78R3965 E
By: Giddings, Elkins, Olivo, Kolkhorst H.B. No. 1156
A BILL TO BE ENTITLED
AN ACT
relating to adoption of the Business Organizations Code.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. ADOPTION OF CODE. The Business Organizations
Code is adopted to read as follows:
BUSINESS ORGANIZATIONS CODE
TITLE 1. GENERAL PROVISIONS
CHAPTER 1. DEFINITIONS AND OTHER GENERAL PROVISIONS
SUBCHAPTER A. DEFINITIONS AND PURPOSE
Sec. 1.001. PURPOSE
Sec. 1.002. DEFINITIONS
Sec. 1.003. DISINTERESTED PERSON
Sec. 1.004. INDEPENDENT PERSON
Sec. 1.005. CONSPICUOUS INFORMATION
Sec. 1.006. SYNONYMOUS TERMS
Sec. 1.007. SIGNING OF DOCUMENT OR OTHER WRITING
Sec. 1.008. SHORT TITLES
Sec. 1.009. DOLLARS AS MONETARY UNITS
[Sections 1.010-1.050 reserved for expansion]
SUBCHAPTER B. CODE CONSTRUCTION
Sec. 1.051. CONSTRUCTION OF CODE
Sec. 1.052. REFERENCE IN LAW TO STATUTE REVISED BY
CODE
Sec. 1.053. APPLICABILITY TO FOREIGN AND INTERSTATE
AFFAIRS
Sec. 1.054. RESERVATION OF POWER
[Sections 1.055-1.100 reserved for expansion]
SUBCHAPTER C. DETERMINATION OF APPLICABLE LAW
Sec. 1.101. DOMESTIC FILING ENTITIES
Sec. 1.102. FOREIGN FILING ENTITIES
Sec. 1.103. ENTITIES NOT FORMED BY FILING INSTRUMENT
Sec. 1.104. LAW APPLICABLE TO LIABILITY
Sec. 1.105. INTERNAL AFFAIRS
Sec. 1.106. ORDER OF PRECEDENCE
CHAPTER 2. PURPOSES AND POWERS OF DOMESTIC ENTITY
SUBCHAPTER A. PURPOSES OF DOMESTIC ENTITY
Sec. 2.001. GENERAL SCOPE OF PERMISSIBLE PURPOSES
Sec. 2.002. PURPOSES OF NONPROFIT ENTITY
Sec. 2.003. GENERAL PROHIBITED PURPOSES
Sec. 2.004. LIMITATION ON PURPOSES OF PROFESSIONAL
ENTITY
Sec. 2.005. LIMITATION IN GOVERNING DOCUMENTS
Sec. 2.006. PERMISSIBLE PURPOSE OF FOR-PROFIT CORPORATION
RELATED TO RAILROADS
Sec. 2.007. ADDITIONAL PROHIBITED ACTIVITIES OF FOR-PROFIT
CORPORATION
Sec. 2.008. NONPROFIT CORPORATIONS
Sec. 2.009. PERMISSIBLE PURPOSE OF NONPROFIT
CORPORATION RELATED TO ORGANIZED
LABOR
Sec. 2.010. PROHIBITED ACTIVITIES OF NONPROFIT
CORPORATION
Sec. 2.011. PURPOSES OF COOPERATIVE ASSOCIATION
Sec. 2.012. LIMITATION ON PURPOSES OF REAL ESTATE
INVESTMENT TRUST
[Sections 2.013-2.100 reserved for expansion]
SUBCHAPTER B. POWERS OF DOMESTIC ENTITY
Sec. 2.101. GENERAL POWERS
Sec. 2.102. ADDITIONAL POWERS OF NONPROFIT ENTITY OR
INSTITUTION
Sec. 2.103. POWER TO INCUR INDEBTEDNESS
Sec. 2.104. POWER TO MAKE GUARANTIES
Sec. 2.105. ADDITIONAL POWERS OF CERTAIN PIPELINE
BUSINESSES
Sec. 2.106. POWER OF NONPROFIT CORPORATION TO SERVE AS
TRUSTEE
Sec. 2.107. STANDARD TAX PROVISIONS FOR CERTAIN
CHARITABLE NONPROFIT CORPORATIONS;
POWER TO EXCLUDE
Sec. 2.108. POWERS OF PROFESSIONAL ASSOCIATION
Sec. 2.109. POWERS OF PROFESSIONAL CORPORATION
Sec. 2.110. POWERS OF COOPERATIVE ASSOCIATION
Sec. 2.111. LIMITATION ON POWERS OF COOPERATIVE
ASSOCIATION
Sec. 2.112. STATED POWERS IN SUBCHAPTER SUFFICIENT
Sec. 2.113. LIMITATION ON POWERS
Sec. 2.114. CERTIFICATED INDEBTEDNESS; MANNER OF
ISSUANCE; SIGNATURE AND SEAL
CHAPTER 3. FORMATION AND GOVERNANCE
SUBCHAPTER A. FORMATION, EXISTENCE, AND
CERTIFICATE OF FORMATION
Sec. 3.001. FORMATION AND EXISTENCE OF FILING
ENTITIES
Sec. 3.002. FORMATION AND EXISTENCE OF NONFILING
ENTITIES
Sec. 3.003. DURATION
Sec. 3.004. ORGANIZERS
Sec. 3.005. CERTIFICATE OF FORMATION
Sec. 3.006. FILINGS IN CASE OF MERGER OR CONVERSION
Sec. 3.007. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF FOR-PROFIT
CORPORATION
Sec. 3.008. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF CLOSE
CORPORATION
Sec. 3.009. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF NONPROFIT
CORPORATION
Sec. 3.010. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF LIMITED
LIABILITY COMPANY
Sec. 3.011. SUPPLEMENTAL PROVISIONS REGARDING
CERTIFICATE OF FORMATION OF LIMITED
PARTNERSHIP
Sec. 3.012. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF REAL ESTATE
INVESTMENT TRUST
Sec. 3.013. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF COOPERATIVE
ASSOCIATION
Sec. 3.014. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF PROFESSIONAL
ENTITY
Sec. 3.015. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF PROFESSIONAL
ASSOCIATION
[Sections 3.016-3.050 reserved for expansion]
SUBCHAPTER B. AMENDMENTS AND RESTATEMENTS OF
CERTIFICATE OF FORMATION
Sec. 3.051. RIGHT TO AMEND CERTIFICATE OF FORMATION
Sec. 3.052. PROCEDURES TO AMEND CERTIFICATE OF
FORMATION
Sec. 3.053. CERTIFICATE OF AMENDMENT
Sec. 3.054. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE
OF AMENDMENT OF FOR-PROFIT CORPORATION
Sec. 3.055. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE
OF AMENDMENT OF REAL ESTATE INVESTMENT
TRUST
Sec. 3.056. EFFECT OF FILING OF CERTIFICATE OF
AMENDMENT
Sec. 3.057. RIGHT TO RESTATE CERTIFICATE OF FORMATION
Sec. 3.058. PROCEDURES TO RESTATE CERTIFICATE OF
FORMATION
Sec. 3.059. RESTATED CERTIFICATE OF FORMATION
Sec. 3.060. SUPPLEMENTAL PROVISIONS FOR RESTATED
CERTIFICATE OF FORMATION FOR FOR-PROFIT
CORPORATION
Sec. 3.061. SUPPLEMENTAL PROVISIONS FOR RESTATED
CERTIFICATE OF FORMATION FOR NONPROFIT
CORPORATION
Sec. 3.062. SUPPLEMENTAL PROVISIONS FOR RESTATED
CERTIFICATE OF FORMATION FOR REAL ESTATE
INVESTMENT TRUST
Sec. 3.063. EFFECT OF FILING OF RESTATED CERTIFICATE
OF FORMATION
[Sections 3.064-3.100 reserved for expansion]
SUBCHAPTER C. GOVERNING PERSONS AND OFFICERS
Sec. 3.101. GOVERNING AUTHORITY
Sec. 3.102. RIGHTS OF GOVERNING PERSONS IN CERTAIN
CASES
Sec. 3.103. OFFICERS
Sec. 3.104. REMOVAL OF OFFICERS
Sec. 3.105. RIGHTS OF OFFICERS IN CERTAIN CASES
[Sections 3.106-3.150 reserved for expansion]
SUBCHAPTER D. RECORDKEEPING OF FILING ENTITIES
Sec. 3.151. BOOKS AND RECORDS FOR ALL FILING
ENTITIES
Sec. 3.152. GOVERNING PERSON'S RIGHT OF INSPECTION
Sec. 3.153. RIGHT OF EXAMINATION BY OWNER OR MEMBER
[Sections 3.154-3.200 reserved for expansion]
SUBCHAPTER E. CERTIFICATES REPRESENTING OWNERSHIP INTEREST
Sec. 3.201. CERTIFICATED OR UNCERTIFICATED OWNERSHIP
INTEREST; APPLICABILITY
Sec. 3.202. FORM AND VALIDITY OF CERTIFICATES;
ENFORCEMENT OF ENTITY'S RIGHTS
Sec. 3.203. SIGNATURE REQUIREMENT
Sec. 3.204. DELIVERY REQUIREMENT
Sec. 3.205. NOTICE FOR UNCERTIFICATED OWNERSHIP
INTEREST
CHAPTER 4. FILINGS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4.001. SIGNATURE AND DELIVERY
Sec. 4.002. ACTION BY SECRETARY OF STATE
Sec. 4.003. FILING OR ISSUANCE OF REPRODUCTION
OR FACSIMILE
Sec. 4.004. TIME FOR FILING
Sec. 4.005. CERTIFICATES AND CERTIFIED COPIES
Sec. 4.006. FORMS ADOPTED BY SECRETARY OF STATE
Sec. 4.007. LIABILITY FOR FALSE FILING
INSTRUMENTS
Sec. 4.008. OFFENSE; PENALTY
Sec. 4.009. FILINGS BY REAL ESTATE INVESTMENT TRUST
[Sections 4.010-4.050 reserved for expansion]
SUBCHAPTER B. WHEN FILINGS TAKE EFFECT
Sec. 4.051. GENERAL RULE
Sec. 4.052. DELAYED EFFECTIVENESS OF CERTAIN
FILINGS
Sec. 4.053. CONDITIONS FOR DELAYED EFFECTIVENESS
Sec. 4.054. DELAYED EFFECTIVENESS ON FUTURE
EVENT OR FACT
Sec. 4.055. STATEMENT OF EVENT OR FACT
Sec. 4.056. FAILURE TO FILE STATEMENT
Sec. 4.057. ABANDONMENT BEFORE EFFECTIVENESS
Sec. 4.058. DELAYED EFFECTIVENESS NOT PERMITTED
Sec. 4.059. ACKNOWLEDGMENT OF FILING WITH
DELAYED EFFECTIVENESS
[Sections 4.060-4.100 reserved for expansion]
SUBCHAPTER C. CORRECTION AND AMENDMENT
Sec. 4.101. CORRECTION OF FILINGS
Sec. 4.102. LIMITATION ON CORRECTION OF FILINGS
Sec. 4.103. CERTIFICATE OF CORRECTION
Sec. 4.104. FILING CERTIFICATE OF CORRECTION
Sec. 4.105. EFFECT OF CERTIFICATE OF CORRECTION
Sec. 4.106. AMENDMENT OF FILINGS
[Sections 4.107-4.150 reserved for expansion]
SUBCHAPTER D. FILING FEES
Sec. 4.151. FILING FEES: ALL ENTITIES
Sec. 4.152. FILING FEES: FOR-PROFIT CORPORATIONS
Sec. 4.153. FILING FEES: NONPROFIT CORPORATIONS
Sec. 4.154. FILING FEES: LIMITED LIABILITY COMPANIES
Sec. 4.155. FILING FEES: LIMITED PARTNERSHIPS
Sec. 4.156. FILING FEES: PROFESSIONAL ASSOCIATIONS
Sec. 4.157. FILING FEES: PROFESSIONAL CORPORATIONS
Sec. 4.158. FILING FEES: GENERAL PARTNERSHIPS
Sec. 4.159. FILING FEES: NONPROFIT ASSOCIATIONS
Sec. 4.160. FILING FEES: FOREIGN FILING ENTITIES
CHAPTER 5. NAMES OF ENTITIES; REGISTERED AGENTS AND
REGISTERED OFFICES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 5.001. EFFECT ON RIGHTS UNDER OTHER LAW
[Sections 5.002-5.050 reserved for expansion]
SUBCHAPTER B. GENERAL PROVISIONS RELATING TO NAMES
OF ENTITIES
Sec. 5.051. ASSUMED NAME
Sec. 5.052. UNAUTHORIZED PURPOSE IN NAME PROHIBITED
Sec. 5.053. IDENTICAL AND DECEPTIVELY SIMILAR NAMES
PROHIBITED
Sec. 5.054. NAME OF CORPORATION, FOREIGN CORPORATION,
OR PROFESSIONAL CORPORATION
Sec. 5.055. NAME OF LIMITED PARTNERSHIP OR FOREIGN
LIMITED PARTNERSHIP
Sec. 5.056. NAME OF LIMITED LIABILITY COMPANY OR
FOREIGN LIMITED LIABILITY COMPANY
Sec. 5.057. NAME OF COOPERATIVE ASSOCIATION
Sec. 5.058. NAME OF PROFESSIONAL ASSOCIATION
Sec. 5.059. NAME OF PROFESSIONAL LIMITED LIABILITY
COMPANY
Sec. 5.060. NAME OF PROFESSIONAL ENTITY; CONFLICTS WITH
OTHER LAW OR ETHICAL RULE
Sec. 5.061. NAME CONTAINING "LOTTO" OR "LOTTERY"
PROHIBITED
Sec. 5.062. VETERANS ORGANIZATIONS; UNAUTHORIZED USE
OF NAME
Sec. 5.063. NAME OF LIMITED LIABILITY PARTNERSHIP
[Sections 5.064-5.100 reserved for expansion]
SUBCHAPTER C. RESERVATION OF NAMES
Sec. 5.101. APPLICATION FOR RESERVATION OF NAME
Sec. 5.102. RESERVATION OF CERTAIN NAMES PROHIBITED;
EXCEPTIONS
Sec. 5.103. ACTION ON APPLICATION
Sec. 5.104. DURATION OF RESERVATION OF NAME
Sec. 5.105. RENEWAL OF RESERVATION
Sec. 5.106. TRANSFER OF RESERVATION OF NAME
[Sections 5.107-5.150 reserved for expansion]
SUBCHAPTER D. REGISTRATION OF NAMES
Sec. 5.151. APPLICATION BY CERTAIN ENTITIES FOR
REGISTRATION OF NAME
Sec. 5.152. APPLICATION FOR REGISTRATION OF NAME
Sec. 5.153. CERTAIN REGISTRATIONS PROHIBITED;
EXCEPTIONS
Sec. 5.154. DURATION OF REGISTRATION OF NAME
Sec. 5.155. RENEWAL OF REGISTRATION
[Sections 5.156-5.200 reserved for expansion]
SUBCHAPTER E. REGISTERED AGENTS AND REGISTERED OFFICES
Sec. 5.201. DESIGNATION AND MAINTENANCE OF REGISTERED
AGENT AND REGISTERED OFFICE
Sec. 5.202. CHANGE BY ENTITY TO REGISTERED OFFICE
OR REGISTERED AGENT
Sec. 5.203. CHANGE BY REGISTERED AGENT TO NAME OR
ADDRESS OF REGISTERED OFFICE
Sec. 5.204. RESIGNATION OF REGISTERED AGENT
[Sections 5.205-5.250 reserved for expansion]
SUBCHAPTER F. SERVICE OF PROCESS
Sec. 5.251. FAILURE TO DESIGNATE REGISTERED AGENT
Sec. 5.252. SERVICE ON SECRETARY OF STATE
Sec. 5.253. ACTION BY SECRETARY OF STATE
Sec. 5.254. REQUIRED RECORDS OF SECRETARY OF STATE
Sec. 5.255. AGENT FOR SERVICE OF PROCESS, NOTICE,
OR DEMAND AS MATTER OF LAW
Sec. 5.256. OTHER MEANS OF SERVICE NOT PRECLUDED
Sec. 5.257. SERVICE OF PROCESS BY POLITICAL
SUBDIVISION
CHAPTER 6. MEETINGS AND VOTING
SUBCHAPTER A. MEETINGS
Sec. 6.001. LOCATION OF MEETINGS
Sec. 6.002. ALTERNATIVE FORMS OF MEETINGS
Sec. 6.003. PARTICIPATION CONSTITUTES PRESENCE
[Sections 6.004-6.050 reserved for expansion]
SUBCHAPTER B. NOTICE OF MEETINGS
Sec. 6.051. GENERAL NOTICE REQUIREMENTS
Sec. 6.052. WAIVER OF NOTICE
Sec. 6.053. EXCEPTION
[Sections 6.054-6.100 reserved for expansion]
