By Bosse H.B. No. 2681
76R5748 CLG-F
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1-19 (3) eliminating repealed, duplicative, expired,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. The term includes a cooperative
2-20 association, nonprofit association, and professional association.
2-21 (4) "Assumed name" means a name adopted for use by a
2-22 person. The term includes an assumed name filed under Chapter 36,
2-23 Business & Commerce Code.
2-24 (5) "Business" means a trade, occupation, profession,
2-25 or other commercial activity.
2-26 (6) "Certificate of formation" means:
2-27 (A) the document required to be filed with the
3-1 secretary of state under Chapter 3 to form a filing entity; and
3-2 (B) if appropriate, a restated certificate of
3-3 formation and all amendments of an original or restated certificate
3-4 of formation.
3-5 (7) "Certificate of ownership" means an instrument
3-6 evidencing an ownership interest or membership interest in an
3-7 entity.
3-8 (8) "Certificated ownership interest" means an
3-9 ownership interest of a domestic entity represented by a
3-10 certificate issued in bearer or registered form.
3-11 (9) "Contribution" means a tangible or intangible
3-12 benefit that a person transfers to an entity in consideration for
3-13 an ownership interest in the entity or otherwise in the person's
3-14 capacity as an owner or a member. The benefit includes cash,
3-15 services rendered, a contract for services to be performed, a
3-16 promissory note or other obligation of a person to pay cash or
3-17 transfer property to the entity, or securities or other interests
3-18 in or obligations of an entity, but does not include cash or
3-19 property received by the entity:
3-20 (A) with respect to a promissory note or other
3-21 obligation to the extent that the agreed value of the note or
3-22 obligation has previously been included as a contribution; or
3-23 (B) that the person intends to be a loan to the
3-24 entity.
3-25 (10) "Conversion" means:
3-26 (A) the continuance of a domestic entity as a
3-27 foreign entity of any type;
4-1 (B) the continuance of a foreign entity as a
4-2 domestic entity of any type; or
4-3 (C) the continuance of a domestic entity of one
4-4 type as a domestic entity of another type.
4-5 (11) "Converted entity" means an entity resulting from
4-6 a conversion.
4-7 (12) "Converting entity" means an entity as the entity
4-8 existed before the entity's conversion.
4-9 (13) "Cooperative" or "cooperative association" means
4-10 an association governed as a cooperative association under Title 6.
4-11 (14) "Corporation" means an entity governed as a
4-12 corporation under Title 2. The term includes a for-profit
4-13 corporation, nonprofit corporation, and professional corporation.
4-14 (15) "Debtor in bankruptcy" means a person who is the
4-15 subject of:
4-16 (A) an order for relief under the United States
4-17 bankruptcy laws (Title 11, United States Code); or
4-18 (B) a comparable order under a:
4-19 (i) successor statute of general
4-20 applicability; or
4-21 (ii) federal or state law governing
4-22 insolvency.
4-23 (16) "Digital signature" means an electronic
4-24 identifier intended by the person using it to have the same force
4-25 and effect as the use of a manual signature.
4-26 (17) "Director" means an individual who serves on the
4-27 board of directors of a foreign or domestic corporation.
5-1 (18) "Distribution" means a transfer of property,
5-2 including cash, from an entity to an owner of the entity in the
5-3 owner's capacity as an owner. The term includes a dividend, a
5-4 redemption or purchase of an ownership interest, or a liquidating
5-5 distribution.
5-6 (19) "Domestic" means, with respect to an entity, that
5-7 the entity is formed under this code or the entity's internal
5-8 affairs are governed by this code.
5-9 (20) "Domestic entity" means an organization formed
5-10 under or the internal affairs of which are governed by this code.
5-11 (21) "Domestic entity subject to dissenters' rights"
5-12 means a domestic entity the owners of which have rights of dissent
5-13 and appraisal under this code or the governing documents of the
5-14 entity.
5-15 (22) "Effective date of this code" means January 1,
5-16 2001.
5-17 (23) "Entity" means a domestic entity or foreign
5-18 entity.
5-19 (24) "Filing entity" means a domestic entity that is a
5-20 corporation, limited partnership, limited liability company,
5-21 professional association, cooperative, or real estate investment
5-22 trust.
5-23 (25) "Filing instrument" means an instrument,
5-24 document, or statement that is required or authorized by this code
5-25 to be filed by or for an entity with the filing officer in
5-26 accordance with Chapter 4.
5-27 (26) "Filing officer" means:
6-1 (A) with respect to an entity other than a real
6-2 estate investment trust, the secretary of state; or
6-3 (B) with respect to a real estate investment
6-4 trust, the county clerk of the county in which the real estate
6-5 investment trust's principal office is located in this state.
6-6 (27) "For-profit association" means an association
6-7 other than a nonprofit association.
6-8 (28) "For-profit corporation" means a corporation
6-9 other than a nonprofit corporation or professional corporation.
6-10 (29) "For-profit entity" means an entity other than a
6-11 nonprofit entity.
6-12 (30) "Foreign" means, with respect to an entity, that
6-13 the entity is formed under, and the entity's internal affairs are
6-14 governed by, the laws of a jurisdiction other than this state.
6-15 (31) "Foreign entity" means an organization formed
6-16 under, and the internal affairs of which are governed by, the laws
6-17 of a jurisdiction other than this state.
6-18 (32) "Foreign filing entity" means a foreign entity
6-19 that registers or is required to register as a foreign entity under
6-20 Chapter 9.
6-21 (33) "Foreign governmental authority" means a
6-22 governmental official, agency, or instrumentality of a jurisdiction
6-23 other than this state.
6-24 (34) "Foreign nonfiling entity" means a foreign entity
6-25 that is not a foreign filing entity.
6-26 (35) "Fundamental business transaction" means a
6-27 merger, interest exchange, conversion, or sale of all or
7-1 substantially all of an entity's assets.
7-2 (36) "General partner" means:
7-3 (A) each partner in a general partnership; or
7-4 (B) a person who is admitted to a limited
7-5 partnership as a general partner in accordance with the governing
7-6 documents of the limited partnership.
7-7 (37) "General partnership" means a partnership
7-8 governed as a general partnership under Title 4. The term includes
7-9 a registered limited liability partnership.
7-10 (38) "Governing authority" means a person or group of
7-11 persons who are entitled to manage and direct the affairs of an
7-12 entity under this code and the governing documents of the entity,
7-13 except that if the governing documents of the entity or this code
7-14 divide the authority to manage and direct the affairs of the entity
7-15 among different persons or groups of persons according to different
7-16 matters, "governing authority" means the person or group of persons
7-17 entitled to manage and direct the affairs of the entity with
7-18 respect to a matter under the governing documents of the entity or
7-19 this code. The term includes the board of directors of a
7-20 corporation or other persons authorized to perform the functions of
7-21 the board of directors, the general partners of a limited
7-22 partnership, the managers of a limited liability company that is
7-23 managed by managers, the members of a limited liability company
7-24 that is managed by members who are entitled to manage the company,
7-25 and the trustees of a real estate investment trust. The term does
7-26 not include an officer who is acting in the capacity of an officer.
7-27 (39) "Governing documents" means:
8-1 (A) in the case of a domestic entity:
8-2 (i) the certificate of formation for a
8-3 domestic filing entity or the document or agreement under which a
8-4 domestic nonfiling entity is formed; and
8-5 (ii) the other documents or agreements
8-6 adopted by the entity under this code to govern the formation or
8-7 the internal affairs of the entity; or
8-8 (B) in the case of a foreign entity, the
8-9 instruments, documents, or agreements adopted under the law of its
8-10 jurisdiction of formation to govern the formation or the internal
8-11 affairs of the entity.
8-12 (40) "Governing person" means a person serving as part
8-13 of the governing authority of an entity.
8-14 (41) "Individual" means a natural person.
8-15 (42) "Insolvency" means the inability of a person to
8-16 pay the person's debts as they become due in the usual course of
8-17 business or affairs.
8-18 (43) "Insolvent" means a person who is unable to pay
8-19 the person's debts as they become due in the usual course of
8-20 business or affairs.
8-21 (44) "Interest exchange" means the acquisition of an
8-22 ownership or membership interest in a domestic entity as provided
8-23 by Subchapter B, Chapter 10. The term does not include a merger or
8-24 conversion.
8-25 (45) "Internal Revenue Code" means the Internal
8-26 Revenue Code of 1986, as amended. The term includes corresponding
8-27 provisions of subsequent federal tax laws.
9-1 (46) "Jurisdiction of formation" means:
9-2 (A) in the case of a domestic filing entity,
9-3 this state;
9-4 (B) in the case of a foreign filing entity, the
9-5 jurisdiction in which the entity's certificate of formation or
9-6 similar organizational instrument is filed; or
9-7 (C) in the case of a foreign or domestic
9-8 nonfiling entity:
9-9 (i) the jurisdiction the laws of which are
9-10 chosen in the entity's governing documents to govern its internal
9-11 affairs if that jurisdiction bears a reasonable relation to the
9-12 owners or members or to the domestic or foreign nonfiling entity's
9-13 business and affairs under the principles of this state that
9-14 otherwise would apply to a contract among the owners or members; or
9-15 (ii) if Subparagraph (i) does not apply,
9-16 the jurisdiction in which the entity has its chief executive
9-17 office.
9-18 (47) "Law" means, unless the context requires
9-19 otherwise, both statutory and common law.
9-20 (48) "License" means a license, certificate of
9-21 registration, or other legal authorization.
9-22 (49) "Limited liability company" means an entity
9-23 governed as a limited liability company under Title 3.
9-24 (50) "Limited partner" means a person who has been
9-25 admitted to a limited partnership as a limited partner as provided
9-26 by:
9-27 (A) in the case of a domestic limited
10-1 partnership, Chapter 153; or
10-2 (B) in the case of a foreign limited
10-3 partnership, the laws of its jurisdiction of formation.
10-4 (51) "Limited partnership" means a partnership
10-5 governed as a limited partnership under Title 4. The term includes
10-6 a registered limited liability limited partnership.
10-7 (52) "Manager" means a person designated as a manager
10-8 of a limited liability company that is not managed by members of
10-9 the company.
10-10 (53) "Managerial official" means an officer or a
10-11 governing person.
10-12 (54) "Member" means:
10-13 (A) in the case of a limited liability company,
10-14 a person who has membership rights in the limited liability
10-15 company under its governing documents;
10-16 (B) in the case of a nonprofit corporation, a
10-17 person who has membership rights in the nonprofit corporation under
10-18 its governing documents;
10-19 (C) in the case of a cooperative association, a
10-20 member of a nonshare or share association;
10-21 (D) in the case of a nonprofit association, a
10-22 person who has membership rights in the nonprofit association under
10-23 its governing documents; or
10-24 (E) in the case of a professional association, a
10-25 person who has membership rights in the professional association
10-26 under its governing documents.
10-27 (55) "Membership interest" means a member's interest
11-1 in an entity.
11-2 (56) "Merger" means:
11-3 (A) the division of a domestic entity into two
11-4 or more new domestic entities or other organizations or into a
11-5 surviving domestic entity and one or more new domestic or foreign
11-6 entities or non-code organizations; or
11-7 (B) the combination of one or more domestic
11-8 entities with one or more domestic entities or non-code
11-9 organizations resulting in:
11-10 (i) one or more surviving domestic
11-11 entities or non-code organizations;
11-12 (ii) the creation of one or more new
11-13 domestic entities or non-code organizations; or
11-14 (iii) one or more surviving domestic
11-15 entities or non-code organizations and the creation of one or more
11-16 new domestic entities or non-code organizations.
11-17 (57) "Non-code organization" means an organization
11-18 other than a domestic entity.
11-19 (58) "Nonfiling entity" means a domestic entity that
11-20 is not a filing entity. The term includes a domestic general
11-21 partnership, nonprofit association, and joint stock company.
11-22 (59) "Nonprofit association" means an association
11-23 governed as a nonprofit association under Title 6.
11-24 (60) "Nonprofit corporation" means a corporation
11-25 governed as a nonprofit corporation under Title 2.
11-26 (61) "Nonprofit entity" means an entity that is a
11-27 nonprofit corporation, nonprofit association, or other entity that
12-1 is organized solely for one or more of the purposes specified by
12-2 Section 2.002.
12-3 (62) "Officer" means an individual elected, appointed,
12-4 or designated as an officer of an entity by the entity's governing
12-5 authority or under the entity's governing documents.
12-6 (63) "Organization" means a corporation, limited or
12-7 general partnership, limited liability company, business trust,
12-8 real estate investment trust, joint venture, joint stock company,
12-9 cooperative, association, bank, insurance company, or other similar
12-10 organization, regardless of whether the organization is for-profit,
12-11 domestic or foreign.
12-12 (64) "Owner" means:
12-13 (A) with respect to a foreign or domestic
12-14 for-profit corporation or real estate investment trust, a
12-15 shareholder;
12-16 (B) with respect to a foreign or domestic
12-17 partnership, a partner;
12-18 (C) with respect to a foreign or domestic
12-19 limited liability company or association, a member; or
12-20 (D) with respect to another foreign or domestic
12-21 entity, an owner of an equity interest in that entity.
12-22 (65) "Ownership interest" means an owner's interest in
12-23 an entity. The term includes the owner's share of profits and
12-24 losses or similar items and the right to receive distributions.
12-25 The term does not include an owner's right to participate in
12-26 management.
12-27 (66) "Parent entity" or "parent organization" means an
13-1 entity or organization that:
13-2 (A) owns at least 50 percent of the ownership or
13-3 membership interest of a subsidiary; or
13-4 (B) possesses at least 50 percent of the voting
13-5 power of the owners or members of a subsidiary.
13-6 (67) "Partner" means a limited partner or general
13-7 partner.
13-8 (68) "Partnership" means an entity governed as a
13-9 partnership under Title 4.
13-10 (69) "Partnership interest" means a partner's interest
13-11 in a partnership. The term includes the partner's share of profits
13-12 and losses or similar items and the right to receive distributions.
13-13 The term does not include a partner's right to participate in
13-14 management.
13-15 (70) "Party to the merger" means a domestic entity or
13-16 non-code organization that under a plan of merger is divided or
13-17 combined by a merger. The term does not include a domestic entity
13-18 or non-code organization that is not to be divided or combined into
13-19 or with one or more domestic entities or non-code organizations,
13-20 regardless of whether ownership interests of the entity are to be
13-21 issued under the plan of merger.
13-22 (71) "President" means the:
13-23 (A) individual designated as president of an
13-24 entity under the entity's governing documents; or
13-25 (B) officer or committee of persons authorized
13-26 to perform the functions of the principal executive officer of an
13-27 entity without regard to the designated name of the officer or
14-1 committee.
14-2 (72) "Professional association" means an association
14-3 that is:
14-4 (A) formed for the purpose of providing the
14-5 professional service of medicine, osteopathy, or podiatry; and
14-6 (B) governed as a professional entity under
14-7 Title 7.
14-8 (73) "Professional corporation" means a corporation
14-9 that is:
14-10 (A) formed for the purpose of providing a
14-11 professional service that by law a corporation governed by Title 2
14-12 is prohibited from rendering; and
14-13 (B) governed as a professional entity under
14-14 Title 7.
14-15 (74) "Professional entity" means a professional
14-16 association, professional corporation, or professional limited
14-17 liability company.
14-18 (75) "Professional individual," with respect to a
14-19 professional entity, means an individual who is licensed to provide
14-20 in this state or another jurisdiction the same professional service
14-21 as rendered by that professional entity.
14-22 (76) "Professional limited liability company" means a
14-23 limited liability company formed for the purpose of providing a
14-24 professional service and governed as a professional entity under
14-25 Title 7.
14-26 (77) "Professional service" means any type of service
14-27 that requires, as a condition precedent to the rendering of the
15-1 service, the obtaining of a license in this state, including the
15-2 personal service rendered by an architect, attorney, certified
15-3 public accountant, dentist, physician, public accountant, or
15-4 veterinarian.
15-5 (78) "Property" includes tangible and intangible
15-6 property and an interest in that property.
15-7 (79) "Real estate investment trust" means an entity
15-8 governed as a real estate investment trust under Title 5.
15-9 (80) "Registered limited liability partnership" means
15-10 a partnership governed as a registered limited liability
15-11 partnership under Title 4.
15-12 (81) "Registered limited liability limited
15-13 partnership" means a partnership governed as a registered limited
15-14 liability partnership and a limited partnership under Title 4.
15-15 (82) "Sale of all or substantially all of the assets"
15-16 means the sale, lease, exchange, or other disposition, other than a
15-17 pledge, mortgage, deed of trust, or trust indenture unless
15-18 otherwise provided by the certificate of formation, of all or
15-19 substantially all of the property and assets of a domestic entity
15-20 that is not made in the usual and regular course of the entity's
15-21 business without regard to whether the disposition is made with
15-22 goodwill. The term does not include a transaction that results in
15-23 the entity directly or indirectly:
15-24 (A) continuing to engage in one or more
15-25 businesses; or
15-26 (B) applying a portion of the consideration
15-27 received in connection with the transaction to the conduct of a
16-1 business that the entity engages in after the transaction.
16-2 (83) "Secretary" means the:
16-3 (A) individual designated as secretary of an
16-4 entity under the entity's governing documents; or
16-5 (B) officer or committee of persons authorized
16-6 to perform the functions of secretary of an entity without regard
16-7 to the designated name of the officer or committee.
16-8 (84) "Share" means a unit into which the ownership
16-9 interest in a corporation is divided, regardless of whether the
16-10 share is certificated or uncertificated.
16-11 (85) "Shareholder" or "holder of shares" means the
16-12 person in whose name shares issued by a corporation are registered
16-13 in the share transfer records maintained by the corporation.
16-14 (86) "Signature" means any symbol executed or adopted
16-15 by a person with present intention to authenticate a writing.
16-16 Unless the context requires otherwise, the term includes a digital
16-17 signature and a facsimile of a signature.
16-18 (87) "Subscriber" means a person who agrees with or
16-19 makes an offer to an entity to purchase by subscription an
16-20 ownership interest in the entity.
16-21 (88) "Subscription" means an agreement between a
16-22 subscriber and an entity, or a written offer made by a subscriber
16-23 to an entity before or after the entity's formation, in which the
16-24 subscriber agrees or offers to purchase a specified ownership
16-25 interest in the entity.
16-26 (89) "Subsidiary" means an entity or organization at
16-27 least 50 percent of:
17-1 (A) the ownership or membership interest of
17-2 which is owned by a parent entity or parent organization; or
17-3 (B) the voting power of which is possessed by a
17-4 parent entity or parent organization.
17-5 (90) "Treasurer" means the:
17-6 (A) individual designated as treasurer of an
17-7 entity under the entity's governing documents; or
17-8 (B) officer or committee of persons authorized
17-9 to perform the functions of treasurer of an entity without regard
17-10 to the designated name of the officer or committee.
17-11 (91) "Trustee" means a person who serves as a trustee
17-12 of a trust, including a real estate investment trust.
17-13 (92) "Uncertificated ownership interest" means an
17-14 ownership interest in a domestic entity that is not represented by
17-15 an instrument and is transferred by:
17-16 (A) amendment of the governing documents of the
17-17 entity; or
17-18 (B) registration on books maintained by or on
17-19 behalf of the entity for the purpose of registering transfers of
17-20 ownership interests.
17-21 (93) "Vice president" means the:
17-22 (A) individual designated as vice president of
17-23 an entity under the governing documents of the entity; or
17-24 (B) officer or committee of persons authorized
17-25 to perform the functions of the president of the entity on the
17-26 death, absence, or resignation of the president or on the inability
17-27 of the president to perform the functions of office without regard
18-1 to the designated name of the officer or committee.
18-2 (94) "Writing" or "written" means an embodiment in a
18-3 tangible medium of expression, now known or later developed, of
18-4 words, letters, characters, numbers, symbols, figures, or other
18-5 textual information sufficiently permanent or stable to permit it
18-6 to be perceived, reproduced, or otherwise communicated, directly or
18-7 with the aid of a machine or device, for a period of more than
18-8 transitory duration. Unless the context requires otherwise, the
18-9 term:
18-10 (A) includes stored or transmitted electronic
18-11 data and transmissions and reproductions of writings; and
18-12 (B) does not include sound or video recordings
18-13 of speech other than transcriptions that are otherwise writings.
18-14 Sec. 1.003. DISINTERESTED PERSON. (a) For purposes of this
18-15 code, a person is disinterested with respect to the approval of a
18-16 contract, transaction, or other matter or to the consideration of
18-17 the disposition of a claim or challenge relating to a contract,
18-18 transaction, or particular conduct, if the person or the person's
18-19 associate:
18-20 (1) is not a party to the contract or transaction or
18-21 materially involved in the conduct that is the subject of the claim
18-22 or challenge; and
18-23 (2) does not have a material financial interest in the
18-24 outcome of the contract or transaction or the disposition of the
18-25 claim or challenge.
18-26 (b) For purposes of Subsection (a), a person is not
18-27 materially involved in a contract or transaction that is the
19-1 subject of a claim or challenge and does not have a material
19-2 financial interest in the outcome of a contract or transaction or
19-3 the disposition of a claim or challenge solely because:
19-4 (1) the person was nominated or elected as a governing
19-5 person by a person who is:
19-6 (A) interested in the contract or transaction;
19-7 or
19-8 (B) alleged to have engaged in the conduct that
19-9 is the subject of the claim or challenge;
19-10 (2) the person receives normal fees or customary
19-11 compensation, reimbursement for expenses, or benefits as a
19-12 governing person of the entity;
19-13 (3) the person has a direct or indirect equity
19-14 interest in the entity;
19-15 (4) the entity has, or its subsidiaries have, an
19-16 interest in the contract or transaction or was affected by the
19-17 alleged conduct;
19-18 (5) the person or an associate of the person receives
19-19 ordinary and reasonable compensation for reviewing, making
19-20 recommendations regarding, or deciding on the disposition of the
19-21 claim or challenge; or
19-22 (6) in the case of a review by the person of the
19-23 alleged conduct that is the subject of the claim or challenge:
19-24 (A) the person is named as a defendant in the
19-25 derivative proceeding regarding the matter or as a person who
19-26 engaged in the alleged conduct; or
19-27 (B) the person, acting as a governing person,
20-1 approved, voted for, or acquiesced in the act being challenged if
20-2 the act did not result in a material personal or financial benefit
20-3 to the person and the challenging party fails to allege particular
20-4 facts that, if true, raise a significant prospect that the
20-5 governing person would be held liable to the entity or its owners
20-6 or members as a result of the conduct.
20-7 Sec. 1.004. INDEPENDENT PERSON. (a) For purposes of this
20-8 code, a person is independent with respect to considering the
20-9 disposition of a claim or challenge regarding a contract or
20-10 transaction, or particular or alleged conduct, if the person:
20-11 (1) is disinterested;
20-12 (2) either:
20-13 (A) is not an associate, or member of the
20-14 immediate family, of a party to the contract or transaction or of a
20-15 person who is alleged to have engaged in the conduct that is the
20-16 subject of the claim or challenge; or
20-17 (B) is an associate to a party or person
20-18 described by Paragraph (A) that is an entity if the person is an
20-19 associate solely because the person is a governing person of the
20-20 entity or of the entity's subsidiaries or associates;
20-21 (3) does not have a business, financial, or familial
20-22 relationship with a party to the contract or transaction, or with
20-23 another person who is alleged to have engaged in the conduct, that
20-24 is the subject of the claim or challenge that could reasonably be
20-25 expected to materially and adversely affect the judgment of the
20-26 person in favor of the party or other person with respect to the
20-27 consideration of the matter; and
21-1 (4) is not shown, by a preponderance of the evidence,
21-2 to be under the controlling influence of a party to the contract or
21-3 transaction that is the subject of the claim or challenge or of a
21-4 person who is alleged to have engaged in the conduct that is the
21-5 subject of the claim or challenge.
21-6 (b) For purposes of Subsection (a), a person does not have a
21-7 relationship that could reasonably be expected to materially and
21-8 adversely affect the judgment of the person regarding the
21-9 disposition of a matter that is the subject of a claim or challenge
21-10 and is not otherwise under the controlling influence of a party to
21-11 a contract or transaction that is the subject of a claim or
21-12 challenge or that is alleged to have engaged in the conduct that is
21-13 the subject of a claim or challenge solely because:
21-14 (1) the person has been nominated or elected as a
21-15 governing person by a person who is interested in the contract or
21-16 transaction or alleged to be engaged in the conduct that is the
21-17 subject of the claim or challenge;
21-18 (2) the person receives normal fees or similar
21-19 customary compensation, reimbursement for expenses, or benefits as
21-20 a governing person of the entity;
21-21 (3) the person has a direct or indirect equity
21-22 interest in the entity;
21-23 (4) the entity has, or its subsidiaries have, an
21-24 interest in the contract or transaction or was affected by the
21-25 alleged conduct;
21-26 (5) the person or an associate of the person receives
21-27 ordinary and reasonable compensation for reviewing, making
22-1 recommendations regarding, or deciding on the disposition of the
22-2 claim or challenge; or
22-3 (6) the person, an associate of the person, other than
22-4 the entity or its associates, or an immediate family member has a
22-5 continuing business relationship with the entity that is not
22-6 material to the person, associate, or family member.
22-7 Sec. 1.005. CONSPICUOUS INFORMATION. In this code, required
22-8 information is conspicuous if the information is placed in a manner
22-9 or displayed using a font that provides or is intended to provide
22-10 notice to a reasonable person affected by the information.
22-11 Required information in a document is conspicuous if the font used
22-12 for the information is capitalized, boldfaced, italicized, or
22-13 underlined or larger or of a different color than the remainder of
22-14 the document.
22-15 Sec. 1.006. SYNONYMOUS TERMS. To the extent not
22-16 inconsistent with the provisions of the constitution and other
22-17 statutes or codes wherein such terms may be found, and as the
22-18 context requires in this code or any other statute or code of this
22-19 state:
22-20 (1) a reference to "articles of incorporation,"
22-21 "articles of organization," "certificate of limited partnership,"
22-22 and "charter" includes a "certificate of formation";
22-23 (2) a reference to "authorized capital stock" includes
22-24 "authorized shares";
22-25 (3) a reference to "capital stock" includes
22-26 "authorized and issued shares," "issued share," and "stated
22-27 capital";
23-1 (4) a reference to a "certificate of registration,"
23-2 "certificate of authority," and "permit to do business" includes
23-3 "registration";
23-4 (5) a reference to "stock" and "shares of stock"
23-5 includes "shares";
23-6 (6) a reference to "stockholder" includes
23-7 "shareholder"; and
23-8 (7) a reference to "no par stock" includes "shares
23-9 without par value."
23-10 Sec. 1.007. SIGNING OF DOCUMENT OR OTHER WRITING. For
23-11 purposes of this code, a writing has been signed by a person when
23-12 the writing includes the person's signature. A transmission or
23-13 reproduction of a writing signed by a person is considered signed
23-14 by that person for purposes of this code.
23-15 Sec. 1.008. SHORT TITLES. (a) The provisions of this code
23-16 as described by this section may be cited as provided by this
23-17 section.
23-18 (b) The provisions of Title 2 and the provisions of Title 1
23-19 to the extent applicable to corporations may be cited as the "Texas
23-20 Corporation Law."
23-21 (c) The provisions of Chapters 20 and 21 and the provisions
23-22 of Title 1 to the extent applicable to for-profit corporations may
23-23 be cited as the "Texas For-Profit Corporation Law."
23-24 (d) The provisions of Chapters 20 and 22 and the provisions
23-25 of Title 1 to the extent applicable to nonprofit corporations may
23-26 be cited as the "Texas Nonprofit Corporation Law."
23-27 (e) The provisions of Title 3 and the provisions of Title 1
24-1 to the extent applicable to limited liability companies may be
24-2 cited as the "Texas Limited Liability Company Law."
24-3 (f) The provisions of Chapters 151, 152, and 154 and the
24-4 provisions of Title 1 to the extent applicable to general
24-5 partnerships may be cited as the "Texas General Partnership Law."
24-6 (g) The provisions of Chapters 151, 152, and 153 and the
24-7 provisions of Title 1 to the extent applicable to limited
24-8 partnerships may be cited as the "Texas Limited Partnership Law."
24-9 (h) The provisions of Title 5 and the provisions of Title 1
24-10 to the extent applicable to real estate investment trusts may be
24-11 cited as the "Texas Real Estate Investment Trust Law."
24-12 (i) The provisions of Chapter 251 and the provisions of
24-13 Title 1 to the extent applicable to cooperative associations may be
24-14 cited as the "Texas Cooperative Association Law."
24-15 (j) The provisions of Title 7 and the provisions of Titles
24-16 1, 2, and 3 to the extent applicable to professional entities may
24-17 be cited as the "Texas Professional Entities Law."
24-18 (k) The provisions of Chapter 252 may be cited as the
24-19 "Uniform Unincorporated Nonprofit Associations Act."
24-20 (l) The provisions of Chapters 301 and 302 and the
24-21 provisions of Chapters 20 and 21 and Title 1 to the extent
24-22 applicable to professional associations may be cited as the "Texas
24-23 Professional Association Law."
24-24 (m) The provisions of Chapters 301 and 303 and the
24-25 provisions of Chapters 20 and 21 and Title 1 to the extent
24-26 applicable to professional corporations may be cited as the "Texas
24-27 Professional Corporations Law."
25-1 (n) The provisions of Chapters 301 and 304 and the
25-2 provisions of Titles 1 and 3 to the extent applicable to
25-3 professional limited liability companies may be cited as the "Texas
25-4 Professional Limited Liability Company Law."
25-5 Sec. 1.009. DOLLARS AS MONETARY UNITS. Unless the context
25-6 requires otherwise, a value or amount that is required by this code
25-7 to be stated in monetary terms must be stated in United States
25-8 dollars. Currency that is not specified is considered to be in
25-9 United States dollars.
25-10 (Sections 1.010-1.050 reserved for expansion)
25-11 SUBCHAPTER B. CODE CONSTRUCTION
25-12 Sec. 1.051. CONSTRUCTION OF CODE. Chapter 311, Government
25-13 Code (Code Construction Act), applies to the construction of each
25-14 provision in this code except as otherwise expressly provided by
25-15 this code.
25-16 Sec. 1.052. REFERENCE IN LAW TO STATUTE REVISED BY CODE. A
25-17 reference in a law to a statute or a part of a statute revised by
25-18 this code is considered to be a reference to the part of this code
25-19 that revises that statute or part of that statute.
25-20 Sec. 1.053. APPLICABILITY TO FOREIGN AND INTERSTATE AFFAIRS.
25-21 This code applies to the conduct of affairs with foreign countries
25-22 and the other states of the United States only to the extent
25-23 permitted under the United States Constitution.
25-24 Sec. 1.054. RESERVATION OF POWER. The legislature at all
25-25 times has the power to prescribe regulations, provisions, and
25-26 limitations as the legislature considers advisable. The
25-27 regulations, provisions, and limitations are binding on any entity
26-1 subject to this code.
26-2 (Sections 1.055-1.100 reserved for expansion)
26-3 SUBCHAPTER C. DETERMINATION OF APPLICABLE LAW
26-4 Sec. 1.101. DOMESTIC FILING ENTITIES. The law of this state
26-5 governs the formation and internal affairs of an entity if the
26-6 entity's formation occurs when a certificate of formation filed in
26-7 accordance with Chapter 4 takes effect.
26-8 Sec. 1.102. FOREIGN FILING ENTITIES. If the formation of an
26-9 entity occurs when a certificate of formation or similar instrument
26-10 filed with a foreign governmental authority takes effect, the law
26-11 of the state or other jurisdiction in which that foreign
26-12 governmental authority is located governs the formation and
26-13 internal affairs of the entity.
26-14 Sec. 1.103. ENTITIES NOT FORMED BY FILING INSTRUMENT. If
26-15 the formation of an entity does not occur when a certificate of
26-16 formation or similar instrument filed with the secretary of state
26-17 or with a foreign governmental authority takes effect, the law
26-18 governing the entity's formation and internal affairs is the law of
26-19 the entity's jurisdiction of formation.
26-20 Sec. 1.104. LAW APPLICABLE TO LIABILITY. The law of the
26-21 jurisdiction that governs an entity as determined under Sections
26-22 1.101-1.103 applies to the liability of an owner, a member, or a
26-23 managerial official of the entity in the capacity as an owner, a
26-24 member, or a managerial official for an obligation, including a
26-25 debt or other liability, of the entity for which the owner, member,
26-26 or managerial official is not otherwise liable by contract or under
26-27 provisions of law other than this code.
27-1 Sec. 1.105. INTERNAL AFFAIRS. For purposes of this code,
27-2 the internal affairs of an entity include:
27-3 (1) the rights, powers, and duties of its governing
27-4 authority, governing persons, officers, owners, and members; and
27-5 (2) matters relating to its membership or ownership
27-6 interests.
27-7 Sec. 1.106. ORDER OF PRECEDENCE. (a) This title applies to
27-8 all domestic entities and foreign entities to the extent provided
27-9 by this title.
27-10 (b) Each title of this code, other than this title, applies
27-11 to a different type of entity to the extent provided by the
27-12 appropriate title.
27-13 (c) If a provision of this title conflicts with a provision
27-14 in another title of this code, the provision of the other title
27-15 supersedes the provision of this title.
27-16 CHAPTER 2. PURPOSES AND POWERS
27-17 OF DOMESTIC ENTITY
27-18 SUBCHAPTER A. PURPOSES OF DOMESTIC ENTITY
27-19 Sec. 2.001. GENERAL SCOPE OF PERMISSIBLE PURPOSES. A
27-20 domestic entity has any lawful purpose or purposes, unless
27-21 otherwise provided by this code.
27-22 Sec. 2.002. PURPOSES OF NONPROFIT ENTITY. The purpose or
27-23 purposes of a domestic nonprofit entity may include one or more of
27-24 the following purposes:
27-25 (1) serving charitable, benevolent, religious,
27-26 eleemosynary, patriotic, civic, missionary, educational,
27-27 scientific, social, fraternal, athletic, aesthetic, agricultural,
28-1 and horticultural purposes;
28-2 (2) operating or managing a professional, commercial,
28-3 or trade association or labor union;
28-4 (3) providing animal husbandry; or
28-5 (4) operating on a nonprofit cooperative basis for the
28-6 benefit of its members.
28-7 Sec. 2.003. PROHIBITED PURPOSES. A domestic entity may not:
28-8 (1) engage in a business or activity that:
28-9 (A) is expressly unlawful or prohibited by a law
28-10 of this state;
28-11 (B) cannot lawfully be engaged in by that entity
28-12 under state law; or
28-13 (C) may not be engaged in by an entity without
28-14 first obtaining a license under the laws of this state to engage in
28-15 that business or activity and a license cannot lawfully be granted
28-16 to the entity; or
28-17 (2) operate as a:
28-18 (A) bank;
28-19 (B) trust company;
28-20 (C) savings association;
28-21 (D) insurance company regulated by this state;
28-22 (E) railroad company;
28-23 (F) cemetery organization; or
28-24 (G) abstract or title company governed by
28-25 Chapter 9, Insurance Code.
28-26 Sec. 2.004. LIMITATION ON PURPOSES OF PROFESSIONAL ENTITY.
28-27 A professional entity may engage in only:
29-1 (1) one type of professional service, unless the
29-2 entity is expressly authorized to provide more than one type of
29-3 professional service under state law regulating the professional
29-4 services; and
29-5 (2) services ancillary to that type of professional
29-6 service.
29-7 Sec. 2.005. LIMITATION IN GOVERNING DOCUMENTS. The
29-8 governing documents of a domestic entity may contain limitations on
29-9 the entity's purposes.
29-10 (Sections 2.006-2.100 reserved for expansion)
29-11 SUBCHAPTER B. POWERS OF DOMESTIC ENTITY
29-12 Sec. 2.101. GENERAL POWERS. Except as otherwise provided by
29-13 this code, a domestic entity has the same powers as an individual
29-14 to take action necessary or convenient to carry out its business
29-15 and affairs. Except as otherwise provided by this code, the powers
29-16 of a domestic entity include the power to:
29-17 (1) sue, be sued, and defend suit in the entity's
29-18 business name;
29-19 (2) have and alter a seal and use the seal or a
29-20 facsimile of it by impressing, affixing, or reproducing it;
29-21 (3) acquire, receive, own, hold, improve, use, and
29-22 deal in and with property or an interest in property;
29-23 (4) sell, convey, mortgage, pledge, lease, exchange,
29-24 and otherwise dispose of property;
29-25 (5) make contracts and guarantees;
29-26 (6) incur liabilities, borrow money, issue notes,
29-27 bonds, or other obligations, which may be convertible into, or
30-1 include the option to purchase, other securities or ownership
30-2 interests in the entity, and secure its obligations by mortgaging
30-3 or pledging its property, franchises, or income;
30-4 (7) lend money, invest its funds, and receive and hold
30-5 property as security for repayment;
30-6 (8) acquire its own bonds, debentures, or other
30-7 evidences of indebtedness or obligations;
30-8 (9) acquire its own ownership interests, regardless of
30-9 whether redeemable, and hold the ownership interests as treasury
30-10 ownership interests or cancel or dispose of the ownership
30-11 interests;
30-12 (10) be a promoter, organizer, owner, partner, member,
30-13 associate, or manager of an organization;
30-14 (11) acquire, receive, own, hold, vote, use, pledge,
30-15 and dispose of ownership interests in or securities issued by
30-16 another person;
30-17 (12) conduct its business, locate its offices, and
30-18 exercise the powers granted by this code to further its purposes,
30-19 in or out of this state;
30-20 (13) lend money to, and otherwise assist, its
30-21 managerial officials, owners, members, or employees as necessary or
30-22 appropriate;
30-23 (14) elect or appoint officers and agents of the
30-24 entity, establish the length of their terms, define their duties,
30-25 and fix their compensation;
30-26 (15) pay pensions and establish pension plans, pension
30-27 trusts, profit-sharing plans, bonus plans, and incentive plans for
31-1 managerial officials, owners, members, or employees or former
31-2 managerial officials, owners, members, or employees;
31-3 (16) indemnify and maintain liability insurance for
31-4 managerial officials, owners, members, employees, and agents of the
31-5 entity or the entity's affiliate;
31-6 (17) adopt and amend governing documents for managing
31-7 the affairs of the entity subject to applicable law;
31-8 (18) make donations for the public welfare or for a
31-9 charitable, scientific, or educational purpose;
31-10 (19) voluntarily wind up its business and activities
31-11 and terminate its existence;
31-12 (20) transact business or take action that will aid
31-13 governmental policy; and
31-14 (21) take other action necessary or appropriate to
31-15 further the purposes of the entity.
31-16 Sec. 2.102. ADDITIONAL POWERS OF NONPROFIT ENTITY OR
31-17 INSTITUTION. To effect its purposes, a domestic nonprofit entity or
31-18 institution formed for a religious, charitable, educational, or
31-19 eleemosynary purpose may acquire, own, hold, mortgage, and dispose
31-20 of and invest its funds in property for the use and benefit of,
31-21 under the discretion of, and in trust for a convention, conference,
31-22 or association organized under the laws of this state or another
31-23 state with which it is affiliated or by which it is controlled.
31-24 Sec. 2.103. POWER TO INCUR INDEBTEDNESS. (a) Unless
31-25 otherwise provided by its governing documents or this code, a
31-26 domestic entity may create indebtedness for any consideration the
31-27 entity considers appropriate, including:
32-1 (1) cash;
32-2 (2) property;
32-3 (3) a contract to receive property;
32-4 (4) a debt or other obligation of the entity or of
32-5 another person;
32-6 (5) services performed or a contract for services to
32-7 be performed; or
32-8 (6) a direct or indirect benefit realized by the
32-9 entity.
32-10 (b) In the absence of fraud in the transaction, the judgment
32-11 of the governing authority of a domestic entity as to the value of
32-12 the consideration received by the entity for indebtedness is
32-13 conclusive.
32-14 (c) For purposes of this section, a domestic entity is
32-15 treated as part of the entity creating indebtedness if the domestic
32-16 entity is directly or indirectly or wholly or partly owned by that
32-17 entity.
32-18 (d) This section does not apply to indebtedness created by a
32-19 for-profit entity that is incurred by reason of the authorization
32-20 or payment of a distribution.
32-21 Sec. 2.104. POWER TO MAKE GUARANTIES. (a) In this section,
32-22 "guaranty" means a mortgage, pledge, security agreement, or other
32-23 agreement making the domestic entity or its assets secondarily
32-24 liable for another person's contract, security, or other
32-25 obligation.
32-26 (b) Unless otherwise provided by its governing documents or
32-27 this code, a domestic entity may:
33-1 (1) make a guaranty on behalf of a parent, subsidiary,
33-2 or affiliate of the entity; or
33-3 (2) make a guaranty of the indebtedness of another
33-4 person if the guaranty may reasonably be expected directly or
33-5 indirectly to benefit the entity.
33-6 (c) For purposes of Subsection (b)(2), a decision by the
33-7 governing authority of the domestic entity that a guaranty may
33-8 reasonably be expected to benefit the entity is conclusive and not
33-9 subject to attack by any person, except:
33-10 (1) a guaranty may not be enforced by a person who
33-11 participated in a fraud on the domestic entity resulting in the
33-12 making of the guaranty or by a person who had notice of that fraud
33-13 at the time the person acquired rights under the guaranty;
33-14 (2) a proposed guaranty may be enjoined at the request
33-15 of an owner of the domestic entity on the ground that the guaranty
33-16 cannot reasonably be expected to benefit the domestic entity; or
33-17 (3) the domestic entity, whether acting directly or
33-18 through a receiver, trustee, or other legal representative, or
33-19 through an owner on behalf of the domestic entity, may bring suit
33-20 for damages against the managerial officials, owners, or members
33-21 who authorized the guaranty on the ground that the guaranty could
33-22 not reasonably be expected to benefit the domestic entity.
33-23 (d) This section does not:
33-24 (1) apply to a domestic entity governed by the
33-25 Insurance Code; or
33-26 (2) authorize a domestic entity that is not governed
33-27 by the Insurance Code to engage in a business or transaction
34-1 regulated by the Insurance Code.
34-2 Sec. 2.105. STATED POWERS IN SUBCHAPTER SUFFICIENT. A
34-3 domestic entity is not required to state any of the powers provided
34-4 to the entity by this subchapter in its governing documents.
34-5 Sec. 2.106. LIMITATION ON POWERS. (a) This subchapter does
34-6 not authorize a domestic entity or a managerial official of a
34-7 domestic entity to exercise a power in a manner inconsistent with a
34-8 limitation on the purposes or powers of the entity contained in its
34-9 governing documents, this code, or other law of this state.
34-10 (b) This code does not authorize any action in violation of
34-11 the antitrust laws of this state.
34-12 Sec. 2.107. CERTIFICATED INDEBTEDNESS; MANNER OF ISSUANCE;
34-13 SIGNATURE AND SEAL. (a) Except as otherwise provided by the
34-14 governing documents of the domestic entity, this code, or other
34-15 law, on the issuance by a domestic entity of a bond, debenture, or
34-16 other evidence of indebtedness in certificated form, the seal of
34-17 the entity, if the entity has adopted a seal, may be a facsimile
34-18 that may be engraved or printed on the certificate.
34-19 (b) Except as otherwise provided by the governing documents
34-20 of the domestic entity, this code, or other law, if a security
34-21 described by Subsection (a) is authenticated with the manual
34-22 signature of an authorized officer of the domestic entity or an
34-23 authorized officer or representative, to the extent permitted by
34-24 law, of a transfer agent or trustee appointed or named by an
34-25 indenture of trust or other agreement under which the security is
34-26 issued, the signature of any officer of the domestic entity may be
34-27 a facsimile signature.
35-1 (c) A security described by Subsection (a) that contains the
35-2 manual or facsimile signature of a person who is no longer an
35-3 officer when the security is delivered by the entity may be
35-4 adopted, issued, and delivered by the entity in the same manner and
35-5 to the same extent as if the person had remained an officer of the
35-6 entity.
35-7 CHAPTER 3. FORMATION AND GOVERNANCE
35-8 SUBCHAPTER A. FORMATION, EXISTENCE, AND CERTIFICATE
35-9 OF FORMATION
35-10 Sec. 3.001. FORMATION AND EXISTENCE OF FILING ENTITIES. (a)
35-11 Subject to the other provisions of this code, to form a filing
35-12 entity, a certificate of formation complying with Sections 3.003,
35-13 3.004, and 3.005 must be filed in accordance with Chapter 4.
35-14 (b) The filing of a certificate of formation described by
35-15 Subsection (a) may be included in a filing under Chapter 10.
35-16 (c) The existence of a filing entity commences when the
35-17 filing of the certificate of formation takes effect as provided by
35-18 Chapter 4.
35-19 (d) Except in a proceeding by the state to terminate the
35-20 existence of a filing entity, an acknowledgment of the filing of a
35-21 certificate of formation issued by the filing officer is conclusive
35-22 evidence of:
35-23 (1) the formation and existence of the filing entity;
35-24 (2) the satisfaction of all conditions precedent to
35-25 the formation of the filing entity; and
35-26 (3) the authority of the filing entity to transact
35-27 business in this state.
36-1 Sec. 3.002. FORMATION AND EXISTENCE OF NONFILING ENTITIES.
36-2 The requirements for the formation of and the determination of the
36-3 existence of a nonfiling entity are governed by the title of this
36-4 code that applies to that entity.
36-5 Sec. 3.003. DURATION. A domestic entity exists perpetually
36-6 unless otherwise provided in the governing documents of the entity.
36-7 A domestic entity may be terminated in accordance with this code or
36-8 the Tax Code.
36-9 Sec. 3.004. ORGANIZERS. (a) Any person having the capacity
36-10 to contract for the person or for another may be an organizer of a
36-11 filing entity.
36-12 (b) Each organizer of a filing entity must sign the
36-13 certificate of formation of the filing entity, except that:
36-14 (1) each general partner must sign the certificate of
36-15 formation of a domestic limited partnership; and
36-16 (2) each trust manager must sign and acknowledge
36-17 before an officer who is authorized by law to take acknowledgment
36-18 of a deed the certificate of formation of a domestic real estate
36-19 investment trust.
36-20 Sec. 3.005. CERTIFICATE OF FORMATION. (a) The certificate
36-21 of formation must state:
36-22 (1) the name of the filing entity being formed;
36-23 (2) the type of filing entity being formed;
36-24 (3) for filing entities other than limited
36-25 partnerships, the purpose or purposes for which the filing entity
36-26 is formed, including any lawful purpose for that type of entity;
36-27 (4) the period of duration, if the entity is not
37-1 formed to exist perpetually;
37-2 (5) the street address of the initial registered
37-3 office of the filing entity and the name of the initial registered
37-4 agent of the filing entity at the office;
37-5 (6) the name and address of each:
37-6 (A) organizer for the filing entity, unless the
37-7 entity is formed under a plan of conversion or merger;
37-8 (B) general partner, if the filing entity is a
37-9 limited partnership; or
37-10 (C) trust manager, if the filing entity is a
37-11 real estate investment trust;
37-12 (7) if the filing entity is formed under a plan of
37-13 conversion or merger, a statement to that effect and, if formed
37-14 under a plan of conversion, the name, address, date of formation,
37-15 prior form of organization, and jurisdiction of formation of the
37-16 converting entity; and
37-17 (8) any other information required by this code to be
37-18 included in the certificate of formation for the filing entity.
37-19 (b) The certificate of formation may contain other
37-20 provisions not inconsistent with law relating to the organization,
37-21 ownership, governance, business, or affairs of the filing entity.
37-22 (c) Except as provided by Section 3.004, Chapter 4 governs
37-23 the signing and filing of a certificate of formation for a domestic
37-24 entity.
37-25 Sec. 3.006. FILINGS IN CASE OF MERGER OR CONVERSION. (a)
37-26 If a new domestic entity is formed under a plan of conversion or
37-27 merger, the certificate of formation of the entity must be filed
38-1 with the certificate of conversion or merger under Section
38-2 10.155(a) or 10.153(a). The certificate of formation is not
38-3 required to be filed separately under Section 3.001.
38-4 (b) The formation and existence of a domestic filing entity
38-5 that is a converted entity in a conversion or that is to be created
38-6 under a plan of merger takes effect and commences on the
38-7 effectiveness of the conversion or merger, as appropriate.
38-8 (Sections 3.007-3.050 reserved for expansion)
38-9 SUBCHAPTER B. AMENDMENTS AND RESTATEMENTS OF
38-10 CERTIFICATE OF FORMATION
38-11 Sec. 3.051. RIGHT TO AMEND CERTIFICATE OF FORMATION. (a) A
38-12 filing entity may amend its certificate of formation.
38-13 (b) An amended certificate of formation may contain only
38-14 provisions that:
38-15 (1) would be permitted at the time of the amendment if
38-16 the amended certificate of formation were a newly filed original
38-17 certificate of formation; or
38-18 (2) effect a change, exchange, reclassification, or
38-19 cancellation in the membership or ownership interests or the rights
38-20 of owners or members of the filing entity.
38-21 Sec. 3.052. PROCEDURES TO AMEND CERTIFICATE OF FORMATION.
38-22 (a) The procedure to adopt an amendment to the certificate of
38-23 formation is as provided by the title of this code that applies to
38-24 the entity.
38-25 (b) A filing entity that amends its certificate of formation
38-26 shall sign and file, in the manner required by Chapter 4, a
38-27 certificate of amendment complying with Section 3.053 or a restated
39-1 certificate of formation complying with Section 3.057.
39-2 Sec. 3.053. CERTIFICATE OF AMENDMENT. A certificate of
39-3 amendment for a filing entity must state:
39-4 (1) the name of the filing entity;
39-5 (2) the type of the filing entity;
39-6 (3) for each provision of the certificate of formation
39-7 that is added, altered, or deleted, an identification by reference
39-8 or description of the added, altered, or deleted provision and, if
39-9 the provision is added or altered, a statement of the text of the
39-10 amended or added provision;
39-11 (4) that the amendment or amendments have been
39-12 approved in the manner required by this code and the governing
39-13 documents of the entity; and
39-14 (5) any other matter required by the provisions of
39-15 this code applicable to the filing entity to be in the certificate
39-16 of amendment.
39-17 Sec. 3.054. EFFECT OF FILING OF CERTIFICATE OF AMENDMENT.
39-18 (a) An amendment to a certificate of formation takes effect when
39-19 the filing of the certificate of amendment takes effect as provided
39-20 by Chapter 4.
39-21 (b) An amendment to a certificate of formation does not
39-22 affect:
39-23 (1) an existing cause of action in favor of or against
39-24 the entity for which the certificate of amendment is sought;
39-25 (2) a pending suit to which the entity is a party; or
39-26 (3) an existing right of a person other than an
39-27 existing owner.
40-1 (c) If the name of an entity is changed by amendment, an
40-2 action brought by or against the entity in the former name of the
40-3 entity does not abate because of the name change.
40-4 Sec. 3.055. RIGHT TO RESTATE CERTIFICATE OF FORMATION. (a)
40-5 A filing entity may restate its certificate of formation.
40-6 (b) An amendment effected by a restated certificate of
40-7 formation must comply with Section 3.051(b).
40-8 Sec. 3.056. PROCEDURES TO RESTATE CERTIFICATE OF FORMATION.
40-9 (a) The procedure to adopt a restated certificate of formation is
40-10 governed by the title of this code that applies to the entity.
40-11 (b) A filing entity that restates its certificate of
40-12 formation shall sign and file, in the manner required by Chapter 4,
40-13 a restated certificate of formation and accompanying statements
40-14 complying with Section 3.057.
40-15 Sec. 3.057. RESTATED CERTIFICATE OF FORMATION. (a) A
40-16 restated certificate of formation must accurately state the text of
40-17 the previous certificate of formation, regardless of whether the
40-18 certificate of formation is an original, corrected, or restated
40-19 certificate, and include:
40-20 (1) each previous amendment to the certificate being
40-21 restated that is carried forward; and
40-22 (2) each new amendment to the certificate being
40-23 restated.
40-24 (b) A restated certificate of formation may omit:
40-25 (1) the name and address of each organizer other than
40-26 the name and address of each general partner of a limited
40-27 partnership or trust manager of a real estate investment trust; and
41-1 (2) any other information that may be omitted under
41-2 the provisions of this code applicable to the filing entity.
41-3 (c) A restated certificate of formation that does not make
41-4 new amendments to the certificate of formation being restated must
41-5 be accompanied by:
41-6 (1) a statement that the restated certificate of
41-7 formation accurately states the text of the certificate of
41-8 formation being restated, as amended, restated, and corrected,
41-9 except for information omitted under Subsection (b); and
41-10 (2) any other information required by other provisions
41-11 of this code applicable to the filing entity.
41-12 (d) A restated certificate of formation that makes new
41-13 amendments to the certificate of formation being restated must:
41-14 (1) be accompanied by a statement that each new
41-15 amendment has been made in accordance with this code;
41-16 (2) identify by reference or description each added,
41-17 altered, or deleted provision;
41-18 (3) be accompanied by a statement that each amendment
41-19 has been approved in the manner required by this code and the
41-20 governing documents of the entity;
41-21 (4) be accompanied by a statement that the restated
41-22 certificate of formation:
41-23 (A) accurately states the text of the
41-24 certificate of formation being restated and each amendment to the
41-25 certificate of formation being restated that is in effect, as
41-26 further amended by the restated certificate of formation; and
41-27 (B) does not contain any other change in the
42-1 certificate of formation being restated except for information
42-2 omitted under Subsection (b); and
42-3 (5) include any other information required by the
42-4 title of this code applicable to the entity.
42-5 Sec. 3.058. EFFECT OF FILING OF RESTATED CERTIFICATE OF
42-6 FORMATION. (a) A restated certificate of formation takes effect
42-7 when the filing of the restated certificate of formation takes
42-8 effect as provided by Chapter 4.
42-9 (b) On the date the restated certificate of formation takes
42-10 effect, the original certificate of formation and each prior
42-11 amendment or restatement of the certificate of formation is
42-12 superseded and the restated certificate of formation is the
42-13 effective certificate of formation.
42-14 (c) Sections 3.054(b) and (c) apply to an amendment effected
42-15 by a restated certificate of formation.
42-16 (Sections 3.059-3.100 reserved for expansion)
42-17 SUBCHAPTER C. GOVERNING PERSONS AND OFFICERS
42-18 Sec. 3.101. RIGHTS OF GOVERNING PERSONS IN CERTAIN CASES.
42-19 (a) In discharging a duty or exercising a power, a governing
42-20 person, including a governing person who is a member of a
42-21 committee, may, in good faith and with ordinary care, rely on
42-22 information, opinions, reports, or statements, including financial
42-23 statements and other financial data, concerning a domestic entity
42-24 or another person and prepared or presented by:
42-25 (1) an officer or employee of the entity;
42-26 (2) legal counsel;
42-27 (3) a public accountant;
43-1 (4) an investment banker;
43-2 (5) a person who the governing person reasonably
43-3 believes possesses professional expertise in the matter; or
43-4 (6) a committee of the governing authority of which
43-5 the governing person is not a member.
43-6 (b) A governing person may not in good faith rely on the
43-7 information described by Subsection (a) if the governing person has
43-8 knowledge of a matter that makes the reliance unwarranted.
43-9 (c) A governing person held liable on a claim is entitled to
43-10 contribution from each of the other governing persons held liable
43-11 on the same claim, as appropriate to achieve equity.
43-12 Sec. 3.102. OFFICERS. (a) Officers of a domestic entity
43-13 may be elected or appointed in accordance with the governing
43-14 documents of the entity or by the governing authority of the entity
43-15 unless prohibited by the governing documents.
43-16 (b) An officer of an entity shall perform the duties in the
43-17 management of the entity and has the authority as provided by the
43-18 governing documents of the entity or the governing authority that
43-19 elects or appoints the officer.
43-20 (c) A person may simultaneously hold any two or more offices
43-21 of an entity unless prohibited by this code or the governing
43-22 documents of the entity.
43-23 Sec. 3.103. REMOVAL OF OFFICERS. (a) Unless otherwise
43-24 provided by the governing documents of a domestic entity, an
43-25 officer may be removed for or without cause by the governing
43-26 authority or as provided by the governing documents of the entity.
43-27 The removal of an officer does not prejudice any contract rights of
44-1 the person removed.
44-2 (b) Election or appointment of an officer does not by itself
44-3 create contract rights.
44-4 Sec. 3.104. RIGHTS OF OFFICERS IN CERTAIN CASES. (a) In
44-5 discharging a duty or exercising a power, an officer of a domestic
44-6 entity may, in good faith and ordinary care, rely on information,
44-7 opinions, reports, or statements, including financial statements
44-8 and other financial data, concerning the entity or another person
44-9 and prepared or presented by:
44-10 (1) another officer or an employee of the entity;
44-11 (2) legal counsel;
44-12 (3) a public accountant;
44-13 (4) an investment banker; or
44-14 (5) a person who the officer reasonably believes
44-15 possesses professional expertise in the matter.
44-16 (b) An officer may not in good faith rely on the information
44-17 described by Subsection (a) if the officer has knowledge of a
44-18 matter that makes the reliance unwarranted.
44-19 (Sections 3.105-3.150 reserved for expansion)
44-20 SUBCHAPTER D. RECORDKEEPING
44-21 Sec. 3.151. BOOKS AND RECORDS FOR ALL FILING ENTITIES.
44-22 (a) Each filing entity shall keep:
44-23 (1) books and records of accounts;
44-24 (2) minutes of the proceedings of the owners or
44-25 members or governing authority of the filing entity and committees
44-26 of the owners or members or governing authority of the filing
44-27 entity;
45-1 (3) at its registered office or principal place of
45-2 business, or at the office of its transfer agent or registrar, a
45-3 record of:
45-4 (A) the original issuance of ownership or
45-5 membership interests issued by the entity; and
45-6 (B) each transfer of the issued ownership or
45-7 membership interests that have been presented to the entity for
45-8 registration or transfer; and
45-9 (4) other books and records as required by the title
45-10 of this code governing the entity.
45-11 (b) The records required by Subsection (a)(3) must state:
45-12 (1) the name and address of each past and current
45-13 owner or member of the entity;
45-14 (2) the number, amount, or percentage and class or
45-15 series of ownership or membership interests issued by the entity
45-16 held by each past and current owner or member; and
45-17 (3) if different, the number of votes to which each is
45-18 entitled.
45-19 (c) The books, records, minutes, and ownership or membership
45-20 transfer records of any entity may be in written form or another
45-21 form capable of being converted into written form within a
45-22 reasonable time.
45-23 Sec. 3.152. GOVERNING PERSON'S RIGHT OF INSPECTION. (a) A
45-24 governing person may examine the entity's books and records
45-25 maintained under Section 3.151 and other books and records of the
45-26 entity for a purpose reasonably related to the governing person's
45-27 service as a governing person.
46-1 (b) A court may require an entity to open the books and
46-2 records of the entity, including the books and records maintained
46-3 under Section 3.151, to permit a governing person to inspect, make
46-4 copies of, or take extracts from the books and records on a showing
46-5 by the governing person that:
46-6 (1) the person is a governing person of the entity;
46-7 (2) the person demanded to inspect the entity's books
46-8 and records;
46-9 (3) the person's purpose for inspecting the entity's
46-10 books and records is reasonably related to the person's service as
46-11 a governing person; and
46-12 (4) the entity refused the person's good faith demand
46-13 to inspect the books and records.
46-14 (c) A court may award a governing person attorney's fees and
46-15 any other proper relief in a suit to require an entity to open its
46-16 books and records under Subsection (b).
46-17 Sec. 3.153. RIGHT OF EXAMINATION BY OWNER OR MEMBER. Each
46-18 owner or member of an entity may examine the books and records of
46-19 an entity maintained under Section 3.151 and other books and
46-20 records of the entity to the extent provided by the governing
46-21 documents of the entity and the title of this code governing the
46-22 entity.
46-23 (Sections 3.154-3.200 reserved for expansion)
46-24 SUBCHAPTER E. CERTIFICATES REPRESENTING OWNERSHIP INTEREST
46-25 Sec. 3.201. CERTIFICATED OR UNCERTIFICATED OWNERSHIP
46-26 INTEREST. (a) Ownership interests in a domestic entity may be
46-27 certificated or uncertificated.
47-1 (b) The ownership interests in a for-profit corporation,
47-2 real estate investment trust, or professional corporation must be
47-3 certificated unless the governing documents of the entity or a
47-4 resolution adopted by the governing authority of the entity states
47-5 that the ownership interests are uncertificated. If a domestic
47-6 entity changes the form of its ownership interests from
47-7 certificated to uncertificated, a certificated ownership interest
47-8 subject to the change becomes an uncertificated ownership interest
47-9 only after the certificate is surrendered to the domestic entity.
47-10 (c) Ownership interests in a domestic entity, other than a
47-11 domestic entity described by Subsection (b), are uncertificated
47-12 unless this code or the governing documents of the domestic entity
47-13 state that the interests are certificated.
47-14 Sec. 3.202. FORM AND VALIDITY OF CERTIFICATES; ENFORCEMENT
47-15 OF ENTITY'S RIGHTS. (a) A certificated ownership interest in a
47-16 domestic entity may contain an impression of the seal of the
47-17 entity, if any. A facsimile of the entity's seal may be printed or
47-18 lithographed on the certificate.
47-19 (b) If a domestic entity is authorized to issue ownership
47-20 interests of more than one class or series, each certificate
47-21 representing ownership interests that is issued by the entity must
47-22 conspicuously state on the front or back of the certificate:
47-23 (1) the designations, preferences, limitations, and
47-24 relative rights of the ownership interests of each class or series
47-25 to the extent they have been determined and the authority of the
47-26 governing authority to make those determinations as to subsequent
47-27 series; or
48-1 (2) that the information required by Subdivision (1)
48-2 is stated in the domestic entity's governing documents and that the
48-3 domestic entity, on written request to the entity's principal place
48-4 of business or registered office, will provide a free copy of that
48-5 information to the record holder of the certificate.
48-6 (c) A certificate representing ownership interests must
48-7 state on the front of the certificate:
48-8 (1) that the domestic entity is organized under the
48-9 laws of this state;
48-10 (2) the name of the person to whom the certificate is
48-11 issued;
48-12 (3) the number and class of ownership interests and
48-13 the designation of the series, if any, represented by the
48-14 certificate; and
48-15 (4) if the ownership interests are shares, the par
48-16 value of each share represented by the certificate, or a statement
48-17 that the shares are without par value.
48-18 (d) A certificate representing ownership interests that is
48-19 subject to a restriction, placed by or agreed to by the domestic
48-20 entity under this subchapter, on the transfer or registration of
48-21 the transfer of the ownership interests must:
48-22 (1) conspicuously state or provide a summary of the
48-23 restriction on the front of the certificate;
48-24 (2) state the restriction on the back of the
48-25 certificate and conspicuously refer to that statement on the front
48-26 of the certificate; or
48-27 (3) conspicuously state on the front or back of the
49-1 certificate that a restriction exists pursuant to a specified
49-2 document and:
49-3 (A) that the domestic entity, on written request
49-4 to the entity's principal place of business, will provide a free
49-5 copy of the document to the certificate record holder; or
49-6 (B) if the document has been filed in accordance
49-7 with this code, that the document:
49-8 (i) is on file with the secretary of state
49-9 or, in the case of a real estate investment trust, with the county
49-10 clerk of the county in which the real estate investment trust's
49-11 principal place of business is located; and
49-12 (ii) contains a complete statement of the
49-13 restriction.
49-14 (e) A domestic entity that fails to provide to the record
49-15 holder of a certificate within a reasonable time a document as
49-16 required by Subsection (d)(3)(A) may not enforce the entity's
49-17 rights under the restriction imposed on the certificated ownership
49-18 interests.
49-19 (f) A certificate representing shares of a corporation in
49-20 which any provision of the certificate of formation, bylaws,
49-21 resolution of the board of directors or shareholders, or agreement
49-22 restricting the transfer of shares has been incorporated by
49-23 reference as provided by Section F, Article 2.19, Texas Business
49-24 Corporation Act, before September 1, 1975, is not invalidated or
49-25 affected by the repeal of that section. An incorporation by
49-26 reference as provided by Section F, Article 2.19, Texas Business
49-27 Corporation Act, may not be used on a certificate issued on or
50-1 after September 1, 1975, without regard to the form of issuance.
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 acknowledgement 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. If the effect of a
56-26 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 Sec. 4.057. ABANDONMENT BEFORE EFFECTIVENESS. (a) The
57-7 parties to a filing instrument may abandon the filing instrument if
57-8 the instrument has not taken effect.
57-9 (b) To abandon a filing instrument the parties to the
57-10 instrument must file with the filing officer a certificate of
57-11 abandonment.
57-12 (c) A certificate of abandonment must:
57-13 (1) be signed on behalf of each entity that is a party
57-14 to the action or transaction by the person authorized by this code
57-15 to act on behalf of the entity;
57-16 (2) state the nature of the filing instrument to be
57-17 abandoned, the date of the instrument, and the parties to the
57-18 instrument; and
57-19 (3) state that the filing instrument has been
57-20 abandoned in accordance with the agreement of the parties.
57-21 (d) On the filing of the certificate of abandonment, the
57-22 action or transaction evidenced by the original filing instrument
57-23 is abandoned and may not take effect.
57-24 (e) If in the interim before a certificate of abandonment is
57-25 filed, the name of an entity that is a party to the action or
57-26 transaction becomes the same as or deceptively similar to the name
57-27 of another entity already on file or reserved or registered under
58-1 this code, the filing officer may not file the certificate of
58-2 abandonment unless the entity by or for whom the certificate is
58-3 filed changes its name in the manner provided by this code for that
58-4 entity.
58-5 Sec. 4.058. DELAYED EFFECTIVENESS NOT PERMITTED. The effect
58-6 of the following filing instruments may not be delayed:
58-7 (1) a reservation of name as provided by Subchapter C,
58-8 Chapter 5;
58-9 (2) a registration of name as provided by Subchapter
58-10 D, Chapter 5;
58-11 (3) a statement of event or fact as provided by
58-12 Section 4.055; or
58-13 (4) a certificate of abandonment as provided by
58-14 Section 4.057.
58-15 Sec. 4.059. ACKNOWLEDGMENT OF FILING WITH DELAYED
58-16 EFFECTIVENESS. (a) An acknowledgment of filing issued or other
58-17 action taken by the secretary of state affirming the filing of a
58-18 filing instrument that has a specific delayed effective date must
58-19 state the date and time at which the instrument takes effect.
58-20 (b) An acknowledgment of filing issued or other action taken
58-21 by the secretary of state affirming the filing of a filing
58-22 instrument the effect of which is delayed until the occurrence of a
58-23 future event or fact must:
58-24 (1) state that the effective date and time of the
58-25 filing instrument is conditioned on the occurrence of a future
58-26 event or fact as described in the filing instrument; or
58-27 (2) otherwise indicate that the effective date and
59-1 time of the instrument is conditioned on the occurrence of a future
59-2 event or fact.
59-3 (Sections 4.060-4.100 reserved for expansion)
59-4 SUBCHAPTER C. CORRECTION AND AMENDMENT
59-5 Sec. 4.101. CORRECTION OF FILINGS. (a) A filing instrument
59-6 that has been filed with the secretary of state that is an
59-7 inaccurate record of the event or transaction evidenced in the
59-8 instrument, that contains an inaccurate or erroneous statement, or
59-9 that was defectively or erroneously signed, sealed, acknowledged,
59-10 or verified may be corrected by filing a certificate of correction.
59-11 (b) A certificate of correction must be signed by the person
59-12 authorized by this code to act on behalf of the entity.
59-13 Sec. 4.102. LIMITATION ON CORRECTION OF FILINGS. A filing
59-14 instrument may be corrected to contain only those statements that
59-15 this code authorizes or requires to be included in the original
59-16 instrument. A certificate of correction may not alter, add, or
59-17 delete a statement that by its alteration, addition, or deletion
59-18 would have caused the secretary of state to determine the filing
59-19 instrument did not conform to this code at the time of filing.
59-20 Sec. 4.103. CERTIFICATE OF CORRECTION. The certificate of
59-21 correction must:
59-22 (1) state the name of the entity;
59-23 (2) identify the filing instrument to be corrected by
59-24 description and date of filing with the secretary of state;
59-25 (3) identify the inaccuracy, error, or defect to be
59-26 corrected; and
59-27 (4) state in corrected form the portion of the filing
60-1 instrument to be corrected.
60-2 Sec. 4.104. FILING CERTIFICATE OF CORRECTION. The
60-3 certificate of correction shall be filed with and acted on by the
60-4 secretary of state as provided by Subchapter A. On filing, the
60-5 secretary of state shall deliver to the entity or its
60-6 representative an acknowledgment of the filing.
60-7 Sec. 4.105. EFFECT OF CERTIFICATE OF CORRECTION. (a) After
60-8 the secretary of state files the certificate of correction, the
60-9 filing instrument is considered to have been corrected on the date
60-10 the filing instrument was originally filed, except as provided by
60-11 Subsection (b).
60-12 (b) As to a person who is adversely affected by the
60-13 correction, the filing instrument is considered to have been
60-14 corrected on the date the certificate of correction is filed.
60-15 (c) An acknowledgment of filing or a similar instrument
60-16 issued by the secretary of state before a filing instrument is
60-17 corrected, with respect to the effect of filing the original filing
60-18 instrument, applies to the corrected filing instrument as of the
60-19 date the corrected filing instrument is considered to have been
60-20 filed under this section.
60-21 Sec. 4.106. AMENDMENT OF FILINGS. A filing instrument that
60-22 an entity files with the secretary of state may be amended or
60-23 supplemented to the extent permitted by the provisions of this code
60-24 that apply to that entity.
60-25 (Sections 4.107-4.150 reserved for expansion)
60-26 SUBCHAPTER D. FILING FEES
60-27 Sec. 4.151. FILING FEES: ALL ENTITIES. The secretary of
61-1 state shall impose the following fees:
61-2 (1) for filing a certificate of correction, $15;
61-3 (2) for filing an application for reservation or
61-4 registration of a name, $40;
61-5 (3) for filing a notice of transfer of a name
61-6 reservation or registration, $15;
61-7 (4) for filing an application for renewal of
61-8 registration of a name, $40;
61-9 (5) for filing a certificate of merger or conversion,
61-10 other than a filing on behalf of a nonprofit corporation, $300
61-11 plus, with respect to a merger, any fee imposed for filing a
61-12 certificate of formation for each newly created filing entity or,
61-13 with respect to a conversion, the fee imposed for filing a
61-14 certificate of formation for the converted entity; and
61-15 (6) for preclearance of a filing instrument, $50.
61-16 Sec. 4.152. FILING FEES: FOR-PROFIT CORPORATION. For a
61-17 filing by or for a for-profit corporation, the secretary of state
61-18 shall impose the following fees:
61-19 (1) for filing a certificate of formation, $300;
61-20 (2) for filing a certificate of amendment, $150;
61-21 (3) for filing an application of a foreign corporation
61-22 for registration to transact business in this state, $750;
61-23 (4) for filing an application of a foreign corporation
61-24 for an amended registration to transact business in this state,
61-25 $150;
61-26 (5) for filing a restated certificate of formation and
61-27 accompanying statement, $300;
62-1 (6) for filing a statement of change of registered
62-2 office, registered agent, or both, $15;
62-3 (7) for filing a statement of change of name or
62-4 address of a registered agent, $15, except that the maximum fee for
62-5 simultaneous filings by a registered agent for more than one
62-6 corporation may not exceed $750;
62-7 (8) for filing a statement of resolution establishing
62-8 one or more series of shares, $15;
62-9 (9) for filing a statement of cancellation of
62-10 redeemable shares, $15;
62-11 (10) for filing a statement of cancellation of
62-12 re-acquired shares, $15;
62-13 (11) for filing a statement of reduction of stated
62-14 capital, $15;
62-15 (12) for filing a certificate of winding up and
62-16 termination, $40;
62-17 (13) for filing a certificate of withdrawal of a
62-18 foreign corporation, $15;
62-19 (14) for filing a certificate from the home state of a
62-20 foreign corporation that the corporation no longer exists in that
62-21 state, $15;
62-22 (15) for filing a bylaw or agreement restricting
62-23 transfer of shares or securities other than as an amendment to the
62-24 certificate of formation, $15;
62-25 (16) for filing an application for reinstatement of a
62-26 certificate of formation or registration as a foreign corporation
62-27 following forfeiture under the Tax Code, $75;
63-1 (17) for filing an application for reinstatement of a
63-2 corporation or registration as a foreign corporation after
63-3 involuntary dissolution or revocation, $75; and
63-4 (18) for filing any instrument as provided by this
63-5 code for which this section does not expressly provide a fee, $15.
63-6 Sec. 4.153. FILING FEES: NONPROFIT CORPORATIONS. For a
63-7 filing by or for a nonprofit corporation, the secretary of state
63-8 shall impose the following fees:
63-9 (1) for filing a certificate of formation, $25;
63-10 (2) for filing a certificate of amendment, $25;
63-11 (3) for filing a certificate of merger or
63-12 consolidation, without regard to whether the surviving or new
63-13 corporation is a domestic or foreign corporation, $50;
63-14 (4) for filing a statement of change of a registered
63-15 office, registered agent, or both, $5;
63-16 (5) for filing a certificate of dissolution, $5;
63-17 (6) for filing an application of a foreign corporation
63-18 for registration to conduct affairs in this state, $25;
63-19 (7) for filing an application of a foreign corporation
63-20 for an amended registration to conduct affairs in this state, $25;
63-21 (8) for filing a certificate of withdrawal of a
63-22 foreign corporation, $5;
63-23 (9) for filing a restated certificate of formation and
63-24 accompanying statement, $50;
63-25 (10) for filing a statement of change of name or
63-26 address of a registered agent, $15, except that the maximum fee for
63-27 simultaneous filings by a registered agent for more than one
64-1 corporation may not exceed $250;
64-2 (11) for filing a report under Chapter 21, $5;
64-3 (12) for filing a report under Chapter 21 to reinstate
64-4 a corporation's right to conduct affairs in this state, $5, plus a
64-5 late fee in the amount of $5 or in the amount of $1 for each month
64-6 or part of a month that the report remains unfiled, whichever
64-7 amount is greater, except that the late fee may not exceed $25;
64-8 (13) for filing a report under Chapter 21 to reinstate
64-9 a corporation or registration following involuntary termination or
64-10 revocation, $25; and
64-11 (14) for filing any instrument of a domestic or
64-12 foreign corporation as provided by this code for which this section
64-13 does not expressly provide a fee, $5.
64-14 Sec. 4.154. FILING FEES: LIMITED LIABILITY COMPANIES. For
64-15 a filing by or for a limited liability company, the secretary of
64-16 state shall impose the same fee as the filing fee for a similar
64-17 instrument under Section 4.152.
64-18 Sec. 4.155. FILING FEES: LIMITED PARTNERSHIPS. For a
64-19 filing by or for a limited partnership, the secretary of state
64-20 shall impose the following fees:
64-21 (1) for filing a certificate of formation or an
64-22 application for registration as a foreign limited partnership,
64-23 $750;
64-24 (2) for filing a certificate of amendment, $150;
64-25 (3) for filing a certificate of cancellation, a
64-26 restated certificate of formation, a certificate under Section
64-27 9.006, or a certificate of cancellation, $200;
65-1 (4) for filing a statement for change of registered
65-2 office, registered agent, or both, $50;
65-3 (5) for filing a statement of change of name or
65-4 address of a registered agent, $50, except that the maximum fee for
65-5 simultaneous filings by a registered agent for more than one
65-6 limited partnership may not exceed $2,500;
65-7 (6) for filing a periodic report required under
65-8 Chapter 153, $50;
65-9 (7) for reviving a limited partnership's right to
65-10 transact business under Chapter 153, $50 plus a late fee in an
65-11 amount equal to the lesser of:
65-12 (A) $25 for each month or part of a month that
65-13 elapses after the date of the notice of forfeiture; or
65-14 (B) $100;
65-15 (8) for reinstatement of a certificate of formation or
65-16 registration under Chapter 153, $50 plus a late fee of $100 and a
65-17 reinstatement fee of $100; and
65-18 (9) for filing any instrument as provided by this code
65-19 for which this section does not expressly provide a fee, $25.
65-20 Sec. 4.156. FILING FEES: PROFESSIONAL ASSOCIATIONS. For a
65-21 filing by or for a professional association, the secretary of state
65-22 shall impose the following fees:
65-23 (1) for filing a certificate of formation or an
65-24 application for registration as a foreign professional association,
65-25 $750;
65-26 (2) for filing an annual statement, $35; and
65-27 (3) for filing any other instrument, the fee provided
66-1 for the filing of a similar instrument under Section 4.152.
66-2 Sec. 4.157. FILING FEES: PROFESSIONAL CORPORATIONS. For a
66-3 filing by or for a professional corporation, the secretary of state
66-4 shall impose the same fee as the filing fee for a similar
66-5 instrument under Section 4.152.
66-6 Sec. 4.158. FILING FEES: GENERAL PARTNERSHIPS. For a
66-7 filing by or for a general partnership, the secretary of state
66-8 shall impose the following fees:
66-9 (1) for filing a registered limited liability
66-10 partnership application, $200 for each partner;
66-11 (2) for filing a registered limited liability
66-12 partnership renewal application, $200 for each partner on the date
66-13 of renewal;
66-14 (3) for filing a statement of foreign qualification by
66-15 a foreign limited liability partnership, $200 for each partner in
66-16 this state, except that the maximum fee may not exceed $750;
66-17 (4) for filing a renewal of registration by a foreign
66-18 limited liability partnership, $200 for each partner in this state,
66-19 except that the maximum fee may not exceed $750;
66-20 (5) for filing a certificate of amendment, $10;
66-21 (6) for filing a certificate of amendment to increase
66-22 the number of partners, $10, plus $200 for each partner added by
66-23 amendment; and
66-24 (7) for filing any other filing instrument, the filing
66-25 fee imposed for a similar instrument under Section 4.155.
66-26 (Sections 4.159-4.200 reserved for expansion)
67-1 SUBCHAPTER E. ANNUAL REPORT
67-2 Sec. 4.201. APPLICABILITY OF SUBCHAPTER. This subchapter
67-3 applies only to for-profit corporations, limited liability
67-4 companies, and professional corporations, whether domestic or
67-5 foreign.
67-6 Sec. 4.202. ANNUAL REPORT. (a) Each domestic entity or
67-7 foreign entity registered to transact business in this state and
67-8 subject to this subchapter shall file an annual report with the
67-9 secretary of state on a form prescribed by the secretary of state.
67-10 The report must include:
67-11 (1) the name of the entity and its jurisdiction of
67-12 formation;
67-13 (2) the federal employer identification number of the
67-14 entity or, if the entity does not have an employer identification
67-15 number, a statement of whether the entity has applied for an
67-16 identification number;
67-17 (3) the address of the registered office of the entity
67-18 in this state and the name of the registered agent at that address;
67-19 (4) the address of the principal office of the entity
67-20 and the mailing address of the entity;
67-21 (5) the name of each subsidiary of the entity in which
67-22 the entity owns at least a 50 percent interest and the interest
67-23 percentage owned by the entity;
67-24 (6) the name of each parent entity of the entity that
67-25 owns at least a 50 percent interest in the entity; and
67-26 (7) the name, title, and mailing address of each
67-27 person who is a managerial official of the entity.
68-1 (b) The annual report must be filed with the secretary of
68-2 state not later than the first anniversary of the domestic entity's
68-3 formation or foreign entity's registration with the secretary of
68-4 state.
68-5 (c) Each annual report must be signed by an authorized
68-6 officer or agent of the entity certifying that:
68-7 (1) the information contained in the report is current
68-8 as of the date the report was signed; and
68-9 (2) any reported change in the information required
68-10 under Subsection (a)(3) has been authorized by all action required
68-11 by the laws of the entity's jurisdiction of formation.
68-12 (d) The secretary of state shall index the filing of any
68-13 additional report received by the secretary of state. The
68-14 secretary of state shall make the information contained in the
68-15 report a part of the official record as provided by Section 4.203.
68-16 (e) The entity shall send a copy of the report to each
68-17 person named in the report under Subsection (a)(7) who is not
68-18 currently employed by the entity or a related business entity
68-19 listed in Subsection (a)(5) or (6).
68-20 (f) An entity that reports a change to its registered office
68-21 or registered agent under this section is not required to file an
68-22 amendment to its certificate of formation or application for
68-23 registration or a statement under this code to reflect the change.
68-24 (g) The fee for filing an annual report under this section
68-25 is $15, except that the fee is $5 if the report is filed by
68-26 electronic transmission.
68-27 (h) An entity that does not file an annual report as
69-1 required by this section is subject to termination or revocation of
69-2 its registration to transact business as provided by Section 4.206.
69-3 Sec. 4.203. ACTION BY SECRETARY OF STATE. (a) The
69-4 secretary of state may furnish to each domestic entity or foreign
69-5 entity registered to transact business in this state copies of the
69-6 report form to be prepared and filed as provided by Section 4.202.
69-7 The report form and a notice that the report is due shall be mailed
69-8 to the registered office address of the entity.
69-9 (b) Neither the secretary of state's failure to furnish the
69-10 report and notice under Subsection (a) nor the entity's failure to
69-11 receive the report form and notice under Subsection (a):
69-12 (1) extends the time for filing the annual report; or
69-13 (2) excuses the entity's failure to file the annual
69-14 report.
69-15 (c) If the secretary of state finds that a report filed
69-16 under this section complies with Section 4.202, the secretary of
69-17 state shall, after the required fees have been paid:
69-18 (1) index the filing of the report in the entity's
69-19 record; and
69-20 (2) update the records of the secretary of state's
69-21 office to show the change in:
69-22 (A) the address of the registered or principal
69-23 office of the entity; or
69-24 (B) the name of the registered agent or
69-25 managerial official of the entity.
69-26 Sec. 4.204. EFFECT OF FAILURE TO FILE ANNUAL REPORT. (a) A
69-27 domestic or foreign entity that does not file a report required by
70-1 Section 4.202 on or before the 30th day after the date the report
70-2 is due forfeits the entity's right to transact business in this
70-3 state. A forfeiture under this section is without judicial
70-4 ascertainment.
70-5 (b) If the right to transact business has been forfeited
70-6 under this section, the secretary of state shall note the
70-7 forfeiture on the entity's record, including the date of the
70-8 forfeiture.
70-9 (c) Notice of the forfeiture of the right to transact
70-10 business shall be mailed to the entity at the entity's registered
70-11 office.
70-12 (d) Unless the right of the entity to transact business is
70-13 revived in accordance with Section 4.205:
70-14 (1) the entity may not maintain an action, suit, or
70-15 proceeding in a court of this state; and
70-16 (2) a successor or assignee of the entity may not
70-17 maintain an action, suit, or proceeding in a court of this state on
70-18 a right, claim, or demand arising from the transaction of business
70-19 by the entity in this state.
70-20 (e) The forfeiture of the right to transact business in this
70-21 state does not:
70-22 (1) impair the validity of a contract or act of the
70-23 entity; or
70-24 (2) prevent the entity from defending an action, suit,
70-25 or proceeding in a court of this state.
70-26 Sec. 4.205. REVIVAL OF RIGHT TO TRANSACT BUSINESS. (a) An
70-27 entity that forfeits the right to transact business in this state
71-1 as provided by Section 4.204 may be relieved from the forfeiture by
71-2 filing the required report not later than the 120th day after the
71-3 date of the notice of forfeiture under Section 4.204, accompanied
71-4 by the filing fee for the report and a late filing fee of $5 for
71-5 each month, or fraction of a month, that has elapsed since the date
71-6 of the notice of the forfeiture of the right to transact business.
71-7 (b) If an entity complies with Subsection (a), the secretary
71-8 of state shall:
71-9 (1) revive the right of the entity to transact
71-10 business in this state; and
71-11 (2) note the revival on the entity's record, including
71-12 the date of revival.
71-13 Sec. 4.206. INVOLUNTARY TERMINATION OR REVOCATION OF
71-14 CERTIFICATE OR REGISTRATION AFTER FORFEITURE. (a) The secretary
71-15 of state may involuntarily terminate an entity or revoke the
71-16 registration of a foreign entity if the entity:
71-17 (1) forfeits its right to transact business in this
71-18 state under Section 4.204; and
71-19 (2) fails to revive that right under Section 4.205.
71-20 (b) Termination of the entity or revocation of the
71-21 registration takes effect without judicial ascertainment.
71-22 (c) The secretary of state shall:
71-23 (1) note the termination or revocation, including the
71-24 date of the termination or revocation, on the entity's record; and
71-25 (2) change the status of the entity to inactive.
71-26 Sec. 4.207. REINSTATEMENT AFTER TERMINATION OR REVOCATION.
71-27 (a) An entity that has been terminated or the registration of
72-1 which has been revoked as provided by Section 4.206 may be
72-2 reinstated by filing the report required by Section 4.202
72-3 accompanied by:
72-4 (1) the filing fee required under Section 4.202;
72-5 (2) a late filing fee of $25; and
72-6 (3) a $50 filing fee for the reinstatement of the
72-7 entity.
72-8 (b) If the entity pays the fees required by Subsection (a),
72-9 the secretary of state shall:
72-10 (1) reinstate the certificate of formation of the
72-11 domestic entity or the registration of the foreign entity without
72-12 judicial ascertainment;
72-13 (2) change the status of the entity to active; and
72-14 (3) note the reinstatement on the entity's record.
72-15 (c) If the name of the entity is not available at the time
72-16 of reinstatement, the secretary of state shall require the entity,
72-17 as a condition of reinstatement, to:
72-18 (1) in the case of a domestic entity, amend its
72-19 certificate of formation to adopt a different available name for
72-20 the entity; or
72-21 (2) in the case of a foreign entity, amend its
72-22 application for registration to adopt an assumed name for use in
72-23 this state.
72-24 Sec. 4.208. DISCLAIMER OF STATUS. (a) If a person's name
72-25 is included in a report under Section 4.202(a)(7) and the person is
72-26 not a managerial official of the entity on the date of the report,
72-27 the person may file with the secretary of state a statement
73-1 disclaiming the person's status as shown on the report. The
73-2 secretary of state shall maintain a record of a statement filed
73-3 under this section in the entity's record. A filing under this
73-4 section has no effect on any issue of personal liability during the
73-5 period that the person was, in fact, a managerial official.
73-6 (b) The secretary of state shall prescribe a form for making
73-7 a statement under Subsection (a).
73-8 CHAPTER 5. NAMES OF ENTITIES; REGISTERED AGENTS
73-9 AND REGISTERED OFFICES
73-10 SUBCHAPTER A. GENERAL PROVISIONS
73-11 Sec. 5.001. EFFECT ON RIGHTS UNDER OTHER LAW. (a) The
73-12 filing of a certificate of formation by a filing entity under this
73-13 code, an application for registration by a foreign filing entity
73-14 under this code, or an application for reservation or registration
73-15 of a name under this chapter does not authorize the use of a name
73-16 in this state in violation of a right of another under:
73-17 (1) the Trademark Act of 1946, as amended (15 U.S.C.
73-18 Section 1051 et seq.);
73-19 (2) Chapter 16 or 36, Business & Commerce Code; or
73-20 (3) common law.
73-21 (b) The secretary of state shall deliver a notice that
73-22 contains the substance of Subsection (a) to each of the following:
73-23 (1) a filing entity that files a certificate of
73-24 formation under this code;
73-25 (2) a foreign filing entity that registers under this
73-26 code;
73-27 (3) a person that reserves a name under Subchapter C;
74-1 and
74-2 (4) a person that registers a name under Subchapter D.
74-3 (Sections 5.002-5.050 reserved for expansion)
74-4 SUBCHAPTER B. GENERAL PROVISIONS RELATING TO NAMES OF ENTITIES
74-5 Sec. 5.051. ASSUMED NAME. A domestic entity or a foreign
74-6 entity having authority to transact business in this state may
74-7 transact business under an assumed name by filing an assumed name
74-8 certificate in accordance with Chapter 36, Business & Commerce
74-9 Code. The requirements of this subchapter do not apply to an
74-10 assumed name set forth in an assumed name certificate filed under
74-11 that chapter.
74-12 Sec. 5.052. UNAUTHORIZED PURPOSE IN NAME PROHIBITED. A
74-13 filing entity or a foreign filing entity may not have a name that
74-14 contains any word or phrase that indicates or implies that the
74-15 entity is formed for a purpose that the entity is not authorized by
74-16 law to pursue.
74-17 Sec. 5.053. IDENTICAL AND DECEPTIVELY SIMILAR NAMES
74-18 PROHIBITED. (a) A filing entity may not have a name, and a
74-19 foreign filing entity may not register to transact business in this
74-20 state under a name, that is the same as, or that the secretary of
74-21 state determines to be deceptively similar or similar to:
74-22 (1) the name of another existing filing entity;
74-23 (2) the name of a foreign filing entity that is
74-24 registered under Chapter 9;
74-25 (3) a name that is reserved under Subchapter C; or
74-26 (4) a name that is registered under Subchapter D.
74-27 (b) Subsection (a) does not apply if the other entity or the
75-1 person for whom the name is reserved or registered, as appropriate,
75-2 consents in writing to the use of the similar name.
75-3 Sec. 5.054. NAME OF CORPORATION, FOREIGN CORPORATION, OR
75-4 PROFESSIONAL CORPORATION. (a) The name of a corporation or
75-5 foreign corporation must contain:
75-6 (1) the word "company," "corporation," "incorporated,"
75-7 or "limited"; or
75-8 (2) an abbreviation of one of those words.
75-9 (b) Subsection (a) does not apply to a nonprofit corporation
75-10 or foreign nonprofit corporation.
75-11 (c) In lieu of a word or abbreviation required by Subsection
75-12 (a), the name of a professional corporation may contain the phrase
75-13 "professional corporation" or an abbreviation of the phrase.
75-14 Sec. 5.055. NAME OF LIMITED PARTNERSHIP OR FOREIGN LIMITED
75-15 PARTNERSHIP. (a) The name of a limited partnership or foreign
75-16 limited partnership must contain:
75-17 (1) the word "limited";
75-18 (2) the phrase "limited partnership"; or
75-19 (3) an abbreviation of that word or phrase.
75-20 (b) The name of the limited partnership may not contain:
75-21 (1) a word or phrase that indicates or implies that
75-22 the partnership is a corporation; or
75-23 (2) the name of a limited partner in the partnership.
75-24 (c) Subsection (b)(2) does not apply if:
75-25 (1) the name of the limited partner is also the name
75-26 of a general partner; or
75-27 (2) the business of the partnership was conducted
76-1 under the name of that person before the date the person was
76-2 admitted as a limited partner.
76-3 (d) The name of a registered limited liability partnership
76-4 must comply with Title 4.
76-5 Sec. 5.056. NAME OF LIMITED LIABILITY COMPANY OR FOREIGN
76-6 LIMITED LIABILITY COMPANY. (a) The name of a limited liability
76-7 company or a foreign limited liability company doing business in
76-8 this state must contain:
76-9 (1) the phrase "limited liability company" or "limited
76-10 company"; or
76-11 (2) an abbreviation of one of those phrases.
76-12 (b) A limited liability company formed before September 1,
76-13 1993, the name of which complied with the laws of this state on the
76-14 date of formation but does not comply with this section is not
76-15 required to change its name.
76-16 Sec. 5.057. NAME OF COOPERATIVE ASSOCIATION. The name of a
76-17 cooperative association must contain:
76-18 (1) the word "cooperative"; or
76-19 (2) an abbreviation of that word.
76-20 Sec. 5.058. NAME OF PROFESSIONAL ASSOCIATION. The name of a
76-21 professional association must contain:
76-22 (1) the word "associated," "associates," or
76-23 "association";
76-24 (2) the phrase "professional association"; or
76-25 (3) an abbreviation of one of those words or that
76-26 phrase.
76-27 Sec. 5.059. NAME OF PROFESSIONAL LIMITED LIABILITY COMPANY.
77-1 The name of a professional limited liability company must contain:
77-2 (1) the phrase "professional limited liability
77-3 company"; or
77-4 (2) an abbreviation of that phrase.
77-5 Sec. 5.060. NAME OF PROFESSIONAL ENTITY; CONFLICTS WITH
77-6 OTHER LAW OR ETHICAL RULE. The name of a professional entity must
77-7 be consistent with a statute or regulation that governs a person
77-8 who provides a professional service through the professional
77-9 entity, including a rule of professional ethics.
77-10 Sec. 5.061. NAME CONTAINING "LOTTO" OR "LOTTERY" PROHIBITED.
77-11 A filing entity or a foreign filing entity may not have a name that
77-12 contains the word "lotto" or "lottery."
77-13 Sec. 5.062. VETERANS ORGANIZATIONS; UNAUTHORIZED USE OF
77-14 NAME. (a) Subject to Subsection (b), a filing entity may not have
77-15 a name that:
77-16 (1) reasonably implies that the entity is created by
77-17 or for the benefit of war veterans or their families; and
77-18 (2) contains the word or phrase, or any variation or
77-19 abbreviation of:
77-20 (A) "veteran";
77-21 (B) "legion";
77-22 (C) "foreign";
77-23 (D) "Spanish";
77-24 (E) "disabled";
77-25 (F) "war"; or
77-26 (G) "world war."
77-27 (b) The prohibition in Subsection (a) does not apply to a
78-1 filing entity with a name approved in writing by:
78-2 (1) a congressionally recognized veterans organization
78-3 with a name containing the same word or phrase, or variation or
78-4 abbreviation, contained in the filing entity's name; or
78-5 (2) if a veterans organization described by
78-6 Subdivision (1) does not exist, the state commander of the:
78-7 (A) American Legion;
78-8 (B) Disabled American Veterans of the World War;
78-9 (C) Veterans of Foreign Wars of the United
78-10 States;
78-11 (D) United Spanish War Veterans; or
78-12 (E) Veterans of the Spanish-American War.
78-13 (Sections 5.063-5.100 reserved for expansion)
78-14 SUBCHAPTER C. RESERVATION OF NAMES
78-15 Sec. 5.101. APPLICATION FOR RESERVATION OF NAME. (a) Any
78-16 person may file an application with the secretary of state to
78-17 reserve the exclusive use of a name under this chapter.
78-18 (b) The application must be:
78-19 (1) accompanied by any required filing fee; and
78-20 (2) signed by the applicant or by the agent or
78-21 attorney of the applicant.
78-22 Sec. 5.102. RESERVATION OF CERTAIN NAMES PROHIBITED;
78-23 EXCEPTIONS. (a) The secretary of state may not reserve a name
78-24 that is the same as, or that the secretary of state considers
78-25 deceptively similar or similar to:
78-26 (1) the name of an existing filing entity;
78-27 (2) the name of a foreign filing entity that is
79-1 registered under Chapter 9;
79-2 (3) a name that is reserved under this subchapter; or
79-3 (4) a name that is registered under Subchapter D.
79-4 (b) Subsection (a) does not apply if the other entity or the
79-5 person for whom the name is reserved or registered, as appropriate,
79-6 consents in writing to the subsequent reservation of the similar
79-7 name.
79-8 Sec. 5.103. ACTION ON APPLICATION. If the secretary of
79-9 state determines that the name specified in the application is
79-10 eligible for reservation, the secretary shall reserve that name for
79-11 the exclusive use of the applicant.
79-12 Sec. 5.104. DURATION OF RESERVATION OF NAME. The secretary
79-13 of state shall reserve the name for the applicant until the earlier
79-14 of:
79-15 (1) the 121st day after the date the application is
79-16 accepted for filing; or
79-17 (2) the date the applicant files with the secretary
79-18 of state a written notice of withdrawal of the reservation.
79-19 Sec. 5.105. RENEWAL OF RESERVATION. A person may renew the
79-20 person's reservation of a name under this subchapter for successive
79-21 120-day periods if, during the 30-day period preceding the
79-22 expiration of that reservation, the person:
79-23 (1) files a new application to reserve the name; and
79-24 (2) pays the required filing fee.
79-25 Sec. 5.106. TRANSFER OF RESERVATION OF NAME. (a) A person
79-26 may transfer the person's reservation of a name by filing with the
79-27 secretary of state a notice of transfer.
80-1 (b) The notice of transfer must:
80-2 (1) be signed by the person for whom the name is
80-3 reserved; and
80-4 (2) state the name and address of the person to whom
80-5 the reservation is to be transferred.
80-6 (Sections 5.107-5.150 reserved for expansion)
80-7 SUBCHAPTER D. REGISTRATION OF NAMES
80-8 Sec. 5.151. APPLICATION BY CERTAIN ENTITIES FOR REGISTRATION
80-9 OF NAME. An organization that is authorized to do business in this
80-10 state as a bank, trust company, savings association, or insurance
80-11 company, or that is a foreign filing entity not registered to do
80-12 business in this state under this code, may apply to register its
80-13 name under this subchapter.
80-14 Sec. 5.152. APPLICATION FOR REGISTRATION OF NAME. (a) To
80-15 register a name under this subchapter, an organization must file an
80-16 application with the secretary of state.
80-17 (b) The application must:
80-18 (1) state that the organization validly exists and is
80-19 doing business;
80-20 (2) contain a brief statement of the nature of the
80-21 organization's business;
80-22 (3) set out:
80-23 (A) the name of the organization;
80-24 (B) the name of the jurisdiction under whose
80-25 laws the organization is formed; and
80-26 (C) the date the organization was formed; and
80-27 (4) be accompanied by any required filing fee.
81-1 Sec. 5.153. CERTAIN REGISTRATIONS PROHIBITED; EXCEPTIONS.
81-2 (a) The secretary of state may not register a name that is the
81-3 same as, or that the secretary of state determines to be
81-4 deceptively similar or similar to:
81-5 (1) the name of an existing filing entity;
81-6 (2) the name of a foreign filing entity that is
81-7 registered under Chapter 9;
81-8 (3) a name that is reserved under Subchapter C; or
81-9 (4) a name that is registered under this subchapter.
81-10 (b) Subsection (a) does not apply if:
81-11 (1) the other entity or the person for whom the name
81-12 is reserved or registered, as appropriate, consents in writing to
81-13 the registration of the similar name; or
81-14 (2) the applicant is a bank, trust company, savings
81-15 association, or insurance company that has been in continuous
81-16 existence from a date that precedes the date the conflicting name
81-17 is filed with the secretary of state.
81-18 Sec. 5.154. DURATION OF REGISTRATION OF NAME. The
81-19 registration of a name under this subchapter is effective until the
81-20 earlier of:
81-21 (1) the first anniversary of the date the application
81-22 is accepted for filing; or
81-23 (2) the date the entity files with the secretary of
81-24 state a written notice of withdrawal of the registration.
81-25 Sec. 5.155. RENEWAL OF REGISTRATION. A person may renew the
81-26 person's registration of a name under this subchapter for
81-27 successive one-year periods if, during the 90-day period preceding
82-1 the expiration of that registration, the person:
82-2 (1) files a new application to register the name; and
82-3 (2) pays the required filing fee.
82-4 (Sections 5.156-5.200 reserved for expansion)
82-5 SUBCHAPTER E. REGISTERED AGENTS AND REGISTERED OFFICES;
82-6 SERVICE OF PROCESS
82-7 Sec. 5.201. DESIGNATION AND MAINTENANCE OF REGISTERED AGENT
82-8 AND REGISTERED OFFICE. (a) Each filing entity and each foreign
82-9 filing entity shall designate and continuously maintain in this
82-10 state:
82-11 (1) a registered agent; and
82-12 (2) a registered office.
82-13 (b) The registered agent:
82-14 (1) is an agent of the entity on whom may be served
82-15 any process, notice, or demand required or permitted by law to be
82-16 served on the entity;
82-17 (2) may be:
82-18 (A) an individual who is a resident of this
82-19 state; or
82-20 (B) a domestic entity or a foreign entity that
82-21 is registered to do business in this state; and
82-22 (3) must maintain a business office at the same
82-23 address as the entity's registered office.
82-24 (c) The registered office:
82-25 (1) must be located at a street address where process
82-26 may be personally served on the entity's registered agent;
82-27 (2) is not required to be a place of business of the
83-1 filing entity or foreign filing entity; and
83-2 (3) may not be solely a mailbox service or a telephone
83-3 answering service.
83-4 Sec. 5.202. CHANGE BY ENTITY TO REGISTERED OFFICE OR
83-5 REGISTERED AGENT. (a) A filing entity or foreign filing entity
83-6 may change its registered office, its registered agent, or both by
83-7 filing a statement of the change in accordance with Chapter 4.
83-8 (b) The statement must contain:
83-9 (1) the name of the entity;
83-10 (2) the name of the entity's registered agent;
83-11 (3) the street address of the entity's registered
83-12 agent;
83-13 (4) if the change relates to the registered agent, the
83-14 name of the entity's new registered agent;
83-15 (5) if the change relates to the registered office,
83-16 the street address of the entity's new registered office;
83-17 (6) a recitation that the change specified in the
83-18 statement is authorized by the entity; and
83-19 (7) a recitation that the street address of the
83-20 registered office and the street address of the registered agent's
83-21 business are the same.
83-22 (c) On acceptance of the statement by the filing officer,
83-23 the statement is effective as an amendment to the appropriate
83-24 provision of:
83-25 (1) the filing entity's certificate of formation; or
83-26 (2) the foreign filing entity's registration.
83-27 Sec. 5.203. CHANGE BY REGISTERED AGENT TO NAME OR ADDRESS OF
84-1 REGISTERED OFFICE. (a) The registered agent of a filing entity or
84-2 a foreign filing entity may change its name, its address as the
84-3 address of the entity's registered office, or both by filing a
84-4 statement of the change in accordance with Chapter 4.
84-5 (b) The statement must be signed by the registered agent, or
84-6 a person authorized to sign the statement on behalf of the
84-7 registered agent, and must contain:
84-8 (1) the name of the entity represented by the
84-9 registered agent;
84-10 (2) the name of the entity's registered agent and the
84-11 address at which the registered agent maintained the entity's
84-12 registered office;
84-13 (3) if the change relates to the name of the
84-14 registered agent, the new name of that agent;
84-15 (4) if the change relates to the address of the
84-16 registered office, the new address of that office; and
84-17 (5) a recitation that written notice of the change was
84-18 given to the entity at least 10 days before the date the statement
84-19 is filed.
84-20 (c) On acceptance of the statement by the filing officer,
84-21 the statement is effective as an amendment to the appropriate
84-22 provision of:
84-23 (1) the filing entity's certificate of formation; or
84-24 (2) the foreign filing entity's registration.
84-25 (d) A registered agent may file a statement under this
84-26 section that applies to more than one entity.
84-27 Sec. 5.204. RESIGNATION OF REGISTERED AGENT. (a) A
85-1 registered agent of a filing entity or a foreign filing entity may
85-2 resign as the registered agent by giving notice to that entity and
85-3 to the appropriate filing officer.
85-4 (b) Notice to the entity must be given to the entity at:
85-5 (1) the address of the entity most recently known by
85-6 the agent; and
85-7 (2) the address most recently known by the agent of
85-8 the attorney or individual at whose request the registered agent
85-9 was appointed.
85-10 (c) Notice to the filing officer must be given before the
85-11 11th day after the date notice under Subsection (b) is mailed or
85-12 delivered and must include:
85-13 (1) the address of the entity most recently known by
85-14 the agent;
85-15 (2) a statement that written notice of the resignation
85-16 has been given to the entity; and
85-17 (3) the date on which that written notice of
85-18 resignation was given.
85-19 (d) On compliance with Subsections (b) and (c), the
85-20 appointment of the registered agent terminates. The termination is
85-21 effective on the 31st day after the date the secretary of state
85-22 receives the notice.
85-23 (e) If the filing officer finds that a notice of resignation
85-24 received by the filing officer conforms to Subsections (b) and (c),
85-25 the filing officer shall:
85-26 (1) notify the entity of the registered agent's
85-27 resignation; and
86-1 (2) file the resignation in accordance with Chapter 4,
86-2 except that a fee is not required to file the resignation.
86-3 Sec. 5.205. FAILURE TO DESIGNATE REGISTERED AGENT. The
86-4 secretary of state is an agent of an entity for purposes of service
86-5 of process, notice, or demand on the entity if:
86-6 (1) the entity is a filing entity or a foreign filing
86-7 entity and:
86-8 (A) the entity fails to appoint or does not
86-9 maintain a registered agent in this state; or
86-10 (B) the registered agent of the entity cannot
86-11 with reasonable diligence be found at the registered office of the
86-12 entity; or
86-13 (2) the entity is a foreign filing entity and:
86-14 (A) the entity's registration to do business
86-15 under this code is revoked; or
86-16 (B) the entity transacts business in this state
86-17 without being registered as required by Chapter 9.
86-18 Sec. 5.206. SERVICE ON SECRETARY OF STATE. (a) Service on
86-19 the secretary of state under Section 5.205 is effected by:
86-20 (1) delivering to the secretary duplicate copies of
86-21 the process, notice, or demand; and
86-22 (2) accompanying the copies with any fee required by
86-23 law, including this code or the Government Code, for:
86-24 (A) maintenance by the secretary of a record of
86-25 the service; and
86-26 (B) forwarding by the secretary of the process,
86-27 notice, or demand.
87-1 (b) Notice on the secretary of state under Subsection (a) is
87-2 returnable in not less than 30 days.
87-3 Sec. 5.207. ACTION BY SECRETARY OF STATE. (a) After
87-4 service in compliance with Section 5.206, the secretary of state
87-5 shall immediately send one of the copies of the process, notice, or
87-6 demand to the named entity.
87-7 (b) The notice must be:
87-8 (1) addressed to the most recent address of the entity
87-9 on file with the secretary of state; and
87-10 (2) sent by certified mail, with return receipt
87-11 requested.
87-12 Sec. 5.208. REQUIRED RECORDS OF SECRETARY OF STATE. The
87-13 secretary of state shall keep a record of each process, notice, or
87-14 demand served on the secretary under this subchapter and shall
87-15 record:
87-16 (1) the time when each service on the secretary was
87-17 made; and
87-18 (2) each subsequent action of the secretary taken in
87-19 relation to that service.
87-20 Sec. 5.209. AGENT FOR SERVICE OF PROCESS, NOTICE, OR DEMAND
87-21 AS MATTER OF LAW. For the purpose of service of process, notice,
87-22 or demand:
87-23 (1) the president and each vice president of a
87-24 domestic or foreign corporation is an agent of that corporation;
87-25 (2) each general partner of a domestic or foreign
87-26 limited partnership and each partner of a domestic or foreign
87-27 general partnership is an agent of that partnership;
88-1 (3) each manager of a manager-managed domestic or
88-2 foreign limited liability company and each member of a
88-3 member-managed domestic or foreign limited liability company is an
88-4 agent of that limited liability company;
88-5 (4) each person who is a governing person of a
88-6 domestic or foreign entity, other than an entity listed in
88-7 Subdivisions (1)-(3), is an agent of that entity; and
88-8 (5) each member of a committee of a nonprofit
88-9 corporation authorized to perform the chief executive function of
88-10 the corporation is an agent of that corporation.
88-11 Sec. 5.210. OTHER MEANS OF SERVICE NOT PRECLUDED. This
88-12 chapter does not preclude other means of service of process,
88-13 notice, or demand on a domestic or foreign entity as provided by
88-14 other law.
88-15 CHAPTER 6. MEETINGS, NOTICES, RECORD DATES, VOTING, AND
88-16 WRITTEN CONSENTS TO ACTION
88-17 SUBCHAPTER A. MEETINGS
88-18 Sec. 6.001. LOCATION OF MEETINGS. (a) Meetings of the
88-19 owners or members of a domestic entity may be held at locations in
88-20 or outside the state as:
88-21 (1) provided by or fixed in accordance with the
88-22 governing documents of the domestic entity; or
88-23 (2) agreed to by all persons entitled to notice of the
88-24 meeting.
88-25 (b) If the location of meetings of the owners or members of
88-26 the entity is not established under Subsection (a), the owners or
88-27 members may hold meetings only at the registered office of the
89-1 entity in this state or the principal office of the entity.
89-2 (c) The governing persons of a domestic entity, or a
89-3 committee of the governing persons, may hold meetings in or outside
89-4 the state as:
89-5 (1) provided by or fixed in accordance with:
89-6 (A) the governing documents of the domestic
89-7 entity; or
89-8 (B) the person calling the meeting; or
89-9 (2) as agreed to by all persons entitled to notice of
89-10 the meeting.
89-11 Sec. 6.002. ALTERNATIVE FORMS OF MEETINGS. Subject to this
89-12 code and the governing documents of a domestic entity, the owners,
89-13 members, or governing persons of the entity, or a committee of the
89-14 owners, members, or governing persons, may hold meetings by using a
89-15 conference telephone or other communications equipment if the
89-16 telephone or other equipment permits each person participating in
89-17 the meeting to communicate with all other persons participating in
89-18 the meeting.
89-19 Sec. 6.003. PARTICIPATION CONSTITUTES PRESENCE. A person
89-20 participating in a meeting is considered present at the meeting,
89-21 unless the participation is for the express purpose of objecting to
89-22 the transaction of business at the meeting on the ground that the
89-23 meeting has not been lawfully called or convened.
89-24 Sec. 6.004. OWNERSHIP OR MEMBERSHIP MEETING LIST FOR CERTAIN
89-25 ENTITIES. (a) This section applies to:
89-26 (1) a domestic for-profit corporation;
89-27 (2) a domestic nonprofit corporation; and
90-1 (3) a domestic limited liability company and a
90-2 domestic limited partnership, if the limited liability company or
90-3 partnership has a class of ownership interests registered under
90-4 Section 12(b) or (g), Securities Exchange Act of 1934, as amended
90-5 (15 U.S.C. Section 78l(b) or (g)).
90-6 (b) Not later than the 11th day before the date of each
90-7 meeting of the owners or members of an entity, an officer or agent
90-8 of the entity who is in charge of the entity's ownership or
90-9 membership records shall prepare an alphabetical list of the owners
90-10 or members entitled to vote at the meeting or at any adjournment of
90-11 the meeting. The list of owners or members must:
90-12 (1) state:
90-13 (A) the address of each owner or member;
90-14 (B) the type of ownership or membership interest
90-15 held by each owner or member;
90-16 (C) the number, amount, or percentage of
90-17 ownership or membership interests held by each owner or member; and
90-18 (D) the number of votes that each owner or
90-19 member is entitled to if the number of votes is different from the
90-20 number, amount, or percentage of ownership or membership interests
90-21 stated under Paragraph (C); and
90-22 (2) be kept on file at the registered office or
90-23 principal executive office of the entity for at least 10 days
90-24 before the date of the meeting.
90-25 (c) The original ownership or membership transfer records of
90-26 an entity are prima facie evidence of the owners or members of the
90-27 entity entitled to vote at the meeting.
91-1 (d) Failure to comply with this section does not affect the
91-2 validity of any action taken at a meeting of the owners or members
91-3 of an entity.
91-4 (Sections 6.005-6.050 reserved for expansion)
91-5 SUBCHAPTER B. NOTICE OF MEETINGS
91-6 Sec. 6.051. GENERAL NOTICE REQUIREMENTS. (a) Subject to
91-7 this code and the governing documents of an entity, notice of a
91-8 meeting of the owners, members, or governing persons of the entity,
91-9 or a committee of the owners, members, or governing persons, must:
91-10 (1) be given in the manner determined by the governing
91-11 authority of the entity; and
91-12 (2) state:
91-13 (A) the date and time of the meeting; and
91-14 (B) the location of the meeting or, if the
91-15 meeting is held by using a conference telephone or other
91-16 communications equipment, the form of communication used for the
91-17 meeting.
91-18 (b) Subject to this code or the governing documents of an
91-19 entity, notice of a meeting that is:
91-20 (1) mailed is considered to be delivered on the date
91-21 notice is deposited in the United States mail with postage paid in
91-22 an envelope addressed to the person at the person's address as it
91-23 appears on the ownership or membership records of the entity; and
91-24 (2) transmitted by facsimile or electronic message is
91-25 considered to be delivered when the facsimile or electronic message
91-26 is successfully transmitted.
91-27 Sec. 6.052. WAIVER OF NOTICE. (a) Notice of a meeting is
92-1 not required to be given to an owner, member, or governing person
92-2 of a domestic entity, or a member of a committee of the owners,
92-3 members, or governing persons, entitled to notice under this code
92-4 or the governing documents of the entity if the person entitled to
92-5 notice signs a written waiver of notice of the meeting, regardless
92-6 of whether the waiver is signed before or after the time of the
92-7 meeting.
92-8 (b) If a person entitled to notice of a meeting participates
92-9 in the meeting, the person's participation constitutes a waiver of
92-10 notice of the meeting unless the person participates in the meeting
92-11 solely to object to the transaction of business at the meeting on
92-12 the ground that the meeting was not lawfully called or convened.
92-13 Sec. 6.053. EXCEPTION. (a) Notice of a meeting is not
92-14 required to be given to an owner or member of a filing entity
92-15 entitled to notice under this code or the governing documents of
92-16 the entity if either of the following is mailed to the person
92-17 entitled to notice of the meeting to the person's address as it
92-18 appears on the ownership or membership transfer records of the
92-19 entity and is returned undeliverable:
92-20 (1) notice of two consecutive annual meetings and
92-21 notice of any meeting held during the period between the two annual
92-22 meetings; or
92-23 (2) all, but in no event less than two, payments of
92-24 distribution or interest on securities during a 12-month period if
92-25 the payments are sent by first class mail.
92-26 (b) Notice of a meeting is not required to be given to an
92-27 owner or member entitled to notice under this code or the governing
93-1 documents of a filing entity the notice requirements of which are
93-2 subject to the Securities Exchange Act of 1934, as amended (15
93-3 U.S.C. Section 78a et seq.), if the person entitled to notice of
93-4 the meeting is considered a lost security holder under that Act and
93-5 the regulations adopted under that Act.
93-6 (c) An action taken or a meeting held without giving notice
93-7 to a person not entitled to notice under this section has the same
93-8 force and effect as if notice had been given to the person.
93-9 (d) A certificate or other document filed with the secretary
93-10 of state as a result of a meeting held or an action taken by a
93-11 filing entity without giving notice of the meeting or action to a
93-12 person not entitled to notice under this section may state that
93-13 notice of the meeting or action was given to each person entitled
93-14 to notice.
93-15 (e) Notice of a meeting must be given to a person not
93-16 entitled to notice of the meeting under this section if the person
93-17 delivers to the entity a written notice of the person's address.
93-18 (Sections 6.054-6.100 reserved for expansion)
93-19 SUBCHAPTER C. RECORD DATES
93-20 Sec. 6.101. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
93-21 CONSENT TO ACTION. (a) Subject to this code, the governing
93-22 documents of a domestic entity may provide the record date, or the
93-23 manner of determining the record date, for:
93-24 (1) determining the owners or members of the entity
93-25 entitled to:
93-26 (A) receive notice of a meeting of the owners or
93-27 members;
94-1 (B) vote at a meeting of the owners or members
94-2 or at any adjournment of a meeting; or
94-3 (C) receive a distribution from the entity other
94-4 than a distribution involving a purchase or redemption by the
94-5 entity of the entity's own securities; or
94-6 (2) any other proper purpose other than for
94-7 determining the owners or members entitled to consent to action
94-8 without a meeting of the owners or members.
94-9 (b) Subject to this code and the governing documents of a
94-10 domestic entity, the governing authority of the entity, in advance,
94-11 may provide a record date for determining the owners or members of
94-12 the entity, except that the date may not be earlier than the 60th
94-13 day before the date the action requiring the determination of
94-14 owners or members is taken.
94-15 (c) Subject to this code and the governing documents of a
94-16 domestic entity, the governing authority of the entity may provide
94-17 for the closing of the ownership or membership transfer records of
94-18 the entity for a period of not longer than 60 days to determine the
94-19 owners or members of the entity for a purpose described by
94-20 Subsection (a).
94-21 (d) If the owners or members of an entity are not otherwise
94-22 determined under this section, the record date for determining the
94-23 owners or members of an entity is the date on which:
94-24 (1) notice of the meeting is mailed to the owners or
94-25 members entitled to notice of the meeting; or
94-26 (2) with respect to a distribution, other than a
94-27 distribution involving a purchase or redemption by the domestic
95-1 entity of any of its own securities, the governing authority adopts
95-2 the resolution declaring the distribution.
95-3 (e) The record date for determining a meeting applies to any
95-4 adjournment of the meeting unless:
95-5 (1) the owners or members entitled to vote are
95-6 determined under Subsection (c); and
95-7 (2) the period during which the transfer records are
95-8 closed expires.
95-9 Sec. 6.102. RECORD DATE FOR WRITTEN CONSENT TO ACTION. (a)
95-10 Subject to this code and the governing documents of an entity, the
95-11 governing authority of the entity may provide the record date for
95-12 determining the owners or members of the entity entitled to written
95-13 consent to action without a meeting of the owners or members unless
95-14 a record date is provided under Section 6.101 for that action. The
95-15 record date may not be earlier than the date the governing
95-16 authority adopts the resolution providing for the record date.
95-17 (b) Subject to this code and the governing documents of an
95-18 entity, the record date for determining the owners or members of
95-19 the entity entitled to written consent to action without a meeting
95-20 of the owners or members is the date a signed written consent to
95-21 action stating the action taken or proposed to be taken is first
95-22 delivered to the entity if:
95-23 (1) the governing authority of the entity does not
95-24 provide a record date under Subsection (a); and
95-25 (2) prior action by the governing authority is not
95-26 required under this code.
95-27 (c) Subject to this code or the governing documents of an
96-1 entity, the record date for determining the owners or members of
96-2 the entity entitled to written consent to action without a meeting
96-3 of the owners or members is at the close of business on the date
96-4 the governing authority of the entity adopts a resolution taking
96-5 prior action if:
96-6 (1) the governing authority does not provide a record
96-7 date under Subsection (a); and
96-8 (2) prior action by the governing authority is
96-9 required by this code.
96-10 Sec. 6.103. RECORD DATE FOR SUSPENDED DISTRIBUTIONS. (a)
96-11 In this section, "distribution" includes a distribution that:
96-12 (1) was payable to an owner or member but not paid and
96-13 was held in suspension by the entity making the distribution; or
96-14 (2) is paid or delivered by the entity making the
96-15 distribution into an escrow account or to a trustee or custodian.
96-16 (b) A distribution made by a domestic entity shall be
96-17 payable by the entity, or an escrow agent, trustee, or custodian of
96-18 the distribution, to the owner or member determined on the record
96-19 date for the distribution as provided by this subchapter.
96-20 (c) The right to a distribution under this section may be
96-21 transferred by contract, by operation of law, or under the laws of
96-22 descent and distribution.
96-23 (Sections 6.104-6.150 reserved for expansion)
96-24 SUBCHAPTER D. VOTING OF OWNERSHIP INTERESTS
96-25 Sec. 6.151. MANNER OF VOTING OF INTERESTS. Subject to this
96-26 code, voting of interests of a domestic entity must be conducted in
96-27 the manner provided by the governing documents of the entity.
97-1 Sec. 6.152. VOTING OF INTERESTS OWNED BY ENTITY. (a)
97-2 Except as provided by Subsection (b), an ownership interest owned
97-3 by the entity that is the issuer of the interest, or by its direct
97-4 or indirect subsidiary, may not be:
97-5 (1) directly or indirectly voted at a meeting; or
97-6 (2) included in determining at any time the total
97-7 number of outstanding ownership interests of the entity.
97-8 (b) This section does not preclude a domestic or foreign
97-9 entity from voting an ownership interest, including an interest in
97-10 the entity, held or controlled by the entity in a fiduciary
97-11 capacity or for which the entity otherwise exercises voting power
97-12 in a fiduciary capacity.
97-13 Sec. 6.153. VOTING OF INTERESTS OWNED BY ANOTHER ENTITY. An
97-14 ownership interest in an entity owned by another entity, whether a
97-15 domestic or foreign entity, may be voted by the officer, agent, or
97-16 proxy as authorized by:
97-17 (1) the governing documents of the entity that owns
97-18 the interest; or
97-19 (2) the governing authority of the entity that owns
97-20 the interest, if the governing documents do not provide for the
97-21 manner of voting.
97-22 Sec. 6.154. VOTING OF INTERESTS IN AN ESTATE OR TRUST. (a)
97-23 An administrator, executor, guardian, or conservator of an estate
97-24 who holds an ownership interest as part of the estate may vote the
97-25 interest without transferring the interest into the person's name.
97-26 (b) An ownership interest in the name of a trust may be
97-27 voted in person or by proxy by:
98-1 (1) the trustee; or
98-2 (2) a person authorized to act on behalf of the trust
98-3 by the trust agreement or the trustee.
98-4 Sec. 6.155. VOTING OF INTERESTS BY RECEIVER. (a) A receiver
98-5 may vote an ownership interest standing in the name of the
98-6 receiver.
98-7 (b) A receiver may vote an ownership interest held by or
98-8 under the control of the receiver without transferring the interest
98-9 into the receiver's name if the court appointing the receiver
98-10 authorizes the receiver to vote the interest.
98-11 Sec. 6.156. VOTING OF PLEDGED INTERESTS. A pledged
98-12 ownership interest may be voted by:
98-13 (1) the owner of the pledged interest until the
98-14 interest is transferred into the pledgee's name; and
98-15 (2) the pledgee after the pledged interest is
98-16 transferred into the pledgee's name.
98-17 (Sections 6.157-6.200 reserved for expansion)
98-18 SUBCHAPTER E. ACTION BY WRITTEN CONSENT
98-19 Sec. 6.201. UNANIMOUS WRITTEN CONSENT TO ACTION. (a) This
98-20 section applies to any action required or authorized to be taken
98-21 under this code or the governing documents of a filing entity at an
98-22 annual or special meeting of the owners or members of the entity or
98-23 at a regular, special, or other meeting of the governing authority
98-24 of the entity or a committee of the governing authority.
98-25 (b) The owners or members or the governing authority of a
98-26 filing entity, or a committee of the governing authority, may take
98-27 action without holding a meeting, providing notice, or taking a
99-1 vote if each person entitled to vote on the action signs a written
99-2 consent or consents stating the action taken.
99-3 (c) A written consent described by Subsection (b) has the
99-4 same effect as a unanimous vote at a meeting.
99-5 (d) A filing instrument filed with the filing officer may
99-6 state that an action approved by written consent or consents has
99-7 the effect of an approval by a unanimous vote at a meeting.
99-8 Sec. 6.202. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT.
99-9 (a) This section applies to any action required or authorized to
99-10 be taken under this code or the governing documents of an entity at
99-11 an annual or special meeting of the owners or members of the
99-12 entity.
99-13 (b) Except as provided by this code, the governing documents
99-14 of an entity may authorize the owners or members of the entity to
99-15 take action without holding a meeting, providing notice, or taking
99-16 a vote if owners or members of the entity having at least the
99-17 minimum number of votes that would be necessary to take the action
99-18 that is the subject of the consent at a meeting, in which each
99-19 owner or member entitled to vote on the action is present and
99-20 votes, sign a written consent or consents stating the action taken.
99-21 (c) A written consent or consents described by Subsection
99-22 (b) must include the date each owner or member signed the consent
99-23 and is effective to take the action that is the subject of the
99-24 consent only if the consent or consents are delivered to the entity
99-25 not later than the 60th day after the date the earliest dated
99-26 consent is delivered to the entity as required by Section 6.203.
99-27 (d) The entity shall promptly notify each owner or member
100-1 who does not sign a consent as provided by Subsection (b) of the
100-2 action that is the subject of the consent.
100-3 Sec. 6.203. DELIVERY OF LESS THAN UNANIMOUS WRITTEN CONSENT.
100-4 (a) A written consent signed by an owner or member of an entity as
100-5 provided by Section 6.202 must be delivered by hand or certified
100-6 or registered mail, return receipt requested, to:
100-7 (1) the entity's registered office or principal
100-8 executive office or place of business; or
100-9 (2) the managerial official or agent of the entity
100-10 having custody of the entity's records of meetings of owners or
100-11 members.
