-27 the domestic entity, after a domestic entity has discharged, or
197-1 made adequate provision for the discharge of, all of its
197-2 liabilities and obligations, the domestic entity shall distribute
197-3 the remainder of its property, in cash or in kind, to the domestic
197-4 entity's owners according to their respective rights and interests.
197-5 (d) A domestic entity may continue its business wholly or
197-6 partly, including delaying the disposition of property of the
197-7 domestic entity, for the limited period necessary to avoid
197-8 unreasonable loss of the entity's property or business.
197-9 Sec. 11.054. COURT SUPERVISION OF WINDING UP PROCESS. On
197-10 application of a domestic entity or an owner or member of a
197-11 domestic entity, a court may:
197-12 (1) supervise the winding up of the domestic entity;
197-13 (2) appoint a person to carry out the winding up of
197-14 the domestic entity; and
197-15 (3) make any other order, direction, or inquiry that
197-16 the circumstances may require.
197-17 Sec. 11.055. COURT ACTION OR PROCEEDING DURING WINDING UP.
197-18 During the winding up process, a domestic entity may continue
197-19 prosecuting or defending a court action or proceeding by or against
197-20 the domestic entity.
197-21 (Sections 11.056-11.100 reserved for expansion)
197-22 SUBCHAPTER C. TERMINATION OF DOMESTIC ENTITY
197-23 Sec. 11.101. CERTIFICATE OF TERMINATION FOR FILING ENTITY.
197-24 (a) On completion of the winding up process under Subchapter B, a
197-25 filing entity must file a certificate of termination in accordance
197-26 with Chapter 4.
197-27 (b) A certificate from the comptroller that all taxes
198-1 administered by the comptroller under Title 2, Tax Code, have been
198-2 paid must be filed with the certificate of termination in
198-3 accordance with Chapter 4 if the filing entity is a professional
198-4 corporation, for-profit corporation, or limited liability company.
198-5 (c) The certificate of termination must contain:
198-6 (1) the name of the filing entity;
198-7 (2) the name and address of each of the filing
198-8 entity's governing persons;
198-9 (3) the entity's file number assigned by the secretary
198-10 of state, unless the entity is a real estate investment trust;
198-11 (4) the nature of the event requiring winding up;
198-12 (5) a statement that the filing entity has complied
198-13 with the provisions of this code governing its winding up; and
198-14 (6) any other information required by this code to be
198-15 included in the certificate of termination for the filing entity.
198-16 Sec. 11.102. EFFECTIVENESS OF TERMINATION OF FILING ENTITY.
198-17 Except as otherwise provided by this chapter, the existence of a
198-18 filing entity terminates on the filing of a certificate of
198-19 termination with the filing officer.
198-20 Sec. 11.103. EFFECTIVENESS OF TERMINATION OF NONFILING
198-21 ENTITY. Except as otherwise provided by this chapter, the
198-22 existence of a nonfiling entity terminates on the completion of the
198-23 winding up of its business and affairs. Notice of the termination
198-24 must be provided by the nonfiling entity in the manner provided in
198-25 the governing documents of the nonfiling entity if notice of
198-26 termination is required under the governing documents.
198-27 Sec. 11.104. ACTION BY THE SECRETARY OF STATE. The
199-1 secretary of state shall remove from its active records a domestic
199-2 filing entity whose period of duration has expired when the
199-3 secretary of state determines that:
199-4 (1) the entity has failed to file a certificate of
199-5 termination in accordance with Section 11.101; and
199-6 (2) the entity has failed to file an amendment to
199-7 extend its existence in accordance with Section 11.152.
199-8 (Sections 11.105-11.150 reserved for expansion)
199-9 SUBCHAPTER D. REVOCATION AND CONTINUATION
199-10 Sec. 11.151. REVOCATION OF VOLUNTARY WINDING UP. (a)
199-11 Before the termination of the existence of a domestic entity takes
199-12 effect, the domestic entity may revoke a voluntary decision to wind
199-13 up the entity by approval of the revocation in the manner specified
199-14 in the title of this code governing the entity.
199-15 (b) A domestic entity may continue its business following
199-16 the revocation of a voluntary decision to wind up under Subsection
199-17 (a).
199-18 Sec. 11.152. CONTINUATION OF BUSINESS WITHOUT WINDING UP.
199-19 (a) Subject to Subsections (c) and (d), a domestic entity to which
199-20 an event requiring the winding up of the entity occurs as specified
199-21 by Section 11.051(3) or (4) may cancel the event requiring winding
199-22 up in the manner specified in the title of this code governing the
199-23 domestic entity not later than the first anniversary of the date of
199-24 the event requiring winding up or an earlier period prescribed by
199-25 the title of this code governing the domestic entity.
199-26 (b) A domestic entity to which an event requiring winding up
199-27 as specified in Section 11.051(1) occurs may cancel the event
200-1 requiring winding up by amending its governing documents in the
200-2 manner provided by this code, not later than the third anniversary
200-3 of the date of the event requiring winding up or an earlier date
200-4 prescribed by the title of this code governing the domestic entity,
200-5 to extend the period of its duration in perpetuity or for a
200-6 definite time. The expiration of the period of its duration does
200-7 not by itself create a vested right on the part of an owner,
200-8 member, or creditor of the entity to prevent the extension of its
200-9 existence. An act undertaken or a contract entered into by a
200-10 terminated entity during a period in which the entity could have
200-11 extended its existence under this section is not invalidated by the
200-12 expiration of the period of the entity's duration, regardless of
200-13 whether the entity has taken any action to extend its existence.
200-14 (c) A domestic entity may not cancel an event requiring
200-15 winding up specified in Section 11.051(3) and continue its business
200-16 if the action is prohibited by the entity's governing documents or
200-17 the title of this code governing the entity.
200-18 (d) A domestic entity may cancel an event requiring winding
200-19 up specified in Section 11.051(4) and continue its business only if
200-20 the action:
200-21 (1) is not prohibited by the entity's governing
200-22 documents; and
200-23 (2) is expressly authorized by the title of this code
200-24 governing the entity.
200-25 (e) On cancellation of an event requiring winding up under
200-26 this section, the domestic entity may continue its business.
200-27 (Sections 11.153-11.200 reserved for expansion)
201-1 SUBCHAPTER E. REINSTATEMENT OF TERMINATED ENTITY
201-2 Sec. 11.201. CONDITIONS FOR REINSTATEMENT. (a) A
201-3 terminated entity may be reinstated under this subchapter if:
201-4 (1) the termination was by mistake or inadvertent;
201-5 (2) the termination occurred without the approval of
201-6 the entity's governing persons when their approval is required by
201-7 the title of this code governing the terminated entity;
201-8 (3) the process of winding up before termination had
201-9 not been completed by the entity; or
201-10 (4) the legal existence of the entity is necessary to:
201-11 (A) convey or assign property;
201-12 (B) settle or release a claim or liability;
201-13 (C) take an action; or
201-14 (D) sign an instrument or agreement.
201-15 (b) A terminated entity may not be reinstated under this
201-16 section if the termination occurred as a result of:
201-17 (1) an order of a court or the secretary of state;
201-18 (2) an event requiring winding up that is specified in
201-19 the title of this code governing the terminated entity, if that
201-20 title prohibits reinstatement; or
201-21 (3) forfeiture under the Tax Code.
201-22 Sec. 11.202. PROCEDURES FOR REINSTATEMENT. (a) To the
201-23 extent applicable, a terminated entity, to be reinstated, must
201-24 complete the requirements of this section not later than the third
201-25 anniversary of the date the termination of the terminated entity's
201-26 existence took effect.
201-27 (b) The owners, members, governing persons, or other persons
202-1 must approve the reinstatement of the domestic entity in the manner
202-2 provided by the title of this code governing the domestic entity.
202-3 (c) After approval of the reinstatement of a filing entity
202-4 that was terminated, and not later than the third anniversary of
202-5 the date of the filing of the entity's certificate of termination,
202-6 the filing entity shall file a certificate of reinstatement in
202-7 accordance with Chapter 4.
202-8 (d) A certificate of reinstatement filed under Subsection
202-9 (c) must contain:
202-10 (1) the name of the filing entity;
202-11 (2) the filing number assigned by filing officer to
202-12 the entity;
202-13 (3) the effective date of the entity's termination;
202-14 (4) a statement that the reinstatement of the filing
202-15 entity has been approved in the manner required by this code; and
202-16 (5) the name of the entity's registered agent and the
202-17 address of the entity's registered office.
202-18 (e) A letter of eligibility from the comptroller of public
202-19 accounts stating that the filing entity has satisfied all franchise
202-20 tax liabilities and may be reinstated must be filed with the
202-21 certificate of reinstatement, if the filing entity is a
202-22 professional corporation, for-profit corporation or limited
202-23 liability company.
202-24 Sec. 11.203. USE OF NAME SIMILAR TO PREVIOUSLY REGISTERED
202-25 NAME. If the secretary of state determines that a filing entity's
202-26 name contained in a certificate of reinstatement filed under
202-27 Section 11.202 is the same as, deceptively similar or similar to a
203-1 name of a filing entity or foreign entity on file as provided by
203-2 or reserved or registered under this code, the secretary of state
203-3 may not accept for filing the certificate of reinstatement unless
203-4 the filing entity contemporaneously amends its certificate of
203-5 formation to change its name or obtains consent for the use of the
203-6 similar name.
203-7 Sec. 11.204. EFFECTIVENESS OF REINSTATEMENT OF NONFILING
203-8 ENTITY. The reinstatement of a terminated nonfiling entity takes
203-9 effect on the approval required by Section 11.202(b).
203-10 Sec. 11.205. EFFECTIVENESS OF REINSTATEMENT OF FILING
203-11 ENTITY. The reinstatement of a terminated filing entity that
203-12 previously filed a certificate of termination takes effect on the
203-13 filing of the entity's certificate of reinstatement.
203-14 Sec. 11.206. EFFECT OF REINSTATEMENT. When the
203-15 reinstatement of a terminated entity takes effect:
203-16 (1) the existence of the terminated entity is
203-17 considered to have continued without interruption from the date of
203-18 termination; and
203-19 (2) the terminated entity may carry on its business as
203-20 if the termination of its existence had not occurred.
203-21 (Sections 11.207-11.250 reserved for expansion)
203-22 SUBCHAPTER F. INVOLUNTARY TERMINATION OF FILING
203-23 ENTITY BY SECRETARY OF STATE
203-24 Sec. 11.251. TERMINATION OF FILING ENTITY BY SECRETARY OF
203-25 STATE. (a) If it appears to the secretary of state that, with
203-26 respect to a filing entity, a circumstance described by Subsection
203-27 (b) exists, the secretary of state may notify the entity of the
204-1 circumstance by regular or certified mail addressed to the entity
204-2 at the entity's registered office or principal place of business as
204-3 shown on the records of the secretary of state.
204-4 (b) The secretary of state may terminate a filing entity's
204-5 existence if the secretary finds that the entity has failed to,
204-6 and, before the 91st day after the date notice was mailed has not
204-7 corrected the entity's failure to:
204-8 (1) file a report within the period required by law or
204-9 to pay a fee or penalty prescribed by law when due and payable;
204-10 (2) maintain a registered agent or registered office
204-11 in this state as required by law; or
204-12 (3) pay a fee required in connection with a filing, or
204-13 payment of the fee was dishonored when presented by the state for
204-14 payment.
204-15 Sec. 11.252. CERTIFICATE OF TERMINATION. (a) The secretary
204-16 of state may terminate a filing entity's existence by issuing and
204-17 delivering to the filing entity at its registered office or
204-18 principal place of business a certificate of termination. The
204-19 certificate must state that the filing entity has been
204-20 involuntarily terminated and the date and cause of the termination.
204-21 (b) Except as otherwise provided by this chapter, the
204-22 existence of the filing entity is terminated on the issuance of the
204-23 certificate of termination by the secretary of state.
204-24 Sec. 11.253. REINSTATEMENT AFTER INVOLUNTARY TERMINATION.
204-25 (a) The secretary of state shall reinstate a filing entity that
204-26 has been involuntarily terminated under this subchapter if the
204-27 entity:
205-1 (1) files a certificate of reinstatement in accordance
205-2 with Section 11.202 accompanied by each amendment to the entity's
205-3 certificate of formation that is required by intervening events,
205-4 including circumstances requiring an amendment to the filing
205-5 entity's name; and
205-6 (2) has corrected the circumstances that led to the
205-7 involuntary termination and any other circumstances that may exist
205-8 of the types described by Section 11.251(b), including the payment
205-9 of fees, interest, or penalties.
205-10 (b) If a filing entity is reinstated before the third
205-11 anniversary of the date of its involuntary termination, the entity
205-12 is considered to have continued in existence without interruption
205-13 from the date of termination.
205-14 Sec. 11.254. REINSTATEMENT OF TAX FORFEITURE OF CERTIFICATE
205-15 OF FORMATION. A filing entity whose certificate of formation has
205-16 been forfeited under the provisions of the Tax Code must follow the
205-17 procedures in the Tax Code to reinstate its certificate of
205-18 formation.
205-19 (Sections 11.255-11.300 reserved for expansion)
205-20 SUBCHAPTER G. JUDICIAL WINDING UP AND TERMINATION
205-21 Sec. 11.301. GROUNDS CONSTITUTING INVOLUNTARY WINDING UP AND
205-22 TERMINATION OF FILING ENTITY BY STATE ACTION. A court may enter a
205-23 decree requiring winding up of a filing entity's business and
205-24 termination of the filing entity's existence if, as the result of
205-25 an action brought under Section 11.303, the court finds that one or
205-26 more of the following problems exist:
205-27 (1) the filing entity or its organizers did not comply
206-1 with a condition precedent to its formation;
206-2 (2) the certificate of formation of the filing entity
206-3 or any amendment to the certificate of formation was fraudulently
206-4 filed;
206-5 (3) the filing entity has continued to transact
206-6 business beyond the scope of the purpose of the filing entity as
206-7 expressed in its certificate of formation;
206-8 (4) a misrepresentation of a material matter has been
206-9 made in an application, report, affidavit, or other document
206-10 submitted by the filing entity under this code; or
206-11 (5) public interest requires winding up and
206-12 termination of the filing entity because:
206-13 (A) the filing entity has been convicted of a
206-14 felony or a high managerial agent of the filing entity has been
206-15 convicted of a felony committed in the conduct of the filing
206-16 entity's affairs; and
206-17 (B) the filing entity or high managerial agent
206-18 has engaged in a persistent course of felonious conduct and
206-19 termination is necessary to prevent future felonious conduct of the
206-20 same character.
206-21 Sec. 11.302. NOTIFICATION OF CAUSE OF ACTION BY SECRETARY OF
206-22 STATE. (a) The secretary of state shall provide to the attorney
206-23 general:
206-24 (1) the name of a filing entity that has given cause
206-25 under Section 11.301 for involuntary winding up of the entity's
206-26 business and termination of the entity's existence; and
206-27 (2) the facts relating to the cause for the winding up
207-1 and termination.
207-2 (b) When notice is provided under Subsection (a), the
207-3 secretary of state shall notify the filing entity of the
207-4 circumstances by writing sent to the entity at its registered
207-5 office in this state. The notice must state that the secretary of
207-6 state has given notice under Subsection (a) and the grounds for the
207-7 notification. The secretary of state must record the date a notice
207-8 required by this subsection is sent.
207-9 (c) A court shall accept a certificate issued by the
207-10 secretary of state as to the facts relating to the cause for the
207-11 winding up and termination and the sending of a notice under
207-12 Subsection (b) as prima facie evidence of the facts stated in the
207-13 certificate and the sending of the notice.
207-14 Sec. 11.303. FILING OF ACTION BY ATTORNEY GENERAL. If the
207-15 attorney general determines that cause exists for the involuntary
207-16 winding up of a filing entity's business and termination of the
207-17 entity's existence under Section 11.301 and the filing entity has
207-18 not cured the problems for which winding up and termination is
207-19 sought before the 31st day after the date the notice under Section
207-20 11.302(b) is sent to the filing entity, the attorney general shall
207-21 file an action against the filing entity in the name of the state
207-22 seeking the winding up and termination.
207-23 Sec. 11.304. CURE BEFORE FINAL JUDGMENT. An action filed by
207-24 the attorney general under Section 11.303 shall be abated if,
207-25 before a district court renders judgment on the action, the filing
207-26 entity:
207-27 (1) cures the problems for which winding up and
208-1 termination is sought; and
208-2 (2) pays the costs of the action.
208-3 Sec. 11.305. JUDGMENT REQUIRING WINDING UP AND TERMINATION.
208-4 If a district court finds in an action brought under this
208-5 subchapter that proper grounds exist under Sections 11.301(1)-(4)
208-6 for a winding up of a filing entity's business and termination of
208-7 the filing entity's existence, the court shall:
208-8 (1) make findings to that effect; and
208-9 (2) subject to Section 11.306, enter a judgment not
208-10 earlier than the fifth day after the date the court makes its
208-11 findings.
208-12 Sec. 11.306. APPLICATION FOR STAY OF JUDGMENT. (a) If, in
208-13 an action brought under this subchapter, a filing entity has proved
208-14 by a preponderance of the evidence and obtained a finding that the
208-15 problems for which the filing entity has been found guilty were not
208-16 wilful or the result of a failure to take reasonable precautions,
208-17 the entity may make a sworn application to the court for a stay of
208-18 entry of the judgment to allow the filing entity a reasonable
208-19 opportunity to cure the problems for which it has been found
208-20 guilty. An application made under this subsection must be made not
208-21 later than the fifth day after the date the court makes its
208-22 findings under Section 11.305.
208-23 (b) After a filing entity has made an application under
208-24 Subsection (a), a court shall stay the entry of the judgment if the
208-25 court is reasonably satisfied after considering the application and
208-26 evidence offered with respect to the application that the filing
208-27 entity:
209-1 (1) is able and intends in good faith to cure the
209-2 problems for which it has been found guilty; and
209-3 (2) has not applied for the stay without just cause.
209-4 (c) A court shall stay an entry of judgment under Subsection
209-5 (b) for the period the court determines is reasonably necessary to
209-6 afford the filing entity the opportunity to cure its problems if
209-7 the entity acts with reasonable diligence. The court may not stay
209-8 the entry of the judgment for longer than 60 days after the date
209-9 the court's findings are made.
209-10 (d) The court shall dismiss an action against a filing
209-11 entity that, during the period the action is stayed by the court
209-12 under this section, cures the problems for which winding up and
209-13 termination is sought and pays all costs accrued in the action.
209-14 (e) If a court finds that a filing entity has not cured the
209-15 problems for which winding up and termination is sought within the
209-16 period prescribed by Subsection (c), the court shall enter final
209-17 judgment requiring a winding up of the filing entity's business.
209-18 Sec. 11.307. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF
209-19 FINDINGS BY APPEALS COURT. (a) An appellate court that affirms a
209-20 trial court's findings against a filing entity under this
209-21 subchapter shall remand the case to the trial court with
209-22 instructions to grant the filing entity an opportunity to cure the
209-23 problems for which the entity has been found guilty if:
209-24 (1) the filing entity did not make an application to
209-25 the trial court for stay of the entry of the judgment;
209-26 (2) the appellate court is satisfied that the appeal
209-27 was taken in good faith and not for purpose of delay or with no
210-1 sufficient cause;
210-2 (3) the appellate court finds that the problems for
210-3 which the filing entity has been found guilty are capable of being
210-4 cured; and
210-5 (4) the filing entity has prayed for the opportunity
210-6 to cure its problems in the appeal.
210-7 (b) The appellate court shall determine the period, which
210-8 may not be longer than 60 days after the date the case is remanded
210-9 to the trial court, to be afforded to a filing entity to enable the
210-10 filing entity to cure its problems under Subsection (a).
210-11 (c) The trial court to which an action against a filing
210-12 entity has been remanded under this section shall dismiss the
210-13 action if, during the period prescribed by the appellate court for
210-14 that conduct, the filing entity cures the problems for which
210-15 winding up and termination is sought and pays all costs accrued in
210-16 the action.
210-17 (d) If a filing entity has not cured the problems for which
210-18 winding up and termination is sought within the period prescribed
210-19 by the appellate court under Subsection (b), the judgment requiring
210-20 winding up and termination shall become final.
210-21 Sec. 11.308. JURISDICTION AND VENUE. (a) The attorney
210-22 general shall bring an action for the involuntary winding up and
210-23 termination of a filing entity under this subchapter in:
210-24 (1) a district court of the county in which the
210-25 registered office or principal place of business of the filing
210-26 entity in this state is located; or
210-27 (2) a district court of Travis County.
211-1 (b) A district court described by Subsection (a) has
211-2 jurisdiction of the action for involuntary winding up and
211-3 termination.
211-4 Sec. 11.309. PROCESS IN STATE ACTION. Citation in an action
211-5 for the involuntary winding up and termination of a filing entity
211-6 under this subchapter shall be issued and served as provided by
211-7 law.
211-8 Sec. 11.310. PUBLICATION OF NOTICE. (a) If process in an
211-9 action under this subchapter is returned not found, the attorney
211-10 general shall publish notice in a newspaper in the county in which
211-11 the registered office of the filing entity in this state is
211-12 located. The notice must contain:
211-13 (1) a statement of the pendency of the action;
211-14 (2) the title of the court;
211-15 (3) the title of the action; and
211-16 (4) the earliest date on which default judgment may be
211-17 entered by the court.
211-18 (b) Notice under this section must be published at least
211-19 once a week for two consecutive weeks beginning at any time after
211-20 the citation has been returned.
211-21 (c) The attorney general may include in one published notice
211-22 the name of each filing entity against which an action for
211-23 involuntary winding up and termination is pending in the same
211-24 court.
211-25 (d) Not later than the 10th day after the date notice under
211-26 this section is first published, the attorney general shall send a
211-27 copy of the notice to the filing entity at the filing entity's
212-1 registered office in this state. A certificate from the attorney
212-2 general regarding the sending of the notice is prima facie evidence
212-3 that notice was mailed under this section.
212-4 (e) Unless a filing entity has been served with citation, a
212-5 default judgment may not be taken against the entity before the
212-6 31st day after the date the notice is first published.
212-7 Sec. 11.311. ACTION ALLOWED AFTER EXPIRATION OF FILING
212-8 ENTITY'S DURATION. The expiration of a filing entity's period of
212-9 duration does not, by itself, create a vested right on the part of
212-10 an owner or creditor of the filing entity to prevent an action by
212-11 the attorney general for the involuntary winding up of the filing
212-12 entity's business and termination of the filing entity's existence.
212-13 Sec. 11.312. COMPLIANCE BY TERMINATED ENTITY. On the decree
212-14 of a court requiring winding up of a filing entity's business, the
212-15 filing entity shall comply with:
212-16 (1) the requirements of the decree concerning the
212-17 winding up process; and
212-18 (2) Subchapter B to the extent it does not conflict
212-19 with the decree.
212-20 Sec. 11.313. TIMING OF TERMINATION. A court may enter a
212-21 decree under Section 11.301 terminating the existence of a filing
212-22 entity:
212-23 (1) when the court considers it necessary or
212-24 advisable; or
212-25 (2) on completion of the winding up process.
212-26 Sec. 11.314. INVOLUNTARY WINDING UP AND TERMINATION IN
212-27 PRIVATE ACTIONS. A district court in the county in which the
213-1 registered office or principal place of a domestic partnership or
213-2 limited liability company is located has jurisdiction to order the
213-3 winding up and termination of the domestic partnership or limited
213-4 liability company on application by:
213-5 (1) a partner in the partnership if the court
213-6 determines that:
213-7 (A) the economic purpose of the partnership is
213-8 likely to be unreasonably frustrated; or
213-9 (B) another partner has engaged in conduct
213-10 relating to the partnership's business that makes it not reasonably
213-11 practicable to carry on the business in partnership with that
213-12 partner; or
213-13 (2) an owner of the partnership or limited liability
213-14 company if the court determines that it is not reasonably
213-15 practicable to carry on the entity's business in conformity with
213-16 its governing documents.
213-17 Sec. 11.315. FILING OF DECREE OF TERMINATION AGAINST FILING
213-18 ENTITY. (a) The clerk of a court that enters a decree terminating
213-19 the existence of a filing entity shall file in accordance with
213-20 Chapter 4 a certified copy of the decree.
213-21 (b) A fee may not be charged for the filing of a decree
213-22 under this section.
213-23 (Sections 11.316-11.350 reserved for expansion)
213-24 SUBCHAPTER H. CLAIMS RESOLUTION ON TERMINATION
213-25 Sec. 11.351. LIABILITY OF TERMINATED ENTITY. A terminated
213-26 entity is liable only for an existing claim.
213-27 Sec. 11.352. DEPOSIT WITH COMPTROLLER OF AMOUNT DUE OWNERS
214-1 AND CREDITORS WHO ARE UNKNOWN OR CANNOT BE LOCATED. (a) On the
214-2 voluntary or involuntary termination of a domestic entity, the
214-3 portion of the entity's assets distributable to creditors or owners
214-4 who are unknown or cannot be found after the exercise of reasonable
214-5 diligence by a person responsible for the distribution in
214-6 liquidation of the domestic entity's assets must be reduced to cash
214-7 and deposited as provided by Subsection (b).
214-8 (b) Money from assets liquidated under Subsection (a) shall
214-9 be deposited with the comptroller in a special account to be
214-10 maintained by the comptroller. The money must be accompanied by a
214-11 statement to the comptroller containing:
214-12 (1) the name and last known address of each person who
214-13 is known to be entitled to all or part of the account;
214-14 (2) the amount of each entitled person's distributive
214-15 portion of the money; and
214-16 (3) other information about each person who is
214-17 entitled to all or part of the money as the comptroller may
214-18 reasonably require.
214-19 (c) The comptroller shall issue a receipt for money received
214-20 under this section.
214-21 Sec. 11.353. DISCHARGE OF LIABILITY OF PERSON RESPONSIBLE
214-22 FOR LIQUIDATION. A person responsible for the distribution in
214-23 liquidation of a filing entity's assets will be released and
214-24 discharged from further liability with respect to money received
214-25 from the liquidation when the person deposits the money with the
214-26 comptroller under Section 11.352.
214-27 Sec. 11.354. PAYMENT FROM ACCOUNT BY COMPTROLLER. (a) To
215-1 claim money deposited in an account under Section 11.352, a person
215-2 must submit to the comptroller satisfactory written proof of the
215-3 person's right to the money not later than the seventh anniversary
215-4 of the date the money was deposited with the comptroller.
215-5 (b) The comptroller shall issue a warrant drawn on the
215-6 account created under Section 11.352 in favor of a person who meets
215-7 the requirements for making a claim under Subsection (a) and in the
215-8 amount to which the person is entitled.
215-9 Sec. 11.355. NOTICE OF ESCHEAT; ESCHEAT. (a) If no
215-10 claimant has made satisfactory proof of a right to the money within
215-11 the period prescribed by Section 11.354(a), the comptroller shall
215-12 publish in one issue of a newspaper of general circulation in
215-13 Travis County a notice of the proposed escheat of the money.
215-14 (b) A notice published under Subsection (a) must contain:
215-15 (1) the name and last known address of any known
215-16 creditor or owner entitled to the money;
215-17 (2) the amount of money deposited with the
215-18 comptroller; and
215-19 (3) the name of the terminated filing entity from
215-20 whose assets the money was derived.
215-21 (c) If no claimant makes satisfactory proof to the
215-22 comptroller of a right to the money before the 61st day after the
215-23 date notice under this section is published, the money
215-24 automatically escheats to and becomes the property of the state and
215-25 shall be deposited in the general revenue fund.
215-26 Sec. 11.356. LIMITED SURVIVAL AFTER TERMINATION.
215-27 (a) Notwithstanding the termination of a domestic entity under
216-1 this chapter, a terminated entity continues in existence until the
216-2 third anniversary of the effective date of the entity's termination
216-3 only for purposes of:
216-4 (1) prosecuting or defending in the terminated
216-5 entity's name an action or proceeding brought by or against the
216-6 terminated entity;
216-7 (2) permitting the survival of an existing claim by or
216-8 against the terminated entity;
216-9 (3) holding title to and liquidating property that
216-10 remained with the terminated entity at the time of termination or
216-11 property that is collected by the terminated entity after
216-12 termination;
216-13 (4) applying or distributing property, or its
216-14 proceeds, as provided by Section 11.053; and
216-15 (5) settling affairs not completed before termination.
216-16 (b) A terminated entity may not continue its existence for
216-17 the purpose of continuing the business or affairs for which the
216-18 terminated entity was formed unless the terminated entity is
216-19 reinstated under Subchapter E.
216-20 (c) If an action on an existing claim by or against a
216-21 terminated entity has been brought before the expiration of the
216-22 three-year period after the date of the entity's termination and
216-23 the claim was not extinguished under Section 11.359, the terminated
216-24 entity continues to survive for purposes of:
216-25 (1) the action until all judgments, orders, and
216-26 decrees have been fully executed; and
216-27 (2) the application or distribution of any property of
217-1 the terminated entity as provided by Section 11.053 until the
217-2 property has been applied or distributed.
217-3 Sec. 11.357. GOVERNING PERSONS OF ENTITY DURING LIMITED
217-4 SURVIVAL. (a) During the three-year period that a terminated
217-5 entity's existence is continued under this section, the governing
217-6 persons of the terminated entity serving at the time of termination
217-7 shall continue to manage the affairs of the terminated entity for
217-8 the limited purposes specified by Section 11.356 and have the
217-9 powers necessary to accomplish those purposes. The number of
217-10 governing persons:
217-11 (1) may be reduced because of the death of a governing
217-12 person; and
217-13 (2) may include successors to governing persons chosen
217-14 by the other governing persons.
217-15 (b) In exercising powers prescribed under Subsection (a), a
217-16 governing person:
217-17 (1) has the same duties to the terminated entity that
217-18 the person had immediately before the termination; and
217-19 (2) is liable to the terminated entity for the
217-20 person's actions taken after the entity's termination to the same
217-21 extent that the person would have been liable had the person taken
217-22 those actions before the termination.
217-23 Sec. 11.358. ACCELERATED PROCEDURE FOR EXISTING CLAIM
217-24 RESOLUTION. (a) A terminated entity may shorten the period for
217-25 resolving a person's existing claim against the entity by giving
217-26 notice by registered or certified mail, return receipt requested,
217-27 to the claimant at the claimant's last known address that the claim
218-1 must be resolved under this section.
218-2 (b) The notice required under Subsection (a) must:
218-3 (1) state the requirements of Subsections (c) and (d)
218-4 for presenting a claim;
218-5 (2) provide the mailing address to which the person's
218-6 claim against the terminated entity must be sent;
218-7 (3) state that the claim will be extinguished if
218-8 written presentation of the claim is not received at the address
218-9 given on or before the date specified in the notice, which may not
218-10 be earlier than the 120th day after the date the notice is mailed
218-11 to the person by the terminated entity; and
218-12 (4) be accompanied by a copy of this section of the
218-13 code.
218-14 (c) To assert a claim, a person who is notified by a
218-15 terminated entity that the person's claim must be resolved under
218-16 this section must present the claim in writing to the terminated
218-17 entity at the address given by the entity in the notice.
218-18 (d) A claim presented under Subsection (c) must:
218-19 (1) contain the:
218-20 (A) identity of the claimant; and
218-21 (B) nature and amount of the claim; and
218-22 (2) be received by the terminated entity not later
218-23 than the date specified in the notice under Subsection (b)(3).
218-24 (e) If a person presents a claim that meets the requirements
218-25 of this section, the terminated entity to whom the claim is
218-26 presented may give written notice to the person that the claim is
218-27 rejected by the terminated entity.
219-1 (f) Notice under Subsection (e) must:
219-2 (1) be sent by registered or certified mail, return
219-3 receipt requested, and addressed to the last known address of the
219-4 person presenting the claim;
219-5 (2) state that the claim has been rejected by the
219-6 terminated entity;
219-7 (3) state that the claim will be extinguished unless
219-8 an action on the claim is brought:
219-9 (A) not later than the 180th day after the date
219-10 the notice of rejection of the claim was mailed to the person; and
219-11 (B) not later than the third anniversary of the
219-12 effective date of the entity's termination; and
219-13 (4) state the date on which notice of the claim's
219-14 rejection was mailed and the effective date of the entity's
219-15 termination.
219-16 Sec. 11.359. EXTINGUISHMENT OF AN EXISTING CLAIM.
219-17 (a) Except as provided by Subsection (b), an existing claim by or
219-18 against a terminated entity is extinguished unless an action or
219-19 proceeding is brought on the claim not later than the third
219-20 anniversary of:
219-21 (1) the date of the filing of the entity's certificate
219-22 of termination, if the terminated entity is a filing entity; or
219-23 (2) the date notice is provided to the claimant under
219-24 Section 11.052.
219-25 (b) A person's claim against a terminated entity may be
219-26 extinguished before the period prescribed by Subsection (a) if the
219-27 person is notified under Section 11.358(a) that the claim will be
220-1 resolved under Section 11.358 and the person:
220-2 (1) fails to properly present the claim in writing
220-3 under Sections 11.358(c) and (d); or
220-4 (2) fails to bring an action on a claim rejected under
220-5 Section 11.358(e) before:
220-6 (A) the 180th day after the date the notice
220-7 rejecting the claim was mailed to the person; and
220-8 (B) the third anniversary of the effective date
220-9 of the entity's termination.
220-10 (Sections 11.360-11.400 reserved for expansion)
220-11 SUBCHAPTER I. RECEIVERSHIP
220-12 Sec. 11.401. CODE GOVERNS. A receiver may be appointed for
220-13 a domestic entity or for a domestic entity's property or business
220-14 only as provided for and on the conditions set forth in this code.
220-15 Sec. 11.402. JURISDICTION TO APPOINT RECEIVER. (a) A court
220-16 that has subject matter jurisdiction over specific property of a
220-17 domestic or foreign entity that is located in this state and is
220-18 involved in litigation has jurisdiction to appoint a receiver for
220-19 that property.
220-20 (b) A district court in the county in which the registered
220-21 office or principal place of business of a domestic entity is
220-22 located has jurisdiction to:
220-23 (1) appoint a receiver for the property and business
220-24 of a domestic entity for the purpose of rehabilitating the entity;
220-25 or
220-26 (2) order the liquidation of the property and business
220-27 of a domestic entity and appoint a receiver to effect that
221-1 liquidation.
221-2 Sec. 11.403. APPOINTMENT OF RECEIVER FOR SPECIFIC PROPERTY.
221-3 (a) Subject to Subsection (b), and on the application of a person
221-4 whose right to or interest in any property or fund or the proceeds
221-5 from the property or fund is probable, a court that has
221-6 jurisdiction over specific property of a domestic or foreign entity
221-7 may appoint a receiver in an action:
221-8 (1) by a vendor to vacate a fraudulent purchase of the
221-9 property;
221-10 (2) by a creditor to subject the property or fund to
221-11 the creditor's claim;
221-12 (3) between partners or others jointly owning or
221-13 interested in the property or fund;
221-14 (4) by a mortgagee of the property for the foreclosure
221-15 of the mortgage and sale of the property, when:
221-16 (A) it appears that the mortgaged property is in
221-17 danger of being lost, removed, or materially injured; or
221-18 (B) it appears that the mortgage is in default
221-19 and that the property is probably insufficient to discharge the
221-20 mortgage debt; or
221-21 (5) in which receivers for specific property have been
221-22 previously appointed by courts of equity.
221-23 (b) A court may appoint a receiver for the property or fund
221-24 under Subsection (a) only if:
221-25 (1) with respect to an action brought under Subsection
221-26 (a)(1), (2), or (3), it is shown that the property or fund is in
221-27 danger of being lost, removed, or materially injured;
222-1 (2) circumstances exist that are considered by the
222-2 court to necessitate the appointment of a receiver to conserve the
222-3 property or fund and avoid damage to interested parties;
222-4 (3) all other requirements of law are complied with;
222-5 and
222-6 (4) the court determines that other available legal
222-7 and equitable remedies are inadequate.
222-8 (c) The court appointing a receiver under this section has
222-9 and shall retain exclusive jurisdiction over the specific property
222-10 placed in receivership. The court shall determine the rights of
222-11 the parties in the property or its proceeds.
222-12 (d) If the condition necessitating the appointment of a
222-13 receiver under this section is remedied, the receivership shall be
222-14 terminated immediately, the management of the domestic entity shall
222-15 be restored to its managerial officials, and the receiver shall
222-16 redeliver to the domestic entity all of the property remaining in
222-17 receivership.
222-18 Sec. 11.404. APPOINTMENT OF RECEIVER TO REHABILITATE
222-19 DOMESTIC ENTITY. (a) Subject to Subsection (b), a court that has
222-20 jurisdiction over the property and business of a domestic entity
222-21 under Section 11.402(b) may appoint a receiver for the entity's
222-22 property and business if:
222-23 (1) in an action by an owner or member of the domestic
222-24 entity, it is established that:
222-25 (A) the entity is insolvent or in imminent
222-26 danger of insolvency;
222-27 (B) the governing persons of the entity are
223-1 deadlocked in the management of the entity's affairs, the owners or
223-2 members of the entity are unable to break the deadlock, and
223-3 irreparable injury to the entity is being suffered or is threatened
223-4 because of the deadlock;
223-5 (C) the actions of the governing persons of the
223-6 entity are illegal, oppressive, or fraudulent;
223-7 (D) the property of the entity is being
223-8 misapplied or wasted; or
223-9 (E) with respect to a for-profit corporation,
223-10 the shareholders of the entity are deadlocked in voting power and
223-11 have failed, for a period of at least two years, to elect
223-12 successors to the governing persons of the entity whose terms have
223-13 expired or would have expired on the election and qualification of
223-14 their successors;
223-15 (2) in an action by a creditor of the domestic entity,
223-16 it is established that:
223-17 (A) the entity is insolvent, the claim of the
223-18 creditor has been reduced to judgment, and an execution on the
223-19 judgment was returned unsatisfied; or
223-20 (B) the entity is insolvent and has admitted in
223-21 writing that the claim of the creditor is due and owing; or
223-22 (3) in an action other than an action described by
223-23 Subdivision (1) or (2), courts of equity have previously appointed
223-24 a receiver.
223-25 (b) A court may appoint a receiver under Subsection (a) only
223-26 if:
223-27 (1) circumstances exist that are considered by the
224-1 court to necessitate the appointment of a receiver to conserve the
224-2 property and business of the domestic entity and avoid damage to
224-3 interested parties;
224-4 (2) all other requirements of law are complied with;
224-5 and
224-6 (3) the court determines that all other available
224-7 legal and equitable remedies, including the appointment of a
224-8 receiver for specific property of the domestic entity under Section
224-9 11.402, are inadequate.
224-10 (c) If the condition necessitating the appointment of a
224-11 receiver under this section is remedied, the receivership shall be
224-12 terminated immediately, the management of the domestic entity shall
224-13 be restored to its managerial officials, and the receiver shall
224-14 redeliver to the domestic entity all of its property remaining in
224-15 receivership.
224-16 Sec. 11.405. APPOINTMENT OF RECEIVER TO LIQUIDATE DOMESTIC
224-17 ENTITY; LIQUIDATION. (a) Subject to Subsection (b), a court that
224-18 has jurisdiction over the property and business of a domestic
224-19 entity under Section 11.402(b) may order the liquidation of the
224-20 property and business of the domestic entity and may appoint a
224-21 receiver to effect the liquidation:
224-22 (1) when an action has been filed by the attorney
224-23 general under this chapter to terminate the existence of the entity
224-24 and it is established that liquidation of the entity's business and
224-25 affairs should precede the entry of a decree of termination;
224-26 (2) on application of the entity to have its
224-27 liquidation continued under the supervision of the court;
225-1 (3) if the entity is in receivership and the court
225-2 does not find that any plan presented before the first anniversary
225-3 of the date the receiver was appointed is feasible for remedying
225-4 the condition requiring appointment of the receiver;
225-5 (4) on application of a creditor of the entity if it
225-6 is established that irreparable damage will ensue to the unsecured
225-7 creditors of the domestic entity as a class, generally, unless
225-8 there is an immediate liquidation of the property of the domestic
225-9 entity; or
225-10 (5) on application of an owner, member, or governing
225-11 person of the entity if it is not a for-profit corporation and it
225-12 appears the entity is unable to carry on its business in conformity
225-13 with its governing documents.
225-14 (b) A court may order a liquidation and appoint a receiver
225-15 under Subsection (a) only if:
225-16 (1) the circumstances demand liquidation to avoid
225-17 damage to interested persons;
225-18 (2) all other requirements of law are complied with;
225-19 and
225-20 (3) the court determines that all other available
225-21 legal and equitable remedies, including the appointment of a
225-22 receiver for specific property of the domestic entity and
225-23 appointment of a receiver to rehabilitate the domestic entity, are
225-24 inadequate.
225-25 (c) If the condition necessitating the appointment of a
225-26 receiver under this section is remedied, the receivership shall be
225-27 terminated immediately, the management of the domestic entity shall
226-1 be restored to its managerial officials, and the receiver shall
226-2 redeliver to the domestic entity all of its property remaining in
226-3 receivership.
226-4 Sec. 11.406. RECEIVERS: QUALIFICATIONS, POWERS, AND DUTIES.
226-5 (a) A receiver appointed under this chapter:
226-6 (1) must be an individual citizen of the United States
226-7 or an entity authorized to act as receiver;
226-8 (2) shall give a bond in the amount required by the
226-9 court and with any sureties as may be required by the court;
226-10 (3) may sue and be sued in the receiver's name in any
226-11 court;
226-12 (4) has the powers and duties provided by other laws
226-13 applicable to receivers; and
226-14 (5) has the powers and duties that are stated in the
226-15 order appointing the receiver or that the appointing court:
226-16 (A) considers appropriate to accomplish the
226-17 objectives for which the receiver was appointed; and
226-18 (B) may increase or diminish at any time during
226-19 the proceedings.
226-20 (b) To be appointed a receiver under this chapter, a foreign
226-21 entity must be registered to transact business in this state.
226-22 Sec. 11.407. COURT-ORDERED FILING OF CLAIMS. (a) In a
226-23 proceeding involving a receivership of the property or business of
226-24 a domestic entity, the court may require all claimants of the
226-25 domestic entity to file with the clerk of the court or the
226-26 receiver, in the form provided by the court, proof of their
226-27 respective claims under oath.
227-1 (b) A court that orders the filing of claims under
227-2 Subsection (a) shall:
227-3 (1) set a date, which may not be earlier than four
227-4 months after the date of the order, as the last day for the filing
227-5 of those claims; and
227-6 (2) prescribe the notice that shall be given to
227-7 claimants of the date set under Subdivision (1).
227-8 (c) Before the expiration of the period under Subsection (b)
227-9 for the filing of claims, a court may extend the period for the
227-10 filing of claims to a later date.
227-11 (d) A court may bar a claimant who fails to file a proof of
227-12 claim during the period authorized by the court from participating
227-13 in the distribution of the property of the domestic entity unless
227-14 the claimant presents to the court a justifiable excuse for its
227-15 delay in filing. A court may not order or effect a discharge of a
227-16 claim of the claimant described by this subsection.
227-17 Sec. 11.408. SUPERVISING COURT; JURISDICTION; AUTHORITY.
227-18 (a) A court supervising a receivership under this subchapter may,
227-19 from time to time:
227-20 (1) make allowances to a receiver or attorney in the
227-21 proceeding; and
227-22 (2) direct the payment of a receiver or attorney from
227-23 the property of the domestic entity that is within the scope of the
227-24 receivership or the proceeds of any sale or disposition of that
227-25 property.
227-26 (b) A court that appoints a receiver under this subchapter
227-27 for the property or business of a domestic entity has exclusive
228-1 jurisdiction over the domestic entity and all of its property,
228-2 regardless of where the property is located.
228-3 Sec. 11.409. ANCILLARY RECEIVERSHIPS OF FOREIGN ENTITIES.
228-4 (a) Notwithstanding any provision of this code to the contrary, a
228-5 district court in the county in which the registered office of a
228-6 foreign entity doing business in this state is located has
228-7 jurisdiction to appoint an ancillary receiver for the property and
228-8 business of that entity when the court determines that
228-9 circumstances exist to require the appointment of an ancillary
228-10 receiver.
228-11 (b) A receiver appointed under Subsection (a) serves
228-12 ancillary to a receiver acting under orders of an out-of-state
228-13 court that has jurisdiction to appoint a receiver for the entity.
228-14 Sec. 11.410. RECEIVERSHIP FOR ALL PROPERTY AND BUSINESS OF
228-15 FOREIGN ENTITY. (a) A district court may appoint a receiver for
228-16 all of the property, in and outside this state, of a foreign entity
228-17 doing business in this state and its business if the court
228-18 determines, in accordance with the ordinary usages of equity, that
228-19 circumstances exist that necessitate the appointment of a receiver
228-20 even if a receiver has not been appointed by another court.
228-21 (b) The appointing court shall convert a receivership
228-22 created under Subsection (a) into an ancillary receivership if the
228-23 appointing court determines an ancillary receivership is
228-24 appropriate because a court in another state has ordered a
228-25 receivership of all property and business of the entity.
228-26 Sec. 11.411. GOVERNING PERSONS AND OWNERS NOT NECESSARY
228-27 PARTIES DEFENDANT. Governing persons and owners or members of a
229-1 domestic entity are not necessary parties to an action for a
229-2 receivership or liquidation of the property and business of a
229-3 domestic entity unless relief is sought against those persons
229-4 individually.
229-5 Sec. 11.412. DECREE OF INVOLUNTARY TERMINATION. In an
229-6 action to liquidate the property and business of a domestic entity,
229-7 the court shall enter a decree terminating the entity and the
229-8 existence of the entity shall cease:
229-9 (1) when the costs and expenses of the action and all
229-10 obligations and liabilities of the domestic entity have been paid
229-11 and discharged or adequately provided for and all of the entity's
229-12 remaining property has been distributed to its owners and members;
229-13 or
229-14 (2) if the entity's property is not sufficient to
229-15 discharge the costs and other expenses of the action and all
229-16 obligations and liabilities of the entity, when all the property of
229-17 the entity has been applied toward their payment.
229-18 CHAPTER 12. ADMINISTRATIVE POWERS
229-19 SUBCHAPTER A. SECRETARY OF STATE
229-20 Sec. 12.001. AUTHORITY OF SECRETARY OF STATE. (a) The
229-21 secretary of state may adopt procedural rules for the filing of
229-22 instruments, including the filing of instruments by electronic or
229-23 other means, authorized to be filed with the secretary of state
229-24 under this code.
229-25 (b) The secretary of state has the power and authority
229-26 reasonably necessary to enable the secretary to perform the duties
229-27 imposed on the secretary under this code.
230-1 Sec. 12.002. INTERROGATORIES BY SECRETARY OF STATE. (a) As
230-2 necessary and proper for the secretary of state to determine
230-3 whether a filing entity or a foreign filing entity has complied
230-4 with this code, the secretary of state may serve by mail
230-5 interrogatories on the entity or a managerial official.
230-6 (b) An entity or individual to whom an interrogatory is sent
230-7 by the secretary of state shall answer the interrogatory before the
230-8 later of the 31st day after the date the interrogatory is mailed or
230-9 a date set by the secretary of state. Each answer to an
230-10 interrogatory must be complete, in writing, and under oath. An
230-11 interrogatory directed to an individual shall be answered by the
230-12 individual, and an interrogatory directed to an entity shall be
230-13 answered by a managerial official.
230-14 (c) The secretary of state is not required to file any
230-15 instrument to which an interrogatory relates until the
230-16 interrogatory is answered as provided by this section and only if
230-17 the instrument conforms to the requirements of this code. The
230-18 secretary of state shall certify to the attorney general for action
230-19 as the attorney general may consider appropriate an interrogatory
230-20 and answer to the interrogatory that disclose a violation of this
230-21 code.
230-22 Sec. 12.003. INFORMATION DISCLOSED BY INTERROGATORIES. An
230-23 interrogatory sent by the secretary of state and the answer to the
230-24 interrogatory are subject to Chapter 552, Government Code.
230-25 Sec. 12.004. APPEALS FROM SECRETARY OF STATE. (a) If the
230-26 secretary of state does not approve the filing of a filing
230-27 instrument, the secretary of state shall, before the 11th day after
231-1 the date of the delivery of the filing instrument to the secretary
231-2 of state, notify the person delivering the filing instrument of the
231-3 disapproval and specifying each reason for the disapproval. The
231-4 disapproval of a filing instrument by the secretary of state may be
231-5 appealed only to a district court of Travis County by filing with
231-6 the court clerk a petition, a copy of the filing instrument sought
231-7 to be filed, and a copy of any written disapproval by the secretary
231-8 of state of the filing instrument. The court shall try the appeal
231-9 de novo and shall sustain the action of the secretary of state or
231-10 direct the secretary to take any action the court considers to be
231-11 proper.
231-12 (b) A final order or judgment entered by the district court
231-13 under this section in review of any ruling or decision of the
231-14 secretary of state may be appealed as in other civil actions.
231-15 (Sections 12.005-12.150 reserved for expansion)
231-16 SUBCHAPTER B. ATTORNEY GENERAL
231-17 Sec. 12.151. AUTHORITY OF ATTORNEY GENERAL TO EXAMINE BOOKS
231-18 AND RECORDS. Each filing entity and foreign filing entity shall
231-19 permit the attorney general to inspect, examine, and make copies,
231-20 as the attorney general considers necessary in the performance of a
231-21 power or duty of the attorney general, of any record of the entity.
231-22 A record of the entity includes minutes and a book, account,
231-23 letter, memorandum, document, check, voucher, telegram,
231-24 constitution, and bylaw.
231-25 Sec. 12.152. REQUEST TO EXAMINE. To examine the business of
231-26 a filing entity or foreign filing entity, the attorney general
231-27 shall make a written request to a managerial official, who shall
232-1 immediately permit the attorney general to inspect, examine, and
232-2 make copies of the records of the entity.
232-3 Sec. 12.153. AUTHORITY TO EXAMINE MANAGEMENT OF ENTITY. The
232-4 attorney general may investigate the organization, conduct, and
232-5 management of a filing entity or foreign filing entity and
232-6 determine if the entity has been or is engaged in acts or conduct
232-7 in violation of:
232-8 (1) its governing documents; or
232-9 (2) any law of this state.
232-10 Sec. 12.154. AUTHORITY TO DISCLOSE INFORMATION. Information
232-11 held by the attorney general and derived in the course of an
232-12 examination of an entity's records or documents is not public
232-13 information, is not subject to Chapter 552, Government Code, and
232-14 may not be disclosed except:
232-15 (1) in the course of an administrative or judicial
232-16 proceeding in which the state is a party;
232-17 (2) in a suit by the state to:
232-18 (A) revoke the registration of the foreign
232-19 filing entity or terminate the certificate of formation of the
232-20 filing entity; or
232-21 (B) collect penalties for a violation of the law
232-22 of this state; or
232-23 (3) to provide information to any officer of this
232-24 state charged with the enforcement of its laws.
232-25 Sec. 12.155. FORFEITURE OF BUSINESS PRIVILEGES. A foreign
232-26 filing entity or a filing entity that fails or refuses to permit
232-27 the attorney general to examine or make copies of a record, without
233-1 regard to whether the record is located in this or another state,
233-2 forfeits the right of the entity to do business in this state, and
233-3 the entity's registration or certificate of formation shall be
233-4 revoked or terminated.
233-5 Sec. 12.156. CRIMINAL PENALTY. (a) A managerial official
233-6 or other individual having the authority to manage the affairs of a
233-7 filing entity or foreign filing entity commits an offense if the
233-8 official or individual fails or refuses to permit the attorney
233-9 general to make an investigation of the entity or to examine or to
233-10 make copies of a record of the entity.
233-11 (b) An offense under this section is a Class B misdemeanor.
233-12 (Sections 12.157-12.200 reserved for expansion)
233-13 SUBCHAPTER C. ENFORCEMENT LIEN
233-14 Sec. 12.201. LIEN FOR LAW VIOLATIONS. (a) If a filing
233-15 entity or foreign filing entity violates a law of this state,
233-16 including the law against trusts, monopolies, and conspiracies, or
233-17 combinations or contracts in restraint of trade, for the violation
233-18 of which a fine, penalties, or forfeiture is provided, all of the
233-19 entity's property in this state at the time of the violation or
233-20 that after the violation comes into this state is, because of the
233-21 violation, liable for any fine or penalty under this chapter and
233-22 for costs of suit and costs of collection.
233-23 (b) The state has a lien on all property of a filing entity
233-24 or foreign filing entity in this state on the date a suit is
233-25 instituted by or under the direction of the attorney general in a
233-26 court of this state for the purpose of forfeiting the certificate
233-27 of formation or revoking the registration of the entity or for the
234-1 collection of a fine or penalty due to the state.
234-2 (c) The filing of a suit for a fine, penalties, or
234-3 forfeiture is notice of the lien.
234-4 (Sections 12.202-12.250 reserved for expansion)
234-5 SUBCHAPTER D. ENFORCEMENT PROCEEDINGS
234-6 Sec. 12.251. RECEIVER. In a suit filed by this state
234-7 against a filing entity or foreign filing entity for the
234-8 termination of the entity's certificate of formation or
234-9 registration or for a fine or penalty, the court in this state in
234-10 which the suit is pending:
234-11 (1) shall appoint a receiver for the property and
234-12 business of the entity in this state or that subsequently comes
234-13 into this state during the receivership if the filing entity or
234-14 foreign filing entity commences the process of winding up its
234-15 business in this or another state or a judgment is rendered against
234-16 it in this or another state for the termination of the entity's
234-17 certificate of formation or registration; and
234-18 (2) may appoint a receiver for the entity if the
234-19 interest of the state requires the appointment.
234-20 Sec. 12.252. FORECLOSURE. (a) The attorney general may
234-21 bring suit to foreclose a lien created by this chapter.
234-22 (b) If a filing entity or a foreign filing entity subject to
234-23 this code has commenced the winding up process or has had the
234-24 entity's certificate of formation or registration terminated by a
234-25 judgment, citation in a suit for foreclosure may be served on any
234-26 person in this state who acted and was acting as agent of the
234-27 entity in this state when the entity commenced the winding up
235-1 process or the entity's certificate of formation or registration
235-2 was terminated.
235-3 Sec. 12.253. ACTION AGAINST INSOLVENT ENTITY. When the
235-4 attorney general is convinced that a filing entity or foreign
235-5 filing entity is insolvent, the attorney general shall institute
235-6 quo warranto or other appropriate proceedings to terminate the
235-7 certificate of formation or registration of the filing entity or
235-8 foreign filing entity that is insolvent.
235-9 Sec. 12.254. SUITS BY DISTRICT OR COUNTY ATTORNEY. A
235-10 district or county attorney shall bring and prosecute a proceeding
235-11 under Section 12.252 or 12.253 when directed to do so by the
235-12 attorney general.
235-13 Sec. 12.255. PERMISSION TO SUE. Before a petition may be
235-14 filed by the attorney general or by a district or county attorney
235-15 in a suit authorized by Section 12.252 or 12.253, leave must be
235-16 granted by the judge of the court in which the proceeding is to be
235-17 filed.
235-18 Sec. 12.256. EXAMINATION AND NOTICE. (a) The judge of a
235-19 court in which a proceeding under Section 12.252 or 12.253 is to be
235-20 filed shall carefully examine the petition before granting leave to
235-21 sue. The judge may also require an examination into the facts. If
235-22 it appears with reasonable certainty from the petition or from the
235-23 petition and facts that there is a prima facie showing for the
235-24 relief sought, the judge may grant leave to file.
235-25 (b) On an application for the appointment of a receiver, the
235-26 entity proceeded against is entitled to 10 days' notice before the
235-27 day set for the hearing.
236-1 Sec. 12.257. DISMISSAL OF ACTION. (a) A suit authorized by
236-2 Section 12.253 or 12.258 may not be filed or, if filed, shall be
236-3 dismissed if the entity, through its owners or members, reduces its
236-4 indebtedness so that it is not insolvent.
236-5 (b) The respondent shall pay the costs of a dismissed suit
236-6 under this section.
236-7 Sec. 12.258. LIQUIDATION OF INSOLVENT ENTITY. (a) A court
236-8 hearing a proceeding under Section 12.253 against an insolvent
236-9 entity may, after the entity has been shown to be insolvent,
236-10 appoint one or more receivers for the entity and its property. The
236-11 receiver may settle the affairs of the entity, collect outstanding
236-12 debts, and divide the money and property belonging to the entity
236-13 among its owners after paying the debts of the entity and all
236-14 expenses incidental to the judicial proceedings and receivership.
236-15 (b) The court may continue the existence of the entity for
236-16 three years, and for additional reasonable time as necessary to
236-17 accomplish the purposes of this subchapter.
236-18 Sec. 12.259. EXTRAORDINARY REMEDIES; BOND. The state has a
236-19 right to a writ of attachment, garnishment, sequestration, or
236-20 injunction, without bond, to aid in the enforcement of the state's
236-21 rights created by this chapter.
236-22 Sec. 12.260. ABATEMENT OF SUIT. An action or cause of
236-23 action for a fine, penalty, or forfeiture that this state has or
236-24 may have against a filing entity or foreign filing entity does not
236-25 abate because the entity dissolves, voluntarily or otherwise, or
236-26 the entity's certificate of formation is terminated or the entity's
236-27 registration is revoked.
237-1 Sec. 12.261. PROVISIONS CUMULATIVE. Each right or remedy
237-2 provided by this chapter is cumulative and does not affect any
237-3 other right or remedy for the enforcement, payment, or collection
237-4 of a fine, forfeiture, or penalty or any other means provided by
237-5 law for securing or preserving testimony or inquiring into the
237-6 rights or privileges of an entity.
237-7 TITLE 2. CORPORATIONS
237-8 CHAPTER 20. GENERAL PROVISIONS
237-9 Sec. 20.001. REQUIREMENT THAT FILING INSTRUMENT BE SIGNED BY
237-10 OFFICER. Unless otherwise provided by this title, a filing
237-11 instrument of a corporation must be signed by an officer of the
237-12 corporation.
237-13 Sec. 20.002. ULTRA VIRES ACTS. (a) Lack of capacity of a
237-14 corporation may not be the basis of any claim or defense at law or
237-15 in equity.
237-16 (b) An act of a corporation or a transfer of property by or
237-17 to a corporation is not invalid because the act or transfer was:
237-18 (1) beyond the scope of the purpose or purposes of the
237-19 corporation as expressed in the corporation's certificate of
237-20 formation; or
237-21 (2) inconsistent with a limitation on the authority of
237-22 an officer or director to exercise a statutory power of the
237-23 corporation, as that limitation is expressed in the corporation's
237-24 certificate of formation.
237-25 (c) The fact that an act or transfer is beyond the scope of
237-26 the expressed purpose or purposes of the corporation or is
237-27 inconsistent with an expressed limitation on the authority of an
238-1 officer or director may be asserted in a proceeding:
238-2 (1) by a shareholder or member against the corporation
238-3 to enjoin the performance of an act or the transfer of property by
238-4 or to the corporation;
238-5 (2) by the corporation, acting directly or through a
238-6 receiver, trustee, or other legal representative, or through
238-7 members in a representative suit, against an officer or director or
238-8 former officer or director of the corporation for exceeding that
238-9 person's authority; or
238-10 (3) by the attorney general to:
238-11 (A) terminate the corporation;
238-12 (B) enjoin the corporation from performing an
238-13 unauthorized act; or
238-14 (C) enforce divestment of real property acquired
238-15 or held contrary to the laws of this state.
238-16 (d) If the unauthorized act or transfer sought to be
238-17 enjoined under Subsection (c)(1) is being or is to be performed or
238-18 made under a contract to which the corporation is a party and if
238-19 each party to the contract is a party to the proceeding, the court
238-20 may set aside and enjoin the performance of the contract. The
238-21 court may award to the corporation or to another party to the
238-22 contract, as appropriate, compensation for loss or damage resulting
238-23 from the action of the court in setting aside and enjoining the
238-24 performance of the contract, excluding loss of anticipated profits.
238-25 CHAPTER 21. FOR-PROFIT CORPORATIONS
238-26 SUBCHAPTER A. GENERAL PROVISIONS
238-27 Sec. 21.001. APPLICABILITY OF CHAPTER. This chapter applies
239-1 only to a:
239-2 (1) domestic for-profit corporation formed under this
239-3 code; and
239-4 (2) foreign for-profit corporation that is transacting
239-5 business in this state, regardless of whether the foreign
239-6 corporation is registered to transact business in this state.
239-7 Sec. 21.002. DEFINITIONS. In this chapter:
239-8 (1) "Authorized share" means a share of any class the
239-9 corporation is authorized to issue.
239-10 (2) "Board of directors" includes each person who is
239-11 authorized to perform the functions of the board of directors under
239-12 a shareholders' agreement as authorized by this chapter.
239-13 (3) "Cancel," with respect to an authorized share of a
239-14 corporation, means the restoration of an issued share to the status
239-15 of an authorized but unissued share.
239-16 (4) "Consuming assets corporation" means a corporation
239-17 that:
239-18 (A) is engaged in the business of exploiting
239-19 assets subject to depletion or amortization;
239-20 (B) states in its certificate of formation that
239-21 it is a consuming assets corporation;
239-22 (C) includes the phrase "a consuming assets
239-23 corporation" as part of its official corporate name and gives the
239-24 phrase equal prominence with the rest of the corporate name on the
239-25 financial statements and certificates of ownership of the
239-26 corporation; and
239-27 (D) includes in each of the certificates of
240-1 ownership of the corporation the sentence, "This corporation is
240-2 permitted by law to pay dividends out of reserves that may impair
240-3 its stated capital."
240-4 (5) "Corporation" or "domestic corporation" means a
240-5 domestic for-profit corporation subject to this chapter.
240-6 (6) "Distribution" does not include:
240-7 (A) an amendment to the corporation's
240-8 certificate of formation to change the shares of a class or series,
240-9 with or without par value, into the same or a different number of
240-10 shares of the same or a different class or series, with or without
240-11 par value; or
240-12 (B) a split-up or division of the issued shares
240-13 of a class of a corporation into a larger number of shares within
240-14 the same class that does not increase the stated capital of the
240-15 corporation.
240-16 (7) "Foreign corporation" means a for-profit
240-17 corporation formed under the laws of a jurisdiction other than this
240-18 state.
240-19 (8) "Investment Company Act" means the Investment
240-20 Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as amended.
240-21 (9) "Net assets" means the amount by which the total
240-22 assets of a corporation exceed the total debts of the corporation.
240-23 (10) "Share distribution" means a distribution by a
240-24 corporation that is payable in authorized but unissued shares or
240-25 treasury shares of the corporation.
240-26 (11) "Stated capital" means the sum of:
240-27 (A) the par value of all shares of the
241-1 corporation with par value that have been issued;
241-2 (B) the consideration, as expressed in terms of
241-3 United States dollars, determined by the corporation in the manner
241-4 provided by Section 21.160 for all shares of the corporation
241-5 without par value that have been issued, except the part of the
241-6 consideration that:
241-7 (i) has been actually received;
241-8 (ii) is less than all of that
241-9 consideration; and
241-10 (iii) the board, by resolution adopted not
241-11 later than the 60th day after the date of issuance of those shares,
241-12 has allocated to surplus; and
241-13 (C) an amount not included in Paragraphs (A) and
241-14 (B) that has been transferred to stated capital of the corporation,
241-15 on the payment of a share distribution or on adoption by the board
241-16 of directors of a resolution directing that all or part of surplus
241-17 be transferred to stated capital, minus each reduction made as
241-18 permitted by law.
241-19 (12) "Surplus" means the amount by which the net
241-20 assets of a corporation exceed the stated capital of the
241-21 corporation.
241-22 (13) "Treasury shares" means shares of a corporation
241-23 that have been issued, and subsequently acquired by the
241-24 corporation, that belong to the corporation and that have not been
241-25 canceled. The term does not include shares held by a corporation
241-26 in a fiduciary capacity, whether directly or through a trust or
241-27 similar arrangement.
242-1 Sec. 21.003. PERMISSIBLE PURPOSE OF CORPORATION RELATED TO
242-2 RAILROADS. Notwithstanding Section 2.003(2)(E), a corporation may:
242-3 (1) construct, acquire, maintain, and operate street
242-4 railways, suburban railways, and belt lines of railways in or near
242-5 municipalities to transport freight and passengers;
242-6 (2) construct, own, and operate union depots;
242-7 (3) buy, sell, and convey rights-of-way on which to
242-8 construct railroads;
242-9 (4) construct, acquire, maintain, and operate lines of
242-10 electric, gas, or gasoline, denatured alcohol, or naphtha motor
242-11 railways in and between municipalities, and interurban railways in
242-12 and between municipalities in this state to transport freight or
242-13 passengers;
242-14 (5) build, maintain, and operate a line of railroads
242-15 to mines, gins, quarries, manufacturing plants, or mills;
242-16 (6) construct, maintain, and operate terminal
242-17 railways; or
242-18 (7) operate a railroad passenger service by
242-19 contracting with a railroad corporation or other company that does
242-20 not construct, own, or maintain a railroad track.
242-21 Sec. 21.004. PROHIBITED ACTIVITIES. A corporation may not:
242-22 (1) operate a cooperative association, limited
242-23 cooperative association, or labor union;
242-24 (2) transact a combination of the businesses of:
242-25 (A) raising cattle and owning land for the
242-26 raising of cattle, other than operating and owning feed lots and
242-27 feeding cattle; and
243-1 (B) operating stockyards and slaughtering,
243-2 refrigerating, canning, curing, or packing meat; or
243-3 (3) engage in a combination of:
243-4 (A) the petroleum oil producing business in this
243-5 state; and
243-6 (B) the oil pipeline business in this state
243-7 other than through stock ownership in a corporation engaged in the
243-8 oil pipeline business and other than the ownership or operation of
243-9 private pipelines in and about the corporation's refineries, fields
243-10 or stations.
243-11 Sec. 21.005. NONPROFIT CORPORATIONS. A corporation formed
243-12 for the purpose of operating a nonprofit institution, including an
243-13 institution devoted to a charitable, benevolent, religious,
243-14 patriotic, civic, cultural, missionary, educational, scientific,
243-15 social, fraternal, athletic, or esthetic purpose, may be formed and
243-16 governed only as a nonprofit corporation under this code and not as
243-17 a for-profit corporation under this title.
243-18 Sec. 21.006. ADDITIONAL POWERS OF CERTAIN PIPELINE
243-19 BUSINESSES. In addition to the powers provided by Subchapter B,
243-20 Chapter 2, a corporation or a partnership or other combination of
243-21 corporations engaged as a common carrier in the pipeline business
243-22 for the purpose of transporting oil, oil products, gas, carbon
243-23 dioxide, salt brine, fuller's earth, sand, clay, liquefied
243-24 minerals, or other mineral solutions has all the rights and powers
243-25 conferred on a common carrier by Sections 111.019-111.022, Natural
243-26 Resources Code.
243-27 (Sections 21.007-21.050 reserved for expansion)
244-1 SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
244-2 Sec. 21.051. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE
244-3 OF FORMATION. (a) In addition to the information required by
244-4 Section 3.005, the certificate of formation of a corporation must:
244-5 (1) state the aggregate number of shares the
244-6 corporation is authorized to issue;
244-7 (2) if the shares the corporation is authorized to
244-8 issue consist of one class of shares only, state the par value of
244-9 each share or a statement that each share is without par value;
244-10 (3) if the corporation is to be managed by a board of
244-11 directors, state the number of directors constituting the initial
244-12 board of directors and the name and address of each person who will
244-13 serve as director until the first annual meeting of shareholders
244-14 and until a successor is elected and qualified; and
244-15 (4) if the corporation is to be managed pursuant to a
244-16 shareholders' agreement in a manner other than by a board of
244-17 directors, state the name and address of each person who will
244-18 perform the functions required by this code to be performed by the
244-19 initial board of directors.
244-20 (b) If the shares the corporation is authorized to issue
244-21 consist of more than one class of shares, the certificate of
244-22 formation of a corporation must, with respect to each class, state:
244-23 (1) the designation of the class;
244-24 (2) the aggregate number of shares in the class;
244-25 (3) the par value of each share or a statement that
244-26 each share is without par value;
244-27 (4) the preferences, limitations, and relative rights
245-1 of the shares; and
245-2 (5) if the shares in a class the corporation is
245-3 authorized to issue consist of more than one series, the following
245-4 with respect to each series:
245-5 (A) the designation of the series;
245-6 (B) the aggregate number of shares in the
245-7 series;
245-8 (C) any preferences, limitations, and relative
245-9 rights of the shares to the extent provided in the certificate of
245-10 formation; and
245-11 (D) any authority vested in the board of
245-12 directors to establish the series and set and determine the
245-13 preferences, limitations, and relative rights of the series.
245-14 (c) If a corporation elects to become a close corporation in
245-15 accordance with Subchapter O, the certificate of formation of the
245-16 corporation:
245-17 (1) must contain a provision required by that
245-18 subchapter to be contained in the certificate of formation of a
245-19 close corporation and not in the certificate of formation of an
245-20 ordinary corporation; and
245-21 (2) may contain:
245-22 (A) a provision contained or permitted to be
245-23 contained in a shareholders' agreement conforming to that
245-24 subchapter that the organizers elect to include in the certificate
245-25 of formation; or
245-26 (B) a copy of a shareholders' agreement that
245-27 conforms to Subchapter O and that may be filed in the manner
246-1 provided by Section 21.212.
246-2 (d) A provision contained in the certificate of formation
246-3 under Subsection (c), other than the statement required by Section
246-4 21.704, must be preceded by a statement that the provision is
246-5 subject to the corporation remaining a close corporation.
246-6 (e) If a corporation elects to have a preemptive right or
246-7 cumulative voting, the certificate of formation of the corporation
246-8 must comply with Section 21.203 or 21.360, as appropriate.
246-9 Sec. 21.052. NO PROPERTY RIGHT IN CERTIFICATE OF FORMATION.
246-10 A shareholder of a corporation does not have a vested property
246-11 right resulting from the certificate of formation, including a
246-12 provision in the certificate of formation relating to the
246-13 management, control, capital structure, dividend entitlement,
246-14 purpose, or duration of the corporation.
246-15 Sec. 21.053. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF
246-16 FORMATION. (a) To adopt an amendment to the certificate of
246-17 formation of a corporation as provided by Subchapter B, Chapter 3,
246-18 the board of directors of the corporation shall:
246-19 (1) adopt a resolution stating the proposed amendment;
246-20 and
246-21 (2) follow the procedures prescribed by Sections
246-22 21.054-21.057.
246-23 (b) The resolution may incorporate the proposed amendment in
246-24 a restated certificate of formation that complies with Section
246-25 3.057.
246-26 Sec. 21.054. ADOPTION OF AMENDMENT BY BOARD OF DIRECTORS.
246-27 If a corporation does not have any issued and outstanding shares,
247-1 the board of directors may adopt a proposed amendment to the
247-2 corporation's certificate of formation by resolution without
247-3 shareholder approval.
247-4 Sec. 21.055. ADOPTION OF AMENDMENT BY SHAREHOLDERS. If a
247-5 corporation has issued and outstanding shares:
247-6 (1) a resolution described by Section 21.053 must also
247-7 direct that the proposed amendment be submitted to a vote of the
247-8 shareholders at a meeting; and
247-9 (2) the shareholders must approve the proposed
247-10 amendment in the manner provided by Section 21.056.
247-11 Sec. 21.056. NOTICE OF AND MEETING TO CONSIDER PROPOSED
247-12 AMENDMENT. (a) Each shareholder of record entitled to vote shall
247-13 be given written notice containing the proposed amendment or a
247-14 summary of the changes to be effected within the time and in the
247-15 manner provided by this code for giving notice of meetings to
247-16 shareholders. The proposed amendment or summary may be included in
247-17 the notice required to be provided for an annual meeting.
247-18 (b) At the meeting, the proposed amendment shall be adopted
247-19 only on receiving the affirmative vote of shareholders entitled to
247-20 vote required by Section 21.364.
247-21 (c) An unlimited number of amendments may be submitted for
247-22 adoption by the shareholders at a meeting.
247-23 Sec. 21.057. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF
247-24 AMENDMENT. (a) In addition to the statements required by Section
247-25 3.053, a certificate of amendment for a corporation must state:
247-26 (1) if the amendment provides for an exchange,
247-27 reclassification, or cancellation of issued shares, the manner in
248-1 which the exchange, reclassification, or cancellation of the issued
248-2 shares will be effected if the manner is not specified in the
248-3 amendment; and
248-4 (2) if the amendment effects a change in the amount of
248-5 stated capital, the manner in which the change in the amount of
248-6 stated capital is effected and the amount of stated capital
248-7 expressed in dollar terms as changed by the amendment.
248-8 (b) An officer shall sign the certificate of amendment on
248-9 behalf of the corporation. If shares of the corporation have not
248-10 been issued and the certificate of amendment is adopted by the
248-11 board of directors, a majority of the directors may sign the
248-12 certificate of amendment on behalf of the corporation.
248-13 (c) The certificate of amendment must be filed in accordance
248-14 with Chapter 4 and takes effect as provided by Subchapter B,
248-15 Chapter 3.
248-16 Sec. 21.058. RESTATED CERTIFICATE OF FORMATION. (a) A
248-17 corporation may adopt a restated certificate of formation as
248-18 provided by Subchapter B, Chapter 3, by following the same
248-19 procedures to amend its certificate of formation under Sections
248-20 21.053-21.057, except that shareholder approval is not required if
248-21 an amendment is not adopted.
248-22 (b) An officer shall sign the restated certificate of
248-23 formation on behalf of the corporation. If shares of the
248-24 corporation have not been issued and the restated certificate of
248-25 formation is adopted by the board of directors, the majority of the
248-26 directors may sign the restated certificate of formation on behalf
248-27 of the corporation.
249-1 (c) In addition to the provisions authorized or required by
249-2 Section 3.057, a restated certificate of formation may update the
249-3 current number of directors and the names and addresses of the
249-4 persons serving as directors.
249-5 (d) The restated certificate of formation shall be filed in
249-6 accordance with Chapter 4 and takes effect as provided by
249-7 Subchapter B, Chapter 3.
249-8 Sec. 21.059. BYLAWS. (a) The board of directors of a
249-9 corporation shall adopt initial bylaws.
249-10 (b) The bylaws may contain provisions for the regulation and
249-11 management of the affairs of the corporation that are consistent
249-12 with law and the corporation's certificate of formation.
249-13 (c) A corporation's board of directors may amend or repeal
249-14 bylaws or adopt new bylaws unless:
249-15 (1) the corporation's certificate of formation or this
249-16 code wholly or partly reserves the power exclusively to the
249-17 corporation's shareholders; or
249-18 (2) in amending, repealing, or adopting a bylaw, the
249-19 shareholders expressly provide that the board of directors may not
249-20 amend, repeal, or readopt that bylaw.
249-21 Sec. 21.060. DUAL AUTHORITY. Unless the certificate of
249-22 formation or a bylaw adopted by the shareholders provides otherwise
249-23 as to all or a part of a corporation's bylaws, a corporation's
249-24 shareholders may amend, repeal, or adopt the corporation's bylaws
249-25 regardless of whether the bylaws may also be amended, repealed, or
249-26 adopted by the corporation's board of directors.
249-27 Sec. 21.061. ORGANIZATION MEETING. (a) This section does
250-1 not apply to a corporation created as a result of a conversion or
250-2 merger the plan of which states the bylaws and names the officers
250-3 of the corporation.
250-4 (b) After the filing of a certificate of formation takes
250-5 effect, an organization meeting shall be held at the call of the
250-6 majority of the initial board of directors or the persons named in
250-7 the certificate of formation under Section 21.051(a)(4) for the
250-8 purpose of adopting bylaws, electing officers, and transacting
250-9 other business.
250-10 (c) Not later than the third day before the date of the
250-11 meeting, the directors or other persons calling the meeting shall
250-12 send notice of the time and place of the meeting to each other
250-13 director or person named in the certificate of formation.
250-14 (Sections 21.062-21.100 reserved for expansion)
250-15 SUBCHAPTER C. SHAREHOLDERS' AGREEMENTS
250-16 Sec. 21.101. SHAREHOLDERS' AGREEMENT. (a) The shareholders
250-17 of a corporation may enter into an agreement that:
250-18 (1) restricts the discretion or powers of the board of
250-19 directors;
250-20 (2) eliminates the board of directors and authorizes
250-21 the business and affairs of the corporation to be managed, wholly
250-22 or partly, by one or more of its shareholders or other persons;
250-23 (3) establishes the individuals who shall serve as
250-24 directors or officers of the corporation;
250-25 (4) determines the term of office, manner of selection
250-26 or removal, or terms or conditions of employment of a director,
250-27 officer, or other employee of the corporation, regardless of the
251-1 length of employment;
251-2 (5) governs the authorization or making of
251-3 distributions whether in proportion to ownership of shares, subject
251-4 to Section 21.303;
251-5 (6) determines the manner in which profits and losses
251-6 will be apportioned;
251-7 (7) governs, in general or with regard to specific
251-8 matters, the exercise or division of voting power by and between
251-9 the shareholders, directors, or other persons, including use of
251-10 disproportionate voting rights or director proxies;
251-11 (8) establishes the terms of an agreement for the
251-12 transfer or use of property or for the provision of services
251-13 between the corporation and another person, including a
251-14 shareholder, director, officer, or employee of the corporation;
251-15 (9) authorizes arbitration or grants authority to a
251-16 shareholder or other person to resolve any issue about which there
251-17 is a deadlock among the directors, shareholders, or other persons
251-18 authorized to manage the corporation;
251-19 (10) requires winding up and termination of the
251-20 corporation at the request of one or more shareholders or on the
251-21 occurrence of a specified event or contingency, in which case the
251-22 winding up and termination of the corporation will proceed as if
251-23 all of the shareholders had consented in writing to the winding up
251-24 and termination as provided by Subchapter K; or
251-25 (11) otherwise governs the exercise of corporate
251-26 powers, the management of the business and affairs of the
251-27 corporation, or the relationship among the shareholders, the
252-1 directors, and the corporation as if the corporation were a
252-2 partnership or in a manner that would otherwise be appropriate only
252-3 among partners and not contrary to public policy.
252-4 (b) A shareholders' agreement authorized by this section
252-5 must be:
252-6 (1) contained in:
252-7 (A) the certificate of formation or bylaws if
252-8 approved by all of the shareholders at the time of the agreement;
252-9 or
252-10 (B) a written agreement that is:
252-11 (i) signed by all of the shareholders at
252-12 the time of the agreement; and
252-13 (ii) made known to the corporation; and
252-14 (2) amended only by all of the shareholders at the
252-15 time of the amendment, unless the agreement provides otherwise.
252-16 Sec. 21.102. TERM OF AGREEMENT. A shareholders' agreement
252-17 under this subchapter is valid for 10 years, unless the agreement
252-18 provides otherwise.
252-19 Sec. 21.103. DISCLOSURE OF AGREEMENT; RECALL OF CERTAIN
252-20 CERTIFICATES. (a) The existence of an agreement authorized by
252-21 this subchapter shall be noted conspicuously on the front or back
252-22 of each certificate for outstanding shares or on the information
252-23 statement required for uncertificated shares by Section 3.205.
252-24 (b) The disclosure required by this section must include the
252-25 sentence, "These shares are subject to the provisions of a
252-26 shareholders' agreement that may provide for management of the
252-27 corporation in a manner different than in other corporations and
253-1 may subject a shareholder to certain obligations or liabilities not
253-2 otherwise imposed on shareholders in other corporations."
253-3 (c) A corporation that has outstanding shares represented by
253-4 certificates at the time the shareholders of the corporation enter
253-5 into an agreement under this subchapter shall recall the
253-6 outstanding certificates and issue substitute certificates that
253-7 comply with this subchapter.
253-8 (d) The failure to note the existence of the agreement on
253-9 the certificate or information statement does not affect the
253-10 validity of the agreement or an action taken pursuant to the
253-11 agreement.
253-12 Sec. 21.104. EFFECT OF SHAREHOLDERS' AGREEMENT. A
253-13 shareholders' agreement that complies with this subchapter is
253-14 effective among the shareholders and between the shareholders and
253-15 the corporation even if the terms of the agreement are inconsistent
253-16 with this code.
253-17 Sec. 21.105. KNOWLEDGE OF PURCHASER OF SHARES. (a) A
253-18 purchaser of shares who does not have knowledge at the time of
253-19 purchase of the existence of a shareholders' agreement authorized
253-20 by this subchapter is entitled to rescind the purchase.
253-21 (b) A purchaser is considered to have knowledge of the
253-22 existence of the shareholders' agreement for purposes of this
253-23 section if:
253-24 (1) the existence of the agreement is noted on the
253-25 certificate or information statement for the shares as required by
253-26 Section 21.103; and
253-27 (2) with respect to shares that are not represented by
254-1 a certificate, the information statement noting existence of the
254-2 agreement is delivered to the purchaser not later than the time the
254-3 shares are purchased.
254-4 (c) An action to enforce the right of rescission authorized
254-5 by this section must be commenced not later than the earlier of:
254-6 (1) the 90th day after the date the existence of the
254-7 shareholder agreement is discovered; or
254-8 (2) the second anniversary of the purchase date of the
254-9 shares.
254-10 Sec. 21.106. AGREEMENT LIMITING AUTHORITY OF AND SUPPLANTING
254-11 BOARD OF DIRECTORS; LIABILITY. (a) A shareholders' agreement
254-12 authorized by this subchapter that limits the discretion or powers
254-13 of the board of directors or supplants the board of directors
254-14 relieves the directors of, and imposes on a person in whom the
254-15 discretion or powers of the board of directors or the management of
254-16 the business and affairs of the corporation is vested, liability
254-17 for an act or omission of the person.
254-18 (b) A person on whom liability for an act or omission is
254-19 imposed under this section is liable in the same manner and to the
254-20 same extent as a director on whom liability for an act or omission
254-21 is imposed by this code or other law.
254-22 Sec. 21.107. LIABILITY OF SHAREHOLDER. The existence of or
254-23 a performance under a shareholders' agreement authorized by this
254-24 subchapter is not a ground for imposing personal liability on a
254-25 shareholder for an act or obligation of the corporation by
254-26 disregarding the separate existence of the corporation or
254-27 otherwise, even if the agreement or a performance under the
255-1 agreement:
255-2 (1) treats the corporation as if the corporation were
255-3 a partnership or in a manner that otherwise is appropriate only
255-4 among partners;
255-5 (2) results in the corporation being considered a
255-6 partnership for purposes of taxation; or
255-7 (3) results in failure to observe the corporate
255-8 formalities otherwise applicable to the matters governed by the
255-9 agreement.
255-10 Sec. 21.108. PERSONS ACTING IN PLACE OF SHAREHOLDERS. An
255-11 organizer or a subscriber for shares may act as a shareholder with
255-12 respect to a shareholders' agreement authorized by this subchapter
255-13 if no shares have been issued when the agreement is signed.
255-14 Sec. 21.109. AGREEMENT NOT EFFECTIVE. (a) A shareholders'
255-15 agreement authorized by this subchapter ceases to be effective when
255-16 shares of the corporation are:
255-17 (1) listed on a national securities exchange or
255-18 similar system;
255-19 (2) quoted on an interdealer quotation system of a
255-20 national securities association or successor system; or
255-21 (3) regularly traded in a market maintained by one or
255-22 more members of a national or affiliated securities association.
255-23 (b) If a corporation does not have a board of directors and
255-24 an agreement of the shareholders of the corporation entered into
255-25 under this subchapter ceases to be effective, a board of directors
255-26 shall be instituted or reinstated to govern the corporation in the
255-27 manner provided by Section 21.710(c).
256-1 (c) If a shareholders' agreement that ceases to be effective
256-2 is contained in or referred to by the certificate of formation or
256-3 bylaws of a corporation, the board of directors of the corporation
256-4 may adopt an amendment to the certificate of formation or bylaws,
256-5 without shareholder action, to delete the agreement and any
256-6 references to the agreement.
256-7 (Sections 21.110-21.150 reserved for expansion)
256-8 SUBCHAPTER D. SHARES, OPTIONS, AND CONVERTIBLE SECURITIES
256-9 Sec. 21.151. NUMBER OF AUTHORIZED SHARES. A corporation may
256-10 issue the number of authorized shares stated in the corporation's
256-11 certificate of formation.
256-12 Sec. 21.152. CLASSES AND SERIES OF SHARES. (a) A
256-13 corporation's certificate of formation may divide the corporation's
256-14 authorized shares into one or more classes and may divide one or
256-15 more classes into one or more series. The certificate of formation
256-16 must designate each class and series of authorized shares to
256-17 distinguish that class and series from any other class or series.
256-18 (b) Shares of the same class must be of the same par value
256-19 or be without par value, as stated in the certificate of formation.
256-20 (c) Shares of the same class must be identical in all
256-21 respects unless the shares have been divided into one or more
256-22 series. If the shares of a class have been divided into one or
256-23 more series, the shares may vary between series, but all shares of
256-24 the same series will be identical in all respects.
256-25 Sec. 21.153. DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
256-26 RIGHTS OF A CLASS OR SERIES. (a) Each class or series of
256-27 authorized shares of a corporation must have the designations,
257-1 preferences, limitations, and relative rights, including voting
257-2 rights, stated in the corporation's certificate of formation.
257-3 (b) The certificate of formation may limit or deny the
257-4 voting rights of, or provide special voting rights for, the shares
257-5 of a class or series or the shares of a class or series held by a
257-6 person or class of persons to the extent the limitation, denial, or
257-7 provision is not inconsistent with this code.
257-8 (c) A designation, preference, limitation, or relative
257-9 right, including voting right, of a class or series of shares of a
257-10 corporation may be made dependent on facts not contained in the
257-11 certificate of formation, including future acts of the corporation,
257-12 if the manner in which those facts will operate on the designation,
257-13 preference, limitation, or right is clearly and expressly stated
257-14 in the certificate of formation.
257-15 Sec. 21.154. CERTAIN OPTIONAL CHARACTERISTICS OF SHARES.
257-16 (a) Subject to Section 21.153, if authorized by the corporation's
257-17 certificate of formation, a corporation may issue shares that:
257-18 (1) are redeemable, subject to Sections 21.303 and
257-19 21.304;
257-20 (2) entitle the holders of the shares to cumulative,
257-21 noncumulative, or partially cumulative distributions;
257-22 (3) have preferences over any or all other classes or
257-23 series of shares with respect to payment of distributions;
257-24 (4) have preferences over any or all other classes or
257-25 series of shares with respect to the assets of the corporation on
257-26 the voluntary or involuntary winding up and termination of the
257-27 corporation;
258-1 (5) are exchangeable for shares, obligations,
258-2 indebtedness, evidence of ownership, rights to purchase securities
258-3 of the corporation or one or more other entities, or other property
258-4 or for a combination of those rights, assets, or obligations
258-5 subject to Section 21.303; and
258-6 (6) are convertible into shares of any other class or
258-7 series.
258-8 (b) Shares without par value may not be converted into
258-9 shares with par value unless:
258-10 (1) at the time of conversion, the part of the
258-11 corporation's stated capital represented by the shares without par
258-12 value is at least equal to the aggregate par value of the shares to
258-13 be converted; or
258-14 (2) the amount of any deficiency computed under
258-15 Subdivision (1) is transferred from surplus to stated capital.
258-16 (c) Shares of a corporation may be redeemed, exchanged, or
258-17 converted at the option of the corporation, shareholder, or other
258-18 person or on the occurrence of a designated event.
258-19 Sec. 21.155. SERIES OF SHARES ESTABLISHED BY BOARD OF
258-20 DIRECTORS. (a) If expressly authorized by the corporation's
258-21 certificate of formation and subject to the certificate of
258-22 formation, the board of directors of a corporation may establish
258-23 series of unissued shares of any class by setting and determining
258-24 the designations, preferences, limitations, and relative rights,
258-25 including voting rights, of the shares of the series to be
258-26 established to the same extent that the designations, preferences,
258-27 limitations, or relative rights could be stated if fully specified
259-1 in the certificate of formation.
259-2 (b) To establish a series if authorized by the certificate
259-3 of formation, the board of directors must adopt a resolution
259-4 specifying the designations, preferences, limitations, and relative
259-5 rights, including voting rights, of the series to be established or
259-6 specifying any designation, preference, limitation, or relative
259-7 right that is not set and determined by the certificate of
259-8 formation.
259-9 (c) If the certificate of formation does not expressly
259-10 restrict the board of directors from increasing or decreasing the
259-11 number of unissued shares of a series to be established under
259-12 Subsection (a), the board of directors may increase or decrease the
259-13 number of shares in each series to be established, except that the
259-14 board of directors may not decrease the number of shares in a
259-15 particular series to a number that is less than the number of
259-16 shares in that series that are issued at the time of the decrease.
259-17 (d) To increase or decrease the number of shares of a series
259-18 under Subsection (c), the board of directors must adopt a
259-19 resolution setting and determining the new number of shares of each
259-20 series in which the number of shares is increased or decreased. If
259-21 the number of shares of a series is decreased, the shares by which
259-22 the series is decreased will resume the status of authorized but
259-23 unissued shares of the class of shares from which the series was
259-24 established, unless otherwise provided by the certificate of
259-25 formation or the terms of the class or series.
259-26 (e) If no shares of a series established by board resolution
259-27 under Subsection (b) are outstanding because no shares of that
260-1 series have been issued or no issued shares of that series remain
260-2 outstanding, the board of directors by resolution may delete the
260-3 series from the certificate of formation and delete any reference
260-4 to the series contained in the certificate of formation. Unless
260-5 otherwise provided by the certificate of formation, the shares of
260-6 any series deleted from the certificate of formation under this
260-7 section shall resume the status of authorized but unissued shares
260-8 of the class of shares from which the series was established.
260-9 (f) If no shares of a series established by resolution of
260-10 the board of directors under Subsection (b) are outstanding because
260-11 no shares of that series have been issued, the board of directors
260-12 may amend the designations, preferences, limitations, and relative
260-13 rights, including voting rights, of the series or amend any
260-14 designation, preference, limitation, or relative right that is not
260-15 set and determined by the certificate of formation.
260-16 Sec. 21.156. ACTIONS WITH RESPECT TO SERIES OF SHARES.
260-17 (a) To effect an action authorized under Section 21.155, the
260-18 corporation must file with the secretary of state a statement that
260-19 contains:
260-20 (1) the name of the corporation;
260-21 (2) if the statement relates to the establishment of a
260-22 series of shares, a copy of the resolution establishing and
260-23 designating the series and setting and determining the
260-24 designations, preferences, limitations, and relative rights of the
260-25 series;
260-26 (3) if the statement relates to an increase or
260-27 decrease in the number of shares of a series, a copy of the
261-1 resolution setting and determining the new number of shares of each
261-2 series in which the number of shares is increased or decreased;
261-3 (4) if the statement relates to the deletion of a
261-4 series of shares and all references to the series from the
261-5 certificate of formation, a copy of the resolution deleting the
261-6 series and all references to the series from the certificate of
261-7 formation;
261-8 (5) if the statement relates to the amendment of
261-9 designations, preferences, limitations, or relative rights of
261-10 shares of a series that was previously established by resolution of
261-11 the board of directors, a copy of the resolution in which the
261-12 amendment is specified;
261-13 (6) the date of the adoption of the resolution; and
261-14 (7) a statement that the resolution was adopted by all
261-15 necessary action on the part of the corporation.