SUBCHAPTER C. RECORD DATES
Sec. 6.101. RECORD DATE FOR PURPOSE OTHER THAN
WRITTEN CONSENT TO ACTION
Sec. 6.102. RECORD DATE FOR WRITTEN CONSENT TO ACTION
Sec. 6.103. RECORD DATE FOR SUSPENDED DISTRIBUTIONS
[Sections 6.104-6.150 reserved for expansion]
SUBCHAPTER D. VOTING OF OWNERSHIP INTERESTS
Sec. 6.151. MANNER OF VOTING OF INTERESTS
Sec. 6.152. VOTING OF INTERESTS OWNED BY ENTITY
Sec. 6.153. VOTING OF INTERESTS OWNED BY ANOTHER
ENTITY
Sec. 6.154. VOTING OF INTERESTS IN AN ESTATE OR TRUST
Sec. 6.155. VOTING OF INTERESTS BY RECEIVER
Sec. 6.156. VOTING OF PLEDGED INTERESTS
[Sections 6.157-6.200 reserved for expansion]
SUBCHAPTER E. ACTION BY WRITTEN CONSENT
Sec. 6.201. UNANIMOUS WRITTEN CONSENT TO ACTION
Sec. 6.202. ACTION BY LESS THAN UNANIMOUS WRITTEN
CONSENT
Sec. 6.203. DELIVERY OF LESS THAN UNANIMOUS
WRITTEN CONSENT
Sec. 6.204. ADVANCE NOTICE NOT REQUIRED
[Sections 6.205-6.250 reserved for expansion]
SUBCHAPTER F. VOTING TRUSTS AND VOTING AGREEMENTS
Sec. 6.251. VOTING TRUSTS
Sec. 6.252. VOTING AGREEMENTS
[Sections 6.253-6.300 reserved for expansion]
SUBCHAPTER G. APPLICABILITY OF CHAPTER TO PARTNERSHIPS
Sec. 6.301. APPLICABILITY OF CHAPTER TO PARTNERSHIPS
Sec. 6.302. APPLICABILITY OF SUBCHAPTERS C AND D TO
LIMITED LIABILITY COMPANIES
CHAPTER 7. LIABILITY
Sec. 7.001. LIMITATION OF LIABILITY OF GOVERNING
PERSON
CHAPTER 8. INDEMNIFICATION AND INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 8.001. DEFINITIONS
Sec. 8.002. APPLICATION OF CHAPTER
Sec. 8.003. LIMITATIONS IN GOVERNING DOCUMENTS
Sec. 8.004. LIMITATIONS IN CHAPTER
[Sections 8.005-8.050 reserved for expansion]
SUBCHAPTER B. MANDATORY AND COURT-ORDERED INDEMNIFICATION
Sec. 8.051. MANDATORY INDEMNIFICATION
Sec. 8.052. COURT-ORDERED INDEMNIFICATION
[Sections 8.053-8.100 reserved for expansion]
SUBCHAPTER C. PERMISSIVE INDEMNIFICATION AND ADVANCEMENT
OF EXPENSES
Sec. 8.101. PERMISSIVE INDEMNIFICATION
Sec. 8.102. GENERAL SCOPE OF PERMISSIVE INDEMNIFICATION
Sec. 8.103. MANNER FOR DETERMINING PERMISSIVE
INDEMNIFICATION
Sec. 8.104. ADVANCEMENT OF EXPENSES
Sec. 8.105. INDEMNIFICATION OF AND ADVANCEMENT OF
EXPENSES TO PERSONS OTHER THAN GOVERNING
PERSONS
Sec. 8.106. PERMISSIVE INDEMNIFICATION OF AND REIMBURSEMENT
OF EXPENSES TO WITNESSES
[Sections 8.107-8.150 reserved for expansion]
SUBCHAPTER D. LIABILITY INSURANCE; REPORTING REQUIREMENTS
Sec. 8.151. INSURANCE AND OTHER ARRANGEMENTS
Sec. 8.152. REPORTS OF INDEMNIFICATION AND ADVANCES
CHAPTER 9. FOREIGN ENTITIES
SUBCHAPTER A. REGISTRATION
Sec. 9.001. FOREIGN ENTITIES REQUIRED TO REGISTER
Sec. 9.002. FOREIGN ENTITIES NOT REQUIRED TO REGISTER
Sec. 9.003. PERMISSIVE REGISTRATION
Sec. 9.004. REGISTRATION PROCEDURE
Sec. 9.005. SUPPLEMENTAL INFORMATION REQUIRED IN
APPLICATION FOR REGISTRATION OF FOREIGN
FOR-PROFIT CORPORATION
Sec. 9.006. SUPPLEMENTAL INFORMATION REQUIRED IN
APPLICATION FOR REGISTRATION OF FOREIGN
NONPROFIT CORPORATION
Sec. 9.007. SUPPLEMENTAL INFORMATION REQUIRED IN
APPLICATION FOR REGISTRATION OF FOREIGN
LIMITED LIABILITY PARTNERSHIP
Sec. 9.008. EFFECT OF REGISTRATION
Sec. 9.009. AMENDMENTS TO REGISTRATION
Sec. 9.010. NAME CHANGE OF FOREIGN ENTITY
Sec. 9.011. VOLUNTARY WITHDRAWAL OF REGISTRATION
[Sections 9.012-9.050 reserved for expansion]
SUBCHAPTER B. FAILURE TO REGISTER
Sec. 9.051. TRANSACTING BUSINESS OR MAINTAINING COURT
PROCEEDING WITHOUT REGISTRATION
Sec. 9.052. CIVIL PENALTY
Sec. 9.053. VENUE
Sec. 9.054. LATE FILING FEE
Sec. 9.055. REQUIREMENTS OF OTHER LAW
[Sections 9.056-9.100 reserved for expansion]
SUBCHAPTER C. REVOCATION OF REGISTRATION BY
SECRETARY OF STATE
Sec. 9.101. REVOCATION OF REGISTRATION BY SECRETARY OF
STATE
Sec. 9.102. CERTIFICATE OF REVOCATION
Sec. 9.103. REINSTATEMENT BY SECRETARY OF STATE
AFTER REVOCATION
Sec. 9.104. PROCEDURES FOR REINSTATEMENT
Sec. 9.105. USE OF NAME SIMILAR TO PREVIOUSLY REGISTERED
NAME
Sec. 9.106. REINSTATEMENT OF REGISTRATION FOLLOWING TAX
FORFEITURE
[Sections 9.107-9.150 reserved for expansion]
SUBCHAPTER D. JUDICIAL REVOCATION OF REGISTRATION
Sec. 9.151. REVOCATION OF REGISTRATION BY COURT ACTION
Sec. 9.152. NOTIFICATION OF CAUSE BY SECRETARY OF STATE
Sec. 9.153. FILING OF ACTION BY ATTORNEY GENERAL
Sec. 9.154. CURE BEFORE FINAL JUDGMENT
Sec. 9.155. JUDGMENT REQUIRING REVOCATION
Sec. 9.156. STAY OF JUDGMENT
Sec. 9.157. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF
FINDINGS BY APPEALS COURT
Sec. 9.158. JURISDICTION AND VENUE
Sec. 9.159. PROCESS IN STATE ACTION
Sec. 9.160. PUBLICATION OF NOTICE
Sec. 9.161. FILING OF DECREE OF REVOCATION AGAINST
FOREIGN FILING ENTITY
[Sections 9.162-9.200 reserved for expansion]
SUBCHAPTER E. BUSINESS, RIGHTS, AND OBLIGATIONS
Sec. 9.201. BUSINESS OF FOREIGN ENTITY
Sec. 9.202. RIGHTS AND PRIVILEGES
Sec. 9.203. OBLIGATIONS AND LIABILITIES
Sec. 9.204. RIGHT OF FOREIGN FILING ENTITY TO PARTICIPATE
IN BUSINESS OF CERTAIN DOMESTIC ENTITIES
[Sections 9.205-9.250 reserved for expansion]
SUBCHAPTER F. DETERMINATION OF TRANSACTING BUSINESS IN
THIS STATE
Sec. 9.251. ACTIVITIES NOT CONSTITUTING TRANSACTING BUSINESS
IN THIS STATE
Sec. 9.252. OTHER ACTIVITIES
[Sections 9.253-9.300 reserved for expansion]
SUBCHAPTER G. MISCELLANEOUS PROVISIONS
Sec. 9.301. APPLICABILITY OF CODE TO CERTAIN FOREIGN
ENTITIES
CHAPTER 10. MERGERS, INTEREST EXCHANGES, CONVERSIONS,
AND SALES OF ASSETS
SUBCHAPTER A. MERGERS
Sec. 10.001. ADOPTION OF PLAN OF MERGER
Sec. 10.002. PLAN OF MERGER: REQUIRED PROVISIONS
Sec. 10.003. CONTENTS OF PLAN OF MERGER: MORE THAN ONE
SUCCESSOR
Sec. 10.004. PLAN OF MERGER: PERMISSIVE PROVISIONS
Sec. 10.005. CREATION OF HOLDING COMPANY BY MERGER
Sec. 10.006. SHORT FORM MERGER
Sec. 10.007. EFFECTIVENESS OF MERGER
Sec. 10.008. EFFECT OF MERGER
Sec. 10.009. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
MERGERS
Sec. 10.010. SPECIAL PROVISIONS APPLYING TO NONPROFIT
CORPORATION MERGERS
[Sections 10.011-10.050 reserved for expansion]
SUBCHAPTER B. EXCHANGES OF INTERESTS
Sec. 10.051. INTEREST EXCHANGES
Sec. 10.052. PLAN OF EXCHANGE: REQUIRED PROVISIONS
Sec. 10.053. PLAN OF EXCHANGE: PERMISSIVE PROVISIONS
Sec. 10.054. EFFECTIVENESS OF EXCHANGE
Sec. 10.055. GENERAL EFFECT OF INTEREST EXCHANGE
Sec. 10.056. SPECIAL PROVISIONS APPLYING TO
PARTNERSHIPS
[Sections 10.057-10.100 reserved for expansion]
SUBCHAPTER C. CONVERSIONS
Sec. 10.101. CONVERSION OF DOMESTIC ENTITIES
Sec. 10.102. CONVERSION OF NON-CODE ORGANIZATIONS
Sec. 10.103. PLAN OF CONVERSION: REQUIRED PROVISIONS
Sec. 10.104. PLAN OF CONVERSION: PERMISSIVE PROVISIONS
Sec. 10.105. EFFECTIVENESS OF CONVERSION
Sec. 10.106. GENERAL EFFECT OF CONVERSION
Sec. 10.107. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
CONVERSIONS
Sec. 10.108. SPECIAL PROVISIONS APPLYING TO NONPROFIT
CORPORATION CONVERSIONS
[Sections 10.109-10.150 reserved for expansion]
SUBCHAPTER D. CERTIFICATE OF MERGER, EXCHANGE,
OR CONVERSION
Sec. 10.151. CERTIFICATE OF MERGER AND EXCHANGE
Sec. 10.152. CERTIFICATE OF MERGER: SHORT FORM MERGER
Sec. 10.153. FILING OF CERTIFICATE OF MERGER OR
EXCHANGE
Sec. 10.154. CERTIFICATE OF CONVERSION
Sec. 10.155. FILING OF CERTIFICATE OF CONVERSION
Sec. 10.156. ACCEPTANCE OF CERTIFICATE FOR FILING
[Sections 10.157-10.200 reserved for expansion]
SUBCHAPTER E. ABANDONMENT OF MERGER, EXCHANGE,
OR CONVERSION
Sec. 10.201. ABANDONMENT OF PLAN OF MERGER, EXCHANGE,
OR CONVERSION
Sec. 10.202. ABANDONMENT AFTER FILING
[Sections 10.203-10.250 reserved for expansion]
SUBCHAPTER F. PROPERTY TRANSFERS AND DISPOSITIONS
Sec. 10.251. GENERAL POWER OF DOMESTIC ENTITY TO SELL,
LEASE, OR CONVEY PROPERTY
Sec. 10.252. NO APPROVAL REQUIRED FOR CERTAIN
DISPOSITIONS OF PROPERTY
Sec. 10.253. RECORDING INSTRUMENT CONVEYING REAL PROPERTY
OF DOMESTIC ENTITY
Sec. 10.254. DISPOSITION OF PROPERTY NOT A MERGER OR
CONVERSION; LIABILITY
[Sections 10.255-10.300 reserved for expansion]
SUBCHAPTER G. BANKRUPTCY REORGANIZATION
Sec. 10.301. REORGANIZATION UNDER BANKRUPTCY
AND SIMILAR LAWS
Sec. 10.302. SIGNING OF DOCUMENTS
Sec. 10.303. REORGANIZATION WITH OTHER
ENTITIES
Sec. 10.304. RIGHT OF DISSENT AND APPRAISAL
EXCLUDED
Sec. 10.305. AFTER FINAL DECREE
Sec. 10.306. CHAPTER CUMULATIVE OF OTHER CHANGES
[Sections 10.307-10.350 reserved for expansion]
SUBCHAPTER H. RIGHTS OF DISSENTING OWNERS
Sec. 10.351. APPLICABILITY OF SUBCHAPTER
Sec. 10.352. DEFINITIONS
Sec. 10.353. FORM AND VALIDITY OF NOTICE
Sec. 10.354. RIGHTS OF DISSENT AND APPRAISAL
Sec. 10.355. NOTICE OF RIGHT OF DISSENT AND APPRAISAL
Sec. 10.356. PROCEDURE FOR DISSENT BY OWNERS AS TO
ACTIONS; PERFECTION OF RIGHT OF DISSENT
AND APPRAISAL
Sec. 10.357. WITHDRAWAL OF DEMAND FOR FAIR VALUE OF
OWNERSHIP INTEREST
Sec. 10.358. RESPONSE BY ORGANIZATION TO NOTICE OF
DISSENT AND DEMAND FOR FAIR VALUE BY
DISSENTING OWNER
Sec. 10.359. RECORD OF DEMAND FOR FAIR VALUE OF
OWNERSHIP INTEREST
Sec. 10.360. RIGHTS OF TRANSFEREE OF CERTAIN OWNERSHIP
INTEREST
Sec. 10.361. PROCEEDING TO DETERMINE FAIR VALUE OF
OWNERSHIP INTEREST AND OWNERS ENTITLED TO
PAYMENT; APPOINTMENT OF APPRAISERS
Sec. 10.362. COMPUTATION AND DETERMINATION OF FAIR VALUE
OF OWNERSHIP INTEREST
Sec. 10.363. POWERS AND DUTIES OF APPRAISER; APPRAISAL
PROCEDURES
Sec. 10.364. OBJECTION TO APPRAISAL; HEARING
Sec. 10.365. COURT COSTS; COMPENSATION FOR APPRAISER
Sec. 10.366. STATUS OF OWNERSHIP INTEREST HELD OR
FORMERLY HELD BY DISSENTING OWNER
Sec. 10.367. RIGHTS OF OWNERS FOLLOWING TERMINATION OF
RIGHT OF DISSENT
Sec. 10.368. EXCLUSIVITY OF REMEDY OF DISSENT AND
APPRAISAL
[Sections 10.369-10.900 reserved for expansion]
SUBCHAPTER Z. MISCELLANEOUS PROVISIONS
Sec. 10.901. CREDITORS; ANTITRUST
Sec. 10.902. NONEXCLUSIVITY
CHAPTER 11. WINDING UP AND TERMINATION OF DOMESTIC ENTITY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 11.001. DEFINITIONS
[Sections 11.002-11.050 reserved for expansion]
SUBCHAPTER B. WINDING UP OF DOMESTIC ENTITY
Sec. 11.051. EVENT REQUIRING WINDING UP OF DOMESTIC
ENTITY
Sec. 11.052. WINDING UP PROCEDURES
Sec. 11.053. PROPERTY APPLIED TO DISCHARGE LIABILITIES AND
OBLIGATIONS
Sec. 11.054. COURT SUPERVISION OF WINDING UP PROCESS
Sec. 11.055. COURT ACTION OR PROCEEDING DURING WINDING
UP
Sec. 11.056. SUPPLEMENTAL EVENT REQUIRING WINDING UP OF
LIMITED LIABILITY COMPANY
Sec. 11.057. SUPPLEMENTAL EVENTS REQUIRING WINDING UP OF
GENERAL PARTNERSHIP
Sec. 11.058. SUPPLEMENTAL EVENTS REQUIRING WINDING UP OF
LIMITED PARTNERSHIP
Sec. 11.059. SUPPLEMENTAL PROVISIONS FOR CORPORATIONS
[Sections 11.060-11.100 reserved for expansion]
SUBCHAPTER C. TERMINATION OF DOMESTIC ENTITY
Sec. 11.101. CERTIFICATE OF TERMINATION
FOR FILING ENTITY
Sec. 11.102. EFFECTIVENESS OF TERMINATION OF
FILING ENTITY
Sec. 11.103. EFFECTIVENESS OF TERMINATION OF
NONFILING ENTITY
Sec. 11.104. ACTION BY SECRETARY OF STATE
Sec. 11.105. SUPPLEMENTAL INFORMATION REQUIRED BY
CERTIFICATE OF TERMINATION OF NONPROFIT
CORPORATION
[Sections 11.106-11.150 reserved for expansion]
SUBCHAPTER D. REVOCATION AND CONTINUATION
Sec. 11.151. REVOCATION OF VOLUNTARY WINDING UP