100-12 (b) A consent delivered to an entity's principal executive
100-13 office or place of business under Subsection (a)(1) must be
100-14 addressed to the chief managerial official of the entity or, if the
100-15 entity does not have a chief managerial official, the governing
100-16 authority of the entity.
100-17 Sec. 6.204. FILINGS WITH FILING OFFICER. Instead of
100-18 containing a statement required by this code concerning any vote of
100-19 the owners or members, the governing authority, or a committee of
100-20 the owners or members or governing authority, a certificate or
100-21 document filed with the filing officer as a result of an action
100-22 taken by written consent by the owners or members or governing
100-23 authority of an entity, or a committee of the owners or members or
100-24 governing authority, must state that:
100-25 (1) written consent has been given as required by this
100-26 subchapter; and
100-27 (2) written notice has been given as required by this
101-1 subchapter.
101-2 Sec. 6.205. ADVANCE NOTICE NOT REQUIRED. Advance notice is
101-3 not required to be given to take an action by written consent as
101-4 provided by this subchapter.
101-5 (Sections 6.206-6.250 reserved for expansion)
101-6 SUBCHAPTER F. VOTING TRUSTS AND VOTING AGREEMENTS
101-7 Sec. 6.251. VOTING TRUSTS. (a) Except as provided by this
101-8 code or the governing documents, any number of owners of an entity
101-9 may enter into a written voting trust agreement to confer on a
101-10 trustee the right to vote or otherwise represent ownership or
101-11 membership interests of the entity.
101-12 (b) An ownership or membership interest that is the subject
101-13 of a voting trust agreement described by Subsection (a) shall be
101-14 transferred to the trustee named in the agreement for purposes of
101-15 the agreement.
101-16 (c) A copy of a voting trust agreement described by
101-17 Subsection (a) shall be deposited with the entity at the entity's
101-18 principal executive office or registered office and is subject to
101-19 examination by:
101-20 (1) an owner, whether in person or by the owner's
101-21 agent or attorney, in the same manner as the owner is entitled to
101-22 examine the books and records of the entity; and
101-23 (2) a holder of a beneficial interest in the voting
101-24 trust, whether in person or by the holder's agent or attorney, at
101-25 any reasonable time for any proper purpose.
101-26 Sec. 6.252. VOTING AGREEMENTS. (a) Except as provided by
101-27 this code or the governing documents, any number of owners of an
102-1 entity, or any number of owners of the entity and the entity
102-2 itself, may enter into a written voting agreement to provide the
102-3 manner of voting of the ownership interests of the entity. A
102-4 voting agreement entered into under this subsection is not part of
102-5 the governing documents of the entity.
102-6 (b) A copy of a voting agreement entered into under
102-7 Subsection (a):
102-8 (1) shall be deposited with the entity at the entity's
102-9 principal executive office or registered office; and
102-10 (2) is subject to examination by an owner, whether in
102-11 person or by the owner's agent or attorney, in the same manner as
102-12 the owner is entitled to examine the books and records of the
102-13 entity.
102-14 (c) A voting agreement entered into under Subsection (a) is
102-15 specifically enforceable against the holder of an ownership
102-16 interest that is the subject of the agreement, and any successor or
102-17 transferee of the holder, if:
102-18 (1) the voting agreement is noted conspicuously on the
102-19 certificate representing the ownership interests; or
102-20 (2) a notation of the voting agreement is contained in
102-21 a notice sent by or on behalf of the entity, if the ownership
102-22 interest is not represented by a certificate.
102-23 (d) Except as provided by Subsection (e), a voting agreement
102-24 entered into under Subsection (a) is specifically enforceable
102-25 against any person other than a transferee for value who acquires
102-26 actual knowledge of the existence of the agreement.
102-27 (e) An otherwise enforceable voting agreement entered into
103-1 under Subsection (a) is not enforceable against a transferee for
103-2 value without actual knowledge of the existence of the agreement at
103-3 the time of the transfer, or any subsequent transferee, without
103-4 regard to value, if the voting agreement is not noted as required
103-5 by Subsection (c).
103-6 (f) Section 6.251 does not apply to a voting agreement
103-7 entered into under Subsection (a).
103-8 CHAPTER 7. LIABILITY
103-9 Sec. 7.001. SEPARATE LEGAL ENTITY APART FROM OWNERS OR
103-10 MEMBERS. A domestic entity is legally separate from its owners or
103-11 members for all purposes.
103-12 Sec. 7.002. LIMITATION OF LIABILITY FOR CONTRACTUAL OR
103-13 RELATED OBLIGATION. (a) Except as provided by this chapter or the
103-14 governing documents of a domestic entity, an owner, member,
103-15 subscriber, or affiliate of the domestic entity may not be held
103-16 liable to the domestic entity or its obligees for any obligation or
103-17 claim arising from or relating to a contract or contractual
103-18 relationship entered into between the domestic entity and an
103-19 obligee or for the benefit of an obligee.
103-20 (b) Subsection (a) applies notwithstanding that:
103-21 (1) the owner, member, subscriber, or affiliate is or
103-22 was the alter ego of the domestic entity or otherwise would be
103-23 liable under a similar theory under common law; or
103-24 (2) the claim or obligation is based on actual or
103-25 constructive fraud, a sham to perpetrate a fraud, or other similar
103-26 theory.
103-27 (c) Subsection (a) does not prevent or limit the liability
104-1 of an owner, member, subscriber, or affiliate to an obligee if the
104-2 obligee demonstrates that the owner, member, subscriber, or
104-3 affiliate, as appropriate, for the primary purpose of providing a
104-4 direct personal benefit to the owner, member, subscriber, or
104-5 affiliate, caused the entity to be used to perpetrate an actual
104-6 fraud on the obligee.
104-7 (d) The liability of an owner, member, subscriber, or
104-8 affiliate of a domestic entity for an obligation or claim limited
104-9 by Subsection (a) is exclusive and preempts any liability under
104-10 common law or otherwise.
104-11 Sec. 7.003. IMMUNITY FROM LIABILITY FOR FAILURE TO OBSERVE
104-12 FORMALITY. An owner, member, subscriber, or affiliate of a
104-13 domestic entity is not obligated to the domestic entity or its
104-14 obligees for a contractual or other obligation of the domestic
104-15 entity because the domestic entity failed to observe a formality,
104-16 including:
104-17 (1) the failure to comply with this code or the
104-18 governing documents of the domestic entity; or
104-19 (2) the failure of the domestic entity, or its
104-20 governing persons, owners, members, subscribers, or affiliates, to
104-21 take an action as required by this code or the governing documents
104-22 of the domestic entity.
104-23 Sec. 7.004. LIMITATION OF LIABILITY OF MANAGERIAL OFFICIAL
104-24 FOR DEBTS AND CONTRACTS. Except as otherwise provided by this code
104-25 or other statutes, a person is not liable for a domestic entity's
104-26 debt or for a domestic entity's breach of contract solely because
104-27 the person:
105-1 (1) is a managerial official of the domestic entity;
105-2 (2) is authorized to participate in the management of
105-3 the domestic entity; or
105-4 (3) is considered by the domestic entity to be a
105-5 managerial official of the domestic entity.
105-6 Sec. 7.005. LIABILITY OF OWNER, MEMBER, OR MANAGERIAL
105-7 OFFICIAL FOR TORT. Except as otherwise provided by this code or
105-8 other law, a person is not liable for a domestic entity's tortious
105-9 act or omission solely because the person:
105-10 (1) is an owner, member, or managerial official of the
105-11 domestic entity;
105-12 (2) is authorized to participate in the management of
105-13 the domestic entity; or
105-14 (3) is considered by the domestic entity to be an
105-15 owner, member, or managerial official of the domestic entity.
105-16 Sec. 7.006. IMPUTED LIABILITY OF OWNER, MEMBER, OR
105-17 MANAGERIAL OFFICIAL. Except as otherwise provided by this code, a
105-18 tortious act or omission of an owner, member, managerial official,
105-19 or other person for which a domestic entity is liable is not
105-20 imputed to another person solely because the person:
105-21 (1) is an owner, member, or managerial official of the
105-22 domestic entity;
105-23 (2) is authorized to participate in the management of
105-24 the domestic entity; or
105-25 (3) is considered by the domestic entity to be an
105-26 owner, member, or managerial official of the domestic entity.
105-27 Sec. 7.007. PLEDGEES AND TRUSTS. (a) A pledgee or other
106-1 holder of an ownership or membership interest as collateral may not
106-2 be held personally liable as an owner or member of the interest.
106-3 (b) An executor, administrator, conservator, guardian,
106-4 trustee, assignee for the benefit of creditors, or receiver may not
106-5 be held personally liable as an owner or subscriber of an ownership
106-6 interest. The property being administered by an executor,
106-7 administrator, conservator, guardian, trustee, assignee, or
106-8 receiver is subject to liability of an owner or subscriber of an
106-9 ownership interest.
106-10 Sec. 7.008. ASSERTION OF CLAIMS. (a) An owner, member, or
106-11 managerial official of a domestic entity or a person considered to
106-12 be an owner, member, or managerial official of a domestic entity by
106-13 the domestic entity may assert a claim in the manner provided by
106-14 this code or other law against the domestic entity.
106-15 (b) A domestic entity may assert a claim in the manner
106-16 provided by this code or other law against:
106-17 (1) an owner, member, or managerial official of the
106-18 domestic entity; or
106-19 (2) a person considered by the domestic entity to be
106-20 an owner, member, or managerial official of the domestic entity.
106-21 Sec. 7.009. EFFECT OF JUDGMENT OR ORDER AGAINST DOMESTIC
106-22 ENTITY. Unless otherwise provided by the judgment or order, a
106-23 judgment or order of a court or other governmental entity against a
106-24 domestic entity is not a judgment or order against:
106-25 (1) an owner, member, or managerial official of the
106-26 domestic entity; or
106-27 (2) a person considered by the domestic entity to be
107-1 an owner, member, or managerial official of the domestic entity.
107-2 Sec. 7.010. CLAIM NOT ABATED BY CHANGE OF OWNERSHIP,
107-3 MEMBERSHIP, OR MANAGEMENT. A claim for relief against a domestic
107-4 entity does not abate solely because of a change in:
107-5 (1) the owners, members, or managerial officials of
107-6 the domestic entity; or
107-7 (2) the persons authorized to manage the domestic
107-8 entity.
107-9 Sec. 7.011. EXCEPTIONS TO LIMITATIONS. (a) A partner in a
107-10 general partnership or registered limited liability partnership or
107-11 a general partner in a limited partnership or registered limited
107-12 liability limited partnership may be held liable for the
107-13 obligations of the partnership as provided by Title 4.
107-14 (b) A limited partner may be held liable as a general
107-15 partner of a limited partnership as provided by Title 4.
107-16 (c) An owner of or subscriber in a domestic entity whose
107-17 subscription has been accepted shall pay to the domestic entity the
107-18 full amount of consideration established in compliance with this
107-19 code and that the owner or subscriber agreed to pay for an
107-20 ownership interest in the domestic entity.
107-21 (d) An owner may be required to make a capital contribution
107-22 to a domestic entity as provided by this code and the governing
107-23 documents of the domestic entity.
107-24 (e) Nothing in this chapter limits the liability of a person
107-25 who:
107-26 (1) expressly assumes, guarantees, or otherwise agrees
107-27 to be personally liable to an obligee of a domestic entity; or
108-1 (2) is otherwise liable for the obligation to an
108-2 obligee of a domestic entity under this code or other applicable
108-3 statute, including a statute relating to fraudulent transfer and
108-4 conveyance.
108-5 Sec. 7.012. LIMITATION OF LIABILITY OF GOVERNING
108-6 PERSON: DOMESTIC ENTITY, CERTAIN OTHER ORGANIZATIONS, CERTAIN
108-7 FEDERAL FINANCIAL INSTITUTIONS. (a) This section applies to:
108-8 (1) a domestic entity other than a partnership;
108-9 (2) an entity, association, or other organization
108-10 incorporated or organized under another law of this state; and
108-11 (3) to the extent permitted by federal law, a
108-12 federally chartered bank, savings and loan association, or credit
108-13 union.
108-14 (b) The governing documents of an entity to which this
108-15 section applies may provide that a governing person of the entity
108-16 is not liable, or is liable only to the extent provided by the
108-17 governing documents, to the entity or its owners or members for
108-18 monetary damages for an act or omission by the person in the
108-19 person's capacity as a governing person.
108-20 (c) Subsection (b) does not authorize the elimination or
108-21 limitation of the liability of a governing person to the extent the
108-22 person is found liable under applicable law for:
108-23 (1) a breach of the person's duty of loyalty, if any,
108-24 to the entity or its owners or members;
108-25 (2) an act or omission not in good faith that:
108-26 (A) constitutes a breach of duty of the person
108-27 to the entity; or
109-1 (B) involves intentional misconduct or a knowing
109-2 violation of law;
109-3 (3) a transaction from which the person received an
109-4 improper benefit, regardless of whether the benefit resulted from
109-5 an action taken within the scope of the person's duties; or
109-6 (4) an act or omission for which the liability of a
109-7 governing person is expressly provided by an applicable statute.
109-8 Sec. 7.013. LIMITATION UNDER GOVERNING DOCUMENTS OF
109-9 PARTNERSHIPS AND LIMITED LIABILITY COMPANIES. Subject to this
109-10 code, the governing documents of a partnership or limited liability
109-11 company may modify the duties, including fiduciary duties,
109-12 obligations, and liabilities, of a managerial official, owner, or
109-13 other person to the partnership or limited liability company and
109-14 its owners and managerial officials.
109-15 CHAPTER 8. INDEMNIFICATION AND INSURANCE
109-16 SUBCHAPTER A. GENERAL PROVISIONS
109-17 Sec. 8.001. DEFINITIONS. In this chapter:
109-18 (1) "Delegate" means a person who is serving or who
109-19 has served as a representative of an enterprise at the request of
109-20 that enterprise at another enterprise. A person is a delegate to
109-21 an employee benefit plan if the performance of the person's
109-22 official duties to the enterprise also imposes duties on or
109-23 otherwise involves service by the person to the plan or
109-24 participants in or beneficiaries of the plan.
109-25 (2) "Enterprise" means a domestic entity or an
109-26 organization subject to this chapter, including a predecessor
109-27 domestic entity or organization.
110-1 (3) "Expenses" includes court costs and attorney's
110-2 fees. The term does not include a judgment, a penalty, a
110-3 settlement, a fine, or an excise or similar tax or an excise tax
110-4 assessed against the person regarding an employee benefit plan.
110-5 (4) "Former governing person" means a person who was a
110-6 governing person of an enterprise.
110-7 (5) "Official capacity" means:
110-8 (A) with respect to a governing person, the
110-9 office of the governing person in the enterprise or the exercise of
110-10 authority by or on behalf of the governing person under this code
110-11 or the governing documents of the enterprise; and
110-12 (B) with respect to a person other than a
110-13 governing person, the elective or appointive office, if any, in the
110-14 enterprise held by the person or the relationship undertaken by the
110-15 person on behalf of the enterprise.
110-16 (6) "Predecessor enterprise" means a sole
110-17 proprietorship or organization that is a predecessor to an
110-18 enterprise in:
110-19 (A) a merger, conversion, consolidation, or
110-20 other transaction in which the liabilities of the predecessor
110-21 enterprise are transferred or allocated to the enterprise by
110-22 operation of law; or
110-23 (B) any other transaction in which the
110-24 enterprise assumes the liabilities of the predecessor enterprise
110-25 and the liabilities that are the subject matter of this chapter are
110-26 not specifically excluded.
110-27 (7) "Proceeding" means:
111-1 (A) a threatened, pending, or completed action
111-2 or other proceeding, whether civil, criminal, administrative,
111-3 arbitrative, or investigative;
111-4 (B) an appeal of an action or proceeding
111-5 described by Paragraph (A); and
111-6 (C) an inquiry or investigation that could lead
111-7 to an action or proceeding described by Paragraph (A).
111-8 (8) "Representative" means a person serving as a
111-9 partner, director, officer, venturer, proprietor, trustee,
111-10 employee, or agent of an enterprise or serving a similar function
111-11 for an enterprise.
111-12 (9) "Respondent" means a person named as a respondent
111-13 or defendant in a proceeding.
111-14 Sec. 8.002. APPLICATION OF CHAPTER. (a) Except as provided
111-15 by Subsection (b), this chapter does not apply to a:
111-16 (1) general partnership; or
111-17 (2) limited liability company.
111-18 (b) The governing documents of a general partnership or
111-19 limited liability company may adopt provisions of this chapter or
111-20 may contain enforceable provisions relating to:
111-21 (1) indemnification;
111-22 (2) advancement of expenses; or
111-23 (3) insurance or another arrangement to indemnify or
111-24 hold harmless a governing person.
111-25 (Sections 8.003-8.050 reserved for expansion)
111-26 SUBCHAPTER B. MANDATORY AND COURT-ORDERED INDEMNIFICATION
111-27 Sec. 8.051. MANDATORY INDEMNIFICATION. (a) An enterprise
112-1 shall indemnify a governing person or former governing person
112-2 against reasonable expenses actually incurred by the person in
112-3 connection with a proceeding in which the person is a respondent
112-4 because the person is or was a governing person if the person is
112-5 wholly successful, on the merits or otherwise, in the defense of
112-6 the proceeding.
112-7 (b) A court that determines, in a suit for indemnification,
112-8 that a governing person is entitled to indemnification under this
112-9 section shall order indemnification and award to the person the
112-10 expenses incurred in securing the indemnification.
112-11 Sec. 8.052. COURT-ORDERED INDEMNIFICATION. (a) On
112-12 application of a governing person, former governing person, or
112-13 delegate and after notice is provided as required by the court, a
112-14 court may order an enterprise to indemnify the person to the extent
112-15 the court determines that the person is fairly and reasonably
112-16 entitled to indemnification in view of all the relevant
112-17 circumstances.
112-18 (b) This section applies without regard to whether the
112-19 governing person, former governing person, or delegate applying to
112-20 the court satisfies the requirements of Section 8.101 or has been
112-21 found liable:
112-22 (1) to the enterprise; or
112-23 (2) because the person improperly received a personal
112-24 benefit, without regard to whether the benefit resulted from an
112-25 action taken in the person's official capacity.
112-26 (c) The indemnification ordered by the court under this
112-27 section is limited to reasonable expenses if the governing person,
113-1 former governing person, or delegate is found liable:
113-2 (1) to the enterprise; or
113-3 (2) because the person improperly received a personal
113-4 benefit, without regard to whether the benefit resulted from an
113-5 action taken in the person's official capacity.
113-6 (Sections 8.053-8.100 reserved for expansion)
113-7 SUBCHAPTER C. PERMISSIVE INDEMNIFICATION AND
113-8 ADVANCEMENT OF EXPENSES
113-9 Sec. 8.101. PERMISSIVE INDEMNIFICATION. (a) An enterprise
113-10 may indemnify a governing person, former governing person, or
113-11 delegate who was, is, or is threatened to be made a respondent in a
113-12 proceeding to the extent permitted by Section 8.102 if it is
113-13 determined in accordance with Section 8.103 that:
113-14 (1) the person:
113-15 (A) acted in good faith;
113-16 (B) reasonably believed:
113-17 (i) in the case of conduct in the person's
113-18 official capacity, that the person's conduct was in the
113-19 enterprise's best interests; and
113-20 (ii) in any other case, that the person's
113-21 conduct was not opposed to the enterprise's best interests; and
113-22 (C) in the case of a criminal proceeding, did
113-23 not have a reasonable cause to believe the person's conduct was
113-24 unlawful;
113-25 (2) with respect to expenses, the amount of expenses
113-26 is reasonable; and
113-27 (3) indemnification should be paid.
114-1 (b) Action taken or omitted by a governing person or
114-2 delegate with respect to an employee benefit plan in the
114-3 performance of the person's duties for a purpose reasonably
114-4 believed by the person to be in the interest of the participants
114-5 and beneficiaries of the plan is for a purpose that is not opposed
114-6 to the best interests of the enterprise.
114-7 (c) Action taken or omitted by a delegate to another
114-8 enterprise for a purpose reasonably believed by the delegate to be
114-9 in the interest of the other enterprise or its owners or members is
114-10 for a purpose that is not opposed to the best interests of the
114-11 enterprise.
114-12 (d) A person does not fail to meet the standard under
114-13 Subsection (a)(1) solely because of the termination of a proceeding
114-14 by:
114-15 (1) judgment;
114-16 (2) order;
114-17 (3) settlement;
114-18 (4) conviction; or
114-19 (5) a plea of nolo contendere or its equivalent.
114-20 Sec. 8.102. GENERAL SCOPE OF PERMISSIVE INDEMNIFICATION.
114-21 (a) Except as provided by Subsection (d) and subject to Subsection
114-22 (b), an enterprise may indemnify a governing person, former
114-23 governing person, or delegate against a judgment, penalty,
114-24 settlement, or fine, including an excise or similar tax or an
114-25 excise tax assessed against the person regarding an employee
114-26 benefit plan, and against reasonable expenses actually incurred by
114-27 the person in connection with a proceeding.
115-1 (b) Indemnification under this subchapter of a person who is
115-2 found liable to the enterprise or is found liable because the
115-3 person improperly received a personal benefit:
115-4 (1) is limited to reasonable expenses actually
115-5 incurred by the person in connection with the proceeding; and
115-6 (2) may not be made in relation to a proceeding in
115-7 which the person has been found liable for:
115-8 (A) wilful or intentional misconduct in the
115-9 performance of the person's duty to the enterprise;
115-10 (B) breach of the person's duty of loyalty owed
115-11 to the enterprise; or
115-12 (C) an act or omission not committed in good
115-13 faith that constitutes a breach of a duty owed by the person to the
115-14 enterprise.
115-15 (c) A governing person, former governing person, or delegate
115-16 is considered to have been found liable in relation to a claim,
115-17 issue, or matter only if the liability is established by an order,
115-18 including a judgment or decree of a court, and all appeals of the
115-19 order are exhausted or foreclosed by law.
115-20 (d) Notwithstanding any other provision of this chapter, an
115-21 enterprise may not indemnify or advance expenses to a person if the
115-22 indemnification or advancement conflicts with a restriction in the
115-23 enterprise's governing documents.
115-24 Sec. 8.103. MANNER FOR DETERMINING PERMISSIVE
115-25 INDEMNIFICATION. (a) Except as provided by Subsections (b) and
115-26 (c), the determinations required under Section 8.101(a) must be
115-27 made by:
116-1 (1) a majority vote of a quorum composed of the
116-2 governing persons who at the time of the vote are disinterested and
116-3 independent;
116-4 (2) if a quorum described by Subdivision (1) cannot be
116-5 obtained, a majority vote of a committee of the board of directors
116-6 of the enterprise designated to act in the matter by a majority
116-7 vote of the governing persons and composed of at least one
116-8 governing person who at the time of the vote is disinterested and
116-9 independent;
116-10 (3) special legal counsel selected by the board of
116-11 directors of the enterprise, or selected by a committee of the
116-12 board of directors, by vote in accordance with Subdivision (1) or
116-13 (2) or, if a quorum described by Subdivision (1) cannot be obtained
116-14 and a committee described by Subdivision (2) cannot be established,
116-15 by a majority vote of the governing persons of the enterprise;
116-16 (4) the owners or members of the enterprise in a vote
116-17 that excludes the ownership or membership interests held by each
116-18 governing person who is not disinterested and independent; or
116-19 (5) a unanimous vote of the owners or members of the
116-20 enterprise.
116-21 (b) If special legal counsel determines under Subsection
116-22 (a)(3) that a person meets the standard under Section 8.101(a)(1),
116-23 the special legal counsel shall determine whether the amount of
116-24 expenses is reasonable under Section 8.101(a)(2) but may not
116-25 determine whether indemnification should be paid under Section
116-26 8.101(a)(3). The determination whether indemnification should be
116-27 paid must be made in a manner specified by Subsection (a)(1), (2),
117-1 (4), or (5).
117-2 (c) A provision contained in the governing documents of the
117-3 enterprise, a resolution of the owners, members, or board of
117-4 directors, or an agreement that requires the indemnification of a
117-5 person who meets the standard under Section 8.101(a)(1) constitutes
117-6 a determination under Section 8.101(a)(3) that indemnification
117-7 should be paid even though the provision may not have been adopted
117-8 or authorized in the same manner as the determinations required
117-9 under Section 8.101(a). The determinations required under Sections
117-10 8.101(a)(1) and (2) must be made in a manner provided by Subsection
117-11 (a).
117-12 Sec. 8.104. ADVANCEMENT OF EXPENSES. (a) An enterprise may
117-13 pay or reimburse reasonable expenses incurred by a governing
117-14 person, former governing person, or delegate who was, is, or is
117-15 threatened to be made a respondent in a proceeding in advance of
117-16 the final disposition of the proceeding without making the
117-17 determinations required under Section 8.101(a) after the enterprise
117-18 receives:
117-19 (1) a written affirmation by the person of the
117-20 person's good faith belief that the person has met the standard of
117-21 conduct necessary for indemnification under this chapter; and
117-22 (2) a written undertaking by or on behalf of the
117-23 person to repay the amount paid or reimbursed if the final
117-24 determination is that the person has not met that standard or that
117-25 indemnification is prohibited by Section 8.102.
117-26 (b) A provision in the governing documents of the
117-27 enterprise, a resolution of the owners, members, or governing
118-1 authority, or an agreement that requires the payment or
118-2 reimbursement permitted under this section authorizes that payment
118-3 or reimbursement after the enterprise receives an affirmation and
118-4 undertaking described by Subsection (a).
118-5 (c) The written undertaking required by Subsection (a)(2)
118-6 must be an unlimited general obligation of the person but need not
118-7 be secured and may be accepted by the enterprise without regard to
118-8 the person's ability to make repayment.
118-9 (d) An enterprise may not advance expenses to or reimburse
118-10 expenses of a person if the advancement or reimbursement conflicts
118-11 with a restriction in the enterprise's governing documents.
118-12 Sec. 8.105. PERMISSIVE INDEMNIFICATION OF AND ADVANCEMENT OF
118-13 EXPENSES TO PERSONS OTHER THAN GOVERNING PERSONS.
118-14 (a) Notwithstanding any other provision of this chapter and to the
118-15 extent consistent with other law, an enterprise may indemnify and
118-16 advance expenses to a person who is not a governing person,
118-17 including an officer, employee, agent, or delegate, as provided by:
118-18 (1) the enterprise's governing documents;
118-19 (2) general or specific action of the enterprise's
118-20 board of directors;
118-21 (3) resolution of the enterprise's owners or members;
118-22 (4) contract; or
118-23 (5) common law.
118-24 (b) An enterprise shall indemnify and advance expenses to an
118-25 officer to the same extent that indemnification or advancement of
118-26 expenses is required under this chapter for a governing person.
118-27 (c) A person described by Subsection (a) may seek
119-1 indemnification or advancement of expenses from an enterprise to
119-2 the same extent that a governing person may seek indemnification or
119-3 advancement of expenses under this chapter.
119-4 Sec. 8.106. PERMISSIVE INDEMNIFICATION OF AND REIMBURSEMENT
119-5 OF EXPENSES TO WITNESSES. Notwithstanding any other provision of
119-6 this chapter, an enterprise may pay or reimburse reasonable
119-7 expenses incurred by a governing person, officer, employee, agent,
119-8 delegate, or other person in connection with that person's
119-9 appearance as a witness or other participation in a proceeding at a
119-10 time when the person is not a respondent in the proceeding.
119-11 (Sections 8.107-8.150 reserved for expansion)
119-12 SUBCHAPTER D. LIABILITY INSURANCE;
119-13 REPORTING REQUIREMENTS
119-14 Sec. 8.151. INSURANCE AND OTHER ARRANGEMENTS. (a)
119-15 Notwithstanding any other provision of this chapter, an enterprise
119-16 may purchase or procure or establish and maintain insurance or
119-17 another arrangement to indemnify or hold harmless an existing or
119-18 former governing person, delegate, officer, employee, or agent
119-19 against any liability:
119-20 (1) asserted against and incurred by the person in
119-21 that capacity; or
119-22 (2) arising out of the person's status in that
119-23 capacity.
119-24 (b) The insurance or other arrangement established under
119-25 Subsection (a) may insure or indemnify against the liability
119-26 described by Subsection (a) without regard to whether the
119-27 enterprise otherwise would have had the power to indemnify the
120-1 person against that liability under this chapter.
120-2 (c) Insurance or another arrangement that involves
120-3 self-insurance or an agreement to indemnify made with the
120-4 enterprise or a person that is not regularly engaged in the
120-5 business of providing insurance coverage may provide for payment of
120-6 a liability with respect to which the enterprise does not otherwise
120-7 have the power to provide indemnification only if the insurance or
120-8 arrangement is approved by the owners or members of the enterprise.
120-9 (d) For the benefit of persons to be indemnified by the
120-10 enterprise, an enterprise may, in addition to purchasing or
120-11 procuring or establishing and maintaining insurance or another
120-12 arrangement:
120-13 (1) create a trust fund;
120-14 (2) establish any form of self-insurance, including a
120-15 contract to indemnify;
120-16 (3) secure the enterprise's indemnity obligation by
120-17 grant of a security interest or other lien on the assets of the
120-18 enterprise; or
120-19 (4) establish a letter of credit, guaranty, or surety
120-20 arrangement.
120-21 (e) Insurance or another arrangement established under this
120-22 section may be purchased or procured or established and maintained:
120-23 (1) within the enterprise; or
120-24 (2) with any insurer or other person considered
120-25 appropriate by the governing authority, regardless of whether all
120-26 or part of the stock, securities, or other ownership interest in
120-27 the insurer or other person is owned in whole or in part by the
121-1 enterprise.
121-2 (f) The governing authority's decision as to the terms of
121-3 the insurance or other arrangement and the selection of the insurer
121-4 or other person participating in an arrangement is conclusive. The
121-5 insurance or arrangement is not voidable and does not subject the
121-6 governing persons approving the insurance or arrangement to
121-7 liability, on any ground, regardless of whether the governing
121-8 persons participating in approving the insurance or other
121-9 arrangement are beneficiaries of the insurance or arrangement.
121-10 This subsection does not apply in case of actual fraud.
121-11 Sec. 8.152. REPORTS OF INDEMNIFICATION AND ADVANCES. (a)
121-12 An enterprise shall report in writing to the owners or members of
121-13 the enterprise an indemnification of or advance of expenses to a
121-14 governing person.
121-15 (b) Subject to Subsection (c), the report must be made with
121-16 or before the notice or waiver of notice of the next meeting of the
121-17 owners or members of the enterprise and before the next submission
121-18 to the owners or members of a consent to action without a meeting.
121-19 (c) The report must be made not later than the first
121-20 anniversary of the date of the indemnification or advance.
121-21 CHAPTER 9. FOREIGN ENTITIES
121-22 SUBCHAPTER A. REGISTRATION
121-23 Sec. 9.001. FOREIGN ENTITIES REQUIRED TO REGISTER. (a) To
121-24 transact business in this state, a foreign entity must register
121-25 under this chapter if the entity:
121-26 (1) is a foreign corporation, foreign limited
121-27 partnership, foreign limited liability company, foreign business
122-1 trust, foreign real estate investment trust, foreign cooperative,
122-2 foreign public or private limited company, or another foreign
122-3 entity, the formation of which, if formed in this state, would
122-4 require the filing under Chapter 3 of a certificate of formation;
122-5 or
122-6 (2) affords limited liability under the law of its
122-7 jurisdiction of formation for any owner or member.
122-8 (b) A foreign entity described by Subsection (a) must
122-9 maintain the entity's registration while transacting business in
122-10 this state.
122-11 Sec. 9.002. FOREIGN ENTITIES NOT REQUIRED TO REGISTER. (a)
122-12 A foreign entity not described by Section 9.001(a) may transact
122-13 business in this state without registering under this chapter.
122-14 (b) Subsection (a) does not relieve a foreign entity from
122-15 the duty to comply with applicable requirements under other law to
122-16 file or register.
122-17 (c) A foreign entity is not required to register under this
122-18 chapter if other state law authorizes the entity to transact
122-19 business in this state.
122-20 (d) A foreign unincorporated nonprofit association is not
122-21 required to register under this chapter.
122-22 Sec. 9.003. PERMISSIVE REGISTRATION. A foreign entity that
122-23 is eligible under other law of this state to register to transact
122-24 business in this state, but that is not registered under that law,
122-25 may register under this chapter unless that registration is
122-26 prohibited by the other law. The registration under this chapter
122-27 confers only the authority provided by this chapter.
123-1 Sec. 9.004. REGISTRATION PROCEDURE. (a) A foreign filing
123-2 entity registers by filing an application for registration as
123-3 provided by Chapter 4.
123-4 (b) The application must state:
123-5 (1) the entity's name and, if that name would not
123-6 comply with Chapter 5, a name that complies with Chapter 5 under
123-7 which the entity will transact business in this state;
123-8 (2) the entity's type;
123-9 (3) the entity's jurisdiction of formation;
123-10 (4) the date of the entity's formation;
123-11 (5) that the entity exists as a valid foreign filing
123-12 entity of the stated type under the laws of the entity's
123-13 jurisdiction of formation;
123-14 (6) for a foreign entity other than a foreign limited
123-15 partnership:
123-16 (A) each business or activity that the entity
123-17 proposes to pursue in this state, which may be stated to be any
123-18 lawful business or activity under the law of this state; and
123-19 (B) that the entity is authorized to pursue the
123-20 same business or activity under the laws of the entity's
123-21 jurisdiction of formation;
123-22 (7) the date the foreign entity began or will begin to
123-23 transact business in this state;
123-24 (8) the address of the principal office of the foreign
123-25 filing entity;
123-26 (9) the address of the initial registered office and
123-27 the name and the address of the initial registered agent for
124-1 service of process that Chapter 5 requires to be maintained;
124-2 (10) the name and address of each of the entity's
124-3 governing persons; and
124-4 (11) that the secretary of state is appointed the
124-5 agent of the foreign filing entity for service of process under the
124-6 circumstances provided by Section 5.205.
124-7 (c) A foreign filing entity may register regardless of any
124-8 differences between the law of the entity's jurisdiction of
124-9 formation and of this state applicable to the governing of the
124-10 internal affairs or to the liability of an owner, member, or
124-11 managerial official.
124-12 Sec. 9.005. EFFECT OF REGISTRATION. (a) The registration
124-13 of a foreign entity is effective when the application filed under
124-14 Chapter 4 takes effect. The registration remains in effect until
124-15 the registration terminates, is withdrawn, or is revoked.
124-16 (b) Except in a proceeding to revoke the registration, the
124-17 secretary of state's issuance of an acknowledgment that the entity
124-18 has filed an application is conclusive evidence of the authority of
124-19 the foreign filing entity to transact business in this state under
124-20 the entity's name or under another name stated in the application,
124-21 in accordance with Section 9.004(b)(1).
124-22 Sec. 9.006. AMENDMENTS TO REGISTRATION. (a) A foreign
124-23 filing entity must amend its registration to change its name or the
124-24 purpose stated in its application for registration if the name or
124-25 purpose has changed.
124-26 (b) A foreign filing entity may amend its application for
124-27 registration by filing an application for amendment of registration
125-1 as provided by Chapter 4.
125-2 (c) The application for amendment must be filed on or before
125-3 the 91st day following the date of the change.
125-4 Sec. 9.007. VOLUNTARY WITHDRAWAL OF REGISTRATION. (a) A
125-5 foreign filing entity registered in this state may withdraw the
125-6 entity's registration at any time by filing a certificate of
125-7 withdrawal as provided by Chapter 4.
125-8 (b) A certificate of withdrawal must state:
125-9 (1) the name of the foreign filing entity as
125-10 registered in this state;
125-11 (2) the type of entity and the entity's jurisdiction
125-12 of formation;
125-13 (3) the address of the principal office of the foreign
125-14 filing entity;
125-15 (4) that the foreign filing entity no longer is
125-16 transacting business in this state;
125-17 (5) that the foreign filing entity:
125-18 (A) revokes the authority of the entity's
125-19 registered agent in this state to accept service of process; and
125-20 (B) consents that service of process in any
125-21 action, suit, or proceeding stating a cause of action arising in
125-22 this state during the time the foreign filing entity was
125-23 authorized to transact business in this state may be made on the
125-24 foreign filing entity by serving the secretary of state;
125-25 (6) an address to which the secretary of state may
125-26 mail a copy of any process against the foreign filing entity served
125-27 on the secretary of state; and
126-1 (7) that any money due or accrued to the state has
126-2 been paid or that adequate provision has been made for the payment
126-3 of that money.
126-4 (c) A certificate from the comptroller that all franchise
126-5 taxes have been paid must be filed with the certificate of
126-6 withdrawal in accordance with Chapter 4 if the foreign filing
126-7 entity is a foreign professional corporation, foreign for-profit
126-8 corporation, or foreign limited liability company.
126-9 (d) If the existence or separate existence of a foreign
126-10 filing entity registered in this state terminates because of
126-11 dissolution, termination, merger, conversion, or other
126-12 circumstances, a certificate by an authorized governmental official
126-13 of the entity's jurisdiction of formation that evidences the
126-14 termination shall be filed with the secretary of state.
126-15 (e) The registration of the foreign filing entity in this
126-16 state terminates when a certificate of withdrawal under this
126-17 section or a certificate evidencing termination under Subsection
126-18 (d) is filed.
126-19 (f) If the address stated in a certificate of withdrawal
126-20 under Subsection (b)(6) changes, the foreign filing entity must
126-21 promptly amend the certificate of withdrawal to update the address.
126-22 (g) A certificate of withdrawal does not terminate the
126-23 authority of the secretary of state to accept service of process on
126-24 the foreign filing entity with respect to causes of action arising
126-25 out of the transaction of business in this state.
126-26 Sec. 9.008. REVOCATION OF REGISTRATION BY COURT ACTION. (a)
126-27 On application of the attorney general, a court may revoke the
127-1 registration of the foreign filing entity if:
127-2 (1) the entity did not comply with a condition to the
127-3 issuance of the entity's certificate of authority or an amendment
127-4 to the certificate;
127-5 (2) the entity's registration or any amendment to the
127-6 entity's application for registration was procured by fraud;
127-7 (3) a misrepresentation of a material matter was made
127-8 in an application, report, affidavit, or other document the entity
127-9 submitted as required by law;
127-10 (4) the entity has continued to transact business
127-11 beyond the scope of the purpose or purposes expressed in the
127-12 entity's application for registration; or
127-13 (5) the public interest requires revocation because:
127-14 (A) the entity has been convicted of a felony or
127-15 a high managerial agent of the entity has been convicted of a
127-16 felony committed in the conduct of the entity's affairs;
127-17 (B) the entity or the high managerial agent has
127-18 engaged in a persistent course of felonious conduct; and
127-19 (C) revocation is necessary to prevent future
127-20 felonious conduct of the same character.
127-21 (b) Only a district court of Travis County or a district
127-22 court of the county in which a foreign filing entity's registered
127-23 office is located has jurisdiction of a suit under Subsection (a).
127-24 Venue is in either court.
127-25 (c) The clerk of the court that revokes the registration
127-26 shall file with the secretary of state a certified copy of the
127-27 order of revocation.
128-1 (d) When a copy of an order of revocation is filed with the
128-2 secretary of state, the secretary of state shall:
128-3 (1) file a certificate of revocation; and
128-4 (2) deliver a certificate of revocation by regular or
128-5 certified mail to the foreign filing entity at its registered
128-6 office or principal place of business.
128-7 (e) The certificate of revocation must state the cause of
128-8 the revocation.
128-9 (f) The revocation of a foreign filing entity's registration
128-10 under this section takes effect on the date the court issues the
128-11 order of revocation.
128-12 (g) Sections 9.017-9.020 do not apply to Subsection (a)(5).
128-13 Sec. 9.009. REVOCATION OF REGISTRATION BY STATE ACTION. (a)
128-14 If it appears to the secretary of state that, with respect to a
128-15 foreign filing entity, a circumstance described by Subsection (b)
128-16 exists, the secretary of state may notify the entity of the
128-17 circumstance by mail or certified mail addressed to the foreign
128-18 filing entity at the entity's registered office or principal place
128-19 of business as shown on the records of the secretary of state.
128-20 (b) The secretary of state may revoke a foreign filing
128-21 entity's registration if the secretary of state finds that the
128-22 entity has failed to, and, before the 91st day after the date
128-23 notice was mailed, has not corrected the entity's failure to:
128-24 (1) file a report within the period required by law or
128-25 to pay a fee or penalty prescribed by law when due and payable;
128-26 (2) maintain a registered agent or registered office
128-27 in this state as required by law;
129-1 (3) amend its registration when required by law; or
129-2 (4) pay a fee required in connection with a filing, or
129-3 payment of the fee was dishonored when presented by the state for
129-4 payment.
129-5 (c) If revocation of a registration is required, the
129-6 secretary of state shall:
129-7 (1) file a certificate of revocation; and
129-8 (2) deliver a certificate of revocation by regular or
129-9 certified mail to the foreign filing entity at its registered
129-10 office or principal place of business.
129-11 (d) The certificate of revocation must state:
129-12 (1) that the foreign filing entity's registration has
129-13 been revoked; and
129-14 (2) the date and cause of the revocation.
129-15 (e) The revocation of a foreign filing entity's registration
129-16 under this section takes effect on the date the certificate of
129-17 revocation is filed.
129-18 Sec. 9.010. REINSTATEMENT. (a) The secretary of state
129-19 shall reinstate the registration of an entity that has been revoked
129-20 under Section 9.009 if the entity files an application for
129-21 reinstatement, accompanied by each amendment to the entity's
129-22 registration that is required by intervening events, including the
129-23 unavailability of the name the entity uses because of a filing made
129-24 since the revocation, and:
129-25 (1) the entity has corrected the circumstances that
129-26 led to the revocation and any other circumstances that may exist of
129-27 the types described by Section 9.009(b), including the payment of
130-1 fees, interest, or penalties; or
130-2 (2) the secretary of state finds that the
130-3 circumstances that led to the revocation did not exist at the time
130-4 of revocation.
130-5 (b) If a foreign filing entity's registration is reinstated
130-6 before the third anniversary of the revocation, the entity is
130-7 considered to have been registered or in existence at all times
130-8 during the period of revocation.
130-9 Sec. 9.011. NAME CHANGE OF FOREIGN ENTITY. If a foreign
130-10 entity authorized to conduct affairs in this state changes its name
130-11 to a name that would cause the entity to be denied an application
130-12 for registration under this subchapter, the entity's registration
130-13 must be suspended. An entity the registration of which has been
130-14 suspended under this section may conduct affairs in this state only
130-15 after the entity:
130-16 (1) changes its name to a name that is available to it
130-17 under the laws of this state; or
130-18 (2) otherwise complies with this chapter.
130-19 Sec. 9.012. TRANSACTING BUSINESS OR MAINTAINING COURT
130-20 PROCEEDING WITHOUT REGISTRATION. (a) On application by the
130-21 attorney general, a court may enjoin a foreign filing entity or the
130-22 entity's agent from transacting business in this state if:
130-23 (1) the entity is not registered in this state; or
130-24 (2) the entity's registration is obtained on the basis
130-25 of a false or misleading representation.
130-26 (b) A foreign filing entity or the entity's legal
130-27 representative may not maintain an action, suit, or proceeding in a
131-1 court of this state, brought either directly by the entity or in
131-2 the form of a derivative action in the entity's name, on a cause of
131-3 action that arises out of the transaction of business in this state
131-4 unless the foreign filing entity is registered in accordance with
131-5 this chapter. This subsection does not affect the rights of an
131-6 assignee of the foreign filing entity as:
131-7 (1) the holder in due course of a negotiable
131-8 instrument; or
131-9 (2) the bona fide purchaser for value of a warehouse
131-10 receipt, security, or other instrument made negotiable by law.
131-11 (c) The failure of a foreign filing entity to register does
131-12 not:
131-13 (1) affect the validity of any contract or act of the
131-14 foreign filing entity;
131-15 (2) prevent the entity from defending an action, suit,
131-16 or proceeding in a court in this state; or
131-17 (3) except as provided by Subsection (d), cause any
131-18 owner, member, or managerial official of the foreign filing entity
131-19 to become liable for the debts, obligations, or liabilities of the
131-20 foreign filing entity.
131-21 (d) Subsection (c)(3) does not apply to a general partner of
131-22 a foreign limited partnership.
131-23 Sec. 9.013. CIVIL PENALTY. (a) A foreign filing entity
131-24 that transacts business in this state and is not registered under
131-25 this chapter is liable to this state for a civil penalty in an
131-26 amount equal to all:
131-27 (1) fees and taxes that would have been imposed by law
132-1 on the entity had the entity registered when first required and
132-2 filed all reports required by law; and
132-3 (2) penalties and interest imposed by law for failure
132-4 to pay those fees and taxes.
132-5 (b) The attorney general may bring suit to recover amounts
132-6 due to this state under this section.
132-7 Sec. 9.014. VENUE. In addition to any other venue
132-8 authorized by law, a suit under Section 9.012 or 9.013 may be
132-9 brought in Travis County.
132-10 Sec. 9.015. LATE FILING FEE. The secretary of state may
132-11 collect from a foreign filing entity a late filing fee equal to the
132-12 registration fee for the entity for each year of delinquency if the
132-13 entity has transacted business in this state for more than 90 days.
132-14 The secretary may condition the effectiveness of a registration on
132-15 the payment of the late filing fee.
132-16 Sec. 9.016. REQUIREMENTS OF OTHER LAW. This chapter does
132-17 not excuse a foreign entity from complying with duties imposed
132-18 under other law, including other chapters of this code, relating to
132-19 filing or registration requirements.
132-20 Sec. 9.017. INVOLUNTARY REVOCATION OF REGISTRATION BY STATE
132-21 ACTION; NOTIFICATION OF ATTORNEY GENERAL. (a) If the secretary of
132-22 state determines that cause exists for judicial revocation of a
132-23 foreign filing entity's registration as provided by Section 9.008,
132-24 the secretary shall simultaneously notify the:
132-25 (1) attorney general of the name of the foreign filing
132-26 entity and the grounds for judicial revocation; and
132-27 (2) foreign filing entity by mail at its registered
133-1 office in this state:
133-2 (A) that the secretary of state has notified the
133-3 attorney general as provided by Subdivision (1); and
133-4 (B) of the grounds for judicial revocation of
133-5 the entity's registration.
133-6 (b) The secretary of state shall maintain a record of the
133-7 date notice is mailed under Subsection (a)(2).
133-8 (c) A court shall accept a certificate issued by the
133-9 secretary of state as to the grounds for judicial revocation of a
133-10 foreign filing entity's registration and the mailing of a notice
133-11 under Subsection (a)(2) as prima facie evidence of the grounds for
133-12 judicial revocation and the mailing of the notice.
133-13 Sec. 9.018. ACTION TO REVOKE REGISTRATION. (a) The
133-14 attorney general shall file an action against a foreign filing
133-15 entity in the name of the state seeking the revocation of the
133-16 entity's registration if:
133-17 (1) the entity does not cure the problems for which
133-18 revocation is sought before the 31st day after the date the notice
133-19 is mailed; and
133-20 (2) the attorney general determines that cause exists
133-21 for judicial revocation of the entity's registration under Section
133-22 9.008.
133-23 (b) An action filed by the attorney general under Subsection
133-24 (a) shall be abated if, before a district court renders judgment
133-25 on the action, the foreign filing entity:
133-26 (1) cures the problems for which revocation is sought;
133-27 and
134-1 (2) pays the costs of the action.
134-2 (c) If a district court finds in an action brought under
134-3 Subsection (a) that proper grounds exist under Section 9.008(a) for
134-4 revocation of the foreign filing entity's registration, the court
134-5 shall:
134-6 (1) make findings to that effect; and
134-7 (2) subject to Section 9.019, enter a judgment not
134-8 earlier than the fifth day after the date the court makes its
134-9 findings.
134-10 Sec. 9.019. APPLICATION FOR STAY OF JUDGMENT. (a) If, in
134-11 an action brought under this subchapter, a foreign filing entity
134-12 has proved by a preponderance of the evidence and obtained a
134-13 finding that the problems for which the foreign filing entity has
134-14 been found guilty were not wilful or the result of a failure to
134-15 take reasonable precautions, the entity may make a sworn
134-16 application to the court for a stay of entry of the judgment to
134-17 allow the foreign filing entity a reasonable opportunity to cure
134-18 the problems for which it has been found guilty. An application
134-19 made under this subsection must be made not later than the fifth
134-20 day after the date the court makes its findings under Section
134-21 9.018.
134-22 (b) After a foreign filing entity has made an application
134-23 under Subsection (a), a court shall stay the entry of the judgment
134-24 if the court is reasonably satisfied after considering the
134-25 application and evidence offered for or against the application
134-26 that the foreign filing entity:
134-27 (1) is able and intends in good faith to cure the
135-1 problems for which it has been found guilty; and
135-2 (2) has not applied for the stay without just cause.
135-3 (c) A court shall stay an entry of judgment under Subsection
135-4 (b) for the period the court determines is reasonably necessary to
135-5 afford the foreign filing entity the opportunity to cure its
135-6 problems if the entity acts with reasonable diligence. The court
135-7 may not stay the entry of the judgment for longer than 60 days
135-8 after the date the court's findings are made.
135-9 (d) The court shall dismiss an action against a foreign
135-10 filing entity that, during the period the action is stayed by the
135-11 court under this section, cures the problems for which revocation
135-12 is sought and pays all costs accrued in the action.
135-13 (e) If a court finds that a foreign filing entity has not
135-14 cured the problems for which revocation is sought within the period
135-15 prescribed by Subsection (c), the court shall enter final judgment
135-16 requiring revocation of the foreign filing entity's registration.
135-17 Sec. 9.020. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF
135-18 FINDINGS BY APPEALS COURT. (a) An appellate court that affirms a
135-19 trial court's findings against a foreign filing entity under this
135-20 subchapter shall remand the case to the trial court with
135-21 instructions to grant the foreign filing entity an opportunity to
135-22 cure the problems for which the entity has been found guilty if:
135-23 (1) the foreign filing entity did not make an
135-24 application to the trial court for stay of the entry of the
135-25 judgment;
135-26 (2) the appellate court is satisfied that the appeal
135-27 was taken in good faith and not for purpose of delay or with no
136-1 sufficient cause;
136-2 (3) the appellate court finds that the problems for
136-3 which the foreign filing entity has been found guilty are capable
136-4 of being cured; and
136-5 (4) the foreign filing entity has prayed for the
136-6 opportunity to cure its problems in the appeal.
136-7 (b) The appellate court shall determine the period, which
136-8 may not be longer than 60 days after the date the case is remanded
136-9 to the trial court, to be afforded to a foreign filing entity to
136-10 enable the foreign filing entity to cure its problems under
136-11 Subsection (a).
136-12 (c) The trial court to which an action against a foreign
136-13 filing entity has been remanded under this section shall dismiss
136-14 the action if, during the period prescribed by the appellate court
136-15 for that conduct, the foreign filing entity cures the problems for
136-16 which revocation is sought and pays all costs accrued in the
136-17 action.
136-18 (d) If a foreign filing entity has not cured the problems
136-19 for which revocation is sought within the period prescribed by the
136-20 appellate court under Subsection (b), the judgment requiring
136-21 revocation shall become final.
136-22 Sec. 9.021. VENUE. The attorney general shall bring an
136-23 action for the involuntary revocation of the registration of a
136-24 foreign filing entity under this subchapter in:
136-25 (1) a district court of the county in which the
136-26 registered office or principal place of business of the filing
136-27 entity in this state is located; or
137-1 (2) a district court of Travis County.
137-2 Sec. 9.022. PROCESS IN STATE ACTION. Citation in an action
137-3 for the involuntary revocation of a foreign filing entity's
137-4 registration under this subchapter shall be issued and served as
137-5 provided by law.
137-6 Sec. 9.023. PUBLICATION OF NOTICE. (a) If process in an
137-7 action under this subchapter is returned not found, the attorney
137-8 general shall publish notice in a newspaper in the county in which
137-9 the registered office of the foreign filing entity in this state is
137-10 located. The notice must contain:
137-11 (1) a statement of the pendency of the action;
137-12 (2) the title of the court;
137-13 (3) the title of the action; and
137-14 (4) the earliest date on which default judgment may be
137-15 entered by the court.
137-16 (b) Notice under this section must be published at least
137-17 once a week for two consecutive weeks beginning at any time after
137-18 the citation has been returned.
137-19 (c) The attorney general may include in one published notice
137-20 the name of each foreign filing entity against which an action for
137-21 involuntary revocation is pending in the same court.
137-22 (d) Not later than the 10th day after the date notice under
137-23 this section is first published, the attorney general shall mail a
137-24 copy of the notice to the appropriate foreign filing entity at the
137-25 foreign filing entity's registered office in this state. The
137-26 attorney general's record of the mailing of the notice is prima
137-27 facie evidence that notice was mailed under this section.
138-1 (e) Unless a foreign filing entity has been served with
138-2 citation, a default judgment may not be taken against the entity
138-3 before the 31st day after the date the notice is first published.
138-4 Sec. 9.024. FILING OF DECREE OF REVOCATION AGAINST FOREIGN
138-5 FILING ENTITY. (a) The clerk of a court that enters a decree
138-6 revoking the registration of a foreign filing entity shall file a
138-7 certified copy of the decree in accordance with Chapter 4.
138-8 (b) A fee may not be charged for the filing of a decree
138-9 under this section.
138-10 (Sections 9.025-9.050 reserved for expansion)
138-11 SUBCHAPTER B. BUSINESS, RIGHTS, AND OBLIGATIONS
138-12 Sec. 9.051. BUSINESS OF FOREIGN ENTITY. A foreign entity
138-13 may not conduct in this state a business or activity that is not
138-14 permitted by this code to be transacted by the domestic entity to
138-15 which it most closely corresponds, unless other law of this state
138-16 authorizes the entity to conduct the business or activity.
138-17 Sec. 9.052. RIGHTS AND PRIVILEGES. A foreign nonfiling
138-18 entity or a foreign filing entity registered under this chapter
138-19 enjoys the same but no greater rights and privileges as the
138-20 domestic entity to which it most closely corresponds.
138-21 Sec. 9.053. OBLIGATIONS AND LIABILITIES. Subject to this
138-22 code and other laws of this state and except as provided by
138-23 Subchapter C, Chapter 1, in any matter that affects the transaction
138-24 of intrastate business in this state, a foreign entity and each
138-25 member, owner, or managerial official of the entity is subject to
138-26 the same duties, restrictions, penalties, and liabilities imposed
138-27 on a domestic entity to which it most closely corresponds or on a
139-1 member, owner, or managerial official of that domestic entity.
139-2 Sec. 9.054. RIGHT OF FOREIGN FILING ENTITY TO PARTICIPATE IN
139-3 THE BUSINESS OF CERTAIN DOMESTIC ENTITIES. A vote cast or consent
139-4 provided by a foreign filing entity with respect to its ownership
139-5 or membership interest in a domestic entity of which the foreign
139-6 filing entity is a lawful owner or member, and the foreign filing
139-7 entity's participation in the management and control of the
139-8 business and affairs of the domestic entity to the extent of the
139-9 participation of other owners or members, are not invalidated if
139-10 the foreign filing entity does not register to transact business in
139-11 this state, subject to all law governing a domestic entity,
139-12 including the antitrust law of this state.
139-13 (Sections 9.055-9.100 reserved for expansion)
139-14 SUBCHAPTER C. DETERMINATION OF TRANSACTING BUSINESS
139-15 IN THIS STATE
139-16 Sec. 9.101. ACTIVITIES NOT CONSTITUTING TRANSACTING BUSINESS
139-17 IN THIS STATE. For purposes of this chapter, activities that do
139-18 not constitute transaction of business in this state include:
139-19 (1) maintaining or defending an action or suit or an
139-20 administrative or arbitration proceeding, or effecting the
139-21 settlement of:
139-22 (A) such an action, suit, or proceeding; or
139-23 (B) a claim or dispute to which the entity is a
139-24 party;
139-25 (2) holding a meeting of the entity's managerial
139-26 officials, owners, or members or carrying on another activity
139-27 concerning the entity's internal affairs;
140-1 (3) maintaining a bank account;
140-2 (4) maintaining an office or agency for:
140-3 (A) transferring, exchanging, or registering
140-4 securities the entity issues; or
140-5 (B) appointing or maintaining a trustee or
140-6 depositary related to the entity's securities;
140-7 (5) voting the interest of an entity the foreign
140-8 entity has acquired;
140-9 (6) effecting a sale through an independent
140-10 contractor;
140-11 (7) creating, as borrower or lender, or acquiring
140-12 indebtedness or a mortgage or other security interest in real or
140-13 personal property;
140-14 (8) securing or collecting a debt due the entity or
140-15 enforcing a right in property that secures a debt due the entity;
140-16 (9) transacting business in interstate commerce;
140-17 (10) conducting an isolated transaction that:
140-18 (A) is completed within a period of 30 days; and
140-19 (B) is not in the course of a number of
140-20 repeated, similar transactions;
140-21 (11) in a case that does not involve an activity that
140-22 would constitute the transaction of business in this state if the
140-23 activity were one of a foreign entity acting in its own right:
140-24 (A) exercising a power of executor or
140-25 administrator of the estate of a nonresident decedent under
140-26 ancillary letters issued by a court of this state; or
140-27 (B) exercising a power of a trustee under the
141-1 will of a nonresident decedent, or under a trust created by one or
141-2 more nonresidents of this state, or by one or more foreign
141-3 entities;
141-4 (12) regarding a debt secured by a mortgage or lien on
141-5 real or personal property in this state:
141-6 (A) acquiring the debt in a transaction outside
141-7 this state or in interstate commerce;
141-8 (B) collecting or adjusting a principal or
141-9 interest payment on the debt;
141-10 (C) enforcing or adjusting a right or property
141-11 securing the debt;
141-12 (D) taking an action necessary to preserve and
141-13 protect the interest of the mortgagee in the security; or
141-14 (E) engaging in any combination of transactions
141-15 described by this subdivision;
141-16 (13) investing in or acquiring, in a transaction
141-17 outside of this state, a royalty or other nonoperating mineral
141-18 interest; or
141-19 (14) the execution of a division order, contract of
141-20 sale, or other instrument incidental to ownership of a nonoperating
141-21 mineral interest.
141-22 Sec. 9.102. OTHER ACTIVITIES. The list provided by Section
141-23 9.101 is not exclusive of activities that do not constitute
141-24 transacting business in this state for the purposes of this code.
141-25 (Sections 9.103-9.150 reserved for expansion)
142-1 SUBCHAPTER D. MISCELLANEOUS PROVISIONS
142-2 Sec. 9.151. APPLICABILITY OF THIS CODE TO CERTAIN FOREIGN
142-3 ENTITIES. (a) Except as provided by a statute described by this
142-4 subsection, the provisions of this code governing a foreign entity
142-5 apply to a foreign entity registered or granted authority to
142-6 transact business in this state under:
142-7 (1) a special statute that does not contain a
142-8 provision regarding a matter provided for by this code with respect
142-9 to a foreign entity; or
142-10 (2) another statute that specifically provides that
142-11 the general law for the granting of a registration or certificate
142-12 of authority to the foreign entity to transact business in this
142-13 state supplements the special statute.
142-14 (b) Except as provided by a special statute described by
142-15 Subsection (a), a document required to be filed with the secretary
142-16 of state under the special statute must be signed and filed in
142-17 accordance with Chapter 4.
142-18 CHAPTER 10. MERGERS, SHARE EXCHANGES, AND CONVERSIONS
142-19 SUBCHAPTER A. MERGERS
142-20 Sec. 10.001. ADOPTION OF PLAN OF MERGER. (a) A domestic
142-21 entity may effect a merger by complying with the applicable
142-22 provisions of this code. A merger must be set forth in a plan of
142-23 merger.
142-24 (b) To effect a merger, the governing authority of each
142-25 domestic entity that is a party to the merger must act on, and, if
142-26 required by this code, the owners or members of the domestic entity
142-27 must approve, the plan of merger in the manner prescribed by this
143-1 code for the approval of mergers by the domestic entity.
143-2 (c) If one or more non-code organizations is a party to the
143-3 merger or is to be created by the plan of merger:
143-4 (1) to effect the merger each non-code organization
143-5 must take all action required by this code and its governing
143-6 documents;
143-7 (2) the merger must be permitted by:
143-8 (A) the law of the state or country under whose
143-9 law each non-code organization is incorporated or organized; or
143-10 (B) the governing documents of each non-code
143-11 organization if the documents are not inconsistent with the law
143-12 under which the non-code organization is incorporated or organized;
143-13 and
143-14 (3) in effecting the merger, each non-code
143-15 organization that is a party to the merger must comply with:
143-16 (A) the applicable laws under which it is
143-17 incorporated or organized; and
143-18 (B) the governing documents of the non-code
143-19 organization.
143-20 (d) An organization may not merge under this subchapter if
143-21 an owner or member of that entity that is a party to the merger
143-22 will, as a result of the merger, become personally liable, without
143-23 that owner's or member's consent, for a liability or other
143-24 obligation of any other person.
143-25 Sec. 10.002. PLAN OF MERGER: REQUIRED PROVISIONS. (a) A
143-26 plan of merger must include:
143-27 (1) the name of each organization that is a party to
144-1 the merger;
144-2 (2) the name of each organization that will survive
144-3 the merger;
144-4 (3) the name of each new organization that is to be
144-5 created by the plan of merger;
144-6 (4) a description of the organizational form of each
144-7 organization that is a party to the merger or that is to be created
144-8 by the plan of merger and the state or country where incorporated
144-9 or organized;
144-10 (5) the manner and basis of converting any of the
144-11 ownership or membership interests of each organization that is a
144-12 party to the merger into:
144-13 (A) ownership interests, membership interests,
144-14 obligations, rights to purchase securities, or other securities of
144-15 one or more of the surviving or new domestic organizations;
144-16 (B) cash;
144-17 (C) other property, including ownership
144-18 interests, membership interests, obligations, rights to purchase
144-19 securities, or other securities of any other person or entity; or
144-20 (D) any combination of the items described by
144-21 Paragraphs (A)-(C);
144-22 (6) the certificate of formation of each new domestic
144-23 entity to be created by the plan of merger;
144-24 (7) the governing documents of each non-code
144-25 organization that:
144-26 (A) is to survive the merger or to be created by
144-27 the plan of merger; and
145-1 (B) is an entity that is not:
145-2 (i) organized under the laws of any state
145-3 or the United States; or
145-4 (ii) required to file its certificate of
145-5 formation or similar document under which the entity is organized
145-6 with the appropriate governmental authority; and
145-7 (8) the address of the registered office and name of
145-8 each registered agent of the surviving or new organizations if a
145-9 registered office or agent is required by the laws under which the
145-10 surviving or new organizations are formed.
145-11 (b) An item required by Subsections (a)(6)-(8) may be
145-12 included in the plan of merger by an attachment or exhibit to the
145-13 plan.
145-14 (c) If the plan of merger provides for a manner and basis of
145-15 converting an ownership or membership interest that may be
145-16 converted in a manner or basis different than any other ownership
145-17 or membership interest of the same class or series of the ownership
145-18 or membership interest, the manner and basis of conversion must be
145-19 included in the plan of merger in the same manner as provided by
145-20 Subsection (a)(5).
145-21 Sec. 10.003. CONTENTS OF PLAN OF MERGER: MORE THAN ONE
145-22 SUCCESSOR. If more than one organization is to survive or to be
145-23 created by the plan of merger, the plan of merger must include:
145-24 (1) the manner and basis of allocating and vesting the
145-25 property of each organization that is a party to the merger among
145-26 one or more of the surviving or new organizations;
145-27 (2) the name of each surviving or new organization
146-1 that is primarily obligated for the payment of the fair value of an
146-2 ownership or membership interest of an owner or member of a
146-3 domestic entity that is a party to the merger and who may have a
146-4 right to, and complies with the requirements for, dissent and
146-5 appraisal under this code applicable to the domestic entity; and
146-6 (3) the manner and basis of allocating each liability
146-7 and obligation of each organization that is a party to the merger,
146-8 or adequate provisions for the payment and discharge of each
146-9 liability and obligation, among one or more of the surviving or new
146-10 organizations.
146-11 Sec. 10.004. PLAN OF MERGER: PERMISSIVE PROVISIONS. A plan
146-12 of merger may include:
146-13 (1) amendments to the governing documents of any
146-14 surviving organization;
146-15 (2) provisions relating to an interest exchange,
146-16 including a plan of exchange; and
146-17 (3) any other provisions relating to the merger that
146-18 are not required by this chapter.
146-19 Sec. 10.005. CREATION OF HOLDING COMPANY BY MERGER. (a) In
146-20 this section:
146-21 (1) "Direct or indirect wholly owned subsidiary"
146-22 means, with respect to a domestic entity, another domestic entity,
146-23 all of the outstanding voting ownership or membership interests of
146-24 which are owned by the domestic entity or by one or more other
146-25 domestic entities or non-code organizations, all of the outstanding
146-26 voting ownership or membership interests of which are owned by the
146-27 domestic entity or one or more other wholly owned domestic entities
147-1 or non-code organizations.
147-2 (2) "Holding company" means a domestic entity that,
147-3 from its organization until a merger takes effect, was at all times
147-4 a direct or indirect wholly owned subsidiary of the domestic entity
147-5 and the ownership or membership interests of which are issued in
147-6 the merger.
147-7 (b) A domestic entity may, without owner approval and
147-8 pursuant to a plan of merger, restructure the ownership structure
147-9 of that entity to create a holding company structure under this
147-10 chapter and the provisions of this code under which the entity was
147-11 formed. The approval of the owners or members of a domestic entity
147-12 of a plan of merger that creates a holding company is not required
147-13 if:
147-14 (1) approval is not otherwise required by the
147-15 governing documents of the domestic entity;
147-16 (2) the domestic entity merges with a direct or
147-17 indirect domestic wholly owned entity;
147-18 (3) after the merger the domestic entity or its
147-19 successor is a direct or indirect wholly owned entity of a holding
147-20 company;
147-21 (4) the domestic entity and the direct or indirect
147-22 wholly owned entity are the only parties to the merger;
147-23 (5) each ownership or membership interest of the
147-24 domestic entity that is outstanding preceding the merger is
147-25 converted in the merger into an ownership or membership interest of
147-26 the holding company having the same designations, preferences,
147-27 limitations, and relative rights as the ownership or membership
148-1 interest held by the owner or member in the domestic entity;
148-2 (6) the holding company is a domestic entity of the
148-3 same organizational form as the merging domestic entity;
148-4 (7) except as provided by Subsections (c) and (d), the
148-5 initial governing documents of the holding company contain
148-6 provisions identical to the governing documents of the domestic
148-7 entity preceding the merger;
148-8 (8) except as provided by Subsections (c) and (d), the
148-9 initial governing documents of the surviving entity contain
148-10 provisions identical to the governing documents of the domestic
148-11 entity preceding the merger;
148-12 (9) the governing persons of the domestic entity
148-13 become or remain the governing persons of the holding company when
148-14 the merger takes effect;
148-15 (10) the owners or members of the domestic entity will
148-16 not recognize gain or loss for United States federal income tax
148-17 purposes or any other tax benefit or attribute as determined by the
148-18 governing authority of the domestic entity; and
148-19 (11) the governing authority of the domestic entity
148-20 adopts a resolution approving the plan of merger.
148-21 (c) Subsections (b)(7) and (8) do not require identical
148-22 provisions regarding the incorporator or incorporators, the entity
148-23 name, the registered office and agent, the initial governing
148-24 persons, and the initial subscribers of ownership interests and
148-25 provisions contained in any amendment to the certificate as are
148-26 necessary to effect a change, exchange, reclassification, or
148-27 cancellation of ownership or membership interests, if the change,
149-1 exchange, reclassification, or cancellation was in effect preceding
149-2 the merger.
149-3 (d) Notwithstanding Subsection (b)(8):
149-4 (1) the governing documents of the surviving entity
149-5 must require that an act or transaction by or involving the
149-6 surviving entity that requires for its approval under this code the
149-7 approval of the owners or members of the merging domestic entity
149-8 must, by specific reference to this section, require the approval
149-9 of the owners or members of the holding company, or any successor
149-10 by merger, by the same vote as is required by this code and the
149-11 governing documents of the surviving entity; and
149-12 (2) the governing documents of the surviving entity
149-13 may change the classes and series of ownership or membership
149-14 interests and the number of ownership or membership interests that
149-15 the surviving entity is authorized to issue.
149-16 (e) To the extent the provisions contained in Section 21.606
149-17 apply to a domestic entity and its owners or members when a merger
149-18 takes effect under this section, those provisions continue to apply
149-19 to the holding company and its owners or members immediately after
149-20 the merger takes effect as though the holding company were the
149-21 domestic entity. All ownership or membership interests of the
149-22 holding company acquired in the merger, for purposes of Section
149-23 21.606, are considered to have been acquired at the time the
149-24 ownership or membership interest of the domestic entity converted
149-25 in the merger was acquired. Any owner or member who, preceding the
149-26 merger, was not an affiliated owner or member as described by
149-27 Section 21.606 does not solely by reason of the merger become an
150-1 affiliated owner or member of the holding company.
150-2 (f) If the name of a holding company immediately following
150-3 the effectiveness of a merger under this section is the same as the
150-4 name of the domestic entity preceding the merger, the ownership or
150-5 membership interests of the holding company into which the
150-6 ownership or membership interests of the domestic entity are merged
150-7 are represented by the certificates, if any, that previously
150-8 represented the ownership or membership interests in the domestic
150-9 entity.
150-10 Sec. 10.006. SHORT FORM MERGER. (a) A parent organization
150-11 that owns at least 90 percent of the outstanding ownership or
150-12 membership interests of each class and series of each of one or
150-13 more subsidiary organizations may merge with one or more of the
150-14 subsidiary organizations as provided by this section if:
150-15 (1) at least one of the parties to the merger is a
150-16 domestic entity and each other party is a domestic entity or
150-17 another non-code organization organized under the laws of a
150-18 jurisdiction that permits a merger of the type authorized by this
150-19 chapter; and
150-20 (2) the resulting organization is the parent
150-21 organization or an existing or new subsidiary organization.
150-22 (b) A merger of one or more subsidiary organizations into
150-23 the parent organization is required to be approved only by a
150-24 resolution adopted by the governing authority of the parent
150-25 organization authorizing the merger.
150-26 (c) If the parent organization is a domestic entity and the
150-27 parent organization will not survive the merger:
151-1 (1) the owners or members of the parent organization
151-2 must approve the merger in the manner under this code that a merger
151-3 by that domestic entity is approved; and
151-4 (2) action to approve the merger by a subsidiary
151-5 organization is not required.
151-6 (d) If the parent organization does not own all of the
151-7 outstanding ownership or membership interests of each class or
151-8 series of ownership or membership interests of each subsidiary
151-9 organization that is a party to the merger, the resolution of the
151-10 parent organization required by this section must describe the
151-11 terms of the merger, including the cash or other property,
151-12 including ownership or membership interests, obligations, rights to
151-13 purchase securities, or other securities of any person or entity or
151-14 any combination of the ownership or membership interests,
151-15 obligations, rights, or other securities, to be used, paid, or
151-16 delivered by the parent organization on surrender of each ownership
151-17 or membership interest of the subsidiary organizations not owned by
151-18 the parent organization.
151-19 (e) An entity is not disqualified from effecting a merger
151-20 under any other provision of this chapter because it qualifies for
151-21 a merger under this section.
151-22 Sec. 10.007. EFFECTIVENESS OF MERGER. Except as otherwise
151-23 provided by Subchapter B, Chapter 4, a merger takes effect at the
151-24 time provided by the plan of merger or otherwise agreed to by the
151-25 parties, except that a merger that requires a filing under
151-26 Subchapter D takes effect on the acceptance of the filing of the
151-27 certificate of merger by the secretary of state or county clerk, as
152-1 appropriate.
152-2 Sec. 10.008. EFFECT OF MERGER. (a) When a merger takes
152-3 effect:
152-4 (1) the separate existence of each domestic entity
152-5 that is a party to the merger, other than a surviving or new
152-6 domestic entity, ceases;
152-7 (2) all rights, title, and interests to all real
152-8 estate and other property owned by each organization that is a
152-9 party to the merger is allocated to and vested, subject to any
152-10 existing liens or other encumbrances on the property, in one or
152-11 more of the surviving or new organizations as provided in the plan
152-12 of merger without:
152-13 (A) reversion or impairment;
152-14 (B) any further act or deed; or
152-15 (C) any transfer or assignment having occurred;
152-16 (3) all liabilities and obligations of each
152-17 organization that is a party to the merger are allocated to one or
152-18 more of the surviving or new organizations in the manner provided
152-19 by the plan of merger;
152-20 (4) each surviving or new domestic organization to
152-21 which a liability or obligation is allocated under the plan of
152-22 merger is the primary obligor for the liability or obligation, and,
152-23 except as otherwise provided by the plan of merger or by law or
152-24 contract, no other party to the merger, other than a surviving
152-25 domestic entity or non-code organization liable or otherwise
152-26 obligated at the time of the merger, and no other new domestic
152-27 entity or non-code organization created under the plan of merger is
153-1 liable for the debt or other obligation;
153-2 (5) any proceeding pending by or against any domestic
153-3 entity or by or against any non-code organization that is a party
153-4 to the merger may be continued as if the merger did not occur, or
153-5 the surviving or new domestic entity or entities or the surviving
153-6 or new non-code organization or non-code organizations to which the
153-7 liability, obligation, asset, or right associated with that
153-8 proceeding is allocated to and vested in under the plan of merger
153-9 may be substituted in the proceeding;
153-10 (6) the governing documents of each surviving domestic
153-11 entity are amended to the extent provided by the plan of merger;
153-12 (7) each new filing entity whose certificate of
153-13 formation is included in the plan of merger under this chapter, on
153-14 meeting any additional requirements, if any, of this code for its
153-15 formation, is formed as a domestic entity under this code as
153-16 provided by the plan of merger;
153-17 (8) the ownership or membership interests of each
153-18 organization that is a party to the merger and that are to be
153-19 converted or exchanged, in whole or part, into ownership or
153-20 membership interests, obligations, rights to purchase securities,
153-21 or other securities of one or more of the surviving or new
153-22 organizations, into cash or other property, including ownership or
153-23 membership interests, obligations, rights to purchase securities,
153-24 or other securities of any organization, or into any combination of
153-25 these are converted and exchanged and the former owners or members
153-26 who held ownership or membership interests of each domestic entity
153-27 that is a party to the merger are entitled only to the rights
154-1 provided by the certificate of merger or, if applicable, any rights
154-2 to receive the fair value for the ownership or membership interests
154-3 previously held by them provided under this code; and
154-4 (9) notwithstanding Subdivision (4), the surviving or
154-5 new organization named in the plan of merger as primarily obligated
154-6 to pay the fair value of an ownership or membership interest under
154-7 Section 10.003(2) is the primary obligor for that payment and all
154-8 other surviving or new organizations are secondarily liable for
154-9 that payment.
154-10 (b) If the plan of merger does not provide for the
154-11 allocation and vesting of the right, title, and interest in any
154-12 particular real estate or other property or for the allocation of
154-13 any liability or obligation of any party to the merger, the
154-14 unallocated property is owned in undivided interest by, or the
154-15 liability or obligation is the joint and several liability and
154-16 obligation of, each of the surviving and new organizations, pro
154-17 rata to the total number of surviving and new organizations
154-18 resulting from the merger.
154-19 (c) If a surviving organization in a merger is not a
154-20 domestic entity, the surviving organization is considered to have:
154-21 (1) appointed the secretary of state in this state as
154-22 the organization's agent for service of process in a proceeding to
154-23 enforce any obligation of a domestic entity that is a party to the
154-24 merger; and
154-25 (2) agreed to promptly pay to the dissenting owners or
154-26 members of each domestic entity that is a party to the merger who
154-27 have the right of dissent and appraisal under this code the amount,
155-1 if any, to which they are entitled under this code.
155-2 (d) If the surviving organization in a merger is not a
155-3 domestic entity, the organization shall register to transact
155-4 business in this state if the entity is required to register for
155-5 that purpose by another provision of this code.
155-6 Sec. 10.009. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
155-7 MERGERS. (a) A partner of a domestic partnership that is a party
155-8 to a merger does not become liable as a result of the merger for
155-9 the liability or obligation of another person that is a party to
155-10 the merger unless the partner consents to becoming personally
155-11 liable by action taken in connection with the specific plan of
155-12 merger approved by the partner.
155-13 (b) A partner of a domestic partnership that is a party to a
155-14 merger who remains in or enters a partnership is treated as an
155-15 incoming partner in the partnership when the merger takes effect
155-16 for purposes of determining the partner's liability for a debt or
155-17 obligation of the partnership or partnerships that are parties to
155-18 the merger or to be created in the merger and in which the partner
155-19 was not a partner.
155-20 (c) If a partnership merges with an organization and,
155-21 because of the merger, no longer exists, a former partner who
155-22 becomes an owner or member of the surviving organization may, until
155-23 the first anniversary of the effective date of the merger, bind the
155-24 surviving organization to a transaction for which the owner or
155-25 member no longer has authority to bind the organization if the
155-26 transaction is one in which the actions by the owner or member as a
155-27 partner would have bound the partnership before the effective date
156-1 of the merger, and the other party to the transaction:
156-2 (1) does not have actual or constructive notice of the
156-3 merger;
156-4 (2) had done business with the terminated partnership
156-5 within one year preceding the effective date of the merger; and
156-6 (3) reasonably believes that the partner who was
156-7 previously an owner or member of the partnership that was merged
156-8 into the surviving organization and is now an owner or member of
156-9 the surviving organization has the authority to bind the surviving
156-10 organization to the transaction at the time of the transaction.
156-11 (d) If a partnership is formed under a plan of merger, the
156-12 existence of the partnership as a partnership begins when the
156-13 merger takes effect, and the persons to be partners become partners
156-14 at that time.
156-15 (e) A partner in a domestic partnership that is a party to
156-16 the merger but does not survive shall be treated as a partner who
156-17 withdrew from the nonsurviving domestic partnership as of the
156-18 effective date of the merger.
156-19 Sec. 10.010. SPECIAL PROVISIONS APPLYING TO NONPROFIT ENTITY
156-20 MERGERS. (a) A domestic nonprofit entity may not merge into
156-21 another entity if the domestic nonprofit entity would, because of
156-22 the merger, lose or impair its charitable status.
156-23 (b) One or more domestic for-profit entities or non-code
156-24 organizations may merge into one or more domestic nonprofit
156-25 entities that continue as the surviving entity or entities.
156-26 (c) A domestic nonprofit entity may not merge into a foreign
156-27 for-profit entity if the domestic entity does not continue as the
157-1 surviving entity.
157-2 (d) One or more domestic nonprofit entities and non-code
157-3 organizations may merge into one or more foreign nonprofit entities
157-4 that continue as the surviving entity or entities.
157-5 (Sections 10.011-10.050 reserved for expansion)
157-6 SUBCHAPTER B. EXCHANGES OF INTERESTS
157-7 Sec. 10.051. INTEREST EXCHANGES. (a) For the purpose of
157-8 acquiring all of the outstanding ownership or membership interests
157-9 of one or more classes or series of one or more domestic entities,
157-10 one or more domestic entities or non-code organizations may adopt a
157-11 plan of exchange.
157-12 (b) To make an interest exchange under this section:
157-13 (1) the governing authority of each domestic entity
157-14 the ownership or membership interests of which are to be acquired
157-15 in the interest exchange must act on a plan of exchange and, if
157-16 otherwise required by this code, the owners or members of the
157-17 domestic entity must approve the plan of exchange in the manner
157-18 provided by this code; and
157-19 (2) each acquiring domestic entity must take all
157-20 action that may otherwise be required by this code and its
157-21 governing documents to effect the exchange.
157-22 (c) If a non-code organization is to acquire ownership or
157-23 membership interests in the exchange, each non-code organization
157-24 must take all action that is required under the laws of the
157-25 organization's jurisdiction of formation and the organization's
157-26 governing documents to effect the exchange.
157-27 (d) If one or more non-code organizations as part of the
158-1 plan of exchange are to issue ownership or membership interests,
158-2 the issuance of the ownership or membership interests must be
158-3 permitted by the laws under which the non-code organizations are
158-4 incorporated or organized or not inconsistent with those laws.
158-5 (e) A plan of exchange may not be effected if any owner or
158-6 member of a domestic entity that is a party to the interest
158-7 exchange will, as a result of the interest exchange, become
158-8 personally liable, without the consent of the owner or member, for
158-9 the liabilities or obligations of any other person or organization.
158-10 Sec. 10.052. PLAN OF EXCHANGE: REQUIRED PROVISIONS. (a) A
158-11 plan of exchange must include:
158-12 (1) the name of each domestic entity the ownership or
158-13 membership interests of which are to be acquired;
158-14 (2) the name of each acquiring organization;
158-15 (3) if there is more than one acquiring organization,
158-16 the ownership or membership interests to be acquired by each
158-17 organization;
158-18 (4) the terms and conditions of the exchange; and
158-19 (5) the manner and basis of exchanging the ownership
158-20 or membership interests to be acquired for:
158-21 (A) ownership or membership interests,
158-22 obligations, rights to purchase securities, or other securities of
158-23 one or more of the acquiring organizations that is a party to the
158-24 plan of exchange;
158-25 (B) cash;
158-26 (C) other property, including ownership or
158-27 membership interests, obligations, rights to purchase securities,
159-1 or other securities of any other person or entity; or
159-2 (D) any combination of those items.
159-3 (b) The manner and basis of exchanging an ownership or
159-4 membership interest of an owner or member that is exchanged in a
159-5 manner or basis different from any other owner or member having
159-6 ownership or membership interests of the same class or series must
159-7 be included in the plan of exchange in the same manner as provided
159-8 by Subsection (a)(5).
159-9 Sec. 10.053. PLAN OF EXCHANGE: PERMISSIVE PROVISIONS. A
159-10 plan of exchange may include any other provisions not required by
159-11 Section 10.052 relating to the interest exchange.
159-12 Sec. 10.054. EFFECTIVENESS OF EXCHANGE. Except as otherwise
159-13 provided by Subchapter B, Chapter 4, an interest exchange takes
159-14 effect at the time provided in the plan of exchange or otherwise
159-15 agreed to by the parties, except that an interest exchange that
159-16 requires a filing under Subchapter D takes effect on the acceptance
159-17 of the filing of the certificate of exchange by the secretary of
159-18 state or county clerk, as appropriate.
159-19 Sec. 10.055. GENERAL EFFECT OF INTEREST EXCHANGE. When an
159-20 interest exchange takes effect:
159-21 (1) the ownership or membership interest of each
159-22 acquired organization is exchanged as provided in the plan of
159-23 exchange, and the former owners whose interests are exchanged under
159-24 the plan of exchange are entitled only to the rights provided in
159-25 the certificate of exchange or, if applicable, a right to receive
159-26 the fair value for the ownership or membership interests provided
159-27 under Subchapter H; and
160-1 (2) the acquiring organization has all rights, title,
160-2 and interests with respect to the ownership or membership interest
160-3 to be acquired by it subject to the provisions of the certificate
160-4 of exchange.
160-5 (Sections 10.056-10.100 reserved for expansion)
160-6 SUBCHAPTER C. CONVERSIONS
160-7 Sec. 10.101. CONVERSION OF DOMESTIC ENTITIES. (a) A
160-8 domestic entity may convert into a different type of domestic
160-9 entity or a non-code organization by adopting a plan of conversion.
160-10 (b) To effect a conversion, the converting entity must act
160-11 on and the owners or members of the domestic entity must approve a
160-12 plan of conversion in the same manner as prescribed by this code
160-13 for the adoption and approval of a plan of merger by a domestic
160-14 entity.
160-15 (c) A conversion may not take effect if the conversion is
160-16 prohibited by or inconsistent with the laws of the converted
160-17 entity's jurisdiction of formation, and the formation,
160-18 incorporation, or organization of the converted entity under the
160-19 plan of conversion must be effected in compliance with those laws
160-20 pursuant to the plan of conversion.
160-21 (d) At the time a conversion takes effect, each owner of the
160-22 converting entity, other than those who receive payment of their
160-23 ownership or membership interest under any applicable provisions of
160-24 this code relating to dissent and appraisal, has, unless otherwise
160-25 agreed to by that owner or member, an ownership or membership
160-26 interest in, and is the owner or member of, the converted entity.
160-27 (e) A domestic entity may not convert under this section if
161-1 an owner or member of the domestic entity, as a result of the
161-2 conversion, becomes personally liable, without the consent of the
161-3 owner or member, for a liability or other obligation of the
161-4 converted entity.
161-5 Sec. 10.102. CONVERSION OF NON-CODE ORGANIZATION. (a) A
161-6 non-code organization may convert into a domestic entity by
161-7 adopting a plan of conversion as provided by this section.
161-8 (b) To effect a conversion, the non-code organization must
161-9 take any action that may be required for a conversion under the
161-10 laws of the organization's jurisdiction of formation and the
161-11 organization's governing documents.
161-12 (c) The conversion must be permitted by the laws under which
161-13 the non-code organization is incorporated or organized or by its
161-14 governing documents, which may not be inconsistent with the laws of
161-15 the jurisdiction in which the non-code organization is incorporated
161-16 or organized.
161-17 Sec. 10.103. PLAN OF CONVERSION: REQUIRED PROVISIONS. (a)
161-18 A plan of conversion must include:
161-19 (1) the name of the converting entity;
161-20 (2) the name of the converted entity;
161-21 (3) a statement that the converting entity is
161-22 continuing its existence in the organizational form of the
161-23 converted entity;
161-24 (4) a statement of the type of entity that the
161-25 converted entity is to be and the converted entity's jurisdiction
161-26 of formation;
161-27 (5) the manner and basis of converting the ownership
162-1 or membership interests of the converting entity into ownership or
162-2 membership interests of the converted entity;
162-3 (6) any certificate of formation required to be filed
162-4 under this code if the converted entity is a filing entity; and
162-5 (7) the certificate of formation or similar
162-6 organizational document of the converted entity if the converted
162-7 entity is not a filing entity.
162-8 (b) An item required by Subsection (a)(6) or (7) may be
162-9 included in the plan of conversion by an attachment or exhibit to
162-10 the plan.
162-11 Sec. 10.104. PLAN OF CONVERSION: PERMISSIVE PROVISIONS. A
162-12 plan of conversion may include other provisions relating to the
162-13 conversion that are not inconsistent with law.
162-14 Sec. 10.105. EFFECTIVENESS OF CONVERSION. Except as
162-15 otherwise provided by Subchapter B, Chapter 4, a conversion takes
162-16 effect at the time provided by the plan of conversion or otherwise
162-17 agreed to by the parties, except that a conversion that requires a
162-18 filing under Subchapter D takes effect on the acceptance of the
162-19 filing of the certificate of conversion by the filing officer.
162-20 Sec. 10.106. GENERAL EFFECT OF CONVERSION. When a
162-21 conversion takes effect:
162-22 (1) the converting entity continues to exist without
162-23 interruption in the organizational form of the converted entity
162-24 rather than in the organizational form of the converting entity;
162-25 (2) all rights, title, and interests to all property
162-26 owned by the converting entity continues to be owned, subject to
162-27 any existing liens or other encumbrances on the property, by the
163-1 converted entity in the new organizational form without:
163-2 (A) reversion or impairment;
163-3 (B) further act or deed; or
163-4 (C) any transfer or assignment having occurred;
163-5 (3) all liabilities and obligations of the converting
163-6 entity continue to be liabilities and obligations of the converted
163-7 entity in the new organizational form without impairment or
163-8 diminution because of the conversion;
163-9 (4) the rights of creditors or other parties with
163-10 respect to or against the previous owners or members of the
163-11 converting entity in their capacities as owners or members in
163-12 existence when the conversion takes effect continue to exist as to
163-13 those liabilities and obligations and may be enforced by the
163-14 creditors and obligees as if a conversion had not occurred;
163-15 (5) a proceeding pending by or against the converting
163-16 entity or by or against any of the converting entity's owners or
163-17 members in their capacities as owners or members may be continued
163-18 by or against the converted entity in the new organizational form
163-19 and by or against the previous owners or members without a need for
163-20 substituting a party;
163-21 (6) the ownership or membership interests of the
163-22 converting entity that are to be converted into ownership or
163-23 membership interests of the converted entity as provided in the
163-24 plan of conversion are converted as provided by the plan, and if
163-25 the converting entity is a domestic entity, the former owners or
163-26 members of the domestic entity are entitled only to the rights
163-27 provided in the plan of conversion or a right of dissent and
164-1 appraisal under this code;
164-2 (7) if, after the conversion takes effect, an owner or
164-3 member of the converted entity as an owner or member is liable for
164-4 the liabilities or obligations of the converted entity, the owner
164-5 or member is liable for the liabilities and obligations of the
164-6 converting entity that existed before the conversion took effect
164-7 only to the extent that the owner or member:
164-8 (A) agrees in writing to be liable for the
164-9 liabilities or obligations;
164-10 (B) was liable, before the conversion took
164-11 effect, for the liabilities or obligations; or
164-12 (C) by becoming an owner or member of the
164-13 converted entity, becomes liable under other applicable law for the
164-14 existing liabilities and obligations of the converted entity; and
164-15 (8) if the converted entity is a non-code
164-16 organization, the converted entity is considered to have:
164-17 (A) appointed the secretary of state in this
164-18 state as its agent for service of process in a proceeding to
164-19 enforce any obligation or the rights of dissenting owners or
164-20 members of the converting domestic entity; and
164-21 (B) agreed that the converted entity will
164-22 promptly pay the dissenting owners or members of the converting
164-23 domestic entity the amount, if any, to which they are entitled
164-24 under this code.
164-25 Sec. 10.107. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
164-26 CONVERSIONS. If a partnership is formed under a plan of conversion
164-27 under this code, the existence of the partnership as a partnership
165-1 begins when the conversion takes effect, and the owners or members
165-2 designated to become the partners under the plan of conversion
165-3 become the partners at that time.
165-4 (Sections 10.108-10.150 reserved for expansion)
165-5 SUBCHAPTER D. CERTIFICATE OF MERGER, EXCHANGE, OR CONVERSION
165-6 Sec. 10.151. CERTIFICATE OF MERGER AND EXCHANGE. (a) After
165-7 approval of a plan of merger or a plan of exchange as provided by
165-8 this code, a certificate of merger, which may also include an
165-9 exchange, or a certificate of exchange, as applicable, must be
165-10 filed for a merger or interest exchange to become effective if:
165-11 (1) for a merger:
165-12 (A) any domestic entity that is a party to the
165-13 merger is a filing entity; or
165-14 (B) any domestic entity to be created under the
165-15 plan of merger is a filing entity; or
165-16 (2) for an exchange, an ownership or membership
165-17 interest in any filing entity is to be acquired in the interest
165-18 exchange.
165-19 (b) If a certificate of merger or exchange is required to be
165-20 filed in connection with an interest exchange or a merger, other
165-21 than a merger under Section 10.006, the certificate must be signed
165-22 on behalf of each domestic entity and non-code organization that is
165-23 a party to the merger or exchange by an officer or other authorized
165-24 representative and must include:
165-25 (1) the plan of merger or exchange or a statement
165-26 certifying:
165-27 (A) the name of each domestic entity or non-code
166-1 organization that is a party to the merger or exchange;
166-2 (B) the name of each domestic entity or non-code
166-3 organization that is to be created by the plan of merger or
166-4 exchange;
166-5 (C) the name of the jurisdiction in which each
166-6 domestic entity or non-code organization named under Paragraph (A)
166-7 or (B) is incorporated or organized;
166-8 (D) for a merger, the amendments or changes to
166-9 the certificate of formation of each filing entity that is a party
166-10 to the merger, or if no amendments are desired to be effected by
166-11 the merger, a statement to that effect;
166-12 (E) that the certificate of formation of each
166-13 new filing entity to be created under the plan of merger or
166-14 exchange is being filed with the certificate of merger or exchange;
166-15 (F) that a signed plan of merger or exchange is
166-16 on file at the principal place of business of each surviving,
166-17 acquiring, or new domestic entity or non-code organization, and the
166-18 address of each principal place of business; and
166-19 (G) that a copy of the plan of merger or
166-20 exchange will be on written request furnished without cost by each
166-21 surviving, acquiring, or new domestic entity or non-code
166-22 organization to any owner or member of any domestic entity that is
166-23 a party to or created by the plan of merger or exchange and, for a
166-24 merger with multiple surviving domestic entities or non-code
166-25 organizations, to any creditor or obligee of the parties to the
166-26 merger at the time of the merger if a liability or obligation is
166-27 then outstanding;
167-1 (2) if approval of the owners or members of any
167-2 domestic entity that was a party to the plan of merger or exchange
167-3 is not required by this code, a statement to that effect; and
167-4 (3) a statement that the plan of merger or exchange
167-5 has been approved as required by the laws of the jurisdiction of
167-6 formation of each organization that is a party to the merger or
167-7 exchange and by the governing documents of those organizations.
167-8 (c) A certificate of merger may also constitute a
167-9 certificate of exchange if it contains the information required for
167-10 a certificate of exchange.
167-11 Sec. 10.152. CERTIFICATE OF MERGER: SHORT FORM MERGER. The
167-12 certificate of merger for a merger under Section 10.006 is required
167-13 to be signed only by an officer or other authorized representative
167-14 of the parent organization described by that section and must
167-15 include:
167-16 (1) the name of the parent organization, the name of
167-17 each subsidiary organization that is a party to the merger, and the
167-18 jurisdiction of formation of each named organization;
167-19 (2) the number of outstanding ownership interests of
167-20 each class or series of each subsidiary organization and the number
167-21 and percentage of ownership interests of each class or series owned
167-22 by the parent organization;
167-23 (3) a copy of the resolution adopted by the governing
167-24 authority of the parent organization authorizing the merger and the
167-25 date of the adoption of the resolution;
167-26 (4) if the surviving organization is not a domestic
167-27 entity, the address, including street number, if any, of its
168-1 registered or principal office in the organization's jurisdiction
168-2 of formation; or
168-3 (5) if the plan of merger is required to be approved
168-4 by the owners or members of the parent organization, the
168-5 information required by Section 10.151(b)(3).
168-6 Sec. 10.153. FILING OF CERTIFICATE OF MERGER OR EXCHANGE.
168-7 (a) If a certificate of merger or exchange is required to be
168-8 filed, the certificate of merger or exchange must be filed in
168-9 accordance with Chapter 4. The certificate of formation of each
168-10 filing entity that is to be formed under a plan of merger must also
168-11 be filed with the certificate of merger in accordance with Chapter
168-12 4. Except as provided by this section, the certificate must be
168-13 filed with the secretary of state.
168-14 (b) If a domestic real estate investment trust is a party to
168-15 the merger or if an ownership interest in a domestic real estate
168-16 investment trust is to be acquired in the interest exchange, the
168-17 certificate of merger or exchange must be filed in accordance with
168-18 Chapter 4 with the county clerk of the county in which the domestic
168-19 real estate investment trust's principal place of business in this
168-20 state is located.
168-21 (c) If a domestic real estate investment trust is to be
168-22 created under the plan of merger, the certificate of formation of
168-23 the domestic real estate investment trust must also be filed with
168-24 the certificate of merger in accordance with Chapter 4 with the
168-25 county clerk of the county in which the domestic real estate
168-26 investment trust's principal place of business in this state is
168-27 located.
169-1 Sec. 10.154. CERTIFICATE OF CONVERSION. (a) After approval
169-2 of a plan of conversion as provided by this code, a certificate of
169-3 conversion must be filed for the conversion to become effective if:
169-4 (1) any domestic entity that is a party to the
169-5 conversion is a filing entity; or
169-6 (2) any domestic entity to be created under the plan
169-7 of conversion is a filing entity.
169-8 (b) If a certificate of conversion is required to be filed
169-9 in connection with a conversion, the certificate must be signed on
169-10 behalf of the converting entity and must include:
169-11 (1) the plan of conversion or a statement certifying
169-12 the following:
169-13 (A) the name and jurisdiction of organization of
169-14 the converting entity;
169-15 (B) the organizational form of the converting
169-16 entity;
169-17 (C) that a signed plan of conversion is on file
169-18 at the principal place of business of the converting entity, and
169-19 the address of the principal place of business;
169-20 (D) that a signed plan of conversion will be on
169-21 file after the conversion at the principal place of business of the
169-22 converted entity, and the address of the principal place of
169-23 business; and
169-24 (E) that a copy of the plan of conversion will
169-25 be on written request furnished without cost by the converting
169-26 entity before the conversion or by the converted entity after the
169-27 conversion to any owner or member of the converting entity or the
170-1 converted entity; and
170-2 (2) a statement that the plan of conversion has been
170-3 approved as required by the laws of the jurisdiction of formation
170-4 and the governing documents of the converting entity.
170-5 Sec. 10.155. FILING OF CERTIFICATE OF CONVERSION. (a) If a
170-6 certificate of conversion is required to be filed, the certificate
170-7 of conversion must be filed in accordance with Chapter 4. If the
170-8 converted entity is a filing entity, the certificate of formation
170-9 of the filing entity must also be filed with the certificate of
170-10 conversion in accordance with Chapter 4. Except as provided by
170-11 this section, the certificate must be filed with the secretary of
170-12 state.
170-13 (b) If the converting entity is a domestic real estate
170-14 investment trust, the certificate of conversion must be filed with
170-15 the county clerk of the county in which the converting entity's
170-16 principal place of business in this state is located in accordance
170-17 with Chapter 4.
170-18 (c) If the converted entity is a domestic real estate
170-19 investment trust, the certificate of formation of the converted
170-20 entity must also be filed with the certificate of conversion with
170-21 the county clerk of the county in which the converted entity's
170-22 principal place of business in this state is located in accordance
170-23 with Chapter 4.
170-24 Sec. 10.156. ACCEPTANCE OF CERTIFICATE FOR FILING. The
170-25 filing officer may not accept a certificate of merger, exchange, or
170-26 conversion for filing if:
170-27 (1) the filing officer finds that the certificate of
171-1 merger, exchange, or conversion does not conform to law; or
171-2 (2) the required franchise taxes have not been paid or
171-3 the certificate of merger, exchange, or conversion does not provide
171-4 that one or more of the surviving, new, or acquiring organizations
171-5 or the converted entity is liable for the payment of the required
171-6 franchise taxes.
171-7 (Sections 10.157-10.200 reserved for expansion)
171-8 SUBCHAPTER E. ABANDONMENT OF MERGER, EXCHANGE, OR CONVERSION
171-9 Sec. 10.201. ABANDONMENT OF PLAN OF MERGER, EXCHANGE, OR
171-10 CONVERSION. After a merger, interest exchange, or conversion is
171-11 approved as provided by this code, and at any time before the
171-12 merger, interest exchange, or conversion takes effect, the plan of
171-13 merger, interest exchange, or conversion may be abandoned, subject
171-14 to any contractual rights, by any of the domestic entities that are
171-15 a party to the merger, interest exchange, or conversion, without
171-16 action by the owners or members, under the procedures provided by
171-17 the plan of merger, exchange, or conversion or, if no abandonment
171-18 procedures are provided, in the manner determined by the governing
171-19 authority.
171-20 Sec. 10.202. ABANDONMENT AFTER FILING. (a) If a
171-21 certificate of merger, exchange, or conversion has been filed, the
171-22 merger, interest exchange, or conversion may be abandoned in
171-23 accordance with Section 4.057.
171-24 (b) A filing of a certificate of abandonment under Section
171-25 4.057 is not required for the abandonment of a merger, interest
171-26 exchange, or conversion if no filing is required under Subchapter D
171-27 to make the merger, interest exchange, or conversion effective.
172-1 Sec. 10.203. ABANDONMENT IF NO FILING REQUIRED. If no
172-2 filing is required by this chapter to abandon a merger, interest
172-3 exchange, or conversion, the merger, interest exchange, or
172-4 conversion is abandoned when and on the terms as provided in
172-5 accordance with the procedures provided by the plan of merger,
172-6 exchange, or conversion or, if no procedures are provided by the
172-7 plan, in the manner determined by the governing authority.
172-8 (Sections 10.204-10.250 reserved for expansion)
172-9 SUBCHAPTER F. PROPERTY TRANSFERS AND DISPOSITIONS
172-10 Sec. 10.251. GENERAL POWER OF DOMESTIC ENTITY TO SELL,
172-11 LEASE, OR CONVEY PROPERTY. (a) Subject to any approval required
172-12 by this code or the governing documents of the domestic entity, a
172-13 domestic entity may transfer and convey by sale, lease, assignment,
172-14 or another method an interest in property of the entity, including
172-15 real property. The transfer and conveyance may:
172-16 (1) be made with or without the goodwill of the
172-17 entity;
172-18 (2) be made on any terms and conditions and for any
172-19 consideration, which may consist wholly or partly of money or other
172-20 property, including an ownership interest in a domestic entity or
172-21 non-code organization; and
172-22 (3) be evidenced by a deed, assignment, or other
172-23 instrument of transfer or conveyance, with or without the seal of
172-24 the entity.
172-25 (b) Subject to any approval required by this code or the
172-26 governing documents of the domestic entity, a domestic entity may
172-27 grant a pledge, mortgage, deed of trust, or trust indenture with
173-1 respect to an interest in property of the entity, including real
173-2 property, with or without the seal of the entity.
173-3 Sec. 10.252. NO APPROVAL REQUIRED FOR CERTAIN DISPOSITIONS
173-4 OF PROPERTY. Except as otherwise provided by this code, the
173-5 governing documents of the domestic entity, or specific limitations
173-6 established by the governing authority, a sale, lease, assignment,
173-7 conveyance, pledge, mortgage, deed of trust, trust indenture, or
173-8 other transfer of an interest in real property or other property
173-9 made by a domestic entity does not require the approval of the
173-10 governing authority, members, or owners of the entity.
173-11 Sec. 10.253. RECORDING INSTRUMENT CONVEYING REAL PROPERTY OF
173-12 DOMESTIC ENTITY. (a) A deed or other instrument executed by a
173-13 domestic entity that conveys an interest in real property may be
173-14 recorded in the same manner and with the same effect as other
173-15 similar instruments if the instrument is signed and acknowledged
173-16 by:
173-17 (1) an officer, authorized attorney-in-fact, or other
173-18 authorized person of the entity; and
173-19 (2) in the case of a partnership or limited liability
173-20 company, a governing person of the entity.
173-21 (b) A deed or other instrument executed by a domestic entity
173-22 that conveys an interest in real property and that is recorded and
173-23 signed by an officer, authorized attorney-in-fact, or other
173-24 authorized person of the entity constitutes prima facie evidence
173-25 that the sale or conveyance that is the subject of the instrument
173-26 was authorized under this code and the governing documents of the
173-27 entity.
174-1 Sec. 10.254. DISPOSITION OF PROPERTY NOT A MERGER OR
174-2 CONVERSION; LIABILITY. (a) A disposition of all or part of the
174-3 property of a domestic entity, regardless of whether the
174-4 disposition requires the approval of the entity's owners or
174-5 members, is not a merger or conversion for any purpose.
174-6 (b) Except as otherwise expressly provided by another law, a
174-7 person acquiring property described by this section may not be held
174-8 responsible or liable for a liability or obligation of the
174-9 transferring domestic entity that is not expressly assumed by the
174-10 person.
174-11 (Sections 10.255-10.300 reserved for expansion)
174-12 SUBCHAPTER G. BANKRUPTCY REORGANIZATION
174-13 Sec. 10.301. REORGANIZATION UNDER BANKRUPTCY AND SIMILAR
174-14 LAWS. (a) A trustee appointed for a domestic entity that is being
174-15 reorganized under a federal statute, the designated officers of a
174-16 domestic entity being reorganized under a federal statute, or any
174-17 other individual designated by a court having jurisdiction of a
174-18 domestic entity being reorganized under a federal statute to act on
174-19 behalf of the domestic entity may, without action by or notice to
174-20 the domestic entity's governing authority, owners, or members, in
174-21 order to carry out a plan of reorganization ordered by a court
174-22 under the federal statute:
174-23 (1) amend or restate the domestic entity's certificate
174-24 of formation if the certificate of formation after amendment or
174-25 restatement contains only provisions required or permitted to be
174-26 contained in the certificate of formation;
174-27 (2) merge or exchange an interest with one or more
175-1 domestic entities or non-code organizations under a plan of merger
175-2 or exchange having any provision required or permitted by Sections
175-3 10.002, 10.003, 10.004, 10.005, 10.052, and 10.053;
175-4 (3) change the location of the domestic entity's
175-5 registered office, change its registered agent, and remove or
175-6 appoint any agent to receive service of process;
175-7 (4) alter, amend, or repeal the domestic entity's
175-8 governing documents other than filing instruments;
175-9 (5) constitute or reconstitute and classify or
175-10 reclassify the domestic entity's governing authority and name,
175-11 constitute, or appoint managerial officials in place of or in
175-12 addition to all or some of the managerial officials;
175-13 (6) sell, lease, exchange, or otherwise dispose of
175-14 all, or substantially all, of the domestic entity's property and
175-15 assets;
175-16 (7) authorize and fix the terms, manner, and
175-17 conditions of the issuance of bonds, debentures, or other
175-18 obligations, regardless of whether the obligation is convertible
175-19 into ownership interests of any class or bearing warrants or other
175-20 evidences of optional rights to purchase or subscribe for any
175-21 ownership interests of any class;
175-22 (8) wind up and terminate the entity's existence; or
175-23 (9) effect a conversion.
175-24 (b) An action taken under Subsection (a)(4) or (5) takes
175-25 effect on entry of the order approving the plan of reorganization
175-26 or on another effective date as may be specified, without further
175-27 action of the domestic entity, as and to the extent provided by the
176-1 plan of reorganization or the order approving the plan of
176-2 reorganization.
176-3 Sec. 10.302. SIGNING OF DOCUMENTS. A trustee appointed for
176-4 a domestic entity being reorganized under a federal statute, the
176-5 designated officers of a domestic entity being reorganized under a
176-6 federal statute, or any other individual designated by a court
176-7 having jurisdiction of a domestic entity being reorganized under a
176-8 federal statute may sign on behalf of a domestic entity that is
176-9 being reorganized:
176-10 (1) a certificate of amendment or restated certificate
176-11 of formation containing:
176-12 (A) the name of the domestic entity;
176-13 (B) each amendment or the restatement approved
176-14 by the court;
176-15 (C) the date of the court's order approving the
176-16 certificate of amendment or the restatement;
176-17 (D) the name of the court having jurisdiction,
176-18 file name, and case number of the reorganization case in which the
176-19 order was entered; and
176-20 (E) a statement that the court had jurisdiction
176-21 of the case under a federal statute;
176-22 (2) a certificate of merger or exchange containing:
176-23 (A) the name of the domestic entity;
176-24 (B) the part of the plan of reorganization that
176-25 contains the plan of merger or exchange approved by the court,
176-26 which must include the information required by Section 10.151(b) or
176-27 10.152, as applicable, but which is not required to include the
177-1 resolution of the governing authority referred to in Section
177-2 10.152;
177-3 (C) the date of the court's order approving the
177-4 plan of merger or consolidation;
177-5 (D) the name of the court having jurisdiction,
177-6 file name, and case number of the reorganization case in which the
177-7 order or decree was entered; and
177-8 (E) a statement that the court had jurisdiction
177-9 of the case under a federal statute;
177-10 (3) a certificate of termination containing:
177-11 (A) the name of the domestic entity;
177-12 (B) the information required by Sections
177-13 11.101(c)(1)-(4);
177-14 (C) the date of the court's order approving the
177-15 certificate of termination;
177-16 (D) a statement that the obligations of the
177-17 domestic entity, including debts and liabilities, have been paid or
177-18 discharged as provided by the plan of reorganization and the
177-19 remaining property and assets of the domestic entity have been
177-20 distributed as provided by the plan of reorganization;
177-21 (E) the name of the court having jurisdiction,
177-22 file name, and case number of the reorganization case in which the
177-23 order or decree was entered; and
177-24 (F) a statement that the court had jurisdiction
177-25 of the case under a federal statute;
177-26 (4) a statement of change of registered office or
177-27 registered agent, or both, containing:
178-1 (A) the name of the domestic entity;
178-2 (B) the information required by Section
178-3 5.202(b), as applicable, but not the information included in the
178-4 statement referred to in Section 5.202(b)(6);
178-5 (C) the date of the court's order approving the
178-6 statement of change of registered office or registered agent, or
178-7 both;
178-8 (D) the name of the court having jurisdiction,
178-9 file name, and case number of the reorganization case in which the
178-10 order or decree was entered; and
178-11 (E) a statement that the court had jurisdiction
178-12 of the case under a federal statute; or
178-13 (5) a certificate of conversion containing:
178-14 (A) the name of the domestic entity;
178-15 (B) the part of the plan of reorganization that
178-16 contains the plan of conversion approved by the court, which must
178-17 include the information required by Section 10.103;
178-18 (C) the date of the court's order or decree
178-19 approving the plan of conversion;
178-20 (D) the name of the court having jurisdiction,
178-21 file name, and case number of the reorganization case in which the
178-22 order was entered; and
178-23 (E) a statement that the court had jurisdiction
178-24 of the case under a federal statute.
178-25 Sec. 10.303. REORGANIZATION WITH OTHER ENTITIES. If a
178-26 domestic entity or non-code organization that is not being
178-27 reorganized under a federal statute merges or exchanges an interest
179-1 with a domestic entity that is being reorganized under a plan of
179-2 reorganization under a federal statute:
179-3 (1) Subchapters A, B, D, E, and H apply to the
179-4 domestic entity or non-code organization that is not being
179-5 reorganized to the same extent those subchapters would apply if the
179-6 domestic entity or non-code organization were merging or engaging
179-7 in an interest exchange with a domestic entity that is not being
179-8 reorganized, except as otherwise provided by the plan of
179-9 reorganization ordered by a court under the federal statute;
179-10 (2) Subchapter H applies to a subsidiary organization
179-11 that is not being reorganized to the same extent that subchapter
179-12 would apply if the subsidiary organization were merging with a
179-13 parent organization that is not being reorganized;
179-14 (3) on the receipt of all required authorization for
179-15 all action required by this code for each domestic entity that is a
179-16 party to the plan of merger or exchange that is not being
179-17 reorganized and all action by each domestic entity or non-code
179-18 organization that is a party to the plan of merger or exchange
179-19 required by the laws of the entity's or organization's jurisdiction
179-20 of formation and governing documents, a certificate of merger or
179-21 exchange shall be signed by each domestic entity or non-code
179-22 organization that is a party to the merger or exchange other than
179-23 the domestic entity that is being reorganized as provided by
179-24 Section 10.151 and on behalf of the domestic entity that is being
179-25 reorganized by the persons specified in Section 10.302;
179-26 (4) the certificate of merger or exchange must contain
179-27 the information required by Section 10.302(2);
180-1 (5) the certificate of merger or exchange must be
180-2 filed in the manner provided by Section 10.153; and
180-3 (6) on the acceptance for filing of the certificate of
180-4 merger or exchange in accordance with Subchapter D, the merger or
180-5 interest exchange, when effective, has the same effect as if it had
180-6 been adopted by unanimous action of the governing authority and
180-7 owners or members of the domestic entity being reorganized, and the
180-8 effectiveness of the merger or interest exchange is determined as
180-9 provided by Section 10.007 or 10.054.
180-10 Sec. 10.304. RIGHT OF DISSENT AND APPRAISAL EXCLUDED. An
180-11 owner or member of a domestic entity being reorganized under a
180-12 federal statute does not have a right to dissent and appraisal
180-13 under this code except as provided by the plan of reorganization.
180-14 Sec. 10.305. AFTER FINAL DECREE. This subchapter does not
180-15 apply after the entry of a final decree in a reorganization case
180-16 under a federal statute even though the court that renders the
180-17 decree may retain jurisdiction of the case for limited purposes
180-18 unrelated to consummation of the plan of reorganization.
180-19 Sec. 10.306. CHAPTER CUMULATIVE OF OTHER CHANGES. This
180-20 chapter does not preclude other changes in a domestic entity or its
180-21 ownership or membership interests or securities by a plan of
180-22 reorganization ordered by a court under a federal statute.
180-23 (Sections 10.307-10.350 reserved for expansion)
180-24 SUBCHAPTER H. RIGHTS OF DISSENTING OWNERS
180-25 Sec. 10.351. APPLICABILITY OF SUBCHAPTER. (a) This
180-26 subchapter does not apply to a fundamental business transaction of
180-27 a domestic entity if, immediately before the effective date of the
181-1 fundamental business transaction, all of the ownership interests of
181-2 the entity otherwise entitled to rights to dissent and appraisal
181-3 under this code are held by one owner or only by the owners who
181-4 approved the fundamental business transaction.
181-5 (b) This subchapter applies only to a domestic entity
181-6 subject to dissenters' rights.
181-7 Sec. 10.352. DEFINITIONS. In this subchapter:
181-8 (1) "Dissenting owner" means an owner of an ownership
181-9 interest in a domestic entity subject to dissenters' rights who:
181-10 (A) provides notice under Section 10.356; and
181-11 (B) complies with the requirements for
181-12 perfecting that owner's right to dissent under this subchapter.
181-13 (2) "Responsible organization" means:
181-14 (A) the organization responsible for:
181-15 (i) the provision of notices under this
181-16 subchapter; and
181-17 (ii) the primary obligation of paying the
181-18 fair value for an ownership interest held by a dissenting owner;
181-19 (B) with respect to a merger or conversion:
181-20 (i) for matters occurring before the
181-21 merger or conversion, the organization that is merging or
181-22 converting; and
181-23 (ii) for matters occurring after the
181-24 merger or conversion, the surviving or new organization that is
181-25 primarily obligated for the payment of the fair value of the
181-26 dissenting owner's ownership interest in the merger or conversion;
181-27 (C) with respect to an interest exchange, the
182-1 organization the ownership interests of which are being acquired in
182-2 the interest exchange; and
182-3 (D) with respect to the sale of all or
182-4 substantially all of the assets of an organization, the
182-5 organization the assets of which are to be transferred by sale or
182-6 in another manner.
182-7 Sec. 10.353. FORM AND VALIDITY OF NOTICE. (a) Notice
182-8 required under this subchapter:
182-9 (1) must be in writing; and
182-10 (2) may be mailed, hand delivered, or delivered by
182-11 courier or electronic transmission.
182-12 (b) Failure to provide notice as required by this subchapter
182-13 does not invalidate any action taken.
182-14 Sec. 10.354. RIGHTS OF DISSENT AND APPRAISAL. (a) Subject
182-15 to Subsection (b), an owner of an ownership interest in a domestic
182-16 entity subject to dissenters' rights, is entitled to:
182-17 (1) dissent from:
182-18 (A) a plan of merger to which the domestic
182-19 entity is a party if owner approval is required by this code and
182-20 the owner owns in the domestic entity an ownership interest that
182-21 was entitled to vote on the plan of merger;
182-22 (B) a sale of all or substantially all of the
182-23 assets of the domestic entity if owner approval is required by this
182-24 code and the owner owns in the domestic entity an ownership
182-25 interest that was entitled to vote on the sale;
182-26 (C) a plan of exchange in which the ownership
182-27 interest of the owner is to be acquired;
183-1 (D) a plan of conversion in which the domestic
183-2 entity is the converting entity if owner approval is required by
183-3 this code and the owner owns in the domestic entity an ownership
183-4 interest that was entitled to vote on the plan of conversion; or
183-5 (E) a plan of merger effected under Section
183-6 10.006 in which:
183-7 (i) the owner is entitled to vote on the
183-8 plan; or
183-9 (ii) the ownership interest of the owner
183-10 is converted or exchanged; and
183-11 (2) subject to compliance with the procedures set
183-12 forth in this subchapter, obtain the fair value of that ownership
183-13 interest through an appraisal.
183-14 (b) Notwithstanding Subsection (a), an owner may not dissent
183-15 from a plan of merger or conversion in which there is a single
183-16 surviving or new domestic entity or non-code organization, or from
183-17 a plan of exchange, if:
183-18 (1) the ownership interest held by the owner is part
183-19 of a class or series of ownership interests that are on the record
183-20 date set for purposes of determining which owners are entitled to
183-21 vote on the plan of merger, conversion, or exchange, as
183-22 appropriate:
183-23 (A) listed on a national securities exchange or
183-24 a similar system;
183-25 (B) listed on the Nasdaq Stock Market or a
183-26 successor quotation system;
183-27 (C) designated as a national market security on
184-1 an interdealer quotation system by the National Association of
184-2 Securities Dealers, Inc., or a successor system; or
184-3 (D) held of record by at least 2,000 owners;
184-4 (2) the owner is not required by the terms of the plan
184-5 of merger, conversion, or exchange, as appropriate, to accept for
184-6 the owner's ownership interest any consideration that is different
184-7 from the consideration to be provided to any other holder of an
184-8 ownership interest of the same class or series as the ownership
184-9 interest held by the owner, other than cash instead of fractional
184-10 shares or interests the owner would otherwise be entitled to
184-11 receive; and
184-12 (3) the owner is not required by the terms of the plan
184-13 of merger, conversion, or exchange, as appropriate, to accept for
184-14 the owner's ownership interest any consideration other than:
184-15 (A) ownership interests of a domestic entity or
184-16 non-code organization of the same general organizational type that,
184-17 immediately after the effective date of the merger, conversion, or
184-18 exchange, as appropriate, will be part of a class or series of
184-19 ownership interests that are:
184-20 (i) listed on a national securities
184-21 exchange or authorized for listing on the exchange on official
184-22 notice of issuance;
184-23 (ii) approved for quotation as a national
184-24 market security on an interdealer quotation system by the National
184-25 Association of Securities Dealers, Inc., or a successor entity; or
184-26 (iii) held of record by at least 2,000
184-27 owners;
185-1 (B) cash instead of fractional ownership
185-2 interests the owner would otherwise be entitled to receive; or
185-3 (C) any combination of the ownership interests
185-4 and cash described by Paragraphs (A) and (B).
185-5 Sec. 10.355. NOTICE OF RIGHT OF DISSENT AND APPRAISAL. (a)
185-6 A domestic entity subject to dissenters' rights that takes or
185-7 proposes to take an action regarding which an owner has a right to
185-8 dissent and obtain an appraisal under Section 10.354 shall notify
185-9 each affected owner of the owner's rights under that section if:
185-10 (1) the action or proposed action is submitted to a
185-11 vote of the owners at a meeting; or
185-12 (2) approval of the action or proposed action is
185-13 obtained by written consent of the owners instead of being
185-14 submitted to a vote of the owners.
185-15 (b) If a domestic entity subject to dissenters' rights
185-16 effects or proposes to effect a merger under Section 10.006, the
185-17 responsible organization shall notify the owners who have a right
185-18 to dissent to the merger under Section 10.354 of their rights under
185-19 this subchapter not later than the 10th day after the effective
185-20 date of the merger.
185-21 (c) A notice required to be provided under Subsection (a) or
185-22 (b) must:
185-23 (1) be accompanied by a copy of this subchapter; and
185-24 (2) advise the owner of the location of the
185-25 responsible organization's principal executive offices to which a
185-26 notice required under Section 10.356(b)(2) may be provided.
185-27 (d) In addition to the requirements prescribed by Subsection
186-1 (c), a notice required to be provided under Subsection (a)(1) must
186-2 accompany the notice of the meeting to consider the action, and a
186-3 notice required under Subsection (a)(2) must be provided to:
186-4 (1) each owner who consents in writing to the action
186-5 before the owner delivers the written consent; and
186-6 (2) each owner who is entitled to vote on the action
186-7 and does not consent in writing to the action before the 11th day
186-8 after the date the action takes effect.
186-9 (e) Not later than the 10th day after the date an action
186-10 described by Subsection (a)(1) takes effect, the responsible
186-11 organization shall give notice that the action has been effected to
186-12 each owner who voted against the action and sent notice under
186-13 Section 10.356(b)(2).
186-14 Sec. 10.356. PROCEDURE FOR DISSENT BY OWNERS AS TO ACTIONS;
186-15 PERFECTION OF RIGHT OF DISSENT AND APPRAISAL. (a) An owner of an
186-16 ownership interest of a domestic entity subject to dissenters'
186-17 rights who has the right to dissent and appraisal from any of the
186-18 actions referred to in Section 10.354 may exercise that right to
186-19 dissent and appraisal only by complying with the procedures
186-20 specified in this subchapter. An owner's right of dissent and
186-21 appraisal under Section 10.354 may be exercised by an owner only
186-22 with respect to an ownership interest that is not voted in favor of
186-23 the action.
186-24 (b) To perfect the owner's rights of dissent and appraisal
186-25 under Section 10.354, an owner:
186-26 (1) with respect to the ownership interest for which
186-27 the rights of dissent and appraisal are sought:
187-1 (A) must vote against the action if the owner is
187-2 entitled to vote on the action and the action is approved at a
187-3 meeting of the owners; and
187-4 (B) may not consent to the action if the action
187-5 is approved by written consent; and
187-6 (2) must give to the responsible organization a notice
187-7 dissenting to the action that:
187-8 (A) is addressed to the president and secretary
187-9 of the responsible organization;
187-10 (B) demands payment of the fair value of the
187-11 ownership interests for which the rights of dissent and appraisal
187-12 are sought;
187-13 (C) provides to the responsible organization an
187-14 address to which a notice relating to the dissent and appraisal
187-15 procedures under this subchapter may be sent;
187-16 (D) states the number and class of the ownership
187-17 interests of the domestic entity owned by the owner and the fair
187-18 value of the ownership interests as estimated by the owner; and
187-19 (E) is delivered to the responsible organization
187-20 at its principal executive offices at the following time:
187-21 (i) before the action is considered for
187-22 approval, if the action is to be submitted to a vote of the owners
187-23 at a meeting;
187-24 (ii) not later than the 20th day after the
187-25 date the responsible organization gives to the owner a notice that
187-26 the action was approved by the requisite vote of the owners, if the
187-27 action is to be undertaken on the written consent of the owners; or
188-1 (iii) not later than the 20th day after
188-2 the date the responsible organization gives to the owner a notice
188-3 that the merger was effected, if the action is a merger effected
188-4 under Section 10.006.
188-5 (c) An owner who does not make a demand within the period
188-6 required by Subsection (b)(2)(E) is bound by the action and is not
188-7 entitled to exercise the rights of dissent and appraisal under
188-8 Section 10.354.
188-9 (d) Not later than the 20th day after the date an owner
188-10 makes a demand under this section, the owner must submit to the
188-11 responsible organization any certificates representing the
188-12 ownership interest to which the demand relates for purposes of
188-13 making a notation on the certificates that a demand for the payment
188-14 of the fair value of an ownership interest has been made under this
188-15 section. An owner's failure to submit the certificates within the
188-16 required period has the effect of terminating, at the option of the
188-17 responsible organization, the owner's rights to dissent and
188-18 appraisal under Section 10.354 unless a court, for good cause
188-19 shown, directs otherwise.
188-20 (e) If a domestic entity and responsible organization
188-21 satisfy the requirements of this subchapter relating to the rights
188-22 of owners of ownership interests in the entity to dissent to an
188-23 action and seek appraisal of those ownership interests, an owner of
188-24 an ownership interest who fails to perfect that owner's right of
188-25 dissent in accordance with this subchapter may not bring suit to
188-26 recover the value of the ownership interest or money damages
188-27 relating to the action.
189-1 Sec. 10.357. WITHDRAWAL OF DEMAND FOR FAIR VALUE OF
189-2 OWNERSHIP INTEREST. Unless the responsible organization consents
189-3 to the withdrawal of the demand, an owner may not withdraw a demand
189-4 for the payment of the fair value of an ownership interest made
189-5 under Section 10.356 before:
189-6 (1) payment for the ownership interest has been made
189-7 under Sections 10.358 and 10.361; or
189-8 (2) a petition has been filed under Section 10.361.