261-16 (b) On the filing of a statement described by Subsection
261-17 (a), the following resolutions will become an amendment of the
261-18 certificate of formation, as appropriate:
261-19 (1) the resolution establishing and designating the
261-20 series and setting and determining the designations, preferences,
261-21 limitations, and relative rights of the series;
261-22 (2) the resolution setting the new number of shares of
261-23 each series in which the number of shares is increased or
261-24 decreased;
261-25 (3) the resolution deleting a series and all
261-26 references to the series from the certificate of formation; or
261-27 (4) the resolution amending the designations,
262-1 preferences, limitations, and relative rights of a series.
262-2 (c) An amendment of the certificate of formation under this
262-3 section is not subject to the procedure to amend the certificate of
262-4 formation contained in Subchapter B.
262-5 Sec. 21.157. ISSUANCE OF SHARES. (a) Except as provided by
262-6 Section 21.158, a corporation may issue shares for consideration if
262-7 authorized by the board of directors of the corporation.
262-8 (b) Shares may not be issued until the consideration,
262-9 determined in accordance with this subchapter, has been received by
262-10 the corporation. When the consideration is received:
262-11 (1) the shares are considered to be issued;
262-12 (2) the subscriber or other person entitled to receive
262-13 the shares is a shareholder with respect to the shares; and
262-14 (3) the shares are considered fully paid and
262-15 nonassessable.
262-16 Sec. 21.158. ISSUANCE OF SHARES UNDER PLAN OF MERGER OR
262-17 CONVERSION. (a) A converted corporation under a plan of
262-18 conversion or a corporation created by a plan of merger may issue
262-19 shares for consideration if authorized by the plan of conversion or
262-20 plan of merger, as appropriate.
262-21 (b) A corporation may issue shares in the manner provided by
262-22 and for consideration specified under a plan of merger or plan of
262-23 conversion.
262-24 Sec. 21.159. TYPES OF CONSIDERATION FOR SHARES. Shares with
262-25 or without par value may be issued for the following types of
262-26 consideration:
262-27 (1) a tangible or intangible benefit to the
263-1 corporation;
263-2 (2) cash;
263-3 (3) a promissory note;
263-4 (4) services performed or a contract for services to
263-5 be performed;
263-6 (5) a security of the corporation or any other
263-7 organization; and
263-8 (6) any other property of any kind or nature.
263-9 Sec. 21.160. DETERMINATION OF CONSIDERATION FOR SHARES.
263-10 (a) Subject to Subsection (b), consideration to be received for
263-11 shares must be determined:
263-12 (1) by the board of directors;
263-13 (2) by a plan of conversion, if the shares are to be
263-14 issued by a converted corporation under the plan; or
263-15 (3) by a plan of merger, if the shares are to be
263-16 issued under the plan by a corporation created under the plan.
263-17 (b) If the corporation's certificate of formation reserves
263-18 to the shareholders the right to determine the consideration to be
263-19 received for shares without par value, the shareholders shall
263-20 determine the consideration for those shares before the shares are
263-21 issued. The board of directors may not determine the consideration
263-22 for shares under this subsection.
263-23 (c) A corporation may dispose of treasury shares for
263-24 consideration that may be determined by the board of directors.
263-25 Sec. 21.161. AMOUNT OF CONSIDERATION FOR ISSUANCE OF CERTAIN
263-26 SHARES. (a) Consideration to be received by a corporation for the
263-27 issuance of shares with par value may not be less than the par
264-1 value of the shares.
264-2 (b) The part of the surplus of a corporation that is
264-3 transferred to stated capital on the issuance of shares as a share
264-4 distribution is considered to be the consideration for the issuance
264-5 of those shares.
264-6 (c) The consideration received by a corporation for the
264-7 issuance of shares on the conversion or exchange of its
264-8 indebtedness or shares is:
264-9 (1) the principal of, and accrued interest on, the
264-10 indebtedness exchanged or converted, or the stated capital on the
264-11 issuance of the shares;
264-12 (2) the part of surplus, if any, transferred to stated
264-13 capital on the issuance of the shares; and
264-14 (3) any additional consideration paid to the
264-15 corporation on the issuance of the shares.
264-16 (d) The consideration received by a corporation for the
264-17 issuance of shares on the exercise of rights or options is:
264-18 (1) any consideration received by the corporation for
264-19 the rights or options; and
264-20 (2) any consideration received by the corporation for
264-21 the issuance of shares on the exercise of the rights or options.
264-22 Sec. 21.162. VALUE AND SUFFICIENCY OF CONSIDERATION. In the
264-23 absence of fraud in the transaction, the judgment of the board of
264-24 directors, the shareholders, or the party approving the plan of
264-25 conversion or the plan of merger, as appropriate, is conclusive in
264-26 determining the value and sufficiency of the consideration received
264-27 for the shares.
265-1 Sec. 21.163. ISSUANCE AND DISPOSITION OF FRACTIONAL SHARES
265-2 OR SCRIP. (a) A corporation may:
265-3 (1) issue fractions of a share, either certificated or
265-4 uncertificated;
265-5 (2) arrange for the disposition of fractional
265-6 interests by persons entitled to the interests;
265-7 (3) pay cash for the fair value of fractions of a
265-8 share determined when the shareholders entitled to receive the
265-9 fractions are determined; or
265-10 (4) subject to Subsection (b), issue scrip in
265-11 registered or bearer form that entitles the holder to receive a
265-12 certificate for a full share or an uncertificated full share on the
265-13 surrender of the scrip aggregating a full share.
265-14 (b) The board of directors may issue scrip:
265-15 (1) on the condition that the scrip will become void
265-16 if not exchanged for certificated or uncertificated full shares
265-17 before a specified date;
265-18 (2) on the condition that the shares for which the
265-19 scrip is exchangeable may be sold by the corporation and the
265-20 proceeds from the sale of the shares may be distributed to the
265-21 holders of scrip; or
265-22 (3) subject to any other condition the board of
265-23 directors may determine advisable.
265-24 Sec. 21.164. RIGHTS OF HOLDERS OF FRACTIONAL SHARES OR
265-25 SCRIP. (a) A holder of a certificated or uncertificated
265-26 fractional share is entitled to exercise voting rights, receive
265-27 distributions, and make a claim with respect to the assets of the
266-1 corporation in the event of winding up and termination.
266-2 (b) A holder of a certificate for scrip is not entitled to
266-3 exercise voting rights, receive distributions, or make a claim with
266-4 respect to the assets of the corporation in the event of winding up
266-5 and termination unless the scrip provides for those rights.
266-6 Sec. 21.165. SUBSCRIPTIONS. (a) A corporation may accept a
266-7 subscription by notifying the subscriber in writing.
266-8 (b) A subscription to purchase shares in a corporation in
266-9 the process of being formed is irrevocable for six months if the
266-10 subscription is in writing and signed by the subscriber, unless the
266-11 subscription provides for a longer or shorter period or all of the
266-12 other subscribers agree to the revocation of the subscription.
266-13 (c) A written subscription entered into after the
266-14 corporation is formed is a contract between the subscriber and the
266-15 corporation.
266-16 Sec. 21.166. PREFORMATION SUBSCRIPTION. (a) The
266-17 corporation may determine the payment terms of a preformation
266-18 subscription unless the payment terms are specified by the
266-19 subscription. The payment terms may authorize payment in full on
266-20 acceptance or by installments.
266-21 (b) Unless the subscription provides otherwise, a
266-22 corporation shall make calls placed to all subscribers of similar
266-23 interests for payment on preformation subscriptions uniform as far
266-24 as practicable.
266-25 (c) After the corporation is formed, a corporation may:
266-26 (1) collect in the same manner as any other debt the
266-27 amount due on any unpaid preformation subscription; or
267-1 (2) forfeit the subscription on 20 days' written
267-2 notice to the subscriber.
267-3 (d) Although the forfeiture of a subscription terminates all
267-4 the rights and obligations of the subscriber, the corporation may
267-5 retain any amount previously paid on the subscription.
267-6 Sec. 21.167. COMMITMENT TO PURCHASE SHARES. (a) A person
267-7 who contemplates the acquisition of shares in a corporation may
267-8 commit to act in a specified manner with respect to the shares
267-9 after the acquisition, including the voting of the shares or the
267-10 retention or disposition of the shares. To be binding, the
267-11 commitment must be in writing and be signed by the person acquiring
267-12 the shares.
267-13 (b) A written commitment entered into under Subsection (a)
267-14 is a contract between the shareholder and the corporation.
267-15 Sec. 21.168. STOCK RIGHTS, OPTIONS, AND CONVERTIBLE
267-16 INDEBTEDNESS. (a) Except as provided by the corporation's
267-17 certificate of formation and regardless of whether done in
267-18 connection with the issuance and sale of any other share or
267-19 security of the corporation, a corporation may create and issue:
267-20 (1) rights or options that entitle the holders to
267-21 purchase or receive from the corporation shares of any class or
267-22 series or other securities; and
267-23 (2) indebtedness convertible into shares of any class
267-24 or series of the corporation or other securities of the
267-25 corporation.
267-26 (b) A right, option, or indebtedness described by this
267-27 section shall be evidenced in the manner approved by the board of
268-1 directors.
268-2 (c) Subject to the certificate of formation, a right or
268-3 option described by this section must state the terms on which, the
268-4 time within which, and any consideration for which the shares may
268-5 be purchased or received from the corporation on the exercise of
268-6 the right or option.
268-7 (d) Subject to the certificate of formation, convertible
268-8 indebtedness described by this section must state the terms and
268-9 conditions on which, the time within which, and the conversion
268-10 ratio at which the indebtedness may be converted into shares.
268-11 Sec. 21.169. TERMS AND CONDITIONS OF RIGHTS AND OPTIONS.
268-12 (a) The terms and conditions of rights or options may include
268-13 restrictions or conditions that:
268-14 (1) prohibit or limit the exercise, transfer, or
268-15 receipt of the rights or options by certain persons or classes of
268-16 persons, including:
268-17 (A) a person who beneficially owns or offers to
268-18 acquire a specified number or percentage of the outstanding common
268-19 shares, voting power, or other securities of the corporation; or
268-20 (B) a transferee of a person described by
268-21 Paragraph (A); or
268-22 (2) invalidate or void the rights or options held by a
268-23 person or transferee described by Subdivision (1).
268-24 (b) Rights or options created or issued before the effective
268-25 date of this code that comply with this section and are not in
268-26 conflict with other provisions of this code are ratified.
268-27 (c) Unless otherwise provided under the terms of rights or
269-1 options or the agreement or plan under which the rights or options
269-2 are issued, the authority to grant, amend, redeem, extend, or
269-3 replace the rights or options on behalf of a corporation is vested
269-4 exclusively in the board of directors of the corporation. A bylaw
269-5 may not require the board to grant, amend, redeem, extend, or
269-6 replace the rights or options.
269-7 Sec. 21.170. CONSIDERATION FOR RIGHTS, OPTIONS, AND
269-8 CONVERTIBLE INDEBTEDNESS. (a) In the absence of fraud in the
269-9 transaction, the judgment of the board of directors of a
269-10 corporation as to the adequacy of the consideration received for
269-11 rights, options, or convertible indebtedness is conclusive.
269-12 (b) A corporation may issue rights or options to its
269-13 shareholders, officers, consultants, independent contractors,
269-14 employees, or directors without consideration if, in the judgment
269-15 of the board of directors, the issuance of the rights or options is
269-16 in the interests of the corporation.
269-17 (c) The consideration for shares having a par value, other
269-18 than treasury shares, and issued on the exercise of the rights or
269-19 options may not be less than the par value of the shares.
269-20 (d) A privilege of conversion may not be conferred on, or
269-21 altered with respect to, any indebtedness that would result in the
269-22 corporation receiving less than the minimum consideration required
269-23 to be received on issuance of the shares.
269-24 (e) The consideration for shares issued on the exercise of
269-25 rights, options, or convertible indebtedness shall be determined as
269-26 provided by Section 21.161.
269-27 Sec. 21.171. TREASURY SHARES. (a) Treasury shares are
270-1 considered to be issued shares and not outstanding shares.
270-2 (b) Treasury shares may not be included in the total assets
270-3 of a corporation for purposes of determining the net assets of a
270-4 corporation.
270-5 Sec. 21.172. EXPENSES OF ORGANIZATION, REORGANIZATION, AND
270-6 FINANCING OF CORPORATION. A corporation may pay or authorize to be
270-7 paid from the consideration received by the corporation as payment
270-8 for the corporation's shares the reasonable charges and expenses of
270-9 the organization or reorganization of the corporation and the sale
270-10 or underwriting of the shares without rendering the shares not
270-11 fully paid and nonassessable.
270-12 (Sections 21.173-21.200 reserved for expansion)
270-13 SUBCHAPTER E. SHAREHOLDER RIGHTS AND RESTRICTIONS
270-14 Sec. 21.201. REGISTERED HOLDERS AS OWNERS. Except as
270-15 otherwise provided by this code and subject to Chapter 8, Business
270-16 & Commerce Code, a corporation may consider the person registered
270-17 as the owner of a share in the share transfer records of the
270-18 corporation at a particular time, including a record date set under
270-19 Section 6.101 or 6.102, as the owner of that share at that time for
270-20 purposes of:
270-21 (1) voting the share;
270-22 (2) receiving distributions on the share;
270-23 (3) transferring the share;
270-24 (4) receiving notice, exercising rights of dissent,
270-25 exercising or waiving a preemptive right, or giving proxies with
270-26 respect to that share;
270-27 (5) entering into agreements with respect to that
271-1 share in accordance with Section 6.251, 6.252, or 21.210; or
271-2 (6) any other shareholder action.
271-3 Sec. 21.202. DEFINITION OF SHARES. In Sections
271-4 21.203-21.207, "shares" includes a security:
271-5 (1) that is convertible into shares; or
271-6 (2) that carries a right to subscribe for or acquire
271-7 shares.
271-8 Sec. 21.203. NO STATUTORY PREEMPTIVE RIGHT UNLESS PROVIDED
271-9 BY CERTIFICATE OF FORMATION. (a) Except as provided by Section
271-10 21.208, a shareholder of a corporation does not have a preemptive
271-11 right under this subchapter to acquire the corporation's unissued
271-12 or treasury shares except to the extent provided by the
271-13 corporation's certificate of formation.
271-14 (b) If the certificate of formation includes a statement
271-15 that the corporation "elects to have a preemptive right" or a
271-16 similar statement, Section 21.204 applies to a shareholder except
271-17 to the extent the certificate of formation expressly provides
271-18 otherwise.
271-19 Sec. 21.204. STATUTORY PREEMPTIVE RIGHTS. (a) If the
271-20 shareholders of a corporation have a preemptive right under this
271-21 subchapter, the shareholders have a preemptive right to acquire
271-22 proportional amounts of the corporation's unissued or treasury
271-23 shares on the decision of the corporation's board of directors to
271-24 issue the shares. The preemptive right granted under this
271-25 subsection is subject to uniform terms and conditions prescribed by
271-26 the board of directors to provide a fair and reasonable opportunity
271-27 to exercise the preemptive right.
272-1 (b) No preemptive right exists with respect to:
272-2 (1) shares issued or granted as compensation to a
272-3 director, officer, agent, or employee of the corporation or a
272-4 subsidiary or affiliate of the corporation;
272-5 (2) shares issued or granted to satisfy conversion or
272-6 option rights created to provide compensation to a director,
272-7 officer, agent, or employee of the corporation or a subsidiary or
272-8 affiliate of the corporation;
272-9 (3) shares authorized in the corporation's certificate
272-10 of formation that are issued not later than the 180th day after the
272-11 effective date of the corporation's formation; or
272-12 (4) shares sold, issued, or granted by the corporation
272-13 for consideration other than money.
272-14 (c) A holder of a share of a class without general voting
272-15 rights but with a preferential right to distributions of profits,
272-16 income, or assets does not have a preemptive right with respect to
272-17 shares of any class.
272-18 (d) A holder of a share of a class with general voting
272-19 rights but without preferential rights to distributions of profits,
272-20 income, or assets does not have a preemptive right with respect to
272-21 shares of any class with preferential rights to distributions of
272-22 profits, income, or assets unless the shares with preferential
272-23 rights are convertible into or carry a right to subscribe for or
272-24 acquire shares without preferential rights.
272-25 (e) For a one-year period after the date the shares have
272-26 been offered to shareholders, shares subject to preemptive rights
272-27 that are not acquired by a shareholder may be issued to a person at
273-1 a consideration set by the corporation's board of directors that is
273-2 not lower than the consideration set for the exercise of preemptive
273-3 rights. An offer at a lower consideration or after the expiration
273-4 of the period prescribed by this subsection is subject to the
273-5 shareholder's preemptive rights.
273-6 Sec. 21.205. WAIVER OF PREEMPTIVE RIGHT. (a) A shareholder
273-7 may waive a preemptive right granted to the shareholder.
273-8 (b) A written waiver of a preemptive right is irrevocable
273-9 regardless of whether the waiver is supported by consideration.
273-10 Sec. 21.206. LIMITATION ON ACTION TO ENFORCE PREEMPTIVE
273-11 RIGHT. (a) An action brought against a corporation, the board of
273-12 directors or an officer, shareholder, or agent of the corporation,
273-13 or an owner of a beneficial interest in shares of the corporation
273-14 for the violation of a preemptive right of a shareholder must be
273-15 brought not later than the earlier of:
273-16 (1) the first anniversary of the date written notice
273-17 is given to each shareholder whose preemptive right was violated;
273-18 or
273-19 (2) the fourth anniversary of the latest of:
273-20 (A) the date the corporation issued the shares,
273-21 securities, or rights;
273-22 (B) the date the corporation sold the shares,
273-23 securities, or rights; or
273-24 (C) the date the corporation otherwise
273-25 distributed the shares, securities, or rights.
273-26 (b) The notice required by Subsection (a)(1) must:
273-27 (1) be sent to the holder at the address for the
274-1 holder as shown on the appropriate records of the corporation; and
274-2 (2) inform the holder that the issuance, sale, or
274-3 other distribution of shares, securities, or rights violated the
274-4 holder's preemptive right.
274-5 Sec. 21.207. DISPOSITION OF SHARES HAVING PREEMPTIVE RIGHTS.
274-6 The transferee or successor of a share that has been transferred or
274-7 otherwise disposed of by a shareholder of a corporation whose
274-8 preemptive right to acquire shares in the corporation has been
274-9 violated does not acquire the preemptive right, or any right or
274-10 claim based on the violation, unless the previous shareholder has
274-11 assigned the preemptive right to the transferee or successor.
274-12 Sec. 21.208. PREEMPTIVE RIGHT IN EXISTING CORPORATION.
274-13 Subject to the certificate of formation, a shareholder of a
274-14 corporation incorporated before the effective date of this code has
274-15 a preemptive right to acquire unissued or treasury shares of the
274-16 corporation to the extent provided by Sections 21.204, 21.206, and
274-17 21.207. After the effective date of this code, a corporation may
274-18 limit or deny the preemptive right of the shareholders of the
274-19 corporation by amending the corporation's certificate of formation.
274-20 Sec. 21.209. TRANSFER OF SHARES AND OTHER SECURITIES.
274-21 Except as otherwise provided by this code, the shares and other
274-22 securities of a corporation are transferable in accordance with
274-23 Chapter 8, Business & Commerce Code.
274-24 Sec. 21.210. RESTRICTION ON TRANSFER OF SHARES AND OTHER
274-25 SECURITIES. (a) A restriction on the transfer or registration of
274-26 transfer of a security may be imposed by:
274-27 (1) the corporation's certificate of formation;
275-1 (2) the corporation's bylaws;
275-2 (3) a written agreement among two or more holders of
275-3 the securities; or
275-4 (4) a written agreement among one or more holders of
275-5 the securities and the corporation if:
275-6 (A) the corporation files a copy of the
275-7 agreement at the principal place of business or registered office
275-8 of the corporation; and
275-9 (B) the copy of the agreement is subject to the
275-10 same right of examination by a shareholder of the corporation, in
275-11 person or by agent, attorney, or accountant, as the books and
275-12 records of the corporation.
275-13 (b) A restriction imposed under Subsection (a) is not valid
275-14 with respect to a security issued before the restriction has been
275-15 adopted, unless the holder of the security voted in favor of the
275-16 restriction or is a party to the agreement imposing the
275-17 restriction.
275-18 Sec. 21.211. VALID RESTRICTIONS ON TRANSFER.
275-19 Notwithstanding Sections 21.210 and 21.213, a restriction placed on
275-20 the transfer or registration of transfer of a security of a
275-21 corporation is valid if the restriction reasonably:
275-22 (1) obligates the holder of the restricted security to
275-23 offer a person, including the corporation or other holders of
275-24 securities of the corporation, an opportunity to acquire the
275-25 restricted security within a reasonable time before the transfer;
275-26 (2) obligates the corporation, to the extent provided
275-27 by this code, or another person to purchase securities that are the
276-1 subject of an agreement relating to the purchase and sale of the
276-2 restricted security;
276-3 (3) requires the corporation or the holders of a class
276-4 of the corporation's securities to consent to a proposed transfer
276-5 of the restricted security or to approve the proposed transferee of
276-6 the restricted security for the purpose of preventing a violation
276-7 of law;
276-8 (4) prohibits the transfer of the restricted security
276-9 to a designated person or group of persons and the designation is
276-10 not manifestly unreasonable;
276-11 (5) maintains the status of the corporation as an
276-12 electing small business corporation under Subchapter S of the
276-13 Internal Revenue Code;
276-14 (6) maintains a tax advantage to the corporation; or
276-15 (7) maintains the status of the corporation as a close
276-16 corporation under Subchapter O.
276-17 Sec. 21.212. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF
276-18 SHARES OR OTHER SECURITIES. (a) A corporation that has adopted a
276-19 bylaw or is a party to an agreement that restricts the transfer of
276-20 the shares or other securities of the corporation may file with the
276-21 secretary of state, in accordance with Chapter 4, a copy of the
276-22 bylaw or agreement and a statement attached to the copy that:
276-23 (1) contains the name of the corporation;
276-24 (2) states that the attached copy of the bylaw or
276-25 agreement is a true and correct copy of the bylaw or agreement; and
276-26 (3) states that the filing has been authorized by the
276-27 board of directors or, in the case of a corporation that is managed
277-1 in some other manner under a shareholders' agreement, by the person
277-2 empowered by the agreement to manage the corporation's business and
277-3 affairs.
277-4 (b) After a statement described by Subsection (a) is filed
277-5 with the secretary of state, the bylaws or agreement restricting
277-6 the transfer of shares or other securities is a public record, and
277-7 the fact that the statement has been filed may be stated on a
277-8 certificate representing the restricted shares or securities if
277-9 required by Section 3.202.
277-10 (c) A corporation that is a party to an agreement
277-11 restricting the transfer of the shares or other securities of the
277-12 corporation may make the agreement part of the corporation's
277-13 certificate of formation without restating the provisions of the
277-14 agreement in the certificate of formation by amending the
277-15 certificate of formation. If the agreement alters any provision of
277-16 the certificate of formation, the certificate of amendment shall
277-17 identify the altered provision by reference or description. If the
277-18 agreement is an addition to the certificate of formation, the
277-19 certificate of amendment must state that fact.
277-20 (d) The certificate of amendment must:
277-21 (1) include a copy of the agreement restricting the
277-22 transfer of shares or other securities;
277-23 (2) state that the attached copy of the agreement is a
277-24 true and correct copy of the agreement; and
277-25 (3) state that inclusion of the certificate of
277-26 amendment as part of the certificate of formation has been
277-27 authorized in the manner required by this code to amend the
278-1 certificate of formation.
278-2 Sec. 21.213. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF
278-3 CERTAIN SECURITIES. (a) A restriction placed on the transfer or
278-4 registration of the transfer of a security of a corporation is
278-5 specifically enforceable against the holder, or a successor or
278-6 transferee of the holder, if:
278-7 (1) the restriction is reasonable and noted
278-8 conspicuously on the certificate or other instrument representing
278-9 the security; or
278-10 (2) with respect to an uncertificated security, the
278-11 restriction is reasonable and a notation of the restriction is
278-12 contained in the notice sent with respect to the security under
278-13 Section 3.205.
278-14 (b) Unless noted in the manner specified by Subsection (a)
278-15 with respect to a certificate or other instrument or an
278-16 uncertificated security, an otherwise enforceable restriction is
278-17 ineffective against a transferee for value without actual knowledge
278-18 of the restriction at the time of the transfer or against a
278-19 subsequent transferee, regardless of whether the transfer is for
278-20 value. A restriction is specifically enforceable against a person
278-21 other than a transferee for value from the time the person acquires
278-22 actual knowledge of the restriction's existence.
278-23 Sec. 21.214. JOINT OWNERSHIP OF SHARES. (a) If shares are
278-24 registered on the books of a corporation in the names of two or
278-25 more persons as joint owners with the right of survivorship and one
278-26 of the owners dies, the corporation may record on its books and
278-27 effect the transfer of the shares to a person, including the
279-1 surviving joint owner, and pay any distributions made with respect
279-2 to the shares, as if the surviving joint owner was the absolute
279-3 owner of the shares. The recording and distribution authorized by
279-4 this subsection must be made after the death of a joint owner and
279-5 before the corporation receives actual written notice that a party
279-6 other than a surviving joint owner is claiming an interest in the
279-7 shares or distribution.
279-8 (b) The discharge of a corporation from liability under
279-9 Section 21.216 and the transfer of full legal and equitable title
279-10 of the shares does not affect, reduce, or limit any cause of action
279-11 existing in favor of an owner of an interest in the shares or
279-12 distributions against the surviving owner.
279-13 Sec. 21.215. LIABILITY FOR DESIGNATING OWNER OF SHARES. A
279-14 corporation or an officer, director, employee, or agent of the
279-15 corporation may not be held liable for considering a person to be
279-16 the owner of a share for a purpose described by Section 21.201,
279-17 regardless of whether the person possesses a certificate for that
279-18 share.
279-19 Sec. 21.216. LIABILITY REGARDING JOINT OWNERSHIP OF SHARES.
279-20 A corporation that transfers shares or makes a distribution to a
279-21 surviving joint owner under Section 21.214 before the corporation
279-22 has received a written claim for the shares or distribution from
279-23 another person is discharged from liability for the transfer or
279-24 payment.
279-25 Sec. 21.217. LIABILITY OF ASSIGNEE OR TRANSFEREE. An
279-26 assignee or transferee of certificated shares, uncertificated
279-27 shares, or a subscription for shares in good faith and without
280-1 knowledge that full consideration for the shares or subscription
280-2 has not been paid may not be held personally liable to the
280-3 corporation or a creditor of the corporation for an unpaid portion
280-4 of the consideration.
280-5 Sec. 21.218. EXAMINATION OF RECORDS. (a) In this section,
280-6 a holder of a beneficial interest in a voting trust entered into
280-7 under Section 6.251 is a holder of the shares represented by the
280-8 beneficial interest.
280-9 (b) Subject to the governing documents and on written demand
280-10 stating a proper purpose, an owner of outstanding shares of a
280-11 corporation for at least six months immediately preceding the
280-12 owner's demand, or a holder of at least five percent of all of the
280-13 outstanding shares of a corporation, is entitled to examine and
280-14 copy, at a reasonable time, the corporation's relevant books,
280-15 records of account, minutes, and share transfer records. The
280-16 examination may be conducted in person or through an agent,
280-17 accountant, or attorney.
280-18 (c) This section does not impair the power of a court, on
280-19 the presentation of proof of proper purpose by a beneficial or
280-20 record holder of shares, to compel the production for examination
280-21 by the holder of the books and records of accounts, minutes, and
280-22 share transfer records of a corporation, regardless of the period
280-23 during which the holder was a beneficial holder or record holder
280-24 and regardless of the number of shares held by the person.
280-25 Sec. 21.219. ANNUAL AND INTERIM STATEMENTS OF CORPORATION.
280-26 (a) On written request of a shareholder of the corporation, a
280-27 corporation shall mail to the shareholder:
281-1 (1) the annual statements of the corporation for the
281-2 last fiscal year that contain in reasonable detail the
281-3 corporation's assets and liabilities and the results of the
281-4 corporation's operations; and
281-5 (2) the most recent interim statements, if any, that
281-6 have been filed in a public record or other publication.
281-7 (b) The corporation shall be allowed a reasonable time to
281-8 prepare the annual statements.
281-9 Sec. 21.220. PENALTY FOR FAILURE TO PREPARE VOTING LIST. An
281-10 officer or agent of a corporation who is in charge of the
281-11 corporation's share transfer records and who does not prepare the
281-12 list of owners, keep the list on file for a 10-day period, or
281-13 produce and keep the list available for inspection at the annual
281-14 meeting as required by Sections 6.004 and 21.354 is liable to an
281-15 owner who suffers damages because of the failure for the damage
281-16 caused by the failure.
281-17 Sec. 21.221. PENALTY FOR FAILURE TO PROVIDE NOTICE OF
281-18 MEETING. If an officer or agent of a corporation is unable to
281-19 comply with the duties prescribed by Sections 6.004 and 21.354
281-20 because the officer or agent did not receive notice of a meeting of
281-21 owners within a sufficient time before the date of the meeting, the
281-22 corporation, rather than the officer or agent, is liable to an
281-23 owner who suffers damages because of the failure for the extent of
281-24 the damage caused by the failure.
281-25 Sec. 21.222. PENALTY FOR REFUSAL TO PERMIT EXAMINATION OF
281-26 CERTAIN RECORDS. (a) A corporation that refuses to allow a person
281-27 to examine and make copies of account records, minutes, and share
282-1 transfer records under Section 21.218 is liable to the owner for
282-2 any cost or expense, including attorney's fees, incurred in
282-3 enforcing the owner's rights under Section 21.218. The liability
282-4 imposed on a corporation under this subsection is in addition to
282-5 any other damages or remedy afforded to the owner by law.
282-6 (b) It is a defense to an action brought under this section
282-7 that the person suing has within the two years preceding the date
282-8 the action is brought:
282-9 (1) sold or offered for sale a list of owners or of
282-10 holders of voting trust certificates in consideration for shares of
282-11 the corporation or any other corporation;
282-12 (2) aided or abetted a person in procuring a list of
282-13 owners or of holders of voting trust certificates for the purpose
282-14 described by Subdivision (1); or
282-15 (3) improperly used in making its request for
282-16 examination information obtained through a prior examination of the
282-17 books and account records, minutes, or share transfer records of
282-18 the corporation or any other corporation that was not acting in
282-19 good faith or for a proper purpose in making its request for
282-20 examination.
282-21 (Sections 21.223-21.250 reserved for expansion)
282-22 SUBCHAPTER F. REDUCTIONS IN STATED CAPITAL; CANCELLATION
282-23 OF TREASURY SHARES
282-24 Sec. 21.251. REDUCTION OF STATED CAPITAL BY REDEMPTION OR
282-25 PURCHASE OF REDEEMABLE SHARES. (a) At the time a corporation
282-26 redeems or purchases the redeemable shares of the corporation, the
282-27 redemption or purchase has the effect of:
283-1 (1) canceling the shares, so a statement of
283-2 cancellation must be filed in accordance with Chapter 4 and Section
283-3 21.252; and
283-4 (2) restoring the shares to the status of authorized
283-5 but unissued shares, unless the corporation's certificate of
283-6 formation provides that shares may not be reissued after the shares
283-7 are redeemed or purchased by the corporation.
283-8 (b) If the corporation is prohibited from reissuing the
283-9 shares by the certificate of formation following a redemption or
283-10 purchase under Subsection (a), the filing of the statement of
283-11 cancellation operates as an amendment to the certificate of
283-12 formation and reduces the number of shares of the class that the
283-13 corporation is authorized to issue by the number of shares
283-14 canceled.
283-15 (c) If shares redeemed or purchased by a corporation under
283-16 Subsection (a) constitute all of the outstanding shares of a
283-17 particular class of shares and the certificate of formation
283-18 provides that the shares of the class, when redeemed and
283-19 repurchased, may not be reissued, the filing of the statement of
283-20 cancellation operates as an amendment to the certificate of
283-21 formation by deleting all references to the class of shares and
283-22 reduces the classes of shares the corporation is authorized to
283-23 issue accordingly.
283-24 Sec. 21.252. CONTENTS AND FILING OF STATEMENT OF
283-25 CANCELLATION OF CERTAIN REDEEMABLE SHARES. (a) The statement of
283-26 cancellation required by Section 21.251 must state:
283-27 (1) the name of the corporation;
284-1 (2) the number of redeemable shares canceled through
284-2 the redemption or purchase, itemized by class and series;
284-3 (3) the aggregate number of issued shares after the
284-4 cancellation takes effect, itemized by class and series;
284-5 (4) the amount of the stated capital of the
284-6 corporation after the cancellation takes effect; and
284-7 (5) if the corporation's certificate of formation
284-8 provides that the corporation may not reissue canceled shares, the
284-9 number of shares the corporation is authorized to issue after the
284-10 cancellation takes effect, itemized by class and series.
284-11 (b) The filing of the statement of cancellation has the
284-12 effect of reducing the stated capital of the corporation by an
284-13 amount equal to that part of the stated capital that was, at the
284-14 time of the cancellation, represented by the canceled shares.
284-15 (c) This section does not prohibit a cancellation of shares
284-16 or a reduction of stated capital in any other manner permitted by
284-17 law.
284-18 Sec. 21.253. CANCELLATION OF TREASURY SHARES. (a) A
284-19 corporation, by resolution of the board of directors of the
284-20 corporation, may cancel all or part of the corporation's treasury
284-21 shares at any time.
284-22 (b) A corporation that cancels all or part of the treasury
284-23 shares of the corporation must file a statement of cancellation in
284-24 accordance with Chapter 4 that states:
284-25 (1) the name of the corporation;
284-26 (2) that a resolution authorizing the cancellation was
284-27 adopted by all necessary action on the part of the corporation;
285-1 (3) the date of adoption of the resolution authorizing
285-2 the cancellation and a summary of the resolution's contents,
285-3 including a statement of:
285-4 (A) the number of treasury shares to be
285-5 canceled, itemized by class and series; and
285-6 (B) the amount of stated capital represented by
285-7 the shares to be canceled;
285-8 (4) the aggregate number of shares that are to retain
285-9 the status of issued shares after the cancellation takes effect,
285-10 itemized by class and series and par value, if any; and
285-11 (5) the amount of the stated capital of the
285-12 corporation after the cancellation takes effect.
285-13 (c) On the filing of a statement of cancellation, the stated
285-14 capital of the corporation shall be reduced by that part of the
285-15 stated capital that was, at the time of the cancellation,
285-16 represented by the canceled shares, and the canceled shares shall
285-17 be restored to the status of authorized but unissued shares.
285-18 (d) This section does not prohibit a cancellation of shares
285-19 or a reduction of stated capital in any other manner permitted by
285-20 law.
285-21 Sec. 21.254. PROCEDURES FOR REDUCTION OF STATED CAPITAL BY
285-22 BOARD OF DIRECTORS. (a) If all or part of the stated capital of a
285-23 corporation is represented by shares without par value, the stated
285-24 capital of the corporation may be reduced in the manner provided by
285-25 this section.
285-26 (b) The board of directors shall adopt a resolution that:
285-27 (1) states the amount of the proposed reduction of the
286-1 stated capital and the manner in which the reduction will be
286-2 effected; and
286-3 (2) directs that the proposed reduction be submitted
286-4 to a vote of the shareholders at an annual or special meeting.
286-5 (c) Each shareholder of record entitled to vote on the
286-6 reduction of stated capital shall be given written notice stating
286-7 that the purpose or one of the purposes of the meeting is to
286-8 consider the matter of reducing the stated capital of the
286-9 corporation in the amount and manner proposed by the board of
286-10 directors. The notice shall be given in the time and manner
286-11 provided by this code for giving notice of shareholders' meetings.
286-12 (d) The affirmative vote of the holders of at least the
286-13 majority of the shares entitled to vote on the matter is required
286-14 for approval of the resolution proposing the reduction of stated
286-15 capital.
286-16 Sec. 21.255. STATEMENT OF REDUCTION OF STATED CAPITAL BY
286-17 BOARD. (a) When a reduction of the stated capital of a
286-18 corporation has been approved by the shareholders under Section
286-19 21.254, a statement on behalf of the corporation must be filed in
286-20 accordance with Chapter 4 that:
286-21 (1) states the name of the corporation;
286-22 (2) contains a copy of the resolution of the
286-23 shareholders approving the reduction;
286-24 (3) states the date of the resolution's adoption;
286-25 (4) states the number of shares outstanding and the
286-26 number of shares entitled to vote on the resolution;
286-27 (5) states the number of shares that voted for and
287-1 against the reduction; and
287-2 (6) states the manner in which the reduction is
287-3 effected and the dollar amount of the stated capital of the
287-4 corporation after the reduction takes effect.
287-5 (b) On the filing of the statement, the stated capital of
287-6 the corporation shall be reduced in the manner provided by the
287-7 statement.
287-8 Sec. 21.256. RESTRICTION ON REDUCTION OF STATED CAPITAL.
287-9 The stated capital of a corporation may not be reduced under this
287-10 subchapter if the amount of the aggregate stated capital of the
287-11 corporation would be reduced to an amount equal to or less than the
287-12 sum of the:
287-13 (1) aggregate preferential amounts payable on all
287-14 issued shares with a preferential right to the assets of the
287-15 corporation in the event of voluntary winding up and termination;
287-16 and
287-17 (2) aggregate par value of all issued shares with par
287-18 value but no preferential right to the assets of the corporation in
287-19 the event of voluntary winding up and termination.
287-20 (Sections 21.257-21.300 reserved for expansion)
287-21 SUBCHAPTER G. DISTRIBUTIONS AND SHARE DISTRIBUTIONS
287-22 Sec. 21.301. DEFINITIONS. In this subchapter:
287-23 (1) "Distribution limit," with respect to a
287-24 distribution made by a corporation, other than a distribution
287-25 described by Subdivision (2), means:
287-26 (A) the net assets of the corporation if the
287-27 distribution:
288-1 (i) is a purchase or redemption of its own
288-2 shares by a corporation that:
288-3 (a) is eliminating
288-4 fractional shares;
288-5 (b) is collecting or
288-6 compromising indebtedness owed by or to the corporation; or
288-7 (c) is paying dissenting
288-8 shareholders entitled to payment for their shares under this code;
288-9 or
288-10 (ii) is not the purchase or redemption of
288-11 its own shares by a consuming asset corporation; or
288-12 (B) the surplus of the corporation for a
288-13 distribution not described by Paragraph (A).
288-14 (2) "Distribution limit," with respect to a
288-15 distribution that is a purchase or redemption of its own shares by
288-16 an investment company the certificate of formation of which
288-17 provides that the company may purchase the company's own shares out
288-18 of stated capital, means the net assets of the investment company
288-19 rather than the surplus of the investment company.
288-20 (3) "Investment company" means a corporation
288-21 registered as an open-end company under the Investment Company Act.
288-22 Sec. 21.302. AUTHORITY FOR DISTRIBUTIONS. The board of
288-23 directors of a corporation may authorize a distribution and the
288-24 corporation may make a distribution, subject to Section 21.303.
288-25 Sec. 21.303. LIMITATIONS ON DISTRIBUTIONS. (a) A
288-26 corporation may not make a distribution that violates the
288-27 corporation's certificate of formation.
289-1 (b) Unless the distribution is made in compliance with
289-2 Chapter 11, a corporation may not make a distribution that:
289-3 (1) will cause the corporation to become insolvent; or
289-4 (2) exceeds the distribution limit.
289-5 Sec. 21.304. REDEMPTIONS. (a) A distribution by a
289-6 corporation that involves a redemption of outstanding redeemable
289-7 shares of the corporation subject to redemption may be related to
289-8 any or all of those shares.
289-9 (b) If less than all of the outstanding redeemable shares of
289-10 a corporation subject to redemption are to be redeemed, the shares
289-11 to be redeemed shall be selected for redemption:
289-12 (1) in accordance with the corporation's certificate
289-13 of formation; or
289-14 (2) ratably or by lot in the manner prescribed by
289-15 resolution of the corporation's board of directors, if the
289-16 certificate of formation does not specify how shares are to be
289-17 selected for redemption.
289-18 (c) A redemption of redeemable shares takes effect by call
289-19 and written notice of the redemption of the shares.
289-20 Sec. 21.305. NOTICE OF REDEMPTION. (a) A notice of
289-21 redemption of redeemable shares of a corporation must state:
289-22 (1) the class or series of shares or part of the class
289-23 or series of shares to be redeemed;
289-24 (2) the date set for redemption;
289-25 (3) the redemptive price; and
289-26 (4) the place at which the shareholders may obtain
289-27 payment of the redemptive price.
290-1 (b) The notice of redemption shall be sent to each holder of
290-2 redeemable shares being called not later than the 21st day or
290-3 earlier than the 60th day before the date set for redemption.
290-4 (c) A notice that is mailed is considered to have been sent
290-5 when the notice is deposited in the United States mail, with
290-6 postage prepaid, addressed to the shareholder at the shareholder's
290-7 address as it appears on the share transfer records of the
290-8 corporation.
290-9 (d) A corporation may give the transfer agent described by
290-10 Section 21.306 irrevocable instructions to send or complete the
290-11 notice of redemption.
290-12 Sec. 21.306. DEPOSIT OF MONEY FOR REDEMPTION. (a) After
290-13 the date the notice of redemption required by Section 21.305 is
290-14 sent and before the day after the date set for redemption of
290-15 redeemable shares of the corporation, a corporation may deposit
290-16 with a bank or trust company in this or another state of the United
290-17 States appointed and acting as transfer agent for the corporation
290-18 an amount sufficient to redeem the shares called for redemption.
290-19 The amount must be deposited as a trust fund.
290-20 (b) Unless the corporation's certificate of formation
290-21 provides otherwise, if a corporation deposits money and gives
290-22 payment instructions in accordance with Subsection (a) and Section
290-23 21.307(b):
290-24 (1) the shares called for redemption are considered
290-25 redeemed, and distributions on those shares cease to accrue on and
290-26 after the date set for redemption; and
290-27 (2) the deposit constitutes full payment of the shares
291-1 called for redemption to the holders of the shares on and after the
291-2 date set for redemption.
291-3 (c) Unless the certificate of formation provides otherwise,
291-4 after the date a deposit is made and instructions are given under
291-5 this section and Section 21.307(b), the shares called for
291-6 redemption are not considered outstanding, and the holders of the
291-7 shares cease to be shareholders of the shares and have no right
291-8 with respect to the shares other than:
291-9 (1) the right to receive payment of the redemptive
291-10 price of the shares without interest from the bank or trust
291-11 company; and
291-12 (2) any right to convert those shares.
291-13 (d) Unless the certificate of formation provides otherwise,
291-14 a bank or trust company receiving a deposit under this section
291-15 shall pay to the corporation on demand the balance of the amount
291-16 deposited if one or more holders of the shares called for
291-17 redemption do not claim for redemption the amount deposited on or
291-18 before the sixth anniversary of the date of the deposit. After
291-19 making a payment under this subsection, the bank or trust company
291-20 is relieved of all responsibility to the holders with respect to
291-21 the amount deposited.
291-22 Sec. 21.307. PAYMENT OF REDEEMED SHARES. (a) Payment of a
291-23 certificated share shall be made only on the surrender of the
291-24 respective share certificate.
291-25 (b) On or after the date set for redemption of redeemable
291-26 shares, a corporation may give a transfer agent described by
291-27 Section 21.306 irrevocable instructions to pay the redemptive price
292-1 to the respective holders of the shares as evidenced by a list of
292-2 shareholders certified by an officer of the corporation.
292-3 Sec. 21.308. PRIORITY OF DISTRIBUTIONS. (a) Except as
292-4 provided by Subsection (b) or (c), a corporation's indebtedness
292-5 that arises as a result of the declaration of a distribution and a
292-6 corporation's indebtedness issued in a distribution are at parity
292-7 with the corporation's indebtedness to its general, unsecured
292-8 creditors.
292-9 (b) The indebtedness described by Subsection (a) shall be
292-10 subordinated to the extent required by an agreement binding on the
292-11 corporation on the date the indebtedness arises or if agreed to by
292-12 the person to whom the indebtedness is owed or, with respect to
292-13 indebtedness issued in a distribution, as provided by the
292-14 corporation.
292-15 (c) The indebtedness described by Subsection (a) shall be
292-16 secured to the extent required by an agreement binding on the
292-17 corporation.
292-18 Sec. 21.309. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM
292-19 SURPLUS. (a) A corporation, by resolution of the board of
292-20 directors of the corporation, may:
292-21 (1) create a reserve out of the surplus of the
292-22 corporation; or
292-23 (2) designate or allocate in any manner a part or all
292-24 of the corporation's surplus for a proper purpose.
292-25 (b) A corporation may increase, decrease, or abolish a
292-26 reserve, designation, or allocation in the manner provided by
292-27 Subsection (a).
293-1 Sec. 21.310. AUTHORITY FOR SHARE DISTRIBUTIONS. The board
293-2 of directors of a corporation may authorize a share distribution
293-3 and the corporation may pay a share distribution subject to Section
293-4 21.311.
293-5 Sec. 21.311. LIMITATIONS ON SHARE DISTRIBUTIONS. A
293-6 corporation may not pay a share distribution in authorized but
293-7 unissued shares of any class if:
293-8 (1) the share distribution violates the corporation's
293-9 certificate of formation;
293-10 (2) the surplus of the corporation is less than the
293-11 amount required by Section 21.313 to be transferred to stated
293-12 capital at the time the share distribution is made; or
293-13 (3) the share distribution will be made to a holder of
293-14 shares of any other class or series, unless the:
293-15 (A) corporation's certificate of formation
293-16 provides for the distribution; or
293-17 (B) the share distribution is authorized by the
293-18 holders of at least a majority of the outstanding shares of the
293-19 class or series in which the share distribution is to be made.
293-20 Sec. 21.312. VALUE OF SHARES ISSUED AS SHARE DISTRIBUTIONS.
293-21 (a) A share distribution payable in authorized but unissued shares
293-22 with par value shall be issued at the par value of the respective
293-23 share.
293-24 (b) A share distribution payable in authorized but unissued
293-25 shares without par value shall be issued at the value set by the
293-26 board of directors when the share distribution is authorized.
293-27 Sec. 21.313. TRANSFER OF SURPLUS FOR SHARE DISTRIBUTIONS.
294-1 (a) When a share distribution payable in authorized but unissued
294-2 shares with par value is made by a corporation, an amount of
294-3 surplus designated by the corporation's board of directors that is
294-4 not less than the aggregate par value of the shares issued as a
294-5 share distribution shall be transferred to stated capital.
294-6 (b) When a share distribution payable in authorized but
294-7 unissued shares without par value is made by a corporation, an
294-8 amount of surplus equal to the aggregate value set by the
294-9 corporation's board of directors with respect to shares under
294-10 Section 21.312(b) shall be transferred to stated capital.
294-11 Sec. 21.314. DETERMINATION OF SOLVENCY, NET ASSETS, STATED
294-12 CAPITAL, AND SURPLUS. (a) For purposes of this subchapter, the
294-13 determination of whether a corporation is or would be insolvent and
294-14 the determination of the value of a corporation's net assets,
294-15 stated capital, or surplus and each of the components of net
294-16 assets, stated capital, or surplus may be based on:
294-17 (1) financial statements of the corporation, including
294-18 financial statements that:
294-19 (A) include subsidiary corporations or other
294-20 corporations accounted for on a consolidated basis or on the equity
294-21 method of accounting; or
294-22 (B) present the financial condition of the
294-23 corporation in accordance with generally accepted accounting
294-24 principles;
294-25 (2) financial statements prepared using the method of
294-26 accounting used to file the corporation's federal income tax return
294-27 or using any other accounting practices and principles that are
295-1 reasonable under the circumstances;
295-2 (3) financial information, including condensed or
295-3 summary financial statements, that is prepared on the same basis as
295-4 financial statements described by Subdivision (1) or (2);
295-5 (4) projection, forecast, or other forward-looking
295-6 information relating to the future economic performance, financial
295-7 condition, or liquidity of the corporation that is reasonable under
295-8 the circumstances;
295-9 (5) a fair valuation or information from any other
295-10 method that is reasonable under the circumstances; or
295-11 (6) a combination of a statement, valuation, or
295-12 information authorized by this section.
295-13 (b) Subsection (a) does not apply to the computation of the
295-14 Texas franchise tax or any other tax imposed on a corporation under
295-15 the laws of this state.
295-16 Sec. 21.315. DATE OF DETERMINATION OF SOLVENCY, NET ASSETS,
295-17 STATED CAPITAL, AND SURPLUS. (a) For purposes of this subchapter,
295-18 a determination of whether a corporation is or would be made
295-19 insolvent by a distribution or share distribution or a
295-20 determination of the value of a corporation's net assets, stated
295-21 capital, or surplus, or each component of net assets, stated
295-22 capital, or surplus, shall be made:
295-23 (1) on the date the distribution or share distribution
295-24 is authorized by the corporation's board of directors if the
295-25 distribution or share distribution is made not later than the 120th
295-26 day after the date of authorization; or
295-27 (2) if the distribution or share distribution is made
296-1 more than 120 days after the date of authorization:
296-2 (A) on the date designated by the corporation's
296-3 board of directors if the date so designated is not earlier than
296-4 120 days before the date the distribution or share distribution is
296-5 made; or
296-6 (B) on the date the distribution or share
296-7 distribution is made if the corporation's board of directors does
296-8 not designate a date as described in Subdivision (2)(A).
296-9 (b) For purposes of this section, a distribution that
296-10 involves:
296-11 (1) the incurrence by a corporation of indebtedness or
296-12 a deferred payment obligation is considered to have been made on
296-13 the date the indebtedness or obligation is incurred; or
296-14 (2) a requirement in the corporation's certificate of
296-15 formation or other contract of the corporation to redeem, exchange,
296-16 or otherwise acquire any of its own shares is considered to have
296-17 been made either on the date when the provision or other contract
296-18 is made or takes effect or on the date when the shares to be
296-19 redeemed, exchanged or acquired are redeemed, exchanged or
296-20 acquired, at the option of the corporation.
296-21 Sec. 21.316. LIABILITY OF DIRECTORS FOR WRONGFUL
296-22 DISTRIBUTIONS. (a) Subject to Subsection (c), the directors of a
296-23 corporation who vote for or assent to a distribution by the
296-24 corporation that is prohibited by Section 21.303 are jointly and
296-25 severally liable to the corporation for the amount by which the
296-26 distribution exceeds the amount permitted by that section to be
296-27 distributed.
297-1 (b) A director is not liable for all or part of the excess
297-2 amount if a distribution of that amount would have been permitted
297-3 by Section 21.303 after the date the director authorized the
297-4 distribution.
297-5 (c) A director is not jointly and severally liable under
297-6 Subsection (a) if, in voting for or assenting to the distribution,
297-7 the director:
297-8 (1) relies in good faith and with ordinary care on:
297-9 (A) the statements, valuations, or information
297-10 described by Section 21.314; or
297-11 (B) other information, opinions, reports, or
297-12 statements, including financial statements and other financial
297-13 data, concerning the corporation or another person that are
297-14 prepared or presented by:
297-15 (i) one or more officers or employees of
297-16 the corporation;
297-17 (ii) a legal counsel, public accountant,
297-18 investment banker, or other person relating to a matter the
297-19 director reasonably believes is within the person's professional or
297-20 expert competence; or
297-21 (iii) a committee of the board of
297-22 directors of which the director is not a member;
297-23 (2) acting in good faith and with ordinary care,
297-24 considers the assets of the corporation to be valued at least at
297-25 their book value; or
297-26 (3) in determining whether the corporation made
297-27 adequate provision for payment, satisfaction, or discharge of all
298-1 of the corporation's liabilities and obligations, as provided by
298-2 Sections 11.053 and 11.356, relies in good faith and with ordinary
298-3 care on financial statements of, or other information concerning, a
298-4 person who was or became contractually obligated to pay, satisfy,
298-5 or discharge some or all of the corporation's liabilities or
298-6 obligations.
298-7 (d) The liability imposed under Subsection (a) is the only
298-8 liability of a director to the corporation or its creditors for
298-9 authorizing a distribution that is prohibited by Section 21.303.
298-10 (e) This section and Sections 21.317 and 21.318 do not limit
298-11 any liability imposed under Chapter 24, Business & Commerce Code,
298-12 or the United States Bankruptcy Code.
298-13 Sec. 21.317. STATUTE OF LIMITATIONS ON ACTION FOR WRONGFUL
298-14 DISTRIBUTION. An action may not be brought against a director of a
298-15 corporation under Section 21.316 after the second anniversary of
298-16 the date the alleged act giving rise to the liability occurred.
298-17 Sec. 21.318. CONTRIBUTION FROM CERTAIN SHAREHOLDERS AND
298-18 DIRECTORS. (a) A director who is held liable for a claim asserted
298-19 under Section 21.316 is entitled to receive contributions from
298-20 shareholders who accepted or received the wrongful distribution
298-21 knowing that it was prohibited by Section 21.303 in proportion to
298-22 the amounts received by the shareholders.
298-23 (b) A director who is liable for a claim asserted under
298-24 Section 21.316 is entitled to receive contributions from each of
298-25 the other directors who are liable with respect to that claim in an
298-26 amount appropriate to achieve equity.
298-27 (c) Except as provided in Chapter 7, the liability provided
299-1 by Subsection (a) is the only liability of a shareholder to the
299-2 corporation or a creditor of the corporation for accepting or
299-3 receiving a distribution by the corporation that is prohibited by
299-4 Section 21.303.
299-5 (Sections 21.319-21.350 reserved for expansion)
299-6 SUBCHAPTER H. SHAREHOLDER MEETINGS; VOTING AND QUORUM
299-7 Sec. 21.351. ANNUAL MEETING. (a) An annual meeting of the
299-8 shareholders of a corporation shall be held at a time that is
299-9 stated in or set in accordance with the corporation's bylaws.
299-10 (b) On the application of a shareholder who has previously
299-11 submitted a written request to the corporation that an annual
299-12 meeting be held, a court in the county in which the principal
299-13 executive office of the corporation is located may order a meeting
299-14 to be held if the annual meeting is not held or written consent
299-15 instead of the annual meeting is not executed within any 13-month
299-16 period, unless the meeting is not required to be held under Section
299-17 21.655.
299-18 (c) The failure to hold an annual meeting at the designated
299-19 time does not result in the winding up or termination of the
299-20 corporation.
299-21 Sec. 21.352. SPECIAL MEETINGS. (a) A special meeting of
299-22 the shareholders of a corporation may be called by:
299-23 (1) the president, the board of directors, or any
299-24 other person authorized to call special meetings by the certificate
299-25 of formation or bylaws of the corporation; or
299-26 (2) the holders of the percentage of shares specified
299-27 in the certificate of formation, not to exceed 50 percent of the
300-1 shares entitled to vote or, if no percentage is specified, at least
300-2 10 percent of all of the shares of the corporation entitled to vote
300-3 at the proposed special meeting.
300-4 (b) Unless stated in or set in accordance with the bylaws,
300-5 the record date for determining which shareholders of the
300-6 corporation are entitled to call a special meeting is the date the
300-7 first shareholder signs the notice of that meeting.
300-8 (c) Other than procedural matters, the only business that
300-9 may be conducted at a special meeting of the shareholders is
300-10 business that is within the purposes described in the notice
300-11 required by Section 21.353.
300-12 Sec. 21.353. NOTICE OF MEETING. (a) Except as provided by
300-13 Section 21.456, written notice of a meeting in accordance with
300-14 Section 6.051 shall be given to each shareholder entitled to vote
300-15 at the meeting not later than the 10th day and not earlier than the
300-16 60th day before the date of the meeting. Notice shall be given at
300-17 the direction of the president, secretary, or other person calling
300-18 the meeting.
300-19 (b) The notice of a special meeting must contain a statement
300-20 regarding the purpose or purposes of the meeting.
300-21 Sec. 21.354. INSPECTION OF VOTING LIST. (a) Subject to the
300-22 corporation's governing documents, the list of shareholders
300-23 entitled to vote at the meeting prepared under Section 6.004 shall
300-24 be:
300-25 (1) subject to inspection by a shareholder during
300-26 regular business hours; and
300-27 (2) produced and kept open at the meeting.
301-1 (b) The original share transfer records are prima facie
301-2 evidence of which shareholders are entitled to inspect the list.
301-3 Sec. 21.355. CLOSING OF SHARE TRANSFER RECORDS. Share
301-4 transfer records that are closed in accordance with Section 6.101
301-5 for the purpose of determining which shareholders are entitled to
301-6 receive notice of a meeting of shareholders shall remain closed for
301-7 at least 10 days immediately preceding the date of the meeting.
301-8 Sec. 21.356. RECORD DATE FOR WRITTEN CONSENT TO ACTION. The
301-9 record date provided in accordance with Section 6.102(a) may not be
301-10 more than 10 days after the date on which the board of directors
301-11 adopts the resolution setting the record date.
301-12 Sec. 21.357. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
301-13 CONSENT TO ACTION. The record date provided by the directors in
301-14 accordance with Section 6.101 must be at least 10 days before the
301-15 date on which the particular action requiring the determination of
301-16 shareholders is to be taken.
301-17 Sec. 21.358. QUORUM. (a) Subject to Subsection (b), the
301-18 holders of the majority of the shares entitled to vote at a meeting
301-19 of the shareholders of a corporation that are present or
301-20 represented by proxy at the meeting are a quorum for the
301-21 consideration of a matter to be presented at that meeting.
301-22 (b) The certificate of formation of a corporation may
301-23 provide that a quorum is present only if:
301-24 (1) the holders of a specified portion of the shares
301-25 that is greater than the majority of the shares entitled to vote
301-26 are represented at the meeting in person or by proxy; or
301-27 (2) the holders of a specified portion of the shares
302-1 that is less than the majority but not less than one-third of the
302-2 shares entitled to vote are represented at the meeting in person or
302-3 by proxy.
302-4 (c) Unless provided by the certificate of formation or
302-5 bylaws of the corporation, after a quorum is present at a meeting
302-6 of shareholders, the shareholders may conduct business properly
302-7 brought before the meeting until the meeting is adjourned. The
302-8 subsequent withdrawal from the meeting of a shareholder or the
302-9 refusal of a shareholder present at or represented by proxy at the
302-10 meeting to vote does not negate the presence of a quorum at the
302-11 meeting.
302-12 (d) Unless provided by the certificate of formation or
302-13 bylaws, the shareholders of the corporation at a meeting at which a
302-14 quorum is not present may adjourn the meeting until the time and to
302-15 the place as may be determined by a vote of the holders of the
302-16 majority of the shares who are present or represented by proxy at
302-17 the meeting.
302-18 Sec. 21.359. VOTING IN ELECTION OF DIRECTORS. (a) Subject
302-19 to Subsection (b), directors of a corporation shall be elected by a
302-20 plurality of the votes cast by the holders of shares entitled to
302-21 vote in the election of directors at a meeting of shareholders at
302-22 which a quorum is present.
302-23 (b) The certificate of formation or bylaws of a corporation
302-24 may provide that a director of a corporation shall be elected only
302-25 if the director receives:
302-26 (1) the vote of the holders of a specified portion,
302-27 but not less than the majority, of the shares entitled to vote in
303-1 the election of directors;
303-2 (2) the vote of the holders of a specified portion,
303-3 but not less than the majority, of the shares entitled to vote in
303-4 the election of directors and represented in person or by proxy at
303-5 a meeting of shareholders at which a quorum is present; or
303-6 (3) the vote of the holders of a specified portion,
303-7 but not less than the majority, of the votes cast by the holders of
303-8 shares entitled to vote in the election of directors at a meeting
303-9 of shareholders at which a quorum is present.
303-10 Sec. 21.360. NO CUMULATIVE VOTING RIGHT UNLESS AUTHORIZED.
303-11 Except as provided by Section 21.361 or 21.362, a shareholder does
303-12 not have the right to cumulate the shareholder's vote in the
303-13 election of directors.
303-14 Sec. 21.361. CUMULATIVE VOTING IN ELECTION OF DIRECTORS.
303-15 (a) If expressly authorized by a corporation's certificate of
303-16 formation in general or with respect to a specified class or series
303-17 of shares or group of classes or series of shares and subject to
303-18 Subsections (b) and (c), at each election of directors of the
303-19 corporation each shareholder entitled to vote at the election is
303-20 entitled to:
303-21 (1) vote the number of shares owned by the shareholder
303-22 for as many candidates as there are directors to be elected and for
303-23 whose election the shareholder is entitled to vote; or
303-24 (2) cumulate votes by:
303-25 (A) giving one candidate as many votes as the
303-26 total of the number of the directors to be elected multiplied by
303-27 the shareholder's shares; or
304-1 (B) distributing the votes among one or more
304-2 candidates using the same principle.
304-3 (b) Cumulative voting permitted by the certificate of
304-4 formation is permitted only in an election of directors in which a
304-5 shareholder who intends to cumulate votes has given written notice
304-6 of that intention to the secretary of the corporation on or before
304-7 the day preceding the date of the election at which the shareholder
304-8 intends to cumulate votes.
304-9 (c) All shareholders entitled to vote cumulatively may
304-10 cumulate their votes if a shareholder gives the notice required by
304-11 Subsection (b).
304-12 Sec. 21.362. CUMULATIVE VOTING RIGHT IN CERTAIN
304-13 CORPORATIONS. Except as provided by the corporation's certificate
304-14 of formation, a shareholder of a corporation incorporated before
304-15 the effective date of this code has the right to cumulatively vote
304-16 the number of shares the shareholder owns in the election of
304-17 directors to the extent permitted and in the manner provided by
304-18 Section 21.361. A corporation may limit or deny a shareholder's
304-19 right to cumulatively vote shares at any time after the effective
304-20 date of this code by amending its certificate of formation.
304-21 Sec. 21.363. VOTING ON MATTERS OTHER THAN ELECTION OF
304-22 DIRECTORS. (a) Subject to Subsection (b), with respect to a
304-23 matter other than the election of directors or a matter for which
304-24 the affirmative vote of the holders of a specified portion of the
304-25 shares entitled to vote is required by this code, the affirmative
304-26 vote of the holders of the majority of the shares entitled to vote
304-27 on, and who voted for, against, or expressly abstained with respect
305-1 to, the matter at a shareholders' meeting of a corporation at which
305-2 a quorum is present is the act of the shareholders.
305-3 (b) With respect to a matter other than the election of
305-4 directors or a matter for which the affirmative vote of the holders
305-5 of a specified portion of the shares entitled to vote is required
305-6 by this code, the certificate of formation or bylaws of a
305-7 corporation may provide that the act of the shareholders of the
305-8 corporation is:
305-9 (1) the affirmative vote of the holders of a specified
305-10 portion, but not less than the majority, of the shares entitled to
305-11 vote on that matter;
305-12 (2) the affirmative vote of the holders of a specified
305-13 portion, but not less than the majority, of the shares entitled to
305-14 vote on that matter and represented in person or by proxy at a
305-15 shareholders' meeting at which a quorum is present;
305-16 (3) the affirmative vote of the holders of a specified
305-17 portion, but not less than the majority, of the shares entitled to
305-18 vote on, and who voted for or against, the matter at a
305-19 shareholders' meeting at which a quorum is present; or
305-20 (4) the affirmative vote of the holders of a specified
305-21 portion, but not less than the majority, of the shares entitled to
305-22 vote on, and who voted for, against, or expressly abstained with
305-23 respect to, the matter at a shareholders' meeting at which a quorum
305-24 is present.
305-25 Sec. 21.364. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION.
305-26 (a) In this section, a "fundamental action" means:
305-27 (1) an amendment of a certificate of formation;
306-1 (2) a voluntary winding up under Chapter 11;
306-2 (3) a revocation of a voluntary decision to wind up
306-3 under Section 11.151;
306-4 (4) a cancellation of an event requiring winding up
306-5 under Section 11.252; or
306-6 (5) a reinstatement under Section 11.202.
306-7 (b) Except as otherwise provided by this code or the
306-8 certificate of formation or bylaws of a corporation in accordance
306-9 with Section 21.363, the vote required for approval of a
306-10 fundamental action by the shareholders is the affirmative vote of
306-11 the holders of at least two-thirds of the outstanding shares
306-12 entitled to vote on the fundamental action.
306-13 (c) If a class or series of shares is entitled to vote as a
306-14 class on a fundamental action, the vote required for approval of
306-15 the action by the shareholders is the affirmative vote of the
306-16 holders of at least two-thirds of the outstanding shares in each
306-17 class or series of shares entitled to vote on the action as a class
306-18 and at least two-thirds of the outstanding shares otherwise
306-19 entitled to vote on the action. Shares entitled to vote as a class
306-20 shall be entitled to vote only as a class unless otherwise entitled
306-21 to vote on each matter submitted to the shareholders generally or
306-22 otherwise provided by the certificate of formation.
306-23 (d) Unless an amendment to the certificate of formation is
306-24 undertaken by the board of directors under Section 21.155, separate
306-25 voting by a class or series of shares of a corporation is required
306-26 for approval of an amendment to the certificate of formation that
306-27 would result in:
307-1 (1) the increase or decrease of the aggregate number
307-2 of authorized shares of the class or series;
307-3 (2) the increase or decrease of the par value of the
307-4 shares of the class, including changing shares with par value into
307-5 shares without par value or changing shares without par value into
307-6 shares with par value;
307-7 (3) effecting an exchange, reclassification, or
307-8 cancellation of all or part of the shares of the class or series;
307-9 (4) effecting an exchange or creating a right of
307-10 exchange of all or part of the shares of another class or series
307-11 into the shares of the class or series;
307-12 (5) the change of the designations, preferences,
307-13 limitations, or relative rights of the shares of the class or
307-14 series;
307-15 (6) the change of the shares of the class or series,
307-16 with or without par value, into the same or a different number of
307-17 shares, with or without par value, of the same class or series or
307-18 another class or series;
307-19 (7) the creation of a new class or series of shares
307-20 with rights and preferences equal, prior, or superior to the shares
307-21 of the class or series;
307-22 (8) increasing the rights and preferences of a class
307-23 or series with rights and preferences equal, prior, or superior to
307-24 the shares of the class or series;
307-25 (9) increasing the rights and preferences of a class
307-26 or series with rights or preferences later or inferior to the
307-27 shares of the class or series in such a manner that the rights or
308-1 preferences will be equal, prior, or superior to the shares of the
308-2 class or series;
308-3 (10) dividing the shares of the class into series and
308-4 setting and determining the designation of the series and the
308-5 variations in the relative rights and preferences between the
308-6 shares of the series;
308-7 (11) the limitation or denial of existing preemptive
308-8 rights or cumulative voting rights of the shares of the class or
308-9 series;
308-10 (12) canceling or otherwise affecting the dividends on
308-11 the shares of the class or series that have accrued but have not
308-12 been declared; or
308-13 (13) the inclusion or deletion from the certificate of
308-14 formation of provisions required or permitted to be included in the
308-15 certificate of formation of a close corporation under Subchapter O.
308-16 (e) The vote required under Subsection (d) by a class or
308-17 series of shares of a corporation is required notwithstanding
308-18 shares of that class or series do not otherwise have a right to
308-19 vote under the certificate of formation.
308-20 (f) Unless otherwise provided by the certificate of
308-21 formation, if the holders of the outstanding shares of a class that
308-22 is divided into series are entitled to vote as a class on a
308-23 proposed amendment that would affect equally all series of the
308-24 class, other than a series in which no shares are outstanding or a
308-25 series that is not affected by the amendment, the holders of the
308-26 separate series are not entitled to separate class votes.
308-27 (g) Unless otherwise provided by the certificate of
309-1 formation, a proposed amendment to the certificate of formation
309-2 that would solely effect changes in the designations, preferences,
309-3 limitations, or relative rights, including voting rights, of one or
309-4 more series of shares of the corporation that have been established
309-5 under the authority granted to the board of directors in the
309-6 certificate of formation in accordance with Section 21.155 does not
309-7 require the approval of the holders of the outstanding shares of a
309-8 class or series other than the affected series if, after giving
309-9 effect to the amendment:
309-10 (1) the preferences, limitations, or relative rights
309-11 of the affected series may be set and determined by the board of
309-12 directors with respect to the establishment of a new series of
309-13 shares under the authority granted to the board of directors in the
309-14 certificate of formation in accordance with Section 21.155; or
309-15 (2) any new series established as a result of a
309-16 reclassification of the affected series are within the preferences,
309-17 limitations, and relative rights that are described by Subdivision
309-18 (1).
309-19 Sec. 21.365. CHANGES IN VOTE REQUIRED FOR CERTAIN MATTERS.
309-20 (a) With respect to a matter for which the affirmative vote of the
309-21 holders of a specified portion of the shares entitled to vote is
309-22 required by this code, the certificate of formation of a
309-23 corporation may provide that the affirmative vote of the holders of
309-24 a specified portion, but not less than the majority, of the shares
309-25 entitled to vote on that matter is required for shareholder action
309-26 on that matter.
309-27 (b) With respect to a matter for which the affirmative vote
310-1 of the holders of a specified portion of the shares of a class or
310-2 series is required by this code, the certificate of formation may
310-3 provide that the affirmative vote of the holders of a specified
310-4 portion, but not less than the majority, of the shares of that
310-5 class or series is required for action of the holders of shares of
310-6 that class or series on that matter.
310-7 (c) If a provision of the certificate of formation provides
310-8 that the affirmative vote of the holders of a specified portion
310-9 that is greater than the majority of the shares entitled to vote on
310-10 a matter is required for shareholder action on that matter, the
310-11 provision may not be amended, directly or indirectly, without the
310-12 same affirmative vote unless otherwise provided by the certificate
310-13 of formation.
310-14 (d) If a provision of the certificate of formation provides
310-15 that the affirmative vote of the holders of a specified portion
310-16 that is greater than the majority of the shares of a class or
310-17 series is required for shareholder action on a matter, the
310-18 provision may not be amended, directly or indirectly, without the
310-19 same affirmative vote unless otherwise provided by the certificate
310-20 of formation.
310-21 Sec. 21.366. NUMBER OF VOTES PER SHARE. (a) Except as
310-22 provided by the certificate of formation of a corporation or this
310-23 code, each outstanding share, regardless of class, shall be
310-24 entitled to one vote on each matter submitted to a vote at a
310-25 shareholders' meeting.
310-26 (b) If the certificate of formation provides for more or
310-27 less than one vote per share on a matter for all of the outstanding
311-1 shares or for the shares of a class or series, each reference in
311-2 this code or in the certificate of formation or bylaws, unless
311-3 expressly stated otherwise, to a specified portion of the shares
311-4 with respect to that matter refers to the portion of the votes
311-5 entitled to be cast with respect to those shares under the
311-6 certificate of formation.
311-7 Sec. 21.367. VOTING IN PERSON OR BY PROXY. (a) A
311-8 shareholder may vote in person or by proxy executed in writing by
311-9 the shareholder.
311-10 (b) A telegram, telex, cablegram, electronic message, or
311-11 similar transmission by the shareholder, or a photographic,
311-12 photostatic, facsimile, or similar reproduction of a writing
311-13 executed by the shareholder, is considered an execution in writing
311-14 for purposes of this section.
311-15 Sec. 21.368. TERM OF PROXY. A proxy is not valid after 11
311-16 months after the date the proxy is executed unless otherwise
311-17 provided by the proxy.
311-18 Sec. 21.369. REVOCABILITY OF PROXY. (a) In this section, a
311-19 "proxy coupled with an interest" includes the appointment as proxy
311-20 of:
311-21 (1) a pledgee;
311-22 (2) a person who purchased or agreed to purchase the
311-23 shares subject to the proxy;
311-24 (3) a person who owns or holds an option to purchase
311-25 the shares subject to the proxy;
311-26 (4) a creditor of the corporation who extended the
311-27 corporation credit under terms requiring the appointment;
312-1 (5) an employee of the corporation whose employment
312-2 contract requires the appointment; or
312-3 (6) a party to a voting agreement created under
312-4 Section 6.252 or a shareholders' agreement created under Section
312-5 21.101.
312-6 (b) A proxy is revocable unless:
312-7 (1) the proxy form conspicuously states that the proxy
312-8 is irrevocable; and
312-9 (2) the proxy is coupled with an interest.
312-10 Sec. 21.370. ENFORCEABILITY OF PROXY. (a) An irrevocable
312-11 proxy is specifically enforceable against the holder of shares or
312-12 any successor or transferee of the holder if:
312-13 (1) the proxy is noted conspicuously on the
312-14 certificate representing the shares subject to the proxy; or
312-15 (2) in the case of uncertificated shares, notation of
312-16 the proxy is contained in the notice sent under Section 3.205 with
312-17 respect to the shares subject to the proxy.
312-18 (b) An irrevocable proxy that is otherwise enforceable is
312-19 ineffective against a transferee for value without actual knowledge
312-20 of the existence of the irrevocable proxy at the time of the
312-21 transfer or against a subsequent transferee, regardless of whether
312-22 the transfer is for value, unless the proxy is:
312-23 (1) noted conspicuously on the certificate
312-24 representing the shares subject to the proxy; or
312-25 (2) in the case of uncertificated shares, notation of
312-26 the proxy is contained in the notice sent under Section 3.205 with
312-27 respect to the shares subject to the proxy.
313-1 (c) An irrevocable proxy shall be specifically enforceable
313-2 against a person who is not a transferee for value from the time
313-3 the person acquires actual knowledge of the existence of the
313-4 irrevocable proxy.
313-5 Sec. 21.371. PROCEDURES IN BYLAWS RELATING TO PROXIES. A
313-6 corporation may establish in the corporation's bylaws procedures
313-7 consistent with this code for determining the validity of proxies
313-8 and determining whether shares that are held of record by a bank,
313-9 broker, or other nominee are represented at a meeting of
313-10 shareholders. The procedures may incorporate rules of and
313-11 determinations made by a stock exchange or self-regulatory
313-12 organization regulating the corporation or that bank, broker, or
313-13 other nominee.
313-14 Sec. 21.372. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT.
313-15 The shareholders of a corporation may act with less than unanimous
313-16 written consent in the manner provided by Section 6.202 if action
313-17 by less than unanimous written consent is authorized by the
313-18 corporation's certificate of formation or a bylaw adopted by the
313-19 corporation's shareholders.
313-20 (Sections 21.373-21.400 reserved for expansion)
313-21 SUBCHAPTER I. BOARD OF DIRECTORS
313-22 Sec. 21.401. MANAGEMENT BY BOARD OF DIRECTORS. (a) Except
313-23 as provided by Section 21.101 or Subchapter O, the board of
313-24 directors of a corporation shall:
313-25 (1) exercise or authorize the exercise of the powers
313-26 of the corporation; and
313-27 (2) manage the business and affairs of the
314-1 corporation.
314-2 (b) In discharging the duties of director under this code or
314-3 otherwise and in considering the best interests of the corporation,
314-4 a director may consider the long-term and short-term interests of
314-5 the corporation and the shareholders of the corporation, including
314-6 the possibility that those interests may be best served by the
314-7 continued independence of the corporation.
314-8 Sec. 21.402. BOARD MEMBER ELIGIBILITY REQUIREMENTS. Unless
314-9 the certificate of formation or bylaws of a corporation provide
314-10 otherwise, a person is not required to be a resident of this state
314-11 or a shareholder of the corporation to serve as a director. The
314-12 certificate of formation or bylaws may prescribe other
314-13 qualifications for directors.
314-14 Sec. 21.403. NUMBER OF DIRECTORS. (a) The board of
314-15 directors of a corporation may consist of one or more directors.
314-16 (b) If the corporation is to be managed by a board of
314-17 directors, the corporation's certificate of formation may set the
314-18 number constituting the initial board of directors. The
314-19 certificate of formation or bylaws of the corporation shall set the
314-20 number constituting each subsequent board of directors or provide
314-21 for the manner in which the number of directors is determined.
314-22 (c) The number of directors may be increased or decreased by
314-23 amendment to, or as provided by, the certificate of formation or
314-24 bylaws. A decrease in the number of directors may not shorten the
314-25 term of an incumbent director.
314-26 (d) If the certificate of formation or bylaws do not set the
314-27 number constituting the board of directors or provide for the
315-1 manner in which the number of directors must be determined, the
315-2 number of directors is the same as the number constituting the
315-3 initial board of directors as set by the certificate of formation.
315-4 Sec. 21.404. DESIGNATION OF INITIAL BOARD OF DIRECTORS. If
315-5 the corporation is to be managed by a board of directors, the
315-6 certificate of formation of a corporation must state the names and
315-7 addresses of the persons constituting the initial board of
315-8 directors of the corporation.
315-9 Sec. 21.405. ELECTION OF BOARD OF DIRECTORS. (a) At the
315-10 first annual meeting of shareholders of a corporation and at each
315-11 subsequent annual meeting of shareholders, the holders of shares
315-12 entitled to vote in the election of directors shall elect directors
315-13 for the term provided under Section 21.407, except as provided by
315-14 Section 21.408.
315-15 (b) A corporation's certificate of formation may provide
315-16 that the holders of a class or series of shares or a group of
315-17 classes or series of shares are entitled to elect one or more
315-18 directors of the corporation.
315-19 Sec. 21.406. SPECIAL VOTING RIGHTS OF DIRECTORS. (a) The
315-20 certificate of formation of a corporation may provide that
315-21 directors elected by the holders of a class or series of shares or
315-22 by a group of classes or series of shares entitled to elect one or
315-23 more directors, as provided by Section 21.405, are entitled to cast
315-24 more or less than one vote on specified matters.
315-25 (b) Unless expressly stated otherwise, each reference in
315-26 this code or in a corporation's certificate of formation or bylaws
315-27 to a specified portion of the directors means the portion of the
316-1 votes entitled to be cast by the directors to which the reference
316-2 applies.
316-3 Sec. 21.407. TERM OF OFFICE. Unless otherwise provided by
316-4 this subchapter or removed in accordance with Section 21.409, the
316-5 term of office of a director extends from the date the director is
316-6 elected and qualified or named in the corporation's certificate of
316-7 formation until the next annual meeting of shareholders and until
316-8 the director's successor is elected and qualified.
316-9 Sec. 21.408. SPECIAL TERMS OF OFFICE. (a) The certificate
316-10 of formation or bylaws of a corporation may provide that all or
316-11 some of the board of directors may be divided into two or three
316-12 classes that shall include the same or a similar number of
316-13 directors as each other class and that have staggered terms of
316-14 office.
316-15 (b) The terms of office of the initial directors
316-16 constituting the first class expire at the first annual meeting of
316-17 shareholders after the election of those directors. The terms of
316-18 office of the initial directors constituting the second class
316-19 expire at the second annual meeting of shareholders after election
316-20 of those directors. The terms of office of the initial directors
316-21 constituting the third class, if any, expire at the third annual
316-22 meeting of shareholders after election of those directors.
316-23 (c) If the certificate of formation or bylaws provide for
316-24 staggered terms of directors, the shareholders, at each annual
316-25 meeting, shall elect a number of directors equal to the number of
316-26 the class of directors whose terms expire at the time of the
316-27 meeting. The directors elected at an annual meeting shall hold
317-1 office until the second succeeding annual meeting, if there are two
317-2 classes, or until the third succeeding annual meeting, if there are
317-3 three classes.
317-4 (d) Unless provided by the certificate of formation or a
317-5 bylaw adopted by the shareholders, staggered terms for directors
317-6 must be effected at a meeting of shareholders at which directors
317-7 are elected. Staggered terms for directors may not be effected if
317-8 any shareholder has the right to cumulate votes for the election of
317-9 directors and the board of directors consists of fewer than nine
317-10 members.
317-11 (e) Directors elected by the holders of a class or series of
317-12 shares or a group of classes or series of shares in accordance with
317-13 the certificate of formation shall hold office for the terms
317-14 specified by the certificate of formation.
317-15 Sec. 21.409. REMOVAL OF DIRECTORS. (a) Except as otherwise
317-16 provided by the certificate of formation or bylaws of a corporation
317-17 or this subchapter, the shareholders of the corporation may remove
317-18 a director or the entire board of directors of the corporation,
317-19 with or without cause, at a meeting called for that purpose, by a
317-20 vote of the holders of a specified portion, but not less than the
317-21 majority, of the shares entitled to vote at an election of
317-22 directors.
317-23 (b) If the certificate of formation entitles the holders of
317-24 a class or series of shares or a group of classes or series of
317-25 shares to elect one or more directors, only the holders of shares
317-26 of that class, series, or group may vote on the removal of a
317-27 director elected by the holders of shares of that class, series, or
318-1 group.
318-2 (c) If the certificate of formation permits cumulative
318-3 voting and less than the entire board is to be removed, a director
318-4 may not be removed if the votes cast against the removal would be
318-5 sufficient to elect the director if cumulatively voted at an
318-6 election of the entire board of directors, or if there are classes
318-7 of directors, at an election of the class of directors of which the
318-8 director is a part.
318-9 (d) In the case of a corporation the directors of which
318-10 serve staggered terms, a director may not be removed except for
318-11 cause unless the certificate of formation provides otherwise.
318-12 Sec. 21.410. VACANCY. (a) A vacancy occurring in the
318-13 initial board of directors before the issuance of shares may be
318-14 filled by the affirmative vote or written consent of the majority
318-15 of the incorporators or by the affirmative vote of the majority of
318-16 the remaining directors, even if the majority of the remaining
318-17 directors constitutes less than a quorum of the board of directors.
318-18 (b) Except as provided by Subsection (e), a vacancy
318-19 occurring in the board of directors after the issuance of shares
318-20 may be filled by election at an annual or special meeting of
318-21 shareholders called for that purpose or by the affirmative vote of
318-22 the majority of the remaining directors, even if the majority of
318-23 directors constitutes less than a quorum of the board of directors.
318-24 (c) The term of a director elected to fill a vacancy
318-25 occurring in the board of directors, including the initial
318-26 directors, is the unexpired term of the director's predecessor in
318-27 office.
319-1 (d) Except as provided by Subsection (e), a vacancy to be
319-2 filled because of an increase in the number of directors may be
319-3 filled by election at an annual or special meeting of shareholders
319-4 called for that purpose or by the board of directors for a term of
319-5 office continuing only until the next election of one or more
319-6 directors by the shareholders. During a period between two
319-7 successive annual meetings of shareholders, the board of directors
319-8 may not fill more than two vacancies created by an increase in the
319-9 number of directors.
319-10 (e) Unless otherwise authorized by a corporation's
319-11 certificate of formation, a vacancy or a newly created vacancy in a
319-12 director position that the certificate of formation entitles the
319-13 holders of a class or series of shares or group of classes or
319-14 series of shares to elect may be filled only (i) by the affirmative
319-15 vote of the majority of the directors then in office elected by the
319-16 class, series, or group, (ii) by the sole remaining director
319-17 elected in that manner, or (iii) by the affirmative vote of the
319-18 holders of the outstanding shares of the class, series, or group.
319-19 Sec. 21.411. NOTICE OF MEETING. (a) Regular meetings of
319-20 the board of directors of a corporation may be held with or without
319-21 notice as prescribed by the corporation's bylaws.
319-22 (b) Special meetings of the board of directors shall be held
319-23 with notice as prescribed by the bylaws.
319-24 (c) A notice of a board meeting is not required to specify
319-25 the business to be transacted at the meeting or the purpose of the
319-26 meeting, unless required by the bylaws.
319-27 Sec. 21.412. WAIVER OF NOTICE. (a) If the bylaws of a
320-1 corporation require notice of a meeting to be given to a director,
320-2 a written waiver of the notice signed by the director entitled to
320-3 the notice, before or after the meeting, is equivalent to the
320-4 giving of the notice.
320-5 (b) The attendance of a director at a board meeting
320-6 constitutes a waiver of notice of the meeting, unless the director
320-7 attends the meeting for the express purpose of objecting to the
320-8 transaction of business at the meeting because the meeting has not
320-9 been lawfully called or convened.
320-10 (c) A waiver of notice of a board meeting is not required to
320-11 specify the business to be transacted at the meeting or the purpose
320-12 of the meeting, unless required by the bylaws.
320-13 Sec. 21.413. QUORUM. (a) A quorum of the board of
320-14 directors is the majority of the number of directors set or
320-15 established in the manner provided by the certificate of formation
320-16 or bylaws of a corporation unless the laws of this state, the
320-17 certificate of formation, or the bylaws require a different number
320-18 or portion.
320-19 (b) Neither the certificate of formation nor the bylaws may
320-20 provide that less than one-third of the number of directors
320-21 constitutes a quorum.
320-22 Sec. 21.414. DISSENT TO ACTION. (a) A director of a
320-23 corporation who is present at a meeting of the board of directors
320-24 at which action has been taken is presumed to have assented to the
320-25 action taken unless:
320-26 (1) the director's dissent has been entered in the
320-27 minutes of the meeting;
321-1 (2) the director has filed a written dissent to the
321-2 action with the person acting as the secretary of the meeting
321-3 before the meeting is adjourned; or
321-4 (3) the director has sent a written dissent by
321-5 registered mail to the secretary of the corporation immediately
321-6 after the meeting has been adjourned.
321-7 (b) A director who voted in favor of an action may not
321-8 dissent to the action.
321-9 Sec. 21.415. ACTION BY DIRECTORS. (a) The act of a
321-10 majority of the directors present at a meeting at which a quorum is
321-11 present is the act of the board of directors of a corporation,
321-12 unless the act of a greater number is required by the certificate
321-13 of formation or bylaws of the corporation or by this code.
321-14 (b) Unless otherwise provided by the certificate of
321-15 formation or bylaws, a written consent stating the action taken and
321-16 signed by all members of the board of directors also is an act of
321-17 the board of directors.
321-18 Sec. 21.416. COMMITTEES OF BOARD OF DIRECTORS. (a) If
321-19 authorized by the certificate of formation or bylaws of a
321-20 corporation, the board of directors of the corporation, by
321-21 resolution adopted by the majority of the entire board of
321-22 directors, may designate:
321-23 (1) committees composed of one or more directors; or
321-24 (2) directors as alternate members of committees to
321-25 replace absent or disqualified committee members at a committee
321-26 meeting, subject to any limitations imposed by the board of
321-27 directors.
322-1 (b) To the extent provided by the resolution designating a
322-2 committee or the certificate of formation or bylaws and subject to
322-3 Subsection (c), the committee has the authority of the board of
322-4 directors.
322-5 (c) A committee of the board of directors may not:
322-6 (1) amend the certificate of formation, except to:
322-7 (A) establish series of shares;
322-8 (B) increase or decrease the number of shares in
322-9 a series; or
322-10 (C) eliminate a series of shares as authorized
322-11 by Section 21.155;
322-12 (2) propose a reduction of stated capital under
322-13 Sections 21.254-21.256;
322-14 (3) approve a plan of merger, share exchange, or
322-15 conversion of the corporation;
322-16 (4) recommend to shareholders the sale, lease, or
322-17 exchange of all or substantially all of the property and assets of
322-18 the corporation not made in the usual and regular course of its
322-19 business;
322-20 (5) recommend to the shareholders a voluntary winding
322-21 up and termination or a revocation of a voluntary winding up and
322-22 termination;
322-23 (6) amend, alter, or repeal the bylaws or adopt new
322-24 bylaws;
322-25 (7) fill vacancies on the board of directors;
322-26 (8) fill vacancies on or designate alternate members
322-27 of a committee of the board of directors;
323-1 (9) fill a vacancy to be filled because of an increase
323-2 in the number of directors;
323-3 (10) elect or remove officers of the corporation or
323-4 members or alternate members of a committee of the board of
323-5 directors;
323-6 (11) set the compensation of the members or alternate
323-7 members of a committee of the board of directors; or
323-8 (12) alter or repeal a resolution of the board of
323-9 directors that states that it may not be amended or repealed by a
323-10 committee of the board of directors.
323-11 (d) A committee of the board of directors may authorize a
323-12 distribution or the issuance of shares if authorized by the
323-13 resolution designating the committee or the certificate of
323-14 formation or bylaws.
323-15 (e) The board of directors may remove a member of a
323-16 committee appointed by the board if the board determines the
323-17 removal is in the best interests of the corporation. The removal
323-18 of the member is without prejudice to any contract rights of the
323-19 person removed. Appointment of a member of a committee does not
323-20 create contract rights.
323-21 (f) The designation and delegation of authority to a
323-22 committee of the board of directors does not relieve the board of
323-23 directors or a director of responsibility imposed by law.
323-24 Sec. 21.417. ELECTION OF OFFICERS. The board of directors
323-25 of a corporation shall elect a president and a secretary at the
323-26 time and in the manner prescribed by the corporation's bylaws.
323-27 Other officers of the board of directors shall be elected in
324-1 accordance with Section 3.102.
324-2 Sec. 21.418. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED
324-3 DIRECTORS AND OFFICERS. (a) This section applies only to a
324-4 contract or transaction between a corporation and:
324-5 (1) one or more of the corporation's directors or
324-6 officers; or
324-7 (2) an entity or other organization in which one or
324-8 more of the corporation's directors or officers:
324-9 (A) is a managerial official; or
324-10 (B) has a financial interest.
324-11 (b) An otherwise valid contract or transaction is valid
324-12 notwithstanding that a director or officer of the corporation is
324-13 present at or participates in the meeting of the board of
324-14 directors, or of a committee of the board that authorizes the
324-15 contract or transaction, or votes to authorize the contract or
324-16 transaction, if:
324-17 (1) the material facts as to the relationship or
324-18 interest and as to the contract or transaction are disclosed to or
324-19 known by:
324-20 (A) the corporation's board of directors or a
324-21 committee of the board of directors and the board of directors or
324-22 committee in good faith authorizes the contract or transaction by
324-23 the affirmative vote of the majority of the disinterested directors
324-24 or committee members, regardless of whether the disinterested
324-25 directors or committee members constitute a quorum; or
324-26 (B) the shareholders entitled to vote on the
324-27 authorization of the contract or transaction, and the contract or
325-1 transaction is specifically approved in good faith by a vote of the
325-2 shareholders; or
325-3 (2) the contract or transaction is fair to the
325-4 corporation when the contract or transaction is authorized,
325-5 approved, or ratified by the board of directors, a committee of the
325-6 board of directors, or the shareholders.
325-7 (c) Common or interested directors of a corporation may be
325-8 included in determining the presence of a quorum at a meeting of
325-9 the corporation's board of directors, or a committee of the board
325-10 of directors, that authorizes the contract or transaction.
325-11 (Sections 21.419-21.450 reserved for expansion)
325-12 SUBCHAPTER J. FUNDAMENTAL BUSINESS TRANSACTIONS
325-13 Sec. 21.451. DEFINITIONS. In this subchapter:
325-14 (1) "Participating shares" means shares that entitle
325-15 the holders of the shares to participate without limitation in
325-16 distributions.
325-17 (2) "Shares" includes a receipt or other instrument
325-18 issued by a depository representing an interest in one or more
325-19 shares or fractions of shares of a domestic or foreign corporation
325-20 that are deposited with the depository.
325-21 (3) "Voting shares" means shares that entitle the
325-22 holders of the shares to vote unconditionally in elections of
325-23 directors.
325-24 Sec. 21.452. APPROVAL OF MERGER. (a) A corporation that
325-25 is a party to the merger under Chapter 10 must approve the merger
325-26 by complying with this section.
325-27 (b) The board of directors of the corporation shall adopt a
326-1 resolution that:
326-2 (1) approves the plan of merger; and
326-3 (2) if shareholder approval of the merger is required
326-4 by this subchapter:
326-5 (A) recommends that the plan of merger be
326-6 approved by the shareholders of the corporation; or
326-7 (B) directs that the plan of merger be submitted
326-8 to the shareholders for approval without recommendation if the
326-9 board of directors determines for any reason not to recommend
326-10 approval of the plan of merger.