Sec. 11.152. CONTINUATION OF BUSINESS WITHOUT
WINDING UP
[Sections 11.153-11.200 reserved for expansion]
SUBCHAPTER E. REINSTATEMENT OF TERMINATED ENTITY
Sec. 11.201. CONDITIONS FOR REINSTATEMENT
Sec. 11.202. PROCEDURES FOR REINSTATEMENT
Sec. 11.203. USE OF NAME SIMILAR TO PREVIOUSLY
REGISTERED NAME
Sec. 11.204. EFFECTIVENESS OF REINSTATEMENT OF
NONFILING ENTITY
Sec. 11.205. EFFECTIVENESS OF REINSTATEMENT OF FILING
ENTITY
Sec. 11.206. EFFECT OF REINSTATEMENT
[Sections 11.207-11.250 reserved for expansion]
SUBCHAPTER F. INVOLUNTARY TERMINATION OF FILING ENTITY
BY SECRETARY OF STATE
Sec. 11.251. TERMINATION OF FILING ENTITY BY SECRETARY
OF STATE
Sec. 11.252. CERTIFICATE OF TERMINATION
Sec. 11.253. REINSTATEMENT BY SECRETARY OF STATE
AFTER INVOLUNTARY TERMINATION
Sec. 11.254. REINSTATEMENT OF CERTIFICATE OF FORMATION
FOLLOWING TAX FORFEITURE
[Sections 11.255-11.300 reserved for expansion]
SUBCHAPTER G. JUDICIAL WINDING UP AND TERMINATION
Sec. 11.301. INVOLUNTARY WINDING UP AND TERMINATION OF
FILING ENTITY BY COURT ACTION
Sec. 11.302. NOTIFICATION OF CAUSE BY SECRETARY OF STATE
Sec. 11.303. FILING OF ACTION BY ATTORNEY GENERAL
Sec. 11.304. CURE BEFORE FINAL JUDGMENT
Sec. 11.305. JUDGMENT REQUIRING WINDING UP AND
TERMINATION
Sec. 11.306. STAY OF JUDGMENT
Sec. 11.307. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF
FINDINGS BY APPEALS COURT
Sec. 11.308. JURISDICTION AND VENUE
Sec. 11.309. PROCESS IN STATE ACTION
Sec. 11.310. PUBLICATION OF NOTICE
Sec. 11.311. ACTION ALLOWED AFTER EXPIRATION OF FILING
ENTITY'S DURATION
Sec. 11.312. COMPLIANCE BY TERMINATED ENTITY
Sec. 11.313. TIMING OF TERMINATION
Sec. 11.314. INVOLUNTARY WINDING UP AND TERMINATION OF
PARTNERSHIP OR LIMITED LIABILITY COMPANY
Sec. 11.315. FILING OF DECREE OF TERMINATION AGAINST
FILING ENTITY
[Sections 11.316-11.350 reserved for expansion]
SUBCHAPTER H. CLAIMS RESOLUTION ON TERMINATION
Sec. 11.351. LIABILITY OF TERMINATED FILING ENTITY
Sec. 11.352. DEPOSIT WITH COMPTROLLER OF AMOUNT DUE
OWNERS AND CREDITORS WHO ARE UNKNOWN OR
CANNOT BE LOCATED
Sec. 11.353. DISCHARGE OF LIABILITY OF PERSON RESPONSIBLE
FOR LIQUIDATION
Sec. 11.354. PAYMENT FROM ACCOUNT BY COMPTROLLER
Sec. 11.355. NOTICE OF ESCHEAT; ESCHEAT
Sec. 11.356. LIMITED SURVIVAL AFTER TERMINATION
Sec. 11.357. GOVERNING PERSONS OF ENTITY DURING LIMITED
SURVIVAL
Sec. 11.358. ACCELERATED PROCEDURE FOR EXISTING CLAIM
RESOLUTION
Sec. 11.359. EXTINGUISHMENT OF EXISTING CLAIM
[Sections 11.360-11.400 reserved for expansion]
SUBCHAPTER I. RECEIVERSHIP
Sec. 11.401. CODE GOVERNS
Sec. 11.402. JURISDICTION TO APPOINT RECEIVER
Sec. 11.403. APPOINTMENT OF RECEIVER FOR SPECIFIC
PROPERTY
Sec. 11.404. APPOINTMENT OF RECEIVER TO REHABILITATE
DOMESTIC ENTITY
Sec. 11.405. APPOINTMENT OF RECEIVER TO LIQUIDATE
DOMESTIC ENTITY; LIQUIDATION
Sec. 11.406. RECEIVERS: QUALIFICATIONS, POWERS, AND
DUTIES
Sec. 11.407. COURT-ORDERED FILING OF CLAIMS
Sec. 11.408. SUPERVISING COURT; JURISDICTION;
AUTHORITY
Sec. 11.409. ANCILLARY RECEIVERSHIPS OF FOREIGN ENTITIES
Sec. 11.410. RECEIVERSHIP FOR ALL PROPERTY AND BUSINESS
OF FOREIGN ENTITY
Sec. 11.411. GOVERNING PERSONS AND OWNERS NOT NECESSARY
PARTIES DEFENDANT
Sec. 11.412. DECREE OF INVOLUNTARY TERMINATION
Sec. 11.413. SUPPLEMENTAL PROVISIONS FOR APPLICATION OF
PROCEEDS FROM LIQUIDATION OF NONPROFIT
CORPORATION
CHAPTER 12. ADMINISTRATIVE POWERS
SUBCHAPTER A. SECRETARY OF STATE
Sec. 12.001. AUTHORITY OF SECRETARY OF STATE
Sec. 12.002. INTERROGATORIES BY SECRETARY OF STATE
Sec. 12.003. INFORMATION DISCLOSED BY INTERROGATORIES
Sec. 12.004. APPEALS FROM SECRETARY OF STATE
[Sections 12.005-12.150 reserved for expansion]
SUBCHAPTER B. ATTORNEY GENERAL
Sec. 12.151. AUTHORITY OF ATTORNEY GENERAL TO EXAMINE
BOOKS AND RECORDS
Sec. 12.152. REQUEST TO EXAMINE
Sec. 12.153. AUTHORITY TO EXAMINE MANAGEMENT OF ENTITY
Sec. 12.154. AUTHORITY TO DISCLOSE INFORMATION
Sec. 12.155. FORFEITURE OF BUSINESS PRIVILEGES
Sec. 12.156. CRIMINAL PENALTY
[Sections 12.157-12.200 reserved for expansion]
SUBCHAPTER C. ENFORCEMENT LIEN
Sec. 12.201. LIEN FOR LAW VIOLATIONS
[Sections 12.202-12.250 reserved for expansion]
SUBCHAPTER D. ENFORCEMENT PROCEEDINGS
Sec. 12.251. RECEIVER
Sec. 12.252. FORECLOSURE
Sec. 12.253. ACTION AGAINST INSOLVENT ENTITY
Sec. 12.254. SUITS BY DISTRICT OR COUNTY ATTORNEY
Sec. 12.255. PERMISSION TO SUE
Sec. 12.256. EXAMINATION AND NOTICE
Sec. 12.257. DISMISSAL OF ACTION
Sec. 12.258. LIQUIDATION OF INSOLVENT ENTITY
Sec. 12.259. EXTRAORDINARY REMEDIES; BOND
Sec. 12.260. ABATEMENT OF SUIT
Sec. 12.261. PROVISIONS CUMULATIVE
TITLE 2. CORPORATIONS
CHAPTER 20. GENERAL PROVISIONS
Sec. 20.001. REQUIREMENT THAT FILING INSTRUMENT BE
SIGNED BY OFFICER
Sec. 20.002. ULTRA VIRES ACTS
CHAPTER 21. FOR-PROFIT CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 21.001. APPLICABILITY OF CHAPTER
Sec. 21.002. DEFINITIONS
[Sections 21.003-21.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 21.051. NO PROPERTY RIGHT IN CERTIFICATE OF
FORMATION
Sec. 21.052. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
OF FORMATION
Sec. 21.053. ADOPTION OF AMENDMENT BY BOARD OF
DIRECTORS
Sec. 21.054. ADOPTION OF AMENDMENT BY SHAREHOLDERS
Sec. 21.055. NOTICE OF AND MEETING TO CONSIDER PROPOSED
AMENDMENT
Sec. 21.056. RESTATED CERTIFICATE OF FORMATION
Sec. 21.057. BYLAWS
Sec. 21.058. DUAL AUTHORITY
Sec. 21.059. ORGANIZATION MEETING
[Sections 21.060-21.100 reserved for expansion]
SUBCHAPTER C. SHAREHOLDERS' AGREEMENTS
Sec. 21.101. SHAREHOLDERS' AGREEMENT
Sec. 21.102. TERM OF AGREEMENT
Sec. 21.103. DISCLOSURE OF AGREEMENT; RECALL OF CERTAIN
CERTIFICATES
Sec. 21.104. EFFECT OF SHAREHOLDERS' AGREEMENT
Sec. 21.105. RIGHT OF RECISSION; KNOWLEDGE
OF PURCHASER OF SHARES
Sec. 21.106. AGREEMENT LIMITING AUTHORITY OF AND
SUPPLANTING BOARD OF DIRECTORS; LIABILITY
Sec. 21.107. LIABILITY OF SHAREHOLDER
Sec. 21.108. PERSONS ACTING IN PLACE OF SHAREHOLDERS
Sec. 21.109. AGREEMENT NOT EFFECTIVE
[Sections 21.110-21.150 reserved for expansion]
SUBCHAPTER D. SHARES, OPTIONS, AND CONVERTIBLE SECURITIES
Sec. 21.151. NUMBER OF AUTHORIZED SHARES
Sec. 21.152. CLASSES AND SERIES OF SHARES
Sec. 21.153. DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
RIGHTS OF A CLASS OR SERIES
Sec. 21.154. CERTAIN OPTIONAL CHARACTERISTICS OF SHARES
Sec. 21.155. SERIES OF SHARES ESTABLISHED BY BOARD OF
DIRECTORS
Sec. 21.156. ACTIONS WITH RESPECT TO SERIES OF SHARES
Sec. 21.157. ISSUANCE OF SHARES
Sec. 21.158. ISSUANCE OF SHARES UNDER PLAN OF MERGER OR
CONVERSION
Sec. 21.159. TYPES OF CONSIDERATION FOR SHARES
Sec. 21.160. DETERMINATION OF CONSIDERATION FOR SHARES
Sec. 21.161. AMOUNT OF CONSIDERATION FOR ISSUANCE OF
CERTAIN SHARES
Sec. 21.162. VALUE AND SUFFICIENCY OF CONSIDERATION
Sec. 21.163. ISSUANCE AND DISPOSITION OF FRACTIONAL
SHARES OR SCRIP
Sec. 21.164. RIGHTS OF HOLDERS OF FRACTIONAL SHARES
OR SCRIP
Sec. 21.165. SUBSCRIPTIONS
Sec. 21.166. PREFORMATION SUBSCRIPTION
Sec. 21.167. COMMITMENT TO PURCHASE SHARES
Sec. 21.168. STOCK RIGHTS, OPTIONS, AND CONVERTIBLE
INDEBTEDNESS
Sec. 21.169. TERMS AND CONDITIONS OF RIGHTS AND
OPTIONS
Sec. 21.170. CONSIDERATION FOR RIGHTS, OPTIONS, AND
CONVERTIBLE INDEBTEDNESS
Sec. 21.171. TREASURY SHARES
Sec. 21.172. EXPENSES OF ORGANIZATION, REORGANIZATION,
AND FINANCING OF CORPORATION
Sec. 21.173. SUPPLEMENTAL REQUIRED RECORDS
[Sections 21.174-21.200 reserved for expansion]
SUBCHAPTER E. SHAREHOLDER RIGHTS AND RESTRICTIONS
Sec. 21.201. REGISTERED HOLDERS AS OWNERS
Sec. 21.202. DEFINITION OF SHARES
Sec. 21.203. NO STATUTORY PREEMPTIVE RIGHT
UNLESS PROVIDED BY CERTIFICATE OF
FORMATION
Sec. 21.204. STATUTORY PREEMPTIVE RIGHTS
Sec. 21.205. WAIVER OF PREEMPTIVE RIGHT
Sec. 21.206. LIMITATION ON ACTION TO ENFORCE
PREEMPTIVE RIGHT
Sec. 21.207. DISPOSITION OF SHARES HAVING
PREEMPTIVE RIGHTS
Sec. 21.208. PREEMPTIVE RIGHT IN EXISTING
CORPORATION
Sec. 21.209. TRANSFER OF SHARES AND OTHER
SECURITIES
Sec. 21.210. RESTRICTION ON TRANSFER OF SHARES
AND OTHER SECURITIES
Sec. 21.211. VALID RESTRICTIONS ON TRANSFER
Sec. 21.212. BYLAW OR AGREEMENT RESTRICTING
TRANSFER OF SHARES OR OTHER SECURITIES
Sec. 21.213. ENFORCEABILITY OF RESTRICTION ON
TRANSFER OF CERTAIN SECURITIES
Sec. 21.214. JOINT OWNERSHIP OF SHARES
Sec. 21.215. LIABILITY FOR DESIGNATING OWNER
OF SHARES
Sec. 21.216. LIABILITY REGARDING JOINT
OWNERSHIP OF SHARES
Sec. 21.217. LIABILITY OF ASSIGNEE OR
TRANSFEREE
Sec. 21.218. EXAMINATION OF RECORDS
Sec. 21.219. ANNUAL AND INTERIM STATEMENTS OF
CORPORATION
Sec. 21.220. PENALTY FOR FAILURE TO PREPARE
VOTING LIST
Sec. 21.221. PENALTY FOR FAILURE TO PROVIDE
NOTICE OF MEETING
Sec. 21.222. PENALTY FOR REFUSAL TO PERMIT
EXAMINATION OF CERTAIN RECORDS
Sec. 21.223. LIMITATION OF LIABILITY FOR OBLIGATIONS
Sec. 21.224. PREEMPTION OF LIABILITY
Sec. 21.225. EXCEPTIONS TO LIMITATIONS
Sec. 21.226. PLEDGEES AND TRUST ADMINISTRATORS
[Sections 21.227-21.250 reserved for expansion]
SUBCHAPTER F. REDUCTIONS IN STATED CAPITAL;
CANCELLATION OF TREASURY SHARES
Sec. 21.251. REDUCTION OF STATED CAPITAL BY
REDEMPTION OR PURCHASE OF REDEEMABLE
SHARES
Sec. 21.252. CANCELLATION OF TREASURY SHARES
Sec. 21.253. PROCEDURES FOR REDUCTION OF
STATED CAPITAL BY BOARD OF DIRECTORS
Sec. 21.254. RESTRICTION ON REDUCTION OF STATED CAPITAL
[Sections 21.255-21.300 reserved for expansion]
SUBCHAPTER G. DISTRIBUTIONS AND SHARE DIVIDENDS
Sec. 21.301. DEFINITIONS
Sec. 21.302. AUTHORITY FOR DISTRIBUTIONS
Sec. 21.303. LIMITATIONS ON DISTRIBUTIONS
Sec. 21.304. REDEMPTIONS
Sec. 21.305. NOTICE OF REDEMPTION
Sec. 21.306. DEPOSIT OF MONEY FOR REDEMPTION
Sec. 21.307. PAYMENT OF REDEEMED SHARES
Sec. 21.308. PRIORITY OF DISTRIBUTIONS
Sec. 21.309. RESERVES, DESIGNATIONS,
AND ALLOCATIONS FROM SURPLUS
Sec. 21.310. AUTHORITY FOR SHARE DIVIDENDS
Sec. 21.311. LIMITATIONS ON SHARE DIVIDENDS
Sec. 21.312. VALUE OF SHARES ISSUED AS SHARE
DIVIDENDS
Sec. 21.313. TRANSFER OF SURPLUS FOR SHARE
DIVIDENDS
Sec. 21.314. DETERMINATION OF SOLVENCY, NET ASSETS,
STATED CAPITAL, AND SURPLUS
Sec. 21.315. DATE OF DETERMINATION OF SOLVENCY, NET
ASSETS, STATED CAPITAL, AND SURPLUS
Sec. 21.316. LIABILITY OF DIRECTORS FOR
WRONGFUL DISTRIBUTIONS
Sec. 21.317. STATUTE OF LIMITATIONS ON ACTION FOR
WRONGFUL DISTRIBUTION
Sec. 21.318. CONTRIBUTION FROM CERTAIN SHAREHOLDERS AND
DIRECTORS
[Sections 21.319-21.350 reserved for expansion]
SUBCHAPTER H. SHAREHOLDERS' MEETINGS; VOTING AND QUORUM
Sec. 21.351. ANNUAL MEETING
Sec. 21.352. SPECIAL MEETINGS
Sec. 21.353. NOTICE OF MEETING
Sec. 21.354. INSPECTION OF VOTING LIST
Sec. 21.355. CLOSING OF SHARE TRANSFER RECORDS
Sec. 21.356. RECORD DATE FOR WRITTEN CONSENT TO ACTION
Sec. 21.357. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
CONSENT TO ACTION
Sec. 21.358. QUORUM
Sec. 21.359. VOTING IN ELECTION OF DIRECTORS
Sec. 21.360. NO CUMULATIVE VOTING RIGHT UNLESS
AUTHORIZED
Sec. 21.361. CUMULATIVE VOTING IN ELECTION OF DIRECTORS
Sec. 21.362. CUMULATIVE VOTING RIGHT IN CERTAIN
