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1-17 to facilitate citation of the law and to accommodate future 1-18 expansion of the law; 1-19 (3) eliminating repealed, duplicative, expired, 1-20 executed, and other ineffective provisions; and 1-21 (4) restating the law in modern American English to 1-22 the greatest extent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.