189-9 Sec. 10.358. RESPONSE BY ORGANIZATION TO NOTICE OF DISSENT
189-10 AND DEMAND FOR FAIR VALUE BY DISSENTING OWNER. (a) Not later than
189-11 the 20th day after the date a responsible organization receives a
189-12 demand for payment made by a dissenting owner in accordance with
189-13 Section 10.356, the responsible organization shall respond to the
189-14 dissenting owner in writing by:
189-15 (1) accepting the amount claimed in the demand as the
189-16 fair value of the ownership interests specified in the notice; or
189-17 (2) rejecting the demand and including in the response
189-18 the requirements prescribed by Subsection (c).
189-19 (b) If the responsible organization accepts the amount
189-20 claimed in the demand, the responsible organization shall pay the
189-21 amount not later than the 90th day after the date the action that
189-22 is the subject of the demand was effected if the owner delivers to
189-23 the responsible organization:
189-24 (1) endorsed certificates representing the ownership
189-25 interests if the ownership interests are certificated; or
189-26 (2) signed assignments of the ownership interests if
189-27 the ownership interests are uncertificated.
190-1 (c) If the responsible organization rejects the amount
190-2 claimed in the demand, the responsible organization shall provide
190-3 to the owner:
190-4 (1) an estimate by the responsible organization of the
190-5 fair value of the ownership interests; and
190-6 (2) an offer to pay the amount of the estimate
190-7 provided under Subdivision (1).
190-8 (d) An offer made under Subsection (c)(2) must remain open
190-9 for a period of at least 60 days from the date the offer is first
190-10 delivered to the dissenting owner.
190-11 (e) If a dissenting owner accepts an offer made by a
190-12 responsible organization under Subsection (c)(2) or if a dissenting
190-13 owner and a responsible organization reach an agreement on the fair
190-14 value of the ownership interests, the responsible organization
190-15 shall pay the agreed amount not later than the 60th day after the
190-16 date the offer is accepted or the agreement is reached, as
190-17 appropriate, if the dissenting owner delivers to the responsible
190-18 organization:
190-19 (1) endorsed certificates representing the ownership
190-20 interests if the ownership interests are certificated; or
190-21 (2) signed assignments of the ownership interests if
190-22 the ownership interests are uncertificated.
190-23 Sec. 10.359. RECORD OF DEMAND FOR FAIR VALUE OF OWNERSHIP
190-24 INTEREST. (a) A responsible organization shall note in the
190-25 organization's ownership interest records maintained under Section
190-26 3.151 the record receipt of a demand for payment from any
190-27 dissenting owner made under Section 10.356.
191-1 (b) If an ownership interest that is the subject of a demand
191-2 for payment made under Section 10.356 is transferred, a new
191-3 certificate representing that ownership interest must contain:
191-4 (1) a reference to the demand; and
191-5 (2) the name of the original dissenting owner of the
191-6 ownership interest.
191-7 Sec. 10.360. RIGHTS OF TRANSFEREE OF CERTAIN OWNERSHIP
191-8 INTEREST. A transferee of an ownership interest that is the
191-9 subject of a demand for payment made under Section 10.356 does not
191-10 acquire additional rights with respect to the responsible
191-11 organization following the transfer. The transferee has only the
191-12 rights the original dissenting owner had with respect to the
191-13 responsible organization after making the demand.
191-14 Sec. 10.361. PROCEEDING TO DETERMINE FAIR VALUE OF OWNERSHIP
191-15 INTEREST AND OWNERS ENTITLED TO PAYMENT; APPOINTMENT OF APPRAISERS.
191-16 (a) If a responsible organization rejects the amount demanded by a
191-17 dissenting owner under Section 10.358 and the dissenting owner and
191-18 responsible organization are unable to reach an agreement relating
191-19 to the fair value of the ownership interests within the period
191-20 prescribed by Section 10.358(d), the dissenting owner or
191-21 responsible organization may file a petition requesting a finding
191-22 and determination of the fair value of the owner's ownership
191-23 interests in a court in:
191-24 (1) the county in which the organization's principal
191-25 office is located in this state; or
191-26 (2) the county in which the organization's registered
191-27 office is located in this state, if the organization does not have
192-1 a business office in this state.
192-2 (b) A petition described by Subsection (a) must be filed not
192-3 later than the 60th day after the expiration of the period required
192-4 by Section 10.358(d).
192-5 (c) On the filing of a petition by an owner under Subsection
192-6 (a), service of a copy of the petition shall be made to the
192-7 responsible organization. Not later than the 10th day after the
192-8 date a responsible organization receives service under this
192-9 subsection, the responsible organization shall file with the clerk
192-10 of the court in which the petition was filed a list containing the
192-11 names and addresses of each owner of the organization who has
192-12 demanded payment for ownership interests under Section 10.356 and
192-13 with whom agreement as to the value of the ownership interests has
192-14 not been reached with the responsible organization. If the
192-15 responsible organization files a petition under Subsection (a), the
192-16 petition must be accompanied by this list.
192-17 (d) The clerk of the court in which a petition is filed
192-18 under this section shall provide by registered mail notice of the
192-19 time and place set for the hearing to:
192-20 (1) the responsible organization; and
192-21 (2) each owner named on the list described by
192-22 Subsection (c) at the address shown for the owner on the list.
192-23 (e) The court shall:
192-24 (1) determine which owners have:
192-25 (A) perfected their rights by complying with
192-26 this subchapter; and
192-27 (B) become subsequently entitled to receive
193-1 payment for the fair value of their ownership interests; and
193-2 (2) appoint one or more qualified appraisers to
193-3 determine the fair value of the ownership interests of the owners
193-4 described by Subdivision (1).
193-5 (f) The court shall approve the form of a notice required to
193-6 be provided under this section. The judgment of the court is final
193-7 and binding on the responsible organization, any other organization
193-8 obligated to make payment under this subchapter for an ownership
193-9 interest, and each owner who is notified as required by this
193-10 section.
193-11 Sec. 10.362. COMPUTATION AND DETERMINATION OF FAIR VALUE OF
193-12 OWNERSHIP INTEREST. (a) For purposes of this subchapter, the fair
193-13 value of an ownership interest of a domestic entity subject to
193-14 dissenters' rights is the value of the ownership interest on the
193-15 date preceding the date of the action that is the subject of the
193-16 appraisal. Any appreciation or depreciation in the value of the
193-17 ownership interest occurring in anticipation of the proposed action
193-18 or as a result of the action must be specifically excluded from the
193-19 computation of the fair value of the ownership interest.
193-20 (b) In computing the fair value of an ownership interest
193-21 under this subchapter, consideration must be given to the value of
193-22 the organization as a going concern without including in the
193-23 computation of value any:
193-24 (1) payment for a control premium or minority discount
193-25 other than a discount attributable to the type of ownership
193-26 interests held by the dissenting owner; and
193-27 (2) limitation placed on the rights and preferences of
194-1 those ownership interests.
194-2 (c) The determination of the fair value of an ownership
194-3 interest made for purposes of this subchapter may not be used for
194-4 purposes of making a determination of the fair value of that
194-5 ownership interest for another purpose or of the fair value of
194-6 another ownership interest, including for purposes of determining
194-7 any minority or liquidity discount that might apply to a sale of an
194-8 ownership interest.
194-9 Sec. 10.363. POWERS AND DUTIES OF APPRAISER; APPRAISAL
194-10 PROCEDURES. (a) An appraiser appointed under Section 10.361 has
194-11 the power and authority that:
194-12 (1) is granted by the court in the order appointing
194-13 the appraiser; and
194-14 (2) may be conferred by a court to a master in
194-15 chancery as provided by Rule 171, Texas Rules of Civil Procedure.
194-16 (b) The appraiser shall:
194-17 (1) determine the fair value of an ownership interest
194-18 of an owner adjudged by the court to be entitled to payment for the
194-19 ownership interest; and
194-20 (2) file with the court a report of that
194-21 determination.
194-22 (c) The appraiser is entitled to examine the books and
194-23 records of a responsible organization and may conduct
194-24 investigations as the appraiser considers appropriate. A
194-25 dissenting owner or responsible organization may submit to an
194-26 appraiser evidence or other information relevant to the
194-27 determination of the fair value of the ownership interest required
195-1 by Subsection (b)(1).
195-2 (d) The clerk of the court appointing the appraiser shall
195-3 provide notice of the filing of the report under Subsection (b) to
195-4 each dissenting owner named in the list filed under Section 10.361
195-5 and the responsible organization.
195-6 Sec. 10.364. OBJECTION TO APPRAISAL; HEARING. (a) A
195-7 dissenting owner or responsible organization may object, based on
195-8 the law or the facts, to all or part of an appraisal report
195-9 containing the fair value of an ownership interest determined under
195-10 Section 10.363(b).
195-11 (b) If an objection to a report is raised under Subsection
195-12 (a), the court shall hold a hearing to determine the fair value of
195-13 the ownership interest that is the subject of the report. After
195-14 the hearing, the court shall require the responsible organization
195-15 to pay to the holders of the ownership interest the amount of the
195-16 determined value with interest, accruing from the 91st day after
195-17 the date the applicable action for which the owner elected to
195-18 dissent was effected until the date of the judgment.
195-19 (c) Interest under Subsection (b) accrues at the same rate
195-20 as is provided for the accrual of prejudgment interest in civil
195-21 cases.
195-22 (d) The responsible organization shall:
195-23 (1) immediately pay the amount of the judgment to a
195-24 holder of an uncertificated ownership interest; and
195-25 (2) pay the amount of the judgment to a holder of a
195-26 certificated ownership interest immediately after the certificate
195-27 holder surrenders to the responsible organization an endorsed
196-1 certificate representing the ownership interest.
196-2 (e) On payment of the judgment, the dissenting owner does
196-3 not have an interest in the:
196-4 (1) ownership interest for which the payment is made;
196-5 or
196-6 (2) responsible organization with respect to that
196-7 ownership interest.
196-8 Sec. 10.365. COURT COSTS; COMPENSATION FOR APPRAISER. (a)
196-9 An appraiser appointed under Section 10.361 is entitled to a
196-10 reasonable fee payable from court costs.
196-11 (b) All court costs shall be allocated between the
196-12 responsible organization and the dissenting owners in the manner
196-13 that the court determines to be fair and equitable.
196-14 Sec. 10.366. STATUS OF OWNERSHIP INTEREST HELD OR FORMERLY
196-15 HELD BY DISSENTING OWNER. (a) An ownership interest of an
196-16 organization acquired by a responsible organization under this
196-17 subchapter:
196-18 (1) in the case of a merger, conversion, or interest
196-19 exchange, shall be held or disposed of as provided in the plan of
196-20 merger, conversion, or interest exchange; and
196-21 (2) in any other case, may be held or disposed of by
196-22 the responsible organization in the same manner as other ownership
196-23 interests acquired by the organization or held in its treasury.
196-24 (b) An owner who has demanded payment for the owner's
196-25 ownership interest under Section 10.356 is not entitled to vote or
196-26 exercise any other rights of another owner with respect to the
196-27 ownership interest except the right to:
197-1 (1) receive payment for the ownership interest under
197-2 this subchapter; and
197-3 (2) bring an appropriate action to obtain relief on
197-4 the ground that the action to which the demand relates would be or
197-5 was fraudulent.
197-6 (c) An ownership interest for which payment has been
197-7 demanded under Section 10.356 may not be considered outstanding for
197-8 purposes of any subsequent vote or action.
197-9 Sec. 10.367. RIGHTS OF OWNERS FOLLOWING TERMINATION OF RIGHT
197-10 OF DISSENT. (a) The rights of a dissenting owner terminate if:
197-11 (1) the owner withdraws the demand under Section
197-12 10.356;
197-13 (2) the owner's right of dissent is terminated under
197-14 Section 10.356;
197-15 (3) a petition is not filed within the period required
197-16 by Section 10.361; or
197-17 (4) after a hearing held under Section 10.361, the
197-18 court adjudges that the owner is not entitled to elect to dissent
197-19 from an action under this subchapter.
197-20 (b) On termination of the right of dissent under this
197-21 section:
197-22 (1) the dissenting owner and all persons claiming a
197-23 right under the owner are conclusively presumed to have approved
197-24 and ratified the action to which the owner dissented and are bound
197-25 by that action;
197-26 (2) the owner's right to be paid the fair value of the
197-27 owner's ownership interests ceases and the owner's status as an
198-1 owner of those ownership interests is restored without prejudice in
198-2 any interim proceeding if the owner's ownership interests were not
198-3 canceled, converted, or exchanged as a result of the action or a
198-4 subsequent fundamental business transaction; and
198-5 (3) the dissenting owner is entitled to receive
198-6 dividends or other distributions made in the interim to owners of
198-7 the same class and series of ownership interests held by the owner
198-8 as if a demand for the payment of the ownership interests had not
198-9 been made under Section 10.356, subject to any change in or
198-10 adjustment to ownership interests because of the cancellation or
198-11 exchange of the ownership interests after the date a demand under
198-12 Section 10.356 was made pursuant to a fundamental business
198-13 transaction.
198-14 Sec. 10.368. EXCLUSIVITY OF REMEDY OF DISSENT AND APPRAISAL.
198-15 In the absence of fraud in the transaction, any right of an owner
198-16 of an ownership interest to dissent from an action and obtain the
198-17 fair value of the ownership interest under this subchapter is the
198-18 exclusive remedy for recovery of:
198-19 (1) the value of the ownership interest or money
198-20 damages to the owner with respect to the ownership interest; and
198-21 (2) the owner's right in the organization with respect
198-22 to a fundamental business transaction.
198-23 (Sections 10.369-10.900 reserved for expansion)
198-24 SUBCHAPTER Z. MISCELLANEOUS PROVISIONS
198-25 Sec. 10.901. CREDITORS; ANTITRUST. This code does not
198-26 affect, nullify, or repeal the antitrust laws or abridge any right
198-27 or rights of any creditor under existing laws.
199-1 Sec. 10.902. NONEXCLUSIVITY. This chapter does not limit
199-2 the power of a domestic entity or non-code organization to acquire
199-3 all or part of the ownership or membership interests of one or more
199-4 classes or series of a domestic entity through a voluntary exchange
199-5 or otherwise.
199-6 CHAPTER 11. WINDING UP AND TERMINATION OF DOMESTIC ENTITY
199-7 SUBCHAPTER A. GENERAL PROVISIONS
199-8 Sec. 11.001. DEFINITIONS. In this chapter:
199-9 (1) "Claim" means a right to payment, damages, or
199-10 property, whether liquidated or unliquidated, accrued or
199-11 contingent, matured or unmatured.
199-12 (2) "Event requiring a winding up" means an event
199-13 specified by Section 11.051.
199-14 (3) "Existing claim" with respect to an entity means:
199-15 (A) a claim against the entity that existed
199-16 before the entity's termination and is not barred by limitations;
199-17 or
199-18 (B) a contractual obligation incurred after
199-19 termination.
199-20 (4) "Terminated entity" means a domestic entity the
199-21 existence of which has been:
199-22 (A) terminated in a manner authorized or
199-23 required by this code, unless the entity has been reinstated in the
199-24 manner provided by this code; or
199-25 (B) forfeited pursuant to the Tax Code, unless
199-26 the forfeiture has been set aside.
199-27 (5) "Voluntary decision to wind up" means the
200-1 determination to wind up a domestic entity made by the domestic
200-2 entity or the owners, members, or governing authority of the
200-3 domestic entity in the manner specified by the title of this code
200-4 governing the domestic entity.
200-5 (6) "Voluntary winding up" means winding up as a
200-6 result of a voluntary decision to wind up.
200-7 (7) "Winding up" means the process of winding up the
200-8 business and affairs of a domestic entity as a result of the
200-9 occurrence of an event requiring winding up.
200-10 (Sections 11.002-11.050 reserved for expansion)
200-11 SUBCHAPTER B. WINDING UP OF DOMESTIC ENTITY
200-12 Sec. 11.051. EVENT REQUIRING WINDING UP OF DOMESTIC ENTITY.
200-13 Winding up of a domestic entity is required on:
200-14 (1) the expiration of the domestic entity's period of
200-15 duration, if not perpetual;
200-16 (2) a voluntary decision to wind up the domestic
200-17 entity;
200-18 (3) an event specified in the governing documents of
200-19 the domestic entity requiring the winding up, dissolution, or
200-20 termination of the domestic entity;
200-21 (4) an event specified in this code requiring the
200-22 winding up or termination of the domestic entity; and
200-23 (5) a decree by a court requiring the winding up or
200-24 dissolution of the domestic entity, rendered under this code or
200-25 other law.
200-26 Sec. 11.052. WINDING UP PROCEDURES. Except as provided by
200-27 the title of this code governing the domestic entity, on the
201-1 occurrence of an event requiring winding up of a domestic entity,
201-2 unless the event requiring winding up is revoked under Section
201-3 11.151 or canceled under Section 11.152, the owners, members,
201-4 managerial officials, or other persons specified in the title of
201-5 this code governing the domestic entity shall, as soon as
201-6 reasonably practicable, wind up the business and affairs of the
201-7 domestic entity. The domestic entity shall:
201-8 (1) cease to carry on its business, except to the
201-9 extent necessary to wind up its business;
201-10 (2) mail a written notice of the winding up to each
201-11 known claimant against the domestic entity;
201-12 (3) collect and sell its property to the extent the
201-13 property is not to be distributed in kind to the domestic entity's
201-14 owners or members; and
201-15 (4) perform any other act required to wind up its
201-16 business and affairs.
201-17 Sec. 11.053. PROPERTY APPLIED TO DISCHARGE LIABILITIES AND
201-18 OBLIGATIONS. (a) Except as provided by Subsection (b) and the
201-19 title of this code governing the domestic entity, a domestic entity
201-20 in the process of winding up shall apply and distribute its
201-21 property to discharge, or make adequate provision for the discharge
201-22 of, all of the domestic entity's liabilities and obligations.
201-23 (b) Except as provided by the title of this code governing
201-24 the domestic entity, if the property of a domestic entity is not
201-25 sufficient to discharge all of the domestic entity's liabilities
201-26 and obligations, the domestic entity shall:
201-27 (1) apply its property, to the extent possible, to the
202-1 just and equitable discharge of its liabilities and obligations,
202-2 including liabilities and obligations owed to owners or members,
202-3 other than for distributions; or
202-4 (2) make adequate provision for the application of the
202-5 property described by Subdivision (1).
202-6 (c) Except as provided by the title of this code governing
202-7 the domestic entity, after a domestic entity has discharged, or
202-8 made adequate provision for the discharge of, all of its
202-9 liabilities and obligations, the domestic entity shall distribute
202-10 the remainder of its property, in cash or in kind, to the domestic
202-11 entity's owners according to their respective rights and interests.
202-12 (d) A domestic entity may continue its business wholly or
202-13 partly, including delaying the disposition of property of the
202-14 domestic entity, only for the limited period necessary to avoid
202-15 unreasonable loss of the entity's property or business.
202-16 Sec. 11.054. COURT SUPERVISION OF WINDING UP PROCESS. On
202-17 application of a domestic entity or an owner or member of a
202-18 domestic entity, a court may:
202-19 (1) supervise the winding up of the domestic entity;
202-20 (2) appoint a person to carry out the winding up of
202-21 the domestic entity; and
202-22 (3) make any other order, direction, or inquiry that
202-23 the circumstances may require.
202-24 Sec. 11.055. COURT ACTION OR PROCEEDING DURING WINDING UP.
202-25 During the winding up process, a domestic entity may continue
202-26 prosecuting or defending a court action or proceeding by or against
202-27 the domestic entity.
203-1 (Sections 11.056-11.100 reserved for expansion)
203-2 SUBCHAPTER C. TERMINATION OF DOMESTIC ENTITY
203-3 Sec. 11.101. CERTIFICATE OF TERMINATION FOR FILING ENTITY.
203-4 (a) On completion of the winding up process under Subchapter B, a
203-5 filing entity must file a certificate of termination in accordance
203-6 with Chapter 4.
203-7 (b) A certificate from the comptroller that all taxes
203-8 administered by the comptroller under Title 2, Tax Code, have been
203-9 paid must be filed with the certificate of termination in
203-10 accordance with Chapter 4 if the filing entity is a professional
203-11 corporation, for-profit corporation, or limited liability company.
203-12 (c) The certificate of termination must contain:
203-13 (1) the name of the filing entity;
203-14 (2) the name and address of each of the filing
203-15 entity's governing persons;
203-16 (3) the entity's file number assigned by the secretary
203-17 of state, unless the entity is a real estate investment trust;
203-18 (4) the nature of the event requiring winding up; and
203-19 (5) a statement that the filing entity has complied
203-20 with the provisions of this code governing its winding up.
203-21 Sec. 11.102. EFFECTIVENESS OF TERMINATION OF FILING ENTITY.
203-22 Except as otherwise provided by this chapter, the existence of a
203-23 filing entity terminates on the filing of a certificate of
203-24 termination with the filing officer.
203-25 Sec. 11.103. NOTICE OF TERMINATION TO OWNERS OR MEMBERS OF
203-26 NONFILING ENTITY. (a) On completion of the winding up process
203-27 under Subchapter B, a nonfiling entity shall send written notice of
204-1 the termination by mail to each of its owners or members.
204-2 (b) The notice required under Subsection (a) must contain:
204-3 (1) the name of the nonfiling entity;
204-4 (2) the name and address of each of the nonfiling
204-5 entity's governing persons;
204-6 (3) the nature of the event requiring winding up;
204-7 (4) a statement that the nonfiling entity has complied
204-8 with the provisions of this code governing its winding up; and
204-9 (5) a statement that the existence of the nonfiling
204-10 entity is terminated.
204-11 Sec. 11.104. EFFECTIVENESS OF TERMINATION OF NONFILING
204-12 ENTITY. Except as otherwise provided by this chapter, the
204-13 existence of a nonfiling entity terminates on the mailing of the
204-14 written notice required by Section 11.103.
204-15 (Sections 11.105-11.150 reserved for expansion)
204-16 SUBCHAPTER D. REVOCATION AND CONTINUATION
204-17 Sec. 11.151. REVOCATION OF VOLUNTARY WINDING UP. (a) Before
204-18 the termination of the existence of a domestic entity takes effect,
204-19 the domestic entity may revoke a voluntary decision to wind up the
204-20 entity by approval of the revocation in the manner specified in the
204-21 title of this code governing the entity.
204-22 (b) A domestic entity may continue its business following
204-23 the revocation of a voluntary decision to wind up under Subsection
204-24 (a).
204-25 Sec. 11.152. CONTINUATION OF BUSINESS WITHOUT WINDING UP.
204-26 (a) Subject to Subsections (c) and (d), a domestic entity to which
204-27 an event requiring the winding up of the entity occurs as specified
205-1 by Section 11.051(3) or (4) may cancel the event requiring winding
205-2 up in the manner specified in the title of this code governing the
205-3 domestic entity not later than the first anniversary of the date of
205-4 the event requiring winding up or an earlier period prescribed by
205-5 the title of this code governing the domestic entity.
205-6 (b) A domestic entity to which an event requiring winding up
205-7 as specified in Section 11.051(1) occurs may cancel the event
205-8 requiring winding up by amending its governing documents to extend
205-9 the period of its duration in perpetuity, for a definite time in
205-10 the manner provided by this code not later than the third
205-11 anniversary of the date of the event requiring winding up, or for
205-12 an earlier period prescribed by the title of this code governing
205-13 the domestic entity. The expiration of the period of its duration
205-14 does not by itself create a vested right on the part of an owner,
205-15 member, or creditor of the entity to prevent the extension of its
205-16 existence. An act undertaken or a contract entered into by a
205-17 terminated entity during a period in which the entity could have
205-18 extended its existence under this section is not invalidated by the
205-19 expiration of the period of the entity's duration, regardless of
205-20 whether the entity has taken any action to extend its existence.
205-21 (c) A domestic entity may not cancel an event requiring
205-22 winding up specified in Section 11.051(3) and continue its business
205-23 if the action is prohibited by the entity's governing documents or
205-24 the title of this code governing the entity.
205-25 (d) A domestic entity may cancel an event requiring winding
205-26 up specified in Section 11.051(4) and continue its business only if
205-27 the action:
206-1 (1) is not prohibited by the entity's governing
206-2 documents; and
206-3 (2) is expressly authorized by the title of this code
206-4 governing the entity.
206-5 (e) On cancellation of an event requiring winding up under
206-6 this section, the domestic entity may continue its business.
206-7 (Sections 11.153-11.200 reserved for expansion)
206-8 SUBCHAPTER E. REINSTATEMENT OF TERMINATED ENTITY
206-9 Sec. 11.201. CONDITIONS FOR REINSTATEMENT. (a) A
206-10 terminated entity may be reinstated under this subchapter if:
206-11 (1) the termination was by mistake or inadvertent;
206-12 (2) the termination occurred without the knowledge of
206-13 the entity's governing persons to the extent their knowledge is
206-14 required by the title of this code governing the terminated entity;
206-15 (3) the process of winding up before termination had
206-16 not been completed by the entity; or
206-17 (4) the legal existence of the entity is necessary to:
206-18 (A) convey or assign property;
206-19 (B) settle or release a claim or liability;
206-20 (C) take an action; or
206-21 (D) sign an instrument or agreement.
206-22 (b) A terminated entity may not be reinstated under this
206-23 section if the termination occurred as a result of:
206-24 (1) an order of a court or the secretary of state;
206-25 (2) an event requiring winding up that is specified in
206-26 the title of this code governing the terminated entity, if that
206-27 title prohibits reinstatement; or
207-1 (3) forfeiture under the Tax Code.
207-2 Sec. 11.202. PROCEDURES FOR REINSTATEMENT. (a) To the
207-3 extent applicable, a terminated entity, to be reinstated, must
207-4 complete the requirements of this section not later than the third
207-5 anniversary of the date the termination of the terminated entity's
207-6 existence took effect.
207-7 (b) The owners, members, governing persons, or other persons
207-8 must approve the reinstatement of the domestic entity in the manner
207-9 provided by the title of this code governing the domestic entity.
207-10 (c) After approval of the reinstatement of a filing entity
207-11 that was terminated, and not later than the third anniversary of
207-12 the date of the filing of the entity's certificate of termination,
207-13 the filing entity shall file a certificate of reinstatement in
207-14 accordance with Chapter 4.
207-15 (d) A certificate of reinstatement filed under Subsection
207-16 (c) must contain:
207-17 (1) the name of the filing entity;
207-18 (2) the file number assigned by the secretary of state
207-19 to the entity if the entity is not a real estate investment trust;
207-20 (3) the effective date of the entity's termination;
207-21 (4) a statement that the reinstatement of the filing
207-22 entity has been approved in the manner required by this code; and
207-23 (5) the name of the entity's registered agent and the
207-24 address of the entity's registered office.
207-25 Sec. 11.203. USE OF NAME SIMILAR TO PREVIOUSLY REGISTERED
207-26 NAME. If the secretary of state determines that a filing entity's
207-27 name contained in a certificate of reinstatement filed under
208-1 Section 11.202 is the same as or deceptively similar to a name of a
208-2 filing entity or foreign entity on file as provided by or reserved
208-3 or registered under this code, the secretary of state may not
208-4 accept for filing the certificate of reinstatement unless the
208-5 filing entity contemporaneously amends its certificate of formation
208-6 to change its name or obtains consent for the use of the similar
208-7 name.
208-8 Sec. 11.204. EFFECTIVENESS OF REINSTATEMENT OF NONFILING
208-9 ENTITY. The reinstatement of a terminated nonfiling entity takes
208-10 effect on the approval required by Section 11.202(b).
208-11 Sec. 11.205. EFFECTIVENESS OF REINSTATEMENT OF FILING
208-12 ENTITY. The reinstatement of a terminated filing entity that
208-13 previously filed a certificate of termination takes effect on the
208-14 filing of the entity's certificate of reinstatement.
208-15 Sec. 11.206. EFFECT OF REINSTATEMENT. (a) A terminated
208-16 entity the existence of which is reinstated under this subchapter
208-17 is subject to the provisions of this chapter requiring winding up
208-18 and termination. Reinstatement does not revoke or cancel a prior
208-19 event requiring winding up.
208-20 (b) When the reinstatement of a terminated entity takes
208-21 effect:
208-22 (1) the existence of the terminated entity is
208-23 considered to have continued without interruption from the date of
208-24 termination; and
208-25 (2) the terminated entity may carry on its business as
208-26 if the termination of its existence had not occurred.
208-27 (Sections 11.207-11.250 reserved for expansion)
209-1 SUBCHAPTER F. INVOLUNTARY TERMINATION OF FILING
209-2 ENTITY BY SECRETARY OF STATE
209-3 Sec. 11.251. TERMINATION OF FILING ENTITY BY SECRETARY OF
209-4 STATE. (a) If it appears to the secretary of state that, with
209-5 respect to a filing entity, a circumstance described by
209-6 Subsection (b) exists, the secretary of state may notify the entity
209-7 of the circumstance by regular or certified mail addressed to the
209-8 entity at the entity's registered office or principal place of
209-9 business as shown on the records of the secretary of state.
209-10 (b) The secretary of state may terminate a filing entity's
209-11 existence if the secretary finds that the entity has failed to,
209-12 and, before the 91st day after the date notice was mailed has not
209-13 corrected the entity's failure to:
209-14 (1) file a report within the period required by law or
209-15 to pay a fee or penalty prescribed by law when due and payable;
209-16 (2) maintain a registered agent or registered office
209-17 in this state as required by law; or
209-18 (3) pay a fee required in connection with a filing, or
209-19 payment of the fee was dishonored when presented by the state for
209-20 payment.
209-21 Sec. 11.252. CERTIFICATE OF TERMINATION. (a) The secretary
209-22 of state may terminate a filing entity's existence by issuing and
209-23 delivering to the filing entity at its registered office or
209-24 principal place of business a certificate of termination. The
209-25 certificate must state that the filing entity has been
209-26 involuntarily terminated and the date and cause of the termination.
209-27 (b) Except as otherwise provided by this chapter, the
210-1 existence of the filing entity is terminated on the issuance of the
210-2 certificate of termination by the secretary of state.
210-3 Sec. 11.253. REINSTATEMENT AFTER INVOLUNTARY TERMINATION.
210-4 (a) The secretary of state shall reinstate a filing entity that
210-5 has been involuntarily terminated under this subchapter if the
210-6 entity:
210-7 (1) files an application for reinstatement accompanied
210-8 by each amendment to the entity's certificate of formation that is
210-9 required by intervening events, including circumstances requiring
210-10 an amendment to the filing entity's name; and
210-11 (2) has corrected the circumstances that led to the
210-12 involuntary termination and any other circumstances that may exist
210-13 of the types described by Section 11.251(b), including the payment
210-14 of fees, interest, or penalties.
210-15 (b) If a filing entity is reinstated before the third
210-16 anniversary of the date of its involuntary termination, the entity
210-17 is considered to have continued in existence without interruption
210-18 from the date of termination.
210-19 (Sections 11.254-11.300 reserved for expansion)
210-20 SUBCHAPTER G. JUDICIAL WINDING UP AND TERMINATION
210-21 Sec. 11.301. GROUNDS CONSTITUTING INVOLUNTARY WINDING UP AND
210-22 TERMINATION OF FILING ENTITY BY STATE ACTION. A court may enter a
210-23 decree requiring winding up of a filing entity's business and
210-24 termination of the filing entity's existence if, as the result of
210-25 an action brought under this subchapter, the court finds that one
210-26 or more of the following problems exist:
210-27 (1) the filing entity or its organizers did not comply
211-1 with a condition precedent to its formation;
211-2 (2) the certificate of formation of the filing entity
211-3 or any amendment to the certificate of formation was fraudulently
211-4 filed;
211-5 (3) the filing entity has continued to transact
211-6 business beyond the scope of the purpose of the filing entity as
211-7 expressed in its certificate of formation;
211-8 (4) a misrepresentation of a material matter has been
211-9 made in an application, report, affidavit, or other document
211-10 submitted by the filing entity under this code; or
211-11 (5) public interest requires winding up and
211-12 termination of the filing entity because:
211-13 (A) the filing entity has been convicted of a
211-14 felony or a high managerial agent of the filing entity has been
211-15 convicted of a felony committed in the conduct of the filing
211-16 entity's affairs; and
211-17 (B) the filing entity or high managerial agent
211-18 has engaged in a persistent course of felonious conduct and
211-19 termination is necessary to prevent future felonious conduct of the
211-20 same character.
211-21 Sec. 11.302. NOTIFICATION OF CAUSE OF ACTION BY SECRETARY OF
211-22 STATE. (a) The secretary of state shall provide to the attorney
211-23 general:
211-24 (1) the name of a filing entity that has given cause
211-25 under Section 11.301 for involuntary winding up of the entity's
211-26 business and termination of the entity's existence; and
211-27 (2) the facts relating to the cause for the winding up
212-1 and termination.
212-2 (b) When notice is provided under Subsection (a), the
212-3 secretary of state shall notify the filing entity of the
212-4 circumstances by mail addressed to the entity at its registered
212-5 office in this state. The notice must state that the secretary of
212-6 state has given notice under Subsection (a) and the grounds for the
212-7 notification. The secretary of state must record the date a notice
212-8 required by this subsection is mailed.
212-9 (c) A court shall accept a certificate issued by the
212-10 secretary of state as to the facts relating to the cause for the
212-11 winding up and termination and the mailing of a notice under
212-12 Subsection (b) as prima facie evidence of the facts stated in the
212-13 certificate and the mailing of the notice.
212-14 Sec. 11.303. FILING OF ACTION BY ATTORNEY GENERAL. If the
212-15 attorney general determines that cause exists for the involuntary
212-16 winding up of a filing entity's business and termination of the
212-17 entity's existence under Section 11.301 and the filing entity has
212-18 not cured the problems for which winding up and termination is
212-19 sought before the 31st day after the date the notice under Section
212-20 11.302(b) is mailed to the filing entity, the attorney general
212-21 shall file an action against the filing entity in the name of the
212-22 state seeking the winding up and termination.
212-23 Sec. 11.304. CURE BEFORE FINAL JUDGMENT. An action filed by
212-24 the attorney general under Section 11.303 shall be abated if,
212-25 before a district court renders judgment on the action, the filing
212-26 entity:
212-27 (1) cures the problems for which winding up and
213-1 termination is sought; and
213-2 (2) pays the costs of the action.
213-3 Sec. 11.305. JUDGMENT REQUIRING WINDING UP AND TERMINATION.
213-4 If a district court finds in an action brought under this
213-5 subchapter that proper grounds exist under Sections 11.301(1)-(4)
213-6 for a winding up of a filing entity's business and termination of
213-7 the filing entity's existence, the court shall:
213-8 (1) make findings to that effect; and
213-9 (2) subject to Section 11.306, enter a judgment not
213-10 earlier than the fifth day after the date the court makes its
213-11 findings.
213-12 Sec. 11.306. APPLICATION FOR STAY OF JUDGMENT. (a) If, in
213-13 an action brought under this subchapter, a filing entity has proved
213-14 by a preponderance of the evidence and obtained a finding that the
213-15 problems for which the filing entity has been found guilty were not
213-16 wilful or the result of a failure to take reasonable precautions,
213-17 the entity may make a sworn application to the court for a stay of
213-18 entry of the judgment to allow the filing entity a reasonable
213-19 opportunity to cure the problems for which it has been found
213-20 guilty. An application made under this subsection must be made not
213-21 later than the fifth day after the date the court makes its
213-22 findings under Section 11.305.
213-23 (b) After a filing entity has made an application under
213-24 Subsection (a), a court shall stay the entry of the judgment if the
213-25 court is reasonably satisfied after considering the application and
213-26 evidence offered with respect to the application that the filing
213-27 entity:
214-1 (1) is able and intends in good faith to cure the
214-2 problems for which it has been found guilty; and
214-3 (2) has not applied for the stay without just cause.
214-4 (c) A court shall stay an entry of judgment under Subsection
214-5 (b) for the period the court determines is reasonably necessary to
214-6 afford the filing entity the opportunity to cure its problems if
214-7 the entity acts with reasonable diligence. The court may not stay
214-8 the entry of the judgment for longer than 60 days after the date
214-9 the court's findings are made.
214-10 (d) The court shall dismiss an action against a filing
214-11 entity that, during the period the action is stayed by the court
214-12 under this section, cures the problems for which winding up and
214-13 termination is sought and pays all costs accrued in the action.
214-14 (e) If a court finds that a filing entity has not cured the
214-15 problems for which winding up and termination is sought within the
214-16 period prescribed by Subsection (c), the court shall enter final
214-17 judgment requiring a winding up of the filing entity's business.
214-18 Sec. 11.307. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF
214-19 FINDINGS BY APPEALS COURT. (a) An appellate court that affirms a
214-20 trial court's findings against a filing entity under this
214-21 subchapter shall remand the case to the trial court with
214-22 instructions to grant the filing entity an opportunity to cure the
214-23 problems for which the entity has been found guilty if:
214-24 (1) the filing entity did not make an application to
214-25 the trial court for stay of the entry of the judgment;
214-26 (2) the appellate court is satisfied that the appeal
214-27 was taken in good faith and not for purpose of delay or with no
215-1 sufficient cause;
215-2 (3) the appellate court finds that the problems for
215-3 which the filing entity has been found guilty are capable of being
215-4 cured; and
215-5 (4) the filing entity has prayed for the opportunity
215-6 to cure its problems in the appeal.
215-7 (b) The appellate court shall determine the period, which
215-8 may not be longer than 60 days after the date the case is remanded
215-9 to the trial court, to be afforded to a filing entity to enable the
215-10 filing entity to cure its problems under Subsection (a).
215-11 (c) The trial court to which an action against a filing
215-12 entity has been remanded under this section shall dismiss the
215-13 action if, during the period prescribed by the appellate court for
215-14 that conduct, the filing entity cures the problems for which
215-15 winding up and termination is sought and pays all costs accrued in
215-16 the action.
215-17 (d) If a filing entity has not cured the problems for which
215-18 winding up and termination is sought within the period prescribed
215-19 by the appellate court under Subsection (b), the judgment requiring
215-20 winding up and termination shall become final.
215-21 Sec. 11.308. JURISDICTION AND VENUE. (a) The attorney
215-22 general shall bring an action for the involuntary winding up and
215-23 termination of a filing entity under this subchapter in:
215-24 (1) a district court of the county in which the
215-25 registered office or principal place of business of the filing
215-26 entity in this state is located; or
215-27 (2) a district court of Travis County.
216-1 (b) A district court described by Subsection (a) has
216-2 jurisdiction of the action for involuntary winding up and
216-3 termination.
216-4 Sec. 11.309. PROCESS IN STATE ACTION. Citation in an action
216-5 for the involuntary winding up and termination of a filing entity
216-6 under this subchapter shall be issued and served as provided by
216-7 law.
216-8 Sec. 11.310. PUBLICATION OF NOTICE. (a) If process in an
216-9 action under this subchapter is returned not found, the attorney
216-10 general shall publish notice in a newspaper in the county in which
216-11 the registered office of the filing entity in this state is
216-12 located. The notice must contain:
216-13 (1) a statement of the pendency of the action;
216-14 (2) the title of the court;
216-15 (3) the title of the action; and
216-16 (4) the earliest date on which default judgment may be
216-17 entered by the court.
216-18 (b) Notice under this section must be published at least
216-19 once a week for two consecutive weeks beginning at any time after
216-20 the citation has been returned.
216-21 (c) The attorney general may include in one published notice
216-22 the name of each filing entity against which an action for
216-23 involuntary winding up and termination is pending in the same
216-24 court.
216-25 (d) Not later than the 10th day after the date notice under
216-26 this section is first published, the attorney general shall mail a
216-27 copy of the notice to the filing entity at the filing entity's
217-1 registered office in this state. A certificate from the attorney
217-2 general regarding the mailing of the notice is prima facie evidence
217-3 that notice was mailed under this section.
217-4 (e) Unless a filing entity has been served with citation, a
217-5 default judgment may not be taken against the entity before the
217-6 31st day after the date the notice is first published.
217-7 Sec. 11.311. ACTION ALLOWED AFTER EXPIRATION OF FILING
217-8 ENTITY'S DURATION. The expiration of a filing entity's period of
217-9 duration does not, by itself, create a vested right on the part of
217-10 an owner or creditor of the filing entity to prevent an action by
217-11 the attorney general for the involuntary winding up of the filing
217-12 entity's business and termination of the filing entity's existence.
217-13 Sec. 11.312. COMPLIANCE BY TERMINATED ENTITY. On the decree
217-14 of a court requiring winding up of a filing entity's business, the
217-15 filing entity shall comply with:
217-16 (1) the requirements of the decree concerning the
217-17 winding up process; and
217-18 (2) Subchapter B to the extent it does not conflict
217-19 with the decree.
217-20 Sec. 11.313. TIMING OF TERMINATION. A court may enter a
217-21 decree under Section 11.301 terminating the existence of a filing
217-22 entity:
217-23 (1) when the court considers it necessary or
217-24 advisable; or
217-25 (2) on completion of the winding up process.
217-26 Sec. 11.314. INVOLUNTARY WINDING UP AND TERMINATION IN
217-27 PRIVATE ACTIONS. (a) Subject to Subsection (b), a district court
218-1 in the county in which the registered office or principal place of
218-2 a domestic partnership or limited liability company is located has
218-3 jurisdiction to order the winding up and termination of the
218-4 domestic partnership or limited liability company on application
218-5 by:
218-6 (1) a partner in the partnership if the court
218-7 determines that:
218-8 (A) the economic purpose of the partnership is
218-9 likely to be unreasonably frustrated; or
218-10 (B) another partner has engaged in conduct
218-11 relating to the partnership's business that makes it not reasonably
218-12 practicable to carry on the business in partnership with that
218-13 partner; or
218-14 (2) an owner of the partnership or limited liability
218-15 company if the court determines that it is not reasonably
218-16 practicable to carry on the entity's business in conformity with
218-17 its governing documents.
218-18 Sec. 11.315. FILING OF DECREE OF TERMINATION AGAINST FILING
218-19 ENTITY. (a) The clerk of a court that enters a decree terminating
218-20 the existence of a filing entity shall file in accordance with
218-21 Chapter 4 a certified copy of the decree.
218-22 (b) A fee may not be charged for the filing of a decree
218-23 under this section.
218-24 (Sections 11.316-11.350 reserved for expansion)
218-25 SUBCHAPTER H. CLAIMS RESOLUTION ON TERMINATION
218-26 Sec. 11.351. LIABILITY OF TERMINATED ENTITY. A terminated
218-27 entity is liable only for an existing claim.
219-1 Sec. 11.352. DEPOSIT WITH COMPTROLLER OF AMOUNT DUE OWNERS
219-2 AND CREDITORS WHO ARE UNKNOWN OR CANNOT BE LOCATED. (a) On the
219-3 voluntary or involuntary termination of a domestic entity, the
219-4 portion of the entity's assets distributable to creditors or owners
219-5 who are unknown or cannot be found after the exercise of reasonable
219-6 diligence by a person responsible for the distribution in
219-7 liquidation of the domestic entity's assets must be reduced to cash
219-8 and deposited as provided by Subsection (b).
219-9 (b) Money from assets liquidated under Subsection (a) shall
219-10 be deposited with the comptroller in a special account to be
219-11 maintained by the comptroller. The money must be accompanied by a
219-12 statement to the comptroller containing:
219-13 (1) the name and last known address of each person who
219-14 is known to be entitled to all or part of the account;
219-15 (2) the amount of each entitled person's distributive
219-16 portion of the money; and
219-17 (3) other information about each person who is
219-18 entitled to all or part of the money as the comptroller may
219-19 reasonably require.
219-20 (c) The comptroller shall issue a receipt for money received
219-21 under this section.
219-22 Sec. 11.353. DISCHARGE OF LIABILITY OF PERSON RESPONSIBLE
219-23 FOR LIQUIDATION. A person responsible for the distribution in
219-24 liquidation of a filing entity's assets will be released and
219-25 discharged from further liability with respect to money received
219-26 from the liquidation when the person deposits the money with the
219-27 comptroller under Section 11.352.
220-1 Sec. 11.354. PAYMENT FROM ACCOUNT BY COMPTROLLER. (a) To
220-2 claim money deposited in an account under Section 11.352, a person
220-3 must submit to the comptroller satisfactory written proof of the
220-4 person's right to the money not later than the seventh anniversary
220-5 of the date the money was deposited with the comptroller.
220-6 (b) The comptroller shall issue a warrant drawn on the
220-7 account created under Section 11.352 in favor of a person who meets
220-8 the requirements for making a claim under Subsection (a) and in the
220-9 amount to which the person is entitled.
220-10 Sec. 11.355. NOTICE OF ESCHEAT; ESCHEAT. (a) If no
220-11 claimant has made satisfactory proof of a right to the money within
220-12 the period prescribed by Section 11.354(a), the comptroller shall
220-13 publish in one issue of a newspaper of general circulation in
220-14 Travis County a notice of the proposed escheat of the money.
220-15 (b) A notice published under Subsection (a) must contain:
220-16 (1) the name and last known address of any known
220-17 creditor or owner entitled to the money;
220-18 (2) the amount of money deposited with the
220-19 comptroller; and
220-20 (3) the name of the terminated filing entity from
220-21 whose assets the money was derived.
220-22 (c) If no claimant makes satisfactory proof to the
220-23 comptroller of a right to the money before the 61st day after the
220-24 date notice under this section is published, the money
220-25 automatically escheats to and becomes the property of the state and
220-26 shall be deposited in the general revenue fund.
220-27 Sec. 11.356. LIMITED SURVIVAL AFTER TERMINATION. (a)
221-1 Notwithstanding the termination of a domestic entity under this
221-2 chapter, a terminated entity continues in existence until the third
221-3 anniversary of the effective date of the entity's termination only
221-4 for purposes of:
221-5 (1) prosecuting or defending in the terminated
221-6 entity's name an action or proceeding brought by or against the
221-7 terminated entity;
221-8 (2) permitting the survival of an existing claim by or
221-9 against the terminated entity;
221-10 (3) holding title to and liquidating property that
221-11 remained with the terminated entity at the time of termination or
221-12 property that is collected by the terminated entity after
221-13 termination;
221-14 (4) applying or distributing property, or its
221-15 proceeds, as provided by Section 11.053; and
221-16 (5) settling affairs not completed before termination.
221-17 (b) A terminated entity may not continue its existence for
221-18 the purpose of continuing the business or affairs for which the
221-19 terminated entity was formed unless the terminated entity is
221-20 reinstated under Subchapter E.
221-21 (c) If an action on an existing claim by or against a
221-22 terminated entity has been brought before the expiration of the
221-23 three-year period after the date of the entity's termination and
221-24 the claim was not extinguished under Section 11.359, the terminated
221-25 entity continues to survive for purposes of:
221-26 (1) the action until all judgments, orders, and
221-27 decrees have been fully executed; and
222-1 (2) the application or distribution of any property of
222-2 the terminated entity as provided by Section 11.053 until the
222-3 property has been applied or distributed.
222-4 Sec. 11.357. GOVERNING PERSONS OF ENTITY DURING LIMITED
222-5 SURVIVAL. (a) During the three-year period that a terminated
222-6 entity's existence is continued under this section, the governing
222-7 persons of the terminated entity serving at the time of termination
222-8 shall continue to manage the affairs of the terminated entity for
222-9 the limited purposes specified by this section and have the powers
222-10 necessary to accomplish those purposes. The number of governing
222-11 persons:
222-12 (1) may be reduced because of the death of a governing
222-13 person; and
222-14 (2) may include successors to governing persons chosen
222-15 by the other governing persons.
222-16 (b) In exercising powers prescribed under Subsection (a), a
222-17 governing person:
222-18 (1) has the same duties to the terminated entity that
222-19 the person had immediately before the termination; and
222-20 (2) is liable to the terminated entity for the
222-21 person's actions taken after the entity's termination to the same
222-22 extent that the person would have been liable had the person taken
222-23 those actions before the termination.
222-24 Sec. 11.358. ACCELERATED PROCEDURE FOR EXISTING CLAIM
222-25 RESOLUTION. (a) A terminated entity may shorten the period for
222-26 resolving a person's existing claim against the entity by giving
222-27 notice by registered or certified mail, return receipt requested,
223-1 to the claimant at the claimant's last known address that the claim
223-2 must be resolved under this section.
223-3 (b) The notice required under Subsection (a) must:
223-4 (1) state the requirements of Subsections (c) and (d)
223-5 for presenting a claim;
223-6 (2) provide the mailing address to which the person's
223-7 claim against the terminated entity must be sent;
223-8 (3) state that the claim will be extinguished if
223-9 written presentation of the claim is not received at the address
223-10 given on or before the date specified in the notice, which may not
223-11 be earlier than the 120th day after the date the notice is mailed
223-12 to the person by the terminated entity; and
223-13 (4) be accompanied by a copy of this section of the
223-14 code.
223-15 (c) To assert a claim, a person who is notified by a
223-16 terminated entity that the person's claim must be resolved under
223-17 this section must present the claim in writing to the terminated
223-18 entity at the address given by the entity in the notice.
223-19 (d) A claim presented under Subsection (c) must:
223-20 (1) contain the:
223-21 (A) identity of the claimant; and
223-22 (B) nature and amount of the claim; and
223-23 (2) be received by the terminated entity not later
223-24 than the date specified in the notice under Subsection (b)(3).
223-25 (e) If a person presents a claim that meets the requirements
223-26 of this section, the terminated entity to whom the claim is
223-27 presented may give written notice to the person that the claim is
224-1 rejected by the terminated entity.
224-2 (f) Notice under Subsection (e) must:
224-3 (1) be sent by registered or certified mail, return
224-4 receipt requested, and addressed to the last known address of the
224-5 person presenting the claim;
224-6 (2) state that the claim has been rejected by the
224-7 terminated entity;
224-8 (3) state that the claim will be extinguished unless
224-9 an action on the claim is brought:
224-10 (A) not later than the 180th day after the date
224-11 the notice of rejection of the claim was mailed to the person; and
224-12 (B) not later than the third anniversary of the
224-13 effective date of the entity's termination; and
224-14 (4) state the date on which notice of the claim's
224-15 rejection was mailed and the effective date of the entity's
224-16 termination.
224-17 Sec. 11.359. EXTINGUISHMENT OF AN EXISTING CLAIM.
224-18 (a) Except as provided by Subsection (b), an existing claim by or
224-19 against a terminated entity is extinguished unless an action or
224-20 proceeding is brought on the claim not later than the third
224-21 anniversary of:
224-22 (1) the date of the filing of the entity's certificate
224-23 of termination, if the terminated entity is a filing entity; or
224-24 (2) the date notice is provided to the claimant under
224-25 Section 11.103.
224-26 (b) A person's claim against a terminated entity may be
224-27 extinguished before the period prescribed by Subsection (a) if the
225-1 person is notified under Section 11.358(a) that the claim will be
225-2 resolved under Section 11.358 and the person:
225-3 (1) fails to properly present the claim in writing
225-4 under Sections 11.358(c) and (d); or
225-5 (2) fails to bring an action on a claim rejected under
225-6 Section 11.358(e) before:
225-7 (A) the 180th day after the date the notice
225-8 rejecting the claim was mailed to the person; and
225-9 (B) the third anniversary of the effective date
225-10 of the entity's termination.
225-11 (Sections 11.360-11.400 reserved for expansion)
225-12 SUBCHAPTER I. RECEIVERSHIP
225-13 Sec. 11.401. CODE GOVERNS. A receiver may be appointed for
225-14 a domestic entity or for a domestic entity's property or business
225-15 only as provided for and on the conditions set forth in this code.
225-16 Sec. 11.402. JURISDICTION TO APPOINT RECEIVER. (a) A court
225-17 that has subject matter jurisdiction over specific property of a
225-18 domestic or foreign entity that is located in this state and is
225-19 involved in litigation has jurisdiction to appoint a receiver for
225-20 that property.
225-21 (b) A district court in the county in which the registered
225-22 office or principal place of business of a domestic entity is
225-23 located has jurisdiction to:
225-24 (1) appoint a receiver for the property and business
225-25 of a domestic entity for the purpose of rehabilitating the entity;
225-26 or
225-27 (2) order the liquidation of the property and business
226-1 of a domestic entity and appoint a receiver to effect that
226-2 liquidation.
226-3 Sec. 11.403. APPOINTMENT OF RECEIVER FOR SPECIFIC PROPERTY.
226-4 (a) Subject to Subsection (b), and on the application of a person
226-5 whose right to or interest in any property or fund or the proceeds
226-6 from the property or fund is probable, a court that has
226-7 jurisdiction over specific property of a domestic or foreign entity
226-8 may appoint a receiver in an action:
226-9 (1) by a vendor to vacate a fraudulent purchase of the
226-10 property;
226-11 (2) by a creditor to subject the property or fund to
226-12 the creditor's claim;
226-13 (3) between partners or others jointly owning or
226-14 interested in the property or fund;
226-15 (4) by a mortgagee of the property for the foreclosure
226-16 of the mortgage and sale of the property, when:
226-17 (A) it appears that the mortgaged property is in
226-18 danger of being lost, removed, or materially injured; or
226-19 (B) it appears that the condition of the
226-20 mortgage has not been performed and that the property is probably
226-21 insufficient to discharge the mortgage debt; or
226-22 (5) in which receivers for specific property have been
226-23 previously appointed by courts of equity.
226-24 (b) A court may appoint a receiver for the property or fund
226-25 under Subsection (a) only if:
226-26 (1) with respect to an action brought under Subsection
226-27 (a)(1), (2), or (3), it is shown that the property or fund is in
227-1 danger of being lost, removed, or materially injured;
227-2 (2) circumstances exist that are considered by the
227-3 court to necessitate the appointment of a receiver to conserve the
227-4 property or fund and avoid damage to interested parties;
227-5 (3) all other requirements of law are complied with;
227-6 and
227-7 (4) the court determines that other available legal
227-8 and equitable remedies are inadequate.
227-9 (c) The court appointing a receiver under this section has
227-10 and shall retain exclusive jurisdiction over the specific property
227-11 placed in receivership. The court shall determine the rights of the
227-12 parties in the property or its proceeds.
227-13 (d) If the condition necessitating the appointment of a
227-14 receiver under this section is remedied, the receivership shall be
227-15 terminated immediately, the management of the domestic entity shall
227-16 be restored to its managerial officials, and the receiver shall
227-17 redeliver to the domestic entity all of the property remaining in
227-18 receivership.
227-19 Sec. 11.404. APPOINTMENT OF RECEIVER TO REHABILITATE
227-20 DOMESTIC ENTITY. (a) Subject to Subsection (b), a court that has
227-21 jurisdiction over the property and business of a domestic entity
227-22 under Section 11.402(b) may appoint a receiver for the entity's
227-23 property and business if:
227-24 (1) in an action by an owner or member of the domestic
227-25 entity, it is established that:
227-26 (A) the entity is insolvent or in imminent
227-27 danger of insolvency;
228-1 (B) the governing persons of the entity are
228-2 deadlocked in the management of the entity's affairs, the owners or
228-3 members of the entity are unable to break the deadlock, and
228-4 irreparable injury to the entity is being suffered or is threatened
228-5 because of the deadlock;
228-6 (C) the actions of the governing persons of the
228-7 entity are illegal, oppressive, or fraudulent;
228-8 (D) the property of the entity is being
228-9 misapplied or wasted; or
228-10 (E) with respect to a for-profit corporation,
228-11 the shareholders of the entity are deadlocked in voting power and
228-12 have failed, for a period of at least two years, to elect
228-13 successors to the governing persons of the entity whose terms have
228-14 expired or would have expired on the election and qualification of
228-15 their successors;
228-16 (2) in an action by a creditor of the domestic entity,
228-17 it is established that:
228-18 (A) the entity is insolvent, the claim of the
228-19 creditor has been reduced to judgment, and an execution on the
228-20 judgment was returned unsatisfied; or
228-21 (B) the entity is insolvent and has admitted in
228-22 writing that the claim of the creditor is due and owing; or
228-23 (3) in an action other than an action described by
228-24 Subdivision (1) or (2), courts of equity have previously appointed
228-25 a receiver.
228-26 (b) A court may appoint a receiver under Subsection (a) only
228-27 if:
229-1 (1) circumstances exist that are considered by the
229-2 court to necessitate the appointment of a receiver to conserve the
229-3 property and business of the domestic entity and avoid damage to
229-4 interested parties;
229-5 (2) all other requirements of law are complied with;
229-6 and
229-7 (3) the court determines that all other available
229-8 legal and equitable remedies, including the appointment of a
229-9 receiver for specific property of the domestic entity under Section
229-10 11.402, are inadequate.
229-11 (c) If the condition necessitating the appointment of a
229-12 receiver under this section is remedied, the receivership shall be
229-13 terminated immediately, the management of the domestic entity shall
229-14 be restored to its managerial officials, and the receiver shall
229-15 redeliver to the domestic entity all of its property remaining in
229-16 receivership.
229-17 Sec. 11.405. APPOINTMENT OF RECEIVER TO LIQUIDATE DOMESTIC
229-18 ENTITY; LIQUIDATION. (a) Subject to Subsection (b), a court that
229-19 has jurisdiction over the property and business of a domestic
229-20 entity under Section 11.402(b) may order the liquidation of the
229-21 property and business of the domestic entity and may appoint a
229-22 receiver to effect the liquidation:
229-23 (1) when an action has been filed by the attorney
229-24 general under this chapter to terminate the existence of the entity
229-25 and it is established that liquidation of the entity's business and
229-26 affairs should precede the entry of a decree of termination;
229-27 (2) on application of the entity to have its
230-1 liquidation continued under the supervision of the court;
230-2 (3) if the entity is in receivership and the court
230-3 does not find that any plan presented before the first anniversary
230-4 of the date the receiver was appointed is feasible for remedying
230-5 the condition requiring appointment of the receiver;
230-6 (4) on application of a creditor of the entity if it
230-7 is established that irreparable damage will ensue to the unsecured
230-8 creditors of the domestic entity as a class, generally, unless
230-9 there is an immediate liquidation of the property of the domestic
230-10 entity; or
230-11 (5) on application of an owner, member, or governing
230-12 person of the entity if it is not a for-profit corporation and it
230-13 appears the entity is unable to carry on its business in conformity
230-14 with its governing documents.
230-15 (b) A court may order a liquidation and appoint a receiver
230-16 under Subsection (a) only if:
230-17 (1) the circumstances demand liquidation to avoid
230-18 damage to interested persons;
230-19 (2) all other requirements of law are complied with;
230-20 and
230-21 (3) the court determines that all other available
230-22 legal and equitable remedies, including the appointment of a
230-23 receiver for specific property of the domestic entity and
230-24 appointment of a receiver to rehabilitate the domestic entity, are
230-25 inadequate.
230-26 (c) If the condition necessitating the appointment of a
230-27 receiver under this section is remedied, the receivership shall be
231-1 terminated immediately, the management of the domestic entity shall
231-2 be restored to its managerial officials, and the receiver shall
231-3 redeliver to the domestic entity all of its property remaining in
231-4 receivership.
231-5 Sec. 11.406. RECEIVERS: QUALIFICATIONS, POWERS, AND DUTIES.
231-6 (a) A receiver appointed under this chapter:
231-7 (1) must be an individual citizen of the United States
231-8 or an entity authorized to act as receiver;
231-9 (2) shall give a bond in the amount required by the
231-10 court and with any sureties as may be required by the court;
231-11 (3) may sue and be sued in the receiver's name in any
231-12 court;
231-13 (4) has the powers and duties provided by other laws
231-14 applicable to receivers; and
231-15 (5) has the powers and duties that are stated in the
231-16 order appointing the receiver or that the appointing court:
231-17 (A) considers appropriate to accomplish the
231-18 objectives for which the receiver was appointed; and
231-19 (B) may increase or diminish at any time during
231-20 the proceedings.
231-21 (b) To be appointed a receiver under this chapter, a foreign
231-22 entity must be registered to transact business in this state.
231-23 Sec. 11.407. COURT-ORDERED FILING OF CLAIMS. (a) In a
231-24 proceeding involving a receivership of the property or business of
231-25 a domestic entity, the court may require all claimants of the
231-26 domestic entity to file with the clerk of the court or the
231-27 receiver, in the form provided by the court, proof of their
232-1 respective claims under oath.
232-2 (b) A court that orders the filing of claims under
232-3 Subsection (a) shall:
232-4 (1) set a date, which may not be earlier than four
232-5 months after the date of the order, as the last day for the filing
232-6 of those claims; and
232-7 (2) prescribe the notice that shall be given to
232-8 claimants of the date set under Subdivision (1).
232-9 (c) Before the expiration of the period under Subsection (b)
232-10 for the filing of claims, a court may extend the period for the
232-11 filing of claims to a later date.
232-12 (d) A court may bar a claimant who fails to file a proof of
232-13 claim during the period authorized by the court from participating
232-14 in the distribution of the property of the domestic entity unless
232-15 the claimant presents to the court a justifiable excuse for its
232-16 delay in filing. A court may not order or effect a discharge of a
232-17 claim or claimant described by this subsection.
232-18 Sec. 11.408. SUPERVISING COURT; JURISDICTION; AUTHORITY.
232-19 (a) A court supervising a receivership under this subchapter may,
232-20 from time to time:
232-21 (1) make allowances to a receiver or attorney in the
232-22 proceeding; and
232-23 (2) direct the payment of a receiver or attorney from
232-24 the property of the domestic entity that is within the scope of the
232-25 receivership or the proceeds of any sale or disposition of that
232-26 property.
232-27 (b) A court that appoints a receiver under this subchapter
233-1 for the property or business of a domestic entity has exclusive
233-2 jurisdiction over the domestic entity and all of its property,
233-3 regardless of where the property is located.
233-4 Sec. 11.409. ANCILLARY RECEIVERSHIPS OF FOREIGN ENTITIES.
233-5 (a) Notwithstanding any provision of this code to the contrary, a
233-6 district court in the county in which the registered office of a
233-7 foreign entity doing business in this state is located has
233-8 jurisdiction to appoint an ancillary receiver for the property and
233-9 business of that entity when the court determines that
233-10 circumstances exist to require the appointment of an ancillary
233-11 receiver.
233-12 (b) A receiver appointed under Subsection (a) serves
233-13 ancillary to a receiver acting under orders of an out-of-state
233-14 court that has jurisdiction to appoint a receiver for the entity.
233-15 Sec. 11.410. RECEIVERSHIP FOR ALL PROPERTY AND BUSINESS OF
233-16 FOREIGN ENTITY. (a) A district court may appoint a receiver for
233-17 all of the property, in and outside this state, of a foreign entity
233-18 doing business in this state and its business if the court
233-19 determines, in accordance with the ordinary usages of equity, that
233-20 circumstances exist that necessitate the appointment of a receiver
233-21 even if a receiver has not been appointed by another court.
233-22 (b) The appointing court shall convert a receivership
233-23 created under Subsection (a) into an ancillary receivership if the
233-24 appointing court determines an ancillary receivership is
233-25 appropriate because a court in another state has ordered a
233-26 receivership of all property and business of the entity.
233-27 Sec. 11.411. GOVERNING PERSONS AND OWNERS NOT NECESSARY
234-1 PARTIES DEFENDANT. Governing persons and owners or members of a
234-2 domestic entity are not necessary parties to an action for a
234-3 receivership or liquidation of the property and business of a
234-4 domestic entity unless relief is sought against those persons
234-5 individually.
234-6 Sec. 11.412. DECREE OF INVOLUNTARY TERMINATION. In an
234-7 action to liquidate the property and business of a domestic entity,
234-8 the court shall enter a decree terminating the entity and the
234-9 existence of the entity shall cease:
234-10 (1) when the costs and expenses of the action and all
234-11 obligations and liabilities of the domestic entity have been paid
234-12 and discharged or adequately provided for and all of the entity's
234-13 remaining property has been distributed to its owners and members;
234-14 or
234-15 (2) if the entity's property is not sufficient to
234-16 discharge the costs and other expenses of the action and all
234-17 obligations and liabilities of the entity, when all the property of
234-18 the entity has been applied toward their payment.
234-19 CHAPTER 12. ADMINISTRATIVE POWERS
234-20 SUBCHAPTER A. SECRETARY OF STATE
234-21 Sec. 12.001. AUTHORITY OF SECRETARY OF STATE. (a) The
234-22 secretary of state may adopt procedural rules for the filing of
234-23 instruments, including the filing of instruments by electronic or
234-24 other means, authorized to be filed with the secretary of state
234-25 under this code.
234-26 (b) The secretary of state has the power and authority
234-27 reasonably necessary to enable the secretary to perform the duties
235-1 imposed on the secretary under this code.
235-2 Sec. 12.002. INTERROGATORIES BY SECRETARY OF STATE. (a) As
235-3 necessary and proper for the secretary of state to determine
235-4 whether a filing entity or a foreign filing entity has complied
235-5 with this code, the secretary of state may serve by mail
235-6 interrogatories on the entity or a managerial official.
235-7 (b) An entity or individual to whom an interrogatory is sent
235-8 by the secretary of state shall answer the interrogatory before the
235-9 later of the 31st day after the date the interrogatory is mailed or
235-10 a date set by the secretary of state. Each answer to an
235-11 interrogatory must be complete, in writing, and under oath. An
235-12 interrogatory directed to an individual shall be answered by the
235-13 individual, and an interrogatory directed to an entity shall be
235-14 answered by a managerial official.
235-15 (c) The secretary of state is not required to file any
235-16 instrument to which an interrogatory relates until the
235-17 interrogatory is answered as provided by this section and only if
235-18 the instrument conforms to the requirements of this code. The
235-19 secretary of state shall certify to the attorney general for action
235-20 as the attorney general may consider appropriate an interrogatory
235-21 and answer to the interrogatory that disclose a violation of this
235-22 code.
235-23 Sec. 12.003. INFORMATION DISCLOSED BY INTERROGATORIES. An
235-24 interrogatory sent by the secretary of state and the answer to the
235-25 interrogatory are subject to Chapter 552, Government Code.
235-26 Sec. 12.004. APPEALS FROM SECRETARY OF STATE. (a) If the
235-27 secretary of state does not approve the filing of a filing
236-1 instrument, the secretary of state shall, before the 11th day after
236-2 the date of the delivery of the filing instrument to the secretary
236-3 of state, notify the person delivering the filing instrument of the
236-4 disapproval and specifying each reason for the disapproval. The
236-5 disapproval of a filing instrument by the secretary of state may be
236-6 appealed only to a district court of Travis County by filing with
236-7 the court clerk a petition, a copy of the filing instrument sought
236-8 to be filed, and a copy of any written disapproval by the secretary
236-9 of state of the filing instrument. The court shall try the appeal
236-10 de novo and shall sustain the action of the secretary of state or
236-11 direct the secretary to take any action the court considers to be
236-12 proper.
236-13 (b) A final order or judgment entered by the district court
236-14 under this section in review of any ruling or decision of the
236-15 secretary of state may be appealed as in other civil actions.
236-16 (Sections 12.005-12.150 reserved for expansion)
236-17 SUBCHAPTER B. ATTORNEY GENERAL
236-18 Sec. 12.151. AUTHORITY OF ATTORNEY GENERAL TO EXAMINE BOOKS
236-19 AND RECORDS. Each filing entity and foreign filing entity shall
236-20 permit the attorney general to inspect, examine, and make copies,
236-21 as the attorney general considers necessary in the performance of a
236-22 power or duty of the attorney general, of any record of the entity.
236-23 A record of the entity includes minutes and a book, account,
236-24 letter, memorandum, document, check, voucher, telegram,
236-25 constitution, and bylaw.
236-26 Sec. 12.152. REQUEST TO EXAMINE. To examine the business of
236-27 a filing entity or foreign filing entity, the attorney general
237-1 shall make a written request to a managerial official, who shall
237-2 immediately permit the attorney general to inspect, examine, and
237-3 make copies of the records of the entity.
237-4 Sec. 12.153. AUTHORITY TO EXAMINE MANAGEMENT OF ENTITY. The
237-5 attorney general may investigate the organization, conduct, and
237-6 management of a filing entity or foreign filing entity and
237-7 determine if the entity has been or is engaged in acts or conduct
237-8 in violation of:
237-9 (1) its governing documents; or
237-10 (2) any law of this state.
237-11 Sec. 12.154. AUTHORITY TO DISCLOSE INFORMATION. Information
237-12 held by the attorney general and derived in the course of an
237-13 examination of an entity's records or documents is not public
237-14 information and is not subject to Chapter 552, Government Code, and
237-15 may not be disclosed except in the course of an administrative or
237-16 judicial proceeding in which the state is a party or in a suit by
237-17 the state to:
237-18 (1) revoke the registration of the foreign filing
237-19 entity or terminate the certificate of formation of the filing
237-20 entity;
237-21 (2) collect penalties for a violation of the law of
237-22 this state; or
237-23 (3) seek information from any officer of this state
237-24 charged with the enforcement of its laws.
237-25 Sec. 12.155. FORFEITURE OF BUSINESS PRIVILEGES. A foreign
237-26 filing entity or a filing entity that fails or refuses to permit
237-27 the attorney general to examine or make copies of a record, without
238-1 regard to whether the record is located in this or another state,
238-2 forfeits the right of the entity to do business in this state, and
238-3 the entity's registration or certificate of formation shall be
238-4 revoked or terminated.
238-5 Sec. 12.156. CRIMINAL PENALTY. (a) A managerial official
238-6 or other individual having the authority to manage the affairs of a
238-7 filing entity or foreign filing entity commits an offense if the
238-8 official or individual fails or refuses to permit the attorney
238-9 general to make an investigation of the entity or to examine or to
238-10 make copies of a record of the entity.
238-11 (b) An offense under this section is a Class B misdemeanor.
238-12 (Sections 12.157-12.200 reserved for expansion)
238-13 SUBCHAPTER C. ENFORCEMENT LIEN
238-14 Sec. 12.201. LIEN FOR LAW VIOLATIONS. (a) If a filing
238-15 entity or foreign filing entity violates a law of this state,
238-16 including the law against trusts, monopolies, and conspiracies, or
238-17 combinations or contracts in restraint of trade, for the violation
238-18 of which a fine, penalties, or forfeiture is provided, all of the
238-19 entity's property in this state at the time of the violation or
238-20 that after the violation comes into this state is, because of the
238-21 violation, liable for any fine or penalty under this chapter and
238-22 for costs of suit and costs of collection.
238-23 (b) The state has a lien on all property of a filing entity
238-24 or foreign filing entity in this state on the date a suit is
238-25 instituted by or under the direction of the attorney general in a
238-26 court of this state for the purpose of forfeiting the certificate
238-27 of formation or revoking the registration of the entity or for the
239-1 collection of a fine or penalty due to the state.
239-2 (c) The filing of a suit for a fine, penalties, or
239-3 forfeiture is notice of the lien.
239-4 (Sections 12.202-12.250 reserved for expansion)
239-5 SUBCHAPTER D. ENFORCEMENT PROCEEDINGS
239-6 Sec. 12.251. RECEIVER. In a suit filed by this state
239-7 against a filing entity or foreign filing entity for the
239-8 termination of the entity's certificate of formation or
239-9 registration or for a fine or penalty, the court in this state in
239-10 which the suit is pending:
239-11 (1) shall appoint a receiver for the property and
239-12 business of the entity in this state or that subsequently comes
239-13 into this state during the receivership if the filing entity or
239-14 foreign filing entity commences the process of winding up its
239-15 business in this or another state or a judgment is rendered against
239-16 it in this or another state for the termination of the entity's
239-17 certificate of formation or registration; and
239-18 (2) may appoint a receiver for the entity if the
239-19 interest of the state requires the appointment.
239-20 Sec. 12.252. FORECLOSURE. (a) The attorney general may
239-21 bring suit to foreclose a lien created by this chapter.
239-22 (b) If a filing entity or a foreign filing entity subject to
239-23 this code has commenced the winding up process or has had the
239-24 entity's certificate of formation or registration terminated by a
239-25 judgment, citation in a suit for foreclosure may be served on any
239-26 person in this state who acted and was acting as agent of the
239-27 entity in this state when the entity commenced the winding up
240-1 process or the entity's certificate of formation or registration
240-2 was terminated.
240-3 Sec. 12.253. ACTION AGAINST INSOLVENT ENTITY. When the
240-4 attorney general is convinced that a filing entity or foreign
240-5 filing entity is insolvent, the attorney general shall institute
240-6 quo warranto or other appropriate proceedings to terminate the
240-7 certificate of formation or registration of the filing entity or
240-8 foreign filing entity that is insolvent.
240-9 Sec. 12.254. SUITS BY DISTRICT OR COUNTY ATTORNEY. A
240-10 district or county attorney shall bring and prosecute a proceeding
240-11 under Section 12.252 or 12.253 when directed to do so by the
240-12 attorney general.
240-13 Sec. 12.255. PERMISSION TO SUE. Before a petition may be
240-14 filed by the attorney general or by a district or county attorney
240-15 in a suit authorized by Section 12.252 or 12.253, leave must be
240-16 granted by the judge of the court in which the proceeding is to be
240-17 filed.
240-18 Sec. 12.256. EXAMINATION AND NOTICE. (a) The judge of a
240-19 court in which a proceeding under Section 12.252 or 12.253 is to be
240-20 filed shall carefully examine the petition before granting leave to
240-21 sue. The judge may also require an examination into the facts. If
240-22 it appears with reasonable certainty from the petition or from the
240-23 petition and facts that there is a prima facie showing for the
240-24 relief sought, the judge may grant leave to file.
240-25 (b) On an application for the appointment of a receiver, the
240-26 entity proceeded against is entitled to 10 days' notice before the
240-27 day set for the hearing.
241-1 Sec. 12.257. DISMISSAL OF ACTION. (a) A suit authorized by
241-2 Section 12.253 or 12.258 may not be filed or, if filed, shall be
241-3 dismissed if the entity, through its owners or members, reduces its
241-4 indebtedness so that it is not insolvent.
241-5 (b) The respondent shall pay the costs of a dismissed suit
241-6 under this section.
241-7 Sec. 12.258. LIQUIDATION OF INSOLVENT ENTITY. (a) A court
241-8 hearing a proceeding under Section 12.253 against an insolvent
241-9 entity may, after the entity has been shown to be insolvent,
241-10 appoint one or more receivers for the entity and its property. The
241-11 receiver may settle the affairs of the entity, collect outstanding
241-12 debts, and divide the money and property belonging to the entity
241-13 among its owners after paying the debts of the entity and all
241-14 expenses incidental to the judicial proceedings and receivership.
241-15 (b) The court may continue the existence of the entity for
241-16 three years, and for additional reasonable time as necessary to
241-17 accomplish the purposes of this subchapter.
241-18 Sec. 12.259. EXTRAORDINARY REMEDIES; BOND. The state has a
241-19 right to a writ of attachment, garnishment, sequestration, or
241-20 injunction, without bond, to aid in the enforcement of the state's
241-21 rights created by this chapter.
241-22 Sec. 12.260. ABATEMENT OF SUIT. An action or cause of
241-23 action for a fine, penalty, or forfeiture that this state has or
241-24 may have against a filing entity or foreign filing entity does not
241-25 abate because the entity dissolves, voluntarily or otherwise, or
241-26 the entity's certificate of formation is terminated or the entity's
241-27 registration is revoked.
242-1 Sec. 12.261. PROVISIONS CUMULATIVE. Each right or remedy
242-2 provided by this chapter is cumulative and does not affect any
242-3 other right or remedy for the enforcement, payment, or collection
242-4 of a fine, forfeiture, or penalty or any other means provided by
242-5 law for securing or preserving testimony or inquiring into the
242-6 rights or privileges of an entity.
242-7 TITLE 2. CORPORATIONS
242-8 CHAPTER 20. GENERAL PROVISIONS
242-9 Sec. 20.001. REQUIREMENT THAT FILING INSTRUMENT BE SIGNED BY
242-10 OFFICER. Unless otherwise provided by this title, a filing
242-11 instrument of a corporation must be signed by an officer of the
242-12 corporation.
242-13 Sec. 20.002. ULTRA VIRES ACTS. (a) Lack of capacity of a
242-14 corporation may not be the basis of any claim or defense at law or
242-15 in equity.
242-16 (b) An act of a corporation or a transfer of property by or
242-17 to a corporation is not invalid because the act or transfer was:
242-18 (1) beyond the scope of the purpose or purposes of the
242-19 corporation as expressed in the corporation's certificate of
242-20 formation; or
242-21 (2) inconsistent with a limitation on the authority of
242-22 an officer or director to exercise a statutory power of the
242-23 corporation, as that limitation is expressed in the corporation's
242-24 certificate of formation.
242-25 (c) The fact that an act or transfer is beyond the scope of
242-26 the expressed purpose or purposes of the corporation or is
242-27 inconsistent with an expressed limitation on the authority of an
243-1 officer or director may be asserted in a proceeding:
243-2 (1) by a shareholder or member against the corporation
243-3 to enjoin the performance of an act or the transfer of property by
243-4 or to the corporation;
243-5 (2) by the corporation, acting directly or through a
243-6 receiver, trustee, or other legal representative, or through
243-7 members in a representative suit, against an officer or director or
243-8 former officer or director of the corporation for exceeding that
243-9 person's authority; or
243-10 (3) by the attorney general to:
243-11 (A) terminate the corporation;
243-12 (B) enjoin the corporation from performing an
243-13 unauthorized act; or
243-14 (C) enforce divestment of real property acquired
243-15 or held contrary to the laws of this state.
243-16 (d) If the unauthorized act or transfer sought to be
243-17 enjoined under Subsection (c)(1) is being or is to be performed or
243-18 made under a contract to which the corporation is a party and if
243-19 each party to the contract is a party to the proceeding, the court
243-20 may set aside and enjoin the performance of the contract. The
243-21 court may award to the corporation or to another party to the
243-22 contract, as appropriate, compensation for loss or damage resulting
243-23 from the action of the court in setting aside and enjoining the
243-24 performance of the contract, excluding loss of anticipated profits.
243-25 CHAPTER 21. FOR-PROFIT CORPORATIONS
243-26 SUBCHAPTER A. GENERAL PROVISIONS
243-27 Sec. 21.001. APPLICABILITY OF CHAPTER. This chapter applies
244-1 only to a:
244-2 (1) domestic for-profit corporation formed under this
244-3 code; and
244-4 (2) foreign for-profit corporation that is transacting
244-5 business in this state, regardless of whether the foreign
244-6 corporation is registered to transact business in this state.
244-7 Sec. 21.002. DEFINITIONS. In this chapter:
244-8 (1) "Authorized share" means a share of any class the
244-9 corporation is authorized to issue.
244-10 (2) "Board of directors" includes each person who is
244-11 authorized to perform the functions of the board of directors under
244-12 a shareholders' agreement as authorized by this chapter.
244-13 (3) "Cancel," with respect to an authorized share of a
244-14 corporation, means the restoration of an issued share to the status
244-15 of an authorized but unissued share.
244-16 (4) "Consuming assets corporation" means a corporation
244-17 that:
244-18 (A) is engaged in the business of exploiting
244-19 assets subject to depletion or amortization;
244-20 (B) states in its certificate of formation that
244-21 it is a consuming assets corporation;
244-22 (C) includes the phrase "a consuming assets
244-23 corporation" as part of its official corporate name and gives the
244-24 phrase equal prominence with the rest of the corporate name on the
244-25 financial statements and certificates of ownership of the
244-26 corporation; and
244-27 (D) includes in each of the certificates of
245-1 ownership of the corporation the sentence, "This corporation is
245-2 permitted by law to pay dividends out of reserves that may impair
245-3 its stated capital."
245-4 (5) "Corporation" or "domestic corporation" means a
245-5 domestic for-profit corporation subject to this chapter.
245-6 (6) "Distribution" does not include:
245-7 (A) an amendment to the corporation's
245-8 certificate of formation to change the shares of a class or series,
245-9 with or without par value, into the same or a different number of
245-10 shares of the same or a different class or series, with or without
245-11 par value; or
245-12 (B) a split-up or division of the issued shares
245-13 of a class of a corporation into a larger number of shares within
245-14 the same class that does not increase the stated capital of the
245-15 corporation.
245-16 (7) "Foreign corporation" means a for-profit
245-17 corporation formed under the laws of a jurisdiction other than this
245-18 state.
245-19 (8) "Investment Company Act" means the Investment
245-20 Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as amended.
245-21 (9) "Net assets" means the amount by which the total
245-22 assets of a corporation exceed the total debts of the corporation.
245-23 (10) "Share distribution" means a distribution by a
245-24 corporation that is payable in authorized but unissued shares or
245-25 treasury shares of the corporation.
245-26 (11) "Stated capital" means the sum of:
245-27 (A) the par value of all shares of the
246-1 corporation with par value that have been issued;
246-2 (B) the consideration, as expressed in terms of
246-3 United States dollars, determined by the corporation in the manner
246-4 provided by Section 21.160 for all shares of the corporation
246-5 without par value that have been issued, except the part of the
246-6 consideration that:
246-7 (i) has been actually received;
246-8 (ii) is less than all of that
246-9 consideration; and
246-10 (iii) the board, by resolution adopted not
246-11 later than the 60th day after the date of issuance of those shares,
246-12 has allocated to surplus; and
246-13 (C) an amount not included in Paragraphs (A) and
246-14 (B) that has been transferred to stated capital of the corporation,
246-15 on the payment of a share distribution or on adoption by the board
246-16 of directors of a resolution directing that all or part of surplus
246-17 be transferred to stated capital, minus each reduction made as
246-18 permitted by law.
246-19 (12) "Surplus" means the amount by which the net
246-20 assets of a corporation exceed the stated capital of the
246-21 corporation.
246-22 (13) "Treasury shares" means shares of a corporation
246-23 that have been issued, and subsequently acquired by the
246-24 corporation, that belong to the corporation and that have not been
246-25 canceled. The term does not include shares held by a corporation
246-26 in a fiduciary capacity, whether directly or through a trust or
246-27 similar arrangement.
247-1 Sec. 21.003. PERMISSIBLE PURPOSE OF CORPORATION RELATED TO
247-2 RAILROADS. Notwithstanding Section 2.003(2)(E), a corporation may:
247-3 (1) construct, acquire, maintain, and operate street
247-4 railways, suburban railways, and belt lines of railways in or near
247-5 municipalities to transport freight and passengers;
247-6 (2) construct, own, and operate union depots;
247-7 (3) buy, sell, and convey rights-of-way on which to
247-8 construct railroads;
247-9 (4) construct, acquire, maintain, and operate lines of
247-10 electric, gas, or gasoline, denatured alcohol, or naphtha motor
247-11 railways in and between municipalities, and interurban railways in
247-12 and between municipalities in this state to transport freight or
247-13 passengers;
247-14 (5) build, maintain, and operate a line of railroads
247-15 to mines, gins, quarries, manufacturing plants, or mills;
247-16 (6) construct, maintain, and operate terminal
247-17 railways; or
247-18 (7) operate a railroad passenger service by
247-19 contracting with a railroad corporation or other company that does
247-20 not construct, own, or maintain a railroad track.
247-21 Sec. 21.004. PROHIBITED ACTIVITIES. A corporation may not:
247-22 (1) operate a cooperative association, limited
247-23 cooperative association, or labor union; or
247-24 (2) transact a combination of the businesses of:
247-25 (A) raising cattle and owning land for the
247-26 raising of cattle, other than operating and owning feed lots and
247-27 feeding cattle; and
248-1 (B) operating stockyards and slaughtering,
248-2 refrigerating, canning, curing, or packing meat.
248-3 Sec. 21.005. NONPROFIT CORPORATIONS. A corporation formed
248-4 for the purpose of operating a nonprofit institution, including an
248-5 institution devoted to a charitable, benevolent, religious,
248-6 patriotic, civic, cultural, missionary, educational, scientific,
248-7 social, fraternal, athletic, or esthetic purpose, may be formed and
248-8 governed only as a nonprofit corporation under this code and not as
248-9 a for-profit corporation under this title.
248-10 Sec. 21.006. ADDITIONAL POWERS OF CERTAIN PIPELINE
248-11 BUSINESSES. In addition to the powers provided by Subchapter B,
248-12 Chapter 2, a corporation or a partnership or other combination of
248-13 corporations engaged as a common carrier in the pipeline business
248-14 for the purpose of transporting oil, oil products, gas, carbon
248-15 dioxide, salt brine, fuller's earth, sand, clay, liquefied
248-16 minerals, or other mineral solutions has all the rights and powers
248-17 conferred on a common carrier by Sections 111.019-111.022, Natural
248-18 Resources Code.
248-19 (Sections 21.007-21.050 reserved for expansion)
248-20 SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
248-21 Sec. 21.051. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF
248-22 FORMATION. (a) In addition to the information required by Section
248-23 3.005, the certificate of formation of a corporation must:
248-24 (1) state the aggregate number of shares the
248-25 corporation is authorized to issue;
248-26 (2) if the shares the corporation is authorized to
248-27 issue consist of one class of shares only, state the par value of
249-1 each share or a statement that each share is without par value;
249-2 (3) if the corporation is to be managed by a board of
249-3 directors, state the number of directors constituting the initial
249-4 board of directors and the name and address of each person who will
249-5 serve as director until the first annual meeting of shareholders
249-6 and until a successor is elected and qualified; and
249-7 (4) if the corporation is to be managed pursuant to a
249-8 shareholders' agreement in a manner other than by a board of
249-9 directors, state the name and address of each person who will
249-10 perform the functions required by this code to be performed by the
249-11 initial board of directors.
249-12 (b) If the shares the corporation is authorized to issue
249-13 consist of more than one class of shares, the certificate of
249-14 formation of a corporation must, with respect to each class, state:
249-15 (1) the designation of the class;
249-16 (2) the aggregate number of shares in the class;
249-17 (3) the par value of each share or a statement that
249-18 each share is without par value;
249-19 (4) the preferences, limitations, and relative rights
249-20 of the shares; and
249-21 (5) if the shares in a class the corporation is
249-22 authorized to issue consist of more than one series, the following
249-23 with respect to each series:
249-24 (A) the designation of the series;
249-25 (B) the aggregate number of shares in the
249-26 series;
249-27 (C) any preferences, limitations, and relative
250-1 rights of the shares to the extent provided in the certificate of
250-2 formation; and
250-3 (D) any authority vested in the board of
250-4 directors to establish the series and set and determine the
250-5 preferences, limitations, and relative rights of the series.
250-6 (c) If a corporation elects to become a close corporation in
250-7 accordance with Subchapter O, the certificate of formation of the
250-8 corporation:
250-9 (1) must contain a provision required by that
250-10 subchapter to be contained in the certificate of formation of a
250-11 close corporation and not in the certificate of formation of an
250-12 ordinary corporation; and
250-13 (2) may contain:
250-14 (A) a provision contained or permitted to be
250-15 contained in a shareholders' agreement conforming to that
250-16 subchapter that the organizers elect to include in the certificate
250-17 of formation; or
250-18 (B) a copy of a shareholders' agreement that
250-19 conforms to Subchapter O and that may be filed or amended in the
250-20 manner provided by Section 21.212.
250-21 (d) A provision contained in the certificate of formation
250-22 under Subsection (c), other than the statement required by Section
250-23 21.704, must be preceded by a statement that the provision is
250-24 subject to the corporation remaining a close corporation.
250-25 (e) If a corporation elects to have preemptive rights under
250-26 Subchapter E or cumulative voting, the certificate of formation of
250-27 the corporation must comply with Section 21.203 or 21.360, as
251-1 appropriate.
251-2 Sec. 21.052. NO PROPERTY RIGHT IN CERTIFICATE OF FORMATION.
251-3 A shareholder of a corporation does not have a vested property
251-4 right resulting from the certificate of formation, including a
251-5 provision in the certificate of formation relating to the
251-6 management, control, capital structure, dividend entitlement,
251-7 purpose, or duration of the corporation.
251-8 Sec. 21.053. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF
251-9 FORMATION. (a) To adopt an amendment to the certificate of
251-10 formation of a corporation as provided by Subchapter B, Chapter 3,
251-11 the board of directors of the corporation shall:
251-12 (1) adopt a resolution stating the proposed amendment;
251-13 and
251-14 (2) follow the procedures prescribed by this section
251-15 and Sections 21.054-21.057.
251-16 (b) The resolution may incorporate the proposed amendment in
251-17 a restated certificate of formation that complies with Section
251-18 3.057.
251-19 Sec. 21.054. ADOPTION OF AMENDMENT BY BOARD OF DIRECTORS.
251-20 If a corporation does not have any issued and outstanding shares,
251-21 the board of directors may adopt a proposed amendment to the
251-22 corporation's certificate of formation by resolution without
251-23 shareholder approval.
251-24 Sec. 21.055. ADOPTION OF AMENDMENT BY SHAREHOLDERS. If a
251-25 corporation has issued shares, a resolution described by Section
251-26 21.053 must also direct that:
251-27 (1) the proposed amendment be submitted to a vote of
252-1 the shareholders at a meeting; and
252-2 (2) the shareholders approve the proposed amendment in
252-3 the manner provided by Section 21.056.
252-4 Sec. 21.056. NOTICE OF AND MEETING TO CONSIDER PROPOSED
252-5 AMENDMENT. (a) Each shareholder of record entitled to vote shall
252-6 be given written notice containing the proposed amendment or a
252-7 summary of the changes to be effected within the time and in the
252-8 manner provided by this code for giving notice of meetings to
252-9 shareholders. The proposed amendment or summary may be included in
252-10 the notice required to be provided for an annual meeting.
252-11 (b) At the meeting, the proposed amendment shall be adopted
252-12 only on receiving the affirmative vote of shareholders entitled to
252-13 vote required by Section 21.364.
252-14 (c) An unlimited number of amendments may be submitted for
252-15 adoption by the shareholders at a meeting.
252-16 Sec. 21.057. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF
252-17 AMENDMENT. (a) In addition to the statements required by Section
252-18 3.053, a certificate of amendment for a corporation must state:
252-19 (1) if the amendment provides for an exchange,
252-20 reclassification, or cancellation of issued shares, the manner in
252-21 which the exchange, reclassification, or cancellation of the issued
252-22 shares will be effected if the manner is not specified in the
252-23 amendment; and
252-24 (2) if the amendment effects a change in the amount of
252-25 stated capital, the manner in which the change in the amount of
252-26 stated capital is effected and the amount of stated capital
252-27 expressed in dollar terms as changed by the amendment.
253-1 (b) An officer shall sign the certificate of amendment on
253-2 behalf of the corporation. If shares of the corporation have not
253-3 been issued and the certificate of amendment is adopted by the
253-4 board of directors, a majority of the directors may sign the
253-5 certificate of amendment on behalf of the corporation.
253-6 (c) The certificate of amendment shall be filed in
253-7 accordance with Chapter 4 and takes effect as provided by
253-8 Subchapter B, Chapter 3.
253-9 Sec. 21.058. RESTATED CERTIFICATE OF FORMATION. (a) A
253-10 corporation may adopt a restated certificate of formation as
253-11 provided by Subchapter B, Chapter 3, by following the same
253-12 procedures to amend its certificate of formation under Sections
253-13 21.053-21.057, except that shareholder approval is not required if
253-14 an amendment is not adopted.
253-15 (b) An officer shall sign the restated certificate of
253-16 formation on behalf of the corporation. If shares of the
253-17 corporation have not been issued and the restated certificate of
253-18 formation is adopted by the board of directors, the majority of the
253-19 directors may sign the restated certificate of formation on behalf
253-20 of the corporation.
253-21 (c) In addition to the provisions authorized or required by
253-22 Section 3.057, a restated certificate of formation may update the
253-23 current number of directors and the names and addresses of the
253-24 persons serving as directors.
253-25 (d) The restated certificate of formation shall be filed in
253-26 accordance with Chapter 4 and takes effect as provided by
253-27 Subchapter B, Chapter 3.
254-1 Sec. 21.059. BYLAWS. (a) The board of directors of a
254-2 corporation shall adopt initial bylaws.
254-3 (b) The bylaws may contain provisions for the regulation and
254-4 management of the affairs of the corporation that are consistent
254-5 with law and the corporation's certificate of formation.
254-6 (c) A corporation's board of directors may amend or repeal
254-7 bylaws or adopt new bylaws unless:
254-8 (1) the corporation's certificate of formation or this
254-9 code wholly or partly reserves the power exclusively to the
254-10 corporation's shareholders; or
254-11 (2) in amending, repealing, or adopting a bylaw, the
254-12 shareholders expressly provide that the board of directors may not
254-13 amend, repeal, or readopt that bylaw.
254-14 Sec. 21.060. DUAL AUTHORITY. Unless the certificate of
254-15 formation or a bylaw adopted by the shareholders provides otherwise
254-16 as to all or a part of a corporation's bylaws, a corporation's
254-17 shareholders may amend, repeal, or adopt the corporation's bylaws
254-18 regardless of whether the bylaws may also be amended, repealed, or
254-19 adopted by the corporation's board of directors.
254-20 Sec. 21.061. ORGANIZATION MEETING. (a) This section does
254-21 not apply to a corporation created as a result of a conversion or
254-22 merger the plan of which states the bylaws and names the officers
254-23 of the corporation.
254-24 (b) After the filing of a certificate of formation takes
254-25 effect, an organization meeting shall be held at the call of the
254-26 majority of the initial board of directors or the persons named in
254-27 the certificate of formation under Section 21.051(a)(4) for the
255-1 purpose of adopting bylaws, electing officers, and transacting
255-2 other business.
255-3 (c) Not later than the fourth day before the date of the
255-4 meeting, the directors or other persons calling the meeting shall
255-5 mail notice of the time and place of the meeting to each other
255-6 director or person named in the certificate of formation.
255-7 (Sections 21.062-21.100 reserved for expansion)
255-8 SUBCHAPTER C. SHAREHOLDERS' AGREEMENTS
255-9 Sec. 21.101. SHAREHOLDERS' AGREEMENT. (a) The shareholders
255-10 of a corporation may enter into an agreement that:
255-11 (1) restricts the discretion or powers of the board of
255-12 directors;
255-13 (2) eliminates the board of directors and authorizes
255-14 the business and affairs of the corporation to be managed, wholly
255-15 or partly, by one or more of its shareholders or other persons;
255-16 (3) establishes the individuals who shall serve as
255-17 directors or officers of the corporation;
255-18 (4) determines the term of office, manner of selection
255-19 or removal, or terms or conditions of employment of a director,
255-20 officer, or other employee of the corporation, regardless of the
255-21 length of employment;
255-22 (5) governs the authorization or making of
255-23 distributions whether in proportion to ownership of shares, subject
255-24 to Section 21.303;
255-25 (6) determines the manner in which profits and losses
255-26 will be apportioned;
255-27 (7) governs, in general or with regard to specific
256-1 matters, the exercise or division of voting power by and between
256-2 the shareholders, directors, or other persons, including use of
256-3 disproportionate voting rights or director proxies;
256-4 (8) establishes the terms of an agreement for the
256-5 transfer or use of property or for the provision of services
256-6 between the corporation and another person, including a
256-7 shareholder, director, officer, or employee of the corporation;
256-8 (9) authorizes arbitration or grant authority to a
256-9 shareholder or other person to resolve any issue about which there
256-10 is a deadlock among the directors, shareholders, or other persons
256-11 authorized to manage the corporation;
256-12 (10) requires winding up and termination of the
256-13 corporation at the request of one or more shareholders or on the
256-14 occurrence of a specified event or contingency, in which case the
256-15 winding up and termination of the corporation will proceed as if
256-16 all of the shareholders had consented in writing to the winding up
256-17 and termination as provided by Subchapter K; or
256-18 (11) otherwise governs the exercise of corporate
256-19 powers, the management of the business and affairs of the
256-20 corporation, or the relationship among the shareholders, the
256-21 directors, and the corporation as if the corporation were a
256-22 partnership or in a manner that would otherwise be appropriate only
256-23 among partners and not contrary to public policy.
256-24 (b) A shareholders' agreement authorized by this section
256-25 must be:
256-26 (1) contained in:
256-27 (A) the certificate of formation or bylaws if
257-1 approved by all of the shareholders at the time of the agreement;
257-2 or
257-3 (B) a written agreement that is:
257-4 (i) signed by all of the shareholders at
257-5 the time of the agreement; and
257-6 (ii) made known to the corporation; and
257-7 (2) amended only by all of the shareholders at the
257-8 time of the amendment, unless the agreement provides otherwise.
257-9 Sec. 21.102. TERM OF AGREEMENT. A shareholders' agreement
257-10 under this subchapter is valid for 10 years, unless the agreement
257-11 provides otherwise.
257-12 Sec. 21.103. DISCLOSURE OF AGREEMENT; RECALL OF CERTAIN
257-13 CERTIFICATES. (a) The existence of an agreement authorized by
257-14 this subchapter shall be noted conspicuously on the front or back
257-15 of each certificate for outstanding shares or on the information
257-16 statement required for uncertificated shares by Section 3.205.
257-17 (b) The disclosure required by this section must include the
257-18 sentence, "These shares are subject to the provisions of a
257-19 shareholders' agreement that may provide for management of the
257-20 corporation in a manner different than in other corporations and
257-21 may subject a shareholder to certain obligations or liabilities not
257-22 otherwise imposed on shareholders in other corporations."
257-23 (c) A corporation that has outstanding shares represented by
257-24 certificates at the time the shareholders of the corporation enter
257-25 into an agreement under this subchapter shall recall the
257-26 outstanding certificates and issue substitute certificates that
257-27 comply with this subchapter.
258-1 (d) The failure to note the existence of the agreement on
258-2 the certificate or information statement does not affect the
258-3 validity of the agreement or an action taken pursuant to the
258-4 agreement.
258-5 Sec. 21.104. EFFECT OF SHAREHOLDERS' AGREEMENT. A
258-6 shareholders' agreement that complies with this subchapter is
258-7 effective among the shareholders and between the shareholders and
258-8 the corporation even if the terms of the agreement are inconsistent
258-9 with this code.
258-10 Sec. 21.105. KNOWLEDGE OF PURCHASER OF SHARES. (a) A
258-11 purchaser of shares who does not have knowledge at the time of
258-12 purchase of the existence of a shareholders' agreement authorized
258-13 by this subchapter is entitled to rescind the purchase.
258-14 (b) A purchaser is considered to have knowledge of the
258-15 existence of the shareholders' agreement for purposes of this
258-16 section if:
258-17 (1) the existence of the agreement is noted on the
258-18 certificate or information statement for the shares as required by
258-19 Section 21.103; and
258-20 (2) with respect to shares that are not represented by
258-21 a certificate, the information statement noting existence of the
258-22 agreement is delivered to the purchaser not later than the time the
258-23 shares are purchased.
258-24 (c) An action to enforce the right of rescission authorized
258-25 by this section must be commenced not later than the earlier of:
258-26 (1) the 90th day after the date the existence of the
258-27 shareholder agreement is discovered; or
259-1 (2) the second anniversary of the purchase date of the
259-2 shares.
259-3 Sec. 21.106. AGREEMENT LIMITING AUTHORITY OF AND SUPPLANTING
259-4 BOARD OF DIRECTORS; LIABILITY. (a) A shareholders' agreement
259-5 authorized by this subchapter that limits the discretion or powers
259-6 of the board of directors or supplants the board of directors
259-7 relieves the directors of, and imposes on a person in whom the
259-8 discretion or powers of the board of directors or the management of
259-9 the business and affairs of the corporation is vested, liability
259-10 for an act or omission of the person.
259-11 (b) A person on whom liability for an act or omission is
259-12 imposed under this section is liable in the same manner and to the
259-13 same extent as a director on whom liability for an act or omission
259-14 is imposed by this code or other law.
259-15 Sec. 21.107. LIABILITY OF SHAREHOLDER. The existence of or
259-16 a performance under a shareholders' agreement authorized by this
259-17 subchapter is not a ground for imposing personal liability on a
259-18 shareholder for an act or obligation of the corporation by
259-19 disregarding the separate existence of the corporation or
259-20 otherwise, even if the agreement or a performance under the
259-21 agreement:
259-22 (1) treats the corporation as if the corporation were
259-23 a partnership or in a manner that otherwise is appropriate only
259-24 among partners;
259-25 (2) results in the corporation being considered a
259-26 partnership for purposes of taxation; or
259-27 (3) results in failure to observe the corporate
260-1 formalities otherwise applicable to the matters governed by the
260-2 agreement.
260-3 Sec. 21.108. PERSONS ACTING IN PLACE OF SHAREHOLDERS. An
260-4 organizer or a subscriber for shares may act as a shareholder with
260-5 respect to a shareholders' agreement authorized by this subchapter
260-6 if no shares have been issued when the agreement is signed.
260-7 Sec. 21.109. AGREEMENT NOT EFFECTIVE. (a) A shareholders'
260-8 agreement authorized by this subchapter ceases to be effective when
260-9 shares of the corporation are:
260-10 (1) listed on a national securities exchange or
260-11 similar system;
260-12 (2) quoted on an interdealer quotation system of a
260-13 national securities association or successor system; or
260-14 (3) regularly traded in a market maintained by one or
260-15 more members of a national or affiliated securities association.
260-16 (b) If a corporation does not have a board of directors and
260-17 an agreement of the shareholders of the corporation entered into
260-18 under this subchapter ceases to be effective, a board of directors
260-19 shall be instituted or reinstated to govern the corporation in the
260-20 manner provided by Section 21.710(c).
260-21 (c) If a shareholders' agreement that ceases to be effective
260-22 is contained in or referred to by the certificate of formation or
260-23 bylaws of a corporation, the board of directors of the corporation
260-24 may adopt an amendment to the certificate of formation or bylaws,
260-25 without shareholder action, to delete the agreement and any
260-26 references to the agreement.
260-27 (Sections 21.110-21.150 reserved for expansion)
261-1 SUBCHAPTER D. SHARES, OPTIONS, AND CONVERTIBLE SECURITIES
261-2 Sec. 21.151. NUMBER OF AUTHORIZED SHARES. A corporation may
261-3 issue the number of shares stated in the corporation's certificate
261-4 of formation.
261-5 Sec. 21.152. CLASSES AND SERIES OF SHARES. (a) A
261-6 corporation's certificate of formation may divide the corporation's
261-7 authorized shares into one or more classes and may divide one or
261-8 more classes into one or more series. The certificate of formation
261-9 must designate each class and series of authorized shares to
261-10 distinguish that class and series from any other class or series.
261-11 (b) Shares of the same class must be of the same par value
261-12 or be without par value, as stated in the certificate of formation.
261-13 (c) Shares of the same class must be identical in all
261-14 respects unless the shares have been divided into one or more
261-15 series. If the shares of a class have been divided into one or
261-16 more series, the shares may vary between series, but all shares of
261-17 the same series will be identical in all respects.
261-18 Sec. 21.153. DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
261-19 RIGHTS OF A CLASS OR SERIES. (a) Each class or series of
261-20 authorized shares of a corporation must have the designations,
261-21 preferences, limitations, and relative rights, including voting
261-22 rights, stated in the corporation's certificate of formation.
261-23 (b) The certificate of formation may limit or deny the
261-24 voting rights of, or provide special voting rights for, the shares
261-25 of a class or series or the shares of a class or series held by a
261-26 person or class of persons to the extent the limitation, denial, or
261-27 provision is not inconsistent with this code.
262-1 (c) A designation, preference, limitation, or relative
262-2 right, including voting right, of a class or series of shares of a
262-3 corporation may be made dependent on facts not contained in the
262-4 certificate of formation, including future acts of the corporation,
262-5 if the manner in which those facts will operate on the designation,
262-6 preference, limitation, or right is clearly and expressly stated in
262-7 the certificate of formation.
262-8 Sec. 21.154. CERTAIN OPTIONAL CHARACTERISTICS OF SHARES.
262-9 (a) Subject to Section 21.153, if authorized by the corporation's
262-10 certificate of formation, a corporation may issue shares that:
262-11 (1) are redeemable, subject to Sections 21.303 and
262-12 21.304;
262-13 (2) entitle the holders of the shares to cumulative,
262-14 noncumulative, or partially cumulative distributions;
262-15 (3) have preferences over any or all other classes or
262-16 series of shares with respect to payment of distributions;
262-17 (4) have preferences over any or all other classes or
262-18 series of shares with respect to the assets of the corporation on
262-19 the voluntary or involuntary winding up and termination of the
262-20 corporation;
262-21 (5) are exchangeable for shares, obligations,
262-22 indebtedness, evidence of ownership, rights to purchase securities
262-23 of the corporation or one or more other entities, or other property
262-24 or for a combination of those rights, assets, or obligations
262-25 subject to Section 21.303; and
262-26 (6) are convertible into shares of any other class or
262-27 series.
263-1 (b) Shares without par value may not be converted into
263-2 shares with par value unless:
263-3 (1) at the time of conversion, the part of the
263-4 corporation's stated capital represented by the shares without par
263-5 value is at least equal to the aggregate par value of the shares to
263-6 be converted; or
263-7 (2) the amount of any deficiency computed under
263-8 Subdivision (1) is transferred from surplus to stated capital.
263-9 (c) Shares of a corporation may be redeemed, exchanged, or
263-10 converted at the option of the corporation, shareholder, or other
263-11 person or on the occurrence of a designated event.
263-12 Sec. 21.155. SERIES OF SHARES ESTABLISHED BY BOARD OF
263-13 DIRECTORS. (a) If expressly authorized by the corporation's
263-14 certificate of formation and subject to the certificate of
263-15 formation, the board of directors of a corporation may establish
263-16 series of unissued shares of any class by setting and determining
263-17 the designations, preferences, limitations, and relative rights,
263-18 including voting rights, of the shares of the series to be
263-19 established to the same extent that the designations, preferences,
263-20 limitations, or relative rights could be stated if fully specified
263-21 in the certificate of formation.
263-22 (b) To establish a series if authorized by the certificate
263-23 of formation, the board of directors must adopt a resolution
263-24 specifying the designations, preferences, limitations, and relative
263-25 rights, including voting rights, of the series to be established or
263-26 specifying any designation, preference, limitation, or relative
263-27 right that is not set and determined by the certificate of
264-1 formation.
264-2 (c) If the certificate of formation does not expressly
264-3 restrict the board of directors from increasing or decreasing the
264-4 number of unissued shares of a series to be established under
264-5 Subsection (a), the board of directors may increase or decrease the
264-6 number of shares in each series to be established, except that the
264-7 board of directors may not decrease the number of shares in a
264-8 particular series to a number that is less than the number of
264-9 shares in that series that are issued at the time of the decrease.
264-10 (d) To increase or decrease the number of shares of a series
264-11 under Subsection (c), the board of directors must adopt a
264-12 resolution setting and determining the new number of shares of each
264-13 series in which the number of shares is increased or decreased. If
264-14 the number of shares of a series is decreased, the shares by which
264-15 the series is decreased will resume the status of authorized but
264-16 unissued shares of the class of shares from which the series was
264-17 established, unless otherwise provided by the certificate of
264-18 formation or the terms of the class or series.
264-19 (e) If no shares of a series established by board resolution
264-20 under Subsection (b) are outstanding because no shares of that
264-21 series have been issued or no issued shares of that series remain
264-22 outstanding, the board of directors by resolution may delete the
264-23 series from the certificate of formation and delete any reference
264-24 to the series contained in the certificate of formation. Unless
264-25 otherwise provided by the certificate of formation, the shares of
264-26 any series deleted from the certificate of formation under this
264-27 section shall resume the status of authorized but unissued shares
265-1 of the class of shares from which the series was established.
265-2 (f) If no shares of a series established by resolution of
265-3 the board of directors under Subsection (b) are outstanding because
265-4 no shares of that series have been issued, the board of directors
265-5 may amend the designations, preferences, limitations, and relative
265-6 rights, including voting rights, of the series or amend any
265-7 designation, preference, limitation, or relative right that is not
265-8 set and determined by the certificate of formation.
265-9 Sec. 21.156. ACTIONS WITH RESPECT TO SERIES OF SHARES. (a)
265-10 To effect an action authorized under Section 21.155, the
265-11 corporation must file with the secretary of state a statement that
265-12 contains:
265-13 (1) the name of the corporation;
265-14 (2) if the statement relates to the establishment of a
265-15 series of shares, a copy of the resolution establishing and
265-16 designating the series and setting and determining the
265-17 designations, preferences, limitations, and relative rights of the
265-18 series;
265-19 (3) if the statement relates to an increase or
265-20 decrease in the number of shares of a series, a copy of the
265-21 resolution setting and determining the new number of shares of each
265-22 series in which the number of shares is increased or decreased;
265-23 (4) if the statement relates to the deletion of a
265-24 series of shares and all references to the series from the
265-25 certificate of formation, a copy of the resolution deleting the
265-26 series and all references to the series from the certificate of
265-27 formation;
266-1 (5) if the statement relates to the amendment of
266-2 designations, preferences, limitations, or relative rights of
266-3 shares of a series that was previously established by resolution of
266-4 the board of directors, a copy of the resolution in which the
266-5 amendment is specified;
266-6 (6) the date of the adoption of the resolution; and
266-7 (7) a statement that the resolution was adopted by all
266-8 necessary action on the part of the corporation.
266-9 (b) On the filing of a statement described by Subsection
266-10 (a), the following resolutions will become an amendment of the
266-11 certificate of formation, as appropriate:
266-12 (1) the resolution establishing and designating the
266-13 series and setting and determining the designations, preferences,
266-14 limitations, and relative rights of the series;
266-15 (2) the resolution setting the new number of shares of
266-16 each series in which the number of shares is increased or
266-17 decreased;
266-18 (3) the resolution deleting a series and all
266-19 references to the series from the certificate of formation; or
266-20 (4) the resolution amending the designations,
266-21 preferences, limitations, and relative rights of a series.
266-22 (c) An amendment of the certificate of formation under this
266-23 section is not subject to the procedure to amend the certificate of
266-24 formation contained in Subchapter B.
266-25 Sec. 21.157. ISSUANCE OF SHARES. (a) Except as provided by
266-26 Section 21.158, a corporation may issue shares for consideration if
266-27 authorized by the board of directors of the corporation.
267-1 (b) Shares may not be issued until the consideration,
267-2 determined in accordance with this subchapter, has been received by
267-3 the corporation. When the consideration is received:
267-4 (1) the shares are issued;
267-5 (2) the subscriber or other person entitled to receive
267-6 the shares is a shareholder with respect to the shares; and
267-7 (3) the shares are considered fully paid and
267-8 nonassessable.
267-9 Sec. 21.158. ISSUANCE OF SHARES UNDER PLAN OF MERGER OR
267-10 CONVERSION. (a) A converted corporation under a plan of
267-11 conversion or a corporation created by a plan of merger may issue
267-12 shares for consideration if authorized by the plan of conversion or
267-13 plan of merger, as appropriate.
267-14 (b) A corporation may issue shares in the manner provided by
267-15 and for consideration specified under a plan of merger or plan of
267-16 conversion.
267-17 Sec. 21.159. TYPES OF CONSIDERATION FOR SHARES. Shares with
267-18 or without par value may be issued for the following types of
267-19 consideration:
267-20 (1) a tangible or intangible benefit to the
267-21 corporation;
267-22 (2) cash;
267-23 (3) a promissory note;
267-24 (4) services performed or a contract for services to
267-25 be performed;
267-26 (5) a security of the corporation or any other
267-27 organization; and
268-1 (6) any other property of any kind or nature.
268-2 Sec. 21.160. DETERMINATION OF CONSIDERATION FOR SHARES. (a)
268-3 Subject to Subsection (b), consideration to be received for shares
268-4 must be determined:
268-5 (1) by the board of directors;
268-6 (2) by a plan of conversion, if the shares are to be
268-7 issued by a converted corporation under the plan; or
268-8 (3) by a plan of merger, if the shares are to be
268-9 issued under the plan by a corporation created under the plan.
268-10 (b) If the corporation's certificate of formation reserves
268-11 to the shareholders the right to determine the consideration to be
268-12 received for shares without par value, the shareholders shall
268-13 determine the consideration for those shares before the shares are
268-14 issued. The board of directors may not determine the consideration
268-15 for shares under this subsection.
268-16 (c) A corporation may dispose of treasury shares for
268-17 consideration that may be determined by the board of directors.
268-18 Sec. 21.161. AMOUNT OF CONSIDERATION FOR ISSUANCE OF CERTAIN
268-19 SHARES. (a) Consideration to be received by a corporation for the
268-20 issuance of shares with par value may not be less than the par
268-21 value of the shares.
268-22 (b) The part of the surplus of a corporation that is
268-23 transferred to stated capital on the issuance of shares as a share
268-24 distribution is considered to be the consideration for the issuance
268-25 of those shares.
268-26 (c) The consideration received by a corporation for the
268-27 issuance of shares on the conversion or exchange of its
269-1 indebtedness or shares is:
269-2 (1) the principal of, and accrued interest on, the
269-3 indebtedness exchanged or converted, or the stated capital on the
269-4 issuance of the shares;
269-5 (2) the part of surplus, if any, transferred to stated
269-6 capital on the issuance of the shares; and
269-7 (3) any additional consideration paid to the
269-8 corporation on the issuance of the shares.
269-9 (d) The consideration received by a corporation for the
269-10 issuance of shares on the exercise of rights or options is:
269-11 (1) any consideration received by the corporation for
269-12 the rights or options; and
269-13 (2) any consideration received by the corporation for
269-14 the issuance of shares on the exercise of the rights or options.
269-15 Sec. 21.162. VALUE AND SUFFICIENCY OF CONSIDERATION. In the
269-16 absence of fraud in the transaction, the judgment of the board of
269-17 directors, the shareholders, or the party approving the plan of
269-18 conversion or the plan of merger, as appropriate, is conclusive in
269-19 determining the value and sufficiency of the consideration received
269-20 for the shares.
269-21 Sec. 21.163. ISSUANCE AND DISPOSITION OF FRACTIONAL SHARES
269-22 OR SCRIP. (a) A corporation may:
269-23 (1) issue fractions of a share, either certificated or
269-24 uncertificated;
269-25 (2) arrange for the disposition of fractional
269-26 interests by persons entitled to the interests;
269-27 (3) pay cash for the fair value of fractions of a
270-1 share determined when the shareholders entitled to receive the
270-2 fractions are determined; or
270-3 (4) subject to Subsection (b), issue scrip in
270-4 registered or bearer form that entitles the holder to receive a
270-5 certificate for a full share or an uncertificated full share on the
270-6 surrender of the scrip aggregating a full share.
270-7 (b) The board of directors may issue scrip:
270-8 (1) on the condition that the scrip will become void
270-9 if not exchanged for certificated or uncertificated full shares
270-10 before a specified date;
270-11 (2) on the condition that the shares for which the
270-12 scrip is exchangeable may be sold by the corporation and the
270-13 proceeds from the sale of the shares may be distributed to the
270-14 holders of scrip; or
270-15 (3) subject to any other condition the board of
270-16 directors may determine advisable.
270-17 Sec. 21.164. RIGHTS OF HOLDERS OF FRACTIONAL SHARES OR
270-18 SCRIP. (a) A holder of a certificated or uncertificated
270-19 fractional share is entitled to exercise voting rights, receive
270-20 distributions, and make a claim with respect to the assets of the
270-21 corporation in the event of winding up and termination.
270-22 (b) A holder of a certificate for scrip is not entitled to
270-23 exercise voting rights, receive distributions, or make a claim with
270-24 respect to the assets of the corporation in the event of winding up
270-25 and termination unless the scrip provides for those rights.
270-26 Sec. 21.165. SUBSCRIPTIONS. (a) A corporation may accept a
270-27 subscription by notifying the subscriber in writing.
271-1 (b) A subscription to purchase shares in a corporation in
271-2 the process of being formed is irrevocable for six months if the
271-3 subscription is in writing and signed by the subscriber, unless the
271-4 subscription provides for a longer or shorter period or all of the
271-5 other subscribers agree to the revocation of the subscription.
271-6 (c) A written subscription entered into after the
271-7 corporation is formed is a contract between the subscriber and the
271-8 corporation.
271-9 Sec. 21.166. PREFORMATION SUBSCRIPTION. (a) The
271-10 corporation may determine the payment terms of a preformation
271-11 subscription unless the payment terms are specified by the
271-12 subscription. The payment terms may authorize payment in full on
271-13 acceptance or by installments.
271-14 (b) Unless the subscription provides otherwise, a
271-15 corporation shall make calls placed to all subscribers of similar
271-16 interests for payment on preformation subscriptions uniform as far
271-17 as practicable.
271-18 (c) After the corporation is formed, a corporation may:
271-19 (1) collect in the same manner as any other debt the
271-20 amount due on any unpaid preformation subscription; or
271-21 (2) forfeit the subscription on 20 days' written
271-22 notice to the subscriber.
271-23 (d) Although the forfeiture of a subscription terminates all
271-24 the rights and obligations of the subscriber, the corporation may
271-25 retain any amount previously paid on the subscription.
271-26 Sec. 21.167. COMMITMENT TO PURCHASE SHARES. (a) A person
271-27 who contemplates the acquisition of shares in a corporation may
272-1 commit to act in a specified manner with respect to the shares
272-2 after the acquisition, including the voting of the shares or the
272-3 retention or disposition of the shares. To be binding, the
272-4 commitment must be in writing and be signed by the person acquiring
272-5 the shares. The commitment continues for a six-month period unless
272-6 the commitment provides for a longer or shorter period.
272-7 (b) A written commitment entered into under Subsection (a)
272-8 is a contract between the shareholder and the corporation.
272-9 Sec. 21.168. STOCK RIGHTS, OPTIONS, AND CONVERTIBLE
272-10 INDEBTEDNESS. (a) Except as provided by the corporation's
272-11 certificate of formation and regardless of whether done in
272-12 connection with the issuance and sale of any other share or
272-13 security of the corporation, a corporation may create and issue:
272-14 (1) rights or options that entitle the holders to
272-15 purchase or receive from the corporation shares of any class or
272-16 series or other securities; and
272-17 (2) indebtedness convertible into shares of any class
272-18 or series of the corporation or other securities of the
272-19 corporation.
272-20 (b) A right, option, or indebtedness described by this
272-21 section shall be evidenced in the manner approved by the board of
272-22 directors.
272-23 (c) Subject to the certificate of formation, a right or
272-24 option described by this section must state the terms on which, the
272-25 time within which, and any consideration for which the shares may
272-26 be purchased or received from the corporation on the exercise of
272-27 the right or option.
273-1 (d) Subject to the certificate of formation, convertible
273-2 indebtedness described by this section must state the terms and
273-3 conditions on which, the time within which, and the conversion
273-4 ratio at which the indebtedness may be converted into shares.
273-5 Sec. 21.169. TERMS AND CONDITIONS OF RIGHTS AND OPTIONS.
273-6 (a) The terms and conditions of rights or options may include
273-7 restrictions or conditions that:
273-8 (1) prohibit or limit the exercise, transfer, or
273-9 receipt of the rights or options by certain persons or classes of
273-10 persons, including:
273-11 (A) a person who beneficially owns or offers to
273-12 acquire a specified number or percentage of the outstanding common
273-13 shares, voting power, or other securities of the corporation; or
273-14 (B) a transferee of a person described by
273-15 Paragraph (A); or
273-16 (2) invalidate or void the rights or options held by a
273-17 person or transferee described by Subdivision (1).
273-18 (b) Rights or options created or issued before the effective
273-19 date of this code that comply with this section and are not in
273-20 conflict with other provisions of this code are ratified.
273-21 (c) Unless otherwise provided under the terms of rights or
273-22 options or the agreement or plan under which the rights or options
273-23 are issued, the authority to grant, amend, redeem, extend, or
273-24 replace the rights or options on behalf of a corporation is vested
273-25 exclusively in the board of directors of the corporation, except
273-26 that a bylaw may not require the board to grant, amend, redeem,
273-27 extend, or replace the rights or options.
274-1 Sec. 21.170. CONSIDERATION FOR RIGHTS, OPTIONS, AND
274-2 CONVERTIBLE INDEBTEDNESS. (a) In the absence of fraud in the
274-3 transaction, the judgment of the board of directors of a
274-4 corporation as to the adequacy of the consideration received for
274-5 rights, options, or convertible indebtedness is conclusive.
274-6 (b) A corporation may issue rights or options to its
274-7 shareholders, officers, consultants, independent contractors,
274-8 employees, or directors without consideration if, in the judgment
274-9 of the board of directors, the issuance of the rights or options is
274-10 in the interests of the corporation.
274-11 (c) The consideration for shares having a par value, other
274-12 than treasury shares, and issued on the exercise of the rights or
274-13 options may not be less than the par value of the shares.
274-14 (d) A privilege of conversion may not be conferred on, or
274-15 altered with respect to, any indebtedness that would result in the
274-16 corporation receiving less than the minimum consideration required
274-17 to be received on issuance of the shares.
274-18 (e) The consideration for shares issued on the exercise of
274-19 rights, options, or convertible indebtedness shall be determined as
274-20 provided by Section 21.161.
274-21 Sec. 21.171. TREASURY SHARES. (a) Treasury shares are
274-22 considered to be issued shares and not outstanding shares.
274-23 (b) Treasury shares may not be included in the total assets
274-24 of a corporation for purposes of determining the net assets of a
274-25 corporation.
274-26 Sec. 21.172. EXPENSES OF ORGANIZATION, REORGANIZATION, AND
274-27 FINANCING OF CORPORATION. A corporation may pay or authorize to be
275-1 paid from the consideration received by the corporation as payment
275-2 for the corporation's shares the reasonable charges and expenses of
275-3 the organization or reorganization of the corporation and the sale
275-4 or underwriting of the shares without rendering the shares not
275-5 fully paid and nonassessable.
275-6 (Sections 21.173-21.200 reserved for expansion)
275-7 SUBCHAPTER E. SHAREHOLDER RIGHTS AND RESTRICTIONS
275-8 Sec. 21.201. REGISTERED HOLDERS AS OWNERS. Except as
275-9 otherwise provided by this code and subject to Chapter 8, Business
275-10 & Commerce Code, a corporation may consider the person registered
275-11 as the owner of a share in the share transfer records of the
275-12 corporation at a particular time, including a record date set under
275-13 Section 6.101 or 6.102, as the owner of that share at that time for
275-14 purposes of:
275-15 (1) voting the share;
275-16 (2) receiving distributions on the share;
275-17 (3) transferring the share;
275-18 (4) receiving notice, exercising rights of dissent,
275-19 exercising or waiving a preemptive right, or giving proxies with
275-20 respect to that share;
275-21 (5) entering into agreements with respect to that
275-22 share in accordance with Section 6.251, 6.252, or 21.210; or
275-23 (6) any other shareholder action.
275-24 Sec. 21.202. DEFINITION OF SHARES. In Sections
275-25 21.203-21.207, "shares" includes a security:
275-26 (1) that is convertible into shares; or
275-27 (2) that carries a right to subscribe for or acquire
276-1 shares.
276-2 Sec. 21.203. NO STATUTORY PREEMPTIVE RIGHT UNLESS PROVIDED
276-3 BY CERTIFICATE OF FORMATION. (a) Except as provided by Section
276-4 21.208, a shareholder of a corporation does not have a preemptive
276-5 right under this subchapter to acquire the corporation's unissued
276-6 or treasury shares except to the extent provided by the
276-7 corporation's certificate of formation.
276-8 (b) If the certificate of formation includes a statement
276-9 that the corporation "elects to have a preemptive right" or a
276-10 similar statement, Section 21.204 applies to a shareholder except
276-11 to the extent the certificate of formation expressly provides
276-12 otherwise.
276-13 Sec. 21.204. STATUTORY PREEMPTIVE RIGHTS. (a) If the
276-14 shareholders of a corporation have a preemptive right under this
276-15 subchapter, the shareholders have a preemptive right to acquire
276-16 proportional amounts of the corporation's unissued or treasury
276-17 shares on the decision of the corporation's board of directors to
276-18 issue the shares. The preemptive right granted under this
276-19 subsection is subject to uniform terms and conditions prescribed by
276-20 the board of directors to provide a fair and reasonable opportunity
276-21 to exercise the preemptive right.