CORPORATIONS
Sec. 21.363. VOTING ON MATTERS OTHER THAN ELECTION OF
DIRECTORS
Sec. 21.364. VOTE REQUIRED TO APPROVE FUNDAMENTAL
ACTION
Sec. 21.365. CHANGES IN VOTE REQUIRED FOR CERTAIN
MATTERS
Sec. 21.366. NUMBER OF VOTES PER SHARE
Sec. 21.367. VOTING IN PERSON OR BY PROXY
Sec. 21.368. TERM OF PROXY
Sec. 21.369. REVOCABILITY OF PROXY
Sec. 21.370. ENFORCEABILITY OF PROXY
Sec. 21.371. PROCEDURES IN BYLAWS RELATING TO
PROXIES
Sec. 21.372. SHAREHOLDER MEETING LIST
[Sections 21.373-21.400 reserved for expansion]
SUBCHAPTER I. BOARD OF DIRECTORS
Sec. 21.401. MANAGEMENT BY BOARD OF DIRECTORS
Sec. 21.402. BOARD MEMBER ELIGIBILITY REQUIREMENTS
Sec. 21.403. NUMBER OF DIRECTORS
Sec. 21.404. DESIGNATION OF INITIAL BOARD OF DIRECTORS
Sec. 21.405. ELECTION OF BOARD OF DIRECTORS
Sec. 21.406. SPECIAL VOTING RIGHTS OF DIRECTORS
Sec. 21.407. TERM OF OFFICE
Sec. 21.408. SPECIAL TERMS OF OFFICE
Sec. 21.409. REMOVAL OF DIRECTORS
Sec. 21.410. VACANCY
Sec. 21.411. NOTICE OF MEETING
Sec. 21.412. WAIVER OF NOTICE
Sec. 21.413. QUORUM
Sec. 21.414. DISSENT TO ACTION
Sec. 21.415. ACTION BY DIRECTORS
Sec. 21.416. COMMITTEES OF BOARD OF DIRECTORS
Sec. 21.417. ELECTION OF OFFICERS
Sec. 21.418. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED DIRECTORS AND OFFICERS
[Sections 21.419-21.450 reserved for expansion]
SUBCHAPTER J. FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 21.451. DEFINITIONS
Sec. 21.452. APPROVAL OF MERGER
Sec. 21.453. APPROVAL OF CONVERSION
Sec. 21.454. APPROVAL OF EXCHANGE
Sec. 21.455. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY
ALL OF ASSETS
Sec. 21.456. GENERAL PROCEDURE FOR SUBMISSION TO
SHAREHOLDERS OF FUNDAMENTAL BUSINESS
TRANSACTION
Sec. 21.457. GENERAL VOTE REQUIREMENT FOR APPROVAL OF
FUNDAMENTAL BUSINESS TRANSACTION
Sec. 21.458. CLASS VOTING REQUIREMENTS FOR CERTAIN
FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 21.459. NO SHAREHOLDER VOTE REQUIREMENT FOR
CERTAIN FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 21.460. RIGHTS OF DISSENT AND APPRAISAL
Sec. 21.461. PLEDGE, MORTGAGE, DEED OF TRUST, OR
TRUST INDENTURE
Sec. 21.462. CONVEYANCE BY CORPORATION
[Sections 21.463-21.500 reserved for expansion]
SUBCHAPTER K. WINDING UP AND TERMINATION
Sec. 21.501. APPROVAL OF VOLUNTARY WINDING UP,
REINSTATEMENT, OR REVOCATION OF
VOLUNTARY WINDING UP
Sec. 21.502. CERTAIN PROCEDURES RELATING TO WINDING UP
Sec. 21.503. MEETING OF SHAREHOLDERS; NOTICE
Sec. 21.504. RESPONSIBILITY FOR WINDING UP
[Sections 21.505-21.550 reserved for expansion]
SUBCHAPTER L. DERIVATIVE PROCEEDINGS
Sec. 21.551. DEFINITIONS
Sec. 21.552. STANDING TO BRING PROCEEDING
Sec. 21.553. DEMAND
Sec. 21.554. DETERMINATION BY DIRECTORS OR INDEPENDENT
PERSONS
Sec. 21.555. STAY OF PROCEEDING
Sec. 21.556. DISCOVERY
Sec. 21.557. TOLLING OF STATUTE OF LIMITATIONS
Sec. 21.558. DISMISSAL OF DERIVATIVE PROCEEDING
Sec. 21.559. PROCEEDING INSTITUTED AFTER DEMAND
REJECTED
Sec. 21.560. DISCONTINUANCE OR SETTLEMENT
Sec. 21.561. PAYMENT OF EXPENSES
Sec. 21.562. APPLICATION TO FOREIGN CORPORATIONS
Sec. 21.563. CLOSELY HELD CORPORATION
[Sections 21.564-21.600 reserved for expansion]
SUBCHAPTER M. AFFILIATED BUSINESS COMBINATIONS
Sec. 21.601. DEFINITIONS
Sec. 21.602. AFFILIATED SHAREHOLDER
Sec. 21.603. BENEFICIAL OWNER OF SHARES OR SIMILAR
SECURITIES
Sec. 21.604. BUSINESS COMBINATION
Sec. 21.605. CONTROL
Sec. 21.606. THREE-YEAR MORATORIUM ON CERTAIN BUSINESS
COMBINATIONS
Sec. 21.607. APPLICATION OF MORATORIUM
Sec. 21.608. EFFECT ON OTHER ACTIONS
Sec. 21.609. CONFLICTING PROVISIONS
Sec. 21.610. CHANGE IN VOTING REQUIREMENTS
[Sections 21.611-21.650 reserved for expansion]
SUBCHAPTER N. PROVISIONS RELATING TO INVESTMENT COMPANIES
Sec. 21.651. DEFINITION
Sec. 21.652. ESTABLISHING CLASS OR SERIES OF SHARES;
CHANGE IN NUMBER OF SHARES
Sec. 21.653. REQUIRED STATEMENT RELATING TO SHARES
Sec. 21.654. TERM OF OFFICE OF DIRECTORS
Sec. 21.655. MEETINGS OF SHAREHOLDERS
[Sections 21.656-21.700 reserved for expansion]
SUBCHAPTER O. CLOSE CORPORATION
Sec. 21.701. DEFINITIONS
Sec. 21.702. APPLICABILITY OF SUBCHAPTER
Sec. 21.703. FORMATION OF CLOSE CORPORATION
Sec. 21.704. BYLAWS OF CLOSE CORPORATION
Sec. 21.705. ADOPTION OF AMENDMENT FOR CLOSE CORPORATION
STATUS
Sec. 21.706. ADOPTION OF CLOSE CORPORATION STATUS
THROUGH MERGER, EXCHANGE, OR CONVERSION
Sec. 21.707. EXISTING CLOSE CORPORATION
Sec. 21.708. TERMINATION OF CLOSE CORPORATION
STATUS
Sec. 21.709. STATEMENT TERMINATING CLOSE CORPORATION
STATUS; FILING; NOTICE
Sec. 21.710. EFFECT OF TERMINATION OF CLOSE
CORPORATION STATUS
Sec. 21.711. SHAREHOLDERS' MEETING TO ELECT DIRECTORS
Sec. 21.712. TERM OF OFFICE OF DIRECTORS
Sec. 21.713. MANAGEMENT
Sec. 21.714. SHAREHOLDERS' AGREEMENT
Sec. 21.715. EXECUTION OF SHAREHOLDERS' AGREEMENT
Sec. 21.716. ADOPTION OF AMENDMENT OF
SHAREHOLDERS' AGREEMENT
Sec. 21.717. DELIVERY OF SHAREHOLDERS' AGREEMENT
Sec. 21.718. STATEMENT OF OPERATION AS CLOSE
CORPORATION
Sec. 21.719. VALIDITY AND ENFORCEABILITY OF
SHAREHOLDERS' AGREEMENT
Sec. 21.720. PERSONS BOUND BY SHAREHOLDERS' AGREEMENT
Sec. 21.721. DELIVERY OF COPY OF SHAREHOLDERS'
AGREEMENT TO TRANSFEREE
Sec. 21.722. EFFECT OF REQUIRED STATEMENT ON
SHARE CERTIFICATE AND DELIVERY OF
SHAREHOLDERS' AGREEMENT
Sec. 21.723. PARTY NOT BOUND BY SHAREHOLDERS'
AGREEMENT ON CESSATION; LIABILITY
Sec. 21.724. TERMINATION OF SHAREHOLDERS'
AGREEMENT
Sec. 21.725. CONSEQUENCES OF MANAGEMENT BY PERSONS
OTHER THAN BOARD OF DIRECTORS
Sec. 21.726. SHAREHOLDERS CONSIDERED DIRECTORS
Sec. 21.727. LIABILITY OF SHAREHOLDERS
Sec. 21.728. MODE AND EFFECT OF TAKING ACTION BY
SHAREHOLDERS AND OTHERS
Sec. 21.729. LIMITATION OF SHAREHOLDER'S
LIABILITY
Sec. 21.730. LACK OF FORMALITIES; TREATMENT AS
PARTNERSHIP
Sec. 21.731. OTHER AGREEMENTS AMONG SHAREHOLDERS
PERMITTED
Sec. 21.732. CLOSE CORPORATION SHARE CERTIFICATES
[Sections 21.733-21.750 reserved for expansion]
SUBCHAPTER P. JUDICIAL PROCEEDINGS RELATING TO
CLOSE CORPORATION
Sec. 21.751. DEFINITIONS
Sec. 21.752. PROCEEDINGS AUTHORIZED
Sec. 21.753. NOTICE; INTERVENTION
Sec. 21.754. PROCEEDING NONEXCLUSIVE
Sec. 21.755. UNAVAILABILITY OF JUDICIAL
PROCEEDING
Sec. 21.756. JUDICIAL PROCEEDING TO ENFORCE
CLOSE CORPORATION PROVISION
Sec. 21.757. LIQUIDATION; INVOLUNTARY WINDING UP
AND TERMINATION; RECEIVERSHIP
Sec. 21.758. APPOINTMENT OF PROVISIONAL DIRECTOR
Sec. 21.759. RIGHTS AND POWERS OF PROVISIONAL
DIRECTOR
Sec. 21.760. COMPENSATION OF PROVISIONAL
DIRECTOR
Sec. 21.761. APPOINTMENT OF CUSTODIAN
Sec. 21.762. POWERS AND DUTIES OF CUSTODIAN
Sec. 21.763. TERMINATION OF CUSTODIANSHIP
[Sections 21.764-21.800 reserved for expansion]
SUBCHAPTER Q. MISCELLANEOUS PROVISIONS
Sec. 21.801. SHARES AND OTHER SECURITIES ARE PERSONAL
PROPERTY
Sec. 21.802. PENALTIES FOR LATE FILING OF CERTAIN
INSTRUMENTS
CHAPTER 22. NONPROFIT CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 22.001. DEFINITIONS
Sec. 22.002. MEETINGS BY REMOTE COMMUNICATIONS
TECHNOLOGY
[Sections 22.003-22.050 reserved for expansion]
SUBCHAPTER B. PURPOSES AND POWERS
Sec. 22.051. GENERAL PURPOSES
Sec. 22.052. DENTAL HEALTH SERVICE CORPORATION
Sec. 22.053. DIVIDENDS PROHIBITED
Sec. 22.054. AUTHORIZED BENEFITS AND DISTRIBUTIONS
Sec. 22.055. POWER TO ASSIST EMPLOYEE OR OFFICER
Sec. 22.056. HEALTH ORGANIZATION CORPORATION
[Sections 22.057-22.100 reserved for expansion]
SUBCHAPTER C. FORMATION AND GOVERNING DOCUMENTS
Sec. 22.101. INCORPORATION OF CERTAIN ORGANIZATIONS
Sec. 22.102. BYLAWS
Sec. 22.103. INCONSISTENCY BETWEEN CERTIFICATE OF
FORMATION AND BYLAW
Sec. 22.104. ORGANIZATION MEETING
Sec. 22.105. PROCEDURES TO ADOPT AMENDMENT TO
CERTIFICATE OF FORMATION BY MEMBERS
HAVING VOTING RIGHTS
Sec. 22.106. PROCEDURES TO ADOPT AMENDMENT TO
CERTIFICATE OF FORMATION BY MANAGING
MEMBERS
Sec. 22.107. PROCEDURES TO ADOPT AMENDMENT TO
CERTIFICATE OF FORMATION BY BOARD OF
DIRECTORS
Sec. 22.108. NUMBER OF AMENDMENTS SUBJECT TO VOTE AT
MEETING
[Sections 22.109-22.150 reserved for expansion]
SUBCHAPTER D. MEMBERS
Sec. 22.151. MEMBERS
Sec. 22.152. IMMUNITY FROM LIABILITY
Sec. 22.153. ANNUAL MEETING
Sec. 22.154. FAILURE TO CALL ANNUAL MEETING
Sec. 22.155. SPECIAL MEETINGS OF MEMBERS
Sec. 22.156. NOTICE OF MEETING
Sec. 22.157. SPECIAL BYLAWS AFFECTING NOTICE
Sec. 22.158. PREPARATION AND INSPECTION OF LIST OF
VOTING MEMBERS
Sec. 22.159. QUORUM OF MEMBERS
Sec. 22.160. VOTING OF MEMBERS
Sec. 22.161. ELECTION OF DIRECTORS
Sec. 22.162. GREATER VOTING REQUIREMENTS UNDER
CERTIFICATE OF FORMATION
Sec. 22.163. RECORD DATE FOR DETERMINATION OF
MEMBERS
Sec. 22.164. VOTE REQUIRED TO APPROVE FUNDAMENTAL
ACTION
[Sections 22.165-22.200 reserved for expansion]
SUBCHAPTER E. MANAGEMENT
Sec. 22.201. MANAGEMENT BY BOARD OF DIRECTORS
Sec. 22.202. MANAGEMENT BY MEMBERS
Sec. 22.203. BOARD MEMBER ELIGIBILITY REQUIREMENTS
Sec. 22.204. NUMBER OF DIRECTORS
Sec. 22.205. DESIGNATION OF INITIAL BOARD OF DIRECTORS
Sec. 22.206. ELECTION OR APPOINTMENT OF BOARD OF
DIRECTORS
Sec. 22.207. ELECTION AND CONTROL BY CERTAIN ENTITIES
Sec. 22.208. TERM OF OFFICE
Sec. 22.209. CLASSIFICATION OF DIRECTORS
Sec. 22.210. EX OFFICIO MEMBER OF BOARD
Sec. 22.211. REMOVAL OF DIRECTOR
Sec. 22.212. VACANCY
Sec. 22.213. QUORUM
Sec. 22.214. ACTION BY DIRECTORS
Sec. 22.215. VOTING IN PERSON OR BY PROXY
Sec. 22.216. TERM AND REVOCABILITY OF PROXY
Sec. 22.217. NOTICE OF MEETING; WAIVER OF NOTICE
Sec. 22.218. MANAGEMENT COMMITTEE
Sec. 22.219. OTHER COMMITTEES
Sec. 22.220. ACTION WITHOUT MEETING OF DIRECTORS
OR COMMITTEE
Sec. 22.221. GENERAL STANDARDS FOR DIRECTORS
Sec. 22.222. RELIGIOUS CORPORATION DIRECTOR'S GOOD
FAITH RELIANCE ON CERTAIN INFORMATION
Sec. 22.223. NOT A TRUSTEE
Sec. 22.224. DELEGATION OF INVESTMENT AUTHORITY
Sec. 22.225. LOAN TO DIRECTOR PROHIBITED
Sec. 22.226. DIRECTOR LIABILITY FOR CERTAIN
DISTRIBUTIONS OF ASSETS
Sec. 22.227. DISSENT TO ACTION
Sec. 22.228. RELIANCE ON WRITTEN OPINION OF ATTORNEY
Sec. 22.229. RIGHT TO CONTRIBUTION
Sec. 22.230. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED DIRECTORS, OFFICERS, AND
MEMBERS
Sec. 22.231. OFFICERS
Sec. 22.232. ELECTION OR APPOINTMENT OF OFFICERS
Sec. 22.233. APPLICATION TO CHURCH
Sec. 22.234. RELIGIOUS CORPORATION OFFICER'S GOOD
FAITH RELIANCE ON CERTAIN INFORMATION
Sec. 22.235. OFFICER LIABILITY
[Sections 22.236-22.250 reserved for expansion]
SUBCHAPTER F. FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 22.251. APPROVAL OF MERGER
Sec. 22.252. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY
ALL OF ASSETS
Sec. 22.253. MEETING OF MEMBERS; NOTICE
Sec. 22.254. PLEDGE, MORTGAGE, DEED OF TRUST, OR
TRUST INDENTURE
Sec. 22.255. CONVEYANCE BY CORPORATION
Sec. 22.256. APPROVAL OF CONVERSION
Sec. 22.257. APPROVAL OF EXCHANGE
[Sections 22.258-22.300 reserved for expansion]
SUBCHAPTER G. WINDING UP AND TERMINATION
Sec. 22.301. APPROVAL OF VOLUNTARY WINDING UP,
REINSTATEMENT, REVOCATION OF VOLUNTARY
WINDING UP, OR DISTRIBUTION PLAN
Sec. 22.302. CERTAIN PROCEDURES FOR APPROVAL