326-11 (c) Except as otherwise provided by this subchapter or
326-12 Chapter 10, the plan of merger shall be submitted to the
326-13 shareholders of the corporation for approval as provided by this
326-14 subchapter. The board of directors may place conditions on the
326-15 submission of the plan of merger to the shareholders.
326-16 (d) If the board of directors approves a plan of merger
326-17 required to be approved by the shareholders of the corporation but
326-18 does not adopt a resolution recommending that the plan of merger be
326-19 approved by the shareholders, the board of directors shall
326-20 communicate to the shareholders the reason for the board's
326-21 determination to submit the plan of merger without a
326-22 recommendation.
326-23 (e) Except as provided by Chapter 10 or Sections
326-24 21.457-21.459, the shareholders of the corporation shall approve
326-25 the plan of merger as provided by this subchapter.
326-26 Sec. 21.453. APPROVAL OF CONVERSION. (a) A corporation
326-27 must approve a conversion under Chapter 10 by complying with this
327-1 section.
327-2 (b) The board of directors of the corporation shall adopt a
327-3 resolution that approves the plan of conversion and:
327-4 (1) recommends that the plan of conversion be approved
327-5 by the shareholders of the corporation; or
327-6 (2) directs that the plan of conversion be submitted
327-7 to the shareholders for approval without recommendation if the
327-8 board of directors determines for any reason not to recommend
327-9 approval of the plan of conversion.
327-10 (c) The plan of conversion shall be submitted to the
327-11 shareholders of the corporation for approval as provided by this
327-12 subchapter. The board of directors may place conditions on the
327-13 submission of the plan of conversion to the shareholders.
327-14 (d) If the board of directors approves a plan of conversion
327-15 but does not adopt a resolution recommending that the plan of
327-16 conversion be approved by the shareholders of the corporation, the
327-17 board of directors shall communicate to the shareholders the reason
327-18 for the board's determination to submit the plan of conversion
327-19 without a recommendation.
327-20 (e) Except as provided by Sections 21.457-21.459, the
327-21 shareholders of the corporation shall approve the plan of
327-22 conversion as provided by this subchapter.
327-23 Sec. 21.454. APPROVAL OF EXCHANGE. (a) A corporation the
327-24 shares of which are to be acquired in an exchange under Chapter 10
327-25 must approve the exchange by complying with this section.
327-26 (b) The board of directors shall adopt a resolution that
327-27 approves the plan of exchange and:
328-1 (1) recommends that the plan of exchange be approved
328-2 by the shareholders of the corporation; or
328-3 (2) directs that the plan of exchange be submitted to
328-4 the shareholders for approval without recommendation if the board
328-5 of directors determines for any reason not to recommend approval of
328-6 the plan of exchange.
328-7 (c) The plan of exchange shall be submitted to the
328-8 shareholders of the corporation for approval as provided by this
328-9 subchapter. The board of directors may place conditions on the
328-10 submission of the plan of exchange to the shareholders.
328-11 (d) If the board of directors approves a plan of exchange
328-12 but does not adopt a resolution recommending that the plan of
328-13 exchange be approved by the shareholders of the corporation, the
328-14 board of directors shall communicate to the shareholders the reason
328-15 for the board's determination to submit the plan of exchange to
328-16 shareholders without a recommendation.
328-17 (e) Except as provided by Sections 21.457-21.459, the
328-18 shareholders of the corporation shall approve the plan of exchange
328-19 as provided by this subchapter.
328-20 Sec. 21.455. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
328-21 ASSETS. (a) Except as provided by the certificate of formation of
328-22 a domestic corporation, a sale, lease, pledge, mortgage,
328-23 assignment, transfer, or other conveyance of an interest in real
328-24 property or other assets of the corporation does not require the
328-25 approval or consent of the shareholders of the corporation unless
328-26 the transaction constitutes a sale of all or substantially all of
328-27 the assets of the corporation.
329-1 (b) A corporation must approve the sale of all or
329-2 substantially all of its assets by complying with this section.
329-3 (c) The board of directors of the corporation shall adopt a
329-4 resolution that approves the sale of all or substantially all of
329-5 the assets of the corporation and:
329-6 (1) recommends that the sale of all or substantially
329-7 all of the assets of the corporation be approved by the
329-8 shareholders of the corporation; or
329-9 (2) directs that the sale of all or substantially all
329-10 of the assets of the corporation be submitted to the shareholders
329-11 for approval without recommendation if the board of directors
329-12 determines for any reason not to recommend approval of the sale.
329-13 (d) The resolution proposing the sale of all or
329-14 substantially all of the assets of the corporation shall be
329-15 submitted to the shareholders of the corporation for approval as
329-16 provided by this subchapter. The board of directors may place
329-17 conditions on the submission of the proposed sale to the
329-18 shareholders.
329-19 (e) If the board of directors approves the sale of all or
329-20 substantially all of the assets of the corporation but does not
329-21 adopt a resolution recommending that the proposed sale be approved
329-22 by the shareholders of the corporation, the board of directors
329-23 shall communicate to the shareholders the reason for the board's
329-24 determination to submit the proposed sale to shareholders without a
329-25 recommendation.
329-26 (f) The shareholders of the corporation shall approve the
329-27 sale of all or substantially all of the assets of the corporation
330-1 as provided by this subchapter. After the approval of the sale by
330-2 the shareholders, the board of directors may abandon the sale of
330-3 all or substantially all of the assets of the corporation, subject
330-4 to the rights of a third party under a contract relating to the
330-5 assets, without further action or approval by the shareholders.
330-6 Sec. 21.456. GENERAL PROCEDURE FOR SUBMISSION TO
330-7 SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION. (a) If a
330-8 fundamental business transaction involving a corporation is
330-9 required to be submitted to the shareholders of the corporation
330-10 under this subchapter, the corporation shall notify each
330-11 shareholder of the corporation that the fundamental business
330-12 transaction is being submitted to the shareholders for approval as
330-13 required by this subchapter, regardless of whether the shareholder
330-14 is entitled to vote on the matter.
330-15 (b) If the fundamental business transaction is a merger,
330-16 conversion, or interest exchange, the notice required by Subsection
330-17 (a) shall contain or be accompanied by a copy or summary of the
330-18 plan of merger, conversion, or interest exchange, as appropriate.
330-19 (c) If the fundamental business transaction is to be
330-20 considered at a meeting of the shareholders of the corporation, the
330-21 notice of the meeting must:
330-22 (1) be given not later than the 21st day before the
330-23 date of the meeting; and
330-24 (2) state that the purpose, or one of the purposes, of
330-25 the meeting is to consider the fundamental business transaction.
330-26 (d) If the fundamental business transaction is being
330-27 submitted to shareholders by written consent, the notice required
331-1 by Subsection (a) must:
331-2 (1) be given not later than the 21st day before the
331-3 date the fundamental business transaction takes effect; and
331-4 (2) state that the purpose, or one of the purposes, of
331-5 the solicitation of written consents from the shareholders is to
331-6 receive approval for the fundamental business transaction.
331-7 Sec. 21.457. GENERAL VOTE REQUIREMENT FOR APPROVAL OF
331-8 FUNDAMENTAL BUSINESS TRANSACTION. (a) Except as provided by this
331-9 code or the certificate of formation of a corporation in accordance
331-10 with Section 21.365, the affirmative vote of the holders of at
331-11 least two-thirds of the outstanding shares of the corporation
331-12 entitled to vote on a fundamental business transaction is required
331-13 to approve the transaction.
331-14 (b) Unless provided by the certificate of formation or
331-15 Section 21.458, shares of a class or series that are not otherwise
331-16 entitled to vote on matters submitted to shareholders generally are
331-17 not entitled to vote for the approval of a fundamental business
331-18 transaction.
331-19 (c) Except as provided by this code, if a class or series of
331-20 shares of a corporation is entitled to vote on a fundamental
331-21 business transaction as a class or series, in addition to the vote
331-22 required under Subsection (a), the affirmative vote of the holders
331-23 of at least two-thirds of the outstanding shares in each class or
331-24 series of shares entitled to vote on the fundamental business
331-25 transaction as a class or series is required to approve the
331-26 transaction. Shares entitled to vote as a class or series shall
331-27 only be entitled to vote as a class or series on the fundamental
332-1 business transaction unless that class or series is otherwise
332-2 entitled to vote on each matter submitted to the shareholders
332-3 generally or is otherwise entitled to vote under the certificate of
332-4 formation.
332-5 (d) Unless required by the certificate of formation,
332-6 approval of a merger by shareholders is not required under this
332-7 code for a corporation that is a party to the plan of merger unless
332-8 that corporation is also a party to the merger.
332-9 Sec. 21.458. CLASS VOTING REQUIREMENTS FOR CERTAIN
332-10 FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Separate voting by a class
332-11 or series of shares of a corporation is required for approval of a
332-12 plan of merger or conversion if:
332-13 (1) the plan of merger or conversion contains a
332-14 provision that would require approval by that class or series of
332-15 shares under Section 21.364 if the provision was contained in a
332-16 proposed amendment to the corporation's certificate of formation;
332-17 or
332-18 (2) that class or series of shares is entitled under
332-19 the certificate of formation to vote as a class on the plan of
332-20 merger or conversion.
332-21 (b) Separate voting by a class or series of shares of a
332-22 corporation is required for approval of a plan of exchange if:
332-23 (1) shares of that class or series are to be exchanged
332-24 under the terms of the plan of exchange; or
332-25 (2) that class or series is entitled under the
332-26 certificate of formation to vote as a class on the plan of
332-27 exchange.
333-1 (c) Separate voting by a class or series of shares of a
333-2 corporation is required for approval of a sale of all or
333-3 substantially all of the assets of a corporation if that class or
333-4 series of shares is entitled under the certificate of formation to
333-5 vote as a class on the sale of the corporation's assets. Shares
333-6 entitled to vote as a class or series shall only be entitled to
333-7 vote as a class or series on the sale of all or substantially all
333-8 of the assets of a corporation unless that class or series is
333-9 otherwise entitled to vote on each matter submitted to the
333-10 shareholders generally or is otherwise entitled to vote under the
333-11 certificate of formation.
333-12 Sec. 21.459. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN
333-13 FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Unless required by the
333-14 corporation's certificate of formation, a plan of merger is not
333-15 required to be approved by the shareholders of a corporation if:
333-16 (1) the corporation is the sole surviving corporation
333-17 in the merger;
333-18 (2) the certificate of formation of the corporation
333-19 following the merger will not differ from the corporation's
333-20 certificate of formation before the merger;
333-21 (3) immediately after the effective date of the
333-22 merger, each shareholder of the corporation whose shares were
333-23 outstanding immediately before the effective date of the merger
333-24 will hold the same number of shares, with identical designations,
333-25 preferences, limitations, and relative rights;
333-26 (4) the sum of the voting power of the number of
333-27 voting shares outstanding immediately after the merger and the
334-1 voting power of securities that may be acquired on the conversion
334-2 or exercise of securities issued under the merger does not exceed
334-3 by more than 20 percent the voting power of the total number of
334-4 voting shares of the corporation that are outstanding immediately
334-5 before the merger; and
334-6 (5) the sum of the number of participating shares that
334-7 are outstanding immediately after the merger and the number of
334-8 participating shares that may be acquired on the conversion or
334-9 exercise of securities issued under the merger does not exceed by
334-10 more than 20 percent the total number of participating shares of
334-11 the corporation that are outstanding immediately before the merger.
334-12 (b) Unless required by the certificate of formation, a plan
334-13 of merger effected under Section 10.005 or 10.006 does not require
334-14 the approval of the shareholders of the corporation.
334-15 Sec. 21.460. RIGHTS OF DISSENT AND APPRAISAL. A shareholder
334-16 of a domestic corporation has the rights of dissent and appraisal
334-17 under Subchapter H, Chapter 10, with respect to a fundamental
334-18 business transaction.
334-19 (Sections 21.461-21.500 reserved for expansion)
334-20 SUBCHAPTER K. WINDING UP AND TERMINATION
334-21 Sec. 21.501. APPROVAL OF VOLUNTARY WINDING UP AND
334-22 REINSTATEMENT OR REVOCATION OF VOLUNTARY WINDING UP. A corporation
334-23 must approve a voluntary winding up in accordance with Chapter 11,
334-24 a reinstatement in accordance with Section 11.202, or revocation of
334-25 a voluntary winding up in accordance with Section 11.151 by
334-26 complying with one of the procedures prescribed by this subchapter.
334-27 Sec. 21.502. CERTAIN PROCEDURES RELATING TO WINDING UP. To
335-1 approve a voluntary winding up, a reinstatement, or a revocation of
335-2 a voluntary winding up, a corporation must follow one of the
335-3 following procedures:
335-4 (1) all shareholders of the corporation must consent
335-5 in writing to the winding up, the reinstatement, or the revocation
335-6 of voluntary winding up of the corporation;
335-7 (2) if the corporation has not commenced business and
335-8 has not issued any shares, a majority of the incorporators or the
335-9 board of directors of the corporation must adopt a resolution to
335-10 wind up or to revoke a voluntary winding up; or
335-11 (3)(A) the board of directors of the corporation must
335-12 adopt a resolution:
335-13 (i) recommending the winding up,
335-14 reinstatement, or revocation of a voluntary winding up of the
335-15 corporation; and
335-16 (ii) directing that the winding up,
335-17 reinstatement, or revocation of a voluntary winding up of the
335-18 corporation be submitted to the shareholders for approval at an
335-19 annual or special meeting of shareholders; and
335-20 (B) the shareholders must approve the action
335-21 described by Paragraph (A) in accordance with Section 21.503.
335-22 Sec. 21.503. MEETING OF SHAREHOLDERS; NOTICE. (a) Each
335-23 shareholder of record entitled to vote at a meeting described by
335-24 Section 21.502(3)(A)(ii) must be given written notice stating that
335-25 the purpose or one of the purposes of the meeting is to consider
335-26 the winding up, reinstatement, or revocation of the voluntary
335-27 winding up of the corporation. The notice must be given in the
336-1 time and manner provided by this code for the giving of notice of
336-2 shareholders' meetings.
336-3 (b) A vote of shareholders entitled to vote at the meeting
336-4 shall be taken on the resolution to wind up, reinstate, or revoke
336-5 the winding up of the corporation. The resolution must be approved
336-6 on receipt of the affirmative vote required by Section 21.364.
336-7 Sec. 21.504. RESPONSIBILITY FOR WINDING UP. If a
336-8 corporation determines or is required to wind up, the directors of
336-9 the corporation shall manage the process of winding up the business
336-10 or affairs of the corporation.
336-11 (Sections 21.505-21.550 reserved for expansion)
336-12 SUBCHAPTER L. DERIVATIVE PROCEEDINGS
336-13 Sec. 21.551. DEFINITIONS. In this subchapter:
336-14 (1) "Derivative proceeding" means a civil suit in the
336-15 right of a domestic corporation or, to the extent provided by
336-16 Section 21.562, in the right of a foreign corporation.
336-17 (2) "Shareholder" includes a beneficial owner whose
336-18 shares are held in a voting trust or by a nominee on the beneficial
336-19 owner's behalf.
336-20 Sec. 21.552. STANDING TO BRING PROCEEDING. A shareholder
336-21 may not institute or maintain a derivative proceeding unless:
336-22 (1) the shareholder:
336-23 (A) was a shareholder of the corporation at the
336-24 time of the act or omission complained of; or
336-25 (B) became a shareholder by operation of law
336-26 from a person that was a shareholder at the time of the act or
336-27 omission complained of; and
337-1 (2) the shareholder fairly and adequately represents
337-2 the interests of the corporation in enforcing the right of the
337-3 corporation.
337-4 Sec. 21.553. DEMAND. (a) A shareholder may not institute a
337-5 derivative proceeding until the 91st day after the date a written
337-6 demand is filed with the corporation stating with particularity the
337-7 act, omission, or other matter that is the subject of the claim or
337-8 challenge and requesting that the corporation take suitable action.
337-9 (b) The waiting period required by Subsection (a) before a
337-10 derivative proceeding may be instituted is not required if:
337-11 (1) the shareholder has been previously notified that
337-12 the demand has been rejected by the corporation;
337-13 (2) the corporation is suffering irreparable injury;
337-14 or
337-15 (3) irreparable injury to the corporation would result
337-16 by waiting for the expiration of the 90-day period.
337-17 Sec. 21.554. DETERMINATION BY DIRECTORS OR INDEPENDENT
337-18 PERSONS. (a) A determination of how to proceed on allegations
337-19 made in a demand or petition relating to a derivative proceeding
337-20 must be made by an affirmative vote of the majority of:
337-21 (1) the independent and disinterested directors of the
337-22 corporation present at a meeting of the board of directors of the
337-23 corporation at which interested directors are not present at the
337-24 time of the vote if the independent and disinterested directors
337-25 constitute a quorum of the board of directors;
337-26 (2) a committee consisting of two or more independent
337-27 and disinterested directors appointed by an affirmative vote of the
338-1 majority of one or more independent and disinterested directors
338-2 present at a meeting of the board of directors, regardless of
338-3 whether the independent and disinterested directors constitute a
338-4 quorum of the board of directors; or
338-5 (3) a panel of one or more independent and
338-6 disinterested persons appointed by the court on a motion by the
338-7 corporation listing the names of the persons to be appointed and
338-8 stating that, to the best of the corporation's knowledge, the
338-9 persons to be appointed are disinterested and qualified to make the
338-10 determinations contemplated by Section 21.558.
338-11 (b) The court shall appoint a panel under Subsection (a)(3)
338-12 if the court finds that the persons recommended by the corporation
338-13 are independent and disinterested and are otherwise qualified with
338-14 respect to expertise, experience, independent judgment, and other
338-15 factors considered appropriate by the court under the circumstances
338-16 to make the determinations. A person appointed by the court to a
338-17 panel under this section may not be held liable to the corporation
338-18 or the corporation's shareholders for an action taken or omission
338-19 made by the person in that capacity, except for an act or omission
338-20 constituting fraud or wilful misconduct.
338-21 Sec. 21.555. STAY OF PROCEEDING. (a) If the domestic or
338-22 foreign corporation that is the subject of a derivative proceeding
338-23 commences an inquiry into the allegations made in a demand or
338-24 petition and the person or group of persons described by Section
338-25 21.554 is conducting an active review of the allegations in good
338-26 faith, the court shall stay a derivative proceeding until the
338-27 review is completed and a determination is made by the person or
339-1 group regarding what further action, if any, should be taken.
339-2 (b) To obtain a stay, the domestic or foreign corporation
339-3 shall provide the court with a written statement agreeing to advise
339-4 the court and the shareholder making the demand of the
339-5 determination promptly on the completion of the review of the
339-6 matter. A stay, on application, may be reviewed every 60 days for
339-7 the continued necessity of the stay.
339-8 (c) If the review and determination made by the person or
339-9 group is not completed before the 61st day after the stay is
339-10 ordered by the court, the stay may be renewed for one or more
339-11 additional 60-day periods if the domestic or foreign corporation
339-12 provides the court and the shareholder with a written statement of
339-13 the status of the review and the reasons why a continued extension
339-14 of the stay is necessary.
339-15 Sec. 21.556. DISCOVERY. (a) If a domestic or foreign
339-16 corporation proposes to dismiss a derivative proceeding under
339-17 Section 21.558, discovery by a shareholder after the filing of the
339-18 derivative proceeding in accordance with this subchapter shall be
339-19 limited to:
339-20 (1) facts relating to whether the person or group of
339-21 persons described by Section 21.558 is independent and
339-22 disinterested;
339-23 (2) the good faith of the inquiry and review by the
339-24 person or group; and
339-25 (3) the reasonableness of the procedures followed by
339-26 the person or group in conducting the review.
339-27 (b) Discovery described by Subsection (a) may not be
340-1 expanded to include a fact or substantive matter regarding the act,
340-2 omission, or other matter that is the subject matter of the
340-3 derivative proceeding. The scope of discovery may be expanded if
340-4 the court determines after notice and hearing that a good faith
340-5 review of the allegations for purposes of Section 21.558 has not
340-6 been made by an independent and disinterested person or group in
340-7 accordance with that section.
340-8 Sec. 21.557. TOLLING OF STATUTE OF LIMITATIONS. A written
340-9 demand filed with the corporation under Section 21.553 tolls the
340-10 statute of limitations on the claim on which demand is made until
340-11 the earlier of:
340-12 (1) the 91st day after the date of the demand; or
340-13 (2) the 31st day after the date the corporation
340-14 advises the shareholder that the demand has been rejected or the
340-15 review has been completed.
340-16 Sec. 21.558. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A
340-17 court shall dismiss a derivative proceeding on a motion by the
340-18 corporation if the person or group of persons described by Section
340-19 21.554 determines in good faith, after conducting a reasonable
340-20 inquiry and based on factors the person or group considers
340-21 appropriate under the circumstances, that continuation of the
340-22 derivative proceeding is not in the best interests of the
340-23 corporation.
340-24 (b) In determining whether the requirements of Subsection
340-25 (a) have been met, the burden of proof shall be on:
340-26 (1) the plaintiff shareholder if:
340-27 (A) the majority of the board of directors
341-1 consists of independent and disinterested directors at the time the
341-2 determination is made;
341-3 (B) the determination is made by a panel of one
341-4 or more independent and disinterested persons appointed under
341-5 Section 21.554; or
341-6 (C) the corporation presents prima facie
341-7 evidence that demonstrates that the directors appointed under
341-8 Section 21.554 are independent and disinterested; or
341-9 (2) the corporation in any other circumstance.
341-10 Sec. 21.559. PROCEEDING INSTITUTED AFTER DEMAND REJECTED.
341-11 If a derivative proceeding is instituted after a demand is
341-12 rejected, the petition must allege with particularity facts that
341-13 establish that the rejection was not made in accordance with the
341-14 requirements of Sections 21.554 and 21.558.
341-15 Sec. 21.560. DISCONTINUANCE OR SETTLEMENT. (a) A
341-16 derivative proceeding may not be discontinued or settled without
341-17 court approval.
341-18 (b) The court shall direct that notice be given to the
341-19 affected shareholders if the court determines that a proposed
341-20 discontinuance or settlement may substantially affect the interests
341-21 of other shareholders.
341-22 Sec. 21.561. PAYMENT OF EXPENSES. (a) In this section,
341-23 "expenses" means reasonable expenses incurred by a party in a
341-24 derivative proceeding, including:
341-25 (1) attorney's fees;
341-26 (2) costs in pursuing an investigation of the matter
341-27 that was the subject of the derivative proceeding; or
342-1 (3) expenses for which the domestic or foreign
342-2 corporation or a corporate defendant may be required to indemnify
342-3 another person.
342-4 (b) On termination of a derivative proceeding, the court may
342-5 order:
342-6 (1) the domestic or foreign corporation to pay the
342-7 expenses the plaintiff incurred in the proceeding if the court
342-8 finds the proceeding has resulted in a substantial benefit to the
342-9 domestic or foreign corporation;
342-10 (2) the plaintiff to pay the expenses the domestic or
342-11 foreign corporation or other defendant incurred in investigating
342-12 and defending the proceeding if the court finds the proceeding has
342-13 been instituted or maintained without reasonable cause or for an
342-14 improper purpose; or
342-15 (3) a party to pay the expenses incurred by another
342-16 party relating to the filing of a pleading, motion, or other paper
342-17 if the court finds the pleading, motion, or other paper:
342-18 (A) was not well grounded in fact after
342-19 reasonable inquiry;
342-20 (B) was not warranted by existing law or a good
342-21 faith argument for the extension, modification, or reversal of
342-22 existing law; or
342-23 (C) was interposed for an improper purpose, such
342-24 as to harass, cause unnecessary delay, or cause a needless increase
342-25 in the cost of litigation.
342-26 Sec. 21.562. APPLICATION TO FOREIGN CORPORATIONS. (a) In a
342-27 derivative proceeding brought in the right of a foreign
343-1 corporation, the matters covered by this subchapter are governed by
343-2 the laws of the jurisdiction of incorporation of the foreign
343-3 corporation, except for Sections 21.555, 21.560, and 21.561, which
343-4 are procedural provisions and do not relate to the internal affairs
343-5 of the foreign corporation.
343-6 (b) In the case of matters relating to a foreign corporation
343-7 under Section 21.554, a reference to a person or group of persons
343-8 described by that section refers to a person or group entitled
343-9 under the laws of the jurisdiction of incorporation of the foreign
343-10 corporation to review and dispose of a derivative proceeding. The
343-11 standard of review of a decision made by the person or group to
343-12 dismiss the derivative proceeding shall be governed by the laws of
343-13 the jurisdiction of incorporation of the foreign corporation.
343-14 Sec. 21.563. CLOSELY HELD CORPORATION. (a) In this
343-15 section, "closely held corporation" means a corporation that has:
343-16 (1) fewer than 35 shareholders; and
343-17 (2) no shares listed on a national securities exchange
343-18 or regularly quoted in an over-the-counter market by one or more
343-19 members of a national securities association.
343-20 (b) Subject to Subsection (c), Sections 21.552-21.559 do not
343-21 apply to a closely held corporation.
343-22 (c) If justice requires:
343-23 (1) a derivative proceeding brought by a shareholder
343-24 of a closely held corporation may be treated by a court as a direct
343-25 action brought by the shareholder for the shareholder's own
343-26 benefit; and
343-27 (2) a recovery in a direct or derivative proceeding by
344-1 a shareholder may be paid directly to the plaintiff or to the
344-2 corporation if necessary to protect the interests of creditors or
344-3 other shareholders of the corporation.
344-4 (Sections 21.564-21.600 reserved for expansion)
344-5 SUBCHAPTER M. AFFILIATED BUSINESS COMBINATIONS
344-6 Sec. 21.601. DEFINITIONS. In this subchapter:
344-7 (1) "Issuing public corporation" means a domestic
344-8 corporation that has:
344-9 (A) 100 or more shareholders of record as shown
344-10 by the share transfer records of the corporation;
344-11 (B) a class or series of the corporation's
344-12 voting shares registered under the Securities Exchange Act of 1934
344-13 (15 U.S.C. Section 77b et seq.), as amended; or
344-14 (C) a class or series of the corporation's
344-15 voting shares qualified for trading in a national market system.
344-16 (2) "Person" includes two or more persons acting as a
344-17 partnership, limited partnership, syndicate, or other group under
344-18 an agreement, arrangement, or understanding, regardless of whether
344-19 in writing, to acquire, hold, vote, or dispose of a corporation's
344-20 shares.
344-21 (3) "Share acquisition date" means the date a person
344-22 initially becomes an affiliated shareholder of an issuing public
344-23 corporation.
344-24 (4) "Subsidiary" means a domestic or foreign
344-25 corporation or other entity of which a majority of the outstanding
344-26 voting shares are owned, directly or indirectly, by an issuing
344-27 public corporation.
345-1 (5) "Voting share" means a share of capital stock of a
345-2 corporation that entitles the holder of the share to vote generally
345-3 in the election of directors.
345-4 Sec. 21.602. AFFILIATED SHAREHOLDER. (a) For purposes of
345-5 this subchapter, a person, other than the issuing public
345-6 corporation or a wholly owned subsidiary of the issuing public
345-7 corporation, is an affiliated shareholder if the person:
345-8 (1) is the beneficial owner of 20 percent or more of
345-9 the outstanding voting shares of the issuing public corporation; or
345-10 (2) during the preceding three-year period, was the
345-11 beneficial owner of 20 percent or more of the outstanding voting
345-12 shares of the issuing public corporation.
345-13 (b) To determine whether a person is an affiliated
345-14 shareholder, the number of voting shares of the issuing public
345-15 corporation considered outstanding includes shares considered
345-16 beneficially owned by that person under Section 21.603, but does
345-17 not include other unissued voting shares of the issuing public
345-18 corporation that may be issuable under an agreement, arrangement,
345-19 or understanding, or on exercise of conversion rights, warrants, or
345-20 options.
345-21 Sec. 21.603. BENEFICIAL OWNER OF SHARES OR SIMILAR
345-22 SECURITIES. (a) For purposes of this subchapter, a person is a
345-23 beneficial owner of shares or similar securities if the person
345-24 individually, or through an affiliate or associate, beneficially
345-25 owns, directly or indirectly, shares or similar securities.
345-26 (b) A beneficial owner of shares or similar securities is
345-27 entitled, individually or through an affiliate or associate, to:
346-1 (1) acquire shares or similar securities that may be
346-2 exercised immediately or after the passage of a certain amount of
346-3 time according to an oral or written agreement, arrangement, or
346-4 understanding, or on the exercise of conversion rights, exchange
346-5 rights, warrants, or options;
346-6 (2) vote the shares or similar securities according to
346-7 an oral or written agreement, arrangement, or understanding; or
346-8 (3) subject to Subsection (c), acquire, hold or
346-9 dispose of, or vote shares or similar securities with another
346-10 person who individually, or through an affiliate or associate,
346-11 beneficially owns, directly or indirectly, the shares or similar
346-12 securities.
346-13 (c) A person is not considered a beneficial owner of shares
346-14 or similar securities if:
346-15 (1) the shares or similar securities are:
346-16 (A) tendered under a tender or exchange offer
346-17 made by the person or an affiliate or associate of the person
346-18 before the tendered shares or securities are accepted for purchase
346-19 or exchange; or
346-20 (B) subject to an agreement, arrangement, or
346-21 understanding that expressly conditions the acquisition or purchase
346-22 of shares or securities on the approval of the acquisition or
346-23 purchase under Section 21.606 if the person has no direct or
346-24 indirect rights of ownership or voting with respect to the shares
346-25 or securities until the time the approval is obtained; or
346-26 (2) the agreement, arrangement, or understanding to
346-27 vote the shares:
347-1 (A) arises solely from an immediately revocable
347-2 proxy that authorizes the person named in the proxy to vote at a
347-3 meeting of the shareholders that has been called when the proxy is
347-4 delivered or at an adjournment of the meeting; and
347-5 (B) is not reportable on a Schedule 13D under
347-6 the Securities Exchange Act of 1934 (15 U.S.C. Section 77b et
347-7 seq.), as amended, or a comparable or successor report.
347-8 Sec. 21.604. BUSINESS COMBINATION. A business combination
347-9 is:
347-10 (1) a merger, share exchange, or conversion of an
347-11 issuing public corporation or a subsidiary with:
347-12 (A) an affiliated shareholder;
347-13 (B) a foreign or domestic corporation or other
347-14 entity that is, or after the merger, share exchange, or conversion
347-15 would be, an affiliate or associate of the affiliated shareholder;
347-16 or
347-17 (C) another domestic or foreign corporation or
347-18 other entity, if the merger, share exchange, or conversion is
347-19 caused by an affiliated shareholder, or an affiliate or associate
347-20 of an affiliated shareholder, and as a result of the merger, share
347-21 exchange, or conversion this subchapter does not apply to the
347-22 surviving corporation or other entity;
347-23 (2) a sale, lease, exchange, mortgage, pledge,
347-24 transfer, or other disposition, in one transaction or a series of
347-25 transactions, including an allocation of assets under a merger, to
347-26 or with the affiliated shareholder, or an affiliate or associate of
347-27 the affiliated shareholder, of assets of the issuing public
348-1 corporation or a subsidiary that:
348-2 (A) has an aggregate market value equal to 10
348-3 percent or more of the aggregate market value of all of the assets,
348-4 determined on a consolidated basis, of the issuing public
348-5 corporation;
348-6 (B) has an aggregate market value equal to 10
348-7 percent or more of the aggregate market value of all of the
348-8 outstanding common stock of the issuing public corporation; or
348-9 (C) represents 10 percent or more of the earning
348-10 power or net income, determined on a consolidated basis, of the
348-11 issuing public corporation;
348-12 (3) the issuance or transfer by an issuing public
348-13 corporation or a subsidiary to an affiliated shareholder or an
348-14 affiliate or associate of the affiliated shareholder, in one
348-15 transaction or a series of transactions, of shares of the issuing
348-16 public corporation or a subsidiary, except by the exercise of
348-17 warrants or rights to purchase shares of the issuing public
348-18 corporation offered, or a share dividend paid, pro rata to all
348-19 shareholders of the issuing public corporation after the affiliated
348-20 shareholder's share acquisition date;
348-21 (4) the adoption of a plan or proposal for the
348-22 liquidation or dissolution of an issuing public corporation
348-23 proposed by or under any agreement, arrangement, or understanding,
348-24 regardless of whether in writing, with an affiliated shareholder or
348-25 an affiliate or associate of the affiliated shareholder;
348-26 (5) a reclassification of securities, including a
348-27 reverse share split or a share split-up, share dividend, or other
349-1 distribution of shares, a recapitalization of the issuing public
349-2 corporation, a merger of the issuing public corporation with a
349-3 subsidiary or pursuant to which the assets and liabilities of the
349-4 issuing public corporation are allocated among two or more
349-5 surviving or new domestic or foreign corporations or other
349-6 entities, or any other transaction proposed by or under an
349-7 agreement, arrangement, or understanding, regardless of whether in
349-8 writing, with an affiliated shareholder or an affiliate or
349-9 associate of the affiliated shareholder that has the effect,
349-10 directly or indirectly, of increasing the proportionate ownership
349-11 percentage of the outstanding shares of a class or series of voting
349-12 shares or securities convertible into voting shares of the issuing
349-13 public corporation that is beneficially owned by the affiliated
349-14 shareholder or an affiliate or associate of the affiliated
349-15 shareholder, except as a result of immaterial changes due to
349-16 fractional share adjustments; or
349-17 (6) the direct or indirect receipt by an affiliated
349-18 shareholder or an affiliate or associate of the affiliated
349-19 shareholder of the benefit of a loan, advance, guarantee, pledge,
349-20 or other financial assistance or a tax credit or other tax
349-21 advantage provided by or through the issuing public corporation,
349-22 except proportionately as a shareholder of the issuing public
349-23 corporation.
349-24 Sec. 21.605. CONTROL. (a) For purposes of this subchapter,
349-25 a person has control of another person if the person has
349-26 possession, directly or indirectly, of the power to direct or cause
349-27 the direction of the management and policies of the other person,
350-1 through the ownership of equity securities, by contract, or in
350-2 another manner.
350-3 (b) A person's beneficial ownership of 10 percent or more of
350-4 a person's outstanding voting shares or similar interests creates a
350-5 presumption that the person has control of the other person, but a
350-6 person is not considered to have control of another person who
350-7 holds the voting shares or similar interests in good faith and not
350-8 to circumvent this part, as an agent, bank, broker, nominee,
350-9 custodian, or trustee for one or more beneficial owners who do not
350-10 individually or as a group have control of the person.
350-11 Sec. 21.606. THREE-YEAR MORATORIUM ON CERTAIN BUSINESS
350-12 COMBINATIONS. An issuing public corporation may not, directly or
350-13 indirectly, enter into or engage in a business combination with an
350-14 affiliated shareholder, or any affiliate or associate of the
350-15 affiliated shareholder, during the three-year period immediately
350-16 following the affiliated shareholder's share acquisition date
350-17 unless:
350-18 (1) the business combination or the purchase or
350-19 acquisition of shares made by the affiliated shareholder on the
350-20 affiliated shareholder's share acquisition date is approved by the
350-21 board of directors of the issuing public corporation before the
350-22 affiliated shareholder's share acquisition date; or
350-23 (2) the business combination is approved, by the
350-24 affirmative vote of the holders of at least two-thirds of the
350-25 outstanding voting shares of the issuing public corporation not
350-26 beneficially owned by the affiliated shareholder or an affiliate or
350-27 associate of the affiliated shareholder, at a meeting of
351-1 shareholders called for that purpose not less than six months after
351-2 the affiliated shareholder's share acquisition date. Approval may
351-3 not be by written consent.
351-4 Sec. 21.607. APPLICATION OF MORATORIUM. Section 21.606 does
351-5 not apply to:
351-6 (1) a business combination of an issuing public
351-7 corporation if:
351-8 (A) the original articles of incorporation or
351-9 original bylaws of the corporation contain a provision expressly
351-10 electing not to be governed by this subchapter;
351-11 (B) before December 31, 1997, the corporation
351-12 adopted an amendment to the articles of incorporation or bylaws of
351-13 the corporation expressly electing not to be governed by this
351-14 subchapter; or
351-15 (C) after December 31, 1997, the corporation
351-16 adopts an amendment to the articles of incorporation or bylaws of
351-17 the corporation, approved by the affirmative vote of the holders,
351-18 other than an affiliated shareholder or an affiliate or associate
351-19 of the affiliated shareholder, of at least two-thirds of the
351-20 outstanding voting shares of the issuing public corporation,
351-21 expressly electing not to be governed by this subchapter, except
351-22 that the amendment to the articles of incorporation or bylaws takes
351-23 effect 18 months after the date of the vote and does not apply to a
351-24 business combination of the issuing public corporation with an
351-25 affiliated shareholder whose share acquisition date is on or before
351-26 the effective date of the amendment;
351-27 (2) a business combination of an issuing public
352-1 corporation with an affiliated shareholder who became an affiliated
352-2 shareholder inadvertently, if the affiliated shareholder:
352-3 (A) as soon as practicable divests itself of a
352-4 sufficient number of the voting shares of the issuing public
352-5 corporation so that the affiliated shareholder no longer is the
352-6 beneficial owner, directly or indirectly, of 20 percent or more of
352-7 the outstanding voting shares of the issuing public corporation;
352-8 and
352-9 (B) would not at any time within the three-year
352-10 period preceding the announcement date of the business combination
352-11 have been an affiliated shareholder except for the inadvertent
352-12 acquisition;
352-13 (3) a business combination with an affiliated
352-14 shareholder who was the beneficial owner of 20 percent or more of
352-15 the outstanding voting shares of the issuing public corporation on
352-16 December 31, 1996, and continuously until the announcement date of
352-17 the business combination;
352-18 (4) a business combination with an affiliated
352-19 shareholder who became an affiliated shareholder through a transfer
352-20 of shares of the issuing public corporation by will or intestate
352-21 succession and continuously was an affiliated shareholder until the
352-22 announcement date of the business combination; or
352-23 (5) a business combination of an issuing public
352-24 corporation with a domestic wholly owned subsidiary if the domestic
352-25 subsidiary is not an affiliate or associate of the affiliated
352-26 shareholder for a reason other than the affiliated shareholder's
352-27 beneficial ownership of voting shares in the issuing public
353-1 corporation.
353-2 Sec. 21.608. EFFECT ON OTHER ACTIONS. (a) This subchapter
353-3 does not affect, directly or indirectly, the validity of another
353-4 action by the board of directors of an issuing public corporation.
353-5 (b) This subchapter does not preclude the board of directors
353-6 of an issuing public corporation from taking other action in
353-7 accordance with law.
353-8 (c) The board of directors of an issuing public corporation
353-9 does not incur liability for an election made or not made under
353-10 this subchapter.
353-11 Sec. 21.609. CONFLICTING PROVISIONS. If this subchapter
353-12 conflicts with another provision of this code, this subchapter
353-13 controls.
353-14 Sec. 21.610. CHANGE IN VOTING REQUIREMENTS. The affirmative
353-15 vote or concurrence of shareholders required for approval of an
353-16 action that is required to be submitted to a vote of the
353-17 shareholders under this subchapter may be increased but not
353-18 decreased under Section 21.365.
353-19 (Sections 21.611-21.650 reserved for expansion)
353-20 SUBCHAPTER N. PROVISIONS RELATING TO INVESTMENT COMPANIES
353-21 Sec. 21.651. DEFINITION. In this subchapter, "investment
353-22 company" means a corporation registered as an open-end company
353-23 under the Investment Company Act.
353-24 Sec. 21.652. ESTABLISHING CLASS OR SERIES OF SHARES; CHANGE
353-25 IN NUMBER OF SHARES. (a) In addition to the actions the board may
353-26 undertake under Subchapters D, E, and F, the board of directors of
353-27 an investment company may:
354-1 (1) establish classes of shares and series of unissued
354-2 shares of a class by setting and determining the designations,
354-3 preferences, limitations, and relative rights, including voting
354-4 rights, of the shares of the class or series established under this
354-5 subdivision to the same extent that the designations, preferences,
354-6 limitations, and relative rights could be stated if fully stated in
354-7 the certificate of formation; and
354-8 (2) increase or decrease the aggregate number of
354-9 shares or the number of shares of, or delete from the investment
354-10 company's certificate of formation, a class or series of shares the
354-11 corporation has authority to issue, unless a provision has been
354-12 included in the certificate of formation of the corporation after
354-13 September 1, 1993, expressly prohibiting those actions by the board
354-14 of directors.
354-15 (b) The board of directors of an investment company may not:
354-16 (1) decrease the number of shares in a class or series
354-17 to a number that is less than the number of shares of that class or
354-18 series that are outstanding at the time; or
354-19 (2) delete from the certificate of formation a
354-20 reference to a class or series that has shares outstanding at the
354-21 time.
354-22 (c) To establish a class or series under this section, the
354-23 board of directors must adopt a resolution stating the designation
354-24 of the class or series and setting and determining the
354-25 designations, preferences, limitations, and relative rights,
354-26 including voting rights, of the class or series.
354-27 (d) To increase or decrease the number of shares of a class
355-1 or series of shares or to delete from the certificate of formation
355-2 a reference to a class or series of shares, the board of directors
355-3 of an investment company must adopt a resolution setting and
355-4 determining the new number of shares of each class or series in
355-5 which the number of shares is increased or decreased or deleting
355-6 the class or series and any reference to the class or series from
355-7 the certificate of formation. The shares of a series removed from
355-8 the certificate of formation shall resume the status of authorized
355-9 but unissued shares of the class of shares from which the series
355-10 was established unless otherwise provided by the resolution or the
355-11 certificate of formation of the investment company.
355-12 Sec. 21.653. REQUIRED STATEMENT RELATING TO SHARES.
355-13 (a) Before the first issuance of shares of a class or series
355-14 established or increased or decreased by resolution adopted by the
355-15 board of directors of an investment company under Section 21.652,
355-16 and to delete from the investment company's certificate of
355-17 formation a class or series of shares and all references to the
355-18 class or series contained in the certificate of formation, the
355-19 investment company shall file with the secretary of state a
355-20 statement that contains:
355-21 (1) the name of the investment company;
355-22 (2) if the statement relates to the establishment of a
355-23 class or series of shares, a copy of the resolution establishing
355-24 and designating the class or series or establishing and designating
355-25 the class or series and setting and determining the preferences,
355-26 limitations, and relative rights of the class or series;
355-27 (3) if the statement relates to an increase or
356-1 decrease in the number of shares of a class or series, a copy of
356-2 the resolution setting and determining the new number of shares of
356-3 each class or series in which the number of shares is increased or
356-4 decreased;
356-5 (4) if the statement relates to the deletion of a
356-6 class or series of shares and all references to the class or series
356-7 from the certificate of formation, a copy of the resolution
356-8 deleting the class or series and all references to the class or
356-9 series from the certificate of formation;
356-10 (5) the date of adoption of the resolution; and
356-11 (6) a statement that the resolution was adopted by all
356-12 necessary action on the part of the investment company.
356-13 (b) After the statement described by Subsection (a) is
356-14 filed, a resolution adopted under Section 21.652 becomes an
356-15 amendment of the certificate of formation. An amendment of the
356-16 certificate of formation described under this section is not
356-17 subject to the procedure to amend the certificate of formation
356-18 contained in Subchapter B.
356-19 Sec. 21.654. TERM OF OFFICE OF DIRECTORS. Unless removed in
356-20 accordance with the certificate of formation or bylaws of the
356-21 investment company, a director of an investment company shall serve
356-22 as director for the term for which the director is elected and
356-23 holds office until a successor is elected and qualifies.
356-24 Sec. 21.655. MEETINGS OF SHAREHOLDERS. (a) If provided by
356-25 the certificate of formation or bylaws of an investment company,
356-26 the investment company is not required to hold an annual meeting of
356-27 shareholders or elect directors in a year in which an election of
357-1 directors is not required under the Investment Company Act.
357-2 (b) If an investment company is required to hold a meeting
357-3 of shareholders to elect directors under the Investment Company
357-4 Act, the meeting shall be designated as the annual meeting of
357-5 shareholders for that year.
357-6 (Sections 21.656-21.700 reserved for expansion)
357-7 SUBCHAPTER O. CLOSE CORPORATION
357-8 Sec. 21.701. DEFINITIONS. In this subchapter:
357-9 (1) "Close corporation" means a domestic corporation
357-10 formed under this subchapter.
357-11 (2) "Close corporation provision" means a provision in
357-12 the certificate of formation of a close corporation or in a
357-13 shareholders' agreement of a close corporation.
357-14 (3) "Ordinary corporation" means a domestic
357-15 corporation that is not a close corporation.
357-16 (4) "Shareholders' agreement" means a written
357-17 agreement regulating an aspect of the business and affairs of or
357-18 the relationship among the shareholders of a close corporation that
357-19 has been executed under this subchapter.
357-20 Sec. 21.702. APPLICABILITY OF SUBCHAPTER. (a) This
357-21 subchapter applies only to a close corporation.
357-22 (b) This chapter applies to a close corporation to the
357-23 extent not inconsistent with this subchapter.
357-24 Sec. 21.703. FORMATION OF CLOSE CORPORATION. A close
357-25 corporation shall be formed in accordance with Chapter 3 and
357-26 Sections 21.051 and 21.704.
357-27 Sec. 21.704. SUPPLEMENTAL PROVISION FOR CERTIFICATE OF
358-1 FORMATION. In addition to a provision required or permitted to be
358-2 stated in the certificate of formation by Section 21.051, the
358-3 certificate of formation of a close corporation, whether original,
358-4 amended, or restated, must include the sentence, "This corporation
358-5 is a close corporation."
358-6 Sec. 21.705. ADOPTION OF AMENDMENT FOR CLOSE CORPORATION
358-7 STATUS. (a) An ordinary corporation may become a close
358-8 corporation by amending its certificate of formation in accordance
358-9 with Chapter 3 and Section 21.704.
358-10 (b) An amendment adopting close corporation status must be
358-11 approved by the affirmative vote of the holders of all of the
358-12 outstanding shares of each class established by the close
358-13 corporation, regardless of whether a class is entitled to vote on
358-14 the amendment by the certificate of formation of the ordinary
358-15 corporation.
358-16 Sec. 21.706. ADOPTION OF CLOSE CORPORATION STATUS THROUGH
358-17 MERGER, EXCHANGE, OR CONVERSION. (a) A surviving or new
358-18 corporation resulting from a merger or conversion or a corporation
358-19 that acquires a corporation under an exchange under Chapter 10 may
358-20 become a close corporation if, as part of the plan of merger,
358-21 exchange, or conversion, the certificate of formation conforms with
358-22 Section 21.704.
358-23 (b) A plan of merger, exchange, or conversion adopting close
358-24 corporation status must be approved by the affirmative vote of the
358-25 holders of all of the outstanding ownership or membership
358-26 interests, and of each class or series of ownership or membership
358-27 interests, of each entity or non-code organization that is party to
359-1 the merger, exchange, or conversion, regardless of whether a class
359-2 or series of ownership or membership interests is entitled to vote
359-3 on the plan by the certificate of formation of the corporation.
359-4 Sec. 21.707. EXISTING CLOSE CORPORATION. (a) This section
359-5 applies to an existing corporation that elected to become a close
359-6 corporation before the effective date of this code and has not
359-7 terminated that status.
359-8 (b) A close corporation existing before the effective date
359-9 of this code is considered to be a close corporation under this
359-10 code.
359-11 (c) A provision in the articles of incorporation of a close
359-12 corporation authorized under former law is valid and enforceable if
359-13 the corporation's status as a close corporation has not been
359-14 terminated.
359-15 (d) An agreement among the shareholders of a close
359-16 corporation in conformance with former law and Sections
359-17 21.714-21.725 before the effective date of this code is considered
359-18 to be a shareholders' agreement.
359-19 (e) A certificate representing the shares issued or
359-20 delivered by the close corporation after the effective date of this
359-21 code, whether in connection with the original issue of shares or a
359-22 transfer of shares, must conform with Section 21.732.
359-23 Sec. 21.708. TERMINATION OF CLOSE CORPORATION STATUS. A
359-24 close corporation may terminate its status as a close corporation
359-25 by:
359-26 (1) filing a statement terminating close corporation
359-27 status under Section 21.709;
360-1 (2) amending the close corporation's certificate of
360-2 formation under Chapter 3 by deleting from the certificate of
360-3 formation the statement that it is a close corporation;
360-4 (3) engaging in a merger, interest exchange, or
360-5 conversion under Chapter 10, unless the plan of merger, exchange,
360-6 or conversion provides that the surviving or new corporation will
360-7 continue as or become a close corporation and the plan has been
360-8 approved by the affirmative vote or consent of the holders of all
360-9 of the outstanding shares, and of each class and series of shares,
360-10 of the close corporation, regardless of whether a class or series
360-11 of shares is entitled to vote on the plan by the certificate of
360-12 formation; or
360-13 (4) instituting a judicial proceeding to enforce a
360-14 close corporation provision providing for the termination.
360-15 Sec. 21.709. STATEMENT TERMINATING CLOSE CORPORATION STATUS;
360-16 FILING; NOTICE. (a) If a close corporation provision specifies a
360-17 time or event requiring the termination of close corporation
360-18 status, regardless of whether the provision is identifiable by a
360-19 person dealing with the close corporation, the termination of the
360-20 close corporation status takes effect on the occurrence of the
360-21 specified time or event and the filing of a statement terminating
360-22 close corporation status under this section.
360-23 (b) Promptly after the time or occurrence of an event
360-24 requiring termination of close corporation status, a statement
360-25 terminating close corporation status shall be signed by an officer
360-26 on behalf of the close corporation. A copy of the applicable close
360-27 corporation provision must be included in or attached to the
361-1 statement. The statement and any attachment shall be filed with
361-2 the secretary of state in accordance with Chapter 4.
361-3 (c) The statement terminating close corporation status must
361-4 contain:
361-5 (1) the name of the corporation;
361-6 (2) a statement that the corporation has terminated
361-7 its status as a close corporation in accordance with the included
361-8 or attached close corporation provision; and
361-9 (3) the time or event that caused the termination and,
361-10 in the case of an event, the approximate date of the event.
361-11 (d) After a statement terminating close corporation status
361-12 has been filed under this section, the certificate of formation of
361-13 the close corporation is considered to be amended to delete from
361-14 the certificate the statement that the corporation is a close
361-15 corporation, and the corporation's status as a close corporation is
361-16 terminated.
361-17 (e) The corporation shall personally deliver or mail a copy
361-18 of the statement to each shareholder of the corporation. A copy of
361-19 the statement is considered to have been delivered by mail under
361-20 this section when the copy is deposited in the United States mail,
361-21 with postage prepaid, addressed to the shareholder at the
361-22 shareholder's address as it appears on the share transfer records
361-23 of the corporation. The failure to deliver the copy of the
361-24 statement does not affect the validity of the termination.
361-25 Sec. 21.710. EFFECT OF TERMINATION OF CLOSE CORPORATION
361-26 STATUS. (a) A close corporation that terminates its status as a
361-27 close corporation and becomes an ordinary corporation is subject to
362-1 this chapter as if the corporation had not elected close
362-2 corporation status under this subchapter.
362-3 (b) The effect of termination of close corporation status on
362-4 a shareholders' agreement is governed by Section 21.724.
362-5 (c) When the termination of close corporation status takes
362-6 effect, if the close corporation's business and affairs have been
362-7 managed by an entity other than a board of directors as provided by
362-8 Section 21.725, governance by a board of directors is instituted or
362-9 reinstated:
362-10 (1) if provided by a shareholders' agreement, in the
362-11 manner stated in the agreement or by the persons named in the
362-12 agreement to serve as the interim board of directors; or
362-13 (2) if each party to a shareholders' agreement agrees
362-14 to elect a board of directors at a shareholders' meeting.
362-15 Sec. 21.711. SHAREHOLDERS' MEETING TO ELECT DIRECTORS. A
362-16 shareholders' meeting required by Section 21.710(c)(2) shall be
362-17 promptly called after the termination of close corporation status
362-18 takes effect. If a meeting is not called before the 31st day after
362-19 the date the termination takes effect, a shareholder may call a
362-20 shareholders' meeting on the provision of notice required by
362-21 Section 21.353, regardless of whether the shareholder is entitled
362-22 to call a shareholders' meeting or vote at the meeting. At the
362-23 meeting, the shareholders shall elect the number of directors
362-24 specified in the certificate of formation or bylaws of the
362-25 corporation or, in the absence of any specification, three
362-26 directors.
362-27 Sec. 21.712. TERM OF OFFICE OF DIRECTORS. A director
363-1 succeeding to the management of the corporation under Section
363-2 21.710(c) shall have a term of office as set forth in Section
363-3 21.408. Until a board of directors is elected, the shareholders of
363-4 the corporation shall act as the corporation's board of directors,
363-5 and the business and affairs of the corporation shall be conducted
363-6 under Section 21.726.
363-7 Sec. 21.713. MANAGEMENT. A close corporation shall be
363-8 managed:
363-9 (1) by a board of directors in the same manner an
363-10 ordinary corporation would be managed under this chapter; or
363-11 (2) in the manner provided by the close corporation's
363-12 certificate of formation or by a shareholders' agreement of the
363-13 close corporation.
363-14 Sec. 21.714. SHAREHOLDERS' AGREEMENT. (a) The shareholders
363-15 of a close corporation may enter into one or more shareholders'
363-16 agreements.
363-17 (b) The business and affairs of a close corporation or the
363-18 relationships among the shareholders that may be regulated by a
363-19 shareholders' agreement include:
363-20 (1) the management of the business and affairs of the
363-21 close corporation by its shareholders, with or without a board of
363-22 directors;
363-23 (2) the management of the business and affairs of the
363-24 close corporation wholly or partly by one or more of its
363-25 shareholders or other persons;
363-26 (3) buy-sell, first option, first refusal, or similar
363-27 arrangements with respect to the close corporation's shares or
364-1 other securities, and restrictions on the transfer of the shares or
364-2 other securities, including more restrictions than those permitted
364-3 by Section 21.211;
364-4 (4) the declaration and payment of dividends or other
364-5 distributions in amounts authorized by Subchapter G, regardless of
364-6 whether the distribution is in proportion to ownership of shares;
364-7 (5) the manner in which profits or losses shall be
364-8 apportioned;
364-9 (6) restrictions placed on the rights of a transferee
364-10 or assignee of shares to participate in the management or
364-11 administration of the close corporation's business and affairs
364-12 during the term of the shareholders' agreement;
364-13 (7) the right of one or more shareholders to cause the
364-14 winding up and termination of the close corporation at will or on
364-15 the occurrence of a specified event or contingency, in which case
364-16 the winding up and termination of the close corporation shall
364-17 proceed as if all of the shareholders of the close corporation had
364-18 consented in writing to winding up and termination as provided by
364-19 Chapter 11;
364-20 (8) the exercise or division of voting power either in
364-21 general or with regard to specified matters by or among the
364-22 shareholders of the close corporation or other persons, including:
364-23 (A) voting agreements and voting trusts that do
364-24 not conform with Section 6.251 or 6.252;
364-25 (B) requiring the vote or consent of the holders
364-26 of a larger or smaller number of shares than is otherwise required
364-27 by this chapter or other law, including an action for termination
365-1 of close corporation status;
365-2 (C) granting one or some other specified number
365-3 of votes for each shareholder; and
365-4 (D) permitting an action for which this chapter
365-5 requires approval by the vote of the board of directors or the
365-6 shareholders of an ordinary corporation, or both, to be taken
365-7 without a vote, in the manner provided by the shareholders'
365-8 agreement;
365-9 (9) the terms and conditions of employment of a
365-10 shareholder, director, officer, or other employee of the close
365-11 corporation, regardless of the length of the period of employment;
365-12 (10) the individuals who will serve as directors, if
365-13 any, and officers of the close corporation;
365-14 (11) the arbitration or mediation of issues about
365-15 which the shareholders may become deadlocked in voting or about
365-16 which the directors or those empowered to manage the close
365-17 corporation may become deadlocked and the shareholders are unable
365-18 to break the deadlock;
365-19 (12) the termination of close corporation status,
365-20 including a right of dissent or other rights that may be granted to
365-21 shareholders who object to the termination;
365-22 (13) qualifications of persons who are or are not
365-23 entitled to be shareholders of the close corporation;
365-24 (14) amendments to or termination of the shareholders'
365-25 agreement; and
365-26 (15) any provision required or permitted to be
365-27 contained in the bylaws by this chapter.
366-1 Sec. 21.715. EXECUTION OF SHAREHOLDERS' AGREEMENT. A
366-2 shareholders' agreement shall be executed:
366-3 (1) in the case of an existing close corporation, by
366-4 each shareholder at the time of execution, regardless of whether
366-5 the shareholder has voting power;
366-6 (2) in the case of an existing ordinary corporation
366-7 that will adopt close corporation status under Section 21.705, by
366-8 each shareholder at the time of execution, regardless of whether
366-9 the shareholder has voting power; or
366-10 (3) in the case of a close corporation that is being
366-11 formed under Section 21.703, by each person who is a subscriber to
366-12 the corporation's shares or agrees to become a holder of the
366-13 corporation's shares under the shareholders' agreement of the close
366-14 corporation.
366-15 Sec. 21.716. ADOPTION OF AMENDMENT OF SHAREHOLDERS'
366-16 AGREEMENT. Unless otherwise provided by a shareholders' agreement,
366-17 an amendment to the shareholders' agreement of a close corporation
366-18 may be adopted only by the written consent of each person who would
366-19 be required to execute the shareholders' agreement if it were being
366-20 executed originally at the time of adoption of the amendment,
366-21 regardless of whether the person has voting power in the close
366-22 corporation.
366-23 Sec. 21.717. DELIVERY OF SHAREHOLDERS' AGREEMENT. (a) The
366-24 close corporation shall deliver a complete copy of a shareholders'
366-25 agreement to:
366-26 (1) each person who is bound by the shareholders'
366-27 agreement;
367-1 (2) each person who is or will become a shareholder in
367-2 the close corporation as provided by Section 21.715 when a
367-3 certificate representing shares in the close corporation is
367-4 delivered to the person; and
367-5 (3) each person to whom a certificate representing
367-6 shares is issued and who has not received a complete copy of the
367-7 agreement.
367-8 (b) The failure to deliver a complete copy of a
367-9 shareholders' agreement as required by this section does not affect
367-10 the validity or enforceability of the shareholders' agreement.
367-11 Sec. 21.718. STATEMENT OF OPERATION AS CLOSE CORPORATION.
367-12 (a) On or after the formation of a close corporation or adoption
367-13 of close corporation status, a close corporation that begins to
367-14 conduct its business and affairs under a shareholders' agreement
367-15 that has become effective shall promptly execute and file with the
367-16 secretary of state a statement of operation as a close corporation
367-17 in accordance with Chapter 4.
367-18 (b) The statement required by Subsection (a) must:
367-19 (1) contain the name of the close corporation;
367-20 (2) state that the close corporation is being operated
367-21 and its business and affairs are being conducted under the terms of
367-22 a shareholders' agreement under this subchapter; and
367-23 (3) contain the date the operation of the corporation
367-24 began.
367-25 (c) A statement of operation as a close corporation shall be
367-26 executed by an officer on behalf of the corporation.
367-27 (d) On the filing of the statement of operation as a close
368-1 corporation, the fact that the close corporation is being operated
368-2 and its business and affairs are being conducted under the terms of
368-3 a shareholders' agreement becomes a matter of public record.
368-4 Sec. 21.719. VALIDITY AND ENFORCEABILITY OF SHAREHOLDERS'
368-5 AGREEMENT. (a) A shareholders' agreement executed in accordance
368-6 with Section 21.715 is valid and enforceable notwithstanding:
368-7 (1) the elimination of a board of directors;
368-8 (2) any restriction imposed on the discretion or
368-9 powers of the board of directors or other person empowered to
368-10 manage the close corporation; and
368-11 (3) that the effect of the shareholders' agreement is
368-12 to treat the business and affairs of the close corporation as if
368-13 the close corporation were a partnership or in a manner that would
368-14 otherwise be appropriate only among partners.
368-15 (b) A close corporation, a shareholder of the close
368-16 corporation, or a party to a shareholders' agreement may initiate a
368-17 proceeding to enforce the shareholders' agreement in accordance
368-18 with Section 21.756.
368-19 Sec. 21.720. PERSONS BOUND BY SHAREHOLDERS' AGREEMENT.
368-20 (a) A shareholders' agreement executed in accordance with Section
368-21 21.715 is:
368-22 (1) considered to be an agreement among all of the
368-23 shareholders of the close corporation; and
368-24 (2) binding on and enforceable against each
368-25 shareholder of the close corporation, regardless of whether:
368-26 (A) a particular shareholder acquired shares in
368-27 the close corporation by purchase, gift, bequest, or otherwise; or
369-1 (B) the shareholder had actual knowledge of the
369-2 existence of the shareholders' agreement at the time of acquiring
369-3 shares.
369-4 (b) A transferee or assignee of shares of a close
369-5 corporation in which there is a shareholders' agreement is bound by
369-6 the agreement for all purposes, regardless of whether the
369-7 transferee or assignee executed or was aware of the agreement.
369-8 Sec. 21.721. DELIVERY OF COPY OF SHAREHOLDERS' AGREEMENT TO
369-9 TRANSFEREE. (a) Before the transfer of shares of a close
369-10 corporation in which there is a shareholders' agreement, the
369-11 transferor shall deliver a complete copy of the shareholders'
369-12 agreement to the transferee.
369-13 (b) If the transferor fails to deliver a complete copy of
369-14 the shareholders' agreement:
369-15 (1) the validity and enforceability of the
369-16 shareholders' agreement against each shareholder of the
369-17 corporation, including the transferee, is not affected;
369-18 (2) the right, title, or interest of the transferee in
369-19 the transferred shares is not adversely affected; and
369-20 (3) the transferee is entitled to obtain on demand
369-21 from the transferor or from the close corporation a complete copy
369-22 of the shareholders' agreement at the transferor's expense.
369-23 Sec. 21.722. EFFECT OF REQUIRED STATEMENT ON SHARE
369-24 CERTIFICATE AND DELIVERY OF SHAREHOLDERS' AGREEMENT. If a
369-25 certificate representing shares of a close corporation contains the
369-26 statement required by Section 21.732, and a complete copy of each
369-27 shareholders' agreement has been delivered as required by Section
370-1 21.717, each holder, transferee, or other person claiming an
370-2 interest in the shares of the close corporation is conclusively
370-3 presumed to have knowledge of a close corporation provision in
370-4 effect at the time of the transfer.
370-5 Sec. 21.723. PARTY NOT BOUND BY SHAREHOLDERS' AGREEMENT ON
370-6 CESSATION; LIABILITY. (a) Notwithstanding the person's signature,
370-7 a person ceases to be a party to, and bound by, a shareholders'
370-8 agreement when the person ceases to be a shareholder of the close
370-9 corporation unless:
370-10 (1) the person's attempted cessation was in violation
370-11 of Section 21.721 or the shareholders' agreement; or
370-12 (2) the shareholders' agreement provides to the
370-13 contrary.
370-14 (b) Cessation as a party to a shareholders' agreement or as
370-15 a shareholder does not relieve a person of liability the person may
370-16 have incurred for breach of the shareholders' agreement.
370-17 Sec. 21.724. TERMINATION OF SHAREHOLDERS' AGREEMENT.
370-18 (a) Except as provided by Subsection (b), a shareholders'
370-19 agreement terminates when the close corporation terminates its
370-20 status as a close corporation.
370-21 (b) If provided by the shareholders' agreement, all or part
370-22 of the agreement is valid and enforceable to the extent permitted
370-23 for an ordinary corporation by this chapter or other law.
370-24 Sec. 21.725. CONSEQUENCES OF MANAGEMENT BY PERSONS OTHER
370-25 THAN BOARD OF DIRECTORS. Sections 21.726-21.729 apply only to a
370-26 close corporation the business and affairs of which are managed
370-27 wholly or partly by the shareholders of the close corporation or
371-1 any other person as provided by a shareholders' agreement rather
371-2 than solely by a board of directors.
371-3 Sec. 21.726. SHAREHOLDERS CONSIDERED DIRECTORS. (a) When
371-4 required by the context of this chapter, the shareholders of a
371-5 close corporation described by Section 21.725 are considered to be
371-6 directors of the close corporation for purposes of applying a
371-7 provision of this chapter, other than a provision relating to the
371-8 election and removal of directors.
371-9 (b) A requirement that an instrument filed with a
371-10 governmental agency contain a statement that a specified action has
371-11 been taken by the board of directors is satisfied by a statement
371-12 that:
371-13 (1) the corporation is a close corporation with no
371-14 board of directors; and
371-15 (2) the action was approved by the shareholders of the
371-16 close corporation or the persons empowered to manage the business
371-17 and affairs of the close corporation under a shareholders'
371-18 agreement.
371-19 Sec. 21.727. LIABILITY OF SHAREHOLDERS. The shareholders of
371-20 a close corporation described by Section 21.725 are subject to any
371-21 liability imposed on a director of a corporation by this chapter or
371-22 other law for a managerial act of or omission made by the
371-23 shareholders or any other person empowered to manage the business
371-24 and affairs of the close corporation under a shareholders'
371-25 agreement and relating to the business and affairs of the close
371-26 corporation, if the action is required by law to be undertaken by
371-27 the board of directors.
372-1 Sec. 21.728. MODE AND EFFECT OF TAKING ACTION BY
372-2 SHAREHOLDERS AND OTHERS. (a) An action that shall or may be taken
372-3 by the board of directors of an ordinary corporation as required or
372-4 authorized by this chapter shall or may be taken by action of the
372-5 shareholders of a close corporation described by Section 21.725 at
372-6 a meeting of the shareholders or, in the manner permitted by a
372-7 shareholders' agreement, this subchapter, or this chapter, without
372-8 a meeting.
372-9 (b) Unless otherwise provided by the certificate of
372-10 formation of the close corporation or a shareholders' agreement of
372-11 the close corporation, an action is binding on a close corporation
372-12 if the action is taken after:
372-13 (1) the affirmative vote of the holders of the
372-14 majority of all outstanding shares entitled to vote on the action;
372-15 or
372-16 (2) the consent of all of the shareholders of the
372-17 close corporation, which may be proven by:
372-18 (A) the full knowledge of the action by all of
372-19 the shareholders and the shareholders' failure to object to the
372-20 action in a timely manner;
372-21 (B) written consent to the action in accordance
372-22 with Section 6.201 or this chapter or any other writing executed by
372-23 or on behalf of all of the shareholders reasonably evidencing the
372-24 consent; or
372-25 (C) any other means reasonably evidencing the
372-26 consent.
372-27 Sec. 21.729. LIMITATION OF SHAREHOLDER'S LIABILITY. (a) A
373-1 shareholder of a close corporation described by Section 21.725 is
373-2 not liable because of a shareholders' vote or shareholder action
373-3 without a vote unless the shareholder had the right to vote or
373-4 consent to the action.
373-5 (b) A shareholder of a close corporation, without regard to
373-6 the right to vote or consent, may not be held liable for an action
373-7 taken by the shareholders or a person empowered to manage the
373-8 business and affairs of the close corporation under a shareholders'
373-9 agreement if the shareholder dissents from and has not voted for or
373-10 consented to the action.
373-11 (c) The dissent of a shareholder may be proven by:
373-12 (1) an entry in the minutes of the meeting of
373-13 shareholders;
373-14 (2) a written dissent filed with the secretary of the
373-15 meeting before the adjournment of the meeting;
373-16 (3) a written dissent sent by registered mail to the
373-17 secretary of the close corporation promptly after the meeting or
373-18 after a written consent was obtained from the other shareholders;
373-19 or
373-20 (4) any other means reasonably evidencing the dissent.
373-21 Sec. 21.730. LACK OF FORMALITIES; TREATMENT AS PARTNERSHIP.
373-22 The failure of a close corporation under this subchapter to observe
373-23 a usual formality or requirement prescribed for an ordinary
373-24 corporation by this chapter relating to the exercise of corporate
373-25 powers or the management of a corporation's business and affairs
373-26 and the performance of a shareholders' agreement that treats the
373-27 close corporation as if the corporation were a partnership or in a
374-1 manner that otherwise is appropriate only among partners may not:
374-2 (1) be a factor in determining whether to impose
374-3 personal liability on the shareholders for the close corporation's
374-4 obligations by disregarding the separate entity of the close
374-5 corporation or otherwise;
374-6 (2) be grounds for invalidating an otherwise valid
374-7 shareholders' agreement; or
374-8 (3) affect the status of the close corporation as a
374-9 corporation under this chapter or other law.
374-10 Sec. 21.731. OTHER AGREEMENTS AMONG SHAREHOLDERS PERMITTED.
374-11 Sections 21.713-21.730 do not prohibit or impair any other
374-12 agreement between two or more shareholders of an ordinary
374-13 corporation permitted by this chapter or other law.
374-14 Sec. 21.732. CLOSE CORPORATION SHARE CERTIFICATES. (a) In
374-15 addition to a matter required or authorized by law to be stated on
374-16 a certificate representing shares, each certificate representing
374-17 shares issued by a close corporation must conspicuously state on
374-18 the front or back of the certificate: "These shares are issued by
374-19 a close corporation as defined by the Texas Business Organizations
374-20 Code. Under Chapter 21 of that code, a shareholders' agreement may
374-21 provide for management of a close corporation by the shareholders
374-22 or in other ways different from an ordinary corporation. This may
374-23 subject the holder of this certificate to certain obligations and
374-24 liabilities not otherwise imposed on shareholders of an ordinary
374-25 corporation. On a sale or transfer of these shares, the transferor
374-26 is required to deliver to the transferee a complete copy of any
374-27 shareholders' agreement."
375-1 (b) Notwithstanding this chapter and Section 3.202, the
375-2 status of a corporation as a close corporation is not affected by
375-3 the failure of a share certificate to contain the statement
375-4 required by Subsection (a).
375-5 Sec. 21.733. BYLAWS OF CLOSE CORPORATION. (a) A close
375-6 corporation does not need to adopt bylaws if provisions required by
375-7 law to be contained in the bylaws are contained in the certificate
375-8 of formation or a shareholders' agreement.
375-9 (b) A close corporation that does not have bylaws when it
375-10 terminates its status as a close corporation under Section 21.708
375-11 shall immediately adopt bylaws that comply with Section 21.059.
375-12 (Sections 21.734-21.750 reserved for expansion)
375-13 SUBCHAPTER P. JUDICIAL PROCEEDINGS RELATING TO
375-14 CLOSE CORPORATION
375-15 Sec. 21.751. DEFINITIONS. In this subchapter:
375-16 (1) "Court" means a district court in the county in
375-17 which the principal office of the close corporation is located.
375-18 (2) "Custodian" means a person appointed by a court
375-19 under Section 21.761.
375-20 (3) "Provisional director" means a person appointed by
375-21 a court under Section 21.758.
375-22 (4) "Shareholder" means a record or beneficial owner
375-23 of shares in a close corporation, including:
375-24 (A) a person holding a beneficial interest in
375-25 the shares under an inter vivos, testamentary, or voting trust; or
375-26 (B) the personal representative, as defined by
375-27 the Texas Probate Code, of a record or beneficial owner.
376-1 Sec. 21.752. PROCEEDINGS AUTHORIZED. In addition to any
376-2 other judicial proceeding pertaining to an ordinary corporation
376-3 provided for by this chapter or other law, a close corporation or
376-4 shareholder may institute a proceeding in a district court in the
376-5 county in which the principal office of the close corporation is
376-6 located to:
376-7 (1) enforce a close corporation provision;
376-8 (2) appoint a provisional director; or
376-9 (3) appoint a custodian.
376-10 Sec. 21.753. NOTICE; INTERVENTION. (a) Notice of the
376-11 institution of a proceeding shall be given to the close
376-12 corporation, if the corporation is not a plaintiff, and to each
376-13 shareholder who is not a plaintiff in the manner prescribed by law
376-14 and consistent with due process of law as directed by the court.
376-15 (b) The close corporation or a shareholder of the close
376-16 corporation may intervene in the proceeding.
376-17 Sec. 21.754. PROCEEDING NONEXCLUSIVE. Except as provided by
376-18 Section 21.755, the right of a close corporation or a shareholder
376-19 to institute a proceeding under Section 21.752 is in addition to
376-20 another right or remedy the plaintiff is entitled to under law.
376-21 Sec. 21.755. UNAVAILABILITY OF JUDICIAL PROCEEDING. (a) A
376-22 shareholder may not institute a proceeding before exhausting any
376-23 nonjudicial remedy contained in a close corporation provision for
376-24 resolution of an issue that is in dispute unless the shareholder
376-25 proves that the close corporation, the shareholders as a whole, or
376-26 the shareholder will suffer irreparable harm before the nonjudicial
376-27 remedy is exhausted.
377-1 (b) A shareholder may not institute a proceeding to seek
377-2 damages or other monetary relief if the shareholder is entitled to
377-3 dissent from a proposed action and receive the fair value of the
377-4 shareholder's shares under this code or a shareholders' agreement.
377-5 Sec. 21.756. JUDICIAL PROCEEDING TO ENFORCE CLOSE
377-6 CORPORATION PROVISION. (a) In a judicial proceeding under this
377-7 section, a court shall enforce a close corporation provision
377-8 without regard to whether there is an adequate remedy at law.
377-9 (b) The court may enforce a close corporation provision by
377-10 injunction, specific performance, or other relief the court
377-11 determines to be fair and equitable under the circumstances,
377-12 including:
377-13 (1) damages instead of or in addition to specific
377-14 enforcement;
377-15 (2) the appointment of a provisional director or
377-16 custodian;
377-17 (3) the appointment of a receiver for specific assets
377-18 of the close corporation in accordance with Section 11.403;
377-19 (4) the appointment of a receiver to rehabilitate the
377-20 close corporation in accordance with Section 11.404;
377-21 (5) subject to Section 21.757, the liquidation of the
377-22 assets and business and involuntary termination of the close
377-23 corporation and appointment of a receiver to effect the liquidation
377-24 in accordance with Section 11.405; and
377-25 (6) the termination of close corporation status.
377-26 (c) The court may not order termination of close corporation
377-27 status under Subsection (b)(6) unless the court determines that:
378-1 (1) any other remedy in law or equity, including
378-2 appointment of a provisional director, custodian, or other type of
378-3 receiver, is inadequate; and
378-4 (2) the size, the nature of the business, or the
378-5 number of shareholders of the close corporation, or their
378-6 relationship to one another or other similar factors, make it
378-7 wholly impractical to continue close corporation status.
378-8 Sec. 21.757. LIQUIDATION; INVOLUNTARY WINDING UP AND
378-9 TERMINATION; RECEIVERSHIP. Except as provided by Section 21.756,
378-10 in a case in which a shareholder is entitled to wind up and
378-11 terminate a close corporation under a shareholders' agreement, a
378-12 court may not order liquidation, involuntary termination, or
378-13 receivership under that section unless the court determines that
378-14 any other remedy in law or equity, including appointment of a
378-15 provisional director, custodian, or other type of receiver, is
378-16 inadequate.
378-17 Sec. 21.758. APPOINTMENT OF PROVISIONAL DIRECTOR. (a) In a
378-18 judicial proceeding under this section, a court shall appoint a
378-19 provisional director for a close corporation on presentation of
378-20 proof that the directors or the persons empowered to manage the
378-21 business and affairs of the close corporation under a shareholders'
378-22 agreement are so divided with respect to the management of the
378-23 business and affairs of the close corporation that the required
378-24 votes or consent to take action on behalf of the close corporation
378-25 cannot be obtained, resulting in the business and affairs being
378-26 conducted in a manner that is not to the general advantage of the
378-27 shareholders.
379-1 (b) The provisional director must be an impartial person who
379-2 is not a shareholder, a party to a shareholders' agreement, a
379-3 person empowered to manage the close corporation under a
379-4 shareholders' agreement, or a creditor of the close corporation or
379-5 of a subsidiary or affiliate of the close corporation. The court
379-6 shall determine any further qualifications.
379-7 (c) A provisional director shall serve until removed by
379-8 court order or by a vote of the majority of the directors or the
379-9 holders of the majority of the shares with voting power, or by a
379-10 vote of a different number, not fewer than the majority, of
379-11 shareholders or directors if a close corporation provision requires
379-12 the concurrence of a larger or different majority for action by the
379-13 directors or shareholders.
379-14 Sec. 21.759. RIGHTS AND POWERS OF PROVISIONAL DIRECTOR. A
379-15 provisional director has all the rights and powers of an elected
379-16 director of the close corporation, or the rights of vote or consent
379-17 of a shareholder and other rights and powers of shareholders or
379-18 other persons who have been empowered to manage the business and
379-19 affairs of the close corporation under a shareholders' agreement
379-20 with the voting power provided by court order, including the right
379-21 to notice of, and to vote at, meetings of directors or
379-22 shareholders.
379-23 Sec. 21.760. COMPENSATION OF PROVISIONAL DIRECTOR. (a) The
379-24 compensation of a provisional director shall be determined by an
379-25 agreement between the provisional director and the close
379-26 corporation, subject to court approval.
379-27 (b) The court may set the compensation in the absence of an
380-1 agreement or in the event of a disagreement between the provisional
380-2 director and the close corporation.
380-3 Sec. 21.761. APPOINTMENT OF CUSTODIAN. (a) In a judicial
380-4 proceeding under this section, a court shall appoint a custodian
380-5 for a close corporation on presentation of proof that:
380-6 (1) at a meeting held for the election of directors,
380-7 the shareholders are so divided that the shareholders have failed
380-8 to elect successors to directors whose terms have expired or would
380-9 have expired on qualification of a successor;
380-10 (2) the business of the close corporation is suffering
380-11 or is threatened with irreparable injury because the directors, or
380-12 the shareholders or the persons empowered to manage the business
380-13 and affairs of the close corporation under a shareholders'
380-14 agreement, are so divided with respect to the management of the
380-15 business and affairs of the close corporation that the required
380-16 vote or consent to take action on behalf of the close corporation
380-17 cannot be obtained and a remedy with respect to the deadlock in a
380-18 close corporation provision has failed; or
380-19 (3) the plaintiff or intervenor has the right to wind
380-20 up and terminate the close corporation under a shareholders'
380-21 agreement as provided by Section 21.714.
380-22 (b) To be eligible to serve as a custodian, a person must
380-23 comply with all the qualifications required to serve as a receiver
380-24 under Section 11.406.
380-25 Sec. 21.762. POWERS AND DUTIES OF CUSTODIAN. A person who
380-26 qualifies as a custodian has all of the powers and duties and the
380-27 title of a receiver appointed under Sections 11.404-11.406. The
381-1 custodian shall continue the business of the close corporation and
381-2 may not liquidate the affairs or distribute the assets of the close
381-3 corporation, except as provided by court order or Section
381-4 21.761(a)(3).
381-5 Sec. 21.763. TERMINATION OF CUSTODIANSHIP. If the condition
381-6 requiring the appointment of a custodian is remedied other than by
381-7 liquidation or winding up and termination, the court shall
381-8 terminate the custodianship immediately and management of the close
381-9 corporation shall be restored to the directors or shareholders of
381-10 the close corporation or to the persons empowered to manage the
381-11 business and affairs of the close corporation under a shareholders'
381-12 agreement.
381-13 (Sections 21.764-21.800 reserved for expansion)
381-14 SUBCHAPTER Q. MISCELLANEOUS PROVISIONS
381-15 Sec. 21.801. SHARES AND OTHER SECURITIES ARE PERSONAL
381-16 PROPERTY. Except as otherwise provided by this code, the shares
381-17 and other securities of a corporation are personal property.
381-18 Sec. 21.802. DELINQUENT TAX. A corporation that is
381-19 delinquent in the payment of any tax owed under Chapter 171, Tax
381-20 Code, may not be:
381-21 (1) awarded a contract by the state; or
381-22 (2) granted a license or permit by the state.
381-23 Sec. 21.803. SUPPLEMENTAL INFORMATION FOR APPLICATION FOR
381-24 REGISTRATION BY FOREIGN CORPORATIONS. In addition to the
381-25 information required by Section 9.004, a foreign corporation's
381-26 application for registration to be filed with the secretary of
381-27 state must state the:
382-1 (1) aggregate number of shares the corporation has
382-2 authority to issue, itemized by classes, par value of shares,
382-3 shares without par value, and any series in a class;
382-4 (2) aggregate number of shares issued by the
382-5 corporation, itemized by classes, par value of shares, shares
382-6 without par value, and any series in a class; and
382-7 (3) amount of the stated capital of the corporation.
382-8 CHAPTER 22. NONPROFIT CORPORATIONS
382-9 SUBCHAPTER A. GENERAL PROVISIONS
382-10 Sec. 22.001. DEFINITIONS. In this chapter:
382-11 (1) "Board of directors" means the group of persons
382-12 vested with the management of the affairs of the corporation,
382-13 regardless of the name used to designate the group.
382-14 (2) "Bylaws" means the rules adopted to regulate or
382-15 manage the corporation, regardless of the name used to designate
382-16 the rules.
382-17 (3) "Corporation" or "domestic corporation" means a
382-18 domestic nonprofit corporation subject to this chapter.
382-19 (4) "Foreign corporation" means a foreign nonprofit
382-20 corporation.
382-21 (5) "Nonprofit corporation" means a corporation no
382-22 part of the income of which is distributable to a member, director,
382-23 or officer of the corporation.
382-24 (6) "Ordinary care" means the care that an ordinarily
382-25 prudent person in a similar position would exercise under similar
382-26 circumstances.
382-27 Sec. 22.002. APPLICABILITY TO CERTAIN INSURANCE ASSOCIATIONS
383-1 AND COMPANIES. To the extent consistent with the Insurance Code,
383-2 this chapter applies to a local mutual aid association, statewide
383-3 mutual assessment company, burial association as defined by Article
383-4 14.37, Insurance Code, and county mutual insurance company, except
383-5 that:
383-6 (1) a mutual insurance association or company may pay
383-7 dividends to its members on advance approval of the commissioner of
383-8 insurance; and
383-9 (2) a power granted to or duty required of the
383-10 secretary of state under this chapter is, with respect to a mutual
383-11 insurance association or company, granted to or required of the
383-12 commissioner of insurance.
383-13 (Sections 22.003-22.050 reserved for expansion)
383-14 SUBCHAPTER B. PURPOSES AND POWERS
383-15 Sec. 22.051. GENERAL PURPOSES. A nonprofit corporation may
383-16 be formed for any lawful purpose or purposes not expressly
383-17 prohibited under this chapter, including any purpose described by
383-18 Section 2.002.
383-19 Sec. 22.052. ORGANIZED LABOR. Subject to Chapter 101, Labor
383-20 Code, a corporation may be organized under this chapter if a
383-21 purpose for the conduct of its affairs in this state is to organize
383-22 laborers, workers, or wage earners to protect themselves in their
383-23 various pursuits.
383-24 Sec. 22.053. DENTAL HEALTH SERVICE CORPORATION. (a) A
383-25 charitable corporation may be formed to operate a dental health
383-26 service corporation that manages and coordinates the relationship
383-27 between a dentist who contracts to perform dental services and a
384-1 patient who will receive the services as a member of a group that
384-2 contracted with the dental health service corporation to provide
384-3 dental care to group members.
384-4 (b) An application for a charter under this section must
384-5 have attached as an exhibit:
384-6 (1) an affidavit of the applicants stating:
384-7 (A) that not less than 30 percent of the
384-8 dentists legally engaged in the practice of dentistry in this state
384-9 have signed a contract to perform the required dental services for
384-10 a period of at least one year after incorporation; and
384-11 (B) the names and addresses of those dentists;
384-12 and
384-13 (2) a certification by the State Board of Dental
384-14 Examiners that:
384-15 (A) the applicants are reputable residents of
384-16 this state of good moral character; and
384-17 (B) the corporation will be in the best interest
384-18 of the public health.
384-19 (c) A corporation formed under this section must have at
384-20 least 12 directors, including 9 directors who are licensed to
384-21 practice dentistry in this state and are actively engaged in the
384-22 practice of dentistry in this state.
384-23 (d) A corporation formed under this section shall maintain
384-24 as participating or contracting dentists at least 30 percent of the
384-25 number of dentists actually engaged in the practice of dentistry in
384-26 this state. The corporation shall file annually in September with
384-27 the State Board of Dental Examiners the name and address of each
385-1 participating or contracting dentist.
385-2 (e) A corporation formed under this section may not:
385-3 (1) prevent a patient from selecting the licensed
385-4 dentist of the patient's choice to provide dental services to the
385-5 patient;
385-6 (2) deny a licensed dentist the right to participate
385-7 as a contracting dentist to perform the dental services contracted
385-8 for by the patient;
385-9 (3) discriminate among patients or licensed dentists
385-10 regarding payment or reimbursement for the cost of performing
385-11 dental services; or
385-12 (4) authorize any person to regulate, interfere with,
385-13 or intervene in any manner in the diagnosis or treatment provided
385-14 by a licensed dentist to a patient.
385-15 (f) A corporation formed under this section may require the
385-16 attending dentist to provide a narrative oral or written
385-17 description of the dental services provided to determine benefits
385-18 or provide proof of treatment. The corporation may request but may
385-19 not require diagnostic aids used in the course of treatment.
385-20 Sec. 22.054. PROHIBITED ACTIVITIES. A corporation may not
385-21 be organized or registered under this chapter to conduct its
385-22 affairs in this state to:
385-23 (1) engage in or operate as a group hospital service,
385-24 rural credit union, agricultural and livestock pool, mutual loan
385-25 corporation, cooperative association under Chapter 251, cooperative
385-26 credit association, farmers' cooperative society, Co-operative
385-27 Marketing Act corporation, rural electric cooperative corporation,
386-1 telephone cooperative corporation, or fraternal organization
386-2 operating under the lodge system and incorporated under Subchapter
386-3 C, Chapter 23; or
386-4 (2) engage in water supply or sewer service as an
386-5 entity incorporated under Chapter 67, Water Code.
386-6 Sec. 22.055. DIVIDENDS PROHIBITED. A dividend may not be
386-7 paid to, and no part of the income of a corporation may be
386-8 distributed to, the corporation's members, directors, or officers.
386-9 Sec. 22.056. AUTHORIZED BENEFITS AND DISTRIBUTIONS. A
386-10 corporation may:
386-11 (1) pay compensation in a reasonable amount to the
386-12 members, directors, or officers of the corporation for services
386-13 provided;
386-14 (2) confer benefits on the corporation's members in
386-15 conformity with the corporation's purposes; and
386-16 (3) make distributions to the corporation's members on
386-17 winding up and termination to the extent authorized by this
386-18 chapter.
386-19 Sec. 22.057. POWER TO ASSIST EMPLOYEE OR OFFICER. (a) A
386-20 corporation may lend money to or otherwise assist an employee or
386-21 officer of the corporation, but not a director, if the loan or
386-22 assistance may reasonably be expected to directly or indirectly
386-23 benefit the corporation.
386-24 (b) A loan made to an officer must be:
386-25 (1) made for the purpose of financing the officer's
386-26 principal residence; or
386-27 (2) set in an original principal amount that does not
387-1 exceed:
387-2 (A) 100 percent of the officer's annual salary,
387-3 if the loan is made before the first anniversary of the officer's
387-4 employment; or
387-5 (B) 50 percent of the officer's annual salary,
387-6 if the loan is made in any subsequent year.
387-7 Sec. 22.058. POWER TO SERVE AS TRUSTEE. A corporation that
387-8 is described by Section 501(c)(3) or 170(c), Internal Revenue Code,
387-9 or a corresponding provision of a subsequent federal tax law, or a
387-10 corporation listed by the Internal Revenue Service in the
387-11 Cumulative List of Organizations Described in Section 170(c) of the
387-12 Internal Revenue Code of 1986, I.R.S. Publication 78, or any
387-13 successor I.R.S. publication, may serve as the trustee of a trust:
387-14 (1) of which the corporation is a beneficiary; or
387-15 (2) benefitting another organization described by one
387-16 of those sections of the Internal Revenue Code, or a corresponding
387-17 provision of a subsequent federal tax law, or listed by the
387-18 Internal Revenue Service in the Cumulative List of Organizations
387-19 Described in Section 170(c) of the Internal Revenue Code of 1986,
387-20 I.R.S. Publication 78, or any successor I.R.S. publication.
387-21 Sec. 22.059. STANDARD TAX PROVISIONS FOR CERTAIN CHARITABLE
387-22 CORPORATIONS; POWER TO EXCLUDE. (a) Notwithstanding any
387-23 conflicting provision of this chapter or the certificate of
387-24 formation and except as provided by Subsection (b), the certificate
387-25 of formation of each corporation that is a private foundation as
387-26 defined by Section 509, Internal Revenue Code, is considered to
387-27 contain the following provisions: "The corporation shall make
388-1 distributions at the time and in the manner as not to subject it to
388-2 tax under Section 4942 of the Internal Revenue Code of 1986; the
388-3 corporation shall not engage in any act of self-dealing which would
388-4 be subject to tax under Section 4941 of the Code; the corporation
388-5 shall not retain any excess business holdings which would subject
388-6 it to tax under Section 4943 of the Code; the corporation shall not
388-7 make any investments which would subject it to tax under Section
388-8 4944 of the Code; and the corporation shall not make any taxable
388-9 expenditures which would subject it to tax under Section 4945 of
388-10 the Code."
388-11 (b) A corporation described by Subsection (a) may amend the
388-12 certificate of formation of the corporation to expressly exclude
388-13 the application of Subsection (a).
388-14 (Sections 22.060-22.100 reserved for expansion)
388-15 SUBCHAPTER C. FORMATION AND GOVERNING DOCUMENTS
388-16 Sec. 22.101. INCORPORATION OF CERTAIN ORGANIZATIONS. A
388-17 religious society, a charitable, benevolent, literary, or social
388-18 association, or a church may incorporate under this chapter with
388-19 the consent of a majority of its members. Those members shall
388-20 authorize the organizers to execute the certificate of formation.
388-21 Sec. 22.102. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE
388-22 OF FORMATION. In addition to the information required to be
388-23 included in the certificate of formation by Section 3.005, the
388-24 certificate of formation of a corporation must include:
388-25 (1) if the corporation is to have no members, a
388-26 statement to that effect;
388-27 (2) if management of the corporation's affairs is to
389-1 be vested in the corporation's members, a statement to that effect;
389-2 (3) the number of directors constituting the initial
389-3 board of directors and the names and addresses of those directors
389-4 or, if the management of the corporation is vested solely in the
389-5 corporation's members, a statement to that effect; and
389-6 (4) if the corporation is to be authorized on its
389-7 winding up to distribute the corporation's assets in a manner other
389-8 than as provided by Section 22.304, a statement describing the
389-9 manner of distribution.
389-10 Sec. 22.103. BYLAWS. (a) The initial bylaws of a
389-11 corporation shall be adopted by the corporation's board of
389-12 directors or, if the management of the corporation is vested in the
389-13 corporation's members, by the members.
389-14 (b) The bylaws may contain provisions for the regulation and
389-15 management of the affairs of the corporation that are consistent
389-16 with law and the certificate of formation.
389-17 (c) The board of directors may amend or repeal the bylaws,
389-18 or adopt new bylaws, unless:
389-19 (1) this chapter or the corporation's certificate of
389-20 formation wholly or partly reserves the power exclusively to the
389-21 corporation's members;
389-22 (2) the management of the corporation is vested in the
389-23 corporation's members; or
389-24 (3) in amending, repealing, or adopting a bylaw, the
389-25 members expressly provide that the board of directors may not amend
389-26 or repeal the bylaw.