276-22 (b) No preemptive right exists with respect to:
276-23 (1) shares issued or granted as compensation to a
276-24 director, officer, agent, or employee of the corporation or a
276-25 subsidiary or affiliate of the corporation;
276-26 (2) shares issued or granted to satisfy conversion or
276-27 option rights created to provide compensation to a director,
277-1 officer, agent, or employee of the corporation or a subsidiary or
277-2 affiliate of the corporation;
277-3 (3) shares authorized in the corporation's certificate
277-4 of formation that are issued not later than the 180th day after the
277-5 effective date of the corporation's formation; or
277-6 (4) shares sold, issued, or granted by the corporation
277-7 for consideration other than money.
277-8 (c) A holder of a share of a class without general voting
277-9 rights but with a preferential right to distributions of profits,
277-10 income, or assets does not have a preemptive right with respect to
277-11 shares of any class.
277-12 (d) A holder of a share of a class with general voting
277-13 rights but without preferential rights to distributions of profits,
277-14 income, or assets does not have a preemptive right with respect to
277-15 shares of any class with preferential rights to distributions of
277-16 profits, income, or assets unless the shares with preferential
277-17 rights are convertible into or carry a right to subscribe for or
277-18 acquire shares without preferential rights.
277-19 (e) For a one-year period after the date the shares have
277-20 been offered to shareholders, shares subject to preemptive rights
277-21 that are not acquired by a shareholder may be issued to a person at
277-22 a consideration set by the corporation's board of directors that is
277-23 not lower than the consideration set for the exercise of preemptive
277-24 rights. An offer at a lower consideration or after the expiration
277-25 of the period prescribed by this subsection is subject to the
277-26 shareholder's preemptive rights.
277-27 Sec. 21.205. WAIVER OF PREEMPTIVE RIGHT. (a) A shareholder
278-1 may waive a preemptive right granted to the shareholder.
278-2 (b) A written waiver of a preemptive right is irrevocable
278-3 regardless of whether the waiver is supported by consideration.
278-4 Sec. 21.206. LIMITATION ON ACTION TO ENFORCE PREEMPTIVE
278-5 RIGHT. (a) An action brought against a corporation, the board of
278-6 directors or an officer, shareholder, or agent of the corporation,
278-7 or an owner of a beneficial interest in shares of the corporation
278-8 for the violation of a preemptive right of a shareholder must be
278-9 brought not later than the earlier of:
278-10 (1) the first anniversary of the date written notice
278-11 is given to each shareholder whose preemptive right was violated;
278-12 or
278-13 (2) the fourth anniversary of the latest of:
278-14 (A) the date the corporation issued the shares,
278-15 securities, or rights;
278-16 (B) the date the corporation sold the shares,
278-17 securities, or rights; or
278-18 (C) the date the corporation otherwise
278-19 distributed the shares, securities, or rights.
278-20 (b) The notice required by Subsection (a)(1) must:
278-21 (1) be given to the holder at the address for the
278-22 holder as shown on the appropriate records of the corporation; and
278-23 (2) inform the holder that the issuance, sale, or
278-24 other distribution of shares, securities, or rights violated the
278-25 holder's preemptive right.
278-26 Sec. 21.207. DISPOSITION OF SHARES HAVING PREEMPTIVE RIGHTS.
278-27 The transferee or successor of a share that has been transferred or
279-1 otherwise disposed of by a shareholder of a corporation whose
279-2 preemptive right to acquire shares in the corporation has been
279-3 violated does not acquire the preemptive right, or any right or
279-4 claim based on the violation, unless the previous shareholder has
279-5 assigned the preemptive right to the transferee or successor.
279-6 Sec. 21.208. PREEMPTIVE RIGHT IN EXISTING CORPORATION.
279-7 Subject to the certificate of formation, a shareholder of a
279-8 corporation incorporated before the effective date of this code has
279-9 a preemptive right to acquire unissued or treasury shares of the
279-10 corporation to the extent provided by Sections 21.204, 21.206, and
279-11 21.207. After the effective date of this code, a corporation may
279-12 limit or deny the preemptive right of the shareholders of the
279-13 corporation by amending the corporation's certificate of formation.
279-14 Sec. 21.209. TRANSFER OF SHARES AND OTHER SECURITIES.
279-15 Except as otherwise provided by this code, the shares and other
279-16 securities of a corporation are transferable in accordance with
279-17 Chapter 8, Business & Commerce Code.
279-18 Sec. 21.210. RESTRICTION ON TRANSFER OF SHARES AND OTHER
279-19 SECURITIES. (a) A restriction on the transfer or registration of
279-20 transfer of a security may be imposed by:
279-21 (1) the corporation's certificate of formation;
279-22 (2) the corporation's bylaws;
279-23 (3) a written agreement among two or more holders of
279-24 the securities; or
279-25 (4) a written agreement among one or more holders of
279-26 the securities and the corporation if:
279-27 (A) the corporation files a copy of the
280-1 agreement at the principal place of business or registered office
280-2 of the corporation; and
280-3 (B) the copy of the agreement is subject to the
280-4 same right of examination by a shareholder of the corporation, in
280-5 person or by agent, attorney, or accountant, as the books and
280-6 records of the corporation.
280-7 (b) A restriction imposed under Subsection (a) is not valid
280-8 with respect to a security issued before the restriction has been
280-9 adopted, unless the holder of the security voted in favor of the
280-10 restriction or is a party to the agreement imposing the
280-11 restriction.
280-12 Sec. 21.211. VALID RESTRICTIONS ON TRANSFER.
280-13 Notwithstanding Sections 21.210 and 21.213, a restriction placed on
280-14 the transfer or registration of transfer of a security of a
280-15 corporation is valid if the restriction reasonably:
280-16 (1) obligates the holder of the restricted security to
280-17 offer a person, including the corporation or other holders of
280-18 securities of the corporation, an opportunity to acquire the
280-19 restricted security within a reasonable time before the transfer;
280-20 (2) obligates the corporation, to the extent provided
280-21 by this code, or another person to purchase securities that are the
280-22 subject of an agreement relating to the purchase and sale of the
280-23 restricted security;
280-24 (3) requires the corporation or the holders of a class
280-25 of the corporation's securities to consent to a proposed transfer
280-26 of the restricted security or to approve the proposed transferee of
280-27 the restricted security for the purpose of preventing a violation
281-1 of law;
281-2 (4) prohibits the transfer of the restricted security
281-3 to a designated person or group of persons and the designation is
281-4 not manifestly unreasonable;
281-5 (5) maintains the status of the corporation as an
281-6 electing small business corporation under Subchapter S of the
281-7 Internal Revenue Code;
281-8 (6) maintains a tax advantage to the corporation; or
281-9 (7) maintains the status of the corporation as a close
281-10 corporation under Subchapter O.
281-11 Sec. 21.212. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF
281-12 SHARES OR OTHER SECURITIES. (a) A corporation that has adopted a
281-13 bylaw or is a party to an agreement that restricts the transfer of
281-14 the shares or other securities of the corporation may file with the
281-15 secretary of state, in accordance with Chapter 4, a copy of the
281-16 bylaw or agreement and a statement attached to the copy that:
281-17 (1) contains the name of the corporation;
281-18 (2) states that the attached copy of the bylaw or
281-19 agreement is a true and correct copy of the bylaw or agreement; and
281-20 (3) states that the filing has been authorized by the
281-21 board of directors or, in the case of a corporation that is managed
281-22 in some other manner under a shareholders' agreement, by the person
281-23 empowered by the agreement to manage the corporation's business and
281-24 affairs.
281-25 (b) After a statement described by Subsection (a) is filed
281-26 with the secretary of state, the bylaws or agreement restricting
281-27 the transfer of shares or other securities is a public record, and
282-1 the fact that the statement has been filed may be stated on a
282-2 certificate representing the restricted shares or securities if
282-3 required by Section 3.202.
282-4 (c) A corporation that is a party to an agreement
282-5 restricting the transfer of the shares or other securities of the
282-6 corporation may make the agreement part of the corporation's
282-7 certificate of formation without restating the provisions of the
282-8 agreement in the certificate of formation by amending the
282-9 certificate of formation. If the agreement alters any provision of
282-10 the certificate of formation, the certificate of amendment shall
282-11 identify the altered provision by reference or description. If the
282-12 agreement is an addition to the certificate of formation, the
282-13 certificate of amendment must state that fact.
282-14 (d) The certificate of amendment must:
282-15 (1) include a copy of the agreement restricting the
282-16 transfer of shares or other securities;
282-17 (2) state that the attached copy of the agreement is a
282-18 true and correct copy of the agreement; and
282-19 (3) state that inclusion of the certificate of
282-20 amendment as part of the certificate of formation has been
282-21 authorized in the manner required by this code to amend the
282-22 certificate of formation.
282-23 Sec. 21.213. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF
282-24 CERTAIN SECURITIES. (a) A restriction placed on the transfer or
282-25 registration of the transfer of a security of a corporation is
282-26 specifically enforceable against the holder, or a successor or
282-27 transferee of the holder, if:
283-1 (1) the restriction is reasonable and noted
283-2 conspicuously on the certificate or other instrument representing
283-3 the security; or
283-4 (2) with respect to an uncertificated security, the
283-5 restriction is reasonable and a notation of the restriction is
283-6 contained in the notice sent with respect to the security under
283-7 Section 3.205.
283-8 (b) Unless noted in the manner specified by Subsection (a)
283-9 with respect to a certificate or other instrument or an
283-10 uncertificated security, an otherwise enforceable restriction is
283-11 ineffective against a transferee for value without actual knowledge
283-12 of the restriction at the time of the transfer or against a
283-13 subsequent transferee, regardless of whether the transfer is for
283-14 value. A restriction is specifically enforceable against a person
283-15 other than a transferee for value from the time the person acquires
283-16 actual knowledge of the restriction's existence.
283-17 Sec. 21.214. JOINT OWNERSHIP OF SHARES. (a) If shares are
283-18 registered on the books of a corporation in the names of two or
283-19 more persons as joint owners with the right of survivorship and one
283-20 of the owners dies, the corporation may record on its books and
283-21 effect the transfer of the shares to a person, including the
283-22 surviving joint owner, and pay any distributions made with respect
283-23 to the shares, as if the surviving joint owner was the absolute
283-24 owner of the shares. The recording and distribution authorized by
283-25 this subsection must be made after the death of a joint owner and
283-26 before the corporation receives actual written notice that a party
283-27 other than a surviving joint owner is claiming an interest in the
284-1 shares or distribution.
284-2 (b) The discharge of a corporation from liability under
284-3 Section 21.216 and the transfer of full legal and equitable title
284-4 of the shares does not affect, reduce, or limit any cause of action
284-5 existing in favor of an owner of an interest in the shares or
284-6 distributions against the surviving owner.
284-7 Sec. 21.215. LIABILITY FOR DESIGNATING OWNER OF SHARES. A
284-8 corporation or an officer, director, employee, or agent of the
284-9 corporation may not be held liable for considering a person to be
284-10 the owner of a share for a purpose described by Section 21.201,
284-11 regardless of whether the person possesses a certificate for that
284-12 share.
284-13 Sec. 21.216. LIABILITY REGARDING JOINT OWNERSHIP OF SHARES.
284-14 A corporation that transfers shares or makes a distribution to a
284-15 surviving joint owner under Section 21.214 before the corporation
284-16 has received a written claim for the shares or distribution from
284-17 another person is discharged from liability for the transfer or
284-18 payment.
284-19 Sec. 21.217. LIABILITY OF ASSIGNEE OR TRANSFEREE. An
284-20 assignee or transferee of certificated shares, uncertificated
284-21 shares, or a subscription for shares in good faith and without
284-22 knowledge that full consideration for the shares or subscription
284-23 has not been paid may not be held personally liable to the
284-24 corporation or a creditor of the corporation for an unpaid portion
284-25 of the consideration.
284-26 Sec. 21.218. EXAMINATION OF RECORDS. (a) In this section,
284-27 a holder of a beneficial interest in a voting trust entered into
285-1 under Section 6.251 is a holder of the shares represented by the
285-2 beneficial interest.
285-3 (b) Subject to the governing documents and on written demand
285-4 stating a proper purpose, an owner of outstanding shares of a
285-5 corporation for at least six months immediately preceding the
285-6 owner's demand, or a holder of at least five percent of all of the
285-7 outstanding shares of a corporation, is entitled to examine and
285-8 copy, at a reasonable time, the corporation's relevant books,
285-9 records of account, minutes, and share transfer records. The
285-10 examination may be conducted in person or through an agent,
285-11 accountant, or attorney.
285-12 (c) This section does not impair the power of a court, on
285-13 the presentation of proof of proper purpose by a beneficial or
285-14 record holder of shares, to compel the production for examination
285-15 by the holder of the books and records of accounts, minutes, and
285-16 share transfer records of a corporation, regardless of the period
285-17 during which the holder was a beneficial holder or record holder
285-18 and regardless of the number of shares held by the person.
285-19 Sec. 21.219. ANNUAL AND INTERIM STATEMENTS OF CORPORATION.
285-20 (a) On written request of a shareholder of the corporation, a
285-21 corporation shall mail to the shareholder:
285-22 (1) the annual statements of the corporation for the
285-23 last fiscal year that contain in reasonable detail the
285-24 corporation's assets and liabilities and the results of the
285-25 corporation's operations; and
285-26 (2) the most recent interim statements, if any, that
285-27 have been filed in a public record or other publication.
286-1 (b) The corporation shall be allowed a reasonable time to
286-2 prepare the annual statements.
286-3 Sec. 21.220. PENALTY FOR FAILURE TO PREPARE VOTING LIST. An
286-4 officer or agent of a corporation who is in charge of the
286-5 corporation's share transfer records and who does not prepare the
286-6 list of owners, keep the list on file for a 10-day period, or
286-7 produce and keep the list available for inspection at the annual
286-8 meeting as required by Sections 6.004 and 21.354 is liable to an
286-9 owner who suffers damages because of the failure for the damage
286-10 caused by the failure.
286-11 Sec. 21.221. PENALTY FOR FAILURE TO PROVIDE NOTICE OF
286-12 MEETING. If an officer or agent of a corporation is unable to
286-13 comply with the duties prescribed by Sections 6.004 and 21.354
286-14 because the officer or agent did not receive notice of a meeting of
286-15 owners within a sufficient time before the date of the meeting, the
286-16 corporation, rather than the officer or agent, is liable to an
286-17 owner who suffers damages because of the failure for the extent of
286-18 the damage caused by the failure.
286-19 Sec. 21.222. PENALTY FOR REFUSAL TO PERMIT EXAMINATION OF
286-20 CERTAIN RECORDS. (a) A corporation that refuses to allow a person
286-21 to examine and make copies of account records, minutes, and share
286-22 transfer records under Section 21.218 is liable to the owner for
286-23 any cost or expense, including attorney's fees, incurred in
286-24 enforcing the owner's rights under Section 21.218. The liability
286-25 imposed on a corporation under this subsection is in addition to
286-26 any other damages or remedy afforded to the owner by law.
286-27 (b) It is a defense to an action brought under this section
287-1 that the person suing has within the two years preceding the date
287-2 the action is brought:
287-3 (1) sold or offered for sale a list of owners or of
287-4 holders of voting trust certificates in consideration for shares of
287-5 the corporation or any other corporation;
287-6 (2) aided or abetted a person in procuring a list of
287-7 owners or of holders of voting trust certificates for the purpose
287-8 described by Subdivision (1); or
287-9 (3) improperly used in making its request for
287-10 examination information obtained through a prior examination of the
287-11 books and account records, minutes, or share transfer records of
287-12 the corporation or any other corporation that was not acting in
287-13 good faith or for a proper purpose in making its request for
287-14 examination.
287-15 (Sections 21.223-21.250 reserved for expansion)
287-16 SUBCHAPTER F. REDUCTIONS IN STATED CAPITAL; CANCELLATION
287-17 OF TREASURY SHARES
287-18 Sec. 21.251. REDUCTION OF STATED CAPITAL BY REDEMPTION OR
287-19 PURCHASE OF REDEEMABLE SHARES. (a) At the time a corporation
287-20 redeems or purchases the redeemable shares of the corporation, the
287-21 redemption or purchase has the effect of:
287-22 (1) canceling the shares, so a statement of
287-23 cancellation must be filed in accordance with Chapter 4 and Section
287-24 21.252; and
287-25 (2) restoring the shares to the status of authorized
287-26 but unissued shares, unless the corporation's certificate of
287-27 formation provides that shares may not be reissued after the shares
288-1 are redeemed or purchased by the corporation.
288-2 (b) If the corporation is prohibited from reissuing the
288-3 shares by the certificate of formation following a redemption or
288-4 purchase under Subsection (a), the filing of the statement of
288-5 cancellation operates as an amendment to the certificate of
288-6 formation and reduces the number of shares of the class that the
288-7 corporation is authorized to issue by the number of shares
288-8 canceled.
288-9 (c) If shares redeemed or purchased by a corporation under
288-10 Subsection (a) constitute all of the outstanding shares of a
288-11 particular class of shares and the certificate of formation
288-12 provides that the shares of the class, when redeemed and
288-13 repurchased, may not be reissued, the filing of the statement of
288-14 cancellation operates as an amendment to the certificate of
288-15 formation by deleting all references to the class of shares and
288-16 reduces the classes of shares the corporation is authorized to
288-17 issue accordingly.
288-18 Sec. 21.252. CONTENTS AND FILING OF STATEMENT OF
288-19 CANCELLATION OF CERTAIN REDEEMABLE SHARES. (a) The statement of
288-20 cancellation required by Section 21.251 must state:
288-21 (1) the name of the corporation;
288-22 (2) the number of redeemable shares canceled through
288-23 the redemption or purchase, itemized by class and series;
288-24 (3) the aggregate number of issued shares after the
288-25 cancellation takes effect, itemized by class and series;
288-26 (4) the dollar amount of the stated capital of the
288-27 corporation after the cancellation takes effect; and
289-1 (5) if the corporation's certificate of formation
289-2 provides that the corporation may not reissue canceled shares, the
289-3 number of shares the corporation is authorized to issue after the
289-4 cancellation takes effect, itemized by class and series.
289-5 (b) The filing of the statement of cancellation has the
289-6 effect of reducing the stated capital of the corporation by an
289-7 amount equal to that part of the stated capital that was, at the
289-8 time of the cancellation, represented by the canceled shares.
289-9 (c) This section does not prohibit a cancellation of shares
289-10 or a reduction of stated capital in any other manner permitted by
289-11 law.
289-12 Sec. 21.253. CANCELLATION OF TREASURY SHARES. (a) A
289-13 corporation, by resolution of the board of directors of the
289-14 corporation, may cancel all or part of the corporation's treasury
289-15 shares at any time.
289-16 (b) A corporation that cancels all or part of the treasury
289-17 shares of the corporation must file a statement of cancellation in
289-18 accordance with Chapter 4 that states:
289-19 (1) the name of the corporation;
289-20 (2) that a resolution authorizing the cancellation was
289-21 adopted by all necessary action on the part of the corporation;
289-22 (3) the date of adoption of the resolution authorizing
289-23 the cancellation and a summary of the resolution's contents,
289-24 including a statement of:
289-25 (A) the number of treasury shares to be
289-26 canceled, itemized by class and series; and
289-27 (B) the amount of stated capital represented by
290-1 the shares to be canceled;
290-2 (4) the aggregate number of shares that are to retain
290-3 the status of issued shares after the cancellation takes effect,
290-4 itemized by class and series and par value, if any; and
290-5 (5) the dollar amount of the stated capital of the
290-6 corporation after the cancellation takes effect.
290-7 (c) On the filing of a statement of cancellation, the stated
290-8 capital of the corporation shall be reduced by that part of the
290-9 stated capital that was, at the time of the cancellation,
290-10 represented by the canceled shares, and the canceled shares shall
290-11 be restored to the status of authorized but unissued shares.
290-12 (d) This section does not prohibit a cancellation of shares
290-13 or a reduction of stated capital in any other manner permitted by
290-14 law.
290-15 Sec. 21.254. PROCEDURES FOR REDUCTION OF STATED CAPITAL BY
290-16 BOARD OF DIRECTORS. (a) If all or part of the stated capital of a
290-17 corporation is represented by shares without par value, the stated
290-18 capital of the corporation may be reduced in the manner provided by
290-19 this section.
290-20 (b) The board of directors shall adopt a resolution that:
290-21 (1) states the amount of the proposed reduction of the
290-22 stated capital and the manner in which the reduction will be
290-23 effected; and
290-24 (2) directs that the proposed reduction be submitted
290-25 to a vote of the shareholders at an annual or special meeting.
290-26 (c) Each shareholder of record entitled to vote on the
290-27 reduction of stated capital shall be given written notice stating
291-1 that the purpose or one of the purposes of the meeting is to
291-2 consider the matter of reducing the stated capital of the
291-3 corporation in the amount and manner proposed by the board of
291-4 directors. The notice shall be given in the time and manner
291-5 provided by this code for giving notice of shareholders' meetings.
291-6 (d) The affirmative vote of the holders of at least the
291-7 majority of the shares entitled to vote on the matter is required
291-8 for approval of the resolution proposing the reduction of stated
291-9 capital.
291-10 Sec. 21.255. STATEMENT OF REDUCTION OF STATED CAPITAL BY
291-11 BOARD. (a) When a reduction of the stated capital of a
291-12 corporation has been approved by the shareholders under Section
291-13 21.254, a statement on behalf of the corporation must be filed in
291-14 accordance with Chapter 4 that:
291-15 (1) states the name of the corporation;
291-16 (2) contains a copy of the resolution of the
291-17 shareholders approving the reduction;
291-18 (3) states the date of the resolution's adoption;
291-19 (4) states the number of shares outstanding and the
291-20 number of shares entitled to vote on the resolution;
291-21 (5) states the number of shares that voted for and
291-22 against the reduction; and
291-23 (6) states the manner in which the reduction is
291-24 effected and the dollar amount of the stated capital of the
291-25 corporation after the reduction takes effect.
291-26 (b) On the filing of the statement, the stated capital of
291-27 the corporation shall be reduced in the manner provided by the
292-1 statement.
292-2 Sec. 21.256. RESTRICTION ON REDUCTION OF STATED CAPITAL.
292-3 The stated capital of a corporation may not be reduced under this
292-4 subchapter if the amount of the aggregate stated capital of the
292-5 corporation would be reduced to an amount equal to or less than the
292-6 sum of the:
292-7 (1) aggregate preferential amounts payable on all
292-8 issued shares with a preferential right to the assets of the
292-9 corporation in the event of voluntary winding up and termination;
292-10 and
292-11 (2) aggregate par value of all issued shares with par
292-12 value but no preferential right to the assets of the corporation in
292-13 the event of voluntary winding up and termination.
292-14 (Sections 21.257-21.300 reserved for expansion)
292-15 SUBCHAPTER G. DISTRIBUTIONS AND SHARE DIVIDENDS
292-16 Sec. 21.301. DEFINITIONS. In this subchapter:
292-17 (1) "Distribution limit," with respect to a
292-18 distribution made by a corporation, other than a distribution
292-19 described by Subdivision (2), means:
292-20 (A) the net assets of the corporation if the
292-21 distribution:
292-22 (i) is a purchase or redemption of its own
292-23 shares by a corporation that:
292-24 (a) is eliminating
292-25 fractional shares;
292-26 (b) is collecting or
292-27 compromising indebtedness owed by or to the corporation; or
293-1 (c) is paying dissenting
293-2 shareholders entitled to payment for their shares under this code;
293-3 or
293-4 (ii) is not the purchase or redemption of
293-5 its own shares by a consuming asset corporation; or
293-6 (B) the surplus of the corporation for a
293-7 distribution not described by Paragraph (A).
293-8 (2) "Distribution limit," with respect to a
293-9 distribution that is a purchase or redemption of its own shares by
293-10 an investment company the certificate of formation of which
293-11 provides that the company may purchase the company's own shares out
293-12 of stated capital, means the net assets of the investment company
293-13 rather than the surplus of the investment company.
293-14 (3) "Investment company" means a corporation
293-15 registered as an open-end company under the Investment Company Act.
293-16 Sec. 21.302. AUTHORITY FOR DISTRIBUTIONS. The board of
293-17 directors of a corporation may authorize a distribution and the
293-18 corporation may make a distribution, subject to Section 21.303.
293-19 Sec. 21.303. LIMITATIONS ON DISTRIBUTIONS. (a) A
293-20 corporation may not make a distribution that violates the
293-21 corporation's certificate of formation.
293-22 (b) Unless the distribution is made in compliance with
293-23 Chapter 11, a corporation may not make a distribution that:
293-24 (1) will cause the corporation to become insolvent; or
293-25 (2) exceeds the distribution limit.
293-26 Sec. 21.304. REDEMPTIONS. (a) A distribution by a
293-27 corporation that involves a redemption of outstanding redeemable
294-1 shares of the corporation subject to redemption may be related to
294-2 any or all of those shares.
294-3 (b) If less than all of the outstanding redeemable shares of
294-4 a corporation subject to redemption are to be redeemed, the shares
294-5 to be redeemed shall be selected for redemption:
294-6 (1) in accordance with the corporation's certificate
294-7 of formation; or
294-8 (2) ratably or by lot in the manner prescribed by
294-9 resolution of the corporation's board of directors, if the
294-10 certificate of formation does not specify how shares are to be
294-11 selected for redemption.
294-12 (c) A redemption of redeemable shares takes effect by call
294-13 and written notice of the redemption of the shares.
294-14 Sec. 21.305. NOTICE OF REDEMPTION. (a) A notice of
294-15 redemption of redeemable shares of a corporation must state:
294-16 (1) the class or series of shares or part of the class
294-17 or series of shares to be redeemed;
294-18 (2) the date set for redemption;
294-19 (3) the redemptive price; and
294-20 (4) the place at which the shareholders may obtain
294-21 payment of the redemptive price.
294-22 (b) The notice of redemption shall be given to each holder
294-23 of redeemable shares being called not later than the 21st day or
294-24 earlier than the 60th day before the date set for redemption.
294-25 (c) A notice that is mailed is considered to have been given
294-26 when the notice is deposited in the United States mail, with
294-27 postage prepaid, addressed to the shareholder at the shareholder's
295-1 address as it appears on the share transfer records of the
295-2 corporation.
295-3 (d) A corporation may give the transfer agent described by
295-4 Section 21.306 irrevocable instructions to give or complete the
295-5 notice of redemption.
295-6 Sec. 21.306. DEPOSIT OF MONEY FOR REDEMPTION. (a) After
295-7 the date the notice of redemption required by Section 21.305 is
295-8 sent and before the day after the date set for redemption of
295-9 redeemable shares of the corporation, a corporation may deposit
295-10 with a bank or trust company in this or another state of the United
295-11 States appointed and acting as transfer agent for the corporation
295-12 an amount sufficient to redeem the shares called for redemption.
295-13 The amount must be deposited as a trust fund.
295-14 (b) Unless the corporation's certificate of formation
295-15 provides otherwise, if a corporation deposits money and gives
295-16 payment instructions in accordance with Subsection (a) and Section
295-17 21.307(b):
295-18 (1) the shares called for redemption are considered
295-19 redeemed, and distributions on those shares cease to accrue on and
295-20 after the date set for redemption; and
295-21 (2) the deposit constitutes full payment of the shares
295-22 called for redemption to the holders of the shares on and after the
295-23 date set for redemption.
295-24 (c) Unless the certificate of formation provides otherwise,
295-25 after the date a deposit is made and instructions are given under
295-26 this section and Section 21.307(b), the shares called for
295-27 redemption are not considered outstanding, and the holders of the
296-1 shares cease to be shareholders of the shares and have no right
296-2 with respect to the shares other than:
296-3 (1) the right to receive payment of the redemptive
296-4 price of the shares without interest from the bank or trust
296-5 company; and
296-6 (2) any right to convert those shares.
296-7 (d) Unless the certificate of formation provides otherwise,
296-8 a bank or trust company receiving a deposit under this section
296-9 shall pay to the corporation on demand the balance of the amount
296-10 deposited if one or more holders of the shares called for
296-11 redemption do not claim for redemption the amount deposited on or
296-12 before the sixth anniversary of the date of the deposit. After
296-13 making a payment under this subsection, the bank or trust company
296-14 is relieved of all responsibility to the holders with respect to
296-15 the amount deposited.
296-16 Sec. 21.307. PAYMENT OF REDEEMED SHARES. (a) Payment of a
296-17 certificated share shall be made only on the surrender of the
296-18 respective share certificate.
296-19 (b) On or after the date set for redemption of redeemable
296-20 shares, a corporation may give a transfer agent described by
296-21 Section 21.306 irrevocable instructions to pay the redemptive price
296-22 to the respective holders of the shares as evidenced by a list of
296-23 shareholders certified by an officer of the corporation.
296-24 Sec. 21.308. PRIORITY OF DISTRIBUTIONS. (a) Except as
296-25 provided by Subsection (b) or (c), a corporation's indebtedness
296-26 that arises as a result of the declaration of a distribution and a
296-27 corporation's indebtedness issued in a distribution are at parity
297-1 with the corporation's indebtedness to its general, unsecured
297-2 creditors.
297-3 (b) The indebtedness described by Subsection (a) shall be
297-4 subordinated to the extent required by an agreement binding on the
297-5 corporation on the date the indebtedness arises or if agreed to by
297-6 the person to whom the indebtedness is owed or, with respect to
297-7 indebtedness issued in a distribution, as provided by the
297-8 corporation.
297-9 (c) The indebtedness described by Subsection (a) shall be
297-10 secured to the extent required by an agreement binding on the
297-11 corporation.
297-12 Sec. 21.309. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM
297-13 SURPLUS. (a) A corporation, by resolution of the board of
297-14 directors of the corporation, may:
297-15 (1) create a reserve out of the surplus of the
297-16 corporation; or
297-17 (2) designate or allocate in any manner a part or all
297-18 of the corporation's surplus for a proper purpose.
297-19 (b) A corporation may increase, decrease, or abolish a
297-20 reserve, designation, or allocation in the manner provided by
297-21 Subsection (a).
297-22 Sec. 21.310. AUTHORITY FOR SHARE DISTRIBUTIONS. The board
297-23 of directors of a corporation may authorize a share distribution
297-24 and the corporation may pay a share distribution subject to Section
297-25 21.311.
297-26 Sec. 21.311. LIMITATIONS ON SHARE DISTRIBUTIONS. A
297-27 corporation may not pay a share distribution in authorized but
298-1 unissued shares of any class if:
298-2 (1) the share distribution will violate the
298-3 corporation's certificate of formation;
298-4 (2) the surplus of the corporation is less than the
298-5 amount required by Section 21.313 to be transferred to stated
298-6 capital at the time the share distribution is paid; or
298-7 (3) the share distribution will be paid to a holder of
298-8 shares of any other class or series, unless the:
298-9 (A) corporation's certificate of formation
298-10 provides for the distribution; or
298-11 (B) payment is authorized by the holders of at
298-12 least a majority of the outstanding shares of the class or series
298-13 in which the payment is to be made.
298-14 Sec. 21.312. VALUE OF SHARES ISSUED AS SHARE DISTRIBUTIONS.
298-15 (a) A share distribution payable in authorized but unissued shares
298-16 with par value shall be issued at the par value of the respective
298-17 share.
298-18 (b) A share distribution payable in authorized but unissued
298-19 shares without par value shall be issued at the value set by the
298-20 board of directors on the date the share distribution is
298-21 authorized.
298-22 Sec. 21.313. TRANSFER OF SURPLUS FOR SHARE DISTRIBUTIONS.
298-23 (a) On the date a share distribution payable in authorized but
298-24 unissued shares with par value is paid by a corporation, an amount
298-25 of surplus designated by the corporation's board of directors that
298-26 is not less than the aggregate par value of the shares issued as a
298-27 share distribution shall be transferred to stated capital.
299-1 (b) On the date a share distribution payable in authorized
299-2 but unissued shares without par value is paid by a corporation, an
299-3 amount of surplus equal to the aggregate value set by the
299-4 corporation's board of directors with respect to shares under
299-5 Section 21.312(b) shall be transferred to stated capital.
299-6 Sec. 21.314. DETERMINATION OF SOLVENCY, NET ASSETS, STATED
299-7 CAPITAL, AND SURPLUS. (a) For purposes of this subchapter, the
299-8 determination of whether a corporation is or would be insolvent and
299-9 the determination of the value of a corporation's net assets,
299-10 stated capital, or surplus and each of the components of net
299-11 assets, stated capital, or surplus may be based on:
299-12 (1) financial statements of the corporation, including
299-13 financial statements that:
299-14 (A) include subsidiary corporations or other
299-15 corporations accounted for on a consolidated basis or on the equity
299-16 method of accounting; or
299-17 (B) present the financial condition of the
299-18 corporation in accordance with generally accepted accounting
299-19 principles;
299-20 (2) financial statements prepared using the method of
299-21 accounting used to file the corporation's federal income tax return
299-22 or using any other accounting practices and principles that are
299-23 reasonable under the circumstances;
299-24 (3) financial information, including condensed or
299-25 summary financial statements, that is prepared on the same basis as
299-26 financial statements described by Subdivision (1) or (2);
299-27 (4) projection, forecast, or other forward-looking
300-1 information relating to the future economic performance, financial
300-2 condition, or liquidity of the corporation that is reasonable under
300-3 the circumstances;
300-4 (5) a fair valuation or information from any other
300-5 method that is reasonable under the circumstances; or
300-6 (6) a combination of a statement, valuation, or
300-7 information authorized by this section.
300-8 (b) Subsection (a) does not apply to the computation of the
300-9 Texas franchise tax or any other tax imposed on a corporation under
300-10 the laws of this state.
300-11 Sec. 21.315. DATE OF DETERMINATION OF SOLVENCY, NET ASSETS,
300-12 STATED CAPITAL, AND SURPLUS. (a) For purposes of this subchapter,
300-13 a determination of whether a corporation is or would be made
300-14 insolvent by a distribution or share distribution or a
300-15 determination of the value of a corporation's net assets, stated
300-16 capital, or surplus, or each component of net assets, stated
300-17 capital, or surplus, shall be made:
300-18 (1) on the date the distribution or share distribution
300-19 is authorized by the corporation's board of directors if the
300-20 distribution or share distribution is made not later than the 120th
300-21 day after the date of authorization;
300-22 (2) on the date designated by the corporation's board
300-23 of directors for the determination to be made if:
300-24 (A) the distribution or share distribution is
300-25 made more than 120 days after the date of authorization; and
300-26 (B) the date designated by the corporation's
300-27 board of directors is not later than the 121st day before the date
301-1 the distribution or share distribution is made; or
301-2 (3) on the date the distribution or share distribution
301-3 is made if:
301-4 (A) the distribution or share distribution is
301-5 made more than 120 days after the date of authorization; and
301-6 (B) the corporation's board of directors does
301-7 not make the designation described by Subdivision (2).
301-8 (b) For purposes of this section, a distribution that
301-9 involves the incurrence by a corporation of indebtedness or a
301-10 deferred payment obligation or that involves a requirement in the
301-11 corporation's certificate of formation or other contract of the
301-12 corporation to redeem, exchange, or otherwise acquire any of its
301-13 own shares is considered to have been made, at the option of the
301-14 corporation, on the date:
301-15 (1) the indebtedness or obligation is incurred or the
301-16 provision or other contract is made or takes effect, as
301-17 appropriate;
301-18 (2) the indebtedness or obligation is paid; or
301-19 (3) the shares are redeemed, exchanged, or acquired.
301-20 Sec. 21.316. LIABILITY OF DIRECTORS FOR WRONGFUL
301-21 DISTRIBUTIONS. (a) Subject to Subsection (c), the directors of a
301-22 corporation who vote for or assent to a distribution by the
301-23 corporation that is prohibited by Section 21.303 are jointly and
301-24 severally liable to the corporation for the amount by which the
301-25 distribution exceeds the amount permitted by that section to be
301-26 distributed.
301-27 (b) A director is not liable for all or part of the excess
302-1 amount if a distribution of that amount would have been permitted
302-2 by Section 21.303 after the date the director authorized the
302-3 distribution.
302-4 (c) A director is not jointly and severally liable under
302-5 Subsection (a) if, in voting for or assenting to the distribution,
302-6 the director:
302-7 (1) relied in good faith and with ordinary care on:
302-8 (A) the statements, valuations, or information
302-9 described by Section 21.314; or
302-10 (B) other information, opinions, reports, or
302-11 statements, including financial statements and other financial
302-12 data, concerning the corporation or another person that were
302-13 prepared or presented by:
302-14 (i) one or more officers or employees of
302-15 the corporation;
302-16 (ii) a legal counsel, public accountant,
302-17 investment banker, or other person relating to a matter the
302-18 director reasonably believes is within the person's professional or
302-19 expert competence; or
302-20 (iii) a committee of the board of
302-21 directors of which the director is not a member;
302-22 (2) acting in good faith and with ordinary care,
302-23 considered the assets of the corporation to be valued at least at
302-24 their book value; or
302-25 (3) in determining whether the corporation made
302-26 adequate provision for payment, satisfaction, or discharge of all
302-27 of the corporation's liabilities and obligations, as provided by
303-1 Sections 11.053 and 11.356, relied in good faith and with ordinary
303-2 care on financial statements of, or other information concerning, a
303-3 person who was or became contractually obligated to pay, satisfy,
303-4 or discharge some or all of the corporation's liabilities or
303-5 obligations.
303-6 (d) The liability imposed under Subsection (a) is the only
303-7 liability of a director to the corporation or its creditors for
303-8 authorizing a distribution that is prohibited by Section 21.303.
303-9 (e) This section and Section 21.317 do not limit any
303-10 liability imposed under Chapter 24, Business & Commerce Code, or
303-11 the United States Bankruptcy Code.
303-12 Sec. 21.317. STATUTE OF LIMITATIONS ON ACTION FOR WRONGFUL
303-13 DISTRIBUTION. An action may not be brought against a director of a
303-14 corporation under Section 21.316 after the second anniversary of
303-15 the date the alleged act giving rise to the liability occurred.
303-16 Sec. 21.318. CONTRIBUTION FROM CERTAIN SHAREHOLDERS AND
303-17 DIRECTORS. (a) A director who is held liable for a claim asserted
303-18 under Section 21.316 is entitled to receive contributions from
303-19 shareholders who accepted or received the wrongful distribution
303-20 knowing that it was prohibited by Section 21.303 in proportion to
303-21 the amount received by the shareholders.
303-22 (b) A director who is liable for a claim asserted under
303-23 Section 21.316 is entitled to receive contributions from each of
303-24 the other directors who are liable with respect to that claim in an
303-25 amount appropriate to achieve equity.
303-26 (c) The liability provided by Subsection (a) is the only
303-27 liability of a shareholder to the corporation or a creditor of the
304-1 corporation for accepting or receiving a distribution by the
304-2 corporation that is prohibited by Section 21.303.
304-3 (Sections 21.319-21.350 reserved for expansion)
304-4 SUBCHAPTER H. SHAREHOLDER MEETINGS; VOTING AND QUORUM
304-5 Sec. 21.351. ANNUAL MEETING. (a) An annual meeting of the
304-6 shareholders of a corporation shall be held at a time that is
304-7 stated in or set in accordance with the corporation's bylaws.
304-8 (b) On the application of a shareholder who has previously
304-9 submitted a written request to the corporation that an annual
304-10 meeting be held, a court in the county in which the principal
304-11 executive office of the corporation is located may order a meeting
304-12 to be held if the annual meeting is not held or written consent
304-13 instead of the annual meeting is not executed within any 13-month
304-14 period, unless the meeting is not required to be held under Section
304-15 21.655.
304-16 (c) The failure to hold an annual meeting at the designated
304-17 time does not result in the winding up or termination of the
304-18 corporation.
304-19 Sec. 21.352. SPECIAL MEETINGS. (a) A special meeting of
304-20 the shareholders of a corporation may be called by:
304-21 (1) the president, the board of directors, or any
304-22 other person authorized to call special meetings by the certificate
304-23 of formation or bylaws of the corporation; or
304-24 (2) the holders of at least 10 percent of all of the
304-25 shares of the corporation entitled to vote at the proposed special
304-26 meeting or the percentage of shares specified in the certificate of
304-27 formation, not to exceed 50 percent of the shares entitled to vote.
305-1 (b) Unless stated in or set in accordance with the bylaws,
305-2 the record date for determining which shareholders of the
305-3 corporation are entitled to call a special meeting is the date the
305-4 first shareholder signs the notice of that meeting.
305-5 (c) Other than procedural matters, the only business that
305-6 may be conducted at a special meeting of the shareholders is
305-7 business that is within the purposes described in the notice
305-8 required by Section 21.353.
305-9 Sec. 21.353. NOTICE OF MEETING. (a) Except as provided by
305-10 Section 21.456, written notice of a meeting in accordance with
305-11 Section 6.051 shall be given to each shareholder entitled to vote
305-12 at the meeting not later than the 10th day and not earlier than the
305-13 60th day before the date of the meeting. Notice shall be given at
305-14 the direction of the president, secretary, or other person calling
305-15 the meeting.
305-16 (b) The notice of a special meeting must contain a statement
305-17 regarding the purpose or purposes of the meeting.
305-18 Sec. 21.354. INSPECTION OF VOTING LIST. (a) Subject to the
305-19 corporation's governing documents, the list of shareholders
305-20 entitled to vote at the meeting prepared under Section 6.004 shall
305-21 be:
305-22 (1) subject to inspection by a shareholder during
305-23 regular business hours; and
305-24 (2) produced and kept open at the meeting.
305-25 (b) The original share transfer records are prima facie
305-26 evidence of which shareholders are entitled to inspect the list.
305-27 Sec. 21.355. CLOSING OF SHARE TRANSFER RECORDS. Share
306-1 transfer records that are closed in accordance with Section 6.101
306-2 for the purpose of determining which shareholders are entitled to
306-3 receive notice of a meeting of shareholders shall remain closed for
306-4 at least 10 days immediately preceding the date of the meeting.
306-5 Sec. 21.356. RECORD DATE FOR WRITTEN CONSENT TO ACTION. The
306-6 record date provided in accordance with Section 6.102(a) may not be
306-7 more than 10 days after the date on which the board of directors
306-8 adopts the resolution setting the record date.
306-9 Sec. 21.357. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
306-10 CONSENT TO ACTION. The record date provided by the directors in
306-11 accordance with Section 6.101 must be at least 10 days before the
306-12 date on which the particular action requiring the determination of
306-13 shareholders is to be taken.
306-14 Sec. 21.358. QUORUM. (a) Subject to Subsection (b), the
306-15 holders of the majority of the shares entitled to vote at a meeting
306-16 of the shareholders of a corporation that are present or
306-17 represented by proxy at the meeting are a quorum for the
306-18 consideration of a matter to be presented at that meeting.
306-19 (b) The certificate of formation of a corporation may
306-20 provide that a quorum is present only if:
306-21 (1) the holders of a specified portion of the shares
306-22 that is greater than the majority of the shares entitled to vote
306-23 are represented at the meeting in person or by proxy; or
306-24 (2) the holders of a specified portion of the shares
306-25 that is less than the majority but not less than one-third of the
306-26 shares entitled to vote are represented at the meeting in person or
306-27 by proxy.
307-1 (c) Unless provided by the certificate of formation or
307-2 bylaws of the corporation, after a quorum is present at a meeting
307-3 of shareholders, the shareholders may conduct business properly
307-4 brought before the meeting until the meeting is adjourned. The
307-5 subsequent withdrawal from the meeting of a shareholder or the
307-6 refusal of a shareholder present at or represented by proxy at the
307-7 meeting to vote does not negate the presence of a quorum at the
307-8 meeting.
307-9 (d) Unless provided by the certificate of formation or
307-10 bylaws, the shareholders of the corporation at a meeting at which a
307-11 quorum is not present may adjourn the meeting until the time and to
307-12 the place as may be determined by a vote of the holders of the
307-13 majority of the shares who are present or represented by proxy at
307-14 the meeting.
307-15 Sec. 21.359. VOTING IN ELECTION OF DIRECTORS. (a) Subject
307-16 to Subsection (b), directors of a corporation shall be elected by a
307-17 plurality of the votes cast by the holders of shares entitled to
307-18 vote in the election of directors at a meeting of shareholders at
307-19 which a quorum is present.
307-20 (b) The certificate of formation or bylaws of a corporation
307-21 may provide that a director of a corporation shall be elected only
307-22 if the director receives:
307-23 (1) the vote of the holders of a specified portion,
307-24 but not less than the majority, of the shares entitled to vote in
307-25 the election of directors;
307-26 (2) the vote of the holders of a specified portion,
307-27 but not less than the majority, of the shares entitled to vote in
308-1 the election of directors and represented in person or by proxy at
308-2 a meeting of shareholders at which a quorum is present; or
308-3 (3) the vote of the holders of a specified portion,
308-4 but not less than the majority, of the votes cast by the holders of
308-5 shares entitled to vote in the election of directors at a meeting
308-6 of shareholders at which a quorum is present.
308-7 Sec. 21.360. NO CUMULATIVE VOTING RIGHT UNLESS AUTHORIZED.
308-8 Except as provided by Section 21.361 or 21.362, a shareholder does
308-9 not have the right to cumulate the shareholder's vote in the
308-10 election of directors.
308-11 Sec. 21.361. CUMULATIVE VOTING IN ELECTION OF DIRECTORS.
308-12 (a) If expressly authorized by a corporation's certificate of
308-13 formation in general or with respect to a specified class or series
308-14 of shares or group of classes or series of shares and subject to
308-15 Subsections (b) and (c), at each election of directors of the
308-16 corporation each shareholder entitled to vote at the election is
308-17 entitled to:
308-18 (1) vote the number of shares owned by the shareholder
308-19 for as many candidates as there are directors to be elected and for
308-20 whose election the shareholder is entitled to vote; or
308-21 (2) cumulate votes by:
308-22 (A) giving one candidate as many votes as the
308-23 total of the number of the directors multiplied by the
308-24 shareholder's shares; or
308-25 (B) distributing the votes among one or more
308-26 candidates using the same principle.
308-27 (b) Cumulative voting permitted by the certificate of
309-1 formation is permitted only in an election of directors in which a
309-2 shareholder who intends to cumulate votes has given written notice
309-3 of that intention to the secretary of the corporation on or before
309-4 the day preceding the date of the election at which the shareholder
309-5 intends to cumulate votes.
309-6 (c) All shareholders entitled to vote cumulatively may
309-7 cumulate their votes if a shareholder gives the notice required by
309-8 Subsection (b).
309-9 Sec. 21.362. CUMULATIVE VOTING RIGHT IN CERTAIN
309-10 CORPORATIONS. Except as provided by the corporation's certificate
309-11 of formation, a shareholder of a corporation incorporated before
309-12 the effective date of this code has the right to cumulatively vote
309-13 the number of shares the shareholder owns in the election of
309-14 directors to the extent permitted and in the manner provided by
309-15 Section 21.361. A corporation may limit or deny a shareholder's
309-16 right to cumulatively vote shares at any time after the effective
309-17 date of this code by amending its certificate of formation.
309-18 Sec. 21.363. VOTING ON MATTERS OTHER THAN ELECTION OF
309-19 DIRECTORS. (a) Subject to Subsection (b), with respect to a
309-20 matter other than the election of directors or a matter for which
309-21 the affirmative vote of the holders of a specified portion of the
309-22 shares entitled to vote is required by this code, the affirmative
309-23 vote of the holders of the majority of the shares entitled to vote
309-24 on, and who voted for, against, or expressly abstained with respect
309-25 to, the matter at a shareholders' meeting of a corporation at which
309-26 a quorum is present is the act of the shareholders.
309-27 (b) With respect to a matter other than the election of
310-1 directors or a matter for which the affirmative vote of the holders
310-2 of a specified portion of the shares entitled to vote is required
310-3 by this code, the certificate of formation or bylaws of a
310-4 corporation may provide that the act of the shareholders of the
310-5 corporation is:
310-6 (1) the affirmative vote of the holders of a specified
310-7 portion, but not less than the majority, of the shares entitled to
310-8 vote on that matter;
310-9 (2) the affirmative vote of the holders of a specified
310-10 portion, but not less than the majority, of the shares entitled to
310-11 vote on that matter and represented in person or by proxy at a
310-12 shareholders' meeting at which a quorum is present;
310-13 (3) the affirmative vote of the holders of a specified
310-14 portion, but not less than the majority, of the shares entitled to
310-15 vote on, and who voted for or against, the matter at a
310-16 shareholders' meeting at which a quorum is present; or
310-17 (4) the affirmative vote of the holders of a specified
310-18 portion, but not less than the majority, of the shares entitled to
310-19 vote on, and who voted for, against, or expressly abstained with
310-20 respect to, the matter at a shareholders' meeting at which a quorum
310-21 is present.
310-22 Sec. 21.364. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION.
310-23 (a) In this section, a "fundamental action" means:
310-24 (1) an amendment of a certificate of formation;
310-25 (2) voluntary winding up and termination; or
310-26 (3) revocation of voluntary winding up and
310-27 termination.
311-1 (b) Except as otherwise provided by this code or the
311-2 certificate of formation or bylaws of a corporation in accordance
311-3 with Section 21.363, the vote required for approval of a
311-4 fundamental action by the shareholders is the affirmative vote of
311-5 the holders of at least two-thirds of the outstanding shares
311-6 entitled to vote on the fundamental action.
311-7 (c) If a class or series of shares is entitled to vote as a
311-8 class on a fundamental action, the vote required for approval of
311-9 the action by the shareholders is the affirmative vote of the
311-10 holders of at least two-thirds of the outstanding shares in each
311-11 class or series of shares entitled to vote on the action as a class
311-12 and at least two-thirds of the outstanding shares otherwise
311-13 entitled to vote on the action. Shares entitled to vote as a class
311-14 shall be entitled to vote only as a class unless otherwise entitled
311-15 to vote on each matter submitted to the shareholders generally or
311-16 otherwise provided by the certificate of formation.
311-17 (d) Unless an amendment to the certificate of formation is
311-18 undertaken by the board of directors under Section 21.155, separate
311-19 voting by a class or series of shares of a corporation is required
311-20 for approval of an amendment to the certificate of formation that
311-21 would result in:
311-22 (1) the increase or decrease of the aggregate number
311-23 of authorized shares of the class or series;
311-24 (2) the increase or decrease of the par value of the
311-25 shares of the class, including changing shares with par value into
311-26 shares without par value or changing shares without par value into
311-27 shares with par value;
312-1 (3) effecting an exchange, reclassification, or
312-2 cancellation of all or part of the shares of the class or series;
312-3 (4) effecting an exchange or creating a right of
312-4 exchange of all or part of the shares of another class or series
312-5 into the shares of the class or series;
312-6 (5) the change of the designations, preferences,
312-7 limitations, or relative rights of the shares of the class or
312-8 series;
312-9 (6) the change of the shares of the class or series,
312-10 with or without par value, into the same or a different number of
312-11 shares, with or without par value, of the same class or series or
312-12 another class or series;
312-13 (7) the creation of a new class or series of shares
312-14 with rights and preferences equal, prior, or superior to the shares
312-15 of the class or series;
312-16 (8) increasing the rights and preferences of a class
312-17 or series with rights and preferences equal, prior, or superior to
312-18 the shares of the class or series;
312-19 (9) increasing the rights and preferences of a class
312-20 or series with rights or preferences later or inferior to the
312-21 shares of the class or series in such a manner that the rights or
312-22 preferences will be equal, prior, or superior to the shares of the
312-23 class or series;
312-24 (10) dividing the shares of the class into series and
312-25 setting and determining the designation of the series and the
312-26 variations in the relative rights and preferences between the
312-27 shares of the series;
313-1 (11) the limitation or denial of existing preemptive
313-2 or cumulative rights of the shares of the class or series;
313-3 (12) canceling or otherwise affecting the dividends on
313-4 the shares of the class or series that have accrued but have not
313-5 been declared; or
313-6 (13) the inclusion or deletion from the certificate of
313-7 formation of provisions required or permitted to be included in the
313-8 certificate of formation of a close corporation under Subchapter O.
313-9 (e) Unless otherwise provided by the certificate of
313-10 formation, if the holders of the outstanding shares of a class that
313-11 is divided into series are entitled to vote as a class on a
313-12 proposed amendment that would affect equally all series of the
313-13 class, other than a series in which no shares are outstanding or a
313-14 series that is not affected by the amendment, the holders of the
313-15 separate series are not entitled to separate class votes.
313-16 (f) Unless otherwise provided by the certificate of
313-17 formation, the adoption of a proposed amendment to the certificate
313-18 of formation that would solely effect changes in the designations,
313-19 preferences, limitations, or relative rights, including voting
313-20 rights, of one or more series of shares of the corporation that
313-21 have been established under the authority granted to the board of
313-22 directors in the certificate of formation in accordance with
313-23 Section 21.155 does not require the approval of the holders of the
313-24 outstanding shares of a class or series other than the affected
313-25 series if, after giving effect to the amendment:
313-26 (1) the preferences, limitations, or relative rights
313-27 of the affected series may be set and determined by the board of
314-1 directors with respect to the establishment of a new series of
314-2 shares under the authority granted to the board of directors in the
314-3 certificate of formation in accordance with Section 21.155; or
314-4 (2) any new series established as a result of a
314-5 reclassification of the affected series are within the preferences,
314-6 limitations, and relative rights that are described by Subdivision
314-7 (1).
314-8 Sec. 21.365. CHANGES IN VOTE REQUIRED FOR CERTAIN MATTERS.
314-9 (a) With respect to a matter for which the affirmative vote of the
314-10 holders of a specified portion of the shares entitled to vote is
314-11 required by this code, the certificate of formation of a
314-12 corporation may provide that the affirmative vote of the holders of
314-13 a specified portion, but not less than the majority, of the shares
314-14 entitled to vote on that matter is required for shareholder action
314-15 on that matter.
314-16 (b) With respect to a matter for which the affirmative vote
314-17 of the holders of a specified portion of the shares of a class or
314-18 series is required by this code, the certificate of formation may
314-19 provide that the affirmative vote of the holders of a specified
314-20 portion, but not less than the majority, of the shares of that
314-21 class or series is required for action of the holders of shares of
314-22 that class or series on that matter.
314-23 (c) If a provision of the certificate of formation provides
314-24 that the affirmative vote of the holders of a specified portion
314-25 that is greater than the majority of the shares entitled to vote on
314-26 a matter is required for shareholder action on that matter, the
314-27 provision may not be amended, directly or indirectly, without the
315-1 same affirmative vote unless otherwise provided by the certificate
315-2 of formation.
315-3 (d) If a provision of the certificate of formation provides
315-4 that the affirmative vote of the holders of a specified portion
315-5 that is greater than the majority of the shares of a class or
315-6 series is required for shareholder action on a matter, the
315-7 provision may not be amended, directly or indirectly, without the
315-8 same affirmative vote unless otherwise provided by the certificate
315-9 of formation.
315-10 Sec. 21.366. NUMBER OF VOTES PER SHARE. (a) Except as
315-11 provided by the certificate of formation of a corporation or this
315-12 code, each outstanding share, regardless of class, shall be
315-13 entitled to one vote on each matter submitted to a vote at a
315-14 shareholders' meeting.
315-15 (b) If the certificate of formation provides for more or
315-16 less than one vote per share on a matter for all of the outstanding
315-17 shares or for the shares of a class or series, each reference in
315-18 this code or in the certificate of formation or bylaws, unless
315-19 expressly stated otherwise, to a specified portion of the shares
315-20 with respect to that matter refers to the portion of the votes
315-21 entitled to be cast with respect to the shares under the
315-22 certificate of formation.
315-23 Sec. 21.367. VOTING IN PERSON OR BY PROXY. (a) A
315-24 shareholder may vote in person or by proxy executed in writing by
315-25 the shareholder.
315-26 (b) A telegram, telex, cablegram, electronic message, or
315-27 similar transmission by the shareholder, or a photographic,
316-1 photostatic, facsimile, or similar reproduction of a writing
316-2 executed by the shareholder, is considered an execution in writing
316-3 for purposes of this section.
316-4 Sec. 21.368. TERM OF PROXY. A proxy is not valid after 11
316-5 months after the date the proxy is executed unless otherwise
316-6 provided by the proxy.
316-7 Sec. 21.369. REVOCABILITY OF PROXY. (a) In this section, a
316-8 "proxy coupled with an interest" includes the appointment as proxy
316-9 of:
316-10 (1) a pledgee;
316-11 (2) a person who purchased or agreed to purchase the
316-12 shares subject to the proxy;
316-13 (3) a person who owns or holds an option to purchase
316-14 the shares subject to the proxy;
316-15 (4) a creditor of the corporation who extended the
316-16 corporation credit under terms requiring the appointment;
316-17 (5) an employee of the corporation whose employment
316-18 contract requires the appointment; or
316-19 (6) a party to a voting agreement created under
316-20 Section 6.252 or a shareholders' agreement created under Section
316-21 21.101.
316-22 (b) A proxy is revocable unless:
316-23 (1) the proxy form conspicuously states that the proxy
316-24 is irrevocable; and
316-25 (2) the proxy is coupled with an interest.
316-26 Sec. 21.370. ENFORCEABILITY OF PROXY. (a) An irrevocable
316-27 proxy is specifically enforceable against the holder of shares or
317-1 any successor or transferee of the holder if:
317-2 (1) the proxy is noted conspicuously on the
317-3 certificate representing the shares subject to the proxy; or
317-4 (2) in the case of uncertificated shares, notation of
317-5 the proxy is contained in the notice sent under Section 3.205 with
317-6 respect to the shares subject to the proxy.
317-7 (b) An irrevocable proxy that is otherwise enforceable is
317-8 ineffective against a transferee for value without actual knowledge
317-9 of the existence of the irrevocable proxy at the time of the
317-10 transfer or against a subsequent transferee, regardless of whether
317-11 the transfer is for value, unless the proxy is:
317-12 (1) noted conspicuously on the certificate
317-13 representing the shares subject to the proxy; or
317-14 (2) in the case of uncertificated shares, notation of
317-15 the proxy is contained in the notice sent under Section 3.205 with
317-16 respect to the shares subject to the proxy.
317-17 (c) An irrevocable proxy shall be specifically enforceable
317-18 against a person who is not a transferee for value from the time
317-19 the person acquires actual knowledge of the existence of the
317-20 irrevocable proxy.
317-21 Sec. 21.371. PROCEDURES IN BYLAWS RELATING TO PROXIES. A
317-22 corporation may establish in the corporation's bylaws procedures
317-23 consistent with this code for determining the validity of proxies
317-24 and determining whether shares that are held of record by a bank,
317-25 broker, or other nominee are represented at a meeting of
317-26 shareholders. The procedures may incorporate rules of and
317-27 determinations made by a stock exchange or self-regulatory
318-1 organization regulating the corporation or that bank, broker, or
318-2 other nominee.
318-3 Sec. 21.372. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT.
318-4 The shareholders of a corporation may act with less than unanimous
318-5 written consent in the manner provided by Section 6.202 if action
318-6 by less than unanimous written consent is authorized by the
318-7 corporation's certificate of formation or a bylaw adopted by the
318-8 corporation's shareholders.
318-9 (Sections 21.373-21.400 reserved for expansion)
318-10 SUBCHAPTER I. BOARD OF DIRECTORS
318-11 Sec. 21.401. MANAGEMENT BY BOARD OF DIRECTORS. (a) Except
318-12 as provided by Section 21.101 or Subchapter O, the board of
318-13 directors of a corporation shall:
318-14 (1) exercise or authorize the exercise of the powers
318-15 of the corporation; and
318-16 (2) manage the business and affairs of the
318-17 corporation.
318-18 (b) In discharging the duties of director under this code or
318-19 otherwise and in considering the best interests of the corporation,
318-20 a director may consider the long-term and short-term interests of
318-21 the corporation and the shareholders of the corporation, including
318-22 the possibility that those interests may be best served by the
318-23 continued independence of the corporation.
318-24 Sec. 21.402. BOARD MEMBER ELIGIBILITY REQUIREMENTS. Unless
318-25 the certificate of formation or bylaws of a corporation provide
318-26 otherwise, a person is not required to be a resident of this state
318-27 or a shareholder of the corporation to serve as a director. The
319-1 certificate of formation or bylaws may prescribe other
319-2 qualifications for directors.
319-3 Sec. 21.403. NUMBER OF DIRECTORS. (a) The board of
319-4 directors of a corporation may consist of one or more directors.
319-5 (b) The corporation's certificate of formation shall set the
319-6 number constituting the initial board of directors. The
319-7 certificate of formation or bylaws of the corporation shall set the
319-8 number constituting each subsequent board of directors or provide
319-9 for the manner in which the number of directors is determined.
319-10 (c) The number of directors may be increased or decreased by
319-11 amendment to, or as provided by, the certificate of formation or
319-12 bylaws. A decrease in the number of directors may not shorten the
319-13 term of an incumbent director.
319-14 (d) If the certificate of formation or bylaws do not set the
319-15 number constituting the board of directors or provide for the
319-16 manner in which the number of directors must be determined, the
319-17 number of directors will be the same as the number constituting the
319-18 initial board of directors as set by the certificate of formation.
319-19 Sec. 21.404. DESIGNATION OF INITIAL BOARD OF DIRECTORS. The
319-20 certificate of formation of a corporation must state the names and
319-21 addresses of the members of the initial board of directors of the
319-22 corporation.
319-23 Sec. 21.405. ELECTION OF BOARD OF DIRECTORS. (a) At the
319-24 first annual meeting of shareholders of a corporation and at each
319-25 subsequent annual meeting of shareholders, the holders of shares
319-26 entitled to vote in the election of directors shall elect directors
319-27 for the term provided under Section 21.407, except as provided by
320-1 Section 21.408.
320-2 (b) A corporation's certificate of formation may provide
320-3 that the holders of a class or series of shares or a group of
320-4 classes or series of shares are entitled to elect one or more
320-5 directors of the corporation.
320-6 Sec. 21.406. VOTING BY DIRECTORS. (a) The certificate of
320-7 formation of a corporation may provide that directors elected by
320-8 the holders of a class or series of shares or by a group of classes
320-9 or series of shares entitled to elect one or more directors, as
320-10 provided by Section 21.405, are entitled to cast more or less than
320-11 one vote on specified matters.
320-12 (b) Unless expressly stated otherwise, each reference in
320-13 this code or in a corporation's certificate of formation or bylaws
320-14 to a specified portion of the directors means the portion of the
320-15 votes entitled to be cast by the directors to which the reference
320-16 applies.
320-17 Sec. 21.407. TERM OF OFFICE. Unless otherwise provided by
320-18 this subchapter, a director shall hold office from the date the
320-19 director is elected and qualified or named in the corporation's
320-20 certificate of formation until the next annual meeting of
320-21 shareholders and until the director's successor is elected and
320-22 qualified.
320-23 Sec. 21.408. SPECIAL TERMS OF OFFICE. (a) The certificate
320-24 of formation or bylaws of a corporation may provide that all or
320-25 some of the board of directors may be divided into two or three
320-26 classes that shall include the same or a similar number of
320-27 directors as each other class.
321-1 (b) The terms of office of directors constituting the first
321-2 class expire at the first annual meeting of shareholders after the
321-3 election of those directors. The terms of office of directors
321-4 constituting the second class expire at the second annual meeting
321-5 of shareholders after election of those directors. The terms of
321-6 office of directors constituting the third class, if any, expire at
321-7 the third annual meeting of shareholders after election of those
321-8 directors.
321-9 (c) If the certificate of formation or bylaws provide for
321-10 staggered terms of directors, the shareholders, at each annual
321-11 meeting, shall elect a number of directors equal to the number of
321-12 the class of directors whose terms expire at the time of the
321-13 meeting. The directors elected at an annual meeting shall hold
321-14 office until the second succeeding annual meeting, if there are two
321-15 classes, or until the third succeeding annual meeting, if there are
321-16 three classes.
321-17 (d) Unless provided by the certificate of formation or a
321-18 bylaw adopted by the shareholders, staggered terms for directors
321-19 must be effected at a meeting of shareholders at which directors
321-20 are elected. Staggered terms for directors may not be effected if
321-21 any shareholder has the right to cumulate votes for the election of
321-22 directors and the board of directors consists of fewer than nine
321-23 members.
321-24 (e) Directors elected by the holders of a class or series of
321-25 shares or a group of classes or series of shares in accordance with
321-26 the certificate of formation shall hold office for the terms
321-27 specified by the certificate of formation.
322-1 Sec. 21.409. REMOVAL OF DIRECTORS. (a) Except as otherwise
322-2 provided by the certificate of formation or bylaws of a corporation
322-3 or this subchapter, the shareholders of the corporation may remove
322-4 a director or the entire board of directors of the corporation,
322-5 with or without cause, at a meeting called for that purpose, by a
322-6 vote of the holders of a specified portion, but not less than the
322-7 majority, of the shares entitled to vote at an election of
322-8 directors.
322-9 (b) If the certificate of formation entitles the holders of
322-10 a class or series of shares or a group of classes or series of
322-11 shares to elect one or more directors, only the holders of shares
322-12 of that class, series, or group may vote on the removal of a
322-13 director elected by the holders of shares of that class, series, or
322-14 group.
322-15 (c) If the certificate of formation permits cumulative
322-16 voting and less than the entire board is to be removed, a director
322-17 may not be removed if the votes cast against the removal would be
322-18 sufficient to elect the director if cumulatively voted at an
322-19 election of the entire board of directors, or if there are classes
322-20 of directors, at an election of the class of directors of which the
322-21 director is a part.
322-22 (d) In the case of a corporation the directors of which
322-23 serve staggered terms, a director may not be removed except for
322-24 cause unless the certificate of formation provides otherwise.
322-25 Sec. 21.410. VACANCY. (a) A vacancy occurring in the
322-26 initial board of directors before the issuance of shares may be
322-27 filled by the affirmative vote or written consent of the majority
323-1 of the incorporators or by the affirmative vote of the majority of
323-2 the remaining directors, even if the majority of the remaining
323-3 directors constitutes less than a quorum of the board of directors.
323-4 (b) Except as provided by Subsection (e), a vacancy
323-5 occurring in the board of directors after the issuance of shares
323-6 may be filled by election at an annual or special meeting of
323-7 shareholders called for that purpose or by the affirmative vote of
323-8 the majority of the remaining directors, even if the majority of
323-9 directors constitutes less than a quorum of the board of directors.
323-10 (c) The term of a director elected to fill a vacancy
323-11 occurring in the board of directors, including the initial
323-12 directors, is the unexpired term of the director's predecessor in
323-13 office.
323-14 (d) Except as provided by Subsection (e), a vacancy to be
323-15 filled because of an increase in the number of directors may be
323-16 filled by election at an annual or special meeting of shareholders
323-17 called for that purpose or by the board of directors for a term of
323-18 office continuing only until the next election of one or more
323-19 directors by the shareholders. During a period between two
323-20 successive annual meetings of shareholders, the board of directors
323-21 may not fill more than two vacancies created by an increase in the
323-22 number of directors.
323-23 (e) Unless otherwise authorized by a corporation's
323-24 certificate of formation, a vacancy in the board of directors of
323-25 the corporation or a newly created vacancy in the board of
323-26 directors that the certificate of formation entitles the holders of
323-27 a class or series of shares or group of classes or series of shares
324-1 to elect may be filled only by the affirmative vote of the majority
324-2 of the directors then in office elected by the class, series, or
324-3 group, by the sole remaining director elected in that manner, or by
324-4 the affirmative vote of the holders of the outstanding shares of
324-5 the class, series, or group.
324-6 Sec. 21.411. NOTICE OF MEETING. (a) Regular meetings of
324-7 the board of directors of a corporation may be held with or without
324-8 notice as prescribed by the corporation's bylaws.
324-9 (b) Special meetings of the board of directors shall be held
324-10 with notice as prescribed by the bylaws.
324-11 (c) A notice of a board meeting is not required to specify
324-12 the business to be transacted at the meeting or the purpose of the
324-13 meeting, unless required by the bylaws.
324-14 Sec. 21.412. WAIVER OF NOTICE. (a) If the bylaws of a
324-15 corporation require notice of a meeting to be given to a director,
324-16 a written waiver of the notice signed by the director entitled to
324-17 the notice, before or after the meeting, is equivalent to the
324-18 giving of the notice.
324-19 (b) The attendance of a director at a board meeting
324-20 constitutes a waiver of notice of the meeting, unless the director
324-21 attends the meeting for the express purpose of objecting to the
324-22 transaction of business at the meeting because the meeting has not
324-23 been lawfully called or convened.
324-24 (c) A waiver of notice of a board meeting is not required to
324-25 specify the business to be transacted at the meeting or the purpose
324-26 of the meeting unless required by the bylaws.
324-27 Sec. 21.413. QUORUM. (a) A quorum of the board of
325-1 directors is the majority of the number of directors set or
325-2 established in the manner provided by the certificate of formation
325-3 or bylaws of a corporation unless the laws of this state, the
325-4 certificate of formation, or the bylaws require a different number
325-5 or portion.
325-6 (b) Neither the certificate of formation nor the bylaws may
325-7 provide that less than one-third of the number of directors
325-8 constitutes a quorum.
325-9 Sec. 21.414. DISSENT TO ACTION. (a) A director of a
325-10 corporation who is present at a meeting of the board of directors
325-11 at which action has been taken is presumed to have assented to the
325-12 action taken unless:
325-13 (1) the director's dissent has been entered in the
325-14 minutes of the meeting;
325-15 (2) the director has filed a written dissent to the
325-16 action with the person acting as the secretary of the meeting
325-17 before the meeting is adjourned; or
325-18 (3) the director has sent a written dissent by
325-19 registered mail to the secretary of the corporation immediately
325-20 after the meeting has been adjourned.
325-21 (b) A director who voted in favor of an action may not
325-22 dissent to the action.
325-23 Sec. 21.415. ACTION BY DIRECTORS. (a) The act of a
325-24 majority of the directors present at a meeting at which a quorum is
325-25 present is the act of the board of directors of a corporation,
325-26 unless the act of a greater number is required by the certificate
325-27 of formation or bylaws of the corporation or by this code.
326-1 (b) Unless otherwise provided by the certificate of
326-2 formation or bylaws, a written consent stating the action taken and
326-3 signed by all members of the board of directors also is an act of
326-4 the board of directors.
326-5 Sec. 21.416. COMMITTEES OF BOARD OF DIRECTORS. (a) If
326-6 authorized by the certificate of formation or bylaws of a
326-7 corporation, the board of directors of the corporation, by
326-8 resolution adopted by the majority of the entire board of
326-9 directors, may designate:
326-10 (1) committees composed of one or more directors; or
326-11 (2) directors as alternate members of committees to
326-12 replace absent or disqualified committee members at a committee
326-13 meeting, subject to any limitations imposed by the board of
326-14 directors.
326-15 (b) To the extent provided by the resolution designating a
326-16 committee or the certificate of formation or bylaws and subject to
326-17 Subsection (c), the committee has the authority of the board of
326-18 directors.
326-19 (c) A committee of the board of directors may not:
326-20 (1) amend the certificate of formation, except to:
326-21 (A) establish series of shares;
326-22 (B) increase or decrease the number of shares in
326-23 a series; or
326-24 (C) eliminate a series of shares as authorized
326-25 by Section 21.155;
326-26 (2) propose a reduction of stated capital under
326-27 Sections 21.254-21.256;
327-1 (3) approve a plan of merger, share exchange, or
327-2 conversion of the corporation;
327-3 (4) recommend to shareholders the sale, lease, or
327-4 exchange of all or substantially all of the property and assets of
327-5 the corporation not made in the usual and regular course of its
327-6 business;
327-7 (5) recommend to the shareholders a voluntary winding
327-8 up and termination or a revocation of a voluntary winding up and
327-9 termination;
327-10 (6) amend, alter, or repeal the bylaws or adopt new
327-11 bylaws;
327-12 (7) fill vacancies on the board of directors;
327-13 (8) fill vacancies on or designate alternate members
327-14 of a committee of the board of directors;
327-15 (9) fill a vacancy to be filled because of an increase
327-16 in the number of directors;
327-17 (10) elect or remove officers of the corporation or
327-18 members or alternate members of a committee of the board of
327-19 directors;
327-20 (11) set the compensation of the members or alternate
327-21 members of a committee of the board of directors; or
327-22 (12) alter or repeal a resolution of the board of
327-23 directors that states that it may not be amended or repealed by a
327-24 committee of the board of directors.
327-25 (d) A committee of the board of directors may authorize a
327-26 distribution or the issuance of shares if authorized by the
327-27 resolution designating the committee or the certificate of
328-1 formation or bylaws.
328-2 (e) The board of directors may remove a member of a
328-3 committee appointed by the board if the board determines the
328-4 removal is in the best interests of the corporation. The removal
328-5 of the member will be without prejudice to any contract rights of
328-6 the person removed. Appointment of a member of a committee does
328-7 not create contract rights.
328-8 (f) The designation and delegation of authority to a
328-9 committee of the board of directors does not relieve the board of
328-10 directors or a director of responsibility imposed by law.
328-11 Sec. 21.417. ELECTION OF OFFICERS. The board of directors
328-12 of a corporation shall elect a president and a secretary at the
328-13 time and in the manner prescribed by the corporation's bylaws.
328-14 Other officers of the board of directors shall be elected in
328-15 accordance with Section 3.102.
328-16 Sec. 21.418. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED
328-17 DIRECTORS AND OFFICERS. (a) This section applies only to a
328-18 contract or transaction between a corporation and:
328-19 (1) one or more of the corporation's directors or
328-20 officers; or
328-21 (2) an entity or other organization in which one or
328-22 more of the corporation's directors or officers:
328-23 (A) is a managerial official; or
328-24 (B) has a financial interest.
328-25 (b) An otherwise valid contract or transaction is valid
328-26 notwithstanding that a director or officer of the corporation is
328-27 present at or participates in the meeting of the board of
329-1 directors, or of a committee of the board that authorizes the
329-2 contract or transaction, or votes to authorize the contract or
329-3 transaction, if:
329-4 (1) the material facts as to the relationship or
329-5 interest and as to the contract or transaction are disclosed to or
329-6 known by:
329-7 (A) the corporation's board of directors or a
329-8 committee of the board of directors and the board of directors or
329-9 committee in good faith authorizes the contract or transaction by
329-10 the affirmative vote of the majority of the disinterested directors
329-11 of the corporation, regardless of whether the disinterested
329-12 directors constitute a quorum; or
329-13 (B) the shareholders entitled to vote on the
329-14 authorization of the contract or transaction, and the contract or
329-15 transaction is specifically approved in good faith by a vote of the
329-16 shareholders; or
329-17 (2) the contract or transaction is fair to the
329-18 corporation when the contract or transaction is authorized,
329-19 approved, or ratified by the board of directors, a committee of the
329-20 board of directors, or the shareholders.
329-21 (c) Common or interested directors of a corporation may be
329-22 included in determining the presence of a quorum at a meeting of
329-23 the corporation's board of directors, or a committee of the board
329-24 of directors, that authorizes the contract or transaction.
329-25 (Sections 21.419-21.450 reserved for expansion)
329-26 SUBCHAPTER J. FUNDAMENTAL BUSINESS TRANSACTIONS
329-27 Sec. 21.451. DEFINITIONS. In this subchapter:
330-1 (1) "Participating shares" means shares that entitle
330-2 the holders of the shares to participate without limitation in
330-3 distributions.
330-4 (2) "Shares" includes a receipt or other instrument
330-5 issued by a depository representing an interest in one or more
330-6 shares or fractions of shares of a domestic or foreign corporation
330-7 that are deposited with the depository.
330-8 (3) "Voting shares" means shares that entitle the
330-9 holders of the shares to vote unconditionally in elections of
330-10 directors.
330-11 Sec. 21.452. APPROVAL OF MERGER. (a) A corporation that
330-12 is a party to the merger under Chapter 10 must approve the merger
330-13 by complying with this section.
330-14 (b) The board of directors of the corporation shall adopt a
330-15 resolution that:
330-16 (1) approves the plan of merger; and
330-17 (2) if shareholder approval of the merger is required
330-18 by this subchapter:
330-19 (A) recommends that the plan of merger be
330-20 approved by the shareholders of the corporation; or
330-21 (B) directs that the plan of merger be submitted
330-22 to the shareholders for approval without recommendation if the
330-23 board of directors determines for any reason not to recommend
330-24 approval of the plan of merger.
330-25 (c) Except as otherwise provided by this subchapter or
330-26 Chapter 10, the plan of merger shall be submitted to the
330-27 shareholders of the corporation for approval as provided by this
331-1 subchapter. The board of directors may place conditions on the
331-2 submission of the plan of merger to the shareholders.
331-3 (d) If the board of directors approves a plan of merger
331-4 required to be approved by the shareholders of the corporation but
331-5 does not adopt a resolution recommending that the plan of merger be
331-6 approved by the shareholders, the board of directors shall
331-7 communicate to the shareholders the reason for the board's
331-8 determination to submit the plan of merger without a
331-9 recommendation.
331-10 (e) Except as provided by Chapter 10 or Sections
331-11 21.457-21.459, the shareholders of the corporation shall approve
331-12 the plan of merger as provided by this subchapter.
331-13 Sec. 21.453. APPROVAL OF CONVERSION. (a) A corporation
331-14 must approve a conversion under Chapter 10 by complying with this
331-15 section.
331-16 (b) The board of directors of the corporation shall adopt a
331-17 resolution that approves the plan of conversion and:
331-18 (1) recommends that the plan of conversion be approved
331-19 by the shareholders of the corporation; or
331-20 (2) directs that the plan of conversion be submitted
331-21 to the shareholders for approval without recommendation if the
331-22 board of directors determines for any reason not to recommend
331-23 approval of the plan of conversion.
331-24 (c) The plan of conversion shall be submitted to the
331-25 shareholders of the corporation for approval as provided by this
331-26 subchapter. The board of directors may place conditions on the
331-27 submission of the plan of conversion to the shareholders.
332-1 (d) If the board of directors approves a plan of conversion
332-2 but does not adopt a resolution recommending that the plan of
332-3 conversion be approved by the shareholders of the corporation, the
332-4 board of directors shall communicate to the shareholders the reason
332-5 for the board's determination to submit the plan of conversion
332-6 without a recommendation.
332-7 (e) Except as provided by Sections 21.457-21.459, the
332-8 shareholders of the corporation shall approve the plan of
332-9 conversion as provided by this subchapter.
332-10 Sec. 21.454. APPROVAL OF INTEREST EXCHANGE. (a) A
332-11 corporation the shares of which are to be acquired in an interest
332-12 exchange under Chapter 10 must approve the interest exchange by
332-13 complying with this section.
332-14 (b) The board of directors shall adopt a resolution that
332-15 approves the plan of exchange and:
332-16 (1) recommends that the plan of exchange be approved
332-17 by the shareholders of the corporation; or
332-18 (2) directs that the plan of exchange be submitted to
332-19 the shareholders for approval without recommendation if the board
332-20 of directors determines for any reason not to recommend approval of
332-21 the plan of exchange.
332-22 (c) The plan of exchange shall be submitted to the
332-23 shareholders of the corporation for approval as provided by this
332-24 subchapter. The board of directors may place conditions on the
332-25 submission of the plan of exchange to the shareholders.
332-26 (d) If the board of directors approves a plan of exchange
332-27 but does not adopt a resolution recommending that the plan of
333-1 exchange be approved by the shareholders of the corporation, the
333-2 board of directors shall communicate to the shareholders the reason
333-3 for the board's determination to submit the plan of exchange to
333-4 shareholders without a recommendation.
333-5 (e) Except as provided by Sections 21.457-21.459, the
333-6 shareholders of the corporation shall approve the plan of exchange
333-7 as provided by this subchapter.
333-8 Sec. 21.455. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
333-9 ASSETS. (a) Except as provided by the certificate of formation of
333-10 a domestic corporation, a sale, lease, pledge, mortgage,
333-11 assignment, transfer, or other conveyance of an interest in real
333-12 property or other assets of the corporation does not require the
333-13 approval or consent of the shareholders of the corporation unless
333-14 the transaction constitutes a sale of all or substantially all of
333-15 the assets of the corporation.
333-16 (b) A corporation must approve the sale of all or
333-17 substantially all of its assets by complying with this section.
333-18 (c) The board of directors of the corporation shall adopt a
333-19 resolution that approves the sale of all or substantially all of
333-20 the assets of the corporation and:
333-21 (1) recommends that the sale of all or substantially
333-22 all of the assets of the corporation be approved by the
333-23 shareholders of the corporation; or
333-24 (2) directs that the sale of all or substantially all
333-25 of the assets of the corporation be submitted to the shareholders
333-26 for approval without recommendation if the board of directors
333-27 determines for any reason not to recommend approval of the sale.
334-1 (d) The resolution proposing the sale of all or
334-2 substantially all of the assets of the corporation shall be
334-3 submitted to the shareholders of the corporation for approval as
334-4 provided by this subchapter. The board of directors may place
334-5 conditions on the submission of the proposed sale to the
334-6 shareholders.
334-7 (e) If the board of directors approves the sale of all or
334-8 substantially all of the assets of the corporation but does not
334-9 adopt a resolution recommending that the proposed sale be approved
334-10 by the shareholders of the corporation, the board of directors
334-11 shall communicate to the shareholders the reason for the board's
334-12 determination to submit the proposed sale to shareholders without a
334-13 recommendation.
334-14 (f) The shareholders of the corporation shall approve the
334-15 sale of all or substantially all of the assets of the corporation
334-16 as provided by this subchapter. After the approval of the sale by
334-17 the shareholders, the board of directors may abandon the sale of
334-18 all or substantially all of the assets of the corporation, subject
334-19 to the rights of a third party under a contract relating to the
334-20 assets, without further action or approval by the shareholders.
334-21 Sec. 21.456. GENERAL PROCEDURE FOR SUBMISSION TO
334-22 SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION. (a) If a
334-23 fundamental business transaction involving a corporation is
334-24 required to be submitted to the shareholders of the corporation
334-25 under this subchapter, the corporation shall notify each
334-26 shareholder of the corporation that the fundamental business
334-27 transaction is being submitted to the shareholders for approval as
335-1 required by this subchapter, regardless of whether the shareholder
335-2 is entitled to vote on the matter.
335-3 (b) If the fundamental business transaction is a merger,
335-4 conversion, or interest exchange, the notice required by Subsection
335-5 (a) shall contain or be accompanied by a copy or summary of the
335-6 plan of merger, conversion, or interest exchange, as appropriate.
335-7 (c) If the fundamental business transaction is to be
335-8 considered at a meeting of the shareholders of the corporation, the
335-9 notice of the meeting must:
335-10 (1) be given not later than the 21st day before the
335-11 date of the meeting; and
335-12 (2) state that the purpose, or one of the purposes, of
335-13 the meeting is to consider the fundamental business transaction.
335-14 (d) If the fundamental business transaction is being
335-15 submitted to shareholders by written consent, the notice required
335-16 by Subsection (a) must:
335-17 (1) be given not later than the 21st day before the
335-18 date the fundamental business transaction takes effect; and
335-19 (2) state that the purpose, or one of the purposes, of
335-20 the solicitation of written consents from the shareholders is to
335-21 receive approval for the fundamental business transaction.
335-22 Sec. 21.457. GENERAL VOTE REQUIREMENT FOR APPROVAL OF
335-23 FUNDAMENTAL BUSINESS TRANSACTION. (a) Except as provided by this
335-24 code or the certificate of formation or bylaws of a corporation in
335-25 accordance with Section 21.363, the affirmative vote of the holders
335-26 of at least two-thirds of the outstanding shares of the corporation
335-27 entitled to vote on a fundamental business transaction is required
336-1 to approve the transaction.
336-2 (b) Unless provided by the certificate of formation or
336-3 Section 21.458, shares of a class or series that are not otherwise
336-4 entitled to vote on matters submitted to shareholders generally
336-5 will not be entitled to vote for the approval of a fundamental
336-6 business transaction.
336-7 (c) Except as provided by this code, if a class or series of
336-8 shares of a corporation is entitled to vote on a fundamental
336-9 business transaction as a class or series, in addition to the vote
336-10 required under Subsection (a), the affirmative vote of the holders
336-11 of at least two-thirds of the outstanding shares in each class or
336-12 series of shares entitled to vote on the fundamental business
336-13 transaction as a class or series is required to approve the
336-14 transaction.
336-15 (d) Unless required by the certificate of formation,
336-16 approval of a merger by shareholders is not required under this
336-17 code for a corporation that is a party to the plan of merger unless
336-18 that corporation is also a party to the merger.
336-19 Sec. 21.458. CLASS VOTING REQUIREMENTS FOR CERTAIN
336-20 FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Separate voting by a class
336-21 or series of shares of a corporation is required for approval of a
336-22 plan of merger or conversion if:
336-23 (1) the plan of merger or conversion contains a
336-24 provision that would require approval by that class or series of
336-25 shares under Section 21.364 if the provision was contained in a
336-26 proposed amendment to the corporation's certificate of formation;
336-27 or
337-1 (2) that class or series of shares is entitled under
337-2 the certificate of formation to vote as a class on the plan of
337-3 merger or conversion.
337-4 (b) Separate voting by a class or series of shares of a
337-5 corporation is required for approval of a plan of exchange if:
337-6 (1) shares of that class or series are to be exchanged
337-7 under the terms of the plan of exchange; or
337-8 (2) that class or series is entitled under the
337-9 certificate of formation to vote as a class on the plan of
337-10 exchange.
337-11 (c) Separate voting by a class or series of shares of a
337-12 corporation is required for approval of a sale of all or
337-13 substantially all of the assets of a corporation if that class or
337-14 series of shares is entitled under the certificate of formation to
337-15 vote as a class on the sale of the corporation's assets.
337-16 Sec. 21.459. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN
337-17 FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Unless required by the
337-18 corporation's certificate of formation, a plan of merger is not
337-19 required to be approved by the shareholders of a corporation if:
337-20 (1) the corporation is the sole surviving corporation
337-21 in the merger;
337-22 (2) the certificate of formation of the corporation
337-23 following the merger will not differ from the corporation's
337-24 certificate of formation before the merger;
337-25 (3) immediately after the effective date of the
337-26 merger, each shareholder of the corporation whose shares were
337-27 outstanding immediately before the effective date of the merger
338-1 will hold the same number of shares, with identical designations,
338-2 preferences, limitations, and relative rights;
338-3 (4) the sum of the voting power of the number of
338-4 voting shares outstanding immediately after the merger and the
338-5 voting power of securities that may be acquired on the conversion
338-6 or exercise of securities issued under the merger does not exceed
338-7 by more than 20 percent the voting power of the total number of
338-8 voting shares of the corporation that are outstanding immediately
338-9 before the merger; and
338-10 (5) the sum of the number of participating shares that
338-11 are outstanding immediately after the merger and the number of
338-12 participating shares that may be acquired on the conversion or
338-13 exercise of securities issued under the merger does not exceed by
338-14 more than 20 percent the total number of participating shares of
338-15 the corporation that are outstanding immediately before the merger.
338-16 (b) Unless required by the certificate of formation, a plan
338-17 of merger effected under Section 10.005 or 10.006 does not require
338-18 the approval of the shareholders of the corporation.
338-19 Sec. 21.460. RIGHTS OF DISSENT AND APPRAISAL. A shareholder
338-20 of a domestic corporation has the rights of dissent and appraisal
338-21 under Subchapter H, Chapter 10, with respect to a fundamental
338-22 business transaction.
338-23 (Sections 21.461-21.500 reserved for expansion)
338-24 SUBCHAPTER K. WINDING UP AND TERMINATION
338-25 Sec. 21.501. APPROVAL OF VOLUNTARY WINDING UP AND
338-26 REINSTATEMENT OR REVOCATION OF VOLUNTARY WINDING UP. A corporation
338-27 must approve a voluntary winding up in accordance with Chapter 11,
339-1 a reinstatement in accordance with Section 11.202, or revocation of
339-2 a voluntary winding up in accordance with Section 11.151 by
339-3 complying with one of the procedures prescribed by this subchapter.
339-4 Sec. 21.502. CERTAIN PROCEDURES RELATING TO WINDING UP. To
339-5 approve a voluntary winding up, a reinstatement, or a revocation of
339-6 a voluntary winding up, a corporation must follow one of the
339-7 following procedures:
339-8 (1) all shareholders of the corporation must consent
339-9 in writing to the winding up, the reinstatement, or the revocation
339-10 of voluntary winding up of the corporation;
339-11 (2) if the corporation has not commenced business and
339-12 has not issued any shares, a majority of the incorporators or the
339-13 board of directors of the corporation must adopt a resolution to
339-14 wind up or to revoke a voluntary winding up; or
339-15 (3)(A) the board of directors of the corporation must
339-16 adopt a resolution:
339-17 (i) recommending the winding up,
339-18 reinstatement, or revocation of a voluntary winding up of the
339-19 corporation; and
339-20 (ii) directing that the winding up,
339-21 reinstatement, or revocation of a voluntary winding up of the
339-22 corporation be submitted to the shareholders for approval at an
339-23 annual or special meeting of shareholders; and
339-24 (B) the shareholders must approve the action
339-25 described by Paragraph (A) in accordance with Section 21.503.
339-26 Sec. 21.503. MEETING OF SHAREHOLDERS; NOTICE. (a) Each
339-27 shareholder of record entitled to vote at a meeting described by
340-1 Section 21.502(3)(A)(ii) shall be given written notice stating that
340-2 the purpose or one of the purposes of the meeting is to consider
340-3 the winding up, reinstatement, or revocation of the voluntary
340-4 winding up of the corporation. The notice shall be given in the
340-5 time and manner provided by this code for the giving of notice of
340-6 shareholders' meetings.
340-7 (b) A vote of shareholders entitled to vote at the meeting
340-8 shall be taken on the resolution to wind up, reinstate, or revoke
340-9 the winding up of the corporation. The resolution must be approved
340-10 on receipt of the affirmative vote required by Section 21.364.
340-11 (Sections 21.504-21.550 reserved for expansion)
340-12 SUBCHAPTER L. DERIVATIVE PROCEEDINGS
340-13 Sec. 21.551. DEFINITIONS. In this subchapter:
340-14 (1) "Derivative proceeding" means a civil suit in the
340-15 right of a domestic corporation or, to the extent provided by
340-16 Section 21.562, in the right of a foreign corporation.
340-17 (2) "Shareholder" includes a beneficial owner whose
340-18 shares are held in a voting trust or by a nominee on the beneficial
340-19 owner's behalf.
340-20 Sec. 21.552. STANDING TO BRING PROCEEDING. A shareholder
340-21 may not institute or maintain a derivative proceeding unless:
340-22 (1) the shareholder:
340-23 (A) was a shareholder of the corporation at the
340-24 time of the act or omission complained of; or
340-25 (B) became a shareholder by operation of law
340-26 from a person that was a shareholder at the time of the act or
340-27 omission complained of; and
341-1 (2) the shareholder fairly and adequately represents
341-2 the interests of the corporation in enforcing the right of the
341-3 corporation.
341-4 Sec. 21.553. DEMAND. (a) A shareholder may not institute a
341-5 derivative proceeding until the 91st day after the date a written
341-6 demand is filed with the corporation stating with particularity the
341-7 act, omission, or other matter that is the subject of the claim or
341-8 challenge and requesting that the corporation take suitable action.
341-9 (b) The waiting period required by Subsection (a) before a
341-10 derivative proceeding may be instituted is not required if:
341-11 (1) the shareholder has been previously notified that
341-12 the demand has been rejected by the corporation;
341-13 (2) the corporation is suffering irreparable injury;
341-14 or
341-15 (3) irreparable injury to the corporation would result
341-16 by waiting for the expiration of the 90-day period.
341-17 Sec. 21.554. DETERMINATION BY DIRECTORS OR INDEPENDENT
341-18 PERSONS. (a) A determination of how to proceed on allegations
341-19 made in a demand or petition relating to a derivative proceeding
341-20 must be made by:
341-21 (1) an affirmative vote of the majority of the
341-22 independent and disinterested directors of the corporation present
341-23 at a meeting of the board of directors of the corporation at which
341-24 interested directors are not present at the time of the vote if the
341-25 independent and disinterested directors constitute a quorum of the
341-26 board of directors;
341-27 (2) an affirmative vote of the majority of a committee
342-1 consisting of two or more independent and disinterested directors
342-2 appointed by an affirmative vote of the majority of one or more
342-3 independent and disinterested directors present at a meeting of the
342-4 board of directors, regardless of whether the independent and
342-5 disinterested directors constitute a quorum of the board of
342-6 directors; or
342-7 (3) a panel of one or more independent and
342-8 disinterested persons appointed by the court on a motion by the
342-9 corporation listing the names of the persons to be appointed and
342-10 stating that, to the best of the corporation's knowledge, the
342-11 persons to be appointed are disinterested and qualified to make the
342-12 determinations contemplated by Section 21.558.
342-13 (b) The court shall appoint a panel under Subsection (a)(3)
342-14 if the court finds that the persons recommended by the corporation
342-15 are independent and disinterested and are otherwise qualified with
342-16 respect to expertise, experience, independent judgment, and other
342-17 factors considered appropriate by the court under the circumstances
342-18 to make the determinations. A person appointed by the court to a
342-19 panel under this section may not be held liable to the corporation
342-20 or the corporation's shareholders for an action taken or omission
342-21 made by the person in that capacity, except for an act or omission
342-22 constituting fraud or wilful misconduct.
342-23 Sec. 21.555. STAY OF PROCEEDING. (a) If the domestic or
342-24 foreign corporation that is the subject of a derivative proceeding
342-25 commences an inquiry into the allegations made in a demand or
342-26 petition and the person or group of persons described by Section
342-27 21.554 is conducting an active review of the allegations in good
343-1 faith, the court shall stay a derivative proceeding until the
343-2 review is completed and a determination is made by the person or
343-3 group regarding what further action, if any, should be taken.
343-4 (b) To obtain a stay, the domestic or foreign corporation
343-5 shall provide the court with a written statement agreeing to advise
343-6 the court and the shareholder making the demand of the
343-7 determination promptly on the completion of the review of the
343-8 matter. A stay, on application, may be reviewed every 60 days for
343-9 the continued necessity of the stay.
343-10 (c) If the review and determination made by the person or
343-11 group is not completed before the 61st day after the day the stay
343-12 is ordered by the court, the stay may be renewed for one or more
343-13 additional 60-day periods if the domestic or foreign corporation
343-14 provides the court and the shareholder with a written statement of
343-15 the status of the review and the reasons why a continued extension
343-16 of the stay is necessary.
343-17 Sec. 21.556. DISCOVERY. (a) If a domestic or foreign
343-18 corporation proposes to dismiss a derivative proceeding under
343-19 Section 21.558, discovery by a shareholder after the filing of the
343-20 derivative proceeding in accordance with this subchapter shall be
343-21 limited to:
343-22 (1) facts relating to whether the person or group of
343-23 persons described by Section 21.558 is independent and
343-24 disinterested;
343-25 (2) the good faith of the inquiry and review by the
343-26 person or group; and
343-27 (3) the reasonableness of the procedures followed by
344-1 the person or group in conducting the review.
344-2 (b) Discovery described by Subsection (a) may not be
344-3 expanded to include a fact or substantive matter regarding the act,
344-4 omission, or other matter that is the subject matter of the
344-5 derivative proceeding. The scope of discovery may be expanded if
344-6 the court determines after notice and hearing that a good faith
344-7 review of the allegations for purposes of Section 21.558 has not
344-8 been made by an independent and disinterested person or group in
344-9 accordance with that section.
344-10 Sec. 21.557. TOLLING OF STATUTE OF LIMITATIONS. A written
344-11 demand filed with the corporation under Section 21.553 tolls the
344-12 statute of limitations on the claim on which demand is made until
344-13 the earlier of:
344-14 (1) the 91st day after the date of the demand; or
344-15 (2) the 31st day after the date the corporation
344-16 advises the shareholder that the demand has been rejected or the
344-17 review has been completed.
344-18 Sec. 21.558. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A
344-19 court shall dismiss a derivative proceeding on a motion by the
344-20 corporation if the person or group of persons described by Section
344-21 21.554 determines in good faith, after conducting a reasonable
344-22 inquiry and based on factors the person or group considers
344-23 appropriate under the circumstances, that continuation of the
344-24 derivative proceeding is not in the best interests of the
344-25 corporation.
344-26 (b) In determining whether the requirements of Subsection
344-27 (a) have been met, the burden of proof shall be on:
345-1 (1) the plaintiff shareholder if:
345-2 (A) the majority of the board of directors
345-3 consists of independent and disinterested directors at the time the
345-4 determination is made;
345-5 (B) the determination is made by a panel of one
345-6 or more independent and disinterested persons appointed under
345-7 Section 21.554; or
345-8 (C) the corporation presents prima facie
345-9 evidence that demonstrates that the directors appointed under
345-10 Section 21.554 are independent and disinterested; or
345-11 (2) the corporation in any other circumstance.
345-12 Sec. 21.559. PROCEEDING INSTITUTED AFTER DEMAND REJECTED.
345-13 If a derivative proceeding is instituted after a demand is
345-14 rejected, the petition must allege with particularity facts that
345-15 establish that the rejection was not made in accordance with the
345-16 requirements of Sections 21.554 and 21.558.
345-17 Sec. 21.560. DISCONTINUANCE OR SETTLEMENT. (a) A
345-18 derivative proceeding may not be discontinued or settled without
345-19 court approval.
345-20 (b) The court shall direct that notice be given to the
345-21 affected shareholders if the court determines that a proposed
345-22 discontinuance or settlement may substantially affect the interests
345-23 of other shareholders.
345-24 Sec. 21.561. PAYMENT OF EXPENSES. (a) In this section,
345-25 "expenses" means reasonable expenses incurred by a party in a
345-26 derivative proceeding, including:
345-27 (1) attorney's fees;
346-1 (2) costs in pursuing an investigation of the matter
346-2 that was the subject of the derivative proceeding; or
346-3 (3) expenses for which the domestic or foreign
346-4 corporation or a corporate defendant may be required to indemnify
346-5 another person.
346-6 (b) On termination of a derivative proceeding, the court may
346-7 order:
346-8 (1) the domestic or foreign corporation to pay the
346-9 expenses the plaintiff incurred in the proceeding if the court
346-10 finds the proceeding has resulted in a substantial benefit to the
346-11 domestic or foreign corporation;
346-12 (2) the plaintiff to pay the expenses the domestic or
346-13 foreign corporation or other defendant incurred in investigating
346-14 and defending the proceeding if the court finds the proceeding has
346-15 been instituted or maintained without reasonable cause or for an
346-16 improper purpose; or
346-17 (3) a party to pay the expenses incurred by another
346-18 party relating to the filing of a pleading, motion, or other paper
346-19 if the court finds the pleading, motion, or other paper:
346-20 (A) was not well grounded in fact after
346-21 reasonable inquiry;
346-22 (B) was not warranted by existing law or a good
346-23 faith argument for the extension, modification, or reversal of
346-24 existing law; or
346-25 (C) was interposed for an improper purpose, such
346-26 as to harass, cause unnecessary delay, or cause a needless increase
346-27 in the cost of litigation.
347-1 Sec. 21.562. APPLICATION TO FOREIGN CORPORATIONS. (a) In a
347-2 derivative proceeding brought in the right of a foreign
347-3 corporation, the matters covered by this subchapter are governed by
347-4 the laws of the jurisdiction of incorporation of the foreign
347-5 corporation, except for Sections 21.555, 21.560, and 21.561, which
347-6 are procedural provisions and do not relate to the internal affairs
347-7 of the foreign corporation.
347-8 (b) In the case of matters relating to a foreign corporation
347-9 under Section 21.554, a reference to a person or group of persons
347-10 described by that section refers to a person or group entitled
347-11 under the laws of the jurisdiction of incorporation of the foreign
347-12 corporation to review and dispose of a derivative proceeding. The
347-13 standard of review of a decision made by the person or group to
347-14 dismiss the derivative proceeding shall be governed by the laws of
347-15 the jurisdiction of incorporation of the foreign corporation.
347-16 Sec. 21.563. CLOSELY HELD CORPORATION. (a) In this
347-17 section, "closely held corporation" means a corporation that has:
347-18 (1) fewer than 35 shareholders; and
347-19 (2) no shares listed on a national securities exchange
347-20 or regularly quoted in an over-the-counter market by one or more
347-21 members of a national securities association.
347-22 (b) Subject to Subsection (c), Sections 21.552-21.559 do not
347-23 apply to a closely held corporation.
347-24 (c) If justice requires:
347-25 (1) a derivative proceeding brought by a shareholder
347-26 of a closely held corporation may be treated by a court as a direct
347-27 action brought by the shareholder for the shareholder's own
348-1 benefit; and
348-2 (2) a recovery in a direct or derivative proceeding by
348-3 a shareholder may be paid directly to the plaintiff or to the
348-4 corporation if necessary to protect the interests of creditors or
348-5 other shareholders of the corporation.
348-6 (Sections 21.564-21.600 reserved for expansion)
348-7 SUBCHAPTER M. AFFILIATED BUSINESS COMBINATIONS
348-8 Sec. 21.601. DEFINITIONS. In this subchapter:
348-9 (1) "Issuing public corporation" means a domestic
348-10 corporation that has:
348-11 (A) 100 or more shareholders of record as shown
348-12 by the share transfer records of the corporation;
348-13 (B) a class or series of the corporation's
348-14 voting shares registered under the Securities Exchange Act of 1934
348-15 (15 U.S.C. Section 77b et seq.), as amended; or
348-16 (C) a class or series of the corporation's
348-17 voting shares qualified for trading in a national market system.
348-18 (2) "Person" includes two or more persons acting as a
348-19 partnership, limited partnership, syndicate, or other group under
348-20 an agreement, arrangement, or understanding, regardless of whether
348-21 in writing, to acquire, hold, vote, or dispose of a corporation's
348-22 shares.
348-23 (3) "Share acquisition date" means the date a person
348-24 initially becomes an affiliated shareholder of an issuing public
348-25 corporation.
348-26 (4) "Subsidiary" means a domestic or foreign
348-27 corporation or other entity of which a majority of the outstanding
349-1 voting shares are owned, directly or indirectly, by an issuing
349-2 public corporation.
349-3 (5) "Voting share" means a share of capital stock of a
349-4 corporation that entitles the holder of the share to vote generally
349-5 in the election of directors.
349-6 Sec. 21.602. AFFILIATED SHAREHOLDER. (a) For purposes of
349-7 this subchapter, a person, other than the issuing public
349-8 corporation or a wholly owned subsidiary of the issuing public
349-9 corporation, is an affiliated shareholder if the person:
349-10 (1) is the beneficial owner of 20 percent or more of
349-11 the outstanding voting shares of the issuing public corporation; or
349-12 (2) during the preceding three-year period, was the
349-13 beneficial owner of 20 percent or more of the outstanding voting
349-14 shares of the issuing public corporation.
349-15 (b) To determine whether a person is an affiliated
349-16 shareholder, the number of voting shares of the issuing public
349-17 corporation considered outstanding includes shares considered
349-18 beneficially owned by that person under Section 21.603, but does
349-19 not include other unissued voting shares of the issuing public
349-20 corporation that may be issuable under an agreement, arrangement,
349-21 or understanding, or on exercise of conversion rights, warrants, or
349-22 options.
349-23 Sec. 21.603. BENEFICIAL OWNER OF SHARES OR SIMILAR
349-24 SECURITIES. (a) For purposes of this subchapter, a person is a
349-25 beneficial owner of shares or similar securities if the person
349-26 individually, or through an affiliate or associate, beneficially
349-27 owns, directly or indirectly, shares or similar securities.
350-1 (b) A beneficial owner of shares or similar securities is
350-2 entitled, individually or through an affiliate or associate, to:
350-3 (1) acquire shares or similar securities that may be
350-4 exercised immediately or after the passage of a certain amount of
350-5 time according to an oral or written agreement, arrangement, or
350-6 understanding, or on the exercise of conversion rights, exchange
350-7 rights, warrants, or options;
350-8 (2) vote the shares or similar securities according to
350-9 an oral or written agreement, arrangement, or understanding; or
350-10 (3) subject to Subsection (c), acquire, hold or
350-11 dispose of, or vote shares or similar securities with another
350-12 person who individually, or through an affiliate or associate,
350-13 beneficially owns, directly or indirectly, the shares or similar
350-14 securities.
350-15 (c) A person is not considered a beneficial owner of shares
350-16 or similar securities if:
350-17 (1) the shares or similar securities are:
350-18 (A) tendered under a tender or exchange offer
350-19 made by the person or an affiliate or associate of the person
350-20 before the tendered shares or securities are accepted for purchase
350-21 or exchange; or
350-22 (B) subject to an agreement, arrangement, or
350-23 understanding that expressly conditions the acquisition or purchase
350-24 of shares or securities on the approval of the acquisition or
350-25 purchase under Section 21.606 if the person has no direct or
350-26 indirect rights of ownership or voting with respect to the shares
350-27 or securities until the time the approval is obtained; or
351-1 (2) the agreement, arrangement, or understanding to
351-2 vote the shares:
351-3 (A) arises solely from an immediately revocable
351-4 proxy that authorizes the person named in the proxy to vote at a
351-5 meeting of the shareholders that has been called when the proxy is
351-6 delivered or at an adjournment of the meeting; and
351-7 (B) is not reportable on a Schedule 13D under
351-8 the Securities Exchange Act of 1934 (15 U.S.C. Section 77b et
351-9 seq.), as amended, or a comparable or successor report.
351-10 Sec. 21.604. BUSINESS COMBINATION. A business combination
351-11 is:
351-12 (1) a merger, share exchange, or conversion of an
351-13 issuing public corporation or a subsidiary with:
351-14 (A) an affiliated shareholder;
351-15 (B) a foreign or domestic corporation or other
351-16 entity that is, or after the merger, share exchange, or conversion
351-17 would be, an affiliate or associate of the affiliated shareholder;
351-18 or
351-19 (C) another domestic or foreign corporation or
351-20 other entity, if the merger, share exchange, or conversion is
351-21 caused by an affiliated shareholder, or an affiliate or associate
351-22 of an affiliated shareholder, and as a result of the merger, share
351-23 exchange, or conversion this subchapter does not apply to the
351-24 surviving corporation or other entity;
351-25 (2) a sale, lease, exchange, mortgage, pledge,
351-26 transfer, or other disposition, in one transaction or a series of
351-27 transactions, including an allocation of assets under a merger, to
352-1 or with the affiliated shareholder, or an affiliate or associate of
352-2 the affiliated shareholder, of assets of the issuing public
352-3 corporation or a subsidiary that:
352-4 (A) has an aggregate market value equal to 10
352-5 percent or more of the aggregate market value of all of the assets,
352-6 determined on a consolidated basis, of the issuing public
352-7 corporation;
352-8 (B) has an aggregate market value equal to 10
352-9 percent or more of the aggregate market value of all of the
352-10 outstanding common stock of the issuing public corporation; or
352-11 (C) represents 10 percent or more of the earning
352-12 power or net income, determined on a consolidated basis, of the
352-13 issuing public corporation;
352-14 (3) the issuance or transfer by an issuing public
352-15 corporation or a subsidiary to an affiliated shareholder or an
352-16 affiliate or associate of the affiliated shareholder, in one
352-17 transaction or a series of transactions, of shares of the issuing
352-18 public corporation or a subsidiary, except by the exercise of
352-19 warrants or rights to purchase shares of the issuing public
352-20 corporation offered, or a share dividend paid, pro rata to all
352-21 shareholders of the issuing public corporation after the affiliated
352-22 shareholder's share acquisition date;
352-23 (4) the adoption of a plan or proposal for the
352-24 liquidation or dissolution of an issuing public corporation
352-25 proposed by or under any agreement, arrangement, or understanding,
352-26 regardless of whether in writing, with an affiliated shareholder or
352-27 an affiliate or associate of the affiliated shareholder;
353-1 (5) a reclassification of securities, including a
353-2 reverse share split or a share split-up, share dividend, or other
353-3 distribution of shares, a recapitalization of the issuing public
353-4 corporation, a merger of the issuing public corporation with a
353-5 subsidiary or pursuant to which the assets and liabilities of the
353-6 issuing public corporation are allocated among two or more
353-7 surviving or new domestic or foreign corporations or other
353-8 entities, or any other transaction proposed by or under an
353-9 agreement, arrangement, or understanding, regardless of whether in
353-10 writing, with an affiliated shareholder or an affiliate or
353-11 associate of the affiliated shareholder that has the effect,
353-12 directly or indirectly, of increasing the proportionate ownership
353-13 percentage of the outstanding shares of a class or series of voting
353-14 shares or securities convertible into voting shares of the issuing
353-15 public corporation that is beneficially owned by the affiliated
353-16 shareholder or an affiliate or associate of the affiliated
353-17 shareholder, except as a result of immaterial changes due to
353-18 fractional share adjustments; or
353-19 (6) the direct or indirect receipt by an affiliated
353-20 shareholder or an affiliate or associate of the affiliated
353-21 shareholder of the benefit of a loan, advance, guarantee, pledge,
353-22 or other financial assistance or a tax credit or other tax
353-23 advantage provided by or through the issuing public corporation,
353-24 except proportionately as a shareholder of the issuing public
353-25 corporation.
353-26 Sec. 21.605. CONTROL. (a) For purposes of this subchapter,
353-27 a person has control of another person if the person has
354-1 possession, directly or indirectly, of the power to direct or cause
354-2 the direction of the management and policies of the other person,
354-3 through the ownership of equity securities, by contract, or in
354-4 another manner.
354-5 (b) A person's beneficial ownership of 10 percent or more of
354-6 a person's outstanding voting shares or similar interests creates a
354-7 presumption that the person has control of the other person, but a
354-8 person is not considered to have control of another person who
354-9 holds the voting shares or similar interests in good faith and not
354-10 to circumvent this part, as an agent, bank, broker, nominee,
354-11 custodian, or trustee for one or more beneficial owners who do not
354-12 individually or as a group have control of the person.
354-13 Sec. 21.606. THREE-YEAR MORATORIUM ON CERTAIN BUSINESS
354-14 COMBINATIONS. An issuing public corporation may not, directly or
354-15 indirectly, enter into or engage in a business combination with an
354-16 affiliated shareholder, or any affiliate or associate of the
354-17 affiliated shareholder, during the three-year period immediately
354-18 following the affiliated shareholder's share acquisition date
354-19 unless:
354-20 (1) the business combination or the purchase or
354-21 acquisition of shares made by the affiliated shareholder on the
354-22 affiliated shareholder's share acquisition date is approved by the
354-23 board of directors of the issuing public corporation before the
354-24 affiliated shareholder's share acquisition date; or
354-25 (2) the business combination is approved, by the
354-26 affirmative vote of the holders of at least two-thirds of the
354-27 outstanding voting shares of the issuing public corporation not
355-1 beneficially owned by the affiliated shareholder or an affiliate or
355-2 associate of the affiliated shareholder, at a meeting of
355-3 shareholders called for that purpose not less than six months after
355-4 the affiliated shareholder's share acquisition date. Approval may
355-5 not be by written consent.
355-6 Sec. 21.607. APPLICATION OF MORATORIUM. Section 21.606 does
355-7 not apply to:
355-8 (1) a business combination of an issuing public
355-9 corporation if:
355-10 (A) the original articles of incorporation or
355-11 original bylaws of the corporation contain a provision expressly
355-12 electing not to be governed by this subchapter;
355-13 (B) before December 31, 1997, the corporation
355-14 adopted an amendment to the articles of incorporation or bylaws of
355-15 the corporation expressly electing not to be governed by this
355-16 subchapter; or
355-17 (C) after December 31, 1997, the corporation
355-18 adopts an amendment to the articles of incorporation or bylaws of
355-19 the corporation, approved by the affirmative vote of the holders,
355-20 other than an affiliated shareholder or an affiliate or associate
355-21 of the affiliated shareholder, of at least two-thirds of the
355-22 outstanding voting shares of the issuing public corporation,
355-23 expressly electing not to be governed by this subchapter, except
355-24 that the amendment to the articles of incorporation or bylaws takes
355-25 effect 18 months after the date of the vote and does not apply to a
355-26 business combination of the issuing public corporation with an
355-27 affiliated shareholder whose share acquisition date is on or before
356-1 the effective date of the amendment;
356-2 (2) a business combination of an issuing public
356-3 corporation with an affiliated shareholder who became an affiliated
356-4 shareholder inadvertently, if the affiliated shareholder:
356-5 (A) as soon as practicable divests itself of a
356-6 sufficient number of the voting shares of the issuing public
356-7 corporation so that the affiliated shareholder no longer is the
356-8 beneficial owner, directly or indirectly, of 20 percent or more of
356-9 the outstanding voting shares of the issuing public corporation;
356-10 and
356-11 (B) would not at any time within the three-year
356-12 period preceding the announcement date of the business combination
356-13 have been an affiliated shareholder except for the inadvertent
356-14 acquisition;
356-15 (3) a business combination with an affiliated
356-16 shareholder who was the beneficial owner of 20 percent or more of
356-17 the outstanding voting shares of the issuing public corporation on
356-18 December 31, 1996, and continuously until the announcement date of
356-19 the business combination;
356-20 (4) a business combination with an affiliated
356-21 shareholder who became an affiliated shareholder through a transfer
356-22 of shares of the issuing public corporation by will or intestate
356-23 succession and continuously was an affiliated shareholder until the
356-24 announcement date of the business combination; or
356-25 (5) a business combination of an issuing public
356-26 corporation with a domestic wholly owned subsidiary if the domestic
356-27 subsidiary is not an affiliate or associate of the affiliated
357-1 shareholder for a reason other than the affiliated shareholder's
357-2 beneficial ownership of voting shares in the issuing public
357-3 corporation.
357-4 Sec. 21.608. EFFECT ON OTHER ACTIONS. (a) This subchapter
357-5 does not affect, directly or indirectly, the validity of another
357-6 action by the board of directors of an issuing public corporation.
357-7 (b) This subchapter does not preclude the board of directors
357-8 of an issuing public corporation from taking other action in
357-9 accordance with law.
357-10 (c) The board of directors of an issuing public corporation
357-11 does not incur liability for an election made or not made under
357-12 this subchapter.
357-13 Sec. 21.609. CONFLICTING PROVISIONS. If this subchapter
357-14 conflicts with another provision of this code, this subchapter
357-15 controls.
357-16 Sec. 21.610. CHANGE IN VOTING REQUIREMENTS. The affirmative
357-17 vote or concurrence of shareholders required for approval of an
357-18 action that is required to be submitted to a vote of the
357-19 shareholders under this subchapter may be increased but not
357-20 decreased under Section 21.365.
357-21 (Sections 21.611-21.650 reserved for expansion)
357-22 SUBCHAPTER N. PROVISIONS RELATING TO INVESTMENT COMPANIES
357-23 Sec. 21.651. DEFINITION. In this subchapter, "investment
357-24 company" means a corporation registered as an open-end company
357-25 under the Investment Company Act.
357-26 Sec. 21.652. ESTABLISHING CLASS OR SERIES OF SHARES; CHANGE
357-27 IN NUMBER OF SHARES. (a) In addition to the actions the board may
358-1 undertake under Subchapters D, E, and F, the board of directors of
358-2 an investment company may:
358-3 (1) establish classes of shares and series of unissued
358-4 shares of a class by setting and determining the designations,
358-5 preferences, limitations, and relative rights, including voting
358-6 rights, of the shares of the class or series established under this
358-7 subdivision to the same extent that the designations, preferences,
358-8 limitations, and relative rights could be stated if fully stated in
358-9 the certificate of formation; and
358-10 (2) increase or decrease the aggregate number of
358-11 shares or the number of shares of, or delete from the investment
358-12 company's certificate of formation, a class or series of shares the
358-13 corporation has authority to issue, unless a provision has been
358-14 included in the certificate of formation of the corporation after
358-15 September 1, 1993, expressly prohibiting those actions by the board
358-16 of directors.
358-17 (b) The board of directors of an investment company may not:
358-18 (1) decrease the number of shares in a class or series
358-19 to a number that is less than the number of shares of that class or
358-20 series that are outstanding at the time; or
358-21 (2) delete from the certificate of formation a
358-22 reference to a class or series that has shares outstanding at the
358-23 time.
358-24 (c) To establish a class or series under this section, the
358-25 board of directors must adopt a resolution stating the designation
358-26 of the class or series and setting and determining the
358-27 designations, preferences, limitations, and relative rights,
359-1 including voting rights, of the class or series.
359-2 (d) To increase or decrease the number of shares of a class
359-3 or series of shares or to delete from the certificate of formation
359-4 a reference to a class or series of shares, the board of directors
359-5 of an investment company must adopt a resolution setting and
359-6 determining the new number of shares of each class or series in
359-7 which the number of shares is increased or decreased or deleting
359-8 the class or series and any reference to the class or series from
359-9 the certificate of formation. The shares of a series removed from
359-10 the certificate of formation shall resume the status of authorized
359-11 but unissued shares of the class of shares from which the series
359-12 was established unless otherwise provided by the resolution or the
359-13 certificate of formation of the investment company.
359-14 Sec. 21.653. REQUIRED STATEMENT RELATING TO SHARES. (a)
359-15 Before the first issuance of shares of a class or series
359-16 established or increased or decreased by resolution adopted by the
359-17 board of directors of an investment company under Section 21.652,
359-18 and to delete from the investment company's certificate of
359-19 formation a class or series of shares and all references to the
359-20 class or series contained in the certificate of formation, the
359-21 investment company shall file with the secretary of state a
359-22 statement that contains:
359-23 (1) the name of the investment company;
359-24 (2) if the statement relates to the establishment of a
359-25 class or series of shares, a copy of the resolution establishing
359-26 and designating the class or series or establishing and designating
359-27 the class or series and setting and determining the preferences,
360-1 limitations, and relative rights of the class or series;
360-2 (3) if the statement relates to an increase or
360-3 decrease in the number of shares of a class or series, a copy of
360-4 the resolution setting and determining the new number of shares of
360-5 each class or series in which the number of shares is increased or
360-6 decreased;
360-7 (4) if the statement relates to the deletion of a
360-8 class or series of shares and all references to the class or series
360-9 from the certificate of formation, a copy of the resolution
360-10 deleting the class or series and all references to the class or
360-11 series from the certificate of formation;
360-12 (5) the date of adoption of the resolution; and
360-13 (6) a statement that the resolution was adopted by all
360-14 necessary action on the part of the investment company.
360-15 (b) After the statement described by Subsection (a) is
360-16 filed, a resolution adopted under Section 21.652 becomes an
360-17 amendment of the certificate of formation. An amendment of the
360-18 certificate of formation described under this section is not
360-19 subject to the procedure to amend the certificate of formation
360-20 contained in Subchapter B.
360-21 Sec. 21.654. TERM OF OFFICE OF DIRECTORS. Unless removed in
360-22 accordance with the certificate of formation or bylaws of the
360-23 investment company, a director of an investment company shall serve
360-24 as director for the term for which the director is elected and
360-25 holds office until a successor is elected and qualifies.
360-26 Sec. 21.655. MEETINGS OF SHAREHOLDERS. (a) If provided by
360-27 the certificate of formation or bylaws of an investment company,
361-1 the investment company is not required to hold an annual meeting of
361-2 shareholders or elect directors in a year in which an election of
361-3 directors is not required under the Investment Company Act.
361-4 (b) If an investment company is required to hold a meeting
361-5 of shareholders to elect directors under the Investment Company
361-6 Act, the meeting shall be designated as the annual meeting of
361-7 shareholders for that year.
361-8 (Sections 21.656-21.700 reserved for expansion)
361-9 SUBCHAPTER O. CLOSE CORPORATION
361-10 Sec. 21.701. DEFINITIONS. In this subchapter:
361-11 (1) "Close corporation" means a domestic corporation
361-12 formed under this subchapter.
361-13 (2) "Close corporation provision" means a provision in
361-14 the certificate of formation of a close corporation or in a
361-15 shareholders' agreement of a close corporation.
361-16 (3) "Ordinary corporation" means a domestic
361-17 corporation that is not a close corporation.
361-18 (4) "Shareholders' agreement" means a written
361-19 agreement regulating an aspect of the business and affairs of or
361-20 the relationship among the shareholders of a close corporation that
361-21 has been executed under this subchapter.
361-22 Sec. 21.702. APPLICABILITY OF SUBCHAPTER. (a) This
361-23 subchapter applies only to a close corporation.
361-24 (b) This chapter applies to a close corporation to the
361-25 extent not inconsistent with this subchapter.
361-26 Sec. 21.703. FORMATION OF CLOSE CORPORATION. A close
361-27 corporation shall be formed in accordance with Chapter 3 and
362-1 Sections 21.051 and 21.704.
362-2 Sec. 21.704. SUPPLEMENTAL PROVISION FOR CERTIFICATE OF
362-3 FORMATION. In addition to a provision required or permitted to be
362-4 stated in the certificate of formation by Section 21.051, the
362-5 certificate of formation of a close corporation, whether original,
362-6 amended, or restated, must include the sentence, "This corporation
362-7 is a close corporation."
362-8 Sec. 21.705. ADOPTION OF AMENDMENT FOR CLOSE CORPORATION
362-9 STATUS. (a) An ordinary corporation may become a close
362-10 corporation by amending its certificate of formation in accordance
362-11 with Chapter 3 and Section 21.704.
362-12 (b) An amendment adopting close corporation status must be
362-13 approved by the affirmative vote of the holders of all of the
362-14 outstanding shares of each class established by the close
362-15 corporation, regardless of whether a class is entitled to vote on
362-16 the amendment by the certificate of formation of the ordinary
362-17 corporation.
362-18 Sec. 21.706. ADOPTION OF CLOSE CORPORATION STATUS THROUGH
362-19 MERGER, SHARE EXCHANGE, OR CONVERSION. (a) A surviving or new
362-20 corporation resulting from a merger or conversion or a corporation
362-21 that acquires a corporation under an interest exchange under
362-22 Chapter 10 may become a close corporation if, as part of the plan
362-23 of merger, exchange, or conversion, the articles of incorporation
362-24 conform with Section 21.704.
362-25 (b) A plan of merger, exchange, or conversion adopting close
362-26 corporation status must be approved by the affirmative vote of the
362-27 holders of all of the outstanding shares, and of each class or
363-1 series of shares, of each corporation that is party to the merger,
363-2 interest, exchange, or conversion, regardless of whether a class or
363-3 series of shares is entitled to vote on the plan by the certificate
363-4 of formation of the corporation.
363-5 Sec. 21.707. EXISTING CLOSE CORPORATION. (a) This section
363-6 applies to an existing corporation that elected to become a close
363-7 corporation before the effective date of this code and has not
363-8 terminated that status.
363-9 (b) A close corporation existing before the effective date
363-10 of this code is considered to be a close corporation under this
363-11 code.
363-12 (c) A provision in the articles of incorporation of a close
363-13 corporation authorized under former law is valid and enforceable if
363-14 the corporation's status as a close corporation has not been
363-15 terminated.
363-16 (d) An agreement among the shareholders of a close
363-17 corporation in conformance with former law and Sections
363-18 21.714-21.725 before the effective date of this code is considered
363-19 to be a shareholders' agreement.
363-20 (e) A certificate representing the shares issued or
363-21 delivered by the close corporation after the effective date of this
363-22 code, whether in connection with the original issue of shares or a
363-23 transfer of shares, must conform with Section 21.732.