Sec. 22.303. MEETING OF MEMBERS; NOTICE
Sec. 22.304. APPLICATION AND DISTRIBUTION OF PROPERTY
Sec. 22.305. DISTRIBUTION PLAN
Sec. 22.306. LIMITED SURVIVAL AFTER NATURAL EXPIRATION
Sec. 22.307. RESPONSIBILITY FOR WINDING UP
[Sections 22.308-22.350 reserved for expansion]
SUBCHAPTER H. RECORDS AND REPORTS
Sec. 22.351. MEMBER'S RIGHT TO INSPECT BOOKS AND
RECORDS
Sec. 22.352. FINANCIAL RECORDS AND ANNUAL REPORTS
Sec. 22.353. AVAILABILITY OF FINANCIAL INFORMATION
FOR PUBLIC INSPECTION
Sec. 22.354. FAILURE TO MAINTAIN FINANCIAL RECORD
OR PREPARE ANNUAL REPORT; OFFENSE
Sec. 22.355. EXEMPTIONS FROM CERTAIN REQUIREMENTS
RELATING TO FINANCIAL RECORDS AND ANNUAL
REPORTS
Sec. 22.356. CORPORATIONS ASSISTING STATE AGENCIES
Sec. 22.357. REPORT OF DOMESTIC AND FOREIGN
CORPORATIONS
Sec. 22.358. NOTICE REGARDING REPORT
Sec. 22.359. FILING OF REPORT
Sec. 22.360. FAILURE TO FILE REPORT
Sec. 22.361. NOTICE OF FORFEITURE
Sec. 22.362. EFFECT OF FORFEITURE
Sec. 22.363. REVIVAL OF RIGHT TO CONDUCT AFFAIRS
Sec. 22.364. FAILURE TO REVIVE; TERMINATION OR
REVOCATION
Sec. 22.365. REINSTATEMENT
[Sections 22.366-22.400 reserved for expansion]
SUBCHAPTER I. CHURCH BENEFITS BOARDS
Sec. 22.401. DEFINITION
Sec. 22.402. PENSIONS AND BENEFITS
Sec. 22.403. CONTRIBUTIONS
Sec. 22.404. POWER TO ACT AS TRUSTEE
Sec. 22.405. DOCUMENTS AND AGREEMENTS
Sec. 22.406. INDEMNIFICATION
Sec. 22.407. PROTECTION OF BENEFITS
Sec. 22.408. ASSIGNMENT OF BENEFITS
Sec. 22.409. INSURANCE CODE NOT APPLICABLE
CHAPTER 23. SPECIAL-PURPOSE CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 23.001. DETERMINATION OF APPLICABLE LAW
Sec. 23.002. APPLICABILITY OF FILING REQUIREMENTS
Sec. 23.003. DOMESTIC CORPORATION ORGANIZED UNDER
SPECIAL STATUTE
[Sections 23.004-23.050 reserved for expansion]
SUBCHAPTER B. BUSINESS DEVELOPMENT CORPORATIONS
Sec. 23.051. DEFINITIONS
Sec. 23.052. ORGANIZERS
Sec. 23.053. PURPOSES
Sec. 23.054. POWERS
Sec. 23.055. STATEWIDE OPERATION
Sec. 23.056. CERTIFICATE OF FORMATION
Sec. 23.057. MANAGEMENT BY BOARD OF DIRECTORS; NUMBER OF
DIRECTORS
Sec. 23.058. ELECTION OR APPOINTMENT OF DIRECTORS
Sec. 23.059. TERM OF OFFICE; VACANCY
Sec. 23.060. OFFICERS
Sec. 23.061. PARTICIPATION AS OWNER
Sec. 23.062. FINANCIAL INSTITUTION AS MEMBER
OF CORPORATION
Sec. 23.063. WITHDRAWAL OF MEMBER
Sec. 23.064. POWERS OF SHAREHOLDERS AND MEMBERS
Sec. 23.065. VOTING BY SHAREHOLDER OR MEMBER
Sec. 23.066. LOAN TO CORPORATION
Sec. 23.067. PROHIBITED LOAN
Sec. 23.068. LOAN LIMITS
Sec. 23.069. SURPLUS
Sec. 23.070. DEPOSITORY
Sec. 23.071. ANNUAL REPORT; PROVISION OF REQUIRED
INFORMATION
[Sections 23.072-23.100 reserved for expansion]
SUBCHAPTER C. GRAND LODGES
Sec. 23.101. FORMATION
Sec. 23.102. APPLICABILITY OF CHAPTER 22
Sec. 23.103. DURATION
Sec. 23.104. SUBORDINATE LODGES
Sec. 23.105. TRUSTEES AND DIRECTORS
Sec. 23.106. FRANCHISE TAXES
Sec. 23.107. GENERAL POWERS
Sec. 23.108. AUTHORITY REGARDING PROPERTY
Sec. 23.109. AUTHORITY REGARDING LOANS
Sec. 23.110. WINDING UP AND TERMINATION OF
SUBORDINATE BODY
TITLE 3. LIMITED LIABILITY COMPANIES
CHAPTER 101. LIMITED LIABILITY COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 101.001. DEFINITIONS
[Sections 101.002-101.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 101.051. CERTAIN PROVISIONS CONTAINED IN CERTIFICATE
OF FORMATION
Sec. 101.052. COMPANY AGREEMENT
Sec. 101.053. AMENDMENT OF COMPANY AGREEMENT
Sec. 101.054. WAIVER OR MODIFICATION OF CERTAIN
STATUTORY PROVISIONS PROHIBITED;
EXCEPTIONS
[Sections 101.055-101.100 reserved for expansion]
SUBCHAPTER C. MEMBERSHIP
Sec. 101.101. MEMBERS REQUIRED
Sec. 101.102. QUALIFICATION FOR MEMBERSHIP
Sec. 101.103. EFFECTIVE DATE OF MEMBERSHIP
Sec. 101.104. CLASSES OR GROUPS OF MEMBERS OR MEMBERSHIP
INTERESTS
Sec. 101.105. ISSUANCE OF MEMBERSHIP INTERESTS AFTER
FORMATION OF COMPANY
Sec. 101.106. NATURE OF MEMBERSHIP INTEREST
Sec. 101.107. WITHDRAWAL OR EXPULSION OF MEMBER
PROHIBITED
Sec. 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST
Sec. 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF
MEMBERSHIP INTEREST BEFORE MEMBERSHIP
Sec. 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF
MEMBERSHIP INTEREST AFTER BECOMING
MEMBER
Sec. 101.111. RIGHTS AND DUTIES OF ASSIGNOR OF MEMBERSHIP
INTEREST
Sec. 101.112. JUDGMENT CREDITOR; CHARGE OF MEMBERSHIP
INTEREST
Sec. 101.113. PARTIES TO ACTIONS
Sec. 101.114. LIABILITY FOR OBLIGATIONS
[Sections 101.115-101.150 reserved for expansion]
SUBCHAPTER D. CONTRIBUTIONS
Sec. 101.151. REQUIREMENTS FOR ENFORCEABLE PROMISE
Sec. 101.152. ENFORCEABLE PROMISE NOT AFFECTED BY CHANGE
IN CIRCUMSTANCES
Sec. 101.153. FAILURE TO PERFORM ENFORCEABLE PROMISE;
CONSEQUENCES
Sec. 101.154. CONSENT REQUIRED TO RELEASE
ENFORCEABLE OBLIGATION
Sec. 101.155. CREDITOR'S RIGHT TO ENFORCE CERTAIN
OBLIGATIONS
Sec. 101.156. REQUIREMENTS TO ENFORCE CONDITIONAL
OBLIGATION
[Sections 101.157-101.200 reserved for expansion]
SUBCHAPTER E. ALLOCATIONS AND DISTRIBUTIONS
Sec. 101.201. ALLOCATION OF PROFITS AND LOSSES
Sec. 101.202. DISTRIBUTION IN KIND
Sec. 101.203. SHARING OF DISTRIBUTIONS
Sec. 101.204. INTERIM DISTRIBUTIONS
Sec. 101.205. DISTRIBUTION ON WITHDRAWAL
Sec. 101.206. PROHIBITED DISTRIBUTION; DUTY TO
RETURN
Sec. 101.207. CREDITOR STATUS WITH RESPECT TO
DISTRIBUTION
[Sections 101.208-101.250 reserved for expansion]
SUBCHAPTER F. MANAGEMENT
Sec. 101.251. MEMBERSHIP
Sec. 101.252. MANAGEMENT BY GOVERNING AUTHORITY
Sec. 101.253. DESIGNATION OF COMMITTEES; DELEGATION
OF AUTHORITY
Sec. 101.254. DESIGNATION OF AGENTS; BINDING ACTS
Sec. 101.255. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED GOVERNING PERSONS OR
OFFICERS
[Sections 101.256-101.300 reserved for expansion]
SUBCHAPTER G. MANAGERS
Sec. 101.301. APPLICABILITY OF SUBCHAPTER
Sec. 101.302. NUMBER AND QUALIFICATIONS
Sec. 101.303. TERM
Sec. 101.304. REMOVAL
Sec. 101.305. MANAGER VACANCY
Sec. 101.306. REMOVAL AND REPLACEMENT OF MANAGER
ELECTED BY CLASS OR GROUP
Sec. 101.307. METHODS OF CLASSIFYING MANAGERS
[Sections 101.308-101.350 reserved for expansion]
SUBCHAPTER H. MEETINGS AND VOTING
Sec. 101.351. APPLICABILITY OF SUBCHAPTER
Sec. 101.352. GENERAL NOTICE REQUIREMENTS
Sec. 101.353. QUORUM
Sec. 101.354. EQUAL VOTING RIGHTS
Sec. 101.355. ACT OF GOVERNING AUTHORITY, MEMBERS,
OR COMMITTEE
Sec. 101.356. VOTES REQUIRED TO APPROVE CERTAIN ACTIONS
Sec. 101.357. MANNER OF VOTING
Sec. 101.358. ACTION BY LESS THAN UNANIMOUS WRITTEN
CONSENT
[Sections 101.359-101.400 reserved for expansion]
SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION
Sec. 101.401. EXPANSION OR RESTRICTION OF DUTIES
AND LIABILITIES
Sec. 101.402. PERMISSIVE INDEMNIFICATION, ADVANCEMENT
OF EXPENSES, AND INSURANCE OR OTHER
ARRANGEMENTS
[Sections 101.403-101.450 reserved for expansion]
SUBCHAPTER J. DERIVATIVE PROCEEDINGS
Sec. 101.451. DEFINITIONS
Sec. 101.452. STANDING TO BRING PROCEEDING
Sec. 101.453. DEMAND
Sec. 101.454. DETERMINATION BY GOVERNING OR
INDEPENDENT PERSONS
Sec. 101.455. STAY OF PROCEEDING
Sec. 101.456. DISCOVERY
Sec. 101.457. TOLLING OF STATUTE OF LIMITATIONS
Sec. 101.458. DISMISSAL OF DERIVATIVE PROCEEDING
Sec. 101.459. ALLEGATIONS IF DEMAND REJECTED
Sec. 101.460. DISCONTINUANCE OR SETTLEMENT
Sec. 101.461. PAYMENT OF EXPENSES
Sec. 101.462. APPLICATION TO FOREIGN LIMITED LIABILITY
COMPANIES
Sec. 101.463. CLOSELY HELD LIMITED LIABILITY COMPANY
[Sections 101.464-101.500 reserved for expansion]
SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS
Sec. 101.501. SUPPLEMENTAL RECORDS REQUIRED FOR
LIMITED LIABILITY COMPANIES
Sec. 101.502. RIGHT TO EXAMINE RECORDS AND CERTAIN
OTHER INFORMATION
[Sections 101.503-101.550 reserved for expansion]
SUBCHAPTER L. SUPPLEMENTAL WINDING UP AND TERMINATION
PROVISIONS
Sec. 101.551. PERSONS ELIGIBLE TO WIND UP COMPANY
Sec. 101.552. APPROVAL OF VOLUNTARY WINDING UP,
REVOCATION, CANCELLATION, OR
REINSTATEMENT
TITLE 4. PARTNERSHIPS
CHAPTER 151. GENERAL PROVISIONS
Sec. 151.001. DEFINITIONS
Sec. 151.002. KNOWLEDGE OF FACT
Sec. 151.003. NOTICE OF FACT
CHAPTER 152. GENERAL PARTNERSHIPS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 152.001. DEFINITIONS
Sec. 152.002. EFFECT OF PARTNERSHIP AGREEMENT;
NONWAIVABLE AND VARIABLE
PROVISIONS
Sec. 152.003. SUPPLEMENTAL PRINCIPLES OF LAW
Sec. 152.004. RULE OF STATUTORY CONSTRUCTION NOT
APPLICABLE
Sec. 152.005. APPLICABLE INTEREST RATE
[Sections 152.006-152.050 reserved for expansion]
SUBCHAPTER B. NATURE AND CREATION OF PARTNERSHIP
Sec. 152.051. PARTNERSHIP DEFINED
Sec. 152.052. RULES FOR DETERMINING IF PARTNERSHIP IS
CREATED
Sec. 152.053. QUALIFICATIONS TO BE PARTNER; NONPARTNER'S
LIABILITY TO THIRD PERSON
Sec. 152.054. FALSE REPRESENTATION OF PARTNERSHIP OR
PARTNER
Sec. 152.055. AUTHORITY OF CERTAIN PROFESSIONALS TO
CREATE PARTNERSHIP
Sec. 152.056. PARTNERSHIP AS ENTITY
[Sections 152.057-152.100 reserved for expansion]
SUBCHAPTER C. PARTNERSHIP PROPERTY
Sec. 152.101. NATURE OF PARTNERSHIP PROPERTY
Sec. 152.102. CLASSIFICATION AS PARTNERSHIP PROPERTY
[Sections 152.103-152.200 reserved for expansion]
SUBCHAPTER D. RELATIONSHIP BETWEEN PARTNERS AND BETWEEN
PARTNERS AND PARTNERSHIPS
Sec. 152.201. ADMISSION AS PARTNER
Sec. 152.202. CREDITS OF AND CHARGES TO PARTNER
Sec. 152.203. RIGHTS AND DUTIES OF PARTNER
Sec. 152.204. GENERAL STANDARDS OF PARTNER'S CONDUCT
Sec. 152.205. PARTNER'S DUTY OF LOYALTY
Sec. 152.206. PARTNER'S DUTY OF CARE
Sec. 152.207. STANDARDS OF CONDUCT APPLICABLE TO PERSON
WINDING UP PARTNERSHIP BUSINESS
Sec. 152.208. AMENDMENT TO PARTNERSHIP AGREEMENT
Sec. 152.209. DECISION-MAKING REQUIREMENT
Sec. 152.210. PARTNER'S LIABILITY TO PARTNERSHIP AND
OTHER PARTNERS
Sec. 152.211. REMEDIES OF PARTNERSHIP AND PARTNERS
Sec. 152.212. BOOKS AND RECORDS OF PARTNERSHIP
Sec. 152.213. INFORMATION REGARDING PARTNERSHIP
Sec. 152.214. CERTAIN THIRD-PARTY OBLIGATIONS NOT
AFFECTED
[Sections 152.215-152.300 reserved for expansion]
SUBCHAPTER E. RELATIONSHIP BETWEEN PARTNERS AND OTHER PERSONS
Sec. 152.301. PARTNER AS AGENT
Sec. 152.302. BINDING EFFECT OF PARTNER'S ACTION
Sec. 152.303. LIABILITY OF PARTNERSHIP FOR CONDUCT OF
PARTNER
Sec. 152.304. NATURE OF PARTNER'S LIABILITY
Sec. 152.305. REMEDY
Sec. 152.306. ENFORCEMENT OF REMEDY
Sec. 152.307. EXTENSION OF CREDIT IN RELIANCE ON
FALSE REPRESENTATION
[Sections 152.308-152.400 reserved for expansion]
SUBCHAPTER F. TRANSFER OF PARTNERSHIP INTERESTS
Sec. 152.401. TRANSFER OF PARTNERSHIP INTEREST
Sec. 152.402. GENERAL EFFECT OF TRANSFER
Sec. 152.403. EFFECT OF TRANSFER ON TRANSFEROR
Sec. 152.404. RIGHTS AND DUTIES OF TRANSFEREE
Sec. 152.405. POWER TO EFFECT TRANSFER OR GRANT
OF SECURITY INTEREST
Sec. 152.406. EFFECT OF DEATH OR DIVORCE ON
PARTNERSHIP INTEREST
[Sections 152.407-152.500 reserved for expansion]
SUBCHAPTER G. WITHDRAWAL OF PARTNER
Sec. 152.501. EVENTS OF WITHDRAWAL
Sec. 152.502. EFFECT OF EVENT OF WITHDRAWAL ON
PARTNERSHIP AND OTHER PARTNERS
Sec. 152.503. WRONGFUL WITHDRAWAL; LIABILITY
Sec. 152.504. WITHDRAWN PARTNER'S POWER TO BIND
PARTNERSHIP