389-27 Sec. 22.104. INCONSISTENCY BETWEEN CERTIFICATE OF FORMATION
390-1 AND BYLAW. (a) A provision of a certificate of formation of a
390-2 corporation that is inconsistent with a bylaw controls over the
390-3 bylaw, except as provided by Subsection (b).
390-4 (b) A change in the number of directors by amendment to the
390-5 bylaws controls over the number stated in the certificate of
390-6 formation, unless the certificate of formation provides that a
390-7 change in the number of directors may be made only by amendment to
390-8 the certificate.
390-9 Sec. 22.105. ORGANIZATION MEETING. (a) After the
390-10 certificate of formation is filed, the board of directors named in
390-11 the certificate of formation of a corporation shall hold an
390-12 organization meeting of the board, either in or out of this state,
390-13 at the call of the incorporators or a majority of the directors to
390-14 adopt bylaws and elect officers and for other purposes determined
390-15 by the board at the meeting. The incorporators or directors
390-16 calling the meeting shall send notice of the time and place of the
390-17 meeting to each director named in the certificate of formation not
390-18 later than the third day before the date of the meeting.
390-19 (b) A first meeting of the members may be held at the call
390-20 of the majority of the directors on notice provided not later than
390-21 the third day before the date of the meeting. The notice must
390-22 state the purposes of the meeting.
390-23 (c) If the management of a corporation is vested in the
390-24 corporation's members, the members shall hold the organization
390-25 meeting on the call of an incorporator. An incorporator who calls
390-26 the meeting shall:
390-27 (1) send notice of the time and place of the meeting
391-1 to each member not later than the third day before the date of the
391-2 meeting;
391-3 (2) if the corporation is a church, make an oral
391-4 announcement of the time and place of the meeting at a regularly
391-5 scheduled worship service before the meeting; or
391-6 (3) send notice of the meeting in the manner provided
391-7 by the certificate of formation.
391-8 Sec. 22.106. RESTATED CERTIFICATE OF FORMATION FOR CERTAIN
391-9 CHURCHES. If the management of a church is vested in the church's
391-10 members under Section 22.202, and the original certificate of
391-11 formation is not required to contain a statement to that effect,
391-12 any restated certificate of formation for the church must contain a
391-13 statement to that effect in addition to the information required by
391-14 Section 3.057.
391-15 Sec. 22.107. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF
391-16 FORMATION BY MEMBERS HAVING VOTING RIGHTS. (a) Except as provided
391-17 by Section 22.109(b), to amend the certificate of formation of a
391-18 corporation with members having voting rights, the board of
391-19 directors of the corporation must adopt a resolution specifying the
391-20 proposed amendment and directing that the amendment be submitted to
391-21 a vote at an annual or special meeting of the members having voting
391-22 rights.
391-23 (b) Written notice containing the proposed amendment or a
391-24 summary of the changes to be effected by the amendment shall be
391-25 given to each member entitled to vote at the meeting within the
391-26 time and in the manner provided by this chapter for giving notice
391-27 of a meeting of members.
392-1 (c) The proposed amendment shall be adopted on receiving at
392-2 least two-thirds of the votes that members present at the meeting
392-3 in person or by proxy are entitled to cast, except that if any
392-4 class of members is entitled to vote on the amendment as a class by
392-5 the terms of the certificate of formation or the bylaws, the
392-6 amendment may be adopted only on also receiving at least two-thirds
392-7 of the votes that the members of each class present at the meeting
392-8 in person or by proxy are entitled to cast.
392-9 Sec. 22.108. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF
392-10 FORMATION BY MANAGING MEMBERS. (a) To be approved, a proposed
392-11 amendment to the certificate of formation of a corporation the
392-12 management of the affairs of which is vested in the corporation's
392-13 members under Section 22.202 must be submitted to a vote at an
392-14 annual, regular, or special meeting of the members.
392-15 (b) Except as otherwise provided by the certificate of
392-16 formation or bylaws, notice containing the proposed amendment or a
392-17 summary of the changes to be effected by the amendment shall be
392-18 given to the members within the time and in the manner provided by
392-19 this chapter for giving notice of a meeting of members.
392-20 (c) The proposed amendment shall be adopted on receiving at
392-21 least two-thirds of the votes of members present at the meeting.
392-22 Sec. 22.109. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF
392-23 FORMATION BY BOARD OF DIRECTORS. (a) If a corporation has no
392-24 members or has no members with voting rights, or in the case of an
392-25 amendment under Subsection (b), an amendment to the corporation's
392-26 certificate of formation shall be adopted at a meeting of the board
392-27 of directors on receiving the affirmative vote of the majority of
393-1 the directors in office.
393-2 (b) Except as otherwise provided by the certificate of
393-3 formation, the board of directors of a corporation with members
393-4 having voting rights may, without member approval, adopt amendments
393-5 to the certificate of formation to:
393-6 (1) extend the duration of the corporation if the
393-7 corporation was incorporated when limited duration was required by
393-8 law;
393-9 (2) delete the names and addresses of the initial
393-10 directors;
393-11 (3) delete the name and address of the initial
393-12 registered agent or registered office, if a statement of change is
393-13 on file with the secretary of state; or
393-14 (4) change the corporate name by:
393-15 (A) substituting the word "corporation,"
393-16 "incorporated," "company," or "limited," or the abbreviation
393-17 "corp.," "inc.," "co.," or "ltd.," for a similar word or
393-18 abbreviation in the name; or
393-19 (B) adding, deleting, or changing a geographical
393-20 attribution to the name.
393-21 Sec. 22.110. NUMBER OF AMENDMENTS SUBJECT TO VOTE AT
393-22 MEETING. Any number of amendments to the corporation's certificate
393-23 of formation may be submitted to and voted on by a corporation's
393-24 members at any one meeting of the members.
393-25 (Sections 22.111-22.150 reserved for expansion)
393-26 SUBCHAPTER D. MEMBERS
393-27 Sec. 22.151. MEMBERS. (a) A corporation may have one or
394-1 more classes of members or may have no members.
394-2 (b) If the corporation has one or more classes of members,
394-3 the corporation's certificate of formation or bylaws must include:
394-4 (1) a designation of each class;
394-5 (2) the manner of the election or appointment of the
394-6 members of each class; and
394-7 (3) the qualifications and rights of the members of
394-8 each class.
394-9 (c) A corporation may issue a certificate, card, or other
394-10 instrument evidencing membership rights, voting rights, or
394-11 ownership rights as authorized by the certificate of formation or
394-12 bylaws.
394-13 Sec. 22.152. IMMUNITY FROM LIABILITY. The members of a
394-14 corporation are not personally liable for a debt, liability, or
394-15 obligation of the corporation.
394-16 Sec. 22.153. ANNUAL MEETING. (a) Except as provided by
394-17 Subsection (b), a corporation shall hold an annual meeting of the
394-18 members at a time that is stated in or determined in accordance
394-19 with the corporation's bylaws.
394-20 (b) If the bylaws provide for more than one regular meeting
394-21 of members each year, an annual meeting is not required. If an
394-22 annual meeting is not required, directors may be elected at a
394-23 meeting as provided by the bylaws.
394-24 Sec. 22.154. FAILURE TO CALL ANNUAL MEETING. (a) If the
394-25 board of directors of a corporation fails to call the annual
394-26 meeting of members at the designated time, a member of the
394-27 corporation may demand that the meeting be held within a reasonable
395-1 time. The demand must be made in writing and sent to an officer of
395-2 the corporation by registered mail.
395-3 (b) If the annual meeting is not called before the 61st day
395-4 after the date of demand, a member of the corporation may compel
395-5 the holding of the meeting by legal action directed against the
395-6 board of directors, and each of the extraordinary writs of common
395-7 law and of courts of equity are available to the member to compel
395-8 the holding of the meeting. Each member has a justiciable interest
395-9 sufficient to enable the member to institute and prosecute the
395-10 legal proceedings.
395-11 (c) Failure to hold the annual meeting at the designated
395-12 time does not result in the winding up and termination of the
395-13 corporation.
395-14 Sec. 22.155. SPECIAL MEETINGS OF MEMBERS. A special meeting
395-15 of the members of a corporation may be called by:
395-16 (1) the president;
395-17 (2) the board of directors;
395-18 (3) members having not less than one-tenth of the
395-19 votes entitled to be cast at the meeting; or
395-20 (4) other officers or persons as provided by the
395-21 certificate of formation or bylaws of the corporation.
395-22 Sec. 22.156. NOTICE OF MEETING. (a) A corporation other
395-23 than a church shall provide written notice of the place, date, and
395-24 time of a meeting of the members of the corporation and, if the
395-25 meeting is a special meeting, the purpose or purposes for which the
395-26 meeting is called. The notice shall be delivered to each member
395-27 entitled to vote at the meeting not later than the 10th day and not
396-1 earlier than the 60th day before the date of the meeting. Notice
396-2 may be delivered personally, by facsimile transmission, or by mail,
396-3 at the direction of the president, secretary, officers, or other
396-4 persons calling the meeting. Notice is considered delivered if
396-5 mailed or transmitted by facsimile in accordance with Section
396-6 6.051.
396-7 (b) Notice of a meeting of the members of a corporation that
396-8 is a church is considered sufficient if given by oral announcement
396-9 at a regularly scheduled worship service before the meeting or as
396-10 otherwise provided by the certificate of formation or bylaws of the
396-11 corporation.
396-12 Sec. 22.157. SPECIAL BYLAWS AFFECTING NOTICE. (a) A
396-13 corporation may provide in the corporation's bylaws that notice of
396-14 an annual or regular meeting is not required.
396-15 (b) A corporation having more than 1,000 members at the time
396-16 a meeting is scheduled or called may provide notice of a meeting by
396-17 publication in a newspaper of general circulation in the community
396-18 in which the principal office of the corporation is located, if the
396-19 corporation provides for that notice in its bylaws.
396-20 Sec. 22.158. PREPARATION AND INSPECTION OF LIST OF VOTING
396-21 MEMBERS. (a) After setting a record date for the notice of a
396-22 meeting, a corporation shall prepare the list of voting members
396-23 required by Section 6.004. The list must identify the members who
396-24 are entitled to notice and the members who are not entitled to
396-25 notice of the meeting.
396-26 (b) Not later than the second business day after the date
396-27 notice is given of a meeting for which a list was prepared in
397-1 accordance with Section 6.004, and continuing through the meeting,
397-2 the list of voting members must be available at the corporation's
397-3 principal office or at a reasonable place in the municipality in
397-4 which the meeting will be held, as identified in the notice of the
397-5 meeting, for inspection by members entitled to vote at the meeting
397-6 for the purpose of communication with other members concerning the
397-7 meeting.
397-8 (c) A voting member or voting member's agent or attorney is
397-9 entitled on written demand to inspect and, at the member's expense
397-10 and subject to Section 22.401, copy the list at a reasonable time
397-11 during the period the list is available for inspection.
397-12 (d) The corporation shall make the list of voting members
397-13 available at the meeting. A voting member or voting member's agent
397-14 or attorney is entitled to inspect the list at any time during the
397-15 meeting or an adjournment of the meeting.
397-16 Sec. 22.159. QUORUM OF MEMBERS. (a) Unless otherwise
397-17 provided by the certificate of formation or bylaws of a
397-18 corporation, members of the corporation holding one-tenth of the
397-19 votes entitled to be cast, in person or by proxy, constitute a
397-20 quorum.
397-21 (b) The vote of the majority of the votes entitled to be
397-22 cast by the members present or represented by proxy at a meeting at
397-23 which a quorum is present is the act of the members meeting, unless
397-24 the vote of a greater number is required by law or the certificate
397-25 of formation or bylaws.
397-26 (c) Unless otherwise provided by the certificate of
397-27 formation or bylaws, a church incorporated before May 12, 1959, is
398-1 considered to have provided in the certificate of formation or
398-2 bylaws that members present at a meeting for which notice has been
398-3 given constitute a quorum.
398-4 Sec. 22.160. VOTING OF MEMBERS. (a) Each member of a
398-5 corporation, regardless of class, is entitled to one vote on each
398-6 matter submitted to a vote of the corporation's members, except to
398-7 the extent that the voting rights of members of a class are
398-8 limited, enlarged, or denied by the certificate of formation or
398-9 bylaws of the corporation.
398-10 (b) A member may vote in person or, unless otherwise
398-11 provided by the certificate of formation or bylaws, by proxy
398-12 executed in writing by the member or the member's attorney-in-fact.
398-13 (c) Unless otherwise provided by the proxy, a proxy is
398-14 revocable and expires 11 months after the date of its execution. A
398-15 proxy may not be irrevocable for longer than 11 months.
398-16 Sec. 22.161. ELECTION OF OFFICERS OR DIRECTORS. (a) If
398-17 directors or officers are to be elected by members of a
398-18 corporation, the corporation's bylaws may authorize the elections
398-19 to be conducted by mail, by facsimile transmission, or by any
398-20 combination of those two methods.
398-21 (b) A member entitled to vote at an election of directors is
398-22 entitled to vote, in person or by proxy, for as many persons as
398-23 there are directors to be elected and for whose election the member
398-24 has a right to vote.
398-25 (c) If expressly authorized by the corporation's certificate
398-26 of formation, the member may cumulate the member's vote by:
398-27 (1) giving one candidate a number of votes equal to
399-1 the number of the directors to be elected multiplied by the
399-2 member's vote; or
399-3 (2) distributing the votes on the same principle among
399-4 any number of the candidates.
399-5 (d) A member who intends to cumulate votes under Subsection
399-6 (c) shall give written notice of the member's intention to the
399-7 secretary of the corporation not later than the day preceding the
399-8 date of the election.
399-9 Sec. 22.162. GREATER VOTING REQUIREMENTS UNDER CERTIFICATE
399-10 OF FORMATION. If the corporation's certificate of formation
399-11 requires the vote or concurrence of a greater proportion of the
399-12 members of a corporation than is required by this chapter with
399-13 respect to an action to be taken by the members, the certificate of
399-14 formation controls.
399-15 Sec. 22.163. RECORD DATE FOR DETERMINATION OF MEMBERS.
399-16 (a) The record date for determining members of a corporation may
399-17 be set as provided by Section 6.101.
399-18 (b) If a record date is not set under Section 6.101:
399-19 (1) members on the date of the meeting who are
399-20 otherwise eligible to vote are entitled to vote at the meeting;
399-21 (2) members at the close of business on the business
399-22 day preceding the date notice is given, or if notice is waived, at
399-23 the close of business on the business day preceding the date of the
399-24 meeting, are entitled to notice of a meeting of members;
399-25 (3) members at the close of business on the later of
399-26 the day the board of directors adopts the resolution relating to
399-27 the action or the 60th day before the date of the action are
400-1 entitled to exercise any rights regarding any other lawful action.
400-2 (c) The board of directors of a corporation may set a new
400-3 date for determining the right to notice of or to vote at any
400-4 adjournment of a members' meeting. The board shall set a new date
400-5 if the meeting is adjourned to a date more than 90 days after the
400-6 record date for determining members entitled to notice of the
400-7 original meeting.
400-8 (Sections 22.164-22.200 reserved for expansion)
400-9 SUBCHAPTER E. MANAGEMENT
400-10 Sec. 22.201. MANAGEMENT BY BOARD OF DIRECTORS. Except as
400-11 provided by Section 22.202, the affairs of a corporation are
400-12 managed by a board of directors. The board of directors may be
400-13 designated by any name appropriate to the customs, usages, or
400-14 tenets of the corporation.
400-15 Sec. 22.202. MANAGEMENT BY MEMBERS. (a) The certificate of
400-16 formation of a corporation may vest the management of the affairs
400-17 of the corporation in the members of the corporation. If the
400-18 corporation has a board of directors, the corporation may limit the
400-19 authority of the board to the extent provided by the certificate of
400-20 formation or bylaws.
400-21 (b) A corporation is considered to have vested the
400-22 management of the corporation's affairs in the board of directors
400-23 of the corporation in the absence of a provision to the contrary in
400-24 the certificate of formation, unless the corporation is a church
400-25 organized and operating under a congregational system that:
400-26 (1) was incorporated before January 1, 1994; and
400-27 (2) has the management of its affairs vested in the
401-1 corporation's members.
401-2 Sec. 22.203. BOARD MEMBER ELIGIBILITY REQUIREMENTS. A
401-3 director of a corporation is not required to be a resident of this
401-4 state or a member of the corporation unless the certificate of
401-5 formation or a bylaw of the corporation imposes that requirement.
401-6 The certificate of formation or bylaws may prescribe other
401-7 qualifications for directors.
401-8 Sec. 22.204. NUMBER OF DIRECTORS. (a) If the corporation
401-9 has a board of directors, a corporation may not have fewer than
401-10 three directors. The number of directors shall be set by, or in
401-11 the manner provided by, the certificate of formation or bylaws of
401-12 the corporation, except that the number of directors on the initial
401-13 board of directors must be set by the certificate of formation.
401-14 (b) The number of directors may be increased or decreased by
401-15 amendment to, or in the manner provided by, the certificate of
401-16 formation or bylaws. A decrease in the number of directors may not
401-17 shorten the term of an incumbent director.
401-18 (c) In the absence of a provision of the certificate of
401-19 formation or a bylaw setting the number of directors or providing
401-20 for the manner in which the number of directors shall be
401-21 determined, the number of directors is the same as the number
401-22 constituting the initial board of directors.
401-23 Sec. 22.205. DESIGNATION OF INITIAL BOARD OF DIRECTORS. If
401-24 the corporation is to be managed by a board of directors, the
401-25 certificate of formation of a corporation must state the names of
401-26 the members of the initial board of directors of the corporation.
401-27 Sec. 22.206. ELECTION OR APPOINTMENT OF BOARD OF DIRECTORS.
402-1 Directors other than the initial directors are elected, appointed,
402-2 or designated in the manner provided by the certificate of
402-3 formation or bylaws. If the method of election, designation, or
402-4 appointment is not provided by the certificate of formation or
402-5 bylaws, directors other than the initial directors are elected by
402-6 the board of directors.
402-7 Sec. 22.207. ELECTION AND CONTROL BY CERTAIN ENTITIES.
402-8 (a) The board of directors of a religious, charitable,
402-9 educational, or eleemosynary corporation may be affiliated with,
402-10 elected, and controlled by an incorporated or unincorporated
402-11 convention, conference, or association organized under the laws of
402-12 this or another state, the membership of which is composed of
402-13 representatives, delegates, or messengers from a church or other
402-14 religious association.
402-15 (b) The board of directors of a corporation may be wholly or
402-16 partly elected by one or more associations or corporations
402-17 organized under the laws of this or another state if:
402-18 (1) the certificate of formation or bylaws of the
402-19 corporation provide for that election; and
402-20 (2) the corporation has no members with voting rights.
402-21 Sec. 22.208. TERM OF OFFICE. (a) A director on the initial
402-22 board of directors of a corporation holds office until the first
402-23 annual election of directors or for the period specified in the
402-24 certificate of formation or bylaws of the corporation. Directors
402-25 other than the initial directors are elected, appointed, or
402-26 designated for the terms provided by the certificate of formation
402-27 or bylaws.
403-1 (b) In the absence of a provision in the certificate of
403-2 formation or bylaws setting the term of office for directors, a
403-3 director holds office until the next annual election of directors
403-4 and until a successor is elected, appointed, or designated and
403-5 qualified.
403-6 Sec. 22.209. CLASSIFICATION OF DIRECTORS. Directors may be
403-7 divided into classes. The terms of office of the several classes
403-8 are not required to be uniform.
403-9 Sec. 22.210. EX OFFICIO MEMBER OF BOARD. (a) The
403-10 certificate of formation or bylaws of a corporation may provide
403-11 that a person may be an ex officio member of the board of directors
403-12 of the corporation.
403-13 (b) A person designated as an ex officio member of the board
403-14 is entitled to receive notice of and to attend board meetings.
403-15 (c) An ex officio member is not entitled to vote unless the
403-16 certificate of formation or bylaws authorize the member to vote.
403-17 An ex officio member of the board who is not entitled to vote does
403-18 not have the duties or liabilities of a director provided by this
403-19 chapter.
403-20 Sec. 22.211. REMOVAL OF DIRECTOR. (a) A director of a
403-21 corporation may be removed from office under any procedure provided
403-22 by the certificate of formation or bylaws of the corporation.
403-23 (b) In the absence of a provision for removal in the
403-24 certificate of formation or bylaws, a director may be removed from
403-25 office, with or without cause, by the persons entitled to elect,
403-26 designate, or appoint the director. If the director was elected to
403-27 office, removal requires an affirmative vote equal to the vote
404-1 necessary to elect the director.
404-2 Sec. 22.212. VACANCY. (a) Unless otherwise provided by the
404-3 certificate of formation or bylaws of the corporation, a vacancy in
404-4 the board of directors of a corporation shall be filled by the
404-5 affirmative vote of the majority of the remaining directors,
404-6 regardless of whether that majority is less than a quorum. A
404-7 director elected to fill a vacancy is elected for the unexpired
404-8 term of the member's predecessor in office.
404-9 (b) A vacancy in the board occurring because of an increase
404-10 in the number of directors shall be filled by election at an annual
404-11 meeting or at a special meeting of members called for that purpose.
404-12 If a corporation has no members or has no members with the right to
404-13 vote on the vacancy, the vacancy shall be filled as provided by the
404-14 certificate of formation or bylaws.
404-15 Sec. 22.213. QUORUM. (a) A quorum for the transaction of
404-16 business by the board of directors of a corporation is the lesser
404-17 of:
404-18 (1) the majority of the number of directors set by the
404-19 corporation's bylaws or, in the absence of a bylaw setting the
404-20 number of directors, a majority of the number of directors stated
404-21 in the corporation's certificate of formation; or
404-22 (2) any number, not less than three, set as a quorum
404-23 by the certificate of formation or bylaws.
404-24 (b) A director present by proxy at a meeting may not be
404-25 counted toward a quorum.
404-26 Sec. 22.214. ACTION BY DIRECTORS. The act of a majority of
404-27 the directors present in person or by proxy at a meeting at which a
405-1 quorum is present is the act of the board of directors of a
405-2 corporation, unless the act of a greater number is required by the
405-3 certificate of formation or bylaws of the corporation.
405-4 Sec. 22.215. VOTING IN PERSON OR BY PROXY. A director of a
405-5 corporation may vote in person or, if authorized by the certificate
405-6 of formation or bylaws of the corporation, by proxy executed in
405-7 writing by the director.
405-8 Sec. 22.216. TERM AND REVOCABILITY OF PROXY. (a) A proxy
405-9 expires three months after the date the proxy is executed.
405-10 (b) A proxy is revocable unless otherwise provided by the
405-11 proxy or made irrevocable by law.
405-12 Sec. 22.217. VOTING REQUIREMENTS UNDER CERTIFICATE OF
405-13 FORMATION. If the certificate of formation of a corporation
405-14 requires the vote or concurrence of a greater proportion of the
405-15 directors of the corporation than is required by this chapter with
405-16 respect to the action, the certificate of formation controls.
405-17 Sec. 22.218. NOTICE OF MEETING; WAIVER OF NOTICE.
405-18 (a) Regular meetings of the board of directors of a corporation
405-19 may be held with or without notice as prescribed by the
405-20 corporation's bylaws.
405-21 (b) Special meetings of the board of directors shall be held
405-22 with notice as prescribed by the bylaws. Attendance of a director
405-23 at a meeting constitutes a waiver of notice, unless the director
405-24 attends a meeting for the express purpose of objecting to the
405-25 transaction of any business on the ground that the meeting is not
405-26 lawfully called or convened.
405-27 (c) Unless required by the bylaws, the business to be
406-1 transacted at, or the purpose of, a regular or special meeting of
406-2 the board of directors is not required to be specified in the
406-3 notice or waiver of notice of the meeting.
406-4 Sec. 22.219. MANAGEMENT COMMITTEE. (a) If authorized by
406-5 the certificate of formation or bylaws of the corporation, the
406-6 board of directors of a corporation, by resolution adopted by the
406-7 majority of the directors in office, may designate one or more
406-8 committees to have and exercise the authority of the board in the
406-9 management of the corporation to the extent provided by:
406-10 (1) the resolution;
406-11 (2) the certificate of formation; or
406-12 (3) the bylaws.
406-13 (b) A committee designated under this section must consist
406-14 of at least two persons. The majority of the persons on the
406-15 committee must be directors. If provided by the certificate of
406-16 formation or bylaws, the remaining persons on the committee are not
406-17 required to be directors.
406-18 (c) The designation of a committee and the delegation of
406-19 authority to the committee does not operate to relieve the board of
406-20 directors, or an individual director, of any responsibility imposed
406-21 on the board or director by law. A committee member who is not a
406-22 director has the same responsibility with respect to the committee
406-23 as a committee member who is a director.
406-24 Sec. 22.220. OTHER COMMITTEES. (a) The board of directors
406-25 of a corporation, by resolution adopted by the majority of the
406-26 directors at a meeting at which a quorum is present, or the
406-27 president, if authorized by a similar resolution of the board of
407-1 directors or by the certificate of formation or bylaws of the
407-2 corporation, may designate and appoint one or more committees that
407-3 do not have the authority of the board of directors in the
407-4 management of the corporation.
407-5 (b) The membership on a committee designated under this
407-6 section may be limited to directors.
407-7 Sec. 22.221. ACTION WITHOUT MEETING OF DIRECTORS OR
407-8 COMMITTEE. (a) The certificate of formation of a corporation may
407-9 provide that an action required by this chapter to be taken at a
407-10 meeting of the corporation's directors or an action that may be
407-11 taken at a meeting of the directors or a committee may be taken
407-12 without a meeting if a written consent, stating the action to be
407-13 taken, is signed by the number of directors or committee members
407-14 necessary to take that action at a meeting at which all of the
407-15 directors or committee members are present and voting. The consent
407-16 must state the date of each director's or committee member's
407-17 signature.
407-18 (b) A written consent signed by less than all of the
407-19 directors or committee members is not effective to take the action
407-20 that is the subject of the consent unless, not later than the 60th
407-21 day after the date of the earliest dated consent delivered to the
407-22 corporation in the manner required by this section, a consent or
407-23 consents signed by the required number of directors or committee
407-24 members are delivered to the corporation:
407-25 (1) at the registered office or principal place of
407-26 business of the corporation; or
407-27 (2) through the corporation's registered agent,
408-1 transfer agent, registrar, or exchange agent or an officer or agent
408-2 of the corporation having custody of the books in which proceedings
408-3 of meetings of directors or committees are recorded.
408-4 (c) Delivery under Subsection (b) must be by hand or by
408-5 certified or registered mail, return receipt requested. Delivery
408-6 to the corporation's principal place of business must be addressed
408-7 to the president or principal executive officer of the corporation.
408-8 (d) Prompt notice of the taking of an action by directors or
408-9 a committee without a meeting by less than unanimous written
408-10 consent shall be given to each director or committee member who did
408-11 not consent in writing to the action.
408-12 Sec. 22.222. GENERAL STANDARDS FOR DIRECTORS. (a) A
408-13 director shall discharge the director's duties, including duties as
408-14 a committee member, in good faith, with ordinary care, and in a
408-15 manner the director reasonably believes to be in the best interest
408-16 of the corporation.
408-17 (b) A director is not liable to the corporation, a member,
408-18 or another person for an action taken or not taken as a director if
408-19 the director acted in compliance with this section. A person
408-20 seeking to establish liability of a director must prove that the
408-21 director did not act:
408-22 (1) in good faith;
408-23 (2) with ordinary care; and
408-24 (3) in a manner the director reasonably believed to be
408-25 in the best interest of the corporation.
408-26 Sec. 22.223. DIRECTOR'S GOOD FAITH RELIANCE ON CERTAIN
408-27 INFORMATION. A director of a religious corporation, in the
409-1 discharge of a duty imposed or power conferred on the director,
409-2 including a duty imposed or power conferred as a committee member,
409-3 may rely in good faith on information or on an opinion, report, or
409-4 statement, including a financial statement or other financial data,
409-5 concerning the corporation or another person that was prepared or
409-6 presented by:
409-7 (1) a religious authority; or
409-8 (2) a minister, priest, rabbi, or other person whose
409-9 position or duties in the corporation the director believes justify
409-10 reliance and confidence and whom the director believes to be
409-11 reliable and competent in the matters presented.
409-12 Sec. 22.224. ROLE AS TRUSTEE. A director of a corporation
409-13 is not considered to have the duties of a trustee of a trust with
409-14 respect to the corporation or with respect to property held or
409-15 administered by the corporation, including property subject to
409-16 restrictions imposed by the donor or transferor of the property.
409-17 Sec. 22.225. DELEGATION OF INVESTMENT AUTHORITY. (a) The
409-18 board of directors of a corporation may:
409-19 (1) contract with an advisor who is an investment
409-20 counsel or a trust company, bank, investment advisor, or investment
409-21 manager; and
409-22 (2) confer on that advisor the authority to:
409-23 (A) purchase or otherwise acquire a stock, bond,
409-24 security, or other investment on behalf of the corporation; and
409-25 (B) sell, transfer, or otherwise dispose of an
409-26 asset or property of the corporation at a time and for a
409-27 consideration the advisor considers appropriate.
410-1 (b) The board of directors may:
410-2 (1) confer on an advisor described by Subsection (a)
410-3 other powers regarding the corporation's investments as the board
410-4 considers appropriate; and
410-5 (2) authorize the advisor to hold title to an asset or
410-6 property of the corporation, in the advisor's own name or in the
410-7 name of a nominee, for the benefit of the corporation.
410-8 (c) The board of directors is not liable for an action taken
410-9 or not taken by an advisor under this section if the board acted in
410-10 good faith and with ordinary care in selecting the advisor. The
410-11 board of directors may remove or replace the advisor, with or
410-12 without cause, if the board considers that action appropriate or
410-13 necessary.
410-14 Sec. 22.226. LOAN TO DIRECTOR PROHIBITED. (a) A
410-15 corporation may not make a loan to a director.
410-16 (b) The directors of a corporation who vote for or assent to
410-17 the making of a loan to a director, and any officer who
410-18 participates in making the loan, are jointly and severally liable
410-19 to the corporation for the amount of the loan until the loan is
410-20 repaid.
410-21 Sec. 22.227. DIRECTOR LIABILITY FOR CERTAIN DISTRIBUTIONS OF
410-22 ASSETS. (a) In addition to any other liability imposed by law on
410-23 the directors of a corporation, the directors who vote for or
410-24 assent to a distribution of assets other than in payment of the
410-25 corporation's debts, when the corporation is insolvent or when
410-26 distribution would render the corporation insolvent, or during the
410-27 liquidation of the corporation, without the payment and discharge
411-1 of or making adequate provisions for any known debt, obligation, or
411-2 liability of the corporation, are jointly and severally liable to
411-3 the corporation for the value of the assets distributed, to the
411-4 extent that the debt, obligation, or liability is not paid and
411-5 discharged.
411-6 (b) A director is not liable under this section if, in
411-7 voting for or assenting to a distribution, the director relied in
411-8 good faith and with ordinary care on information or an opinion,
411-9 report, or statement in accordance with Section 3.101.
411-10 Sec. 22.228. DISSENT TO ACTION. (a) A director of a
411-11 corporation who is present at a meeting of the board of directors
411-12 at which action is taken on a corporate matter described by Section
411-13 22.227(a) is presumed to have assented to the action unless:
411-14 (1) the director's dissent has been entered in the
411-15 minutes of the meeting;
411-16 (2) the director has filed a written dissent to the
411-17 action with the person acting as the secretary of the meeting
411-18 before the meeting is adjourned; or
411-19 (3) the director has sent a written dissent by
411-20 registered mail to the secretary of the corporation immediately
411-21 after the meeting has been adjourned.
411-22 (b) The right to dissent under this section does not apply
411-23 to a director who voted in favor of the action.
411-24 Sec. 22.229. RELIANCE ON WRITTEN OPINION OF ATTORNEY. A
411-25 director is not liable under Section 22.227 or 22.228 if, in the
411-26 exercise of ordinary care, the director acted in good faith and in
411-27 reliance on the written opinion of an attorney for the corporation.
412-1 Sec. 22.230. RIGHT TO CONTRIBUTION. A director against whom
412-2 a claim is asserted under Section 22.227 or 22.228 and who is held
412-3 liable on the claim is entitled to contribution from persons who
412-4 accepted or received the distribution knowing the distribution to
412-5 have been made in violation of that section, in proportion to the
412-6 amounts received by those persons.
412-7 Sec. 22.231. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED
412-8 DIRECTORS, OFFICERS, AND MEMBERS. (a) This section applies only
412-9 to a contract or transaction between a corporation and:
412-10 (1) one or more of the corporation's directors,
412-11 officers, or members; or
412-12 (2) an entity or other organization in which one or
412-13 more of the corporation's directors, officers, or members:
412-14 (A) is a managerial official or a member; or
412-15 (B) has a financial interest.
412-16 (b) An otherwise valid contract or transaction is valid
412-17 notwithstanding that a director, officer, or member of the
412-18 corporation is present at or participates in the meeting of the
412-19 board of directors, of a committee of the board, or of the members
412-20 that authorizes the contract or transaction, or votes to authorize
412-21 the contract or transaction, if:
412-22 (1) the material facts as to the relationship or
412-23 interest and as to the contract or transaction are disclosed to or
412-24 known by:
412-25 (A) the corporation's board of directors, a
412-26 committee of the board of directors, or the members, and the board,
412-27 the committee, or the members in good faith and with ordinary care
413-1 authorize the contract or transaction by the affirmative vote of
413-2 the majority of the disinterested directors, committee members or
413-3 members, regardless of whether the disinterested directors,
413-4 committee members or members constitute a quorum; or
413-5 (B) the members entitled to vote on the
413-6 authorization of the contract or transaction, and the contract or
413-7 transaction is specifically approved in good faith and with
413-8 ordinary care by a vote of the members; or
413-9 (2) the contract or transaction is fair to the
413-10 corporation when the contract or transaction is authorized,
413-11 approved, or ratified by the board of directors, a committee of the
413-12 board of directors, or the members.
413-13 (c) Common or interested directors or members of a
413-14 corporation may be included in determining the presence of a quorum
413-15 at a meeting of the board, a committee of the board, or members
413-16 that authorizes the contract or transaction.
413-17 Sec. 22.232. OFFICERS. (a) The officers of a corporation
413-18 shall include a president and a secretary and may include one or
413-19 more vice presidents, a treasurer, and other officers and assistant
413-20 officers as considered necessary. Any two or more offices, other
413-21 than the offices of president and secretary, may be held by the
413-22 same person.
413-23 (b) A properly designated committee may perform the
413-24 functions of an officer. A single committee may perform the
413-25 functions of any two or more officers, including the functions of
413-26 president and secretary.
413-27 (c) The officers of a corporation may be designated by other
414-1 or additional titles as provided by the certificate of formation or
414-2 bylaws of the corporation.
414-3 Sec. 22.233. ELECTION OR APPOINTMENT OF OFFICERS. (a) An
414-4 officer of a corporation shall be elected or appointed at the time,
414-5 in the manner, and for the terms prescribed by the certificate of
414-6 formation or bylaws of the corporation. The term of an officer may
414-7 not exceed three years.
414-8 (b) If the certificate of formation or bylaws do not include
414-9 provisions for the election or appointment of officers, the
414-10 officers shall be elected or appointed annually by the board of
414-11 directors or, if the management of the corporation is vested in the
414-12 corporation's members, by the members.
414-13 Sec. 22.234. APPLICATION TO CHURCH. A corporation that is a
414-14 church is not required to have officers as provided by this
414-15 subchapter. The duties and responsibilities of the officers may be
414-16 vested in the corporation's board of directors or other designated
414-17 body in any manner provided for by the certificate of formation or
414-18 bylaws of the corporation.
414-19 Sec. 22.235. OFFICER'S GOOD FAITH RELIANCE ON CERTAIN
414-20 INFORMATION. An officer of a religious corporation, in the
414-21 discharge of a duty imposed or power conferred on the officer, may
414-22 rely in good faith and with ordinary care on information or on an
414-23 opinion, report, or statement concerning the corporation or another
414-24 person that was prepared or presented by:
414-25 (1) a religious authority or another religious
414-26 corporation; or
414-27 (2) a minister, priest, rabbi, or other person whose
415-1 position or duties in the religious authority or religious
415-2 corporation the officer believes justify reliance and confidence
415-3 and whom the officer believes to be reliable and competent in the
415-4 matters presented.
415-5 Sec. 22.236. EFFECT OF LIABILITY PROVISIONS ON DUTIES OWED
415-6 TO CHARITABLE CORPORATIONS. Sections 7.002 and 7.003 do not
415-7 affect, limit, or eliminate any duty owed to a charitable
415-8 corporation by a director, officer, or managing member of the
415-9 corporation.
415-10 (Sections 22.237-22.250 reserved for expansion)
415-11 SUBCHAPTER F. FUNDAMENTAL BUSINESS TRANSACTIONS
415-12 Sec. 22.251. APPROVAL OF MERGER BY MEMBERS HAVING VOTING
415-13 RIGHTS. (a) To adopt a plan of merger of a domestic corporation
415-14 with members having voting rights, the board of directors must
415-15 adopt a resolution approving the proposed plan and directing that
415-16 the plan be submitted to a vote at an annual or special meeting of
415-17 the members having voting rights.
415-18 (b) Written notice stating the proposed plan or a summary of
415-19 the plan shall be given to each member entitled to vote at the
415-20 meeting within the time and in the manner provided by this chapter
415-21 for the giving of notice of a meeting of members.
415-22 (c) The proposed plan shall be adopted on receiving at least
415-23 two-thirds of the votes that members present at the meeting in
415-24 person or by proxy are entitled to cast, except that if any class
415-25 of members is entitled to vote on the plan as a class as provided
415-26 by the certificate of formation or bylaws of the domestic
415-27 corporation, the plan may be adopted only if it also receives at
416-1 least two-thirds of the votes that the members of each class
416-2 present at the meeting in person or by proxy are entitled to cast.
416-3 Sec. 22.252. APPROVAL OF MERGER BY MANAGING MEMBERS.
416-4 (a) To be adopted, a proposed plan of merger of a domestic
416-5 corporation the management of the affairs of which is vested in its
416-6 members under Section 22.202 must be submitted to a vote at an
416-7 annual, regular, or special meeting of the members.
416-8 (b) Except as otherwise provided by the certificate of
416-9 formation or bylaws of the domestic corporation, notice stating the
416-10 proposed plan or a summary of the plan shall be given to the
416-11 members within the time and in the manner provided by this chapter
416-12 for giving notice of a meeting to members.
416-13 (c) The proposed plan shall be adopted on receiving at least
416-14 two-thirds of the votes of members present at the meeting.
416-15 Sec. 22.253. APPROVAL OF MERGER BY BOARD OF DIRECTORS. If a
416-16 domestic corporation has no members or has no members with voting
416-17 rights, a plan of merger of the corporation shall be adopted at a
416-18 meeting of the board of directors of the corporation on receiving
416-19 the affirmative vote of the majority of the directors in office.
416-20 Sec. 22.254. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
416-21 ASSETS BY MEMBERS HAVING VOTING RIGHTS. (a) To approve a sale of
416-22 all or substantially all of the assets of a corporation with
416-23 members having voting rights, the board of directors of the
416-24 corporation must adopt a resolution recommending the sale and
416-25 directing that the resolution be submitted to a vote at an annual
416-26 or special meeting of the members having voting rights.
416-27 (b) Written notice stating that a purpose of the meeting is
417-1 to consider the sale of all or substantially all of the assets of
417-2 the corporation shall be given to each member entitled to vote at
417-3 the meeting within the time and in the manner provided by this
417-4 chapter for giving notice of a meeting to members.
417-5 (c) At the meeting, the members may authorize the sale and
417-6 may set, or authorize the board of directors to set, the terms and
417-7 conditions of the sale and the consideration to be received by the
417-8 corporation for the sale. The authorization requires at least
417-9 two-thirds of the votes that members present at the meeting in
417-10 person or by proxy are entitled to cast, except that if any class
417-11 of members is entitled to vote on the recommendation as a class as
417-12 provided by the certificate of formation or bylaws of the
417-13 corporation, the authorization also requires at least two-thirds of
417-14 the votes that the members of each class present at the meeting in
417-15 person or by proxy are entitled to cast.
417-16 (d) After the members authorize a sale under Subsection (c),
417-17 the board of directors may abandon the sale, subject to the rights
417-18 of third parties under any contracts relating to the sale, without
417-19 further action or approval by members.
417-20 Sec. 22.255. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
417-21 ASSETS BY MANAGING MEMBERS. (a) To be adopted, a resolution
417-22 authorizing a sale of all or substantially all of the assets of a
417-23 corporation the management of the affairs of which is vested in the
417-24 corporation's members under Section 22.202 must be submitted to a
417-25 vote at an annual, regular, or special meeting of the members.
417-26 (b) Except as otherwise provided by the certificate of
417-27 formation or bylaws of the corporation, notice stating that a
418-1 purpose of the meeting is to consider the sale of all or
418-2 substantially all of the assets of the corporation shall be given
418-3 to the corporation's members within the time and in the manner
418-4 provided by this chapter for giving notice of a meeting to members.
418-5 (c) At the meeting, the members may authorize the sale and
418-6 may set, or authorize one or more members to set, the terms and
418-7 conditions of the sale and the consideration to be received by the
418-8 corporation for the transaction. The authorization requires at
418-9 least two-thirds of the votes of members present at the meeting.
418-10 Sec. 22.256. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
418-11 ASSETS BY BOARD OF DIRECTORS. (a) Unless otherwise provided by
418-12 the corporation's certificate of formation, a sale of all or
418-13 substantially all of the assets of a corporation that has no
418-14 members or has no members with voting rights may be authorized on
418-15 receiving the affirmative vote of the majority of the directors in
418-16 office.
418-17 (b) Notwithstanding Section 22.255, if a corporation is
418-18 insolvent, a sale of all or substantially all of the assets of the
418-19 corporation may be authorized on receiving the affirmative vote of
418-20 the majority of the directors in office.
418-21 Sec. 22.257. PLEDGE, MORTGAGE, DEED OF TRUST, OR TRUST
418-22 INDENTURE. (a) Except as otherwise provided by Subsection (b) or
418-23 by the corporation's certificate of formation, the board of
418-24 directors of a corporation may authorize a pledge, mortgage, deed
418-25 of trust, or trust indenture, and an authorization or consent of
418-26 members is not required for the validity of the transaction or for
418-27 any sale under the terms of the transaction.
419-1 (b) If the management of the affairs of a corporation is
419-2 vested in the corporation's members under Section 22.202, the
419-3 members may authorize a pledge, mortgage, deed of trust, or trust
419-4 indenture in the manner provided by Section 22.256 for a sale of
419-5 all or substantially all of the assets of a corporation, and an
419-6 authorization by the board of directors is not required for the
419-7 validity of the transaction or for any sale under the terms of the
419-8 transaction.
419-9 (Sections 22.258-22.300 reserved for expansion)
419-10 SUBCHAPTER G. WINDING UP AND TERMINATION
419-11 Sec. 22.301. APPROVAL OF VOLUNTARY WINDING UP AND
419-12 TERMINATION BY MEMBERS HAVING VOTING RIGHTS. (a) To approve in
419-13 accordance with Chapter 11 a voluntary winding up and termination
419-14 of a corporation with members having voting rights, the
419-15 corporation's board of directors must adopt a resolution:
419-16 (1) recommending that the corporation be wound up and
419-17 terminated; and
419-18 (2) directing that the question be submitted to a vote
419-19 at an annual or special meeting of the members having voting
419-20 rights.
419-21 (b) Written notice stating that a purpose of the meeting is
419-22 to consider the advisability of winding up and terminating the
419-23 corporation shall be given to each member entitled to vote at the
419-24 meeting within the time and in the manner provided by this chapter
419-25 for giving notice of a meeting to members.
419-26 (c) A resolution to wind up and terminate the corporation
419-27 shall be adopted on receiving at least two-thirds of the votes that
420-1 members present at the meeting in person or by proxy are entitled
420-2 to cast, except that if any class of members is entitled to vote on
420-3 the resolution as a class by the certificate of formation or bylaws
420-4 of the corporation, the resolution may be adopted only on also
420-5 receiving at least two-thirds of the votes that the members of each
420-6 class present at the meeting in person or by proxy are entitled to
420-7 cast.
420-8 Sec. 22.302. APPROVAL OF VOLUNTARY WINDING UP AND
420-9 TERMINATION BY MANAGING MEMBERS. (a) To be approved, a resolution
420-10 to voluntarily wind up and terminate in accordance with Chapter 11
420-11 a corporation the management of the affairs of which is vested in
420-12 the corporation's members under Section 22.202 must be submitted to
420-13 a vote at an annual, regular, or special meeting of members.
420-14 (b) Except as otherwise provided by the certificate of
420-15 formation or bylaws of the corporation, notice stating that a
420-16 purpose of the meeting is to consider the advisability of winding
420-17 up and terminating the corporation shall be given to the members
420-18 within the time and in the manner provided by this chapter for
420-19 giving notice of a meeting to members.
420-20 (c) A resolution to wind up and terminate the corporation
420-21 shall be adopted on receiving at least two-thirds of the votes of
420-22 members present at the meeting.
420-23 Sec. 22.303. APPROVAL OF VOLUNTARY WINDING UP AND
420-24 TERMINATION BY BOARD OF DIRECTORS. If a corporation has no members
420-25 or has no members with voting rights, the winding up and
420-26 termination of the corporation shall be authorized at a meeting of
420-27 the corporation's board of directors on the adoption of a
421-1 resolution to wind up and terminate by the affirmative vote of the
421-2 majority of the directors in office.
421-3 Sec. 22.304. APPLICATION AND DISTRIBUTION OF PROPERTY.
421-4 (a) After all liabilities and obligations of a corporation in the
421-5 process of winding up are paid, satisfied, and discharged in
421-6 accordance with Section 11.053, the property of the corporation
421-7 shall be applied and distributed as follows:
421-8 (1) property held by the corporation on a condition
421-9 requiring return, transfer, or conveyance because of the winding up
421-10 or termination shall be returned, transferred, or conveyed in
421-11 accordance with that requirement; and
421-12 (2) unless otherwise provided by the corporation's
421-13 certificate of formation, the remaining property of the corporation
421-14 shall be distributed only for tax-exempt purposes to one or more
421-15 organizations that are exempt under Section 501(c)(3), Internal
421-16 Revenue Code, or described by Section 170(c)(1) or (2), Internal
421-17 Revenue Code, under a plan of distribution adopted under this
421-18 chapter.
421-19 (b) A district court of the county in which the
421-20 corporation's principal office is located shall distribute to one
421-21 or more organizations exempt under Section 501(c)(3), Internal
421-22 Revenue Code, or described by Section 170(c)(1) or (2), Internal
421-23 Revenue Code, the property of the corporation remaining after a
421-24 distribution of property under the plan of distribution. The court
421-25 shall make the distribution in the manner the court determines will
421-26 best accomplish the general purposes for which the corporation was
421-27 organized.
422-1 Sec. 22.305. DISTRIBUTION PLAN. A plan providing for the
422-2 distribution of property may be adopted by a corporation in the
422-3 process of winding up, and shall be adopted by a corporation to
422-4 authorize a transfer or conveyance of assets for which this chapter
422-5 requires a plan of distribution, in the manner provided by Section
422-6 22.306, 22.307, or 22.308.
422-7 Sec. 22.306. APPROVAL OF DISTRIBUTION PLAN BY MEMBERS HAVING
422-8 VOTING RIGHTS. (a) To adopt a plan providing for the distribution
422-9 of property of a corporation with members having voting rights, the
422-10 board of directors of the corporation must adopt a resolution
422-11 recommending a plan of distribution and directing that the proposed
422-12 plan be submitted to a vote at an annual or special meeting of the
422-13 members.
422-14 (b) Written notice stating the proposed plan of distribution
422-15 or a summary of the plan shall be given to each member entitled to
422-16 vote at the meeting at which the plan will be considered within the
422-17 time and in the manner provided by this chapter for giving notice
422-18 of a meeting to members.
422-19 (c) The proposed plan of distribution shall be adopted on
422-20 receiving at least two-thirds of the votes that members present at
422-21 the meeting in person or by proxy are entitled to cast, except that
422-22 if any class of members is entitled to vote on the plan as a class
422-23 by the certificate of formation or bylaws of the corporation, the
422-24 proposed plan may be adopted only on also receiving at least
422-25 two-thirds of the votes the members of each class present at the
422-26 meeting in person or by proxy are entitled to cast.
422-27 Sec. 22.307. APPROVAL OF DISTRIBUTION PLAN BY MANAGING
423-1 MEMBERS. (a) To be adopted, a proposed plan providing for the
423-2 distribution of property of a corporation the management of the
423-3 affairs of which is vested in the corporation's members under
423-4 Section 22.202 must be submitted to a vote at an annual, regular,
423-5 or special meeting of the members.
423-6 (b) Except as otherwise provided by the certificate of
423-7 formation or bylaws of the corporation, notice stating the proposed
423-8 plan of distribution or a summary of the plan shall be given to the
423-9 members within the time and in the manner provided by this chapter
423-10 for giving notice of a meeting to members.
423-11 (c) The proposed plan of distribution shall be adopted on
423-12 receiving at least two-thirds of the votes of the members present
423-13 at the meeting.
423-14 Sec. 22.308. APPROVAL OF DISTRIBUTION PLAN BY BOARD OF
423-15 DIRECTORS. If a corporation has no members or has no members with
423-16 voting rights, a plan of distribution may be adopted by the
423-17 corporation at a meeting of the corporation's board of directors on
423-18 receiving the affirmative vote of the majority of the directors in
423-19 office.
423-20 Sec. 22.309. APPROVAL OF REINSTATEMENT OR REVOCATION OF
423-21 VOLUNTARY WINDING UP BY MEMBERS HAVING VOTING RIGHTS. (a) To
423-22 approve a reinstatement or a revocation of the voluntary winding up
423-23 of a corporation with members having voting rights under Section
423-24 11.151 or 11.201, the board of directors of the corporation must
423-25 adopt a resolution recommending the reinstatement or the revocation
423-26 of the voluntary winding up and directing that the question be
423-27 submitted to a vote at an annual or special meeting of the members
424-1 of the corporation having voting rights.
424-2 (b) Written notice stating that a purpose of the meeting is
424-3 to consider the advisability of the reinstatement or the revocation
424-4 of the voluntary winding up shall be given to each member of the
424-5 corporation entitled to vote at the meeting within the time and in
424-6 the manner provided by this chapter for giving notice of a meeting
424-7 to members.
424-8 (c) A resolution to reinstate or to revoke the voluntary
424-9 winding up shall be adopted on receiving at least two-thirds of the
424-10 votes that members present at the meeting in person or by proxy are
424-11 entitled to cast, except that if any class of members is entitled
424-12 to vote on the resolution as a class by the certificate of
424-13 formation or bylaws of the corporation, the resolution may be
424-14 adopted only on also receiving at least two-thirds of the votes the
424-15 members of each class present at the meeting in person or by proxy
424-16 are entitled to cast.
424-17 Sec. 22.310. APPROVAL OF REINSTATEMENT OR REVOCATION OF
424-18 VOLUNTARY WINDING UP BY MANAGING MEMBERS. (a) To be adopted, a
424-19 resolution approving the reinstatement or the revocation of the
424-20 voluntary winding up of a corporation the management of the affairs
424-21 of which is vested in the corporation's members under Section
424-22 22.202 must be submitted to a vote at an annual, regular, or
424-23 special meeting of the members.
424-24 (b) Except as otherwise provided by the certificate of
424-25 formation or bylaws of the corporation, notice stating that a
424-26 purpose of the meeting is to consider the reinstatement or the
424-27 revocation of the voluntary winding up shall be given to the
425-1 members within the time and in the manner provided by this chapter
425-2 for giving notice of a meeting to members.
425-3 (c) The resolution shall be adopted on receiving at least
425-4 two-thirds of the votes of the members present at the meeting.
425-5 Sec. 22.311. APPROVAL OF REINSTATEMENT OR REVOCATION OF
425-6 VOLUNTARY WINDING UP BY BOARD OF DIRECTORS. If a corporation has
425-7 no members or has no members with voting rights, a resolution to
425-8 reinstate or to revoke the voluntary winding up of the corporation
425-9 may be adopted at a meeting of the board of directors on receiving
425-10 the affirmative vote of the majority of the directors in office.
425-11 Sec. 22.312. CERTIFICATE OF TERMINATION. (a) In addition
425-12 to the information required by Section 11.101, the certificate of
425-13 termination filed by a corporation that has completed its winding
425-14 up process must contain a statement that:
425-15 (1) any property of the corporation has been
425-16 transferred, conveyed, applied or distributed in accordance with
425-17 this chapter and Chapter 11; and
425-18 (2) there is no suit pending against the corporation
425-19 or adequate provision has been made for the satisfaction of any
425-20 judgment, order, or decree that may be entered against the
425-21 corporation in a pending suit.
425-22 (b) In addition to the statements required by Subsection
425-23 (a), if the corporation received and held property permitted to be
425-24 used only for charitable, religious, eleemosynary, benevolent,
425-25 educational, or similar purposes, but the corporation did not hold
425-26 the property on a condition requiring return, transfer, or
425-27 conveyance because of the winding up and termination, the
426-1 certificate of termination must include:
426-2 (1) a copy of the plan of distribution adopted under
426-3 this chapter; and
426-4 (2) a statement that distribution has been effected in
426-5 accordance with that plan.
426-6 Sec. 22.313. SUPPLEMENTAL PROVISIONS FOR JURISDICTION OF
426-7 COURT TO LIQUIDATE PROPERTY AND BUSINESS OF CORPORATION AND
426-8 RECEIVERSHIPS. (a) In proceedings under Section 11.405, the
426-9 property of the corporation or the proceeds resulting from a sale,
426-10 conveyance, or other disposition of the property shall be applied
426-11 to:
426-12 (1) pay, satisfy, and discharge all costs and expenses
426-13 of the court proceedings and all liabilities and obligations of the
426-14 corporation; or
426-15 (2) make adequate provision for the payment,
426-16 satisfaction, and discharge of the costs, expenses, liabilities, or
426-17 obligations described by Subdivision (1).
426-18 (b) Any property remaining after application is made under
426-19 this section must be applied and distributed in the manner provided
426-20 by Section 22.304.
426-21 Sec. 22.314. LIMITED SURVIVAL AFTER NATURAL EXPIRATION.
426-22 (a) A corporation that was terminated by the expiration of the
426-23 period of its duration may, during the three-year period following
426-24 the date of termination, amend the corporation's certificate of
426-25 formation by following the procedure prescribed by this chapter to
426-26 extend or perpetuate the corporation's period of duration. The
426-27 expiration of a corporation's period of duration does not give a
427-1 member or creditor of the corporation a vested right to prevent the
427-2 corporation from taking action under this subsection.
427-3 (b) An act or contract of a terminated corporation during a
427-4 period within which the corporation could have extended the
427-5 corporation's existence under this section, regardless of whether
427-6 the corporation has taken action to extend its existence, is not
427-7 invalidated by the expiration of the period of duration.
427-8 Sec. 22.315. RESPONSIBILITY FOR WINDING UP. If a
427-9 corporation determines or is required to wind up, the winding up of
427-10 the corporation's affairs shall be managed by:
427-11 (1) the directors if management of the affairs is not
427-12 vested in the corporation's members under Section 22.202; or
427-13 (2) the members if management of the affairs is vested
427-14 in the corporation's members under Section 22.202.
427-15 (Sections 22.316-22.350 reserved for expansion)
427-16 SUBCHAPTER H. FOREIGN CORPORATIONS
427-17 Sec. 22.351. SUPPLEMENTAL INFORMATION REQUIRED IN
427-18 APPLICATION FOR REGISTRATION. In addition to the information
427-19 required by Section 9.004, a foreign corporation's application for
427-20 registration to be filed with the secretary of state must state:
427-21 (1) the names and addresses of the corporation's
427-22 directors and officers;
427-23 (2) whether or not the corporation has members; and
427-24 (3) any additional information as necessary or
427-25 appropriate to enable the secretary of state to determine whether
427-26 the corporation is entitled to register to conduct affairs in this
427-27 state.
428-1 (Sections 22.352-22.400 reserved for expansion)
428-2 SUBCHAPTER I. RECORDS AND REPORTS
428-3 Sec. 22.401. MEMBER'S RIGHT TO INSPECT BOOKS AND RECORDS. A
428-4 member of a corporation, on written demand stating the purpose of
428-5 the demand, is entitled to examine and copy at the member's
428-6 expense, in person or by agent, accountant, or attorney, at any
428-7 reasonable time and for a proper purpose, the books and records of
428-8 the corporation relevant to that purpose.
428-9 Sec. 22.402. FINANCIAL RECORDS AND ANNUAL REPORTS. (a) A
428-10 corporation shall maintain current and accurate financial records
428-11 with complete entries as to each financial transaction of the
428-12 corporation, including income and expenditures, in accordance with
428-13 generally accepted accounting practices.
428-14 (b) Based on the records maintained under Subsection (a),
428-15 the board of directors of the corporation shall annually prepare or
428-16 approve a financial report for the corporation for the preceding
428-17 year. The report must conform to accounting standards as adopted
428-18 by the American Institute of Certified Public Accountants and must
428-19 include:
428-20 (1) a statement of support, revenue, and expenses;
428-21 (2) a statement of changes in fund balances;
428-22 (3) a statement of functional expenses; and
428-23 (4) a balance sheet for each fund.
428-24 Sec. 22.403. AVAILABILITY OF FINANCIAL INFORMATION FOR
428-25 PUBLIC INSPECTION. (a) A corporation shall keep records, books,
428-26 and annual reports of the corporation's financial activity at the
428-27 corporation's registered or principal office in this state for at
429-1 least three years after the close of the fiscal year.
429-2 (b) The corporation shall make the records, books, and
429-3 reports available to the public for inspection and copying at the
429-4 corporation's registered or principal office during regular
429-5 business hours. The corporation may charge a reasonable fee for
429-6 preparing a copy of a record or report.
429-7 Sec. 22.404. FAILURE TO MAINTAIN FINANCIAL RECORD OR PREPARE
429-8 ANNUAL REPORT; OFFENSE. (a) A corporation commits an offense if
429-9 the corporation fails to maintain a financial record, prepare an
429-10 annual report, or make the record or report available to the public
429-11 in the manner required by Section 22.403.
429-12 (b) An offense under this section is a Class B misdemeanor.
429-13 Sec. 22.405. EXEMPTIONS FROM CERTAIN REQUIREMENTS RELATING
429-14 TO FINANCIAL RECORDS AND ANNUAL REPORTS. Sections 22.402, 22.403,
429-15 and 22.404 do not apply to:
429-16 (1) a corporation that solicits funds only from
429-17 members of the corporation;
429-18 (2) a corporation that does not intend to solicit and
429-19 receive and does not actually raise or receive during a fiscal year
429-20 contributions in an amount exceeding $10,000 from a source other
429-21 than its own membership;
429-22 (3) a proprietary school that has received a
429-23 certificate of approval from the commissioner of education, a
429-24 public institution of higher education or a foundation chartered
429-25 for the benefit of the institution or any component part of the
429-26 institution, a private institution of higher education authorized
429-27 to grant degrees under a certificate of authority issued by the
430-1 Texas Higher Education Coordinating Board, or an elementary or
430-2 secondary school;
430-3 (4) a religious institution that is a church, an
430-4 ecclesiastical or denominational organization, or another
430-5 established physical place for worship at which religious services
430-6 are the primary activity and are regularly conducted;
430-7 (5) a trade association or professional society the
430-8 income of which is principally derived from membership dues and
430-9 assessments, sales, or services;
430-10 (6) an insurer licensed and regulated by the Texas
430-11 Department of Insurance;
430-12 (7) an organization the charitable activities of which
430-13 relate to public concern in the conservation and protection of
430-14 wildlife, fisheries, and allied natural resources; or
430-15 (8) an alumni association of a public or private
430-16 institution of higher education in this state that is recognized
430-17 and acknowledged as the official alumni association by the
430-18 institution.
430-19 Sec. 22.406. CORPORATIONS ASSISTING STATE AGENCIES. (a) In
430-20 this section, "state agency" means:
430-21 (1) a board, commission, department, office, or other
430-22 entity that is in the executive branch of state government and that
430-23 was created by the constitution or a statute of this state,
430-24 including an institution of higher education as defined by Section
430-25 61.003, Education Code;
430-26 (2) the legislature or a legislative agency; or
430-27 (3) the supreme court, the court of criminal appeals,
431-1 a court of appeals, the state bar, or another state judicial
431-2 agency.
431-3 (b) The books and records of a corporation other than a bona
431-4 fide alumni association are subject to audit at the discretion of
431-5 the state auditor if:
431-6 (1) the corporation's charter specifically dedicates
431-7 the corporation's activities to the benefit of a particular state
431-8 agency; and
431-9 (2) a board member, officer, or employee of that state
431-10 agency sits on the board of directors of the corporation in other
431-11 than an ex officio capacity.
431-12 (c) If the corporation's charter specifically dedicates the
431-13 corporation's activities to the benefit of a particular state
431-14 agency but the conditions described by Subsection (b)(2) do not
431-15 exist, a corporation shall file with the secretary of state a copy
431-16 of the report required by Section 22.402(b) for the preceding
431-17 fiscal year not later than the 89th day after the last day of the
431-18 corporation's fiscal year.
431-19 Sec. 22.407. REPORT OF DOMESTIC AND FOREIGN CORPORATIONS.
431-20 (a) The secretary of state may require a domestic corporation or a
431-21 foreign corporation registered to conduct affairs in this state to
431-22 file a report in accordance with Chapter 4 not more than once every
431-23 four years as required by this subchapter. The report must state:
431-24 (1) the name of the corporation;
431-25 (2) the state or country under the laws of which the
431-26 corporation is incorporated;
431-27 (3) the address of the registered office of the
432-1 corporation in this state and the name of the registered agent at
432-2 that address;
432-3 (4) if the corporation is a foreign corporation, the
432-4 address of the principal office of the corporation in the state or
432-5 country under the laws of which the corporation is incorporated;
432-6 and
432-7 (5) the names and addresses of the directors and
432-8 officers of the corporation.
432-9 (b) A corporation required to prepare a report under this
432-10 section shall prepare the report on a form adopted by the secretary
432-11 of state for that purpose and shall include in the report
432-12 information that is accurate as of the date the report is executed.
432-13 An officer or, if the corporation is in the hands of a receiver or
432-14 trustee, the receiver or trustee shall sign the report on behalf of
432-15 the corporation.
432-16 Sec. 22.408. NOTICE REGARDING REPORT. (a) The secretary of
432-17 state shall send written notice that the report required by Section
432-18 22.407 is due. The notice must be:
432-19 (1) addressed to the corporation; and
432-20 (2) mailed to the corporation's registered agent or to
432-21 the corporation at:
432-22 (A) the last known address of the corporation as
432-23 it appears on record in the office of the secretary of state; or
432-24 (B) any other known place of business of the
432-25 corporation.
432-26 (b) The secretary of state shall include with the notice a
432-27 report form to be prepared and filed as provided by this
433-1 subchapter.
433-2 Sec. 22.409. FILING OF REPORT. A copy of the report must be
433-3 filed with the secretary of state in accordance with Chapter 4 not
433-4 later than the 30th day after the date notice is mailed under
433-5 Section 22.408.
433-6 Sec. 22.410. FAILURE TO FILE REPORT. (a) A domestic or
433-7 foreign corporation that fails to file a report under Sections
433-8 22.407 and 22.409 when the report is due forfeits the corporation's
433-9 right to conduct affairs in this state.
433-10 (b) The forfeiture takes effect, without judicial action,
433-11 when the secretary of state enters on the record of the corporation
433-12 kept in the office of the secretary of state:
433-13 (1) the words "right to conduct affairs forfeited";
433-14 and
433-15 (2) the date of forfeiture.
433-16 Sec. 22.411. NOTICE OF FORFEITURE. Notice of forfeiture
433-17 under Section 22.410 shall be mailed to the corporation's
433-18 registered agent at the registered office or to the corporation at:
433-19 (1) the address of the principal place of business of
433-20 the corporation as it appears in the certificate of formation;
433-21 (2) the last known address of the corporation as it
433-22 appears on record in the office of the secretary of state; or
433-23 (3) any other known place of business of the
433-24 corporation.
433-25 Sec. 22.412. EFFECT OF FORFEITURE. (a) Unless the right of
433-26 the corporation to conduct affairs in this state is revived under
433-27 Section 22.413:
434-1 (1) the corporation may not maintain an action, suit,
434-2 or proceeding in a court of this state; and
434-3 (2) a successor or assignee of the corporation may not
434-4 maintain an action, suit, or proceeding in a court of this state on
434-5 a right, claim, or demand arising from the conduct of affairs by
434-6 the corporation in this state.
434-7 (b) This section does not affect the right of an assignee of
434-8 the corporation as:
434-9 (1) the holder in due course of a negotiable
434-10 promissory note, check, or bill of exchange; or
434-11 (2) the bona fide purchaser for value of a warehouse
434-12 receipt, stock certificate, or other instrument negotiable by law.
434-13 (c) The forfeiture of the right to conduct affairs in this
434-14 state does not:
434-15 (1) impair the validity of a contract or act of the
434-16 corporation; or
434-17 (2) prevent the corporation from defending an action,
434-18 suit, or proceeding in a court of this state.
434-19 Sec. 22.413. REVIVAL OF RIGHT TO CONDUCT AFFAIRS. (a) A
434-20 corporation may be relieved from a forfeiture under Section 22.410
434-21 by filing the required report, accompanied by the revival fee, not
434-22 later than the 120th day after the date of mailing of the notice of
434-23 forfeiture under Section 22.408.
434-24 (b) If a corporation complies with Subsection (a), the
434-25 secretary of state shall:
434-26 (1) revive the right of the corporation to conduct
434-27 affairs in this state;
435-1 (2) cancel the words regarding the forfeiture on the
435-2 record of the corporation; and
435-3 (3) endorse on that record the word "revived" and the
435-4 date of revival.
435-5 Sec. 22.414. FAILURE TO REVIVE; TERMINATION OR REVOCATION.
435-6 (a) The failure of a corporation that has forfeited its right to
435-7 conduct affairs in this state to revive that right under Section
435-8 22.413 is grounds for:
435-9 (1) the involuntary termination of the domestic
435-10 corporation; or
435-11 (2) the revocation of the foreign corporation's
435-12 registration to transact business in this state.
435-13 (b) The termination or revocation takes effect, without
435-14 judicial action, when the secretary of state enters on the record
435-15 of the corporation filed in the office of the secretary of state
435-16 the word "forfeited" and the date of forfeiture and cites this
435-17 chapter as authority for that forfeiture.
435-18 Sec. 22.415. REINSTATEMENT. (a) A corporation that is
435-19 terminated or the registration of which has been revoked as
435-20 provided by Section 22.414 may be relieved of the termination or
435-21 revocation by filing the report required by Section 22.407,
435-22 accompanied by the filing fee for the report, if the corporation
435-23 has paid:
435-24 (1) all fees, taxes, penalties, and interest due and
435-25 accruing before the termination or revocation; and
435-26 (2) an amount equal to the total taxes from the date
435-27 of termination or revocation to the date of reinstatement that
436-1 would have been payable if the corporation had not been terminated
436-2 or had its registration revoked.
436-3 (b) When the report is filed and the filing fee is paid to
436-4 the secretary of state, the secretary of state shall:
436-5 (1) reinstate the certificate of formation or
436-6 registration without judicial action;
436-7 (2) cancel the word "forfeited" on the record; and
436-8 (3) endorse on the record kept in the secretary's
436-9 office relating to the corporation the words "set aside" and the
436-10 date of the reinstatement.
436-11 (c) If a termination or revocation is set aside under this
436-12 section, the corporation shall determine from the secretary of
436-13 state whether the name of the corporation is available. If the
436-14 name of the corporation is not available at the time of
436-15 reinstatement, the corporation shall amend its corporate name under
436-16 this code.
436-17 (Sections 22.416-22.450 reserved for expansion)
436-18 SUBCHAPTER J. CHURCH BENEFITS BOARDS
436-19 Sec. 22.451. DEFINITION. In this chapter, "church benefits
436-20 board" means an organization described by Section 414(e)(3)(A),
436-21 Internal Revenue Code, that:
436-22 (1) has the principal purpose or function of
436-23 administering or funding a plan or program to provide retirement
436-24 benefits, welfare benefits, or both for the ministers or employees
436-25 of a church or a conference, convention, or association of
436-26 churches; and
436-27 (2) is controlled by or affiliated with a church or a
437-1 conference, convention, or association of churches.
437-2 Sec. 22.452. PENSIONS AND BENEFITS. When authorized by the
437-3 corporation's members or as otherwise provided by law, a domestic
437-4 or foreign nonprofit corporation formed for a religious purpose may
437-5 provide, directly or through a separate church benefits board, for
437-6 the support and payment of benefits and pensions to:
437-7 (1) the ministers, teachers, employees, trustees,
437-8 directors, or other functionaries of the corporation;
437-9 (2) the ministers, teachers, employees, trustees,
437-10 directors, or other functionaries of organizations controlled by or
437-11 affiliated with a church or a conference, convention, or
437-12 association of churches under the jurisdiction and control of the
437-13 corporation; and
437-14 (3) the spouse, children, dependents, or other
437-15 beneficiaries of the persons described by Subdivisions (1) and (2).
437-16 Sec. 22.453. CONTRIBUTIONS. (a) A church benefits board
437-17 may provide for:
437-18 (1) the collection of contributions and other payments
437-19 to assist in providing pensions and benefits under this subchapter;
437-20 and
437-21 (2) the creation, maintenance, investment, management,
437-22 and disbursement of necessary annuities, endowments, reserves, or
437-23 other funds for a purpose under Subdivision (1).
437-24 (b) A church benefits board may receive payments from a
437-25 trust fund or corporation that funds a church plan as defined by
437-26 Section 414(e), Internal Revenue Code.
437-27 Sec. 22.454. POWER TO ACT AS TRUSTEE. A church benefits
438-1 board may act as:
438-2 (1) a trustee under a lawful trust committed to the
438-3 board by contract, will, or otherwise; and
438-4 (2) an agent for the performance of a lawful act
438-5 relating to the purposes of the trust.
438-6 Sec. 22.455. DOCUMENTS AND AGREEMENTS. A church benefits
438-7 board may provide to a program participant a certificate or
438-8 agreement of participation, a debenture, or an indemnification
438-9 agreement, as appropriate to accomplish the purposes of the board.
438-10 Sec. 22.456. INDEMNIFICATION. A church benefits board, or
438-11 an affiliate wholly owned by the board, may agree to indemnify
438-12 against damage or risk of loss:
438-13 (1) a minister, teacher, employee, trustee,
438-14 functionary, or director affiliated with the board or a family
438-15 member, dependent, or beneficiary of one of those persons;
438-16 (2) a church or a convention, conference, or
438-17 association of churches; or
438-18 (3) an organization that is controlled by or
438-19 affiliated with the board or with a church or a convention,
438-20 conference, or association of churches.
438-21 Sec. 22.457. PROTECTION OF BENEFITS. (a) Money or other
438-22 benefits that have been or will be provided to a participant or a
438-23 beneficiary under a plan or program provided by or through a church
438-24 benefits board under this subchapter are not subject to execution,
438-25 attachment, garnishment, or other process and may not be
438-26 appropriated or applied as part of a judicial, legal, or equitable
438-27 process or operation of a law other than a constitution to pay a
439-1 debt or liability of the participant or beneficiary.
439-2 (b) This section does not apply to a qualified domestic
439-3 relations order or an amount required by the church benefits board
439-4 to recover costs or expenses incurred in the plan or program.
439-5 Sec. 22.458. ASSIGNMENT OF BENEFITS. An assignment or
439-6 transfer or an attempt to make an assignment or transfer by a
439-7 beneficiary of money, benefits, or other rights under a plan or
439-8 program under this subchapter is void if:
439-9 (1) the plan or program contains a provision
439-10 prohibiting the assignment or other transfer without the written
439-11 consent of the church benefits board; and
439-12 (2) the beneficiary assigns or transfers or attempts
439-13 to make an assignment or transfer without that consent.
439-14 Sec. 22.459. INSURANCE CODE NOT APPLICABLE. The Insurance
439-15 Code does not apply to a church benefits board or a program, plan,
439-16 benefit, or activity of the board or a person affiliated with the
439-17 board.
439-18 CHAPTER 23. SPECIAL-PURPOSE CORPORATIONS
439-19 SUBCHAPTER A. GENERAL PROVISIONS
439-20 Sec. 23.001. DETERMINATION OF APPLICABLE LAW. (a) A
439-21 corporation created under this chapter or under a special statute
439-22 outside this code, to the extent not inconsistent with a special
439-23 statute regarding a particular corporation, is governed by:
439-24 (1) Title 1 and Chapter 21, if the corporation is
439-25 organized for profit; and
439-26 (2) Title 1 and Chapter 22, if the corporation is
439-27 organized not for profit.
440-1 (b) If a special statute does not contain any provision
440-2 regarding a matter provided for in Title 1 or Chapter 21 or 22, or
440-3 if the special statute specifically provides that the general laws
440-4 for corporations supplement the statute, to the extent consistent
440-5 with the special statute:
440-6 (1) Title 1 and Chapter 21 apply to a corporation
440-7 organized for profit; and
440-8 (2) Title 1 and Chapter 22 apply to a corporation
440-9 organized not for profit.
440-10 Sec. 23.002. APPLICABILITY OF FILING REQUIREMENTS. Except
440-11 as otherwise provided by the special statute, a document to be
440-12 filed with the secretary of state under a special statute shall be
440-13 executed and filed in accordance with Chapter 4.
440-14 Sec. 23.003. DOMESTIC CORPORATION ORGANIZED UNDER SPECIAL
440-15 STATUTE. A corporation organized under a special statute other
440-16 than this code is not considered a "domestic corporation" formed
440-17 under this code, although this code may apply to the corporation.
440-18 (Sections 23.004-23.050 reserved for expansion)
440-19 SUBCHAPTER B. BUSINESS DEVELOPMENT CORPORATIONS
440-20 Sec. 23.051. DEFINITIONS. In this subchapter:
440-21 (1) "Corporation" means a business development
440-22 corporation organized under this subchapter.
440-23 (2) "Financial institution" means a banking
440-24 corporation or trust company, savings and loan association,
440-25 governmental agency, insurance company, or related corporation,
440-26 partnership, foundation, or other institution engaged primarily in
440-27 lending or investing funds.
441-1 (3) "Loan limit" means the maximum amount permitted to
441-2 be outstanding at one time on loans made by a member to a
441-3 corporation.
441-4 (4) "Member" means a financial institution authorized
441-5 to do business in this state that undertakes to lend money to a
441-6 corporation.
441-7 Sec. 23.052. INCORPORATORS. Subject to The Securities Act
441-8 (Article 581-1 et seq., Vernon's Texas Civil Statutes), 25 or more
441-9 persons, the majority of whom must be residents of this state, may
441-10 form a business development corporation to promote, develop, and
441-11 advance the prosperity and economic welfare of this state.
441-12 Sec. 23.053. PURPOSES. (a) A business development
441-13 corporation may be organized as a:
441-14 (1) for-profit corporation under Chapter 21; or
441-15 (2) nonprofit corporation under Chapter 22.
441-16 (b) The business development corporation must be organized
441-17 to:
441-18 (1) promote, stimulate, develop, and advance the
441-19 business prosperity and economic welfare of this state and the
441-20 residents of this state;
441-21 (2) encourage and assist, through loans, investments,
441-22 or other business transactions, new business and industry in this
441-23 state;
441-24 (3) rehabilitate and assist existing industry in this
441-25 state;
441-26 (4) stimulate and assist in the expansion of business
441-27 activity that will tend to promote the business development and
442-1 maintain the economic stability of this state, provide maximum
442-2 opportunities for employment, encourage thrift, and improve the
442-3 standard of living of the residents of this state;
442-4 (5) cooperate and act in conjunction with other public
442-5 or private organizations in the promotion and advancement of
442-6 industrial, commercial, agricultural, and recreational developments
442-7 in this state; or
442-8 (6) provide financing for the promotion, development,
442-9 and conduct of business activity in this state.
442-10 Sec. 23.054. POWERS. (a) The powers of a corporation
442-11 include, in addition to the powers conferred on the corporation by
442-12 Chapter 21 or 22, as applicable, the power to:
442-13 (1) elect, appoint, and employ officers, agents, and
442-14 employees;
442-15 (2) make contracts and incur liabilities for a purpose
442-16 of the corporation;
442-17 (3) borrow money on a secured or unsecured basis to
442-18 carry out a purpose of the corporation;
442-19 (4) issue for the purpose of borrowing money a bond,
442-20 debenture, note, or other evidence of indebtedness, whether secured
442-21 or unsecured;
442-22 (5) secure an evidence of indebtedness by mortgage,
442-23 pledge, deed of trust, or other lien on a property, franchise,
442-24 right, or privilege of the corporation, or any part of or interest
442-25 in those items, without securing shareholder or member approval;
442-26 (6) make a secured or unsecured loan and establish and
442-27 regulate the terms and conditions of that loan and the charges for
443-1 interest or service connected with that loan;
443-2 (7) purchase, receive, hold, lease, or otherwise
443-3 acquire, and sell, convey, transfer, lease, or otherwise dispose
443-4 of, property and exercise those rights and privileges incidental
443-5 and appurtenant to the acquisition or disposal of the property and
443-6 to the use of the property, including any property acquired by the
443-7 corporation periodically in the satisfaction of a debt or
443-8 enforcement of an obligation;
443-9 (8) acquire improved or unimproved real property to
443-10 construct an industrial plant or other business establishment on
443-11 the property or dispose of the real property for the construction
443-12 of an industrial plant or other business establishment;
443-13 (9) acquire, construct or reconstruct, alter, repair,
443-14 maintain, operate, sell, convey, transfer, lease, or otherwise
443-15 dispose of an industrial plant or business establishment;
443-16 (10) protect the corporation's position as creditor by
443-17 acquiring the goodwill, business, rights, property, including a
443-18 share, bond, debenture, note, other evidence of indebtedness, other
443-19 asset, or any part of an asset or interest in an asset, of a person
443-20 to whom the corporation loaned money and assume, undertake, or pay
443-21 an obligation, debt, or liability of the person;
443-22 (11) mortgage, pledge, or otherwise encumber any
443-23 property, right, or thing of value, acquired under Subdivision (7),
443-24 (8), (9), or (10), as security for the payment of a part of the
443-25 purchase price;
443-26 (12) promote the establishment of local development
443-27 corporations in the various communities of this state, enter into
444-1 agreements with those local development corporations, and cooperate
444-2 with, assist, or otherwise encourage the local foundations; and
444-3 (13) participate with a properly authorized federal
444-4 lending agency in the making of loans.
444-5 (b) A corporation may approve an application for a loan
444-6 under Subsection (a)(6) only if the applicant demonstrates that:
444-7 (1) the applicant applied for the loan through
444-8 ordinary banking channels; and
444-9 (2) the loan has been refused by at least two banks or
444-10 other financial institutions.
444-11 Sec. 23.055. STATEWIDE OPERATION. A corporation organized
444-12 under this subchapter is a state development company as defined by
444-13 Section 103, Small Business Investment Act of 1958 (15 U.S.C.
444-14 Section 662), as amended, or similar federal legislation, and may
444-15 operate on a statewide basis.
444-16 Sec. 23.056. CERTIFICATE OF FORMATION. (a) The certificate
444-17 of formation of a corporation must state:
444-18 (1) the name of the corporation;
444-19 (2) the purpose or purposes for which the corporation
444-20 is organized as required by Section 23.053; and
444-21 (3) any other information required by:
444-22 (A) Chapter 4; and
444-23 (B) Chapter 21 or 22, as applicable.
444-24 (b) The name of a corporation must include the words
444-25 "Business Development Corporation."
444-26 Sec. 23.057. MANAGEMENT BY BOARD OF DIRECTORS; NUMBER OF
444-27 DIRECTORS. (a) The organization, control, and management of a
445-1 corporation are vested in a board of directors. The board must
445-2 consist of not fewer than 15 and not more than 21 directors.
445-3 (b) The board of directors may exercise any power of the
445-4 corporation not conferred on the shareholders or members by law or
445-5 by the corporation's bylaws.
445-6 Sec. 23.058. ELECTION OR APPOINTMENT OF DIRECTORS. (a) The
445-7 incorporators of a corporation shall name the directors
445-8 constituting the initial board of directors of the corporation.
445-9 Directors other than the initial directors shall be elected at each
445-10 annual meeting of the corporation. If an annual meeting is not
445-11 held at the time designated by the bylaws of the corporation, the
445-12 directors shall be elected at a special meeting held in lieu of the
445-13 annual meeting.
445-14 (b) At an annual meeting or special meeting held in lieu of
445-15 the annual meeting, the members of the corporation shall elect
445-16 two-thirds of the directors, and the shareholders of the
445-17 corporation shall elect the remaining directors.
445-18 Sec. 23.059. TERM OF OFFICE; VACANCY. (a) A director of a
445-19 corporation holds office until the next annual election of
445-20 directors and until a successor is elected and qualified, unless
445-21 the director is removed at an earlier date in accordance with the
445-22 corporation's bylaws.
445-23 (b) A vacancy in the office of a director elected by the
445-24 members shall be filled by the directors elected by the members,
445-25 and a vacancy in the office of a director elected by the
445-26 shareholders shall be filled by the directors elected by the
445-27 shareholders.
446-1 Sec. 23.060. OFFICERS. The board of directors of a
446-2 corporation shall appoint a president, a treasurer, and any other
446-3 agent or officer of the corporation and shall fill each vacancy
446-4 other than a vacancy on the board.
446-5 Sec. 23.061. PARTICIPATION AS OWNER. (a) An individual,
446-6 corporation, or other organization authorized to conduct business
446-7 in this state, including a public utility company, insurance and
446-8 casualty company, or foreign corporation licensed to do business in
446-9 this state, or a trust may acquire, purchase, hold, sell, assign,
446-10 transfer, mortgage, pledge, or otherwise dispose of a bond,
446-11 security, or other evidence of indebtedness created by, or shares
446-12 of, the corporation.
446-13 (b) An owner of shares of the corporation may exercise any
446-14 right, power, or privilege of that ownership, including the right
446-15 to vote.
446-16 Sec. 23.062. FINANCIAL INSTITUTION AS MEMBER OF CORPORATION.
446-17 (a) A financial institution may become a member of a corporation
446-18 and may make loans to the corporation as provided by this chapter.
446-19 (b) A financial institution may request membership in the
446-20 corporation by applying to the corporation's board of directors in
446-21 the manner prescribed by the board. Membership in the corporation
446-22 takes effect on the board's acceptance of the application.
446-23 (c) A financial institution that is a member of a
446-24 corporation may acquire, purchase, hold, sell, assign, transfer,
446-25 mortgage, pledge, or otherwise dispose of a bond, security, or
446-26 other evidence of indebtedness created by, or a share of, the
446-27 corporation. As owner of shares of the corporation, a financial
447-1 institution may exercise any right, power, or privilege of that
447-2 ownership, including the right to vote. A member of a corporation
447-3 may not acquire shares of the corporation in an amount greater than
447-4 10 percent of the member's loan limit. The amount of shares of the
447-5 corporation that a member may acquire is in addition to the amount
447-6 of shares of corporations that the member may otherwise acquire.
447-7 (d) A financial institution that is not a member of the
447-8 corporation may not acquire any shares of the corporation.
447-9 Sec. 23.063. WITHDRAWAL OF MEMBER. (a) On written notice
447-10 to the corporation's board of directors, a member may withdraw from
447-11 a corporation on the date stated in the notice. The date of a
447-12 member's withdrawal must be at least six months after the date
447-13 notice is given under this subsection.
447-14 (b) A member is not obligated to make a loan to the
447-15 corporation pursuant to a call made after the date of the member's
447-16 withdrawal from the corporation, but a member shall fulfill any
447-17 obligation that has accrued or for which a commitment has been made
447-18 before the withdrawal date.
447-19 Sec. 23.064. POWERS OF SHAREHOLDERS AND MEMBERS. The
447-20 shareholders and members of a corporation may:
447-21 (1) determine the number of directors and elect the
447-22 directors as provided by Section 23.058;
447-23 (2) make, amend, and repeal bylaws of the corporation;
447-24 or
447-25 (3) exercise any other power of the corporation that
447-26 is conferred on the shareholders and members by the bylaws.
447-27 Sec. 23.065. VOTING BY SHAREHOLDER OR MEMBER. (a) Each
448-1 shareholder of a corporation has one vote, in person or by proxy,
448-2 for each share held by the shareholder.
448-3 (b) Each member of a corporation has one vote in person or
448-4 by proxy.
448-5 (c) A member with a loan limit that exceeds $1,000 has one
448-6 additional vote, in person or by proxy, for each additional $1,000
448-7 the member may have outstanding on loans to the corporation at any
448-8 one time as determined under Section 23.068.
448-9 Sec. 23.066. LOAN TO CORPORATION. (a) When called on by a
448-10 corporation to make a loan to the corporation, a member of the
448-11 corporation shall make the loan on those terms and conditions
448-12 periodically approved by the board of directors.
448-13 (b) A loan made to the corporation by a member shall be
448-14 evidenced by a bond, debenture, note, or other evidence of
448-15 indebtedness of the corporation that:
448-16 (1) is freely transferable at any time; and
448-17 (2) accrues interest at a rate of not less than
448-18 one-fourth of one percent more than the rate of interest determined
448-19 by the board of directors to be the prime rate prevailing on the
448-20 date of issuance on unsecured commercial loans.
448-21 Sec. 23.067. PROHIBITED LOAN. (a) A member may not make a
448-22 loan to a corporation if, immediately after the loan would be made,
448-23 the total amount of the obligations of the corporation would exceed
448-24 50 times the capital of the corporation.
448-25 (b) For purposes of this section, the capital of the
448-26 corporation includes the amount of the outstanding shares of the
448-27 corporation, whether common or preferred, and the earned or paid-in
449-1 surplus of the corporation.
449-2 Sec. 23.068. LOAN LIMITS. (a) A loan limit shall be
449-3 established at the $1,000 amount nearest to the amount computed in
449-4 accordance with this section.
449-5 (b) The total amount outstanding on loans made to a
449-6 corporation by a member at any one time, when added to the amount
449-7 of the investment in the shares of the corporation then held by the
449-8 member, may not exceed:
449-9 (1) 20 percent of the total amount then outstanding on
449-10 loans to the corporation by all members, including outstanding
449-11 amounts validly called for a loan but not yet loaned; or
449-12 (2) the following limit, to be determined as of the
449-13 time the member becomes a member of the corporation, or at any time
449-14 requested by a member on the basis of the audited balance sheet of
449-15 the member at the close of its fiscal year immediately preceding
449-16 its application for membership or, in the case of an insurance
449-17 company, its last annual statement to the Texas Department of
449-18 Insurance:
449-19 (A) an amount equal to the lesser of $750,000 or
449-20 two percent of the capital and surplus of a commercial bank or
449-21 trust company;
449-22 (B) an amount equal to one percent of the total
449-23 outstanding loans made by a savings and loan association;
449-24 (C) an amount equal to one percent of the
449-25 capital and unassigned surplus of a stock insurance company other
449-26 than a fire insurance company;
449-27 (D) an amount equal to one percent of the
450-1 unassigned surplus of a mutual insurance company other than a fire
450-2 insurance company;
450-3 (E) an amount equal to one-tenth of one percent
450-4 of the assets of a fire insurance company; or
450-5 (F) the limits approved by the board of
450-6 directors of the corporation for a government pension fund or other
450-7 financial institution.
450-8 (c) Subject to Subsection (b), each call made by the
450-9 corporation shall be prorated among the members of the corporation
450-10 in substantially the same proportion that the adjusted loan limit
450-11 of each member bears to the aggregate of the adjusted loan limits
450-12 of all members.
450-13 (d) For purposes of Subsection (c), the adjusted loan limit
450-14 of a member is the amount of the member's loan limit, reduced by
450-15 the balance of outstanding loans made by the member to the
450-16 corporation and the investment in shares of the corporation held by
450-17 the member at the time of the call.
450-18 Sec. 23.069. SURPLUS. (a) A corporation shall set apart as
450-19 earned surplus not less than 10 percent of the corporation's net
450-20 earnings each year until the surplus, with any unimpaired surplus
450-21 paid in, is equal to one-half of the amount paid in on the shares
450-22 then outstanding. The surplus shall be kept to secure against
450-23 losses and contingencies. If the surplus becomes impaired, the
450-24 surplus shall be reimbursed in the manner provided for its
450-25 accumulation.
450-26 (b) Net earnings and surplus shall be determined by the
450-27 board of directors after providing for the required reserves as the
451-1 directors consider advisable. A good faith determination of net
451-2 earnings and surplus by the directors under this subsection is
451-3 conclusive.
451-4 Sec. 23.070. DEPOSITORY. (a) A corporation may deposit the
451-5 corporation's funds in a banking institution that has been
451-6 designated as a depository by a vote of the majority of the
451-7 directors present at an authorized meeting of the board of
451-8 directors of the corporation, excluding a director who is an
451-9 officer or director of the designated depository.
451-10 (b) The corporation may not receive money on deposit.
451-11 Sec. 23.071. ANNUAL REPORT; PROVISION OF REQUIRED
451-12 INFORMATION. (a) A corporation shall annually make a report of
451-13 its condition to the banking commissioner and the Texas Department
451-14 of Insurance.
451-15 (b) A corporation shall provide any information that is
451-16 required by the secretary of state.
451-17 (Sections 23.072-23.100 reserved for expansion)
451-18 SUBCHAPTER C. GRAND LODGES
451-19 Sec. 23.101. FORMATION. (a) An institution or order, by
451-20 resolution or other consent of its members, may incorporate under
451-21 this subchapter if the institution or order is:
451-22 (1) the grand lodge of Texas, Ancient, Free and
451-23 Accepted Masons;
451-24 (2) the Grand Royal Arch Chapter of Texas;
451-25 (3) the Grand Commandery of Knights Templars of Texas;
451-26 (4) the grand lodge of the Independent Order of Odd
451-27 Fellows of Texas; or
452-1 (5) another similar institution or order organized for
452-2 charitable or benevolent purposes.
452-3 (b) A corporation formed under this subchapter shall file a
452-4 certificate of formation in accordance with Chapter 4 that complies
452-5 with this subchapter.
452-6 Sec. 23.102. APPLICABILITY OF CHAPTER 22. If this
452-7 subchapter does not contain any provision regarding a matter
452-8 provided for in Chapter 22, to the extent consistent with this
452-9 subchapter, Chapter 22 applies to a corporation formed under this
452-10 subchapter.
452-11 Sec. 23.103. DURATION. A grand body that incorporates under
452-12 this subchapter may provide in the grand body's certificate of
452-13 formation for the expiration of its corporate powers at the end of
452-14 a stated number of years. If the certificate of formation does not
452-15 provide for the duration of the grand body, the grand body has
452-16 perpetual existence. The grand body may by its corporate name have
452-17 perpetual succession of its officers and members.
452-18 Sec. 23.104. SUBORDINATE LODGES. (a) The incorporation of
452-19 a grand body includes each of its subordinate lodges or bodies
452-20 holding a warrant or charter under the grand body.