363-24 Sec. 21.708. TERMINATION OF CLOSE CORPORATION STATUS. A
363-25 close corporation may terminate its status as a close corporation
363-26 by:
363-27 (1) filing a statement terminating close corporation
364-1 status under Section 21.709;
364-2 (2) amending the close corporation's certificate of
364-3 formation under Chapter 3 by deleting from the certificate of
364-4 formation the statement that it is a close corporation;
364-5 (3) engaging in a merger, interest exchange, or
364-6 conversion under Chapter 10, unless the plan of merger, exchange,
364-7 or conversion provides that the surviving or new corporation will
364-8 continue as or become a close corporation and the plan has been
364-9 approved by the affirmative vote or consent of the holders of all
364-10 of the outstanding shares, and of each class and series of shares,
364-11 of the close corporation, regardless of whether a class or series
364-12 of shares is entitled to vote on the plan by the certificate of
364-13 formation; or
364-14 (4) instituting a judicial proceeding to enforce a
364-15 close corporation provision providing for the termination.
364-16 Sec. 21.709. STATEMENT TERMINATING CLOSE CORPORATION STATUS;
364-17 FILING; NOTICE. (a) If a close corporation provision specifies a
364-18 time or event requiring the termination of close corporation
364-19 status, regardless of whether the provision is identifiable by a
364-20 person dealing with the close corporation, the termination of the
364-21 close corporation takes effect on the occurrence of the specified
364-22 time or event and the filing of a statement terminating close
364-23 corporation status under this section.
364-24 (b) Promptly after the time or occurrence of an event
364-25 requiring termination of close corporation status, a statement
364-26 terminating close corporation status shall be signed by an officer
364-27 on behalf of the close corporation. A copy of the applicable close
365-1 corporation provision must be included in or attached to the
365-2 statement. The statement and any attachment shall be filed with
365-3 the secretary of state in accordance with Chapter 4.
365-4 (c) The statement terminating close corporation status must
365-5 contain:
365-6 (1) the name of the corporation;
365-7 (2) a statement that the corporation has terminated
365-8 its status as a close corporation in accordance with the included
365-9 or attached close corporation provision; and
365-10 (3) the time or event that caused the termination and,
365-11 in the case of an event, the approximate date of the event.
365-12 (d) After a statement terminating close corporation status
365-13 has been filed under this section, the certificate of formation of
365-14 the close corporation is considered to be amended to delete from
365-15 the certificate the statement that the corporation is a close
365-16 corporation, and the corporation's status as a close corporation is
365-17 terminated.
365-18 (e) The corporation shall personally deliver or mail a copy
365-19 of the statement to each shareholder of the corporation. A copy of
365-20 the statement is considered to have been delivered by mail under
365-21 this section when the copy is deposited in the United States mail,
365-22 with postage prepaid, addressed to the shareholder at the
365-23 shareholder's address as it appears on the share transfer records
365-24 of the corporation. The failure to deliver the copy of the
365-25 statement does not affect the validity of the termination.
365-26 Sec. 21.710. EFFECT OF TERMINATION OF CLOSE CORPORATION
365-27 STATUS. (a) A close corporation that terminates its status as a
366-1 close corporation and becomes an ordinary corporation is subject to
366-2 this chapter as if the corporation had not elected close
366-3 corporation status under this subchapter.
366-4 (b) The effect of termination of close corporation status on
366-5 a shareholders' agreement is governed by Section 21.724.
366-6 (c) When the termination of close corporation status takes
366-7 effect, if the close corporation's business and affairs have been
366-8 managed by an entity other than a board of directors as provided by
366-9 Section 21.725, governance by a board of directors is instituted or
366-10 reinstated:
366-11 (1) if provided by a shareholders' agreement, in the
366-12 manner stated in the agreement or by the persons named in the
366-13 agreement to serve as the interim board of directors; or
366-14 (2) if each party to a shareholders' agreement agrees
366-15 to elect a board of directors at a shareholders' meeting.
366-16 Sec. 21.711. SHAREHOLDERS' MEETING TO ELECT DIRECTORS. A
366-17 shareholders' meeting required by Section 21.710(c)(2) shall be
366-18 promptly called after the termination of close corporation status
366-19 takes effect. If a meeting is not called before the 31st day after
366-20 the date the termination takes effect, a shareholder may call a
366-21 shareholders' meeting on the provision of notice required by
366-22 Section 21.353, regardless of whether the shareholder is entitled
366-23 to call a shareholders' meeting or vote at the meeting. At the
366-24 meeting, the shareholders shall elect the number of directors
366-25 specified in the certificate of formation or bylaws of the
366-26 corporation or, in the absence of any specification, three
366-27 directors.
367-1 Sec. 21.712. TERM OF DIRECTORS. A director succeeding to
367-2 the management of the corporation under Section 21.710(c) shall
367-3 serve until the next annual meeting of shareholders and until a
367-4 successor is elected and qualifies. Until a board of directors is
367-5 elected, the shareholders of the corporation shall act as the
367-6 corporation's board of directors, and the business and affairs of
367-7 the corporation shall be conducted under Section 21.726.
367-8 Sec. 21.713. MANAGEMENT. A close corporation shall be
367-9 managed:
367-10 (1) by a board of directors in the same manner an
367-11 ordinary corporation would be managed under this chapter; or
367-12 (2) in the manner provided by the close corporation's
367-13 certificate of formation or by a shareholders' agreement of the
367-14 close corporation.
367-15 Sec. 21.714. SHAREHOLDERS' AGREEMENT. (a) The shareholders
367-16 of a close corporation may enter into one or more shareholders'
367-17 agreements.
367-18 (b) The business and affairs of a close corporation or the
367-19 relationships among the shareholders that may be regulated by a
367-20 shareholders' agreement include:
367-21 (1) the management of the business and affairs of the
367-22 close corporation by its shareholders, with or without a board of
367-23 directors;
367-24 (2) the management of the business and affairs of the
367-25 close corporation wholly or partly by one or more of its
367-26 shareholders or other persons;
367-27 (3) buy-sell, first option, first refusal, or similar
368-1 arrangements with respect to the close corporation's shares or
368-2 other securities, and restrictions on the transfer of the shares or
368-3 other securities, including more restrictions than those permitted
368-4 by Section 21.211;
368-5 (4) the declaration and payment of dividends or other
368-6 distributions in amounts authorized by Subchapter G, regardless of
368-7 whether the distribution is in proportion to ownership of shares;
368-8 (5) the manner in which profits or losses shall be
368-9 apportioned;
368-10 (6) restrictions placed on the rights of a transferee
368-11 or assignee of shares to participate in the management or
368-12 administration of the close corporation's business and affairs
368-13 during the term of the shareholders' agreement;
368-14 (7) the right of one or more shareholders to cause the
368-15 winding up and termination of the close corporation at will or on
368-16 the occurrence of a specified event or contingency, in which case
368-17 the winding up and termination of the close corporation shall
368-18 proceed as if all of the shareholders of the close corporation had
368-19 consented in writing to winding up and termination as provided by
368-20 Chapter 11;
368-21 (8) the exercise or division of voting power either in
368-22 general or with regard to specified matters by or among the
368-23 shareholders of the close corporation or other persons, including:
368-24 (A) voting agreements and voting trusts that do
368-25 not conform with Section 6.251 or 6.252;
368-26 (B) requiring the vote or consent of the holders
368-27 of a larger or smaller number of shares than is otherwise required
369-1 by this chapter or other law, including an action for termination
369-2 of close corporation status;
369-3 (C) granting one or some other specified number
369-4 of votes for each shareholder; and
369-5 (D) permitting an action for which this chapter
369-6 requires approval by the vote of the board of directors or the
369-7 shareholders of an ordinary corporation, or both, to be taken
369-8 without a vote, in the manner provided by the shareholders'
369-9 agreement;
369-10 (9) the terms and conditions of employment of a
369-11 shareholder, director, officer, or other employee of the close
369-12 corporation, regardless of the length of the period of employment;
369-13 (10) the individuals who will serve as directors, if
369-14 any, and officers of the close corporation;
369-15 (11) the arbitration or mediation of issues about
369-16 which the shareholders may become deadlocked in voting or about
369-17 which the directors or those empowered to manage the close
369-18 corporation may become deadlocked and the shareholders are unable
369-19 to break the deadlock;
369-20 (12) the termination of close corporation status,
369-21 including a right of dissent or other rights that may be granted to
369-22 shareholders who object to the termination;
369-23 (13) qualifications of persons who are or are not
369-24 entitled to be shareholders of the close corporation;
369-25 (14) amendments to or termination of the shareholders'
369-26 agreement; and
369-27 (15) any provision required or permitted to be
370-1 contained in the bylaws by this chapter.
370-2 Sec. 21.715. EXECUTION OF SHAREHOLDERS' AGREEMENT. A
370-3 shareholders' agreement shall be executed:
370-4 (1) in the case of an existing close corporation, by
370-5 each shareholder at the time of execution, regardless of whether
370-6 the shareholder has voting power;
370-7 (2) in the case of an existing ordinary corporation
370-8 that will adopt close corporation status under Section 21.705, by
370-9 each shareholder at the time of execution, regardless of whether
370-10 the shareholder has voting power; or
370-11 (3) in the case of a close corporation that is being
370-12 formed under Section 21.703, by each person who is a subscriber to
370-13 the corporation's shares or agrees to become a holder of the
370-14 corporation's shares under the shareholders' agreement of the close
370-15 corporation.
370-16 Sec. 21.716. ADOPTION OF AMENDMENT OF SHAREHOLDERS'
370-17 AGREEMENT. Unless otherwise provided by a shareholders' agreement,
370-18 an amendment to the shareholders' agreement of a close corporation
370-19 may be adopted only by the written consent of each person who would
370-20 be required to execute the shareholders' agreement if it were being
370-21 executed originally at the time of adoption of the amendment,
370-22 regardless of whether the person has voting power in the close
370-23 corporation.
370-24 Sec. 21.717. DELIVERY OF SHAREHOLDERS' AGREEMENT. (a) The
370-25 close corporation shall deliver a complete copy of a shareholders'
370-26 agreement to:
370-27 (1) each person who is bound by the shareholders'
371-1 agreement;
371-2 (2) each person who is or will become a shareholder in
371-3 the close corporation as provided by Section 21.715 when a
371-4 certificate representing shares in the close corporation is
371-5 delivered to the person; and
371-6 (3) each person to whom a certificate representing
371-7 shares is issued and who has not received a complete copy of the
371-8 agreement.
371-9 (b) The failure to deliver a complete copy of a
371-10 shareholders' agreement as required by this section does not affect
371-11 the validity or enforceability of the shareholders' agreement.
371-12 Sec. 21.718. STATEMENT OF OPERATION AS CLOSE CORPORATION.
371-13 (a) On or after the formation of a close corporation or adoption
371-14 of close corporation status, a close corporation that begins to
371-15 conduct its business and affairs under a shareholders' agreement
371-16 that has become effective shall promptly execute and file with the
371-17 secretary of state a statement of operation as a close corporation
371-18 in accordance with Chapter 4.
371-19 (b) The statement required by Subsection (a) must:
371-20 (1) contain the name of the close corporation;
371-21 (2) state that the close corporation is being operated
371-22 and its business and affairs are being conducted under the terms of
371-23 a shareholders' agreement under this subchapter; and
371-24 (3) contain the date the operation of the corporation
371-25 began.
371-26 (c) A statement of operation as a close corporation shall be
371-27 executed by an officer on behalf of the corporation.
372-1 (d) On the filing of the statement of operation as a close
372-2 corporation, the fact that the close corporation is being operated
372-3 and its business and affairs are being conducted under the terms of
372-4 a shareholders' agreement becomes a matter of public record.
372-5 Sec. 21.719. VALIDITY AND ENFORCEABILITY OF SHAREHOLDERS'
372-6 AGREEMENT. (a) A shareholders' agreement executed in accordance
372-7 with Section 21.715 is valid and enforceable notwithstanding:
372-8 (1) the elimination of a board of directors;
372-9 (2) any restriction imposed on the discretion or
372-10 powers of the board of directors or other person empowered to
372-11 manage the close corporation; and
372-12 (3) that the effect of the shareholders' agreement is
372-13 to treat the business and affairs of the close corporation as if
372-14 the close corporation were a partnership or in a manner that would
372-15 otherwise be appropriate only among partners.
372-16 (b) A close corporation, a shareholder of the close
372-17 corporation, or a party to a shareholders' agreement may initiate a
372-18 proceeding to enforce the shareholders' agreement in accordance
372-19 with Section 21.756.
372-20 Sec. 21.720. PERSONS BOUND BY SHAREHOLDERS' AGREEMENT. (a)
372-21 A shareholders' agreement executed in accordance with Section
372-22 21.715 is:
372-23 (1) considered to be an agreement among all of the
372-24 shareholders of the close corporation; and
372-25 (2) binding on and enforceable against each
372-26 shareholder of the close corporation, regardless of whether:
372-27 (A) a particular shareholder acquired shares in
373-1 the close corporation by purchase, gift, bequest, or otherwise; or
373-2 (B) the shareholder had actual knowledge of the
373-3 existence of the shareholders' agreement at the time of acquiring
373-4 shares.
373-5 (b) A transferee or assignee of shares of a close
373-6 corporation in which there is a shareholders' agreement is bound by
373-7 the agreement for all purposes, regardless of whether the
373-8 transferee or assignee executed or was aware of the agreement.
373-9 Sec. 21.721. DELIVERY OF COPY OF SHAREHOLDERS' AGREEMENT TO
373-10 TRANSFEREE. (a) Before the transfer of shares of a close
373-11 corporation in which there is a shareholders' agreement, the
373-12 transferor shall deliver a complete copy of the shareholders'
373-13 agreement to the transferee.
373-14 (b) If the transferor fails to deliver a complete copy of
373-15 the shareholders' agreement:
373-16 (1) the validity and enforceability of the
373-17 shareholders' agreement against each shareholder of the
373-18 corporation, including the transferee, is not affected;
373-19 (2) the right, title, or interest of the transferee in
373-20 the transferred shares is not adversely affected; and
373-21 (3) the transferee is entitled to obtain on demand
373-22 from the transferor or from the close corporation a complete copy
373-23 of the shareholders' agreement at the transferor's expense.
373-24 Sec. 21.722. EFFECT OF REQUIRED STATEMENT ON SHARE
373-25 CERTIFICATE AND DELIVERY OF SHAREHOLDERS' AGREEMENT. If a
373-26 certificate representing shares of a close corporation contains the
373-27 statement required by Section 21.732, and a complete copy of each
374-1 shareholders' agreement has been delivered as required by Section
374-2 21.717, each holder, transferee, or other person claiming an
374-3 interest in the shares of the close corporation is conclusively
374-4 presumed to have knowledge of a close corporation provision in
374-5 effect at the time of the transfer.
374-6 Sec. 21.723. PARTY NOT BOUND BY SHAREHOLDERS' AGREEMENT ON
374-7 CESSATION; LIABILITY. (a) Notwithstanding the person's signature,
374-8 a person ceases to be a party to, and bound by, a shareholders'
374-9 agreement when the person ceases to be a shareholder of the close
374-10 corporation unless:
374-11 (1) the person's attempted cessation was in violation
374-12 of Section 21.721 or the shareholders' agreement; or
374-13 (2) the shareholders' agreement provides to the
374-14 contrary.
374-15 (b) Cessation as a party to a shareholders' agreement or as
374-16 a shareholder does not relieve a person of liability the person may
374-17 have incurred for breach of the shareholders' agreement.
374-18 Sec. 21.724. TERMINATION OF SHAREHOLDERS' AGREEMENT. (a)
374-19 Except as provided by Subsection (b), a shareholders' agreement
374-20 terminates when the close corporation terminates its status as a
374-21 close corporation.
374-22 (b) If provided by the shareholders' agreement, all or part
374-23 of the agreement is valid and enforceable to the extent permitted
374-24 for an ordinary corporation by this chapter or other law.
374-25 Sec. 21.725. CONSEQUENCES OF MANAGEMENT BY PERSONS OTHER
374-26 THAN BOARD OF DIRECTORS. Sections 21.726-21.729 apply only to a
374-27 close corporation the business and affairs of which are managed
375-1 wholly or partly by the shareholders of the close corporation or
375-2 any other person as provided by a shareholders' agreement rather
375-3 than solely by a board of directors.
375-4 Sec. 21.726. SHAREHOLDERS CONSIDERED DIRECTORS. (a) When
375-5 required by the context of this chapter, the shareholders of a
375-6 close corporation described by Section 21.725 are considered to be
375-7 directors of the close corporation for purposes of applying a
375-8 provision of this chapter, other than a provision relating to the
375-9 election and removal of directors.
375-10 (b) A requirement that an instrument filed with a
375-11 governmental agency contain a statement that a specified action has
375-12 been taken by the board of directors is satisfied by a statement
375-13 that:
375-14 (1) the corporation is a close corporation with no
375-15 board of directors; and
375-16 (2) the action was approved by the shareholders of the
375-17 close corporation or the persons empowered to manage the business
375-18 and affairs of the close corporation under a shareholders'
375-19 agreement.
375-20 Sec. 21.727. LIABILITY OF SHAREHOLDERS. The shareholders of
375-21 a close corporation described by Section 21.725 are subject to any
375-22 liability imposed on a director of a corporation by this chapter or
375-23 other law for a managerial act of or omission made by the
375-24 shareholders or any other person empowered to manage the business
375-25 and affairs of the close corporation under a shareholders'
375-26 agreement and relating to the business and affairs of the close
375-27 corporation, if the action is required by law to be undertaken by
376-1 the board of directors.
376-2 Sec. 21.728. MODE AND EFFECT OF TAKING ACTION BY
376-3 SHAREHOLDERS AND OTHERS. (a) An action that shall or may be taken
376-4 by the board of directors of an ordinary corporation as required or
376-5 authorized by this chapter shall or may be taken by action of the
376-6 shareholders of a close corporation described by Section 21.725 at
376-7 a meeting of the shareholders or, in the manner permitted by a
376-8 shareholders' agreement, this subchapter, or this chapter, without
376-9 a meeting.
376-10 (b) Unless otherwise provided by the certificate of
376-11 formation of the close corporation or a shareholders' agreement of
376-12 the close corporation, an action is binding on a close corporation
376-13 if the action is taken after:
376-14 (1) the affirmative vote of the holders of the
376-15 majority of all outstanding shares entitled to vote on the action;
376-16 or
376-17 (2) the consent of all of the shareholders of the
376-18 close corporation, which may be proven by:
376-19 (A) the full knowledge of the action by all of
376-20 the shareholders and the shareholders' failure to object to the
376-21 action in a timely manner;
376-22 (B) written consent to the action in accordance
376-23 with Section 6.201 or this chapter or any other writing executed by
376-24 or on behalf of all of the shareholders reasonably evidencing the
376-25 consent; or
376-26 (C) any other means reasonably evidencing the
376-27 consent.
377-1 Sec. 21.729. LIMITATION OF SHAREHOLDER'S LIABILITY. (a) A
377-2 shareholder of a close corporation described by Section 21.725 is
377-3 not liable because of a shareholders' vote or shareholder action
377-4 without a vote unless the shareholder had the right to vote or
377-5 consent to the action.
377-6 (b) A shareholder of a close corporation, without regard to
377-7 the right to vote or consent, may not be held liable for an action
377-8 taken by the shareholders or a person empowered to manage the
377-9 business and affairs of the close corporation under a shareholders'
377-10 agreement if the shareholder dissents from and has not voted for or
377-11 consented to the action.
377-12 (c) The dissent of a shareholder may be proven by:
377-13 (1) an entry in the minutes of the meeting of
377-14 shareholders;
377-15 (2) a written dissent filed with the secretary of the
377-16 meeting before the adjournment of the meeting;
377-17 (3) a written dissent sent by registered mail to the
377-18 secretary of the close corporation promptly after the meeting or
377-19 after a written consent was obtained from the other shareholders;
377-20 or
377-21 (4) any other means reasonably evidencing the dissent.
377-22 Sec. 21.730. LACK OF FORMALITIES; TREATMENT AS PARTNERSHIP.
377-23 The failure of a close corporation under this subchapter to observe
377-24 a usual formality or requirement prescribed for an ordinary
377-25 corporation by this chapter relating to the exercise of corporate
377-26 powers or the management of a corporation's business and affairs
377-27 and the performance of a shareholders' agreement that treats the
378-1 close corporation as if the corporation were a partnership or in a
378-2 manner that otherwise is appropriate only among partners may not:
378-3 (1) be a factor in determining whether to impose
378-4 personal liability on the shareholders for the close corporation's
378-5 obligations by disregarding the separate entity of the close
378-6 corporation or otherwise;
378-7 (2) be grounds for invalidating an otherwise valid
378-8 shareholders' agreement; or
378-9 (3) affect the status of the close corporation as a
378-10 corporation under this chapter or other law.
378-11 Sec. 21.731. OTHER AGREEMENTS AMONG SHAREHOLDERS PERMITTED.
378-12 Sections 21.713-21.730 do not prohibit or impair any other
378-13 agreement between two or more shareholders of an ordinary
378-14 corporation permitted by this chapter or other law.
378-15 Sec. 21.732. CLOSE CORPORATION SHARE CERTIFICATES. (a) In
378-16 addition to a matter required or authorized by law to be stated on
378-17 a certificate representing shares, each certificate representing
378-18 shares issued by a close corporation must conspicuously state on
378-19 the front or back of the certificate: "These shares are issued by
378-20 a close corporation as defined by the Texas Business Organizations
378-21 Code. Under Chapter 21 of that code, a shareholders' agreement may
378-22 provide for management of a close corporation by the shareholders
378-23 or in other ways different from an ordinary corporation. This may
378-24 subject the holder of this certificate to certain obligations and
378-25 liabilities not otherwise imposed on shareholders of an ordinary
378-26 corporation. On a sale or transfer of these shares, the transferor
378-27 is required to deliver to the transferee a complete copy of any
379-1 shareholders' agreement."
379-2 (b) Notwithstanding this chapter and Section 3.202, the
379-3 status of a corporation as a close corporation is not affected by
379-4 the failure of a share certificate to contain the statement
379-5 required by Subsection (a).
379-6 Sec. 21.733. BYLAWS OF CLOSE CORPORATION. (a) A close
379-7 corporation does not need to adopt bylaws if provisions required by
379-8 law to be contained in the bylaws are contained in the certificate
379-9 of formation or a shareholders' agreement.
379-10 (b) A close corporation that does not have bylaws when it
379-11 terminates its status as a close corporation under Section 21.708
379-12 shall immediately adopt bylaws that comply with Section 21.059.
379-13 (Sections 21.734-21.750 reserved for expansion)
379-14 SUBCHAPTER P. JUDICIAL PROCEEDINGS RELATING TO
379-15 CLOSE CORPORATION
379-16 Sec. 21.751. DEFINITIONS. In this subchapter:
379-17 (1) "Court" means a district court in the county in
379-18 which the principal office of the close corporation is located.
379-19 (2) "Custodian" means a person appointed by a court
379-20 under Section 21.761.
379-21 (3) "Provisional director" means a person appointed by
379-22 a court under Section 21.758.
379-23 (4) "Shareholder" means a record or beneficial owner
379-24 of shares in a close corporation, including:
379-25 (A) a person holding a beneficial interest in
379-26 the shares under an inter vivos, testamentary, or voting trust; or
379-27 (B) the personal representative, as defined by
380-1 the Texas Probate Code, of a record or beneficial owner.
380-2 Sec. 21.752. PROCEEDINGS AUTHORIZED. In addition to any
380-3 other judicial proceeding pertaining to an ordinary corporation
380-4 provided for by this chapter or other law, a close corporation or
380-5 shareholder may institute a proceeding in a district court in the
380-6 county in which the principal office of the close corporation is
380-7 located to:
380-8 (1) enforce a close corporation provision;
380-9 (2) appoint a provisional director; or
380-10 (3) appoint a custodian.
380-11 Sec. 21.753. NOTICE; INTERVENTION. (a) Notice of the
380-12 institution of a proceeding shall be given to the close
380-13 corporation, if the corporation is not a plaintiff, and to each
380-14 shareholder who is not a plaintiff in the manner prescribed by law
380-15 and consistent with due process of law as directed by the court.
380-16 (b) The close corporation or a shareholder of the close
380-17 corporation may intervene in the proceeding.
380-18 Sec. 21.754. PROCEEDING NONEXCLUSIVE. Except as provided by
380-19 Section 21.755, the right of a close corporation or a shareholder
380-20 to institute a proceeding under Section 21.752 is in addition to
380-21 another right or remedy the plaintiff is entitled to under law.
380-22 Sec. 21.755. UNAVAILABILITY OF JUDICIAL PROCEEDING. (a) A
380-23 shareholder may not institute a proceeding before exhausting any
380-24 nonjudicial remedy contained in a close corporation provision for
380-25 resolution of an issue that is in dispute unless the shareholder
380-26 proves that the close corporation, the shareholders as a whole, or
380-27 the shareholder will suffer irreparable harm before the nonjudicial
381-1 remedy is exhausted.
381-2 (b) A shareholder may not institute a proceeding to seek
381-3 damages or other monetary relief if the shareholder is entitled to
381-4 dissent from a proposed action and receive the fair value of the
381-5 shareholder's shares under this code or a shareholders' agreement.
381-6 Sec. 21.756. JUDICIAL PROCEEDING TO ENFORCE CLOSE
381-7 CORPORATION PROVISION. (a) In a judicial proceeding under this
381-8 section, a court shall enforce a close corporation provision
381-9 without regard to whether there is an adequate remedy at law.
381-10 (b) The court may enforce a close corporation provision by
381-11 injunction, specific performance, or other relief the court
381-12 determines to be fair and equitable under the circumstances,
381-13 including:
381-14 (1) damages instead of or in addition to specific
381-15 enforcement;
381-16 (2) the appointment of a provisional director or
381-17 custodian;
381-18 (3) the appointment of a receiver for specific assets
381-19 of the close corporation in accordance with Section 11.403;
381-20 (4) the appointment of a receiver to rehabilitate the
381-21 close corporation in accordance with Section 11.404;
381-22 (5) subject to Section 21.757, the liquidation of the
381-23 assets and business and involuntary termination of the close
381-24 corporation and appointment of a receiver to effect the liquidation
381-25 in accordance with Section 11.405; and
381-26 (6) the termination of close corporation status.
381-27 (c) The court may not order termination of close corporation
382-1 status under Subsection (b)(6) unless the court determines that:
382-2 (1) any other remedy in law or equity, including
382-3 appointment of a provisional director, custodian, or other type of
382-4 receiver, is inadequate; and
382-5 (2) the size, the nature of the business, or the
382-6 number of shareholders of the close corporation, or their
382-7 relationship to one another or other similar factors, make it
382-8 wholly impractical to continue close corporation status.
382-9 Sec. 21.757. LIQUIDATION; INVOLUNTARY WINDING UP AND
382-10 TERMINATION; RECEIVERSHIP. Except as provided by Section 21.756, in
382-11 a case in which a shareholder is entitled to wind up and terminate
382-12 a close corporation under a shareholders' agreement, a court may
382-13 not order liquidation, involuntary termination, or receivership
382-14 under that section unless the court determines that any other
382-15 remedy in law or equity, including appointment of a provisional
382-16 director, custodian, or other type of receiver, is inadequate.
382-17 Sec. 21.758. APPOINTMENT OF PROVISIONAL DIRECTOR. (a) In a
382-18 judicial proceeding under this section, a court shall appoint a
382-19 provisional director for a close corporation on presentation of
382-20 proof that the directors or the persons empowered to manage the
382-21 business and affairs of the close corporation under a shareholders'
382-22 agreement are so divided with respect to the management of the
382-23 business and affairs of the close corporation that the required
382-24 votes or consent to take action on behalf of the close corporation
382-25 cannot be obtained, resulting in the business and affairs being
382-26 conducted in a manner that is not to the general advantage of the
382-27 shareholders.
383-1 (b) The provisional director must be an impartial person who
383-2 is not a shareholder, a party to a shareholders' agreement, a
383-3 person empowered to manage the close corporation under a
383-4 shareholders' agreement, or a creditor of the close corporation or
383-5 of a subsidiary or affiliate of the close corporation. The court
383-6 shall determine any further qualifications.
383-7 (c) A provisional director shall serve until removed by
383-8 court order or by a vote of the majority of the directors or the
383-9 holders of the majority of the shares with voting power, or by a
383-10 vote of a different number, not fewer than the majority, of
383-11 shareholders or directors if a close corporation provision requires
383-12 the concurrence of a larger or different majority for action by the
383-13 directors or shareholders.
383-14 Sec. 21.759. RIGHTS AND POWERS OF PROVISIONAL DIRECTOR. A
383-15 provisional director has all the rights and powers of an elected
383-16 director of the close corporation, or the rights of vote or consent
383-17 of a shareholder and other rights and powers of shareholders or
383-18 other persons who have been empowered to manage the business and
383-19 affairs of the close corporation under a shareholders' agreement
383-20 with the voting power provided by court order, including the right
383-21 to notice of, and to vote at, meetings of directors or
383-22 shareholders.
383-23 Sec. 21.760. COMPENSATION OF PROVISIONAL DIRECTOR. (a) The
383-24 compensation of a provisional director shall be determined by an
383-25 agreement between the provisional director and the close
383-26 corporation, subject to court approval.
383-27 (b) The court may set the compensation in the absence of an
384-1 agreement or in the event of a disagreement between the provisional
384-2 director and the close corporation.
384-3 Sec. 21.761. APPOINTMENT OF CUSTODIAN. (a) In a judicial
384-4 proceeding under this section, a court shall appoint a custodian
384-5 for a close corporation on presentation of proof that:
384-6 (1) at a meeting held for the election of directors,
384-7 the shareholders are so divided that the shareholders have failed
384-8 to elect successors to directors whose terms have expired or would
384-9 have expired on qualification of a successor;
384-10 (2) the business of the close corporation is suffering
384-11 or is threatened with irreparable injury because the directors, or
384-12 the shareholders or the persons empowered to manage the business
384-13 and affairs of the close corporation under a shareholders'
384-14 agreement, are so divided with respect to the management of the
384-15 business and affairs of the close corporation that the required
384-16 vote or consent to take action on behalf of the close corporation
384-17 cannot be obtained and a remedy with respect to the deadlock in a
384-18 close corporation provision has failed; or
384-19 (3) the plaintiff or intervenor has the right to wind
384-20 up and terminate the close corporation under a shareholders'
384-21 agreement as provided by Section 21.714.
384-22 (b) To be eligible to serve as a custodian, a person must
384-23 comply with all the qualifications required to serve as a receiver
384-24 under Section 11.406.
384-25 Sec. 21.762. POWERS AND DUTIES OF CUSTODIAN. A person who
384-26 qualifies as a custodian has all of the powers and duties and the
384-27 title of a receiver appointed under Sections 11.404-11.406. The
385-1 custodian shall continue the business of the close corporation and
385-2 may not liquidate the affairs or distribute the assets of the close
385-3 corporation, except as provided by court order or Section
385-4 21.761(a)(3).
385-5 Sec. 21.763. TERMINATION OF CUSTODIANSHIP. If the condition
385-6 requiring the appointment of a custodian is remedied other than by
385-7 liquidation or winding up and termination, the court shall
385-8 terminate the custodianship immediately and management of the close
385-9 corporation shall be restored to the directors or shareholders of
385-10 the close corporation or to the persons empowered to manage the
385-11 business and affairs of the close corporation under a shareholders'
385-12 agreement.
385-13 (Sections 21.764-21.800 reserved for expansion)
385-14 SUBCHAPTER Q. MISCELLANEOUS PROVISIONS
385-15 Sec. 21.801. SHARES AND OTHER SECURITIES ARE PERSONAL
385-16 PROPERTY. Except as otherwise provided by this code, the shares
385-17 and other securities of a corporation are personal property.
385-18 Sec. 21.802. DELINQUENT TAX. A corporation that is
385-19 delinquent in the payment of any tax owed under Chapter 171, Tax
385-20 Code, may not be:
385-21 (1) awarded a contract by the state; or
385-22 (2) granted a license or permit by the state.
385-23 Sec. 21.803. SUPPLEMENTAL INFORMATION FOR APPLICATION FOR
385-24 REGISTRATION BY FOREIGN CORPORATIONS. In addition to the
385-25 information required by Section 9.004, a foreign corporation's
385-26 application for registration to be filed with the secretary of
385-27 state must state the:
386-1 (1) aggregate number of shares the corporation has
386-2 authority to issue, itemized by classes, par value of shares,
386-3 shares without par value, and any series in a class;
386-4 (2) aggregate number of shares issued by the
386-5 corporation, itemized by classes, par value of shares, shares
386-6 without par value, and any series in a class; and
386-7 (3) dollar amount of the stated capital of the
386-8 corporation.
386-9 CHAPTER 22. NONPROFIT CORPORATIONS
386-10 SUBCHAPTER A. GENERAL PROVISIONS
386-11 Sec. 22.001. DEFINITIONS. In this chapter:
386-12 (1) "Board of directors" means the group of persons
386-13 vested with the management of the affairs of the corporation,
386-14 regardless of the name used to designate the group.
386-15 (2) "Bylaws" means the rules adopted to regulate or
386-16 manage the corporation, regardless of the name used to designate
386-17 the rules.
386-18 (3) "Corporation" or "domestic corporation" means a
386-19 domestic nonprofit corporation subject to this chapter.
386-20 (4) "Foreign corporation" means a foreign nonprofit
386-21 corporation.
386-22 (5) "Nonprofit corporation" means a corporation no
386-23 part of the income of which is distributable to a member, director,
386-24 or officer of the corporation.
386-25 (6) "Ordinary care" means the care that an ordinarily
386-26 prudent person in a similar position would exercise under similar
386-27 circumstances.
387-1 Sec. 22.002. APPLICABILITY TO CERTAIN INSURANCE ASSOCIATIONS
387-2 AND COMPANIES. To the extent consistent with the Insurance Code,
387-3 this chapter applies to a local mutual aid association, statewide
387-4 mutual assessment company, burial association as defined by Article
387-5 14.37, Insurance Code, and county mutual insurance company, except
387-6 that:
387-7 (1) a mutual insurance association or company may pay
387-8 dividends to its members on advance approval of the commissioner of
387-9 insurance; and
387-10 (2) a power granted to or duty required of the
387-11 secretary of state under this chapter is, with respect to a mutual
387-12 insurance association or company, granted to or required of the
387-13 commissioner of insurance.
387-14 (Sections 22.003-22.050 reserved for expansion)
387-15 SUBCHAPTER B. PURPOSES AND POWERS
387-16 Sec. 22.051. GENERAL PURPOSES. A nonprofit corporation may
387-17 be formed for any lawful purpose or purposes not expressly
387-18 prohibited under this chapter, including any purpose described by
387-19 Section 2.002.
387-20 Sec. 22.052. ORGANIZED LABOR. Subject to Chapter 101, Labor
387-21 Code, a corporation may be organized under this chapter if a
387-22 purpose for the conduct of its affairs in this state is to organize
387-23 laborers, workers, or wage earners to protect themselves in their
387-24 various pursuits.
387-25 Sec. 22.053. DENTAL HEALTH SERVICE CORPORATION. (a) A
387-26 charitable corporation may be formed to operate a dental health
387-27 service corporation that manages and coordinates the relationship
388-1 between a dentist who contracts to perform dental services and a
388-2 patient who will receive the services as a member of a group that
388-3 contracted with the dental health service corporation to provide
388-4 dental care to group members.
388-5 (b) An application for a charter under this section must
388-6 have attached as an exhibit:
388-7 (1) an affidavit of the applicants stating:
388-8 (A) that not less than 30 percent of the
388-9 dentists legally engaged in the practice of dentistry in this state
388-10 have signed a contract to perform the required dental services for
388-11 a period of at least one year after incorporation; and
388-12 (B) the names and addresses of those dentists;
388-13 and
388-14 (2) a certification by the State Board of Dental
388-15 Examiners that:
388-16 (A) the applicants are reputable residents of
388-17 this state of good moral character; and
388-18 (B) the corporation will be in the best interest
388-19 of the public health.
388-20 (c) A corporation formed under this section must have at
388-21 least 12 directors, including 9 directors who are licensed to
388-22 practice dentistry in this state and are actively engaged in the
388-23 practice of dentistry in this state.
388-24 (d) A corporation formed under this section shall maintain
388-25 as participating or contracting dentists at least 30 percent of the
388-26 number of dentists actually engaged in the practice of dentistry in
388-27 this state. The corporation shall file annually in September with
389-1 the State Board of Dental Examiners the name and address of each
389-2 participating or contracting dentist.
389-3 (e) A corporation formed under this section may not:
389-4 (1) prevent a patient from selecting the licensed
389-5 dentist of the patient's choice to provide dental services to the
389-6 patient;
389-7 (2) deny a licensed dentist the right to participate
389-8 as a contracting dentist to perform the dental services contracted
389-9 for by the patient;
389-10 (3) discriminate among patients or licensed dentists
389-11 regarding payment or reimbursement for the cost of performing
389-12 dental services; or
389-13 (4) authorize any person to regulate, interfere with,
389-14 or intervene in any manner in the diagnosis or treatment provided
389-15 by a licensed dentist to a patient.
389-16 (f) A corporation formed under this section may require the
389-17 attending dentist to provide a narrative oral or written
389-18 description of the dental services provided to determine benefits
389-19 or provide proof of treatment. The corporation may request but may
389-20 not require diagnostic aids used in the course of treatment.
389-21 Sec. 22.054. PROHIBITED ACTIVITIES. A corporation may not
389-22 be organized or register under this chapter to conduct its affairs
389-23 in this state if a purpose for the conduct of its affairs in this
389-24 state is to:
389-25 (1) organize a group hospital service, rural credit
389-26 union, agricultural and livestock pool, mutual loan corporation,
389-27 cooperative association under Chapter 251, cooperative credit
390-1 association, farmers' cooperative society, Co-operative Marketing
390-2 Act corporation, rural electric cooperative corporation, telephone
390-3 cooperative corporation, or fraternal organization operating under
390-4 the lodge system and incorporated under Subchapter C, Chapter 23;
390-5 or
390-6 (2) engage in water supply or sewer service as an
390-7 entity incorporated under Chapter 67, Water Code.
390-8 Sec. 22.055. DIVIDENDS PROHIBITED. A dividend may not be
390-9 paid to, and no part of the income of a corporation may be
390-10 distributed to, the corporation's members, directors, or officers.
390-11 Sec. 22.056. AUTHORIZED BENEFITS AND DISTRIBUTIONS. A
390-12 corporation may:
390-13 (1) pay compensation in a reasonable amount to the
390-14 members, directors, or officers of the corporation for services
390-15 provided;
390-16 (2) confer benefits on the corporation's members in
390-17 conformity with the corporation's purposes; and
390-18 (3) make distributions to the corporation's members on
390-19 winding up and termination to the extent authorized by this
390-20 chapter.
390-21 Sec. 22.057. POWER TO ASSIST EMPLOYEE OR OFFICER. (a) A
390-22 corporation may lend money to or otherwise assist an employee or
390-23 officer of the corporation, but not a director, if the loan or
390-24 assistance may reasonably be expected to directly or indirectly
390-25 benefit the corporation.
390-26 (b) A loan made to an officer must be:
390-27 (1) made for the purpose of financing the officer's
391-1 principal residence; or
391-2 (2) set in an original principal amount that does not
391-3 exceed:
391-4 (A) 100 percent of the officer's annual salary,
391-5 if the loan is made before the first anniversary of the officer's
391-6 employment; or
391-7 (B) 50 percent of the officer's annual salary,
391-8 if the loan is made in any subsequent year.
391-9 Sec. 22.058. POWER OF CERTAIN CORPORATIONS TO SERVE AS
391-10 TRUSTEE. A corporation that is described by Section 170(c) or
391-11 501(c)(3), Internal Revenue Code, or by a corresponding provision
391-12 of a subsequent federal tax law, or that is listed by the Internal
391-13 Revenue Service in the Cumulative List of Organizations Described
391-14 in Section 170(c), Internal Revenue Code of 1986, I.R.S.
391-15 Publication 78, may serve as the trustee of a trust:
391-16 (1) naming the corporation as a beneficiary; or
391-17 (2) benefiting another organization described by this
391-18 section.
391-19 Sec. 22.059. STANDARD TAX PROVISIONS FOR CERTAIN CHARITABLE
391-20 CORPORATIONS; POWER TO EXCLUDE. (a) Notwithstanding any
391-21 conflicting provision of this chapter or the certificate of
391-22 formation and except as provided by Subsection (b), the certificate
391-23 of formation of each corporation that is a private foundation as
391-24 defined by Section 509, Internal Revenue Code, is considered to
391-25 contain the following provisions: "The corporation shall make
391-26 distributions at the time and in the manner as not to subject it to
391-27 tax under Section 4942 of the Internal Revenue Code of 1986; the
392-1 corporation shall not engage in any act of self-dealing which would
392-2 be subject to tax under Section 4941 of the Code; the corporation
392-3 shall not retain any excess business holdings which would subject
392-4 it to tax under Section 4943 of the Code; the corporation shall not
392-5 make any investments which would subject it to tax under Section
392-6 4944 of the Code; and the corporation shall not make any taxable
392-7 expenditures which would subject it to tax under Section 4945 of
392-8 the Code."
392-9 (b) A corporation described by Subsection (a) may amend the
392-10 certificate of formation of the corporation to expressly exclude
392-11 the application of Subsection (a).
392-12 (Sections 22.060-22.100 reserved for expansion)
392-13 SUBCHAPTER C. FORMATION AND GOVERNING DOCUMENTS
392-14 Sec. 22.101. INCORPORATION OF CERTAIN ORGANIZATIONS. A
392-15 religious society, a charitable, benevolent, literary, or social
392-16 association, or a church may incorporate under this chapter with
392-17 the consent of a majority of its members. Those members shall
392-18 authorize the organizers to execute the certificate of formation.
392-19 Sec. 22.102. SUPPLEMENTAL REQUIREMENTS FOR CERTIFICATE OF
392-20 FORMATION. In addition to the information required to be included
392-21 in the certificate of formation by Section 3.005, the certificate
392-22 of formation of a corporation must include:
392-23 (1) if the corporation is to have no members, a
392-24 statement to that effect;
392-25 (2) if management of the corporation's affairs is to
392-26 be vested in the corporation's members, a statement to that effect;
392-27 (3) the number of directors constituting the initial
393-1 board of directors and the names and addresses of those directors
393-2 or, if the management of the corporation is vested solely in the
393-3 corporation's members, a statement to that effect; and
393-4 (4) if the corporation is to be authorized on its
393-5 winding up to distribute the corporation's assets in a manner other
393-6 than as provided by Section 22.304, a statement describing the
393-7 manner of distribution.
393-8 Sec. 22.103. BYLAWS. (a) The initial bylaws of a
393-9 corporation shall be adopted by the corporation's board of
393-10 directors or, if the management of the corporation is vested in the
393-11 corporation's members, by the members.
393-12 (b) The bylaws may contain provisions for the regulation and
393-13 management of the affairs of the corporation that are consistent
393-14 with law and the certificate of formation.
393-15 (c) The board of directors may amend or repeal the bylaws,
393-16 or adopt new bylaws, unless:
393-17 (1) this chapter or the corporation's certificate of
393-18 formation wholly or partly reserves the power exclusively to the
393-19 corporation's members;
393-20 (2) the management of the corporation is vested in the
393-21 corporation's members; or
393-22 (3) in amending, repealing, or adopting a bylaw, the
393-23 members expressly provide that the board of directors may not amend
393-24 or repeal the bylaw.
393-25 Sec. 22.104. INCONSISTENCY BETWEEN CERTIFICATE OF FORMATION
393-26 AND BYLAW. (a) A provision of a certificate of formation of a
393-27 corporation that is inconsistent with a bylaw controls over the
394-1 bylaw, except as provided by Subsection (b).
394-2 (b) A change in the number of directors by amendment to the
394-3 bylaws controls over the number stated in the certificate of
394-4 formation, unless the certificate of formation provides that a
394-5 change in the number of directors may be made only by amendment to
394-6 the certificate.
394-7 Sec. 22.105. ORGANIZATION MEETING. (a) After the
394-8 certificate of formation is filed, the board of directors named in
394-9 the certificate of formation of a corporation shall hold an
394-10 organization meeting of the board, either in or out of this state,
394-11 at the call of the incorporators or a majority of the directors to
394-12 adopt bylaws and elect officers and for other purposes determined
394-13 by the board at the meeting. The incorporators or directors
394-14 calling the meeting shall mail notice of the time and place of the
394-15 meeting to each director named in the certificate of formation not
394-16 later than the fourth day before the date of the meeting.
394-17 (b) A first meeting of the members may be held at the call
394-18 of the majority of the directors on notice provided not later than
394-19 the fourth day before the date of the meeting. The notice must
394-20 state the purposes of the meeting.
394-21 (c) If the management of a corporation is vested in the
394-22 corporation's members, the members shall hold the organization
394-23 meeting on the call of an incorporator. An incorporator who calls
394-24 the meeting shall:
394-25 (1) mail notice of the time and place of the meeting
394-26 to each member not later than the fourth day before the date of the
394-27 meeting;
395-1 (2) if the corporation is a church, make an oral
395-2 announcement of the time and place of the meeting at a regularly
395-3 scheduled worship service before the meeting; or
395-4 (3) provide notice of the meeting in the manner
395-5 provided by the certificate of formation.
395-6 Sec. 22.106. DUTY OF CERTAIN CORPORATIONS TO AMEND
395-7 CERTIFICATE OF FORMATION. (a) A corporation that existed on May
395-8 12, 1959, for which the certificate of formation does not contain
395-9 information required by Section 3.005 or by Section 22.102 is not
395-10 required to amend its certificate of formation to include that
395-11 information.
395-12 (b) An amendment or restatement of the corporation's
395-13 certificate of formation that is filed after May 12, 1959, must
395-14 include the information required by Sections 3.005 and 22.102,
395-15 other than information relating to the organizers, the initial
395-16 directors, or the initial registered office.
395-17 Sec. 22.107. RESTATED CERTIFICATE OF FORMATION FOR CERTAIN
395-18 CHURCHES. If the management of a church is vested in the church's
395-19 members under Section 22.202, and the original certificate of
395-20 formation is not required to contain a statement to that effect,
395-21 any restated certificate of formation for the church must contain a
395-22 statement to that effect in addition to the information required by
395-23 Section 3.057.
395-24 Sec. 22.108. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF
395-25 FORMATION BY MEMBERS HAVING VOTING RIGHTS. (a) Except as provided
395-26 by Section 22.110(b), to amend the certificate of formation of a
395-27 corporation with members having voting rights, the board of
396-1 directors of the corporation must adopt a resolution specifying the
396-2 proposed amendment and directing that the amendment be submitted to
396-3 a vote at an annual or special meeting of the members having voting
396-4 rights.
396-5 (b) Written notice containing the proposed amendment or a
396-6 summary of the changes to be effected by the amendment shall be
396-7 given to each member entitled to vote at the meeting within the
396-8 time and in the manner provided by this chapter for giving notice
396-9 of a meeting of members.
396-10 (c) The proposed amendment shall be adopted on receiving at
396-11 least two-thirds of the votes that members present at the meeting
396-12 in person or by proxy are entitled to cast, except that if any
396-13 class of members is entitled to vote on the amendment as a class by
396-14 the terms of the certificate of formation or the bylaws, the
396-15 amendment may be adopted only on also receiving at least two-thirds
396-16 of the votes that the members of each class present at the meeting
396-17 in person or by proxy are entitled to cast.
396-18 Sec. 22.109. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF
396-19 FORMATION BY MANAGING MEMBERS. (a) To be approved, a proposed
396-20 amendment to the certificate of formation of a corporation the
396-21 management of the affairs of which is vested in the corporation's
396-22 members under Section 22.202 must be submitted to a vote at an
396-23 annual, regular, or special meeting of the members.
396-24 (b) Except as otherwise provided by the certificate of
396-25 formation or bylaws, notice containing the proposed amendment or a
396-26 summary of the changes to be effected by the amendment shall be
396-27 given to the members within the time and in the manner provided by
397-1 this chapter for giving notice of a meeting of members.
397-2 (c) The proposed amendment shall be adopted on receiving at
397-3 least two-thirds of the votes of members present at the meeting.
397-4 Sec. 22.110. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE OF
397-5 FORMATION BY BOARD OF DIRECTORS. (a) If a corporation has no
397-6 members or has no members with voting rights, or in the case of an
397-7 amendment under Subsection (b), an amendment to the corporation's
397-8 certificate of formation shall be adopted at a meeting of the board
397-9 of directors on receiving the affirmative vote of the majority of
397-10 the directors in office.
397-11 (b) Except as otherwise provided by the certificate of
397-12 formation, the board of directors of a corporation with members
397-13 having voting rights may, without member approval, adopt
397-14 amendments to the certificate of formation to:
397-15 (1) extend the duration of the corporation if the
397-16 corporation was incorporated when limited duration was required by
397-17 law;
397-18 (2) delete the names and addresses of the initial
397-19 directors;
397-20 (3) delete the name and address of the initial
397-21 registered agent or registered office, if a statement of change is
397-22 on file with the secretary of state; or
397-23 (4) change the corporate name by:
397-24 (A) substituting the word "corporation,"
397-25 "incorporated," "company," or "limited," or the abbreviation
397-26 "corp.," "inc.," "co.," or "ltd.," for a similar word or
397-27 abbreviation in the name; or
398-1 (B) adding, deleting, or changing a geographical
398-2 attribution to the name.
398-3 Sec. 22.111. NUMBER OF AMENDMENTS SUBJECT TO VOTE AT
398-4 MEETING. Any number of amendments to the corporation's certificate
398-5 of formation may be submitted to and voted on by a corporation's
398-6 members at any one meeting of the members.
398-7 (Sections 22.112-22.150 reserved for expansion)
398-8 SUBCHAPTER D. MEMBERS
398-9 Sec. 22.151. MEMBERS. (a) A corporation may have one or
398-10 more classes of members or may have no members.
398-11 (b) If the corporation has one or more classes of members,
398-12 the corporation's certificate of formation or bylaws must include:
398-13 (1) a designation of each class;
398-14 (2) the manner of the election or appointment of the
398-15 members of each class; and
398-16 (3) the qualifications and rights of the members of
398-17 each class.
398-18 (c) A corporation may issue a certificate, card, or other
398-19 instrument evidencing membership rights, voting rights, or
398-20 ownership rights as authorized by the certificate of formation or
398-21 bylaws.
398-22 Sec. 22.152. IMMUNITY FROM LIABILITY. The members of a
398-23 corporation are not personally liable for a debt, liability, or
398-24 obligation of the corporation.
398-25 Sec. 22.153. ANNUAL MEETING. (a) Except as provided by
398-26 Subsection (b), a corporation shall hold an annual meeting of the
398-27 members at a time that is stated in or determined in accordance
399-1 with the corporation's bylaws.
399-2 (b) If the bylaws provide for more than one regular meeting
399-3 of members each year, an annual meeting is not required. If an
399-4 annual meeting is not required, directors may be elected at a
399-5 meeting as provided by the bylaws.
399-6 Sec. 22.154. FAILURE TO CALL ANNUAL MEETING. (a) If the
399-7 board of directors of a corporation fails to call the annual
399-8 meeting of members at the designated time, a member of the
399-9 corporation may demand that the meeting be held within a reasonable
399-10 time. The demand must be made in writing and sent to an officer of
399-11 the corporation by registered mail.
399-12 (b) If the annual meeting is not called before the 61st day
399-13 after the date of demand, a member of the corporation may compel
399-14 the holding of the meeting by legal action directed against the
399-15 board of directors, and each of the extraordinary writs of common
399-16 law and of courts of equity are available to the member to compel
399-17 the holding of the meeting. Each member has a justiciable interest
399-18 sufficient to enable the member to institute and prosecute the
399-19 legal proceedings.
399-20 (c) Failure to hold the annual meeting at the designated
399-21 time does not result in the winding up and termination of the
399-22 corporation.
399-23 Sec. 22.155. SPECIAL MEETING OF MEMBERS. A special meeting
399-24 of the members of a corporation may be called by:
399-25 (1) the president;
399-26 (2) the board of directors;
399-27 (3) members having not less than one-tenth of the
400-1 votes entitled to be cast at the meeting; or
400-2 (4) other officers or persons as provided by the
400-3 certificate of formation or bylaws of the corporation.
400-4 Sec. 22.156. NOTICE OF MEETING. (a) A corporation other
400-5 than a church shall provide written notice of the place, date, and
400-6 time of a meeting of the members of the corporation and, if the
400-7 meeting is a special meeting, the purpose or purposes for which the
400-8 meeting is called. The notice shall be delivered to each member
400-9 entitled to vote at the meeting not later than the 10th day and not
400-10 earlier than the 60th day before the date of the meeting. Notice
400-11 may be delivered personally, by facsimile transmission, or by mail,
400-12 at the direction of the president, secretary, officers, or other
400-13 persons calling the meeting. Notice is considered delivered if
400-14 mailed or transmitted by facsimile in accordance with Section
400-15 6.051.
400-16 (b) Notice of a meeting of the members of a corporation that
400-17 is a church is considered sufficient if given by oral announcement
400-18 at a regularly scheduled worship service before the meeting or as
400-19 otherwise provided by the certificate of formation or bylaws of the
400-20 corporation.
400-21 Sec. 22.157. SPECIAL BYLAWS AFFECTING NOTICE. (a) A
400-22 corporation may provide in the corporation's bylaws that notice of
400-23 an annual or regular meeting is not required.
400-24 (b) A corporation having more than 1,000 members at the time
400-25 a meeting is scheduled or called may provide notice of a meeting by
400-26 publication in a newspaper of general circulation in the community
400-27 in which the principal office of the corporation is located, if the
401-1 corporation provides for that notice in its bylaws.
401-2 Sec. 22.158. PREPARATION AND INSPECTION OF LIST OF VOTING
401-3 MEMBERS. (a) After setting a record date for the notice of a
401-4 meeting, a corporation shall prepare the list of voting members
401-5 required by Section 6.004. The list must identify the members who
401-6 are entitled to notice and the members who are not entitled to
401-7 notice of the meeting.
401-8 (b) Not later than the second business day after the date
401-9 notice is given of a meeting for which a list was prepared in
401-10 accordance with Section 6.004, and continuing through the meeting,
401-11 the list of voting members must be available at the corporation's
401-12 principal office or at a reasonable place in the municipality in
401-13 which the meeting will be held, as identified in the notice of the
401-14 meeting, for inspection by members entitled to vote at the meeting
401-15 for the purpose of communication with other members concerning the
401-16 meeting.
401-17 (c) A voting member or voting member's agent or attorney is
401-18 entitled on written demand to inspect and, at the member's expense
401-19 and subject to Section 22.401, copy the list at a reasonable time
401-20 during the period the list is available for inspection.
401-21 (d) The corporation shall make the list of voting members
401-22 available at the meeting. A voting member or voting member's agent
401-23 or attorney is entitled to inspect the list at any time during the
401-24 meeting or an adjournment of the meeting.
401-25 Sec. 22.159. QUORUM OF MEMBERS. (a) Unless otherwise
401-26 provided by the certificate of formation or bylaws of a
401-27 corporation, members of the corporation holding one-tenth of the
402-1 votes entitled to be cast, in person or by proxy, constitute a
402-2 quorum.
402-3 (b) The vote of the majority of the votes entitled to be
402-4 cast by the members present or represented by proxy at a meeting at
402-5 which a quorum is present is the act of the members meeting, unless
402-6 the vote of a greater number is required by law or the certificate
402-7 of formation or bylaws.
402-8 (c) Unless otherwise provided by the certificate of
402-9 formation or bylaws, a church incorporated before May 12, 1959, is
402-10 considered to have provided in the certificate of formation or
402-11 bylaws that members present at a meeting for which notice has been
402-12 given constitute a quorum.
402-13 Sec. 22.160. VOTING OF MEMBERS. (a) Each member of a
402-14 corporation, regardless of class, is entitled to one vote on each
402-15 matter submitted to a vote of the corporation's members, except to
402-16 the extent that the voting rights of members of a class are
402-17 limited, enlarged, or denied by the certificate of formation or
402-18 bylaws of the corporation.
402-19 (b) A member may vote in person or, unless otherwise
402-20 provided by the certificate of formation or bylaws, by proxy
402-21 executed in writing by the member or the member's attorney-in-fact.
402-22 (c) Unless otherwise provided by the proxy, a proxy is
402-23 revocable and expires 11 months after the date of its execution. A
402-24 proxy may not be irrevocable for longer than 11 months.
402-25 Sec. 22.161. ELECTION OF OFFICERS OR DIRECTORS. (a) If
402-26 directors or officers are to be elected by members of a
402-27 corporation, the corporation's bylaws may authorize the elections
403-1 to be conducted by mail, by facsimile transmission, or by any
403-2 combination of those two methods.
403-3 (b) A member entitled to vote at an election of directors is
403-4 entitled to vote, in person or by proxy, for as many persons as
403-5 there are directors to be elected and for whose election the member
403-6 has a right to vote.
403-7 (c) If expressly authorized by the corporation's certificate
403-8 of formation, the member may cumulate the member's vote by:
403-9 (1) giving one candidate a number of votes equal to
403-10 the number of the directors to be elected multiplied by the
403-11 member's vote; or
403-12 (2) distributing the votes on the same principle among
403-13 any number of the candidates.
403-14 (d) A member who intends to cumulate votes under Subsection
403-15 (c) shall give written notice of the member's intention to the
403-16 secretary of the corporation not later than the day preceding the
403-17 date of the election.
403-18 Sec. 22.162. GREATER VOTING REQUIREMENTS UNDER CERTIFICATE
403-19 OF FORMATION. If the corporation's certificate of formation
403-20 requires the vote or concurrence of a greater proportion of the
403-21 members of a corporation than is required by this chapter with
403-22 respect to an action to be taken by the members, the certificate of
403-23 formation controls.
403-24 Sec. 22.163. RECORD DATE FOR DETERMINATION OF MEMBERS.
403-25 (a) The record date for determining members of a corporation may
403-26 be set as provided by Section 6.101.
403-27 (b) If a record date is not set under Section 6.101:
404-1 (1) members on the date of the meeting who are
404-2 otherwise eligible to vote are entitled to vote at the meeting;
404-3 (2) members at the close of business on the business
404-4 day preceding the date notice is given, or if notice is waived, at
404-5 the close of business on the business day preceding the date of the
404-6 meeting, are entitled to notice of a meeting of members;
404-7 (3) members at the close of business on the later of
404-8 the day the board of directors adopts the resolution relating to
404-9 the action or the 60th day before the date of the action are
404-10 entitled to exercise any rights regarding any other lawful action.
404-11 (c) The board of directors of a corporation may set a new
404-12 date for determining the right to notice of or to vote at any
404-13 adjournment of a members' meeting. The board shall set a new date
404-14 if the meeting is adjourned to a date more than 90 days after the
404-15 record date for determining members entitled to notice of the
404-16 original meeting.
404-17 (Sections 22.164-22.200 reserved for expansion)
404-18 SUBCHAPTER E. MANAGEMENT
404-19 Sec. 22.201. MANAGEMENT BY BOARD OF DIRECTORS. The affairs
404-20 of a corporation are managed by a board of directors. The board of
404-21 directors may be designated by any name appropriate to the customs,
404-22 usages, or tenets of the corporation.
404-23 Sec. 22.202. MANAGEMENT BY MEMBERS. (a) The certificate of
404-24 formation of a corporation may vest the management of the affairs
404-25 of the corporation in the members of the corporation. If the
404-26 corporation has a board of directors, the corporation may limit the
404-27 authority of the board to the extent provided by the certificate of
405-1 formation or bylaws.
405-2 (b) A corporation is considered to have vested the
405-3 management of the corporation's affairs in the board of directors
405-4 of the corporation in the absence of a provision to the contrary in
405-5 the certificate of formation or bylaws, unless the corporation is a
405-6 church organized and operating under a congregational system that:
405-7 (1) was incorporated before January 1, 1994; and
405-8 (2) has the management of its affairs vested in the
405-9 corporation's members.
405-10 Sec. 22.203. BOARD MEMBER ELIGIBILITY REQUIREMENTS. A
405-11 director of a corporation is not required to be a resident of this
405-12 state or a member of the corporation unless the certificate of
405-13 formation or a bylaw of the corporation imposes that requirement.
405-14 The certificate of formation or bylaws may prescribe other
405-15 qualifications for directors.
405-16 Sec. 22.204. NUMBER OF DIRECTORS. (a) A corporation may
405-17 not have fewer than three directors. The number of directors shall
405-18 be set by, or in the manner provided by, the certificate of
405-19 formation or bylaws of the corporation, except that the number of
405-20 directors on the initial board of directors must be set by the
405-21 certificate of formation.
405-22 (b) The number of directors may be increased or decreased by
405-23 amendment to, or in the manner provided by, the certificate of
405-24 formation or bylaws. A decrease in the number of directors may not
405-25 shorten the term of an incumbent director.
405-26 (c) In the absence of a provision of the certificate of
405-27 formation or a bylaw setting the number of directors or providing
406-1 for the manner in which the number of directors shall be
406-2 determined, the number of directors is the same as the number
406-3 constituting the initial board of directors.
406-4 Sec. 22.205. DESIGNATION OF INITIAL BOARD OF DIRECTORS. The
406-5 certificate of formation of a corporation must state the names of
406-6 the members of the initial board of directors of the corporation.
406-7 Sec. 22.206. ELECTION OR APPOINTMENT OF BOARD OF DIRECTORS.
406-8 Directors other than the initial directors are elected, appointed,
406-9 or designated in the manner provided by the certificate of
406-10 formation or bylaws. If the method of election, designation, or
406-11 appointment is not provided by the certificate of formation or
406-12 bylaws, directors other than the initial directors are elected by
406-13 the board of directors.
406-14 Sec. 22.207. ELECTION AND CONTROL BY CERTAIN ENTITIES.
406-15 (a) The board of directors of a religious, charitable,
406-16 educational, or eleemosynary corporation may be affiliated with,
406-17 elected, and controlled by an incorporated or unincorporated
406-18 convention, conference, or association organized under the laws of
406-19 this or another state, the membership of which is composed of
406-20 representatives, delegates, or messengers from a church or other
406-21 religious association.
406-22 (b) The board of directors of a corporation may be wholly or
406-23 partly elected by one or more associations or corporations
406-24 organized under the laws of this or another state if:
406-25 (1) the certificate of formation or bylaws of the
406-26 corporation provide for that election; and
406-27 (2) the corporation has no members with voting rights.
407-1 Sec. 22.208. TERM OF OFFICE. (a) A director on the initial
407-2 board of directors of a corporation holds office until the first
407-3 annual election of directors or for the period specified in the
407-4 certificate of formation or bylaws of the corporation. Directors
407-5 other than the initial directors are elected, appointed, or
407-6 designated for the terms provided by the certificate of formation
407-7 or bylaws.
407-8 (b) In the absence of a provision in the certificate of
407-9 formation or bylaws setting the term of office for directors, a
407-10 director holds office until the next annual election of directors
407-11 and until a successor is elected, appointed, or designated and
407-12 qualified.
407-13 Sec. 22.209. CLASSIFICATION OF DIRECTORS. Directors may be
407-14 divided into classes. The terms of office of the several classes
407-15 are not required to be uniform.
407-16 Sec. 22.210. EX OFFICIO MEMBER OF BOARD. (a) The
407-17 certificate of formation or bylaws of a corporation may provide
407-18 that a person may be an ex officio member of the board of directors
407-19 of the corporation.
407-20 (b) A person designated as an ex officio member of the board
407-21 is entitled to receive notice of and to attend board meetings.
407-22 (c) An ex officio member is not entitled to vote unless the
407-23 certificate of formation or bylaws authorize the member to vote.
407-24 An ex officio member of the board who is not entitled to vote does
407-25 not have the duties or liabilities of a director provided by this
407-26 chapter.
407-27 Sec. 22.211. REMOVAL OF DIRECTOR. (a) A director of a
408-1 corporation may be removed from office under any procedure provided
408-2 by the certificate of formation or bylaws of the corporation.
408-3 (b) In the absence of a provision for removal in the
408-4 certificate of formation or bylaws, a director may be removed from
408-5 office, with or without cause, by the persons entitled to elect,
408-6 designate, or appoint the director. If the director was elected to
408-7 office, removal requires an affirmative vote equal to the vote
408-8 necessary to elect the director.
408-9 Sec. 22.212. VACANCY. (a) Unless otherwise provided by the
408-10 certificate of formation or bylaws of the corporation, a vacancy in
408-11 the board of directors of a corporation shall be filled by the
408-12 affirmative vote of the majority of the remaining directors,
408-13 regardless of whether that majority is less than a quorum. A
408-14 director elected to fill a vacancy is elected for the unexpired
408-15 term of the member's predecessor in office.
408-16 (b) A vacancy in the board occurring because of an increase
408-17 in the number of directors shall be filled by election at an annual
408-18 meeting or at a special meeting of members called for that purpose.
408-19 If a corporation has no members or has no members with the right to
408-20 vote on the vacancy, the vacancy shall be filled as provided by the
408-21 certificate of formation or bylaws.
408-22 Sec. 22.213. QUORUM. (a) A quorum for the transaction of
408-23 business by the board of directors of a corporation is the lesser
408-24 of:
408-25 (1) the majority of the number of directors set by the
408-26 corporation's bylaws or, in the absence of a bylaw setting the
408-27 number of directors, a majority of the number of directors stated
409-1 in the corporation's certificate of formation; or
409-2 (2) any number, not less than three, set as a quorum
409-3 by the certificate of formation or bylaws.
409-4 (b) A director present by proxy at a meeting may not be
409-5 counted toward a quorum.
409-6 Sec. 22.214. ACTION BY DIRECTORS. The act of a majority of
409-7 the directors present in person or by proxy at a meeting at which a
409-8 quorum is present is the act of the board of directors of a
409-9 corporation, unless the act of a greater number is required by the
409-10 certificate of formation or bylaws of the corporation.
409-11 Sec. 22.215. VOTING IN PERSON OR BY PROXY. A director of a
409-12 corporation may vote in person or, if authorized by the certificate
409-13 of formation or bylaws of the corporation, by proxy executed in
409-14 writing by the director.
409-15 Sec. 22.216. TERM AND REVOCABILITY OF PROXY. (a) A proxy
409-16 expires three months after the date the proxy is executed.
409-17 (b) A proxy is revocable unless otherwise provided by the
409-18 proxy or made irrevocable by law.
409-19 Sec. 22.217. VOTING REQUIREMENTS UNDER CERTIFICATE OF
409-20 FORMATION. If the certificate of formation of a corporation
409-21 requires the vote or concurrence of a greater proportion of the
409-22 directors of the corporation than is required by this chapter with
409-23 respect to the action, the certificate of formation controls.
409-24 Sec. 22.218. NOTICE OF MEETING; WAIVER OF NOTICE. (a)
409-25 Regular meetings of the board of directors of a corporation may be
409-26 held with or without notice as prescribed by the corporation's
409-27 bylaws.
410-1 (b) Special meetings of the board of directors shall be held
410-2 with notice as prescribed by the bylaws. Attendance of a director
410-3 at a meeting constitutes a waiver of notice, unless the director
410-4 attends a meeting for the express purpose of objecting to the
410-5 transaction of any business on the ground that the meeting is not
410-6 lawfully called or convened.
410-7 (c) Unless required by the bylaws, the business to be
410-8 transacted at, or the purpose of, a regular or special meeting of
410-9 the board of directors is not required to be specified in the
410-10 notice or waiver of notice of the meeting.
410-11 Sec. 22.219. MANAGEMENT COMMITTEE. (a) If authorized by
410-12 the certificate of formation or bylaws of the corporation, the
410-13 board of directors of a corporation, by resolution adopted by the
410-14 majority of the directors in office, may designate one or more
410-15 committees to have and exercise the authority of the board in the
410-16 management of the corporation to the extent provided by:
410-17 (1) the resolution;
410-18 (2) the certificate of formation; or
410-19 (3) the bylaws.
410-20 (b) A committee designated under this section must consist
410-21 of at least two persons. The majority of the persons on the
410-22 committee must be directors. If provided by the certificate of
410-23 formation or bylaws, the remaining persons on the committee are not
410-24 required to be directors.
410-25 (c) The designation of a committee and the delegation of
410-26 authority to the committee does not operate to relieve the board of
410-27 directors, or an individual director, of any responsibility imposed
411-1 on the board or director by law. A committee member who is not a
411-2 director has the same responsibility with respect to the committee
411-3 as a committee member who is a director.
411-4 Sec. 22.220. OTHER COMMITTEES. (a) The board of directors
411-5 of a corporation, by resolution adopted by the majority of the
411-6 directors at a meeting at which a quorum is present, or the
411-7 president, if authorized by a similar resolution of the board of
411-8 directors or by the certificate of formation or bylaws of the
411-9 corporation, may designate and appoint one or more committees that
411-10 do not have the authority of the board of directors in the
411-11 management of the corporation.
411-12 (b) The membership on a committee designated under this
411-13 section may be limited to directors.
411-14 Sec. 22.221. ACTION WITHOUT MEETING OF DIRECTORS OR
411-15 COMMITTEE. (a) The certificate of formation of a corporation may
411-16 provide that an action required by this chapter to be taken at a
411-17 meeting of the corporation's directors or an action that may be
411-18 taken at a meeting of the directors or a committee may be taken
411-19 without a meeting if a written consent, stating the action to be
411-20 taken, is signed by the number of directors or committee members
411-21 necessary to take that action at a meeting at which all of the
411-22 directors or committee members are present and voting. The consent
411-23 must state the date of each director's or committee member's
411-24 signature.
411-25 (b) A written consent signed by less than all of the
411-26 directors or committee members is not effective to take the action
411-27 that is the subject of the consent unless, not later than the 60th
412-1 day after the date of the earliest dated consent delivered to the
412-2 corporation in the manner required by this section, a consent or
412-3 consents signed by the required number of directors or committee
412-4 members are delivered to the corporation:
412-5 (1) at the registered office or principal place of
412-6 business of the corporation; or
412-7 (2) through the corporation's registered agent,
412-8 transfer agent, registrar, or exchange agent or an officer or agent
412-9 of the corporation having custody of the books in which proceedings
412-10 of meetings of directors or committees are recorded.
412-11 (c) Delivery under Subsection (b) must be by hand or by
412-12 certified or registered mail, return receipt requested. Delivery
412-13 to the corporation's principal place of business must be addressed
412-14 to the president or principal executive officer of the corporation.
412-15 (d) Prompt notice of the taking of an action by directors or
412-16 a committee without a meeting by less than unanimous written
412-17 consent shall be given to each director or committee member who did
412-18 not consent in writing to the action.
412-19 Sec. 22.222. GENERAL STANDARDS FOR DIRECTORS. (a) A
412-20 director shall discharge the director's duties, including duties as
412-21 a committee member, in good faith, with ordinary care, and in a
412-22 manner the director reasonably believes to be in the best interest
412-23 of the corporation.
412-24 (b) A director is not liable to the corporation, a member,
412-25 or another person for an action taken or not taken as a director if
412-26 the director acted in compliance with this section. A person
412-27 seeking to establish liability of a director must prove that the
413-1 director did not act:
413-2 (1) in good faith;
413-3 (2) with ordinary care; and
413-4 (3) in a manner the director reasonably believed to be
413-5 in the best interest of the corporation.
413-6 Sec. 22.223. DIRECTOR'S GOOD FAITH RELIANCE ON CERTAIN
413-7 INFORMATION. A director of a religious corporation, in the
413-8 discharge of a duty imposed or power conferred on the director,
413-9 including a duty imposed or power conferred as a committee member,
413-10 may rely in good faith on information or on an opinion, report, or
413-11 statement, including a financial statement or other financial data,
413-12 concerning the corporation or another person that was prepared or
413-13 presented by:
413-14 (1) a religious authority; or
413-15 (2) a minister, priest, rabbi, or other person whose
413-16 position or duties in the corporation the director believes justify
413-17 reliance and confidence and whom the director believes to be
413-18 reliable and competent in the matters presented.
413-19 Sec. 22.224. ROLE AS TRUSTEE. A director of a corporation
413-20 is not considered to have the duties of a trustee of a trust with
413-21 respect to the corporation or with respect to property held or
413-22 administered by the corporation, including property subject to
413-23 restrictions imposed by the donor or transferor of the property.
413-24 Sec. 22.225. DELEGATION OF INVESTMENT AUTHORITY. (a) The
413-25 board of directors of a corporation may:
413-26 (1) contract with an advisor who is an investment
413-27 counsel or a trust company, bank, investment advisor, or investment
414-1 manager; and
414-2 (2) confer on that advisor the authority to:
414-3 (A) purchase or otherwise acquire a stock, bond,
414-4 security, or other investment on behalf of the corporation; and
414-5 (B) sell, transfer, or otherwise dispose of an
414-6 asset or property of the corporation at a time and for a
414-7 consideration the advisor considers appropriate.
414-8 (b) The board of directors may:
414-9 (1) confer on an advisor described by Subsection (a)
414-10 other powers regarding the corporation's investments as the board
414-11 considers appropriate; and
414-12 (2) authorize the advisor to hold title to an asset or
414-13 property of the corporation, in the advisor's own name or in the
414-14 name of a nominee, for the benefit of the corporation.
414-15 (c) The board of directors is not liable for an action taken
414-16 or not taken by an advisor under this section if the board acted in
414-17 good faith and with ordinary care in selecting the advisor. The
414-18 board of directors may remove or replace the advisor, with or
414-19 without cause, if the board considers that action appropriate or
414-20 necessary.
414-21 Sec. 22.226. LOAN TO DIRECTOR PROHIBITED. (a) A
414-22 corporation may not make a loan to a director.
414-23 (b) The directors of a corporation who vote for or assent to
414-24 the making of a loan to a director, and any officer who
414-25 participates in making the loan, are jointly and severally liable
414-26 to the corporation for the amount of the loan until the loan is
414-27 repaid.
415-1 Sec. 22.227. DIRECTOR LIABILITY FOR CERTAIN DISTRIBUTIONS OF
415-2 ASSETS. (a) In addition to any other liability imposed by law on
415-3 the directors of a corporation, the directors who vote for or
415-4 assent to a distribution of assets other than in payment of the
415-5 corporation's debts, when the corporation is insolvent or when
415-6 distribution would render the corporation insolvent, or during the
415-7 liquidation of the corporation, without the payment and discharge
415-8 of or making adequate provisions for any known debt, obligation, or
415-9 liability of the corporation, are jointly and severally liable to
415-10 the corporation for the value of the assets distributed, to the
415-11 extent that the debt, obligation, or liability is not paid and
415-12 discharged.
415-13 (b) A director is not liable under this section if, in
415-14 voting for or assenting to a distribution, the director relied in
415-15 good faith and with ordinary care on information or an opinion,
415-16 report, or statement in accordance with Section 3.101.
415-17 Sec. 22.228. DISSENT TO ACTION. (a) A director of a
415-18 corporation who is present at a meeting of the board of directors
415-19 at which action is taken on a corporate matter described by Section
415-20 22.227(a) is presumed to have assented to the action unless:
415-21 (1) the director's dissent has been entered in the
415-22 minutes of the meeting;
415-23 (2) the director has filed a written dissent to the
415-24 action with the person acting as the secretary of the meeting
415-25 before the meeting is adjourned; or
415-26 (3) the director has sent a written dissent by
415-27 registered mail to the secretary of the corporation immediately
416-1 after the meeting has been adjourned.
416-2 (b) The right to dissent under this section does not apply
416-3 to a director who voted in favor of the action.
416-4 Sec. 22.229. RELIANCE ON WRITTEN OPINION OF ATTORNEY. A
416-5 director is not liable under Section 22.227 or 22.228 if, in the
416-6 exercise of ordinary care, the director acted in good faith and in
416-7 reliance on the written opinion of an attorney for the corporation.
416-8 Sec. 22.230. RIGHT TO CONTRIBUTION. A director against whom
416-9 a claim is asserted under Section 22.227 or 22.228 and who is held
416-10 liable on the claim is entitled to contribution from persons who
416-11 accepted or received the distribution knowing the distribution to
416-12 have been made in violation of that section, in proportion to the
416-13 amounts received by those persons.
416-14 Sec. 22.231. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED
416-15 DIRECTORS, OFFICERS, AND MEMBERS. (a) This section applies only
416-16 to a contract or transaction between a corporation and:
416-17 (1) one or more of the corporation's directors,
416-18 officers, or members; or
416-19 (2) an entity or other organization in which one or
416-20 more of the corporation's directors, officers, or members:
416-21 (A) is a managerial official or a member; or
416-22 (B) has a financial interest.
416-23 (b) An otherwise valid contract or transaction is valid
416-24 notwithstanding that a director, officer, or member of the
416-25 corporation is present at or participates in the meeting of the
416-26 board of directors, of a committee of the board, or of the members
416-27 that authorizes the contract or transaction, or votes to authorize
417-1 the contract or transaction, if:
417-2 (1) the material facts as to the relationship or
417-3 interest and as to the contract or transaction are disclosed to or
417-4 known by:
417-5 (A) the corporation's board of directors, a
417-6 committee of the board of directors, or the members, and the board,
417-7 the committee, or the members in good faith and with ordinary care
417-8 authorize the contract or transaction by the affirmative vote of
417-9 the majority of the disinterested directors of the corporation,
417-10 regardless of whether the disinterested directors constitute a
417-11 quorum; or
417-12 (B) the shareholders entitled to vote on the
417-13 authorization of the contract or transaction, and the contract or
417-14 transaction is specifically approved in good faith by a vote of the
417-15 shareholders; or
417-16 (2) the contract or transaction is fair to the
417-17 corporation when the contract or transaction is authorized,
417-18 approved, or ratified by the board of directors, a committee of the
417-19 board of directors, or the shareholders.
417-20 (c) Common or interested directors or members of a
417-21 corporation may be included in determining the presence of a quorum
417-22 at a meeting of the board, a committee of the board, or members
417-23 that authorizes the contract or transaction.
417-24 Sec. 22.232. OFFICERS. (a) The officers of a corporation
417-25 shall include a president and a secretary and may include one or
417-26 more vice presidents, a treasurer, and other officers and assistant
417-27 officers as considered necessary. Any two or more offices, other
418-1 than the offices of president and secretary, may be held by the
418-2 same person.
418-3 (b) A properly designated committee may perform the
418-4 functions of an officer. A single committee may perform the
418-5 functions of any two or more officers, including the functions of
418-6 president and secretary.
418-7 (c) The officers of a corporation may be designated by other
418-8 or additional titles as provided by the certificate of formation or
418-9 bylaws of the corporation.
418-10 Sec. 22.233. ELECTION OR APPOINTMENT OF OFFICERS. (a) An
418-11 officer of a corporation shall be elected or appointed at the time,
418-12 in the manner, and for the terms prescribed by the certificate of
418-13 formation or bylaws of the corporation. The term of an officer may
418-14 not exceed three years.
418-15 (b) If the certificate of formation or bylaws do not include
418-16 provisions for the election or appointment of officers, the
418-17 officers shall be elected or appointed annually by the board of
418-18 directors or, if the management of the corporation is vested in the
418-19 corporation's members, by the members.
418-20 Sec. 22.234. APPLICATION TO CHURCH. A corporation that is a
418-21 church is not required to have officers as provided by this
418-22 subchapter. The duties and responsibilities of the officers may be
418-23 vested in the corporation's board of directors or other designated
418-24 body in any manner provided for by the certificate of formation or
418-25 bylaws of the corporation.
418-26 Sec. 22.235. OFFICER'S GOOD FAITH RELIANCE ON CERTAIN
418-27 INFORMATION. An officer of a religious corporation, in the
419-1 discharge of a duty imposed or power conferred on the officer, may
419-2 rely in good faith and with ordinary care on information or on an
419-3 opinion, report, or statement concerning the corporation or another
419-4 person that was prepared or presented by:
419-5 (1) a religious authority or another religious
419-6 corporation; or
419-7 (2) a minister, priest, rabbi, or other person whose
419-8 position or duties in the religious authority or religious
419-9 corporation the officer believes justify reliance and confidence
419-10 and whom the officer believes to be reliable and competent in the
419-11 matters presented.
419-12 (Sections 22.236-22.250 reserved for expansion)
419-13 SUBCHAPTER F. FUNDAMENTAL BUSINESS TRANSACTIONS
419-14 Sec. 22.251. APPROVAL OF MERGER BY MEMBERS HAVING VOTING
419-15 RIGHTS. (a) To adopt a plan of merger of a domestic corporation
419-16 with members having voting rights, the board of directors must
419-17 adopt a resolution approving the proposed plan and directing that
419-18 the plan be submitted to a vote at an annual or special meeting of
419-19 the members having voting rights.
419-20 (b) Written notice stating the proposed plan or a summary of
419-21 the plan shall be given to each member entitled to vote at the
419-22 meeting within the time and in the manner provided by this chapter
419-23 for the giving of notice of a meeting of members.
419-24 (c) The proposed plan shall be adopted on receiving at least
419-25 two-thirds of the votes that members present at the meeting in
419-26 person or by proxy are entitled to cast, except that if any class
419-27 of members is entitled to vote on the plan as a class as provided
420-1 by the certificate of formation or bylaws of the domestic
420-2 corporation, the plan may be adopted only if it also receives at
420-3 least two-thirds of the votes that the members of each class
420-4 present at the meeting in person or by proxy are entitled to cast.
420-5 Sec. 22.252. APPROVAL OF MERGER BY MANAGING MEMBERS. (a)
420-6 To be adopted, a proposed plan of merger of a domestic corporation
420-7 the management of the affairs of which is vested in its members
420-8 under Section 22.202 must be submitted to a vote at an annual,
420-9 regular, or special meeting of the members.
420-10 (b) Except as otherwise provided by the certificate of
420-11 formation or bylaws of the domestic corporation, notice stating the
420-12 proposed plan or a summary of the plan shall be given to the
420-13 members within the time and in the manner provided by this chapter
420-14 for giving notice of a meeting to members.
420-15 (c) The proposed plan shall be adopted on receiving at least
420-16 two-thirds of the votes of members present at the meeting.
420-17 Sec. 22.253. APPROVAL OF MERGER BY BOARD OF DIRECTORS. If a
420-18 domestic corporation has no members or has no members with voting
420-19 rights, a plan of merger of the corporation shall be adopted at a
420-20 meeting of the board of directors of the corporation on receiving
420-21 the affirmative vote of the majority of the directors in office.
420-22 Sec. 22.254. SURVIVING FOREIGN CORPORATION IN MERGER. To
420-23 transact business in this state, a foreign corporation that is the
420-24 surviving or new corporation in a merger shall comply with the
420-25 provisions of this code applicable to foreign corporations and
420-26 shall file with the secretary of state:
420-27 (1) an agreement that the foreign corporation may be
421-1 served with process in this state in any proceeding to enforce an
421-2 obligation of a domestic corporation that was a party to the
421-3 merger; and
421-4 (2) an irrevocable appointment of the secretary of
421-5 state as the agent of the foreign corporation to accept service of
421-6 process in any proceeding of that nature.
421-7 Sec. 22.255. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
421-8 ASSETS BY MEMBERS HAVING VOTING RIGHTS. (a) To approve a sale of
421-9 all or substantially all of the assets of a corporation with
421-10 members having voting rights, the board of directors of the
421-11 corporation must adopt a resolution recommending the sale and
421-12 directing that the resolution be submitted to a vote at an annual
421-13 or special meeting of the members having voting rights.
421-14 (b) Written notice stating that a purpose of the meeting is
421-15 to consider the sale of all or substantially all of the assets of
421-16 the corporation shall be given to each member entitled to vote at
421-17 the meeting within the time and in the manner provided by this
421-18 chapter for giving notice of a meeting to members.
421-19 (c) At the meeting, the members may authorize the sale and
421-20 may set, or authorize the board of directors to set, the terms and
421-21 conditions of the sale and the consideration to be received by the
421-22 corporation for the sale. The authorization requires at least
421-23 two-thirds of the votes that members present at the meeting in
421-24 person or by proxy are entitled to cast, except that if any class
421-25 of members is entitled to vote on the recommendation as a class as
421-26 provided by the certificate of formation or bylaws of the
421-27 corporation, the authorization also requires at least two-thirds of
422-1 the votes that the members of each class present at the meeting in
422-2 person or by proxy are entitled to cast.
422-3 (d) After the members authorize a sale under Subsection (c),
422-4 the board of directors may abandon the sale, subject to the rights
422-5 of third parties under any contracts relating to the sale, without
422-6 further action or approval by members.
422-7 Sec. 22.256. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
422-8 ASSETS BY MANAGING MEMBERS. (a) To be adopted, a resolution
422-9 authorizing a sale of all or substantially all of the assets of a
422-10 corporation the management of the affairs of which is vested in the
422-11 corporation's members under Section 22.202 must be submitted to a
422-12 vote at an annual, regular, or special meeting of the members.
422-13 (b) Except as otherwise provided by the certificate of
422-14 formation or bylaws of the corporation, notice stating that a
422-15 purpose of the meeting is to consider the sale of all or
422-16 substantially all of the assets of the corporation shall be given
422-17 to the corporation's members within the time and in the manner
422-18 provided by this chapter for giving notice of a meeting to members.
422-19 (c) At the meeting, the members may authorize the sale and
422-20 may set, or authorize one or more members to set, the terms and
422-21 conditions of the sale and the consideration to be received by the
422-22 corporation for the transaction. The authorization requires at
422-23 least two-thirds of the votes of members present at the meeting.
422-24 Sec. 22.257. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
422-25 ASSETS BY BOARD OF DIRECTORS. (a) Unless otherwise provided by
422-26 the corporation's certificate of formation, a sale of all or
422-27 substantially all of the assets of a corporation that has no
423-1 members or has no members with voting rights may be authorized on
423-2 receiving the affirmative vote of the majority of the directors in
423-3 office.
423-4 (b) Notwithstanding Section 22.255, if a corporation is
423-5 insolvent, a sale of all or substantially all of the assets of the
423-6 corporation may be authorized on receiving the affirmative vote of
423-7 the majority of the directors in office.
423-8 Sec. 22.258. PLEDGE, MORTGAGE, DEED OF TRUST, OR TRUST
423-9 INDENTURE. (a) Except as otherwise provided by Subsection (b) or
423-10 by the corporation's certificate of formation, the board of
423-11 directors of a corporation may authorize a pledge, mortgage, deed
423-12 of trust, or trust indenture, and an authorization or consent of
423-13 members is not required for the validity of the transaction or for
423-14 any sale under the terms of the transaction.
423-15 (b) If the management of the affairs of a corporation is
423-16 vested in the corporation's members under Section 22.202, the
423-17 members may authorize a pledge, mortgage, deed of trust, or trust
423-18 indenture in the manner provided by Section 22.256 for a sale of
423-19 all or substantially all of the assets of a corporation, and an
423-20 authorization by the board of directors is not required for the
423-21 validity of the transaction or for any sale under the terms of the
423-22 transaction.
423-23 (Sections 22.259-22.300 reserved for expansion)
423-24 SUBCHAPTER G. WINDING UP AND TERMINATION
423-25 Sec. 22.301. APPROVAL OF VOLUNTARY WINDING UP AND
423-26 TERMINATION BY MEMBERS HAVING VOTING RIGHTS. (a) To approve in
423-27 accordance with Chapter 11 a voluntary winding up and termination
424-1 of a corporation with members having voting rights, the
424-2 corporation's board of directors must adopt a resolution:
424-3 (1) recommending that the corporation be wound up and
424-4 terminated; and
424-5 (2) directing that the question be submitted to a vote
424-6 at an annual or special meeting of the members having voting
424-7 rights.
424-8 (b) Written notice stating that a purpose of the meeting is
424-9 to consider the advisability of winding up and terminating the
424-10 corporation shall be given to each member entitled to vote at the
424-11 meeting within the time and in the manner provided by this chapter
424-12 for giving notice of a meeting to members.
424-13 (c) A resolution to wind up and terminate the corporation
424-14 shall be adopted on receiving at least two-thirds of the votes that
424-15 members present at the meeting in person or by proxy are entitled
424-16 to cast, except that if any class of members is entitled to vote on
424-17 the resolution as a class by the certificate of formation or bylaws
424-18 of the corporation, the resolution may be adopted only on also
424-19 receiving at least two-thirds of the votes that the members of each
424-20 class present at the meeting in person or by proxy are entitled to
424-21 cast.
424-22 Sec. 22.302. APPROVAL OF VOLUNTARY WINDING UP AND
424-23 TERMINATION BY MANAGING MEMBERS. (a) To be approved, a resolution
424-24 to voluntarily wind up and terminate in accordance with Chapter 11
424-25 a corporation the management of the affairs of which is vested in
424-26 the corporation's members under Section 22.202 must be submitted to
424-27 a vote at an annual, regular, or special meeting of members.
425-1 (b) Except as otherwise provided by the certificate of
425-2 formation or bylaws of the corporation, notice stating that a
425-3 purpose of the meeting is to consider the advisability of winding
425-4 up and terminating the corporation shall be given to the members
425-5 within the time and in the manner provided by this chapter for
425-6 giving notice of a meeting to members.
425-7 (c) A resolution to wind up and terminate the corporation
425-8 shall be adopted on receiving at least two-thirds of the votes of
425-9 members present at the meeting.
425-10 Sec. 22.303. APPROVAL OF VOLUNTARY WINDING UP AND
425-11 TERMINATION BY BOARD OF DIRECTORS. If a corporation has no members
425-12 or has no members with voting rights, the winding up and
425-13 termination of the corporation shall be authorized at a meeting of
425-14 the corporation's board of directors on the adoption of a
425-15 resolution to wind up and terminate by the affirmative vote of the
425-16 majority of the directors in office.
425-17 Sec. 22.304. APPLICATION AND DISTRIBUTION OF PROPERTY. (a)
425-18 After all liabilities and obligations of a corporation in the
425-19 process of winding up are paid, satisfied, and discharged in
425-20 accordance with Section 11.053, the property of the corporation
425-21 shall be applied and distributed as follows:
425-22 (1) property held by the corporation on a condition
425-23 requiring return, transfer, or conveyance because of the winding up
425-24 or termination shall be returned, transferred, or conveyed in
425-25 accordance with that requirement; and
425-26 (2) unless otherwise provided by the corporation's
425-27 certificate of formation, the remaining property of the corporation
426-1 shall be distributed only for tax-exempt purposes to one or more
426-2 organizations that are exempt under Section 501(c)(3), Internal
426-3 Revenue Code, or described by Section 170(c)(1) or (2), Internal
426-4 Revenue Code, under a plan of distribution adopted under this
426-5 chapter.
426-6 (b) A district court of the county in which the
426-7 corporation's principal office is located shall distribute to one
426-8 or more organizations exempt under Section 501(c)(3), Internal
426-9 Revenue Code, or described by Section 170(c)(1) or (2), Internal
426-10 Revenue Code, the property of the corporation remaining after a
426-11 distribution of property under the plan of distribution. The court
426-12 shall make the distribution in the manner the court determines will
426-13 best accomplish the general purposes for which the corporation was
426-14 organized.
426-15 Sec. 22.305. DISTRIBUTION PLAN. A plan providing for the
426-16 distribution of property may be adopted by a corporation in the
426-17 process of winding up, and shall be adopted by a corporation to
426-18 authorize a transfer or conveyance of assets for which this chapter
426-19 requires a plan of distribution, in the manner provided by Section
426-20 22.306, 22.307, or 22.308.
426-21 Sec. 22.306. APPROVAL OF DISTRIBUTION PLAN BY MEMBERS HAVING
426-22 VOTING RIGHTS. (a) To adopt a plan providing for the distribution
426-23 of property of a corporation with members having voting rights, the
426-24 board of directors of the corporation must adopt a resolution
426-25 recommending a plan of distribution and directing that the proposed
426-26 plan be submitted to a vote at an annual or special meeting of the
426-27 members.
427-1 (b) Written notice stating the proposed plan of distribution
427-2 or a summary of the plan shall be given to each member entitled to
427-3 vote at the meeting at which the plan will be considered within the
427-4 time and in the manner provided by this chapter for giving notice
427-5 of a meeting to members.
427-6 (c) The proposed plan of distribution shall be adopted on
427-7 receiving at least two-thirds of the votes that members present at
427-8 the meeting in person or by proxy are entitled to cast, except that
427-9 if any class of members is entitled to vote on the plan as a class
427-10 by the certificate of formation or bylaws of the corporation, the
427-11 proposed plan may be adopted only on also receiving at least
427-12 two-thirds of the votes the members of each class present at the
427-13 meeting in person or by proxy are entitled to cast.
427-14 Sec. 22.307. APPROVAL OF DISTRIBUTION PLAN BY MANAGING
427-15 MEMBERS. (a) To be adopted, a proposed plan providing for the
427-16 distribution of property of a corporation the management of the
427-17 affairs of which is vested in the corporation's members under
427-18 Section 22.202 must be submitted to a vote at an annual, regular,
427-19 or special meeting of the members.
427-20 (b) Except as otherwise provided by the certificate of
427-21 formation or bylaws of the corporation, notice stating the proposed
427-22 plan of distribution or a summary of the plan shall be given to the
427-23 members within the time and in the manner provided by this chapter
427-24 for giving notice of a meeting to members.
427-25 (c) The proposed plan of distribution shall be adopted on
427-26 receiving at least two-thirds of the votes of the members present
427-27 at the meeting.
428-1 Sec. 22.308. APPROVAL OF DISTRIBUTION PLAN BY BOARD OF
428-2 DIRECTORS. If a corporation has no members or has no members with
428-3 voting rights, a plan of distribution may be adopted by the
428-4 corporation at a meeting of the corporation's board of directors
428-5 on receiving the affirmative vote of the majority of the directors
428-6 in office.
428-7 Sec. 22.309. APPROVAL OF REINSTATEMENT OR REVOCATION OF
428-8 VOLUNTARY WINDING UP BY MEMBERS HAVING VOTING RIGHTS. (a) To
428-9 approve a reinstatement or a revocation of the voluntary winding up
428-10 of a corporation with members having voting rights under Section
428-11 11.151 or 11.201, the board of directors of the corporation must
428-12 adopt a resolution recommending the reinstatement or the revocation
428-13 of the voluntary winding up and directing that the question be
428-14 submitted to a vote at an annual or special meeting of the members
428-15 of the corporation having voting rights.
428-16 (b) Written notice stating that a purpose of the meeting is
428-17 to consider the advisability of the reinstatement or the revocation
428-18 of the voluntary winding up shall be given to each member of the
428-19 corporation entitled to vote at the meeting within the time and in
428-20 the manner provided by this chapter for giving notice of a meeting
428-21 to members.
428-22 (c) A resolution to reinstate or to revoke the voluntary
428-23 winding up shall be adopted on receiving at least two-thirds of the
428-24 votes that members present at the meeting in person or by proxy are
428-25 entitled to cast, except that if any class of members is entitled
428-26 to vote on the resolution as a class by the certificate of
428-27 formation or bylaws of the corporation, the resolution may be
429-1 adopted only on also receiving at least two-thirds of the votes the
429-2 members of each class present at the meeting in person or by proxy
429-3 are entitled to cast.
429-4 Sec. 22.310. APPROVAL OF REINSTATEMENT OR REVOCATION OF
429-5 VOLUNTARY WINDING UP BY MANAGING MEMBERS. (a) To be adopted, a
429-6 resolution approving the reinstatement or the revocation of the
429-7 voluntary winding up of a corporation the management of the affairs
429-8 of which is vested in the corporation's members under Section
429-9 22.202 must be submitted to a vote at an annual, regular, or
429-10 special meeting of the members.
429-11 (b) Except as otherwise provided by the certificate of
429-12 formation or bylaws of the corporation, notice stating that a
429-13 purpose of the meeting is to consider the reinstatement or the
429-14 revocation of the voluntary winding up shall be given to the
429-15 members within the time and in the manner provided by this chapter
429-16 for giving notice of a meeting to members.
429-17 (c) The resolution shall be adopted on receiving at least
429-18 two-thirds of the votes of the members present at the meeting.
429-19 Sec. 22.311. APPROVAL OF REINSTATEMENT OR REVOCATION OF
429-20 VOLUNTARY WINDING UP BY BOARD OF DIRECTORS. If a corporation has
429-21 no members or has no members with voting rights, a resolution to
429-22 reinstate or to revoke the voluntary winding up of the corporation
429-23 may be adopted at a meeting of the board of directors on receiving
429-24 the affirmative vote of the majority of the directors in office.
429-25 Sec. 22.312. CERTIFICATE OF TERMINATION. (a) In addition
429-26 to the information required by Section 11.101, the certificate of
429-27 termination filed by a corporation that has completed its winding
430-1 up process must contain a statement that:
430-2 (1) no property remained available for distribution
430-3 among the members of the corporation;
430-4 (2) all remaining property of the corporation has been
430-5 transferred, conveyed, or distributed in accordance with this
430-6 chapter and Chapter 11; and
430-7 (3) there is no suit pending against the corporation
430-8 or adequate provision has been made for the satisfaction of any
430-9 judgment, order, or decree that may be entered against the
430-10 corporation in a pending suit.
430-11 (b) In addition to the statements required by Subsection
430-12 (a), if the corporation received and held property permitted to be
430-13 used only for charitable, religious, eleemosynary, benevolent,
430-14 educational, or similar purposes, but the corporation did not hold
430-15 the property on a condition requiring return, transfer, or
430-16 conveyance because of the winding up and termination, the
430-17 certificate of termination must include:
430-18 (1) a copy of the plan of distribution adopted under
430-19 this chapter; and
430-20 (2) a statement that distribution has been effected in
430-21 accordance with that plan.
430-22 Sec. 22.313. SUPPLEMENTAL PROVISIONS FOR JURISDICTION OF
430-23 COURT TO LIQUIDATE PROPERTY AND BUSINESS OF CORPORATION AND
430-24 RECEIVERSHIPS. (a) In proceedings under Section 11.405, the
430-25 property of the corporation or the proceeds resulting from a sale,
430-26 conveyance, or other disposition of the property shall be applied
430-27 to:
431-1 (1) pay, satisfy, and discharge all costs and expenses
431-2 of the court proceedings and all liabilities and obligations of the
431-3 corporation; or
431-4 (2) make adequate provision for the payment,
431-5 satisfaction, and discharge of the costs, expenses, liabilities, or
431-6 obligations described by Subdivision (1).
431-7 (b) Any property remaining after application is made under
431-8 this section must be applied and distributed in the manner provided
431-9 by Section 22.304.
431-10 Sec. 22.314. LIMITED SURVIVAL AFTER NATURAL EXPIRATION. (a)
431-11 A corporation that was terminated by the expiration of the period
431-12 of its duration may, during the three-year period following the
431-13 date of termination, amend the corporation's certificate of
431-14 formation by following the procedure prescribed by this chapter to
431-15 extend or perpetuate the corporation's period of duration. The
431-16 expiration of a corporation's period of duration does not give a
431-17 member or creditor of the corporation a vested right to prevent the
431-18 corporation from taking action under this subsection.
431-19 (b) An act or contract of a terminated corporation during a
431-20 period within which the corporation could have extended the
431-21 corporation's existence under this section, regardless of whether
431-22 the corporation has taken action to extend its existence, is not
431-23 invalidated by the expiration of the period of duration.
431-24 (Sections 22.315-22.350 reserved for expansion)
431-25 SUBCHAPTER H. FOREIGN CORPORATIONS
431-26 Sec. 22.351. SUPPLEMENTAL INFORMATION FOR APPLICATION FOR
431-27 REGISTRATION. In addition to the information required by Section
432-1 9.004, a foreign corporation's application for registration to be
432-2 filed with the secretary of state must state:
432-3 (1) the names and addresses of the corporation's
432-4 directors and officers;
432-5 (2) whether or not the corporation has members; and
432-6 (3) any additional information as necessary or
432-7 appropriate to enable the secretary of state to determine whether
432-8 the corporation is entitled to register to conduct affairs in this
432-9 state.
432-10 Sec. 22.352. SUPPLEMENTAL INFORMATION FOR WITHDRAWAL OF
432-11 REGISTRATION. In addition to the information required by Section
432-12 9.007, a foreign corporation's certificate of withdrawal must state
432-13 that:
432-14 (1) payment or provision for payment has been made to
432-15 any known creditor or claimant; and
432-16 (2) there is no suit pending or threatened against the
432-17 corporation in any court in this state or adequate provision has
432-18 been made for the satisfaction of any judgment, order, or decree
432-19 that may be entered against the corporation in a pending suit.
432-20 (Sections 22.353-22.400 reserved for expansion)
432-21 SUBCHAPTER I. RECORDS AND REPORTS
432-22 Sec. 22.401. MEMBER'S RIGHT TO INSPECT BOOKS AND RECORDS. A
432-23 member of a corporation, on written demand stating the purpose of
432-24 the demand, is entitled to examine and copy at the member's
432-25 expense, in person or by agent, accountant, or attorney, at any
432-26 reasonable time and for a proper purpose, the books and records of
432-27 the corporation relevant to that purpose.
433-1 Sec. 22.402. FINANCIAL RECORDS AND ANNUAL REPORTS. (a) A
433-2 corporation shall maintain current and accurate financial records
433-3 with complete entries as to each financial transaction of the
433-4 corporation, including income and expenditures, in accordance with
433-5 generally accepted accounting practices.
433-6 (b) Based on the records maintained under Subsection (a),
433-7 the board of directors of the corporation shall annually prepare or
433-8 approve a financial report for the corporation for the preceding
433-9 year. The report must conform to accounting standards as adopted
433-10 by the American Institute of Certified Public Accountants and must
433-11 include:
433-12 (1) a statement of support, revenue, and expenses;
433-13 (2) a statement of changes in fund balances;
433-14 (3) a statement of functional expenses; and
433-15 (4) a balance sheet for each fund.
433-16 Sec. 22.403. AVAILABILITY OF FINANCIAL INFORMATION FOR
433-17 PUBLIC INSPECTION. (a) A corporation shall keep records, books,
433-18 and annual reports of the corporation's financial activity at the
433-19 corporation's registered or principal office in this state for at
433-20 least three years after the close of the fiscal year.
433-21 (b) The corporation shall make the records, books, and
433-22 reports available to the public for inspection and copying at the
433-23 corporation's registered or principal office during regular
433-24 business hours. The corporation may charge a reasonable fee for
433-25 preparing a copy of a record or report.
433-26 Sec. 22.404. FAILURE TO MAINTAIN FINANCIAL RECORD OR PREPARE
433-27 ANNUAL REPORT; OFFENSE. (a) A corporation commits an offense if
434-1 the corporation fails to maintain a financial record, prepare an
434-2 annual report, or make the record or report available to the public
434-3 in the manner required by Section 22.403.
434-4 (b) An offense under this section is a Class B misdemeanor.
434-5 Sec. 22.405. EXEMPTIONS FROM CERTAIN REQUIREMENTS RELATING
434-6 TO FINANCIAL RECORDS AND ANNUAL REPORTS. Sections 22.402, 22.403,
434-7 and 22.404 do not apply to:
434-8 (1) a corporation that solicits funds only from
434-9 members of the corporation;
434-10 (2) a corporation that does not intend to solicit and
434-11 receive and does not actually raise or receive during a fiscal year
434-12 contributions in an amount exceeding $10,000 from a source other
434-13 than its own membership;
434-14 (3) a proprietary school that has received a
434-15 certificate of approval from the commissioner of education, a
434-16 public institution of higher education or a foundation chartered
434-17 for the benefit of the institution or any component part of the
434-18 institution, a private institution of higher education authorized
434-19 to grant degrees under a certificate of authority issued by the
434-20 Texas Higher Education Coordinating Board, or an elementary or
434-21 secondary school;
434-22 (4) a religious institution that is a church, an
434-23 ecclesiastical or denominational organization, or another
434-24 established physical place for worship at which religious services
434-25 are the primary activity and are regularly conducted;
434-26 (5) a trade association or professional society the
434-27 income of which is principally derived from membership dues and
435-1 assessments, sales, or services;
435-2 (6) an insurer licensed and regulated by the Texas
435-3 Department of Insurance;
435-4 (7) an organization the charitable activities of which
435-5 relate to public concern in the conservation and protection of
435-6 wildlife, fisheries, and allied natural resources; or
435-7 (8) an alumni association of a public or private
435-8 institution of higher education in this state that is recognized
435-9 and acknowledged as the official alumni association by the
435-10 institution.
435-11 Sec. 22.406. CORPORATIONS ASSISTING STATE AGENCIES. (a) In
435-12 this section, "state agency" means:
435-13 (1) a board, commission, department, office, or other
435-14 entity that is in the executive branch of state government and that
435-15 was created by the constitution or a statute of this state,
435-16 including an institution of higher education as defined by Section
435-17 61.003, Education Code;
435-18 (2) the legislature or a legislative agency; or
435-19 (3) the supreme court, the court of criminal appeals,
435-20 a court of appeals, the state bar, or another state judicial
435-21 agency.
435-22 (b) The books and records of a corporation other than a bona
435-23 fide alumni association are subject to audit at the discretion of
435-24 the state auditor if:
435-25 (1) the corporation's charter specifically dedicates
435-26 the corporation's activities to the benefit of a particular state
435-27 agency; and
436-1 (2) a board member, officer, or employee of that state
436-2 agency sits on the board of directors of the corporation in other
436-3 than an ex officio capacity.
436-4 (c) If the corporation's charter specifically dedicates the
436-5 corporation's activities to the benefit of a particular state
436-6 agency but the conditions described by Subsection (b)(2) do not
436-7 exist, a corporation shall file with the secretary of state a copy
436-8 of the report required by Section 22.402(b) for the preceding
436-9 fiscal year not later than the 89th day after the last day of the
436-10 corporation's fiscal year.
436-11 Sec. 22.407. REPORT OF DOMESTIC AND FOREIGN CORPORATIONS.
436-12 (a) The secretary of state may require a domestic corporation or a
436-13 foreign corporation registered to conduct affairs in this state to
436-14 file a report in accordance with Chapter 4 not more than once every
436-15 four years as required by this subchapter. The report must state:
436-16 (1) the name of the corporation;
436-17 (2) the state or country under the laws of which the
436-18 corporation is incorporated;
436-19 (3) the address of the registered office of the
436-20 corporation in this state and the name of the registered agent at
436-21 that address;
436-22 (4) if the corporation is a foreign corporation, the
436-23 address of the principal office of the corporation in the state or
436-24 country under the laws of which the corporation is incorporated;
436-25 and
436-26 (5) the names and addresses of the directors and
436-27 officers of the corporation.
437-1 (b) A corporation required to prepare a report under this
437-2 section shall prepare the report on a form adopted by the secretary
437-3 of state for that purpose and shall include in the report
437-4 information that is accurate as of the date the report is executed.
437-5 An officer or, if the corporation is in the hands of a receiver or
437-6 trustee, the receiver or trustee shall sign the report on behalf of
437-7 the corporation.
437-8 Sec. 22.408. NOTICE REGARDING REPORT. (a) The secretary of
437-9 state shall send written notice that the report required by Section
437-10 22.407 is due. The notice must be:
437-11 (1) addressed to the corporation; and
437-12 (2) mailed to the corporation's registered agent or to
437-13 the corporation at:
437-14 (A) the address of the principal place of
437-15 business of the corporation as it appears in the certificate of
437-16 formation;
437-17 (B) the last known address of the corporation as
437-18 it appears on record in the office of the secretary of state; or
437-19 (C) any other known place of business of the
437-20 corporation.
437-21 (b) The secretary of state shall include with the notice two
437-22 copies of a report form to be prepared and filed as provided by
437-23 this subchapter.
437-24 Sec. 22.409. DELIVERY AND FILING OF REPORT. A copy of the
437-25 report must be filed with the secretary of state in accordance with
437-26 Chapter 4 not later than the 30th day after the date notice is
437-27 mailed under Section 22.408.
438-1 Sec. 22.410. FAILURE TO FILE REPORT. (a) A domestic or
438-2 foreign corporation that fails to file a report under Sections
438-3 22.407 and 22.409 when the report is due forfeits the corporation's
438-4 right to conduct affairs in this state.
438-5 (b) The forfeiture takes effect, without judicial action,
438-6 when the secretary of state enters on the record of the corporation
438-7 kept in the office of the secretary of state:
438-8 (1) the words "right to conduct affairs forfeited";
438-9 and
438-10 (2) the date of forfeiture.
438-11 Sec. 22.411. NOTICE OF FORFEITURE. Notice of forfeiture
438-12 under Section 22.410 shall be mailed to the corporation's
438-13 registered agent or to the corporation at:
438-14 (1) the address of the principal place of business of
438-15 the corporation as it appears in the certificate of formation;
438-16 (2) the last known address of the corporation as it
438-17 appears on record in the office of the secretary of state; or
438-18 (3) any other known place of business of the
438-19 corporation.
438-20 Sec. 22.412. EFFECT OF FORFEITURE. (a) Unless the right of
438-21 the corporation to conduct affairs in this state is revived under
438-22 Section 22.413:
438-23 (1) the corporation may not maintain an action, suit,
438-24 or proceeding in a court of this state; and
438-25 (2) a successor or assignee of the corporation may not
438-26 maintain an action, suit, or proceeding in a court of this state on
438-27 a right, claim, or demand arising from the conduct of affairs by
439-1 the corporation in this state.
439-2 (b) This section does not affect the right of an assignee of
439-3 the corporation as:
439-4 (1) the holder in due course of a negotiable
439-5 promissory note, check, or bill of exchange; or
439-6 (2) the bona fide purchaser for value of a warehouse
439-7 receipt, stock certificate, or other instrument negotiable by law.
439-8 (c) The forfeiture of the right to conduct affairs in this
439-9 state does not:
439-10 (1) impair the validity of a contract or act of the
439-11 corporation; or
439-12 (2) prevent the corporation from defending an action,
439-13 suit, or proceeding in a court of this state.
439-14 Sec. 22.413. REVIVAL OF RIGHT TO CONDUCT AFFAIRS. (a) A
439-15 corporation may be relieved from a forfeiture under Section 22.410
439-16 by filing the required report, accompanied by the revival fee, not
439-17 later than the 120th day after the date of mailing of the notice of
439-18 forfeiture under Section 22.408.
439-19 (b) If a corporation complies with Subsection (a), the
439-20 secretary of state shall:
439-21 (1) revive the right of the corporation to conduct
439-22 affairs in this state;
439-23 (2) cancel the words regarding the forfeiture on the
439-24 record of the corporation; and
439-25 (3) endorse on that record the word "revived" and the
439-26 date of revival.
439-27 Sec. 22.414. FAILURE TO REVIVE; TERMINATION OR REVOCATION.
440-1 (a) The failure of a corporation that has forfeited its right to
440-2 conduct affairs in this state to revive that right under Section
440-3 22.413 is grounds for:
440-4 (1) the involuntary termination of the domestic
440-5 corporation; or
440-6 (2) the revocation of the foreign corporation's
440-7 registration to transact business in this state.
440-8 (b) The termination or revocation takes effect, without
440-9 judicial action, when the secretary of state enters on the record
440-10 of the corporation filed in the office of the secretary of state
440-11 the word "forfeited" and the date of forfeiture and cites this
440-12 chapter as authority for that forfeiture.
440-13 Sec. 22.415. REINSTATEMENT. (a) A corporation that is
440-14 terminated or the registration of which has been revoked as
440-15 provided by Section 22.414 may be relieved of the termination or
440-16 revocation by filing the report required by Section 22.407,
440-17 accompanied by the filing fee for the report, if the corporation
440-18 has paid:
440-19 (1) all fees, taxes, penalties, and interest due and
440-20 accruing before the termination or revocation; and
440-21 (2) an amount equal to the total taxes from the date
440-22 of termination or revocation to the date of reinstatement that
440-23 would have been payable if the corporation had not been terminated
440-24 or had its registration revoked.
440-25 (b) When the report is filed and the filing fee is paid to
440-26 the secretary of state, the secretary of state shall:
440-27 (1) reinstate the certificate of formation or
441-1 registration without judicial action;
441-2 (2) cancel the word "forfeited" on the record; and
441-3 (3) endorse on the record kept in the secretary's
441-4 office relating to the corporation the words "set aside" and the
441-5 date of the reinstatement.
441-6 (c) If a termination or revocation is set aside under this
441-7 section, the corporation shall determine from the secretary of
441-8 state whether the name of the corporation is available. If the
441-9 name of the corporation is not available at the time of
441-10 reinstatement, the corporation shall amend its corporate name under
441-11 this code.
441-12 (Sections 22.416-22.450 reserved for expansion)
441-13 SUBCHAPTER J. CHURCH BENEFITS BOARDS
441-14 Sec. 22.451. DEFINITION. In this chapter, "church benefits
441-15 board" means an organization described by Section 414(e)(3)(A),
441-16 Internal Revenue Code, that:
441-17 (1) has the principal purpose or function of
441-18 administering or funding a plan or program to provide retirement
441-19 benefits, welfare benefits, or both for the ministers or employees
441-20 of a church or a conference, convention, or association of
441-21 churches; and
441-22 (2) is controlled by or affiliated with a church or a
441-23 conference, convention, or association of churches.
441-24 Sec. 22.452. PENSIONS AND BENEFITS. When authorized by the
441-25 corporation's members or as otherwise provided by law, a domestic
441-26 or foreign nonprofit corporation formed for a religious purpose may
441-27 provide, directly or through a separate church benefits board, for
442-1 the support and payment of benefits and pensions to:
442-2 (1) the ministers, teachers, employees, trustees,
442-3 directors, or other functionaries of the corporation;
442-4 (2) the ministers, teachers, employees, trustees,
442-5 directors, or other functionaries of organizations controlled by or
442-6 affiliated with a church or a conference, convention, or
442-7 association of churches under the jurisdiction and control of the
442-8 corporation; and
442-9 (3) the spouse, children, dependents, or other
442-10 beneficiaries of the persons described by Subdivisions (1) and (2).
442-11 Sec. 22.453. CONTRIBUTIONS. (a) A church benefits board
442-12 may provide for:
442-13 (1) the collection of contributions and other payments
442-14 to assist in providing pensions and benefits under this subchapter;
442-15 and
442-16 (2) the creation, maintenance, investment, management,
442-17 and disbursement of necessary annuities, endowments, reserves, or
442-18 other funds for a purpose under Subdivision (1).
442-19 (b) A church benefits board may receive payments from a
442-20 trust fund or corporation that funds a church plan as defined by
442-21 Section 414(e), Internal Revenue Code.
442-22 Sec. 22.454. POWER TO ACT AS TRUSTEE. A church benefits
442-23 board may act as:
442-24 (1) a trustee under a lawful trust committed to the
442-25 board by contract, will, or otherwise; and
442-26 (2) an agent for the performance of a lawful act
442-27 relating to the purposes of the trust.
443-1 Sec. 22.455. DOCUMENTS AND AGREEMENTS. A church benefits
443-2 board may provide to a program participant a certificate or
443-3 agreement of participation, a debenture, or an indemnification
443-4 agreement, as appropriate to accomplish the purposes of the board.
443-5 Sec. 22.456. INDEMNIFICATION. A church benefits board, or
443-6 an affiliate wholly owned by the board, may agree to indemnify
443-7 against damage or risk of loss:
443-8 (1) a minister, teacher, employee, trustee,
443-9 functionary, or director affiliated with the board or a family
443-10 member, dependent, or beneficiary of one of those persons;
443-11 (2) a church or a convention, conference, or
443-12 association of churches; or
443-13 (3) an organization that is controlled by or
443-14 affiliated with the board or with a church or a convention,
443-15 conference, or association of churches.
443-16 Sec. 22.457. PROTECTION OF BENEFITS. (a) Money or other
443-17 benefits that have been or will be provided to a participant or a
443-18 beneficiary under a plan or program provided by or through a church
443-19 benefits board under this subchapter are not subject to execution,
443-20 attachment, garnishment, or other process and may not be
443-21 appropriated or applied as part of a judicial, legal, or equitable
443-22 process or operation of a law other than a constitution to pay a
443-23 debt or liability of the participant or beneficiary.
443-24 (b) This section does not apply to a qualified domestic
443-25 relations order or an amount required by the church benefits board
443-26 to recover costs or expenses incurred in the plan or program.
443-27 Sec. 22.458. ASSIGNMENT OF BENEFITS. An assignment or
444-1 transfer or an attempt to make an assignment or transfer by a
444-2 beneficiary of money, benefits, or other rights under a plan or
444-3 program under this subchapter is void if:
444-4 (1) the plan or program contains a provision
444-5 prohibiting the assignment or other transfer without the written
444-6 consent of the church benefits board; and
444-7 (2) the beneficiary assigns or transfers or attempts
444-8 to make an assignment or transfer without that consent.
444-9 Sec. 22.459. INSURANCE CODE NOT APPLICABLE. The Insurance
444-10 Code does not apply to a church benefits board or a program, plan,
444-11 benefit, or activity of the board or a person affiliated with the
444-12 board.
444-13 CHAPTER 23. SPECIAL-PURPOSE CORPORATIONS
444-14 SUBCHAPTER A. GENERAL PROVISIONS
444-15 Sec. 23.001. DETERMINATION OF APPLICABLE LAW. (a) A
444-16 corporation created under this chapter or under a special statute
444-17 outside this code, to the extent not inconsistent with a special
444-18 statute regarding a particular corporation, is governed by:
444-19 (1) Title 1 and Chapter 21, if the corporation is
444-20 organized for profit; and
444-21 (2) Title 1 and Chapter 22, if the corporation is
444-22 organized not for profit.
444-23 (b) If a special statute does not contain any provision
444-24 regarding a matter provided for in Title 1 or Chapter 21 or 22, or
444-25 if the special statute specifically provides that the general laws
444-26 for corporations supplement the statute, to the extent consistent
444-27 with the special statute:
445-1 (1) Title 1 and Chapter 21 apply to a corporation
445-2 organized for profit; and
445-3 (2) Title 1 and Chapter 22 apply to a corporation
445-4 organized not for profit.
445-5 Sec. 23.002. APPLICABILITY OF FILING REQUIREMENTS. Except
445-6 as otherwise provided by the special statute, a document to be
445-7 filed with the secretary of state under a special statute shall be
445-8 executed and filed in accordance with Chapter 4.
445-9 Sec. 23.003. DOMESTIC CORPORATION ORGANIZED UNDER SPECIAL
445-10 STATUTE. A corporation organized under a special statute other
445-11 than this code is not considered a "domestic corporation" formed
445-12 under this code, although this code may apply to the corporation.
445-13 (Sections 23.004-23.050 reserved for expansion)
445-14 SUBCHAPTER B. BUSINESS DEVELOPMENT CORPORATIONS
445-15 Sec. 23.051. DEFINITIONS. In this subchapter:
445-16 (1) "Corporation" means a business development
445-17 corporation organized under this subchapter.
445-18 (2) "Financial institution" means a banking
445-19 corporation or trust company, savings and loan association,
445-20 governmental agency, insurance company, or related corporation,
445-21 partnership, foundation, or other institution engaged primarily in
445-22 lending or investing funds.
445-23 (3) "Loan limit" means the maximum amount permitted to
445-24 be outstanding at one time on loans made by a member to a
445-25 corporation.
445-26 (4) "Member" means a financial institution authorized
445-27 to do business in this state that undertakes to lend money to a
446-1 corporation.
446-2 Sec. 23.052. INCORPORATORS. Subject to The Securities Act
446-3 (Article 581-1 et seq., Vernon's Texas Civil Statutes), 25 or more
446-4 persons, the majority of whom must be residents of this state, may
446-5 form a business development corporation to promote, develop, and
446-6 advance the prosperity and economic welfare of this state.
446-7 Sec. 23.053. PURPOSES. (a) A business development
446-8 corporation may be organized as a:
446-9 (1) for-profit corporation under Chapter 21; or
446-10 (2) nonprofit corporation under Chapter 22.
446-11 (b) The business development corporation must be organized
446-12 to:
446-13 (1) promote, stimulate, develop, and advance the
446-14 business prosperity and economic welfare of this state and the
446-15 residents of this state;
446-16 (2) encourage and assist, through loans, investments,
446-17 or other business transactions, new business and industry in this
446-18 state;
446-19 (3) rehabilitate and assist existing industry in this
446-20 state;
446-21 (4) stimulate and assist in the expansion of business
446-22 activity that will tend to promote the business development and
446-23 maintain the economic stability of this state, provide maximum
446-24 opportunities for employment, encourage thrift, and improve the
446-25 standard of living of the residents of this state;
446-26 (5) cooperate and act in conjunction with other public
446-27 or private organizations in the promotion and advancement of
447-1 industrial, commercial, agricultural, and recreational developments
447-2 in this state; or
447-3 (6) provide financing for the promotion, development,
447-4 and conduct of business activity in this state.
447-5 Sec. 23.054. POWERS. (a) The powers of a corporation
447-6 include, in addition to the powers conferred on the corporation by
447-7 Chapter 21 or 22, as applicable, the power to:
447-8 (1) elect, appoint, and employ officers, agents, and
447-9 employees;
447-10 (2) make contracts and incur liabilities for a purpose
447-11 of the corporation;
447-12 (3) borrow money on a secured or unsecured basis to
447-13 carry out a purpose of the corporation;
447-14 (4) issue for the purpose of borrowing money a bond,
447-15 debenture, note, or other evidence of indebtedness, whether secured
447-16 or unsecured;
447-17 (5) secure an evidence of indebtedness by mortgage,
447-18 pledge, deed of trust, or other lien on a property, franchise,
447-19 right, or privilege of the corporation, or any part of or interest
447-20 in those items, without securing shareholder or member approval;
447-21 (6) make a secured or unsecured loan and establish and
447-22 regulate the terms and conditions of that loan and the charges for
447-23 interest or service connected with that loan;
447-24 (7) purchase, receive, hold, lease, or otherwise
447-25 acquire, and sell, convey, transfer, lease, or otherwise dispose
447-26 of, property and exercise those rights and privileges incidental
447-27 and appurtenant to the acquisition or disposal of the property and
448-1 to the use of the property, including any property acquired by the
448-2 corporation periodically in the satisfaction of a debt or
448-3 enforcement of an obligation;
448-4 (8) acquire improved or unimproved real property to
448-5 construct an industrial plant or other business establishment on
448-6 the property or dispose of the real property for the construction
448-7 of an industrial plant or other business establishment;
448-8 (9) acquire, construct or reconstruct, alter, repair,
448-9 maintain, operate, sell, convey, transfer, lease, or otherwise
448-10 dispose of an industrial plant or business establishment;
448-11 (10) protect the corporation's position as creditor by
448-12 acquiring the goodwill, business, rights, property, including a
448-13 share, bond, debenture, note, other evidence of indebtedness, other
448-14 asset, or any part of an asset or interest in an asset, of a person
448-15 to whom the corporation loaned money and assume, undertake, or pay
448-16 an obligation, debt, or liability of the person;
448-17 (11) mortgage, pledge, or otherwise encumber any
448-18 property, right, or thing of value, acquired under Subdivision (7),
448-19 (8), (9), or (10), as security for the payment of a part of the
448-20 purchase price;
448-21 (12) promote the establishment of local development
448-22 corporations in the various communities of this state, enter into
448-23 agreements with those local development corporations, and cooperate
448-24 with, assist, or otherwise encourage the local foundations; and
448-25 (13) participate with a properly authorized federal
448-26 lending agency in the making of loans.
448-27 (b) A corporation may approve an application for a loan
449-1 under Subsection (a)(6) only if the applicant demonstrates that:
449-2 (1) the applicant applied for the loan through
449-3 ordinary banking channels; and
449-4 (2) the loan has been refused by at least two banks or
449-5 other financial institutions.
449-6 Sec. 23.055. STATEWIDE OPERATION. A corporation organized
449-7 under this subchapter is a state development company as defined by
449-8 Section 103, Small Business Investment Act of 1958 (15 U.S.C.
449-9 Section 662), as amended, or similar federal legislation, and may
449-10 operate on a statewide basis.