Sec. 152.505. EFFECT OF WITHDRAWAL ON PARTNER'S EXISTING
LIABILITY
Sec. 152.506. LIABILITY OF WITHDRAWN PARTNER TO THIRD
PARTY
[Sections 152.507-152.600 reserved for expansion]
SUBCHAPTER H. REDEMPTION OF WITHDRAWING PARTNER'S OR
TRANSFEREE'S INTEREST
Sec. 152.601. REDEMPTION IF PARTNERSHIP NOT WOUND
UP
Sec. 152.602. REDEMPTION PRICE
Sec. 152.603. CONTRIBUTION OBLIGATION
Sec. 152.604. SETOFF FOR CERTAIN DAMAGES
Sec. 152.605. ACCRUAL OF INTEREST
Sec. 152.606. INDEMNIFICATION FOR CERTAIN LIABILITY
Sec. 152.607. DEMAND OR PAYMENT OF ESTIMATED
REDEMPTION
Sec. 152.608. DEFERRED PAYMENT ON WRONGFUL
WITHDRAWAL
Sec. 152.609. ACTION TO DETERMINE TERMS OF
REDEMPTION
Sec. 152.610. DEFERRED PAYMENT ON WINDING UP
PARTNERSHIP
Sec. 152.611. REDEMPTION OF TRANSFEREE'S PARTNERSHIP
INTEREST
Sec. 152.612. ACTION TO DETERMINE TRANSFEREE'S
REDEMPTION PRICE
[Sections 152.613-152.700 reserved for expansion]
SUBCHAPTER I. SUPPLEMENTAL WINDING UP AND
TERMINATION PROVISIONS
Sec. 152.701. EFFECT OF EVENT REQUIRING WINDING UP
Sec. 152.702. PERSONS ELIGIBLE TO WIND UP PARTNERSHIP
BUSINESS
Sec. 152.703. RIGHTS AND DUTIES OF PERSON WINDING
UP PARTNERSHIP BUSINESS
Sec. 152.704. BINDING EFFECT OF PARTNER'S ACTION AFTER EVENT
REQUIRING WINDING UP
Sec. 152.705. PARTNER'S LIABILITY TO OTHER PARTNERS AFTER
EVENT REQUIRING WINDING UP
Sec. 152.706. DISPOSITION OF ASSETS
Sec. 152.707. SETTLEMENT OF ACCOUNTS
Sec. 152.708. CONTRIBUTIONS TO DISCHARGE OBLIGATIONS
Sec. 152.709. CONTINUATION OF PARTNERSHIP
Sec. 152.710. REINSTATEMENT
[Sections 152.711-152.800 reserved for expansion]
SUBCHAPTER J. LIMITED LIABILITY PARTNERSHIPS
Sec. 152.801. LIABILITY OF PARTNER
Sec. 152.802. REGISTRATION
Sec. 152.803. NAME
Sec. 152.804. INSURANCE OR FINANCIAL RESPONSIBILITY
Sec. 152.805. LIMITED PARTNERSHIP
[Sections 152.806-152.900 reserved for expansion]
SUBCHAPTER K. FOREIGN LIMITED LIABILITY PARTNERSHIPS
Sec. 152.901. GENERAL
Sec. 152.902. NAME
Sec. 152.903. ACTIVITIES NOT CONSTITUTING TRANSACTING
BUSINESS
Sec. 152.904. REGISTERED AGENT
Sec. 152.905. STATEMENT OF FOREIGN QUALIFICATION
Sec. 152.906. CANCELLATION OF REGISTRATION
Sec. 152.907. EFFECT OF CERTIFICATE OF CANCELLATION
Sec. 152.908. RENEWAL OF REGISTRATION
Sec. 152.909. ACTION BY SECRETARY OF STATE
Sec. 152.910. EFFECT OF FAILURE TO QUALIFY
Sec. 152.911. AMENDMENT
Sec. 152.912. EXECUTION OF APPLICATION FOR AMENDMENT
Sec. 152.913. EXECUTION OF STATEMENT OF CHANGE OF
REGISTERED OFFICE OR REGISTERED AGENT
CHAPTER 153. LIMITED PARTNERSHIPS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 153.001. DEFINITION
Sec. 153.002. CONSTRUCTION
Sec. 153.003. APPLICABILITY OF OTHER LAWS
Sec. 153.004. NONWAIVABLE TITLE 1 PROVISIONS
Sec. 153.005. WAIVER OR MODIFICATION OF RIGHTS OF THIRD
PARTIES
[Sections 153.006-153.050 reserved for expansion]
SUBCHAPTER B. SUPPLEMENTAL PROVISIONS REGARDING AMENDMENT
TO CERTIFICATE OF FORMATION
Sec. 153.051. REQUIRED AMENDMENT TO CERTIFICATE OF
FORMATION
Sec. 153.052. DISCRETIONARY AMENDMENT TO CERTIFICATE OF
FORMATION
[Sections 153.053-153.100 reserved for expansion]
SUBCHAPTER C. LIMITED PARTNERS
Sec. 153.101. ADMISSION OF LIMITED PARTNERS
Sec. 153.102. LIABILITY TO THIRD PARTIES
Sec. 153.103. ACTIONS NOT CONSTITUTING PARTICIPATION IN
BUSINESS FOR LIABILITY PURPOSES
Sec. 153.104. ENUMERATION OF ACTIONS NOT EXCLUSIVE
Sec. 153.105. CREATION OF RIGHTS
Sec. 153.106. ERRONEOUS BELIEF OF CONTRIBUTOR BEING
LIMITED PARTNER
Sec. 153.107. STATEMENT REQUIRED FOR LIABILITY
PROTECTION
Sec. 153.108. REQUIREMENTS FOR LIABILITY PROTECTION
FOLLOWING EXPIRATION OF STATEMENT
Sec. 153.109. LIABILITY OF ERRONEOUS CONTRIBUTOR
Sec. 153.110. WITHDRAWAL OF LIMITED PARTNER
Sec. 153.111. DISTRIBUTION ON WITHDRAWAL
Sec. 153.112. RECEIPT OF WRONGFUL DISTRIBUTION
Sec. 153.113. POWERS OF ESTATE OF LIMITED PARTNER WHO IS
DECEASED OR INCAPACITATED
[Sections 153.114-153.150 reserved for expansion]
SUBCHAPTER D. GENERAL PARTNERS
Sec. 153.151. ADMISSION OF ADDITIONAL GENERAL PARTNERS
Sec. 153.152. GENERAL POWERS AND LIABILITIES OF GENERAL
PARTNER
Sec. 153.153. POWERS AND LIABILITIES OF PERSON WHO IS BOTH
GENERAL PARTNER AND LIMITED
PARTNER
Sec. 153.154. CONTRIBUTIONS BY AND DISTRIBUTIONS TO GENERAL
PARTNER
Sec. 153.155. WITHDRAWAL OF GENERAL PARTNER
Sec. 153.156. NOTICE OF EVENT OF WITHDRAWAL
Sec. 153.157. WITHDRAWAL OF GENERAL PARTNER IN
VIOLATION OF PARTNERSHIP AGREEMENT
Sec. 153.158. EFFECT OF WITHDRAWAL
Sec. 153.159. CONVERSION OF PARTNERSHIP INTEREST
AFTER WITHDRAWAL
Sec. 153.160. EFFECT OF CONVERSION OF PARTNERSHIP
INTEREST
Sec. 153.161. LIABILITY OF GENERAL PARTNER FOR DEBT
INCURRED AFTER EVENT OF WITHDRAWAL
Sec. 153.162. LIABILITY FOR WRONGFUL WITHDRAWAL
[Sections 153.163-153.200 reserved for expansion]
SUBCHAPTER E. FINANCES
Sec. 153.201. FORM OF CONTRIBUTION
Sec. 153.202. ENFORCEABILITY OF PROMISE TO MAKE
CONTRIBUTION
Sec. 153.203. RELEASE OF OBLIGATION TO PARTNERSHIP
Sec. 153.204. ENFORCEABILITY OF OBLIGATION
Sec. 153.205. REQUIREMENTS TO ENFORCE CONDITIONAL
OBLIGATION
Sec. 153.206. ALLOCATION OF PROFITS AND LOSSES
Sec. 153.207. RIGHT TO DISTRIBUTION
Sec. 153.208. SHARING OF DISTRIBUTIONS
Sec. 153.209. INTERIM DISTRIBUTIONS
Sec. 153.210. LIMITATION ON DISTRIBUTION
[Sections 153.211-153.250 reserved for expansion]
SUBCHAPTER F. PARTNERSHIP INTEREST
Sec. 153.251. ASSIGNMENT OF PARTNERSHIP INTEREST
Sec. 153.252. RIGHTS OF ASSIGNOR
Sec. 153.253. RIGHTS OF ASSIGNEE
Sec. 153.254. LIABILITY OF ASSIGNEE
Sec. 153.255. LIABILITY OF ASSIGNOR
Sec. 153.256. CHARGE IN PAYMENT OF JUDGMENT CREDITOR
Sec. 153.257. EXEMPTION LAWS APPLICABLE TO PARTNERSHIP
INTEREST NOT AFFECTED
[Sections 153.258-153.300 reserved for expansion]
SUBCHAPTER G. REPORTS
Sec. 153.301. PERIODIC REPORT
Sec. 153.302. FORM AND CONTENTS OF REPORT
Sec. 153.303. FILING FEE
Sec. 153.304. DELIVERY OF REPORT
Sec. 153.305. ACTION BY SECRETARY OF STATE
Sec. 153.306. EFFECT OF FILING REPORT
Sec. 153.307. EFFECT OF FAILURE TO FILE REPORT
Sec. 153.308. NOTICE OF FORFEITURE OF RIGHT TO
TRANSACT BUSINESS
Sec. 153.309. EFFECT OF FORFEITURE OF RIGHT TO
TRANSACT BUSINESS
Sec. 153.310. REVIVAL OF RIGHT TO TRANSACT BUSINESS
Sec. 153.311. CANCELLATION OF CERTIFICATE OR
REGISTRATION AFTER FORFEITURE
Sec. 153.312. REINSTATEMENT OF CERTIFICATE OF
FORMATION OR REGISTRATION
[Sections 153.313-153.350 reserved for expansion]
SUBCHAPTER H. LIMITED PARTNERSHIP AS LIMITED
LIABILITY PARTNERSHIP
Sec. 153.351. REQUIREMENTS
Sec. 153.352. APPLICABILITY OF OTHER REQUIREMENTS
Sec. 153.353. LAW APPLICABLE TO PARTNERS
[Sections 153.354-153.400 reserved for expansion]
SUBCHAPTER I. DERIVATIVE ACTIONS
Sec. 153.401. RIGHT TO BRING ACTION
Sec. 153.402. PROPER PLAINTIFF
Sec. 153.403. PLEADING
Sec. 153.404. SECURITY FOR EXPENSES OF DEFENDANTS
Sec. 153.405. EXPENSES OF PLAINTIFF
[Sections 153.406-153.450 reserved for expansion]
SUBCHAPTER J. CANCELLATION OF CERTIFICATE OF FORMATION
Sec. 153.451. CERTIFICATE OF CANCELLATION
Sec. 153.452. CONTENTS OF CERTIFICATE OF CANCELLATION
[Sections 153.453-153.500 reserved for expansion]
SUBCHAPTER K. SUPPLEMENTAL WINDING UP AND TERMINATION
PROVISIONS
Sec. 153.501. CONTINUATION WITHOUT WINDING UP
Sec. 153.502. WINDING UP PROCEDURES
Sec. 153.503. POWERS OF PERSON CONDUCTING WIND UP
Sec. 153.504. DISPOSITION OF ASSETS
[Sections 153.505-153.550 reserved for expansion]
SUBCHAPTER L. MISCELLANEOUS PROVISIONS
Sec. 153.551. RECORDS
Sec. 153.552. EXAMINATION OF RECORDS AND INFORMATION
Sec. 153.553. EXECUTION OF CERTAIN FILINGS
Sec. 153.554. EXECUTION, AMENDMENT, OR CANCELLATION BY
JUDICIAL ORDER
Sec. 153.555. PERMITTED TRANSFER IN CONNECTION WITH
RACETRACK LICENSE
CHAPTER 154. PROVISIONS APPLICABLE TO BOTH
GENERAL AND LIMITED PARTNERSHIPS
SUBCHAPTER A. PARTNERSHIP INTERESTS
Sec. 154.001. NATURE OF PARTNER'S PARTNERSHIP INTEREST
Sec. 154.002. TRANSFER OF INTEREST IN PARTNERSHIP
PROPERTY PROHIBITED
[Sections 154.003-154.100 reserved for expansion]
SUBCHAPTER B. PARTNERSHIP AGREEMENT
Sec. 154.101. CLASS OR GROUP OF PARTNERS
Sec. 154.102. PROVISIONS RELATING TO VOTING
Sec. 154.103. NOTICE OF ACTION BY CONSENT WITHOUT A
MEETING
[Sections 154.104-154.200 reserved for expansion]
SUBCHAPTER C. PARTNERSHIP TRANSACTIONS AND RELATIONSHIPS
Sec. 154.201. BUSINESS TRANSACTIONS BETWEEN
PARTNER AND PARTNERSHIP
Sec. 154.202. EFFECT OF PARTNER CHANGE ON
RELATIONSHIP BETWEEN PARTNERSHIP AND
CREDITORS
Sec. 154.203. DISTRIBUTIONS IN KIND
TITLE 5. REAL ESTATE INVESTMENT TRUSTS
CHAPTER 200. REAL ESTATE INVESTMENT TRUSTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 200.001. DEFINITION
Sec. 200.002. APPLICABILITY OF CHAPTER
Sec. 200.003. CONFLICT WITH OTHER LAW
Sec. 200.004. ULTRA VIRES ACTS
Sec. 200.005. SUPPLEMENTARY POWERS OF REAL ESTATE
INVESTMENT TRUST
Sec. 200.006. REQUIREMENT THAT FILING INSTRUMENT BE
SIGNED BY OFFICER
[Sections 200.007-200.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 200.051. DECLARATION OF TRUST
Sec. 200.052. NO PROPERTY RIGHT IN CERTIFICATE OF
FORMATION
Sec. 200.053. PROCEDURES TO ADOPT AMENDMENT TO
CERTIFICATE OF FORMATION
Sec. 200.054. ADOPTION OF AMENDMENT BY TRUST
MANAGERS
Sec. 200.055. ADOPTION OF AMENDMENT BY
SHAREHOLDERS
Sec. 200.056. NOTICE OF AND MEETING TO CONSIDER PROPOSED
AMENDMENT
Sec. 200.057. ADOPTION OF RESTATED CERTIFICATE OF
FORMATION
Sec. 200.058. BYLAWS
Sec. 200.059. DUAL AUTHORITY
Sec. 200.060. ORGANIZATION MEETING
[Sections 200.061-200.100 reserved for expansion]
SUBCHAPTER C. SHARES
Sec. 200.101. NUMBER
Sec. 200.102. CLASSIFICATION OF SHARES
Sec. 200.103. CLASSES OF SHARES ESTABLISHED BY TRUST
MANAGERS
Sec. 200.104. ISSUANCE OF SHARES
Sec. 200.105. TYPES OF CONSIDERATION FOR ISSUANCE OF
SHARES
Sec. 200.106. DETERMINATION OF CONSIDERATION FOR SHARES
Sec. 200.107. AMOUNT OF CONSIDERATION FOR ISSUANCE OF
SHARES WITH PAR VALUE
Sec. 200.108. VALUE OF CONSIDERATION
Sec. 200.109. LIABILITY OF ASSIGNEE OR TRANSFEREE
Sec. 200.110. SUBSCRIPTIONS
Sec. 200.111. PREFORMATION SUBSCRIPTION
Sec. 200.112. COMMITMENT IN CONNECTION WITH PURCHASE OF
SHARES
Sec. 200.113. SUPPLEMENTAL REQUIRED RECORDS
[Sections 200.114-200.150 reserved for expansion]
SUBCHAPTER D. SHAREHOLDER RIGHTS AND RESTRICTIONS
Sec. 200.151. REGISTERED HOLDERS AS OWNERS
Sec. 200.152. NO STATUTORY PREEMPTIVE RIGHT UNLESS
SPECIFICALLY PROVIDED BY CERTIFICATE OF
FORMATION
Sec. 200.153. CHARACTERIZATION AND TRANSFER OF SHARES
AND OTHER SECURITIES
Sec. 200.154. RESTRICTION ON TRANSFER OF SHARES AND OTHER
SECURITIES
Sec. 200.155. VALID RESTRICTION ON TRANSFER
Sec. 200.156. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF
SHARES OR OTHER SECURITIES
Sec. 200.157. ENFORCEABILITY OF RESTRICTION ON TRANSFER
OF CERTAIN SECURITIES
Sec. 200.158. JOINT OWNERSHIP OF SHARES
Sec. 200.159. LIABILITY FOR DESIGNATING OWNER OF
SHARES
Sec. 200.160. LIABILITY REGARDING JOINT OWNERSHIP OF
SHARES
Sec. 200.161. LIMITATION OF LIABILITY FOR OBLIGATIONS
Sec. 200.162. PREEMPTION OF LIABILITY
Sec. 200.163. EXCEPTIONS TO LIMITATIONS