452-21 (b) A subordinate body has all of the rights of other
452-22 corporations under and by the name given to the grand body in the
452-23 warrant or charter issued to the grand body to which it is
452-24 attached. Those rights shall be provided for in the charter of the
452-25 grand body.
452-26 (c) A subordinate body is subject to the jurisdiction and
452-27 control of its respective grand body, and the warrant or charter of
453-1 the subordinate body may be revoked by the grand body.
453-2 Sec. 23.105. TRUSTEES AND DIRECTORS. A grand body and a
453-3 subordinate of the grand body may elect trustees and directors or
453-4 may appoint trustees or directors from among their officers.
453-5 Sec. 23.106. FRANCHISE TAXES. A corporation formed under
453-6 this subchapter is not subject to or required to pay a franchise
453-7 tax, except that a corporation is exempt from the franchise tax
453-8 imposed by Chapter 171, Tax Code, only if the corporation is
453-9 exempted by that chapter.
453-10 Sec. 23.107. GENERAL POWERS. A grand body and a subordinate
453-11 of the grand body may take action as directed or provided by law in
453-12 the case of other corporations and may make constitutions and
453-13 bylaws to govern their affairs.
453-14 Sec. 23.108. AUTHORITY REGARDING PROPERTY. (a) A grand
453-15 body or subordinate body may acquire and hold property as necessary
453-16 or convenient for a site on which to erect a building for the use
453-17 and occupancy of the body and to erect homes and schools for
453-18 members' widows or orphans or elderly, disabled, or indigent
453-19 members and may sell or mortgage the property.
453-20 (b) A conveyance must be executed by the presiding officer
453-21 and attested to by the secretary with the seal.
453-22 (c) The authority of a subordinate body to sell or to
453-23 mortgage property is subject to the conditions periodically
453-24 prescribed or established by the grand body to which the
453-25 subordinate is attached.
453-26 Sec. 23.109. AUTHORITY REGARDING LOANS. (a) A grand body
453-27 incorporated under this subchapter may:
454-1 (1) loan money held and owned by the grand body for
454-2 charitable purposes, for the endowment of any of the institutions
454-3 of the grand body, or otherwise; and
454-4 (2) secure loans by taking and receiving liens on real
454-5 property or by another method elected by the grand body.
454-6 (b) On sale of real property secured by a lien, a grand body
454-7 may become the purchaser of the real property and hold title to the
454-8 property.
454-9 Sec. 23.110. WINDING UP AND TERMINATION OF SUBORDINATE BODY.
454-10 (a) On the winding up and termination of a subordinate body
454-11 attached to a grand body, all property and rights existing in the
454-12 subordinate body pass to and vest in the grand body to which it was
454-13 attached, subject to the payment of any debt owed by the
454-14 subordinate body.
454-15 (b) Notwithstanding a grand body's liability for the debt of
454-16 a subordinate body under Subsection (a), the grand body is not
454-17 liable for an amount greater than the actual cash value of the
454-18 subordinate body's effects or authority.
454-19 TITLE 3. LIMITED LIABILITY COMPANIES
454-20 CHAPTER 101. LIMITED LIABILITY COMPANIES
454-21 SUBCHAPTER A. GENERAL PROVISIONS
454-22 Sec. 101.001. DEFINITIONS. In this title:
454-23 (1) "Assignee" means a person who, before the person
454-24 is admitted as a member of a limited liability company, is assigned
454-25 or transferred a membership interest in the company.
454-26 (2) "Company agreement" means an oral or written
454-27 agreement relating to a limited liability company executed by the
455-1 members of the company.
455-2 (3) "Foreign limited liability company" or "foreign
455-3 company" means a limited liability company formed under the laws of
455-4 a jurisdiction other than this state.
455-5 (4) "Limited liability company" or "company" means a
455-6 domestic limited liability company subject to this title.
455-7 (Sections 101.002-101.050 reserved for expansion)
455-8 SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
455-9 Sec. 101.051. SUPPLEMENTAL PROVISIONS REQUIRED IN
455-10 CERTIFICATE OF FORMATION. In addition to the statements required
455-11 by Section 3.005, the certificate of formation of a limited
455-12 liability company must state:
455-13 (1) whether the company will or will not have
455-14 managers;
455-15 (2) if the company will have managers, the name and
455-16 address of each initial manager of the company; and
455-17 (3) if the company will not have managers, the name
455-18 and address of each initial member of the company.
455-19 Sec. 101.052. CERTAIN PROVISIONS CONTAINED IN CERTIFICATE OF
455-20 FORMATION. (a) A provision that may be contained in the company
455-21 agreement of a limited liability company may alternatively be
455-22 included in the certificate of formation of the company as provided
455-23 by Section 3.005(b).
455-24 (b) A reference in this title to the company agreement of a
455-25 limited liability company includes any provision contained in the
455-26 company's certificate of formation instead of the company agreement
455-27 as provided by Subsection (a).
456-1 Sec. 101.053. COMPANY AGREEMENT. (a) Except as provided by
456-2 Section 101.054, the company agreement of a limited liability
456-3 company governs:
456-4 (1) the relations among members, managers, and
456-5 officers of the company, assignees of membership interests in the
456-6 company, and the company itself; and
456-7 (2) other internal affairs of the company.
456-8 (b) To the extent that the company agreement of a limited
456-9 liability company does not otherwise provide, this title and the
456-10 provisions of Title 1 applicable to a limited liability company
456-11 govern the internal affairs of the company.
456-12 (c) Except as provided by Section 101.054, a provision of
456-13 this title or Title 1 that is applicable to a limited liability
456-14 company may be waived or modified in the company agreement of a
456-15 limited liability company.
456-16 Sec. 101.054. WAIVER OR MODIFICATION OF CERTAIN STATUTORY
456-17 PROVISIONS PROHIBITED; EXCEPTIONS. (a) Except as provided by this
456-18 section, the following provisions may not be waived or modified in
456-19 the company agreement of a limited liability company:
456-20 (1) this section;
456-21 (2) Section 101.051, 101.101(b), 101.206, 101.501,
456-22 101.502, or 101.551;
456-23 (3) Chapter 1, if the provision is used to interpret a
456-24 provision or define a word or phrase contained in a section listed
456-25 in this subsection;
456-26 (4) Chapter 2, except that Section 2.104(c)(2),
456-27 2.104(c)(3), or 2.106 may be waived or modified in the company
457-1 agreement;
457-2 (5) Chapter 3, except that Subchapters C and E may be
457-3 waived or modified in the company agreement; or
457-4 (6) Chapter 4, 5, 7, 10, 11, or 12.
457-5 (b) A provision listed in Subsection (a) may be waived or
457-6 modified in the company agreement if the provision that is waived
457-7 or modified authorizes the limited liability company to waive or
457-8 modify the provision in the company's governing documents.
457-9 (c) A provision listed in Subsection (a) may be modified in
457-10 the company agreement if the provision that is modified specifies:
457-11 (1) the person or group of persons entitled to approve
457-12 a modification; or
457-13 (2) the vote or other method by which a modification
457-14 is required to be approved.
457-15 (d) A provision in this title or in that part of Title 1
457-16 applicable to a limited liability company that grants a right to a
457-17 person, other than a member, manager, officer, or assignee of a
457-18 membership interest in a limited liability company, may be waived
457-19 or modified in the company agreement of the company only if the
457-20 person consents in writing to the waiver or modification.
457-21 Sec. 101.055. AMENDMENT OF COMPANY AGREEMENT. The company
457-22 agreement of a limited liability company may be amended only if
457-23 each member of the company consents to the amendment.
457-24 Sec. 101.056. ADDITIONAL POWERS OF CERTAIN PIPELINE
457-25 BUSINESSES. In addition to the powers provided by Subchapter B,
457-26 Chapter 2, a limited liability company engaged as a common carrier
457-27 in the pipeline business for the purpose of transporting oil, oil
458-1 products, gas, carbon dioxide, salt brine, fuller's earth, sand,
458-2 clay, liquefied minerals, or other mineral solutions has all the
458-3 rights and powers conferred on a common carrier by Sections
458-4 111.019-111.022, Natural Resources Code.
458-5 (Sections 101.057-101.100 reserved for expansion)
458-6 SUBCHAPTER C. MEMBERSHIP
458-7 Sec. 101.101. MEMBERS REQUIRED. (a) A limited liability
458-8 company may have one or more members. Except as provided by this
458-9 section, a limited liability company must have at least one member.
458-10 (b) A limited liability company that has managers is not
458-11 required to have any members during a reasonable period between the
458-12 date the company is formed and the date the first member is
458-13 admitted to the company.
458-14 (c) A limited liability company is not required to have any
458-15 members during the period between the date the continued membership
458-16 of the last remaining member of the company is terminated and the
458-17 date the agreement to continue the company described by Section
458-18 101.551 is executed.
458-19 Sec. 101.102. QUALIFICATION FOR MEMBERSHIP. (a) A person
458-20 may be a member of or acquire a membership interest in a limited
458-21 liability company unless the person lacks capacity apart from this
458-22 code.
458-23 (b) A person is not required, as a condition to becoming a
458-24 member of or acquiring a membership interest in a limited liability
458-25 company, to:
458-26 (1) make a contribution to the company;
458-27 (2) otherwise pay cash or transfer property to the
459-1 company; or
459-2 (3) assume an obligation to make a contribution or
459-3 otherwise pay cash or transfer property to the company.
459-4 Sec. 101.103. EFFECTIVE DATE OF MEMBERSHIP. (a) A person
459-5 who acquires a membership interest in a limited liability company
459-6 in connection with the formation of the company becomes a member of
459-7 the company on the date the company is formed if the person is
459-8 named as an initial member in the company's certificate of
459-9 formation.
459-10 (b) A person who acquires a membership interest in a limited
459-11 liability company during the formation of the company but who is
459-12 not named as an initial member in the company's certificate of
459-13 formation becomes a member of the company on the latest of:
459-14 (1) the date the company is formed;
459-15 (2) the date stated in the company's records as the
459-16 date the person becomes a member of the company; or
459-17 (3) if the company's records do not state a date
459-18 described by Subdivision (2), the date the person's admission to
459-19 the company is first reflected in the company's records.
459-20 (c) A person who, after the formation of a limited liability
459-21 company, acquires directly or is assigned a membership interest in
459-22 the company becomes a member of the company on approval of the
459-23 company's governing authority.
459-24 Sec. 101.104. CLASSES OR GROUPS OF MEMBERS OR MEMBERSHIP
459-25 INTERESTS. (a) The company agreement of a limited liability
459-26 company may:
459-27 (1) establish within the company classes or groups of
460-1 one or more members or membership interests each of which has
460-2 certain expressed relative rights, powers, and duties, including
460-3 voting rights; and
460-4 (2) provide for the manner of establishing within the
460-5 company additional classes or groups of one or more members or
460-6 membership interests each of which has certain expressed relative
460-7 rights, powers, and duties, including voting rights.
460-8 (b) The rights, powers, and duties of a class or group of
460-9 members or membership interests described by Subsection (a)(2) may
460-10 be stated in the company agreement or stated at the time the class
460-11 or group is established.
460-12 (c) If the company agreement of a limited liability company
460-13 does not provide for the manner of establishing classes or groups
460-14 of members or membership interests under Subsection (a)(2),
460-15 additional classes or groups of members or membership interests may
460-16 be established only by the adoption of an amendment to the company
460-17 agreement.
460-18 (d) The rights, powers, or duties of any class or group of
460-19 members or membership interests of a limited liability company may
460-20 be senior to the rights, powers, or duties of any other class or
460-21 group of members or membership interests in the company, including
460-22 a previously established class or group.
460-23 Sec. 101.105. ISSUANCE OF MEMBERSHIP INTERESTS AFTER
460-24 FORMATION OF COMPANY. A limited liability company, after the
460-25 formation of the company, may:
460-26 (1) issue membership interests in the company to any
460-27 person, including an existing member of the company, with the
461-1 approval of the governing authority of the company; and
461-2 (2) if the issuance of a membership interest requires
461-3 the establishment of a new class or group of members or membership
461-4 interests, establish a new class or group as provided by Sections
461-5 101.104(a)(2), (b), and (c).
461-6 Sec. 101.106. NATURE OF MEMBERSHIP INTEREST. (a) A
461-7 membership interest in a limited liability company is personal
461-8 property.
461-9 (b) A member of a limited liability company or an assignee
461-10 of a membership interest in a limited liability company does not
461-11 have an interest in any specific property of the company.
461-12 Sec. 101.107. WITHDRAWAL OR EXPULSION OF MEMBER PROHIBITED.
461-13 A member of a limited liability company may not withdraw or be
461-14 expelled from the company.
461-15 Sec. 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST. (a) A
461-16 membership interest in a limited liability company may be wholly or
461-17 partly assigned.
461-18 (b) An assignment of a membership interest in a limited
461-19 liability company:
461-20 (1) is not an event requiring the winding up of the
461-21 company; and
461-22 (2) does not entitle the assignee to:
461-23 (A) participate in the management and affairs of
461-24 the company;
461-25 (B) become a member of the company; or
461-26 (C) exercise any rights of a member of the
461-27 company.
462-1 Sec. 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF MEMBERSHIP
462-2 INTEREST BEFORE MEMBERSHIP. (a) A person who is assigned a
462-3 membership interest in a limited liability company is entitled to:
462-4 (1) receive any allocation of income, gain, loss,
462-5 deduction, credit, or a similar item that the assignor is entitled
462-6 to receive if the allocation of the item is assigned;
462-7 (2) receive any distribution the assignor is entitled
462-8 to receive if the distribution is assigned;
462-9 (3) require, for any proper purpose, reasonable
462-10 information or a reasonable account of the transactions of the
462-11 company; and
462-12 (4) make, for any proper purpose, reasonable
462-13 inspections of the books and records of the company.
462-14 (b) An assignee of a membership interest in a limited
462-15 liability company is entitled to become a member of the company on
462-16 the approval of the company's governing authority.
462-17 (c) An assignee of a membership interest in a limited
462-18 liability company is not liable as a member of the company until
462-19 the assignee becomes a member of the company.
462-20 Sec. 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF
462-21 MEMBERSHIP INTEREST AFTER BECOMING MEMBER. (a) An assignee of a
462-22 membership interest in a limited liability company, after becoming
462-23 a member of the company, is:
462-24 (1) entitled, to the extent assigned, to the same
462-25 rights and powers granted or provided to a member of the company by
462-26 the company agreement or this code;
462-27 (2) subject to the same restrictions and liabilities
463-1 placed or imposed on a member of the company by the company
463-2 agreement or this code; and
463-3 (3) except as provided by Subsection (b), liable for
463-4 the assignor's obligation to make contributions to the company.
463-5 (b) An assignee of a membership interest in a limited
463-6 liability company, after becoming a member of the company, is not
463-7 obligated for a liability of the assignor that:
463-8 (1) the assignee did not have knowledge of on the date
463-9 the assignee became a member of the company; and
463-10 (2) could not be ascertained from the company
463-11 agreement.
463-12 Sec. 101.111. RIGHTS AND DUTIES OF ASSIGNOR OF MEMBERSHIP
463-13 INTEREST. (a) An assignor of a membership interest in a limited
463-14 liability company continues to be a member of the company and is
463-15 entitled to exercise any unassigned rights or powers of a member of
463-16 the company until the assignee becomes a member of the company.
463-17 (b) An assignor of a membership interest in a limited
463-18 liability company is not released from the assignor's liability to
463-19 the company, regardless of whether the assignee of the membership
463-20 interest becomes a member of the company.
463-21 Sec. 101.112. JUDGMENT CREDITOR; CHARGE OF MEMBERSHIP
463-22 INTEREST. (a) On application by a judgment creditor of a member
463-23 of a limited liability company or an assignee of a membership
463-24 interest in a limited liability company, a court may charge the
463-25 membership interest of the member or assignee, as appropriate, with
463-26 payment of the unsatisfied amount of the judgment.
463-27 (b) If a court charges a membership interest with payment of
464-1 a judgment as provided by Subsection (a), the judgment creditor has
464-2 only the rights of an assignee of the membership interest.
464-3 (c) This section may not be construed to deprive a member of
464-4 a limited liability company or an assignee of a membership interest
464-5 in a limited liability company of the benefit of any exemption laws
464-6 applicable to the membership interest of the member or assignee.
464-7 Sec. 101.113. PARTIES TO ACTIONS. A member of a limited
464-8 liability company may be named as a party only in an action brought
464-9 to enforce a right or liability of the member relating to the
464-10 company.
464-11 Sec. 101.114. REQUIREMENTS FOR ENFORCEABLE SUBSCRIPTION. A
464-12 subscription to purchase a membership interest in a limited
464-13 liability company is enforceable only if the subscription is:
464-14 (1) in writing; and
464-15 (2) signed by the person making the subscription.
464-16 (Sections 101.115-101.150 reserved for expansion)
464-17 SUBCHAPTER D. CONTRIBUTIONS
464-18 Sec. 101.151. REQUIREMENTS FOR ENFORCEABLE PROMISE. A
464-19 promise to make a contribution or otherwise pay cash or transfer
464-20 property to a limited liability company is enforceable only if the
464-21 promise is:
464-22 (1) in writing; and
464-23 (2) signed by the person making the promise.
464-24 Sec. 101.152. ENFORCEABLE PROMISE NOT AFFECTED BY CHANGE IN
464-25 CIRCUMSTANCES. A member of a limited liability company is
464-26 obligated to perform an enforceable promise to make a contribution
464-27 or otherwise pay cash or transfer property to the company without
465-1 regard to the death, disability, or other change in circumstances
465-2 of the member.
465-3 Sec. 101.153. FAILURE TO PERFORM ENFORCEABLE PROMISE;
465-4 CONSEQUENCES. (a) A member of a limited liability company, or the
465-5 member's legal representative or successor, who does not perform an
465-6 enforceable promise to make a contribution, including a previously
465-7 made contribution, or to otherwise pay cash or transfer property to
465-8 the company is obligated, at the request of the company, to pay in
465-9 cash the agreed value of the contribution, as stated in the company
465-10 agreement or the company's records required under Section 3.151,
465-11 less:
465-12 (1) any amount already paid for the contribution; and
465-13 (2) the value of any property already transferred.
465-14 (b) The company agreement of a limited liability company may
465-15 provide that the membership interest of a member who fails to
465-16 perform an enforceable promise to make a payment of cash or
465-17 transfer property to the company, whether as a contribution or in
465-18 connection with a contribution already made, may be:
465-19 (1) reduced;
465-20 (2) subordinated to other membership interests of
465-21 nondefaulting members;
465-22 (3) redeemed or sold at a value determined by
465-23 appraisal or other formula; or
465-24 (4) made the subject of:
465-25 (A) a forced sale;
465-26 (B) forfeiture;
465-27 (C) a loan from other members of the company in
466-1 an amount necessary to satisfy the enforceable promise; or
466-2 (D) another penalty or consequence.
466-3 Sec. 101.154. CONSENT REQUIRED TO RELEASE ENFORCEABLE
466-4 OBLIGATION. The obligation of a member of a limited liability
466-5 company, or of the member's legal representative or successor, to
466-6 make a contribution or otherwise pay cash or transfer property to
466-7 the company, or to return cash or property to the company paid or
466-8 distributed to the member in violation of this code or the company
466-9 agreement, may be released or settled only by consent of each
466-10 member of the company.
466-11 Sec. 101.155. CREDITOR'S RIGHT TO ENFORCE CERTAIN
466-12 OBLIGATIONS. A creditor of a limited liability company who extends
466-13 credit or otherwise acts in reasonable reliance on an enforceable
466-14 obligation of a member of the company that is released or settled
466-15 as provided by Section 101.154 may enforce the original obligation
466-16 if the obligation is stated in a document that is:
466-17 (1) signed by the member; and
466-18 (2) not amended or canceled to evidence the release or
466-19 settlement of the obligation.
466-20 Sec. 101.156. REQUIREMENTS TO ENFORCE CONDITIONAL
466-21 OBLIGATION. (a) An obligation of a member of a limited liability
466-22 company that is subject to a condition may be enforced by the
466-23 company or a creditor described by Section 101.155 only if the
466-24 condition is satisfied or waived by or with respect to the member.
466-25 (b) A conditional obligation of a member of a limited
466-26 liability company under this section includes a contribution
466-27 payable on a discretionary call of the limited liability company
467-1 before the time the call occurs.
467-2 (Sections 101.157-101.200 reserved for expansion)
467-3 SUBCHAPTER E. ALLOCATIONS AND DISTRIBUTIONS
467-4 Sec. 101.201. ALLOCATION OF PROFITS AND LOSSES. The profits
467-5 and losses of a limited liability company shall be allocated to
467-6 each member of the company in accordance with the member's
467-7 percentage or other interest in the company on the date of the
467-8 allocation as stated in the company's records required under
467-9 Sections 3.151 and 101.501.
467-10 Sec. 101.202. DISTRIBUTION IN KIND. A member of a limited
467-11 liability company is entitled to receive or demand a distribution
467-12 from the company only in the form of cash, regardless of the form
467-13 of the member's contribution to the company.
467-14 Sec. 101.203. SHARING OF DISTRIBUTIONS. Distributions of
467-15 cash and other assets of a limited liability company shall be made
467-16 to each member of the company according to the agreed value of the
467-17 member's contribution to the company as stated in the company's
467-18 records required under Sections 3.151 and 101.501.
467-19 Sec. 101.204. INTERIM DISTRIBUTIONS. A member of a limited
467-20 liability company, before the winding up of the company, is not
467-21 entitled to receive and may not demand a distribution from the
467-22 company until the company's governing authority declares a
467-23 distribution to:
467-24 (1) each member of the company; or
467-25 (2) a class or group of members that includes the
467-26 member.
467-27 Sec. 101.205. DISTRIBUTION ON WITHDRAWAL. A member of a
468-1 limited liability company who validly exercises the member's right
468-2 to withdraw from the company granted under the company agreement is
468-3 entitled to receive, within a reasonable time after the date of
468-4 withdrawal, the fair value of the member's interest in the company
468-5 as determined on the date of withdrawal.
468-6 Sec. 101.206. PROHIBITED DISTRIBUTION; DUTY TO RETURN.
468-7 (a) A limited liability company may not make a distribution to a
468-8 member of the company if, immediately after making the
468-9 distribution, the company's total liabilities, other than
468-10 liabilities described by Subsection (b), exceed the fair value of
468-11 the company's total assets.
468-12 (b) For purposes of Subsection (a), the liabilities of a
468-13 limited liability company do not include:
468-14 (1) a liability related to the member's membership
468-15 interest; or
468-16 (2) except as provided by Subsection (c), a liability
468-17 for which the recourse of creditors is limited to specified
468-18 property of the company.
468-19 (c) For purposes of Subsection (a), the assets of a limited
468-20 liability company include the fair value of property subject to a
468-21 liability for which recourse of creditors is limited to specified
468-22 property of the company only if the fair value of that property
468-23 exceeds the liability.
468-24 (d) A member of a limited liability company who receives a
468-25 distribution from the company in violation of this section is
468-26 required to return the distribution to the company if the member
468-27 had knowledge of the violation.
469-1 (e) This section may not be construed to affect the
469-2 obligation of a member of a limited liability company to return a
469-3 distribution to the company under the company agreement or other
469-4 state or federal law.
469-5 Sec. 101.207. CREDITOR STATUS WITH RESPECT TO DISTRIBUTION.
469-6 Subject to Sections 11.053 and 101.206, when a member of a limited
469-7 liability company is entitled to receive a distribution from the
469-8 company, the member, with respect to the distribution, has the same
469-9 status as a creditor of the company and is entitled to any remedy
469-10 available to a creditor of the company.
469-11 (Sections 101.208-101.250 reserved for expansion)
469-12 SUBCHAPTER F. MANAGEMENT
469-13 Sec. 101.251. MEMBERSHIP. The governing authority of a
469-14 limited liability company consists of:
469-15 (1) the managers of the company, if the company's
469-16 certificate of formation states that the company will have one or
469-17 more managers; or
469-18 (2) the members of the company, if the company's
469-19 certificate of formation states that the company will not have
469-20 managers.
469-21 Sec. 101.252. MANAGEMENT BY GOVERNING AUTHORITY. The
469-22 governing authority of a limited liability company shall manage the
469-23 business and affairs of the company as provided by:
469-24 (1) the company agreement; and
469-25 (2) this title and the provisions of Title 1
469-26 applicable to a limited liability company to the extent that the
469-27 company agreement does not provide for the management of the
470-1 company.
470-2 Sec. 101.253. DESIGNATION OF COMMITTEES; DELEGATION OF
470-3 AUTHORITY. (a) The governing authority of a limited liability
470-4 company by resolution may designate:
470-5 (1) one or more committees of the governing authority
470-6 consisting of one or more governing persons of the company; and
470-7 (2) subject to any limitation imposed by the governing
470-8 authority, a governing person to serve as an alternate member of a
470-9 committee designated under Subdivision (1) at a committee meeting
470-10 from which a member of the committee is absent or disqualified.
470-11 (b) A committee of the governing authority of a limited
470-12 liability company may exercise the authority of the governing
470-13 authority as provided by the resolution designating the committee.
470-14 (c) The designation of a committee under this section does
470-15 not relieve the governing authority of any responsibility imposed
470-16 by law.
470-17 Sec. 101.254. DESIGNATION OF AGENTS; BINDING ACTS.
470-18 (a) Except as provided by this title and Title 1, each governing
470-19 person of a limited liability company and each officer or agent of
470-20 a limited liability company vested with actual or apparent
470-21 authority by the governing authority of the company is an agent of
470-22 the company for purposes of carrying out the company's business.
470-23 (b) An act committed by an agent of a limited liability
470-24 company described by Subsection (a) for the purpose of apparently
470-25 carrying out the ordinary course of business of the company,
470-26 including the execution of an instrument in the name of the
470-27 company, binds the company unless:
471-1 (1) the agent does not have actual authority to act
471-2 for the company; and
471-3 (2) the person with whom the agent is dealing has
471-4 knowledge of the agent's lack of actual authority.
471-5 (c) An act committed by an agent of a limited liability
471-6 company described by Subsection (a) that is not apparently for
471-7 carrying out the ordinary course of business of the company binds
471-8 the company only if the act is authorized in accordance with this
471-9 title.
471-10 Sec. 101.255. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED
471-11 GOVERNING PERSONS OR OFFICERS. (a) This section applies only to a
471-12 contract or transaction between a limited liability company and:
471-13 (1) one or more of the company's governing persons or
471-14 officers; or
471-15 (2) an entity or other organization in which one or
471-16 more of the company's governing persons or officers:
471-17 (A) is a managerial official; or
471-18 (B) has a financial interest.
471-19 (b) An otherwise valid contract or transaction is valid
471-20 notwithstanding that a governing person or officer of the company
471-21 is present at or participates in the meeting of the governing
471-22 authority, or of a committee of the governing person's authority,
471-23 that authorizes the contract or transaction or votes to authorize
471-24 the contract or transaction, if:
471-25 (1) the material facts as to the relationship or
471-26 interest and as to the contract or transaction are disclosed to or
471-27 known by:
472-1 (A) the company's governing authority or a
472-2 committee of the governing authority and the governing authority or
472-3 committee in good faith authorizes the contract or transaction by
472-4 the affirmative vote of the majority of the disinterested governing
472-5 persons or committee members, regardless of whether the
472-6 disinterested governing persons or committee members constitute a
472-7 quorum; or
472-8 (B) if the company has managers, the members of
472-9 the company, and the members in good faith approve the contract or
472-10 transaction by a majority vote of all of the members; or
472-11 (2) the contract or transaction is fair to the company
472-12 when the contract or transaction is authorized, approved, or
472-13 ratified by the governing authority, a committee of the governing
472-14 authority, or the members of the company.
472-15 (c) Common or interested governing persons of a limited
472-16 liability company may be included in determining the presence of a
472-17 quorum at a meeting of the company's governing authority, or of a
472-18 committee of the governing authority that authorizes the contract
472-19 or transaction.
472-20 (Sections 101.256-101.300 reserved for expansion)
472-21 SUBCHAPTER G. MANAGERS
472-22 Sec. 101.301. APPLICABILITY OF SUBCHAPTER. This subchapter
472-23 applies only to a limited liability company that has one or more
472-24 managers.
472-25 Sec. 101.302. NUMBER AND QUALIFICATIONS. (a) The managers
472-26 of a limited liability company may consist of one or more persons.
472-27 (b) Except as provided by Subsection (c), the number of
473-1 managers of a limited liability company consists of the number of
473-2 initial managers listed in the company's certificate of formation.
473-3 (c) The number of managers of a limited liability company
473-4 may be increased or decreased by amendment to, or as provided by,
473-5 the company agreement, except that a decrease in the number of
473-6 managers may not shorten the term of an incumbent manager.
473-7 (d) A manager of a limited liability company is not required
473-8 to be a:
473-9 (1) resident of this state; or
473-10 (2) member of the company.
473-11 Sec. 101.303. TERM. A manager of a limited liability
473-12 company serves:
473-13 (1) for the term, if any, for which the manager is
473-14 elected and until the manager's successor is elected; or
473-15 (2) until the earlier resignation, removal or death of
473-16 the manager.
473-17 Sec. 101.304. REMOVAL. Subject to Section 101.306(a), a
473-18 manager of a limited liability company may be removed, with or
473-19 without cause, at a meeting of the company's members called for
473-20 that purpose.
473-21 Sec. 101.305. MANAGER VACANCY. (a) Subject to Section
473-22 101.306(b), a vacancy in the position of a manager of a limited
473-23 liability company may be filled by:
473-24 (1) the affirmative vote of the majority of the
473-25 remaining managers of the company, without regard to whether the
473-26 remaining managers constitute a quorum; or
473-27 (2) if the vacancy is a result of an increase in the
474-1 number of managers, an election at an annual or special meeting of
474-2 the company's members called for that purpose.
474-3 (b) A person elected to fill a vacancy in the position of a
474-4 manager serves for the unexpired term of the person's predecessor.
474-5 Sec. 101.306. REMOVAL AND REPLACEMENT OF MANAGER ELECTED BY
474-6 CLASS OR GROUP. (a) If a class or group of the members of a
474-7 limited liability company is entitled by the company agreement of
474-8 the company to elect one or more managers of the company, a manager
474-9 may be removed from office only by the class or group that elected
474-10 the manager.
474-11 (b) A vacancy in the position of a manager elected as
474-12 provided by Subsection (a) may be filled only by:
474-13 (1) a majority vote of the managers serving on the
474-14 date the vacancy occurs who were elected by the class or group of
474-15 members; or
474-16 (2) a majority vote of the members of the class or
474-17 group.
474-18 Sec. 101.307. METHODS OF CLASSIFYING MANAGERS. Other
474-19 methods of classifying managers of a limited liability company,
474-20 including providing for managers who serve for staggered terms of
474-21 office or terms that are not uniform, may be established in the
474-22 company agreement.
474-23 (Sections 101.308-101.350 reserved for expansion)
474-24 SUBCHAPTER H. MEETINGS AND VOTING
474-25 Sec. 101.351. APPLICABILITY OF SUBCHAPTER. This subchapter
474-26 applies only to a meeting of and voting by:
474-27 (1) the governing authority of a limited liability
475-1 company;
475-2 (2) the members of a limited liability company if the
475-3 members do not constitute the governing authority of the company;
475-4 and
475-5 (3) a committee of the governing authority of a
475-6 limited liability company.
475-7 Sec. 101.352. GENERAL NOTICE REQUIREMENTS. (a) Except as
475-8 provided by Subsection (b), notice of a regular or special meeting
475-9 of the governing authority or members of a limited liability
475-10 company, or a committee of the company's governing authority, shall
475-11 be given in writing to each governing person, member, or committee
475-12 member, as appropriate, and as provided by Section 6.051.
475-13 (b) If the members of a limited liability company do not
475-14 constitute the governing authority of the company, notice required
475-15 by Subsection (a) shall be given by or at the direction of the
475-16 governing authority not later than the 10th day or earlier than the
475-17 60th day before the date of the meeting. Notice of a meeting
475-18 required under this subsection must state the business to be
475-19 transacted at the meeting or the purpose of the meeting if:
475-20 (1) the meeting is a special meeting; or
475-21 (2) a purpose of the meeting is to consider a matter
475-22 described by Section 101.356.
475-23 Sec. 101.353. QUORUM. A majority of all of the governing
475-24 persons, members, or committee members of a limited liability
475-25 company constitutes a quorum for the purpose of transacting
475-26 business at a meeting of the governing authority, members, or
475-27 committee of the company, as appropriate.
476-1 Sec. 101.354. EQUAL VOTING RIGHTS. Each governing person,
476-2 member, or committee member of a limited liability company has an
476-3 equal vote at a meeting of the governing authority, members, or
476-4 committee of the company, as appropriate.
476-5 Sec. 101.355. ACT OF GOVERNING AUTHORITY, MEMBERS, OR
476-6 COMMITTEE. Except as provided by this title or Title 1, the
476-7 affirmative vote of the majority of the governing persons, members,
476-8 or committee members of a limited liability company present at a
476-9 meeting at which a quorum is present constitutes an act of the
476-10 governing authority, members, or committee of the company, as
476-11 appropriate.
476-12 Sec. 101.356. VOTES REQUIRED TO APPROVE CERTAIN ACTIONS.
476-13 (a) Except as provided in this section or any other section in
476-14 this title, an action of a limited liability company may be
476-15 approved by the company's governing authority as provided by
476-16 Section 101.355.
476-17 (b) Except as provided by Subsections (c), (d) or (e) or any
476-18 other section in this title, an action of a limited liability
476-19 company taken apparently not for carrying out the ordinary course
476-20 of business of the company must be approved by the affirmative vote
476-21 of the majority of the company's governing persons.
476-22 (c) Except as provided by Subsections (d) or (e) or any
476-23 other section in this title, a fundamental business transaction of
476-24 a limited liability company, or an action that would make it
476-25 impossible for a limited liability company to carry out the
476-26 ordinary business of the company, must be approved by the
476-27 affirmative vote of the majority of all of:
477-1 (1) the company's governing persons; and
477-2 (2) if the company has managers, the company's
477-3 members.
477-4 (d) Except as provided by Subsection (e) or any other
477-5 section of this title, an amendment to the certificate of formation
477-6 of a limited liability company must be approved by an affirmative
477-7 vote of all of:
477-8 (1) the company's governing persons; and
477-9 (2) if the company has managers, the company's
477-10 members.
477-11 (e) A requirement that an action of a limited liability
477-12 company must be approved by the company's members does not apply
477-13 during the period prescribed by Section 101.101(b).
477-14 Sec. 101.357. MANNER OF VOTING. (a) A member of a limited
477-15 liability company may vote:
477-16 (1) in person; or
477-17 (2) by a proxy executed in writing by the member.
477-18 (b) A manager or committee member of a limited liability
477-19 company, if authorized by the company agreement, may vote:
477-20 (1) in person; or
477-21 (2) by a proxy executed in writing by the manager or
477-22 committee member, as appropriate.
477-23 Sec. 101.358. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT.
477-24 (a) This section applies only to an action required or authorized
477-25 to be taken at an annual or special meeting of the governing
477-26 authority, the members, or a committee of the governing authority
477-27 of a limited liability company under this title, Title 1, or the
478-1 governing documents of the company.
478-2 (b) Notwithstanding Sections 6.201 and 6.202, an action may
478-3 be taken without holding a meeting, providing notice, or taking a
478-4 vote if a written consent or consents stating the action to be
478-5 taken is signed by the number of governing persons, members, or
478-6 committee members of a limited liability company, as appropriate,
478-7 necessary to have at least the minimum number of votes that would
478-8 be necessary to take the action at a meeting at which each
478-9 governing person, member, or committee member, as appropriate,
478-10 entitled to vote on the action is present and votes.
478-11 Sec. 101.359. RIGHTS OF DISSENT AND APPRAISAL. (a) Except
478-12 as provided by Subsection (b), a limited liability company is not a
478-13 domestic entity subject to dissenters' rights, as defined by
478-14 Section 1.002, and the members of a limited liability company are
478-15 not entitled to the rights of dissent and appraisal provided by
478-16 Subchapter H, Chapter 10, with respect to an action of the company
478-17 described by this title or Title 1.
478-18 (b) A limited liability company is a domestic entity subject
478-19 to dissenters' rights and the members of the limited liability
478-20 company are entitled to the rights of dissent and appraisal
478-21 provided by Subchapter H, Chapter 10, if the rights of dissent and
478-22 appraisal are conferred by a company agreement.
478-23 (Sections 101.360-101.400 reserved for expansion)
478-24 SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION
478-25 Sec. 101.401. EXPANSION OR RESTRICTION OF DUTIES AND
478-26 LIABILITIES. The company agreement of a limited liability company
478-27 may expand or restrict duties, including fiduciary duties, and
479-1 liabilities of a person relating to the company or to a member,
479-2 manager, or officer of the company or an assignee of a membership
479-3 interest in the company.
479-4 Sec. 101.402. PERMISSIVE INDEMNIFICATION, ADVANCEMENT OF
479-5 EXPENSES, AND INSURANCE OR OTHER ARRANGEMENTS. (a) A limited
479-6 liability company may:
479-7 (1) indemnify a person;
479-8 (2) pay in advance or reimburse expenses incurred by a
479-9 person; and
479-10 (3) purchase or procure or establish and maintain
479-11 insurance or another arrangement to indemnify or hold harmless a
479-12 person.
479-13 (b) In this section, "person" includes a member, manager, or
479-14 officer of a limited liability company or an assignee of a
479-15 membership interest in the company.
479-16 (Sections 101.403-101.450 reserved for expansion)
479-17 SUBCHAPTER J. DERIVATIVE PROCEEDINGS
479-18 Sec. 101.451. DEFINITIONS. In this subchapter:
479-19 (1) "Derivative proceeding" means a civil suit in the
479-20 right of a domestic limited liability company or, to the extent
479-21 provided by Section 101.462, in the right of a foreign limited
479-22 liability company.
479-23 (2) "Member" includes a beneficial owner whose shares
479-24 are held in a voting trust or by a nominee on the beneficial
479-25 owner's behalf.
479-26 Sec. 101.452. STANDING TO BRING PROCEEDING. A member may
479-27 not institute or maintain a derivative proceeding unless:
480-1 (1) the member:
480-2 (A) was a member of the limited liability
480-3 company at the time of the act or omission complained of; or
480-4 (B) became a member by operation of law from a
480-5 person that was a member at the time of the act or omission
480-6 complained of; and
480-7 (2) the member fairly and adequately represents the
480-8 interests of the limited liability company in enforcing the right
480-9 of the limited liability company.
480-10 Sec. 101.453. DEMAND. (a) A member may not institute a
480-11 derivative proceeding until the 91st day after the date a written
480-12 demand is filed with the limited liability company stating with
480-13 particularity the act, omission, or other matter that is the
480-14 subject of the claim or challenge and requesting that the limited
480-15 liability company take suitable action.
480-16 (b) The waiting period required by Subsection (a) before a
480-17 derivative proceeding may be instituted is not required if:
480-18 (1) the member has been previously notified that the
480-19 demand has been rejected by the limited liability company;
480-20 (2) the limited liability company is suffering
480-21 irreparable injury; or
480-22 (3) irreparable injury to the limited liability
480-23 company would result by waiting for the expiration of the 90-day
480-24 period.
480-25 Sec. 101.454. DETERMINATION BY GOVERNING OR INDEPENDENT
480-26 PERSONS. (a) The determination of how to proceed on allegations
480-27 made in a demand or petition relating to a derivative proceeding
481-1 must be made by an affirmative vote of the majority of:
481-2 (1) the independent and disinterested governing
481-3 persons present at a meeting of the governing authority at which
481-4 interested governing persons are not present at the time of the
481-5 vote if the independent and disinterested governing persons
481-6 constitute a quorum of the governing authority;
481-7 (2) a committee consisting of two or more independent
481-8 and disinterested governing persons appointed by one or more
481-9 independent and disinterested governing persons present at a
481-10 meeting of the governing authority, regardless of whether the
481-11 independent and disinterested governing persons constitute a quorum
481-12 of the governing authority; or
481-13 (3) a panel of one or more independent and
481-14 disinterested persons appointed by the court on a motion by the
481-15 limited liability company listing the names of the persons to be
481-16 appointed and stating that, to the best of the limited liability
481-17 company's knowledge, the persons to be appointed are disinterested
481-18 and qualified to make the determinations contemplated by Section
481-19 101.458.
481-20 (b) The court shall appoint a panel under Subsection (a)(3)
481-21 if the court finds that the persons recommended by the limited
481-22 liability company are independent and disinterested and are
481-23 otherwise qualified with respect to expertise, experience,
481-24 independent judgment, and other factors considered appropriate by
481-25 the court under the circumstances to make the determinations. A
481-26 person appointed by the court to a panel under this section may not
481-27 be held liable to the limited liability company or the limited
482-1 liability company's members for an action taken or omission made by
482-2 the person in that capacity, except for acts or omissions
482-3 constituting fraud or wilful misconduct.
482-4 Sec. 101.455. STAY OF PROCEEDING. (a) If the domestic or
482-5 foreign limited liability company that is the subject of a
482-6 derivative proceeding commences an inquiry into the allegations
482-7 made in a demand or petition and the person or group of persons
482-8 described by Section 101.454 is conducting an active review of the
482-9 allegations in good faith, the court shall stay a derivative
482-10 proceeding until the review is completed and a determination is
482-11 made by the person or group regarding what further action, if any,
482-12 should be taken.
482-13 (b) To obtain a stay, the domestic or foreign limited
482-14 liability company shall provide the court with a written statement
482-15 agreeing to advise the court and the member making the demand of
482-16 the determination promptly on the completion of the review of the
482-17 matter. A stay, on motion, may be reviewed every 60 days for the
482-18 continued necessity of the stay.
482-19 (c) If the review and determination made by the person or
482-20 group is not completed before the 61st day after the date on which
482-21 the court orders the stay, the stay may be renewed for one or more
482-22 additional 60-day periods if the domestic or foreign limited
482-23 liability company provides the court and the member with a written
482-24 statement of the status of the review and the reasons why a
482-25 continued extension of the stay is necessary.
482-26 Sec. 101.456. DISCOVERY. (a) If a domestic or foreign
482-27 limited liability company proposes to dismiss a derivative
483-1 proceeding under Section 101.458, discovery by a member after the
483-2 filing of the derivative proceeding in accordance with this
483-3 subchapter shall be limited to:
483-4 (1) facts relating to whether the person or group of
483-5 persons described by Section 101.458 is independent and
483-6 disinterested;
483-7 (2) the good faith of the inquiry and review by the
483-8 person or group; and
483-9 (3) the reasonableness of the procedures followed by
483-10 the person or group in conducting the review.
483-11 (b) Discovery described by Subsection (a) may not be
483-12 expanded to include a fact or substantive matter regarding the act,
483-13 omission, or other matter that is the subject matter of the
483-14 derivative proceeding. The scope of discovery may be expanded if
483-15 the court determines after notice and hearing that a good faith
483-16 review of the allegations for purposes of Section 101.458 has not
483-17 been made by an independent and disinterested person or group in
483-18 accordance with that section.
483-19 Sec. 101.457. TOLLING OF STATUTE OF LIMITATIONS. A written
483-20 demand filed with the limited liability company under Section
483-21 101.453 tolls the statute of limitations on the claim on which
483-22 demand is made until the earlier of:
483-23 (1) the 91st day after the date of the demand; or
483-24 (2) the 31st day after the date the limited liability
483-25 company advises the member that the demand has been rejected or the
483-26 review has been completed.
483-27 Sec. 101.458. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A
484-1 court shall dismiss a derivative proceeding on a motion by the
484-2 limited liability company if the person or group of persons
484-3 described by Section 101.454 determines in good faith, after
484-4 conducting a reasonable inquiry and based on factors the person or
484-5 group considers appropriate under the circumstances, that
484-6 continuation of the derivative proceeding is not in the best
484-7 interests of the limited liability company.
484-8 (b) In determining whether the requirements of Subsection
484-9 (a) have been met, the burden of proof shall be on:
484-10 (1) the plaintiff member if:
484-11 (A) the majority of the governing authority
484-12 consists of independent and disinterested persons at the time the
484-13 determination is made;
484-14 (B) the determination is made by a panel of one
484-15 or more independent and disinterested persons appointed under
484-16 Section 101.454; or
484-17 (C) the limited liability company presents prima
484-18 facie evidence that demonstrates that the persons appointed under
484-19 Section 101.454 are independent and disinterested; or
484-20 (2) the limited liability company in any other
484-21 circumstance.
484-22 Sec. 101.459. ALLEGATIONS IF DEMAND REJECTED. If a
484-23 derivative proceeding is instituted after a demand is rejected, the
484-24 petition must allege with particularity facts that establish that
484-25 the rejection was not made in accordance with the requirements of
484-26 Sections 101.454 and 101.458.
484-27 Sec. 101.460. DISCONTINUANCE OR SETTLEMENT. (a) A
485-1 derivative proceeding may not be discontinued or settled without
485-2 court approval.
485-3 (b) The court shall direct that notice be given to the
485-4 affected members if the court determines that a proposed
485-5 discontinuance or settlement may substantially affect the interests
485-6 of other members.
485-7 Sec. 101.461. PAYMENT OF EXPENSES. (a) In this section,
485-8 "expenses" means reasonable expenses incurred by a party in a
485-9 derivative proceeding, including:
485-10 (1) attorney's fees;
485-11 (2) costs of pursuing an investigation of the matter
485-12 that was the subject of the derivative proceeding; or
485-13 (3) expenses for which the domestic or foreign limited
485-14 liability company may be required to indemnify another person.
485-15 (b) On termination of a derivative proceeding, the court may
485-16 order:
485-17 (1) the domestic or foreign limited liability company
485-18 to pay the expenses the plaintiff incurred in the proceeding if the
485-19 court finds the proceeding has resulted in a substantial benefit to
485-20 the domestic or foreign limited liability company;
485-21 (2) the plaintiff to pay the expenses the domestic or
485-22 foreign limited liability company or other defendant incurred in
485-23 investigating and defending the proceeding if the court finds the
485-24 proceeding has been instituted or maintained without reasonable
485-25 cause or for an improper purpose; or
485-26 (3) a party to pay the expenses incurred by another
485-27 party relating to the filing of a pleading, motion, or other paper
486-1 if the court finds the pleading, motion, or other paper:
486-2 (A) was not well grounded in fact after
486-3 reasonable inquiry;
486-4 (B) was not warranted by existing law or a good
486-5 faith argument for the extension, modification, or reversal of
486-6 existing law; or
486-7 (C) was interposed for an improper purpose, such
486-8 as to harass, cause unnecessary delay, or cause a needless increase
486-9 in the cost of litigation.
486-10 Sec. 101.462. APPLICATION TO FOREIGN LIMITED LIABILITY
486-11 COMPANIES. (a) In a derivative proceeding brought in the right of
486-12 a foreign limited liability company, the matters covered by this
486-13 subchapter are governed by the laws of the jurisdiction of
486-14 organization of the foreign limited liability company, except for
486-15 Sections 101.455, 101.460, and 101.461, which are procedural
486-16 provisions and do not relate to the internal affairs of the foreign
486-17 limited liability company.
486-18 (b) In the case of matters relating to a foreign limited
486-19 liability company under Section 101.454, a reference to a person or
486-20 group of persons described by that section refers to a person or
486-21 group entitled under the laws of the jurisdiction of organization
486-22 of the foreign limited liability company to review and dispose of a
486-23 derivative proceeding. The standard of review of a decision made
486-24 by the person or group to dismiss the derivative proceeding shall
486-25 be governed by the laws of the jurisdiction of organization of the
486-26 foreign limited liability company.
486-27 Sec. 101.463. CLOSELY HELD LIMITED LIABILITY COMPANY.
487-1 (a) In this section, "closely held limited liability company"
487-2 means a limited liability company that has:
487-3 (1) fewer than 35 members; and
487-4 (2) no shares listed on a national securities exchange
487-5 or regularly quoted in an over-the-counter market by one or more
487-6 members of a national securities association.
487-7 (b) Subject to Subsection (c), Sections 101.452-101.459 do
487-8 not apply to a closely held limited liability company.
487-9 (c) If justice requires:
487-10 (1) a derivative proceeding brought by a member of a
487-11 closely held limited liability company may be treated by a court as
487-12 a direct action brought by the member for the member's own benefit;
487-13 and
487-14 (2) a recovery in a direct or derivative proceeding by
487-15 a member may be paid directly to the plaintiff or to the limited
487-16 liability company if necessary to protect the interests of
487-17 creditors or other members of the limited liability company.
487-18 (Sections 101.464-101.500 reserved for expansion)
487-19 SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS
487-20 Sec. 101.501. ADDITIONAL RECORDS REQUIRED. (a) In addition
487-21 to the books and records required to be kept under Section 3.151, a
487-22 limited liability company shall keep at its principal office in the
487-23 United States, or make available to a person at its principal
487-24 office in the United States not later than the fifth day after the
487-25 date the person submits a written request to examine the books and
487-26 records of the company under Section 3.152(a) or 101.502:
487-27 (1) a current list of each member of a class or group
488-1 of membership interests in the company;
488-2 (2) a copy of the company's federal, state, and local
488-3 tax information or income tax returns for each of the six preceding
488-4 tax years;
488-5 (3) a copy of the company's certificate of formation,
488-6 including any amendments to or restatements of the certificate of
488-7 formation;
488-8 (4) if the company agreement is in writing, a copy of
488-9 the company agreement, including any amendments to or restatements
488-10 of the company agreement;
488-11 (5) an executed copy of any powers of attorney;
488-12 (6) a copy of any document that establishes a class or
488-13 group of members of the company as provided by the company
488-14 agreement; and
488-15 (7) except as provided by Subsection (b), a written
488-16 statement of:
488-17 (A) the amount of a cash contribution and a
488-18 description and statement of the agreed value of any other
488-19 contribution made or agreed to be made by each member;
488-20 (B) the dates any additional contributions are
488-21 to be made by a member;
488-22 (C) any event the occurrence of which requires a
488-23 member to make additional contributions;
488-24 (D) any event the occurrence of which requires
488-25 the winding up of the company; and
488-26 (E) the date each member became a member of the
488-27 company.
489-1 (b) A limited liability company is not required to keep or
489-2 make available at its principal office in the United States a
489-3 written statement of the information required by Subsection (a)(7)
489-4 if that information is stated in the company agreement.
489-5 (c) A limited liability company shall keep at its registered
489-6 office located in this state and make available to a member of the
489-7 company on reasonable request the street address of the company's
489-8 principal office in the United States in which the records required
489-9 by this section and Section 3.151 are maintained or made
489-10 available.
489-11 Sec. 101.502. RIGHT TO EXAMINE RECORDS AND CERTAIN OTHER
489-12 INFORMATION. (a) A member of a limited liability company or an
489-13 assignee of a membership interest in a limited liability company,
489-14 or a representative of the member or assignee, on written request
489-15 and for a proper purpose, may examine and copy at any reasonable
489-16 time and at the member's or assignee's expense:
489-17 (1) records required under Sections 3.151 and 101.501;
489-18 and
489-19 (2) other information regarding the business, affairs,
489-20 and financial condition of the company that is reasonable for the
489-21 person to examine and copy.
489-22 (b) A limited liability company shall provide to a member of
489-23 the company or an assignee of a membership interest in the company,
489-24 on written request by the member or assignee sent to the company's
489-25 principal office in the United States or, if different, the person
489-26 and address designated in the company agreement, a free copy of:
489-27 (1) the company's certificate of formation, including
490-1 any amendments to or restatements of the certificate of formation;
490-2 (2) if in writing, the company agreement, including
490-3 any amendments to or restatements of the company agreement; and
490-4 (3) any tax returns described by Section
490-5 101.501(a)(2).
490-6 (Sections 101.503-101.550 reserved for expansion)
490-7 SUBCHAPTER L. SUPPLEMENTAL WINDING UP AND TERMINATION
490-8 PROVISIONS
490-9 Sec. 101.551. ADDITIONAL EVENT REQUIRING WINDING UP. In
490-10 addition to an event listed under Section 11.051, the termination
490-11 of the continued membership of the last remaining member of a
490-12 limited liability company is an event that requires the winding up
490-13 of a domestic entity unless, not later than the 90th day after the
490-14 date of the termination, the legal representative or successor of
490-15 the last remaining member agrees:
490-16 (1) to continue the company; and
490-17 (2) from the date of the termination, to become a
490-18 member of the company or nominate or delegate another person to
490-19 become a member of the company.
490-20 Sec. 101.552. PERSONS ELIGIBLE TO WIND UP COMPANY. After an
490-21 event requiring the winding up of a limited liability company
490-22 unless a revocation as provided by Section 11.151 or a cancellation
490-23 as provided by Section 11.152 occurs, the winding up of the company
490-24 must be carried out by:
490-25 (1) the company's governing authority or one or more
490-26 persons, including a governing person, designated by the governing
490-27 authority;
491-1 (2) if the event requiring the winding up of the
491-2 company is the termination of the continued membership of the last
491-3 remaining member of the company, the legal representative or
491-4 successor of the last remaining member or one or more persons
491-5 designated by the legal representative or successor; or
491-6 (3) a person appointed by the court to carry out the
491-7 winding up of the company under Section 11.054, 11.405, 11.409, or
491-8 11.410.
491-9 Sec. 101.553. APPROVAL OF VOLUNTARY WINDING UP, REVOCATION,
491-10 CANCELLATION, OR REINSTATEMENT. A majority vote of all of the
491-11 governing persons of a limited liability company and, if the
491-12 limited liability company has managers, a majority vote of all of
491-13 the members of the company is required to approve:
491-14 (1) a voluntary winding up of the company under
491-15 Chapter 11;
491-16 (2) a revocation of a voluntary decision to wind up
491-17 the company under Section 11.151;
491-18 (3) a cancellation of an event requiring the winding
491-19 up of the company under Section 11.152; or
491-20 (4) a reinstatement of a terminated company under
491-21 Section 11.202.
491-22 TITLE 4. PARTNERSHIPS
491-23 CHAPTER 151. GENERAL PROVISIONS
491-24 Sec. 151.001. DEFINITIONS. In this title:
491-25 (1) "Capital account" means the amount computed by:
491-26 (A) adding the amount of a partner's original
491-27 and additional contributions of cash to a partnership, the agreed
492-1 value of any other property that that partner originally or
492-2 additionally contributed to the partnership, and allocations of
492-3 partnership profits to that partner; and
492-4 (B) subtracting the amount of distributions to
492-5 that partner and allocations of partnership losses to that partner.
492-6 (2) "Foreign limited partnership" means a partnership
492-7 formed under the laws of another state that has one or more general
492-8 partners and one or more limited partners.
492-9 (3) "Majority-in-interest," with respect to all or a
492-10 specified group of partners, means partners who own more than 50
492-11 percent of the current percentage or other interest in the profits
492-12 of the partnership that is owned by all of the partners or by the
492-13 partners in the specified group, as appropriate.
492-14 (4) "Partnership agreement" means a written or oral
492-15 agreement of the partners concerning a partnership.
492-16 Sec. 151.002. KNOWLEDGE OF FACT. For purposes of this
492-17 title, a person has knowledge of a fact only if the person has
492-18 actual knowledge of the fact.
492-19 Sec. 151.003. NOTICE OF FACT. (a) For purposes of this
492-20 title, a person has notice of a fact if the person:
492-21 (1) has knowledge of the fact;
492-22 (2) has received a communication of the fact as
492-23 provided by Subsection (c); or
492-24 (3) reasonably should have concluded, from all facts
492-25 then known to that person, that the fact exists.
492-26 (b) A person notifies or gives notice to another person of a
492-27 fact by taking actions reasonably required to inform the other
493-1 person of the fact in the ordinary course of business, regardless
493-2 of whether the other person actually has knowledge of the fact.
493-3 (c) A person is notified or receives notice of a fact when
493-4 the fact is communicated to:
493-5 (1) the person;
493-6 (2) the person's place of business; or
493-7 (3) another place held out by the person as the place
493-8 for receipt of communications.
493-9 (d) Receipt of notice by a partner of a fact relating to the
493-10 partnership is effective immediately as notice to the partnership
493-11 unless fraud against the partnership is committed by or with the
493-12 consent of the partner receiving the notice.
493-13 CHAPTER 152. GENERAL PARTNERSHIPS
493-14 SUBCHAPTER A. GENERAL PROVISIONS
493-15 Sec. 152.001. DEFINITIONS. In this chapter:
493-16 (1) "Event of withdrawal" or "withdrawal" means an
493-17 event specified by Section 152.501(b).
493-18 (2) "Event requiring a winding up" means an event
493-19 specified by Section 152.701.
493-20 (3) "Foreign limited liability partnership" means a
493-21 partnership that:
493-22 (A) is foreign; and
493-23 (B) has the status of a registered limited
493-24 liability partnership pursuant to the laws of the jurisdiction of
493-25 formation.
493-26 (4) "Other partnership provisions" means the
493-27 provisions of Chapters 151 and 154 and Title 1 to the extent
494-1 applicable to partnerships.
494-2 (5) "Transfer" includes:
494-3 (A) an assignment;
494-4 (B) a conveyance;
494-5 (C) a lease;
494-6 (D) a mortgage;
494-7 (E) a deed;
494-8 (F) an encumbrance; and
494-9 (G) the creation of a security interest.
494-10 (6) "Withdrawn partner" means a partner with respect
494-11 to whom an event of withdrawal has occurred.
494-12 Sec. 152.002. EFFECT OF PARTNERSHIP AGREEMENT; NONWAIVABLE
494-13 AND VARIABLE PROVISIONS. (a) Except as provided by Subsection
494-14 (b), a partnership agreement governs the relations of the partners
494-15 and between the partners and the partnership. To the extent that
494-16 the partnership agreement does not otherwise provide, this chapter
494-17 and the other partnership provisions govern the relationship of the
494-18 partners and between the partners and the partnership.
494-19 (b) A partnership agreement or the partners may not:
494-20 (1) unreasonably restrict a partner's right of access
494-21 to books and records under Section 152.212;
494-22 (2) eliminate the duty of loyalty under Section
494-23 152.205, except that the partners by agreement may identify
494-24 specific types of activities or categories of activities that do
494-25 not violate the duty of loyalty if the types or categories are not
494-26 manifestly unreasonable;
494-27 (3) eliminate the duty of care under Section 152.206,
495-1 except that the partners by agreement may determine the standards
495-2 by which the performance of the obligation is to be measured if the
495-3 standards are not manifestly unreasonable;
495-4 (4) eliminate the obligation of good faith under
495-5 Section 152.204(b), except that the partners by agreement may
495-6 determine the standards by which the performance of the obligation
495-7 is to be measured if the standards are not manifestly unreasonable;
495-8 (5) vary the power to withdraw as a partner under
495-9 Section 152.501(b)(1), (7), or (8), except for the requirement that
495-10 notice be in writing;
495-11 (6) vary the right to expel a partner by a court in an
495-12 event specified by Section 152.501(b)(5);
495-13 (7) vary the requirement to wind up the partnership
495-14 business in an event specified by Section 152.701(a)(3),
495-15 152.701(a)(4) or 11.314;
495-16 (8) restrict rights of a third party under this
495-17 chapter or the other partnership provisions, except for a
495-18 limitation on an individual partner's liability in a registered
495-19 limited liability partnership as provided by this chapter; or
495-20 (9) select a governing law not permitted under
495-21 Sections 1.103 and 1.002(46)(C); or
495-22 (10) except as provided in Subsections (c) and (d),
495-23 waive or modify the following provisions of Title 1:
495-24 (A) Chapter 1, if the provision is used to
495-25 interpret a provision or to define a word or phrase contained in a
495-26 section listed in this subsection;
495-27 (B) Chapter 2, other than Sections 2.104(c)(2),
496-1 2.104(c)(3) or 2.106;
496-2 (C) Chapter 3, other than Subchapters C and E
496-3 thereof and Section 3.152 (provided, that a partner's right of
496-4 access to books and records shall in all events be governed by
496-5 Sections 152.002(b)(1) and 152.212); or
496-6 (D) Chapters 4, 5, 7, 10, 11 and 12.
496-7 (c) A provision listed in Subsection (b) may be waived or
496-8 modified in a partnership agreement if the provision that is waived
496-9 or modified authorizes the partnership to waive or modify the
496-10 provision in the partnership's governing documents.
496-11 (d) A provision listed in Subsection (b) may be waived or
496-12 modified in the partnership agreement if the provision that is
496-13 modified specifies:
496-14 (1) the person or group of persons entitled to approve
496-15 a modification; or
496-16 (2) the vote or other method by which a modification
496-17 is required to be approved.
496-18 Sec. 152.003. SUPPLEMENTAL PRINCIPLES OF LAW. The
496-19 principles of law and equity and the other partnership provisions
496-20 supplement this chapter unless otherwise provided by this chapter
496-21 or the other partnership provisions.
496-22 Sec. 152.004. RULE OF STATUTORY CONSTRUCTION NOT APPLICABLE.
496-23 The rule that a statute in derogation of the common law is to be
496-24 strictly construed does not apply to this chapter or the other
496-25 partnership provisions.
496-26 Sec. 152.005. APPLICABLE INTEREST RATE. If an obligation to
496-27 pay interest arises under this chapter and the rate is not
497-1 specified, the interest rate is the rate specified by Section
497-2 302.002, Finance Code.
497-3 (Sections 152.006-152.050 reserved for expansion)
497-4 SUBCHAPTER B. NATURE AND CREATION OF PARTNERSHIP
497-5 Sec. 152.051. PARTNERSHIP DEFINED. (a) In this section,
497-6 "association" does not have the meaning of the term "association"
497-7 under Section 1.002.
497-8 (b) Except as provided by Subsection (c) and Section
497-9 152.053(a), an association of two or more persons to carry on a
497-10 business for profit as owners creates a partnership, regardless of
497-11 whether:
497-12 (1) the persons intend to create a partnership; or
497-13 (2) the association is called a "partnership," "joint
497-14 venture," or other name.
497-15 (c) An association or organization is not a partnership if
497-16 it was created under a statute other than:
497-17 (1) this title and the provisions of Title 1
497-18 applicable to partnerships and limited partnerships;
497-19 (2) a predecessor to a statute referred to in
497-20 Subdivision (1); or
497-21 (3) a comparable statute of another jurisdiction.
497-22 (d) The provisions of this chapter govern limited
497-23 partnerships only to the extent provided by Sections 153.003 and
497-24 153.152 and Subchapter H, Chapter 153.
497-25 Sec. 152.052. RULES FOR DETERMINING IF PARTNERSHIP IS
497-26 CREATED. (a) Factors indicating that persons have created a
497-27 partnership include the persons':
498-1 (1) receipt or right to receive a share of profits of
498-2 the business;
498-3 (2) expression of an intent to be partners in the
498-4 business;
498-5 (3) participation or right to participate in control
498-6 of the business;
498-7 (4) agreement to share or sharing:
498-8 (A) losses of the business; or
498-9 (B) liability for claims by third parties
498-10 against the business; and
498-11 (5) agreement to contribute or contributing money or
498-12 property to the business.
498-13 (b) One of the following circumstances, by itself, does not
498-14 indicate that a person is a partner in the business:
498-15 (1) the receipt or right to receive a share of profits
498-16 as payment:
498-17 (A) of a debt, including repayment by
498-18 installments;
498-19 (B) of wages or other compensation to an
498-20 employee or independent contractor;
498-21 (C) of rent;
498-22 (D) to a former partner, surviving spouse or
498-23 representative of a deceased or disabled partner, or transferee of
498-24 a partnership interest;
498-25 (E) of interest or other charge on a loan,
498-26 regardless of whether the amount varies with the profits of the
498-27 business, including a direct or indirect present or future
499-1 ownership interest in collateral or rights to income, proceeds, or
499-2 increase in value derived from collateral; or
499-3 (F) of consideration for the sale of a business
499-4 or other property, including payment by installments;
499-5 (2) co-ownership of property, regardless of whether
499-6 the co-ownership is:
499-7 (A) a joint tenancy, tenancy in common, tenancy
499-8 by the entirety, joint property, community property, or part
499-9 ownership; or
499-10 (B) combined with sharing of profits from the
499-11 property;
499-12 (3) the right to share or sharing gross returns or
499-13 revenues, regardless of whether the persons sharing the gross
499-14 returns or revenues have a common or joint interest in the property
499-15 from which the returns or revenues are derived; or
499-16 (4) ownership of mineral property under a joint
499-17 operating agreement.
499-18 (c) An agreement by the owners of a business to share losses
499-19 is not necessary to create a partnership.
499-20 Sec. 152.053. QUALIFICATIONS TO BE PARTNER; NONPARTNER'S
499-21 LIABILITY TO THIRD PERSON. (a) A person may be a partner unless
499-22 the person lacks capacity apart from this chapter.
499-23 (b) Except as provided by Sections 152.054, 152.307, 152.505
499-24 and 152.506, a person who is not a partner in a partnership under
499-25 Section 152.051 is not a partner as to a third person and is not
499-26 liable to a third person under this chapter.
499-27 Sec. 152.054. FALSE REPRESENTATION OF PARTNERSHIP OR
500-1 PARTNER. (a) A false representation or other conduct falsely
500-2 indicating that a person is a partner with another person does not
500-3 of itself create a partnership.
500-4 (b) A representation or other conduct indicating that a
500-5 person is a partner in an existing partnership, if that is not the
500-6 case, does not of itself make that person a partner in the
500-7 partnership.
500-8 (Sections 152.055-152.100 reserved for expansion)
500-9 SUBCHAPTER C. PARTNERSHIP PROPERTY
500-10 Sec. 152.101. NATURE OF PARTNERSHIP PROPERTY. Partnership
500-11 property is not property of the partners. A partner or a partner's
500-12 spouse does not have an interest in partnership property.
500-13 Sec. 152.102. CLASSIFICATION AS PARTNERSHIP PROPERTY.
500-14 (a) Property is partnership property if acquired in the name of:
500-15 (1) the partnership; or
500-16 (2) one or more partners, regardless of whether or not
500-17 the name of the partnership is indicated, if the instrument
500-18 transferring title to the property indicates:
500-19 (A) the person's capacity as a partner; or
500-20 (B) the existence of a partnership.
500-21 (b) Property is presumed to be partnership property if
500-22 acquired with partnership property, regardless of whether the
500-23 property is acquired as provided by Subsection (a).
500-24 (c) Property acquired in the name of one or more partners is
500-25 presumed to be the partner's property, regardless of whether the
500-26 property is used for partnership purposes, if the instrument
500-27 transferring title to the property does not indicate the person's
501-1 capacity as a partner or the existence of a partnership, and if the
501-2 property is not acquired with partnership property.
501-3 (d) For purposes of this section, property is acquired in
501-4 the name of the partnership by a transfer to:
501-5 (1) the partnership in its name; or
501-6 (2) one or more partners in the partners' capacity as
501-7 partners in the partnership, if the name of the partnership is
501-8 indicated in the instrument transferring title to the property.
501-9 (Sections 152.103-152.200 reserved for expansion)
501-10 SUBCHAPTER D. RELATIONSHIP BETWEEN PARTNERS AND BETWEEN
501-11 PARTNERS AND PARTNERSHIPS
501-12 Sec. 152.201. ADMISSION AS PARTNER. A person may become a
501-13 partner only with the consent of all partners.
501-14 Sec. 152.202. CREDITS OF AND CHARGES TO PARTNER. (a) Each
501-15 partner is credited with an amount equal to:
501-16 (1) the cash and the value of property the partner
501-17 contributes to a partnership; and
501-18 (2) the partner's share of the partnership's profits.
501-19 (b) Each partner is charged with an amount equal to:
501-20 (1) the cash and the value of other property
501-21 distributed by the partnership to the partner; and
501-22 (2) the partner's share of the partnership's losses.
501-23 (c) Each partner is entitled to be credited with an equal
501-24 share of the partnership's profits and is chargeable with a share
501-25 of the partnership's capital or operating losses in proportion to
501-26 the partner's share of the profits.
501-27 Sec. 152.203. RIGHTS AND DUTIES OF PARTNER. (a) Each
502-1 partner has equal rights in the management and conduct of the
502-2 business of a partnership. A partner's right to participate in the
502-3 management and conduct of the business is not community property.
502-4 (b) A partner may use or possess partnership property only
502-5 on behalf of the partnership.
502-6 (c) A partner is not entitled to receive compensation for
502-7 services performed for a partnership other than reasonable
502-8 compensation for services rendered in winding up the business of
502-9 the partnership.
502-10 (d) A partner who, in the proper conduct of the business of
502-11 the partnership or for the preservation of its business or
502-12 property, reasonably makes a payment or advance beyond the amount
502-13 the partner agreed to contribute, or who reasonably incurs a
502-14 liability, is entitled to be repaid and to receive interest from
502-15 the date of the:
502-16 (1) payment or advance; or
502-17 (2) incurrence of the liability.
502-18 Sec. 152.204. GENERAL STANDARDS OF PARTNER'S CONDUCT.
502-19 (a) A partner owes to the partnership and the other partners:
502-20 (1) a duty of loyalty; and
502-21 (2) a duty of care.
502-22 (b) A partner shall discharge the partner's duties to the
502-23 partnership and the other partners under this code or under the
502-24 partnership agreement and exercise any rights and powers in the
502-25 conduct or winding up of the partnership business:
502-26 (1) in good faith; and
502-27 (2) in a manner the partner reasonably believes to be
503-1 in the best interest of the partnership.
503-2 (c) A partner does not violate a duty or obligation under
503-3 this chapter or under the partnership agreement merely because the
503-4 partner's conduct furthers the partner's own interest.
503-5 (d) A partner, in the partner's capacity as partner, is not
503-6 a trustee and is not held to the standards of a trustee.
503-7 Sec. 152.205. PARTNER'S DUTY OF LOYALTY. A partner's duty
503-8 of loyalty includes:
503-9 (1) accounting to and holding for the partnership
503-10 property, profit, or benefit derived by the partner:
503-11 (A) in the conduct and winding up of the
503-12 partnership business; or
503-13 (B) from use by the partner of partnership
503-14 property;
503-15 (2) refraining from dealing with the partnership on
503-16 behalf of a person who has an interest adverse to the partnership;
503-17 and
503-18 (3) refraining from competing or dealing with the
503-19 partnership in a manner adverse to the partnership.
503-20 Sec. 152.206. PARTNER'S DUTY OF CARE. (a) A partner's duty
503-21 of care to the partnership and the other partners is to act in the
503-22 conduct and winding up of the partnership business with the care an
503-23 ordinarily prudent person would exercise in similar circumstances.
503-24 (b) An error in judgment does not by itself constitute a
503-25 breach of the duty of care.
503-26 (c) A partner is presumed to satisfy the duty of care if the
503-27 partner acts on an informed basis and in compliance with Section
504-1 152.204(b).
504-2 Sec. 152.207. STANDARDS OF CONDUCT APPLICABLE TO PERSON
504-3 WINDING UP PARTNERSHIP BUSINESS. Sections 152.204-152.206 apply to
504-4 a person winding up the partnership business as the personal or
504-5 legal representative of the last surviving partner to the same
504-6 extent as those sections apply to a partner.
504-7 Sec. 152.208. AMENDMENT TO PARTNERSHIP AGREEMENT. A
504-8 partnership agreement may be amended only with the consent of all
504-9 partners.
504-10 Sec. 152.209. DECISION-MAKING REQUIREMENT. (a) A
504-11 difference arising in a matter in the ordinary course of the
504-12 partnership business may be decided by a majority-in-interest of
504-13 the partners.
504-14 (b) An act outside the ordinary course of business of a
504-15 partnership may be undertaken only with the consent of all
504-16 partners.
504-17 Sec. 152.210. PARTNER'S LIABILITY TO PARTNERSHIP AND OTHER
504-18 PARTNERS. A partner is liable to a partnership and the other
504-19 partners for:
504-20 (1) a breach of the partnership agreement; or
504-21 (2) a violation of a duty to the partnership or other
504-22 partners under this chapter that causes harm to the partnership or
504-23 the other partners.
504-24 Sec. 152.211. REMEDIES OF PARTNERSHIP AND PARTNERS. (a) A
504-25 partnership may maintain an action against a partner for a breach
504-26 of the partnership agreement or for the violation of a duty to the
504-27 partnership causing harm to the partnership.
505-1 (b) A partner may maintain an action against the partnership
505-2 or another partner for legal or equitable relief, including an
505-3 accounting of partnership business, to:
505-4 (1) enforce a right under the partnership agreement;
505-5 (2) enforce a right under this chapter, including:
505-6 (A) the partner's rights under Sections
505-7 152.201-152.209, 152.212, and 152.213;
505-8 (B) the partner's right on withdrawal to have
505-9 the partner's interest in the partnership redeemed under Subchapter
505-10 H or to enforce any other right under Subchapters G and H; and
505-11 (C) the partner's rights under Subchapter I; or
505-12 (3) enforce the rights and otherwise protect the
505-13 interests of the partner, including rights and interests arising
505-14 independently of the partnership relationship.
505-15 (c) The accrual of and a time limitation on a right of
505-16 action for a remedy under this section is governed by other
505-17 applicable law.
505-18 (d) A right to an accounting does not revive a claim barred
505-19 by law.
505-20 Sec. 152.212. BOOKS AND RECORDS OF PARTNERSHIP. (a) In
505-21 this section, "access" includes the opportunity to inspect and copy
505-22 books and records during ordinary business hours.
505-23 (b) A partnership shall keep its books and records, if any,
505-24 at its chief executive office.
505-25 (c) A partnership shall provide access to its books and
505-26 records to a partner or an agent or attorney of a partner.
505-27 (d) The partnership shall provide a former partner or an
506-1 agent or attorney of a former partner access to books and records
506-2 pertaining to the period during which the former partner was a
506-3 partner or for any other proper purpose with respect to another
506-4 period.
506-5 (e) A partnership may impose a reasonable charge, covering
506-6 the costs of labor and material, for copies of documents furnished
506-7 under this section.
506-8 Sec. 152.213. INFORMATION REGARDING PARTNERSHIP. (a) On
506-9 request and to the extent just and reasonable, each partner and the
506-10 partnership shall furnish complete and accurate information
506-11 concerning the partnership to:
506-12 (1) a partner;
506-13 (2) the legal representative of a deceased partner or
506-14 a partner who has a legal disability; or
506-15 (3) an assignee.
506-16 (b) A legal representative of a deceased partner or a
506-17 partner who has a legal disability and an assignee are subject to
506-18 the duties of a partner with respect to information made available.
506-19 Sec. 152.214. CERTAIN THIRD-PARTY OBLIGATIONS NOT AFFECTED.
506-20 Sections 152.201-152.203, 152.208, 152.209, 154.101-154.103, and
506-21 154.201 do not limit a partnership's obligations to another person
506-22 under Sections 152.301 and 152.302.
506-23 (Sections 152.215-152.300 reserved for expansion)
506-24 SUBCHAPTER E. RELATIONSHIP BETWEEN PARTNERS
506-25 AND OTHER PERSONS
506-26 Sec. 152.301. PARTNER AS AGENT. Each partner is an agent of
506-27 the partnership for the purpose of its business.
507-1 Sec. 152.302. BINDING EFFECT OF PARTNER'S ACTION.
507-2 (a) Unless a partner does not have authority to act for the
507-3 partnership in a particular matter and the person with whom the
507-4 partner is dealing knows that the partner lacks authority, an act
507-5 of a partner, including the execution of an instrument in the
507-6 partnership name, binds the partnership if the act is apparently
507-7 for carrying on in the ordinary course:
507-8 (1) the partnership business; or
507-9 (2) business of the kind carried on by the
507-10 partnership.
507-11 (b) An act of a partner that is not apparently for carrying
507-12 on in the ordinary course a business described by Subsection (a)
507-13 binds the partnership only if authorized by the other partners.
507-14 (c) A conveyance of real property by a partner on behalf of
507-15 the partnership not otherwise binding on the partnership binds the
507-16 partnership if the property has been conveyed by the grantee or a
507-17 person claiming through the grantee to be a holder for value
507-18 without knowledge that the partner exceeded that partner's
507-19 authority in making the conveyance.
507-20 Sec. 152.303. LIABILITY OF PARTNERSHIP FOR CONDUCT OF
507-21 PARTNER. (a) A partnership is liable for loss or injury to a
507-22 person, including a partner, or for a penalty caused by or incurred
507-23 as a result of a wrongful act or omission or other actionable
507-24 conduct of a partner acting:
507-25 (1) in the ordinary course of business of the
507-26 partnership; or
507-27 (2) with the authority of the partnership.
508-1 (b) A partnership is liable for the loss of money or
508-2 property of a person who is not a partner that is:
508-3 (1) received in the course of the partnership's
508-4 business; and
508-5 (2) misapplied by a partner while in the custody of
508-6 the partnership.
508-7 Sec. 152.304. NATURE OF PARTNER'S LIABILITY. (a) Except as
508-8 provided by Subsection (b) or Section 152.801(b), all partners are
508-9 liable jointly and severally for a debt or obligation of the
508-10 partnership unless otherwise:
508-11 (1) agreed by the claimant; or
508-12 (2) provided by law.
508-13 (b) A person who is admitted as a partner into an existing
508-14 partnership does not have personal liability under Subsection (a)
508-15 for an obligation of the partnership that:
508-16 (1) arises before the partner's admission to the
508-17 partnership;
508-18 (2) relates to an action taken or omission occurring
508-19 before the partner's admission to the partnership; or
508-20 (3) arises before or after the partner's admission to
508-21 the partnership under a contract or commitment entered into before
508-22 the partner's admission.
508-23 Sec. 152.305. REMEDY. An action may be brought against a
508-24 partnership and any or all of the partners in the same action or in
508-25 separate actions.
508-26 Sec. 152.306. ENFORCEMENT OF REMEDY. (a) A judgment
508-27 against a partnership is not by itself a judgment against a
509-1 partner. A judgment may be entered against a partner who has been
509-2 served with process in a suit against the partnership.
509-3 (b) Except as provided by Subsection (c), a creditor may
509-4 proceed against one or more partners or the property of the
509-5 partners to satisfy a judgment based on a claim against the
509-6 partnership only if a judgment:
509-7 (1) is also obtained against the partner; and
509-8 (2) based on the same claim:
509-9 (A) is obtained against the partnership;
509-10 (B) has not been reversed or vacated; and
509-11 (C) remains unsatisfied for 90 days after:
509-12 (i) the date on which the judgment is
509-13 entered; or
509-14 (ii) the date on which the stay expires,
509-15 if the judgment is contested by appropriate proceedings and
509-16 execution on the judgment is stayed.
509-17 (c) Subsection (b) does not prohibit a creditor from
509-18 proceeding directly against one or more partners or the property of
509-19 the partners without first seeking satisfaction from partnership
509-20 property if:
509-21 (1) the partnership is a debtor in bankruptcy;
509-22 (2) the creditor and the partnership agreed that the
509-23 creditor is not required to comply with Subsection (b);
509-24 (3) a court orders otherwise, based on a finding that
509-25 partnership property subject to execution in the state is clearly
509-26 insufficient to satisfy the judgment or that compliance with
509-27 Subsection (b) is excessively burdensome; or
510-1 (4) liability is imposed on the partner by law
510-2 independently of the person's status as a partner.
510-3 (d) This section does not limit the effect of Section
510-4 152.801 with respect to a registered limited liability partnership.
510-5 Sec. 152.307. EXTENSION OF CREDIT IN RELIANCE ON FALSE
510-6 REPRESENTATION. (a) The rights of a person extending credit in
510-7 reliance on a representation described by Section 152.054 are
510-8 determined by applicable law other than this chapter and the other
510-9 partnership provisions, including the law of estoppel, agency,
510-10 negligence, fraud, and unjust enrichment.
510-11 (b) The rights and duties of a person held liable under
510-12 Subsection (a) are also determined by law other than the law
510-13 described by Subsection (a).
510-14 (Sections 152.308-152.400 reserved for expansion)
510-15 SUBCHAPTER F. TRANSFER OF PARTNERSHIP INTERESTS
510-16 Sec. 152.401. TRANSFER OF PARTNERSHIP INTEREST. A partner
510-17 may transfer all or part of the partner's partnership interest.
510-18 Sec. 152.402. GENERAL EFFECT OF TRANSFER. A transfer of all
510-19 or part of a partner's partnership interest:
510-20 (1) is not an event of withdrawal;
510-21 (2) does not by itself cause a winding up of the
510-22 partnership business; and
510-23 (3) against the other partners or the partnership,
510-24 does not entitle the transferee, during the continuance of the
510-25 partnership, to participate in the management or conduct of the
510-26 partnership business.
510-27 Sec. 152.403. EFFECT OF TRANSFER ON TRANSFEROR. After
511-1 transfer, the transferor continues to have the rights and duties of
511-2 a partner other than the interest transferred.
511-3 Sec. 152.404. RIGHTS AND DUTIES OF TRANSFEREE. (a) A
511-4 transferee of a partner's partnership interest is entitled to
511-5 receive, to the extent transferred, distributions to which the
511-6 transferor otherwise would be entitled.
511-7 (b) If an event requires a winding up of partnership
511-8 business under Subchapter I, a transferee is entitled to receive,
511-9 to the extent transferred, the net amount otherwise distributable
511-10 to the transferor.
511-11 (c) Until a transferee becomes a partner, the transferee
511-12 does not have liability as a partner solely as a result of the
511-13 transfer.
511-14 (d) For a proper purpose the transferee may require
511-15 reasonable information or an account of a partnership transaction
511-16 and make reasonable inspection of the partnership books. In a
511-17 winding up of partnership business, a transferee may require an
511-18 accounting only from the date of the latest account agreed to by
511-19 all of the partners.
511-20 (e) Until receipt of notice of a transfer, a partnership is
511-21 not required to give effect to a transferee's rights under this
511-22 section and Sections 152.401-152.403.
511-23 Sec. 152.405. POWER TO EFFECT TRANSFER OR GRANT OF SECURITY
511-24 INTEREST. A partnership is not required to give effect to a
511-25 transfer prohibited by a partnership agreement.
511-26 Sec. 152.406. EFFECT OF DEATH OR DIVORCE ON PARTNERSHIP
511-27 INTEREST. (a) For purposes of this code:
512-1 (1) on the divorce of a partner, the partner's spouse,
512-2 to the extent of the spouse's partnership interest, is a
512-3 transferee of the partnership interest from the partner;
512-4 (2) on the death of a partner, the partner's surviving
512-5 spouse, if any, and an heir, legatee, or personal representative of
512-6 the partner, to the extent of their respective partnership
512-7 interest, is a transferee of the partnership interest from the
512-8 partner; and
512-9 (3) on the death of a partner's spouse, an heir,
512-10 legatee, or personal representative of the spouse, to the extent of
512-11 their respective partnership interest, is a transferee of the
512-12 partnership interest from the partner.
512-13 (b) An event of the type described by Section 152.501
512-14 occurring with respect to a partner's spouse is not an event of
512-15 withdrawal.
512-16 (c) This chapter does not impair an agreement for the
512-17 purchase or sale of a partnership interest at any time, including
512-18 the death of an owner of the partnership interest.
512-19 (Sections 152.407-152.500 reserved for expansion)
512-20 SUBCHAPTER G. WITHDRAWAL OF PARTNER
512-21 Sec. 152.501. EVENTS OF WITHDRAWAL. (a) A person ceases to
512-22 be a partner on the occurrence of an event of withdrawal.
512-23 (b) An event of withdrawal of a partner occurs on:
512-24 (1) receipt by the partnership of notice of the
512-25 partner's express will to withdraw as a partner on:
512-26 (A) the date on which the notice is received; or
512-27 (B) a later date specified by the notice;
513-1 (2) an event specified in the partnership agreement as
513-2 causing the partner's withdrawal;
513-3 (3) the partner's expulsion as provided by the
513-4 partnership agreement;
513-5 (4) the partner's expulsion by vote of a
513-6 majority-in-interest of the other partners if:
513-7 (A) it is unlawful to carry on the partnership
513-8 business with that partner;
513-9 (B) there has been a transfer of all or
513-10 substantially all of that partner's partnership interest, other
513-11 than:
513-12 (i) a transfer for security purposes that
513-13 has not been foreclosed; or
513-14 (ii) the substitution of a successor
513-15 trustee or successor personal representative;
513-16 (C) not later than the 90th day after the date
513-17 on which the partnership notifies an entity partner, other than a
513-18 nonfiling entity or foreign nonfiling entity partner, that it will
513-19 be expelled because it has filed a certificate of termination or
513-20 the equivalent, its existence has been involuntarily terminated or
513-21 its charter has been revoked, or its right to conduct business has
513-22 been terminated or suspended by the jurisdiction of its formation,
513-23 if the certificate of termination or the equivalent is not revoked
513-24 or its existence, charter, or right to conduct business is not
513-25 reinstated; or
513-26 (D) an event requiring a winding up has occurred
513-27 with respect to a nonfiling entity or foreign nonfiling entity that
514-1 is a partner;
514-2 (5) application by the partnership or another partner
514-3 for the partner's expulsion by judicial decree because the partner:
514-4 (A) engaged in wrongful conduct that adversely
514-5 and materially affected the partnership business;
514-6 (B) wilfully or persistently committed a
514-7 material breach of:
514-8 (i) the partnership agreement; or
514-9 (ii) a duty owed to the partnership or the
514-10 other partners under Sections 152.204-152.206; or
514-11 (C) engaged in conduct relating to the
514-12 partnership business that made it not reasonably practicable to
514-13 carry on the business in partnership with that partner;
514-14 (6) the partner's:
514-15 (A) becoming a debtor in bankruptcy;
514-16 (B) executing an assignment for the benefit of a
514-17 creditor;
514-18 (C) seeking, consenting to, or acquiescing in
514-19 the appointment of a trustee, receiver, or liquidator of that
514-20 partner or of all or substantially all of that partner's property;
514-21 or
514-22 (D) failing, not later than the 90th day after
514-23 the appointment, to have vacated or stayed the appointment of a
514-24 trustee, receiver, or liquidator of the partner or of all or
514-25 substantially all of the partner's property obtained without the
514-26 partner's consent or acquiescence, or not later than the 90th day
514-27 after the date of expiration of a stay, failing to have the
515-1 appointment vacated;
515-2 (7) if a partner is an individual:
515-3 (A) the partner's death;
515-4 (B) the appointment of a guardian or general
515-5 conservator for the partner; or
515-6 (C) a judicial determination that the partner
515-7 has otherwise become incapable of performing the partner's duties
515-8 under the partnership agreement;
515-9 (8) termination of a partner's existence;
515-10 (9) if a partner has transferred all of the partner's
515-11 partnership interest, redemption of the transferee's interest under
515-12 Sections 152.611 and 152.612(a)-(c); or
515-13 (10) an agreement to continue the partnership under
515-14 Section 152.701 if the partnership has received a notice from the
515-15 partner under Section 152.701 requesting that the partnership be
515-16 wound up.
515-17 Sec. 152.502. EFFECT OF EVENT OF WITHDRAWAL ON PARTNERSHIP
515-18 AND OTHER PARTNERS. A partnership continues after an event of
515-19 withdrawal. The event of withdrawal affects the relationships
515-20 among the withdrawn partner, the partnership, and the continuing
515-21 partners as provided by Sections 152.503-152.506 and Subchapter H.
515-22 Sec. 152.503. WRONGFUL WITHDRAWAL; LIABILITY. (a) At any
515-23 time before the occurrence of an event requiring a winding up of
515-24 partnership business, a partner may withdraw from the partnership
515-25 and cease to be a partner as provided by Section 152.501.
515-26 (b) A partner's withdrawal is wrongful only if:
515-27 (1) the withdrawal breaches an express provision of
516-1 the partnership agreement;
516-2 (2) in the case of a partnership for a definite term
516-3 or particular undertaking or for which the partnership agreement
516-4 provides for winding up on a specified event, before the expiration
516-5 of the term, the completion of the undertaking, or the occurrence
516-6 of the event, as appropriate:
516-7 (A) the partner withdraws by express will;
516-8 (B) the partner withdraws by becoming a debtor
516-9 in bankruptcy; or
516-10 (C) in the case of a partner that is not an
516-11 individual, a trust other than a business trust, or an estate, the
516-12 partner is expelled or otherwise withdraws because the partner
516-13 wilfully dissolved or terminated; or
516-14 (3) the partner is expelled by judicial decree under
516-15 Section 152.501(b)(5).
516-16 (c) In addition to other liability of the partner to the
516-17 partnership or to the other partners, a wrongfully withdrawing
516-18 partner is liable to the partnership and to the other partners for
516-19 damages caused by the withdrawal.
516-20 Sec. 152.504. WITHDRAWN PARTNER'S POWER TO BIND PARTNERSHIP.
516-21 (a) The action of a withdrawn partner occurring not later than the
516-22 first anniversary of the date of the person's withdrawal binds the
516-23 partnership if the transaction would bind the partnership before
516-24 the person's withdrawal and the other party to the transaction:
516-25 (1) does not have notice of the person's withdrawal as
516-26 a partner;
516-27 (2) had done business with the partnership within one
517-1 year preceding the date of withdrawal; and
517-2 (3) reasonably believed that the withdrawn partner was
517-3 a partner at the time of the transaction.
517-4 (b) A withdrawn partner is liable to the partnership for
517-5 loss caused to the partnership arising from an obligation incurred
517-6 by the withdrawn partner after the withdrawal date and for which
517-7 the partnership is liable under Subsection (a).
517-8 Sec. 152.505. EFFECT OF WITHDRAWAL ON PARTNER'S EXISTING
517-9 LIABILITY. (a) Withdrawal of a partner does not by itself
517-10 discharge the partner's liability for an obligation of the
517-11 partnership incurred before the date of withdrawal.
517-12 (b) The estate of a deceased partner is liable for an
517-13 obligation of the partnership incurred while the deceased was a
517-14 partner to the same extent that a withdrawn partner is liable for
517-15 an obligation of the partnership incurred before the date of
517-16 withdrawal.
517-17 (c) A withdrawn partner is discharged from liability
517-18 incurred before the date of withdrawal by an agreement to that
517-19 effect between the partner and a partnership creditor.
517-20 (d) If a creditor of a partnership has notice of a partner's
517-21 withdrawal and without the consent of the withdrawn partner agrees
517-22 to a material alteration in the nature or time of payment of an
517-23 obligation of the partnership incurred before the date of
517-24 withdrawal, the withdrawn partner is discharged from the
517-25 obligation.
517-26 Sec. 152.506. LIABILITY OF WITHDRAWN PARTNER TO THIRD PARTY.
517-27 A person who withdraws as a partner in a circumstance that is not
518-1 an event requiring a winding up of partnership business under
518-2 Section 152.701 is liable to another party as a partner in a
518-3 transaction entered into by the partnership or a surviving
518-4 partnership under Section 10.001 not later than the second
518-5 anniversary of the date of the partner's withdrawal only if the
518-6 other party to the transaction:
518-7 (1) does not have notice of the partner's withdrawal;
518-8 and
518-9 (2) reasonably believed that the withdrawn partner was
518-10 a partner at the time of the transaction.