449-11 Sec. 23.056. CERTIFICATE OF FORMATION. (a) The certificate
449-12 of formation of a corporation must state:
449-13 (1) the name of the corporation;
449-14 (2) the purpose or purposes for which the corporation
449-15 is organized as required by Section 23.053; and
449-16 (3) any other information required by:
449-17 (A) Chapter 4; and
449-18 (B) Chapter 21 or 22, as applicable.
449-19 (b) The name of a corporation must include the words
449-20 "Business Development Corporation."
449-21 Sec. 23.057. MANAGEMENT BY BOARD OF DIRECTORS; NUMBER OF
449-22 DIRECTORS. (a) The organization, control, and management of a
449-23 corporation are vested in a board of directors. The board must
449-24 consist of not fewer than 15 and not more than 21 directors.
449-25 (b) The board of directors may exercise any power of the
449-26 corporation not conferred on the shareholders or members by law or
449-27 by the corporation's bylaws.
450-1 Sec. 23.058. ELECTION OR APPOINTMENT OF DIRECTORS. (a) The
450-2 incorporators of a corporation shall name the directors
450-3 constituting the initial board of directors of the corporation.
450-4 Directors other than the initial directors shall be elected at each
450-5 annual meeting of the corporation. If an annual meeting is not
450-6 held at the time designated by the bylaws of the corporation, the
450-7 directors shall be elected at a special meeting held in lieu of the
450-8 annual meeting.
450-9 (b) At an annual meeting or special meeting held in lieu of
450-10 the annual meeting, the members of the corporation shall elect
450-11 two-thirds of the directors, and the shareholders of the
450-12 corporation shall elect the remaining directors.
450-13 Sec. 23.059. TERM OF OFFICE; VACANCY. (a) A director of a
450-14 corporation holds office until the next annual election of
450-15 directors and until a successor is elected and qualified, unless
450-16 the director is removed at an earlier date in accordance with the
450-17 corporation's bylaws.
450-18 (b) A vacancy in the office of a director elected by the
450-19 members shall be filled by the directors elected by the members,
450-20 and a vacancy in the office of a director elected by the
450-21 shareholders shall be filled by the directors elected by the
450-22 shareholders.
450-23 Sec. 23.060. OFFICERS. The board of directors of a
450-24 corporation shall appoint a president, a treasurer, and any other
450-25 agent or officer of the corporation and shall fill each vacancy
450-26 other than a vacancy on the board.
450-27 Sec. 23.061. PARTICIPATION AS OWNER. (a) An individual,
451-1 corporation, or other organization authorized to conduct business
451-2 in this state, including a public utility company, insurance and
451-3 casualty company, or foreign corporation licensed to do business in
451-4 this state, or a trust may acquire, purchase, hold, sell, assign,
451-5 transfer, mortgage, pledge, or otherwise dispose of a bond,
451-6 security, or other evidence of indebtedness created by, or shares
451-7 of, the corporation.
451-8 (b) An owner of shares of the corporation may exercise any
451-9 right, power, or privilege of that ownership, including the right
451-10 to vote.
451-11 Sec. 23.062. FINANCIAL INSTITUTION AS MEMBER OF CORPORATION.
451-12 (a) A financial institution may become a member of a corporation
451-13 and may make loans to the corporation as provided by this chapter.
451-14 (b) A financial institution may request membership in the
451-15 corporation by applying to the corporation's board of directors in
451-16 the manner prescribed by the board. Membership in the corporation
451-17 takes effect on the board's acceptance of the application.
451-18 (c) A financial institution that is a member of a
451-19 corporation may acquire, purchase, hold, sell, assign, transfer,
451-20 mortgage, pledge, or otherwise dispose of a bond, security, or
451-21 other evidence of indebtedness created by, or a share of, the
451-22 corporation. As owner of shares of the corporation, a financial
451-23 institution may exercise any right, power, or privilege of that
451-24 ownership, including the right to vote. A member of a corporation
451-25 may not acquire shares of the corporation in an amount greater than
451-26 10 percent of the member's loan limit. The amount of shares of the
451-27 corporation that a member may acquire is in addition to the amount
452-1 of shares of corporations that the member may otherwise acquire.
452-2 (d) A financial institution that is not a member of the
452-3 corporation may not acquire any shares of the corporation.
452-4 Sec. 23.063. WITHDRAWAL OF MEMBER. (a) On written notice
452-5 to the corporation's board of directors, a member may withdraw from
452-6 a corporation on the date stated in the notice. The date of a
452-7 member's withdrawal must be at least six months after the date
452-8 notice is given under this subsection.
452-9 (b) A member is not obligated to make a loan to the
452-10 corporation pursuant to a call made after the date of the member's
452-11 withdrawal from the corporation, but a member shall fulfill any
452-12 obligation that has accrued or for which a commitment has been made
452-13 before the withdrawal date.
452-14 Sec. 23.064. POWERS OF SHAREHOLDERS AND MEMBERS. The
452-15 shareholders and members of a corporation may:
452-16 (1) determine the number of directors and elect the
452-17 directors as provided by Section 23.058;
452-18 (2) make, amend, and repeal bylaws of the corporation;
452-19 or
452-20 (3) exercise any other power of the corporation that
452-21 is conferred on the shareholders and members by the bylaws.
452-22 Sec. 23.065. VOTING BY SHAREHOLDER OR MEMBER. (a) Each
452-23 shareholder of a corporation has one vote, in person or by proxy,
452-24 for each share held by the shareholder.
452-25 (b) Each member of a corporation has one vote in person or
452-26 by proxy.
452-27 (c) A member with a loan limit that exceeds $1,000 has one
453-1 additional vote, in person or by proxy, for each additional $1,000
453-2 the member may have outstanding on loans to the corporation at any
453-3 one time as determined under Section 23.068.
453-4 Sec. 23.066. LOAN TO CORPORATION. (a) When called on by a
453-5 corporation to make a loan to the corporation, a member of the
453-6 corporation shall make the loan on those terms and conditions
453-7 periodically approved by the board of directors.
453-8 (b) A loan made to the corporation by a member shall be
453-9 evidenced by a bond, debenture, note, or other evidence of
453-10 indebtedness of the corporation that:
453-11 (1) is freely transferable at any time; and
453-12 (2) accrues interest at a rate of not less than
453-13 one-fourth of one percent more than the rate of interest determined
453-14 by the board of directors to be the prime rate prevailing on the
453-15 date of issuance on unsecured commercial loans.
453-16 Sec. 23.067. PROHIBITED LOAN. (a) A member may not make a
453-17 loan to a corporation if, immediately after the loan would be made,
453-18 the total amount of the obligations of the corporation would exceed
453-19 50 times the capital of the corporation.
453-20 (b) For purposes of this section, the capital of the
453-21 corporation includes the amount of the outstanding shares of the
453-22 corporation, whether common or preferred, and the earned or paid-in
453-23 surplus of the corporation.
453-24 Sec. 23.068. LOAN LIMITS. (a) A loan limit shall be
453-25 established at the $1,000 amount nearest to the amount computed in
453-26 accordance with this section.
453-27 (b) The total amount outstanding on loans made to a
454-1 corporation by a member at any one time, when added to the amount
454-2 of the investment in the shares of the corporation then held by the
454-3 member, may not exceed:
454-4 (1) 20 percent of the total amount then outstanding on
454-5 loans to the corporation by all members, including outstanding
454-6 amounts validly called for a loan but not yet loaned; or
454-7 (2) the following limit, to be determined as of the
454-8 time the member becomes a member of the corporation, or at any time
454-9 requested by a member on the basis of the audited balance sheet of
454-10 the member at the close of its fiscal year immediately preceding
454-11 its application for membership or, in the case of an insurance
454-12 company, its last annual statement to the Texas Department of
454-13 Insurance:
454-14 (A) an amount equal to the lesser of $750,000 or
454-15 two percent of the capital and surplus of a commercial bank or
454-16 trust company;
454-17 (B) an amount equal to one percent of the total
454-18 outstanding loans made by a savings and loan association;
454-19 (C) an amount equal to one percent of the
454-20 capital and unassigned surplus of a stock insurance company other
454-21 than a fire insurance company;
454-22 (D) an amount equal to one percent of the
454-23 unassigned surplus of a mutual insurance company other than a fire
454-24 insurance company;
454-25 (E) an amount equal to one-tenth of one percent
454-26 of the assets of a fire insurance company; or
454-27 (F) the limits approved by the board of
455-1 directors of the corporation for a government pension fund or other
455-2 financial institution.
455-3 (c) Subject to Subsection (b), each call made by the
455-4 corporation shall be prorated among the members of the corporation
455-5 in substantially the same proportion that the adjusted loan limit
455-6 of each member bears to the aggregate of the adjusted loan limits
455-7 of all members.
455-8 (d) For purposes of Subsection (c), the adjusted loan limit
455-9 of a member is the amount of the member's loan limit, reduced by
455-10 the balance of outstanding loans made by the member to the
455-11 corporation and the investment in shares of the corporation held by
455-12 the member at the time of the call.
455-13 Sec. 23.069. SURPLUS. (a) A corporation shall set apart as
455-14 earned surplus not less than 10 percent of the corporation's net
455-15 earnings each year until the surplus, with any unimpaired surplus
455-16 paid in, is equal to one-half of the amount paid in on the shares
455-17 then outstanding. The surplus shall be kept to secure against
455-18 losses and contingencies. If the surplus becomes impaired, the
455-19 surplus shall be reimbursed in the manner provided for its
455-20 accumulation.
455-21 (b) Net earnings and surplus shall be determined by the
455-22 board of directors after providing for the required reserves as the
455-23 directors consider advisable. A good faith determination of net
455-24 earnings and surplus by the directors under this subsection is
455-25 conclusive.
455-26 Sec. 23.070. DEPOSITORY. (a) A corporation may deposit the
455-27 corporation's funds in a banking institution that has been
456-1 designated as a depository by a vote of the majority of the
456-2 directors present at an authorized meeting of the board of
456-3 directors of the corporation, excluding a director who is an
456-4 officer or director of the designated depository.
456-5 (b) The corporation may not receive money on deposit.
456-6 Sec. 23.071. ANNUAL REPORT; PROVISION OF REQUIRED
456-7 INFORMATION. (a) A corporation shall annually make a report of
456-8 its condition to the banking commissioner and the Texas Department
456-9 of Insurance.
456-10 (b) A corporation shall provide any information that is
456-11 periodically required by the secretary of state.
456-12 (Sections 23.072-23.100 reserved for expansion)
456-13 SUBCHAPTER C. GRAND LODGES
456-14 Sec. 23.101. FORMATION. (a) An institution or order, by
456-15 resolution or other consent of its members, may incorporate under
456-16 this subchapter if the institution or order is:
456-17 (1) the grand lodge of Texas, Ancient, Free and
456-18 Accepted Masons;
456-19 (2) the Grand Royal Arch Chapter of Texas;
456-20 (3) the Grand Commandery of Knights Templars of Texas;
456-21 (4) the grand lodge of the Independent Order of Odd
456-22 Fellows of Texas; or
456-23 (5) another similar institution or order organized for
456-24 charitable or benevolent purposes.
456-25 (b) A corporation formed under this subchapter shall file a
456-26 certificate of formation in accordance with Chapter 4 that complies
456-27 with this subchapter.
457-1 Sec. 23.102. APPLICABILITY OF CHAPTER 22. If this
457-2 subchapter does not contain any provision regarding a matter
457-3 provided for in Chapter 22, to the extent consistent with this
457-4 subchapter, Chapter 22 applies to a corporation formed under this
457-5 subchapter.
457-6 Sec. 23.103. DURATION. A grand body that incorporates under
457-7 this subchapter may provide in the grand body's certificate of
457-8 formation for the expiration of its corporate powers at the end of
457-9 a stated number of years. If the certificate of formation does not
457-10 provide for the duration of the grand body, the grand body has
457-11 perpetual existence. The grand body may by its corporate name have
457-12 perpetual succession of its officers and members.
457-13 Sec. 23.104. SUBORDINATE LODGES. (a) The incorporation of
457-14 a grand body includes each of its subordinate lodges or bodies
457-15 holding a warrant or charter under the grand body.
457-16 (b) A subordinate body has all of the rights of other
457-17 corporations under and by the name given to the grand body in the
457-18 warrant or charter issued to the grand body to which it is
457-19 attached. Those rights shall be provided for in the charter of the
457-20 grand body.
457-21 (c) A subordinate body is subject to the jurisdiction and
457-22 control of its respective grand body, and the warrant or charter of
457-23 the subordinate body may be revoked by the grand body.
457-24 Sec. 23.105. TRUSTEES AND DIRECTORS. A grand body and a
457-25 subordinate of the grand body may elect trustees and directors or
457-26 may appoint trustees or directors from among their officers.
457-27 Sec. 23.106. FRANCHISE TAXES. A corporation formed under
458-1 this subchapter is not subject to or required to pay a franchise
458-2 tax, except that a corporation is exempt from the franchise tax
458-3 imposed by Chapter 171, Tax Code, only if the corporation is
458-4 exempted by that chapter.
458-5 Sec. 23.107. GENERAL POWERS. A grand body and a subordinate
458-6 of the grand body may take action as directed or provided by law in
458-7 the case of other corporations and may make constitutions and
458-8 bylaws to govern their affairs.
458-9 Sec. 23.108. AUTHORITY REGARDING PROPERTY. (a) A grand
458-10 body or subordinate body may acquire and hold property as necessary
458-11 or convenient for a site on which to erect a building for the use
458-12 and occupancy of the body and to erect homes and schools for
458-13 members' widows or orphans or elderly, disabled, or indigent
458-14 members and may sell or mortgage the property.
458-15 (b) A conveyance must be executed by the presiding officer
458-16 and attested to by the secretary with the seal.
458-17 (c) The authority of a subordinate body to sell or to
458-18 mortgage property is subject to the conditions periodically
458-19 prescribed or established by the grand body to which the
458-20 subordinate is attached.
458-21 Sec. 23.109. AUTHORITY REGARDING LOANS. (a) A grand body
458-22 incorporated under this subchapter may:
458-23 (1) loan money held and owned by the grand body for
458-24 charitable purposes, for the endowment of any of the institutions
458-25 of the grand body, or otherwise; and
458-26 (2) secure loans by taking and receiving liens on real
458-27 property or by another method elected by the grand body.
459-1 (b) On sale of real property secured by a lien, a grand body
459-2 may become the purchaser of the real property and hold title to the
459-3 property.
459-4 Sec. 23.110. WINDING UP AND TERMINATION OF SUBORDINATE BODY.
459-5 (a) On the winding up and termination of a subordinate body
459-6 attached to a grand body, all property and rights existing in the
459-7 subordinate body pass to and vest in the grand body to which it was
459-8 attached, subject to the payment of any debt owed by the
459-9 subordinate body.
459-10 (b) Notwithstanding a grand body's liability for the debt of
459-11 a subordinate body under Subsection (a), the grand body is not
459-12 liable for an amount greater than the actual cash value of the
459-13 subordinate body's effects or authority.
459-14 TITLE 3. LIMITED LIABILITY COMPANIES
459-15 CHAPTER 101. LIMITED LIABILITY COMPANIES
459-16 SUBCHAPTER A. GENERAL PROVISIONS
459-17 Sec. 101.001. DEFINITIONS. In this title:
459-18 (1) "Assignee" means a person who, before the person
459-19 is admitted as a member of a limited liability company, is assigned
459-20 or transferred a membership interest in the company.
459-21 (2) "Company" means a domestic or foreign limited
459-22 liability company governed by this title.
459-23 (3) "Company agreement" means an oral or written
459-24 agreement relating to a limited liability company executed by the
459-25 members of the company.
459-26 (Sections 101.002-101.050 reserved for expansion)
460-1 SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
460-2 Sec. 101.051. SUPPLEMENTAL INFORMATION FOR CERTIFICATE OF
460-3 FORMATION. In addition to the information required by Section
460-4 3.005, the certificate of formation of a limited liability company
460-5 must state:
460-6 (1) whether the company will or will not have
460-7 managers;
460-8 (2) if the company will have managers, the name and
460-9 address of each initial manager of the company; and
460-10 (3) if the company will not have managers, the name
460-11 and address of each initial member of the company.
460-12 Sec. 101.052. CERTAIN PROVISIONS CONTAINED IN CERTIFICATE OF
460-13 FORMATION. (a) A provision that may be contained in the company
460-14 agreement of a limited liability company may alternatively be
460-15 included in the certificate of formation of the company as provided
460-16 by Section 3.005(b).
460-17 (b) A reference in this title to the company agreement of a
460-18 limited liability company includes any provision contained in the
460-19 company's certificate of formation instead of the company agreement
460-20 as provided by Subsection (a).
460-21 Sec. 101.053. COMPANY AGREEMENT. (a) Except as provided by
460-22 Section 101.054, the company agreement of a limited liability
460-23 company governs:
460-24 (1) the relations among members, managers, and
460-25 officers of the company, assignees of membership interests in the
460-26 company, and the company itself; and
460-27 (2) other internal affairs of the company.
461-1 (b) To the extent that the company agreement of a limited
461-2 liability company does not otherwise provide, this title and the
461-3 provisions of Title 1 applicable to a limited liability company
461-4 govern the internal affairs of the company.
461-5 (c) Except as provided by Section 101.054, a provision of
461-6 this title or Title 1 that is applicable to a limited liability
461-7 company may be waived or modified in the company agreement of a
461-8 limited liability company.
461-9 Sec. 101.054. WAIVER OR MODIFICATION OF CERTAIN STATUTORY
461-10 PROVISIONS PROHIBITED; EXCEPTIONS. (a) Except as provided by this
461-11 section, the following provisions may not be waived or modified in
461-12 the company agreement of a limited liability company:
461-13 (1) this section;
461-14 (2) Section 101.051, 101.055, 101.101(b), 101.206,
461-15 101.502, or 101.551;
461-16 (3) Chapter 1, if the provision is used to interpret a
461-17 provision or define a word or phrase contained in a section listed
461-18 in this subsection;
461-19 (4) Chapter 2, other than Section 2.104(c)(2),
461-20 2.104(c)(3), or 2.106;
461-21 (5) Chapter 3, other than Subchapters C and E; or
461-22 (6) Chapter 4, 5, 7, 10, 11, or 12.
461-23 (b) A provision listed in Subsection (a) may be waived or
461-24 modified in the company agreement if the provision that is waived
461-25 or modified authorizes the limited liability company to waive or
461-26 modify the provision in the company's governing documents.
461-27 (c) A provision listed in Subsection (a) may be modified in
462-1 the company agreement if the provision that is modified specifies:
462-2 (1) the person or group of persons entitled to approve
462-3 a modification; or
462-4 (2) the vote or other method by which a modification
462-5 is required to be approved.
462-6 (d) A provision in this title or in that part of Title 1
462-7 applicable to a limited liability company that grants a right to a
462-8 person, other than a member, manager, officer, or assignee of a
462-9 membership interest in a limited liability company, may be waived
462-10 or modified in the company agreement of the company only if the
462-11 person consents in writing to the waiver or modification.
462-12 Sec. 101.055. AMENDMENT OF COMPANY AGREEMENT. The company
462-13 agreement of a limited liability company may be amended only if
462-14 each member of the company consents to the amendment.
462-15 (Sections 101.056-101.100 reserved for expansion)
462-16 SUBCHAPTER C. MEMBERSHIP
462-17 Sec. 101.101. MEMBERS REQUIRED. (a) A limited liability
462-18 company may have one or more members. Except as provided by this
462-19 section, a limited liability company must have at least one member.
462-20 (b) A limited liability company that has managers is not
462-21 required to have any members during a reasonable period between the
462-22 date the company is formed and the date the first member is
462-23 admitted to the company.
462-24 (c) A limited liability company is not required to have any
462-25 members during the period between the date the continued membership
462-26 of the last remaining member of the company is terminated and the
462-27 date the agreement to continue the company described by Section
463-1 101.551 is executed.
463-2 Sec. 101.102. QUALIFICATION FOR MEMBERSHIP. (a) A person
463-3 may be a member of or acquire a membership interest in a limited
463-4 liability company unless the person lacks capacity apart from this
463-5 code.
463-6 (b) A person is not required, as a condition to becoming a
463-7 member of or acquiring a membership interest in a limited liability
463-8 company, to:
463-9 (1) make a contribution to the company;
463-10 (2) otherwise pay cash or transfer property to the
463-11 company; or
463-12 (3) assume an obligation to make a contribution or
463-13 otherwise pay cash or transfer property to the company.
463-14 Sec. 101.103. EFFECTIVE DATE OF MEMBERSHIP. (a) A person
463-15 who acquires a membership interest in a limited liability company
463-16 in connection with the formation of the company becomes a member of
463-17 the company on the date the company is formed if the person is
463-18 named as an initial member in the company's certificate of
463-19 formation.
463-20 (b) A person who acquires a membership interest in a limited
463-21 liability company during the formation of the company but who is
463-22 not named as an initial member in the company's certificate of
463-23 formation becomes a member of the company on the latest of:
463-24 (1) the date the company is formed;
463-25 (2) the date stated in the company's records as the
463-26 date the person becomes a member of the company; or
463-27 (3) if the company's records do not state a date
464-1 described by Subdivision (2), the date the person's admission to
464-2 the company is first reflected in the company's records.
464-3 (c) A person who, after the formation of a limited liability
464-4 company, acquires directly or is assigned a membership interest in
464-5 the company becomes a member of the company on approval of the
464-6 company's governing authority.
464-7 Sec. 101.104. CLASSES OR GROUPS OF MEMBERS OR MEMBERSHIP
464-8 INTERESTS. (a) The company agreement of a limited liability
464-9 company may:
464-10 (1) establish within the company classes or groups of
464-11 one or more members or membership interests each of which has
464-12 certain expressed relative rights, powers, and duties, including
464-13 voting rights; and
464-14 (2) provide for the manner of establishing within the
464-15 company additional classes or groups of one or more members or
464-16 membership interests each of which has certain expressed relative
464-17 rights, powers, and duties, including voting rights.
464-18 (b) The rights, powers, and duties of a class or group of
464-19 members or membership interests described by Subsection (a)(2) may
464-20 be stated in the company agreement or stated at the time the class
464-21 or group is established.
464-22 (c) If the company agreement of a limited liability company
464-23 does not provide for the manner of establishing classes or groups
464-24 of members or membership interests under Subsection (a)(2),
464-25 additional classes or groups of members or membership interests may
464-26 be established only by the adoption of an amendment to the company
464-27 agreement.
465-1 (d) The rights, powers, or duties of any class or group of
465-2 members or membership interests of a limited liability company may
465-3 be senior to the rights, powers, or duties of any other class or
465-4 group of members or membership interests in the company, including
465-5 a previously established class or group.
465-6 Sec. 101.105. ISSUANCE OF MEMBERSHIP INTERESTS AFTER
465-7 FORMATION OF COMPANY. A limited liability company, after the
465-8 formation of the company, may:
465-9 (1) issue membership interests in the company to any
465-10 person, including an existing member of the company, with the
465-11 approval of the governing authority of the company; and
465-12 (2) if the issuance of a membership interest requires
465-13 the establishment of a new class or group of members or membership
465-14 interests, establish a new class or group as provided by Sections
465-15 101.104(a)(2), (b), and (c).
465-16 Sec. 101.106. NATURE OF MEMBERSHIP INTEREST. (a) A
465-17 membership interest in a limited liability company is personal
465-18 property.
465-19 (b) A member of a limited liability company or an assignee
465-20 of a membership interest in a limited liability company does not
465-21 have an interest in any specific property of the company.
465-22 Sec. 101.107. WITHDRAWAL OR EXPULSION OF MEMBER PROHIBITED.
465-23 A member of a limited liability company may not withdraw or be
465-24 expelled from the company.
465-25 Sec. 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST. (a) A
465-26 membership interest in a limited liability company may be wholly or
465-27 partly assigned.
466-1 (b) An assignment of a membership interest in a limited
466-2 liability company:
466-3 (1) is not an event requiring the winding up of the
466-4 company; and
466-5 (2) does not entitle the assignee to:
466-6 (A) participate in the management and affairs of
466-7 the company;
466-8 (B) become a member of the company; or
466-9 (C) exercise any rights of a member of the
466-10 company.
466-11 Sec. 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF MEMBERSHIP
466-12 INTEREST BEFORE MEMBERSHIP. (a) A person who is assigned a
466-13 membership interest in a limited liability company is entitled to:
466-14 (1) receive any allocation of income, gain, loss,
466-15 deduction, credit, or a similar item that the assignor is entitled
466-16 to receive if the allocation of the item is assigned;
466-17 (2) receive any distribution the assignor is entitled
466-18 to receive if the distribution is assigned;
466-19 (3) require, for any proper purpose, reasonable
466-20 information or a reasonable account of the transactions of the
466-21 company; and
466-22 (4) make, for any proper purpose, reasonable
466-23 inspections of the books and records of the company.
466-24 (b) An assignee of a membership interest in a limited
466-25 liability company is entitled to become a member of the company on
466-26 the approval of the company's governing authority.
466-27 (c) An assignee of a membership interest in a limited
467-1 liability company is not liable as a member of the company until
467-2 the assignee becomes a member of the company.
467-3 Sec. 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF
467-4 MEMBERSHIP INTEREST AFTER BECOMING MEMBER. (a) An assignee of a
467-5 membership interest in a limited liability company, after becoming
467-6 a member of the company, is:
467-7 (1) entitled, to the extent assigned, to the same
467-8 rights and powers granted or provided to a member of the company by
467-9 the company agreement or this code;
467-10 (2) subject to the same restrictions and liabilities
467-11 placed or imposed on a member of the company by the company
467-12 agreement or this code; and
467-13 (3) except as provided by Subsection (b), liable for
467-14 the assignor's obligation to make contributions to the company.
467-15 (b) An assignee of a membership interest in a limited
467-16 liability company, after becoming a member of the company, is not
467-17 obligated for a liability of the assignor that:
467-18 (1) the assignee did not have knowledge of on the date
467-19 the assignee became a member of the company; and
467-20 (2) could not be ascertained from the company
467-21 agreement.
467-22 Sec. 101.111. RIGHTS AND DUTIES OF ASSIGNOR OF MEMBERSHIP
467-23 INTEREST. (a) An assignor of a membership interest in a limited
467-24 liability company continues to be a member of the company and is
467-25 entitled to exercise any unassigned rights or powers of a member of
467-26 the company until the assignee becomes a member of the company.
467-27 (b) An assignor of a membership interest in a limited
468-1 liability company is not released from any liability arising from
468-2 the assignor's membership interest in the company, regardless of
468-3 whether the assignee of the membership interest becomes a member of
468-4 the company.
468-5 Sec. 101.112. JUDGMENT CREDITOR; CHARGE OF MEMBERSHIP
468-6 INTEREST. (a) On application by a judgment creditor of a member
468-7 of a limited liability company or an assignee of a membership
468-8 interest in a limited liability company, a court may charge the
468-9 membership interest of the member or assignee, as appropriate, with
468-10 payment of the unsatisfied amount of the judgment.
468-11 (b) If a court charges a membership interest with payment of
468-12 a judgment as provided by Subsection (a), the judgment creditor has
468-13 only the rights of an assignee of the membership interest.
468-14 (c) This section may not be construed to deprive a member of
468-15 a limited liability company or an assignee of a membership interest
468-16 in a limited liability company of the benefit of any exemption laws
468-17 applicable to the membership interest of the member or assignee.
468-18 Sec. 101.113. PARTIES TO ACTIONS. A member of a limited
468-19 liability company may be named as a party only in an action brought
468-20 to enforce a right or liability of the member relating to the
468-21 company.
468-22 Sec. 101.114. REQUIREMENTS FOR ENFORCEABLE SUBSCRIPTION. A
468-23 subscription to purchase a membership interest in a limited
468-24 liability company is enforceable only if the subscription is:
468-25 (1) in writing; and
468-26 (2) signed by the person making the subscription.
468-27 (Sections 101.115-101.150 reserved for expansion)
469-1 SUBCHAPTER D. CONTRIBUTIONS
469-2 Sec. 101.151. REQUIREMENTS FOR ENFORCEABLE PROMISE. A
469-3 promise to make a contribution or otherwise pay cash or transfer
469-4 property to a limited liability company is enforceable only if the
469-5 promise is:
469-6 (1) in writing; and
469-7 (2) signed by the person making the promise.
469-8 Sec. 101.152. ENFORCEABLE PROMISE NOT AFFECTED BY CHANGE IN
469-9 CIRCUMSTANCES. A member of a limited liability company is
469-10 obligated to perform an enforceable promise to make a contribution
469-11 or otherwise pay cash or transfer property to the company without
469-12 regard to the death, disability, or other change in circumstances
469-13 of the member.
469-14 Sec. 101.153. FAILURE TO PERFORM ENFORCEABLE PROMISE;
469-15 CONSEQUENCES. (a) A member of a limited liability company, or the
469-16 member's legal representative or successor, who does not perform an
469-17 enforceable promise to make a contribution, including a previously
469-18 made contribution, or to otherwise pay cash or transfer property to
469-19 the company is obligated, at the request of the company, to pay in
469-20 cash the agreed value of the contribution, as stated in the company
469-21 agreement or the company's records required under Section 3.151,
469-22 less:
469-23 (1) any amount already paid for the contribution; and
469-24 (2) the value of any property already transferred.
469-25 (b) The company agreement of a limited liability company may
469-26 provide that the membership interest of a member who does not
469-27 perform an enforceable promise to make a contribution, including a
470-1 previously made contribution, or otherwise pay cash or transfer
470-2 property to the company may be:
470-3 (1) reduced;
470-4 (2) subordinated to other membership interests of
470-5 nondefaulting members;
470-6 (3) redeemed or sold at a value determined by
470-7 appraisal or other formula; or
470-8 (4) made the subject of:
470-9 (A) a forced sale;
470-10 (B) forfeiture;
470-11 (C) a loan from other members of the company in
470-12 an amount necessary to satisfy the enforceable promise; or
470-13 (D) another penalty or consequence.
470-14 Sec. 101.154. CONSENT REQUIRED TO RELEASE ENFORCEABLE
470-15 OBLIGATION. The obligation of a member of a limited liability
470-16 company, or of the member's legal representative or successor, to
470-17 make a contribution or otherwise pay cash or transfer property to
470-18 the company, or to return cash or property to the company paid or
470-19 distributed to the member in violation of this code or the company
470-20 agreement, may be released or settled only by consent of each
470-21 member of the company.
470-22 Sec. 101.155. CREDITOR'S RIGHT TO ENFORCE CERTAIN
470-23 OBLIGATIONS. A creditor of a limited liability company who extends
470-24 credit or otherwise acts in reasonable reliance on an enforceable
470-25 obligation of a member of the company that is released or settled
470-26 as provided by Section 101.154 may enforce the original obligation
470-27 if the obligation is stated in a document that is:
471-1 (1) signed by the member; and
471-2 (2) not amended or canceled to evidence the release or
471-3 settlement of the obligation.
471-4 Sec. 101.156. REQUIREMENTS TO ENFORCE CONDITIONAL
471-5 OBLIGATION. (a) An obligation of a member of a limited liability
471-6 company that is subject to a condition may be enforced by the
471-7 company or a creditor described by Section 101.155 only if the
471-8 condition is satisfied or waived by or with respect to the member.
471-9 (b) A conditional obligation of a member of a limited
471-10 liability company under this section includes a contribution
471-11 payable on a discretionary call of the limited liability company
471-12 before the time the call occurs.
471-13 (Sections 101.157-101.200 reserved for expansion)
471-14 SUBCHAPTER E. ALLOCATIONS AND DISTRIBUTIONS
471-15 Sec. 101.201. ALLOCATION OF PROFITS AND LOSSES. The profits
471-16 and losses of a limited liability company shall be allocated to
471-17 each member of the company in accordance with the member's
471-18 percentage or other interest in the company on the date of the
471-19 allocation as stated in the company's records required under
471-20 Sections 3.151 and 101.501.
471-21 Sec. 101.202. DISTRIBUTION IN KIND. A member of a limited
471-22 liability company is entitled to receive or demand a distribution
471-23 from the company only in the form of cash, regardless of the form
471-24 of the member's contribution to the company.
471-25 Sec. 101.203. SHARING OF DISTRIBUTIONS. Distributions of
471-26 cash and other assets of a limited liability company shall be made
471-27 to each member of the company according to the agreed value of the
472-1 member's contribution to the company as stated in the company's
472-2 records required under Sections 3.151 and 101.501.
472-3 Sec. 101.204. INTERIM DISTRIBUTIONS. A member of a limited
472-4 liability company, before the winding up of the company, is not
472-5 entitled to receive and may not demand a distribution from the
472-6 company until the company's governing authority declares a
472-7 distribution to:
472-8 (1) each member of the company; or
472-9 (2) a class or group of members that includes the
472-10 member.
472-11 Sec. 101.205. DISTRIBUTION ON WITHDRAWAL. A member of a
472-12 limited liability company who validly exercises the member's right
472-13 to withdraw from the company granted under the company agreement is
472-14 entitled to receive, within a reasonable time after the date of
472-15 withdrawal, the fair value of the member's interest in the company
472-16 as determined on the date of withdrawal.
472-17 Sec. 101.206. PROHIBITED DISTRIBUTION; DUTY TO RETURN. (a)
472-18 A limited liability company may not make a distribution to a member
472-19 of the company if, immediately after making the distribution, the
472-20 company's total liabilities, other than liabilities described by
472-21 Subsection (b), exceed the fair value of the company's total
472-22 assets.
472-23 (b) For purposes of Subsection (a), the liabilities of a
472-24 limited liability company do not include:
472-25 (1) a liability related to the member's membership
472-26 interest; or
472-27 (2) except as provided by Subsection (c), a liability
473-1 for which the recourse of creditors is limited to specified
473-2 property of the company.
473-3 (c) For purposes of Subsection (a), the assets of a limited
473-4 liability company include the fair value of property subject to a
473-5 liability for which recourse of creditors is limited to specified
473-6 property of the company only if the fair value of that property
473-7 exceeds the liability.
473-8 (d) A member of a limited liability company who receives a
473-9 distribution from the company in violation of this section is
473-10 required to return the distribution to the company if the member
473-11 had knowledge of the violation.
473-12 (e) This section may not be construed to affect the
473-13 obligation of a member of a limited liability company to return a
473-14 distribution to the company under the company agreement or other
473-15 state or federal law.
473-16 Sec. 101.207. CREDITOR STATUS WITH RESPECT TO DISTRIBUTION.
473-17 Subject to Sections 11.053 and 101.206, when a member of a limited
473-18 liability company is entitled to receive a distribution from the
473-19 company, the member, with respect to the distribution, has the same
473-20 status as a creditor of the company and is entitled to any remedy
473-21 available to a creditor of the company.
473-22 (Sections 101.208-101.250 reserved for expansion)
473-23 SUBCHAPTER F. MANAGEMENT
473-24 Sec. 101.251. MEMBERSHIP. The governing authority of a
473-25 limited liability company consists of:
473-26 (1) the managers of the company, if the company's
473-27 certificate of formation states that the company will have one or
474-1 more managers; or
474-2 (2) the members of the company, if the company's
474-3 certificate of formation states that the company will not have
474-4 managers.
474-5 Sec. 101.252. MANAGEMENT BY GOVERNING AUTHORITY. The
474-6 governing authority of a limited liability company shall manage the
474-7 business and affairs of the company as provided by:
474-8 (1) the company agreement; and
474-9 (2) this title and the provisions of Title 1
474-10 applicable to a limited liability company to the extent that the
474-11 company agreement does not provide for the management of the
474-12 company.
474-13 Sec. 101.253. DESIGNATION OF COMMITTEES; DELEGATION OF
474-14 AUTHORITY. (a) The governing authority of a limited liability
474-15 company by resolution may designate:
474-16 (1) one or more committees of the governing authority
474-17 consisting of one or more governing persons of the company; and
474-18 (2) subject to any limitation imposed by the governing
474-19 authority, a governing person to serve as an alternate member of a
474-20 committee designated under Subdivision (1) at a committee meeting
474-21 from which a member of the committee is absent or disqualified.
474-22 (b) A committee of the governing authority of a limited
474-23 liability company may exercise the authority of the governing
474-24 authority as provided by the resolution designating the committee.
474-25 (c) The designation of a committee under this section does
474-26 not relieve the governing authority of any responsibility imposed
474-27 by law.
475-1 Sec. 101.254. DESIGNATION OF AGENTS; BINDING ACTS. (a)
475-2 Except as provided by this title and Title 1, each governing person
475-3 of a limited liability company and each officer or agent of a
475-4 limited liability company vested with actual or apparent authority
475-5 by the governing authority of the company is an agent of the
475-6 company for purposes of carrying out the company's business.
475-7 (b) An act committed by an agent of a limited liability
475-8 company described by Subsection (a) for the purpose of apparently
475-9 carrying out the ordinary course of business of the company,
475-10 including the execution of an instrument in the name of the
475-11 company, binds the company unless:
475-12 (1) the agent does not have actual authority to act
475-13 for the company; and
475-14 (2) the person with whom the agent is dealing has
475-15 knowledge of the agent's lack of actual authority.
475-16 (c) An act committed by an agent of a limited liability
475-17 company described by Subsection (a) that is not apparently for
475-18 carrying out the ordinary course of business of the company binds
475-19 the company only if the act is authorized in accordance with this
475-20 title.
475-21 Sec. 101.255. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED
475-22 GOVERNING PERSONS OR OFFICERS. (a) This section applies only to a
475-23 contract or transaction between a limited liability company and:
475-24 (1) one or more of the company's governing persons or
475-25 officers; or
475-26 (2) an entity or other organization in which one or
475-27 more of the company's governing persons or officers:
476-1 (A) is a managerial official; or
476-2 (B) has a financial interest.
476-3 (b) An otherwise valid contract or transaction is valid
476-4 notwithstanding that a governing person or officer of the company
476-5 is present at or participates in the meeting of the governing
476-6 authority, or of a committee of the governing person's authority,
476-7 that authorizes the contract or transaction or votes to authorize
476-8 the contract or transaction, if:
476-9 (1) the material facts as to the relationship or
476-10 interest and as to the contract or transaction are disclosed to or
476-11 known by:
476-12 (A) the company's governing authority or a
476-13 committee of the governing authority and the governing authority or
476-14 committee in good faith authorizes the contract or transaction by
476-15 the affirmative vote of the majority of the disinterested governing
476-16 persons of the company, regardless of whether the disinterested
476-17 governing persons constitute a quorum; or
476-18 (B) if the company has managers, the members of
476-19 the company, and the members in good faith approve the contract or
476-20 transaction by a majority vote of all of the members; or
476-21 (2) the contract or transaction is fair to the company
476-22 when the contract or transaction is authorized, approved, or
476-23 ratified by the governing authority, a committee of the governing
476-24 authority, or the members of the company.
476-25 (c) Common or interested governing persons of a limited
476-26 liability company may be included in determining the presence of a
476-27 quorum at a meeting of the company's governing authority, or of a
477-1 committee of the governing authority that authorizes the contract
477-2 or transaction.
477-3 (Sections 101.256-101.300 reserved for expansion)
477-4 SUBCHAPTER G. MANAGERS
477-5 Sec. 101.301. APPLICABILITY OF SUBCHAPTER. This subchapter
477-6 applies only to a limited liability company that has one or more
477-7 managers.
477-8 Sec. 101.302. NUMBER AND QUALIFICATIONS. (a) The managers
477-9 of a limited liability company consist of one or more persons.
477-10 (b) Except as provided by Subsection (c), the number of
477-11 managers of a limited liability company consists of the number of
477-12 initial managers listed in the company's certificate of formation.
477-13 (c) The number of managers of a limited liability company
477-14 may be increased or decreased by amendment to, or as provided by,
477-15 the company agreement, except that a decrease in the number of
477-16 managers may not shorten the term of an incumbent manager.
477-17 (d) A manager of a limited liability company is not required
477-18 to be a:
477-19 (1) resident of this state; or
477-20 (2) member of the company.
477-21 Sec. 101.303. TERM. A manager of a limited liability
477-22 company serves:
477-23 (1) for the term, if any, for which the manager is
477-24 elected and until the manager's successor is elected; or
477-25 (2) until the death, resignation, or removal of the
477-26 manager.
477-27 Sec. 101.304. REMOVAL. Subject to Section 101.306(a), a
478-1 manager of a limited liability company may be removed, with or
478-2 without cause, at a meeting of the company's members called for
478-3 that purpose.
478-4 Sec. 101.305. MANAGER VACANCY. (a) Subject to Section
478-5 101.306(b), a vacancy in the position of a manager of a limited
478-6 liability company may be filled by:
478-7 (1) the affirmative vote of the majority of the
478-8 remaining managers of the company, without regard to whether the
478-9 remaining managers constitute a quorum; or
478-10 (2) if the vacancy is a result of an increase in the
478-11 number of managers, an election at an annual or special meeting of
478-12 the company's members called for that purpose.
478-13 (b) A person elected to fill a vacancy in the position of a
478-14 manager serves for the unexpired term of the person's predecessor.
478-15 Sec. 101.306. ELECTION OF MANAGER BY CLASS OR GROUP. (a)
478-16 If a class or group of the members of a limited liability company
478-17 is entitled by the company agreement of the company to elect one or
478-18 more managers of the company, a manager may be removed from office
478-19 only by the class or group that elected the manager.
478-20 (b) A vacancy in the position of a manager elected as
478-21 provided by Subsection (a) may be filled only by:
478-22 (1) a majority vote of the managers serving on the
478-23 date the vacancy occurs who were elected by the class or group of
478-24 members; or
478-25 (2) a majority vote of the members of the class or
478-26 group.
478-27 Sec. 101.307. METHODS OF CLASSIFYING MANAGERS. Other
479-1 methods of classifying managers of a limited liability company,
479-2 including providing for managers who serve for staggered terms of
479-3 office or terms that are not uniform, may be established in the
479-4 company agreement.
479-5 (Sections 101.308-101.350 reserved for expansion)
479-6 SUBCHAPTER H. MEETINGS AND VOTING
479-7 Sec. 101.351. APPLICABILITY OF SUBCHAPTER. This subchapter
479-8 applies only to a meeting of and voting by:
479-9 (1) the governing authority of a limited liability
479-10 company;
479-11 (2) the members of a limited liability company if the
479-12 members do not constitute the governing authority of the company;
479-13 and
479-14 (3) a committee of the governing authority of a
479-15 limited liability company.
479-16 Sec. 101.352. GENERAL NOTICE REQUIREMENTS. (a) Except as
479-17 provided by Subsection (b), notice of a regular or special meeting
479-18 of the governing authority or members of a limited liability
479-19 company, or a committee of the company's governing authority, shall
479-20 be given in writing to each governing person, member, or committee
479-21 member, as appropriate, and as provided by Section 6.051.
479-22 (b) If the members of a limited liability company do not
479-23 constitute the governing authority of the company, notice required
479-24 by Subsection (a) shall be given by or at the direction of the
479-25 governing authority not later than the 10th day or earlier than the
479-26 60th day before the date of the meeting. Notice of a meeting
479-27 required under this subsection must state the business to be
480-1 transacted at the meeting or the purpose of the meeting if:
480-2 (1) the meeting is a special meeting; or
480-3 (2) a purpose of the meeting is to consider a matter
480-4 described by Section 101.356.
480-5 Sec. 101.353. QUORUM. A majority of all of the governing
480-6 persons, members, or committee members of a limited liability
480-7 company constitutes a quorum for the purpose of transacting
480-8 business at a meeting of the governing authority, members, or
480-9 committee of the company, as appropriate.
480-10 Sec. 101.354. EQUAL VOTING RIGHTS. Each governing person,
480-11 member, or committee member of a limited liability company has an
480-12 equal vote at a meeting of the governing authority, members, or
480-13 committee of the company, as appropriate.
480-14 Sec. 101.355. ACT OF GOVERNING AUTHORITY, MEMBERS, OR
480-15 COMMITTEE. Except as provided by this title or Title 1, the
480-16 affirmative vote of the majority of the governing persons, members,
480-17 or committee members of a limited liability company present at a
480-18 meeting at which a quorum is present constitutes an act of the
480-19 governing authority, members, or committee of the company, as
480-20 appropriate.
480-21 Sec. 101.356. VOTES REQUIRED TO APPROVE CERTAIN ACTIONS.
480-22 (a) Except as provided by Subsections (b), (c), and (d) or other
480-23 sections in this title, an action of a limited liability company
480-24 may be approved by the company's governing authority as provided by
480-25 Section 101.355.
480-26 (b) Except as provided by Subsections (c) and (d) or other
480-27 sections in this title, an action of a limited liability company
481-1 taken apparently not for carrying out the ordinary course of
481-2 business of the company must be approved by the affirmative vote of
481-3 the majority of the company's governing persons.
481-4 (c) Except as provided by Subsections (d) and (e) or other
481-5 sections in this title, a fundamental business transaction of a
481-6 limited liability company, or an action that would make it
481-7 impossible for a limited liability company to carry out the
481-8 ordinary business of the company, must be approved by the
481-9 affirmative vote of the majority of all of:
481-10 (1) the company's governing persons; or
481-11 (2) if the company has no managers, the company's
481-12 members.
481-13 (d) Except as provided by Subsection (e) and other sections
481-14 of this title, an amendment to the certificate of formation of a
481-15 limited liability company must be approved by an affirmative vote
481-16 of all of:
481-17 (1) the company's governing persons; and
481-18 (2) if the company has no managers, the company's
481-19 members.
481-20 (e) A requirement that an action of a limited liability
481-21 company must be approved by the company's members does not apply
481-22 during the period prescribed by Section 101.101(b).
481-23 Sec. 101.357. MANNER OF VOTING. (a) A member of a limited
481-24 liability company may vote:
481-25 (1) in person; or
481-26 (2) by a proxy executed in writing by the member.
481-27 (b) A manager or committee member of a limited liability
482-1 company, if authorized by the company agreement, may vote:
482-2 (1) in person; or
482-3 (2) by a proxy executed in writing by the governing
482-4 person or committee member, as appropriate.
482-5 Sec. 101.358. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT.
482-6 (a) This section applies only to an action required or authorized
482-7 to be taken at an annual or special meeting of the governing
482-8 authority, the members, or a committee of the governing authority
482-9 of a limited liability company under this title, Title 1, or the
482-10 governing documents of the company.
482-11 (b) Notwithstanding Sections 6.201 and 6.202, an action may
482-12 be taken without holding a meeting, providing notice, or taking a
482-13 vote if a written consent or consents stating the action to be
482-14 taken is signed by the number of governing persons, members, or
482-15 committee members of a limited liability company, as appropriate,
482-16 necessary to have at least the minimum number of votes that would
482-17 be necessary to take the action at a meeting at which each
482-18 governing person, member, or committee member, as appropriate,
482-19 entitled to vote on the action is present and votes.
482-20 Sec. 101.359. RIGHTS OF DISSENT AND APPRAISAL. (a) Except
482-21 as provided by Subsection (b), a limited liability company is not a
482-22 domestic entity subject to dissenters' rights, as defined by
482-23 Section 1.002, and the members of a limited liability company are
482-24 not entitled to the rights of dissent and appraisal provided by
482-25 Subchapter H, Chapter 10, with respect to an action of the company
482-26 described by this title or Title 1.
482-27 (b) A limited liability company is a domestic entity subject
483-1 to dissenters' rights and the members of the limited liability
483-2 company are entitled to the rights of dissent and appraisal
483-3 provided by Subchapter H, Chapter 10, if the rights of dissent and
483-4 appraisal are conferred by a company agreement.
483-5 (Sections 101.360-101.400 reserved for expansion)
483-6 SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION
483-7 Sec. 101.401. EXPANSION OR RESTRICTION OF DUTIES AND
483-8 LIABILITIES. The company agreement of a limited liability company
483-9 may expand or restrict duties, including fiduciary duties, and
483-10 liabilities of a person relating to the company or to a member,
483-11 manager, or officer of the company or an assignee of a membership
483-12 interest in the company.
483-13 Sec. 101.402. PERMISSIVE INDEMNIFICATION, ADVANCEMENT OF
483-14 EXPENSES, AND INSURANCE OR OTHER ARRANGEMENTS. (a) A limited
483-15 liability company may:
483-16 (1) indemnify a person;
483-17 (2) pay in advance or reimburse expenses incurred by a
483-18 person; and
483-19 (3) purchase or procure or establish and maintain
483-20 insurance or another arrangement to indemnify or hold harmless a
483-21 person.
483-22 (b) In this section, "person" includes a member, manager, or
483-23 officer of a limited liability company or an assignee of a
483-24 membership interest in the company.
483-25 (Sections 101.403-101.450 reserved for expansion)
483-26 SUBCHAPTER J. DERIVATIVE PROCEEDINGS
483-27 Sec. 101.451. DEFINITIONS. In this subchapter:
484-1 (1) "Derivative proceeding" means a civil suit in the
484-2 right of a domestic limited liability company or, to the extent
484-3 provided by Section 101.462, in the right of a foreign limited
484-4 liability company.
484-5 (2) "Member" includes a beneficial owner whose shares
484-6 are held in a voting trust or by a nominee on the beneficial
484-7 owner's behalf.
484-8 Sec. 101.452. STANDING TO BRING PROCEEDING. A member may
484-9 not institute or maintain a derivative proceeding unless:
484-10 (1) the member:
484-11 (A) was a member of the limited liability
484-12 company at the time of the act or omission complained of; or
484-13 (B) became a member by operation of law from a
484-14 person that was a member at the time of the act or omission
484-15 complained of; and
484-16 (2) the member fairly and adequately represents the
484-17 interests of the limited liability company in enforcing the right
484-18 of the limited liability company.
484-19 Sec. 101.453. DEMAND. (a) A member may not institute a
484-20 derivative proceeding until the 91st day after the date a written
484-21 demand is filed with the limited liability company stating with
484-22 particularity the act, omission, or other matter that is the
484-23 subject of the claim or challenge and requesting that the limited
484-24 liability company take suitable action.
484-25 (b) The waiting period required by Subsection (a) before a
484-26 derivative proceeding may be instituted is not required if:
484-27 (1) the member has been previously notified that the
485-1 demand has been rejected by the limited liability company;
485-2 (2) the limited liability company is suffering
485-3 irreparable injury; or
485-4 (3) irreparable injury to the limited liability
485-5 company would result by waiting for the expiration of the 90-day
485-6 period.
485-7 Sec. 101.454. DETERMINATION BY GOVERNING OR INDEPENDENT
485-8 PERSONS. (a) The determination of how to proceed on allegations
485-9 made in a demand or petition relating to a derivative proceeding
485-10 must be made by:
485-11 (1) an affirmative vote of the majority of the
485-12 independent and disinterested governing persons present at a
485-13 meeting of the governing authority at which interested governing
485-14 persons are not present at the time of the vote if the independent
485-15 and disinterested governing persons constitute a quorum of the
485-16 governing authority;
485-17 (2) an affirmative vote of the majority of a committee
485-18 consisting of two or more independent and disinterested governing
485-19 persons appointed by an affirmative vote of the majority of one or
485-20 more independent and disinterested governing persons present at a
485-21 meeting of the governing authority, regardless of whether the
485-22 independent and disinterested governing persons constitute a quorum
485-23 of the governing authority; or
485-24 (3) a panel of one or more independent and
485-25 disinterested persons appointed by the court on a motion by the
485-26 limited liability company listing the names of the persons to be
485-27 appointed and stating that, to the best of the limited liability
486-1 company's knowledge, the persons to be appointed are disinterested
486-2 and qualified to make the determinations contemplated by Section
486-3 101.458.
486-4 (b) The court shall appoint a panel under Subsection (a)(3)
486-5 if the court finds that the persons recommended by the limited
486-6 liability company are independent and disinterested and are
486-7 otherwise qualified with respect to expertise, experience,
486-8 independent judgment, and other factors considered appropriate by
486-9 the court under the circumstances to make the determinations. A
486-10 person appointed by the court to a panel under this section may not
486-11 be held liable to the limited liability company or the limited
486-12 liability company's members for an action taken or omission made by
486-13 the person in that capacity, except for acts or omissions
486-14 constituting fraud or wilful misconduct.
486-15 Sec. 101.455. STAY OF PROCEEDING. (a) If the domestic or
486-16 foreign limited liability company that is the subject of a
486-17 derivative proceeding commences an inquiry into the allegations
486-18 made in a demand or petition and the person or group of persons
486-19 described by Section 101.454 is conducting an active review of the
486-20 allegations in good faith, the court shall stay a derivative
486-21 proceeding until the review is completed and a determination is
486-22 made by the person or group regarding what further action, if any,
486-23 should be taken.
486-24 (b) To obtain a stay, the domestic or foreign limited
486-25 liability company shall provide the court with a written statement
486-26 agreeing to advise the court and the member making the demand of
486-27 the determination promptly on the completion of the review of the
487-1 matter. A stay, on motion, may be reviewed every 60 days for the
487-2 continued necessity of the stay.
487-3 (c) If the review and determination made by the person or
487-4 group is not completed before the 61st day after the date on which
487-5 the court orders the stay, the stay may be renewed for one or more
487-6 additional 60-day periods if the domestic or foreign limited
487-7 liability company provides the court and the member with a written
487-8 statement of the status of the review and the reasons why a
487-9 continued extension of the stay is necessary.
487-10 Sec. 101.456. DISCOVERY. (a) If a domestic or foreign
487-11 limited liability company proposes to dismiss a derivative
487-12 proceeding under Section 101.458, discovery by a member after the
487-13 filing of the derivative proceeding in accordance with this
487-14 subchapter shall be limited to:
487-15 (1) facts relating to whether the person or group of
487-16 persons described by Section 101.458 is independent and
487-17 disinterested;
487-18 (2) the good faith of the inquiry and review by the
487-19 person or group; and
487-20 (3) the reasonableness of the procedures followed by
487-21 the person or group in conducting the review.
487-22 (b) Discovery described by Subsection (a) may not be
487-23 expanded to include a fact or substantive matter regarding the act,
487-24 omission, or other matter that is the subject matter of the
487-25 derivative proceeding. The scope of discovery may be expanded if
487-26 the court determines after notice and hearing that a good faith
487-27 review of the allegations for purposes of Section 101.458 has not
488-1 been made by an independent and disinterested person or group in
488-2 accordance with that section.
488-3 Sec. 101.457. TOLLING OF STATUTE OF LIMITATIONS. A written
488-4 demand filed with the limited liability company under Section
488-5 101.453 tolls the statute of limitations on the claim on which
488-6 demand is made until the earlier of:
488-7 (1) the 91st day after the date of the demand; or
488-8 (2) the 31st day after the date the limited liability
488-9 company advises the member that the demand has been rejected or the
488-10 review has been completed.
488-11 Sec. 101.458. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A
488-12 court shall dismiss a derivative proceeding on a motion by the
488-13 limited liability company if the person or group of persons
488-14 described by Section 101.454 determines in good faith, after
488-15 conducting a reasonable inquiry and based on factors the person or
488-16 group considers appropriate under the circumstances, that
488-17 continuation of the derivative proceeding is not in the best
488-18 interests of the limited liability company.
488-19 (b) In determining whether the requirements of Subsection
488-20 (a) have been met, the burden of proof shall be on:
488-21 (1) the plaintiff member if:
488-22 (A) the majority of the governing authority
488-23 consists of independent and disinterested persons at the time the
488-24 determination is made;
488-25 (B) the determination is made by a panel of one
488-26 or more independent and disinterested persons appointed under
488-27 Section 101.454; or
489-1 (C) the limited liability company presents prima
489-2 facie evidence that demonstrates that the persons appointed under
489-3 Section 101.454 are independent and disinterested; or
489-4 (2) the limited liability company in any other
489-5 circumstance.
489-6 Sec. 101.459. DEMAND. If a derivative proceeding is
489-7 instituted after a demand is rejected, the petition must allege
489-8 with particularity facts that establish that the rejection was not
489-9 made in accordance with the requirements of Sections 101.454 and
489-10 101.458.
489-11 Sec. 101.460. DISCONTINUANCE OR SETTLEMENT. (a) A
489-12 derivative proceeding may not be discontinued or settled without
489-13 court approval.
489-14 (b) The court shall direct that notice be given to the
489-15 affected members if the court determines that a proposed
489-16 discontinuance or settlement may substantially affect the interests
489-17 of other members.
489-18 Sec. 101.461. PAYMENT OF EXPENSES. (a) In this section,
489-19 "expenses" means reasonable expenses incurred by a party in a
489-20 derivative proceeding, including:
489-21 (1) attorney's fees;
489-22 (2) costs of pursuing an investigation of the matter
489-23 that was the subject of the derivative proceeding; or
489-24 (3) expenses for which the domestic or foreign limited
489-25 liability company may be required to indemnify another person.
489-26 (b) On termination of a derivative proceeding, the court may
489-27 order:
490-1 (1) the domestic or foreign limited liability company
490-2 to pay the expenses the plaintiff incurred in the proceeding if the
490-3 court finds the proceeding has resulted in a substantial benefit to
490-4 the domestic or foreign limited liability company;
490-5 (2) the plaintiff to pay the expenses the domestic or
490-6 foreign limited liability company or other defendant incurred in
490-7 investigating and defending the proceeding if the court finds the
490-8 proceeding has been instituted or maintained without reasonable
490-9 cause or for an improper purpose; or
490-10 (3) a party to pay the expenses incurred by another
490-11 party relating to the filing of a pleading, motion, or other paper
490-12 if the court finds the pleading, motion, or other paper:
490-13 (A) was not well grounded in fact after
490-14 reasonable inquiry;
490-15 (B) was not warranted by existing law or a good
490-16 faith argument for the extension, modification, or reversal of
490-17 existing law; or
490-18 (C) was interposed for an improper purpose, such
490-19 as to harass, cause unnecessary delay, or cause a needless increase
490-20 in the cost of litigation.
490-21 Sec. 101.462. APPLICATION TO FOREIGN LIMITED LIABILITY
490-22 COMPANIES. (a) In a derivative proceeding brought in the right of
490-23 a foreign limited liability company, the matters covered by this
490-24 subchapter are governed by the laws of the jurisdiction of
490-25 organization of the foreign limited liability company, except for
490-26 Sections 101.455, 101.460, and 101.461, which are procedural
490-27 provisions and do not relate to the internal affairs of the foreign
491-1 limited liability company.
491-2 (b) In the case of matters relating to a foreign limited
491-3 liability company under Section 101.454, a reference to a person or
491-4 group of persons described by that section refers to a person or
491-5 group entitled under the laws of the jurisdiction of organization
491-6 of the foreign limited liability company to review and dispose of a
491-7 derivative proceeding. The standard of review of a decision made
491-8 by the person or group to dismiss the derivative proceeding shall
491-9 be governed by the laws of the jurisdiction of organization of the
491-10 foreign limited liability company.
491-11 Sec. 101.463. CLOSELY HELD LIMITED LIABILITY COMPANY. (a)
491-12 In this section, "closely held limited liability company" means a
491-13 limited liability company that has:
491-14 (1) fewer than 35 members; and
491-15 (2) no shares listed on a national securities exchange
491-16 or regularly quoted in an over-the-counter market by one or more
491-17 members of a national securities association.
491-18 (b) Subject to Subsection (c), Sections 101.452-101.459 do
491-19 not apply to a closely held limited liability company.
491-20 (c) If justice requires:
491-21 (1) a derivative proceeding brought by a member of a
491-22 closely held limited liability company may be treated by a court as
491-23 a direct action brought by the member for the member's own benefit;
491-24 and
491-25 (2) a recovery in a direct or derivative proceeding by
491-26 a member may be paid directly to the plaintiff or to the limited
491-27 liability company if necessary to protect the interests of
492-1 creditors or other members of the limited liability company.
492-2 (Sections 101.464-101.500 reserved for expansion)
492-3 SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS
492-4 Sec. 101.501. ADDITIONAL RECORDS REQUIRED. (a) In addition
492-5 to the books and records required to be kept under Section 3.151, a
492-6 limited liability company shall keep at its principal domestic
492-7 office, or make available to a person at its principal domestic
492-8 office not later than the fifth day after the date the person
492-9 submits a written request to examine the books and records of the
492-10 company under Section 3.152(a) or 101.502:
492-11 (1) a current list of each member of a class or group
492-12 of membership interests in the company;
492-13 (2) a copy of the company's federal, state, and local
492-14 tax information or income tax returns for each of the six preceding
492-15 tax years;
492-16 (3) a copy of the company's certificate of formation,
492-17 including any amendments to or restatements of the certificate of
492-18 formation;
492-19 (4) if the company agreement is in writing, a copy of
492-20 the company agreement, including any amendments to or restatements
492-21 of the company agreement;
492-22 (5) an executed copy of any powers of attorney;
492-23 (6) a copy of any document that establishes a class or
492-24 group of members of the company as provided by the company
492-25 agreement; and
492-26 (7) except as provided by Subsection (b), a written
492-27 statement of:
493-1 (A) the amount of a cash contribution and a
493-2 description and statement of the agreed value of any other
493-3 contribution made or agreed to be made by each member;
493-4 (B) the dates any additional contributions are
493-5 to be made by a member;
493-6 (C) any event the occurrence of which requires a
493-7 member to make additional contributions;
493-8 (D) any event the occurrence of which requires
493-9 the winding up of the company; and
493-10 (E) the date each member became a member of the
493-11 company.
493-12 (b) A limited liability company is not required to keep or
493-13 make available at its principal domestic office a written statement
493-14 of the information required by Subsection (a)(7) if that
493-15 information is stated in the company agreement.
493-16 (c) A limited liability company shall keep at its registered
493-17 office located in this state and make available to a member of the
493-18 company on reasonable request the street address of the company's
493-19 principal domestic office in which the records required by this
493-20 section and Section 3.151 are maintained or made available.
493-21 Sec. 101.502. RIGHT TO EXAMINE RECORDS AND CERTAIN OTHER
493-22 INFORMATION. (a) A member of a limited liability company or an
493-23 assignee of a membership interest in a limited liability company,
493-24 or a representative of the member or assignee, on written request
493-25 and for a proper purpose, may examine and copy at any reasonable
493-26 time and at the member's or assignee's expense:
493-27 (1) records required under Sections 3.151 and 101.501;
494-1 and
494-2 (2) other information regarding the business, affairs,
494-3 and financial condition of the company that is reasonable for the
494-4 person to examine and copy.
494-5 (b) A limited liability company shall provide to a member of
494-6 the company or an assignee of a membership interest in the company,
494-7 on written request by the member or assignee mailed to the
494-8 company's principal domestic office or, if different, the person
494-9 and address designated in the company agreement, a free copy of:
494-10 (1) the company's certificate of formation, including
494-11 any amendments to or restatements of the certificate of formation;
494-12 (2) if in writing, the company agreement, including
494-13 any amendments to or restatements of the company agreement; and
494-14 (3) any tax returns described by Section
494-15 101.501(a)(2).
494-16 (Sections 101.503-101.550 reserved for expansion)
494-17 SUBCHAPTER L. SUPPLEMENTAL WINDING UP AND TERMINATION
494-18 PROVISIONS
494-19 Sec. 101.551. ADDITIONAL EVENT REQUIRING WINDING UP. In
494-20 addition to an event listed under Section 11.051, the termination
494-21 of the continued membership of the last remaining member of a
494-22 limited liability company is an event that requires the winding up
494-23 of a domestic entity unless, not later than the 90th day after the
494-24 date of the termination, the legal representative or successor of
494-25 the last remaining member agrees:
494-26 (1) to continue the company; and
494-27 (2) from the date of the termination, to become a
495-1 member of the company or nominate or delegate another person to
495-2 become a member of the company.
495-3 Sec. 101.552. PERSONS ELIGIBLE TO WIND UP COMPANY. After an
495-4 event requiring the winding up of a limited liability company
495-5 unless a revocation as provided by Section 11.151 or a cancellation
495-6 as provided by Section 11.152 occurs, the winding up of the company
495-7 must be carried out by:
495-8 (1) the company's governing authority or one or more
495-9 persons, including a governing person, designated by the governing
495-10 authority;
495-11 (2) if the event requiring the winding up of the
495-12 company is the termination of the continued membership of the last
495-13 remaining member of the company, the legal representative or
495-14 successor of the last remaining member or one or more persons
495-15 designated by the legal representative or successor; or
495-16 (3) a person appointed by the court to carry out the
495-17 winding up of the company under Section 11.054, 11.405, 11.409, or
495-18 11.410.
495-19 Sec. 101.553. APPROVAL OF VOLUNTARY WINDING UP, REVOCATION,
495-20 CANCELLATION, OR REINSTATEMENT. A majority vote of all of the
495-21 governing persons of a limited liability company and, if the
495-22 limited liability company has managers, a majority vote of all of
495-23 the members of the company is required to approve:
495-24 (1) a voluntary winding up of the company under
495-25 Chapter 11;
495-26 (2) a revocation of a voluntary decision to wind up
495-27 the company under Section 11.151;
496-1 (3) a cancellation of an event requiring the winding
496-2 up of the company under Section 11.152; or
496-3 (4) a reinstatement of a termination of the company
496-4 under Section 11.202.
496-5 TITLE 4. PARTNERSHIPS
496-6 CHAPTER 151. GENERAL PROVISIONS
496-7 Sec. 151.001. DEFINITIONS. In this title:
496-8 (1) "Capital account" means the amount computed by:
496-9 (A) adding the amount of a partner's original
496-10 and additional contributions of cash to a partnership, the agreed
496-11 value of any other property that that partner originally or
496-12 additionally contributed to the partnership, and allocations of
496-13 partnership profits to that partner; and
496-14 (B) subtracting the amount of distributions to
496-15 that partner and allocations of partnership losses to that partner.
496-16 (2) "Foreign limited partnership" means a partnership
496-17 formed under the laws of another state that has one or more general
496-18 partners and one or more limited partners.
496-19 (3) "Majority-in-interest," with respect to all or a
496-20 specified group of partners, means partners who own more than 50
496-21 percent of the current percentage or other interest in the profits
496-22 of the partnership that is owned by all of the partners or by the
496-23 partners in the specified group, as appropriate.
496-24 (4) "Partnership agreement" means a written or oral
496-25 agreement of the partners concerning a partnership.
496-26 Sec. 151.002. KNOWLEDGE OF FACT. For purposes of this
496-27 title, a person has knowledge of a fact only if the person has
497-1 actual knowledge of the fact.
497-2 Sec. 151.003. NOTICE OF FACT. (a) For purposes of this
497-3 title, a person has notice of a fact if the person:
497-4 (1) has knowledge of the fact;
497-5 (2) has received a communication of the fact as
497-6 provided by Subsection (c); or
497-7 (3) reasonably should have concluded, from all facts
497-8 then known to that person, that the fact exists.
497-9 (b) A person notifies or gives notice to another person of a
497-10 fact by taking actions reasonably required to inform the other
497-11 person of the fact in the ordinary course of business, regardless
497-12 of whether the other person actually has knowledge of the fact.
497-13 (c) A person is notified or receives notice of a fact when
497-14 the fact is communicated to:
497-15 (1) the person;
497-16 (2) the person's place of business; or
497-17 (3) another place held out by the person as the place
497-18 for receipt of communications.
497-19 (d) Receipt of notice by a partner of a fact relating to the
497-20 partnership is effective immediately as notice to the partnership
497-21 unless fraud against the partnership is committed by or with the
497-22 consent of the partner receiving the notice.
497-23 CHAPTER 152. GENERAL PARTNERSHIPS
497-24 SUBCHAPTER A. GENERAL PROVISIONS
497-25 Sec. 152.001. DEFINITIONS. In this chapter:
497-26 (1) "Event of withdrawal" or "withdrawal" means an
497-27 event specified by Section 152.501(b).
498-1 (2) "Event requiring a winding up" means an event
498-2 specified by Section 152.701.
498-3 (3) "Foreign limited liability partnership" means a
498-4 partnership that:
498-5 (A) is foreign; and
498-6 (B) has the status of a registered limited
498-7 liability partnership pursuant to the laws of the jurisdiction
498-8 under which it is formed or that govern its internal affairs.
498-9 (4) "Other partnership provisions" means the
498-10 provisions of Chapters 151 and 154 and Title 1 to the extent
498-11 applicable to partnerships.
498-12 (5) "Withdrawn partner" means a partner with respect
498-13 to whom an event of withdrawal has occurred.
498-14 Sec. 152.002. EFFECT OF PARTNERSHIP AGREEMENT; NONWAIVABLE
498-15 AND VARIABLE PROVISIONS. (a) Except as provided by Subsection
498-16 (b), a partnership agreement governs the relations of the partners
498-17 and between the partners and the partnership. To the extent that
498-18 the partnership agreement does not otherwise provide, this chapter
498-19 and the other partnership provisions govern the relationship of the
498-20 partners and between the partners and the partnership.
498-21 (b) A partnership agreement or the partners may not:
498-22 (1) unreasonably restrict a partner's right of access
498-23 to books and records under Section 152.212;
498-24 (2) eliminate the duty of loyalty under Section
498-25 152.205, except that the partners by agreement may identify a
498-26 specific type of activity or category of activities that do not
498-27 violate the duty of loyalty if the type or category is not
499-1 manifestly unreasonable;
499-2 (3) eliminate the duty of care under Section 152.206,
499-3 except that the partners by agreement may determine the standards
499-4 by which the performance of the obligation is to be measured if the
499-5 standards are not manifestly unreasonable;
499-6 (4) eliminate the obligation of good faith under
499-7 Section 152.204(b), except that the partners by agreement may
499-8 determine the standards by which the performance of the obligation
499-9 is to be measured if the standards are not manifestly unreasonable;
499-10 (5) vary the power to withdraw as a partner under
499-11 Section 152.501(b)(1), (7), or (8), except for the requirement that
499-12 notice be in writing;
499-13 (6) vary the right to expel a partner by a court in an
499-14 event specified by Section 152.501(b)(5);
499-15 (7) vary the requirement to wind up the partnership
499-16 business in an event specified by Section 152.701(a)(3), (4), or
499-17 (5);
499-18 (8) restrict rights of a third party under this
499-19 chapter or the other partnership provisions, except for a
499-20 limitation on an individual partner's liability in a registered
499-21 limited liability partnership as provided by this chapter; or
499-22 (9) select a governing law not permitted under
499-23 Sections 1.103 and 1.001(43)(c).
499-24 Sec. 152.003. SUPPLEMENTAL PRINCIPLES OF LAW. The
499-25 principles of law and equity and the other partnership provisions
499-26 supplement this chapter unless otherwise provided by this chapter
499-27 or the other partnership provisions.
500-1 Sec. 152.004. RULE OF STATUTORY CONSTRUCTION NOT APPLICABLE.
500-2 The rule that a statute in derogation of the common law is to be
500-3 strictly construed does not apply to this chapter or the other
500-4 partnership provisions.
500-5 Sec. 152.005. APPLICABLE INTEREST RATE. If an obligation to
500-6 pay interest arises under this chapter and the rate is not
500-7 specified, the interest rate is the rate specified by Section
500-8 302.002, Finance Code.
500-9 (Sections 152.006-152.050 reserved for expansion)
500-10 SUBCHAPTER B. NATURE AND CREATION OF PARTNERSHIP
500-11 Sec. 152.051. PARTNERSHIP DEFINED. (a) In this section,
500-12 "association" does not have the meaning of the term "association"
500-13 under Section 1.002.
500-14 (b) Except as provided by Subsection (c) and Section
500-15 152.053, an association of two or more persons to carry on a
500-16 business for profit as owners creates a partnership, regardless of
500-17 whether:
500-18 (1) the persons intend to create a partnership; or
500-19 (2) the association is called a "partnership," "joint
500-20 venture," or other name.
500-21 (c) An association or entity created under a law other than
500-22 this title and the provisions of Title 1 applicable to partnerships
500-23 and limited partnerships is not a partnership.
500-24 Sec. 152.052. RULES FOR DETERMINING IF PARTNERSHIP IS
500-25 CREATED. (a) Factors indicating that persons have created a
500-26 partnership include the persons':
500-27 (1) receipt or right to receive a share of profits of
501-1 the business;
501-2 (2) expression of an intent to be partners in the
501-3 business;
501-4 (3) participation or right to participate in control
501-5 of the business;
501-6 (4) agreement to share or sharing:
501-7 (A) losses of the business; or
501-8 (B) liability for claims by third parties
501-9 against the business; and
501-10 (5) agreement to contribute or contributing money or
501-11 property to the business.
501-12 (b) One of the following circumstances, by itself, does not
501-13 indicate that a person is a partner in the business:
501-14 (1) the receipt or right to receive a share of profits
501-15 as payment:
501-16 (A) of a debt, including repayment by
501-17 installments;
501-18 (B) of wages or other compensation to an
501-19 employee or independent contractor;
501-20 (C) of rent;
501-21 (D) to a former partner, surviving spouse or
501-22 representative of a deceased or disabled partner, or transferee of
501-23 a partnership interest;
501-24 (E) of interest or other charge on a loan,
501-25 regardless of whether the amount varies with the profits of the
501-26 business, including a direct or indirect present or future
501-27 ownership interest in collateral or rights to income, proceeds, or
502-1 increase in value derived from collateral; or
502-2 (F) of consideration for the sale of a business
502-3 or other property, including payment by installments;
502-4 (2) co-ownership of property, regardless of whether
502-5 the co-ownership is:
502-6 (A) a joint tenancy, tenancy in common, tenancy
502-7 by the entirety, joint property, community property, or part
502-8 ownership; or
502-9 (B) combined with sharing of profits from the
502-10 property;
502-11 (3) the right to share or sharing gross returns or
502-12 revenues, regardless of whether the persons sharing the gross
502-13 returns or revenues have a common or joint interest in the property
502-14 from which the returns or revenues are derived; or
502-15 (4) ownership of mineral property under a joint
502-16 operating agreement.
502-17 (c) An agreement by the owners of a business to share losses
502-18 is not necessary to create a partnership.
502-19 Sec. 152.053. QUALIFICATIONS TO BE PARTNER; NONPARTNER'S
502-20 LIABILITY TO THIRD PERSON. (a) A person may be a partner unless
502-21 the person lacks capacity apart from this chapter.
502-22 (b) Except as provided by Sections 152.054 and 152.506, a
502-23 person who is not a partner in a partnership under Section 152.051
502-24 is not a partner as to a third person and is not liable to a third
502-25 person under this chapter.
502-26 Sec. 152.054. FALSE REPRESENTATION OF PARTNERSHIP OR
502-27 PARTNER. (a) A false representation or other conduct falsely
503-1 indicating that a person is a partner with another person does not
503-2 of itself create a partnership.
503-3 (b) A representation or other conduct indicating that a
503-4 person is a partner in an existing partnership, if that is not the
503-5 case, does not of itself make that person a partner in the
503-6 partnership.
503-7 (Sections 152.055-152.100 reserved for expansion)
503-8 SUBCHAPTER C. PARTNERSHIP PROPERTY
503-9 Sec. 152.101. NATURE OF PARTNERSHIP PROPERTY. Partnership
503-10 property is not property of the partners. A partner or a partner's
503-11 spouse does not have an interest in partnership property.
503-12 Sec. 152.102. CLASSIFICATION AS PARTNERSHIP PROPERTY. (a)
503-13 Property is partnership property if acquired in the name of:
503-14 (1) the partnership; or
503-15 (2) one or more partners if the instrument
503-16 transferring title to the property indicates:
503-17 (A) the person's capacity as a partner; or
503-18 (B) the existence of a partnership, regardless
503-19 of whether the name of the partnership is indicated.
503-20 (b) Property is presumed to be partnership property if
503-21 acquired with partnership property, regardless of whether the
503-22 property is acquired as provided by Subsection (a).
503-23 (c) Property acquired in the name of one or more partners is
503-24 presumed to be the partner's property, regardless of whether the
503-25 property is used for partnership purposes, if the instrument
503-26 transferring title to the property does not indicate the person's
503-27 capacity as a partner or the existence of a partnership, and if the
504-1 property is not acquired with partnership property.
504-2 (d) For purposes of this section, property is acquired in
504-3 the name of the partnership by a transfer to:
504-4 (1) the partnership in its name; or
504-5 (2) one or more partners in the partners' capacity as
504-6 partners in the partnership, if the name of the partnership is
504-7 indicated in the instrument transferring title to the property.
504-8 (Sections 152.103-152.200 reserved for expansion)
504-9 SUBCHAPTER D. RELATIONSHIP BETWEEN PARTNERS AND BETWEEN
504-10 PARTNERS AND PARTNERSHIPS
504-11 Sec. 152.201. ADMISSION AS PARTNER. A person may become a
504-12 partner only with the consent of all partners.
504-13 Sec. 152.202. CREDITS OF AND CHARGES TO PARTNER. (a) Each
504-14 partner is credited with an amount equal to:
504-15 (1) the cash and the value of property the partner
504-16 contributes to a partnership; and
504-17 (2) the partner's share of the partnership's profits.
504-18 (b) Each partner is charged with an amount equal to:
504-19 (1) the cash and the value of other property
504-20 distributed by the partnership to the partner; and
504-21 (2) the partner's share of the partnership's losses.
504-22 (c) Each partner is entitled to be credited with an equal
504-23 share of the partnership's profits and is chargeable with a share
504-24 of the partnership's capital or operating losses in proportion to
504-25 the partner's share of the profits.
504-26 Sec. 152.203. RIGHTS AND DUTIES OF PARTNER. (a) Each
504-27 partner has equal rights in the management and conduct of the
505-1 business of a partnership. A partner's right to participate in the
505-2 management and conduct of the business is not community property.
505-3 (b) A partner may use or possess partnership property only
505-4 on behalf of the partnership.
505-5 (c) A partner is not entitled to receive compensation for
505-6 services performed for a partnership other than reasonable
505-7 compensation for services rendered in winding up the business of
505-8 the partnership.
505-9 (d) A partner who, in the proper conduct of the business of
505-10 the partnership or for the preservation of its business or
505-11 property, reasonably makes a payment or advance beyond the amount
505-12 the partner agreed to contribute, or who reasonably incurs a
505-13 liability, is entitled to be repaid and to receive interest from
505-14 the date of the:
505-15 (1) payment or advance; or
505-16 (2) incurrence of the liability.
505-17 Sec. 152.204. GENERAL STANDARDS OF PARTNER'S CONDUCT. (a)
505-18 A partner owes to the partnership and the other partners:
505-19 (1) a duty of loyalty; and
505-20 (2) a duty of care.
505-21 (b) A partner shall discharge the partner's duties to the
505-22 partnership and the other partners under this code or under the
505-23 partnership agreement and exercise any rights and powers in the
505-24 conduct or winding up of the partnership business:
505-25 (1) in good faith; and
505-26 (2) in a manner the partner reasonably believes to be
505-27 in the best interest of the partnership.
506-1 (c) A partner does not violate a duty or obligation under
506-2 this chapter or under the partnership agreement merely because the
506-3 partner's conduct furthers the partner's own interest.
506-4 (d) A partner, in the partner's capacity as partner, is not
506-5 a trustee and is not held to the standards of a trustee.
506-6 Sec. 152.205. PARTNER'S DUTY OF LOYALTY. A partner's duty
506-7 of loyalty includes:
506-8 (1) accounting to and holding for the partnership
506-9 property, profit, or benefit derived by the partner:
506-10 (A) in the conduct and winding up of the
506-11 partnership business; or
506-12 (B) from use by the partner of partnership
506-13 property;
506-14 (2) refraining from dealing with the partnership on
506-15 behalf of a person who has an interest adverse to the partnership;
506-16 and
506-17 (3) refraining from competing or dealing with the
506-18 partnership in a manner adverse to the partnership.
506-19 Sec. 152.206. PARTNER'S DUTY OF CARE. (a) A partner's duty
506-20 of care to the partnership and the other partners is to act in the
506-21 conduct and winding up of the partnership business with the care an
506-22 ordinarily prudent person would exercise in similar circumstances.
506-23 (b) An error in judgment does not by itself constitute a
506-24 breach of the duty of care.
506-25 (c) A partner is presumed to satisfy the duty of care if the
506-26 partner acts on an informed basis and in compliance with Section
506-27 152.154(b).
507-1 Sec. 152.207. STANDARDS OF CONDUCT APPLICABLE TO PERSON
507-2 WINDING UP PARTNERSHIP BUSINESS. Sections 152.204-152.206 apply to
507-3 a person winding up the partnership business as the personal or
507-4 legal representative of the last surviving partner to the same
507-5 extent as those sections apply to a partner.
507-6 Sec. 152.208. AMENDMENT TO PARTNERSHIP AGREEMENT. A
507-7 partnership agreement may be amended only with the consent of all
507-8 partners.
507-9 Sec. 152.209. DECISION-MAKING REQUIREMENT. (a) A
507-10 difference arising in a matter in the ordinary course of the
507-11 partnership business may be decided by a majority-in-interest of
507-12 the partners.
507-13 (b) An act outside the ordinary course of business of a
507-14 partnership may be undertaken only with the consent of all
507-15 partners.
507-16 Sec. 152.210. PARTNER'S LIABILITY TO PARTNERSHIP AND OTHER
507-17 PARTNERS. A partner is liable to a partnership and the other
507-18 partners for:
507-19 (1) a breach of the partnership agreement; or
507-20 (2) a violation of a duty to the partnership or other
507-21 partners under this chapter that causes harm to the partnership or
507-22 the other partners.
507-23 Sec. 152.211. REMEDIES OF PARTNERSHIP AND PARTNERS. (a) A
507-24 partnership may maintain an action against a partner for a breach
507-25 of the partnership agreement or for the violation of a duty to the
507-26 partnership causing harm to the partnership.
507-27 (b) A partner may maintain an action against the partnership
508-1 or another partner for legal or equitable relief, including an
508-2 accounting of partnership business, to:
508-3 (1) enforce a right under the partnership agreement;
508-4 (2) enforce a right under this chapter, including:
508-5 (A) the partner's rights under Sections
508-6 152.201-152.209, 152.212, and 152.213;
508-7 (B) the partner's right on withdrawal to have
508-8 the partner's interest in the partnership redeemed under Subchapter
508-9 H or to enforce any other right under Subchapters G and H; and
508-10 (C) the partner's rights under Subchapter I; or
508-11 (3) enforce the rights and otherwise protect the
508-12 interests of the partner, including rights and interests arising
508-13 independently of the partnership relationship.
508-14 (c) The accrual of and a time limitation on a right of
508-15 action for a remedy under this section is governed by other
508-16 applicable law.
508-17 (d) A right to an accounting does not revive a claim barred
508-18 by law.
508-19 Sec. 152.212. BOOKS AND RECORDS OF PARTNERSHIP. (a) In
508-20 this section, "access" includes the opportunity to inspect and copy
508-21 books and records during ordinary business hours.
508-22 (b) A partnership shall keep its books and records, if any,
508-23 at its chief executive office.
508-24 (c) A partnership shall provide access to its books and
508-25 records to a partner or an agent or attorney of a partner.
508-26 (d) The partnership shall provide a former partner or an
508-27 agent or attorney of a former partner access to books and records
509-1 pertaining to the period during which the former partner was a
509-2 partner or for any other proper purpose with respect to another
509-3 period.
509-4 (e) A partnership may impose a reasonable charge, covering
509-5 the costs of labor and material, for copies of documents furnished
509-6 under this section.
509-7 Sec. 152.213. INFORMATION REGARDING PARTNERSHIP. (a) On
509-8 request and to the extent just and reasonable, each partner and the
509-9 partnership shall furnish complete and accurate information
509-10 concerning the partnership to:
509-11 (1) a partner;
509-12 (2) the legal representative of a deceased partner or
509-13 a partner who has a legal disability; or
509-14 (3) an assignee.
509-15 (b) A legal representative of a deceased partner or a
509-16 partner who has a legal disability and an assignee are subject to
509-17 the duties of a partner with respect to information made available.
509-18 Sec. 152.214. CERTAIN THIRD-PARTY OBLIGATIONS NOT AFFECTED.
509-19 Sections 152.201-152.203, 152.208, 152.209, 154.101-154.103, and
509-20 154.201 do not limit a partnership's obligations to another person
509-21 under Sections 152.301 and 152.302.
509-22 (Sections 152.215-152.300 reserved for expansion)
509-23 SUBCHAPTER E. RELATIONSHIP BETWEEN PARTNERS
509-24 AND OTHER PERSONS
509-25 Sec. 152.301. PARTNER AS AGENT. Each partner is an agent of
509-26 the partnership for the purpose of its business.
509-27 Sec. 152.302. BINDING EFFECT OF PARTNER'S ACTION. (a)
510-1 Unless a partner does not have authority to act for the partnership
510-2 in a particular matter and the person with whom the partner is
510-3 dealing knows that the partner lacks authority, an act of a
510-4 partner, including the execution of an instrument in the
510-5 partnership name, binds the partnership if the act is apparently
510-6 for carrying on in the ordinary course:
510-7 (1) the partnership business; or
510-8 (2) business of the kind carried on by the
510-9 partnership.
510-10 (b) An act of a partner that is not apparently for carrying
510-11 on in the ordinary course a business described by Subsection (a)
510-12 binds the partnership only if authorized by the other partners.
510-13 (c) A conveyance of real property by a partner on behalf of
510-14 the partnership not otherwise binding on the partnership binds the
510-15 partnership if the property has been conveyed by the grantee or a
510-16 person claiming through the grantee to be a holder for value
510-17 without knowledge that the partner exceeded that partner's
510-18 authority in making the conveyance.
510-19 Sec. 152.303. LIABILITY OF PARTNERSHIP FOR CONDUCT OF
510-20 PARTNER. (a) A partnership is liable for loss or injury to a
510-21 person, including a partner, or for a penalty caused by or incurred
510-22 as a result of a wrongful act or omission or other actionable
510-23 conduct of a partner acting:
510-24 (1) in the ordinary course of business of the
510-25 partnership; or
510-26 (2) with the authority of the partnership.
510-27 (b) A partnership is liable for the loss of money or
511-1 property of a person who is not a partner that is:
511-2 (1) received in the course of the partnership's
511-3 business; and
511-4 (2) misapplied by a partner while in the custody of
511-5 the partnership.
511-6 Sec. 152.304. NATURE OF PARTNER'S LIABILITY. (a) Except as
511-7 provided by Subsection (b) or Section 152.801(b), all partners are
511-8 liable jointly and severally for a debt or obligation of the
511-9 partnership unless otherwise:
511-10 (1) agreed by the claimant; or
511-11 (2) provided by law.
511-12 (b) A person who is admitted as a partner into an existing
511-13 partnership does not have personal liability under Subsection (a)
511-14 for an obligation of the partnership that:
511-15 (1) arises before the partner's admission to the
511-16 partnership;
511-17 (2) relates to an action taken or omission occurring
511-18 before the partner's admission to the partnership; or
511-19 (3) arises before or after the partner's admission to
511-20 the partnership under a contract or commitment entered into before
511-21 the partner's admission.
511-22 Sec. 152.305. REMEDY. An action may be brought against a
511-23 partnership and any or all of the partners in the same action or in
511-24 separate actions.
511-25 Sec. 152.306. ENFORCEMENT OF REMEDY. (a) A judgment
511-26 against a partnership is not by itself a judgment against a
511-27 partner. A judgment may be entered against a partner who has been
512-1 served with process in a suit against the partnership.
512-2 (b) Except as provided by Subsection (c), a creditor may
512-3 proceed against one or more partners or the property of the
512-4 partners to satisfy a judgment based on a claim that could have
512-5 been successfully asserted against the partnership only if a
512-6 judgment:
512-7 (1) is also obtained against the partner; and
512-8 (2) based on the same claim:
512-9 (A) is obtained against the partnership;
512-10 (B) has not been reversed or vacated; and
512-11 (C) remains unsatisfied for 90 days after:
512-12 (i) the date on which the judgment is
512-13 entered; or
512-14 (ii) the date on which the stay expires,
512-15 if the judgment is contested by appropriate proceedings and
512-16 execution on the judgment is stayed.
512-17 (c) Subsection (b) does not prohibit a creditor from
512-18 proceeding directly against one or more partners or the property of
512-19 the partners without first seeking satisfaction from partnership
512-20 property if:
512-21 (1) the partnership is a debtor in bankruptcy;
512-22 (2) the creditor and the partnership agreed that the
512-23 creditor is not required to comply with Subsection (b);
512-24 (3) a court orders otherwise, based on a finding that
512-25 partnership property subject to execution in the state is clearly
512-26 insufficient to satisfy the judgment or that compliance with
512-27 Subsection (b) is excessively burdensome; or
513-1 (4) liability is imposed on the partner by law
513-2 independently of the person's status as a partner.
513-3 (d) This section does not limit the effect of Section
513-4 152.801 with respect to a registered limited liability partnership.
513-5 Sec. 152.307. EXTENSION OF CREDIT IN RELIANCE ON FALSE
513-6 REPRESENTATION. (a) The rights of a person extending credit in
513-7 reliance on a representation described by Section 152.054 are
513-8 determined by applicable law other than this chapter and the other
513-9 partnership provisions, including the law of estoppel, agency,
513-10 negligence, fraud, and unjust enrichment.
513-11 (b) The rights and duties of a person held liable under
513-12 Subsection (a) are also determined by law other than the law
513-13 described by Subsection (a).
513-14 (Sections 152.308-152.400 reserved for expansion)
513-15 SUBCHAPTER F. TRANSFER OF PARTNERSHIP INTERESTS
513-16 Sec. 152.401. TRANSFER OF PARTNERSHIP INTEREST. A partner
513-17 may transfer all or part of the partner's partnership interest.
513-18 Sec. 152.402. GENERAL EFFECT OF TRANSFER. A transfer of all
513-19 or part of a partner's partnership interest:
513-20 (1) is not an event of withdrawal;
513-21 (2) does not by itself cause a winding up of the
513-22 partnership business; and
513-23 (3) against the other partners or the partnership,
513-24 does not entitle the transferee, during the continuance of the
513-25 partnership, to participate in the management or conduct of the
513-26 partnership business.
513-27 Sec. 152.403. EFFECT OF TRANSFER ON TRANSFEROR. After
514-1 transfer, the transferor continues to have the rights and duties of
514-2 a partner other than the interest transferred.
514-3 Sec. 152.404. RIGHTS AND DUTIES OF TRANSFEREE. (a) A
514-4 transferee of a partner's partnership interest is entitled to
514-5 receive, to the extent transferred, distributions to which the
514-6 transferor otherwise would be entitled.
514-7 (b) If an event requires a winding up of partnership
514-8 business under Subchapter I, a transferee is entitled to receive,
514-9 to the extent transferred, the net amount otherwise distributable
514-10 to the transferor.
514-11 (c) Until a transferee becomes a partner, the transferee
514-12 does not have liability as a partner solely as a result of the
514-13 transfer.
514-14 (d) For a proper purpose the transferee may require
514-15 reasonable information or an account of a partnership transaction
514-16 and make reasonable inspection of the partnership books. In a
514-17 winding up of partnership business, a transferee may require an
514-18 accounting only from the date of the latest account agreed to by
514-19 all of the partners.
514-20 (e) Until receipt of notice of a transfer, a partnership is
514-21 not required to give effect to a transferee's rights under this
514-22 section and Sections 152.401-152.403.
514-23 Sec. 152.405. POWER TO EFFECT TRANSFER OR GRANT OF SECURITY
514-24 INTEREST. A partnership is not required to give effect to a
514-25 transfer, assignment, or grant of a security interest prohibited by
514-26 a partnership agreement.
514-27 Sec. 152.406. EFFECT OF DEATH OR DIVORCE ON PARTNERSHIP
515-1 INTEREST. (a) For purposes of this code:
515-2 (1) on the divorce of a partner, the partner's spouse,
515-3 to the extent of the spouse's partnership interest, is a
515-4 transferee of the partnership interest from the partner;
515-5 (2) on the death of a partner, the partner's surviving
515-6 spouse, if any, and an heir, legatee, or personal representative of
515-7 the partner, to the extent of their respective partnership
515-8 interest, is a transferee of the partnership interest from the
515-9 partner; and
515-10 (3) on the death of a partner's spouse, an heir,
515-11 legatee, or personal representative of the spouse, to the extent of
515-12 their respective partnership interest, is a transferee of the
515-13 partnership interest from the partner.
515-14 (b) An event of the type described by Section 152.501
515-15 occurring with respect to a partner's spouse is not an event of
515-16 withdrawal.
515-17 (c) This chapter does not impair an agreement for the
515-18 purchase or sale of a partnership interest at any time, including
515-19 the death of an owner of the partnership interest.
515-20 (Sections 152.407-152.500 reserved for expansion)
515-21 SUBCHAPTER G. WITHDRAWAL OF PARTNER
515-22 Sec. 152.501. EVENTS OF WITHDRAWAL. (a) A person ceases to
515-23 be a partner on the occurrence of an event of withdrawal.
515-24 (b) An event of withdrawal of a partner occurs on:
515-25 (1) receipt by the partnership of notice of the
515-26 partner's express will to withdraw as a partner on:
515-27 (A) the date on which the notice is received; or
516-1 (B) a later date specified by the notice;
516-2 (2) an event specified in the partnership agreement as
516-3 causing the partner's withdrawal;
516-4 (3) the partner's expulsion as provided by the
516-5 partnership agreement;
516-6 (4) the partner's expulsion by vote of a
516-7 majority-in-interest of the other partners if:
516-8 (A) it is unlawful to carry on the partnership
516-9 business with that partner;
516-10 (B) there has been a transfer of all or
516-11 substantially all of that partner's partnership interest, other
516-12 than:
516-13 (i) a transfer for security purposes that
516-14 has not been foreclosed; or
516-15 (ii) the substitution of a successor
516-16 trustee or successor personal representative;
516-17 (C) not later than the 90th day after the date
516-18 on which the partnership notifies an entity partner, other than a
516-19 nonfiling entity or foreign nonfiling entity partner, that it will
516-20 be expelled because it has filed a certificate of termination or
516-21 the equivalent, its existence has been involuntarily terminated or
516-22 its charter has been revoked, or its right to conduct business has
516-23 been terminated or suspended by the jurisdiction of its formation,
516-24 if the certificate of termination or the equivalent is not revoked
516-25 or its existence, charter, or right to conduct business is not
516-26 reinstated; or
516-27 (D) an event requiring a winding up has occurred
517-1 with respect to a nonfiling entity or foreign nonfiling entity that
517-2 is a partner;
517-3 (5) application by the partnership or another partner
517-4 for the partner's expulsion by judicial decree because the partner:
517-5 (A) engaged in wrongful conduct that adversely
517-6 and materially affected the partnership business;
517-7 (B) wilfully or persistently committed a
517-8 material breach of:
517-9 (i) the partnership agreement; or
517-10 (ii) a duty owed to the partnership or the
517-11 other partners under Sections 152.204-152.206; or
517-12 (C) engaged in conduct relating to the
517-13 partnership business that made it not reasonably practicable to
517-14 carry on the business in partnership with that partner;
517-15 (6) the partner's:
517-16 (A) becoming a debtor in bankruptcy;
517-17 (B) executing an assignment for the benefit of a
517-18 creditor;
517-19 (C) seeking, consenting to, or acquiescing in
517-20 the appointment of a trustee, receiver, or liquidator of that
517-21 partner or of all or substantially all of that partner's property;
517-22 or
517-23 (D) failing, not later than the 90th day after
517-24 the appointment, to have vacated or stayed the appointment of a
517-25 trustee, receiver, or liquidator of the partner or of all or
517-26 substantially all of the partner's property obtained without the
517-27 partner's consent or acquiescence, or not later than the 90th day
518-1 after the date of expiration of a stay, failing to have the
518-2 appointment vacated;
518-3 (7) if a partner is an individual:
518-4 (A) the partner's death;
518-5 (B) the appointment of a guardian or general
518-6 conservator for the partner; or
518-7 (C) a judicial determination that the partner
518-8 has otherwise become incapable of performing the partner's duties
518-9 under the partnership agreement;
518-10 (8) termination of a partner's existence;
518-11 (9) if a partner has transferred all of the partner's
518-12 partnership interest, redemption of the transferee's interest under
518-13 Sections 152.611 and 152.612(a); or
518-14 (10) an agreement to continue the partnership under
518-15 Section 152.701 if the partnership has received a notice from the
518-16 partner under Section 152.701 requesting that the partnership be
518-17 wound up.
518-18 Sec. 152.502. EFFECT OF EVENT OF WITHDRAWAL ON PARTNERSHIP
518-19 AND OTHER PARTNERS. A partnership continues after an event of
518-20 withdrawal. The event of withdrawal affects the relationships
518-21 among the withdrawn partner, the partnership, and the continuing
518-22 partners as provided by Sections 152.503-152.506 and Subchapter H.
518-23 Sec. 152.503. WRONGFUL WITHDRAWAL; LIABILITY. (a) At any
518-24 time before the occurrence of an event requiring a winding up of
518-25 partnership business, a partner may withdraw from the partnership
518-26 and cease to be a partner as provided by Section 152.501.
518-27 (b) A partner's withdrawal is wrongful only if:
519-1 (1) the withdrawal breaches an express provision of
519-2 the partnership agreement;
519-3 (2) in the case of a partnership for a definite term
519-4 or particular undertaking or for which the partnership agreement
519-5 provides for winding up on a specified event, before the expiration
519-6 of the term, the completion of the undertaking, or the occurrence
519-7 of the event, as appropriate:
519-8 (A) the partner withdraws by express will;
519-9 (B) the partner withdraws by becoming a debtor
519-10 in bankruptcy; or
519-11 (C) in the case of a partner that is not an
519-12 individual, a trust other than a business trust, or an estate, the
519-13 partner is expelled or otherwise withdraws because the partner
519-14 wilfully dissolved or terminated; or
519-15 (3) the partner is expelled by judicial decree under
519-16 Section 152.501(b)(5).
519-17 (c) In addition to other liability of the partner to the
519-18 partnership or to the other partners, a wrongfully withdrawing
519-19 partner is liable to the partnership and to the other partners for
519-20 damages caused by the withdrawal.
519-21 Sec. 152.504. WITHDRAWN PARTNER'S POWER TO BIND PARTNERSHIP.
519-22 (a) The action of a withdrawn partner occurring not later than the
519-23 first anniversary of the date of the person's withdrawal binds the
519-24 partnership if the transaction would bind the partnership before
519-25 the person's withdrawal and the other party to the transaction:
519-26 (1) does not have notice of the person's withdrawal as
519-27 a partner;
520-1 (2) had done business with the partnership within one
520-2 year preceding the date of withdrawal; and
520-3 (3) reasonably believed that the withdrawn partner was
520-4 a partner at the time of the transaction.
520-5 (b) A withdrawn partner is liable to the partnership for
520-6 loss caused to the partnership arising from an obligation incurred
520-7 by the withdrawn partner after the withdrawal date and for which
520-8 the partnership is liable under Subsection (a).
520-9 Sec. 152.505. EFFECT OF WITHDRAWAL ON PARTNER'S EXISTING
520-10 LIABILITY. (a) Withdrawal of a partner does not by itself
520-11 discharge the partner's liability for an obligation of the
520-12 partnership incurred before the date of withdrawal.
520-13 (b) The estate of a deceased partner is liable for an
520-14 obligation of the partnership incurred while the deceased was a
520-15 partner to the same extent that a withdrawn partner is liable for
520-16 an obligation of the partnership incurred before the date of
520-17 withdrawal.
520-18 (c) A withdrawn partner is discharged from liability
520-19 incurred before the date of withdrawal by an agreement to that
520-20 effect between the partner and a partnership creditor.
520-21 (d) If a creditor of a partnership has notice of a partner's
520-22 withdrawal and without the consent of the withdrawn partner agrees
520-23 to a material alteration in the nature or time of payment of an
520-24 obligation of the partnership incurred before the date of
520-25 withdrawal, the withdrawn partner is discharged from the
520-26 obligation.
520-27 Sec. 152.506. LIABILITY OF WITHDRAWN PARTNER TO THIRD PARTY.
521-1 A person who withdraws as a partner in a circumstance that is not
521-2 an event requiring a winding up of partnership business under
521-3 Section 152.701 is liable to another party as a partner in a
521-4 transaction entered into by the partnership or a surviving
521-5 partnership under Section 10.001 not later than the second
521-6 anniversary of the date of the partner's withdrawal only if the
521-7 other party to the transaction:
521-8 (1) does not have notice of the partner's withdrawal;
521-9 and
521-10 (2) reasonably believed that the withdrawn partner was
521-11 a partner at the time of the transaction.
521-12 (Sections 152.507-152.600 reserved for expansion)
521-13 SUBCHAPTER H. REDEMPTION OF WITHDRAWING PARTNER OR
521-14 TRANSFEREE'S INTEREST
521-15 Sec. 152.601. REDEMPTION IF PARTNERSHIP NOT WOUND UP. The
521-16 partnership interest of a withdrawn partner automatically is
521-17 redeemed by the partnership as of the date of withdrawal in
521-18 accordance with this subchapter if:
521-19 (1) an event of withdrawal occurs under Sections
521-20 152.501(b)(1)-(9) and an event requiring a winding up of
521-21 partnership business does not occur before the 61st day after the
521-22 date of the withdrawal; or
521-23 (2) an event of a withdrawal occurs under Section
521-24 152.501(b)(10).
521-25 Sec. 152.602. REDEMPTION PRICE. (a) Except as provided by
521-26 Subsection (b), the redemption price of a withdrawn partner's
521-27 partnership interest is the fair value of the interest on the date
522-1 of withdrawal.
522-2 (b) The redemption price of the partnership interest of a
522-3 partner who wrongfully withdraws before the expiration of a
522-4 definite term, the completion of a particular undertaking, or the
522-5 occurrence of a specified event requiring a winding up of
522-6 partnership business, as appropriate, is the lesser of:
522-7 (1) the fair value of the withdrawn partner's
522-8 partnership interest on the date of withdrawal; or
522-9 (2) the amount that the withdrawn partner would have
522-10 received if an event requiring a winding up of partnership business
522-11 had occurred at the time of the partner's withdrawal.
522-12 (c) Interest is payable on the amount owed under this
522-13 section.
522-14 Sec. 152.603. CONTRIBUTION OBLIGATION. If a wrongfully
522-15 withdrawing partner would have been required to make contributions
522-16 to the partnership under Section 152.708 or 152.709 if an event
522-17 requiring winding up of the partnership business had occurred at
522-18 the time of withdrawal, the withdrawn partner is required to make
522-19 contributions to the partnership in that amount and pay interest on
522-20 the amount owed.
522-21 Sec. 152.604. SETOFF FOR CERTAIN DAMAGES. The partnership
522-22 may set off against the redemption price payable to the withdrawn
522-23 partner the damages for wrongful withdrawal under Section
522-24 152.503(b) and all other amounts owed by the withdrawn partner to
522-25 the partnership, whether currently due, including interest.
522-26 Sec. 152.605. ACCRUAL OF INTEREST. Interest payable under
522-27 Sections 152.602-152.604 accrues from the date of the withdrawal to
523-1 the date of payment.
523-2 Sec. 152.606. INDEMNIFICATION FOR CERTAIN LIABILITY. (a) A
523-3 partnership shall indemnify a withdrawn partner against a
523-4 partnership liability incurred before the date of withdrawal,
523-5 except for a liability:
523-6 (1) that is unknown to the partnership at the time; or
523-7 (2) incurred by an act of the withdrawn partner under
523-8 Sections 152.504 and 152.505.
523-9 (b) For purposes of this section, a liability is unknown to
523-10 the partnership if it is not known to a partner other than the
523-11 withdrawn partner.
523-12 Sec. 152.607. DEMAND OR PAYMENT OF ESTIMATED REDEMPTION.
523-13 (a) If a deferred payment is not authorized under Section 152.608
523-14 and an agreement on the redemption price of a withdrawn partner's
523-15 interest is not reached before the 121st day after the date of a
523-16 written demand for payment is made by either party, not later than
523-17 the 30th day after the expiration of the period, the partnership
523-18 shall:
523-19 (1) pay to the withdrawn partner in cash the amount
523-20 the partnership estimates to be the redemption price and any
523-21 accrued interest, reduced by any setoffs and accrued interest under
523-22 Section 152.604; or
523-23 (2) make written demand to the partnership for payment
523-24 of its estimate of the amount owed by the withdrawn partner, minus
523-25 any amount owed to the partner.
523-26 (b) If a deferred payment is authorized under Section
523-27 152.608 or a contribution or other amount is owed by the withdrawn
524-1 partner to the partnership, the partnership may offer in writing to
524-2 pay or deliver a written statement of demand for the amount it
524-3 estimates to be the net amount owed, stating the amount and other
524-4 terms of the obligation.
524-5 (c) On request of the other party, the payment, offer, or
524-6 demand required or allowed by Subsection (a) or (b) must be
524-7 accompanied or followed promptly by:
524-8 (1) if payment, tender, or demand is made or delivered
524-9 by the partnership, a statement of partnership property and
524-10 liabilities from the date of the partner's withdrawal and the most
524-11 recent available partnership balance sheet and income statement, if
524-12 any; and
524-13 (2) an explanation of the computation of the estimated
524-14 payment obligation.
524-15 (d) The terms of a payment or tender under Subsection (a) or
524-16 (b) govern a redemption if:
524-17 (1) the payment or tender is accompanied by written
524-18 notice that:
524-19 (A) the payment or tendered amount, if made,
524-20 fully satisfies a party's obligations relating to the redemption of
524-21 the withdrawn partner's partnership interest; and
524-22 (B) an action to determine the redemption price,
524-23 a contribution obligation or setoff under Section 152.603 or
524-24 152.604, or other terms of the redemption obligation must be
524-25 commenced not later than the first anniversary of the later of:
524-26 (i) the date on which the written notice
524-27 is given; or
525-1 (ii) the date on which the information
525-2 required by Subsection (c) is delivered; and
525-3 (2) the party receiving the payment or offer does not
525-4 commence an action in the period described by Subdivision (1)(B).
525-5 Sec. 152.608. DEFERRED PAYMENT ON WRONGFUL WITHDRAWAL. (a)
525-6 A partner who wrongfully withdraws before the expiration of a
525-7 definite term, the completion of a particular undertaking, or the
525-8 occurrence of a specified event requiring a winding up of
525-9 partnership business is not entitled to receive any portion of the
525-10 redemption price until the expiration of the term, the completion
525-11 of the undertaking, or the occurrence of the specified event, as
525-12 appropriate, unless the partner establishes to the satisfaction of
525-13 a court that earlier payment will not cause undue hardship to the
525-14 partnership.
525-15 (b) A deferred payment accrues interest.
525-16 (c) The withdrawn partner may demonstrate to the
525-17 satisfaction of the court that security for a deferred payment is
525-18 appropriate.
525-19 Sec. 152.609. ACTION TO DETERMINE PARTNER'S REDEMPTION.
525-20 (a) A withdrawn partner or the partnership may maintain an action
525-21 against the other party under Sections 152.210 and 152.211 to
525-22 determine:
525-23 (1) the terms of redemption of that partner's
525-24 interest, including a contribution obligation or setoff under
525-25 Section 152.603 or 152.604; or
525-26 (2) other terms of the redemption obligations of
525-27 either party.
526-1 (b) The action must be commenced not later than the first
526-2 anniversary of the later of:
526-3 (1) the date of delivery of information required by
526-4 Section 152.607(c); or
526-5 (2) the date written notice is given under Section
526-6 152.607(d).
526-7 (c) The court shall determine the terms of the redemption of
526-8 the withdrawn partner's interest, any contribution obligation or
526-9 setoff due under Section 152.603 or 152.604, and accrued interest
526-10 and shall enter judgment for an additional payment or refund.
526-11 (d) If deferred payment is authorized under Section 152.608,
526-12 the court shall also determine the security for payment if
526-13 requested to consider whether security is appropriate.
526-14 (e) If the court finds that a party failed to tender payment
526-15 or make an offer to pay or to comply with the requirements of
526-16 Section 152.607(c) or otherwise acted arbitrarily, vexatiously, or
526-17 not in good faith, the court may assess damages against the party,
526-18 including, if appropriate, in an amount the court finds equitable:
526-19 (1) a share of the profits of the continuing business;
526-20 (2) reasonable attorney's fees; and
526-21 (3) fees and expenses of appraisers or other experts
526-22 for a party to the action.
526-23 Sec. 152.610. DEFERRAL ON WINDING UP PARTNERSHIP. (a) If a
526-24 partner withdraws under Section 152.501 and not later than the 60th
526-25 day after the date of withdrawal an event requiring winding up
526-26 occurs under Section 11.051 or 152.701, the partnership may defer
526-27 paying the redemption price to the withdrawn partner until the
527-1 partnership makes a winding up distribution to the remaining
527-2 partners.
527-3 (b) The redemption price or contribution obligation is the
527-4 amount the withdrawn partner would have received or contributed if
527-5 the event requiring winding up had occurred at the time of the
527-6 partner's withdrawal.
527-7 Sec. 152.611. REDEMPTION OF TRANSFEREE'S PARTNERSHIP
527-8 INTEREST. (a) A partnership must redeem the partnership interest
527-9 of a transferee for its fair value if:
527-10 (1) the interest was transferred when:
527-11 (A) the partnership was for a definite term that
527-12 has not yet expired;
527-13 (B) the partnership was for a particular
527-14 undertaking not yet completed; or
527-15 (C) the partnership agreement provided for
527-16 winding up of the partnership business on a specified event that
527-17 has not yet occurred;
527-18 (2) the definite term of the partnership has expired,
527-19 the particular undertaking has been completed, or the specified
527-20 event has occurred; and
527-21 (3) the transferee makes a written demand for
527-22 redemption.
527-23 (b) If an agreement for the redemption price of a
527-24 transferee's interest is not reached before the 121st day after the
527-25 date a written demand for redemption is made, the partnership must
527-26 pay to the transferee in cash the amount the partnership estimates
527-27 to be the redemption price and any accrued interest from the date
528-1 of demand not later than the 30th day after the expiration of the
528-2 period.
528-3 (c) On request of the transferee, the payment required by
528-4 Subsection (b) must be accompanied or followed by:
528-5 (1) a statement of partnership property and
528-6 liabilities from the date of the demand for redemption;
528-7 (2) the most recent available partnership balance
528-8 sheet and income statement, if any; and
528-9 (3) an explanation of the computation of the estimated
528-10 payment obligation.
528-11 (d) If the payment required by Subsection (b) is accompanied
528-12 by written notice that the payment is in full satisfaction of the
528-13 partnership's obligations relating to the redemption of the
528-14 transferee's interest, the payment, less interest, is the
528-15 redemption price unless the transferee, not later than the first
528-16 anniversary of the written notice, commences an action to determine
528-17 the redemption price.
528-18 Sec. 152.612. ACTION TO DETERMINE TRANSFEREE'S REDEMPTION.
528-19 (a) A transferee may maintain an action against a partnership to
528-20 determine the redemption price of the transferee's interest.
528-21 (b) The court shall determine the redemption price of the
528-22 transferee's interest and accrued interest and enter judgment for
528-23 payment or refund.
528-24 (c) If the court finds that the partnership failed to make
528-25 payment or otherwise acted arbitrarily, vexatiously, or not in good
528-26 faith, the court may assess against the partnership in an amount
528-27 the court finds equitable:
529-1 (1) reasonable attorney's fees; and
529-2 (2) fees and expenses of appraisers or other experts
529-3 for a party to the action.
529-4 (d) The redemption of a transferee's interest under Sections
529-5 152.611(a) and (b) may be deferred as determined by the court if
529-6 the partnership establishes to the satisfaction of the court that
529-7 failure to defer redemption will cause undue hardship to the
529-8 partnership business.
529-9 (Sections 152.613-152.700 reserved for expansion)
529-10 SUBCHAPTER I. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS
529-11 Sec. 152.701. ADDITIONAL EVENTS REQUIRING WINDING UP. (a)
529-12 An event requiring winding up of a partnership includes, in
529-13 addition to any event specified in Section 11.051, the following:
529-14 (1) in a partnership that is not for a definite term
529-15 or for a particular undertaking or in which the partnership
529-16 agreement does not provide for winding up the partnership business
529-17 on a specified event, the express will of a majority-in-interest of
529-18 the partners who have not assigned their interests;
529-19 (2) in a partnership for a definite term or for a
529-20 particular undertaking, on:
529-21 (A) the express will of all of the partners; or
529-22 (B) the expiration of the term or the completion
529-23 of the undertaking, unless otherwise continued under Section
529-24 152.710;
529-25 (3) in a partnership in which the partnership
529-26 agreement provides for the winding up of the partnership business
529-27 on a specified event, on the express will of all of the partners;
530-1 (4) an event that makes it illegal for all or
530-2 substantially all of the partnership business to be continued, but
530-3 a cure of illegality before the 91st day after the date of notice
530-4 to the partnership of the event is effective retroactively to the
530-5 date of the event for purposes of this subsection;
530-6 (5) on application by a partner, a judicial decree
530-7 that determines:
530-8 (A) the economic purpose of the partnership is
530-9 likely to be unreasonably frustrated;
530-10 (B) another partner has engaged in conduct
530-11 relating to the partnership business that makes it not reasonably
530-12 practicable to carry on the business in partnership with that
530-13 partner; or
530-14 (C) it is not otherwise reasonably practicable
530-15 to carry on the partnership business in conformity with the
530-16 partnership agreement;
530-17 (6) the sale of all or substantially all of the
530-18 property of the partnership outside the ordinary course of
530-19 business; and
530-20 (7) if a partnership is not for a definite term or a
530-21 particular undertaking and its partnership agreement does not
530-22 provide for a specified event requiring a winding up of the
530-23 partnership business, a request for winding up the partnership
530-24 business from a partner, other than a partner who has agreed not to
530-25 withdraw.
530-26 (b) An event described by Subsection (a)(7) requires the
530-27 winding up of a partnership 60 days after the date on which the
531-1 partnership receives notice of the request or at a later date as
531-2 specified by the notice, unless a majority-in-interest of the
531-3 partners agree to continue the partnership.
531-4 Sec. 152.702. EFFECT OF EVENT REQUIRING WINDING UP. On the
531-5 occurrence of an event requiring winding up of a partnership
531-6 business under Section 11.051 or 152.701:
531-7 (1) the partnership continues until the winding up of
531-8 its business is completed, at which time the partnership is
531-9 terminated; and
531-10 (2) the relationship among the partners is changed as
531-11 provided by this subchapter.
531-12 Sec. 152.703. PERSONS ELIGIBLE TO WIND UP PARTNERSHIP
531-13 BUSINESS. (a) After the occurrence of an event requiring a
531-14 winding up of a partnership business, the partnership business may
531-15 be wound up by:
531-16 (1) the partners who have not withdrawn;
531-17 (2) the legal representative of the last surviving
531-18 partner; or
531-19 (3) a person appointed by the court to carry out the
531-20 winding up under Subsection (b).
531-21 (b) On application of a partner, a partner's legal
531-22 representative or transferee, or a withdrawn partner whose interest
531-23 is not redeemed under Section 152.608, a court, for good cause, may
531-24 appoint a person to carry out the winding up and may make an order,
531-25 direction, or inquiry that the circumstances require.
531-26 Sec. 152.704. RIGHTS AND DUTIES OF PERSON WINDING UP
531-27 PARTNERSHIP BUSINESS. (a) To the extent appropriate for winding
532-1 up, as soon as reasonably practicable, and in the name of and for
532-2 and on behalf of the partnership, a person winding up a
532-3 partnership's business may:
532-4 (1) prosecute and defend a civil, criminal, or
532-5 administrative suit;
532-6 (2) settle and close the partnership's business;
532-7 (3) dispose of and convey the partnership's property;
532-8 (4) satisfy or provide for the satisfaction of the
532-9 partnership's liabilities;
532-10 (5) distribute to the partners any remaining property
532-11 of the partnership; and
532-12 (6) perform any other necessary act.
532-13 (b) A person winding up a partnership's business may
532-14 continue the partnership business wholly or partly, including
532-15 delaying the disposition of partnership property, only for the
532-16 limited period necessary to avoid unreasonable loss of the
532-17 partnership's property or business.
532-18 Sec. 152.705. BINDING EFFECT OF PARTNER'S ACTION AFTER WIND
532-19 UP. After the occurrence of an event requiring winding up of the
532-20 partnership business, a partnership is bound by a partner's act
532-21 that:
532-22 (1) is appropriate for winding up; or
532-23 (2) would bind the partnership under Sections 152.301
532-24 and 152.302 before the occurrence of the event requiring winding
532-25 up, if the other party to the transaction does not have notice that
532-26 an event requiring winding up has occurred.
532-27 Sec. 152.706. PARTNER'S LIABILITY TO OTHER PARTNERS AFTER
533-1 WIND UP. (a) Except as provided by Subsection (b), after
533-2 occurrence of an event requiring winding up of the partnership
533-3 business the losses with respect to which a partner must contribute
533-4 under Section 152.709(a) include losses from a liability incurred
533-5 under Section 152.705.
533-6 (b) A partner who incurs, with notice that an event
533-7 requiring a winding up of the partnership business has occurred, a
533-8 partnership liability under Section 152.705(2) by an act that is
533-9 not appropriate for winding up is liable to the partnership for a
533-10 loss caused to the partnership arising from that liability.
533-11 Sec. 152.707. DISPOSITION OF ASSETS. (a) In winding up the
533-12 partnership business, the property of the partnership shall be
533-13 applied to discharge its obligations to creditors, including
533-14 partners who are creditors other than in the partners' capacities
533-15 as partners.
533-16 (b) A surplus shall be applied to pay in cash the net amount
533-17 distributable to partners in accordance with their right to
533-18 distributions under Section 152.708.
533-19 Sec. 152.708. SETTLEMENT OF ACCOUNTS. (a) Each partner is
533-20 entitled to a settlement of all partnership accounts on winding up
533-21 the partnership business.
533-22 (b) In settling accounts among the partners, the partnership
533-23 interest of a withdrawn partner that is not redeemed under
533-24 Subchapter H is credited with a share of any profits for the period
533-25 after the partner's withdrawal but is charged with a share of
533-26 losses for that period only to the extent of profits credited for
533-27 that period.
534-1 (c) The profits and losses that result from the liquidation
534-2 of the partnership property must be credited and charged to the
534-3 partners' capital accounts.
534-4 (d) The partnership shall make a distribution to a partner
534-5 in an amount equal to that partner's positive balance in the
534-6 partner's capital account. Except as provided by Section
534-7 152.304(b) or 152.801, a partner shall contribute to the
534-8 partnership an amount equal to that partner's negative balance in
534-9 the partner's capital account.
534-10 Sec. 152.709. CONTRIBUTIONS TO DISCHARGE OBLIGATIONS. (a)
534-11 Except as provided by Sections 152.304(b) and 152.801, to the
534-12 extent not taken into account in settling the accounts among
534-13 partners under Section 152.708:
534-14 (1) each partner shall contribute, in the proportion
534-15 in which the partner shares partnership losses, the amount
534-16 necessary to satisfy partnership obligations, excluding liabilities
534-17 that creditors have agreed may be satisfied only with partnership
534-18 property without recourse to individual partners;
534-19 (2) if a partner fails to contribute, the other
534-20 partners shall contribute the additional amount necessary to
534-21 satisfy the partnership obligations in the proportions in which the
534-22 partners share partnership losses; and
534-23 (3) a partner or partner's legal representative may
534-24 enforce or recover from the other partners, or from the estate of a
534-25 deceased partner, contributions the partner or estate makes to the
534-26 extent the amount contributed exceeds that partner's or the
534-27 estate's share of the partnership obligations.
535-1 (b) The estate of a deceased partner is liable for the
535-2 partner's obligation to contribute to the partnership.
535-3 (c) The following persons may enforce the obligation of a
535-4 partner or the estate of a deceased partner to contribute to a
535-5 partnership:
535-6 (1) the partnership;
535-7 (2) an assignee for the benefit of creditors of a
535-8 partnership or a partner; or
535-9 (3) a person appointed by a court to represent
535-10 creditors of a partnership or a partner.
535-11 Sec. 152.710. CONTINUATION OF PARTNERSHIP. (a) If all the
535-12 partners in a partnership for a definite term or for a particular
535-13 undertaking or for which the partnership agreement provides for
535-14 winding up on a specified event agree to continue the partnership
535-15 business notwithstanding the expiration of the term, the completion
535-16 of the undertaking, or the occurrence of the event, as appropriate,
535-17 other than the withdrawal of a partner, the partnership is
535-18 continued and the partnership agreement is considered amended to
535-19 provide that the expiration, the completion, or the occurrence of
535-20 the event did not result in an event requiring the winding up of
535-21 the partnership business.
535-22 (b) A continuation of the business for 90 days by the
535-23 partners or those who habitually acted in the business during the
535-24 term or undertaking or preceding the event, without a settlement or
535-25 liquidation of the partnership business and without objection from
535-26 a partner, is prima facie evidence of agreement by all partners to
535-27 continue the business under Subsection (a).
536-1 (c) The continuation of the business by the other partners
536-2 or by those who habitually acted in the business before the notice
536-3 under Section 152.701(b), other than the partner giving the notice,
536-4 without any settlement or liquidation of the partnership business,
536-5 is prima facie evidence of an agreement to continue the partnership
536-6 under Section 152.701(b).
536-7 (Sections 152.711-152.800 reserved for expansion)
536-8 SUBCHAPTER J. REGISTERED LIMITED LIABILITY PARTNERSHIPS
536-9 Sec. 152.801. LIABILITY OF PARTNER. (a) In this section,
536-10 "representative" includes an agent, servant, or employee of a
536-11 registered limited liability partnership.
536-12 (b) Except as provided by Subsection (c), a partner in a
536-13 registered limited liability partnership is not individually
536-14 liable, directly or indirectly, by contribution, indemnity, or
536-15 otherwise, for a debt or obligation of the partnership incurred
536-16 while the partnership is a registered limited liability
536-17 partnership.
536-18 (c) A partner in a registered limited liability partnership
536-19 is individually liable, in the manner prescribed by Subsection (b),
536-20 for a debt or obligation of the partnership arising from an error,
536-21 an omission, negligence, incompetence, or malfeasance committed
536-22 while the partnership is a registered limited liability partnership
536-23 and in the course of the partnership business by another partner or
536-24 a representative of the partnership who is not working under the
536-25 supervision or direction of the first partner if the first partner:
536-26 (1) was directly involved in the specific activity in
536-27 which the error, omission, negligence, incompetence, or malfeasance
537-1 was committed by the other partner or representative; or
537-2 (2) had notice or knowledge of the error, omission,
537-3 negligence, incompetence, or malfeasance by the other partner or
537-4 representative at the time of occurrence and failed to take
537-5 reasonable action to prevent or cure the error, omission,
537-6 negligence, incompetence, or malfeasance.
537-7 (d) Sections 2.101(a)(1), 152.305, and 152.306 do not limit
537-8 the effect of Subsection (b) with respect to a registered limited
537-9 liability partnership.
537-10 (e) Subsections (b) and (c) do not affect:
537-11 (1) the liability of a partnership to pay its debts
537-12 and obligations from partnership property;
537-13 (2) the liability of a partner, if any, imposed by law
537-14 or contract independently of the partner's status as a partner; or
537-15 (3) the manner in which service of citation or other
537-16 civil process may be served in an action against a partnership.
537-17 (f) This section controls over Chapter 152 and the other
537-18 partnership provisions regarding the liability of partners of a
537-19 registered limited liability partnership, the chargeability of the
537-20 partners for the debts and obligations of the partnership, and the
537-21 obligations of the partners regarding contributions and indemnity.
537-22 Sec. 152.802. REGISTRATION. (a) In addition to complying
537-23 with Sections 152.803 and 152.804, a partnership, to become a
537-24 registered limited liability partnership, must file an application
537-25 with the secretary of state in accordance with Chapter 4. The
537-26 application must:
537-27 (1) set out:
538-1 (A) the name of the partnership;
538-2 (B) the federal tax identification number of the
538-3 partnership;
538-4 (C) the street address of the partnership's
538-5 principal office in this state or outside of this state, as
538-6 applicable; and
538-7 (D) the number of partners at the date of
538-8 application;
538-9 (2) contain a brief statement of the partnership's
538-10 business; and
538-11 (3) be accompanied by the fees required under Chapter
538-12 4.