Sec. 200.164. PLEDGEES AND TRUST ADMINISTRATORS
[Sections 200.165-200.200 reserved for expansion]
SUBCHAPTER E. DISTRIBUTIONS AND SHARE DIVIDENDS
Sec. 200.201. AUTHORITY FOR DISTRIBUTIONS
Sec. 200.202. LIMITATIONS ON DISTRIBUTIONS
Sec. 200.203. PRIORITY OF DISTRIBUTIONS
Sec. 200.204. RESERVES, DESIGNATIONS, AND ALLOCATIONS
FROM SURPLUS
Sec. 200.205. AUTHORITY FOR SHARE DIVIDENDS
Sec. 200.206. LIMITATIONS ON SHARE DIVIDENDS
Sec. 200.207. VALUE OF SHARES ISSUED AS SHARE
DIVIDENDS
Sec. 200.208. TRANSFER OF SURPLUS FOR SHARE
DIVIDENDS
Sec. 200.209. DETERMINATION OF SOLVENCY, NET ASSETS,
STATED CAPITAL, AND SURPLUS
Sec. 200.210. DATE OF DETERMINATION OF SURPLUS
Sec. 200.211. SPLIT-UP OR DIVISION OF SHARES
[Sections 200.212-200.250 reserved for expansion]
SUBCHAPTER F. SHAREHOLDERS' MEETINGS; VOTING AND QUORUM
Sec. 200.251. ANNUAL MEETING
Sec. 200.252. SPECIAL MEETINGS
Sec. 200.253. NOTICE OF MEETING
Sec. 200.254. CLOSING OF SHARE TRANSFER RECORDS
Sec. 200.255. RECORD DATE FOR WRITTEN CONSENT TO
ACTION
Sec. 200.256. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
CONSENT TO ACTION
Sec. 200.257. QUORUM
Sec. 200.258. VOTING IN ELECTION OF TRUST MANAGERS
Sec. 200.259. CUMULATIVE VOTING IN ELECTION OF TRUST
MANAGERS
Sec. 200.260. VOTING ON MATTERS OTHER THAN ELECTION OF
TRUST MANAGERS
Sec. 200.261. VOTE REQUIRED TO APPROVE FUNDAMENTAL
ACTION
Sec. 200.262. CHANGES IN VOTE REQUIRED FOR
CERTAIN MATTERS
Sec. 200.263. NUMBER OF VOTES PER SHARE
Sec. 200.264. VOTING IN PERSON OR BY PROXY
Sec. 200.265. TERM OF PROXY
Sec. 200.266. REVOCABILITY OF PROXY
Sec. 200.267. ENFORCEABILITY OF PROXY
Sec. 200.268. PROCEDURES IN BYLAWS RELATING
TO PROXIES
[Sections 200.269-200.300 reserved for expansion]
SUBCHAPTER G. TRUST MANAGERS
Sec. 200.301. MANAGEMENT BY TRUST MANAGERS
Sec. 200.302. DESIGNATION OF TRUST MANAGERS
Sec. 200.303. TRUST MANAGER ELIGIBILITY REQUIREMENTS
Sec. 200.304. NUMBER OF TRUST MANAGERS
Sec. 200.305. COMPENSATION
Sec. 200.306. TERM OF TRUST MANAGER
Sec. 200.307. STAGGERED TERMS OF TRUST MANAGERS
Sec. 200.308. VACANCY
Sec. 200.309. NOTICE OF MEETING
Sec. 200.310. QUORUM
Sec. 200.311. COMMITTEES OF TRUST MANAGERS
Sec. 200.312. LIABILITY OF TRUST MANAGERS
Sec. 200.313. STATUTE OF LIMITATIONS ON CERTAIN ACTION
AGAINST TRUST MANAGERS
Sec. 200.314. IMMUNITY FROM LIABILITY FOR PERFORMANCE
OF DUTY
Sec. 200.315. RIGHT OF CONTRIBUTION
Sec. 200.316. OFFICERS
Sec. 200.317. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED TRUST MANAGERS AND
OFFICERS
[Sections 200.318-200.350 reserved for expansion]
SUBCHAPTER H. INVESTMENTS
Sec. 200.351. INVESTMENTS
[Sections 200.352-200.400 reserved for expansion]
SUBCHAPTER I. FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 200.401. DEFINITIONS
Sec. 200.402. APPROVAL OF MERGER
Sec. 200.403. APPROVAL OF CONVERSION
Sec. 200.404. APPROVAL OF EXCHANGE
Sec. 200.405. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY
ALL OF ASSETS
Sec. 200.406. GENERAL PROCEDURE FOR SUBMISSION TO
SHAREHOLDERS OF FUNDAMENTAL BUSINESS
TRANSACTION
Sec. 200.407. GENERAL VOTE REQUIREMENT FOR APPROVAL
OF FUNDAMENTAL BUSINESS TRANSACTION
Sec. 200.408. CLASS VOTING REQUIREMENTS FOR CERTAIN
FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 200.409. NO SHAREHOLDER VOTE REQUIREMENT FOR
CERTAIN FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 200.410. RIGHTS OF DISSENT AND APPRAISAL
[Sections 200.411-200.450 reserved for expansion]
SUBCHAPTER J. SUPPLEMENTAL WINDING UP AND TERMINATION
PROVISIONS
Sec. 200.451. APPROVAL OF VOLUNTARY WINDING UP
Sec. 200.452. APPROVAL OF REINSTATEMENT, CANCELLATION, OR
REVOCATION OF VOLUNTARY WINDING UP
Sec. 200.453. RESPONSIBILITY FOR WINDING UP
[Sections 200.454-200.500 reserved for expansion]
SUBCHAPTER K. MISCELLANEOUS PROVISIONS
Sec. 200.501. EXAMINATION OF RECORDS
Sec. 200.502. JOINDER OF SHAREHOLDERS NOT REQUIRED
Sec. 200.503. TAX LAW REQUIREMENTS
TITLE 6. ASSOCIATIONS
CHAPTER 251. COOPERATIVE ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 251.001. DEFINITIONS
Sec. 251.002. APPLICABILITY OF NONPROFIT CORPORATION
PROVISIONS
Sec. 251.003. EXEMPTION
[Sections 251.004-251.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 251.051. ORGANIZATION MEETING
Sec. 251.052. AMENDMENT OF CERTIFICATE OF FORMATION
Sec. 251.053. BYLAWS
[Sections 251.054-251.100 reserved for expansion]
SUBCHAPTER C. MANAGEMENT
Sec. 251.101. BOARD OF DIRECTORS
Sec. 251.102. OFFICERS
Sec. 251.103. REMOVAL OF DIRECTORS AND OFFICERS
Sec. 251.104. REFERENDUM
[Sections 251.105-251.150 reserved for expansion]
SUBCHAPTER D. MEMBERSHIP
Sec. 251.151. ELIGIBILITY AND ADMISSION
Sec. 251.152. EXPULSION
Sec. 251.153. SUBSCRIBERS
Sec. 251.154. LIABILITY
[Sections 251.155-251.200 reserved for expansion]
SUBCHAPTER E. SHARES
Sec. 251.201. SHARE AND MEMBERSHIP CERTIFICATES:
ISSUANCE AND CONTENTS
Sec. 251.202. TRANSFER OF SHARES AND MEMBERSHIP;
WITHDRAWAL
Sec. 251.203. SHARE AND MEMBERSHIP CERTIFICATES;
RECALL
Sec. 251.204. CERTIFICATES; ATTACHMENT
[Sections 251.205-251.250 reserved for expansion]
SUBCHAPTER F. MEETINGS AND VOTING
Sec. 251.251. MEETINGS
Sec. 251.252. NOTICE OF SPECIAL MEETING
Sec. 251.253. MEETINGS BY UNITS OF MEMBERSHIP
Sec. 251.254. ONE MEMBER--ONE VOTE
Sec. 251.255. NO PROXY
Sec. 251.256. VOTING BY MAIL
Sec. 251.257. VOTING BY MAIL OR BY DELEGATES
[Sections 251.258-251.300 reserved for expansion]
SUBCHAPTER G. CAPITAL AND NET SAVINGS
Sec. 251.301. LIMITATIONS ON RETURN ON CAPITAL
Sec. 251.302. ALLOCATION AND DISTRIBUTION OF NET
SAVINGS
[Sections 251.303-251.350 reserved for expansion]
SUBCHAPTER H. REPORTS AND RECORDS
Sec. 251.351. RECORDKEEPING
Sec. 251.352. REPORTS TO MEMBERS
Sec. 251.353. ANNUAL REPORT OF FINANCIAL CONDITION
Sec. 251.354. FAILURE TO FILE REPORT
[Sections 251.355-251.400 reserved for expansion]
SUBCHAPTER I. WINDING UP AND TERMINATION
Sec. 251.401. VOLUNTARY WINDING UP AND TERMINATION
Sec. 251.402. EXECUTION OF CERTIFICATE OF
TERMINATION
Sec. 251.403. DISTRIBUTION OF ASSETS
Sec. 251.404. INVOLUNTARY TERMINATION
[Sections 251.405-251.450 reserved for expansion]
SUBCHAPTER J. MISCELLANEOUS PROVISIONS
Sec. 251.451. EXEMPTION FROM TAXES
Sec. 251.452. USE OF NAME "COOPERATIVE"
CHAPTER 252. UNINCORPORATED NONPROFIT ASSOCIATIONS
Sec. 252.001. DEFINITIONS
Sec. 252.002. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW
AND EQUITY
Sec. 252.003. TERRITORIAL APPLICATION
Sec. 252.004. REAL AND PERSONAL PROPERTY; NONPROFIT
ASSOCIATION AS BENEFICIARY
Sec. 252.005. STATEMENT OF AUTHORITY AS TO REAL
PROPERTY
Sec. 252.006. LIABILITY IN TORT AND CONTRACT
Sec. 252.007. CAPACITY TO ASSERT AND DEFEND;
STANDING
Sec. 252.008. EFFECT OF JUDGMENT OR ORDER
Sec. 252.009. DISPOSITION OF PERSONAL PROPERTY OF
INACTIVE NONPROFIT ASSOCIATION
Sec. 252.010. BOOKS AND RECORDS
Sec. 252.011. APPOINTMENT OF AGENT TO RECEIVE SERVICE
OF PROCESS
Sec. 252.012. CLAIM NOT ABATED BY CHANGE
Sec. 252.013. SUMMONS AND COMPLAINT; SERVICE
Sec. 252.014. UNIFORMITY OF APPLICATION AND
CONSTRUCTION
Sec. 252.015. TRANSITION CONCERNING REAL AND PERSONAL
PROPERTY
Sec. 252.016. EFFECT ON OTHER LAW
Sec. 252.017. CHAPTER CONTROLLING
TITLE 7. PROFESSIONAL ENTITIES
CHAPTER 301. PROVISIONS RELATING TO
PROFESSIONAL ENTITIES
Sec. 301.001. APPLICABILITY OF TITLE
Sec. 301.002. CONFLICTS OF LAW
Sec. 301.003. DEFINITIONS
Sec. 301.004. AUTHORIZED PERSON
Sec. 301.005. APPLICATION FOR REGISTRATION OF
FOREIGN PROFESSIONAL ENTITY
Sec. 301.006. LICENSE REQUIRED TO PROVIDE
PROFESSIONAL SERVICE
Sec. 301.007. CERTAIN REQUIREMENTS TO BE OWNER,
GOVERNING PERSON, OR OFFICER
Sec. 301.008. DUTIES AND POWERS OF OWNER OR
MANAGERIAL OFFICIAL WHO CEASES TO BE
LICENSED; PURCHASE OF OWNERSHIP
INTEREST
Sec. 301.009. TRANSFER OF OWNERSHIP INTEREST
Sec. 301.010. LIABILITY
Sec. 301.011. EXEMPTION FROM SECURITIES LAWS
Sec. 301.012. JOINT PRACTICE BY CERTAIN
PROFESSIONALS
CHAPTER 302. PROVISIONS RELATING TO
PROFESSIONAL ASSOCIATIONS
Sec. 302.001. APPLICABILITY OF CERTAIN PROVISIONS
GOVERNING FOR-PROFIT CORPORATIONS
Sec. 302.002. DURATION OF PROFESSIONAL ASSOCIATION
Sec. 302.003. AMENDMENT OF CERTIFICATE OF
FORMATION
Sec. 302.004. ADOPTION OF BYLAWS; DELEGATION OF
AUTHORITY
Sec. 302.005. GOVERNING AUTHORITY
Sec. 302.006. MEMBERS' VOTING RIGHTS
Sec. 302.007. ELECTION OF OFFICERS
Sec. 302.008. OFFICER AND GOVERNING PERSON
ELIGIBILITY REQUIREMENTS
Sec. 302.009. EMPLOYMENT OF AGENTS AND EMPLOYEES
Sec. 302.010. LIMITATION ON MEMBER'S POWER TO BIND
ASSOCIATION
Sec. 302.011. DIVISION OF PROFITS
Sec. 302.012. ANNUAL STATEMENT REQUIRED
Sec. 302.013. WINDING UP AND TERMINATION;
CERTIFICATE OF TERMINATION
CHAPTER 303. PROVISIONS RELATING TO
PROFESSIONAL CORPORATIONS
Sec. 303.001. APPLICABILITY OF CERTAIN PROVISIONS
GOVERNING FOR-PROFIT CORPORATIONS
Sec. 303.002. AUTHORITY AND LIABILITY OF
SHAREHOLDER
Sec. 303.003. NOTICE OF RESTRICTION ON TRANSFER
OF SHARES
Sec. 303.004. REDEMPTION OF SHARES; PRICE AND
TERMS
Sec. 303.005. EXISTENCE OF PROFESSIONAL CORPORATION
BEFORE WINDING UP AND TERMINATION
Sec. 303.006. WINDING UP AND TERMINATION OF
PROFESSIONAL CORPORATION
CHAPTER 304. PROVISIONS RELATING TO PROFESSIONAL
LIMITED LIABILITY COMPANIES
Sec. 304.001. APPLICABILITY OF CERTAIN PROVISIONS
GOVERNING LIMITED LIABILITY
COMPANIES
TITLE 8. MISCELLANEOUS AND TRANSITION PROVISIONS
CHAPTER 401. GENERAL PROVISIONS
Sec. 401.001. DEFINITIONS
CHAPTER 402. MISCELLANEOUS AND TRANSITION PROVISIONS
Sec. 402.001. APPLICABILITY UPON EFFECTIVE DATE
Sec. 402.002. EARLY EFFECTIVENESS OF FEES
Sec. 402.003. EARLY ADOPTION OF CODE BY EXISTING
DOMESTIC ENTITY
Sec. 402.004. EARLY ADOPTION OF CODE BY REGISTERED
FOREIGN ENTITY
Sec. 402.005. APPLICABILITY TO EXISTING ENTITIES
ON MANDATORY APPLICATION DATE
Sec. 402.006. APPLICABILITY TO CERTAIN ACTS,
CONTRACTS, AND TRANSACTIONS
Sec. 402.007. INDEMNIFICATION
Sec. 402.008. MEETINGS OF OWNERS AND MEMBERS;
CONSENTS; VOTING OF INTERESTS
Sec. 402.009. MEETINGS OF GOVERNING AUTHORITY AND
COMMITTEES; CONSENTS
Sec. 402.010. SALE OF ASSETS, MERGERS, REORGANIZATIONS,
CONVERSIONS
Sec. 402.011. WINDING UP AND TERMINATION
Sec. 402.012. REGISTRATION OF CERTAIN FOREIGN
ENTITIES
Sec. 402.013. ENTITIES UNDER SUSPENSION FOR
NONFILING OF REQUIRED REPORTS OR PAYMENT
OF TAXES; APPLICABILITY OF PRIOR LAW
Sec. 402.014. MAINTENANCE OF PRIOR ACTION
BUSINESS ORGANIZATIONS CODE
TITLE 1. GENERAL PROVISIONS
CHAPTER 1. DEFINITIONS AND OTHER GENERAL PROVISIONS
SUBCHAPTER A. DEFINITIONS AND PURPOSE
Sec. 1.001. PURPOSE. The purpose of this code is to make the
law encompassed by this code more accessible and understandable by:
(1) rearranging the statutes into a more logical
order;
(2) employing a format and numbering system designed
to facilitate citation of the law and to accommodate future
expansion of the law;
(3) eliminating repealed, duplicative, expired,
executed, and other ineffective provisions; and
(4) restating the law in modern American English to
the greatest extent possible. (New.)