518-11 (Sections 152.507-152.600 reserved for expansion)
518-12 SUBCHAPTER H. REDEMPTION OF WITHDRAWING PARTNER OR
518-13 TRANSFEREE'S INTEREST
518-14 Sec. 152.601. REDEMPTION IF PARTNERSHIP NOT WOUND UP. The
518-15 partnership interest of a withdrawn partner automatically is
518-16 redeemed by the partnership as of the date of withdrawal in
518-17 accordance with this subchapter if:
518-18 (1) the event of withdrawal occurs under Sections
518-19 152.501(b)(1)-(9) and an event requiring a winding up of
518-20 partnership business does not occur before the 61st day after the
518-21 date of the withdrawal; or
518-22 (2) the event of a withdrawal occurs under Section
518-23 152.501(b)(10).
518-24 Sec. 152.602. REDEMPTION PRICE. (a) Except as provided by
518-25 Subsection (b), the redemption price of a withdrawn partner's
518-26 partnership interest is the fair value of the interest on the date
518-27 of withdrawal.
519-1 (b) The redemption price of the partnership interest of a
519-2 partner who wrongfully withdraws before the expiration of a
519-3 definite term, the completion of a particular undertaking, or the
519-4 occurrence of a specified event requiring a winding up of
519-5 partnership business is the lesser of:
519-6 (1) the fair value of the withdrawn partner's
519-7 partnership interest on the date of withdrawal; or
519-8 (2) the amount that the withdrawn partner would have
519-9 received if an event requiring a winding up of partnership business
519-10 had occurred at the time of the partner's withdrawal.
519-11 (c) Interest is payable on the amount owed under this
519-12 section.
519-13 Sec. 152.603. CONTRIBUTION OBLIGATION. If a wrongfully
519-14 withdrawing partner would have been required to make contributions
519-15 to the partnership under Section 152.708 or 152.709 if an event
519-16 requiring winding up of the partnership business had occurred at
519-17 the time of withdrawal, the withdrawn partner is liable to the
519-18 partnership to make contributions to the partnership in that amount
519-19 and pay interest on the amount owed.
519-20 Sec. 152.604. SETOFF FOR CERTAIN DAMAGES. The partnership
519-21 may set off against the redemption price payable to the withdrawn
519-22 partner the damages for wrongful withdrawal under Section
519-23 152.503(b) and all other amounts owed by the withdrawn partner to
519-24 the partnership, whether currently due, including interest.
519-25 Sec. 152.605. ACCRUAL OF INTEREST. Interest payable under
519-26 Sections 152.602-152.604 accrues from the date of the withdrawal to
519-27 the date of payment.
520-1 Sec. 152.606. INDEMNIFICATION FOR CERTAIN LIABILITY. (a) A
520-2 partnership shall indemnify a withdrawn partner against a
520-3 partnership liability incurred before the date of withdrawal,
520-4 except for a liability:
520-5 (1) that is unknown to the partnership at the time; or
520-6 (2) incurred by an act of the withdrawn partner under
520-7 Section 152.504.
520-8 (b) For purposes of this section, a liability is unknown to
520-9 the partnership if it is not known to a partner other than the
520-10 withdrawn partner.
520-11 Sec. 152.607. DEMAND OR PAYMENT OF ESTIMATED REDEMPTION.
520-12 (a) If a deferred payment is not authorized under Section 152.608
520-13 and an agreement on the redemption price of a withdrawn partner's
520-14 interest is not reached before the 121st day after the date of a
520-15 written demand for payment is made by either party, not later than
520-16 the 30th day after the expiration of the period, the partnership
520-17 shall:
520-18 (1) pay to the withdrawn partner in cash the amount
520-19 the partnership estimates to be the redemption price and any
520-20 accrued interest, reduced by any setoffs and accrued interest under
520-21 Section 152.604; or
520-22 (2) make written demand for payment of its estimate of
520-23 the amount owed by the withdrawn partner to the partnership, minus
520-24 any amount owed to the withdrawn partner by the partnership.
520-25 (b) If a deferred payment is authorized under Section
520-26 152.608 or a contribution or other amount is owed by the withdrawn
520-27 partner to the partnership, the partnership may offer in writing to
521-1 pay, or deliver a written statement of demand for, the amount it
521-2 estimates to be the net amount owed, stating the amount and other
521-3 terms of the obligation.
521-4 (c) On request of the other party, the payment, tender,
521-5 offer, or demand required or allowed by Subsection (a) or (b) must
521-6 be accompanied or followed promptly by:
521-7 (1) if payment, tender, offer or demand is made or
521-8 delivered by the partnership, a statement of partnership property
521-9 and liabilities from the date of the partner's withdrawal and the
521-10 most recent available partnership balance sheet and income
521-11 statement, if any; and
521-12 (2) an explanation of the computation of the estimated
521-13 payment obligation.
521-14 (d) The terms of a payment, tender, offer or demand under
521-15 Subsection (a) or (b) govern a redemption if:
521-16 (1) accompanied by written notice that:
521-17 (A) the payment or tendered amount, if made,
521-18 fully satisfies a party's obligations relating to the redemption of
521-19 the withdrawn partner's partnership interest; and
521-20 (B) an action to determine the redemption price,
521-21 a contribution obligation or setoff under Section 152.603 or
521-22 152.604, or other terms of the redemption obligation must be
521-23 commenced not later than the first anniversary of the later of:
521-24 (i) the date on which the written notice
521-25 is given; or
521-26 (ii) the date on which the information
521-27 required by Subsection (c) is delivered; and
522-1 (2) the party receiving the payment, tender, offer or
522-2 demand does not commence an action in the period described by
522-3 Subdivision (1)(B).
522-4 Sec. 152.608. DEFERRED PAYMENT ON WRONGFUL WITHDRAWAL.
522-5 (a) A partner who wrongfully withdraws before the expiration of a
522-6 definite term, the completion of a particular undertaking, or the
522-7 occurrence of a specified event requiring a winding up of
522-8 partnership business is not entitled to receive any portion of the
522-9 redemption price until the expiration of the term, the completion
522-10 of the undertaking, or the occurrence of the specified event, as
522-11 appropriate, unless the partner establishes to the satisfaction of
522-12 a court that earlier payment will not cause undue hardship to the
522-13 partnership.
522-14 (b) A deferred payment accrues interest.
522-15 (c) The withdrawn partner may seek to demonstrate to the
522-16 satisfaction of the court that security for a deferred payment is
522-17 appropriate.
522-18 Sec. 152.609. ACTION TO DETERMINE TERMS OF REDEMPTION.
522-19 (a) A withdrawn partner or the partnership may maintain an action
522-20 against the other party under Section 152.211 to determine:
522-21 (1) the terms of redemption of that partner's
522-22 interest, including a contribution obligation or setoff under
522-23 Section 152.603 or 152.604; or
522-24 (2) other terms of the redemption obligations of
522-25 either party.
522-26 (b) The action must be commenced not later than the first
522-27 anniversary of the later of:
523-1 (1) the date of delivery of information required by
523-2 Section 152.607(c); or
523-3 (2) the date written notice is given under Section
523-4 152.607(d).
523-5 (c) The court shall determine the terms of the redemption of
523-6 the withdrawn partner's interest, any contribution obligation or
523-7 setoff due under Section 152.603 or 152.604, and accrued interest
523-8 and shall enter judgment for an additional payment or refund.
523-9 (d) If deferred payment is authorized under Section 152.608,
523-10 the court shall also determine the security for payment if
523-11 requested to consider whether security is appropriate.
523-12 (e) If the court finds that a party failed to tender payment
523-13 or make an offer to pay or to comply with the requirements of
523-14 Section 152.607(c) or otherwise acted arbitrarily, vexatiously, or
523-15 not in good faith, the court may assess damages against the party,
523-16 including, if appropriate, in an amount the court finds equitable:
523-17 (1) a share of the profits of the continuing business;
523-18 (2) reasonable attorney's fees; and
523-19 (3) fees and expenses of appraisers or other experts
523-20 for a party to the action.
523-21 Sec. 152.610. DEFERRAL ON WINDING UP PARTNERSHIP. (a) If a
523-22 partner withdraws under Section 152.501 and not later than the 60th
523-23 day after the date of withdrawal an event requiring winding up
523-24 occurs under Section 11.051 or 152.701, the partnership may defer
523-25 paying the redemption price to the withdrawn partner until the
523-26 partnership makes a winding up distribution to the remaining
523-27 partners.
524-1 (b) The redemption price or contribution obligation is the
524-2 amount the withdrawn partner would have received or contributed if
524-3 the event requiring winding up had occurred at the time of the
524-4 partner's withdrawal.
524-5 Sec. 152.611. REDEMPTION OF TRANSFEREE'S PARTNERSHIP
524-6 INTEREST. (a) A partnership must redeem the partnership interest
524-7 of a transferee for its fair value if:
524-8 (1) the interest was transferred when:
524-9 (A) the partnership was for a definite term not
524-10 yet expired;
524-11 (B) the partnership was for a particular
524-12 undertaking not yet completed; or
524-13 (C) the partnership agreement provided for
524-14 winding up of the partnership business on a specified event that
524-15 had not yet occurred;
524-16 (2) the definite term of the partnership has expired,
524-17 the particular undertaking has been completed, or the specified
524-18 event has occurred; and
524-19 (3) the transferee makes a written demand for
524-20 redemption.
524-21 (b) If an agreement for the redemption price of a
524-22 transferee's interest is not reached before the 121st day after the
524-23 date a written demand for redemption is made, the partnership must
524-24 pay to the transferee in cash the amount the partnership estimates
524-25 to be the redemption price and any accrued interest from the date
524-26 of demand not later than the 30th day after the expiration of the
524-27 period.
525-1 (c) On request of the transferee, the payment required by
525-2 Subsection (b) must be accompanied or followed by:
525-3 (1) a statement of partnership property and
525-4 liabilities from the date of the demand for redemption;
525-5 (2) the most recent available partnership balance
525-6 sheet and income statement, if any; and
525-7 (3) an explanation of the computation of the estimated
525-8 payment obligation.
525-9 (d) If the payment required by Subsection (b) is accompanied
525-10 by written notice that the payment is in full satisfaction of the
525-11 partnership's obligations relating to the redemption of the
525-12 transferee's interest, the payment, less interest, is the
525-13 redemption price unless the transferee, not later than the first
525-14 anniversary of the written notice, commences an action to determine
525-15 the redemption price.
525-16 Sec. 152.612. ACTION TO DETERMINE TRANSFEREE'S REDEMPTION
525-17 PRICE. (a) A transferee may maintain an action against a
525-18 partnership to determine the redemption price of the transferee's
525-19 interest.
525-20 (b) The court shall determine the redemption price of the
525-21 transferee's interest and accrued interest and enter judgment for
525-22 payment or refund.
525-23 (c) If the court finds that the partnership failed to make
525-24 payment or otherwise acted arbitrarily, vexatiously, or not in good
525-25 faith, the court may assess against the partnership in an amount
525-26 the court finds equitable:
525-27 (1) reasonable attorney's fees; and
526-1 (2) fees and expenses of appraisers or other experts
526-2 for a party to the action.
526-3 (d) The redemption of a transferee's interest under Sections
526-4 152.611(a) and (b) may be deferred as determined by the court if
526-5 the partnership establishes to the satisfaction of the court that
526-6 failure to defer redemption will cause undue hardship to the
526-7 partnership business.
526-8 (Sections 152.613-152.700 reserved for expansion)
526-9 SUBCHAPTER I. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS
526-10 Sec. 152.701. ADDITIONAL EVENTS REQUIRING WINDING UP.
526-11 (a) An event requiring winding up of a partnership includes, in
526-12 addition to any event specified in Section 11.051, the following:
526-13 (1) in a partnership that is not for a definite term
526-14 or for a particular undertaking or in which the partnership
526-15 agreement does not provide for winding up the partnership business
526-16 on a specified event, the express will of a majority-in-interest of
526-17 the partners who have not assigned their interests;
526-18 (2) in a partnership for a definite term or for a
526-19 particular undertaking, on:
526-20 (A) the express will of all of the partners; or
526-21 (B) the expiration of the term or the completion
526-22 of the undertaking, unless otherwise continued under Section
526-23 152.710;
526-24 (3) in a partnership in which the partnership
526-25 agreement provides for the winding up of the partnership business
526-26 on a specified event, upon:
526-27 (A) the express will of all of the partners; or
527-1 (B) the occurrence of the specified event,
527-2 unless otherwise continued under Section 152.710.
527-3 (4) an event that makes it illegal for all or
527-4 substantially all of the partnership business to be continued, but
527-5 a cure of illegality before the 91st day after the date of notice
527-6 to the partnership of the event is effective retroactively to the
527-7 date of the event for purposes of this subsection;
527-8 (5) the sale of all or substantially all of the
527-9 property of the partnership outside the ordinary course of
527-10 business; and
527-11 (6) if a partnership is not for a definite term or a
527-12 particular undertaking and its partnership agreement does not
527-13 provide for a specified event requiring a winding up of the
527-14 partnership business, a request for winding up the partnership
527-15 business from a partner, other than a partner who has agreed not to
527-16 withdraw.
527-17 (b) An event described by Subsection (a)(6) requires the
527-18 winding up of a partnership 60 days after the date on which the
527-19 partnership receives notice of the request or at a later date as
527-20 specified by the notice, unless a majority-in-interest of the
527-21 partners agree to continue the partnership.
527-22 Sec. 152.702. EFFECT OF EVENT REQUIRING WINDING UP. On the
527-23 occurrence of an event requiring winding up of a partnership
527-24 business under Section 11.051 or 152.701:
527-25 (1) the partnership continues until the winding up of
527-26 its business is completed, at which time the partnership is
527-27 terminated; and
528-1 (2) the relationship among the partners is changed as
528-2 provided by this subchapter.
528-3 Sec. 152.703. PERSONS ELIGIBLE TO WIND UP PARTNERSHIP
528-4 BUSINESS. (a) After the occurrence of an event requiring a
528-5 winding up of a partnership business, the partnership business may
528-6 be wound up by:
528-7 (1) the partners who have not withdrawn;
528-8 (2) the legal representative of the last surviving
528-9 partner; or
528-10 (3) a person appointed by the court to carry out the
528-11 winding up under Subsection (b).
528-12 (b) On application of a partner, a partner's legal
528-13 representative or transferee, or a withdrawn partner whose interest
528-14 is not redeemed under Section 152.608, a court, for good cause, may
528-15 appoint a person to carry out the winding up and may make an order,
528-16 direction, or inquiry that the circumstances require.
528-17 Sec. 152.704. RIGHTS AND DUTIES OF PERSON WINDING UP
528-18 PARTNERSHIP BUSINESS. (a) To the extent appropriate for winding
528-19 up, as soon as reasonably practicable, and in the name of and for
528-20 and on behalf of the partnership, a person winding up a
528-21 partnership's business may take the actions specified in Sections
528-22 11.052, 11.053 and 11.055.
528-23 (b) Section 11.052(a)(2) shall not be applicable to a
528-24 partnership.
528-25 Sec. 152.705. BINDING EFFECT OF PARTNER'S ACTION AFTER EVENT
528-26 REQUIRING WINDING UP. After the occurrence of an event requiring
528-27 winding up of the partnership business, a partnership is bound by a
529-1 partner's act that:
529-2 (1) is appropriate for winding up; or
529-3 (2) would bind the partnership under Sections 152.301
529-4 and 152.302 before the occurrence of the event requiring winding
529-5 up, if the other party to the transaction does not have notice that
529-6 an event requiring winding up has occurred.
529-7 Sec. 152.706. PARTNER'S LIABILITY TO OTHER PARTNERS AFTER
529-8 WIND UP. (a) Except as provided by Subsection (b), after
529-9 occurrence of an event requiring winding up of the partnership
529-10 business the losses with respect to which a partner must contribute
529-11 under Section 152.709(a) include losses from a liability incurred
529-12 under Section 152.705.
529-13 (b) A partner who incurs, with notice that an event
529-14 requiring a winding up of the partnership business has occurred, a
529-15 partnership liability under Section 152.705(2) by an act that is
529-16 not appropriate for winding up is liable to the partnership for a
529-17 loss caused to the partnership arising from that liability.
529-18 Sec. 152.707. DISPOSITION OF ASSETS. (a) In winding up the
529-19 partnership business, the property of the partnership, including
529-20 any required contributions of the partners under Sections 152.708
529-21 and 152.709, shall be applied to discharge its obligations to
529-22 creditors, including partners who are creditors other than in the
529-23 partners' capacities as partners.
529-24 (b) A surplus shall be applied to pay in cash the net amount
529-25 distributable to partners in accordance with their right to
529-26 distributions under Section 152.708.
529-27 Sec. 152.708. SETTLEMENT OF ACCOUNTS. (a) Each partner is
530-1 entitled to a settlement of all partnership accounts on winding up
530-2 the partnership business.
530-3 (b) In settling accounts among the partners, the partnership
530-4 interest of a withdrawn partner that is not redeemed under
530-5 Subchapter H is credited with a share of any profits for the period
530-6 after the partner's withdrawal but is charged with a share of
530-7 losses for that period only to the extent of profits credited for
530-8 that period.
530-9 (c) The profits and losses that result from the liquidation
530-10 of the partnership property must be credited and charged to the
530-11 partners' capital accounts.
530-12 (d) The partnership shall make a distribution to a partner
530-13 in an amount equal to that partner's positive balance in the
530-14 partner's capital account. Except as provided by Section
530-15 152.304(b) or 152.801, a partner shall contribute to the
530-16 partnership an amount equal to that partner's negative balance in
530-17 the partner's capital account.
530-18 Sec. 152.709. CONTRIBUTIONS TO DISCHARGE OBLIGATIONS.
530-19 (a) Except as provided by Sections 152.304(b) and 152.801, to the
530-20 extent not taken into account in settling the accounts among
530-21 partners under Section 152.708:
530-22 (1) each partner shall contribute, in the proportion
530-23 in which the partner shares partnership losses, the amount
530-24 necessary to satisfy partnership obligations, excluding liabilities
530-25 that creditors have agreed may be satisfied only with partnership
530-26 property without recourse to individual partners;
530-27 (2) if a partner fails to contribute, the other
531-1 partners shall contribute the additional amount necessary to
531-2 satisfy the partnership obligations in the proportions in which the
531-3 partners share partnership losses; and
531-4 (3) a partner or partner's legal representative may
531-5 enforce or recover from the other partners, or from the estate of a
531-6 deceased partner, contributions the partner or estate makes to the
531-7 extent the amount contributed exceeds that partner's or the
531-8 estate's share of the partnership obligations.
531-9 (b) The estate of a deceased partner is liable for the
531-10 partner's obligation to contribute to the partnership.
531-11 (c) The following persons may enforce the obligation of a
531-12 partner or the estate of a deceased partner to contribute to a
531-13 partnership:
531-14 (1) the partnership;
531-15 (2) an assignee for the benefit of creditors of a
531-16 partnership or a partner; or
531-17 (3) a person appointed by a court to represent
531-18 creditors of a partnership or a partner.
531-19 Sec. 152.710. CONTINUATION OF PARTNERSHIP. (a) If all the
531-20 partners in a partnership for a definite term or for a particular
531-21 undertaking or for which the partnership agreement provides for
531-22 winding up on a specified event agree to continue the partnership
531-23 business notwithstanding the expiration of the term, the completion
531-24 of the undertaking, or the occurrence of the event, as appropriate,
531-25 other than the withdrawal of a partner, the partnership is
531-26 continued and the partnership agreement is considered amended to
531-27 provide that the expiration, the completion, or the occurrence of
532-1 the event did not result in an event requiring the winding up of
532-2 the partnership business.
532-3 (b) A continuation of the business for 90 days by the
532-4 partners or those who habitually acted in the business during the
532-5 term or undertaking or preceding the event, without a settlement or
532-6 liquidation of the partnership business and without objection from
532-7 a partner, is prima facie evidence of agreement by all partners to
532-8 continue the business under Subsection (a).
532-9 (c) The continuation of the business by the other partners
532-10 or by those who habitually acted in the business before the notice
532-11 under Section 152.701(b), other than the partner giving the notice,
532-12 without any settlement or liquidation of the partnership business,
532-13 is prima facie evidence of an agreement to continue the partnership
532-14 under Section 152.701(b).
532-15 (Sections 152.711-152.800 reserved for expansion)
532-16 SUBCHAPTER J. REGISTERED LIMITED LIABILITY PARTNERSHIPS
532-17 Sec. 152.801. LIABILITY OF PARTNER. (a) Except as provided
532-18 by Subsection (b), a partner in a registered limited liability
532-19 partnership is not personally liable, directly or indirectly, by
532-20 contribution, indemnity, or otherwise, for a debt or obligation of
532-21 the partnership incurred while the partnership is a registered
532-22 limited liability partnership.
532-23 (b) A partner in a registered limited liability partnership
532-24 is not personally liable for a debt or obligation of the
532-25 partnership arising from an error, omission, negligence,
532-26 incompetence, or malfeasance committed by another partner or
532-27 representative of the partnership while the partnership is a
533-1 registered limited liability partnership and in the course of the
533-2 partnership business unless the first partner:
533-3 (1) was supervising or directing the other partner or
533-4 representative when the error, omission, negligence, incompetence,
533-5 or malfeasance was committed by the other partner or
533-6 representative;
533-7 (2) was directly involved in the specific activity in
533-8 which the error, omission, negligence, incompetence, or malfeasance
533-9 was committed by the other partner or representative; or
533-10 (3) had notice or knowledge of the error, omission,
533-11 negligence, incompetence, or malfeasance by the other partner or
533-12 representative at the time of the occurrence and then failed to
533-13 take reasonable action to prevent or cure the error, omission,
533-14 negligence, incompetence, or malfeasance.
533-15 (c) Sections 2.101(a)(1), 152.305 and 152.306 do not limit
533-16 the effect of Subsection (a) in a registered limited liability
533-17 partnership.
533-18 (d) In this section, "representative" includes an agent,
533-19 servant, or employee of a registered limited liability partnership.
533-20 (e) Subsections (a) and (b) do not affect:
533-21 (1) the liability of a partnership to pay its debts
533-22 and obligations from partnership property;
533-23 (2) the liability of a partner, if any, imposed by law
533-24 or contract independently of the partner's status as a partner; or
533-25 (3) the manner in which service of citation or other
533-26 civil process may be served in an action against a partnership.
533-27 (f) This section controls over the other parts of Chapter
534-1 152 and the other partnership provisions regarding the liability of
534-2 partners of a registered limited liability partnership, the
534-3 chargeability of the partners for the debts and obligations of the
534-4 partnership, and the obligations of the partners regarding
534-5 contributions and indemnity.
534-6 Sec. 152.802. REGISTRATION. (a) In addition to complying
534-7 with Sections 152.803 and 152.804, a partnership, to become a
534-8 registered limited liability partnership, must file an application
534-9 with the secretary of state in accordance with Chapter 4 and this
534-10 section. The application must:
534-11 (1) set out:
534-12 (A) the name of the partnership;
534-13 (B) the federal tax identification number of the
534-14 partnership;
534-15 (C) the street address of the partnership's
534-16 principal office in this state or outside of this state, as
534-17 applicable; and
534-18 (D) the number of partners at the date of
534-19 application; and
534-20 (2) contain a brief statement of the partnership's
534-21 business.
534-22 (b) The application must be signed by:
534-23 (1) a majority-in-interest of the partners; or
534-24 (2) one or more partners authorized by a
534-25 majority-in-interest of the partners.
534-26 (c) A partnership is registered as a registered limited
534-27 liability partnership by the secretary of state on:
535-1 (1) the date on which a completed initial or renewal
535-2 application is filed in accordance with Chapter 4; or
535-3 (2) a later date specified in the application.
535-4 (d) A registration is not affected by subsequent changes in
535-5 the partners of the partnership.
535-6 (e) The registration of a limited liability partnership is
535-7 effective until the first anniversary of the date of registration
535-8 or a later effective date, unless the application is:
535-9 (1) withdrawn or revoked at an earlier time; or
535-10 (2) renewed in accordance with Subsection (g).
535-11 (f) A registration may be withdrawn by filing a withdrawal
535-12 notice with the secretary of state in accordance with Chapter 4. A
535-13 withdrawal notice terminates the status of the partnership as a
535-14 registered limited liability partnership from the date on which the
535-15 notice is filed or a later date specified in the notice, but not
535-16 later than the expiration date under Subsection (e). A withdrawal
535-17 notice must:
535-18 (1) contain:
535-19 (A) the name of the partnership;
535-20 (B) the federal tax identification number of the
535-21 partnership;
535-22 (C) the date of registration of the
535-23 partnership's last application under this subchapter; and
535-24 (D) the current street address of the
535-25 partnership's principal office in this state and outside this
535-26 state, if applicable; and
535-27 (2) be signed by:
536-1 (A) a majority-in-interest of the partners; or
536-2 (B) one or more partners authorized by a
536-3 majority-in-interest of the partners.
536-4 (g) An effective registration may be renewed before its
536-5 expiration by filing an application with the secretary of state in
536-6 accordance with Chapter 4. A renewal application filed under this
536-7 subsection continues an effective registration for one year after
536-8 the date the registration would otherwise expire. The renewal
536-9 application must contain:
536-10 (1) current information required for an initial
536-11 application; and
536-12 (2) the most recent date of registration of the
536-13 partnership.
536-14 (h) The secretary of state may remove from its active
536-15 records the registration of a partnership the registration of which
536-16 has:
536-17 (1) been withdrawn or revoked; or
536-18 (2) expired and not been renewed.
536-19 (i) The secretary of state is not responsible for
536-20 determining whether a partnership is in compliance with the
536-21 requirements of Section 152.804(a).
536-22 (j) A document filed under this subchapter may be amended by
536-23 filing an application for amendment of registration with the
536-24 secretary of state in accordance with Chapter 4 and this
536-25 subsection. The application for amendment must:
536-26 (1) contain:
536-27 (A) the name of the partnership;
537-1 (B) the tax identification number of the
537-2 partnership;
537-3 (C) the identity of the document being amended;
537-4 (D) the date on which the document being amended
537-5 was filed;
537-6 (E) a reference to the part of the document
537-7 being amended; and
537-8 (F) the amendment or correction; and
537-9 (2) be signed by:
537-10 (A) a majority-in-interest of the partners; or
537-11 (B) one or more partners authorized by a
537-12 majority-in-interest of the partners.
537-13 Sec. 152.803. NAME. The name of a registered limited
537-14 liability partnership must contain:
537-15 (1) the phrases "registered limited liability
537-16 partnership" or "limited liability partnership"; or
537-17 (2) an abbreviation of one of the phrases as the last
537-18 word or letters of its name.
537-19 Sec. 152.804. INSURANCE OR FINANCIAL RESPONSIBILITY. (a) A
537-20 registered limited liability partnership must:
537-21 (1) carry at least $100,000 of liability insurance of
537-22 a kind that is designed to cover the kind of error, omission,
537-23 negligence, incompetence, or malfeasance for which liability is
537-24 limited by Section 152.801(b); or
537-25 (2) provide $100,000 specifically designated and
537-26 segregated for the satisfaction of judgments against the
537-27 partnership for the kind of error, omission, negligence,
538-1 incompetence, or malfeasance for which liability is limited by
538-2 Section 152.801(b) by:
538-3 (A) deposit of cash, bank certificates of
538-4 deposit, or United States Treasury obligations in trust or bank
538-5 escrow;
538-6 (B) a bank letter of credit; or
538-7 (C) insurance company bond.
538-8 (b) If the registered limited liability partnership is in
538-9 compliance with Subsection (a), the requirements of this section
538-10 may not be admissible or be made known to the jury in determining
538-11 an issue of liability for or extent of:
538-12 (1) the debt or obligation in question; or
538-13 (2) damages in question.
538-14 (c) If compliance with Subsection (a) is disputed:
538-15 (1) compliance must be determined separately from the
538-16 trial or proceeding to determine:
538-17 (A) the partnership debt or obligation in
538-18 question;
538-19 (B) the amount of the debt or obligation; or
538-20 (C) partner liability for the debt or
538-21 obligation; and
538-22 (2) the burden of proof of compliance is on the person
538-23 claiming limitation of liability under Section 152.801(b).
538-24 Sec. 152.805. LIMITED PARTNERSHIP. A limited partnership
538-25 may become a registered limited liability partnership by complying
538-26 with applicable provisions of Chapter 153.
538-27 (Sections 152.806-152.900 reserved for expansion)
539-1 SUBCHAPTER K. FOREIGN LIMITED LIABILITY PARTNERSHIPS
539-2 Sec. 152.901. GENERAL. (a) A foreign limited liability
539-3 partnership is subject to Section 2.101 with respect to its
539-4 activities in this state to the same extent as a domestic
539-5 registered limited liability partnership.
539-6 (b) A foreign limited liability partnership may not be
539-7 denied registration because of a difference between the laws of the
539-8 state under which the partnership is formed and the laws of this
539-9 state.
539-10 Sec. 152.902. NAME. The name of a foreign limited liability
539-11 partnership must:
539-12 (1) satisfy the requirements of the state of
539-13 formation; and
539-14 (2) end with:
539-15 (A) the phrases "registered limited liability
539-16 partnership" or "limited liability partnership"; or
539-17 (B) an abbreviation of one of the phrases.
539-18 Sec. 152.903. ACTIVITIES NOT CONSTITUTING TRANSACTING
539-19 BUSINESS. Without excluding other activities that do not
539-20 constitute transacting business in this state, a foreign limited
539-21 liability partnership is not considered to be transacting business
539-22 in this state for purposes of this code because it carries on in
539-23 this state one or more of the activities listed by Section 9.101.
539-24 Sec. 152.904. REGISTERED AGENT. (a) A foreign limited
539-25 liability partnership subject to this chapter shall maintain a
539-26 registered office and registered agent in this state.
539-27 (b) For purposes of a registered office and registered
540-1 agent, a foreign limited liability partnership is subject to
540-2 Sections 5.201 through 5.209 to the same extent as a foreign filing
540-3 entity.
540-4 Sec. 152.905. STATEMENT OF FOREIGN QUALIFICATION.
540-5 (a) Before transacting business in this state, a foreign limited
540-6 liability partnership must file an application for registration in
540-7 accordance with Chapters 4 and 9 as though it were a foreign filing
540-8 entity and this section.
540-9 (b) In addition to the information required by Section
540-10 9.004, the application must set out:
540-11 (1) the federal tax identification number of the
540-12 partnership;
540-13 (2) the date of initial registration as a limited
540-14 liability partnership under the laws of the state of formation;
540-15 (3) the number of partners at the date of the
540-16 statement; and
540-17 (4) that the secretary of state is appointed the agent
540-18 of the partnership for service of process under the circumstances
540-19 set forth by Section 152.904.
540-20 (c) The application must be signed by:
540-21 (1) a majority-in-interest of the partners; or
540-22 (2) one or more partners authorized by a
540-23 majority-in-interest of the partners.
540-24 (d) A partnership is registered as a foreign limited
540-25 liability partnership on:
540-26 (1) the date on which a completed initial or renewal
540-27 statement of foreign qualification is filed with the secretary of
541-1 state in accordance with Chapter 4; or
541-2 (2) a later date specified in the statement.
541-3 (e) A registration is not affected by subsequent changes in
541-4 the partners of the partnership.
541-5 (f) The registration of a foreign limited liability
541-6 partnership is effective until the first anniversary of the date
541-7 after the date of registration or a later effective date, unless
541-8 the statement is:
541-9 (1) withdrawn or revoked at an earlier time; or
541-10 (2) renewed in accordance with Section 152.908.
541-11 Sec. 152.906. CANCELLATION OF REGISTRATION. (a) A
541-12 registration may be canceled by filing a certificate of
541-13 cancellation.
541-14 (b) The certificate of cancellation must:
541-15 (1) contain:
541-16 (A) the federal tax identification number of the
541-17 partnership; and
541-18 (B) the date of effectiveness of the
541-19 partnership's last application for registration under this section;
541-20 and
541-21 (2) be signed by:
541-22 (A) a majority-in-interest of the partners; or
541-23 (B) one or more partners authorized by a
541-24 majority-in-interest of the partners.
541-25 Sec. 152.907. EFFECT OF CERTIFICATE OF CANCELLATION. A
541-26 certificate of cancellation terminates the registration of the
541-27 partnership as a foreign limited liability partnership as of the
542-1 date on which the notice is filed or a later date specified in the
542-2 notice, but not later than the expiration date under Section
542-3 152.905(f).
542-4 Sec. 152.908. RENEWAL OF REGISTRATION. (a) An effective
542-5 registration may be renewed before its expiration by filing a
542-6 renewal application for registration with the secretary of state in
542-7 accordance with Chapter 9.
542-8 (b) The renewal application must contain:
542-9 (1) current information required for an initial
542-10 statement of qualification; and
542-11 (2) the most recent date of registration of the
542-12 partnership.
542-13 (c) An application for registration filed under this section
542-14 continues an effective registration for one year after the date the
542-15 registration would otherwise expire.
542-16 Sec. 152.909. ACTION BY SECRETARY OF STATE. The secretary
542-17 of state may remove from its active records the registration of a
542-18 foreign limited liability partnership the registration of which
542-19 has:
542-20 (a) been withdrawn or revoked; or
542-21 (b) expired and not been renewed.
542-22 Sec. 152.910. EFFECT OF FAILURE TO QUALIFY. (a) A foreign
542-23 limited liability partnership that transacts business in this state
542-24 without being registered is subject to Sections 9.012 and 9.013 to
542-25 the same extent as a foreign filing entity.
542-26 (b) A partner of a foreign limited liability partnership is
542-27 not liable for a debt or obligation of the partnership solely
543-1 because the partnership transacted business in this state without
543-2 being registered.
543-3 Sec. 152.911. AMENDMENT. (a) A document filed under this
543-4 subchapter may be amended by filing with the secretary of state an
543-5 application for amendment of registration in accordance with
543-6 Chapter 4.
543-7 (b) The application for amendment must contain:
543-8 (1) the name of the partnership;
543-9 (2) the tax identification number of the partnership;
543-10 (3) the identity of the document being amended;
543-11 (4) a reference to the date on which the document
543-12 being amended was filed;
543-13 (5) the part of the document being amended; and
543-14 (6) the amendment or correction.
543-15 Sec. 152.912. EXECUTION OF APPLICATION FOR AMENDMENT. The
543-16 application for amendment must be signed by:
543-17 (1) a majority-in-interest of the partners; or
543-18 (2) one or more partners authorized by a
543-19 majority-in-interest of the partners.
543-20 Sec. 152.913. EXECUTION OF STATEMENT OF CHANGE OF REGISTERED
543-21 OFFICE OR REGISTERED AGENT. A statement filed by a foreign limited
543-22 liability partnership in accordance with Section 5.202 must be
543-23 signed by:
543-24 (1) a majority-in-interest of the partners; or
543-25 (2) one or more partners authorized by a
543-26 majority-in-interest of the partners.
544-1 CHAPTER 153. LIMITED PARTNERSHIPS
544-2 SUBCHAPTER A. GENERAL PROVISIONS
544-3 Sec. 153.001. DEFINITION. In this chapter, "other limited
544-4 partnership provisions" means the provisions of Title 1 and
544-5 Chapters 151 and 154, to the extent applicable to limited
544-6 partnerships.
544-7 Sec. 153.002. CONSTRUCTION. (a) This chapter and the other
544-8 limited partnership provisions shall be applied and construed to
544-9 effect its general purpose to make uniform the law with respect to
544-10 limited partnerships among states that have similar laws.
544-11 (b) The rule that a statute in derogation of the common law
544-12 is to be strictly construed does not apply to this chapter and the
544-13 other limited partnership provisions.
544-14 Sec. 153.003. APPLICABILITY OF OTHER LAWS. (a) Except as
544-15 provided by Subsection (b), in a case not provided for by this
544-16 chapter and the other limited partnership provisions, the
544-17 provisions of Chapter 152 governing partnerships that are not
544-18 limited partnerships and the rules of law and equity govern.
544-19 (b) The powers and duties of a limited partner shall not be
544-20 governed by a provision of Chapter 152 that would be inconsistent
544-21 with the nature and role of a limited partner as contemplated by
544-22 this chapter.
544-23 (c) A limited partner shall not have any obligation or duty
544-24 of a general partner solely by reason of being a limited partner.
544-25 Sec. 153.004. NON-WAIVABLE TITLE 1 PROVISIONS. (a) Except
544-26 as provided by this section, the following provisions of Title 1
544-27 may not be waived or modified in the partnership agreement of a
545-1 limited partnership:
545-2 (1) Chapter 1, if the provision is used to interpret a
545-3 provision or define a word or phrase contained in a section listed
545-4 in this subsection;
545-5 (2) Chapter 2, other than Section 2.104(c)(2), Section
545-6 2.104(c)(3) or 2.106;
545-7 (3) Chapter 3, other than Subchapters C and E thereof
545-8 and Sections 3.151 and 3.152 (provided, that in all events a
545-9 partnership agreement may not validly waive or modify Sections
545-10 153.551 and 153.552); or
545-11 (4) Chapter 4, 5, 7, 10, 11 or 12.
545-12 (b) A provision listed in Subsection (a) may be waived or
545-13 modified in the partnership agreement if the provision that is
545-14 waived or modified authorizes the limited partnership to waive or
545-15 modify the provision in the limited partnership's governing
545-16 documents.
545-17 (c) A provision listed in Subsection (a) may be modified in
545-18 the partnership agreement if the provision that is modified
545-19 specifies:
545-20 (1) the person or group or persons who are entitled to
545-21 approve a modification; or
545-22 (2) the vote or other method by which a modification
545-23 is required to be approved.
545-24 Sec. 153.005. WAIVER OR MODIFICATION OF RIGHTS OF THIRD
545-25 PARTIES. A provision in this title or in that part of Title 1
545-26 applicable to a limited partnership that grants a right to a
545-27 person, other than a general partner, a limited partner, or
546-1 assignee of a partnership interest in a limited partnership, may be
546-2 waived or modified in the partnership agreement of the limited
546-3 partnership only if the person consents in writing to the waiver or
546-4 modification.
546-5 (Sections 153.006-153.050 reserved for expansion)
546-6 SUBCHAPTER B. SUPPLEMENTAL PROVISIONS REGARDING CERTIFICATE OF
546-7 FORMATION AND AMENDMENT TO CERTIFICATE
546-8 Sec. 153.051. SUPPLEMENTAL PROVISIONS REGARDING CERTIFICATE
546-9 OF FORMATION. (a) To form a limited partnership, the partners
546-10 must enter into a partnership agreement and file a certificate of
546-11 formation as provided by Chapter 3 and this section.
546-12 (b) The partners of a limited partnership formed under
546-13 Section 10.001 or 10.101 may include the partnership agreement
546-14 required under Subsection (a) in the plan of merger or conversion.
546-15 (c) A certificate of formation for a limited partnership
546-16 must include the address of the principal office of the partnership
546-17 in the United States where records are to be kept or made available
546-18 under Section 153.551.
546-19 (d) The fact that a certificate of formation is on file with
546-20 the secretary of state is notice that the partnership is a limited
546-21 partnership and of all other facts contained in the certificate as
546-22 required by Section 3.005.
546-23 Sec. 153.052. REQUIRED AMENDMENT TO CERTIFICATE OF
546-24 FORMATION. (a) A general partner shall file a certificate of
546-25 amendment reflecting the occurrence of one or more of the following
546-26 events not later than the 30th day after the date on which the
546-27 event occurred:
547-1 (1) the admission of a new general partner;
547-2 (2) the withdrawal of a general partner;
547-3 (3) a change in the name of the limited partnership;
547-4 or
547-5 (4) except as provided by Section 5.202, a change in:
547-6 (A) the address of the registered office; or
547-7 (B) the name or address of the registered agent
547-8 of the limited partnership.
547-9 (b) A general partner who becomes aware that a statement in
547-10 a certificate of formation was false when made or that a matter
547-11 described in the certificate has changed, making the certificate
547-12 false in any material respect, shall promptly amend the certificate
547-13 to make it accurate.
547-14 Sec. 153.053. DISCRETIONARY AMENDMENT TO CERTIFICATE OF
547-15 FORMATION. (a) A certificate of formation may be amended at any
547-16 time for a proper purpose as determined by the general partners.
547-17 (b) A certificate of formation may be amended to state the
547-18 name, mailing address, and street address of the business or
547-19 residence of each person winding up the limited partnership's
547-20 affairs if, after an event requiring the winding up of a limited
547-21 partnership but before the limited partnership is reconstituted or
547-22 a certificate of cancellation is filed as provided by Section
547-23 153.451:
547-24 (1) the certificate of formation has been amended to
547-25 reflect the withdrawal of all general partners; or
547-26 (2) a person who is not shown on the certificate of
547-27 formation as a general partner is carrying out the winding up of a
548-1 limited partnership's affairs.
548-2 (c) If the certificate of formation is amended under
548-3 Subsection (b), each person winding up the limited partnership's
548-4 affairs shall execute and file the certificate of amendment. A
548-5 person winding up the partnership's affairs is not subject to
548-6 liability as a general partner because of the filing of the
548-7 certificate of amendment.
548-8 (d) A general partner who is not winding up the limited
548-9 partnership's affairs is not required to execute and file a
548-10 certificate of amendment as provided by this section.
548-11 (Sections 153.054-153.100 reserved for expansion)
548-12 SUBCHAPTER C. LIMITED PARTNERS
548-13 Sec. 153.101. ADMISSION OF LIMITED PARTNERS. (a) In
548-14 connection with the formation of a limited partnership, a person
548-15 acquiring a limited partnership interest becomes a limited partner
548-16 on the later of:
548-17 (1) the date on which the limited partnership is
548-18 formed; or
548-19 (2) the date stated in the records of the limited
548-20 partnership as the date on which the person becomes a limited
548-21 partner or, if that date is not stated in those records, the date
548-22 on which the person's admission is first reflected in the records
548-23 of the limited partnership.
548-24 (b) After a limited partnership is formed, a person who
548-25 acquires a partnership interest directly from the limited
548-26 partnership becomes a new limited partner on:
548-27 (1) compliance with the provisions of the partnership
549-1 agreement governing admission of new limited partners; or
549-2 (2) if the partnership agreement does not contain
549-3 relevant admission provisions, the written consent of all partners.
549-4 (c) After formation of a limited partnership, an assignee of
549-5 a partnership interest becomes a new limited partner as provided by
549-6 Section 153.253(a).
549-7 (d) A person may be a limited partner unless the person
549-8 lacks capacity apart from this chapter and the other limited
549-9 partnership provisions.
549-10 Sec. 153.102. LIABILITY TO THIRD PARTIES. (a) Except as
549-11 provided by Subsection (c) of this section, a limited partner is
549-12 not liable for the obligations of a limited partnership unless:
549-13 (1) the limited partner is also a general partner; or
549-14 (2) in addition to the exercise of the limited
549-15 partner's rights and powers as a limited partner, the limited
549-16 partner participates in the control of the business.
549-17 (b) If the limited partner participates in the control of
549-18 the business, the limited partner is liable only to a person who
549-19 transacts business with the limited partnership reasonably
549-20 believing, based on the limited partner's conduct, that the limited
549-21 partner is a general partner.
549-22 (c) A limited partner who knowingly permits the limited
549-23 partner's name to be used in the name of the limited partnership,
549-24 except under a circumstance permitted by Section 5.055(c), is
549-25 liable to a creditor who extends credit to the limited partnership
549-26 without actual knowledge that the limited partner is not a general
549-27 partner.
550-1 Sec. 153.103. ACTIONS NOT CONSTITUTING PARTICIPATION IN
550-2 BUSINESS FOR LIABILITY PURPOSES. For purposes of this section and
550-3 Sections 153.102, 153.104, and 153.105, a limited partner does not
550-4 participate in the control of the business because the limited
550-5 partner has or has acted in one or more of the following capacities
550-6 or possesses or exercises one or more of the following powers:
550-7 (1) acting as a contractor for or an agent or employee
550-8 of:
550-9 (A) the limited partnership;
550-10 (B) a general partner;
550-11 (C) an officer, director, or stockholder of a
550-12 corporate general partner;
550-13 (D) a partner of a partnership that is a general
550-14 partner of the limited partnership; or
550-15 (E) a member or manager of a limited liability
550-16 company that is a general partner of the limited partnership;
550-17 (2) acting in a capacity similar to that described in
550-18 Subdivision (1) with any other person that is a general partner of
550-19 the limited partnership;
550-20 (3) consulting with or advising a general partner on
550-21 any matter, including the business of the limited partnership;
550-22 (4) acting as surety, guarantor, or endorser for the
550-23 limited partnership, guaranteeing or assuming one or more specific
550-24 obligations of the limited partnership, or providing collateral for
550-25 borrowings of the limited partnership;
550-26 (5) calling, requesting, attending, or participating
550-27 in a meeting of the partners or the limited partners;
551-1 (6) winding up the business of a limited partnership
551-2 under Sections 153.504 and 153.505;
551-3 (7) taking an action required or permitted by law to
551-4 bring, pursue, settle, or otherwise terminate a derivative action
551-5 in the right of the limited partnership;
551-6 (8) serving on a committee of the limited partnership
551-7 or the limited partners; or
551-8 (9) proposing, approving, or disapproving, by vote or
551-9 otherwise, one or more of the following matters:
551-10 (A) the dissolution or winding up of the limited
551-11 partnership;
551-12 (B) an election to reconstitute the limited
551-13 partnership or continue the business of the limited partnership;
551-14 (C) the sale, exchange, lease, mortgage,
551-15 assignment, pledge, or other transfer of, or granting of a security
551-16 interest in, an asset of the limited partnership;
551-17 (D) the incurring, renewal, refinancing, or
551-18 payment or other discharge of indebtedness by the limited
551-19 partnership;
551-20 (E) a change in the nature of the business of
551-21 the limited partnership;
551-22 (F) the admission, removal, or retention of a
551-23 general partner;
551-24 (G) the admission, removal, or retention of a
551-25 limited partner;
551-26 (H) a transaction or other matter involving an
551-27 actual or potential conflict of interest;
552-1 (I) an amendment to the partnership agreement or
552-2 certificate of formation;
552-3 (J) if the limited partnership is qualified as
552-4 an investment company under the federal Investment Company Act of
552-5 1940 (15 U.S.C. Section 80a-1 et seq.), as amended, any matter
552-6 required by that act or the rules and regulations of the Securities
552-7 and Exchange Commission under that act, to be approved by the
552-8 holders of beneficial interests in an investment company,
552-9 including:
552-10 (i) electing directors or trustees of the
552-11 investment company;
552-12 (ii) approving or terminating an
552-13 investment advisory or underwriting contract;
552-14 (iii) approving an auditor; and
552-15 (iv) acting on another matter that that
552-16 act requires to be approved by the holders of beneficial interests
552-17 in the investment company;
552-18 (K) indemnification of a general partner under
552-19 Chapter 8 or otherwise;
552-20 (L) any other matter stated in the partnership
552-21 agreement;
552-22 (M) the exercising of a right or power granted
552-23 or permitted to limited partners under this code and not
552-24 specifically enumerated in this section; or
552-25 (N) the merger or conversion of a limited
552-26 partnership.
552-27 Sec. 153.104. ENUMERATION OF ACTIONS NOT EXCLUSIVE. The
553-1 enumeration in Section 153.103 does not mean that a limited partner
553-2 who has acted or acts in another capacity or possesses or exercises
553-3 another power constitutes participation by that limited partner in
553-4 the control of the business of the limited partnership.
553-5 Sec. 153.105. CREATION OF RIGHTS. Sections 153.102(c),
553-6 153.103, and 153.104 do not create rights of limited partners.
553-7 Rights of limited partners may be created only by:
553-8 (1) the certificate of formation;
553-9 (2) the partnership agreement;
553-10 (3) other sections of this chapter; or
553-11 (4) the other limited partnership provisions.
553-12 Sec. 153.106. ERRONEOUS BELIEF OF CONTRIBUTOR BEING LIMITED
553-13 PARTNER. Except as provided by Section 153.109, a person who
553-14 erroneously but in good faith believes that the person has made a
553-15 contribution to and has become a limited partner in a limited
553-16 partnership is not liable as a general partner or otherwise
553-17 obligated because of making or attempting to make the contribution,
553-18 receiving distributions from the partnership, or exercising the
553-19 rights of a limited partner if, within a reasonable time after
553-20 ascertaining the mistake, the person:
553-21 (1) causes an appropriate certificate of formation or
553-22 certificate of amendment to be signed and filed;
553-23 (2) files or causes to be filed with the secretary of
553-24 state a written statement in accordance with Section 153.107; or
553-25 (3) withdraws from participation in future profits of
553-26 the enterprise by executing and filing with the secretary of state
553-27 a certificate declaring the person's withdrawal under this section.
554-1 Sec. 153.107. STATEMENT REQUIRED FOR LIABILITY PROTECTION.
554-2 (a) A written statement filed under Section 153.106(2) must be
554-3 entitled "Filing under Section 153.106(2), Business Organizations
554-4 Code," and contain:
554-5 (1) the name of the partnership;
554-6 (2) the name and mailing address of the person signing
554-7 the written statement; and
554-8 (3) a statement that:
554-9 (A) the person signing the written statement
554-10 acquired a limited partnership interest in the partnership;
554-11 (B) the person signing the written statement has
554-12 made an effort to cause a general partner of the partnership to
554-13 file an accurate certificate of formation required by the code and
554-14 the general partner has failed or refused to file the certificate;
554-15 and
554-16 (C) the statement is being filed under Section
554-17 153.106(2) and the person signing the written statement is claiming
554-18 status as a limited partner of the partnership named in the
554-19 document.
554-20 (b) The statement is effective for 180 days.
554-21 (c) A statement filed under Section 153.106(2) may be signed
554-22 by more than one person claiming limited partnership status under
554-23 this section and Sections 153.106, 153.108, and 153.109.
554-24 Sec. 153.108. REQUIREMENTS FOR LIABILITY PROTECTION
554-25 FOLLOWING EXPIRATION OF STATEMENT. (a) If a certificate described
554-26 by Section 153.106(1) has not been filed before the expiration of
554-27 the 180-day period described by Section 153.107(b), the person
555-1 filing the statement has no further protection from liability under
555-2 Section 153.106(2) unless the person complies with this section.
555-3 To be protected under Section 153.106 the person must, not later
555-4 than the 10th day after the date of expiration of the 180-day
555-5 period:
555-6 (1) withdraw under Section 153.106(3); or
555-7 (2) bring an action under Section 153.554 to compel
555-8 the execution and filing of a certificate of formation or
555-9 amendment.
555-10 (b) If an action is brought within the applicable period and
555-11 is diligently prosecuted to conclusion, the person bringing the
555-12 action continues to be protected from liability under Section
555-13 153.106(2) until the action is finally decided adversely to that
555-14 person.
555-15 (c) This section and Sections 153.106, 153.107, and 153.109
555-16 do not protect a person from liability that arises under Sections
555-17 153.102-153.105.
555-18 Sec. 153.109. LIABILITY OF ERRONEOUS CONTRIBUTOR.
555-19 Regardless of whether Sections 153.106, 153.107 and 153.108 apply,
555-20 a person who makes a contribution in the circumstances described by
555-21 Section 153.106 is liable as a general partner to a third party who
555-22 transacts business with the partnership before an action taken
555-23 under Section 153.106 if:
555-24 (1) the contributor has knowledge or notice that no
555-25 certificate has been filed or that the certificate inaccurately
555-26 referred to the contributor as a general partner; and
555-27 (2) the third party reasonably believed, based on the
556-1 contributor's conduct, that the contributor was a general partner
556-2 at the time of the transaction and extended credit to the
556-3 partnership in reasonable reliance on the credit of the
556-4 contributor.
556-5 Sec. 153.110. WITHDRAWAL OF LIMITED PARTNER. A limited
556-6 partner may withdraw from a limited partnership only at the time or
556-7 on the occurrence of an event specified in a written partnership
556-8 agreement. The withdrawal of the partner must be made in
556-9 accordance with that agreement.
556-10 Sec. 153.111. DISTRIBUTION ON WITHDRAWAL. Except as
556-11 otherwise provided by this section and Sections 153.105, 153.110,
556-12 153.112, 153.157-153.162, 153.207, 153.209, and 153.210 or the
556-13 partnership agreement, on withdrawal a withdrawing limited partner
556-14 is entitled to receive, not later than a reasonable time after
556-15 withdrawal, the fair value of that limited partner's interest in
556-16 the limited partnership as of the date of withdrawal.
556-17 Sec. 153.112. RECEIPT OF WRONGFUL DISTRIBUTION. A limited
556-18 partner who receives a distribution that is not permitted under
556-19 Section 153.210 is not required to return the distribution unless
556-20 the limited partner knew that the distribution violated the
556-21 prohibition of Section 153.210. This subsection does not affect an
556-22 obligation of the limited partner under the partnership agreement
556-23 or other applicable law to return the distribution.
556-24 Sec. 153.113. POWERS OF ESTATE OF LIMITED PARTNER WHO IS
556-25 DECEASED OR INCAPACITATED. If a limited partner who is an
556-26 individual dies or a court adjudges the limited partner to be
556-27 incapacitated in managing the limited partner's person or property,
557-1 the limited partner's executor, administrator, guardian,
557-2 conservator, or other legal representative may exercise all of the
557-3 limited partner's rights and powers to settle the limited partner's
557-4 estate or administer the limited partner's property, including the
557-5 power of an assignee to become a limited partner under the
557-6 partnership agreement.
557-7 (Sections 153.114-153.150 reserved for expansion)
557-8 SUBCHAPTER D. GENERAL PARTNERS
557-9 Sec. 153.151. ADMISSION OF ADDITIONAL GENERAL PARTNERS.
557-10 (a) After a limited partnership is formed, additional general
557-11 partners may be admitted:
557-12 (1) in the manner provided by a written partnership
557-13 agreement; or
557-14 (2) if a written partnership agreement does not
557-15 provide for the admission of additional general partners, with the
557-16 written consent of all partners.
557-17 (b) A person may be a general partner unless the person
557-18 lacks capacity apart from this chapter.
557-19 Sec. 153.152. GENERAL POWERS AND LIABILITIES OF GENERAL
557-20 PARTNER. (a) Except as provided by this chapter, the other limited
557-21 partnership provisions, or a partnership agreement, a general
557-22 partner of a limited partnership:
557-23 (1) has the rights and powers and is subject to the
557-24 restrictions of a partner in a partnership without limited
557-25 partners; and
557-26 (2) has the liabilities of a partner in a partnership
557-27 without limited partners to the partnership and to the other
558-1 partners.
558-2 (b) Except as provided by this chapter or the other limited
558-3 partnership provisions, a general partner of a limited partnership
558-4 has the liabilities of a partner in a partnership without limited
558-5 partners to a person other than the partnership and the other
558-6 partners.
558-7 Sec. 153.153. POWERS AND LIABILITIES OF PERSON WHO IS BOTH
558-8 GENERAL PARTNER AND LIMITED PARTNER. A person who is both a
558-9 general partner and a limited partner:
558-10 (1) has the rights and powers and is subject to the
558-11 restrictions and liabilities of a general partner; and
558-12 (2) except as otherwise provided by the partnership
558-13 agreement, this chapter, or the other limited partnership
558-14 provisions, has the rights and powers and is subject to the
558-15 restrictions and liabilities, if any, of a limited partner to the
558-16 extent of the general partner's participation in the partnership as
558-17 a limited partner.
558-18 Sec. 153.154. CONTRIBUTIONS BY AND DISTRIBUTIONS TO GENERAL
558-19 PARTNER. A general partner of a limited partnership may make a
558-20 contribution to, be allocated profits and losses of, and receive a
558-21 distribution from the limited partnership as a general partner, a
558-22 limited partner, or both.
558-23 Sec. 153.155. WITHDRAWAL OF GENERAL PARTNER. (a) A person
558-24 ceases to be a general partner of a limited partnership on the
558-25 occurrence of one or more of the following events of withdrawal:
558-26 (1) the general partner withdraws as a general partner
558-27 from the limited partnership as provided by Section 153.155(b) and
559-1 Sections 153.157-153.162;
559-2 (2) the general partner ceases to be a general partner
559-3 of the limited partnership as provided by Sections 153.251(b),
559-4 153.252, and 153.254;
559-5 (3) the general partner is removed as a general
559-6 partner in accordance with the partnership agreement;
559-7 (4) unless otherwise provided by a written partnership
559-8 agreement, or with the written consent of all partners, the general
559-9 partner:
559-10 (A) makes a general assignment for the benefit
559-11 of creditors;
559-12 (B) files a voluntary bankruptcy petition;
559-13 (C) becomes the subject of an order for relief
559-14 or is declared insolvent in a federal or state bankruptcy or
559-15 insolvency proceeding;
559-16 (D) files a petition or answer seeking for the
559-17 general partner a reorganization, arrangement, composition,
559-18 readjustment, liquidation, dissolution, or similar relief under
559-19 law;
559-20 (E) files a pleading admitting or failing to
559-21 contest the material allegations of a petition filed against the
559-22 general partner in a proceeding of the type described by Paragraphs
559-23 (A)-(D); or
559-24 (F) seeks, consents to, or acquiesces in the
559-25 appointment of a trustee, receiver, or liquidator of the general
559-26 partner or of all or a substantial part of the general partner's
559-27 properties;
560-1 (5) unless otherwise provided by a written partnership
560-2 agreement or with the written consent of all partners, the
560-3 expiration of:
560-4 (A) 120 days after the date of the commencement
560-5 of a proceeding against the general partner seeking reorganization,
560-6 arrangement, composition, readjustment, liquidation, dissolution,
560-7 or similar relief under law if the proceeding has not been
560-8 previously dismissed;
560-9 (B) 90 days after the date of the appointment,
560-10 without the general partner's consent, of a trustee, receiver, or
560-11 liquidator of the general partner or of all or a substantial part
560-12 of the general partner's properties if the appointment has not
560-13 previously been vacated or stayed; or
560-14 (C) 90 days after the date of expiration of a
560-15 stay, if the appointment has not previously been vacated;
560-16 (6) the death of a general partner;
560-17 (7) a court adjudicating a general partner who is an
560-18 individual mentally incompetent to manage the general partner's
560-19 person or property;
560-20 (8) unless otherwise provided by a written partnership
560-21 agreement or with the written consent of all partners, the
560-22 commencement of winding up activities intended to conclude in the
560-23 termination of a trust that is a general partner, but not merely
560-24 the substitution of a new trustee;
560-25 (9) unless otherwise provided by a written partnership
560-26 agreement or with the written consent of all partners, the
560-27 commencement of winding up activities of a separate partnership
561-1 that is a general partner;
561-2 (10) unless otherwise provided by a written
561-3 partnership agreement or with the written consent of all partners,
561-4 the:
561-5 (A) filing of a certificate of termination or
561-6 its equivalent for an entity, other than a nonfiling entity or a
561-7 foreign nonfiling entity, that is a general partner; or
561-8 (B) termination of the certificate of formation
561-9 or its equivalent of an entity, other than a nonfiling entity or a
561-10 foreign nonfiling entity, that is a general partner and the
561-11 expiration of 90 days after the date of notice to the entity of
561-12 termination without a reinstatement of its certificate of formation
561-13 or its equivalent; or
561-14 (11) the distribution by the fiduciary of an estate
561-15 that is a general partner of the estate's entire interest in the
561-16 limited partnership.
561-17 (b) A general partner may withdraw at any time from a
561-18 limited partnership and cease to be a general partner under
561-19 Subsection (a) by giving written notice to the other partners.
561-20 Sec. 153.156. NOTICE OF EVENT OF WITHDRAWAL. A general
561-21 partner who is subject to an event that with the passage of the
561-22 specified period becomes an event of withdrawal under Section
561-23 153.155(a)(4) or (5) shall notify the other partners of the event
561-24 not later than the 30th day after the date on which the event
561-25 occurred.
561-26 Sec. 153.157. WITHDRAWAL OF GENERAL PARTNER IN VIOLATION OF
561-27 PARTNERSHIP AGREEMENT. Unless otherwise provided by the
562-1 partnership agreement, a withdrawal by a general partner of a
562-2 partnership for a definite term or particular undertaking before
562-3 the expiration of that term or completion of that undertaking is a
562-4 breach of the partnership agreement.
562-5 Sec. 153.158. EFFECT OF WITHDRAWAL. (a) Unless otherwise
562-6 provided by a written partnership agreement and subject to the
562-7 liability created under Section 153.162, if a general partner
562-8 ceases to be a general partner under Section 153.155, the remaining
562-9 general partner or partners, or, if there are no remaining general
562-10 partners, a majority-in-interest of the limited partners in a vote
562-11 that excludes any limited partnership interest held by the
562-12 withdrawing general partner, may:
562-13 (1) convert that general partner's partnership
562-14 interest to that of a limited partner; or
562-15 (2) pay to the withdrawn general partner in cash, or
562-16 secure by bond approved by a court of competent jurisdiction, the
562-17 value of that partner's partnership interest minus the damages
562-18 caused if the withdrawal constituted a breach of the partnership
562-19 agreement.
562-20 (b) Until an action described by Subsection (a) is taken,
562-21 the owner of the partnership interest of the withdrawn general
562-22 partner has the status of an assignee under Subchapter F, Section
562-23 153.113, and Section 153.555.
562-24 (c) If there are no remaining general partners following the
562-25 withdrawal of a general partner, the partnership may be
562-26 reconstituted.
562-27 Sec. 153.159. CONVERSION OF PARTNERSHIP INTEREST AFTER
563-1 WITHDRAWAL. If the partners convert the partnership interest under
563-2 Section 153.158(a)(1), the limited partnership interest may be
563-3 reduced pro rata with all other partners to provide compensation,
563-4 an interest in the partnership, or both, to a replacement general
563-5 partner.
563-6 Sec. 153.160. EFFECT OF CONVERSION OF PARTNERSHIP INTEREST.
563-7 (a) After an amendment to the certificate of formation reflecting
563-8 the general partner's withdrawal as a general partner is filed
563-9 under Section 153.052, the withdrawing general partner:
563-10 (1) may vote as a limited partner in all matters, to
563-11 the same extent as the members of the class of limited partners
563-12 having the least voting rights with respect to the matter on which
563-13 the vote is taken; and
563-14 (2) may not vote on the admission and compensation of
563-15 a general partner who replaces the withdrawing general partner.
563-16 (b) If the general partner's withdrawal violates the
563-17 partnership agreement, the general partner does not have voting
563-18 rights.
563-19 Sec. 153.161. LIABILITY OF GENERAL PARTNER FOR DEBT INCURRED
563-20 AFTER EVENT OF WITHDRAWAL. (a) Unless otherwise provided by a
563-21 written partnership agreement and subject to the liability created
563-22 under Section 153.162, a general partner who ceases to be a general
563-23 partner under Section 153.155 is not personally liable in the
563-24 partner's capacity as a general partner for partnership debt
563-25 incurred after that partner ceases to be a general partner unless
563-26 the applicable creditor at the time the debt was incurred
563-27 reasonably believed that the partner remained a general partner.
564-1 (b) A creditor of the partnership has reason to believe that
564-2 a partner remains a general partner if:
564-3 (1) the creditor had no knowledge or notice of the
564-4 general partner's withdrawal and:
564-5 (A) was a creditor of the partnership at the
564-6 time of the general partner's withdrawal; or
564-7 (B) had extended credit to the partnership
564-8 within two years before the date of withdrawal; or
564-9 (2) the creditor had known that the partner was a
564-10 general partner in the partnership before the general partner's
564-11 withdrawal and had no knowledge or notice of the withdrawal and the
564-12 general partner's withdrawal had not been advertised in a
564-13 newspaper of general circulation in each place at which the
564-14 partnership business was regularly conducted.
564-15 Sec. 153.162. LIABILITY FOR WRONGFUL WITHDRAWAL. (a) If a
564-16 general partner's withdrawal from a limited partnership violates
564-17 the partnership agreement, the partnership may recover damages from
564-18 the withdrawing general partner for breach of the partnership
564-19 agreement, including the reasonable cost of obtaining replacement
564-20 of the services the withdrawn partner was obligated to perform.
564-21 (b) In addition to pursuing any remedy available under
564-22 applicable law, the partnership may effect the recovery of damages
564-23 under Subsection (a) by offsetting those damages against the amount
564-24 otherwise distributable to the withdrawing general partner,
564-25 reducing the limited partner interest into which the withdrawing
564-26 general partner's interest may be converted under Section
564-27 153.158(a)(1), or both.
565-1 (Sections 153.163-153.200 reserved for expansion)
565-2 SUBCHAPTER E. FINANCES
565-3 Sec. 153.201. FORM OF CONTRIBUTION. The contribution of a
565-4 limited partner may consist of a tangible or intangible benefit to
565-5 the limited partnership or other property of any kind or nature,
565-6 including:
565-7 (1) cash;
565-8 (2) a promissory note;
565-9 (3) services performed;
565-10 (4) a contract for services to be performed; and
565-11 (5) another interest in or security of the limited
565-12 partnership, another domestic or foreign limited partnership, or
565-13 other entity.
565-14 Sec. 153.202. ENFORCEABILITY OF PROMISE TO MAKE
565-15 CONTRIBUTION. (a) A promise by a limited partner to make a
565-16 contribution to, or pay cash or transfer other property to, a
565-17 limited partnership is not enforceable unless the promise is in
565-18 writing and signed by the limited partner.
565-19 (b) Except as otherwise provided by the partnership
565-20 agreement, a partner or the partner's legal representative or
565-21 successor is obligated to the limited partnership to perform an
565-22 enforceable promise to make a contribution to or pay cash or
565-23 transfer other property to a limited partnership, notwithstanding
565-24 the partner's death, disability, or other change in circumstances.
565-25 (c) If a partner or a partner's legal representative or
565-26 successor does not make a contribution or other payment of cash or
565-27 transfer of other property required by the enforceable promise,
566-1 whether as a contribution or with respect to a contribution
566-2 previously made, that partner or the partner's legal representative
566-3 or successor is obligated, at the option of the limited
566-4 partnership, to pay to the partnership an amount of cash equal to
566-5 the portion of the agreed value, as stated in the partnership
566-6 agreement or in the partnership records required to be kept under
566-7 Sections 153.551 and 153.552, of the contribution represented by
566-8 the amount of cash that has not been paid or the value of the
566-9 property that has not been transferred.
566-10 (d) A partnership agreement may provide that the partnership
566-11 interest of a partner who fails to make a payment of cash or
566-12 transfer of other property to the partnership, whether as a
566-13 contribution or with respect to a contribution previously made,
566-14 required by an enforceable promise is subject to specified
566-15 consequences, which may include:
566-16 (1) a reduction of the defaulting partner's percentage
566-17 or other interest in the limited partnership;
566-18 (2) subordination of the partner's partnership
566-19 interest to the interest of nondefaulting partners;
566-20 (3) a forced sale of the partner's partnership
566-21 interest;
566-22 (4) forfeiture of the partner's partnership interest;
566-23 (5) the lending of money to the defaulting partner by
566-24 other partners of the amount necessary to meet the defaulting
566-25 partner's commitment;
566-26 (6) a determination of the value of the defaulting
566-27 partner's partnership interest by appraisal or by formula and
567-1 redemption or sale of the partnership interest at that value; or
567-2 (7) another penalty or consequence.
567-3 Sec. 153.203. RELEASE OF OBLIGATION TO PARTNERSHIP. Unless
567-4 otherwise provided by the partnership agreement, the obligation of
567-5 a partner or the legal representative or successor of a partner to
567-6 make a contribution, pay cash, transfer other property, or return
567-7 cash or property paid or distributed to the partner in violation of
567-8 this chapter or the partnership agreement may be compromised or
567-9 released only by consent of all of the partners.
567-10 Sec. 153.204. ENFORCEABILITY OF OBLIGATION.
567-11 (a) Notwithstanding a compromise or release under Section 153.203,
567-12 a creditor of a limited partnership who extends credit or otherwise
567-13 acts in reasonable reliance on an obligation described by Section
567-14 153.203 may enforce the original obligation if:
567-15 (1) the obligation is reflected in a document signed
567-16 by the partner; and
567-17 (2) the document is not amended or canceled to reflect
567-18 the compromise or release.
567-19 (b) Notwithstanding the compromise or release, a general
567-20 partner remains liable to persons other than the partnership and
567-21 the other partners, as provided by Sections 153.152(a)(2) and
567-22 153.152(b).
567-23 Sec. 153.205. ENFORCEABILITY OF CONDITIONAL OBLIGATION.
567-24 (a) A conditional obligation may not be enforced unless the
567-25 conditions of the obligation have been satisfied or waived as to or
567-26 by the applicable limited partner.
567-27 (b) A conditional obligation includes a contribution payable
568-1 on a discretionary call of a limited partnership before the time
568-2 the call occurs.
568-3 Sec. 153.206. ALLOCATION OF PROFITS AND LOSSES. (a) The
568-4 profits and losses of a limited partnership shall be allocated
568-5 among the partners in the manner provided by a written partnership
568-6 agreement.
568-7 (b) If a written partnership agreement does not provide for
568-8 the allocation of profits and losses, the profits and losses shall
568-9 be allocated:
568-10 (1) in accordance with the current percentage or other
568-11 interest in the partnership stated in partnership records of the
568-12 kind described by Section 153.551(a); or
568-13 (2) if the allocation of profits and losses is not
568-14 provided for in partnership records of the kind described by
568-15 Section 153.551(a), in proportion to capital accounts.
568-16 Sec. 153.207. RIGHT TO DISTRIBUTION. Subject to Sections
568-17 153.112, 153.210, and 153.505, when a partner becomes entitled to
568-18 receive a distribution, the partner has with respect to the
568-19 distribution the status of and is entitled to all remedies
568-20 available to a creditor of the limited partnership.
568-21 Sec. 153.208. SHARING OF DISTRIBUTIONS. (a) A distribution
568-22 of cash or another asset of a limited partnership shall be made to
568-23 a partner in the manner provided by a written partnership
568-24 agreement.
568-25 (b) If a written partnership agreement does not provide
568-26 otherwise, a distribution that is a return of capital shall be made
568-27 on the basis of the agreed value, as stated in the partnership
569-1 records required to be maintained under Section 153.551(a), of the
569-2 contribution made by each partner to the extent that the
569-3 contribution has not been returned. A distribution that is not a
569-4 return of capital shall be made in proportion to the allocation of
569-5 profits as determined under Section 153.206.
569-6 (c) Unless otherwise defined by a written partnership
569-7 agreement, in this section, "return of capital" means a
569-8 distribution to a partner to the extent that the partner's capital
569-9 account, immediately after the distribution, is less than the
569-10 amount of that partner's contribution to the partnership as reduced
569-11 by a prior distribution that was a return of capital.
569-12 Sec. 153.209. INTERIM DISTRIBUTIONS. Except as otherwise
569-13 provided by this section and Sections 153.105, 153.110-153.112,
569-14 153.157-153.162, 153.207, and 153.210, a partner is entitled to
569-15 receive a distribution from a limited partnership to the extent and
569-16 at the time or on the occurrence of an event specified in the
569-17 partnership agreement before:
569-18 (1) the partner withdraws from the partnership; and
569-19 (2) the winding up of the partnership business.
569-20 Sec. 153.210. LIMITATION ON DISTRIBUTION. A limited
569-21 partnership may not make a distribution to a partner if immediately
569-22 after giving effect to the distribution and despite any compromise
569-23 of a claim referred to by Sections 153.203 and 153.204, all
569-24 liabilities of the limited partnership, other than liabilities to
569-25 partners with respect to their partnership interests and
569-26 liabilities for which the recourse of creditors is limited to
569-27 specified property of the limited partnership, exceed the fair
570-1 value of the partnership assets. The fair value of property that
570-2 is subject to a liability for which recourse of creditors is
570-3 limited shall be included in the partnership assets for purposes of
570-4 this subsection only to the extent that the fair value of that
570-5 property exceeds that liability.
570-6 (Sections 153.211-153.250 reserved for expansion)
570-7 SUBCHAPTER F. PARTNERSHIP INTEREST
570-8 Sec. 153.251. ASSIGNMENT OF PARTNERSHIP INTEREST.
570-9 (a) Except as otherwise provided by the partnership agreement, a
570-10 partnership interest is assignable wholly or partly.
570-11 (b) Except as otherwise provided by the partnership
570-12 agreement, an assignment of a partnership interest:
570-13 (1) does not dissolve a limited partnership;
570-14 (2) does not entitle the assignee to become, or to
570-15 exercise rights or powers of, a partner; and
570-16 (3) entitles the assignee to be allocated income,
570-17 gain, loss, deduction, credit, or similar items and to receive
570-18 distributions to which the assignor was entitled to the extent
570-19 those items are assigned.
570-20 Sec. 153.252. RIGHTS OF ASSIGNOR. (a) Except as otherwise
570-21 provided by the partnership agreement, until the assignee becomes a
570-22 partner, the assignor partner continues to be a partner in the
570-23 limited partnership. The assignor partner may exercise any rights
570-24 or powers of a partner, except to the extent those rights or powers
570-25 are assigned.
570-26 (b) Except as otherwise provided by the partnership
570-27 agreement, on the assignment by a general partner of all of the
571-1 general partner's rights as a general partner, the general
571-2 partner's status as a general partner may be terminated by the
571-3 affirmative vote of a majority-in-interest of the limited partners.
571-4 Sec. 153.253. RIGHTS OF ASSIGNEE. (a) An assignee of a
571-5 partnership interest, including the partnership interest of a
571-6 general partner, may become a limited partner if and to the extent
571-7 that:
571-8 (1) the partnership agreement provides; or
571-9 (2) all partners consent.
571-10 (b) An assignee who becomes a limited partner, to the extent
571-11 of the rights and powers assigned, has the rights and powers and is
571-12 subject to the restrictions and liabilities of a limited partner
571-13 under a partnership agreement and this code.
571-14 Sec. 153.254. LIABILITY OF ASSIGNEE. (a) Until an assignee
571-15 of the partnership interest in a limited partnership becomes a
571-16 partner, the assignee does not have liability as a partner solely
571-17 as a result of the assignment.
571-18 (b) Unless otherwise provided by a written partnership
571-19 agreement, an assignee who becomes a limited partner:
571-20 (1) is liable for the obligations of the assignor to
571-21 make contributions as provided by Sections 153.202-153.204;
571-22 (2) is not obligated for liabilities unknown to the
571-23 assignee at the time the assignee became a limited partner and
571-24 that could not be ascertained from a written partnership agreement;
571-25 and
571-26 (3) is not liable for the obligations of the assignor
571-27 under Sections 153.105, 153.110-153.112, 153.157-153.162, 153.207,
572-1 153.209, and 153.210.
572-2 Sec. 153.255. LIABILITY OF ASSIGNOR. Regardless of whether
572-3 an assignee of a partnership interest becomes a limited partner,
572-4 the assignor is not released from the assignor's liability to the
572-5 limited partnership under Subchapter E and Sections 153.105,
572-6 153.110-153.112, 153.157-153.162, 153.207, 153.209, and 153.210.
572-7 Sec. 153.256. CHARGE IN PAYMENT OF JUDGMENT CREDITOR.
572-8 (a) On application to a court by a judgment creditor of a partner
572-9 or other owner of a partnership interest, the court may:
572-10 (1) charge the partnership interest of the partner or
572-11 other owner with payment of the unsatisfied amount of the judgment,
572-12 with interest;
572-13 (2) appoint a receiver for the debtor partner's share
572-14 of the partnership's profits and other money payable or that
572-15 becomes payable to the debtor partner with respect to the
572-16 partnership; and
572-17 (3) make other orders, directions, and inquiries that
572-18 the circumstances of the case require.
572-19 (b) To the extent that the partnership interest is charged
572-20 in the manner provided by Subsection (a), the judgment creditor has
572-21 only the rights of an assignee of the partnership interest.
572-22 (c) The partnership interest charged may be:
572-23 (1) redeemed at any time before foreclosure; or
572-24 (2) in case of a sale directed by the court, and
572-25 without constituting an event requiring winding up, purchased:
572-26 (A) by one or more of the general partners with
572-27 separate property of any general partner; or
573-1 (B) with respect to partnership property, by one
573-2 or more of the general partners whose interests are not charged, on
573-3 the consent of all general partners whose interests are not charged
573-4 and a majority in interest of the limited partners, excluding
573-5 limited partnership interests held by a general partner whose
573-6 interest is charged.
573-7 (d) The remedies provided by Subsection (a) are exclusive of
573-8 other remedies that may exist, including remedies under laws of
573-9 this state applicable to partnerships without limited partners.
573-10 Sec. 153.257. EXEMPTION LAWS APPLICABLE TO PARTNERSHIP
573-11 INTEREST NOT AFFECTED. Section 153.256 does not deprive a partner
573-12 of the benefit of an exemption law applicable to that partner's
573-13 partnership interest.
573-14 (Sections 153.258-153.300 reserved for expansion)
573-15 SUBCHAPTER G. REPORTS, RECORDS, AND INFORMATION
573-16 Sec. 153.301. PERIODIC REPORT. The secretary of state may
573-17 require a domestic limited partnership or a foreign limited
573-18 partnership registered to transact business in this state to file a
573-19 report not more than once every four years as required by this
573-20 subchapter.
573-21 Sec. 153.302. FORM AND CONTENTS OF REPORT. (a) The report
573-22 must:
573-23 (1) include:
573-24 (A) the name of the limited partnership;
573-25 (B) the state or territory under the laws of
573-26 which the limited partnership is formed;
573-27 (C) the address of the registered office of the
574-1 limited partnership in this state and the name of the registered
574-2 agent at that address;
574-3 (D) the address of the principal office in the
574-4 United States where records are to be kept or made available under
574-5 Sections 153.551 and 153.552; and
574-6 (E) the name, mailing address, and street
574-7 address of the business or residence of each general partner;
574-8 (2) be made on a form adopted by the secretary of
574-9 state for that purpose; and
574-10 (3) be signed on behalf of the limited partnership by
574-11 at least one general partner.
574-12 (b) The information contained in the report must be given as
574-13 of the date of the execution of the report.
574-14 Sec. 153.303. FILING FEE. The filing fee for the report is
574-15 as provided by Chapter 4.
574-16 Sec. 153.304. DELIVERY OF REPORT. The report must be
574-17 delivered to the secretary of state not later than the 30th day
574-18 after the date on which notice is mailed under Section 153.305.
574-19 Sec. 153.305. ACTION BY SECRETARY OF STATE. (a) The
574-20 secretary of state shall send a notice that the report required by
574-21 Section 153.301 is due.
574-22 (b) The notice must be:
574-23 (1) addressed to the limited partnership; and
574-24 (2) mailed to:
574-25 (A) the registered office of the limited
574-26 partnership;
574-27 (B) the last known address of the limited
575-1 partnership as it appears on record in the office of the secretary
575-2 of state; or
575-3 (C) any other known place of business of the
575-4 limited partnership.
575-5 (c) The secretary of state shall include with the notice a
575-6 copy of a report form to be prepared and filed as provided by this
575-7 subchapter.
575-8 Sec. 153.306. EFFECT OF FILING REPORT. (a) If the
575-9 secretary of state finds that the report complies with this
575-10 subchapter, the secretary shall:
575-11 (1) accept the report for filing;
575-12 (2) acknowledge to the limited partnership of the
575-13 filing of the report; and
575-14 (3) update the records of the secretary of state's
575-15 office to reflect:
575-16 (A) a reported change in the address of the
575-17 registered office, principal office, or the business or residence
575-18 address of a general partner; and
575-19 (B) a reported change in the name of the
575-20 registered agent.
575-21 (b) The filing of a report under Section 153.301 does not
575-22 relieve the limited partnership of the requirement to file an
575-23 amendment to the certificate of formation required under Section
575-24 153.052 or 153.053, except that the limited partnership is not
575-25 required to file an amendment to change the information specified
575-26 in Subsection (a)(3).
575-27 Sec. 153.307. EFFECT OF FAILURE TO FILE REPORT. (a) A
576-1 domestic or foreign limited partnership that fails to file a report
576-2 under Section 153.301 when the report is due forfeits the limited
576-3 partnership's right to transact business in this state. A
576-4 forfeiture under this section takes effect without judicial
576-5 ascertainment.
576-6 (b) When the right to transact business has been forfeited
576-7 under this section, the secretary of state shall note that the
576-8 right to transact business has been forfeited and the date of
576-9 forfeiture on the record kept in the secretary's office relating to
576-10 the limited partnership.
576-11 Sec. 153.308. NOTICE OF FORFEITURE OF RIGHT TO TRANSACT
576-12 BUSINESS. Notice of the forfeiture under Section 153.307 shall be
576-13 mailed to the limited partnership at:
576-14 (1) the registered office of the limited partnership;
576-15 (2) the last known address of the limited partnership;
576-16 or
576-17 (3) any other place of business of the limited
576-18 partnership.
576-19 Sec. 153.309. EFFECT OF FORFEITURE OF RIGHT TO TRANSACT
576-20 BUSINESS. (a) Unless the right of the limited partnership to
576-21 transact business is revived in accordance with Section 153.310:
576-22 (1) the limited partnership may not maintain an
576-23 action, suit, or proceeding in a court of this state; and
576-24 (2) a successor or assignee of the limited partnership
576-25 may not maintain an action, suit, or proceeding in a court of this
576-26 state on a right, claim, or demand arising from the transaction of
576-27 business by the limited partnership in this state.
577-1 (b) The forfeiture of the right to transact business in this
577-2 state does not:
577-3 (1) impair the validity of a contract or act of the
577-4 limited partnership; or
577-5 (2) prevent the limited partnership from defending an
577-6 action, suit, or proceeding in a court of this state.
577-7 (c) This section and Sections 153.307 and 153.308 do not
577-8 affect the liability of a limited partner to the limited
577-9 partnership.
577-10 Sec. 153.310. REVIVAL OF RIGHT TO TRANSACT BUSINESS. (a) A
577-11 limited partnership that forfeits the right to transact business in
577-12 this state as provided by Section 153.309 may be relieved from the
577-13 forfeiture by filing the required report not later than the 120th
577-14 day after the date of mailing of the notice of forfeiture under
577-15 Section 153.308, accompanied by the filing fees as provided by
577-16 Chapter 4.
577-17 (b) If a limited partnership complies with Subsection (a),
577-18 the secretary of state shall:
577-19 (1) revive the right of the limited partnership to
577-20 transact business in this state;
577-21 (2) cancel the note regarding the forfeiture; and
577-22 (3) note the revival and the date of revival on the
577-23 record kept in the secretary's office relating to the limited
577-24 partnership.
577-25 Sec. 153.311. CANCELLATION OF CERTIFICATE OR REGISTRATION
577-26 AFTER FORFEITURE. (a) The secretary of state may cancel the
577-27 certificate of formation of a domestic limited partnership, or the
578-1 registration of a foreign limited partnership, if the limited
578-2 partnership:
578-3 (1) forfeits its right to transact business in this
578-4 state under Section 153.307; and
578-5 (2) fails to revive that right under Section 153.310.
578-6 (b) Cancellation of the certificate or registration takes
578-7 effect without judicial ascertainment.
578-8 (c) The secretary of state shall note the cancellation and
578-9 the date of cancellation on the record kept in the secretary's
578-10 office relating to the limited partnership.
578-11 (d) On cancellation, the status of the limited partnership
578-12 is changed to inactive according to the records of the secretary of
578-13 state. The change to inactive status does not affect the liability
578-14 of a limited partner to the limited partnership.
578-15 Sec. 153.312. REINSTATEMENT OF CERTIFICATE OF FORMATION OR
578-16 REGISTRATION. (a) A limited partnership the certificate of
578-17 formation or registration of which has been canceled as provided by
578-18 Section 153.311 may be relieved of the cancellation by filing the
578-19 report required by Section 153.301, accompanied by the filing fees
578-20 provided by Chapter 4.
578-21 (b) If the limited partnership pays the fees required by
578-22 Subsection (a), the secretary of state shall:
578-23 (1) reinstate the certificate or registration of the
578-24 limited partnership without judicial ascertainment;
578-25 (2) change the status of the limited partnership to
578-26 active; and
578-27 (3) note the reinstatement on the record kept in the
579-1 secretary's office relating to the limited partnership.
579-2 (c) If the name of the limited partnership is not available
579-3 at the time of reinstatement, the secretary of state shall require
579-4 the limited partnership as a precondition to reinstatement to:
579-5 (1) file an amendment to the partnership's certificate
579-6 of formation; or
579-7 (2) in the case of a foreign limited partnership,
579-8 amend its application for registration to adopt an assumed name for
579-9 use in this state.
579-10 (Sections 153.313-153.350 reserved for expansion)
579-11 SUBCHAPTER H. LIMITED PARTNERSHIP AS REGISTERED LIMITED
579-12 LIABILITY PARTNERSHIP
579-13 Sec. 153.351. REQUIREMENTS. A limited partnership is a
579-14 registered limited liability partnership and a limited partnership
579-15 if the partnership:
579-16 (1) registers as a registered limited liability
579-17 partnership:
579-18 (A) as permitted by its partnership agreement;
579-19 or
579-20 (B) if its partnership agreement does not
579-21 include a provision for becoming a registered limited liability
579-22 partnership, with the consent of partners required to amend its
579-23 partnership agreement;
579-24 (2) complies with Subchapter J, Chapter 152; and
579-25 (3) complies with Chapter 5 and has as the last words
579-26 or letters of its name the phrases "registered limited liability
579-27 partnership," "limited liability partnership," "registered limited
580-1 liability limited partnership" or "limited liability limited
580-2 partnership" or an abbreviation of one of the phrases.
580-3 Sec. 153.352. APPLICABILITY OF OTHER REQUIREMENTS. For
580-4 purposes of applying Section 152.802 to a limited partnership:
580-5 (1) an application to become a registered limited
580-6 liability partnership or to withdraw a registration must be signed
580-7 by at least one general partner; and
580-8 (2) other references to a partner mean a general
580-9 partner only.
580-10 Sec. 153.353. LAW APPLICABLE TO PARTNERS. If a limited
580-11 partnership is a registered limited liability partnership, Section
580-12 152.801 applies to a general partner and to a limited partner who
580-13 is liable under other provisions of this chapter for the debts or
580-14 obligations of the limited partnership.
580-15 (Sections 153.354-153.400 reserved for expansion)
580-16 SUBCHAPTER I. DERIVATIVE ACTIONS
580-17 Sec. 153.401. RIGHT TO BRING ACTION. A limited partner may
580-18 bring an action in a court on behalf of the limited partnership to
580-19 recover a judgment in the limited partnership's favor if:
580-20 (1) all general partners with authority to bring the
580-21 action have refused to bring the action; or
580-22 (2) an effort to cause those general partners to bring
580-23 the action is not likely to succeed.
580-24 Sec. 153.402. PROPER PLAINTIFF. In a derivative action, the
580-25 plaintiff must be a limited partner when the action is brought and:
580-26 (1) must have been a limited partner at the time of
580-27 the transaction that is the subject of the action; or
581-1 (2) the person's status as a limited partner must have
581-2 arisen by operation of law or under the terms of the partnership
581-3 agreement from a person who was a limited partner at the time of
581-4 the transaction.
581-5 Sec. 153.403. PLEADING. In a derivative action, the
581-6 complaint must contain with particularity:
581-7 (1) the effort, if any, of the plaintiff to secure
581-8 initiation of the action by a general partner; or
581-9 (2) the reasons for not making the effort.
581-10 Sec. 153.404. SECURITY FOR EXPENSES OF DEFENDANTS. (a) In
581-11 a derivative action, the court may require the plaintiff to give
581-12 security for the reasonable expenses incurred or expected to be
581-13 incurred by a defendant in the action, including reasonable
581-14 attorney's fees.
581-15 (b) The court may increase or decrease at any time the
581-16 amount of the security on a showing that the security provided is
581-17 inadequate or excessive.
581-18 (c) If a plaintiff is unable to give security, the plaintiff
581-19 may file an affidavit in accordance with the Texas Rules of Civil
581-20 Procedure.
581-21 (d) Except as provided by Subsection (c), if a plaintiff
581-22 fails to give the security within a reasonable time set by the
581-23 court, the court shall dismiss the suit without prejudice.
581-24 (e) The court, on final judgment for a defendant and on a
581-25 finding that suit was brought without reasonable cause against the
581-26 defendant, may require the plaintiff to pay reasonable expenses,
581-27 including reasonable attorney's fees, to the defendant, regardless
582-1 of whether security has been required.
582-2 Sec. 153.405. EXPENSES OF PLAINTIFF. If a derivative action
582-3 is successful, wholly or partly, or if anything is received by the
582-4 plaintiff because of a judgment, compromise, or settlement of the
582-5 action or claim constituting a part of the action, the court may
582-6 award the plaintiff reasonable expenses, including reasonable
582-7 attorney's fees, and shall direct the plaintiff to remit to a party
582-8 identified by the court the remainder of the proceeds received by
582-9 the plaintiff.
582-10 (Sections 153.406-153.450 reserved for expansion)
582-11 SUBCHAPTER J. CANCELLATION OF CERTIFICATE OF FORMATION
582-12 Sec. 153.451. CERTIFICATE OF CANCELLATION. (a) A
582-13 certificate of formation shall be canceled by filing a certificate
582-14 of cancellation with the secretary of state in accordance with
582-15 Chapter 4:
582-16 (1) on the completion of the winding up of the
582-17 partnership business;
582-18 (2) when there are no limited partners; or
582-19 (3) subject to Subsection (b), on a merger or
582-20 conversion as provided by Chapter 10.
582-21 (b) If a limited partnership formed under this code is not
582-22 one of the surviving or resulting domestic limited partnerships or
582-23 other entities in a merger or conversion, the certificate of merger
582-24 or conversion filed under Chapter 10 is sufficient, without a
582-25 filing under this section, to cancel the certificate of formation
582-26 of the nonsurviving limited partnership.
582-27 Sec. 153.452. CONTENTS OF CERTIFICATE OF CANCELLATION. A
583-1 certificate of cancellation must contain:
583-2 (1) the name of the limited partnership;
583-3 (2) the date of the filing of the partnership's
583-4 certificate of formation;
583-5 (3) the reason for filing the certificate of
583-6 cancellation;
583-7 (4) the future effective date or a certain time of
583-8 cancellation if cancellation is not effective on the filing of the
583-9 certificate; and
583-10 (5) other proper information as determined by the
583-11 person filing the certificate of cancellation.
583-12 (Sections 153.453-153.500 reserved for expansion)
583-13 SUBCHAPTER K. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS
583-14 Sec. 153.501. ADDITIONAL EVENTS REQUIRING WINDING UP. An
583-15 event requiring the winding up of a limited partnership includes,
583-16 in addition to any event specified in Section 11.051, the
583-17 following:
583-18 (1) written consent of all partners to the winding up
583-19 and termination of the limited partnership; and
583-20 (2) an event of withdrawal of a general partner.
583-21 Sec. 153.502. CONTINUATION WITHOUT WINDING UP. (a) The
583-22 limited partnership may cancel an event requiring winding up as
583-23 specified in Section 11.051(1) or (3) if, not later than the 90th
583-24 day after the event, all remaining partners, or another group or
583-25 percentage of partners as specified by the partnership agreement,
583-26 agree in writing to continue the business of the limited
583-27 partnership.
584-1 (b) The limited partnership may revoke an event requiring
584-2 winding up as specified in Section 153.501(2) if:
584-3 (1) there remains at least one general partner and the
584-4 partnership agreement permits the business of the limited
584-5 partnership to be carried on by the remaining general partners and
584-6 those remaining general partners carry on the business; or
584-7 (2) not later than the 90th day after the event, all
584-8 remaining partners, or another group or percentage of partners
584-9 specified in the partnership agreement:
584-10 (A) agree in writing to continue the business of
584-11 the limited partnership in writing; and
584-12 (B) to the extent that they desire or if there
584-13 are no remaining general partners, agree to the appointment of one
584-14 or more new general partners.