538-13 (b) The application must be signed by:
538-14 (1) a majority-in-interest of the partners; or
538-15 (2) one or more partners authorized by a
538-16 majority-in-interest of the partners.
538-17 (c) A partnership is registered as a registered limited
538-18 liability partnership by the secretary of state on:
538-19 (1) the date on which a completed initial or renewal
538-20 application is filed in accordance with Chapter 4; or
538-21 (2) a later date specified in the application.
538-22 (d) A registration is not affected by subsequent changes in
538-23 the partners of the partnership.
538-24 (e) The registration of a limited liability partnership is
538-25 effective until the first anniversary of the date of registration
538-26 or a later effective date, unless the application is:
538-27 (1) withdrawn or revoked at an earlier time; or
539-1 (2) renewed in accordance with Subsection (g).
539-2 (f) A registration may be withdrawn by filing a withdrawal
539-3 notice with the secretary of state in accordance with Chapter 4. A
539-4 withdrawal notice terminates the status of the partnership as a
539-5 registered limited liability partnership from the date on which the
539-6 notice is filed or a later date specified in the notice, but not
539-7 later than the expiration date under Subsection (e). A withdrawal
539-8 notice must:
539-9 (1) contain:
539-10 (A) the name of the partnership;
539-11 (B) the federal tax identification number of the
539-12 partnership;
539-13 (C) the date of registration of the
539-14 partnership's last application under this subchapter; and
539-15 (D) the current street address of the
539-16 partnership's principal office in this state and outside this
539-17 state, if applicable; and
539-18 (2) be signed by:
539-19 (A) a majority-in-interest of the partners; or
539-20 (B) one or more partners authorized by a
539-21 majority-in-interest of the partners.
539-22 (g) An effective registration may be renewed before its
539-23 expiration by filing an application with the secretary of state in
539-24 accordance with Chapter 4. A renewal application filed under this
539-25 subsection continues an effective registration for one year after
539-26 the date the registration would otherwise expire. The renewal
539-27 application must:
540-1 (1) contain:
540-2 (A) current information required for an initial
540-3 application; and
540-4 (B) the most recent date of registration of the
540-5 partnership; and
540-6 (2) be accompanied by the fees required under Chapter
540-7 4.
540-8 (h) The secretary of state may remove from its active
540-9 records the registration of a partnership the registration of which
540-10 has:
540-11 (1) been withdrawn or revoked; or
540-12 (2) expired and not been renewed.
540-13 (i) The secretary of state may revoke the filing of a
540-14 document filed under this subchapter if the secretary of state
540-15 determines that the filing fee for the document was paid by an
540-16 instrument that was dishonored when presented by the state for
540-17 payment. The secretary of state shall return the document and give
540-18 notice of revocation to the filing party by regular mail. Failure
540-19 to give or receive notice does not invalidate the revocation. A
540-20 revocation of a filing does not affect an earlier filing.
540-21 (j) The secretary of state is not responsible for
540-22 determining whether a partnership is in compliance with the
540-23 requirements of Section 152.804(a).
540-24 (k) A document filed under this subchapter may be amended by
540-25 filing articles of amendment with the secretary of state in
540-26 accordance with Chapter 4. The articles of amendment must:
540-27 (1) contain:
541-1 (A) the name of the partnership;
541-2 (B) the tax identification number of the
541-3 partnership;
541-4 (C) the identity of the document being amended;
541-5 (D) the date on which the document being amended
541-6 was filed;
541-7 (E) a reference to the part of the document
541-8 being amended; and
541-9 (F) the amendment or correction;
541-10 (2) be accompanied by the fees required under Chapter
541-11 4; and
541-12 (3) be signed by:
541-13 (A) a majority-in-interest of the partners; or
541-14 (B) one or more partners authorized by a
541-15 majority-in-interest of the partners.
541-16 Sec. 152.803. NAME. The name of a registered limited
541-17 liability partnership must contain:
541-18 (1) the words "registered limited liability
541-19 partnership"; or
541-20 (2) the abbreviation "L.L.P." as the last word or
541-21 letters of its name.
541-22 Sec. 152.804. INSURANCE OR FINANCIAL RESPONSIBILITY. (a) A
541-23 registered limited liability partnership must:
541-24 (1) carry at least $100,000 of liability insurance of
541-25 a kind that is designed to cover the kind of error, omission,
541-26 negligence, incompetence, or malfeasance for which liability is
541-27 limited by Section 152.801(c); or
542-1 (2) provide $100,000 specifically designated and
542-2 segregated for the satisfaction of judgments against the
542-3 partnership for the kind of error, omission, negligence,
542-4 incompetence, or malfeasance for which liability is limited by
542-5 Section 152.801(c) by:
542-6 (A) deposit of cash, bank certificates of
542-7 deposit, or United States Treasury obligations in trust or bank
542-8 escrow;
542-9 (B) a bank letter of credit; or
542-10 (C) insurance company bond.
542-11 (b) If the registered limited liability partnership is in
542-12 compliance with Subsection (a), the requirements of this section
542-13 may not be admissible or be made known to the jury in determining
542-14 an issue of liability for or extent of:
542-15 (1) the debt or obligation in question; or
542-16 (2) damages in question.
542-17 (c) If compliance with Subsection (a) is disputed:
542-18 (1) compliance must be determined separately from the
542-19 trial or proceeding to determine:
542-20 (A) the partnership debt or obligation in
542-21 question;
542-22 (B) the amount of the debt or obligation; or
542-23 (C) partner liability for the debt or
542-24 obligation; and
542-25 (2) the burden of proof of compliance is on the person
542-26 claiming limitation of liability under Section 154.801(c).
542-27 Sec. 152.805. APPLICABILITY OF CERTAIN FILING PROVISIONS.
543-1 Chapters 4 and 10 apply to a filing under this chapter with the
543-2 secretary of state.
543-3 Sec. 152.806. LIMITED PARTNERSHIP. A limited partnership
543-4 may become a registered limited liability partnership by complying
543-5 with applicable provisions of Chapter 153.
543-6 (Sections 152.807-152.900 reserved for expansion)
543-7 SUBCHAPTER K. FOREIGN LIMITED LIABILITY PARTNERSHIPS
543-8 Sec. 152.901. GENERAL. (a) A foreign limited liability
543-9 partnership is subject to Section 2.101 with respect to its
543-10 activities in this state to the same extent as a domestic
543-11 registered limited liability partnership.
543-12 (b) A foreign limited liability partnership may not be
543-13 denied a statement of foreign qualification because of a difference
543-14 between the laws of the state under which the partnership is formed
543-15 and the laws of this state.
543-16 Sec. 152.902. NAME. The name of a foreign limited liability
543-17 partnership must:
543-18 (1) satisfy the requirements of the state of
543-19 formation; and
543-20 (2) end with:
543-21 (A) the words "registered limited liability
543-22 partnership" or "limited liability partnership"; or
543-23 (B) the letters "R.L.L.P.," "L.L.P.," or "LLP."
543-24 Sec. 152.903. ACTIVITIES NOT CONSTITUTING TRANSACTING
543-25 BUSINESS. Without excluding other activities that do not
543-26 constitute transacting business in this state, a foreign limited
543-27 liability partnership is not considered to be transacting business
544-1 in this state for purposes of this code because it carries on in
544-2 this state one or more of the activities listed by Section 9.101.
544-3 Sec. 152.904. REGISTERED AGENT. (a) A foreign limited
544-4 liability partnership subject to this chapter shall maintain a
544-5 registered office and registered agent in this state.
544-6 (b) For purposes of a registered office and registered
544-7 agent, a foreign limited liability partnership is subject to
544-8 Sections 5.201 through 5.209 to the same extent as a foreign filing
544-9 entity.
544-10 Sec. 152.905. STATEMENT OF FOREIGN QUALIFICATION. (a)
544-11 Before transacting business in this state, a foreign limited
544-12 liability partnership must file a statement of foreign
544-13 qualification with the secretary of state in accordance with
544-14 Chapter 4.
544-15 (b) The statement must:
544-16 (1) set out:
544-17 (A) the name of the partnership;
544-18 (B) the federal tax identification number of the
544-19 partnership;
544-20 (C) the state in which the partnership is
544-21 formed;
544-22 (D) the date of initial registration as a
544-23 limited liability partnership under the laws of the state of
544-24 formation;
544-25 (E) the street address of the partnership's
544-26 chief executive office and, if different, the street address of any
544-27 other office in this state;
545-1 (F) the address of the registered office and the
545-2 name and address of the registered agent for service of process
545-3 required to be maintained by Section 152.904; and
545-4 (G) the number of partners at the date of the
545-5 statement;
545-6 (2) contain a statement that:
545-7 (A) as of the date of the filing, the
545-8 partnership validly exists as a limited liability partnership under
545-9 the laws of the state of formation; and
545-10 (B) the secretary of state is appointed the
545-11 agent of the partnership for service of process under the
545-12 circumstances set forth by Section 152.904;
545-13 (3) contain a brief statement of the partnership's
545-14 business; and
545-15 (4) be accompanied by the fees required by Chapter 4.
545-16 (c) The statement of qualification must be signed by:
545-17 (1) a majority-in-interest of the partners; or
545-18 (2) one or more partners authorized by a
545-19 majority-in-interest of the partners.
545-20 (d) A partnership is registered as a foreign limited
545-21 liability partnership on:
545-22 (1) the date on which a completed initial or renewal
545-23 statement of foreign qualification is filed with the secretary of
545-24 state in accordance with Chapter 4; or
545-25 (2) a later date specified in the statement.
545-26 (e) A registration is not affected by subsequent changes in
545-27 the partners of the partnership.
546-1 (f) The registration of a foreign limited liability
546-2 partnership is effective until the first anniversary of the date
546-3 after the date of registration or a later effective date, unless
546-4 the statement is:
546-5 (1) withdrawn or revoked at an earlier time; or
546-6 (2) renewed in accordance with Section 152.908.
546-7 Sec. 152.906. WITHDRAWAL OF REGISTRATION. (a) A
546-8 registration may be withdrawn by filing in duplicate with the
546-9 secretary of state a written withdrawal notice.
546-10 (b) A withdrawal notice must:
546-11 (1) contain:
546-12 (A) the name of the partnership;
546-13 (B) the federal tax identification number of the
546-14 partnership;
546-15 (C) the date of registration of the
546-16 partnership's last statement of foreign qualification under this
546-17 section; and
546-18 (D) a current street address of the
546-19 partnership's principal office in this state and outside this
546-20 state, if applicable; and
546-21 (2) be signed by:
546-22 (A) a majority-in-interest of the partners; or
546-23 (B) one or more partners authorized by a
546-24 majority-in-interest of the partners.
546-25 Sec. 152.907. EFFECT OF WITHDRAWAL NOTICE. A withdrawal
546-26 notice terminates the registration of the partnership as a foreign
546-27 limited liability partnership as of the date on which the notice is
547-1 filed or a later date specified in the notice, but not later than
547-2 the expiration date under Section 152.905(f).
547-3 Sec. 152.908. RENEWAL OF REGISTRATION. (a) An effective
547-4 registration may be renewed before its expiration by filing a
547-5 statement of foreign qualification with the secretary of state in
547-6 accordance with Chapter 4.
547-7 (b) The statement must:
547-8 (1) contain:
547-9 (A) current information required for an initial
547-10 statement of qualification; and
547-11 (B) the most recent date of registration of the
547-12 partnership; and
547-13 (2) be accompanied by a $200 fee for each partner in
547-14 this state on the date of renewal, with the aggregate of the fees
547-15 not to exceed $750.
547-16 (c) A renewal statement of foreign qualification filed under
547-17 this section continues an effective registration for one year after
547-18 the date the registration would otherwise expire.
547-19 Sec. 152.909. ACTION BY SECRETARY OF STATE. (a) The
547-20 secretary of state may remove from its active records the
547-21 registration of a foreign limited liability partnership the
547-22 registration of which has:
547-23 (1) been withdrawn or revoked; or
547-24 (2) expired and not been renewed.
547-25 (b) The secretary of state may revoke the filing of a
547-26 document filed under this subchapter if the secretary of state
547-27 determines that the filing fee for the document was paid by an
548-1 instrument that was dishonored when presented by the state for
548-2 payment. The secretary of state shall return the document and give
548-3 notice of revocation to the filing party by regular mail.
548-4 (c) Failure to give or receive notice under Subsection (b)
548-5 does not affect an earlier filing.
548-6 (d) The secretary of state may provide a form for the
548-7 statement of foreign qualification or renewal of registration.
548-8 Sec. 152.910. EFFECT OF FAILURE TO QUALIFY. (a) A foreign
548-9 limited liability partnership that transacts business in this state
548-10 without being registered is subject to Sections 9.011 and 9.012 to
548-11 the same extent as a foreign filing entity.
548-12 (b) A partner of a foreign limited liability partnership is
548-13 not liable for a debt or obligation of the partnership solely
548-14 because the partnership transacted business in this state without
548-15 being registered.
548-16 Sec. 152.911. AMENDMENT. (a) A document filed under this
548-17 subchapter may be amended by filing with the secretary of state
548-18 articles of amendment in accordance with Chapter 4.
548-19 (b) The articles must:
548-20 (1) contain:
548-21 (A) the name of the partnership;
548-22 (B) the tax identification number of the
548-23 partnership;
548-24 (C) the identity of the document being amended;
548-25 (D) a reference to the date on which the
548-26 document being amended was filed;
548-27 (E) the part of the document being amended; and
549-1 (F) the amendment or correction; and
549-2 (2) be accompanied by the fees required under Chapter 4.
549-3 Sec. 152.912. EXECUTION OF APPLICATION FOR AMENDMENT. The
549-4 articles of amendment must be signed by:
549-5 (1) a majority-in-interest of the partners; or
549-6 (2) one or more partners authorized by a
549-7 majority-in-interest of the partners.
549-8 Sec. 152.913. EXECUTION OF STATEMENT OF CHANGE OF REGISTERED
549-9 OFFICE OR REGISTERED AGENT. A statement filed by a foreign limited
549-10 liability partnership in accordance with Section 5.202 must be
549-11 signed by:
549-12 (1) a majority-in-interest of the partners; or
549-13 (2) one or more partners authorized by a
549-14 majority-in-interest of the partners.
549-15 CHAPTER 153. LIMITED PARTNERSHIPS
549-16 SUBCHAPTER A. GENERAL PROVISIONS
549-17 Sec. 153.001. DEFINITION. In this chapter, "other limited
549-18 partnership provisions" means the provisions of Title 1 and
549-19 Chapters 151 and 154, to the extent applicable to limited
549-20 partnerships.
549-21 Sec. 153.002. CONSTRUCTION. (a) This chapter and the other
549-22 limited partnership provisions shall be applied and construed to
549-23 effect its general purpose to make uniform the law with respect to
549-24 limited partnerships among states that have similar laws.
549-25 (b) The rule that a statute in derogation of the common law
549-26 is to be strictly construed does not apply to this chapter and the
549-27 other limited partnership provisions.
550-1 Sec. 153.003. APPLICABILITY OF OTHER LAW. In a case not
550-2 provided for by this chapter and the other limited partnership
550-3 provisions, the applicable provisions of Chapters 152 and 154
550-4 governing partnerships that are not limited partnerships and the
550-5 rules of law and equity govern.
550-6 (Sections 153.004-153.050 reserved for expansion)
550-7 SUBCHAPTER B. SUPPLEMENTAL PROVISIONS REGARDING CERTIFICATE OF
550-8 FORMATION AND AMENDMENT TO CERTIFICATE
550-9 Sec. 153.051. CERTIFICATE OF FORMATION. (a) To form a
550-10 limited partnership, the partners must enter into a partnership
550-11 agreement and file a certificate of formation as provided by
550-12 Chapter 3 and this section.
550-13 (b) The partners of a limited partnership agreement formed
550-14 under Section 10.001 or 10.101 may include the partnership
550-15 agreement required under Subsection (a) in the plan of merger or
550-16 conversion.
550-17 (c) A certificate of formation for a limited partnership
550-18 must include the address of the principal office of the partnership
550-19 in the United States where records are to be kept or made available
550-20 under Section 153.551.
550-21 (d) The fact that a certificate of formation is on file with
550-22 the secretary of state is notice that the partnership is a limited
550-23 partnership and of all other facts contained in the certificate as
550-24 required by Section 3.005.
550-25 Sec. 153.052. REQUIRED AMENDMENT TO CERTIFICATE OF
550-26 FORMATION. (a) A general partner shall file a certificate of
550-27 amendment reflecting the occurrence of one or more of the following
551-1 events not later than the 30th day after the date on which the
551-2 event occurred:
551-3 (1) the admission of a new general partner;
551-4 (2) the withdrawal of a general partner;
551-5 (3) a change in the name of the limited partnership;
551-6 or
551-7 (4) except as provided by Section 5.03, a change in:
551-8 (A) the address of the registered office; or
551-9 (B) the name or address of the registered agent
551-10 of the limited partnership.
551-11 (b) A general partner who becomes aware that a statement in
551-12 a certificate of formation was false when made or that a matter
551-13 described in the certificate has changed, making the certificate
551-14 false in any material respect, shall promptly amend the certificate
551-15 to make it accurate.
551-16 Sec. 153.053. DISCRETIONARY AMENDMENT TO CERTIFICATE OF
551-17 FORMATION. (a) A certificate of formation may be amended at any
551-18 time for a proper purpose as determined by the general partners.
551-19 (b) A certificate of formation may be amended to state the
551-20 name, mailing address, and street address of the business or
551-21 residence of each person winding up the limited partnership's
551-22 affairs if, after an event requiring the winding up of a limited
551-23 partnership but before the limited partnership is reconstituted or
551-24 a certificate of cancellation is filed as provided by Section
551-25 153.451:
551-26 (1) the certificate of formation has been amended to
551-27 reflect the withdrawal of all general partners; or
552-1 (2) a person who is not shown on the certificate of
552-2 formation as a general partner is carrying out the winding up of a
552-3 limited partnership's affairs.
552-4 (c) If the certificate of formation is amended under
552-5 Subsection (b), each person winding up the limited partnership's
552-6 affairs shall execute and file the certificate of amendment. A
552-7 person winding up the partnership's affairs is not subject to
552-8 liability as a general partner because of the filing of the
552-9 certificate of amendment.
552-10 (d) A general partner who is not winding up the limited
552-11 partnership's affairs is not required to execute and file a
552-12 certificate of amendment as provided by this section.
552-13 (Sections 153.054-153.100 reserved for expansion)
552-14 SUBCHAPTER C. LIMITED PARTNERS
552-15 Sec. 153.101. ADMISSION OF LIMITED PARTNERS. (a) In
552-16 connection with the formation of a limited partnership, a person
552-17 acquiring a limited partnership interest becomes a limited partner
552-18 on the later of:
552-19 (1) the date on which the limited partnership is
552-20 formed; or
552-21 (2) the date stated in the records of the limited
552-22 partnership as the date on which the person becomes a limited
552-23 partner or, if that date is not stated in those records, the date
552-24 on which the person's admission is first reflected in the records
552-25 of the limited partnership.
552-26 (b) After a limited partnership is formed, a person who
552-27 acquires a partnership interest directly from the limited
553-1 partnership becomes a new limited partner on:
553-2 (1) compliance with the provisions of the partnership
553-3 agreement governing admission of new limited partners; or
553-4 (2) if the partnership agreement does not contain
553-5 relevant admission provisions, the written consent of all partners.
553-6 (c) After formation of a limited partnership, an assignee of
553-7 a partnership interest becomes a new limited partner as provided by
553-8 Section 153.253(a).
553-9 (d) A person may be a limited partner unless the person
553-10 lacks capacity apart from this chapter.
553-11 Sec. 153.102. LIABILITY TO THIRD PARTIES. (a) Except as
553-12 provided by Subsection (c), a limited partner is not liable for the
553-13 obligations of a limited partnership unless:
553-14 (1) the limited partner is also a general partner; or
553-15 (2) in addition to the exercise of the limited
553-16 partner's rights and powers as a limited partner, the limited
553-17 partner participates in the control of the business.
553-18 (b) If the limited partner participates in the control of
553-19 the business, the limited partner is liable only to a person who
553-20 transacts business with the limited partnership reasonably
553-21 believing, based on the limited partner's conduct, that the limited
553-22 partner is a general partner.
553-23 (c) A limited partner who knowingly permits the limited
553-24 partner's name to be used in the name of the limited partnership,
553-25 except under a circumstance permitted by Section 5.055(c), is
553-26 liable to a creditor who extends credit to the limited partnership
553-27 without actual knowledge that the limited partner is not a general
554-1 partner.
554-2 Sec. 153.103. ACTIONS NOT CONSTITUTING PARTICIPATION IN
554-3 BUSINESS FOR LIABILITY PURPOSES. For purposes of this section and
554-4 Sections 153.102, 153.104, and 153.105, a limited partner does not
554-5 participate in the control of the business because the limited
554-6 partner has or has acted in one or more of the following capacities
554-7 or possesses or exercises one or more of the following powers:
554-8 (1) acting as a contractor for or an agent or employee
554-9 of:
554-10 (A) the limited partnership;
554-11 (B) a general partner;
554-12 (C) an officer, director, or stockholder of a
554-13 corporate general partner;
554-14 (D) a partner of a partnership that is a general
554-15 partner of the limited partnership; or
554-16 (E) a member or manager of a limited liability
554-17 company that is a general partner of the limited partnership;
554-18 (2) acting in a capacity similar to that described in
554-19 Subdivision (1) with any other person that is a general partner of
554-20 the limited partnership;
554-21 (3) consulting with or advising a general partner on
554-22 any matter, including the business of the limited partnership;
554-23 (4) acting as surety, guarantor, or endorser for the
554-24 limited partnership, guaranteeing or assuming one or more specific
554-25 obligations of the limited partnership, or providing collateral for
554-26 borrowings of the limited partnership;
554-27 (5) calling, requesting, attending, or participating
555-1 in a meeting of the partners or the limited partners;
555-2 (6) winding up the business of a limited partnership
555-3 under Sections 153.504-153.506;
555-4 (7) taking an action required or permitted by law to
555-5 bring, pursue, settle, or otherwise terminate a derivative action
555-6 in the right of the limited partnership;
555-7 (8) serving on a committee of the limited partnership
555-8 or the limited partners; or
555-9 (9) proposing, approving, or disapproving, by vote or
555-10 otherwise:
555-11 (A) the winding up of the limited partnership;
555-12 (B) an election to reconstitute or continue the
555-13 business of the limited partnership;
555-14 (C) the sale, exchange, lease, mortgage,
555-15 assignment, pledge, or other transfer of, or granting of a security
555-16 interest in, an asset of the limited partnership;
555-17 (D) the incurring, renewal, refinancing, or
555-18 payment or other discharge of indebtedness by the limited
555-19 partnership;
555-20 (E) a change in the nature of the business of
555-21 the limited partnership;
555-22 (F) the admission, removal, or retention of a
555-23 general partner;
555-24 (G) the admission, removal, or retention of a
555-25 limited partner;
555-26 (H) a transaction or other matter involving an
555-27 actual or potential conflict of interest;
556-1 (I) an amendment to the partnership agreement or
556-2 certificate of formation;
556-3 (J) if the limited partnership is qualified as
556-4 an investment company under the federal Investment Company Act of
556-5 1940 (15 U.S.C. Section 80a-1 et seq.), as amended, any matter
556-6 required by that Act or the rules and regulations of the Securities
556-7 and Exchange Commission under that Act, to be approved by the
556-8 holders of beneficial interests in an investment company,
556-9 including:
556-10 (i) electing directors or trustees of the
556-11 investment company;
556-12 (ii) approving or terminating an
556-13 investment advisory or underwriting contract;
556-14 (iii) approving an auditor; and
556-15 (iv) acting on another matter that that
556-16 Act requires to be approved by the holders of beneficial interests
556-17 in the investment company;
556-18 (K) indemnification of a general partner under
556-19 Chapter 8;
556-20 (L) any other matter stated in the partnership
556-21 agreement;
556-22 (M) the exercising of a right or power granted
556-23 or permitted to limited partners under this code and not
556-24 specifically enumerated in this subsection; or
556-25 (N) the merger or conversion of a limited
556-26 partnership.
556-27 Sec. 153.104. ENUMERATION OF ACTIONS NOT EXCLUSIVE. The
557-1 enumeration in Section 153.103 does not mean that a limited partner
557-2 who has acted or acts in another capacity or possesses or exercises
557-3 another power constitutes participation by that limited partner in
557-4 the control of the business of the limited partnership.
557-5 Sec. 153.105. CREATION OF RIGHTS. Sections 153.102(c),
557-6 153.103, and 153.104 do not create rights of limited partners.
557-7 Rights of limited partners may be created only by:
557-8 (1) the certificate of formation;
557-9 (2) the partnership agreement;
557-10 (3) other sections of this chapter; or
557-11 (4) the other limited partnership provisions.
557-12 Sec. 153.106. ERRONEOUS BELIEF OF CONTRIBUTOR BEING LIMITED
557-13 PARTNER. Except as provided by Section 153.109, a person who
557-14 erroneously but in good faith believes that the person has made a
557-15 contribution to and has become a limited partner in a limited
557-16 partnership is not liable as a general partner or otherwise
557-17 obligated because of making or attempting to make the contribution,
557-18 receiving distributions from the partnership, or exercising the
557-19 rights of a limited partner if, within a reasonable time after
557-20 ascertaining the mistake, the person:
557-21 (1) causes an appropriate certificate of formation or
557-22 certificate of amendment to be signed and filed;
557-23 (2) files or causes to be filed with the secretary of
557-24 state a statement in accordance with Section 153.107; or
557-25 (3) withdraws from participation in future profits of
557-26 the enterprise by executing and filing with the secretary of state
557-27 a certificate declaring the person's withdrawal under this section,
558-1 Section 153.102, and Sections 153.107-153.109.
558-2 Sec. 153.107. STATEMENT REQUIRED FOR LIABILITY PROTECTION.
558-3 (a) A statement filed under Section 153.106(2) must be entitled
558-4 "Filing under Section 153.106(2), Business Organizations Code," and
558-5 contain:
558-6 (1) the name of the partnership;
558-7 (2) the name and mailing address of the person signing
558-8 the statement; and
558-9 (3) a statement that:
558-10 (A) the person signing the statement acquired a
558-11 limited partnership interest in the partnership;
558-12 (B) the person signing the statement has made an
558-13 effort to cause a general partner of the partnership to file an
558-14 accurate certificate of formation required by the code and the
558-15 general partner has failed or refused to file the certificate; and
558-16 (C) the statement is being filed under Section
558-17 153.106(2) and the person signing the statement is claiming status
558-18 as a limited partner of the partnership named in the document.
558-19 (b) The statement is effective for 180 days.
558-20 (c) A statement filed under Section 153.106(2) may be signed
558-21 by more than one person claiming limited partnership status under
558-22 this section and Sections 153.106, 153.108, and 153.109.
558-23 Sec. 153.108. REQUIREMENTS FOR LIABILITY PROTECTION
558-24 FOLLOWING EXPIRATION OF STATEMENT. (a) If a certificate described
558-25 by Section 153.106(1) has not been filed before the expiration of
558-26 the 180-day period described by Section 153.107(b), the person
558-27 filing the statement has no further protection from liability under
559-1 Section 153.106(2). To be protected under Section 153.106 the
559-2 person must, not later than the 10th day after the date of
559-3 expiration of the 180-day period:
559-4 (1) withdraw under Section 153.106(3); or
559-5 (2) bring an action under Section 153.554 to compel
559-6 the execution and filing of a certificate of formation or
559-7 amendment.
559-8 (b) If an action is brought within the applicable period and
559-9 is diligently prosecuted to conclusion, the person bringing the
559-10 action continues to be protected from liability under Section
559-11 153.106(2) until the action is finally decided adversely to that
559-12 person.
559-13 (c) This section and Sections 153.102, 153.106, 153.107, and
559-14 153.109 do not protect a person from liability that arises under
559-15 Sections 153.102-153.105.
559-16 Sec. 153.109. LIABILITY OF ERRONEOUS CONTRIBUTOR.
559-17 Regardless of whether Sections 153.107 and 153.108 apply, a person
559-18 who makes a contribution in the circumstances described by Section
559-19 153.107(a) is liable as a general partner to a third party who
559-20 transacts business with the partnership before an action taken
559-21 under Section 153.107(a) if:
559-22 (1) the contributor has knowledge or notice that no
559-23 certificate has been filed or that the certificate inaccurately
559-24 referred to the contributor as a general partner; and
559-25 (2) the third party reasonably believed, based on the
559-26 contributor's conduct, that the contributor was a general partner
559-27 at the time of the transaction and extended credit to the
560-1 partnership in reasonable reliance on the credit of the
560-2 contributor.
560-3 Sec. 153.110. WITHDRAWAL OF LIMITED PARTNER. A limited
560-4 partner may withdraw from a limited partnership on the occurrence
560-5 of an event specified in a written partnership agreement. The
560-6 withdrawal of the partner must be made in accordance with that
560-7 agreement.
560-8 Sec. 153.111. DISTRIBUTION ON WITHDRAWAL. Except as
560-9 otherwise provided by this section and Sections 153.105, 153.110,
560-10 153.112, 153.157-153.162, 153.207, 153.209, and 153.210 or the
560-11 partnership agreement, on withdrawal a withdrawing limited partner
560-12 is entitled to receive, not later than a reasonable time after
560-13 withdrawal, the fair value of that limited partner's interest in
560-14 the limited partnership as of the date of withdrawal.
560-15 Sec. 153.112. RECEIPT OF WRONGFUL DISTRIBUTION. A limited
560-16 partner who receives a distribution that is not permitted under
560-17 Section 153.210 is not required to return the distribution unless
560-18 the limited partner knew that the distribution violated the
560-19 prohibition of Section 153.210. This subsection does not affect an
560-20 obligation of the limited partner under the partnership agreement
560-21 or other applicable law to return the distribution.
560-22 Sec. 153.113. POWERS OF ESTATE OF LIMITED PARTNER WHO IS
560-23 DECEASED OR INCAPACITATED. If a limited partner who is an
560-24 individual dies or a court adjudges the limited partner to be
560-25 incapacitated in managing the limited partner's person or property,
560-26 the limited partner's executor, administrator, guardian,
560-27 conservator, or other legal representative may exercise all of the
561-1 limited partner's rights and powers to settle the limited partner's
561-2 estate or administer the limited partner's property, including the
561-3 power of an assignee to become a limited partner under the
561-4 partnership agreement.
561-5 (Sections 153.114-153.150 reserved for expansion)
561-6 SUBCHAPTER D. GENERAL PARTNERS
561-7 Sec. 153.151. ADMISSION OF ADDITIONAL GENERAL PARTNERS.
561-8 (a) After a limited partnership is formed, additional general
561-9 partners may be admitted:
561-10 (1) in the manner provided by a written partnership
561-11 agreement; or
561-12 (2) if a written partnership agreement does not
561-13 provide for the admission of additional general partners, with the
561-14 written consent of all partners.
561-15 (b) A person may be a general partner unless the person
561-16 lacks capacity apart from this chapter.
561-17 Sec. 153.152. GENERAL POWERS AND LIABILITIES OF GENERAL
561-18 PARTNER. (a) Except as provided by this chapter, the other
561-19 limited partnership provisions, or a partnership agreement, a
561-20 general partner of a limited partnership:
561-21 (1) has the rights and powers and is subject to the
561-22 restrictions of a partner in a partnership without limited
561-23 partners; and
561-24 (2) has the liabilities of a partner in a partnership
561-25 without limited partners to the partnership and to the other
561-26 partners.
561-27 (b) Except as provided by this chapter or the other limited
562-1 partnership provisions, a general partner of a limited partnership
562-2 has the liabilities of a partner in a partnership without limited
562-3 partners to a person other than the partnership and the other
562-4 partners.
562-5 Sec. 153.153. POWERS AND LIABILITIES OF PERSON WHO IS BOTH
562-6 GENERAL PARTNER AND LIMITED PARTNER. A person who is both a
562-7 general partner and a limited partner:
562-8 (1) has the rights and powers and is subject to the
562-9 restrictions and liabilities of a general partner; and
562-10 (2) except as otherwise provided by the partnership
562-11 agreement, this chapter, or the other limited partnership
562-12 provisions, has the rights and powers and is subject to the
562-13 restrictions and liabilities, if any, of a limited partner to the
562-14 extent of the general partner's participation in the partnership as
562-15 a limited partner.
562-16 Sec. 153.154. CONTRIBUTIONS BY AND DISTRIBUTIONS TO GENERAL
562-17 PARTNER. A general partner of a limited partnership may make a
562-18 contribution to, be allocated profits and losses of, and receive a
562-19 distribution from the limited partnership as a general partner, a
562-20 limited partner, or both.
562-21 Sec. 153.155. WITHDRAWAL OF GENERAL PARTNER. (a) A person
562-22 ceases to be a general partner of a limited partnership on the
562-23 occurrence of one or more of the following events of withdrawal:
562-24 (1) the general partner withdraws as a general partner
562-25 from the limited partnership as provided by Sections
562-26 153.157-153.162;
562-27 (2) the general partner ceases to be a general partner
563-1 of the limited partnership as provided by Section 153.251;
563-2 (3) the general partner is removed as a general
563-3 partner in accordance with the partnership agreement;
563-4 (4) unless otherwise provided by a written partnership
563-5 agreement, or with the written consent of all partners, the general
563-6 partner:
563-7 (A) makes a general assignment for the benefit
563-8 of creditors;
563-9 (B) files a voluntary bankruptcy petition;
563-10 (C) becomes the subject of an order for relief
563-11 or is declared insolvent in a federal or state bankruptcy or
563-12 insolvency proceeding;
563-13 (D) files a petition or answer seeking for the
563-14 general partner a reorganization, arrangement, composition,
563-15 readjustment, liquidation, dissolution, or similar relief under
563-16 law;
563-17 (E) files a pleading admitting or failing to
563-18 contest the material allegations of a petition filed against the
563-19 general partner in a proceeding of the type described by Paragraphs
563-20 (A)-(D); or
563-21 (F) seeks, consents to, or acquiesces in the
563-22 appointment of a trustee, receiver, or liquidator of the general
563-23 partner or of all or a substantial part of the general partner's
563-24 properties;
563-25 (5) unless otherwise provided by a written partnership
563-26 agreement or with the written consent of all partners, the
563-27 expiration of:
564-1 (A) 120 days after the date of the commencement
564-2 of a proceeding against the general partner seeking reorganization,
564-3 arrangement, composition, readjustment, liquidation, dissolution,
564-4 or similar relief under law if the proceeding has not been
564-5 previously dismissed;
564-6 (B) 90 days after the date of the appointment,
564-7 without the general partner's consent, of a trustee, receiver, or
564-8 liquidator of the general partner or of all or a substantial part
564-9 of the general partner's properties if the appointment has not
564-10 previously been vacated or stayed; or
564-11 (C) 90 days after the date of expiration of a
564-12 stay, if the appointment has not previously been vacated;
564-13 (6) the death of a general partner;
564-14 (7) a court adjudicating a general partner who is an
564-15 individual mentally incompetent to manage the general partner's
564-16 person or property;
564-17 (8) unless otherwise provided by a written partnership
564-18 agreement or with the written consent of all partners, the
564-19 commencement of winding up activities intended to conclude in the
564-20 termination of a trust that is a general partner, but not merely
564-21 the substitution of a new trustee;
564-22 (9) unless otherwise provided by a written partnership
564-23 agreement or with the written consent of all partners, the
564-24 commencement of winding up activities of a separate partnership
564-25 that is a general partner;
564-26 (10) unless otherwise provided by a written
564-27 partnership agreement or with the written consent of all partners,
565-1 the:
565-2 (A) filing of a certificate of termination or
565-3 its equivalent for an entity, other than a nonfiling entity or a
565-4 foreign nonfiling entity, that is a general partner; or
565-5 (B) revocation of the charter of an entity,
565-6 other than a nonfiling entity or a foreign nonfiling entity, that
565-7 is a general partner and the expiration of 90 days after the date
565-8 of notice to the entity of revocation without a reinstatement of
565-9 its charter; or
565-10 (11) the distribution by the fiduciary of an estate
565-11 that is a general partner of the estate's entire interest in the
565-12 limited partnership.
565-13 (b) A general partner may withdraw at any time from a
565-14 limited partnership and cease to be a general partner under
565-15 Subsection (a) by giving written notice to the other partners.
565-16 Sec. 153.156. NOTICE OF EVENT OF WITHDRAWAL. A general
565-17 partner who is subject to an event that with the passage of the
565-18 specified period becomes an event of withdrawal under Section
565-19 153.155(a)(4) or (5) shall notify the other partners of the event
565-20 not later than the 30th day after the date on which the event
565-21 occurred.
565-22 Sec. 153.157. WITHDRAWAL OF GENERAL PARTNER IN VIOLATION OF
565-23 PARTNERSHIP AGREEMENT. Unless otherwise provided by the
565-24 partnership agreement, a withdrawal by a general partner of a
565-25 partnership for a definite term or particular undertaking before
565-26 the expiration of that term or completion of that undertaking is a
565-27 breach of the partnership agreement.
566-1 Sec. 153.158. EFFECT OF WITHDRAWAL. (a) Unless otherwise
566-2 provided by a written partnership agreement and subject to the
566-3 liability created under Section 153.162, if a general partner
566-4 ceases to be a general partner under Section 153.155, the remaining
566-5 general partner or partners, or, if there are no remaining general
566-6 partners, a majority-in-interest of the limited partners in a vote
566-7 that excludes any limited partnership interest held by the
566-8 withdrawing general partner, may:
566-9 (1) convert that general partner's partnership
566-10 interest to that of a limited partner; or
566-11 (2) pay to the withdrawn general partner in cash, or
566-12 secure by bond approved by a court of competent jurisdiction, the
566-13 value of that partner's partnership interest minus the damages
566-14 caused if the withdrawal constituted a breach of the partnership
566-15 agreement.
566-16 (b) Until an action described by Subsection (a) is taken,
566-17 the owner of the partnership interest of the withdrawn general
566-18 partner has the status of an assignee under Subchapter F, Section
566-19 153.113, and Section 153.555.
566-20 (c) If there are no remaining general partners following the
566-21 withdrawal of a general partner, the partnership may be
566-22 reconstituted.
566-23 Sec. 153.159. CONVERSION OF PARTNERSHIP INTEREST AFTER
566-24 WITHDRAWAL. If the partners convert the partnership interest under
566-25 Section 153.158(a)(1), the limited partnership interest may be
566-26 reduced pro rata with all other partners to provide compensation,
566-27 an interest in the partnership, or both, to a replacement general
567-1 partner.
567-2 Sec. 153.160. EFFECT OF CONVERSION OF PARTNERSHIP INTEREST.
567-3 (a) After an amendment to the certificate of formation reflecting
567-4 the general partner's withdrawal as a general partner is filed
567-5 under Section 153.052, the withdrawing general partner:
567-6 (1) may vote as a limited partner in all matters, to
567-7 the same extent as the members of the class of limited partners
567-8 having the least voting rights with respect to the matter on which
567-9 the vote is taken; and
567-10 (2) may not vote on the admission and compensation of
567-11 a general partner who replaces the withdrawing general partner.
567-12 (b) If the general partner's withdrawal violates the
567-13 partnership agreement, the general partner does not have voting
567-14 rights.
567-15 Sec. 153.161. LIABILITY OF GENERAL PARTNER FOR EVENT OF
567-16 WITHDRAWAL. (a) Unless otherwise provided by a written
567-17 partnership agreement and subject to the liability created under
567-18 Section 153.157, a general partner who ceases to be a general
567-19 partner under Section 153.155 is not personally liable in the
567-20 partner's capacity as a general partner for partnership debt
567-21 incurred after that partner ceases to be a general partner unless
567-22 the applicable creditor at the time the debt was incurred
567-23 reasonably believed that the partner remained a general partner.
567-24 (b) A creditor of the partnership has reason to believe that
567-25 a partner remains a general partner if:
567-26 (1) the creditor was:
567-27 (A) a creditor of the partnership at the time of
568-1 the general partner's withdrawal; or
568-2 (B) had extended credit to the partnership
568-3 within two years before the date of withdrawal and had no knowledge
568-4 or notice of the general partner's withdrawal; or
568-5 (2) the creditor had known that the partner was a
568-6 general partner in the partnership before the general partner's
568-7 withdrawal and had no knowledge or notice of the withdrawal and the
568-8 general partner's withdrawal had not been advertised in a
568-9 newspaper of general circulation in each place at which the
568-10 partnership business was regularly conducted.
568-11 Sec. 153.162. LIABILITY FOR WRONGFUL WITHDRAWAL. (a) If a
568-12 general partner's withdrawal from a limited partnership violates
568-13 the partnership agreement, the partnership may recover damages from
568-14 the withdrawing general partner for breach of the partnership
568-15 agreement, including the reasonable cost of obtaining replacement
568-16 of the services the withdrawn partner was obligated to perform.
568-17 (b) In addition to pursuing any remedy available under
568-18 applicable law, the partnership may effect the recovery of damages
568-19 under Subsection (a) by offsetting those damages against the amount
568-20 otherwise distributable to the withdrawing general partner,
568-21 reducing the limited partner interest into which the withdrawing
568-22 general partner's interest may be converted under Section
568-23 153.158(a)(1), or both.
568-24 (Sections 153.163-153.200 reserved for expansion)
568-25 SUBCHAPTER E. FINANCES
568-26 Sec. 153.201. FORM OF CONTRIBUTION. The contribution of a
568-27 limited partner may consist of a tangible or intangible benefit to
569-1 the limited partnership or other property of any kind or nature,
569-2 including:
569-3 (1) cash;
569-4 (2) a promissory note;
569-5 (3) services performed;
569-6 (4) a contract for services to be performed; and
569-7 (5) another interest in or security of the limited
569-8 partnership, another domestic or foreign limited partnership, or
569-9 other entity.
569-10 Sec. 153.202. ENFORCEABILITY OF PROMISE TO MAKE
569-11 CONTRIBUTION. (a) A promise by a limited partner to make a
569-12 contribution to, or pay cash or transfer other property to, a
569-13 limited partnership is not enforceable unless the promise is in
569-14 writing and signed by the limited partner.
569-15 (b) Except as otherwise provided by the partnership
569-16 agreement, a partner or the partner's legal representative or
569-17 successor is obligated to the limited partnership to perform an
569-18 enforceable promise to make a contribution to or pay cash or
569-19 transfer other property to a limited partnership, notwithstanding
569-20 the partner's death, disability, or other change in circumstances.
569-21 (c) If a partner or a partner's legal representative or
569-22 successor does not make a contribution or other payment of cash or
569-23 transfer of other property required by the enforceable promise,
569-24 whether as a contribution or with respect to a contribution
569-25 previously made, that partner or the partner's legal representative
569-26 or successor is obligated, at the option of the limited
569-27 partnership, to pay to the partnership an amount of cash equal to
570-1 the portion of the agreed value, as stated in the partnership
570-2 agreement or in the partnership records required to be kept under
570-3 Sections 153.551 and 153.552, of the contribution represented by
570-4 the amount of cash that has not been paid or the value of the
570-5 property that has not been transferred.
570-6 (d) A partnership agreement may provide that the partnership
570-7 interest of a partner who fails to make a payment of cash or
570-8 transfer of other property to the partnership, whether as a
570-9 contribution or with respect to a contribution previously made,
570-10 required by an enforceable promise is subject to specified
570-11 consequences, which may include:
570-12 (1) a reduction of the defaulting partner's percentage
570-13 or other interest in the limited partnership;
570-14 (2) subordination of the partner's partnership
570-15 interest to the interest of nondefaulting partners;
570-16 (3) a forced sale of the partner's partnership
570-17 interest;
570-18 (4) forfeiture of the partner's partnership interest;
570-19 (5) the lending of money to the defaulting partner by
570-20 other partners of the amount necessary to meet the defaulting
570-21 partner's commitment;
570-22 (6) a determination of the value of the defaulting
570-23 partner's partnership interest by appraisal or by formula and
570-24 redemption or sale of the partnership interest at that value; or
570-25 (7) another penalty or consequence.
570-26 Sec. 153.203. RELEASE OF OBLIGATION TO PARTNERSHIP. Unless
570-27 otherwise provided by the partnership agreement, the obligation of
571-1 a partner or the legal representative or successor of a partner to
571-2 make a contribution, pay cash, transfer other property, or return
571-3 cash or property paid or distributed to the partner in violation of
571-4 this chapter or the partnership agreement may be compromised or
571-5 released only by consent of all of the partners.
571-6 Sec. 153.204. ENFORCEABILITY OF OBLIGATION. (a)
571-7 Notwithstanding a compromise or release under Section 153.203, a
571-8 creditor of a limited partnership who extends credit or otherwise
571-9 acts in reasonable reliance on an obligation described by Section
571-10 153.203 may enforce the original obligation if:
571-11 (1) the obligation is reflected in a document signed
571-12 by the partner; and
571-13 (2) the document is not amended or canceled to reflect
571-14 the compromise or release.
571-15 (b) Notwithstanding the compromise or release, a general
571-16 partner remains liable to persons other than the partnership and
571-17 the other partners, as provided by Sections 153.152(a)(2) and
571-18 153.152(b).
571-19 Sec. 153.205. ENFORCEABILITY OF CONDITIONAL OBLIGATION.
571-20 (a) A conditional obligation may not be enforced unless the
571-21 conditions of the obligation have been satisfied or waived as to or
571-22 by the applicable limited partner.
571-23 (b) A conditional obligation includes a contribution payable
571-24 on a discretionary call of a limited partnership before the time
571-25 the call occurs.
571-26 Sec. 153.206. ALLOCATION OF PROFITS AND LOSSES. (a) The
571-27 profits and losses of a limited partnership shall be allocated
572-1 among the partners in the manner provided by a written partnership
572-2 agreement.
572-3 (b) If a written partnership agreement does not provide for
572-4 the allocation of profits and losses, the profits and losses shall
572-5 be allocated:
572-6 (1) in accordance with the current percentage or other
572-7 interest in the partnership stated in partnership records of the
572-8 kind described by Section 153.551(a); or
572-9 (2) if the allocation of profits and losses is not
572-10 provided for in partnership records of the kind described by
572-11 Section 153.551(a), in proportion to capital accounts.
572-12 Sec. 153.207. RIGHT TO DISTRIBUTION. Subject to Sections
572-13 153.112, 153.210, and 153.506, when a partner becomes entitled to
572-14 receive a distribution, the partner has with respect to the
572-15 distribution the status of and is entitled to all remedies
572-16 available to a creditor of the limited partnership.
572-17 Sec. 153.208. SHARING OF DISTRIBUTIONS. (a) A distribution
572-18 of cash or another asset of a limited partnership shall be made to
572-19 a partner in the manner provided by a written partnership
572-20 agreement.
572-21 (b) If a written partnership agreement does not provide
572-22 otherwise, a distribution that is a return of capital shall be made
572-23 on the basis of the agreed value, as stated in the partnership
572-24 records required to be maintained under Section 153.551(a), of the
572-25 contribution made by each partner to the extent that the
572-26 contribution has not been returned. A distribution that is not a
572-27 return of capital shall be made in proportion to the allocation of
573-1 profits as determined under Section 153.206.
573-2 (c) Unless otherwise defined by a written partnership
573-3 agreement, in this section, "return of capital" means a
573-4 distribution to a partner to the extent that the partner's capital
573-5 account, immediately after the distribution, is less than the
573-6 amount of that partner's contribution to the partnership as reduced
573-7 by a prior distribution that was a return of capital.
573-8 Sec. 153.209. INTERIM DISTRIBUTIONS. Except as otherwise
573-9 provided by this section and Sections 153.105, 153.110-153.112,
573-10 153.157-153.162, 153.207, and 153.210, a partner is entitled to
573-11 receive a distribution from a limited partnership to the extent and
573-12 at the time or on the occurrence of an event specified in the
573-13 partnership agreement before:
573-14 (1) the partner withdraws from the partnership; and
573-15 (2) the winding up of the partnership business.
573-16 Sec. 153.210. LIMITATION ON DISTRIBUTION. A limited
573-17 partnership may not make a distribution to a partner if immediately
573-18 after giving effect to the distribution and despite any compromise
573-19 of a claim referred to by Sections 153.203 and 153.204, all
573-20 liabilities of the limited partnership, other than liabilities to
573-21 partners with respect to their partnership interests and
573-22 liabilities for which the recourse of creditors is limited to
573-23 specified property of the limited partnership, exceed the fair
573-24 value of the partnership assets. The fair value of property that
573-25 is subject to a liability for which recourse of creditors is
573-26 limited shall be included in the partnership assets for purposes of
573-27 this subsection only to the extent that the fair value of that
574-1 property exceeds that liability.
574-2 (Sections 153.211-153.250 reserved for expansion)
574-3 SUBCHAPTER F. PARTNERSHIP INTEREST
574-4 Sec. 153.251. ASSIGNMENT OF PARTNERSHIP INTEREST.
574-5 (a) Except as otherwise provided by the partnership agreement, a
574-6 partnership interest is assignable wholly or partly.
574-7 (b) Except as otherwise provided by the partnership
574-8 agreement, an assignment of a partnership interest:
574-9 (1) does not dissolve a limited partnership;
574-10 (2) does not entitle the assignee to become, or to
574-11 exercise rights or powers of, a partner; and
574-12 (3) entitles the assignee to be allocated income,
574-13 gain, loss, deduction, credit, or similar items and to receive
574-14 distributions to which the assignor was entitled to the extent
574-15 those items are assigned.
574-16 Sec. 153.252. RIGHTS OF ASSIGNOR. (a) Except as otherwise
574-17 provided by the partnership agreement, until the assignee becomes a
574-18 partner, the assignor partner continues to be a partner in the
574-19 partnership. The assignor partner may exercise any rights or
574-20 powers of a partner, except to the extent those rights or powers
574-21 are assigned.
574-22 (b) Except as otherwise provided by the partnership
574-23 agreement, on the assignment by a general partner of all of the
574-24 general partner's rights as a general partner, the general
574-25 partner's status as a general partner may be terminated by the
574-26 affirmative vote of a majority-in-interest of the limited partners.
574-27 Sec. 153.253. RIGHTS OF ASSIGNEE. (a) An assignee of a
575-1 partnership interest, including the partnership interest of a
575-2 general partner, may become a limited partner if and to the extent
575-3 that:
575-4 (1) the partnership agreement provides; or
575-5 (2) all partners consent.
575-6 (b) An assignee who becomes a limited partner, to the extent
575-7 of the rights and powers assigned, has the rights and powers and is
575-8 subject to the restrictions and liabilities of a limited partner
575-9 under a partnership agreement and this code.
575-10 Sec. 153.254. LIABILITY OF ASSIGNEE. (a) Until an assignee
575-11 of the partnership interest in a limited partnership becomes a
575-12 partner, the assignee does not have liability as a partner solely
575-13 as a result of the assignment.
575-14 (b) Unless otherwise provided by a written partnership
575-15 agreement, an assignee who becomes a limited partner:
575-16 (1) is liable for the obligations of the assignor to
575-17 make contributions as provided by Sections 153.202-153.204;
575-18 (2) is not obligated for liabilities unknown to the
575-19 assignee at the time the assignee became a limited partner and
575-20 that could not be ascertained from a written partnership agreement;
575-21 and
575-22 (3) is not liable for the obligations of the assignor
575-23 under Sections 153.105, 153.110-153.112, 153.157-153.162, 153.207,
575-24 153.209, and 153.210.
575-25 Sec. 153.255. LIABILITY OF ASSIGNOR. Regardless of whether
575-26 an assignee of a partnership interest becomes a limited partner,
575-27 the assignor is not released from the assignor's liability to the
576-1 limited partnership under Subchapter E and Sections 153.105,
576-2 153.110-153.112, 153.157-153.162, 153.207, 153.209, and 153.210.
576-3 Sec. 153.256. CHARGE IN PAYMENT OF JUDGMENT CREDITOR.
576-4 (a) On application to a court by a judgment creditor of a partner
576-5 or other owner of a partnership interest, the court may:
576-6 (1) charge the partnership interest of the partner or
576-7 other owner with payment of the unsatisfied amount of the judgment,
576-8 with interest;
576-9 (2) appoint a receiver for the debtor partner's share
576-10 of the partnership's profits and other money payable or that
576-11 becomes payable to the debtor partner with respect to the
576-12 partnership; and
576-13 (3) make other orders, directions, and inquiries that
576-14 the circumstances of the case require.
576-15 (b) To the extent that the partnership interest is charged
576-16 in the manner provided by Subsection (a), the judgment creditor has
576-17 only the rights of an assignee of the partnership interest.
576-18 (c) The partnership interest charged may be:
576-19 (1) redeemed at any time before foreclosure; or
576-20 (2) in case of a sale directed by the court, and
576-21 without constituting an event requiring winding up, purchased:
576-22 (A) by one or more of the general partners with
576-23 separate property of any general partner; or
576-24 (B) with respect to partnership property, by one
576-25 or more of the general partners whose interests are not charged, on
576-26 the consent of all general partners whose interests are not charged
576-27 and a majority in interest of the limited partners, excluding
577-1 limited partnership interests held by a general partner whose
577-2 interest is charged.
577-3 (d) The remedies provided by Subsection (a) are exclusive of
577-4 other remedies that may exist, including remedies under laws of
577-5 this state applicable to partnerships without limited partners.
577-6 Sec. 153.257. EXEMPTION LAWS APPLICABLE TO PARTNERSHIP
577-7 INTEREST NOT AFFECTED. Section 153.256 does not deprive a partner
577-8 of the benefit of an exemption law applicable to that partner's
577-9 partnership interest.
577-10 (Sections 153.258-153.300 reserved for expansion)
577-11 SUBCHAPTER G. REPORTS, RECORDS, AND INFORMATION
577-12 Sec. 153.301. PERIODIC REPORT. The secretary of state may
577-13 require a domestic limited partnership or a foreign limited
577-14 partnership registered to transact business in this state to file a
577-15 report not more than once every four years as required by this
577-16 subchapter.
577-17 Sec. 153.302. FORM AND CONTENTS OF REPORT. (a) The report
577-18 must:
577-19 (1) include:
577-20 (A) the name of the limited partnership;
577-21 (B) the state or territory under the laws of
577-22 which the limited partnership is formed;
577-23 (C) the address of the registered office of the
577-24 limited partnership in this state and the name of the registered
577-25 agent at that address;
577-26 (D) the address of the principal office in the
577-27 United States where records are to be kept or made available under
578-1 Sections 153.551 and 153.552; and
578-2 (E) the name, mailing address, and street
578-3 address of the business or residence of each general partner;
578-4 (2) be made on a form adopted by the secretary of
578-5 state for that purpose; and
578-6 (3) be signed on behalf of the limited partnership by
578-7 at least one general partner.
578-8 (b) The information contained in the report must be given as
578-9 of the date of the execution of the report.
578-10 Sec. 153.303. FILING FEE. The filing fee for the report is
578-11 as provided by Chapter 4.
578-12 Sec. 153.304. DELIVERY OF REPORT. Two copies of the report
578-13 must be delivered to the secretary of state not later than the 30th
578-14 day after the date on which notice is mailed under Section 153.305.
578-15 Sec. 153.305. ACTION BY SECRETARY OF STATE. (a) The
578-16 secretary of state shall send a notice that the report required by
578-17 Section 153.301 is due.
578-18 (b) The notice must be:
578-19 (1) addressed to the limited partnership; and
578-20 (2) mailed to:
578-21 (A) the registered office of the limited
578-22 partnership;
578-23 (B) the last known address of the limited
578-24 partnership as it appears on record in the office of the secretary
578-25 of state; or
578-26 (C) any other known place of business of the
578-27 limited partnership.
579-1 (c) The secretary of state shall include with the notice
579-2 copies of a report form to be prepared and filed as provided by
579-3 this subchapter.
579-4 Sec. 153.306. EFFECT OF FILING REPORT. (a) If the
579-5 secretary of state finds that the report complies with this
579-6 subchapter, the secretary shall:
579-7 (1) endorse on the report the word "Filed" and the
579-8 month, day, and year of filing;
579-9 (2) notify the limited partnership of the filing of
579-10 the report; and
579-11 (3) update the records of the secretary of state's
579-12 office to reflect:
579-13 (A) a reported change in the address of the
579-14 registered office, principal office, or the business or residence
579-15 address of a general partner; and
579-16 (B) a reported change in the name of the
579-17 registered agent.
579-18 (b) The filing of a report under Section 153.301 does not
579-19 relieve the limited partnership of the requirement to file an
579-20 amendment to the certificate of formation required under Section
579-21 153.052 or 153.053, except that the limited partnership is not
579-22 required to file an amendment to change the information specified
579-23 in Subsection (a)(3).
579-24 Sec. 153.307. EFFECT OF FAILURE TO FILE REPORT. (a) A
579-25 domestic or foreign limited partnership that fails to file a report
579-26 under Section 153.301 when the report is due forfeits the limited
579-27 partnership's right to transact business in this state. A
580-1 forfeiture under this section takes effect without judicial
580-2 ascertainment.
580-3 (b) When the right to transact business has been forfeited
580-4 under this section, the secretary of state shall note that the
580-5 right to transact business has been forfeited and the date of
580-6 forfeiture on the record kept in the secretary's office relating to
580-7 the limited partnership.
580-8 Sec. 153.308. NOTICE OF FORFEITURE OF RIGHT TO TRANSACT
580-9 BUSINESS. Notice of the forfeiture under Section 153.307 shall be
580-10 mailed to the limited partnership at:
580-11 (1) the registered office of the limited partnership;
580-12 (2) the last known address of the limited partnership;
580-13 or
580-14 (3) any other place of business of the limited
580-15 partnership.
580-16 Sec. 153.309. EFFECT OF FORFEITURE OF RIGHT TO TRANSACT
580-17 BUSINESS. (a) Unless the right of the limited partnership to
580-18 transact business is revived in accordance with Section 153.310:
580-19 (1) the limited partnership may not maintain an
580-20 action, suit, or proceeding in a court of this state; and
580-21 (2) a successor or assignee of the limited partnership
580-22 may not maintain an action, suit, or proceeding in a court of this
580-23 state on a right, claim, or demand arising from the transaction of
580-24 business by the limited partnership in this state.
580-25 (b) The forfeiture of the right to transact business in this
580-26 state does not:
580-27 (1) impair the validity of a contract or act of the
581-1 limited partnership; or
581-2 (2) prevent the limited partnership from defending an
581-3 action, suit, or proceeding in a court of this state.
581-4 (c) This section and Sections 153.307 and 153.308 do not
581-5 affect the liability of a limited partner to the limited
581-6 partnership.
581-7 Sec. 153.310. REVIVAL OF RIGHT TO TRANSACT BUSINESS. (a) A
581-8 limited partnership that forfeits the right to transact business in
581-9 this state as provided by Section 153.309 may be relieved from the
581-10 forfeiture by filing the required report not later than the 120th
581-11 day after the date of mailing of the notice of forfeiture under
581-12 Section 153.308, accompanied by the filing fees as provided by
581-13 Chapter 4.
581-14 (b) If a limited partnership complies with Subsection (a),
581-15 the secretary of state shall:
581-16 (1) revive the right of the limited partnership to
581-17 transact business in this state;
581-18 (2) cancel the note regarding the forfeiture; and
581-19 (3) note the revival and the date of revival on the
581-20 record kept in the secretary's office relating to the limited
581-21 partnership.
581-22 Sec. 153.311. CANCELLATION OF CERTIFICATE OR REGISTRATION
581-23 AFTER FORFEITURE. (a) The secretary of state may cancel the
581-24 certificate of a limited partnership, or the registration of a
581-25 foreign limited partnership, if the limited partnership:
581-26 (1) forfeits its right to transact business in this
581-27 state under Section 153.307; and
582-1 (2) fails to revive that right under Section 153.310.
582-2 (b) Cancellation of the certificate or registration takes
582-3 effect without judicial ascertainment.
582-4 (c) The secretary of state shall note the cancellation and
582-5 the date of cancellation on the record kept in the secretary's
582-6 office relating to the limited partnership.
582-7 (d) On cancellation, the status of the limited partnership
582-8 is changed to inactive according to the records of the secretary of
582-9 state. The change to inactive status does not affect the liability
582-10 of a limited partner to the limited partnership.
582-11 Sec. 153.312. REINSTATEMENT OF CERTIFICATE OR REGISTRATION.
582-12 (a) A limited partnership the certificate or registration of which
582-13 has been canceled as provided by Section 153.311 may be relieved of
582-14 the cancellation by filing the report required by Section 153.301,
582-15 accompanied by the filing fees provided by Chapter 4.
582-16 (b) If the limited partnership pays the fees required by
582-17 Subsection (a), the secretary of state shall:
582-18 (1) reinstate the certificate or registration of the
582-19 limited partnership without judicial ascertainment;
582-20 (2) change the status of the limited partnership to
582-21 active; and
582-22 (3) note the reinstatement on the record kept in the
582-23 secretary's office relating to the limited partnership.
582-24 (c) If the name of the limited partnership is not available
582-25 at the time of reinstatement, the secretary of state shall require
582-26 the limited partnership as a precondition to reinstatement to:
582-27 (1) file an amendment to the partnership's certificate
583-1 or application; or
583-2 (2) in the case of a foreign limited partnership,
583-3 amend its application to adopt an assumed name for use in this
583-4 state.
583-5 (Sections 153.313-153.350 reserved for expansion)
583-6 SUBCHAPTER H. LIMITED PARTNERSHIP AS REGISTERED LIMITED
583-7 LIABILITY PARTNERSHIP
583-8 Sec. 153.351. REQUIREMENTS. A limited partnership is a
583-9 registered limited liability partnership and a limited partnership
583-10 if the partnership:
583-11 (1) registers as a registered limited liability
583-12 partnership:
583-13 (A) as permitted by its partnership agreement;
583-14 or
583-15 (B) if its partnership agreement does not
583-16 include a provision for becoming a registered limited liability
583-17 partnership, with the consent of partners required to amend its
583-18 partnership agreement;
583-19 (2) complies with Subchapter J, Chapter 152; and
583-20 (3) has as the last words or letters of its name the
583-21 words "Limited Partnership" or the abbreviation "Ltd." followed by
583-22 the words "registered limited liability partnership" or the
583-23 abbreviation "L.L.P."
583-24 Sec. 153.352. APPLICABILITY OF OTHER REQUIREMENTS. For
583-25 purposes of applying Section 152.802 to a limited partnership:
583-26 (1) an application to become a registered limited
583-27 liability partnership or to withdraw a registration must be signed
584-1 by at least one general partner; and
584-2 (2) other references to a partner mean a general
584-3 partner only.
584-4 Sec. 153.353. LAW APPLICABLE TO PARTNERS. If a limited
584-5 partnership is a registered limited liability partnership, Section
584-6 152.801 applies to a general partner and to a limited partner who
584-7 is liable under other provisions of this chapter for the debts or
584-8 obligations of the limited partnership.
584-9 (Sections 153.354-153.400 reserved for expansion)
584-10 SUBCHAPTER I. DERIVATIVE ACTIONS
584-11 Sec. 153.401. RIGHT TO BRING ACTION. A limited partner may
584-12 bring an action in a court on behalf of the limited partnership to
584-13 recover a judgment in the limited partnership's favor if:
584-14 (1) all general partners with authority to bring the
584-15 action have refused to bring the action; or
584-16 (2) an effort to cause those general partners to bring
584-17 the action is not likely to succeed.
584-18 Sec. 153.402. PROPER PLAINTIFF. In a derivative action, the
584-19 plaintiff must be a limited partner when the action is brought and:
584-20 (1) must have been a limited partner at the time of
584-21 the transaction that is the subject of the action; or
584-22 (2) the person's status as a limited partner must have
584-23 arisen by operation of law or under the terms of the partnership
584-24 agreement from a person who was a limited partner at the time of
584-25 the transaction.
584-26 Sec. 153.403. PLEADING. In a derivative action, the
584-27 complaint must contain with particularity:
585-1 (1) the effort, if any, of the plaintiff to secure
585-2 initiation of the action by a general partner; or
585-3 (2) the reasons for not making the effort.
585-4 Sec. 153.404. SECURITY FOR EXPENSES OF DEFENDANTS. (a) In
585-5 a derivative action, the court may require the plaintiff to give
585-6 security for the reasonable expenses incurred or expected to be
585-7 incurred by a defendant in the action, including reasonable
585-8 attorney's fees.
585-9 (b) The court may increase or decrease at any time the
585-10 amount of the security on a showing that the security provided is
585-11 inadequate or excessive.
585-12 (c) If a plaintiff is unable to give security, the plaintiff
585-13 may file an affidavit in accordance with the Texas Rules of Civil
585-14 Procedure.
585-15 (d) Except as provided by Subsection (c), if a plaintiff
585-16 fails to give the security within a reasonable time set by the
585-17 court, the court shall dismiss the suit without prejudice.
585-18 (e) The court, on final judgment for a defendant and on a
585-19 finding that suit was brought without reasonable cause against the
585-20 defendant, may require the plaintiff to pay reasonable expenses,
585-21 including reasonable attorney's fees, to the defendant, regardless
585-22 of whether security has been required.
585-23 Sec. 153.405. EXPENSES OF PLAINTIFF. If a derivative action
585-24 is successful, wholly or partly, or if anything is received by the
585-25 plaintiff because of a judgment, compromise, or settlement of the
585-26 action or claim constituting a part of the action, the court may
585-27 award the plaintiff reasonable expenses, including reasonable
586-1 attorney's fees, and shall direct the plaintiff to remit to a party
586-2 identified by the court the remainder of the proceeds received by
586-3 the plaintiff.
586-4 (Sections 153.406-153.450 reserved for expansion)
586-5 SUBCHAPTER J. CANCELLATION OF CERTIFICATE OF FORMATION
586-6 Sec. 153.451. CERTIFICATE OF CANCELLATION. (a) A
586-7 certificate of formation shall be canceled by filing a certificate
586-8 of cancellation with the secretary of state in accordance with
586-9 Chapter 4:
586-10 (1) on the completion of the winding up of the
586-11 partnership business;
586-12 (2) when there are no limited partners; or
586-13 (3) subject to Subsection (b), on a merger or
586-14 conversion as provided by Chapter 10.
586-15 (b) If a limited partnership formed under this code is not
586-16 one of the surviving or resulting domestic limited partnerships or
586-17 other entities in a merger or conversion, the articles of merger or
586-18 conversion filed under Chapter 10 are sufficient, without a filing
586-19 under this section, to cancel the certificate of formation of the
586-20 nonsurviving limited partnership.
586-21 Sec. 153.452. CONTENTS OF CERTIFICATE OF CANCELLATION. A
586-22 certificate of cancellation must contain:
586-23 (1) the name of the limited partnership;
586-24 (2) the date of the filing of the partnership's
586-25 certificate of formation;
586-26 (3) the reason for filing the certificate of
586-27 cancellation;
587-1 (4) the future effective date or a certain time of
587-2 cancellation if cancellation is not effective on the filing of the
587-3 certificate; and
587-4 (5) other proper information as determined by the
587-5 person filing the certificate of cancellation.
587-6 (Sections 153.453-153.500 reserved for expansion)
587-7 SUBCHAPTER K. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS
587-8 Sec. 153.501. ADDITIONAL EVENTS REQUIRING WINDING UP. An
587-9 event requiring the winding up of a limited partnership includes,
587-10 in addition to any event specified in Section 11.051, the
587-11 following:
587-12 (1) written consent of all partners to the winding up
587-13 and termination of the limited partnership; and
587-14 (2) an event of withdrawal of a general partner.
587-15 Sec. 153.502. CONTINUATION WITHOUT WINDING UP. (a) The
587-16 limited partnership may cancel an event requiring winding up as
587-17 specified in Section 11.051(1) or (3) if, not later than the 90th
587-18 day after the event, all remaining partners, or another group or
587-19 percentage of partners as specified by the partnership agreement,
587-20 agree in writing to continue the business of the limited
587-21 partnership.
587-22 (b) The limited partnership may revoke an event requiring
587-23 winding up as specified in Section 153.501(2) if:
587-24 (1) there remains at least one general partner and the
587-25 partnership agreement permits the business of the limited
587-26 partnership to be carried on by the remaining general partners and
587-27 those remaining general partners carry on the business; or
588-1 (2) not later than the 90th day after the event, all
588-2 remaining partners, or another group or percentage of partners
588-3 specified in the partnership agreement:
588-4 (A) agree in writing to continue the business of
588-5 the limited partnership in writing; and
588-6 (B) to the extent that they desire or if there
588-7 are no remaining general partners, agree to the appointment of one
588-8 or more new general partners.
588-9 (c) The appointment of one or more new general partners
588-10 under Subsection (b)(2)(B) is effective from the date of
588-11 withdrawal.
588-12 Sec. 153.503. JUDICIAL DECREE. On application by or for a
588-13 partner, a court may decree the winding up and termination of a
588-14 limited partnership if the court determines that:
588-15 (1) the economic purpose of the limited partnership is
588-16 likely to be unreasonably frustrated;
588-17 (2) another partner has engaged in conduct relating to
588-18 the limited partnership business that makes it not reasonably
588-19 practicable to carry on the business in limited partnership with
588-20 that partner; or
588-21 (3) it is not reasonably practicable to carry on the
588-22 business of the limited partnership in conformity with the
588-23 partnership agreement.
588-24 Sec. 153.504. WINDING UP PROCEDURES. (a) Except as
588-25 provided by the partnership agreement, after an event requiring the
588-26 winding up of a limited partnership, the partnership's affairs
588-27 shall be wound up as soon as reasonably practicable.
589-1 (b) The winding up of the partnership's affairs shall be
589-2 accomplished by:
589-3 (1) the general partners who have not wrongfully
589-4 dissolved a limited partnership; or
589-5 (2) if there are no general partners who have not
589-6 wrongfully dissolved the partnership, the limited partners or a
589-7 person chosen by the limited partners.
589-8 Sec. 153.505. POWERS OF PERSON CONDUCTING WIND UP. (a)
589-9 After an event requiring the winding up of a limited partnership
589-10 and until the filing of a certificate of cancellation as provided
589-11 by Sections 153.451 and 153.452, unless a written partnership
589-12 agreement provides otherwise, a person winding up the limited
589-13 partnership's business in the name of and on behalf of the limited
589-14 partnership may:
589-15 (1) prosecute or defend a civil, criminal, or
589-16 administrative suit;
589-17 (2) settle and close the limited partnership's
589-18 business;
589-19 (3) dispose of and convey the limited partnership's
589-20 property for cash, unless a written partnership agreement permits a
589-21 transfer on noncash terms;
589-22 (4) discharge or make reasonable provision to pay the
589-23 limited partnership's liabilities; and
589-24 (5) distribute to the partners any remaining assets of
589-25 the limited partnership.
589-26 (b) A power described by Subsection (a) does not create a
589-27 liability for a limited partner that did not exist before an action
590-1 to wind up the business of the partnership was taken.
590-2 Sec. 153.506. DISPOSITION OF ASSETS. On the winding up of a
590-3 limited partnership, its assets shall be paid or transferred as
590-4 follows:
590-5 (1) to the extent otherwise permitted by law, to
590-6 creditors, including partners who are creditors other than solely
590-7 because of the application of Section 153.207 for the payment or
590-8 the making of reasonable provision for payment to satisfy the
590-9 liabilities of the limited partnership;
590-10 (2) unless otherwise provided by the partnership
590-11 agreement, to partners and former partners to satisfy the
590-12 partnership's liability for distributions under Section 153.111 or
590-13 153.209; and
590-14 (3) unless otherwise provided by the partnership
590-15 agreement, to partners first for the return of their capital and
590-16 second with respect to their partnership interests, in the
590-17 proportions provided by Section 153.208.
590-18 (Sections 153.507-153.550 reserved for expansion)
590-19 SUBCHAPTER L. MISCELLANEOUS PROVISIONS
590-20 Sec. 153.551. RECORDS. (a) A domestic limited partnership
590-21 shall maintain the following records in its principal office in the
590-22 United States or make the records available in that office not
590-23 later than the fifth day after the date on which a written request
590-24 under Section 153.552(a) is received:
590-25 (1) a current list that states:
590-26 (A) the name and mailing address of each
590-27 partner, separately identifying in alphabetical order the general
591-1 partners and the limited partners;
591-2 (B) the last known street address of the
591-3 business or residence of each general partner;
591-4 (C) the percentage or other interest in the
591-5 partnership owned by each partner; and
591-6 (D) if one or more classes or groups are
591-7 established under the partnership agreement, the names of the
591-8 partners who are members of each specified class or group;
591-9 (2) a copy of:
591-10 (A) the limited partnership's federal, state,
591-11 and local information or income tax returns for each of the
591-12 partnership's six most recent tax years;
591-13 (B) the partnership agreement and certificate of
591-14 formation; and
591-15 (C) all amendments or restatements;
591-16 (3) copies of any document that creates, in the manner
591-17 provided by the partnership agreement, classes or groups of
591-18 partners;
591-19 (4) an executed copy of any powers of attorney under
591-20 which the partnership agreement, certificate of formation, and all
591-21 amendments or restatements to the agreement and certificate have
591-22 been executed;
591-23 (5) unless contained in the written partnership
591-24 agreement, a written statement of:
591-25 (A) the amount of the cash contribution and a
591-26 description and statement of the agreed value of any other
591-27 contribution made by each partner;
592-1 (B) the amount of the cash contribution and a
592-2 description and statement of the agreed value of any other
592-3 contribution that the partner has agreed to make in the future as
592-4 an additional contribution;
592-5 (C) the date on which additional contributions
592-6 are to be made or the date of events requiring additional
592-7 contributions to be made;
592-8 (D) events requiring the limited partnership to
592-9 be dissolved and its affairs wound up; and
592-10 (E) the date on which each partner in the
592-11 limited partnership became a partner; and
592-12 (6) books and records of the accounts of the limited
592-13 partnership.
592-14 (b) A limited partnership shall maintain its records in
592-15 written form or in another form capable of being converted to
592-16 written form in a reasonable time.
592-17 (c) A limited partnership shall keep in its registered
592-18 office in this state and make available to a partner on reasonable
592-19 request the street address of its principal office in the United
592-20 States in which the records required by this section are
592-21 maintained.
592-22 Sec. 153.552. EXAMINATION OF RECORDS AND INFORMATION. (a)
592-23 On written request stating a proper purpose, a partner or an
592-24 assignee of a partnership interest may examine and copy, in person
592-25 or through a representative, records required to be kept under
592-26 Section 153.551 and other information regarding the business,
592-27 affairs, and financial condition of the limited partnership as is
593-1 just and reasonable for the person to examine and copy.
593-2 (b) The records requested under Subsection (a) may be
593-3 examined and copied at a reasonable time and at the partner's sole
593-4 expense.
593-5 (c) On written request by a partner or an assignee of a
593-6 partnership interest, the partnership shall provide to the
593-7 requesting partner or assignee without charge copies of:
593-8 (1) the partnership agreement and certificate of
593-9 formation and all amendments or restatements; and
593-10 (2) any tax return described by Section 153.551(a)(2).
593-11 (d) A request made under Subsection (c) must be made to:
593-12 (1) the person who is designated to receive the
593-13 request in the partnership agreement at the address designated in
593-14 the partnership agreement; or
593-15 (2) if there is no designation, a general partner at
593-16 the partnership's principal office in the United States.
593-17 Sec. 153.553. EXECUTION OF CERTAIN FILINGS. (a) Each
593-18 certificate required by this code to be filed by a limited
593-19 partnership with the secretary of state shall be executed as
593-20 follows:
593-21 (1) an initial certificate of formation must be signed
593-22 by all general partners, except for an initial certification of
593-23 formation signed by a person under Section 153.106(1);
593-24 (2) a certificate of amendment or restated certificate
593-25 of formation must be signed by at least one general partner and by
593-26 each other general partner designated in the certificate of
593-27 amendment as a new general partner, unless signed and filed by a
594-1 person under Section 153.053(b), 153.053(c), or 153.106(1), but the
594-2 certificate of amendment need not be signed by a withdrawing
594-3 general partner;
594-4 (3) a certificate of cancellation must be signed by
594-5 all general partners participating in the winding up of the limited
594-6 partnership's business or, if no general partners are winding up
594-7 the limited partnership's business, by all nonpartner liquidators
594-8 or, if the limited partners are winding up the limited
594-9 partnership's business, by a majority in interest of the limited
594-10 partners;
594-11 (4) a certificate of merger filed on behalf of a
594-12 domestic limited partnership must be signed as provided by Chapter
594-13 10;
594-14 (5) a certificate filed under Section 10.251 must be
594-15 signed by the person designated by the court; and
594-16 (6) a certificate of correction must be signed by at
594-17 least one general partner.
594-18 (b) Any person may sign a certificate or partnership
594-19 agreement or amendment or restated certificate by an attorney in
594-20 fact. A power of attorney relating to the signing of a certificate
594-21 or partnership agreement or amendment or restated certificate by an
594-22 attorney in fact:
594-23 (1) is not required to be sworn to, verified, or
594-24 acknowledged;
594-25 (2) is not required to be filed with the secretary of
594-26 state; and
594-27 (3) shall be retained with the partnership records
595-1 under Sections 153.551 and 153.552.
595-2 (c) The execution of a certificate by a general partner or
595-3 the execution of a written statement by a person under Section
595-4 153.106(2) is an oath or affirmation, under a penalty of perjury,
595-5 that, to the best of the executing party's knowledge and belief,
595-6 the facts stated in the certificate or statement are true.
595-7 Sec. 153.554. EXECUTION, AMENDMENT, OR CANCELLATION BY
595-8 JUDICIAL ORDER. (a) If a person fails or refuses to execute or
595-9 file a certificate as required by this chapter or to execute a
595-10 partnership agreement, another person adversely affected by the
595-11 failure or refusal may petition a court to direct the execution or
595-12 filing of the certificate or the execution of the partnership
595-13 agreement, as appropriate.
595-14 (b) If the court finds that the execution or filing of the
595-15 certificate is proper and that a person required to execute or file
595-16 the certificate has failed or refused to execute or file the
595-17 certificate, the court shall order the secretary of state to record
595-18 an appropriate certificate.
595-19 (c) The judicial remedy described by Subsection (b) is not a
595-20 limit on the rights of a person to file a written statement under
595-21 Section 153.106(2).
595-22 (d) If the court finds that the partnership agreement should
595-23 be executed and that a person required to execute the partnership
595-24 agreement has failed or refused to execute the agreement, the court
595-25 shall enter an order granting appropriate relief.
595-26 (e) If a court enters an order in favor of the adversely
595-27 affected person requesting relief under this section, the court
596-1 shall award to that person reasonable expenses, including
596-2 reasonable attorney's fees.
596-3 Sec. 153.555. PERMITTED TRANSFER IN CONNECTION WITH
596-4 RACETRACK LICENSE. The following transfer relating to a limited
596-5 partnership is not a prohibited transfer that violates Section
596-6 6.12(a), Texas Racing Act (Article 179e, Vernon's Texas Civil
596-7 Statutes):
596-8 (1) a transfer by a general partnership of its assets
596-9 to a limited partnership, the corporate general partner of which is
596-10 controlled by the partners of the general partnership; or
596-11 (2) a transfer by a limited partnership of the
596-12 beneficial use of or interest in any of its rights, privileges, or
596-13 assets to a local development corporation incorporated before
596-14 January 31, 1993, under Subchapter D, Chapter 431, Transportation
596-15 Code.
596-16 CHAPTER 154. PROVISIONS APPLICABLE TO BOTH GENERAL
596-17 AND LIMITED PARTNERSHIPS
596-18 SUBCHAPTER A. PARTNERSHIP INTERESTS
596-19 Sec. 154.001. NATURE OF PARTNER'S PARTNERSHIP INTEREST.
596-20 (a) A partner's partnership interest is personal property for all
596-21 purposes.
596-22 (b) A partner's partnership interest may be community
596-23 property under applicable law.
596-24 (c) A partner is not a co-owner of partnership property.
596-25 Sec. 154.002. TRANSFER OF INTEREST IN PARTNERSHIP PROPERTY
596-26 PROHIBITED. A partner does not have an interest that can be
596-27 transferred, voluntarily or involuntarily, in partnership property.
597-1 (Sections 154.003-154.100 reserved for expansion)
597-2 SUBCHAPTER B. PARTNERSHIP AGREEMENT
597-3 Sec. 154.101. CLASS OR GROUP OF PARTNERS. (a) A written
597-4 partnership agreement may establish or provide for the future
597-5 creation of additional classes or groups of one or more partners
597-6 that have certain express relative rights, powers, and duties,
597-7 including voting rights. The future creation of additional classes
597-8 or groups may be expressed in the partnership agreement or at the
597-9 time of creation of the class or group.
597-10 (b) The rights, powers, or duties of a class or group of
597-11 partners may be senior to those partners of an existing class or
597-12 group.
597-13 Sec. 154.102. PROVISIONS RELATING TO VOTING. A written
597-14 partnership agreement that grants or provides for granting a right
597-15 to vote to a partner may contain a provision relating to:
597-16 (1) giving notice of the time, place, or purpose of a
597-17 meeting at which a matter is to be voted on by the partners;
597-18 (2) waiver of notice;
597-19 (3) action by consent without a meeting;
597-20 (4) the establishment of a record date;
597-21 (5) quorum requirements;
597-22 (6) voting in person or by proxy; or
597-23 (7) other matters relating to the exercise of the
597-24 right to vote.
597-25 Sec. 154.103. NOTICE OF ACTION BY CONSENT WITHOUT A MEETING.
597-26 (a) Prompt notice of the taking of an action under a partnership
597-27 agreement that may be taken without a meeting by consent of fewer
598-1 than all of the partners shall be given to a partner who has not
598-2 given written consent to the action.
598-3 (b) For purposes of this section, the "taking of an action"
598-4 includes:
598-5 (1) amending the partnership agreement; or
598-6 (2) creating under the partnership agreement a class
598-7 of partners that did not previously exist.
598-8 (Sections 154.104-154.200 reserved for expansion)
598-9 SUBCHAPTER C. PARTNERSHIP TRANSACTIONS AND RELATIONSHIPS
598-10 Sec. 154.201. BUSINESS TRANSACTIONS BETWEEN PARTNER AND
598-11 PARTNERSHIP. Except as otherwise provided by the partnership
598-12 agreement, a partner may lend money to and transact other business
598-13 with the partnership. Subject to other applicable law, a partner
598-14 has the same rights and obligations with respect to those matters
598-15 as a person who is not a partner.
598-16 Sec. 154.202. EFFECT OF PARTNER CHANGE ON RELATIONSHIP
598-17 BETWEEN PARTNERSHIP AND CREDITORS. A relationship between a
598-18 partnership and its creditors is not affected by the:
598-19 (1) withdrawal of a partner; or
598-20 (2) addition of a new partner.
598-21 Sec. 154.203. DISTRIBUTIONS IN KIND. (a) Except as
598-22 provided by the partnership agreement, a partner, regardless of the
598-23 nature of the partner's contribution, is not entitled to demand or
598-24 receive from a partnership a distribution in any form other than
598-25 cash.
598-26 (b) Except as provided by the partnership agreement, a
598-27 partner may not be compelled to accept a disproportionate
599-1 distribution of an asset in kind from a partnership to the extent
599-2 that the percentage portion of assets distributed to the partner
599-3 exceeds the percentage of those assets that equals the percentage
599-4 in which the partner shares in distributions from the partnership.
599-5 TITLE 5. BUSINESS TRUSTS
599-6 CHAPTER 200. REAL ESTATE INVESTMENT TRUSTS
599-7 SUBCHAPTER A. GENERAL PROVISIONS
599-8 Sec. 200.001. DEFINITION. In this chapter, "real estate
599-9 investment trust" means an unincorporated trust:
599-10 (1) formed by one or more trust managers under this
599-11 chapter and Chapter 3; and
599-12 (2) managed under this chapter.
599-13 Sec. 200.002. APPLICABILITY OF CHAPTER. (a) The provisions
599-14 of Chapters 20 and 21 govern a matter to the extent that this
599-15 chapter or Title 1 does not govern the matter.
599-16 (b) An unincorporated trust that does not meet the
599-17 requirements of this chapter is an unincorporated association under
599-18 Chapter 253.
599-19 Sec. 200.003. CONFLICT WITH OTHER LAW. In case of conflict
599-20 between this chapter and Chapters 20 and 21, this chapter controls.
599-21 Chapters 20 and 21 do not control over this chapter merely because
599-22 a provision of Chapter 20 or 21 is more or less extensive,
599-23 restrictive, or detailed than a similar provision of this chapter.
599-24 Sec. 200.004. ULTRA VIRES ACTS. (a) Lack of capacity of a
599-25 real estate investment trust may not be the basis of any claim or
599-26 defense at law or in equity.
599-27 (b) An act of a real estate investment trust or a transfer
600-1 of property by or to a real estate investment trust is not invalid
600-2 because the act or transfer was:
600-3 (1) beyond the scope of the purpose or purposes of the
600-4 real estate investment trust as expressed in the real estate
600-5 investment trust's certificate of formation; or
600-6 (2) inconsistent with a limitation on the authority of
600-7 an officer or trust manager to exercise a statutory power of the
600-8 real estate investment trust, as that limitation is expressed in
600-9 the real estate investment trust's certificate of formation.
600-10 (c) The fact that an act or transfer is beyond the scope of
600-11 the expressed purpose or purposes of the real estate investment
600-12 trust or is inconsistent with an expressed limitation on the
600-13 authority of an officer or trust manager may be asserted in a
600-14 proceeding:
600-15 (1) by a shareholder against the real estate
600-16 investment trust to enjoin the performance of an act or the
600-17 transfer of property by or to the real estate investment trust; or
600-18 (2) by the real estate investment trust, acting
600-19 directly or through a receiver, trustee, or other legal
600-20 representative, or through shareholders in a representative suit,
600-21 against an officer or trust manager or former officer or trust
600-22 manager of the real estate investment trust for exceeding that
600-23 person's authority.
600-24 (d) If the unauthorized act or transfer sought to be
600-25 enjoined under Subsection (c)(1) is being or is to be performed or
600-26 made under a contract to which the real estate investment trust is
600-27 a party and if each party to the contract is a party to the
601-1 proceeding, the court may set aside and enjoin the performance of
601-2 the contract. The court may award to the real estate investment
601-3 trust or to another party to the contract, as appropriate,
601-4 compensation for loss or damage resulting from the action of the
601-5 court in setting aside and enjoining the performance of the
601-6 contract, excluding loss of anticipated profits.
601-7 Sec. 200.005. SUPPLEMENTARY POWERS OF REAL ESTATE INVESTMENT
601-8 TRUST. (a) Subject to Section 2.106(a) and in addition to the
601-9 powers specified in Section 2.101, a real estate investment trust
601-10 may engage in activities mandated or authorized by:
601-11 (1) provisions of the Internal Revenue Code that are
601-12 related to or govern real estate investment trusts; and
601-13 (2) regulations adopted under the Internal Revenue
601-14 Code.
601-15 (b) This section does not authorize a real estate investment
601-16 trust or an officer or trust manager of a real estate investment
601-17 trust to exercise a power in a manner inconsistent with a
601-18 limitation on the purposes or powers of the real estate investment
601-19 trust contained in:
601-20 (1) the trust's certificate of formation;
601-21 (2) this code; or
601-22 (3) another law of this state.
601-23 (Sections 200.006-200.050 reserved for expansion)
601-24 SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
601-25 Sec. 200.051. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF
601-26 FORMATION. (a) For purposes of this code, the certificate of
601-27 formation of a real estate investment trust is a declaration of
602-1 trust. The certificate of formation may be titled "declaration of
602-2 trust" or "certificate of formation."
602-3 (b) In addition to the information required by Section
602-4 3.005, the certificate of formation of a real estate investment
602-5 trust must state:
602-6 (1) that an assumed name certificate stating the name
602-7 of the real estate investment trust has been filed in the manner
602-8 provided by law;
602-9 (2) that the purpose of the real estate investment
602-10 trust is to:
602-11 (A) purchase, hold, lease, manage, sell,
602-12 exchange, develop, subdivide, and improve real property and
602-13 interests in real property, other than severed mineral, oil, or gas
602-14 royalty interests, and carry on any other business and perform any
602-15 other action in connection with a purpose described by this
602-16 paragraph;
602-17 (B) exercise powers conferred by the laws of
602-18 this state on a real estate investment trust; and
602-19 (C) perform any action described by this chapter
602-20 or Title 1 to the same extent as an individual;
602-21 (3) the post office address of the initial principal
602-22 office and place of business of the real estate investment trust;
602-23 (4) the aggregate number of shares of beneficial
602-24 interest the real estate investment trust is authorized to issue
602-25 and the par value to be received by the real estate investment
602-26 trust for the issuance of each share;
602-27 (5) if shares described by Subdivision (4) are divided
603-1 into classes as authorized by Section 200.102 or 200.103, a
603-2 description of each class of shares, including any preferences,
603-3 conversion, and other rights, voting powers, restrictions,
603-4 limitations as to dividends, qualifications, and terms and
603-5 conditions of redemption; and
603-6 (6) that the trust managers shall manage the money or
603-7 property received for the issuance of shares for the benefit of the
603-8 shareholders of the real estate investment trust.
603-9 Sec. 200.052. NO PROPERTY RIGHT IN CERTIFICATE OF FORMATION.
603-10 A shareholder of a real estate investment trust does not have a
603-11 vested property right resulting from the certificate of formation,
603-12 including a provision in the certificate of formation relating to
603-13 the management, control, capital structure, dividend entitlement,
603-14 purpose, or duration of the real estate investment trust.
603-15 Sec. 200.053. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
603-16 OF FORMATION. (a) To adopt an amendment to the certificate of
603-17 formation of a real estate investment trust as provided by
603-18 Subchapter B, Chapter 3, the trust managers shall:
603-19 (1) adopt a resolution stating the proposed amendment;
603-20 and
603-21 (2) follow the procedures prescribed by this section
603-22 and Sections 200.054-200.057.
603-23 (b) The resolution may incorporate the proposed amendment in
603-24 a restated certificate of formation that complies with Section
603-25 3.057.
603-26 Sec. 200.054. ADOPTION OF AMENDMENT BY TRUST MANAGERS. If a
603-27 real estate investment trust does not have any issued and
604-1 outstanding shares, the trust managers may adopt a proposed
604-2 amendment to the real estate investment trust's certificate of
604-3 formation by resolution without shareholder approval.
604-4 Sec. 200.055. ADOPTION OF AMENDMENT BY SHAREHOLDERS. If a
604-5 real estate investment trust has issued shares, a resolution
604-6 described by Section 200.053 must also direct that:
604-7 (1) the proposed amendment be submitted to a vote of
604-8 the shareholders at a meeting; and
604-9 (2) the shareholders approve the proposed amendment in
604-10 the manner provided by Section 200.056.
604-11 Sec. 200.056. NOTICE OF AND MEETING TO CONSIDER PROPOSED
604-12 AMENDMENT. (a) Each shareholder of record entitled to vote shall
604-13 be given written notice containing the proposed amendment or a
604-14 summary of the changes to be effected within the time and in the
604-15 manner provided by this code for giving notice of meetings to
604-16 shareholders. If the proposed amendment is to be considered at an
604-17 annual meeting, the proposed amendment or summary may be included
604-18 in the notice required to be provided for an annual meeting.
604-19 (b) At the meeting, the proposed amendment shall be adopted
604-20 only on receiving the affirmative vote of shareholders entitled to
604-21 vote required by Section 200.261.
604-22 (c) An unlimited number of amendments may be submitted for
604-23 adoption by the shareholders at a meeting.
604-24 Sec. 200.057. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF
604-25 AMENDMENT. (a) In addition to the statements required by Section
604-26 3.053, a certificate of amendment for a real estate investment
604-27 trust must state:
605-1 (1) if the amendment provides for an exchange,
605-2 reclassification, or cancellation of issued shares, the manner in
605-3 which the exchange, reclassification, or cancellation of the issued
605-4 shares will be effected if the manner is not specified in the
605-5 amendment; and
605-6 (2) if the amendment effects a change in the amount of
605-7 stated capital, the manner in which the change in the amount of
605-8 stated capital is effected and the amount of stated capital
605-9 expressed in dollar terms as changed by the amendment.
605-10 (b) An officer shall sign the certificate of amendment on
605-11 behalf of the real estate investment trust. If shares of the real
605-12 estate investment trust have not been issued and the certificate of
605-13 amendment is adopted by the trust managers, a majority of the trust
605-14 managers may execute the certificate of amendment on behalf of the
605-15 real estate investment trust.
605-16 (c) The certificate of amendment must be filed in accordance
605-17 with Chapter 4 and has the same effect as provided by Subchapter B,
605-18 Chapter 3.
605-19 Sec. 200.058. RESTATED CERTIFICATE OF FORMATION. (a) A
605-20 real estate investment trust may adopt a restated certificate of
605-21 formation, as provided by Subchapter B, Chapter 3, by following the
605-22 same procedures to amend its certificate of formation under
605-23 Sections 200.053-200.057, except that shareholder approval is not
605-24 required if an amendment is not adopted.
605-25 (b) An officer shall sign the restated certificate of
605-26 formation on behalf of the real estate investment trust. If shares
605-27 of the real estate investment trust have not been issued and the
606-1 restated certificate of formation is adopted by the trust managers,
606-2 the majority of the trust managers may execute the restated
606-3 certificate of formation on behalf of the real estate investment
606-4 trust.
606-5 (c) In addition to the provisions authorized or required by
606-6 Section 3.057, a restated certificate of formation may update the
606-7 current number of trust managers and the names and addresses of the
606-8 persons serving as trust managers.
606-9 Sec. 200.059. BYLAWS. (a) The trust managers of a real
606-10 estate investment trust shall adopt initial bylaws.
606-11 (b) The bylaws may contain provisions for the regulation and
606-12 management of the affairs of the real estate investment trust that
606-13 are consistent with law and the real estate investment trust's
606-14 certificate of formation.
606-15 (c) The trust managers of a real estate investment trust may
606-16 amend or repeal bylaws or adopt new bylaws unless:
606-17 (1) the real estate investment trust's certificate of
606-18 formation or this chapter wholly or partly reserves the power
606-19 exclusively to the real estate investment trust's shareholders; or
606-20 (2) in amending, repealing, or adopting a bylaw, the
606-21 shareholders expressly provide that the trust managers may not
606-22 amend, repeal, or readopt that bylaw.
606-23 Sec. 200.060. DUAL AUTHORITY. Unless the certificate of
606-24 formation or a bylaw adopted by the shareholders provides otherwise
606-25 as to all or a part of a real estate investment trust's bylaws, the
606-26 shareholders of a real estate investment trust may amend, repeal,
606-27 or adopt the bylaws of the real estate investment trust even if the
607-1 bylaws may also be amended, repealed, or adopted by the trust
607-2 managers of the real estate investment trust.
607-3 Sec. 200.061. ORGANIZATION MEETING. (a) After the real
607-4 estate investment trust has been formed, the initial trust managers
607-5 of the real estate investment trust shall hold an organization
607-6 meeting, at the call of a majority of those trust managers, for the
607-7 purpose of adopting bylaws, electing officers, and transacting
607-8 other business.
607-9 (b) Not later than the fourth day before the date of the
607-10 meeting, the initial trust managers calling the meeting shall mail
607-11 notice of the time and place of the meeting to the other initial
607-12 trust managers named in the certificate of formation.
607-13 (Sections 200.062-200.100 reserved for expansion)
607-14 SUBCHAPTER C. SHARES
607-15 Sec. 200.101. NUMBER. A real estate investment trust may
607-16 issue the number of shares stated in the real estate investment
607-17 trust's certificate of formation.
607-18 Sec. 200.102. CLASSIFICATION OF SHARES. A real estate
607-19 investment trust may provide in the real estate investment trust's
607-20 certificate of formation:
607-21 (1) that a specified class of shares is preferred over
607-22 another class of shares as to its distributive share of the assets
607-23 on voluntary or involuntary liquidation of the real estate
607-24 investment trust;
607-25 (2) the amount of a preference described by
607-26 Subdivision (1);
607-27 (3) that a specified class of shares may be redeemed
608-1 at the option of the real estate investment trust or of the holders
608-2 of the shares;
608-3 (4) the terms and conditions of a redemption of shares
608-4 described by Subdivision (3), including the time and price of
608-5 redemption;
608-6 (5) that a specified class of shares may be converted
608-7 into shares of one or more other classes;
608-8 (6) the terms and conditions of a conversion described
608-9 by Subdivision (5);
608-10 (7) that a holder of a specified security issued or to
608-11 be issued by the real estate investment trust has voting or other
608-12 rights authorized by law; and
608-13 (8) for other preferences, rights, restrictions,
608-14 including restrictions on transferability, and qualifications
608-15 consistent with law.
608-16 Sec. 200.103. CLASSES OF SHARES ESTABLISHED BY TRUST
608-17 MANAGERS. (a) A real estate investment trust may provide in the
608-18 real estate investment trust's certificate of formation that the
608-19 trust managers may periodically classify or reclassify any unissued
608-20 shares by setting or changing the preferences, conversion or other
608-21 rights, voting powers, restrictions, limitations as to dividends,
608-22 qualifications, or terms or conditions of redemption of the shares.
608-23 (b) Before issuing shares, the trust managers who perform as
608-24 authorized by the certificate of formation an action described by
608-25 Subsection (a) must file with the county clerk of the county of the
608-26 principal place of business of the real estate investment trust a
608-27 statement of designation that contains:
609-1 (1) a description of the shares, including the
609-2 preferences, conversion and other rights, voting powers,
609-3 restrictions, limitations as to dividends, qualifications, and
609-4 terms and conditions of redemption, as set or changed by the trust
609-5 managers; and
609-6 (2) a statement that the shares have been classified
609-7 or reclassified by the trust managers as authorized by the
609-8 certificate of formation.
609-9 Sec. 200.104. TYPES OF CONSIDERATION FOR ISSUANCE OF SHARES.
609-10 Shares with or without par value may be issued by a real estate
609-11 investment trust for the following types of consideration:
609-12 (1) a tangible or intangible benefit to the real
609-13 estate investment trust;
609-14 (2) cash;
609-15 (3) a promissory note;
609-16 (4) services performed or a contract for services to
609-17 be performed;
609-18 (5) a security of the real estate investment trust or
609-19 any other organization; and
609-20 (6) any other property of any kind or nature.
609-21 Sec. 200.105. ISSUANCE OF SHARES. Shares may not be issued
609-22 until the consideration has been received by the real estate
609-23 investment trust or by a corporation the outstanding shares of each
609-24 class of capital stock of which are directly or indirectly owned by
609-25 the real estate investment trust. When the consideration is
609-26 received:
609-27 (1) the shares are considered to be issued, and the
610-1 shareholder entitled to receive the shares is a shareholder with
610-2 respect to the shares; and
610-3 (2) the shares are considered fully paid and
610-4 nonassessable.
610-5 Sec. 200.106. DETERMINATION OF CONSIDERATION FOR SHARES.
610-6 Consideration to be received by a real estate investment trust for
610-7 shares shall be determined by the trust managers.
610-8 Sec. 200.107. AMOUNT OF CONSIDERATION FOR ISSUANCE OF SHARES
610-9 WITH PAR VALUE. Consideration to be received by a real estate
610-10 investment trust for the issuance of shares with par value may not
610-11 be less than the par value of the shares.
610-12 Sec. 200.108. VALUE OF CONSIDERATION. In the absence of
610-13 fraud in the transaction, the judgment of the trust managers or
610-14 shareholders, as appropriate, is conclusive in determining the
610-15 value of the consideration received for the shares.
610-16 Sec. 200.109. LIABILITY OF ASSIGNEE OR TRANSFEREE. An
610-17 assignee or transferee of certificated shares, uncertificated
610-18 shares, or a subscription for shares in good faith and without
610-19 knowledge that full consideration for the shares or subscription
610-20 has not been paid may not be held personally liable to the real
610-21 estate investment trust or a creditor of the real estate investment
610-22 trust for an unpaid portion of the consideration.
610-23 Sec. 200.110. SUBSCRIPTIONS. (a) A real estate investment
610-24 trust may accept a subscription by notifying the subscriber in
610-25 writing.
610-26 (b) A subscription to purchase shares in a real estate
610-27 investment trust that is in the process of being formed is
611-1 irrevocable for six months if the subscription is in writing and
611-2 signed by the subscriber unless the subscription provides for a
611-3 longer or shorter period or all of the other subscribers agree to
611-4 the revocation of the subscription.
611-5 (c) A written subscription entered into after the real
611-6 estate investment trust is formed is a contract between the
611-7 subscriber and the real estate investment trust.
611-8 Sec. 200.111. PREFORMATION SUBSCRIPTION. (a) A real estate
611-9 investment trust may determine the payment terms of a preformation
611-10 subscription unless the payment terms are specified by the
611-11 subscription. The payment terms may authorize payment in full on
611-12 acceptance or by installments.
611-13 (b) Unless the subscription provides otherwise, a real
611-14 estate investment trust shall make calls placed to all subscribers
611-15 of similar interests for payment on preformation subscriptions
611-16 uniform as far as practicable.
611-17 (c) After a real estate investment trust is formed, the real
611-18 estate investment trust may:
611-19 (1) collect as any other debt the amount due on any
611-20 unpaid preformation subscription; or
611-21 (2) forfeit the subscription on 20 days' written
611-22 notice to the subscriber.
611-23 (d) Although the forfeiture of a subscription terminates all
611-24 the rights and obligations of the subscriber, the real estate
611-25 investment trust may retain any amount previously paid on the
611-26 subscription.
611-27 Sec. 200.112. COMMITMENT TO PURCHASE SHARES. (a) A person
612-1 who contemplates the acquisition of shares in a real estate
612-2 investment trust may commit to act in a specified manner with
612-3 respect to the shares after the acquisition, including the voting
612-4 of the shares or the retention or disposition of the shares. To be
612-5 binding, the commitment must be in writing and be signed by the
612-6 person acquiring the shares. The commitment continues for a
612-7 six-month period unless the commitment provides for a longer or
612-8 shorter period.
612-9 (b) A written commitment entered into under Subsection (a)
612-10 is a contract between the shareholder and the real estate
612-11 investment trust.
612-12 (Sections 200.113-200.150 reserved for expansion)
612-13 SUBCHAPTER D. SHAREHOLDER RIGHTS AND RESTRICTIONS
612-14 Sec. 200.151. REGISTERED HOLDERS AS OWNERS. Except as
612-15 otherwise provided by this code and subject to Chapter 8, Business
612-16 & Commerce Code, a real estate investment trust may consider the
612-17 person registered as the owner of a share in the share transfer
612-18 records of the real estate investment trust at a particular time,
612-19 including a record date set under Section 6.102, as the owner of
612-20 that share at that time for purposes of:
612-21 (1) voting the share;
612-22 (2) receiving distributions on the share;
612-23 (3) transferring the share;
612-24 (4) receiving notice, exercising rights of dissent and
612-25 appraisal, exercising or waiving a preemptive right, or giving
612-26 proxies with respect to that share; or
612-27 (5) entering into agreements with respect to that
613-1 share in accordance with Section 6.251 or 6.252 or with this
613-2 subchapter.
613-3 Sec. 200.152. NO STATUTORY PREEMPTIVE RIGHT UNLESS
613-4 SPECIFICALLY PROVIDED BY CERTIFICATE OF FORMATION. A shareholder
613-5 of a real estate investment trust does not have a preemptive right
613-6 to acquire securities except to the extent specifically provided by
613-7 the certificate of formation.
613-8 Sec. 200.153. TRANSFER OF SHARES AND OTHER SECURITIES.
613-9 Except as otherwise provided by this code, the shares and other
613-10 securities of a real estate investment trust are transferable in
613-11 accordance with Chapter 8, Business & Commerce Code.
613-12 Sec. 200.154. RESTRICTION ON TRANSFER OF SHARES AND OTHER
613-13 SECURITIES. (a) A restriction on the transfer or registration of
613-14 transfer of a security may be imposed by:
613-15 (1) the real estate investment trust's certificate of
613-16 formation;
613-17 (2) the real estate investment trust's bylaws;
613-18 (3) a written agreement among two or more holders of
613-19 the securities; or
613-20 (4) a written agreement among one or more holders of
613-21 the securities and the real estate investment trust if:
613-22 (A) the real estate investment trust files a
613-23 copy of the agreement at the principal place of business or
613-24 registered office of the real estate investment trust; and
613-25 (B) the copy of the agreement is subject to the
613-26 same right of examination by a shareholder of the real estate
613-27 investment trust, in person or by agent, attorney, or accountant,
614-1 as the books and records of the real estate investment trust.
614-2 (b) A restriction imposed under Subsection (a) is not valid
614-3 with respect to a security issued before the restriction has been
614-4 adopted, unless the holder of the security voted in favor of the
614-5 restriction or is a party to the agreement imposing the
614-6 restriction.
614-7 Sec. 200.155. VALID RESTRICTION ON TRANSFER.
614-8 Notwithstanding Sections 200.154 and 200.157, a restriction placed
614-9 on the transfer or registration of transfer of a security of a real
614-10 estate investment trust is valid if the restriction reasonably:
614-11 (1) obligates the holder of the restricted security to
614-12 offer a person, including the real estate investment trust or other
614-13 holders of securities of the real estate investment trust, an
614-14 opportunity to acquire the restricted security within a reasonable
614-15 time before the transfer;
614-16 (2) obligates the real estate investment trust, to the
614-17 extent provided by this code, or another person to purchase
614-18 securities that are the subject of an agreement relating to the
614-19 purchase and sale of the restricted security;
614-20 (3) requires the real estate investment trust or the
614-21 holders of a class of the real estate investment trust's securities
614-22 to consent to a proposed transfer of the restricted security or to
614-23 approve the proposed transferee of the restricted security for the
614-24 purpose of preventing a violation of law;
614-25 (4) prohibits the transfer of the restricted security
614-26 to a designated person or group of persons and the designation is
614-27 not manifestly unreasonable; or
615-1 (5) maintains a tax advantage to the real estate
615-2 investment trust, including maintaining its status as a real estate
615-3 investment trust under the relevant provisions of the Internal
615-4 Revenue Code and regulations adopted under the Internal Revenue
615-5 Code.
615-6 Sec. 200.156. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF
615-7 SHARES OR OTHER SECURITIES. (a) A real estate investment trust
615-8 that has adopted a bylaw or is a party to an agreement that
615-9 restricts the transfer of the shares or other securities of the
615-10 real estate investment trust may file with the county clerk of the
615-11 county of the principal place of business of the real estate
615-12 investment trust a copy of the bylaw or agreement and a statement
615-13 attached to the copy that:
615-14 (1) contains the name of the real estate investment
615-15 trust;
615-16 (2) states that the attached copy of the bylaw or
615-17 agreement is a true and correct copy of the bylaw or agreement; and
615-18 (3) states that the filing has been authorized by the
615-19 trust managers or shareholders, as appropriate.
615-20 (b) After the statement is filed with the county clerk, the
615-21 bylaws or agreement restricting the transfer of shares or other
615-22 securities is a public record, and the fact that the statement has
615-23 been filed must be stated on a certificate representing the
615-24 restricted shares or securities if required by Section 3.202.
615-25 (c) A real estate investment trust that is a party to an
615-26 agreement restricting the transfer of the shares or other
615-27 securities of the real estate investment trust may make the
616-1 agreement part of the real estate investment trust's certificate of
616-2 formation without restating the provisions of the agreement in the
616-3 certificate of formation by complying with this code or amending
616-4 the certificate of formation. If the agreement alters the original
616-5 or amended certificate of formation, the altered provision must be
616-6 identified by reference or description in the certificate of
616-7 amendment. If the agreement is an addition to the original or
616-8 amended certificate of formation, the certificate of amendment must
616-9 state that fact.
616-10 (d) The certificate of amendment must:
616-11 (1) include a copy of the agreement restricting the
616-12 transfer of shares or other securities;
616-13 (2) state that the attached copy of the agreement is a
616-14 true and correct copy of the agreement; and
616-15 (3) state that inclusion of the certificate of
616-16 amendment as part of the certificate of formation has been
616-17 authorized in the manner required by this code to amend the
616-18 certificate of formation.
616-19 Sec. 200.157. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF
616-20 CERTAIN SECURITIES. (a) A restriction placed on the transfer or
616-21 registration of the transfer of a security of a real estate
616-22 investment trust is specifically enforceable against the holder, or
616-23 a successor or transferee of the holder, if:
616-24 (1) the restriction is reasonable and noted
616-25 conspicuously on the certificate or other instrument representing
616-26 the security; or
616-27 (2) with respect to an uncertificated security, the
617-1 restriction is reasonable and a notation of the restriction is
617-2 contained in the notice sent with respect to the security under
617-3 Section 3.205.
617-4 (b) Unless noted in the manner specified by Subsection (a)
617-5 with respect to a certificate or other instrument or an
617-6 uncertificated security, an otherwise enforceable restriction is
617-7 ineffective against a transferee for value without actual knowledge
617-8 of the restriction at the time of the transfer or against a
617-9 subsequent transferee, regardless of whether the transfer is for
617-10 value. A restriction is specifically enforceable against a person
617-11 other than a transferee for value from the time the person acquires
617-12 actual knowledge of the restriction's existence.
617-13 Sec. 200.158. JOINT OWNERSHIP OF SHARES. (a) If shares are
617-14 registered on the books of a real estate investment trust in the
617-15 names of two or more persons as joint owners with the right of
617-16 survivorship and one of the owners dies, the real estate investment
617-17 trust may record on its books and effect the transfer of the shares
617-18 to a person, including the surviving joint owner, and pay any
617-19 distributions made with respect to the shares, as if the surviving
617-20 joint owner was the sole owner of the shares. The recording and
617-21 distribution authorized by this subsection must be made after the
617-22 death of a joint owner and before the real estate investment trust
617-23 receives actual written notice that a party other than a surviving
617-24 joint owner is claiming an interest in the shares or distribution.
617-25 (b) The discharge of a real estate investment trust from
617-26 liability under Section 200.160 and the transfer of full legal and
617-27 equitable title of the shares does not affect, reduce, or limit any
618-1 cause of action existing in favor of an owner of an interest in the
618-2 shares or distributions against the surviving owner.
618-3 Sec. 200.159. LIABILITY FOR DESIGNATING OWNER OF SHARES. A
618-4 real estate investment trust or an officer, trust manager,
618-5 employee, or agent of the real estate investment trust may not be
618-6 held liable for considering a person to be the owner of a share for
618-7 a purpose described by Section 200.151, regardless of whether the
618-8 person possesses a certificate for those shares.
618-9 Sec. 200.160. LIABILITY REGARDING JOINT OWNERSHIP OF SHARES.
618-10 A real estate investment trust that transfers shares or makes a
618-11 distribution to a surviving joint owner under Section 200.158
618-12 before the real estate investment trust has received a written
618-13 claim for the shares or distribution from another person is
618-14 discharged from liability for the transfer or payment.
618-15 (Sections 200.161-200.200 reserved for expansion)
618-16 SUBCHAPTER E. DISTRIBUTIONS AND SHARE DIVIDENDS
618-17 Sec. 200.201. AUTHORITY FOR DISTRIBUTIONS. The trust
618-18 managers of a real estate investment trust may authorize a
618-19 distribution and the real estate investment trust may make a
618-20 distribution, subject to Section 200.202 and any restriction in the
618-21 certificate of formation.
618-22 Sec. 200.202. LIMITATIONS ON DISTRIBUTIONS. (a) A real
618-23 estate investment trust may not make a distribution that:
618-24 (1) will cause the real estate investment trust to
618-25 become insolvent; or
618-26 (2) is more than the surplus of the real estate
618-27 investment trust.
619-1 (b) Notwithstanding Subsection (a), if the net assets of a
619-2 real estate investment trust are not less than the amount of the
619-3 proposed distribution, the real estate investment trust may make a
619-4 distribution involving a purchase or redemption of its own shares
619-5 if the purchase or redemption is made by the real estate investment
619-6 trust to:
619-7 (1) eliminate fractional shares;
619-8 (2) collect or settle indebtedness owed by or to the
619-9 real estate investment trust;
619-10 (3) pay dissenting shareholders entitled to receive
619-11 payment for their shares under this chapter; or
619-12 (4) effect the purchase or redemption of redeemable
619-13 shares in accordance with this code.
619-14 Sec. 200.203. PRIORITY OF DISTRIBUTIONS. A real estate
619-15 investment trust's indebtedness that arises as a result of the
619-16 declaration of a distribution made in accordance with this
619-17 subchapter is at parity with the real estate investment trust's
619-18 indebtedness to its general, unsecured creditors, except to the
619-19 extent the indebtedness is subordinated, or payment of that
619-20 indebtedness is secured, by agreement.
619-21 Sec. 200.204. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM
619-22 SURPLUS. (a) A real estate investment trust, by resolution of the
619-23 trust managers of the real estate investment trust, may:
619-24 (1) create a reserve out of the surplus of the real
619-25 estate investment trust; or
619-26 (2) designate or allocate in any manner a part or all
619-27 of the real estate investment trust's surplus for a proper purpose.
620-1 (b) A real estate investment trust may increase, decrease,
620-2 or abolish a reserve, designation, or allocation in the manner
620-3 provided by Subsection (a).
620-4 Sec. 200.205. AUTHORITY FOR SHARE DISTRIBUTIONS. The trust
620-5 managers of a real estate investment trust may authorize a share
620-6 distribution, and the real estate investment trust may pay a share
620-7 distribution subject to Section 200.206 and any restriction in the
620-8 certificate of formation.
620-9 Sec. 200.206. LIMITATIONS ON SHARE DISTRIBUTIONS. (a) A
620-10 real estate investment trust may not pay a share distribution in
620-11 authorized but unissued shares of any class if the surplus of the
620-12 real estate investment trust is less than the amount required by
620-13 Section 200.208 to be transferred to stated capital at the time the
620-14 share distribution is made.
620-15 (b) A share distribution in shares of any class may not be
620-16 made to a holder of shares of any other class unless:
620-17 (1) the real estate investment trust's certificate of
620-18 formation provides for the distribution; or
620-19 (2) the share distribution is authorized by the
620-20 affirmative vote or the written consent of the holders of at least
620-21 a majority of the outstanding shares of the class in which the
620-22 share distribution is to be made.
620-23 Sec. 200.207. VALUE OF SHARES ISSUED AS SHARE DISTRIBUTIONS.
620-24 (a) A share distribution payable in authorized but unissued shares
620-25 with par value shall be issued at the par value of the shares.
620-26 (b) A share distribution payable in authorized but unissued
620-27 shares without par value shall be issued at the value set by the
621-1 trust managers when the share distribution is authorized.
621-2 Sec. 200.208. TRANSFER OF SURPLUS FOR SHARE DISTRIBUTIONS.
621-3 (a) When a share distribution payable in authorized but unissued
621-4 shares with par value is made by a real estate investment trust, an
621-5 amount of surplus designated by the trust managers that is not less
621-6 than the aggregate par value of the shares issued as a share
621-7 distribution shall be transferred to stated capital.
621-8 (b) When a share distribution payable in authorized but
621-9 unissued shares without par value is made by a real estate
621-10 investment trust, an amount of surplus equal to the aggregate value
621-11 set by the trust managers with respect to the shares under Section
621-12 200.207(b) shall be transferred to stated capital.
621-13 Sec. 200.209. DETERMINATION OF SOLVENCY, NET ASSETS, STATED
621-14 CAPITAL, AND SURPLUS. (a) The determination of whether a real
621-15 estate investment trust is insolvent and the determination of the
621-16 value of a real estate investment trust's net assets, stated
621-17 capital, or surplus and each of the components of net assets,
621-18 stated capital, or surplus may be based on:
621-19 (1) financial statements of the real estate investment
621-20 trust that present the financial condition of the real estate
621-21 investment trust in accordance with generally accepted accounting
621-22 principles, including financial statements that include subsidiary
621-23 entities or other entities accounted for on a consolidated basis or
621-24 on the equity method of accounting;
621-25 (2) financial statements prepared using the method of
621-26 accounting used to file the real estate investment trust's federal
621-27 income tax return or using any other accounting practices and
622-1 principles that are reasonable under the circumstances;
622-2 (3) financial information, including condensed or
622-3 summary financial statements, that is prepared on the same basis as
622-4 financial statements described by Subdivision (1) or (2);
622-5 (4) a projection, forecast, or other forward-looking
622-6 information relating to the future economic performance, financial
622-7 condition, or liquidity of the real estate investment trust that is
622-8 reasonable under the circumstances;
622-9 (5) a fair valuation or information from any other
622-10 method that is reasonable under the circumstances; or
622-11 (6) a combination of a statement, valuation, or
622-12 information authorized by this section.
622-13 (b) Subsection (a) does not apply to the computation of any
622-14 tax imposed under the laws of this state.
622-15 Sec. 200.210. DATE OF DETERMINATION OF SURPLUS. (a) For
622-16 purposes of this subchapter, a determination of whether a real
622-17 estate investment trust is or would be made insolvent by a
622-18 distribution or share distribution or a determination of the value
622-19 of a real estate investment trust's surplus shall be made:
622-20 (1) on the date the distribution or share distribution
622-21 is authorized by the trust managers of the real estate investment
622-22 trust if the distribution or the share distribution is made not
622-23 later than the 120th day after the date of authorization;
622-24 (2) on the date designated by the trust managers for
622-25 the determination to be made if:
622-26 (A) the distribution or the share distribution
622-27 is made more than 120 days after the date of authorization; and
623-1 (B) the date designated by the trust managers is
623-2 not later than the 121st day before the date the distribution or
623-3 the share distribution is made; or
623-4 (3) on the date the distribution or the share
623-5 distribution is made if:
623-6 (A) the distribution or the share distribution
623-7 is made more than 120 days after the date of authorization; and
623-8 (B) the trust managers do not make the
623-9 designation described by Subdivision (2).
623-10 (b) For purposes of this section, a distribution that
623-11 involves the incurrence by a real estate investment trust of
623-12 indebtedness or a deferred payment obligation or that involves a
623-13 contract by the real estate investment trust to acquire any of its
623-14 own shares is considered to have been made on the date:
623-15 (1) the indebtedness or obligation is incurred; or
623-16 (2) if it involves a contract by the real estate
623-17 investment trust to acquire shares, the contract is made or takes
623-18 effect or on the date the shares are acquired, at the option of the
623-19 real estate investment trust.
623-20 Sec. 200.211. SPLIT-UP OR DIVISION OF SHARES. The trust
623-21 managers of a real estate investment trust may authorize the real
623-22 estate investment trust to carry out any split-up or division of
623-23 the issued shares of a class of the real estate investment trust
623-24 into a larger number of shares within the same class that does not
623-25 increase the stated capital of the real estate investment trust
623-26 because the split-up or division of issued shares is not a share
623-27 dividend or a distribution.
624-1 (Sections 200.212-200.250 reserved for expansion)
624-2 SUBCHAPTER F. SHAREHOLDER MEETINGS; VOTING AND QUORUM
624-3 Sec. 200.251. ANNUAL MEETING. (a) An annual meeting of the
624-4 shareholders of a real estate investment trust shall be held at a
624-5 time that is stated in or set in accordance with the bylaws of the
624-6 real estate investment trust.
624-7 (b) If the annual meeting is not held at the designated
624-8 time, a shareholder may by registered mail make a written request
624-9 to an officer or trust manager of the real estate investment trust
624-10 that the meeting be held within a reasonable time. If the annual
624-11 meeting is not called before the 61st day after the date the
624-12 request calling for a meeting is made, any shareholder may bring
624-13 suit at law or in equity to compel the meeting to be held.
624-14 (c) Each shareholder has a justifiable interest sufficient
624-15 to enable the shareholder to institute and prosecute a legal
624-16 proceeding described by this section.
624-17 (d) The failure to hold an annual meeting at the designated
624-18 time does not result in the winding up or termination of the real
624-19 estate investment trust.
624-20 Sec. 200.252. SPECIAL MEETING. A special meeting of the
624-21 shareholders of a real estate investment trust may be called by:
624-22 (1) a trust manager, an officer of the real estate
624-23 investment trust, or any other person authorized to call special
624-24 meetings by the certificate of formation or bylaws of the real
624-25 estate investment trust; or
624-26 (2) the holders of at least 10 percent of all of the
624-27 shares of the real estate investment trust entitled to vote at the
625-1 proposed special meeting unless a quarter percentage of shares is
625-2 specified in the certificate of formation, not to exceed 50 percent
625-3 of the shares entitled to vote.
625-4 Sec. 200.253. NOTICE OF MEETING. (a) Written notice of a
625-5 meeting in accordance with Section 6.051 shall be given to each
625-6 shareholder entitled to vote at the meeting not later than the 10th
625-7 day and not earlier than the 60th day before the date of the
625-8 meeting. Notice shall be given in person or by mail by or at the
625-9 direction of a trust manager, officer, or other person calling the
625-10 meeting.
625-11 (b) The notice of a special meeting must contain a statement
625-12 regarding the purpose or purposes of the meeting.
625-13 Sec. 200.254. CLOSING OF SHARE TRANSFER RECORDS. Share
625-14 transfer records that are closed in accordance with Section 6.101
625-15 for the purpose of determining which shareholders are entitled to
625-16 receive notice of a meeting of shareholders shall remain closed for
625-17 at least 10 days immediately preceding the date of the meeting.
625-18 Sec. 200.255. RECORD DATE FOR WRITTEN CONSENT TO ACTION.
625-19 The record date provided in accordance with Section 6.102(a) may
625-20 not be more than 10 days after the date on which the trust managers
625-21 adopt the resolution setting the record date.
625-22 Sec. 200.256. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
625-23 CONSENT TO ACTION. The record date provided by the trust managers
625-24 in accordance with Section 6.101 must be at least 10 days before
625-25 the date on which the particular action requiring the determination
625-26 of shareholders is to be taken.
625-27 Sec. 200.257. QUORUM. (a) Subject to Subsection (b), the
626-1 holders of the majority of the shares entitled to vote at a meeting
626-2 of the shareholders of a real estate investment trust that are
626-3 present or represented by proxy at the meeting are a quorum for the
626-4 consideration of a matter to be presented at that meeting.
626-5 (b) The certificate of formation of a real estate investment
626-6 trust may provide that a quorum is present only if:
626-7 (1) the holders of a specified portion of the shares
626-8 that is greater than the majority of the shares entitled to vote
626-9 are represented at the meeting in person or by proxy; or
626-10 (2) the holders of a specified portion of the shares
626-11 that is less than the majority but not less than one-third of the
626-12 shares entitled to vote are represented at the meeting in person or
626-13 by proxy.
626-14 (c) Unless provided by the certificate of formation or
626-15 bylaws of the real estate investment trust, after a quorum is
626-16 present at a meeting of shareholders, the shareholders may conduct
626-17 business properly brought before the meeting until the meeting is
626-18 adjourned. The subsequent withdrawal from the meeting of a
626-19 shareholder or the refusal of a shareholder present at or
626-20 represented by proxy at the meeting to vote does not negate the
626-21 presence of a quorum at the meeting.
626-22 (d) Unless provided by the certificate of formation or
626-23 bylaws, the shareholders of the real estate investment trust at a
626-24 meeting at which a quorum is not present may adjourn the meeting
626-25 until the time and to the place as may be determined by a vote of
626-26 the holders of the majority of the shares who are present or
626-27 represented by proxy at the meeting.
627-1 Sec. 200.258. VOTING IN ELECTION OF TRUST MANAGERS. (a)
627-2 Subject to Subsection (b), trust managers of a real estate
627-3 investment trust shall be elected by two-thirds of the votes cast
627-4 by the holders of shares entitled to vote in the election of trust
627-5 managers at a meeting of shareholders at which a quorum is present.