584-15 (c) The appointment of one or more new general partners
584-16 under Subsection (b)(2)(B) is effective from the date of
584-17 withdrawal.
584-18 Sec. 153.503. WINDING UP PROCEDURES. (a) Except as
584-19 provided by the partnership agreement, the winding up of the
584-20 partnership's affairs shall be accomplished by:
584-21 (1) the general partners; or
584-22 (2) if there are no general partners, the limited
584-23 partners or a person chosen by the limited partners.
584-24 (b) Section 11.052(a)(2) shall not be applicable to a limited
584-25 partnership.
584-26 Sec. 153.504. POWERS OF PERSON CONDUCTING WIND UP.
584-27 (a) After an event requiring the winding up of a limited
585-1 partnership and until the filing of a certificate of cancellation
585-2 as provided by Sections 153.451 and 153.452, unless a written
585-3 partnership agreement provides otherwise, a person winding up the
585-4 limited partnership's business in the name of and on behalf of the
585-5 limited partnership may take the actions specified in Sections
585-6 11.052, 11.053 and 11.055.
585-7 (b) The acts described by Subsection (a) do not create a
585-8 liability for a limited partner that did not exist before an action
585-9 to wind up the business of the partnership was taken.
585-10 Sec. 153.505. DISPOSITION OF ASSETS. On the winding up of a
585-11 limited partnership, its assets shall be paid or transferred as
585-12 follows:
585-13 (1) to the extent otherwise permitted by law, to
585-14 creditors, including partners who are creditors other than solely
585-15 because of the application of Section 153.207 for the payment or
585-16 the making of reasonable provision for payment to satisfy the
585-17 liabilities of the limited partnership;
585-18 (2) unless otherwise provided by the partnership
585-19 agreement, to partners and former partners to satisfy the
585-20 partnership's liability for distributions under Section 153.111 or
585-21 153.209; and
585-22 (3) unless otherwise provided by the partnership
585-23 agreement, to partners first for the return of their capital and
585-24 second with respect to their partnership interests, in the
585-25 proportions provided by Sections 153.208(a) and (b).
585-26 (Sections 153.506-153.550 reserved for expansion)
585-27 SUBCHAPTER L. MISCELLANEOUS PROVISIONS
586-1 Sec. 153.551. RECORDS. (a) A domestic limited partnership
586-2 shall maintain the following records in its principal office in the
586-3 United States or make the records available in that office not
586-4 later than the fifth day after the date on which a written request
586-5 under Section 153.552(a) is received:
586-6 (1) a current list that states:
586-7 (A) the name and mailing address of each
586-8 partner, separately identifying in alphabetical order the general
586-9 partners and the limited partners;
586-10 (B) the last known street address of the
586-11 business or residence of each general partner;
586-12 (C) the percentage or other interest in the
586-13 partnership owned by each partner; and
586-14 (D) if one or more classes or groups are
586-15 established under the partnership agreement, the names of the
586-16 partners who are members of each specified class or group;
586-17 (2) a copy of:
586-18 (A) the limited partnership's federal, state,
586-19 and local information or income tax returns for each of the
586-20 partnership's six most recent tax years;
586-21 (B) the partnership agreement and certificate of
586-22 formation; and
586-23 (C) all amendments or restatements;
586-24 (3) copies of any document that creates, in the manner
586-25 provided by the partnership agreement, classes or groups of
586-26 partners;
586-27 (4) an executed copy of any powers of attorney under
587-1 which the partnership agreement, certificate of formation, and all
587-2 amendments or restatements to the agreement and certificate have
587-3 been executed;
587-4 (5) unless contained in the written partnership
587-5 agreement, a written statement of:
587-6 (A) the amount of the cash contribution and a
587-7 description and statement of the agreed value of any other
587-8 contribution made by each partner;
587-9 (B) the amount of the cash contribution and a
587-10 description and statement of the agreed value of any other
587-11 contribution that the partner has agreed to make in the future as
587-12 an additional contribution;
587-13 (C) the date on which additional contributions
587-14 are to be made or the date of events requiring additional
587-15 contributions to be made;
587-16 (D) events requiring the limited partnership to
587-17 be dissolved and its affairs wound up; and
587-18 (E) the date on which each partner in the
587-19 limited partnership became a partner; and
587-20 (6) books and records of the accounts of the limited
587-21 partnership.
587-22 (b) A limited partnership shall maintain its records in
587-23 written form or in another form capable of being converted to
587-24 written form in a reasonable time.
587-25 (c) A limited partnership shall keep in its registered
587-26 office in this state and make available to a partner on reasonable
587-27 request the street address of its principal office in the United
588-1 States in which the records required by this section are
588-2 maintained.
588-3 Sec. 153.552. EXAMINATION OF RECORDS AND INFORMATION.
588-4 (a) On written request stating a proper purpose, a partner or an
588-5 assignee of a partnership interest may examine and copy, in person
588-6 or through a representative, records required to be kept under
588-7 Section 153.551 and other information regarding the business,
588-8 affairs, and financial condition of the limited partnership as is
588-9 just and reasonable for the person to examine and copy.
588-10 (b) The records requested under Subsection (a) may be
588-11 examined and copied at a reasonable time and at the partner's sole
588-12 expense.
588-13 (c) On written request by a partner or an assignee of a
588-14 partnership interest, the partnership shall provide to the
588-15 requesting partner or assignee without charge copies of:
588-16 (1) the partnership agreement and certificate of
588-17 formation and all amendments or restatements; and
588-18 (2) any tax return described by Section 153.551(a)(2).
588-19 (d) A request made under Subsection (c) must be made to:
588-20 (1) the person who is designated to receive the
588-21 request in the partnership agreement at the address designated in
588-22 the partnership agreement; or
588-23 (2) if there is no designation, a general partner at
588-24 the partnership's principal office in the United States.
588-25 Sec. 153.553. EXECUTION OF CERTAIN FILINGS. (a) Each
588-26 certificate required by this code to be filed by a limited
588-27 partnership with the secretary of state shall be executed as
589-1 follows:
589-2 (1) an initial certificate of formation must be signed
589-3 as provided in Section 3.004(b)(1), except for an initial
589-4 certification of formation signed by a person under Section
589-5 153.106(1);
589-6 (2) a certificate of amendment or restated certificate
589-7 of formation must be signed by at least one general partner and by
589-8 each other general partner designated in the certificate of
589-9 amendment as a new general partner, unless signed and filed by a
589-10 person under Section 153.053(b), 153.053(c), or 153.106(1), but the
589-11 certificate of amendment need not be signed by a withdrawing
589-12 general partner;
589-13 (3) a certificate of cancellation must be signed by
589-14 all general partners participating in the winding up of the limited
589-15 partnership's business or, if no general partners are winding up
589-16 the limited partnership's business, by all nonpartner liquidators
589-17 or, if the limited partners are winding up the limited
589-18 partnership's business, by a majority-in-interest of the limited
589-19 partners;
589-20 (4) a certificate of merger filed on behalf of a
589-21 domestic limited partnership must be signed as provided by Chapter
589-22 10;
589-23 (5) a certificate filed under Section 10.251 must be
589-24 signed by the person designated by the court; and
589-25 (6) a certificate of correction must be signed by at
589-26 least one general partner.
589-27 (b) Any person may sign a certificate or partnership
590-1 agreement or amendment or restated certificate by an attorney in
590-2 fact. A power of attorney relating to the signing of a certificate
590-3 or partnership agreement or amendment or restated certificate by an
590-4 attorney in fact:
590-5 (1) is not required to be sworn to, verified, or
590-6 acknowledged;
590-7 (2) is not required to be filed with the secretary of
590-8 state; and
590-9 (3) shall be retained with the partnership records
590-10 under Sections 153.551 and 153.552.
590-11 (c) The execution of a certificate by a general partner or
590-12 the execution of a written statement by a person under Section
590-13 153.106(2) is an oath or affirmation, under a penalty of perjury,
590-14 that, to the best of the executing party's knowledge and belief,
590-15 the facts stated in the certificate or statement are true.
590-16 Sec. 153.554. EXECUTION, AMENDMENT, OR CANCELLATION BY
590-17 JUDICIAL ORDER. (a) If a person fails or refuses to execute or
590-18 file a certificate as required by this chapter or Title 1 or to
590-19 execute a partnership agreement, another person adversely affected
590-20 by the failure or refusal may petition a court to direct the
590-21 execution or filing of the certificate or the execution of the
590-22 partnership agreement, as appropriate.
590-23 (b) If the court finds that the execution or filing of the
590-24 certificate is proper and that a person required to execute or file
590-25 the certificate has failed or refused to execute or file the
590-26 certificate, the court shall order the secretary of state to record
590-27 an appropriate certificate.
591-1 (c) The judicial remedy described by Subsection (b) is not a
591-2 limit on the rights of a person to file a written statement under
591-3 Section 153.106(2).
591-4 (d) If the court finds that the partnership agreement should
591-5 be executed and that a person required to execute the partnership
591-6 agreement has failed or refused to execute the agreement, the court
591-7 shall enter an order granting appropriate relief.
591-8 (e) If a court enters an order in favor of the adversely
591-9 affected person requesting relief under this section, the court
591-10 shall award to that person reasonable expenses, including
591-11 reasonable attorney's fees.
591-12 Sec. 153.555. PERMITTED TRANSFER IN CONNECTION WITH
591-13 RACETRACK LICENSE. The following transfer relating to a limited
591-14 partnership is not a prohibited transfer that violates Section
591-15 6.12(a), Texas Racing Act (Article 179e, Vernon's Texas Civil
591-16 Statutes):
591-17 (1) a transfer by a general partnership of its assets
591-18 to a limited partnership, the corporate general partner of which is
591-19 controlled by the partners of the general partnership; or
591-20 (2) a transfer by a limited partnership of the
591-21 beneficial use of or interest in any of its rights, privileges, or
591-22 assets to a local development corporation incorporated before
591-23 January 31, 1993, under Subchapter D, Chapter 431, Transportation
591-24 Code.
591-25 Sec. 153.556. OBLIGATION OF FOREIGN LIMITED PARTNERSHIP TO
591-26 FILE ASSUMED NAME CERTIFICATE. Unless a foreign limited
591-27 partnership conducts business under another name, filing the
592-1 application for registration under Chapter 9 makes it unnecessary
592-2 to file any other documents under Chapter 36, Business & Commerce
592-3 Code.
592-4 Sec. 153.557. COMMON CARRIER. A limited partnership engaged
592-5 as a common carrier in the pipeline business for transporting oil,
592-6 oil products, gas, carbon dioxide, salt brine, fuller's earth,
592-7 sand, clay, liquefied minerals, or other mineral solutions has all
592-8 of the rights and powers conferred by Sections 111.019 through
592-9 111.022, Natural Resources Code. A limited partnership that is a
592-10 common carrier as defined in Section 111.002, Natural Resources
592-11 Code, has in addition all of the obligations conferred by Sections
592-12 111.001 through 111.025, Natural Resources Code.
592-13 CHAPTER 154. PROVISIONS APPLICABLE TO BOTH GENERAL
592-14 AND LIMITED PARTNERSHIPS
592-15 SUBCHAPTER A. PARTNERSHIP INTERESTS
592-16 Sec. 154.001. NATURE OF PARTNER'S PARTNERSHIP INTEREST. (a)
592-17 A partner's partnership interest is personal property for all
592-18 purposes.
592-19 (b) A partner's partnership interest may be community
592-20 property under applicable law.
592-21 (c) A partner is not a co-owner of partnership property.
592-22 Sec. 154.002. TRANSFER OF INTEREST IN PARTNERSHIP PROPERTY
592-23 PROHIBITED. A partner does not have an interest that can be
592-24 transferred, voluntarily or involuntarily, in partnership property.
592-25 (Sections 154.003-154.100 reserved for expansion)
592-26 SUBCHAPTER B. PARTNERSHIP AGREEMENT
592-27 Sec. 154.101. CLASS OR GROUP OF PARTNERS. (a) A written
593-1 partnership agreement may establish or provide for the future
593-2 creation of additional classes or groups of one or more partners
593-3 that have certain express relative rights, powers, and duties,
593-4 including voting rights. The future creation of additional classes
593-5 or groups may be expressed in the partnership agreement or at the
593-6 time of creation of the class or group.
593-7 (b) The rights, powers, or duties of a class or group of
593-8 partners may be senior to those partners of an existing class or
593-9 group.
593-10 Sec. 154.102. PROVISIONS RELATING TO VOTING. A written
593-11 partnership agreement that grants or provides for granting a right
593-12 to vote to a partner may contain a provision relating to:
593-13 (1) giving notice of the time, place, or purpose of a
593-14 meeting at which a matter is to be voted on by the partners;
593-15 (2) waiver of notice;
593-16 (3) action by consent without a meeting;
593-17 (4) the establishment of a record date;
593-18 (5) quorum requirements;
593-19 (6) voting in person or by proxy; or
593-20 (7) other matters relating to the exercise of the
593-21 right to vote.
593-22 Sec. 154.103. NOTICE OF ACTION BY CONSENT WITHOUT A MEETING.
593-23 (a) Prompt notice of the taking of an action under a partnership
593-24 agreement that may be taken without a meeting by consent of fewer
593-25 than all of the partners shall be given to a partner who has not
593-26 given written consent to the action.
593-27 (b) For purposes of this section, the "taking of an action"
594-1 includes:
594-2 (1) amending the partnership agreement; or
594-3 (2) creating under the partnership agreement a class
594-4 of partners that did not previously exist.
594-5 (Sections 154.104-154.200 reserved for expansion)
594-6 SUBCHAPTER C. PARTNERSHIP TRANSACTIONS AND RELATIONSHIPS
594-7 Sec. 154.201. BUSINESS TRANSACTIONS BETWEEN PARTNER AND
594-8 PARTNERSHIP. Except as otherwise provided by the partnership
594-9 agreement, a partner may lend money to and transact other business
594-10 with the partnership. Subject to other applicable law, a partner
594-11 has the same rights and obligations with respect to those matters
594-12 as a person who is not a partner.
594-13 Sec. 154.202. EFFECT OF PARTNER CHANGE ON RELATIONSHIP
594-14 BETWEEN PARTNERSHIP AND CREDITORS. The relationships between a
594-15 partnership and its creditors are not affected by the:
594-16 (1) withdrawal of a partner; or
594-17 (2) addition of a new partner.
594-18 Sec. 154.203. DISTRIBUTIONS IN KIND. (a) Except as
594-19 provided by the partnership agreement, a partner, regardless of the
594-20 nature of the partner's contribution, is not entitled to demand or
594-21 receive from a partnership a distribution in any form other than
594-22 cash.
594-23 (b) Except as provided by the partnership agreement, a
594-24 partner may not be compelled to accept a disproportionate
594-25 distribution of an asset in kind from a partnership to the extent
594-26 that the percentage portion of assets distributed to the partner
594-27 exceeds the percentage of those assets that equals the percentage
595-1 in which the partner shares in distributions from the partnership.
595-2 TITLE 5. REAL ESTATE INVESTMENT TRUSTS
595-3 CHAPTER 200. REAL ESTATE INVESTMENT TRUSTS
595-4 SUBCHAPTER A. GENERAL PROVISIONS
595-5 Sec. 200.001. DEFINITION. In this chapter, "real estate
595-6 investment trust" means an unincorporated trust:
595-7 (1) formed by one or more trust managers under this
595-8 chapter and Chapter 3; and
595-9 (2) managed under this chapter.
595-10 Sec. 200.002. APPLICABILITY OF CHAPTER. (a) The provisions
595-11 of Chapters 20 and 21 govern a matter to the extent that this
595-12 chapter or Title 1 does not govern the matter.
595-13 (b) An unincorporated trust that does not meet the
595-14 requirements of this chapter is an unincorporated association under
595-15 Chapter 253.
595-16 Sec. 200.003. CONFLICT WITH OTHER LAW. In case of conflict
595-17 between this chapter and Chapters 20 and 21, this chapter controls.
595-18 Chapters 20 and 21 do not control over this chapter merely because
595-19 a provision of Chapter 20 or 21 is more or less extensive,
595-20 restrictive, or detailed than a similar provision of this chapter.
595-21 Sec. 200.004. ULTRA VIRES ACTS. (a) Lack of capacity of a
595-22 real estate investment trust may not be the basis of any claim or
595-23 defense at law or in equity.
595-24 (b) An act of a real estate investment trust or a transfer
595-25 of property by or to a real estate investment trust is not invalid
595-26 because the act or transfer was:
595-27 (1) beyond the scope of the purpose or purposes of the
596-1 real estate investment trust as expressed in the real estate
596-2 investment trust's certificate of formation; or
596-3 (2) inconsistent with a limitation on the authority of
596-4 an officer or trust manager to exercise a statutory power of the
596-5 real estate investment trust, as that limitation is expressed in
596-6 the real estate investment trust's certificate of formation.
596-7 (c) The fact that an act or transfer is beyond the scope of
596-8 the expressed purpose or purposes of the real estate investment
596-9 trust or is inconsistent with an expressed limitation on the
596-10 authority of an officer or trust manager may be asserted in a
596-11 proceeding:
596-12 (1) by a shareholder against the real estate
596-13 investment trust to enjoin the performance of an act or the
596-14 transfer of property by or to the real estate investment trust; or
596-15 (2) by the real estate investment trust, acting
596-16 directly or through a receiver, trustee, or other legal
596-17 representative, or through shareholders in a representative suit,
596-18 against an officer or trust manager or former officer or trust
596-19 manager of the real estate investment trust for exceeding that
596-20 person's authority.
596-21 (d) If the unauthorized act or transfer sought to be
596-22 enjoined under Subsection (c)(1) is being or is to be performed or
596-23 made under a contract to which the real estate investment trust is
596-24 a party and if each party to the contract is a party to the
596-25 proceeding, the court may set aside and enjoin the performance of
596-26 the contract. The court may award to the real estate investment
596-27 trust or to another party to the contract, as appropriate,
597-1 compensation for loss or damage resulting from the action of the
597-2 court in setting aside and enjoining the performance of the
597-3 contract, excluding loss of anticipated profits.
597-4 Sec. 200.005. SUPPLEMENTARY POWERS OF REAL ESTATE INVESTMENT
597-5 TRUST. (a) Subject to Section 2.106(a) and in addition to the
597-6 powers specified in Section 2.101, a real estate investment trust
597-7 may engage in activities mandated or authorized by:
597-8 (1) provisions of the Internal Revenue Code that are
597-9 related to or govern real estate investment trusts; and
597-10 (2) regulations adopted under the Internal Revenue
597-11 Code.
597-12 (b) This section does not authorize a real estate investment
597-13 trust or an officer or trust manager of a real estate investment
597-14 trust to exercise a power in a manner inconsistent with a
597-15 limitation on the purposes or powers of the real estate investment
597-16 trust contained in:
597-17 (1) the trust's certificate of formation;
597-18 (2) this code; or
597-19 (3) another law of this state.
597-20 Sec. 200.006. REQUIREMENT THAT FILING INSTRUMENT BE SIGNED
597-21 BY OFFICER. Unless otherwise provided by this chapter, a filing
597-22 instrument of a real estate investment trust may be signed by an
597-23 officer of the real estate investment trust.
597-24 (Sections 200.007-200.050 reserved for expansion)
597-25 SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
597-26 Sec. 200.051. SUPPLEMENTAL PROVISIONS REQUIRED IN
597-27 CERTIFICATE OF FORMATION. (a) For purposes of this code, the
598-1 certificate of formation of a real estate investment trust is a
598-2 declaration of trust. The certificate of formation may be titled
598-3 "declaration of trust" or "certificate of formation."
598-4 (b) In addition to the information required by Section
598-5 3.005, the certificate of formation of a real estate investment
598-6 trust must state:
598-7 (1) that an assumed name certificate stating the name
598-8 of the real estate investment trust has been filed in the manner
598-9 provided by law;
598-10 (2) that the purpose of the real estate investment
598-11 trust is to:
598-12 (A) purchase, hold, lease, manage, sell,
598-13 exchange, develop, subdivide, and improve real property and
598-14 interests in real property, other than severed mineral, oil, or gas
598-15 royalty interests, and carry on any other business and perform any
598-16 other action in connection with a purpose described by this
598-17 paragraph;
598-18 (B) exercise powers conferred by the laws of
598-19 this state on a real estate investment trust; and
598-20 (C) perform any action described by this chapter
598-21 or Title 1 to the same extent as an individual;
598-22 (3) the post office address of the initial principal
598-23 office and place of business of the real estate investment trust;
598-24 (4) the aggregate number of shares of beneficial
598-25 interest the real estate investment trust is authorized to issue
598-26 and the par value to be received by the real estate investment
598-27 trust for the issuance of each share;
599-1 (5) if shares described by Subdivision (4) are divided
599-2 into classes as authorized by Section 200.102 or 200.103, a
599-3 description of each class of shares, including any preferences,
599-4 conversion, and other rights, voting powers, restrictions,
599-5 limitations as to dividends, qualifications, and terms and
599-6 conditions of redemption; and
599-7 (6) that the trust managers shall manage the money or
599-8 property received for the issuance of shares for the benefit of the
599-9 shareholders of the real estate investment trust.
599-10 Sec. 200.052. NO PROPERTY RIGHT IN CERTIFICATE OF FORMATION.
599-11 A shareholder of a real estate investment trust does not have a
599-12 vested property right resulting from the certificate of formation,
599-13 including a provision in the certificate of formation relating to
599-14 the management, control, capital structure, dividend entitlement,
599-15 purpose, or duration of the real estate investment trust.
599-16 Sec. 200.053. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
599-17 OF FORMATION. (a) To adopt an amendment to the certificate of
599-18 formation of a real estate investment trust as provided by
599-19 Subchapter B, Chapter 3, the trust managers shall:
599-20 (1) adopt a resolution stating the proposed amendment;
599-21 and
599-22 (2) follow the procedures prescribed by Sections
599-23 200.054-200.057.
599-24 (b) The resolution may incorporate the proposed amendment in
599-25 a restated certificate of formation that complies with Section
599-26 3.057.
599-27 Sec. 200.054. ADOPTION OF AMENDMENT BY TRUST MANAGERS. If a
600-1 real estate investment trust does not have any issued and
600-2 outstanding shares, the trust managers may adopt a proposed
600-3 amendment to the real estate investment trust's certificate of
600-4 formation by resolution without shareholder approval.
600-5 Sec. 200.055. ADOPTION OF AMENDMENT BY SHAREHOLDERS. If a
600-6 real estate investment trust has issued and outstanding shares:
600-7 (1) a resolution described by Section 200.053 must
600-8 also direct that the proposed amendment be submitted to a vote of
600-9 the shareholders at a meeting; and
600-10 (2) the shareholders must approve the proposed
600-11 amendment in the manner provided by Section 200.056.
600-12 Sec. 200.056. NOTICE OF AND MEETING TO CONSIDER PROPOSED
600-13 AMENDMENT. (a) Each shareholder of record entitled to vote shall
600-14 be given written notice containing the proposed amendment or a
600-15 summary of the changes to be effected within the time and in the
600-16 manner provided by this code for giving notice of meetings to
600-17 shareholders. If the proposed amendment is to be considered at an
600-18 annual meeting, the proposed amendment or summary may be included
600-19 in the notice required to be provided for an annual meeting.
600-20 (b) At the meeting, the proposed amendment shall be adopted
600-21 only on receiving the affirmative vote of shareholders entitled to
600-22 vote required by Section 200.261.
600-23 (c) An unlimited number of amendments may be submitted for
600-24 adoption by the shareholders at a meeting.
600-25 Sec. 200.057. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF
600-26 AMENDMENT. (a) In addition to the statements required by Section
600-27 3.053, a certificate of amendment for a real estate investment
601-1 trust must state:
601-2 (1) if the amendment provides for an exchange,
601-3 reclassification, or cancellation of issued shares, the manner in
601-4 which the exchange, reclassification, or cancellation of the issued
601-5 shares will be effected if the manner is not specified in the
601-6 amendment; and
601-7 (2) if the amendment effects a change in the amount of
601-8 stated capital, the manner in which the change in the amount of
601-9 stated capital is effected and the amount of stated capital
601-10 expressed in dollar terms as changed by the amendment.
601-11 (b) If shares of the real estate investment trust have not
601-12 been issued and the certificate of amendment is adopted by the
601-13 trust managers, a majority of the trust managers may execute the
601-14 certificate of amendment on behalf of the real estate investment
601-15 trust.
601-16 (c) The certificate of amendment must be filed in accordance
601-17 with Chapter 4 and takes effect as provided by Subchapter B,
601-18 Chapter 3.
601-19 Sec. 200.058. RESTATED CERTIFICATE OF FORMATION. (a) A
601-20 real estate investment trust may adopt a restated certificate of
601-21 formation as provided by Subchapter B, Chapter 3, by following the
601-22 same procedures to amend its certificate of formation under
601-23 Sections 200.053-200.057, except that shareholder approval is not
601-24 required if an amendment is not adopted.
601-25 (b) If shares of the real estate investment trust have not
601-26 been issued and the restated certificate of formation is adopted by
601-27 the trust managers, the majority of the trust managers may sign the
602-1 restated certificate of formation on behalf of the real estate
602-2 investment trust.
602-3 (c) In addition to the provisions authorized or required by
602-4 Section 3.057, a restated certificate of formation may update the
602-5 current number of trust managers and the names and addresses of the
602-6 persons serving as trust managers.
602-7 Sec. 200.059. BYLAWS. (a) The trust managers of a real
602-8 estate investment trust shall adopt initial bylaws.
602-9 (b) The bylaws may contain provisions for the regulation and
602-10 management of the affairs of the real estate investment trust that
602-11 are consistent with law and the real estate investment trust's
602-12 certificate of formation.
602-13 (c) The trust managers of a real estate investment trust may
602-14 amend or repeal bylaws or adopt new bylaws unless:
602-15 (1) the real estate investment trust's certificate of
602-16 formation or this chapter wholly or partly reserves the power
602-17 exclusively to the real estate investment trust's shareholders; or
602-18 (2) in amending, repealing, or adopting a bylaw, the
602-19 shareholders expressly provide that the trust managers may not
602-20 amend, repeal, or readopt that bylaw.
602-21 Sec. 200.060. DUAL AUTHORITY. Unless the certificate of
602-22 formation or a bylaw adopted by the shareholders provides otherwise
602-23 as to all or a part of a real estate investment trust's bylaws, the
602-24 shareholders of a real estate investment trust may amend, repeal,
602-25 or adopt the bylaws of the real estate investment trust even if the
602-26 bylaws may also be amended, repealed, or adopted by the trust
602-27 managers of the real estate investment trust.
603-1 Sec. 200.061. ORGANIZATION MEETING. (a) After the real
603-2 estate investment trust has been formed, the initial trust managers
603-3 of the real estate investment trust shall hold an organization
603-4 meeting, at the call of a majority of those trust managers, for the
603-5 purpose of adopting bylaws, electing officers, and transacting
603-6 other business.
603-7 (b) Not later than the third day before the date of the
603-8 meeting, the initial trust managers calling the meeting shall send
603-9 notice of the time and place of the meeting to the other initial
603-10 trust managers named in the certificate of formation.
603-11 (Sections 200.062-200.100 reserved for expansion)
603-12 SUBCHAPTER C. SHARES
603-13 Sec. 200.101. NUMBER. A real estate investment trust may
603-14 issue the number of shares stated in the real estate investment
603-15 trust's certificate of formation.
603-16 Sec. 200.102. CLASSIFICATION OF SHARES. A real estate
603-17 investment trust may provide in the real estate investment trust's
603-18 certificate of formation:
603-19 (1) that a specified class of shares is preferred over
603-20 another class of shares as to its distributive share of the assets
603-21 on voluntary or involuntary liquidation of the real estate
603-22 investment trust;
603-23 (2) the amount of a preference described by
603-24 Subdivision (1);
603-25 (3) that a specified class of shares may be redeemed
603-26 at the option of the real estate investment trust or of the holders
603-27 of the shares;
604-1 (4) the terms and conditions of a redemption of shares
604-2 described by Subdivision (3), including the time and price of
604-3 redemption;
604-4 (5) that a specified class of shares may be converted
604-5 into shares of one or more other classes;
604-6 (6) the terms and conditions of a conversion described
604-7 by Subdivision (5);
604-8 (7) that a holder of a specified security issued or to
604-9 be issued by the real estate investment trust has voting or other
604-10 rights authorized by law; and
604-11 (8) for other preferences, rights, restrictions,
604-12 including restrictions on transferability, and qualifications
604-13 consistent with law.
604-14 Sec. 200.103. CLASSES OF SHARES ESTABLISHED BY TRUST
604-15 MANAGERS. (a) A real estate investment trust may provide in the
604-16 real estate investment trust's certificate of formation that the
604-17 trust managers may classify or reclassify any unissued shares by
604-18 setting or changing the preferences, conversion or other rights,
604-19 voting powers, restrictions, limitations as to dividends,
604-20 qualifications, or terms or conditions of redemption of the shares.
604-21 (b) Before issuing shares, the trust managers who perform as
604-22 authorized by the certificate of formation an action described by
604-23 Subsection (a) must file with the county clerk of the county of the
604-24 principal place of business of the real estate investment trust a
604-25 statement of designation that contains:
604-26 (1) a description of the shares, including the
604-27 preferences, conversion and other rights, voting powers,
605-1 restrictions, limitations as to dividends, qualifications, and
605-2 terms and conditions of redemption, as set or changed by the trust
605-3 managers; and
605-4 (2) a statement that the shares have been classified
605-5 or reclassified by the trust managers as authorized by the
605-6 certificate of formation.
605-7 Sec. 200.104. ISSUANCE OF SHARES. (a) A real estate
605-8 investment trust may issue shares for consideration if authorized
605-9 by the trust managers.
605-10 (b) Shares may not be issued until the consideration,
605-11 determined in accordance with this subchapter, has been received by
605-12 the real estate investment trust or by a corporation the
605-13 outstanding shares of each class of capital stock of which are
605-14 directly or indirectly owned by the real estate investment trust.
605-15 When the consideration is received:
605-16 (1) the shares are considered to be issued;
605-17 (2) the shareholder entitled to receive the shares is
605-18 a shareholder with respect to the shares; and
605-19 (3) the shares are considered fully paid and
605-20 nonassessable.
605-21 Sec. 200.105. TYPES OF CONSIDERATION FOR ISSUANCE OF SHARES.
605-22 Shares with or without par value may be issued by a real estate
605-23 investment trust for the following types of consideration:
605-24 (1) a tangible or intangible benefit to the real
605-25 estate investment trust;
605-26 (2) cash;
605-27 (3) a promissory note;
606-1 (4) services performed or a contract for services to
606-2 be performed;
606-3 (5) a security of the real estate investment trust or
606-4 any other organization; and
606-5 (6) any other property of any kind or nature.
606-6 Sec. 200.106. DETERMINATION OF CONSIDERATION FOR SHARES.
606-7 Consideration to be received by a real estate investment trust for
606-8 shares shall be determined by the trust managers.
606-9 Sec. 200.107. AMOUNT OF CONSIDERATION FOR ISSUANCE OF SHARES
606-10 WITH PAR VALUE. Consideration to be received by a real estate
606-11 investment trust for the issuance of shares with par value may not
606-12 be less than the par value of the shares.
606-13 Sec. 200.108. VALUE OF CONSIDERATION. In the absence of
606-14 fraud in the transaction, the judgment of the trust managers is
606-15 conclusive in determining the value of the consideration received
606-16 for the shares.
606-17 Sec. 200.109. LIABILITY OF ASSIGNEE OR TRANSFEREE. An
606-18 assignee or transferee of certificated shares, uncertificated
606-19 shares, or a subscription for shares in good faith and without
606-20 knowledge that full consideration for the shares or subscription
606-21 has not been paid may not be held personally liable to the real
606-22 estate investment trust or a creditor of the real estate investment
606-23 trust for an unpaid portion of the consideration.
606-24 Sec. 200.110. SUBSCRIPTIONS. (a) A real estate investment
606-25 trust may accept a subscription by notifying the subscriber in
606-26 writing.
606-27 (b) A subscription to purchase shares in a real estate
607-1 investment trust that is in the process of being formed is
607-2 irrevocable for six months if the subscription is in writing and
607-3 signed by the subscriber unless the subscription provides for a
607-4 longer or shorter period or all of the other subscribers agree to
607-5 the revocation of the subscription.
607-6 (c) A written subscription entered into after the real
607-7 estate investment trust is formed is a contract between the
607-8 subscriber and the real estate investment trust.
607-9 Sec. 200.111. PREFORMATION SUBSCRIPTION. (a) A real estate
607-10 investment trust may determine the payment terms of a preformation
607-11 subscription unless the payment terms are specified by the
607-12 subscription. The payment terms may authorize payment in full on
607-13 acceptance or by installments.
607-14 (b) Unless the subscription provides otherwise, a real
607-15 estate investment trust shall make calls placed to all subscribers
607-16 of similar interests for payment on preformation subscriptions
607-17 uniform as far as practicable.
607-18 (c) After the real estate investment trust is formed, the
607-19 real estate investment trust may:
607-20 (1) collect as any other debt the amount due on any
607-21 unpaid preformation subscription; or
607-22 (2) forfeit the subscription on 20 days' written
607-23 notice to the subscriber.
607-24 (d) Although the forfeiture of a subscription terminates all
607-25 the rights and obligations of the subscriber, the real estate
607-26 investment trust may retain any amount previously paid on the
607-27 subscription.
608-1 Sec. 200.112. COMMITMENT TO PURCHASE SHARES. (a) A person
608-2 who contemplates the acquisition of shares in a real estate
608-3 investment trust may commit to act in a specified manner with
608-4 respect to the shares after the acquisition, including the voting
608-5 of the shares or the retention or disposition of the shares. To be
608-6 binding, the commitment must be in writing and be signed by the
608-7 person acquiring the shares.
608-8 (b) A written commitment entered into under Subsection (a)
608-9 is a contract between the shareholder and the real estate
608-10 investment trust.
608-11 (Sections 200.113-200.150 reserved for expansion)
608-12 SUBCHAPTER D. SHAREHOLDER RIGHTS AND RESTRICTIONS
608-13 Sec. 200.151. REGISTERED HOLDERS AS OWNERS. Except as
608-14 otherwise provided by this code and subject to Chapter 8, Business
608-15 & Commerce Code, a real estate investment trust may consider the
608-16 person registered as the owner of a share in the share transfer
608-17 records of the real estate investment trust at a particular time,
608-18 including a record date set under Section 6.102, as the owner of
608-19 that share at that time for purposes of:
608-20 (1) voting the share;
608-21 (2) receiving distributions on the share;
608-22 (3) transferring the share;
608-23 (4) receiving notice, exercising rights of dissent and
608-24 appraisal, exercising or waiving a preemptive right, or giving
608-25 proxies with respect to that share; or
608-26 (5) entering into agreements with respect to that
608-27 share in accordance with Section 6.251 or 6.252 or with this
609-1 subchapter.
609-2 Sec. 200.152. NO STATUTORY PREEMPTIVE RIGHT UNLESS
609-3 SPECIFICALLY PROVIDED BY CERTIFICATE OF FORMATION. A shareholder
609-4 of a real estate investment trust does not have a preemptive right
609-5 to acquire securities except to the extent specifically provided by
609-6 the certificate of formation.
609-7 Sec. 200.153. TRANSFER OF SHARES AND OTHER SECURITIES.
609-8 Except as otherwise provided by this code, the shares and other
609-9 securities of a real estate investment trust are transferable in
609-10 accordance with Chapter 8, Business & Commerce Code.
609-11 Sec. 200.154. RESTRICTION ON TRANSFER OF SHARES AND OTHER
609-12 SECURITIES. (a) A restriction on the transfer or registration of
609-13 transfer of a security may be imposed by:
609-14 (1) the real estate investment trust's certificate of
609-15 formation;
609-16 (2) the real estate investment trust's bylaws;
609-17 (3) a written agreement among two or more holders of
609-18 the securities; or
609-19 (4) a written agreement among one or more holders of
609-20 the securities and the real estate investment trust if:
609-21 (A) the real estate investment trust files a
609-22 copy of the agreement at the principal place of business or
609-23 registered office of the real estate investment trust; and
609-24 (B) the copy of the agreement is subject to the
609-25 same right of examination by a shareholder of the real estate
609-26 investment trust, in person or by agent, attorney, or accountant,
609-27 as the books and records of the real estate investment trust.
610-1 (b) A restriction imposed under Subsection (a) is not valid
610-2 with respect to a security issued before the restriction has been
610-3 adopted, unless the holder of the security voted in favor of the
610-4 restriction or is a party to the agreement imposing the
610-5 restriction.
610-6 Sec. 200.155. VALID RESTRICTION ON TRANSFER.
610-7 Notwithstanding Sections 200.154 and 200.157, a restriction placed
610-8 on the transfer or registration of transfer of a security of a real
610-9 estate investment trust is valid if the restriction reasonably:
610-10 (1) obligates the holder of the restricted security to
610-11 offer a person, including the real estate investment trust or other
610-12 holders of securities of the real estate investment trust, an
610-13 opportunity to acquire the restricted security within a reasonable
610-14 time before the transfer;
610-15 (2) obligates the real estate investment trust, to the
610-16 extent provided by this code, or another person to purchase a
610-17 security that is the subject of an agreement relating to the
610-18 purchase and sale of the restricted security;
610-19 (3) requires the real estate investment trust or the
610-20 holders of a class of the real estate investment trust's securities
610-21 to consent to a proposed transfer of the restricted security or to
610-22 approve the proposed transferee of the restricted security for the
610-23 purpose of preventing a violation of law;
610-24 (4) prohibits the transfer of the restricted security
610-25 to a designated person or group of persons and the designation is
610-26 not manifestly unreasonable; or
610-27 (5) maintains a tax advantage to the real estate
611-1 investment trust, including maintaining its status as a real estate
611-2 investment trust under the relevant provisions of the Internal
611-3 Revenue Code and regulations adopted under the Internal Revenue
611-4 Code.
611-5 Sec. 200.156. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF
611-6 SHARES OR OTHER SECURITIES. (a) A real estate investment trust
611-7 that has adopted a bylaw or is a party to an agreement that
611-8 restricts the transfer of the shares or other securities of the
611-9 real estate investment trust may file with the county clerk of the
611-10 county of the principal place of business of the real estate
611-11 investment trust a copy of the bylaw or agreement and a statement
611-12 attached to the copy that:
611-13 (1) contains the name of the real estate investment
611-14 trust;
611-15 (2) states that the attached copy of the bylaw or
611-16 agreement is a true and correct copy of the bylaw or agreement; and
611-17 (3) states that the filing has been authorized by the
611-18 trust managers or shareholders, as appropriate.
611-19 (b) After the statement is filed with the county clerk, the
611-20 bylaws or agreement restricting the transfer of shares or other
611-21 securities is a public record, and the fact that the statement has
611-22 been filed must be stated on a certificate representing the
611-23 restricted shares or securities if required by Section 3.202.
611-24 (c) A real estate investment trust that is a party to an
611-25 agreement restricting the transfer of the shares or other
611-26 securities of the real estate investment trust may make the
611-27 agreement part of the real estate investment trust's certificate of
612-1 formation without restating the provisions of the agreement in the
612-2 certificate of formation by complying with this code or amending
612-3 the certificate of formation. If the agreement alters the original
612-4 or amended certificate of formation, the altered provision must be
612-5 identified by reference or description in the certificate of
612-6 amendment. If the agreement is an addition to the original or
612-7 amended certificate of formation, the certificate of amendment must
612-8 state that fact.
612-9 (d) The certificate of amendment must:
612-10 (1) include a copy of the agreement restricting the
612-11 transfer of shares or other securities;
612-12 (2) state that the attached copy of the agreement is a
612-13 true and correct copy of the agreement; and
612-14 (3) state that inclusion of the certificate of
612-15 amendment as part of the certificate of formation has been
612-16 authorized in the manner required by this code to amend the
612-17 certificate of formation.
612-18 Sec. 200.157. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF
612-19 CERTAIN SECURITIES. (a) A restriction placed on the transfer or
612-20 registration of the transfer of a security of a real estate
612-21 investment trust is specifically enforceable against the holder, or
612-22 a successor or transferee of the holder, if:
612-23 (1) the restriction is reasonable and noted
612-24 conspicuously on the certificate or other instrument representing
612-25 the security; or
612-26 (2) with respect to an uncertificated security, the
612-27 restriction is reasonable and a notation of the restriction is
613-1 contained in the notice sent with respect to the security under
613-2 Section 3.205.
613-3 (b) Unless noted in the manner specified by Subsection (a)
613-4 with respect to a certificate or other instrument or an
613-5 uncertificated security, an otherwise enforceable restriction is
613-6 ineffective against a transferee for value without actual knowledge
613-7 of the restriction at the time of the transfer or against a
613-8 subsequent transferee, regardless of whether the transfer is for
613-9 value. A restriction is specifically enforceable against a person
613-10 other than a transferee for value from the time the person acquires
613-11 actual knowledge of the restriction's existence.
613-12 Sec. 200.158. JOINT OWNERSHIP OF SHARES. (a) If shares are
613-13 registered on the books of a real estate investment trust in the
613-14 names of two or more persons as joint owners with the right of
613-15 survivorship and one of the owners dies, the real estate investment
613-16 trust may record on its books and effect the transfer of the shares
613-17 to a person, including the surviving joint owner, and pay any
613-18 distributions made with respect to the shares, as if the surviving
613-19 joint owner was the sole owner of the shares. The recording and
613-20 distribution authorized by this subsection must be made after the
613-21 death of a joint owner and before the real estate investment trust
613-22 receives actual written notice that a party other than a surviving
613-23 joint owner is claiming an interest in the shares or distribution.
613-24 (b) The discharge of a real estate investment trust from
613-25 liability under Section 200.160 and the transfer of full legal and
613-26 equitable title of the shares does not affect, reduce, or limit any
613-27 cause of action existing in favor of an owner of an interest in the
614-1 shares or distribution against the surviving owner.
614-2 Sec. 200.159. LIABILITY FOR DESIGNATING OWNER OF SHARES. A
614-3 real estate investment trust or an officer, trust manager,
614-4 employee, or agent of the real estate investment trust may not be
614-5 held liable for considering a person to be the owner of a share for
614-6 a purpose described by Section 200.151, regardless of whether the
614-7 person possesses a certificate for those shares.
614-8 Sec. 200.160. LIABILITY REGARDING JOINT OWNERSHIP OF SHARES.
614-9 A real estate investment trust that transfers shares or makes a
614-10 distribution to a surviving joint owner under Section 200.158
614-11 before the real estate investment trust has received a written
614-12 claim for the shares or distribution from another person is
614-13 discharged from liability for the transfer or payment.
614-14 (Sections 200.161-200.200 reserved for expansion)
614-15 SUBCHAPTER E. DISTRIBUTIONS AND SHARE DISTRIBUTIONS
614-16 Sec. 200.201. AUTHORITY FOR DISTRIBUTIONS. The trust
614-17 managers of a real estate investment trust may authorize a
614-18 distribution and the real estate investment trust may make a
614-19 distribution, subject to Section 200.202 and any restriction in the
614-20 certificate of formation.
614-21 Sec. 200.202. LIMITATIONS ON DISTRIBUTIONS. (a) A real
614-22 estate investment trust may not make a distribution that:
614-23 (1) will cause the real estate investment trust to
614-24 become insolvent; or
614-25 (2) is more than the surplus of the real estate
614-26 investment trust.
614-27 (b) Notwithstanding Subsection (a), if the net assets of a
615-1 real estate investment trust are not less than the amount of the
615-2 proposed distribution, the real estate investment trust may make a
615-3 distribution involving a purchase or redemption of its own shares
615-4 if the purchase or redemption is made by the real estate investment
615-5 trust to:
615-6 (1) eliminate fractional shares;
615-7 (2) collect or settle indebtedness owed by or to the
615-8 real estate investment trust;
615-9 (3) pay dissenting shareholders entitled to receive
615-10 payment for their shares under this chapter; or
615-11 (4) effect the purchase or redemption of redeemable
615-12 shares in accordance with this code.
615-13 Sec. 200.203. PRIORITY OF DISTRIBUTIONS. A real estate
615-14 investment trust's indebtedness that arises as a result of the
615-15 declaration of a distribution and a real estate investment trust's
615-16 indebtedness issued in a distribution are at parity with the real
615-17 estate investment trust's indebtedness to its general, unsecured
615-18 creditors, except to the extent the indebtedness is subordinated,
615-19 or payment of that indebtedness is secured, by agreement.
615-20 Sec. 200.204. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM
615-21 SURPLUS. (a) A real estate investment trust, by resolution of the
615-22 trust managers of the real estate investment trust, may:
615-23 (1) create a reserve out of the surplus of the real
615-24 estate investment trust; or
615-25 (2) designate or allocate in any manner a part or all
615-26 of the real estate investment trust's surplus for a proper purpose.
615-27 (b) A real estate investment trust may increase, decrease,
616-1 or abolish a reserve, designation, or allocation in the manner
616-2 provided by Subsection (a).
616-3 Sec. 200.205. AUTHORITY FOR SHARE DISTRIBUTIONS. The trust
616-4 managers of a real estate investment trust may authorize a share
616-5 distribution, and the real estate investment trust may pay a share
616-6 distribution subject to Section 200.206 and any restriction in the
616-7 certificate of formation.
616-8 Sec. 200.206. LIMITATIONS ON SHARE DISTRIBUTIONS. (a) A
616-9 real estate investment trust may not pay a share distribution in
616-10 authorized but unissued shares of any class if the surplus of the
616-11 real estate investment trust is less than the amount required by
616-12 Section 200.208 to be transferred to stated capital at the time the
616-13 share distribution is made.
616-14 (b) A share distribution in shares of any class may not be
616-15 made to a holder of shares of any other class unless:
616-16 (1) the real estate investment trust's certificate of
616-17 formation provides for the distribution; or
616-18 (2) the share distribution is authorized by the
616-19 affirmative vote or the written consent of the holders of at least
616-20 a majority of the outstanding shares of the class in which the
616-21 share distribution is to be made.
616-22 Sec. 200.207. VALUE OF SHARES ISSUED AS SHARE DISTRIBUTIONS.
616-23 (a) A share distribution payable in authorized but unissued shares
616-24 with par value shall be issued at the par value of the shares.
616-25 (b) A share distribution payable in authorized but unissued
616-26 shares without par value shall be issued at the value set by the
616-27 trust managers when the share distribution is authorized.
617-1 Sec. 200.208. TRANSFER OF SURPLUS FOR SHARE DISTRIBUTIONS.
617-2 (a) When a share distribution payable in authorized but unissued
617-3 shares with par value is made by a real estate investment trust, an
617-4 amount of surplus designated by the trust managers that is not less
617-5 than the aggregate par value of the shares issued as a share
617-6 distribution shall be transferred to stated capital.
617-7 (b) When a share distribution payable in authorized but
617-8 unissued shares without par value is made by a real estate
617-9 investment trust, an amount of surplus equal to the aggregate value
617-10 set by the trust managers with respect to the shares under Section
617-11 200.207(b) shall be transferred to stated capital.
617-12 Sec. 200.209. DETERMINATION OF SOLVENCY, NET ASSETS, STATED
617-13 CAPITAL, AND SURPLUS. (a) The determination of whether a real
617-14 estate investment trust is or would be insolvent and the
617-15 determination of the value of a real estate investment trust's net
617-16 assets, stated capital, or surplus and each of the components of
617-17 net assets, stated capital, or surplus may be based on:
617-18 (1) financial statements of the real estate investment
617-19 trust that present the financial condition of the real estate
617-20 investment trust in accordance with generally accepted accounting
617-21 principles, including financial statements that include subsidiary
617-22 entities or other entities accounted for on a consolidated basis or
617-23 on the equity method of accounting;
617-24 (2) financial statements prepared using the method of
617-25 accounting used to file the real estate investment trust's federal
617-26 income tax return or using any other accounting practices and
617-27 principles that are reasonable under the circumstances;
618-1 (3) financial information, including condensed or
618-2 summary financial statements, that is prepared on the same basis as
618-3 financial statements described by Subdivision (1) or (2);
618-4 (4) a projection, forecast, or other forward-looking
618-5 information relating to the future economic performance, financial
618-6 condition, or liquidity of the real estate investment trust that is
618-7 reasonable under the circumstances;
618-8 (5) a fair valuation or information from any other
618-9 method that is reasonable under the circumstances; or
618-10 (6) a combination of a statement, valuation, or
618-11 information authorized by this section.
618-12 (b) Subsection (a) does not apply to the computation of any
618-13 tax imposed under the laws of this state.
618-14 Sec. 200.210. DATE OF DETERMINATION OF SURPLUS. (a) For
618-15 purposes of this subchapter, a determination of whether a real
618-16 estate investment trust is or would be made insolvent by a
618-17 distribution or share distribution or a determination of the value
618-18 of a real estate investment trust's surplus shall be made:
618-19 (1) on the date the distribution or share distribution
618-20 is authorized by the trust managers of the real estate investment
618-21 trust if the distribution or the share distribution is made not
618-22 later than the 120th day after the date of authorization; or
618-23 (2) if the distribution or the share distribution is
618-24 made more than 120 days after the date of authorization:
618-25 (A) on the date designated by the trust managers
618-26 if the date so designated is not earlier than 120 days before the
618-27 date the distribution or the share distribution is made; or
619-1 (B) on the date the distribution or the share
619-2 distribution is made if the trust managers do not designate a date
619-3 as described in Subdivision (2)(A).
619-4 (b) For purposes of this section, a distribution that
619-5 involves:
619-6 (1) the incurrence by a real estate investment trust
619-7 of indebtedness or a deferred payment obligation is considered to
619-8 have been made on the date the indebtedness or obligation is
619-9 incurred; or
619-10 (2) a contract by the real estate investment trust to
619-11 acquire any of its own shares is considered to have been made on
619-12 the date when the contract is made or takes effect or on the date
619-13 the shares are acquired, at the option of the real estate
619-14 investment trust.
619-15 Sec. 200.211. SPLIT-UP OR DIVISION OF SHARES. The trust
619-16 managers of a real estate investment trust may authorize the real
619-17 estate investment trust to carry out any split-up or division of
619-18 the issued shares of a class of the real estate investment trust
619-19 into a larger number of shares within the same class that does not
619-20 increase the stated capital of the real estate investment trust
619-21 because the split-up or division of issued shares is not a share
619-22 dividend or a distribution.
619-23 (Sections 200.212-200.250 reserved for expansion)
619-24 SUBCHAPTER F. SHAREHOLDER MEETINGS; VOTING AND QUORUM
619-25 Sec. 200.251. ANNUAL MEETING. (a) An annual meeting of the
619-26 shareholders of a real estate investment trust shall be held at a
619-27 time that is stated in or set in accordance with the bylaws of the
620-1 real estate investment trust.
620-2 (b) If the annual meeting is not held at the designated
620-3 time, a shareholder may by certified or registered mail make a
620-4 written request to an officer or trust manager of the real estate
620-5 investment trust that the meeting be held within a reasonable time.
620-6 If the annual meeting is not called before the 61st day after the
620-7 date the request calling for a meeting is made, any shareholder may
620-8 bring suit at law or in equity to compel the meeting to be held.
620-9 (c) Each shareholder has a justifiable interest sufficient
620-10 to enable the shareholder to institute and prosecute a legal
620-11 proceeding described by this section.
620-12 (d) The failure to hold an annual meeting at the designated
620-13 time does not result in the winding up or termination of the real
620-14 estate investment trust.
620-15 Sec. 200.252. SPECIAL MEETINGS. A special meeting of the
620-16 shareholders of a real estate investment trust may be called by:
620-17 (1) a trust manager, an officer of the real estate
620-18 investment trust, or any other person authorized to call special
620-19 meetings by the certificate of formation or bylaws of the real
620-20 estate investment trust; or
620-21 (2) the holders of at least 10 percent of all of the
620-22 shares of the real estate investment trust entitled to vote at the
620-23 proposed special meeting unless a quarter percentage of shares is
620-24 specified in the certificate of formation, not to exceed 50 percent
620-25 of the shares entitled to vote.
620-26 Sec. 200.253. NOTICE OF MEETING. (a) Written notice of a
620-27 meeting in accordance with Section 6.051 shall be given to each
621-1 shareholder entitled to vote at the meeting not later than the 10th
621-2 day and not earlier than the 60th day before the date of the
621-3 meeting. Notice shall be given in person or by mail by or at the
621-4 direction of a trust manager, officer, or other person calling the
621-5 meeting.
621-6 (b) The notice of a special meeting must contain a statement
621-7 regarding the purpose or purposes of the meeting.
621-8 Sec. 200.254. CLOSING OF SHARE TRANSFER RECORDS. Share
621-9 transfer records that are closed in accordance with Section 6.101
621-10 for the purpose of determining which shareholders are entitled to
621-11 receive notice of a meeting of shareholders shall remain closed for
621-12 at least 10 days immediately preceding the date of the meeting.
621-13 Sec. 200.255. RECORD DATE FOR WRITTEN CONSENT TO ACTION.
621-14 The record date provided in accordance with Section 6.102(a) may
621-15 not be more than 10 days after the date on which the trust managers
621-16 adopt the resolution setting the record date.
621-17 Sec. 200.256. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
621-18 CONSENT TO ACTION. The record date provided by the trust managers
621-19 in accordance with Section 6.101 must be at least 10 days before
621-20 the date on which the particular action requiring the determination
621-21 of shareholders is to be taken.
621-22 Sec. 200.257. QUORUM. (a) Subject to Subsection (b), the
621-23 holders of the majority of the shares entitled to vote at a meeting
621-24 of the shareholders of a real estate investment trust that are
621-25 present or represented by proxy at the meeting are a quorum for the
621-26 consideration of a matter to be presented at that meeting.
621-27 (b) The certificate of formation of a real estate investment
622-1 trust may provide that a quorum is present only if:
622-2 (1) the holders of a specified portion of the shares
622-3 that is greater than the majority of the shares entitled to vote
622-4 are represented at the meeting in person or by proxy; or
622-5 (2) the holders of a specified portion of the shares
622-6 that is less than the majority but not less than one-third of the
622-7 shares entitled to vote are represented at the meeting in person or
622-8 by proxy.
622-9 (c) Unless provided by the certificate of formation or
622-10 bylaws of the real estate investment trust, after a quorum is
622-11 present at a meeting of shareholders, the shareholders may conduct
622-12 business properly brought before the meeting until the meeting is
622-13 adjourned. The subsequent withdrawal from the meeting of a
622-14 shareholder or the refusal of a shareholder present at or
622-15 represented by proxy at the meeting to vote does not negate the
622-16 presence of a quorum at the meeting.
622-17 (d) Unless provided by the certificate of formation or
622-18 bylaws, the shareholders of the real estate investment trust at a
622-19 meeting at which a quorum is not present may adjourn the meeting
622-20 until the time and to the place as may be determined by a vote of
622-21 the holders of the majority of the shares who are present or
622-22 represented by proxy at the meeting.
622-23 Sec. 200.258. VOTING IN ELECTION OF TRUST MANAGERS.
622-24 (a) Subject to Subsection (b), trust managers of a real estate
622-25 investment trust shall be elected by two-thirds of the votes cast
622-26 by the holders of shares entitled to vote in the election of trust
622-27 managers at a meeting of shareholders at which a quorum is present.
623-1 (b) The certificate of formation or bylaws of a real estate
623-2 investment trust may provide that a trust manager of the real
623-3 estate investment trust shall be elected only if the trust manager
623-4 receives:
623-5 (1) the vote of the holders of a specified portion,
623-6 but not less than the majority, of the shares entitled to vote in
623-7 the election of trust managers;
623-8 (2) the vote of the holders of a specified portion,
623-9 but not less than the majority, of the shares entitled to vote in
623-10 the election of trust managers and represented in person or by
623-11 proxy at a meeting of shareholders at which a quorum is present; or
623-12 (3) the vote of the holders of a specified portion,
623-13 but not less than the majority, of the votes cast by the holders of
623-14 shares entitled to vote in the election of trust managers at a
623-15 meeting of shareholders at which a quorum is present.
623-16 (c) Subject to Section 200.259, at each election of trust
623-17 managers of a real estate investment trust each shareholder
623-18 entitled to vote at the election is entitled to vote, in person or
623-19 by proxy, the number of shares owned by the shareholder for as many
623-20 candidates as there are trust managers to be elected and for whose
623-21 election the shareholder is entitled to vote.
623-22 Sec. 200.259. CUMULATIVE VOTING IN ELECTION OF TRUST
623-23 MANAGERS. (a) Cumulative voting is allowed only if specifically
623-24 authorized by the certificate of formation of a real estate
623-25 investment trust.
623-26 (b) Cumulative voting occurs when a shareholder:
623-27 (1) gives one candidate as many votes as the total of
624-1 the number of the trust managers to be elected multiplied by the
624-2 shareholder's shares; or
624-3 (2) distributes the votes among one or more candidates
624-4 using the same principle.
624-5 (c) If cumulative voting is specifically authorized by the
624-6 certificate of formation, a shareholder who intends to cumulate
624-7 votes must give written notice of that intention to the trust
624-8 managers on or before the day preceding the date of the election at
624-9 which the shareholder intends to cumulate votes.
624-10 Sec. 200.260. VOTING ON MATTERS OTHER THAN ELECTION OF TRUST
624-11 MANAGERS. (a) Subject to Subsection (b), with respect to a matter
624-12 other than the election of trust managers or a matter for which the
624-13 affirmative vote of the holders of a specified portion of the
624-14 shares entitled to vote is required by this code, the affirmative
624-15 vote of the holders of the majority of the shares entitled to vote
624-16 on, and who voted for, against, or expressly abstained with respect
624-17 to, the matter at a shareholders' meeting of a real estate
624-18 investment trust at which a quorum is present is the act of the
624-19 shareholders.
624-20 (b) With respect to a matter other than the election of
624-21 trust managers or a matter for which the affirmative vote of the
624-22 holders of a specified portion of the shares entitled to vote is
624-23 required by this code, the certificate of formation or bylaws of a
624-24 real estate investment trust may provide that the act of the
624-25 shareholders of the real estate investment trust is:
624-26 (1) the affirmative vote of the holders of a specified
624-27 portion, but not less than the majority, of the shares entitled to
625-1 vote on that matter;
625-2 (2) the affirmative vote of the holders of a specified
625-3 portion, but not less than the majority, of the shares entitled to
625-4 vote on that matter and represented in person or by proxy at a
625-5 shareholders' meeting at which a quorum is present;
625-6 (3) the affirmative vote of the holders of a specified
625-7 portion, but not less than the majority, of the shares entitled to
625-8 vote on, and who voted for or against, the matter at a
625-9 shareholders' meeting at which a quorum is present; or
625-10 (4) the affirmative vote of the holders of a specified
625-11 portion, but not less than the majority, of the shares entitled to
625-12 vote on, and who voted for, against, or expressly abstained with
625-13 respect to, the matter at a shareholders' meeting at which a quorum
625-14 is present.
625-15 Sec. 200.261. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION.
625-16 (a) In this section, a "fundamental action" means:
625-17 (1) an amendment of a certificate of formation;
625-18 (2) a voluntary winding up under Chapter 11;
625-19 (3) a revocation of a voluntary decision to wind up
625-20 under Section 11.151;
625-21 (4) a cancellation of an event requiring winding up
625-22 under Section 11.252; or
625-23 (5) a reinstatement under Section 11.202.
625-24 (b) Except as otherwise provided by this code or the
625-25 certificate of formation or bylaws of a real estate investment
625-26 trust in accordance with Section 200.260, the vote required for
625-27 approval of a fundamental action by the shareholders is the
626-1 affirmative vote of the holders of at least two-thirds of the
626-2 outstanding shares entitled to vote on the fundamental action.
626-3 (c) If a class or series of shares is entitled to vote as a
626-4 class on a fundamental action, the vote required for approval of
626-5 the action by the shareholders is the affirmative vote of the
626-6 holders of at least two-thirds of the outstanding shares in each
626-7 class or series of shares entitled to vote on the action as a class
626-8 and at least two-thirds of the outstanding shares otherwise
626-9 entitled to vote on the action. Shares entitled to vote as a class
626-10 shall be entitled to vote only as a class unless otherwise entitled
626-11 to vote on each matter generally or otherwise provided by the
626-12 certificate of formation.
626-13 (d) Unless an amendment to the certificate of formation is
626-14 undertaken by the trust managers under Section 200.103, separate
626-15 voting by a class or series of shares of a real estate investment
626-16 trust is required for approval of an amendment to the certificate
626-17 of formation that would result in:
626-18 (1) the increase or decrease of the aggregate number
626-19 of authorized shares of the class or series;
626-20 (2) the increase or decrease of the par value of the
626-21 shares of the class, including changing shares with par value into
626-22 shares without par value or changing shares without par value into
626-23 shares with par value;
626-24 (3) effecting an exchange, reclassification, or
626-25 cancellation of all or part of the shares of the class or series;
626-26 (4) effecting an exchange or creating a right of
626-27 exchange of all or part of the shares of another class or series
627-1 into the shares of the class or series;
627-2 (5) the change of the designations, preferences,
627-3 limitations, or relative rights of the shares of the class or
627-4 series;
627-5 (6) the change of the shares of the class or series,
627-6 with or without par value, into the same or a different number of
627-7 shares, with or without par value, of the same class or series or
627-8 another class or series;
627-9 (7) the creation of a new class or series of shares
627-10 with rights and preferences equal, prior, or superior to the shares
627-11 of the class or series;
627-12 (8) increasing the rights and preferences of a class
627-13 or series with rights and preferences equal, prior or superior to
627-14 the shares of the class or series;
627-15 (9) increasing the rights and preferences of a class
627-16 or series with rights or preferences later or inferior to the
627-17 shares of the class or series in such a manner that the rights or
627-18 preferences will be equal, prior, or superior to the shares of the
627-19 class or series;
627-20 (10) dividing the shares of the class into series and
627-21 setting and determining the designation of the series and the
627-22 variations in the relative rights and preferences between the
627-23 shares of the series;
627-24 (11) the limitation or denial of existing preemptive
627-25 rights or cumulative voting rights of the shares of the class or
627-26 series; or
627-27 (12) canceling or otherwise affecting the dividends on
628-1 the shares of the class or series that have accrued but have not
628-2 been declared.
628-3 (e) Unless otherwise provided by the certificate of
628-4 formation, if the holders of the outstanding shares of a class that
628-5 is divided into series are entitled to vote as a class on a
628-6 proposed amendment that would affect equally all series of the
628-7 class, other than a series in which no shares are outstanding or a
628-8 series that is not affected by the amendment, the holders of the
628-9 separate series are not entitled to separate class votes.
628-10 (f) Unless otherwise provided by the certificate of
628-11 formation, a proposed amendment to the certificate of formation
628-12 that would solely effect changes in the designations, preferences,
628-13 limitations, or relative rights, including voting rights, of one or
628-14 more series of shares of the real estate investment trust that have
628-15 been established under the authority granted to the trust managers
628-16 in the certificate of formation in accordance with Section 200.103
628-17 does not require the approval of the holders of the outstanding
628-18 shares of a class or series other than the affected series if,
628-19 after giving effect to the amendment:
628-20 (1) the preferences, limitations, or relative rights
628-21 of the affected series may be set and determined by the trust
628-22 managers with respect to the establishment of a new series of
628-23 shares under the authority granted to the trust managers in the
628-24 certificate of formation in accordance with Section 200.103; or
628-25 (2) any new series established as a result of a
628-26 reclassification of the affected series are within the preferences,
628-27 limitations, and relative rights that are described by
629-1 Subdivision (1).
629-2 Sec. 200.262. CHANGES IN VOTE REQUIRED FOR CERTAIN MATTERS.
629-3 (a) With respect to a matter for which the affirmative vote of the
629-4 holders of a specified portion of the shares entitled to vote is
629-5 required by this code, the certificate of formation of a real
629-6 estate investment trust may provide that the affirmative vote of
629-7 the holders of a specified portion, but not less than the majority,
629-8 of the shares entitled to vote on that matter is required for
629-9 shareholder action on that matter.
629-10 (b) With respect to a matter for which the affirmative vote
629-11 of the holders of a specified portion of the shares of a class or
629-12 series is required by this code, the certificate of formation may
629-13 provide that the affirmative vote of the holders of a specified
629-14 portion, but not less than the majority, of the shares of that
629-15 class or series is required for action of the holders of shares of
629-16 that class or series on that matter.
629-17 (c) If a provision of the certificate of formation provides
629-18 that the affirmative vote of the holders of a specified portion
629-19 that is greater than the majority of the shares entitled to vote on
629-20 a matter is required for shareholder action on that matter, the
629-21 provision may not be amended, directly or indirectly, without the
629-22 same affirmative vote unless otherwise provided by the certificate
629-23 of formation.
629-24 (d) If a provision of the certificate of formation provides
629-25 that the affirmative vote of the holders of a specified portion
629-26 that is greater than the majority of the shares of a class or
629-27 series is required for shareholder action on a matter, the
630-1 provision may not be amended, directly or indirectly, without the
630-2 same affirmative vote unless otherwise provided by the certificate
630-3 of formation.
630-4 Sec. 200.263. NUMBER OF VOTES PER SHARE. (a) Except as
630-5 provided by the certificate of formation of a real estate
630-6 investment trust or this code, each outstanding share, regardless
630-7 of class, is entitled to one vote on each matter submitted to a
630-8 vote at a shareholders' meeting.
630-9 (b) If the certificate of formation provides for more or
630-10 less than one vote per share on a matter for all of the outstanding
630-11 shares or for the shares of a class or series, each reference in
630-12 this code or in the certificate of formation or bylaws, unless
630-13 expressly stated otherwise, to a specified portion of the shares
630-14 with respect to that matter refers to the portion of the votes
630-15 entitled to be cast with respect to those shares under the
630-16 certificate of formation.
630-17 Sec. 200.264. VOTING IN PERSON OR BY PROXY. (a) A
630-18 shareholder may vote in person or by proxy executed in writing by
630-19 the shareholder.
630-20 (b) A telegram, telex, cablegram, electronic message, or
630-21 similar transmission by the shareholder, or a photographic,
630-22 photostatic, facsimile, or similar reproduction of a writing
630-23 executed by the shareholder, is considered an execution in writing
630-24 for purposes of this section.
630-25 Sec. 200.265. TERM OF PROXY. A proxy is not valid after 11
630-26 months after the date the proxy is executed unless otherwise
630-27 provided by the proxy.
631-1 Sec. 200.266. REVOCABILITY OF PROXY. (a) In this section,
631-2 a "proxy coupled with an interest" includes the appointment as
631-3 proxy of:
631-4 (1) a pledgee;
631-5 (2) a person who purchased or agreed to purchase the
631-6 shares subject to the proxy;
631-7 (3) a person who owns or holds an option to purchase
631-8 the shares subject to the proxy;
631-9 (4) a creditor of the real estate investment trust who
631-10 extended the real estate investment trust credit under terms
631-11 requiring the appointment;
631-12 (5) an employee of the real estate investment trust
631-13 whose employment contract requires the appointment; or
631-14 (6) a party to a voting agreement created under
631-15 Section 6.252.
631-16 (b) A proxy is revocable unless:
631-17 (1) the proxy form conspicuously states that the proxy
631-18 is irrevocable; and
631-19 (2) the proxy is coupled with an interest.
631-20 Sec. 200.267. ENFORCEABILITY OF PROXY. (a) An irrevocable
631-21 proxy is specifically enforceable against the holder of shares or
631-22 any successor or transferee of the holder if:
631-23 (1) the proxy is noted conspicuously on the
631-24 certificate representing the shares subject to the proxy; or
631-25 (2) in the case of uncertificated shares, notation of
631-26 the proxy is contained in the notice sent under Section 3.205 with
631-27 respect to the shares subject to the proxy.
632-1 (b) An irrevocable proxy that is otherwise enforceable is
632-2 ineffective against a transferee for value without actual knowledge
632-3 of the existence of the irrevocable proxy at the time of the
632-4 transfer or against a subsequent transferee, regardless of whether
632-5 the transfer is for value, unless the proxy is:
632-6 (1) noted conspicuously on the certificate
632-7 representing the shares subject to the proxy; or
632-8 (2) in the case of uncertificated shares, notation of
632-9 the proxy is contained in the notice sent under Section 3.205 with
632-10 respect to the shares subject to the proxy.
632-11 (c) An irrevocable proxy shall be specifically enforceable
632-12 against a person who is not a transferee for value from the time
632-13 the person acquires actual knowledge of the existence of the
632-14 irrevocable proxy.
632-15 Sec. 200.268. PROCEDURES IN BYLAWS RELATING TO PROXIES. A
632-16 real estate investment trust may establish in the bylaws of the
632-17 real estate investment trust procedures consistent with this code
632-18 for determining the validity of proxies and determining whether
632-19 shares held of record by a bank, broker, or other nominee are
632-20 represented at a meeting of shareholders. The procedures may
632-21 incorporate rules of and determinations made by a self-regulatory
632-22 organization regulating that bank, broker, or other nominee.
632-23 (Sections 200.269-200.300 reserved for expansion)
632-24 SUBCHAPTER G. TRUST MANAGERS
632-25 Sec. 200.301. MANAGEMENT BY TRUST MANAGERS. The control,
632-26 operation, disposition, investment, and management of the trust
632-27 estate and the powers necessary or appropriate to effect any
633-1 purpose for which a real estate investment trust is organized are
633-2 vested in one or more trust managers.
633-3 Sec. 200.302. DESIGNATION OF TRUST MANAGERS. (a) The
633-4 certificate of formation of a real estate investment trust must
633-5 contain the name of each trust manager.
633-6 (b) A successor trust manager must be selected in accordance
633-7 with the certificate of formation. The selection of a successor
633-8 trust manager is considered an amendment to the certificate of
633-9 formation of a real estate investment trust.
633-10 Sec. 200.303. TRUST MANAGER ELIGIBILITY REQUIREMENTS. A
633-11 trust manager of a real estate investment trust must be an
633-12 individual. Unless the certificate of formation or bylaws of a
633-13 real estate investment trust provide otherwise, a person is not
633-14 required to be a resident of this state or a shareholder of the
633-15 real estate investment trust to serve as a trust manager. The
633-16 certificate of formation or bylaws may prescribe other
633-17 qualifications for trust managers.
633-18 Sec. 200.304. NUMBER OF TRUST MANAGERS. (a) The
633-19 certificate of formation of a real estate investment trust shall
633-20 set the number constituting the initial trust managers. The
633-21 certificate of formation or bylaws of the real estate investment
633-22 trust shall set the number of successor trust managers or provide
633-23 for the manner of determining the number of successor trust
633-24 managers.
633-25 (b) The number of trust managers may be increased or
633-26 decreased by amendment to, or as provided by, the certificate of
633-27 formation or bylaws. A decrease in the number of trust managers may
634-1 not shorten the term of an incumbent trust manager.
634-2 Sec. 200.305. COMPENSATION. A trust manager or officer of a
634-3 real estate investment trust is entitled to receive compensation
634-4 set by or in the manner provided by the certificate of formation or
634-5 bylaws of the real estate investment trust. If the certificate of
634-6 formation or bylaws do not provide for compensation to trust
634-7 managers and officers, the trust managers of the real estate
634-8 investment trust must determine the compensation.
634-9 Sec. 200.306. TERM OF TRUST MANAGER. (a) Except as
634-10 provided by the certificate of formation or bylaws of a real estate
634-11 investment trust, a trust manager of the real estate investment
634-12 trust serves until the trust manager's successor is elected.
634-13 (b) A trust manager may succeed himself or herself in
634-14 office.
634-15 (c) If a successor trust manager is not elected, the trust
634-16 manager in office continues to serve as trust manager until the
634-17 trust manager's successor is elected.
634-18 Sec. 200.307. STAGGERED TERMS OF TRUST MANAGERS. (a) A
634-19 governing document of a real estate investment trust may provide
634-20 that all or some of the board of trust managers may be divided into
634-21 two or three classes. Each class must include the same or a
634-22 similar number of trust managers as each other class.
634-23 (b) The terms of office of trust managers constituting the
634-24 first class expire on the election of successors at the first
634-25 annual meeting of shareholders after the election of those trust
634-26 managers. The terms of office of trust managers constituting the
634-27 second class expire on the election of successors at the second
635-1 annual meeting of shareholders after election of those trust
635-2 managers. The terms of office of trust managers constituting the
635-3 third class, if any, expire on the election of successors at the
635-4 third annual meeting of shareholders after election of those trust
635-5 managers.
635-6 (c) If a governing document of the real estate investment
635-7 trust provides for the classification of trust managers, an annual
635-8 election for trust managers as a whole is not necessary. At each
635-9 annual meeting held after the classification of trust managers, an
635-10 election shall be held to elect the number of trust managers equal
635-11 to the number of trust managers in the class the term of which
635-12 expires on the date of the meeting, and those trust managers serve
635-13 until:
635-14 (1) the second succeeding annual meeting if there are
635-15 two classes; or
635-16 (2) the third succeeding annual meeting if there are
635-17 three classes.
635-18 (d) Unless provided by the certificate of formation or a
635-19 bylaw adopted by shareholders, staggered terms for trust managers
635-20 do not take effect until the next annual meeting of shareholders at
635-21 which trust managers are elected. Staggered terms for trust
635-22 managers may not be effected if any shareholder has the right to
635-23 cumulate votes for the election of trust managers and the number of
635-24 trust managers is fewer than nine trust managers.
635-25 Sec. 200.308. VACANCY. (a) Except as provided by
635-26 Subsection (b), a vacancy occurring in the office of a trust
635-27 manager of a real estate investment trust may be filled by the
636-1 affirmative vote of the majority of the remaining trust managers,
636-2 even if the majority of trust managers constitutes less than a
636-3 quorum of the trust managers.
636-4 (b) The certificate of formation or bylaws of the real
636-5 estate investment trust may provide an alternative procedure for
636-6 filling a vacancy occurring in the office of a trust manager,
636-7 including filling vacancies by simple majority or super majority
636-8 votes of the shareholders.
636-9 (c) The term of a trust manager elected to fill a vacancy
636-10 occurring in the office of a trust manager is the unexpired term of
636-11 the trust manager's predecessor in office and until the trust
636-12 manager's successor is elected and has qualified.
636-13 Sec. 200.309. NOTICE OF MEETING. (a) Regular meetings of
636-14 the trust managers of a real estate investment trust may be held
636-15 with or without notice as prescribed by the real estate investment
636-16 trust's bylaws.
636-17 (b) Special meetings of the trust managers shall be held
636-18 with notice as prescribed by the bylaws.
636-19 (c) A notice of a board meeting is not required to specify
636-20 the business to be transacted at the meeting or the purpose of the
636-21 meeting, unless required by the bylaws.
636-22 Sec. 200.310. QUORUM. A quorum of the board of trust
636-23 managers of a real estate investment trust is the majority of the
636-24 number of trust managers unless the real estate investment trust's
636-25 certificate of formation or bylaws require a greater number.
636-26 Sec. 200.311. COMMITTEES OF TRUST MANAGERS. (a) If
636-27 authorized by the certificate of formation or bylaws of a real
637-1 estate investment trust, the trust managers of the real estate
637-2 investment trust, by resolution adopted by a majority of the trust
637-3 managers, may designate:
637-4 (1) committees composed of one or more trust managers;
637-5 or
637-6 (2) trust managers as alternate committee members to
637-7 replace absent or disqualified committee members at a committee
637-8 meeting, subject to any limitations imposed by the trust managers.
637-9 (b) To the extent provided by the resolution designating a
637-10 committee or the certificate of formation or bylaws and subject to
637-11 Subsection (c), the committee has the authority of the trust
637-12 managers.
637-13 (c) A committee of the trust managers may not:
637-14 (1) amend the certificate of formation, except to
637-15 classify or reclassify shares in accordance with Section 200.103 if
637-16 authorized by the resolution designating the committee, certificate
637-17 of formation, or bylaws;
637-18 (2) propose a reduction of stated capital of the real
637-19 estate investment trust;
637-20 (3) approve a plan of merger or share exchange of the
637-21 real estate investment trust;
637-22 (4) recommend to shareholders the sale, lease, or
637-23 exchange of all or substantially all of the property and assets of
637-24 the real estate investment trust not made in the usual and regular
637-25 course of its business;
637-26 (5) recommend to the shareholders a voluntary winding
637-27 up and termination or a revocation of the real estate investment
638-1 trust;
638-2 (6) amend, alter, or repeal the bylaws or adopt new
638-3 bylaws;
638-4 (7) fill vacancies in the offices of the trust
638-5 managers;
638-6 (8) fill vacancies in or designate alternate members
638-7 of a committee of the trust managers;
638-8 (9) fill a vacancy to be filled because of an increase
638-9 in the number of trust managers;
638-10 (10) elect or remove officers of the real estate
638-11 investment trust or members or alternate members of a committee of
638-12 the trust managers;
638-13 (11) set the compensation of the members or alternate
638-14 members of a committee of the trust managers; or
638-15 (12) alter or repeal a resolution of the trust
638-16 managers that states that it may not be amended or repealed.
638-17 (d) A committee of the trust managers may authorize a
638-18 distribution or the issuance of shares if authorized by the
638-19 resolution designating the committee or the certificate of
638-20 formation.
638-21 (e) The designation of and delegation of authority to a
638-22 committee of the trust managers does not relieve a trust manager of
638-23 responsibility imposed by law.
638-24 Sec. 200.312. LIABILITY OF TRUST MANAGERS. (a) A trust
638-25 manager of a real estate investment trust who votes for or assents
638-26 to a distribution of assets made by the real estate investment
638-27 trust to its shareholders during the liquidation of the real estate
639-1 investment trust without the payment and discharge of or the making
639-2 of adequate provision for the payment of all of the known debts,
639-3 liabilities, and other obligations of the real estate investment
639-4 trust is jointly and severally liable to the real estate investment
639-5 trust for the value of the distributed assets to the extent the
639-6 debts, liabilities, and other obligations are not paid and
639-7 discharged.
639-8 (b) A trust manager of a real estate investment trust who
639-9 votes for or assents to the making of a loan to another trust
639-10 manager or officer of the real estate investment trust or to the
639-11 making of a loan secured by shares of the real estate investment
639-12 trust is jointly and severally liable to the real estate investment
639-13 trust for the loan amount until the loan is repaid.
639-14 (c) A trust manager is not jointly and severally liable
639-15 under Subsection (a) if, in determining the amount available for
639-16 the distribution, the trust manager, acting in good faith and with
639-17 ordinary care:
639-18 (1) relied on information, opinions, reports, or
639-19 statements in accordance with Section 3.101; or
639-20 (2) considered the assets of the real estate
639-21 investment trust to be valued at least at book value.
639-22 Sec. 200.313. STATUTE OF LIMITATIONS ON CERTAIN ACTION
639-23 AGAINST TRUST MANAGERS. An action may not be brought against a
639-24 trust manager of a real estate investment trust under Section
639-25 200.312 after the second anniversary of the date the alleged act
639-26 giving rise to the liability occurred.
639-27 Sec. 200.314. IMMUNITY FROM LIABILITY FOR PERFORMANCE OF
640-1 DUTY. A trust manager of a real estate investment trust may not be
640-2 held liable to the real estate investment trust for an act,
640-3 omission, loss, damage, or expense arising from the performance of
640-4 the trust manager's duties under the trust, except for liability
640-5 arising from the wilful misfeasance, wilful malfeasance, or gross
640-6 negligence of the trust manager.
640-7 Sec. 200.315. OFFICERS. (a) An officer of a real estate
640-8 investment trust designated by a trust manager under Section 3.102
640-9 may exercise all of the powers of a trust manager relating to the
640-10 business and affairs of the real estate investment trust, unless
640-11 action by a trust manager is specified by this code or another
640-12 applicable law.
640-13 (b) A designation of or delegation of authority to an
640-14 officer of a real estate investment trust described by this section
640-15 does not relieve a trust manager of responsibility imposed by law.
640-16 Sec. 200.316. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED
640-17 TRUST MANAGERS AND OFFICERS. (a) This section applies only to a
640-18 contract or transaction between a real estate investment trust and:
640-19 (1) one or more of the trust's trust managers or
640-20 officers; or
640-21 (2) an entity or other organization in which one or
640-22 more of the trust's trust managers or officers:
640-23 (A) is a managerial official; or
640-24 (B) has a financial interest.
640-25 (b) An otherwise valid contract or transaction is valid
640-26 notwithstanding that a trust manager or officer of the trust is
640-27 present at or participates in the meeting of the trust managers or
641-1 of a committee of the trust managers that authorizes the contract
641-2 or transaction, or votes to authorize the contract or transaction,
641-3 if:
641-4 (1) the material facts as to the relationship or
641-5 interest and as to the contract or transaction are disclosed to or
641-6 known by:
641-7 (A) the trust managers or a committee of the
641-8 trust managers, and the trust managers or committee of the trust
641-9 managers in good faith authorize the contract or transaction by the
641-10 affirmative vote of the majority of disinterested trust managers or
641-11 committee members, regardless of whether the disinterested trust
641-12 managers or committee members constitute a quorum; or
641-13 (B) the shareholders entitled to vote on the
641-14 authorization of the contract or transaction, and the contract or
641-15 transaction is specifically approved in good faith by a vote of the
641-16 shareholders; or
641-17 (2) the contract or transaction is fair to the real
641-18 estate investment trust when the contract or transaction is
641-19 authorized, approved, or ratified by the trust managers, a
641-20 committee of the trust managers, or the shareholders.
641-21 (c) Common or interested trust managers may be included in
641-22 determining the presence of a quorum at a meeting of the trust
641-23 managers, or a committee of the trust managers, that authorizes the
641-24 contract or transaction.
641-25 (Sections 200.317-200.350 reserved for expansion)
641-26 SUBCHAPTER H. INVESTMENTS
641-27 Sec. 200.351. INVESTMENTS. A trust manager or officer of a
642-1 real estate investment trust has complete discretion with respect
642-2 to the investment of the trust estate unless the investment is
642-3 contrary to or inconsistent with:
642-4 (1) this chapter;
642-5 (2) a provision of the Internal Revenue Code relating
642-6 to or governing real estate investment trusts; or
642-7 (3) regulations adopted under a provision of the
642-8 Internal Revenue Code relating to or governing real estate
642-9 investment trusts.
642-10 (Sections 200.352-200.400 reserved for expansion)
642-11 SUBCHAPTER I. FUNDAMENTAL BUSINESS TRANSACTIONS
642-12 Sec. 200.401. DEFINITIONS. In this subchapter:
642-13 (1) "Participating shares" means shares that entitle
642-14 the holders of the shares to participate without limitation in
642-15 distributions.
642-16 (2) "Shares" includes a receipt or other instrument
642-17 issued by a depository representing an interest in one or more
642-18 shares or fractions of shares of a domestic or foreign real estate
642-19 investment trust that are deposited with the depository.
642-20 (3) "Voting shares" means shares that entitle the
642-21 holders of the shares to vote unconditionally in elections of trust
642-22 managers.
642-23 Sec. 200.402. APPROVAL OF MERGER. (a) A real estate
642-24 investment trust that is a party to the merger under Chapter 10
642-25 must approve the merger by complying with this section.
642-26 (b) The trust managers of the real estate investment trust
642-27 shall adopt a resolution that:
643-1 (1) approves the plan of merger; and
643-2 (2) if shareholder approval of the merger is required
643-3 by this subchapter:
643-4 (A) recommends that the plan of merger be
643-5 approved by the shareholders of the real estate investment trust;
643-6 or
643-7 (B) directs that the plan of merger be submitted
643-8 to the shareholders for approval without recommendation if the
643-9 trust managers determine for any reason not to recommend approval
643-10 of the plan of merger.
643-11 (c) Except as provided by this subchapter or Chapter 10, the
643-12 plan of merger shall be submitted to the shareholders of the real
643-13 estate investment trust for approval as provided by this
643-14 subchapter. The trust managers may place conditions on the
643-15 submission of the plan of merger to the shareholders.
643-16 (d) If the trust managers approve a plan of merger required
643-17 to be approved by the shareholders of the real estate investment
643-18 trust but do not adopt a resolution recommending that the plan of
643-19 merger be approved by the shareholders, the trust managers shall
643-20 communicate to the shareholders the reason for the trust managers'
643-21 determination to submit the plan of merger without a
643-22 recommendation.
643-23 (e) Except as provided by Chapter 10 or Sections
643-24 200.407-200.409, the shareholders of the real estate investment
643-25 trust shall approve the plan of merger as provided by this
643-26 subchapter.
643-27 Sec. 200.403. APPROVAL OF CONVERSION. (a) A real estate
644-1 investment trust must approve a conversion under Chapter 10 by
644-2 complying with this section.
644-3 (b) The trust managers of the real estate investment trust
644-4 shall adopt a resolution that approves the plan of conversion and:
644-5 (1) recommends that the plan of conversion be approved
644-6 by the shareholders of the real estate investment trust; or
644-7 (2) directs that the plan of conversion be submitted
644-8 to the shareholders for approval without recommendation if the
644-9 trust managers determine for any reason not to recommend approval
644-10 of the plan of conversion.
644-11 (c) The plan of conversion shall be submitted to the
644-12 shareholders of the real estate investment trust for approval as
644-13 provided by this subchapter. The trust managers may place
644-14 conditions on the submission of the plan of conversion to the
644-15 shareholders.
644-16 (d) If the trust managers approve a plan of conversion but
644-17 do not adopt a resolution recommending that the plan of conversion
644-18 be approved by the shareholders of the real estate investment
644-19 trust, the trust managers shall communicate to the shareholders the
644-20 reason for the trust managers' determination to submit the plan of
644-21 conversion without a recommendation.
644-22 (e) Except as provided by Sections 200.407-200.409, the
644-23 shareholders of the real estate investment trust must approve the
644-24 plan of conversion as provided by this subchapter.
644-25 Sec. 200.404. APPROVAL OF EXCHANGE. (a) A real estate
644-26 investment trust the shares of which are to be acquired in an
644-27 exchange under Chapter 10 must approve the exchange by complying
645-1 with this section.
645-2 (b) The trust managers shall adopt a resolution that
645-3 approves the plan of exchange and:
645-4 (1) recommends that the plan of exchange be approved
645-5 by the shareholders of the real estate investment trust; or
645-6 (2) directs that the plan of exchange be submitted to
645-7 the shareholders for approval without recommendation if the trust
645-8 managers determine for any reason not to recommend approval of the
645-9 plan of exchange.
645-10 (c) The plan of exchange shall be submitted to the
645-11 shareholders of the real estate investment trust for approval as
645-12 provided by this subchapter. The trust managers may place
645-13 conditions on the submission of the plan of exchange to the
645-14 shareholders.
645-15 (d) If the trust managers approve a plan of exchange but do
645-16 not adopt a resolution recommending that the plan of exchange be
645-17 approved by the shareholders of the real estate investment trust,
645-18 the trust managers shall communicate to the shareholders the reason
645-19 for the trust managers' determination to submit the plan of
645-20 exchange to shareholders without a recommendation.
645-21 (e) Except as provided by Sections 200.407-200.409, the
645-22 shareholders of the real estate investment trust shall approve the
645-23 plan of exchange as provided by this subchapter.
645-24 Sec. 200.405. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL
645-25 OF ASSETS. (a) Except as provided by the certificate of formation
645-26 of a domestic real estate investment trust, a sale, lease, pledge,
645-27 mortgage, assignment, transfer, or other conveyance of an interest
646-1 in real property or other assets of the real estate investment
646-2 trust does not require the approval or consent of the shareholders
646-3 of the real estate investment trust unless the transaction
646-4 constitutes a sale of all or substantially all of the assets of the
646-5 real estate investment trust.
646-6 (b) A real estate investment trust must approve the sale of
646-7 all or substantially all of its assets by complying with this
646-8 section.
646-9 (c) The trust managers of the real estate investment trust
646-10 shall adopt a resolution that approves the sale of all or
646-11 substantially all of the assets of the real estate investment trust
646-12 and:
646-13 (1) recommends that the sale of all or substantially
646-14 all of the assets of the real estate investment trust be approved
646-15 by the shareholders of the real estate investment trust; or
646-16 (2) directs that the sale of all or substantially all
646-17 of the assets of the real estate investment trust be submitted to
646-18 the shareholders for approval without recommendation if the trust
646-19 managers determine for any reason not to recommend approval of the
646-20 sale.
646-21 (d) The sale of all or substantially all of the assets of
646-22 the real estate investment trust shall be submitted to the
646-23 shareholders of the real estate investment trust for approval as
646-24 provided by this subchapter. The trust managers may place
646-25 conditions on the submission of the proposed sale to the
646-26 shareholders.
646-27 (e) If the trust managers approve the sale of all or
647-1 substantially all of the assets of the real estate investment trust
647-2 but do not adopt a resolution recommending that the proposed sale
647-3 be approved by the shareholders of the real estate investment
647-4 trust, the trust managers shall communicate to the shareholders the
647-5 reason for the trust managers' determination to submit the proposed
647-6 sale to shareholders without a recommendation.
647-7 (f) The shareholders of the real estate investment trust
647-8 shall approve the sale of all or substantially all of the assets of
647-9 the real estate investment trust as provided by this subchapter.
647-10 After the approval of the sale by the shareholders, the trust
647-11 managers may abandon the sale of all or substantially all of the
647-12 assets of the real estate investment trust, subject to the rights
647-13 of a third party under a contract relating to the assets, without
647-14 further action or approval by the shareholders.
647-15 Sec. 200.406. GENERAL PROCEDURE FOR SUBMISSION TO
647-16 SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION. (a) If a
647-17 fundamental business transaction involving a real estate investment
647-18 trust is required to be submitted to the shareholders of the real
647-19 estate investment trust under this subchapter, the real estate
647-20 investment trust shall notify each shareholder of the real estate
647-21 investment trust that the fundamental business transaction is being
647-22 submitted to the shareholders for approval as required by this
647-23 subchapter, regardless of whether the shareholder is entitled to
647-24 vote on the matter.
647-25 (b) If the fundamental business transaction is a merger,
647-26 conversion, or interest exchange, the notice required by Subsection
647-27 (a) shall contain or be accompanied by a copy or summary of the
648-1 plan of merger, conversion, or interest exchange, as appropriate.
648-2 (c) If the fundamental business transaction is to be
648-3 considered at a meeting of the shareholders of the real estate
648-4 investment trust, the notice of the meeting must:
648-5 (1) be given not later than the 21st day before the
648-6 date of the meeting; and
648-7 (2) state that the purpose, or one of the purposes, of
648-8 the meeting is to consider the fundamental business transaction.
648-9 (d) If the fundamental business transaction is being
648-10 submitted to shareholders by written consent, the notice required
648-11 by Subsection (a) must:
648-12 (1) be given not later than the 21st day before the
648-13 date the fundamental business transaction takes effect; and
648-14 (2) state that the purpose, or one of the purposes, of
648-15 the solicitation of written consents from the shareholders is to
648-16 receive approval for the fundamental business transaction.
648-17 Sec. 200.407. GENERAL VOTE REQUIREMENT FOR APPROVAL OF
648-18 FUNDAMENTAL BUSINESS TRANSACTION. (a) Except as provided by this
648-19 code or the certificate of formation or bylaws of a real estate
648-20 investment trust in accordance with Section 200.261, the
648-21 affirmative vote of the holders of at least two-thirds of the
648-22 outstanding shares of the real estate investment trust entitled to
648-23 vote on a fundamental business transaction is required to approve
648-24 the transaction.
648-25 (b) Unless provided by the certificate of formation or
648-26 Section 200.408, shares of a class or series that are not otherwise
648-27 entitled to vote on matters submitted to shareholders generally
649-1 will not be entitled to vote for the approval of a fundamental
649-2 business transaction.
649-3 (c) Except as provided by this code, if a class or series of
649-4 shares of a real estate investment trust is entitled to vote on a
649-5 fundamental business transaction as a class or series, in addition
649-6 to the vote required under Subsection (a), the affirmative vote of
649-7 the holders of at least two-thirds of the outstanding shares in
649-8 each class or series of shares entitled to vote on the fundamental
649-9 business transaction as a class or series is required to approve
649-10 the transaction.
649-11 (d) Unless required by the certificate of formation,
649-12 approval of a merger by shareholders is not required under this
649-13 code for a real estate investment trust that is a party to the plan
649-14 of merger unless that real estate investment trust is also a party
649-15 to the merger.
649-16 Sec. 200.408. CLASS VOTING REQUIREMENTS FOR CERTAIN
649-17 FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Separate voting by a class
649-18 or series of shares of a real estate investment trust is required
649-19 for approval of a plan of merger or conversion if:
649-20 (1) the plan of merger or conversion contains a
649-21 provision that would require approval by that class or series of
649-22 shares under Section 200.262 if the provision was contained in a
649-23 proposed amendment to the real estate investment trust's
649-24 certificate of formation; or
649-25 (2) that class or series of shares is entitled under
649-26 the certificate of formation to vote as a class on the plan of
649-27 merger or conversion.
650-1 (b) Separate voting by a class or series of shares of a real
650-2 estate investment trust is required for approval of a plan of
650-3 exchange if:
650-4 (1) shares of that class or series are to be exchanged
650-5 under the terms of the plan of exchange; or
650-6 (2) that class or series is entitled under the
650-7 certificate of formation to vote as a class on the plan of
650-8 exchange.
650-9 (c) Separate voting by a class or series of shares of a real
650-10 estate investment trust is required for approval of a sale of all
650-11 or substantially all of the assets of the real estate investment
650-12 trust if that class or series of shares is entitled under the
650-13 certificate of formation to vote as a class on the sale of the real
650-14 estate investment trust's assets.
650-15 Sec. 200.409. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN
650-16 FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Unless required by the
650-17 real estate investment trust's certificate of formation, a plan of
650-18 merger is not required to be approved by the shareholders of a real
650-19 estate investment trust if:
650-20 (1) the real estate investment trust is the sole
650-21 surviving real estate investment trust in the merger;
650-22 (2) the certificate of formation of the real estate
650-23 investment trust following the merger will not differ from the real
650-24 estate investment trust's certificate of formation before the
650-25 merger;
650-26 (3) immediately after the effective date of the
650-27 merger, each shareholder of the real estate investment trust whose
651-1 shares were outstanding immediately before the effective date of
651-2 the merger will hold the same number of shares, with identical
651-3 designations, preferences, limitations, and relative rights;
651-4 (4) the sum of the voting power of the number of
651-5 voting shares outstanding immediately after the merger and the
651-6 voting power of securities that may be acquired on the conversion
651-7 or exercise of securities issued under the merger does not exceed
651-8 by more than 20 percent the voting power of the total number of
651-9 voting shares of the real estate investment trust that are
651-10 outstanding immediately before the merger; and
651-11 (5) the sum of the number of participating shares that
651-12 are outstanding immediately after the merger and the number of
651-13 participating shares that may be acquired on the conversion or
651-14 exercise of securities issued under the merger does not exceed by
651-15 more than 20 percent the total number of participating shares of
651-16 the real estate investment trust that are outstanding immediately
651-17 before the merger.
651-18 (b) Unless required by the certificate of formation, a plan
651-19 of merger effected under Section 10.005 or 10.006 does not require
651-20 the approval of the shareholders of the real estate investment
651-21 trust.
651-22 Sec. 200.410. RIGHTS OF DISSENT AND APPRAISAL. A
651-23 shareholder of a domestic real estate investment trust has the
651-24 rights of dissent and appraisal under Subchapter H, Chapter 10,
651-25 with respect to a fundamental business transaction.
651-26 (Sections 200.411-200.450 reserved for expansion)
652-1 SUBCHAPTER J. WINDING UP AND TERMINATION
652-2 Sec. 200.451. APPROVAL OF VOLUNTARY WINDING UP. A real
652-3 estate investment trust must approve a voluntary winding up under
652-4 Chapter 11 by the affirmative vote of the shareholders in
652-5 accordance with Section 200.261.
652-6 Sec. 200.452. APPROVAL OF REINSTATEMENT OR REVOCATION OF
652-7 VOLUNTARY WINDING UP. A real estate investment trust may reinstate
652-8 its existence under Section 11.202, revoke a voluntary decision to
652-9 wind up under Section 11.151 or cancel an event requiring winding
652-10 up under Section 11.152 by the affirmative vote of the shareholders
652-11 in accordance with Section 200.261.
652-12 Sec. 200.453. RESPONSIBILITY FOR WINDING UP. If a real
652-13 estate investment trust determines or is required to wind up, the
652-14 trust managers shall manage the winding up of the business or
652-15 affairs of the real estate investment trust.
652-16 (Sections 200.454-200.500 reserved for expansion)
652-17 SUBCHAPTER K. MISCELLANEOUS PROVISIONS
652-18 Sec. 200.501. EXAMINATION OF RECORDS. (a) On written
652-19 demand stating a proper purpose, a shareholder of record of a real
652-20 estate investment trust for at least six months immediately
652-21 preceding the shareholder's demand, or a holder of record of at
652-22 least five percent of all of the outstanding shares of a real
652-23 estate investment trust, is entitled to examine and copy, at a
652-24 reasonable time the real estate investment trust's relevant books,
652-25 records of account, minutes, and share transfer records. The
652-26 examination may be conducted in person or through an agent or
652-27 attorney.
653-1 (b) This section does not impair the power of a court, on
653-2 the presentation of proof of proper purpose by a shareholder, to
653-3 compel the production for examination by the shareholder of the
653-4 books and records of accounts, minutes, and share transfer records
653-5 of a real estate investment trust, regardless of the period during
653-6 which the shareholder was a record holder and regardless of the
653-7 number of shares held by the person.
653-8 Sec. 200.502. JOINDER OF SHAREHOLDERS NOT REQUIRED. The
653-9 joinder of shareholders of a real estate investment trust is not
653-10 required for any sale, lease, mortgage, or other disposition of all
653-11 or part of the assets of the real estate investment trust.
653-12 Sec. 200.503. TAX LAW REQUIREMENTS. In connection with a
653-13 real estate investment trust qualifying or attempting to qualify as
653-14 a real estate investment trust under the Internal Revenue Code and
653-15 the regulations adopted under the Internal Revenue Code, a
653-16 provision of this chapter is subject to the provisions of the
653-17 Internal Revenue Code or the regulations relating to or governing
653-18 real estate investment trusts adopted under those provisions if:
653-19 (1) the provision of this chapter is contrary to or
653-20 inconsistent with the federal provisions or regulations;
653-21 (2) the federal provisions or regulations require a
653-22 real estate investment trust to take any action required to secure
653-23 or maintain its status as a real estate investment trust under the
653-24 federal provisions or regulations; or
653-25 (3) the federal provisions or regulations prohibit the
653-26 real estate investment trust from taking any action required to
653-27 secure or maintain its status as a real estate investment trust
654-1 under the federal provision or regulation.
654-2 TITLE 6. ASSOCIATIONS
654-3 CHAPTER 251. COOPERATIVE ASSOCIATIONS
654-4 SUBCHAPTER A. GENERAL PROVISIONS
654-5 Sec. 251.001. DEFINITIONS. In this chapter:
654-6 (1) "Cooperative basis" means that net savings, after
654-7 payment of any investment dividends or after provision for separate
654-8 funds has been made as required or authorized by law, the
654-9 certificate of formation, or bylaws, are:
654-10 (A) allocated or distributed to a member patron
654-11 or to each patron in proportion to patronage; or
654-12 (B) retained by the entity for:
654-13 (i) actual or potential expansion of the
654-14 entity's services;
654-15 (ii) the reduction of charges to patrons;
654-16 or
654-17 (iii) any other purpose consistent with
654-18 the entity's nonprofit character.
654-19 (2) "Invested capital" means funds invested in a
654-20 cooperative association by an investor with the expectation of
654-21 receiving an investment dividend.
654-22 (3) "Investment dividend" means the return on invested
654-23 capital or on membership capital derived from the net savings of
654-24 the cooperative association.
654-25 (4) "Membership capital" means the funds of a
654-26 cooperative association derived from members of the cooperative
654-27 association generally as a requirement of membership or in lieu of
655-1 patronage dividends. The term does not include deposits or loans
655-2 from members.
655-3 (5) "Net savings" means the total income of a
655-4 cooperative association less the costs of operation.
655-5 (6) "Patronage dividend" means a share of the net
655-6 savings distributed among members of the cooperative association on
655-7 the basis of patronage, as provided by the certificate of
655-8 formation.
655-9 (7) "Savings returns" means the amount returned by a
655-10 cooperative association to patrons of a cooperative association in
655-11 proportion to patronage or otherwise.
655-12 Sec. 251.002. APPLICABILITY OF NONPROFIT CORPORATION
655-13 PROVISIONS. (a) A provision of Title 1 and Chapters 20 and 22
655-14 governing nonprofit corporations applies to a cooperative
655-15 association.
655-16 (b) Notwithstanding Subsection (a), this chapter controls
655-17 over any conflicting provision of Title 1 and Chapters 20 and 22
655-18 governing nonprofit corporations.
655-19 Sec. 251.003. EXEMPTION. This chapter does not apply to a
655-20 corporation or association organized under or having a purpose
655-21 prohibited under:
655-22 (1) Title 2; or
655-23 (2) a law listed in Sections 22.051-22.054.
655-24 (Sections 251.004-251.050 reserved for expansion)
655-25 SUBCHAPTER B. PURPOSES AND POWERS
655-26 Sec. 251.051. PURPOSES. (a) A person may incorporate a
655-27 cooperative association under this code to acquire, produce, build,
656-1 operate, manufacture, furnish, exchange, or distribute any type of
656-2 property, commodities, goods, or services for the primary and
656-3 mutual benefit of the members of the cooperative association.
656-4 (b) A cooperative association may not be incorporated or
656-5 organized to:
656-6 (1) serve or function as a health maintenance
656-7 organization;
656-8 (2) furnish medical or health care; or
656-9 (3) employ or contract with a health care provider in
656-10 a manner prohibited by the statute under which the provider is
656-11 licensed.
656-12 Sec. 251.052. GENERAL POWERS. (a) Except as provided by
656-13 this chapter, a cooperative association may exercise the same
656-14 powers and privileges and is subject to the same duties,
656-15 restrictions, and liabilities as a nonprofit corporation under
656-16 Title 1 and Chapters 20 and 22.
656-17 (b) A cooperative association may:
656-18 (1) own and hold membership in other associations or
656-19 corporations;
656-20 (2) own and hold share capital of other associations
656-21 or corporations;
656-22 (3) own and exercise ownership rights in bonds or
656-23 other obligations;
656-24 (4) make agreements of mutual aid or federation with
656-25 other associations, other groups organized on a cooperative basis,
656-26 or other nonprofit groups; and
656-27 (5) deliver money to a scholarship fund for rural
657-1 students.
657-2 Sec. 251.053. LIMITATION ON POWERS. (a) A cooperative
657-3 association may not directly or indirectly engage in a health
657-4 maintenance organization or a prepaid legal service corporation.
657-5 (b) Except for the payment of necessary legal fees or
657-6 promotion expenses, a cooperative association may not directly or
657-7 indirectly use its funds, issue shares, or incur indebtedness for
657-8 the payment of compensation for the organization of the cooperative
657-9 association in excess of five percent of the amount paid for the
657-10 shares or membership certificates involved in the promotion
657-11 transaction.
657-12 (Sections 251.054-251.100 reserved for expansion)
657-13 SUBCHAPTER C. FORMATION AND GOVERNING DOCUMENTS
657-14 Sec. 251.101. SUPPLEMENTAL PROVISIONS REQUIRED IN
657-15 CERTIFICATE OF FORMATION. In addition to the information required
657-16 by Section 3.005, the certificate of formation of a cooperative
657-17 association must state:
657-18 (1) whether the cooperative association is organized
657-19 with or without shares;
657-20 (2) the number of shares or memberships subscribed for
657-21 the cooperative association;
657-22 (3) if the cooperative association is organized with
657-23 shares:
657-24 (A) the amount of authorized capital;
657-25 (B) the number and type of shares;
657-26 (C) par value of the shares, if any; and
657-27 (D) the rights, preferences, and restrictions of
658-1 each type of share; and
658-2 (4) the method of distribution on winding up and
658-3 termination of any surplus of the cooperative association in
658-4 accordance with Section 251.453.
658-5 Sec. 251.102. ORGANIZATIONAL MEETING. After a cooperative
658-6 association's certificate of formation is issued, the cooperative
658-7 association shall hold an organizational meeting in accordance with
658-8 Section 22.105.
658-9 Sec. 251.103. AMENDMENT OF CERTIFICATE OF FORMATION.
658-10 (a) The board of directors of a cooperative association may
658-11 propose an amendment to the cooperative association's certificate
658-12 of formation by a two-thirds vote of the board members. The
658-13 members of a cooperative association may petition to amend the
658-14 certificate of formation as provided by the bylaws.
658-15 (b) Not later than the 31st day before the date of the
658-16 meeting, the secretary shall:
658-17 (1) send notice of a meeting to consider a proposed
658-18 amendment to each member of the cooperative association at the
658-19 member's last known address; or
658-20 (2) post notice of a meeting to consider a proposed
658-21 amendment in a conspicuous place in all principal places of
658-22 activity of the cooperative association.
658-23 (c) The notice required by Subsection (b) must include the
658-24 full text of the proposed amendment and the text of the part of the
658-25 certificate of formation to be amended.
658-26 (d) To be approved, an amendment must be adopted by the
658-27 affirmative vote of two-thirds of the members voting on the
659-1 amendment.
659-2 (e) Not later than the 30th day after the date an amendment
659-3 is adopted by the members of a cooperative association, the
659-4 cooperative association shall file a certificate of amendment with
659-5 the secretary of state in accordance with Chapter 4. The
659-6 certificate of amendment must be:
659-7 (1) signed by an authorized officer of the cooperative
659-8 association; and
659-9 (2) in the form required by Section 3.052.
659-10 Sec. 251.104. BYLAWS. (a) Unless the certificate of
659-11 formation or bylaws of a cooperative association require a greater
659-12 majority, the bylaws may be adopted, amended, or repealed by a
659-13 majority vote of the cooperative association's members voting on
659-14 the matter.
659-15 (b) Except as provided by this code, the bylaws may contain:
659-16 (1) requirements for admission to membership;
659-17 (2) requirements for disposal of a member's interest
659-18 on cessation of membership;
659-19 (3) the time, place, and manner of calling and
659-20 conducting meetings;
659-21 (4) the number or percentage of the members
659-22 constituting a quorum;
659-23 (5) the number, qualifications, powers, duties, and
659-24 term of directors and officers;
659-25 (6) the method of electing, removing, and filling a
659-26 vacancy of directors and officers;
659-27 (7) the division or classification, if any, of
660-1 directors to provide for staggered terms;
660-2 (8) the compensation, if any, of the directors;
660-3 (9) the number of directors necessary to constitute a
660-4 quorum;
660-5 (10) the method for distributing the net savings;
660-6 (11) a requirement that each officer or employee of
660-7 the cooperative association who handles funds or securities be
660-8 bonded;
660-9 (12) other discretionary provisions of this chapter,
660-10 Title 1 and Chapters 20 and 22; and
660-11 (13) any other provision incident to a purpose or
660-12 activity of the cooperative association.
660-13 (Sections 251.105-251.150 reserved for expansion)
660-14 SUBCHAPTER D. MANAGEMENT
660-15 Sec. 251.151. BOARD OF DIRECTORS. (a) Except as provided
660-16 by Subsections (b) and (c), a cooperative association is managed by
660-17 a board of directors in accordance with Chapter 22.
660-18 (b) The board shall contain at least five directors elected
660-19 by and from the cooperative association's members. A director:
660-20 (1) serves a term not to exceed three years as
660-21 provided by the bylaws; and
660-22 (2) holds office until the director is removed or the
660-23 director's successor is elected.
660-24 (c) The bylaws of a cooperative association may:
660-25 (1) apportion the number of directors among the units
660-26 into which the cooperative association may be divided; and
660-27 (2) provide for the election of the directors by the
661-1 respective units to which the directors are apportioned.
661-2 (d) An executive committee of the board of directors may be
661-3 elected in the manner and with the powers and duties specified by
661-4 the certificate of formation or bylaws.
661-5 Sec. 251.152. OFFICERS. (a) The directors of a cooperative
661-6 association shall annually elect, unless otherwise provided by the
661-7 bylaws, the following officers for the cooperative association:
661-8 (1) a president;
661-9 (2) one or more vice presidents; and
661-10 (3) a secretary and treasurer or a
661-11 secretary-treasurer.
661-12 (b) Any two or more offices, other than the offices of
661-13 president and secretary, may be held by the same person.
661-14 (c) The officers of a cooperative association may be
661-15 designated by other titles as provided by the certificate of
661-16 formation or the bylaws of the cooperative association.
661-17 Sec. 251.153. REMOVAL OF DIRECTORS AND OFFICERS. (a) A
661-18 director or officer of a cooperative association may be removed
661-19 from office in the manner provided by the certificate of formation
661-20 or bylaws of the cooperative association.
661-21 (b) If the certificate of formation or bylaws do not provide
661-22 for the person's removal, a director or officer may be removed with
661-23 cause by a vote of a majority of the members voting at a regular or
661-24 special meeting. The director or officer who is to be removed is
661-25 entitled to be heard at the meeting.
661-26 (c) Except as provided by the certificate of formation or
661-27 bylaws, a vacancy on the board of directors caused by removal shall
662-1 be filled by a director elected in the same manner provided by the
662-2 bylaws for the election of directors.
662-3 Sec. 251.154. REFERENDUM. (a) The certificate of formation
662-4 or bylaws of a cooperative association may provide for a referendum
662-5 on any action undertaken by the cooperative association's board of
662-6 directors if the referendum is:
662-7 (1) requested by petition of 10 percent or more of all
662-8 of the members of the cooperative association; or
662-9 (2) requested and approved by the vote of at least a
662-10 majority of the directors of the cooperative association.
662-11 (b) The proposition to be voted on in a referendum
662-12 authorized under Subsection (a) must be submitted to the members of
662-13 the cooperative association for consideration within the time
662-14 specified in the document authorizing the referendum.
662-15 (c) A right of a third party that has vested between the
662-16 time of the action and the time of the referendum is not impaired
662-17 by the referendum results.
662-18 (Sections 251.155-251.200 reserved for expansion)
662-19 SUBCHAPTER E. MEMBERSHIP
662-20 Sec. 251.201. ELIGIBILITY AND ADMISSION. A person, an
662-21 unincorporated group or other person organized on a cooperative
662-22 basis or a nonprofit group may be admitted to membership in a
662-23 cooperative association only if the person meets the qualifications
662-24 for eligibility stated in the certificate of formation or bylaws of
662-25 the cooperative association.
662-26 Sec. 251.202. EXPULSION. (a) A member of a cooperative
662-27 association may be expelled by the vote of a majority of the
663-1 cooperative association's members voting at a regular or special
663-2 meeting.
663-3 (b) Not later than the 11th day before the date of the
663-4 meeting, the cooperative association shall give the member written
663-5 notice of the charges. The member is entitled to be heard at the
663-6 meeting in person or by counsel.
663-7 (c) If the cooperative association votes to expel a member,
663-8 the cooperative association's board of directors must purchase the
663-9 member's capital holdings at par value if the purchase does not
663-10 jeopardize the cooperative association's solvency.
663-11 Sec. 251.203. SUBSCRIBERS. (a) A person is a subscriber of
663-12 a cooperative association only if the person is:
663-13 (1) eligible for membership in the cooperative
663-14 association under Section 251.201; and
663-15 (2) legally obligated to purchase a share or
663-16 membership in the cooperative association.
663-17 (b) The certificate of formation or bylaws of a cooperative
663-18 association may state whether and the conditions under which voting
663-19 rights or other membership rights are granted to a subscriber of
663-20 the cooperative association.
663-21 Sec. 251.204. LIABILITY. (a) Except as provided by
663-22 Subsection (b), a member or subscriber of a cooperative association
663-23 is not jointly or severally liable for a debt of the cooperative
663-24 association. A subscriber is liable for any unpaid amount on the
663-25 subscriber's membership certificates or invested capital
663-26 certificates.
663-27 (b) A subscriber who assigns the subscriber's interest in
664-1 membership certificates or invested capital certificates is jointly
664-2 and severally liable with the assignee until the appropriate
664-3 certificates are fully paid.
664-4 (Sections 251.205-251.250 reserved for expansion)
664-5 SUBCHAPTER F. SHARES
664-6 Sec. 251.251. SHARE AND MEMBERSHIP CERTIFICATES: ISSUANCE
664-7 AND CONTENTS. (a) A cooperative association may not issue a
664-8 certificate for membership capital or for invested capital until
664-9 any par value of the certificate has been paid in full.
664-10 (b) Each certificate for membership capital issued by a
664-11 cooperative association must contain a statement of the
664-12 requirements of Sections 251.252, 251.304, and 251.305.
664-13 (c) Each certificate for invested capital issued by a
664-14 cooperative association must contain a statement of the
664-15 restrictions on transferability as provided by the cooperative
664-16 association's bylaws.
664-17 Sec. 251.252. TRANSFER OF SHARES AND MEMBERSHIP; WITHDRAWAL.
664-18 (a) A member who decides to withdraw from a cooperative
664-19 association shall make a written offer to sell the member's
664-20 membership certificates to the cooperative association's board of
664-21 directors.
664-22 (b) Not later than the 90th day after the date the directors
664-23 receive an offer under Subsection (a), the directors may purchase
664-24 the holdings by paying the member the par value of the certificates
664-25 and shall reissue or cancel the shares after purchasing the
664-26 holdings. The directors shall purchase the shares if a majority of
664-27 the cooperative association's members voting at a regular or
665-1 special meeting vote to require the purchase.
665-2 (c) An investor owning investor certificates must sell,
665-3 assign, or convey the certificates in accordance with the
665-4 cooperative association's bylaws. If an investor fails to sell,
665-5 assign, or convey investor certificates in accordance with the
665-6 bylaws, the cooperative association on written notice to its
665-7 directors shall repurchase the certificates by paying the investor
665-8 the par value of the certificate plus all accrued investment
665-9 dividends. The certificates must be repurchased not later than the
665-10 90th day after the date the cooperative association receives notice
665-11 of the failure.
665-12 Sec. 251.253. SHARE AND MEMBERSHIP CERTIFICATES; RECALL.
665-13 (a) The bylaws of a cooperative association may authorize the
665-14 cooperative association's board of directors to recall during a
665-15 specified time and in accordance with the bylaws the membership
665-16 certificates of a member who fails to patronize the cooperative
665-17 association. The board may use the reserve funds to recall, at par
665-18 value, the membership certificates of any member in excess of the
665-19 amount required for membership.
665-20 (b) After the board of directors of a cooperative
665-21 association recalls a membership certificate under Subsection (a),
665-22 membership in the cooperative association is terminated and the
665-23 board shall reissue or cancel the certificate. The board of
665-24 directors may not recall membership certificates if recalling the
665-25 certificates would jeopardize the cooperative association's
665-26 solvency.
665-27 (c) The board of directors may use the reserve funds to
666-1 recall and repurchase the investment certificates of an investor at
666-2 par value plus any investment dividends due.
666-3 (d) The bylaws of a cooperative association may establish
666-4 specific procedures, terms, and conditions for recalls and
666-5 repurchases of investment certificates.
666-6 Sec. 251.254. CERTIFICATES; ATTACHMENT. The minimum amount
666-7 necessary for membership in a cooperative association, not to
666-8 exceed $50, is exempt from attachment, execution, or garnishment
666-9 for the debts of a member of a cooperative association. If a
666-10 member's holdings are subject to attachment, execution, or
666-11 garnishment, the directors of the cooperative association may admit
666-12 the purchaser to membership or may purchase the holdings at par
666-13 value.
666-14 (Sections 251.255-251.300 reserved for expansion)
666-15 SUBCHAPTER G. MEETINGS AND VOTING
666-16 Sec. 251.301. MEETINGS. (a) Regular meetings of members of
666-17 a cooperative association shall be held at least once a year as
666-18 prescribed by the cooperative association's bylaws.
666-19 (b) A special meeting of the members of a cooperative
666-20 association may be requested by a majority vote of the directors or
666-21 by written petition of at least one-tenth of the membership of the
666-22 cooperative association. The secretary shall call a special
666-23 meeting to be held 30 days after receipt of the request for a
666-24 special meeting.
666-25 Sec. 251.302. NOTICE OF SPECIAL MEETING. The notice of a
666-26 special meeting of the members of a cooperative association shall
666-27 state the purpose of the meeting.
667-1 Sec. 251.303. MEETINGS BY UNITS OF MEMBERSHIP. (a) The
667-2 certificate of formation or bylaws of a cooperative association may
667-3 provide for the holding of meetings by units of the membership of
667-4 the cooperative association and may provide for:
667-5 (1) a method of transmitting the votes cast at unit
667-6 meetings to the central meeting;
667-7 (2) a method of representation of units of the
667-8 membership by the election of delegates to the central meeting; or
667-9 (3) a combination of both methods.
667-10 (b) Except as otherwise provided by the bylaws, a meeting by
667-11 a unit of the membership shall be called and held in the same
667-12 manner as a regular meeting of the members.
667-13 Sec. 251.304. ONE MEMBER--ONE VOTE. (a) Except as provided
667-14 by Subsection (b), a member of a cooperative association has one
667-15 vote.
667-16 (b) If a cooperative association includes among its
667-17 membership another cooperative association or a group that is
667-18 organized on a cooperative basis, the voting rights of the
667-19 cooperative association member or group member may be prescribed by
667-20 the certificate of formation or bylaws of the cooperative
667-21 association.
667-22 (c) Any voting agreement or other device that is made to
667-23 evade the one-member-one-vote rule is not enforceable.
667-24 Sec. 251.305. NO PROXY. A member is not entitled to vote by
667-25 proxy.
667-26 Sec. 251.306. VOTING BY MAIL. (a) The certificate of
667-27 formation or bylaws of a cooperative association may contain the
668-1 procedures in Subsection (b) or (c), or both, for voting by mail.
668-2 (b) With notice of a meeting sent to members of the
668-3 cooperative association, the secretary may include a copy of a
668-4 proposal to be offered at the meeting. If a mail vote is returned
668-5 to the cooperative association within the specified number of days,
668-6 the mail vote shall be counted with the votes cast at the meeting.
668-7 (c) The secretary may send to a member of the cooperative
668-8 association who is absent from a meeting an exact copy of the
668-9 proposal considered at the meeting. If the vote is returned to the
668-10 cooperative association within the specified number of days, the
668-11 mail vote is counted with the votes cast at the meeting.
668-12 (d) The certificate of formation or bylaws may state whether
668-13 and to what extent mail votes are counted in computing a quorum.
668-14 Sec. 251.307. VOTING BY MAIL OR BY DELEGATES. (a) If a
668-15 cooperative association has provided for voting by mail or by
668-16 delegates, a provision of this chapter referring to votes cast by
668-17 members of the cooperative association applies to votes cast by
668-18 mail or by delegates.
668-19 (b) A delegate may not vote by mail.
668-20 (Sections 251.308-251.350 reserved for expansion)
668-21 SUBCHAPTER H. CAPITAL AND NET SAVINGS
668-22 Sec. 251.351. LIMITATIONS ON RETURN ON CAPITAL. (a) Except
668-23 as otherwise provided by the cooperative association's bylaws, an
668-24 investment dividend of a cooperative association may not be
668-25 cumulative and may not exceed eight percent of investment capital.
668-26 (b) Total investment dividends distributed for a fiscal
668-27 year may not exceed 50 percent of the net savings for the period.
669-1 Sec. 251.352. ALLOCATION AND DISTRIBUTION OF NET SAVINGS.
669-2 (a) At least once each year the members or directors of a
669-3 cooperative association, as provided by the certificate of
669-4 formation or bylaws of the cooperative association, shall apportion
669-5 the net savings of the cooperative association in the following
669-6 order:
669-7 (1) subject to Section 251.351, investment dividends
669-8 payable from the surplus of the total assets over total liabilities
669-9 may be paid on invested capital or, if authorized by the bylaws,
669-10 may be paid on the membership certificates;
669-11 (2) a portion of the remainder, as determined by the
669-12 certificate of formation or bylaws, may be allocated to an
669-13 educational fund to be used in teaching cooperation;
669-14 (3) a portion of the remainder may be allocated to
669-15 funds for the general welfare of the members of the cooperative
669-16 association;
669-17 (4) a portion of the remainder may be allocated to
669-18 retained earnings; and
669-19 (5) the remainder shall be allocated at the same
669-20 uniform rate to each patron of the cooperative association in
669-21 proportion to individual patronage as follows:
669-22 (A) for a member patron, the proportionate
669-23 amount of savings return distributed to the member may be any
669-24 combination of cash, property, membership certificates, or
669-25 investment certificates; and
669-26 (B) for a subscriber patron, the patron's
669-27 proportionate amount of savings returns as provided by the
670-1 certificate of formation or bylaws may be distributed to the
670-2 subscriber patron or credited to the subscriber patron's account
670-3 until the amount of capital subscribed for has been fully paid.
670-4 (b) This section does not prevent a cooperative association
670-5 engaged in rendering services from disposing of the net savings
670-6 from the rendering of services in a manner that lowers the fees
670-7 charged for services or furthers the common benefit of the members.
670-8 (c) A cooperative association may adopt a system in which:
670-9 (1) the payment of savings returns that would
670-10 otherwise be distributed are deferred for a fixed period; or
670-11 (2) the savings returns distributed are partly in cash
670-12 or partly in shares, to be retired at a fixed future date, in the
670-13 order of the shares' serial numbers or issuance dates.
670-14 (Sections 251.353-251.400 reserved for expansion)
670-15 SUBCHAPTER I. REPORTS AND RECORDS
670-16 Sec. 251.401. RECORDKEEPING. A cooperative association
670-17 shall keep books and records relating to the cooperative
670-18 association's business operation in accordance with standard
670-19 accounting practices.
670-20 Sec. 251.402. REPORTS TO MEMBERS. (a) A cooperative
670-21 association shall submit a written report to its members at the
670-22 annual meeting of the cooperative association. The annual report
670-23 must contain:
670-24 (1) a balance sheet;
670-25 (2) an income and expense statement;
670-26 (3) the amount and nature of the cooperative
670-27 association's authorized, subscribed, and paid-in capital;
671-1 (4) the total number of shareholders;
671-2 (5) the number of shareholders who were admitted to or
671-3 withdrew from the association during the year;
671-4 (6) the par value of the shares;
671-5 (7) the rate at which any investment dividends have
671-6 been paid; and
671-7 (8) if the cooperative association does not issue
671-8 shares:
671-9 (A) the total number of members;
671-10 (B) the number of members who were admitted to
671-11 or withdrew from the association during the year; and
671-12 (C) the amount of membership fees received.
671-13 (b) The directors shall appoint a committee composed of
671-14 members who are not principal bookkeepers, accountants, or
671-15 employees of the cooperative association to review the cooperative
671-16 association.
671-17 (c) The committee appointed under Subsection (b) shall
671-18 report on the quality of the annual report required by this section
671-19 and the bookkeeping system of the cooperative association at the
671-20 annual meeting.
671-21 Sec. 251.403. ANNUAL REPORT OF FINANCIAL CONDITION.
671-22 (a) This section applies only to a cooperative association that
671-23 has at least 100 members or at least $20,000 in annual business.
671-24 (b) Not later than the 120th day after the date on which the
671-25 association closes its business each year, a cooperative
671-26 association shall file in the association's registered office a
671-27 report of the association's financial condition stating:
672-1 (1) the name of the association;
672-2 (2) the address of the association's principal office;
672-3 (3) the name, address, occupation, and date of
672-4 expiration of the term of office of each officer and director;
672-5 (4) any compensation paid by the association to each
672-6 officer or director of the association;
672-7 (5) the amount and nature of the authorized,
672-8 subscribed, and paid-in capital;
672-9 (6) the total number of shareholders;
672-10 (7) the number of shareholders who were admitted to or
672-11 withdrew from the association during the year;
672-12 (8) the par value of the association's shares;
672-13 (9) the rate at which any investment dividends have
672-14 been paid; and
672-15 (10) if the association has no shares:
672-16 (A) the total number of members;
672-17 (B) the number of members who were admitted to
672-18 or withdrew from the association during the year; and
672-19 (C) the amount of membership fees received.
672-20 (c) The report required by Subsection (b) must:
672-21 (1) include a balance sheet and income and expense
672-22 statement of the cooperative association; and
672-23 (2) be signed by the president and secretary.
672-24 (d) A cooperative association that has at least 3,000
672-25 members or at least $750,000 in annual business shall file a copy
672-26 of the report required by this section with the secretary of state.
672-27 (e) A person commits an offense if the person signs a report
673-1 that is required by this section and contains a materially false
673-2 statement that the person knows is false. An offense under this
673-3 subsection is a misdemeanor punishable by:
673-4 (1) a fine of not less than $25 or more than $200;
673-5 (2) confinement in county jail for a term of not less
673-6 than 30 days or more than one year; or
673-7 (3) both the fine and confinement.
673-8 Sec. 251.404. FAILURE TO FILE REPORT. (a) If a cooperative
673-9 association required by Section 251.403 to file a copy of a report
673-10 with the secretary of state does not file the report within the
673-11 prescribed time, the secretary of state shall send written notice
673-12 of the requirement to the cooperative association. The notice must
673-13 be sent to the cooperative association's principal office not later
673-14 than the 60th day after the date the report becomes due.
673-15 (b) If a cooperative association is required by Section
673-16 251.403 to file a report at its registered office but not with the
673-17 secretary of state and fails to file the report within the
673-18 prescribed time, the secretary of state or any member of the
673-19 cooperative association may send written notice of the requirement
673-20 to the cooperative association's principal office.
673-21 (c) If the cooperative association does not file the report
673-22 before the 61st day after the date notice is sent under Subsection
673-23 (a) or (b), a member of the cooperative association or the attorney
673-24 general may seek a writ of mandamus against the cooperative
673-25 association and the appropriate officer or officers to compel the
673-26 filing of the report. The court shall require the cooperative
673-27 association or the officer who is determined to be at fault to pay
674-1 the expenses of the proceeding, including attorney's fees.
674-2 (Sections 251.405-251.450 reserved for expansion)
674-3 SUBCHAPTER J. WINDING UP AND TERMINATION
674-4 Sec. 251.451. VOLUNTARY WINDING UP AND TERMINATION. (a) A
674-5 cooperative association may wind up and terminate its affairs in
674-6 accordance with Chapter 11 and Section 22.301.
674-7 (b) If a cooperative association is directed to wind up and
674-8 liquidate its affairs, three members of the cooperative association
674-9 elected by a vote of at least a majority of the members voting
674-10 shall be designated as trustees on behalf of the cooperative
674-11 association to:
674-12 (1) pay debts;
674-13 (2) liquidate the cooperative association's assets
674-14 within the time set in the trustees' designation or any extension
674-15 of time; and
674-16 (3) distribute the cooperative association's assets in
674-17 the manner provided by Section 251.453.
674-18 Sec. 251.452. EXECUTION OF CERTIFICATE OF TERMINATION. An
674-19 officer of a cooperative association or one or more of the persons
674-20 designated as a liquidating trustee under Section 251.451 shall
674-21 execute the certificate of termination on behalf of the cooperative
674-22 association.
674-23 Sec. 251.453. DISTRIBUTION OF ASSETS. Subject to Section
674-24 11.052, the trustees designated under Section 251.451 shall
674-25 distribute the cooperative association's assets in the following
674-26 order:
674-27 (1) by returning the par value of the investors'
675-1 capital to investors;
675-2 (2) by returning the amounts paid on subscriptions to
675-3 subscribers who invested capital;
675-4 (3) by returning the amount of patronage dividends
675-5 credited to patrons' accounts to the patrons;
675-6 (4) by returning the membership capital to members;
675-7 and
675-8 (5) by distributing any surplus in the manner provided
675-9 by the certificate of formation:
675-10 (A) among the patrons who have been members or
675-11 subscribers of the cooperative association during the six years
675-12 preceding the date of dissolution, on the basis of patronage during
675-13 that period;
675-14 (B) as a gift to any cooperative association or
675-15 other nonprofit enterprise designated in the certificate of
675-16 formation; or
675-17 (C) a combination of both methods of
675-18 distribution.
675-19 Sec. 251.454. INVOLUNTARY TERMINATION. A suit for
675-20 involuntary termination of a cooperative association organized
675-21 under this chapter may be instituted for the causes and prosecuted
675-22 in the manner provided by Section 11.251. The assets of a
675-23 cooperative association that is involuntarily terminated shall be
675-24 distributed in accordance with Section 251.453.
675-25 (Sections 251.455-251.500 reserved for expansion)
675-26 SUBCHAPTER K. MISCELLANEOUS PROVISIONS
675-27 Sec. 251.501. EXEMPTION FROM TAXES. A cooperative
676-1 association organized under this chapter is exempt from the
676-2 franchise tax and license fees imposed by the state or a political
676-3 subdivision of the state, except that a cooperative association is
676-4 exempt from the franchise tax imposed by Chapter 171, Tax Code,
676-5 only if the cooperative association is exempt under that chapter.
676-6 Sec. 251.502. USE OF NAME "COOPERATIVE." (a) Only a
676-7 cooperative association organized under this chapter, a group
676-8 organized on a cooperative basis under another law of this state,
676-9 or a foreign entity operating on a cooperative basis and authorized
676-10 to do business in this state may use the term "cooperative" or any
676-11 abbreviation or derivation of the term "cooperative" as part of its
676-12 business name or represent itself, in advertising or otherwise, as
676-13 conducting business on a cooperative basis.
676-14 (b) A person commits an offense if the person violates
676-15 Subsection (a). An offense under this subsection is a misdemeanor
676-16 punishable by:
676-17 (1) a fine of not less than $25 or more than $200 for
676-18 the first month in which the violation occurs;
676-19 (2) a fine of not more than $200 for each month during
676-20 which a violation occurs after the first month;
676-21 (3) confinement in the county jail for not less than
676-22 30 days or more than one year; or
676-23 (4) a combination of those punishments.
676-24 (c) The attorney general may sue to enjoin a violation of
676-25 this section.
676-26 (d) If a court renders a judgment that a person who used the
676-27 term "cooperative" before September 1, 1975, is not organized on a
677-1 cooperative basis but is authorized to continue to use the term,
677-2 the business shall place immediately after its name the words "does
677-3 not comply with the cooperative association law of Texas" in the
677-4 same kind of type and in letters not less than two-thirds the size
677-5 of the letters used in the word "cooperative."
677-6 (e) Notwithstanding this section, The University Cooperative
677-7 Society, a domestic nonprofit corporation related to The University
677-8 of Texas, may continue to use the word "cooperative" in its name.
677-9 CHAPTER 252. UNINCORPORATED NONPROFIT ASSOCIATIONS
677-10 Sec. 252.001. DEFINITIONS. In this chapter:
677-11 (1) "Member" means a person who, under the rules or
677-12 practices of a nonprofit association, may participate in the
677-13 selection of persons authorized to manage the affairs of the
677-14 nonprofit association or in the development of policy of the
677-15 nonprofit association.
677-16 (2) "Nonprofit association" means an unincorporated
677-17 organization, other than one created by a trust, consisting of
677-18 three or more members joined by mutual consent for a common,
677-19 nonprofit purpose. A form of joint tenancy, tenancy in common, or
677-20 tenancy by the entirety does not by itself establish a nonprofit
677-21 association, regardless of whether the co-owners share use of the
677-22 property for a nonprofit purpose.
677-23 Sec. 252.002. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW AND
677-24 EQUITY. Principles of law and equity supplement this chapter
677-25 unless displaced by a particular provision of this chapter.
677-26 Sec. 252.003. TERRITORIAL APPLICATION. Real and personal
677-27 property in this state may be acquired, held, encumbered, and
678-1 transferred by a nonprofit association, regardless of whether the
678-2 nonprofit association or a member has any other relationship to
678-3 this state.
678-4 Sec. 252.004. REAL AND PERSONAL PROPERTY; NONPROFIT
678-5 ASSOCIATION AS BENEFICIARY. (a) A nonprofit association in its
678-6 name may acquire, hold, encumber, or transfer an estate or interest
678-7 in real or personal property.
678-8 (b) A nonprofit association may be a beneficiary of a trust,
678-9 contract, or will.
678-10 Sec. 252.005. STATEMENT OF AUTHORITY AS TO REAL PROPERTY.
678-11 (a) A nonprofit association may execute and record a statement of
678-12 authority to transfer an estate or interest in real property in the
678-13 name of the nonprofit association.
678-14 (b) An estate or interest in real property in the name of a
678-15 nonprofit association may be transferred by a person so authorized
678-16 in a statement of authority recorded in the county clerk's office
678-17 in the county in which a transfer of the property would be
678-18 recorded.
678-19 (c) A statement of authority must contain:
678-20 (1) the name of the nonprofit association;
678-21 (2) the address in this state, including the street
678-22 address, if any, of the nonprofit association, or, if the nonprofit
678-23 association does not have an address in this state, its address out
678-24 of state; and
678-25 (3) the name or title of a person authorized to
678-26 transfer an estate or interest in real property held in the name of
678-27 the nonprofit association.
679-1 (d) A statement of authority must be executed in the same
679-2 manner as a deed by a person who is not the person authorized to
679-3 transfer the estate or interest.
679-4 (e) The county clerk may collect a fee for recording a
679-5 statement of authority in the amount authorized for recording a
679-6 transfer of real property.
679-7 (f) An amendment, including a cancellation, of a statement
679-8 of authority must meet the requirements for execution and recording
679-9 of an original statement. Unless canceled earlier, a recorded
679-10 statement of authority or its most recent amendment is canceled by
679-11 operation of law on the fifth anniversary of the date of the most
679-12 recent recording.
679-13 (g) If the record title to real property is in the name of a
679-14 nonprofit association and the statement of authority is recorded in
679-15 the county clerk's office of the county in which a transfer of real
679-16 property would be recorded, the authority of the person named in a
679-17 statement of authority is conclusive in favor of a person who gives
679-18 value without notice that the person lacks authority.
679-19 Sec. 252.006. LIABILITY IN TORT AND CONTRACT. (a) A
679-20 nonprofit association is a legal entity separate from its members
679-21 for the purposes of determining and enforcing rights, duties, and
679-22 liabilities in contract and tort.
679-23 (b) A person is not liable for a breach of a nonprofit
679-24 association's contract or for a tortious act or omission for which
679-25 a nonprofit association is liable merely because the person is a
679-26 member, is authorized to participate in the management of the
679-27 affairs of the nonprofit association, or is a person considered as
680-1 a member by the nonprofit association.
680-2 (c) A tortious act or omission of a member or other person
680-3 for which a nonprofit association is liable is not imputed to a
680-4 person merely because the person is a member of the nonprofit
680-5 association, is authorized to participate in the management of the
680-6 affairs of the nonprofit association, or is a person considered as
680-7 a member by the nonprofit association.
680-8 (d) A member of, or a person considered as a member by, a
680-9 nonprofit association may assert a claim against the nonprofit
680-10 association. A nonprofit association may assert a claim against a
680-11 member or a person considered as a member by the nonprofit
680-12 association.
680-13 Sec. 252.007. CAPACITY TO ASSERT AND DEFEND; STANDING.
680-14 (a) A nonprofit association, in its name, may institute, defend,
680-15 intervene, or participate in a judicial, administrative, or other
680-16 governmental proceeding or in an arbitration, mediation, or any
680-17 other form of alternative dispute resolution.
680-18 (b) A nonprofit association may assert a claim in its name
680-19 on behalf of members of the nonprofit association if:
680-20 (1) one or more of the nonprofit association's members
680-21 have standing to assert a claim in their own right;
680-22 (2) the interests the nonprofit association seeks to
680-23 protect are germane to its purposes; and
680-24 (3) neither the claim asserted nor the relief
680-25 requested requires the participation of a member.
680-26 Sec. 252.008. EFFECT OF JUDGMENT OR ORDER. A judgment or
680-27 order against a nonprofit association is not by itself a judgment
681-1 or order against a member or a person considered as a member by the
681-2 nonprofit association.
681-3 Sec. 252.009. DISPOSITION OF PERSONAL PROPERTY OF INACTIVE
681-4 NONPROFIT ASSOCIATION. (a) If a nonprofit association has been
681-5 inactive for three years or longer, or a shorter period as
681-6 specified in a document of the nonprofit association, a person in
681-7 possession or control of personal property of the nonprofit
681-8 association may transfer the custody of the property:
681-9 (1) if a document of a nonprofit association specifies
681-10 a person to whom transfer is to be made under these circumstances,
681-11 to that person; or
681-12 (2) if no person is specified, to a nonprofit
681-13 association or nonprofit corporation pursuing broadly similar
681-14 purposes, or to a government or governmental subdivision, agency,
681-15 or instrumentality.
681-16 (b) Notwithstanding the above, if a nonprofit association is
681-17 classified under the Internal Revenue Code as a 501(c)(3)
681-18 organization or is or holds itself out to be established or
681-19 operating for a charitable, religious, or educational purpose, as
681-20 defined by Section 501(c)(3), Internal Revenue Code, then any
681-21 distribution must be made to another nonprofit association or
681-22 nonprofit corporation with similar charitable, religious, or
681-23 educational purposes.
681-24 Sec. 252.010. BOOKS AND RECORDS. (a) A nonprofit
681-25 association shall keep correct and complete books and records of
681-26 account for at least three years after the end of each fiscal year
681-27 and shall make the books and records available on request to
682-1 members of the association for inspection and copying.
682-2 (b) The attorney general may inspect, examine, and make
682-3 copies of the books, records, and other documents the attorney
682-4 general considers necessary and may investigate the association to
682-5 determine if a violation of any law of this state has occurred.
682-6 Sec. 252.011. APPOINTMENT OF AGENT TO RECEIVE SERVICE OF
682-7 PROCESS. (a) A nonprofit association may file in the office of
682-8 the secretary of state a statement appointing an agent authorized
682-9 to receive service of process.
682-10 (b) A statement appointing an agent must contain:
682-11 (1) the name of the nonprofit association;
682-12 (2) the federal tax identification number of the
682-13 nonprofit association, if applicable;
682-14 (3) the address in this state, including the street
682-15 address, if any, of the nonprofit association, or, if the nonprofit
682-16 association does not have an address in this state, its address out
682-17 of state; and
682-18 (4) the name of the person in this state authorized to
682-19 receive service of process and the person's address, including the
682-20 street address, in this state.
682-21 (c) A statement appointing an agent must be signed by a
682-22 person authorized to manage the affairs of the nonprofit
682-23 association. The statement must also be signed by the person
682-24 appointed agent, who by signing accepts the appointment. The
682-25 appointed agent may resign by filing a resignation in the office of
682-26 the secretary of state and giving notice to the nonprofit
682-27 association.
683-1 (d) The secretary of state may collect a fee for filing a
683-2 statement appointing an agent to receive service of process, an
683-3 amendment, a cancellation, or a resignation in the amount charged
683-4 for filing similar documents.
683-5 (e) An amendment to a statement appointing an agent to
683-6 receive service of process must meet the requirements for execution
683-7 of an original statement.
683-8 (f) A statement appointing an agent may be canceled by
683-9 filing with the secretary of state a written notice of cancellation
683-10 executed by a person authorized to manage the affairs of the
683-11 nonprofit association. A notice of cancellation must contain:
683-12 (1) the name of the nonprofit association;
683-13 (2) the federal tax identification number of the
683-14 nonprofit association, if applicable;
683-15 (3) the date of filing of the nonprofit association's
683-16 statement appointing the agent; and
683-17 (4) a current street address, if any, of the nonprofit
683-18 association in this state, or if the nonprofit association does not
683-19 have an address in this state, its address out of state.
683-20 (g) The secretary of state may adopt forms and procedural
683-21 rules for filing documents under this section.
683-22 Sec. 252.012. CLAIM NOT ABATED BY CHANGE. A claim for
683-23 relief against a nonprofit association does not abate merely
683-24 because of a change in the members or persons authorized to manage
683-25 the affairs of the nonprofit association.
683-26 Sec. 252.013. SUMMONS AND COMPLAINT; SERVICE. (a) In an
683-27 action or proceeding against a nonprofit association, a summons and
684-1 complaint must be served on an agent authorized by appointment to
684-2 receive service of process, an officer, a managing or general
684-3 agent, or a person authorized to participate in the management of
684-4 its affairs, in accordance with the Civil Practice and Remedies
684-5 Code.
684-6 (b) Not later than the 10th day after the date of a request
684-7 by the attorney general to an officer or board member of a
684-8 nonprofit association or to the nonprofit association, the
684-9 nonprofit association shall provide to the attorney general the
684-10 names, current addresses, and telephone numbers of:
684-11 (1) each agent authorized to receive service of
684-12 process on behalf of the nonprofit association; and
684-13 (2) each officer, managing or general agent, and other
684-14 person authorized to participate in the management of the affairs
684-15 of the nonprofit association.
684-16 Sec. 252.014. UNIFORMITY OF APPLICATION AND CONSTRUCTION.
684-17 This chapter shall be applied and construed to make uniform the law
684-18 with respect to the subject of this chapter among states enacting
684-19 it.
684-20 Sec. 252.015. TRANSITION CONCERNING REAL AND PERSONAL
684-21 PROPERTY. If, before September 1, 1995, an estate or interest in
684-22 real or personal property was by the terms of the transfer
684-23 purportedly transferred to a nonprofit association, but under the
684-24 law the estate or interest was vested in a fiduciary such as
684-25 officers of the nonprofit association to hold the estate or
684-26 interest for members of the nonprofit association, on or after
684-27 September 1, 1995, the fiduciary may transfer the estate or
685-1 interest to the nonprofit association in its name, or the nonprofit
685-2 association, by appropriate proceedings, may require that the
685-3 estate or interest be transferred to it in its name.
685-4 Sec. 252.016. EFFECT ON OTHER LAW. This chapter replaces
685-5 existing law with respect to matters covered by this chapter but
685-6 does not affect other law covering unincorporated nonprofit
685-7 associations.
685-8 CHAPTER 253. UNINCORPORATED JOINT STOCK COMPANIES OR
685-9 ASSOCIATIONS
685-10 Sec. 253.001. APPLICABILITY OF CHAPTER. This chapter
685-11 applies to an action by or against an unincorporated joint stock
685-12 company or association or to an action for the enforcement of the
685-13 liability of a stockholder of the company or association.
685-14 Sec. 253.002. EFFECT OF CHAPTER. This chapter does not
685-15 affect or impair the right of an unincorporated joint stock company
685-16 or association to sue in the individual names of its stockholders
685-17 or members or the right of a person to sue the individual
685-18 stockholders or members.
685-19 Sec. 253.003. CUMULATIVE REMEDIES. Each remedy provided by
685-20 this chapter is cumulative of other remedies in law.
685-21 Sec. 253.004. SUIT IN NAME OF JOINT STOCK ASSOCIATION. A
685-22 domestic or foreign unincorporated joint stock company or
685-23 association doing business in this state may sue or be sued in the
685-24 name of the company or association. An individual stockholder or
685-25 member of the company or association does not need to be a named
685-26 party to the suit.
685-27 Sec. 253.005. SERVICE OF CITATION. In an action against a
686-1 joint stock company or association, citation may be served in the
686-2 manner provided by Section 17.023, Civil Practice and Remedies
686-3 Code. Service of citation may also be provided to a stockholder or
686-4 member of the company or association.
686-5 Sec. 253.006. LIABILITY OF STOCKHOLDERS OR MEMBERS. A
686-6 stockholder of an unincorporated joint stock company or association
686-7 is liable to the same extent as a partner in a general partnership
686-8 under this code.
686-9 Sec. 253.007. EXECUTION OF JUDGMENT. (a) In a suit against
686-10 a joint stock company or association, if service is only made on an
686-11 officer or agent of the company or association specified by Section
686-12 17.023, Civil Practice and Remedies Code, a judgment rendered
686-13 against the company or association is binding on the joint property
686-14 of all of the stockholders or members of the company or association
686-15 and may be enforced by execution against the joint property. The
686-16 judgment is not binding on the individual property of the
686-17 stockholders or members of the company or association and does not
686-18 authorize execution against the property of a stockholder or
686-19 member.
686-20 (b) A judgment against a joint stock company or association
686-21 is binding on the individual property of a stockholder or member of
686-22 the company or association who is served with citation. The
686-23 judgment may be executed against the individual property of the
686-24 stockholder only after execution against the joint property has
686-25 been returned unsatisfied.
687-1 TITLE 7. PROFESSIONAL ENTITIES
687-2 CHAPTER 301. PROVISIONS RELATING TO PROFESSIONAL
687-3 ENTITIES
687-4 Sec. 301.001. APPLICABILITY OF TITLE. (a) This title
687-5 applies only to a professional entity or foreign professional
687-6 entity.
687-7 (b) This title does not affect:
687-8 (1) the professional relationship between a person who
687-9 provides a professional service and the recipient of that service,
687-10 including any privilege of confidentiality arising from that
687-11 relationship under state law; or
687-12 (2) a person's legal remedies against another person
687-13 who commits an error, omission, negligent or incompetent act, or
687-14 malfeasance while providing a professional service.
687-15 Sec. 301.002. CONFLICTS OF LAW. This title prevails over a
687-16 conflicting provision of Title 1, 2, 3, or 4.
687-17 Sec. 301.003. DEFINITION. In this title, "professional
687-18 organization," with respect to a professional corporation or a
687-19 professional limited liability company, means a person other than
687-20 an individual, whether nonprofit, for-profit, domestic, or foreign
687-21 and including a nonprofit corporation or nonprofit association,
687-22 that renders the same professional service as the professional
687-23 corporation or professional limited liability company only through
687-24 owners, members, managerial officials, employees, or agents, each
687-25 of whom is a professional individual or professional organization.
687-26 Sec. 301.004. AUTHORIZED PERSON. For purposes of this
687-27 title, a person is an authorized person with respect to:
688-1 (1) a professional association if the person is a
688-2 professional individual; and
688-3 (2) a professional corporation or a professional
688-4 limited liability company if the person is a professional
688-5 individual or professional organization.
688-6 Sec. 301.005. SUPPLEMENTAL PROVISIONS REQUIRED IN
688-7 CERTIFICATE OF FORMATION. In addition to the information required
688-8 to be included in a certificate of formation under Section 3.005,
688-9 the certificate of formation of a professional entity must state:
688-10 (1) the type of professional service to be provided by
688-11 the professional entity as the purpose of the entity; and
688-12 (2) that the professional entity is a:
688-13 (A) professional association;
688-14 (B) professional corporation; or
688-15 (C) professional limited liability company.
688-16 Sec. 301.006. APPLICATION FOR REGISTRATION OF FOREIGN
688-17 PROFESSIONAL ENTITY. (a) A foreign professional entity may file
688-18 an application for registration to provide a professional service
688-19 in this state in accordance with Chapter 9.
688-20 (b) The secretary of state may accept an application filed
688-21 under Subsection (a) only if:
688-22 (1) the name and purpose of the foreign professional
688-23 entity stated in the application comply with this title and
688-24 Chapters 2 and 5; and
688-25 (2) the application states that the jurisdiction of
688-26 formation of the foreign professional entity permits reciprocal
688-27 admission of an entity formed under this code.
689-1 Sec. 301.007. LICENSE REQUIRED TO PROVIDE PROFESSIONAL
689-2 SERVICE. (a) A professional association or foreign professional
689-3 association may provide a professional service in this state only
689-4 through owners, managerial officials, employees, or agents, each of
689-5 whom:
689-6 (1) is a professional individual; and
689-7 (2) is licensed in this state to provide the same
689-8 professional service provided by the entity.
689-9 (b) A professional entity, other than a professional
689-10 association, may provide a professional service in this state only
689-11 through owners, managerial officials, employees, or agents, each of
689-12 whom is an authorized person.
689-13 (c) An individual may not, under the guise of employment,
689-14 provide a professional service in this state unless the individual
689-15 is licensed to provide the professional service under the laws of
689-16 this state.
689-17 (d) This section may not be construed to prohibit a
689-18 professional entity or foreign professional entity from employing
689-19 individuals who do not, according to general custom and practice,
689-20 ordinarily provide a professional service, including clerks,
689-21 secretaries, bookkeepers, technicians, nurses, or assistants.
689-22 Sec. 301.008. CERTAIN REQUIREMENTS TO BE OWNER, GOVERNING
689-23 PERSON, OR OFFICER. (a) A person may be an owner of a
689-24 professional entity or a governing person of a professional limited
689-25 liability company only if the person is an authorized person.
689-26 (b) An individual may be an officer of a professional entity
689-27 or a governing person of a professional association or professional
690-1 corporation only if the individual is a professional individual.
690-2 Sec. 301.009. DUTIES AND POWERS OF OWNER OR MANAGERIAL
690-3 OFFICIAL WHO CEASES TO BE LICENSED; PURCHASE OF OWNERSHIP INTEREST.
690-4 (a) A managerial official of a professional entity who ceases to
690-5 satisfy the requirements of Section 301.008 shall promptly resign
690-6 the person's position and employment with the entity.
690-7 (b) An owner of a professional entity who ceases to be an
690-8 authorized person as required by Section 301.008 shall promptly
690-9 relinquish the person's ownership interest in the entity.
690-10 (c) A person who becomes an owner of a professional entity
690-11 by succeeding to the ownership interest of another owner of the
690-12 entity shall promptly relinquish the person's financial interest in
690-13 the entity if the person is not an authorized person as required by
690-14 Section 301.008.
690-15 (d) A professional entity shall purchase or cause to be
690-16 purchased the ownership interest in the entity of a person who is
690-17 required to relinquish the person's financial interest in the
690-18 entity under this section. The price and terms of a purchase of an
690-19 ownership interest required under this subsection may be provided
690-20 by the governing documents of the entity or an applicable
690-21 agreement.
690-22 (e) A person who owns all of the outstanding ownership
690-23 interests in a professional entity but is required under this
690-24 section to relinquish the person's financial interest in the entity
690-25 may act as a managerial official or owner of the entity only for
690-26 the purpose of winding up the affairs of the entity, including
690-27 selling the outstanding ownership interests and other assets of the
691-1 entity.
691-2 Sec. 301.010. TRANSFER OF OWNERSHIP INTEREST. Except as
691-3 limited by the governing documents of the professional entity or an
691-4 applicable agreement, an ownership interest in a professional
691-5 entity may be transferred only to:
691-6 (1) an owner of the entity;
691-7 (2) the entity itself; or
691-8 (3) an authorized person.
691-9 Sec. 301.011. LIABILITY. (a) A professional entity is
691-10 jointly and severally liable for an error, omission, negligent or
691-11 incompetent act, or malfeasance committed by a person who:
691-12 (1) is an owner, managerial official, employee, or
691-13 agent of the entity; and
691-14 (2) commits the error, omission, negligent or
691-15 incompetent act, or malfeasance while providing a professional
691-16 service for the entity or during the course of the person's
691-17 employment.
691-18 (b) An owner, managerial official, employee, or agent of a
691-19 professional entity other than an owner, managerial official,
691-20 employee, or agent liable under Subsection (a) is not subject to
691-21 the same liability imposed on the professional entity under this
691-22 section.
691-23 (c) If a person described by Subsection (a) is a
691-24 professional organization, the professional organization and the
691-25 professional entity are jointly and severally liable for the error,
691-26 omission, negligent or incompetent act, or malfeasance committed by
691-27 the person, or the person's owner, member, managerial official,
692-1 employee or agent, while providing a professional service for the
692-2 professional entity.
692-3 Sec. 301.012. EXEMPTION FROM SECURITIES LAWS. (a) A sale,
692-4 issuance, or offer for sale of an ownership interest in a
692-5 professional entity to a person authorized under this title to own
692-6 an ownership interest in the professional entity is exempt from any
692-7 state law, other than this code, that regulates the sale, issuance,
692-8 or offer for sale of securities.
692-9 (b) A transaction described by Subsection (a) does not
692-10 require the approval of or other action by a state official or
692-11 regulatory agency authorized to regulate the sale, issuance, or
692-12 offer for sale of securities.
692-13 CHAPTER 302. PROVISIONS RELATING TO PROFESSIONAL ASSOCIATIONS
692-14 Sec. 302.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING
692-15 FOR-PROFIT CORPORATIONS. The provisions of Chapters 20 and 21
692-16 governing a for-profit corporation apply to a professional
692-17 association, unless there is a conflict with this title.
692-18 Sec. 302.002. SUPPLEMENTAL PROVISIONS REQUIRED IN
692-19 CERTIFICATE OF FORMATION; ADDITIONAL REQUIREMENTS. (a) One or
692-20 more persons who are licensed to practice medicine, osteopathy, or
692-21 podiatry may form a professional association by filing a
692-22 certificate of formation in accordance with Chapter 3 for the
692-23 purpose of providing the professional service.
692-24 (b) In addition to containing the information required under
692-25 Sections 3.005 and 301.005, the certificate of formation of a
692-26 professional association must:
692-27 (1) be signed by each member of the association; and
693-1 (2) state:
693-2 (A) the name and address of each original member
693-3 of the association; and
693-4 (B) that a member of the association may not
693-5 dissolve the association independently of other members of the
693-6 association.
693-7 (c) The certificate of formation of a professional
693-8 association may:
693-9 (1) contain provisions regarding shares or units of
693-10 ownership in the association;
693-11 (2) contain provisions governing the winding up and
693-12 termination of the association's business; and
693-13 (3) contain any other provision consistent with state
693-14 law regulating the internal affairs of a professional association.
693-15 Sec. 302.003. DURATION OF PROFESSIONAL ASSOCIATION. A
693-16 professional association continues:
693-17 (1) for all purposes as a separate entity independent
693-18 of the association's members until:
693-19 (A) the expiration of the period of duration
693-20 stated in the certificate of formation; or
693-21 (B) the association is wound up and terminated
693-22 in the manner provided by the certificate of formation or, if the
693-23 certificate of formation does not provide a manner for winding up
693-24 and termination, by a two-thirds vote of the association's members;
693-25 and
693-26 (2) in existence notwithstanding:
693-27 (A) the death, insanity, incompetency, felony
694-1 conviction, resignation, withdrawal, transfer of ownership
694-2 interest, or expulsion of a member other than the last surviving
694-3 member of the association;
694-4 (B) the admission of a new member or the
694-5 transfer of ownership interest to a new or existing member; or
694-6 (C) the occurrence of an event that would
694-7 require the winding up of a partnership under state law or similar
694-8 circumstances.
694-9 Sec. 302.004. AMENDMENT OF CERTIFICATE OF FORMATION. (a) A
694-10 professional association may amend the association's certificate of
694-11 formation as provided by:
694-12 (1) Chapter 3;
694-13 (2) the procedure for amendment stated in the
694-14 certificate of formation; or
694-15 (3) if the certificate of formation does not provide a
694-16 procedure for amending the certificate, two-thirds vote of the
694-17 association's members.
694-18 (b) A professional association is not required to amend the
694-19 association's certificate of formation to reflect a change in
694-20 membership or a transfer of ownership interests in the association.
694-21 Sec. 302.005. ADOPTION OF BYLAWS; DELEGATION OF AUTHORITY.
694-22 (a) The members of a professional association may adopt bylaws for
694-23 the association.
694-24 (b) The authority to adopt bylaws of a professional
694-25 association granted under Subsection (a) may be delegated under the
694-26 certificate of formation to the governing authority of the
694-27 association.
695-1 Sec. 302.006. GOVERNING AUTHORITY. (a) A professional
695-2 association shall be governed by:
695-3 (1) a board of directors; or
695-4 (2) an executive committee.
695-5 (b) The governing authority of a professional association
695-6 shall be elected by the members of the association.
695-7 Sec. 302.007. MEMBERS' VOTING RIGHTS. A member of a
695-8 professional association is entitled to cast a vote at a meeting of
695-9 the members as provided by the certificate of formation of the
695-10 association.
695-11 Sec. 302.008. ELECTION OF OFFICERS. The governing authority
695-12 of a professional association shall elect officers of the
695-13 association.
695-14 Sec. 302.009. OFFICER AND GOVERNING AUTHORITY ELIGIBILITY
695-15 REQUIREMENTS. (a) Only a member of the professional association
695-16 is eligible to serve as an officer or governing person of a
695-17 professional association.
695-18 (b) Except as provided by Subsection (c), a person is not
695-19 required to be a governing person of a professional association to
695-20 serve as an officer of the association.
695-21 (c) Only a governing person of a professional association is
695-22 eligible to serve as the president of the professional association.
695-23 Sec. 302.010. GENERAL POWERS, DUTIES, AND LIABILITIES.
695-24 Except as provided by this title, a professional association has
695-25 the same powers, privileges, duties, restrictions, and liabilities
695-26 as a for-profit corporation under Chapters 20 and 21.
695-27 Sec. 302.011. EMPLOYMENT OF AGENTS AND EMPLOYEES. The
696-1 officers of a professional association may employ agents or
696-2 employees for the association as the officers consider advisable.
696-3 Sec. 302.012. LIMITATION ON MEMBER'S POWER TO BIND
696-4 ASSOCIATION. A member of a professional association is not
696-5 entitled to bind the association within the scope of the
696-6 association's business or profession merely by virtue of being a
696-7 member of the professional association.
696-8 Sec. 302.013. DIVISION OF PROFITS. The members of a
696-9 professional association shall divide the profits derived from the
696-10 association in the manner provided by the governing documents of
696-11 the association.
696-12 Sec. 302.014. JOINT PRACTICE BY CERTAIN PROFESSIONALS.
696-13 (a) Persons licensed as doctors of medicine and persons licensed
696-14 as doctors of osteopathy by the Texas State Board of Medical
696-15 Examiners and persons licensed as podiatrists by the Texas State
696-16 Board of Podiatric Medical Examiners may jointly form and own a
696-17 professional association under this chapter.
696-18 (b) A professional association formed under Subsection (a)
696-19 may provide a professional service only if a member of the
696-20 association is licensed in this state to provide that type of
696-21 professional service.
696-22 (c) A member of a professional association formed under
696-23 Subsection (a) may provide a professional service for the
696-24 association only if the member is licensed in this state to provide
696-25 that type of professional service.
696-26 (d) A member of a professional association formed under
696-27 Subsection (a) may not through any type of arrangement, including
697-1 an agreement, bylaw, directive, or financial incentive, exercise
697-2 control over the conduct of another member of the association who
697-3 provides a different type of professional service for the
697-4 association.
697-5 Sec. 302.015. ANNUAL STATEMENT REQUIRED. (a) In June of
697-6 each year, a professional association shall file with the secretary
697-7 of state a statement that:
697-8 (1) lists:
697-9 (A) the name and address of each member of the
697-10 association; and
697-11 (B) the name of each officer and governing
697-12 person of the association; and
697-13 (2) states that each member of the association is
697-14 licensed to provide the same type of professional service provided
697-15 by the association.
697-16 (b) The statement required by this section must be executed
697-17 by an officer of the association on behalf of the association.
697-18 Sec. 302.016. WINDING UP AND TERMINATION; CERTIFICATE OF
697-19 TERMINATION. (a) A professional association may wind up and
697-20 terminate the association's business as provided by:
697-21 (1) the association's certificate of formation; or
697-22 (2) if the certificate of formation does not provide
697-23 for the winding up and termination of the association, two-thirds
697-24 vote of the association's members.
697-25 (b) Except as provided by Subsection (c), a certificate of
697-26 termination must be executed by an officer of the professional
697-27 association on behalf of the association.
698-1 (c) If a professional association does not have any living
698-2 officer, the certificate of termination must be executed by the
698-3 legal representative of the last surviving officer of the
698-4 association.
698-5 CHAPTER 303. PROVISIONS RELATING TO PROFESSIONAL CORPORATIONS
698-6 Sec. 303.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING
698-7 FOR-PROFIT CORPORATIONS. The provisions of Chapters 20 and 21
698-8 governing a for-profit corporation apply to a professional
698-9 corporation, unless there is a conflict with this title.
698-10 Sec. 303.002. GENERAL POWERS, DUTIES, AND LIABILITIES.
698-11 Except as provided by this title, a professional corporation has
698-12 the same powers, privileges, duties, restrictions, and liabilities
698-13 as a for-profit corporation.
698-14 Sec. 303.003. AUTHORITY AND LIABILITY OF SHAREHOLDER.
698-15 (a) A shareholder of a professional corporation is not required to
698-16 supervise the performance of duties by an officer or employee of
698-17 the corporation.
698-18 (b) A shareholder of a professional corporation is subject
698-19 to the same liability imposed on a shareholder of a for-profit
698-20 corporation.
698-21 Sec. 303.004. NOTICE OF RESTRICTION ON TRANSFER OF SHARES.
698-22 Any restriction on the transfer of shares in a professional
698-23 corporation that is imposed by the governing documents of the
698-24 corporation or an applicable agreement must be:
698-25 (1) noted on each certificate representing the shares;
698-26 or
698-27 (2) incorporated by reference in the manner provided
699-1 by Chapter 21.
699-2 Sec. 303.005. REDEMPTION OF SHARES; PRICE AND TERMS. (a) A
699-3 professional corporation may redeem shares of a shareholder,
699-4 including a deceased shareholder.
699-5 (b) The price and other terms of a redemption of shares may
699-6 be:
699-7 (1) agreed to between the board of directors or
699-8 executive committee of the professional corporation and the
699-9 shareholder or the shareholder's personal representative; or
699-10 (2) specified in the governing documents of the
699-11 professional corporation or an applicable agreement.
699-12 Sec. 303.006. EXISTENCE OF PROFESSIONAL CORPORATION BEFORE
699-13 WINDING UP AND TERMINATION. A professional corporation continues
699-14 to exist until the winding up and termination of the corporation as
699-15 provided by Chapter 11 without regard to:
699-16 (1) the death, incompetency, bankruptcy, resignation,
699-17 withdrawal, retirement, or expulsion of any shareholder of the
699-18 corporation;
699-19 (2) the transfer of shares to a new shareholder; or
699-20 (3) the occurrence of an event requiring the winding
699-21 up of a partnership.
699-22 Sec. 303.007. WINDING UP AND TERMINATION OF PROFESSIONAL
699-23 CORPORATION. A shareholder of a professional corporation may not
699-24 independently of other shareholders of the corporation wind up the
699-25 affairs of and terminate the corporation.
700-1 CHAPTER 304. PROVISIONS RELATING TO PROFESSIONAL LIMITED
700-2 LIABILITY COMPANIES
700-3 Sec. 304.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING
700-4 LIMITED LIABILITY COMPANIES. Title 3 applies to a professional
700-5 limited liability company, unless there is a conflict with this
700-6 title.
700-7 TITLE 8. MISCELLANEOUS AND TRANSITION PROVISIONS
700-8 CHAPTER 401. GENERAL PROVISIONS
700-9 Sec. 401.001. DEFINITIONS. In this title:
700-10 (1) "Mandatory application date" means:
700-11 (A) for an entity subject to this code under
700-12 Section 402.001, January 1, 2002;
700-13 (B) for an entity subject to this code under
700-14 Section 402.003 or 402.004, the date of completion of the action
700-15 required by that section but no earlier than January 1, 2002; and
700-16 (C) for any other entity, January 1, 2006.
700-17 (2) "Prior law" means the applicable law in effect
700-18 before January 1, 2002.
700-19 CHAPTER 402. MISCELLANEOUS AND TRANSITION PROVISIONS
700-20 Sec. 402.001. APPLICABILITY UPON EFFECTIVE DATE. At the
700-21 effective date of this code, this code applies to:
700-22 (1) a domestic entity formed on or after the effective
700-23 date of this code;
700-24 (2) a foreign filing entity or other foreign entity
700-25 that has not registered with the secretary of state to transact
700-26 business in this state before the effective date of this code; and
700-27 (3) a foreign non-filing entity.
701-1 Sec. 402.002. EARLY EFFECTIVENESS OF FEES. On or after the
701-2 effective date of this code, the fees required by Chapter 4 apply
701-3 to all filings made with the secretary of state, including
701-4 comparable filings under prior law regardless of whether an entity
701-5 is subject to or has adopted this code. The intent of this section
701-6 is to:
701-7 (1) require a filing fee for all documents filed under
701-8 either this code or the prior law without regard to the difference
701-9 in designation of the document; and
701-10 (2) make the filing fees described by Subdivision (1)
701-11 uniform from the effective date of this code.
701-12 Sec. 402.003. EARLY ADOPTION OF CODE BY EXISTING DOMESTIC
701-13 ENTITY. (a) A domestic entity formed before the effective date of
701-14 this code may voluntarily elect to adopt and become subject to this
701-15 code by:
701-16 (1) complying with the procedures to amend its
701-17 governing documents to adopt this code and, if necessary, to cause
701-18 its governing documents to comply with this code; and
701-19 (2) if the domestic entity is a filing entity, filing
701-20 with the secretary of state in accordance with Chapter 4:
701-21 (A) a statement that the filing entity is
701-22 electing to adopt this code; and
701-23 (B) if necessary, a certificate of amendment
701-24 that would cause its certificate of formation to comply with this
701-25 code.
701-26 (b) If amendments to the governing documents of a domestic
701-27 entity that are necessary to conform the governing documents to
702-1 this code would not require, under prior law, the vote or consent
702-2 of the owners or members of the entity, this code and any amendment
702-3 to the governing documents required by this section may be adopted
702-4 by the governing authority only in the manner provided for an
702-5 amendment of the particular governing document.
702-6 Sec. 402.004. EARLY ADOPTION OF CODE BY REGISTERED FOREIGN
702-7 ENTITY. A foreign filing entity registered with the secretary of
702-8 state to transact business in this state before the effective date
702-9 of this code may voluntarily elect to adopt and become subject to
702-10 this code by filing with the secretary of state in accordance with
702-11 Chapter 4:
702-12 (1) a statement that the foreign filing entity is
702-13 electing to adopt this code; and
702-14 (2) an amendment to its application for registration
702-15 that would cause its application for registration to comply with
702-16 this code.
702-17 Sec. 402.005. APPLICABILITY TO EXISTING ENTITIES ON
702-18 MANDATORY APPLICATION DATE. On January 1, 2006, if a domestic
702-19 filing entity formed before the effective date of this code or a
702-20 foreign filing entity registered with the secretary of state to
702-21 transact business in this state before the effective date of this
702-22 code has not taken the actions specified by Section 402.003(a) or
702-23 402.004 to elect to adopt this code:
702-24 (1) this code applies to the entity and all actions
702-25 taken by the managerial officials, owners, or members of the
702-26 entity, except as otherwise expressly provided by this title;
702-27 (2) the entity is not considered to have failed to
703-1 comply with this code if the entity's certificate of formation or
703-2 application for registration, as appropriate, does not comply with
703-3 this code;
703-4 (3) if the entity is a domestic filing entity, the
703-5 entity shall conform its certificate of formation to the
703-6 requirements of this code when it next files an amendment to its
703-7 certificate of formation; and
703-8 (4) if the entity is a foreign filing entity, the
703-9 entity shall conform its application for registration to the
703-10 requirements of this code when it next files an amendment to its
703-11 application for registration.
703-12 Sec. 402.006. APPLICABILITY TO CERTAIN ACTS, CONTRACTS, AND
703-13 TRANSACTIONS. Except as otherwise expressly provided by this
703-14 title, all of the provisions of this code govern acts, contracts,
703-15 or other transactions by an entity subject to this code or its
703-16 managerial officials, owners, or members that occur on or after the
703-17 mandatory application date. The prior law governs the acts,
703-18 contracts, or transactions of the entity or its managerial
703-19 officials, owners or members that occur before the mandatory
703-20 application date.
703-21 Sec. 402.007. INDEMNIFICATION. Chapter 8 governs any
703-22 proposed indemnification by a domestic entity after the mandatory
703-23 application date, regardless of whether the events on which the
703-24 indemnification is based occurred before or after the mandatory
703-25 application date. A statement relating to indemnification
703-26 contained in the governing documents of a domestic entity on the
703-27 mandatory application date may not be construed as limiting the
704-1 indemnification authorized by Chapter 8 unless it expressly states
704-2 that is the intent.
704-3 Sec. 402.008. MEETINGS OF OWNERS AND MEMBERS; CONSENTS;
704-4 VOTING OF INTERESTS. (a) Except as provided by Subsection (b) and
704-5 regardless of whether a proxy or consent was executed by an owner
704-6 or member before the mandatory application date, Chapter 6 and any
704-7 other applicable provision of this code apply to:
704-8 (1) a meeting of owners or members held on or after
704-9 the mandatory application date;
704-10 (2) an action undertaken by owners or members under a
704-11 written consent that takes effect on or after the mandatory
704-12 application date;
704-13 (3) a vote cast at a meeting described by Subdivision
704-14 (1); and
704-15 (4) consent given for an action described by
704-16 Subdivision (2).
704-17 (b) Prior law applies to a meeting of owners or members and
704-18 to any vote cast at a meeting described by this subsection if the
704-19 meeting was initially called for a date before the mandatory
704-20 application date and notice of the meeting was given to owners or
704-21 members entitled to vote at the meeting.
704-22 Sec. 402.009. MEETINGS OF GOVERNING AUTHORITY AND
704-23 COMMITTEES; CONSENTS. (a) Except as provided by Subsection (b),
704-24 Chapter 6 and any other applicable provision of this code apply to:
704-25 (1) a meeting of the governing authority or a
704-26 committee of the governing authority held on or after the mandatory
704-27 application date;
705-1 (2) an action undertaken by the governing authority or
705-2 a committee of the governing authority under a written consent that
705-3 takes effect on or after the mandatory application date;
705-4 (3) a vote cast at a meeting described by Subdivision
705-5 (1); and
705-6 (4) consent given for an action described by
705-7 Subdivision (2).
705-8 (b) Prior law applies to a meeting of the governing
705-9 authority or a committee of the governing authority and to any vote
705-10 cast at a meeting described by this subsection if the meeting was
705-11 initially called for a date before the mandatory application date
705-12 and notice of the meeting was given to governing persons entitled
705-13 to vote at the meeting.
705-14 Sec. 402.010. SALE OF ASSETS, MERGERS, REORGANIZATIONS,
705-15 CONVERSIONS. Chapter 10 and any other applicable provisions of
705-16 this code apply to a transaction consummated by an entity after the
705-17 mandatory application date, except that if a required approval of
705-18 the owners or members of the entity has been given before the
705-19 mandatory application date or has been given after the mandatory
705-20 application date but at a meeting of owners or members initially
705-21 called for a date before the mandatory application date, the
705-22 transaction shall be governed by the prior law.
705-23 Sec. 402.011. WINDING UP AND TERMINATION. (a) Chapter 11
705-24 applies to:
705-25 (1) an action for involuntary or judicial winding up
705-26 and termination commenced after the mandatory application date; or
705-27 (2) a voluntary winding up and termination proceeding
706-1 initiated after the mandatory application date by:
706-2 (A) the governing authority;
706-3 (B) the terms of the governing documents; or
706-4 (C) applicable law.
706-5 (b) The prior law governs:
706-6 (1) an action described by Subsection (a)(1) that is
706-7 pending on the mandatory application date; or
706-8 (2) a proceeding described by Subsection (a)(2)
706-9 initiated before the mandatory application date.
706-10 Sec. 402.012. REGISTRATION OF CERTAIN FOREIGN ENTITIES. A
706-11 foreign entity that has transacted intrastate business in this
706-12 state before the mandatory application date and that is required by
706-13 Chapter 9 to register to transact business is not subject to a
706-14 direct or indirect penalty as a result of failure to register under
706-15 Chapter 9 if the application for registration is filed not later
706-16 than the 30th day after the mandatory application date.
706-17 Sec. 402.013. ENTITIES UNDER SUSPENSION FOR NONFILING OF
706-18 REQUIRED REPORTS OR PAYMENT OF TAXES; APPLICABILITY OF PRIOR LAW.
706-19 (a) If the rights, privileges, and powers of a domestic filing
706-20 entity have been suspended and are still suspended immediately
706-21 before the mandatory application date under the prior law, this
706-22 code applies to the entity on the mandatory application date.
706-23 (b) If the rights, privileges, and powers of a domestic
706-24 filing entity have been suspended and are still suspended under the
706-25 Tax Code immediately before the mandatory application date, the
706-26 suspension continues to apply to the entity until the rights,
706-27 privileges, and powers are restored by the secretary of state under
707-1 that code.
707-2 Sec. 402.014. MAINTENANCE OF PRIOR ACTION. Except as
707-3 expressly provided by this title, this code does not apply to an
707-4 action or proceeding commenced before the mandatory application
707-5 date. Prior law applies to the action or proceeding.
707-6 SECTION 2. CONFORMING AMENDMENT. Part Eleven, Texas
707-7 Business Corporation Act, is amended by adding Article 11.02 to
707-8 read as follows:
707-9 Art. 11.02. APPLICABILITY; EXPIRATION. A. Except as
707-10 provided by Title 8, Texas Business Organizations Code, this Act
707-11 does not apply to a corporation to which the Texas Business
707-12 Organizations Code applies.
707-13 B. This Act expires January 1, 2006.
707-14 SECTION 3. CONFORMING AMENDMENT. Part Seven, Texas
707-15 Miscellaneous Corporation Laws Act (Article 1302-7.01 et seq.,
707-16 Vernon's Texas Civil Statutes), is amended by adding Article 7.09
707-17 to read as follows:
707-18 Art. 7.09. APPLICABILITY; EXPIRATION. A. Except as
707-19 provided by Title 8, Texas Business Organizations Code, this Act
707-20 does not apply to a corporation to which the Texas Business
707-21 Organizations Code applies.
707-22 B. This Act expires January 1, 2006.
707-23 SECTION 4. CONFORMING AMENDMENT. The Texas Non-Profit
707-24 Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil
707-25 Statutes) is amended by adding Article 11.02 to read as follows:
707-26 Art. 11.02. APPLICABILITY; EXPIRATION. A. Except as
707-27 provided by Title 8, Texas Business Organizations Code, this Act
708-1 does not apply to a corporation to which the Texas Business
708-2 Organizations Code applies.
708-3 B. This Act expires January 1, 2006.
708-4 SECTION 5. CONFORMING AMENDMENT. The Cooperative
708-5 Association Act (Article 1396-50.01, Vernon's Texas Civil Statutes)
708-6 is amended by adding Section 47 to read as follows:
708-7 Sec. 47. APPLICABILITY; EXPIRATION. (a) Except as provided
708-8 by Title 8, Texas Business Organizations Code, this Act does not
708-9 apply to an association to which the Texas Business Organizations
708-10 Code applies.
708-11 (b) This Act expires January 1, 2006.
708-12 SECTION 6. CONFORMING AMENDMENT. The Texas Uniform
708-13 Unincorporated Nonprofit Association Act (Article 1396-70.01,
708-14 Vernon's Texas Civil Statutes) is amended by adding Section 19 to
708-15 read as follows:
708-16 Sec. 19. APPLICABILITY; EXPIRATION. (a) Except as provided
708-17 by Title 8, Texas Business Organizations Code, this Act does not
708-18 apply to a nonprofit association to which the Texas Business
708-19 Organizations Code applies.
708-20 (b) This Act expires January 1, 2006.
708-21 SECTION 7. CONFORMING AMENDMENT. The Texas Professional
708-22 Corporation Act (Article 1528e, Vernon's Texas Civil Statutes) is
708-23 amended by adding Section 21 to read as follows:
708-24 Sec. 21. APPLICABILITY; EXPIRATION. (a) Except as provided
708-25 by Title 8, Texas Business Organizations Code, this Act does not
708-26 apply to a professional corporation to which the Texas Business
708-27 Organizations Code applies.
709-1 (b) This Act expires January 1, 2006.
709-2 SECTION 8. CONFORMING AMENDMENT. The Texas Professional
709-3 Association Act (Article 1528f, Vernon's Texas Civil Statutes) is
709-4 amended by adding Section 27 to read as follows:
709-5 Sec. 27. APPLICABILITY; EXPIRATION. (A) Except as provided
709-6 by Title 8, Texas Business Organizations Code, this Act does not
709-7 apply to a professional association to which the Texas Business
709-8 Organizations Code applies.
709-9 (B) This Act expires January 1, 2006.
709-10 SECTION 9. CONFORMING AMENDMENT. Part Eight, Texas Limited
709-11 Liability Company Act (Article 1528n, Vernon's Texas Civil
709-12 Statutes), is amended by adding Article 8.13 to read as follows:
709-13 Art. 8.13. APPLICABILITY; EXPIRATION. A. Except as
709-14 provided by Title 8, Texas Business Organizations Code, this Act
709-15 does not apply to a limited liability company to which the Texas
709-16 Business Organizations Code applies.
709-17 B. This Act expires January 1, 2006.
709-18 SECTION 10. CONFORMING AMENDMENT. Article 13, Texas Revised
709-19 Limited Partnership Act (Article 6132a-1, Vernon's Texas Civil
709-20 Statutes), is amended by adding Section 13.10 to read as follows:
709-21 Sec. 13.10. APPLICABILITY; EXPIRATION. (a) Except as
709-22 provided by Title 8, Texas Business Organizations Code, this Act
709-23 does not apply to a limited partnership to which the Texas Business
709-24 Organizations Code applies.
709-25 (b) This Act expires January 1, 2006.
709-26 SECTION 11. CONFORMING AMENDMENT. Article XI, Texas Revised
709-27 Partnership Act (Article 6132b-11.01 et seq., Vernon's Texas Civil
710-1 Statutes), is amended by adding Section 11.05 to read as follows:
710-2 Sec. 11.05. APPLICABILITY; EXPIRATION. (a) Except as
710-3 provided by Title 8, Texas Business Organizations Code, this Act
710-4 does not apply to a partnership to which the Texas Business
710-5 Organizations Code applies.
710-6 (b) This Act expires January 1, 2006.
710-7 SECTION 12. CONFORMING AMENDMENT. The Texas Real Estate
710-8 Investment Trust Act (Article 6138A, Vernon's Texas Civil Statutes)
710-9 is amended by adding Section 29.10 to read as follows:
710-10 Sec. 29.10. APPLICABILITY; EXPIRATION. (A) Except as
710-11 provided by Title 8, Texas Business Organizations Code, this Act
710-12 does not apply to a real estate investment trust to which the Texas
710-13 Business Organizations Code applies.
710-14 (B) This Act expires January 1, 2006.
710-15 SECTION 13. CONFORMING AMENDMENT. Article 1399, Revised
710-16 Statutes, is amended to read as follows:
710-17 Art. 1399. LODGES. The grand lodge of Texas, Ancient, Free
710-18 and Accepted Masons, the Grand Royal Arch Chapter of Texas, the
710-19 Grand Commandery of Knights Templars of Texas (Masonic); the grand
710-20 lodge of the Independent Order of Odd Fellows of Texas, and other
710-21 like institutions and orders organized for charitable or benevolent
710-22 purposes may, by the consent of their respective bodies expressed
710-23 by a resolution or otherwise, become bodies corporate under this
710-24 title. Except as provided by Title 8, Texas Business Organizations
710-25 Code, this article and Articles 1400-1407, Revised Statutes, do not
710-26 apply to a grand body to which the Texas Business Organizations
710-27 Code applies.
711-1 SECTION 14. CONFORMING AMENDMENT. Chapter 963, Acts of the
711-2 70th Legislature, Regular Session, 1987 (Article 1407a, Vernon's
711-3 Texas Civil Statutes), is amended by adding Section 9 to read as
711-4 follows:
711-5 Sec. 9. APPLICABILITY. Except as provided by Title 8, Texas
711-6 Business Organizations Code, this Act does not apply to a church
711-7 benefits board to which the Texas Business Organizations Code
711-8 applies.
711-9 SECTION 15. CONFORMING AMENDMENT. Chapter 853, Acts of the
711-10 62nd Legislature, Regular Session, 1971 (Article 1528g, Vernon's
711-11 Texas Civil Statutes), is amended by adding Section 13 to read as
711-12 follows:
711-13 Sec. 13. APPLICABILITY. Except as provided by Title 8,
711-14 Texas Business Organizations Code, this Act does not apply to a
711-15 business development corporation to which the Texas Business
711-16 Organizations Code applies.
711-17 SECTION 16. EFFECT OF ACT. (a) This section shall apply to
711-18 organizations described by Section 501(c)(3) or 170(c), Internal
711-19 Revenue Code of 1986, or a corresponding provision of a subsequent
711-20 federal tax law, to organizations listed by the Internal Revenue
711-21 Service in the Cumulative List of Organizations Described in
711-22 Section 170(c) of the Internal Revenue Code of 1986, I.R.S.
711-23 Publication 78, or any successor I.R.S. publication, and to persons
711-24 or entities engaged in assisting any such organizations.
711-25 (b) No provision of this Act shall deprive any organization,
711-26 person, or entity described in Subsection (a) of this section of
711-27 any right, exemption, immunity, or other privilege that such
712-1 organization, person, or entity has under existing law.
712-2 (c) No provision of this Act shall affect any other
712-3 reenactment, revision, amendment, or repeal of or addition to a
712-4 statute by the 76th Legislature, Regular Session, 1999, relating to
712-5 any right, exemption, immunity, or other privilege held by an
712-6 organization, person, or entity described in Subsection (a) of this
712-7 section. Such other reenactment, revision, amendment, repeal, or
712-8 addition is preserved and shall be given effect in lieu of any
712-9 provision in this Act that corresponds to the statute so reenacted,
712-10 revised, amended, repealed, or added to.
712-11 (d) If any provision of this Act conflicts with any other
712-12 statute enacted by the 76th Legislature, Regular Session, 1999,
712-13 relating to any right, exemption, immunity, or other privilege held
712-14 by an organization, person, or entity described in Subsection (a)
712-15 of this section, the other statute controls.
712-16 (e) Any other statute enacted by the 76th Legislature,
712-17 Regular Session, 1999, relating to any right, exemption, immunity,
712-18 or other privilege held by an organization, person, or entity
712-19 described in Subsection (a) of this section shall take effect and
712-20 apply as provided in such other statute, notwithstanding any
712-21 provision of this Act.
712-22 SECTION 17. REPEALER. (a) The following Acts and articles
712-23 as compiled in Vernon's Texas Civil Statutes are repealed:
712-24 Articles 1525, 1526, 1527, 1527a, 1528, 1528a, and 1528h.
712-25 (b) The following Acts and articles as compiled in Vernon's
712-26 Texas Civil Statutes are repealed on January 1, 2006: Articles
712-27 1399, 1400, 1401, 1402, 1403, 1404, 1405, 1406, 1407, 1407a, and
713-1 1528g.
713-2 SECTION 18. EFFECTIVE DATE. This Act takes effect January
713-3 1, 2002.
713-4 SECTION 19. EMERGENCY CLAUSE. The importance of this
713-5 legislation and the crowded condition of the calendars in both
713-6 houses create an emergency and an imperative public necessity that
713-7 the constitutional rule requiring bills to be read on three
713-8 several days in each house be suspended, and this rule is hereby
713-9 suspended.