627-6 (b) The certificate of formation or bylaws of a real estate
627-7 investment trust may provide that a trust manager of the real
627-8 estate investment trust shall be elected only if the trust manager
627-9 receives:
627-10 (1) the vote of the holders of a specified portion,
627-11 but not less than the majority, of the shares entitled to vote in
627-12 the election of trust managers;
627-13 (2) the vote of the holders of a specified portion,
627-14 but not less than the majority, of the shares entitled to vote in
627-15 the election of trust managers and represented in person or by
627-16 proxy at a meeting of shareholders at which a quorum is present; or
627-17 (3) the vote of the holders of a specified portion,
627-18 but not less than the majority, of the votes cast by the holders of
627-19 shares entitled to vote in the election of trust managers at a
627-20 meeting of shareholders at which a quorum is present.
627-21 (c) Subject to Section 200.259, at each election of trust
627-22 managers of a real estate investment trust each shareholder
627-23 entitled to vote at the election is entitled to vote, in person or
627-24 by proxy, the number of shares owned by the shareholder for as many
627-25 candidates as there are trust managers to be elected and for whose
627-26 election the shareholder is entitled to vote.
627-27 Sec. 200.259. CUMULATIVE VOTING IN ELECTION OF TRUST
628-1 MANAGERS. (a) Cumulative voting is allowed only if specifically
628-2 authorized by the certificate of formation of a real estate
628-3 investment trust.
628-4 (b) Cumulative voting occurs when a shareholder:
628-5 (1) gives one candidate as many votes as the total of
628-6 the number of the trust managers to be elected multiplied by the
628-7 shareholder's shares; or
628-8 (2) distributes the votes among one or more candidates
628-9 using the same principle.
628-10 (c) If cumulative voting is specifically authorized by the
628-11 certificate of formation, a shareholder who intends to cumulate
628-12 votes must give written notice of that intention to the trust
628-13 managers on or before the day preceding the date of the election at
628-14 which the shareholder intends to cumulate votes.
628-15 Sec. 200.260. VOTING ON MATTERS OTHER THAN ELECTION OF TRUST
628-16 MANAGERS. (a) Subject to Subsection (b), with respect to a matter
628-17 other than the election of trust managers or a matter for which the
628-18 affirmative vote of the holders of a specified portion of the
628-19 shares entitled to vote is required by this code, the affirmative
628-20 vote of the holders of the majority of the shares entitled to vote
628-21 on, and who voted for, against, or expressly abstained with respect
628-22 to, the matter at a shareholders' meeting of a real estate
628-23 investment trust at which a quorum is present is the act of the
628-24 shareholders.
628-25 (b) With respect to a matter other than the election of
628-26 trust managers or a matter for which the affirmative vote of the
628-27 holders of a specified portion of the shares entitled to vote is
629-1 required by this code, the certificate of formation or bylaws of a
629-2 real estate investment trust may provide that the act of the
629-3 shareholders of the real estate investment trust is:
629-4 (1) the affirmative vote of the holders of a specified
629-5 portion, but not less than the majority, of the shares entitled to
629-6 vote on that matter;
629-7 (2) the affirmative vote of the holders of a specified
629-8 portion, but not less than the majority, of the shares entitled to
629-9 vote on that matter and represented in person or by proxy at a
629-10 shareholders' meeting at which a quorum is present;
629-11 (3) the affirmative vote of the holders of a specified
629-12 portion, but not less than the majority, of the shares entitled to
629-13 vote on, and who voted for or against, the matter at a
629-14 shareholders' meeting at which a quorum is present; or
629-15 (4) the affirmative vote of the holders of a specified
629-16 portion, but not less than the majority, of the shares entitled to
629-17 vote on, and who voted for, against, or expressly abstained with
629-18 respect to, the matter at a shareholders' meeting at which a quorum
629-19 is present.
629-20 Sec. 200.261. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION.
629-21 (a) In this section, a "fundamental action" means:
629-22 (1) an amendment of a certificate of formation;
629-23 (2) a voluntary winding up; or
629-24 (3) a revocation of a voluntary winding up.
629-25 (b) Except as otherwise provided by this code or the
629-26 certificate of formation or bylaws of a real estate investment
629-27 trust in accordance with Section 200.260, the vote required for
630-1 approval of a fundamental action by the shareholders is the
630-2 affirmative vote of the holders of at least two-thirds of the
630-3 outstanding shares entitled to vote on the fundamental action.
630-4 (c) If a class or series of shares is entitled to vote as a
630-5 class on a fundamental action, the vote required for approval of
630-6 the action by the shareholders is the affirmative vote of the
630-7 holders of at least two-thirds of the outstanding shares in each
630-8 class or series of shares entitled to vote on the action as a class
630-9 and at least two-thirds of the outstanding shares otherwise
630-10 entitled to vote on the action. Shares entitled to vote as a class
630-11 shall be entitled to vote only as a class unless otherwise entitled
630-12 to vote on each matter generally or otherwise provided by the
630-13 certificate of formation.
630-14 (d) Unless an amendment to the certificate of formation is
630-15 undertaken by the trust managers under Section 200.103, separate
630-16 voting by a class or series of shares of a real estate investment
630-17 trust is required for approval of an amendment to the certificate
630-18 of formation that would result in:
630-19 (1) the increase or decrease of the aggregate number
630-20 of authorized shares of the class or series;
630-21 (2) the increase or decrease of the par value of the
630-22 shares of the class, including changing shares with par value into
630-23 shares without par value or changing shares without par value into
630-24 shares with par value;
630-25 (3) effecting an exchange, reclassification, or
630-26 cancellation of all or part of the shares of the class or series;
630-27 (4) effecting an exchange or creating a right of
631-1 exchange of all or part of the shares of another class or series
631-2 into the shares of the class or series;
631-3 (5) the change of the designations, preferences,
631-4 limitations, or relative rights of the shares of the class or
631-5 series;
631-6 (6) the change of the shares of the class or series,
631-7 with or without par value, into the same or a different number of
631-8 shares, with or without par value, of the same class or series or
631-9 another class or series;
631-10 (7) the creation of a new class or series of shares
631-11 with rights and preferences equal, prior, or superior to the shares
631-12 of the class or series;
631-13 (8) increasing the rights and preferences of a class
631-14 or series with rights and preferences equal, lesser than, or
631-15 superior to the shares of the class or series;
631-16 (9) increasing the rights and preferences of a class
631-17 or series with rights or preferences later or inferior to the
631-18 shares of the class or series in such a manner that the rights or
631-19 preferences will be equal, prior, or superior to the shares of the
631-20 class or series;
631-21 (10) dividing the shares of the class into series and
631-22 setting and determining the designation of the series and the
631-23 variations in the relative rights and preferences between the
631-24 shares of the series;
631-25 (11) the limitation or denial of existing preemptive
631-26 or cumulative voting rights of the shares of the class or series;
631-27 or
632-1 (12) canceling or otherwise affecting the dividends on
632-2 the shares of the class or series that have accrued but have not
632-3 been declared.
632-4 (e) Unless otherwise provided by the certificate of
632-5 formation, if the holders of the outstanding shares of a class that
632-6 is divided into series are entitled to vote as a class on a
632-7 proposed amendment that would affect equally all series of the
632-8 class, other than a series in which no shares are outstanding or a
632-9 series that is not affected by the amendment, the holders of the
632-10 separate series are not entitled to separate class votes.
632-11 (f) Unless otherwise provided by the certificate of
632-12 formation, a proposed amendment to the certificate of formation
632-13 that would solely effect changes in the designations, preferences,
632-14 limitations, or relative rights, including voting rights, of one or
632-15 more series of shares of the real estate investment trust that have
632-16 been established under the authority granted to the trust managers
632-17 in the certificate of formation in accordance with Section 200.103
632-18 does not require the approval of the holders of the outstanding
632-19 shares of a class or series other than the affected series if,
632-20 after giving effect to the amendment, the preferences, limitations,
632-21 or relative rights of the affected series, or of any new series
632-22 established as a result of a reclassification of the affected
632-23 series, are within the preferences, limitations, and relative
632-24 rights that may be set and determined by the trust managers with
632-25 respect to the establishment of a new series of shares under the
632-26 authority granted to the trust managers in the certificate of
632-27 formation in accordance with Section 200.103.
633-1 Sec. 200.262. CHANGES IN VOTE REQUIRED FOR CERTAIN MATTERS.
633-2 (a) With respect to a matter for which the affirmative vote of the
633-3 holders of a specified portion of the shares entitled to vote is
633-4 required by this code, the certificate of formation of a real
633-5 estate investment trust may provide that the affirmative vote of
633-6 the holders of a specified portion, but not less than the majority,
633-7 of the shares entitled to vote on that matter is required for
633-8 shareholder action on that matter.
633-9 (b) With respect to a matter for which the affirmative vote
633-10 of the holders of a specified portion of the shares of a class or
633-11 series is required by this code, the certificate of formation may
633-12 provide that the affirmative vote of the holders of a specified
633-13 portion, but not less than the majority, of the shares of that
633-14 class or series is required for action of the holders of shares of
633-15 that class or series on that matter.
633-16 (c) If a provision of the certificate of formation provides
633-17 that the affirmative vote of the holders of a specified portion
633-18 that is greater than the majority of the shares entitled to vote on
633-19 a matter is required for shareholder action on that matter, the
633-20 provision may not be amended, directly or indirectly, without the
633-21 same affirmative vote unless otherwise provided by the certificate
633-22 of formation.
633-23 (d) If a provision of the certificate of formation provides
633-24 that the affirmative vote of the holders of a specified portion
633-25 that is greater than the majority of the shares of a class or
633-26 series is required for shareholder action on a matter, the
633-27 provision may not be amended, directly or indirectly, without the
634-1 same affirmative vote unless otherwise provided by the certificate
634-2 of formation.
634-3 Sec. 200.263. NUMBER OF VOTES PER SHARE. (a) Except as
634-4 provided by the certificate of formation of a real estate
634-5 investment trust or this code, each outstanding share, regardless
634-6 of class, is entitled to one vote on each matter submitted to a
634-7 vote at a shareholders' meeting.
634-8 (b) If the certificate of formation provides for more or
634-9 less than one vote per share on a matter for all of the outstanding
634-10 shares or for the shares of a class or series, each reference in
634-11 this code or in the certificate of formation or bylaws, unless
634-12 expressly stated otherwise, to a specified portion of the shares
634-13 with respect to that matter refers to the portion of the votes
634-14 entitled to be cast with respect to those shares under the
634-15 certificate of formation.
634-16 Sec. 200.264. VOTING IN PERSON OR BY PROXY. (a) A
634-17 shareholder may vote in person or by proxy executed in writing by
634-18 the shareholder.
634-19 (b) A telegram, telex, cablegram, electronic message, or
634-20 similar transmission by the shareholder, or a photographic,
634-21 photostatic, facsimile, or similar reproduction of a writing
634-22 executed by the shareholder, is considered an execution in writing
634-23 for purposes of this section.
634-24 Sec. 200.265. TERM OF PROXY. A proxy is not valid after 11
634-25 months after the date the proxy is executed unless otherwise
634-26 provided by the proxy.
634-27 Sec. 200.266. REVOCABILITY OF PROXY. (a) In this section,
635-1 a "proxy coupled with an interest" includes the appointment as
635-2 proxy of:
635-3 (1) a pledgee;
635-4 (2) a person who purchased or agreed to purchase the
635-5 shares subject to the proxy;
635-6 (3) a person who owns or holds an option to purchase
635-7 the shares subject to the proxy;
635-8 (4) a creditor of the real estate investment trust who
635-9 extended the real estate investment trust credit under terms
635-10 requiring the appointment;
635-11 (5) an employee of the real estate investment trust
635-12 whose employment contract requires the appointment; or
635-13 (6) a party to a voting agreement created under
635-14 Section 6.252.
635-15 (b) A proxy is revocable unless:
635-16 (1) the proxy form conspicuously states that the proxy
635-17 is irrevocable; and
635-18 (2) the proxy is coupled with an interest.
635-19 Sec. 200.267. ENFORCEABILITY OF PROXY. (a) An irrevocable
635-20 proxy is specifically enforceable against the holder of shares or
635-21 any successor or transferee of the holder if:
635-22 (1) the proxy is noted conspicuously on the
635-23 certificate representing the shares subject to the proxy; or
635-24 (2) in the case of uncertificated shares, notation of
635-25 the proxy is contained in the notice sent under Section 3.205 with
635-26 respect to the shares subject to the proxy.
635-27 (b) An irrevocable proxy that is otherwise enforceable is
636-1 ineffective against a transferee for value without actual knowledge
636-2 of the existence of the irrevocable proxy at the time of the
636-3 transfer or against a subsequent transferee, regardless of whether
636-4 the transfer is for value, unless the proxy is:
636-5 (1) noted conspicuously on the certificate
636-6 representing the shares subject to the proxy; or
636-7 (2) in the case of uncertificated shares, notation of
636-8 the proxy is contained in the notice sent under Section 3.205 with
636-9 respect to the shares subject to the proxy.
636-10 (c) An irrevocable proxy shall be specifically enforceable
636-11 against a person who is not a transferee for value from the time
636-12 the person acquires actual knowledge of the existence of the
636-13 irrevocable proxy.
636-14 Sec. 200.268. PROCEDURES IN BYLAWS RELATING TO PROXIES. A
636-15 real estate investment trust may establish in the bylaws of the
636-16 real estate investment trust procedures consistent with this code
636-17 for determining the validity of proxies and determining whether
636-18 shares held of record by a bank, broker, or other nominee are
636-19 represented at a meeting of shareholders. The procedures may
636-20 incorporate rules of and determinations made by a self-regulatory
636-21 organization regulating that bank, broker, or other nominee.
636-22 (Sections 200.269-200.300 reserved for expansion)
636-23 SUBCHAPTER G. BOARD OF MANAGERS
636-24 Sec. 200.301. MANAGEMENT BY TRUST MANAGERS. The control,
636-25 operation, disposition, investment, and management of the trust
636-26 estate and the powers necessary or appropriate to effect any
636-27 purpose for which a real estate investment trust is organized are
637-1 vested in one or more trust managers.
637-2 Sec. 200.302. DESIGNATION OF TRUST MANAGERS. (a) The
637-3 certificate of formation of a real estate investment trust must
637-4 contain the name of each trust manager.
637-5 (b) A successor trust manager must be selected in accordance
637-6 with the certificate of formation. The selection of a successor
637-7 trust manager is considered an amendment to the certificate of
637-8 formation of a real estate investment trust.
637-9 Sec. 200.303. TRUST MANAGER ELIGIBILITY REQUIREMENTS. A
637-10 trust manager of a real estate investment trust must be an
637-11 individual. Unless the certificate of formation or bylaws of a
637-12 real estate investment trust provide otherwise, a person is not
637-13 required to be a resident of this state or a shareholder of the
637-14 real estate investment trust to serve as a trust manager. The
637-15 certificate of formation or bylaws may prescribe other
637-16 qualifications for trust managers.
637-17 Sec. 200.304. NUMBER OF TRUST MANAGERS. (a) The
637-18 certificate of formation of a real estate investment trust shall
637-19 set the number constituting the initial trust managers. The
637-20 certificate of formation or bylaws of the real estate investment
637-21 trust shall set the number of successor trust managers or provide
637-22 for the manner of determining the number of successor trust
637-23 managers.
637-24 (b) The number of trust managers may be increased or
637-25 decreased by amendment to, or as provided by, the certificate of
637-26 formation or bylaws. A decrease in the number of trust managers
637-27 may not shorten the term of an incumbent trust manager.
638-1 Sec. 200.305. COMPENSATION. A trust manager or officer of a
638-2 real estate investment trust is entitled to receive compensation
638-3 set by or in the manner provided by the certificate of formation or
638-4 bylaws of the real estate investment trust. If the certificate of
638-5 formation or bylaws do not provide for compensation to trust
638-6 managers and officers, the trust managers of the real estate
638-7 investment trust must determine the compensation.
638-8 Sec. 200.306. TERM OF TRUST MANAGER. (a) Except as
638-9 provided by the certificate of formation or bylaws of a real estate
638-10 investment trust, a trust manager of the real estate investment
638-11 trust serves until the trust manager's successor is elected.
638-12 (b) A trust manager may succeed himself or herself in
638-13 office.
638-14 (c) If a successor trust manager is not elected, the trust
638-15 manager in office continues to serve as trust manager until the
638-16 trust manager's successor is elected.
638-17 Sec. 200.307. STAGGERED TERMS OF TRUST MANAGERS. (a) A
638-18 governing document of a real estate investment trust may provide
638-19 that all or some of the board of trust managers may be divided into
638-20 two or three classes. Each class must include the same or a
638-21 similar number of trust managers as each other class.
638-22 (b) The terms of office of trust managers constituting the
638-23 first class expire on the election of successors at the first
638-24 annual meeting of shareholders after the election of those trust
638-25 managers. The terms of office of trust managers constituting the
638-26 second class expire on the election of successors at the second
638-27 annual meeting of shareholders after election of those trust
639-1 managers. The terms of office of trust managers constituting the
639-2 third class, if any, expire on the election of successors at the
639-3 third annual meeting of shareholders after election of those trust
639-4 managers.
639-5 (c) If a governing document of the real estate investment
639-6 trust provides for the classification of trust managers, an annual
639-7 election for trust managers as a whole is not necessary. At each
639-8 annual meeting held after the classification of trust managers, an
639-9 election shall be held to elect the number of trust managers equal
639-10 to the number of trust managers in the class the term of which
639-11 expires on the date of the meeting, and those trust managers serve
639-12 until:
639-13 (1) the second succeeding annual meeting if there are
639-14 two classes; or
639-15 (2) the third succeeding annual meeting if there are
639-16 three classes.
639-17 (d) Unless provided by the certificate of formation or a
639-18 bylaw adopted by shareholders, staggered terms for trust managers
639-19 do not take effect until the next annual meeting of shareholders at
639-20 which trust managers are elected. Staggered terms for trust
639-21 managers may not be effected if any shareholder has the right to
639-22 cumulate votes for the election of trust managers and the board of
639-23 trust managers consists of fewer than nine trust managers.
639-24 Sec. 200.308. VACANCY. (a) Except as provided by
639-25 Subsection (b), a vacancy occurring on the board of trust managers
639-26 of a real estate investment trust may be filled by the affirmative
639-27 vote of the majority of the remaining trust managers, even if the
640-1 majority of trust managers constitutes less than a quorum of the
640-2 board of trust managers.
640-3 (b) The certificate of formation or bylaws of the real
640-4 estate investment trust may provide an alternative procedure for
640-5 filling vacancies occurring on the board of trust managers,
640-6 including filling vacancies by simple majority or super majority
640-7 votes of the shareholders.
640-8 (c) The term of a trust manager elected to fill a vacancy
640-9 occurring on the board of trust managers is the unexpired term of
640-10 the director's predecessor in office and until the trust manager's
640-11 successor is elected and has qualified.
640-12 Sec. 200.309. NOTICE OF MEETING. (a) Regular meetings of
640-13 the trust managers of a real estate investment trust may be held
640-14 with or without notice as prescribed by the real estate investment
640-15 trust's bylaws.
640-16 (b) Special meetings of the trust managers shall be held
640-17 with notice as prescribed by the bylaws.
640-18 (c) A notice of a board meeting is not required to specify
640-19 the business to be transacted at the meeting or the purpose of the
640-20 meeting, unless required by the bylaws.
640-21 Sec. 200.310. QUORUM. A quorum of the board of trust
640-22 managers of a real estate investment trust is the majority of the
640-23 number of trust managers unless the real estate investment trust's
640-24 certificate of formation or bylaws require a greater number.
640-25 Sec. 200.311. COMMITTEES OF TRUST MANAGERS. (a) If
640-26 authorized by the certificate of formation or bylaws of a real
640-27 estate investment trust, the trust managers of the real estate
641-1 investment trust, by resolution adopted by a majority of the trust
641-2 managers, may designate:
641-3 (1) committees composed of one or more trust managers;
641-4 or
641-5 (2) trust managers as alternate committee members to
641-6 replace absent or disqualified committee members at a committee
641-7 meeting, subject to any limitations imposed by the trust managers.
641-8 (b) To the extent provided by the resolution designating a
641-9 committee or the certificate of formation or bylaws and subject to
641-10 Subsection (c), the committee has the authority of the trust
641-11 managers.
641-12 (c) A committee of the trust managers may not:
641-13 (1) amend the certificate of formation, except to
641-14 classify or reclassify shares in accordance with Section 200.103 if
641-15 authorized by the resolution designating the committee, certificate
641-16 of formation, or bylaws;
641-17 (2) propose a reduction of stated capital of the real
641-18 estate investment trust;
641-19 (3) approve a plan of merger or share exchange of the
641-20 real estate investment trust;
641-21 (4) recommend to shareholders the sale, lease, or
641-22 exchange of all or substantially all of the property and assets of
641-23 the real estate investment trust not made in the usual and regular
641-24 course of its business;
641-25 (5) recommend to the shareholders a voluntary winding
641-26 up and termination or a revocation of the real estate investment
641-27 trust;
642-1 (6) amend, alter, or repeal the bylaws or adopt new
642-2 bylaws;
642-3 (7) fill vacancies on the board of trust managers;
642-4 (8) fill vacancies in or designate alternate members
642-5 of a committee of the trust managers;
642-6 (9) fill a vacancy to be filled because of an increase
642-7 in the number of trust managers;
642-8 (10) elect or remove officers of the real estate
642-9 investment trust or members or alternate members of a committee of
642-10 the trust managers;
642-11 (11) set the compensation of the members or alternate
642-12 members of a committee of the trust managers; or
642-13 (12) alter or repeal a resolution of the trust
642-14 managers that states that it may not be amended or repealed.
642-15 (d) A committee of the trust managers may authorize a
642-16 distribution or the issuance of shares if authorized by the
642-17 resolution designating the committee or the certificate of
642-18 formation.
642-19 (e) The designation of and delegation of authority to a
642-20 committee of the trust managers does not relieve a trust manager of
642-21 responsibility imposed by law.
642-22 Sec. 200.312. LIABILITY OF TRUST MANAGERS. (a) A trust
642-23 manager of a real estate investment trust who votes for or assents
642-24 to a distribution of assets made by the real estate investment
642-25 trust to its shareholders during the liquidation of the real estate
642-26 investment trust without the payment and discharge of or the making
642-27 of adequate provision for the payment of all of the known debts,
643-1 liabilities, and other obligations of the real estate investment
643-2 trust is jointly and severally liable to the real estate investment
643-3 trust for the value of the distributed assets to the extent the
643-4 debts, liabilities, and other obligations are not paid and
643-5 discharged.
643-6 (b) A trust manager of a real estate investment trust who
643-7 votes for or assents to the making of a loan to another trust
643-8 manager or officer of the real estate investment trust or to the
643-9 making of a loan secured by shares of the real estate investment
643-10 trust is jointly and severally liable to the real estate investment
643-11 trust for the loan amount until the loan is repaid.
643-12 (c) A trust manager is not jointly and severally liable
643-13 under Subsection (a) if, in determining the amount available for
643-14 the distribution, the trust manager, acting in good faith and with
643-15 ordinary care:
643-16 (1) relied on information, opinions, reports, or
643-17 statements in accordance with Section 3.101; or
643-18 (2) considered the assets of the real estate
643-19 investment trust to be valued at least at book value.
643-20 Sec. 200.313. STATUTE OF LIMITATIONS ON CERTAIN ACTION
643-21 AGAINST TRUST MANAGERS. An action may not be brought against a
643-22 trust manager of a real estate investment trust under Section
643-23 200.312 after the second anniversary of the date the alleged act
643-24 giving rise to the liability occurred.
643-25 Sec. 200.314. IMMUNITY FROM LIABILITY FOR PERFORMANCE OF
643-26 DUTY. A trust manager of a real estate investment trust may not be
643-27 held liable to the real estate investment trust for an act,
644-1 omission, loss, or expense arising from the performance of the
644-2 trust manager's duties under the trust, except for liability
644-3 arising from the wilful misfeasance, wilful malfeasance, or gross
644-4 negligence of the trust manager.
644-5 Sec. 200.315. OFFICERS. (a) An officer of a real estate
644-6 investment trust designated by a trust manager under Section 3.102
644-7 may exercise all of the powers of a trust manager relating to the
644-8 business and affairs of the real estate investment trust, unless
644-9 action by a trust manager is specified by this code or another
644-10 applicable law.
644-11 (b) A designation of or delegation of authority to an
644-12 officer of a real estate investment trust described by this section
644-13 does not relieve a trust manager of responsibility imposed by law.
644-14 (Sections 200.316-200.350 reserved for expansion)
644-15 SUBCHAPTER H. TRANSACTIONS AND COMPENSATION OF OFFICERS
644-16 OR TRUST MANAGERS
644-17 Sec. 200.351. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED
644-18 TRUST MANAGERS AND OFFICERS. (a) This section applies only to a
644-19 contract or transaction between a real estate investment trust and:
644-20 (1) one or more of the trust's trust managers or
644-21 officers; or
644-22 (2) an entity or other organization in which one or
644-23 more of the trust's trust managers or officers:
644-24 (A) is a managerial official; or
644-25 (B) has a financial interest.
644-26 (b) An otherwise valid contract or transaction is valid
644-27 notwithstanding that a trust manager or officer of the trust is
645-1 present at or participates in the meeting of the trust managers or
645-2 of a committee of the trust managers that authorizes the contract
645-3 or transaction, or votes to authorize the contract or transaction,
645-4 if:
645-5 (1) the material facts as to the relationship or
645-6 interest and as to the contract or transaction are disclosed to or
645-7 known by:
645-8 (A) the trust managers or a committee of the
645-9 trust managers, and the trust managers or committee of the trust
645-10 managers in good faith authorize the contract or transaction by the
645-11 affirmative vote of the majority of disinterested trust managers,
645-12 regardless of whether the disinterested trust managers constitute a
645-13 quorum; or
645-14 (B) the shareholders entitled to vote on the
645-15 authorization of the contract or transaction, and the contract or
645-16 transaction is specifically approved in good faith by a vote of the
645-17 shareholders; or
645-18 (2) the contract or transaction is fair to the real
645-19 estate investment trust when the contract or transaction is
645-20 authorized, approved, or ratified by the trust managers, a
645-21 committee of the trust managers, or the shareholders.
645-22 (c) Common or interested trust managers may be included in
645-23 determining the presence of a quorum at a meeting of the trust
645-24 managers, or a committee of the trust managers, that authorizes the
645-25 contract or transaction.
645-26 Sec. 200.352. INVESTMENTS. A trust manager or officer of a
645-27 real estate investment trust has complete discretion with respect
646-1 to the investment of the trust estate unless the investment is
646-2 contrary to or inconsistent with:
646-3 (1) this subchapter;
646-4 (2) a provision of the Internal Revenue Code relating
646-5 to or governing real estate investment trusts; or
646-6 (3) regulations adopted under a provision of the
646-7 Internal Revenue Code relating to or governing real estate
646-8 investment trusts.
646-9 (Sections 200.353-200.400 reserved for expansion)
646-10 SUBCHAPTER I. FUNDAMENTAL BUSINESS TRANSACTIONS
646-11 Sec. 200.401. DEFINITIONS. In this subchapter:
646-12 (1) "Participating shares" means shares that entitle
646-13 the holders of the shares to participate without limitation in
646-14 distributions.
646-15 (2) "Shares" includes a receipt or other instrument
646-16 issued by a depository representing an interest in one or more
646-17 shares or fractions of shares of a domestic or foreign real estate
646-18 investment trust that are deposited with the depository.
646-19 (3) "Voting shares" means shares that entitle the
646-20 holders of the shares to vote unconditionally in elections of trust
646-21 managers.
646-22 Sec. 200.402. APPROVAL OF MERGER. (a) A real estate
646-23 investment trust that is a party to the merger under Chapter 10
646-24 must approve the merger by complying with this section.
646-25 (b) The trust managers of the real estate investment trust
646-26 shall adopt a resolution that:
646-27 (1) approves the plan of merger; and
647-1 (2) if shareholder approval of the merger is required
647-2 by this subchapter:
647-3 (A) recommends that the plan of merger be
647-4 approved by the shareholders of the real estate investment trust;
647-5 or
647-6 (B) directs that the plan of merger be submitted
647-7 to the shareholders for approval without recommendation if the
647-8 trust managers determine for any reason not to recommend approval
647-9 of the plan of merger.
647-10 (c) Except as provided by this subchapter or Chapter 10, the
647-11 plan of merger shall be submitted to the shareholders of the real
647-12 estate investment trust for approval as provided by this
647-13 subchapter. The trust managers may place conditions on the
647-14 submission of the plan of merger to the shareholders.
647-15 (d) If the trust managers approve a plan of merger required
647-16 to be approved by the shareholders of the real estate investment
647-17 trust but do not adopt a resolution recommending that the plan of
647-18 merger be approved by the shareholders, the trust managers shall
647-19 communicate to the shareholders the reason for the trust managers'
647-20 determination to submit the plan of merger without a
647-21 recommendation.
647-22 (e) Except as provided by Chapter 10 or Sections
647-23 200.407-200.409, the shareholders of the real estate investment
647-24 trust shall approve the plan of merger as provided by this
647-25 subchapter.
647-26 Sec. 200.403. APPROVAL OF CONVERSION. (a) A real estate
647-27 investment trust must approve a conversion under Chapter 10 by
648-1 complying with this section.
648-2 (b) The trust managers of the real estate investment trust
648-3 shall adopt a resolution that approves the plan of conversion and:
648-4 (1) recommends that the plan of conversion be approved
648-5 by the shareholders of the real estate investment trust; or
648-6 (2) directs that the plan of conversion be submitted
648-7 to the shareholders for approval without recommendation if the
648-8 trust managers determine for any reason not to recommend approval
648-9 of the plan of conversion.
648-10 (c) The plan of conversion shall be submitted to the
648-11 shareholders of the real estate investment trust for approval as
648-12 provided by this subchapter. The trust managers may place
648-13 conditions on the submission of the plan of conversion to the
648-14 shareholders.
648-15 (d) If the trust managers approve a plan of conversion but
648-16 do not adopt a resolution recommending that the plan of conversion
648-17 be approved by the shareholders of the real estate investment
648-18 trust, the trust managers shall communicate to the shareholders the
648-19 reason for the trust managers' determination to submit the plan of
648-20 conversion without a recommendation.
648-21 (e) Except as provided by Sections 200.407-200.409, the
648-22 shareholders of the real estate investment trust must approve the
648-23 plan of conversion as provided by this subchapter.
648-24 Sec. 200.404. APPROVAL OF INTEREST EXCHANGE. (a) A real
648-25 estate investment trust the shares of which are to be acquired in
648-26 an interest exchange under Chapter 10 must approve the interest
648-27 exchange by complying with this section.
649-1 (b) The trust managers shall adopt a resolution that
649-2 approves the plan of exchange and:
649-3 (1) recommends that the plan of exchange be approved
649-4 by the shareholders of the real estate investment trust; or
649-5 (2) directs that the plan of exchange be submitted to
649-6 the shareholders for approval without recommendation if the trust
649-7 managers determine for any reason not to recommend approval of the
649-8 plan of exchange.
649-9 (c) The plan of exchange shall be submitted to the
649-10 shareholders of the real estate investment trust for approval as
649-11 provided by this subchapter. The trust managers may place
649-12 conditions on the submission of the plan of exchange to the
649-13 shareholders.
649-14 (d) If the trust managers approve a plan of exchange but do
649-15 not adopt a resolution recommending that the plan of exchange be
649-16 approved by the shareholders of the real estate investment trust,
649-17 the trust managers shall communicate to the shareholders the reason
649-18 for the trust managers' determination to submit the plan of
649-19 exchange to shareholders without a recommendation.
649-20 (e) Except as provided by Sections 200.407-200.409, the
649-21 shareholders of the real estate investment trust shall approve the
649-22 plan of exchange as provided by this subchapter.
649-23 Sec. 200.405. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL
649-24 OF ASSETS. (a) Except as provided by the certificate of formation
649-25 of a domestic real estate investment trust, a sale, lease, pledge,
649-26 mortgage, assignment, transfer, or other conveyance of an interest
649-27 in real property or other assets of the real estate investment
650-1 trust does not require the approval or consent of the shareholders
650-2 of the real estate investment trust unless the transaction
650-3 constitutes a sale of all or substantially all of the assets of the
650-4 real estate investment trust.
650-5 (b) A real estate investment trust must approve the sale of
650-6 all or substantially all of its assets by complying with this
650-7 section.
650-8 (c) The trust managers of the real estate investment trust
650-9 shall adopt a resolution that approves the sale of all or
650-10 substantially all of the assets of the real estate investment trust
650-11 and:
650-12 (1) recommends that the sale of all or substantially
650-13 all of the assets of the real estate investment trust be approved
650-14 by the shareholders of the real estate investment trust; or
650-15 (2) directs that the sale of all or substantially all
650-16 of the assets of the real estate investment trust be submitted to
650-17 the shareholders for approval without recommendation if the trust
650-18 managers determine for any reason not to recommend approval of the
650-19 sale.
650-20 (d) The sale of all or substantially all of the assets of
650-21 the real estate investment trust shall be submitted to the
650-22 shareholders of the real estate investment trust for approval as
650-23 provided by this subchapter. The trust managers may place
650-24 conditions on the submission of the proposed sale to the
650-25 shareholders.
650-26 (e) If the trust managers approve the sale of all or
650-27 substantially all of the assets of the real estate investment trust
651-1 but do not adopt a resolution recommending that the proposed sale
651-2 be approved by the shareholders of the real estate investment
651-3 trust, the trust managers shall communicate to the shareholders the
651-4 reason for the trust managers' determination to submit the proposed
651-5 sale to shareholders without a recommendation.
651-6 (f) The shareholders of the real estate investment trust
651-7 shall approve the sale of all or substantially all of the assets of
651-8 the real estate investment trust as provided by this subchapter.
651-9 After the approval of the sale by the shareholders, the trust
651-10 managers may abandon the sale of all or substantially all of the
651-11 assets of the real estate investment trust, subject to the rights
651-12 of a third party under a contract relating to the assets, without
651-13 further action or approval by the shareholders.
651-14 Sec. 200.406. GENERAL PROCEDURE FOR SUBMISSION TO
651-15 SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION. (a) If a
651-16 fundamental business transaction involving a real estate investment
651-17 trust is required to be submitted to the shareholders of the real
651-18 estate investment trust under this subchapter, the real estate
651-19 investment trust shall notify each shareholder of the real estate
651-20 investment trust that the fundamental business transaction is being
651-21 submitted to the shareholders for approval as required by this
651-22 subchapter, regardless of whether the shareholder is entitled to
651-23 vote on the matter.
651-24 (b) If the fundamental business transaction is a merger,
651-25 conversion, or interest exchange, the notice required by Subsection
651-26 (a) shall contain or be accompanied by a copy or summary of the
651-27 plan of merger, conversion, or interest exchange, as appropriate.
652-1 (c) If the fundamental business transaction is to be
652-2 considered at a meeting of the shareholders of the real estate
652-3 investment trust, the notice of the meeting must:
652-4 (1) be given not later than the 21st day before the
652-5 date of the meeting; and
652-6 (2) state that the purpose, or one of the purposes, of
652-7 the meeting is to consider the fundamental business transaction.
652-8 (d) If the fundamental business transaction is being
652-9 submitted to shareholders by written consent, the notice required
652-10 by Subsection (a) must:
652-11 (1) be given not later than the 21st day before the
652-12 date the fundamental business transaction takes effect; and
652-13 (2) state that the purpose, or one of the purposes, of
652-14 the solicitation of written consents from the shareholders is to
652-15 receive approval for the fundamental business transaction.
652-16 Sec. 200.407. GENERAL VOTE REQUIREMENT FOR APPROVAL OF
652-17 FUNDAMENTAL BUSINESS TRANSACTION. (a) Except as provided by this
652-18 code or the certificate of formation or bylaws of a real estate
652-19 investment trust in accordance with Section 200.261, the
652-20 affirmative vote of the holders of at least two-thirds of the
652-21 outstanding shares of the real estate investment trust entitled to
652-22 vote on a fundamental business transaction is required to approve
652-23 the transaction.
652-24 (b) Unless provided by the certificate of formation or
652-25 Section 200.408, shares of a class or series that are not otherwise
652-26 entitled to vote on matters submitted to shareholders generally
652-27 will not be entitled to vote for the approval of a fundamental
653-1 business transaction.
653-2 (c) Except as provided by this code, if a class or series of
653-3 shares of a real estate investment trust is entitled to vote on a
653-4 fundamental business transaction as a class or series, in addition
653-5 to the vote required under Subsection (a), the affirmative vote of
653-6 the holders of at least two-thirds of the outstanding shares in
653-7 each class or series of shares entitled to vote on the fundamental
653-8 business transaction as a class or series is required to approve
653-9 the transaction.
653-10 (d) Unless required by the certificate of formation,
653-11 approval of a merger by shareholders is not required under this
653-12 code for a real estate investment trust that is a party to the plan
653-13 of merger unless that real estate investment trust is also a party
653-14 to the merger.
653-15 Sec. 200.408. CLASS VOTING REQUIREMENTS FOR CERTAIN
653-16 FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Separate voting by a class
653-17 or series of shares of a real estate investment trust is required
653-18 for approval of a plan of merger or conversion if:
653-19 (1) the plan of merger or conversion contains a
653-20 provision that would require approval by that class or series of
653-21 shares under Section 200.262 if the provision was contained in a
653-22 proposed amendment to the real estate investment trust's
653-23 certificate of formation; or
653-24 (2) that class or series of shares is entitled under
653-25 the certificate of formation to vote as a class on the plan of
653-26 merger or conversion.
653-27 (b) Separate voting by a class or series of shares of a real
654-1 estate investment trust is required for approval of a plan of
654-2 exchange if:
654-3 (1) shares of that class or series are to be exchanged
654-4 under the terms of the plan of exchange; or
654-5 (2) that class or series is entitled under the
654-6 certificate of formation to vote as a class on the plan of
654-7 exchange.
654-8 (c) Separate voting by a class or series of shares of a real
654-9 estate investment trust is required for approval of a sale of all
654-10 or substantially all of the assets of the real estate investment
654-11 trust if that class or series of shares is entitled under the
654-12 certificate of formation to vote as a class on the sale of the real
654-13 estate investment trust's assets.
654-14 Sec. 200.409. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN
654-15 FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Unless required by the
654-16 real estate investment trust's certificate of formation, a plan of
654-17 merger is not required to be approved by the shareholders of a real
654-18 estate investment trust if:
654-19 (1) the real estate investment trust is the sole
654-20 surviving real estate investment trust in the merger;
654-21 (2) the certificate of formation of the real estate
654-22 investment trust following the merger will not differ from the real
654-23 estate investment trust's certificate of formation before the
654-24 merger;
654-25 (3) immediately after the effective date of the
654-26 merger, each shareholder of the real estate investment trust whose
654-27 shares were outstanding immediately before the effective date of
655-1 the merger will hold the same number of shares, with identical
655-2 designations, preferences, limitations, and relative rights;
655-3 (4) the sum of the voting power of the number of
655-4 voting shares outstanding immediately after the merger and the
655-5 voting power of securities that may be acquired on the conversion
655-6 or exercise of securities issued under the merger does not exceed
655-7 by more than 20 percent the voting power of the total number of
655-8 voting shares of the real estate investment trust that are
655-9 outstanding immediately before the merger; and
655-10 (5) the sum of the number of participating shares that
655-11 are outstanding immediately after the merger and the number of
655-12 participating shares that may be acquired on the conversion or
655-13 exercise of securities issued under the merger does not exceed by
655-14 more than 20 percent the total number of participating shares of
655-15 the real estate investment trust that are outstanding immediately
655-16 before the merger.
655-17 (b) Unless required by the certificate of formation, a plan
655-18 of merger effected under Section 10.005 or 10.006 does not require
655-19 the approval of the shareholders of the real estate investment
655-20 trust.
655-21 Sec. 200.410. RIGHTS OF DISSENT AND APPRAISAL. A
655-22 shareholder of a domestic real estate investment trust has the
655-23 rights of dissent and appraisal under Subchapter H, Chapter 10,
655-24 with respect to a fundamental business transaction.
655-25 (Sections 200.411-200.450 reserved for expansion)
655-26 SUBCHAPTER J. WINDING UP AND TERMINATION
655-27 Sec. 200.451. APPROVAL OF VOLUNTARY WINDING UP. A real
656-1 estate investment trust must approve a voluntary winding up in
656-2 accordance with Chapter 11 by the affirmative vote of the
656-3 shareholders of the real estate investment trust as provided by
656-4 Section 200.262.
656-5 Sec. 200.452. APPROVAL OF REINSTATEMENT OR REVOCATION OF
656-6 VOLUNTARY WINDING UP. A real estate investment trust may reinstate
656-7 its existence under Section 11.202 or revoke a voluntary decision
656-8 to wind up under Section 11.151 by the affirmative vote of the
656-9 shareholders in accordance with Section 200.262.
656-10 (Sections 200.453-200.500 reserved for expansion)
656-11 SUBCHAPTER K. MISCELLANEOUS PROVISIONS
656-12 Sec. 200.501. EXAMINATION OF RECORDS. (a) On written
656-13 demand stating a proper purpose, a shareholder of record of a real
656-14 estate investment trust for at least six months immediately
656-15 preceding the shareholder's demand, or a holder of record of at
656-16 least five percent of all of the outstanding shares of a real
656-17 estate investment trust, is entitled to examine and copy, at a
656-18 reasonable time the real estate investment trust's relevant books,
656-19 records of account, minutes, and share transfer records. The
656-20 examination may be conducted in person or through an agent or
656-21 attorney.
656-22 (b) This section does not impair the power of a court, on
656-23 the presentation of proof of proper purpose by a shareholder, to
656-24 compel the production for examination by the shareholder of the
656-25 books and records of accounts, minutes, and share transfer records
656-26 of a real estate investment trust, regardless of the period during
656-27 which the shareholder was a record holder and regardless of the
657-1 number of shares held by the person.
657-2 Sec. 200.502. JOINDER OF SHAREHOLDERS NOT REQUIRED. The
657-3 joinder of shareholders of a real estate investment trust is not
657-4 required for any sale, lease, mortgage, or other disposition of all
657-5 or part of the assets of the real estate investment trust.
657-6 Sec. 200.503. TAX LAW REQUIREMENTS. In connection with a
657-7 real estate investment trust qualifying or attempting to qualify as
657-8 a real estate investment trust under the Internal Revenue Code and
657-9 the regulations adopted under the Internal Revenue Code, a
657-10 provision of this chapter is subject to the provisions of the
657-11 Internal Revenue Code or the regulations relating to or governing
657-12 real estate investment trusts adopted under those provisions if:
657-13 (1) the provision of this chapter is contrary to or
657-14 inconsistent with the federal provisions or regulations;
657-15 (2) the federal provisions or regulations require a
657-16 real estate investment trust to take any action required to secure
657-17 or maintain its status as a real estate investment trust under the
657-18 federal provisions or regulations; or
657-19 (3) the federal provisions or regulations prohibit the
657-20 real estate investment trust from taking any action required to
657-21 secure or maintain its status as a real estate investment trust
657-22 under the federal provision or regulation.
657-23 TITLE 6. ASSOCIATIONS
657-24 CHAPTER 251. COOPERATIVE ASSOCIATIONS
657-25 SUBCHAPTER A. GENERAL PROVISIONS
657-26 Sec. 251.001. DEFINITIONS. In this chapter:
657-27 (1) "Cooperative basis" means that net savings, after
658-1 payment of any investment dividends or after provision for separate
658-2 funds has been made as required or authorized by law, the
658-3 certificate of formation, or bylaws, are:
658-4 (A) allocated or distributed to a member patron
658-5 or to each patron in proportion to patronage; or
658-6 (B) retained by the entity for:
658-7 (i) actual or potential expansion of the
658-8 entity's services;
658-9 (ii) the reduction of charges to patrons;
658-10 or
658-11 (iii) any other purpose consistent with
658-12 the entity's nonprofit character.
658-13 (2) "Invested capital" means funds invested in a
658-14 cooperative association by an investor with the expectation of
658-15 receiving an investment dividend.
658-16 (3) "Investment dividend" means the return on invested
658-17 capital or on membership capital derived from the net savings of
658-18 the cooperative association.
658-19 (4) "Membership capital" means the funds of a
658-20 cooperative association derived from members of the cooperative
658-21 association generally as a requirement of membership or in lieu of
658-22 patronage dividends. The term does not include deposits or loans
658-23 from members.
658-24 (5) "Net savings" means the total income of a
658-25 cooperative association less the costs of operation.
658-26 (6) "Patronage dividend" means a share of the net
658-27 savings distributed among members of the cooperative association on
659-1 the basis of patronage, as provided by the certificate of
659-2 formation.
659-3 (7) "Savings returns" means the amount returned by a
659-4 cooperative association to patrons of a cooperative association in
659-5 proportion to patronage or otherwise.
659-6 Sec. 251.002. APPLICABILITY OF NONPROFIT CORPORATION
659-7 PROVISIONS. (a) A provision of Title 1 and Chapters 20 and 22
659-8 governing nonprofit corporations applies to a cooperative
659-9 association.
659-10 (b) Notwithstanding Subsection (a), this chapter controls
659-11 over any conflicting provision of Title 1 and Chapters 20 and 22
659-12 governing nonprofit corporations.
659-13 Sec. 251.003. EXEMPTION. This chapter does not apply to a
659-14 corporation or association organized under or having a purpose
659-15 prohibited under:
659-16 (1) Title 2; or
659-17 (2) a law listed in Sections 22.051-22.054.
659-18 (Sections 251.004-251.050 reserved for expansion)
659-19 SUBCHAPTER B. PURPOSES AND POWERS
659-20 Sec. 251.051. PURPOSES. (a) A person may incorporate a
659-21 cooperative association under this code to acquire, produce, build,
659-22 operate, manufacture, furnish, exchange, or distribute any type of
659-23 property, commodities, goods, or services for the primary and
659-24 mutual benefit of the members of the cooperative association.
659-25 (b) A cooperative association may not be incorporated or
659-26 organized to:
659-27 (1) serve or function as a health maintenance
660-1 organization;
660-2 (2) furnish medical or health care; or
660-3 (3) employ or contract with a health care provider in
660-4 a manner prohibited by the statute under which the provider is
660-5 licensed.
660-6 Sec. 251.052. GENERAL POWERS. (a) Except as provided by
660-7 this chapter, a cooperative association may exercise the same
660-8 powers and privileges and is subject to the same duties,
660-9 restrictions, and liabilities as a nonprofit corporation under
660-10 Title 1 and Chapters 20 and 22.
660-11 (b) A cooperative association may:
660-12 (1) own and hold membership in other associations or
660-13 corporations;
660-14 (2) own and hold share capital of other associations
660-15 or corporations;
660-16 (3) own and exercise ownership rights in bonds or
660-17 other obligations;
660-18 (4) make agreements of mutual aid or federation with
660-19 other associations, other groups organized on a cooperative basis,
660-20 or other nonprofit groups; and
660-21 (5) deliver money to a scholarship fund for rural
660-22 students.
660-23 Sec. 251.053. LIMITATION ON POWERS. (a) A cooperative
660-24 association may not directly or indirectly engage in a health
660-25 maintenance organization or a prepaid legal service corporation.
660-26 (b) Except for the payment of necessary legal fees or
660-27 promotion expenses, a cooperative association may not directly or
661-1 indirectly use its funds, issue shares, or incur indebtedness for
661-2 the payment of compensation for the organization of the cooperative
661-3 association in excess of five percent of the amount paid for the
661-4 shares or membership certificates involved in the promotion
661-5 transaction.
661-6 (Sections 251.054-251.100 reserved for expansion)
661-7 SUBCHAPTER C. FORMATION
661-8 Sec. 251.101. CERTIFICATE OF FORMATION. In addition to the
661-9 information required by Section 3.005, the certificate of formation
661-10 of a cooperative association must state:
661-11 (1) whether the cooperative association is organized
661-12 with or without shares;
661-13 (2) the number of shares or memberships subscribed for
661-14 the cooperative association;
661-15 (3) if the cooperative association is organized with
661-16 shares:
661-17 (A) the amount of authorized capital;
661-18 (B) the number and type of shares;
661-19 (C) par value of the shares, if any; and
661-20 (D) the rights, preferences, and restrictions of
661-21 each type of share; and
661-22 (4) the method for distributing on winding up and
661-23 termination of any surplus of the cooperative association in
661-24 accordance with Section 251.453.
661-25 Sec. 251.102. ORGANIZATIONAL MEETING. After a cooperative
661-26 association's certificate of formation is issued, the cooperative
661-27 association shall hold an organizational meeting in accordance with
662-1 Section 22.106.
662-2 Sec. 251.103. AMENDMENT OF CERTIFICATE OF FORMATION. (a)
662-3 The board of directors of a cooperative association may propose an
662-4 amendment to the cooperative association's certificate of formation
662-5 by a two-thirds vote of the board members. The members of a
662-6 cooperative association may petition to amend the certificate of
662-7 formation as provided by the bylaws.
662-8 (b) Not later than the 31st day before the date of the
662-9 meeting, the secretary shall:
662-10 (1) send notice of a meeting to consider a proposed
662-11 amendment to each member of the cooperative association at the
662-12 member's last known address; or
662-13 (2) post notice of a meeting to consider a proposed
662-14 amendment in a conspicuous place in all principal places of
662-15 activity of the cooperative association.
662-16 (c) The notice required by Subsection (b) must include the
662-17 full text of the proposed amendment and the text of the part of the
662-18 certificate of formation to be amended.
662-19 (d) To be approved, an amendment must be adopted by the
662-20 affirmative vote of two-thirds of the members voting on the
662-21 amendment.
662-22 (e) Not later than the 30th day after the date an amendment
662-23 is adopted by the members of a cooperative association, the
662-24 cooperative association shall file a certificate of amendment with
662-25 the secretary of state in accordance with Chapter 4. The
662-26 certificate of amendment must be:
662-27 (1) executed by the president and secretary of the
663-1 cooperative association; and
663-2 (2) in the form required by Section 3.052.
663-3 Sec. 251.104. BYLAWS. (a) Unless the certificate of
663-4 formation or bylaws of a cooperative association require a greater
663-5 majority, the bylaws may be adopted, amended, or repealed by a
663-6 majority vote of the cooperative association's members voting on
663-7 the matter.
663-8 (b) Except as provided by this code, the bylaws may contain:
663-9 (1) requirements for admission to membership;
663-10 (2) requirements for disposal of a member's interest
663-11 on cessation of membership;
663-12 (3) the time, place, and manner of calling and
663-13 conducting meetings;
663-14 (4) the number or percentage of the members
663-15 constituting a quorum;
663-16 (5) the number, qualifications, powers, duties, and
663-17 term of directors and officers;
663-18 (6) the method of electing, removing, and filling a
663-19 vacancy of directors and officers;
663-20 (7) the division or classification, if any, of
663-21 directors to provide for staggered terms;
663-22 (8) the compensation, if any, of the directors;
663-23 (9) the number of directors necessary to constitute a
663-24 quorum;
663-25 (10) the method for distributing the net savings;
663-26 (11) a requirement that each officer or employee of
663-27 the cooperative association who handles funds or securities be
664-1 bonded;
664-2 (12) other discretionary provisions of this code; and
664-3 (13) any other provision incident to a purpose or
664-4 activity of the cooperative association.
664-5 (Sections 251.105-251.150 reserved for expansion)
664-6 SUBCHAPTER D. MANAGEMENT
664-7 Sec. 251.151. BOARD OF DIRECTORS. (a) Except as provided
664-8 by Subsections (b) and (c), a cooperative association is managed by
664-9 a board of directors in accordance with Chapter 22.
664-10 (b) The board shall contain at least five directors elected
664-11 by and from the cooperative association's members. A director:
664-12 (1) serves a term not to exceed three years as
664-13 provided by the bylaws; and
664-14 (2) holds office until the director is removed or the
664-15 director's successor is elected.
664-16 (c) The bylaws of a cooperative association may:
664-17 (1) apportion the number of directors among the units
664-18 into which the cooperative association may be divided; and
664-19 (2) provide for the election of the directors by the
664-20 respective units to which the directors are apportioned.
664-21 (d) An executive committee of the board of directors may be
664-22 elected in the manner and with the powers and duties specified by
664-23 the certificate of formation or bylaws.
664-24 Sec. 251.152. OFFICERS. (a) The directors of a cooperative
664-25 association shall annually elect, unless otherwise provided by the
664-26 bylaws, the following officers for the cooperative association:
664-27 (1) a president;
665-1 (2) one or more vice presidents; and
665-2 (3) a secretary and treasurer or a
665-3 secretary-treasurer.
665-4 (b) The officers of a cooperative association may be
665-5 designated by other titles as provided by the certificate of
665-6 formation or the bylaws of the cooperative association.
665-7 Sec. 251.153. REMOVAL OF DIRECTORS AND OFFICERS. (a) A
665-8 director or officer of a cooperative association may be removed
665-9 from office in the manner provided by the certificate of formation
665-10 or bylaws of the cooperative association.
665-11 (b) If the certificate of formation or bylaws do not provide
665-12 for the person's removal, a director or officer may be removed with
665-13 cause by a vote of a majority of the members voting at a regular or
665-14 special meeting. The director or officer who is to be removed is
665-15 entitled to be heard at the meeting.
665-16 (c) Except as provided by the certificate of formation or
665-17 bylaws, a vacancy on the board of directors caused by removal shall
665-18 be filled by a director elected in the same manner provided by the
665-19 bylaws for the election of directors.
665-20 Sec. 251.154. REFERENDUM. (a) The certificate of formation
665-21 or bylaws of a cooperative association may provide for a referendum
665-22 on any action undertaken by the cooperative association's board of
665-23 directors if the referendum is:
665-24 (1) requested by petition of 10 percent or more of all
665-25 of the members of the cooperative association; or
665-26 (2) requested and approved by the vote of at least a
665-27 majority of the directors of the cooperative association.
666-1 (b) The proposition to be voted on in a referendum
666-2 authorized under Subsection (a) must be submitted to the members of
666-3 the cooperative association for consideration within the time
666-4 specified in the document authorizing the referendum.
666-5 (c) A right of a third party that has vested between the
666-6 time of the action and the time of the referendum is not impaired
666-7 by the referendum results.
666-8 (Sections 251.155-251.200 reserved for expansion)
666-9 SUBCHAPTER E. MEMBERSHIP
666-10 Sec. 251.201. ELIGIBILITY AND ADMISSION. An unincorporated
666-11 group or other person organized on a cooperative basis or a
666-12 nonprofit group may be admitted to membership in a cooperative
666-13 association only if the person meets the qualifications for
666-14 eligibility stated in the certificate of formation or bylaws of the
666-15 cooperative association.
666-16 Sec. 251.202. EXPULSION. (a) A member of a cooperative
666-17 association may be expelled by the vote of a majority of the
666-18 cooperative association's members voting at a regular or special
666-19 meeting.
666-20 (b) Not later than the 11th day before the date of the
666-21 meeting, the cooperative association shall give the member written
666-22 notice of the charges. The member is entitled to be heard at the
666-23 meeting in person or by counsel.
666-24 (c) If the cooperative association votes to expel a member,
666-25 the cooperative association's board of directors must purchase the
666-26 member's capital holdings at par value if the purchase does not
666-27 jeopardize the cooperative association's solvency.
667-1 Sec. 251.203. SUBSCRIBERS. (a) A person is a subscriber of
667-2 a cooperative association only if the person is:
667-3 (1) eligible for membership in the cooperative
667-4 association under Section 251.201; and
667-5 (2) legally obligated to purchase a share or
667-6 membership in the cooperative association.
667-7 (b) The certificate of formation or bylaws of a cooperative
667-8 association may state whether and the conditions under which voting
667-9 rights or other membership rights are granted to a subscriber of
667-10 the cooperative association.
667-11 Sec. 251.204. LIABILITY. (a) Except as provided by
667-12 Subsection (b), a member or subscriber of a cooperative association
667-13 is not jointly or severally liable for a debt of the cooperative
667-14 association. A subscriber is liable for any unpaid amount on the
667-15 subscriber's membership certificates or invested capital
667-16 certificates.
667-17 (b) A subscriber who assigns the subscriber's interest in
667-18 membership certificates or invested capital certificates is jointly
667-19 and severally liable with the assignee until the appropriate
667-20 certificates are fully paid.
667-21 (Sections 251.205-251.250 reserved for expansion)
667-22 SUBCHAPTER F. SHARES
667-23 Sec. 251.251. SHARE AND MEMBERSHIP CERTIFICATES: ISSUANCE
667-24 AND CONTENTS. (a) A cooperative association may not issue a
667-25 certificate for membership capital or for invested capital until
667-26 any par value of the certificate has been paid in full.
667-27 (b) Each certificate for membership capital issued by a
668-1 cooperative association must contain a statement of the
668-2 requirements of Sections 251.252, 251.304, and 251.305.
668-3 (c) Each certificate for invested capital issued by a
668-4 cooperative association must contain a statement of the
668-5 restrictions on transferability as provided by the cooperative
668-6 association's bylaws.
668-7 Sec. 251.252. TRANSFER OF SHARES AND MEMBERSHIP; WITHDRAWAL.
668-8 (a) A member who decides to withdraw from a cooperative
668-9 association shall make a written offer to sell the member's
668-10 membership certificates to the cooperative association's board of
668-11 directors.
668-12 (b) Not later than the 90th day after the date the directors
668-13 receive an offer under Subsection (a), the directors may purchase
668-14 the holdings by paying the member the par value of the certificates
668-15 and shall reissue or cancel the shares after purchasing the
668-16 holdings. The directors shall purchase the shares if a majority of
668-17 the cooperative association's members voting at a regular or
668-18 special meeting vote to require the purchase.
668-19 (c) An investor owning investor certificates must sell,
668-20 assign, or convey the certificates in accordance with the
668-21 cooperative association's bylaws. If an investor fails to sell,
668-22 assign, or convey investor certificates in accordance with the
668-23 bylaws, the cooperative association on written notice to its
668-24 directors shall repurchase the certificates by paying the investor
668-25 the par value of the certificate plus all accrued investment
668-26 dividends. The certificates must be repurchased not later than the
668-27 90th day after the date the cooperative association receives notice
669-1 of the failure.
669-2 Sec. 251.253. SHARE AND MEMBERSHIP CERTIFICATES; RECALL.
669-3 (a) The bylaws of a cooperative association may authorize the
669-4 cooperative association's board of directors to recall during a
669-5 specified time and in accordance with the bylaws the membership
669-6 certificates of a member who fails to patronize the cooperative
669-7 association. The board may use the reserve funds to recall, at par
669-8 value, the membership certificates of any member in excess of the
669-9 amount required for membership.
669-10 (b) After the board of directors of a cooperative
669-11 association recalls a membership certificate under Subsection (a),
669-12 membership in the cooperative association is terminated and the
669-13 board shall reissue or cancel the certificate. The board of
669-14 directors may not recall membership certificates if recalling the
669-15 certificates would jeopardize the cooperative association's
669-16 solvency.
669-17 (c) The board of directors may use the reserve funds to
669-18 recall and repurchase the investment certificates of an investor at
669-19 par value plus any investment dividends due.
669-20 (d) The bylaws of a cooperative association may establish
669-21 specific procedures, terms, and conditions for recalls and
669-22 repurchases of investment certificates.
669-23 Sec. 251.254. CERTIFICATES; ATTACHMENT. The minimum amount
669-24 necessary for membership in a cooperative association, not to
669-25 exceed $50, is exempt from attachment, execution, or garnishment
669-26 for the debts of a member of a cooperative association. If a
669-27 member's holdings are subject to attachment, execution, or
670-1 garnishment, the directors of the cooperative association may admit
670-2 the purchaser to membership or may purchase the holdings at par
670-3 value.
670-4 (Sections 251.255-251.300 reserved for expansion)
670-5 SUBCHAPTER G. MEETINGS AND VOTING
670-6 Sec. 251.301. MEETINGS. (a) Regular meetings of members of
670-7 a cooperative association shall be held at least once a year as
670-8 prescribed by the cooperative association's bylaws.
670-9 (b) A special meeting of the members of a cooperative
670-10 association may be requested by a majority vote of the directors or
670-11 by written petition of at least one-tenth of the membership of the
670-12 cooperative association. The secretary shall call a special
670-13 meeting to be held 30 days after receipt of the request for a
670-14 special meeting.
670-15 Sec. 251.302. NOTICE OF SPECIAL MEETING. The notice of a
670-16 special meeting of the members of a cooperative association shall
670-17 state the purpose of the meeting.
670-18 Sec. 251.303. MEETINGS BY UNITS OF MEMBERSHIP. (a) The
670-19 certificate of formation or bylaws of a cooperative association may
670-20 provide for the holding of meetings by units of the membership of
670-21 the cooperative association and may provide for:
670-22 (1) a method of transmitting the votes cast at unit
670-23 meetings to the central meeting;
670-24 (2) a method of representation of units of the
670-25 membership by the election of delegates to the central meeting; or
670-26 (3) a combination of both methods.
670-27 (b) Except as otherwise provided by the bylaws, a meeting by
671-1 a unit of the membership shall be called and held in the same
671-2 manner as a regular meeting of the members.
671-3 Sec. 251.304. ONE MEMBER--ONE VOTE. (a) Except as provided
671-4 by Subsection (b), a member of a cooperative association has one
671-5 vote.
671-6 (b) If a cooperative association includes among its
671-7 membership another cooperative association or a group that is
671-8 organized on a cooperative basis, the voting rights of the
671-9 cooperative association member or group member may be prescribed by
671-10 the certificate of formation or bylaws of the cooperative
671-11 association.
671-12 (c) Any voting agreement or other device that is made to
671-13 evade the one-member-one-vote rule is not enforceable.
671-14 Sec. 251.305. NO PROXY. A member is not entitled to vote by
671-15 proxy.
671-16 Sec. 251.306. VOTING BY MAIL. (a) The certificate of
671-17 formation or bylaws of a cooperative association may contain the
671-18 procedures in Subsection (b) or (c), or both, for voting by mail.
671-19 (b) With notice of a meeting sent to members of the
671-20 cooperative association, the secretary may include a copy of a
671-21 proposal to be offered at the meeting. If a mail vote is returned
671-22 to the cooperative association within the specified number of days,
671-23 the mail vote shall be counted with the votes cast at the meeting.
671-24 (c) The secretary may send to a member of the cooperative
671-25 association who is absent from a meeting an exact copy of the
671-26 proposal considered at the meeting. If the vote is returned to the
671-27 cooperative association within the specified number of days, the
672-1 mail vote is counted with the votes cast at the meeting.
672-2 (d) The certificate of formation or bylaws may state whether
672-3 and to what extent mail votes are counted in computing a quorum.
672-4 Sec. 251.307. VOTING BY MAIL OR BY DELEGATES. (a) If a
672-5 cooperative association has provided for voting by mail or by
672-6 delegates, a provision of this chapter referring to votes cast by
672-7 members of the cooperative association applies to votes cast by
672-8 mail or by delegates.
672-9 (b) A delegate may not vote by mail.
672-10 (Sections 251.308-251.350 reserved for expansion)
672-11 SUBCHAPTER H. CAPITAL AND NET SAVINGS
672-12 Sec. 251.351. LIMITATIONS ON RETURN ON CAPITAL. (a) Except
672-13 as otherwise provided by the cooperative association's bylaws, an
672-14 investment dividend of a cooperative association may not be
672-15 cumulative and may not exceed eight percent of investment capital.
672-16 (b) Total investment dividends distributed for a fiscal
672-17 year may not exceed 50 percent of the net savings for the period.
672-18 Sec. 251.352. ALLOCATION AND DISTRIBUTION OF NET SAVINGS.
672-19 (a) At least once each year the members or directors of a
672-20 cooperative association, as provided by the certificate of
672-21 formation or bylaws of the cooperative association, shall apportion
672-22 the net savings of the cooperative association in the following
672-23 order:
672-24 (1) subject to Section 251.351, investment dividends
672-25 payable from the surplus of the total assets over total liabilities
672-26 may be paid on invested capital or, if authorized by the bylaws,
672-27 may be paid on the membership certificates;
673-1 (2) a portion of the remainder, as determined by the
673-2 certificate of formation or bylaws, may be allocated to an
673-3 educational fund to be used in teaching cooperation;
673-4 (3) a portion of the remainder may be allocated to
673-5 funds for the general welfare of the members of the cooperative
673-6 association;
673-7 (4) a portion of the remainder may be allocated to
673-8 retained earnings; and
673-9 (5) the remainder shall be allocated at the same
673-10 uniform rate to each patron of the cooperative association in
673-11 proportion to individual patronage as follows:
673-12 (A) for a member patron, the proportionate
673-13 amount of savings return distributed to the member may be any
673-14 combination of cash, property, membership certificates, or
673-15 investment certificates; and
673-16 (B) for a subscriber patron, the patron's
673-17 proportionate amount of savings returns as provided by the
673-18 certificate of formation or bylaws may be distributed to the
673-19 subscriber patron or credited to the subscriber patron's account
673-20 until the amount of capital subscribed for has been fully paid.
673-21 (b) This section does not prevent a cooperative association
673-22 engaged in rendering services from disposing of the net savings
673-23 from the rendering of services in a manner that lowers the fees
673-24 charged for services or furthers the common benefit of the members.
673-25 (c) A cooperative association may adopt a system in which:
673-26 (1) the payment of savings returns that would
673-27 otherwise be distributed are deferred for a fixed period; or
674-1 (2) the savings returns distributed are partly in cash
674-2 or partly in shares, to be retired at a fixed future date, in the
674-3 order of the shares' serial numbers or issuance dates.
674-4 (Sections 251.353-251.400 reserved for expansion)
674-5 SUBCHAPTER I. REPORTS AND RECORDS
674-6 Sec. 251.401. RECORDKEEPING. A cooperative association
674-7 shall keep books and records relating to the cooperative
674-8 association's business operation in accordance with standard
674-9 accounting practices.
674-10 Sec. 251.402. REPORTS TO MEMBERS. (a) A cooperative
674-11 association shall submit a written report to its members at the
674-12 annual meeting of the cooperative association. The annual report
674-13 must contain:
674-14 (1) a balance sheet;
674-15 (2) an income and expense statement;
674-16 (3) the amount and nature of the cooperative
674-17 association's authorized, subscribed, and paid-in capital;
674-18 (4) the total number of shareholders;
674-19 (5) the number of shareholders who were admitted to or
674-20 withdrew from the association during the year;
674-21 (6) the par value of the shares;
674-22 (7) the rate at which any investment dividends have
674-23 been paid; and
674-24 (8) if the cooperative association does not issue
674-25 shares:
674-26 (A) the total number of members;
674-27 (B) the number of members who were admitted to
675-1 or withdrew from the association during the year; and
675-2 (C) the amount of membership fees received.
675-3 (b) The directors shall appoint a committee composed of
675-4 members who are not principal bookkeepers, accountants, or
675-5 employees of the cooperative association to review the cooperative
675-6 association.
675-7 (c) The committee appointed under Subsection (b) shall
675-8 report on the quality of the annual report required by this section
675-9 and the bookkeeping system of the cooperative association at the
675-10 annual meeting.
675-11 Sec. 251.403. ANNUAL REPORT OF FINANCIAL CONDITION. (a)
675-12 This section applies only to a cooperative association that has at
675-13 least 100 members or at least $20,000 in annual business.
675-14 (b) Not later than the 120th day after the date on which the
675-15 association closes its business each year, a cooperative
675-16 association shall file in the association's registered office a
675-17 report of the association's financial condition stating:
675-18 (1) the name of the association;
675-19 (2) the address of the association's principal office;
675-20 (3) the name, address, occupation, and date of
675-21 expiration of the term of office of each officer and director;
675-22 (4) any compensation paid by the association to each
675-23 officer or director of the association;
675-24 (5) the amount and nature of the authorized,
675-25 subscribed, and paid-in capital;
675-26 (6) the total number of shareholders;
675-27 (7) the number of shareholders who were admitted to or
676-1 withdrew from the association during the year;
676-2 (8) the par value of the association's shares;
676-3 (9) the rate at which any investment dividends have
676-4 been paid; and
676-5 (10) if the association has no shares:
676-6 (A) the total number of members;
676-7 (B) the number of members who were admitted to
676-8 or withdrew from the association during the year; and
676-9 (C) the amount of membership fees received.
676-10 (c) The report required by Subsection (b) must:
676-11 (1) include a balance sheet and income and expense
676-12 statement of the cooperative association; and
676-13 (2) be sworn to by the president and secretary.
676-14 (d) A cooperative association that has at least 3,000
676-15 members or at least $750,000 in annual business shall file a copy
676-16 of the report required by this section with the secretary of state.
676-17 (e) A person commits an offense if the person subscribes or
676-18 verifies a report that is required by this section and contains a
676-19 materially false statement that the person knows is false. An
676-20 offense under this subsection is a misdemeanor punishable by:
676-21 (1) a fine of not less than $25 or more than $200;
676-22 (2) confinement in county jail for a term of not less
676-23 than 30 days or more than one year; or
676-24 (3) both the fine and confinement.
676-25 Sec. 251.404. FAILURE TO FILE REPORT. (a) If a cooperative
676-26 association required by Section 251.403 to file a copy of a report
676-27 with the secretary of state does not file the report within the
677-1 prescribed time, the secretary of state shall send written notice
677-2 of the requirement to the cooperative association. The notice must
677-3 be sent by registered mail to the cooperative association's
677-4 principal office not later than the 60th day after the date the
677-5 report becomes due.
677-6 (b) If a cooperative association is required by Section
677-7 251.403 to file a report at its registered office but not with the
677-8 secretary of state and fails to file the report within the
677-9 prescribed time, the secretary of state or any member of the
677-10 cooperative association may send written notice of the requirement
677-11 by registered mail to the cooperative association's principal
677-12 office.
677-13 (c) If the cooperative association does not file the report
677-14 before the 61st day after the date notice is sent under Subsection
677-15 (a) or (b), a member of the cooperative association or the attorney
677-16 general may seek a writ of mandamus against the cooperative
677-17 association and the appropriate officer or officers to compel the
677-18 filing of the report. The court shall require the cooperative
677-19 association or the officer who is determined to be at fault to pay
677-20 the expenses of the proceeding, including attorney's fees.
677-21 (Sections 251.405-251.450 reserved for expansion)
677-22 SUBCHAPTER J. WINDING UP AND TERMINATION
677-23 Sec. 251.451. VOLUNTARY WINDING UP AND LIQUIDATION. (a) A
677-24 cooperative association may wind up and liquidate its affairs in
677-25 accordance with Chapter 11 and Section 22.301.
677-26 (b) If a cooperative association is directed to wind up and
677-27 liquidate its affairs, three members of the cooperative association
678-1 elected by a vote of at least a majority of the members voting
678-2 shall be designated as trustees on behalf of the cooperative
678-3 association to:
678-4 (1) pay debts;
678-5 (2) liquidate the cooperative association's assets
678-6 within the time set in the trustees' designation or any extension
678-7 of time; and
678-8 (3) distribute the cooperative association's assets in
678-9 the manner provided by Section 251.453.
678-10 Sec. 251.452. EXECUTION OF CERTIFICATE OF TERMINATION. An
678-11 officer of a cooperative association or one or more of the persons
678-12 designated as a liquidating trustee under Section 251.451 shall
678-13 execute the certificate of termination on behalf of the cooperative
678-14 association.
678-15 Sec. 251.453. DISTRIBUTION OF ASSETS. Subject to Section
678-16 11.052, the trustees designated under Section 251.451 shall
678-17 distribute the cooperative association's assets in the following
678-18 order:
678-19 (1) by returning the par value of the investors'
678-20 capital to investors;
678-21 (2) by returning the amounts paid on subscriptions to
678-22 subscribers who invested capital;
678-23 (3) by returning the amount of patronage dividends
678-24 credited to patrons' accounts to the patrons;
678-25 (4) by returning the membership capital to members;
678-26 and
678-27 (5) by distributing any surplus in the manner provided
679-1 by the certificate of formation:
679-2 (A) among the patrons who have been members or
679-3 subscribers of the cooperative association during the six years
679-4 preceding the date of dissolution, on the basis of patronage during
679-5 that period;
679-6 (B) as a gift to any cooperative association or
679-7 other nonprofit enterprise designated in the certificate of
679-8 formation; or
679-9 (C) a combination of both methods of
679-10 distribution.
679-11 Sec. 251.454. INVOLUNTARY TERMINATION. A suit for
679-12 involuntary termination of a cooperative association organized
679-13 under this chapter may be instituted for the causes and prosecuted
679-14 in the manner provided by Section 11.251. The assets of a
679-15 cooperative association that is involuntarily terminated shall be
679-16 distributed in accordance with Section 251.453.
679-17 (Sections 251.455-251.500 reserved for expansion)
679-18 SUBCHAPTER K. MISCELLANEOUS PROVISIONS
679-19 Sec. 251.501. EXEMPTION FROM TAXES. A cooperative
679-20 association organized under this chapter is exempt from the
679-21 franchise tax and license fees imposed by the state or a political
679-22 subdivision of the state, except that a cooperative association is
679-23 exempt from the franchise tax imposed by Chapter 171, Tax Code,
679-24 only if the cooperative association is exempt under that chapter.
679-25 Sec. 251.502. USE OF NAME "COOPERATIVE." (a) Only a
679-26 cooperative association organized under this title, a group
679-27 organized on a cooperative basis under another law of this state,
680-1 or a foreign corporation operating on a cooperative basis and
680-2 authorized to do business in this state may use the term
680-3 "cooperative" or any abbreviation or derivation of the term
680-4 "cooperative" as part of its business name or represent itself, in
680-5 advertising or otherwise, as conducting business on a cooperative
680-6 basis.
680-7 (b) A person commits an offense if the person violates
680-8 Subsection (a). An offense under this subsection is a misdemeanor
680-9 punishable by:
680-10 (1) a fine of not less than $25 or more than $200 for
680-11 the first month in which the violation occurs;
680-12 (2) a fine of not more than $200 for each month during
680-13 which a violation occurs after the first month;
680-14 (3) confinement in the county jail for not less than
680-15 30 days or more than one year; or
680-16 (4) a combination of those punishments.
680-17 (c) The attorney general may sue to enjoin a violation of
680-18 this section.
680-19 (d) If a court renders a judgment that a person who used the
680-20 term "cooperative" before September 1, 1975, is not organized on a
680-21 cooperative basis but is authorized to continue to use the term,
680-22 the business shall place immediately after its name the words "does
680-23 not comply with the cooperative association law of Texas" in the
680-24 same kind of type and in letters not less than two-thirds the size
680-25 of the letters used in the word "cooperative."
680-26 (e) Notwithstanding this section, The University Cooperative
680-27 Society, a domestic nonprofit corporation related to The University
681-1 of Texas, may continue to use the word "cooperative" in its name.
681-2 CHAPTER 252. UNINCORPORATED NONPROFIT ASSOCIATIONS
681-3 Sec. 252.001. DEFINITIONS. In this chapter:
681-4 (1) "Member" means a person who, under the rules or
681-5 practices of a nonprofit association, may participate in the
681-6 selection of persons authorized to manage the affairs of the
681-7 nonprofit association or in the development of policy of the
681-8 nonprofit association.
681-9 (2) "Nonprofit association" means an unincorporated
681-10 organization, other than one created by a trust, consisting of
681-11 three or more members joined by mutual consent for a common,
681-12 nonprofit purpose. A form of joint tenancy, tenancy in common, or
681-13 tenancy by the entirety does not by itself establish a nonprofit
681-14 association, regardless of whether the co-owners share use of the
681-15 property for a nonprofit purpose.
681-16 Sec. 252.002. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW AND
681-17 EQUITY. Principles of law and equity supplement this chapter
681-18 unless displaced by a particular provision of this chapter.
681-19 Sec. 252.003. TERRITORIAL APPLICATION. Real and personal
681-20 property in this state may be acquired, held, encumbered, and
681-21 transferred by a nonprofit association, regardless of whether the
681-22 nonprofit association or a member has any other relationship to
681-23 this state.
681-24 Sec. 252.004. REAL AND PERSONAL PROPERTY; NONPROFIT
681-25 ASSOCIATION AS BENEFICIARY. (a) A nonprofit association in its
681-26 name may acquire, hold, encumber, or transfer an estate or interest
681-27 in real or personal property.
682-1 (b) A nonprofit association may be a beneficiary of a trust,
682-2 contract, or will.
682-3 Sec. 252.005. STATEMENT OF AUTHORITY AS TO REAL PROPERTY.
682-4 (a) A nonprofit association may execute and record a statement of
682-5 authority to transfer an estate or interest in real property in the
682-6 name of the nonprofit association.
682-7 (b) An estate or interest in real property in the name of a
682-8 nonprofit association may be transferred by a person so authorized
682-9 in a statement of authority recorded in the county clerk's office
682-10 in the county in which a transfer of the property would be
682-11 recorded.
682-12 (c) A statement of authority must contain:
682-13 (1) the name of the nonprofit association;
682-14 (2) 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 (3) the name or title of a person authorized to
682-19 transfer an estate or interest in real property held in the name of
682-20 the nonprofit association.
682-21 (d) A statement of authority must be executed in the same
682-22 manner as a deed by a person who is not the person authorized to
682-23 transfer the estate or interest.
682-24 (e) The county clerk may collect a fee for recording a
682-25 statement of authority in the amount authorized for recording a
682-26 transfer of real property.
682-27 (f) An amendment, including a cancellation, of a statement
683-1 of authority must meet the requirements for execution and recording
683-2 of an original statement. Unless canceled earlier, a recorded
683-3 statement of authority or its most recent amendment is canceled by
683-4 operation of law on the fifth anniversary of the date of the most
683-5 recent recording.
683-6 (g) If the record title to real property is in the name of a
683-7 nonprofit association and the statement of authority is recorded in
683-8 the county clerk's office of the county in which a transfer of real
683-9 property would be recorded, the authority of the person named in a
683-10 statement of authority is conclusive in favor of a person who gives
683-11 value without notice that the person lacks authority.
683-12 Sec. 252.006. LIABILITY IN TORT AND CONTRACT. (a) A
683-13 nonprofit association is a legal entity separate from its members
683-14 for the purposes of determining and enforcing rights, duties, and
683-15 liabilities in contract and tort.
683-16 (b) A person is not liable for a breach of a nonprofit
683-17 association's contract or for a tortious act or omission for which
683-18 a nonprofit association is liable merely because the person is a
683-19 member, is authorized to participate in the management of the
683-20 affairs of the nonprofit association, or is a person considered as
683-21 a member by the nonprofit association.
683-22 (c) A tortious act or omission of a member or other person
683-23 for which a nonprofit association is liable is not imputed to a
683-24 person merely because the person is a member of the nonprofit
683-25 association, is authorized to participate in the management of the
683-26 affairs of the nonprofit association, or is a person considered as
683-27 a member by the nonprofit association.
684-1 (d) A member of, or a person considered as a member by, a
684-2 nonprofit association may assert a claim against the nonprofit
684-3 association. A nonprofit association may assert a claim against a
684-4 member or a person considered as a member by the nonprofit
684-5 association.
684-6 Sec. 252.007. CAPACITY TO ASSERT AND DEFEND; STANDING.
684-7 (a) A nonprofit association, in its name, may institute, defend,
684-8 intervene, or participate in a judicial, administrative, or other
684-9 governmental proceeding or in an arbitration, mediation, or any
684-10 other form of alternative dispute resolution.
684-11 (b) A nonprofit association may assert a claim in its name
684-12 on behalf of members of the nonprofit association if:
684-13 (1) one or more of the nonprofit association's members
684-14 have standing to assert a claim in their own right;
684-15 (2) the interests the nonprofit association seeks to
684-16 protect are germane to its purposes; and
684-17 (3) neither the claim asserted nor the relief
684-18 requested requires the participation of a member.
684-19 Sec. 252.008. EFFECT OF JUDGMENT OR ORDER. A judgment or
684-20 order against a nonprofit association is not by itself a judgment
684-21 or order against a member or a person considered as a member by the
684-22 nonprofit association.
684-23 Sec. 252.009. DISPOSITION OF PERSONAL PROPERTY OF INACTIVE
684-24 NONPROFIT ASSOCIATION. (a) If a nonprofit association has been
684-25 inactive for three years or longer, or a shorter period as
684-26 specified in a document of the nonprofit association, a person in
684-27 possession or control of personal property of the nonprofit
685-1 association may transfer the custody of the property:
685-2 (1) if a document of a nonprofit association specifies
685-3 a person to whom transfer is to be made under these circumstances,
685-4 to that person; or
685-5 (2) if no person is specified, to a nonprofit
685-6 association or nonprofit corporation pursuing broadly similar
685-7 purposes, or to a government or governmental subdivision, agency,
685-8 or instrumentality.
685-9 (b) Notwithstanding the above, if a nonprofit association is
685-10 classified under the Internal Revenue Code as a 501(c)(3)
685-11 organization or is or holds itself out to be established or
685-12 operating for a charitable, religious, or educational purpose, as
685-13 defined by Section 501(c)(3), Internal Revenue Code, then any
685-14 distribution must be made to another nonprofit association or
685-15 nonprofit corporation with similar charitable, religious, or
685-16 educational purposes.
685-17 Sec. 252.010. BOOKS AND RECORDS. (a) A nonprofit
685-18 association shall keep correct and complete books and records of
685-19 account for at least three years after the end of each fiscal year
685-20 and shall make the books and records available on request to
685-21 members of the association for inspection and copying.
685-22 (b) The attorney general may inspect, examine, and make
685-23 copies of the books, records, and other documents the attorney
685-24 general considers necessary and may investigate the association to
685-25 determine if a violation of any law of this state has occurred.
685-26 Sec. 252.011. APPOINTMENT OF AGENT TO RECEIVE SERVICE OF
685-27 PROCESS. (a) A nonprofit association may file in the office of
686-1 the secretary of state a statement appointing an agent authorized
686-2 to receive service of process.
686-3 (b) A statement appointing an agent must contain:
686-4 (1) the name of the nonprofit association;
686-5 (2) the federal tax identification number of the
686-6 nonprofit association, if applicable;
686-7 (3) the address in this state, including the street
686-8 address, if any, of the nonprofit association, or, if the nonprofit
686-9 association does not have an address in this state, its address out
686-10 of state; and
686-11 (4) the name of the person in this state authorized to
686-12 receive service of process and the person's address, including the
686-13 street address, in this state.
686-14 (c) A statement appointing an agent must be signed by a
686-15 person authorized to manage the affairs of the nonprofit
686-16 association. The statement must also be signed by the person
686-17 appointed agent, who by signing accepts the appointment. The
686-18 appointed agent may resign by filing a resignation in the office of
686-19 the secretary of state and giving notice to the nonprofit
686-20 association.
686-21 (d) The secretary of state may collect a fee for filing a
686-22 statement appointing an agent to receive service of process, an
686-23 amendment, a cancellation, or a resignation in the amount charged
686-24 for filing similar documents.
686-25 (e) An amendment to a statement appointing an agent to
686-26 receive service of process must meet the requirements for execution
686-27 of an original statement.
687-1 (f) A statement appointing an agent may be canceled by
687-2 filing with the secretary of state a written notice of cancellation
687-3 executed by a person authorized to manage the affairs of the
687-4 nonprofit association. A notice of cancellation must contain:
687-5 (1) the name of the nonprofit association;
687-6 (2) the federal tax identification number of the
687-7 nonprofit association, if applicable;
687-8 (3) the date of filing of the nonprofit association's
687-9 statement appointing the agent; and
687-10 (4) a current street address, if any, of the nonprofit
687-11 association in this state, or if the nonprofit association does not
687-12 have an address in this state, its address out of state.
687-13 (g) The secretary of state may adopt forms and procedural
687-14 rules for filing documents under this section.
687-15 Sec. 252.012. CLAIM NOT ABATED BY CHANGE. A claim for
687-16 relief against a nonprofit association does not abate merely
687-17 because of a change in the members or persons authorized to manage
687-18 the affairs of the nonprofit association.
687-19 Sec. 252.013. SUMMONS AND COMPLAINT; SERVICE. (a) In an
687-20 action or proceeding against a nonprofit association, a summons and
687-21 complaint must be served on an agent authorized by appointment to
687-22 receive service of process, an officer, a managing or general
687-23 agent, or a person authorized to participate in the management of
687-24 its affairs, in accordance with the Civil Practice and Remedies
687-25 Code.
687-26 (b) Not later than the 10th day after the date of a request
687-27 by the attorney general to an officer or board member of a
688-1 nonprofit association or to the nonprofit association, the
688-2 nonprofit association shall provide to the attorney general the
688-3 names, current addresses, and telephone numbers of:
688-4 (1) each agent authorized to receive service of
688-5 process on behalf of the nonprofit association; and
688-6 (2) each officer, managing or general agent, and other
688-7 person authorized to participate in the management of the affairs
688-8 of the nonprofit association.
688-9 Sec. 252.014. UNIFORMITY OF APPLICATION AND CONSTRUCTION.
688-10 This chapter shall be applied and construed to make uniform the law
688-11 with respect to the subject of this chapter among states enacting
688-12 it.
688-13 Sec. 252.015. TRANSITION CONCERNING REAL AND PERSONAL
688-14 PROPERTY. If, before September 1, 1995, an estate or interest in
688-15 real or personal property was by the terms of the transfer
688-16 purportedly transferred to a nonprofit association, but under the
688-17 law the estate or interest was vested in a fiduciary such as
688-18 officers of the nonprofit association to hold the estate or
688-19 interest for members of the nonprofit association, on or after
688-20 September 1, 1995, the fiduciary may transfer the estate or
688-21 interest to the nonprofit association in its name, or the nonprofit
688-22 association, by appropriate proceedings, may require that the
688-23 estate or interest be transferred to it in its name.
688-24 Sec. 252.016. SAVING CLAUSE. This chapter does not affect
688-25 an action or proceeding begun or a right accrued before September
688-26 1, 1995.
688-27 Sec. 252.017. EFFECT ON OTHER LAW. This chapter replaces
689-1 existing law with respect to matters covered by this chapter but
689-2 does not affect other law covering unincorporated nonprofit
689-3 associations.
689-4 CHAPTER 253. UNINCORPORATED JOINT STOCK COMPANIES OR
689-5 ASSOCIATIONS
689-6 Sec. 253.001. APPLICABILITY OF CHAPTER. This chapter
689-7 applies to an action by or against an unincorporated joint stock
689-8 company or association or to an action for the enforcement of the
689-9 liability of a stockholder of the company or association.
689-10 Sec. 253.002. EFFECT OF CHAPTER. This chapter does not
689-11 affect or impair the right of an unincorporated joint stock company
689-12 or association to sue in the individual names of its stockholders
689-13 or members or the right of a person to sue the individual
689-14 stockholders or members.
689-15 Sec. 253.003. CUMULATIVE REMEDIES. Each remedy provided by
689-16 this chapter is cumulative of other remedies in law.
689-17 Sec. 253.004. SUIT IN NAME OF JOINT STOCK ASSOCIATION. A
689-18 domestic or foreign unincorporated joint stock company or
689-19 association doing business in this state may sue or be sued in the
689-20 name of the company or association. An individual stockholder or
689-21 member of the company or association does not need to be a named
689-22 party to the suit.
689-23 Sec. 253.005. SERVICE OF CITATION. In an action against a
689-24 joint stock company or association, citation may be served in the
689-25 manner provided by Section 17.023, Civil Practice and Remedies
689-26 Code. Service of citation may also be provided to a stockholder or
689-27 member of the company or association.
690-1 Sec. 253.006. LIABILITY OF STOCKHOLDERS OR MEMBERS. A
690-2 stockholder of an unincorporated joint stock company or association
690-3 is liable to the same extent as a partner in a general partnership
690-4 under this code.
690-5 Sec. 253.007. EXECUTION OF JUDGMENT. (a) In a suit against
690-6 a joint stock company or association, if service is only made on an
690-7 officer or agent of the company or association specified by Section
690-8 17.023, Civil Practice and Remedies Code, a judgment rendered
690-9 against the company or association is binding on the joint property
690-10 of all of the stockholders or members of the company or association
690-11 and may be enforced by execution against the joint property. The
690-12 judgment is not binding on the individual property of the
690-13 stockholders or members of the company or association and does not
690-14 authorize execution against the property of a stockholder or
690-15 member.
690-16 (b) A judgment against a joint stock company or association
690-17 is binding on the individual property of a stockholder or member of
690-18 the company or association who is served with citation. The
690-19 judgment may be executed against the individual property of the
690-20 stockholder only after execution against the joint property has
690-21 been returned unsatisfied.
690-22 TITLE 7. PROFESSIONAL ENTITIES
690-23 CHAPTER 301. PROVISIONS RELATING TO PROFESSIONAL
690-24 ENTITIES
690-25 Sec. 301.001. APPLICABILITY OF TITLE. (a) This title
690-26 applies only to a professional entity or foreign professional
690-27 entity.
691-1 (b) This title does not affect:
691-2 (1) the professional relationship between a person who
691-3 provides a professional service and the recipient of that service,
691-4 including any privilege of confidentiality arising from that
691-5 relationship under state law; or
691-6 (2) a person's legal remedies against another person
691-7 who commits an error, omission, negligent or incompetent act, or
691-8 malfeasance while providing a professional service.
691-9 Sec. 301.002. CONFLICTS OF LAW. This title prevails over a
691-10 conflicting provision of Title 1, 2, 3, or 4.
691-11 Sec. 301.003. DEFINITION. In this title, "professional
691-12 organization," with respect to a professional corporation or a
691-13 professional limited liability company, means a person other than
691-14 an individual, whether nonprofit, for-profit, domestic, or foreign
691-15 and including a nonprofit corporation or nonprofit association,
691-16 that renders the same professional service as the professional
691-17 corporation or professional limited liability company only through
691-18 owners, members, managerial officials, employees, or agents, each
691-19 of whom is a professional individual or professional organization.
691-20 Sec. 301.004. AUTHORIZED PERSON. For purposes of this
691-21 title, a person is authorized to act with respect to:
691-22 (1) a professional association if the person is a
691-23 professional individual; and
691-24 (2) a professional corporation or a professional
691-25 limited liability company if the person is a professional
691-26 individual or organization.
691-27 Sec. 301.005. ADDITIONAL INFORMATION REQUIRED IN CERTIFICATE
692-1 OF FORMATION. In addition to the information required to be
692-2 included in a certificate of formation under Section 3.005, the
692-3 certificate of formation of a professional entity must state:
692-4 (1) the type of professional service to be provided by
692-5 the professional entity as the purpose of the entity; and
692-6 (2) that the professional entity is a:
692-7 (A) professional association;
692-8 (B) professional corporation; or
692-9 (C) professional limited liability company.
692-10 Sec. 301.006. APPLICATION FOR REGISTRATION OF FOREIGN
692-11 PROFESSIONAL ENTITY. (a) A foreign professional entity may file
692-12 an application for registration to provide a professional service
692-13 in this state in accordance with Chapter 9.
692-14 (b) The secretary of state may accept an application filed
692-15 under Subsection (a) only if:
692-16 (1) the name and purpose of the foreign professional
692-17 entity stated in the application comply with this title and
692-18 Chapters 2 and 5; and
692-19 (2) the application states that the jurisdiction of
692-20 formation of the foreign professional entity permits reciprocal
692-21 admission of an entity formed under this code.
692-22 Sec. 301.007. LICENSE REQUIRED TO PROVIDE PROFESSIONAL
692-23 SERVICE. (a) A professional association or foreign professional
692-24 association may provide a professional service in this state only
692-25 through owners, managerial officials, employees, or agents, each of
692-26 whom:
692-27 (1) is a professional individual; and
693-1 (2) is licensed in this state to provide the same
693-2 professional service provided by the entity.
693-3 (b) A professional entity, other than a professional
693-4 association, may provide a professional service in this state only
693-5 through owners, managerial officials, employees, or agents, each of
693-6 whom is an authorized person.
693-7 (c) An individual may not, under the guise of employment,
693-8 provide a professional service in this state unless the individual
693-9 is licensed to provide the professional service under the laws of
693-10 this state.
693-11 (d) This section may not be construed to prohibit a
693-12 professional entity or foreign professional entity from employing
693-13 individuals who do not, according to general custom and practice,
693-14 ordinarily provide a professional service, including clerks,
693-15 secretaries, bookkeepers, technicians, nurses, or assistants.
693-16 Sec. 301.008. CERTAIN REQUIREMENTS TO BE OWNER, GOVERNING
693-17 PERSON, OR OFFICER. (a) A person may be an owner of a
693-18 professional entity or a governing person of a professional limited
693-19 liability company only if the person is an authorized person.
693-20 (b) An individual may be an officer of a professional entity
693-21 or a governing person of a professional association or professional
693-22 corporation only if the individual is a professional individual.
693-23 Sec. 301.009. DUTIES AND POWERS OF OWNER OR MANAGERIAL
693-24 OFFICIAL WHO CEASES TO BE LICENSED; PURCHASE OF OWNERSHIP INTEREST.
693-25 (a) A managerial official of a professional entity who ceases to
693-26 satisfy the requirements of Section 301.008 shall promptly resign
693-27 the person's position and employment with the entity.
694-1 (b) An owner of a professional entity who ceases to be an
694-2 authorized person as required by Section 301.008 shall promptly
694-3 relinquish the person's ownership interest in the entity.
694-4 (c) A person who becomes an owner of a professional entity
694-5 by succeeding to the ownership interest of another owner of the
694-6 entity shall promptly relinquish the person's financial interest in
694-7 the entity if the person is not an authorized person as required by
694-8 Section 301.008.
694-9 (d) A professional entity shall purchase or cause to be
694-10 purchased the ownership interest in the entity of a person who is
694-11 required to relinquish the person's financial interest in the
694-12 entity under this section. The price and terms of a purchase of an
694-13 ownership interest required under this subsection may be provided
694-14 by the governing documents of the entity or an applicable
694-15 agreement.
694-16 (e) A person who owns all of the outstanding ownership
694-17 interests in a professional entity but is required under this
694-18 section to relinquish the person's financial interest in the entity
694-19 may act as a managerial official or owner of the entity only for
694-20 the purpose of winding up the affairs of the entity, including
694-21 selling the outstanding ownership interests and other assets of the
694-22 entity.
694-23 Sec. 301.010. TRANSFER OF OWNERSHIP INTEREST. Except as
694-24 limited by the governing documents of the professional entity or an
694-25 applicable agreement, an ownership interest in a professional
694-26 entity may be transferred only to:
694-27 (1) an owner of the entity;
695-1 (2) the entity itself; or
695-2 (3) an authorized person.
695-3 Sec. 301.011. LIABILITY. (a) A professional entity is
695-4 jointly and severally liable for an error, omission, negligent or
695-5 incompetent act, or malfeasance committed by a person who:
695-6 (1) is an owner, managerial official, employee, or
695-7 agent of the entity; and
695-8 (2) commits the error, omission, negligent or
695-9 incompetent act, or malfeasance while providing a professional
695-10 service for the entity or during the course of the person's
695-11 employment.
695-12 (b) An owner, managerial official, employee, or agent of a
695-13 professional entity other than an owner, managerial official,
695-14 employee, or agent liable under Subsection (a) is not subject to
695-15 the same liability imposed on the professional entity under this
695-16 section.
695-17 (c) If a person described by Subsection (a) is a
695-18 professional organization, the professional organization and the
695-19 professional entity are jointly and severally liable for the error,
695-20 omission, negligent or incompetent act, or malfeasance committed by
695-21 the person while providing a professional service for the
695-22 professional entity or during the course of the person's
695-23 employment.
695-24 Sec. 301.012. EXEMPTION FROM SECURITIES LAWS. (a) A sale,
695-25 issuance, or offer for sale of an ownership interest in a
695-26 professional entity to a person authorized under this title to own
695-27 an ownership interest in the professional entity is exempt from any
696-1 state law, other than this code, that regulates the sale, issuance,
696-2 or offer for sale of securities.
696-3 (b) A transaction described by Subsection (a) does not
696-4 require the approval of or other action by a state official or
696-5 regulatory agency authorized to regulate the sale, issuance, or
696-6 offer for sale of securities.
696-7 CHAPTER 302. PROVISIONS RELATING TO PROFESSIONAL ASSOCIATIONS
696-8 Sec. 302.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING
696-9 FOR-PROFIT CORPORATIONS. The provisions of Chapters 20 and 21
696-10 governing a for-profit corporation apply to a professional
696-11 association, unless there is a conflict with this title.
696-12 Sec. 302.002. CERTIFICATE OF FORMATION; ADDITIONAL
696-13 REQUIREMENTS. (a) One or more persons who are licensed to
696-14 practice medicine, osteopathy, or podiatry may form a professional
696-15 association by filing a certificate of formation in accordance with
696-16 Chapter 3 for the purpose of providing the professional service.
696-17 (b) In addition to containing the information required under
696-18 Sections 3.005 and 301.005, the certificate of formation of a
696-19 professional association must:
696-20 (1) be signed by each member of the association; and
696-21 (2) state:
696-22 (A) the name and address of each original member
696-23 of the association; and
696-24 (B) that a member of the association may not
696-25 dissolve the association independently of other members of the
696-26 association.
696-27 (c) The certificate of formation of a professional
697-1 association may:
697-2 (1) contain provisions governing the winding up and
697-3 termination of the association's business;
697-4 (2) contain provisions regarding shares or units of
697-5 ownership in the association; and
697-6 (3) contain any other provision consistent with state
697-7 law regulating the internal affairs of a professional association.
697-8 Sec. 302.003. DURATION OF PROFESSIONAL ASSOCIATION. A
697-9 professional association continues:
697-10 (1) for all purposes as a separate entity independent
697-11 of the association's members until:
697-12 (A) the expiration of the period of duration
697-13 stated in the certificate of formation; or
697-14 (B) the association is dissolved in the manner
697-15 provided by the certificate of formation or, if the certificate of
697-16 formation does not provide a manner for dissolution, by a
697-17 two-thirds vote of the association's members; and
697-18 (2) in existence notwithstanding:
697-19 (A) the death, insanity, incompetency, felony
697-20 conviction, resignation, withdrawal, transfer of ownership
697-21 interest, or expulsion of a member other than the last surviving
697-22 member of the association;
697-23 (B) the admission of a new member or the
697-24 transfer of ownership interest to a new or existing member; or
697-25 (C) the occurrence of an event that would
697-26 require the winding up of a partnership under state law or similar
697-27 circumstances.
698-1 Sec. 302.004. AMENDMENT OF CERTIFICATE OF FORMATION. (a) A
698-2 professional association may amend the association's certificate of
698-3 formation as provided by:
698-4 (1) Chapter 3;
698-5 (2) the procedure for amendment stated in the
698-6 certificate of formation; or
698-7 (3) if the certificate of formation does not provide a
698-8 procedure for amending the certificate, two-thirds vote of the
698-9 association's members.
698-10 (b) A professional association is not required to amend the
698-11 association's certificate of formation to reflect a change in
698-12 membership or a transfer of ownership interests in the association.
698-13 Sec. 302.005. ADOPTION OF BYLAWS; DELEGATION OF AUTHORITY.
698-14 (a) The members of a professional association may adopt bylaws for
698-15 the association.
698-16 (b) The authority to adopt bylaws of a professional
698-17 association granted under Subsection (a) may be delegated under the
698-18 certificate of formation to the governing authority of the
698-19 association.
698-20 Sec. 302.006. GOVERNING AUTHORITY. (a) A professional
698-21 association shall be governed by:
698-22 (1) a board of directors; or
698-23 (2) an executive committee.
698-24 (b) The governing authority of a professional association
698-25 shall be elected by the members of the association.
698-26 Sec. 302.007. MEMBERS' VOTING RIGHTS. A member of a
698-27 professional association is entitled to cast a vote at a meeting of
699-1 the members as provided by the certificate of formation of the
699-2 association.
699-3 Sec. 302.008. ELECTION OF OFFICERS. The governing authority
699-4 of a professional association shall elect officers of the
699-5 association.
699-6 Sec. 302.009. OFFICER AND GOVERNING AUTHORITY ELIGIBILITY
699-7 REQUIREMENTS. (a) Only a member of the professional association
699-8 is eligible to serve as an officer or governing person of a
699-9 professional association.
699-10 (b) Except as provided by Subsection (c), a person is not
699-11 required to be a governing person of a professional association to
699-12 serve as an officer of the association.
699-13 (c) Only a governing person of a professional association is
699-14 eligible to serve as the president of the professional association.
699-15 Sec. 302.010. GENERAL POWERS, DUTIES, AND LIABILITIES.
699-16 Except as provided by this title, a professional association has
699-17 the same powers, privileges, duties, restrictions, and liabilities
699-18 as a for-profit corporation under Chapters 20 and 21.
699-19 Sec. 302.011. EMPLOYMENT OF AGENTS AND EMPLOYEES. The
699-20 officers of a professional association may employ agents or
699-21 employees for the association as the officers consider advisable.
699-22 Sec. 302.012. LIMITATION ON MEMBER'S POWER TO BIND
699-23 ASSOCIATION. A member of a professional association is not
699-24 entitled to bind the association within the scope of the
699-25 association's business or profession merely by virtue of being a
699-26 member of the professional association.
699-27 Sec. 302.013. DIVISION OF PROFITS. The members of a
700-1 professional association shall divide the profits derived from the
700-2 association in the manner provided by the governing documents of
700-3 the association.
700-4 Sec. 302.014. JOINT PRACTICE BY CERTAIN PROFESSIONALS. (a)
700-5 Persons licensed as doctors of medicine and persons licensed as
700-6 doctors of osteopathy by the Texas State Board of Medical Examiners
700-7 and persons licensed as podiatrists by the Texas State Board of
700-8 Podiatric Medical Examiners may jointly form and own a professional
700-9 association as provided by this section.
700-10 (b) A professional association formed under Subsection (a)
700-11 may provide a professional service only if a member of the
700-12 association is licensed in this state to provide that type of
700-13 professional service.
700-14 (c) A member of a professional association formed under
700-15 Subsection (a) may provide a professional service for the
700-16 association only if the member is licensed in this state to provide
700-17 that type of professional service.
700-18 (d) A member of a professional association formed under
700-19 Subsection (a) may not through any type of arrangement, including
700-20 an agreement, bylaw, directive, or financial incentive, exercise
700-21 control over the conduct of another member of the association who
700-22 provides a different type of professional service for the
700-23 association.
700-24 Sec. 302.015. ANNUAL STATEMENT REQUIRED. (a) In June of
700-25 each year, a professional association shall file with the secretary
700-26 of state a statement that:
700-27 (1) lists:
701-1 (A) the name and address of each member of the
701-2 association; and
701-3 (B) the name of each officer and governing
701-4 person of the association; and
701-5 (2) states that each member of the association is
701-6 licensed to provide the same type of professional service provided
701-7 by the association.
701-8 (b) The statement required by this section must be executed
701-9 by an officer of the association on behalf of the association.
701-10 Sec. 302.016. WINDING UP AND TERMINATION; CERTIFICATE OF
701-11 TERMINATION. (a) A professional association may wind up and
701-12 terminate the association's business as provided by:
701-13 (1) the association's certificate of formation; or
701-14 (2) if the certificate of formation does not provide
701-15 for the winding up and termination of the association, two-thirds
701-16 vote of the association's members.
701-17 (b) Except as provided by Subsection (c), a certificate of
701-18 termination must be executed by an officer of the professional
701-19 association on behalf of the association.
701-20 (c) If a professional association does not have any living
701-21 officer, the certificate of termination must be executed by the
701-22 legal representative of the last surviving officer of the
701-23 association.
701-24 CHAPTER 303. PROVISIONS RELATING TO PROFESSIONAL CORPORATIONS
701-25 Sec. 303.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING
701-26 FOR-PROFIT CORPORATIONS. The provisions of Chapters 20 and 21
701-27 governing a for-profit corporation apply to a professional
702-1 corporation, unless there is a conflict with this title.
702-2 Sec. 303.002. PROFESSIONAL CORPORATION NOT A PARTNERSHIP. A
702-3 professional corporation is not a partnership.
702-4 Sec. 303.003. GENERAL POWERS, DUTIES, AND LIABILITIES.
702-5 Except as provided by this title, a professional corporation has
702-6 the same powers, privileges, duties, restrictions, and liabilities
702-7 as a for-profit corporation.
702-8 Sec. 303.004. AUTHORITY AND LIABILITY OF SHAREHOLDER. (a)
702-9 A shareholder of a professional corporation is not required to
702-10 supervise the performance of duties by an officer or employee of
702-11 the corporation.
702-12 (b) A shareholder of a professional corporation is subject
702-13 to the same liability imposed on a shareholder of a for-profit
702-14 corporation.
702-15 Sec. 303.005. NOTICE OF RESTRICTION ON TRANSFER OF SHARES.
702-16 Any restriction on the transfer of shares in a professional
702-17 corporation that is imposed by the governing documents of the
702-18 corporation or an applicable agreement must be:
702-19 (1) noted on each certificate representing the shares;
702-20 or
702-21 (2) incorporated by reference in the manner provided
702-22 by Chapter 21.
702-23 Sec. 303.006. REDEMPTION OF SHARES; PRICE AND TERMS. (a) A
702-24 professional corporation may redeem shares of a shareholder,
702-25 including a deceased shareholder.
702-26 (b) The price and other terms of a redemption of shares may
702-27 be:
703-1 (1) agreed to between the board of directors or
703-2 executive committee of the professional corporation and the
703-3 shareholder or the shareholder's personal representative; or
703-4 (2) specified in the governing documents of the
703-5 professional corporation or an applicable agreement.
703-6 Sec. 303.007. EXISTENCE OF PROFESSIONAL CORPORATION BEFORE
703-7 WINDING UP AND TERMINATION. A professional corporation continues
703-8 to exist until the winding up and termination of the corporation as
703-9 provided by Chapter 11 without regard to:
703-10 (1) the death, incompetency, bankruptcy, resignation,
703-11 withdrawal, retirement, or expulsion of any shareholder of the
703-12 corporation;
703-13 (2) the transfer of shares to a new shareholder; or
703-14 (3) the occurrence of an event requiring the winding
703-15 up of a partnership.
703-16 Sec. 303.008. WINDING UP AND TERMINATION OF PROFESSIONAL
703-17 CORPORATION. A shareholder of a professional corporation may not
703-18 independently of other shareholders of the corporation wind up the
703-19 affairs of and terminate the corporation.
703-20 CHAPTER 304. PROVISIONS RELATING TO PROFESSIONAL LIMITED
703-21 LIABILITY COMPANIES
703-22 Sec. 304.001. APPLICABILITY OF CERTAIN PROVISIONS GOVERNING
703-23 LIMITED LIABILITY CORPORATIONS. Title 3 applies to a professional
703-24 limited liability company, unless there is a conflict with this
703-25 title.
703-26 TITLE 8. MISCELLANEOUS AND TRANSITION PROVISIONS
703-27 CHAPTER 401. GENERAL PROVISIONS
704-1 Sec. 401.001. DEFINITIONS. In this title:
704-2 (1) "Mandatory application date" means:
704-3 (A) for an entity subject to this code under
704-4 Section 402.001, the date of formation or registration of the
704-5 entity;
704-6 (B) for an entity subject to this code under
704-7 Section 402.003 or 402.004, the date of filing of documentation
704-8 necessary to adopt this code; and
704-9 (C) for any other entity, January 1, 2006.
704-10 (2) "Prior law" means the applicable law in effect
704-11 before January 1, 2002.
704-12 CHAPTER 402. MISCELLANEOUS AND TRANSITION PROVISIONS
704-13 Sec. 402.001. APPLICABILITY TO ENTITIES FORMED OR REGISTERED
704-14 ON OR AFTER EFFECTIVE DATE. This code applies to:
704-15 (1) a domestic entity formed on or after the effective
704-16 date of this code; and
704-17 (2) a foreign filing entity or other foreign entity
704-18 that:
704-19 (A) affords limited liability under the law of
704-20 its jurisdiction of formation to an owner or member of the entity;
704-21 and
704-22 (B) is transacting business in this state and
704-23 has not registered with the secretary of state to transact business
704-24 in this state before the effective date of this code.
704-25 Sec. 402.002. APPLICABILITY BEFORE MANDATORY APPLICATION
704-26 DATE. (a) Except as provided by Section 402.001, before the
704-27 mandatory application date, this code applies only to a domestic
705-1 entity formed before the mandatory application date, or a foreign
705-2 entity that has registered with the secretary of state to transact
705-3 business in this state before the mandatory application date, that
705-4 elected, as provided by Section 402.003 or 402.004, to be governed
705-5 by this code.
705-6 (b) On or after the effective date of this code, the fees
705-7 required by Chapter 4 apply to all filings made with the secretary
705-8 of state, including comparable filings under prior law regardless
705-9 of whether an existing entity has adopted this code. The intent of
705-10 this subsection is to:
705-11 (1) require a filing fee for all documents made under
705-12 either this code or the prior law without regard to the difference
705-13 in designation of the document; and
705-14 (2) make the filing fees described by Subdivision (1)
705-15 uniform from the effective date of this code.
705-16 Sec. 402.003. ADOPTION OF CODE BY DOMESTIC ENTITY BEFORE
705-17 MANDATORY APPLICATION DATE. (a) A domestic entity formed before
705-18 the effective date of this code may voluntarily elect to adopt and
705-19 become subject to this code by:
705-20 (1) complying with the procedures to amend its
705-21 governing documents;
705-22 (2) amending the domestic entity's governing
705-23 documents; and
705-24 (3) if the domestic entity is a filing entity, filing
705-25 with the secretary of state in accordance with Chapter 4 a
705-26 certificate of amendment to its certificate of formation, or a
705-27 restated certificate of formation, that:
706-1 (A) specifically states that the filing entity
706-2 is electing to adopt this code; and
706-3 (B) would cause its certificate of formation or
706-4 restated certificate of formation to comply with this code.
706-5 (b) If amendments to the governing documents of a domestic
706-6 entity that are necessary to conform the governing documents to
706-7 this code would not require, under prior law, the vote or consent
706-8 of the owners or members of the entity, this code and any amendment
706-9 to the governing documents required by this section may be adopted
706-10 by the governing authority only in the manner provided for an
706-11 amendment of the particular governing document.
706-12 Sec. 402.004. ADOPTION OF CODE BY FOREIGN ENTITY BEFORE
706-13 MANDATORY APPLICATION DATE. A foreign entity registered with the
706-14 secretary of state to transact business in this state before the
706-15 effective date of this code may voluntarily elect to adopt and
706-16 become subject to this code by:
706-17 (1) filing with the secretary of state in accordance
706-18 with Chapter 4 an amendment to its application for registration
706-19 that:
706-20 (A) states that the foreign filing entity is
706-21 electing to adopt this code; and
706-22 (B) would cause its application for registration
706-23 to comply with this code; or
706-24 (2) filing an application for registration that
706-25 complies with this code.
706-26 Sec. 402.005. APPLICABILITY TO EXISTING ENTITIES ON
706-27 MANDATORY APPLICATION DATE. After December 31, 2005, if a domestic
707-1 filing entity formed before the effective date of this code or a
707-2 foreign filing entity registered with the secretary of state to
707-3 transact business in this state before the effective date of this
707-4 code has not taken the actions specified by Section 402.003(a) or
707-5 402.004 to elect to adopt this code:
707-6 (1) the new law applies on or after the mandatory
707-7 application date to all domestic entities and foreign filing
707-8 entities existing on the mandatory application date and all actions
707-9 taken by the governing authority, officers, owners, or members of
707-10 those entities on or after the mandatory application date, except
707-11 as otherwise expressly provided by this title; and
707-12 (2) the entity is not considered to have failed to
707-13 comply with this code if the entity's certificate of formation or
707-14 application for registration, as appropriate, does not comply with
707-15 this code.
707-16 Sec. 402.006. APPLICABILITY TO CERTAIN ACTS, CONTRACTS, AND
707-17 TRANSACTIONS. Except as otherwise expressly provided by this
707-18 title, all of the provisions of this code govern acts, contracts,
707-19 or other transactions by an entity subject to this code or its
707-20 governing authority, officers, owners, or members that occur on or
707-21 after the mandatory application date. The prior law governs the
707-22 acts, contracts, or transactions of the entity that occur before
707-23 the mandatory application date.
707-24 Sec. 402.007. INDEMNIFICATION. Chapter 8 governs any
707-25 proposed indemnification by a domestic entity after the mandatory
707-26 application date, regardless of whether the events on which the
707-27 indemnification is based occurred before or after the mandatory
708-1 application date. A statement relating to indemnification
708-2 contained in the governing documents of a domestic entity on the
708-3 mandatory application date may not be construed as limiting the
708-4 indemnification authorized by Chapter 8 unless it expressly states
708-5 that is the intent.
708-6 Sec. 402.008. MEETINGS OF OWNERS AND MEMBERS; CONSENTS;
708-7 VOTING OF INTERESTS. (a) Except as provided by Subsection (b) and
708-8 regardless of whether a proxy or consent was executed by an owner
708-9 or member before the mandatory application date, Chapter 6 and any
708-10 other applicable provision of this code apply to:
708-11 (1) a meeting of owners or members held on or after
708-12 the mandatory application date;
708-13 (2) an action undertaken by owners or members under a
708-14 written consent that takes effect on or after the mandatory
708-15 application date;
708-16 (3) a vote cast at a meeting described by Subdivision
708-17 (1); and
708-18 (4) consent given for an action described by
708-19 Subdivision (2).
708-20 (b) Prior law applies to a meeting of owners or members and
708-21 to any vote cast at a meeting described by this subsection if the
708-22 meeting was initially called for a date before the mandatory
708-23 application date and notice of the meeting was given to owners or
708-24 members entitled to vote at the meeting.
708-25 Sec. 402.009. MEETINGS OF GOVERNING AUTHORITY AND
708-26 COMMITTEES; CONSENTS. (a) Except as provided by Subsection (b),
708-27 Chapter 6 and any other applicable provision of this code apply to:
709-1 (1) a meeting of the governing authority or a
709-2 committee of the governing authority held on or after the mandatory
709-3 application date;
709-4 (2) an action undertaken by the governing authority or
709-5 a committee of the governing authority under a written consent that
709-6 takes effect on or after the mandatory application date;
709-7 (3) a vote cast at a meeting described by Subdivision
709-8 (1); and
709-9 (4) consent given for an action described by
709-10 Subdivision (2).
709-11 (b) Prior law applies to a meeting of the governing
709-12 authority or a committee of the governing authority and to any vote
709-13 cast at a meeting described by this subsection if the meeting was
709-14 initially called for a date before the mandatory application date
709-15 and notice of the meeting was given to governing persons entitled
709-16 to vote at the meeting.
709-17 Sec. 402.010. SALE OF ASSETS, MERGERS, REORGANIZATIONS,
709-18 CONVERSIONS. Chapter 10 and any other applicable provisions of
709-19 this code apply to a transaction consummated after the mandatory
709-20 application date, except that if a required approval of the
709-21 outstanding ownership interests has been given before the mandatory
709-22 application date or has been given after the mandatory application
709-23 date but at a meeting of owners or members initially called for a
709-24 date before the mandatory application date, the transaction shall
709-25 be governed by the prior law.
709-26 Sec. 402.011. WINDING UP AND TERMINATION. (a) Chapter 11
709-27 applies to:
710-1 (1) an action for involuntary or judicial winding up
710-2 and termination commenced after the mandatory application date; or
710-3 (2) a voluntary winding up and termination proceeding
710-4 initiated by:
710-5 (A) the governing authority;
710-6 (B) the terms of the governing documents; or
710-7 (C) applicable law after the mandatory
710-8 application date.
710-9 (b) The prior law governs:
710-10 (1) an action described by Subsection (a)(1) that is
710-11 pending on the mandatory application date; or
710-12 (2) a proceeding described by Subsection (a)(2)
710-13 initiated before the mandatory application date.
710-14 Sec. 402.012. REGISTRATION OF CERTAIN FOREIGN ENTITIES. A
710-15 foreign entity that has transacted intrastate business in this
710-16 state before the mandatory application date and that is required by
710-17 Chapter 9 to register to transact business is not subject to a
710-18 direct or indirect penalty as a result of failure to register under
710-19 Chapter 9 if the application for registration is filed not later
710-20 than the 30th day after the mandatory application date.
710-21 Sec. 402.013. CORPORATIONS AND OTHER ENTITIES UNDER
710-22 SUSPENSION FOR NONFILING OF REQUIRED REPORTS OR PAYMENT OF TAXES;
710-23 APPLICABILITY OF PRIOR LAW. (a) If the corporate or other similar
710-24 rights, privileges, and powers of a corporation or other domestic
710-25 filing entity have been suspended and are still suspended
710-26 immediately before the mandatory application date under the prior
710-27 law, this code applies to the corporation or other entity on the
711-1 mandatory application date.
711-2 (b) If the corporate or other similar rights, privileges,
711-3 and powers of a corporation or other domestic filing entity have
711-4 been suspended and are still suspended under the Tax Code
711-5 immediately before the mandatory application date, the suspension
711-6 continues to apply to the corporation or other entity until the
711-7 rights, privileges, and powers are restored by the secretary of
711-8 state under that code.
711-9 Sec. 402.014. MAINTENANCE OF PRIOR ACTION. Except as
711-10 expressly provided by this title, this code does not apply to an
711-11 action or proceeding commenced before the mandatory application
711-12 date. Prior law applies to the action or proceeding.
711-13 SECTION 2. CONFORMING AMENDMENT. Part Eleven, Texas
711-14 Business Corporation Act, is amended by adding Article 11.02 to
711-15 read as follows:
711-16 Art. 11.02. APPLICABILITY; EXPIRATION. A. Except as
711-17 provided by Title 8, Texas Business Organizations Code, this Act
711-18 does not apply to a corporation to which the Texas Business
711-19 Organizations Code applies.
711-20 B. This Act expires January 1, 2006.
711-21 SECTION 3. CONFORMING AMENDMENT. Part Seven, Texas
711-22 Miscellaneous Corporation Laws Act (Article 1302-7.01 et seq.,
711-23 Vernon's Texas Civil Statutes), is amended by adding Article 7.09
711-24 to read as follows:
711-25 Art. 7.09. APPLICABILITY; EXPIRATION. A. Except as
711-26 provided by Title 8, Texas Business Organizations Code, this Act
711-27 does not apply to a corporation to which the Texas Business
712-1 Organizations Code applies.
712-2 B. This Act expires January 1, 2006.
712-3 SECTION 4. CONFORMING AMENDMENT. The Texas Non-Profit
712-4 Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil
712-5 Statutes) is amended by adding Article 11.02 to read as follows:
712-6 Art. 11.02. APPLICABILITY; EXPIRATION. A. Except as
712-7 provided by Title 8, Texas Business Organizations Code, this Act
712-8 does not apply to a corporation to which the Texas Business
712-9 Organizations Code applies.
712-10 B. This Act expires January 1, 2006.
712-11 SECTION 5. CONFORMING AMENDMENT. The Cooperative
712-12 Association Act (Article 1396-50.01, Vernon's Texas Civil Statutes)
712-13 is amended by adding Section 47 to read as follows:
712-14 Sec. 47. APPLICABILITY; EXPIRATION. (a) Except as provided
712-15 by Title 8, Texas Business Organizations Code, this Act does not
712-16 apply to an association to which the Texas Business Organizations
712-17 Code applies.
712-18 (b) This Act expires January 1, 2006.
712-19 SECTION 6. CONFORMING AMENDMENT. The Texas Uniform
712-20 Unincorporated Nonprofit Association Act (Article 1396-70.01,
712-21 Vernon's Texas Civil Statutes) is amended by adding Section 19 to
712-22 read as follows:
712-23 Sec. 19. APPLICABILITY; EXPIRATION. (a) Except as provided
712-24 by Title 8, Texas Business Organizations Code, this Act does not
712-25 apply to a nonprofit association to which the Texas Business
712-26 Organizations Code applies.
712-27 (b) This Act expires January 1, 2006.
713-1 SECTION 7. CONFORMING AMENDMENT. The Texas Professional
713-2 Corporation Act (Article 1528e, Vernon's Texas Civil Statutes) is
713-3 amended by adding Section 21 to read as follows:
713-4 Sec. 21. APPLICABILITY; EXPIRATION. (a) Except as provided
713-5 by Title 8, Texas Business Organizations Code, this Act does not
713-6 apply to a professional corporation to which the Texas Business
713-7 Organizations Code applies.
713-8 (b) This Act expires January 1, 2006.
713-9 SECTION 8. CONFORMING AMENDMENT. The Texas Professional
713-10 Association Act (Article 1528f, Vernon's Texas Civil Statutes) is
713-11 amended by adding Section 27 to read as follows:
713-12 Sec. 27. APPLICABILITY; EXPIRATION. (A) Except as provided
713-13 by Title 8, Texas Business Organizations Code, this Act does not
713-14 apply to a professional association to which the Texas Business
713-15 Organizations Code applies.
713-16 (B) This Act expires January 1, 2006.
713-17 SECTION 9. CONFORMING AMENDMENT. Part Eight, Texas Limited
713-18 Liability Company Act (Article 1528n, Vernon's Texas Civil
713-19 Statutes), is amended by adding Article 8.13 to read as follows:
713-20 Art. 8.13. APPLICABILITY; EXPIRATION. A. Except as
713-21 provided by Title 8, Texas Business Organizations Code, this Act
713-22 does not apply to a limited liability company to which the Texas
713-23 Business Organizations Code applies.
713-24 B. This Act expires January 1, 2006.
713-25 SECTION 10. CONFORMING AMENDMENT. Article 13, Texas Revised
713-26 Limited Partnership Act (Article 6132a-1, Vernon's Texas Civil
713-27 Statutes), is amended by adding Section 13.10 to read as follows:
714-1 Sec. 13.10. APPLICABILITY; EXPIRATION. (a) Except as
714-2 provided by Title 8, Texas Business Organizations Code, this Act
714-3 does not apply to a limited partnership to which the Texas Business
714-4 Organizations Code applies.
714-5 (b) This Act expires January 1, 2006.
714-6 SECTION 11. CONFORMING AMENDMENT. Article XI, Texas Revised
714-7 Partnership Act (Article 6132b-11.01 et seq., Vernon's Texas Civil
714-8 Statutes), is amended by adding Section 11.05 to read as follows:
714-9 Sec. 11.05. APPLICABILITY; EXPIRATION. (a) Except as
714-10 provided by Title 8, Texas Business Organizations Code, this Act
714-11 does not apply to a partnership to which the Texas Business
714-12 Organizations Code applies.
714-13 (b) This Act expires January 1, 2006.
714-14 SECTION 12. CONFORMING AMENDMENT. The Texas Real Estate
714-15 Investment Trust Act (Article 6138A, Vernon's Texas Civil Statutes)
714-16 is amended by adding Section 29.10 to read as follows:
714-17 Sec. 29.10. APPLICABILITY; EXPIRATION. (A) Except as
714-18 provided by Title 8, Texas Business Organizations Code, this Act
714-19 does not apply to a real estate investment trust to which the Texas
714-20 Business Organizations Code applies.
714-21 (B) This Act expires January 1, 2006.
714-22 SECTION 13. REPEALER. The following Acts and articles as
714-23 compiled in Vernon's Texas Civil Statutes are repealed: Articles
714-24 1399, 1400, 1401, 1402, 1403, 1404, 1405, 1406, 1407, 1407a, 1525,
714-25 1526, 1527, 1527a, 1528, 1528a, 1528g, and 1528h.
714-26 SECTION 14. EFFECTIVE DATE. This Act takes effect January
714-27 1, 2001.
715-1 SECTION 15. EMERGENCY CLAUSE. The importance of this
715-2 legislation and the crowded condition of the calendars in both
715-3 houses create an emergency and an imperative public necessity that
715-4 the constitutional rule requiring bills to be read on three several
715-5 days in each house be suspended, and this rule is hereby suspended.