Sec. 1.002. DEFINITIONS. In this code:
(1) "Affiliate" means a person who controls, is
controlled by, or is under common control with another person.
(TBCA 13.02.A(1).)
(2) "Associate," when used to indicate a relationship
with a person, means:
(A) a domestic or foreign entity or organization
for which the person:
(i) is an officer or governing person; or
(ii) beneficially owns, directly or
indirectly, either individually or through an affiliate, 10 percent
or more of a class of voting ownership interests or similar
securities of the entity or organization;
(B) a trust or estate in which the person has a
substantial beneficial interest or for which the person serves as
trustee or in a similar fiduciary capacity;
(C) the person's spouse or a relative of the
person related by consanguinity or affinity who resides with the
person; or
(D) a governing person or an affiliate or officer
of the person. (TBCA 1.02.A(2).)
(3) "Association" means an entity governed as an
association under Title 6 or 7. The term includes a cooperative
association, nonprofit association, and professional association.
(New.)
(4) "Assumed name" means a name adopted for use by a
person. The term includes an assumed name filed under Chapter 36,
Business & Commerce Code. (New.)
(5) "Business" means a trade, occupation, profession,
or other commercial activity. (TRPA 1.01(1).)
(6) "Certificate of formation" means:
(A) the document required to be filed with the
filing officer under Chapter 3 to form a filing entity; and
(B) if appropriate, a restated certificate of
formation and all amendments of an original or restated certificate
of formation. (New.)
(7) "Certificated ownership interest" means an
ownership interest of a domestic entity represented by a
certificate issued in bearer or registered form. (TBCA 1.02.A(5).)
(8) "Close corporation" means a for-profit
corporation that elects to be governed as a close corporation in
accordance with Subchapter O, Chapter 21. (TBCA 12.02.A(1).)
(9) "Contribution" means a tangible or intangible
benefit that a person transfers to an entity in consideration for an
ownership interest in the entity or otherwise in the person's
capacity as an owner or a member. The benefit includes cash,
services rendered, a contract for services to be performed, a
promissory note or other obligation of a person to pay cash or
transfer property to the entity, or securities or other interests
in or obligations of an entity, but does not include cash or
property received by the entity:
(A) with respect to a promissory note or other
obligation to the extent that the agreed value of the note or
obligation has previously been included as a contribution; or
(B) that the person intends to be a loan to the
entity. (TLLCA 5.01; TRLPA 1.02(2).)
(10) "Conversion" means:
(A) the continuance of a domestic entity as a
foreign entity of any type;
(B) the continuance of a foreign entity as a
domestic entity of any type; or
(C) the continuance of a domestic entity of one
type as a domestic entity of another type. (TBCA 1.02.A(8); TLLCA
1.02.A(11); TRLPA 2.15(h)(1); TRPA 9.05(i)(1).)
(11) "Converted entity" means an entity resulting from
a conversion. (TBCA 1.02.A(9); TLLCA 1.02.A(12); TRLPA 2.15(h)(2);
TRPA 9.05(i)(2).)
(12) "Converting entity" means an entity as the entity
existed before the entity's conversion. (TBCA 1.02.A(10); TLLCA
1.02.A(13); TRLPA 2.15(h)(3); TRPA 9.05(i)(3).)
(13) "Cooperative" or "cooperative association" means
an association governed as a cooperative association under Chapter
251. (New.)
(14) "Corporation" means an entity governed as a
corporation under Title 2 or 7. The term includes a for-profit
corporation, nonprofit corporation, and professional corporation.
(TBCA 1.02.A(11); TNPCA 1.02.A(1).)
(15) "Debtor in bankruptcy" means a person who is the
subject of:
(A) an order for relief under the United States
bankruptcy laws (Title 11, United States Code); or
(B) a comparable order under a:
(i) successor statute of general
applicability; or
(ii) federal or state law governing
insolvency. (TRPA 1.01(4).)
(16) "Director" means an individual who serves on the
board of directors of a foreign or domestic corporation. (TNPCA
1.02.A(14).)
(17) "Domestic" means, with respect to an entity, that
the entity is formed under this code or the entity's internal
affairs are governed by this code. (TBCA 1.02.A(11) (part); TRPA
9.05(i)(4).)
(18) "Domestic entity" means an organization formed
under or the internal affairs of which are governed by this code.
(TBCA 1.02.A(11) (part); TRPA 9.05(i)(4).)
(19) "Domestic entity subject to dissenters' rights"
means a domestic entity the owners of which have rights of dissent
and appraisal under this code or the governing documents of the
entity. (New.)
(20) "Effective date of this code" means January 1,
2006. The applicability of this code is governed by Title 8.
(New.)
(21) "Entity" means a domestic entity or foreign
entity. (New.)
(22) "Filing entity" means a domestic entity that is a
corporation, limited partnership, limited liability company,
professional association, cooperative, or real estate investment
trust. (New.)
(23) "Filing instrument" means an instrument,
document, or statement that is required or authorized by this code
to be filed by or for an entity with the filing officer in
accordance with Chapter 4. (New.)
(24) "Filing officer" means:
(A) with respect to an entity other than a
domestic real estate investment trust, the secretary of state; or
(B) with respect to a domestic real estate
investment trust, the county clerk of the county in which the real
estate investment trust's principal office is located in this
state. (New.)
(25) "For-profit corporation" means a corporation
governed as a for-profit corporation under Chapter 21. (TMCLA
1.03.A.)
(26) "For-profit entity" means an entity other than a
nonprofit entity. (New.)
(27) "Foreign" means, with respect to an entity, that
the entity is formed under, and the entity's internal affairs are
governed by, the laws of a jurisdiction other than this state.
(TBCA 1.02.A(14); TNPCA 1.02.A(2); TRPA 9.05(i)(5).)
(28) "Foreign entity" means an organization formed
under, and the internal affairs of which are governed by, the laws
of a jurisdiction other than this state. (TBCA 1.02.A(14); TNPCA
1.02.A(2).)
(29) "Foreign filing entity" means a foreign entity
that registers or is required to register as a foreign entity under
Chapter 9. (New.)
(30) "Foreign governmental authority" means a
governmental official, agency, or instrumentality of a
jurisdiction other than this state. (New.)
(31) "Foreign nonfiling entity" means a foreign entity
that is not a foreign filing entity. (New.)
(32) "Fundamental business transaction" means a
merger, interest exchange, conversion, or sale of all or
substantially all of an entity's assets. (New.)
(33) "General partner" means:
(A) each partner in a general partnership; or
(B) a person who is admitted to a limited
partnership as a general partner in accordance with the governing
documents of the limited partnership. (TRLPA 1.02(4).)
(34) "General partnership" means a partnership
governed as a general partnership under Chapter 152. The term
includes a limited liability partnership. (TRPA 1.01(11).)
(35)(A) "Governing authority" means a person or group
of persons who are entitled to manage and direct the affairs of an
entity under this code and the governing documents of the entity,
except that if the governing documents of the entity or this code
divide the authority to manage and direct the affairs of the entity
among different persons or groups of persons according to different
matters, "governing authority" means the person or group of persons
entitled to manage and direct the affairs of the entity with respect
to a matter under the governing documents of the entity or this
code. The term includes:
(i) the board of directors of a corporation
or other persons authorized to perform the functions of the board of
directors of a corporation;
(ii) the general partners of a general
partnership or limited partnership;
(iii) the managers of a limited liability
company that is managed by managers;
(iv) the members of a limited liability
company that is managed by members who are entitled to manage the
company;
(v) the board of directors of a cooperative
association; and
(vi) the trust managers of a real estate
investment trust.
(B) The term does not include an officer who is
acting in the capacity of an officer. (New.)
(36) "Governing documents" means:
(A) in the case of a domestic entity:
(i) the certificate of formation for a
domestic filing entity or the document or agreement under which a
domestic nonfiling entity is formed; and
(ii) the other documents or agreements
adopted by the entity under this code to govern the formation or the
internal affairs of the entity; or
(B) in the case of a foreign entity, the
instruments, documents, or agreements adopted under the law of its
jurisdiction of formation to govern the formation or the internal
affairs of the entity. (New.)
(37) "Governing person" means a person serving as part
of the governing authority of an entity. (New.)
(38) "Individual" means a natural person. (New.)
(39) "Insolvency" means the inability of a person to
pay the person's debts as they become due in the usual course of
business or affairs. (TBCA 1.02.A(16); TNPCA 1.02.A(12).)
(40) "Insolvent" means a person who is unable to pay
the person's debts as they become due in the usual course of
business or affairs. (New.)
(41) "Interest exchange" means the acquisition of an
ownership or membership interest in a domestic entity as provided
by Subchapter B, Chapter 10. The term does not include a merger or
conversion. (New.)
(42) "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended. The term includes corresponding
provisions of subsequent federal tax laws. (New.)
(43) "Jurisdiction of formation" means:
(A) in the case of a domestic filing entity, this
state;
(B) in the case of a foreign filing entity, the
jurisdiction in which the entity's certificate of formation or
similar organizational instrument is filed; or
(C) in the case of a foreign or domestic
nonfiling entity:
(i) the jurisdiction the laws of which are
chosen in the entity's governing documents to govern its internal
affairs if that jurisdiction bears a reasonable relation to the
owners or members or to the domestic or foreign nonfiling entity's
business and affairs under the principles of this state that
otherwise would apply to a contract among the owners or members; or
(ii) if Subparagraph (i) does not apply,
the jurisdiction in which the entity has its chief executive
office. (TBCA 8.02 (part); TLLCA 7.02 (part); TNPCA 8.02 (part);
TRLPA 9.01(a); TRPA 1.05(a), 10.01(a).)
(44) "Law" means, unless the context requires
otherwise, both statutory and common law. (New.)
(45) "License" means a license, certificate of
registration, or other legal authorization. (New.)
(46) "Limited liability company" means an entity
governed as a limited liability company under Title 3 or 7. The
term includes a professional limited liability company. (TLLCA
1.02.A(3).)
(47) "Limited liability limited partnership" means a
partnership governed as a limited liability partnership and a
limited partnership under Title 4. (New.)
(48) "Limited liability partnership" means a
partnership governed as a limited liability partnership under Title
4. (TRPA 1.01(16).)
(49) "Limited partner" means a person who has been
admitted to a limited partnership as a limited partner as provided
by:
(A) in the case of a domestic limited
partnership, Chapter 153; or
(B) in the case of a foreign limited partnership,
the laws of its jurisdiction of formation. (TRLPA 1.02(5).)
(50) "Limited partnership" means a partnership
governed as a limited partnership under Title 4. The term includes
a limited liability limited partnership. (TRLPA 1.02(6).)
(51) "Manager" means a person designated as a manager
of a limited liability company that is not managed by members of the
company. (TLLCA 2.12 (part).)
(52) "Managerial official" means an officer or a
governing person. (New.)
(53) "Member" means:
(A) in the case of a limited liability company, a
person who is a member or has been admitted as a member in the
limited liability company under its governing documents;
(B) in the case of a nonprofit corporation, a
person who has membership rights in the nonprofit corporation under
its governing documents;
(C) in the case of a cooperative association, a
member of a nonshare or share association;
(D) in the case of a nonprofit association, a
person who has membership rights in the nonprofit association under
its governing documents; or
(E) in the case of a professional association, a
person who has membership rights in the professional association
under its governing documents. (CAA 2(2); TLLCA 4.01.A (part);
TNPCA 1.02.A(6); TUUNAA 2(1).)
(54) "Membership interest" means a member's interest
in an entity. With respect to a limited liability company, the term
includes a member's share of profits and losses or similar items and
the right to receive distributions, but does not include a member's
right to participate in management. (TLLCA 4.04, 4.05.A.)
(55) "Merger" means:
(A) the division of a domestic entity into two or
more new domestic entities or other organizations or into a
surviving domestic entity and one or more new domestic or foreign
entities or non-code organizations; or
(B) the combination of one or more domestic
entities with one or more domestic entities or non-code
organizations resulting in:
(i) one or more surviving domestic entities
or non-code organizations;
(ii) the creation of one or more new
domestic entities or non-code organizations; or
(iii) one or more surviving domestic
entities or non-code organizations and the creation of one or more
new domestic entities or non-code organizations. (TBCA 1.02.A(18);
TLLCA 1.02.A(10); TRLPA 1.02(8).)
(56) "Non-code organization" means an organization
other than a domestic entity. (TBCA 1.02.A(20); TLLCA 10.07; TRLPA
2.15(h)(4); TRPA 9.05(i)(6).)
(57) "Nonfiling entity" means a domestic entity that
is not a filing entity. The term includes a domestic general
partnership and nonprofit association. (New.)
(58) "Nonprofit association" means an association
governed as a nonprofit association under Chapter 252. (TUUNAA
2(2).)
(59) "Nonprofit corporation" means a corporation
governed as a nonprofit corporation under Chapter 22. (TNPCA
1.02.A(3).)
(60) "Nonprofit entity" means an entity that is a
nonprofit corporation, nonprofit association, or other entity that
is organized solely for one or more of the purposes specified by
Section 2.002. (New.)
(61) "Officer" means an individual elected,
appointed, or designated as an officer of an entity by the entity's
governing authority or under the entity's governing documents.
(New.)
(62) "Organization" means a corporation, limited or
general partnership, limited liability company, business trust,
real estate investment trust, joint venture, joint stock company,
cooperative, association, bank, insurance company, credit union,
savings and loan association, or other organization, regardless of
whether the organization is for-profit, nonprofit, domestic, or
foreign. (New.)
(63) "Owner," for purposes of Title 1, 7, or 8, means:
(A) with respect to a foreign or domestic
for-profit corporation or real estate investment trust, a
shareholder;
(B) with respect to a foreign or domestic
partnership, a partner;
(C) with respect to a foreign or domestic limited
liability company or professional association, a member; or
(D) with respect to another foreign or domestic
entity, an owner of an equity interest in that entity. (New.)
(64) "Ownership interest" means an owner's interest in
an entity. The term includes the owner's share of profits and
losses or similar items and the right to receive distributions. The
term does not include an owner's right to participate in
management. (New.)
(65) "Parent" means an organization that, directly or
indirectly through or with one or more of its subsidiaries:
(A) owns at least 50 percent of the outstanding
ownership or membership interests of another organization; or
(B) possesses at least 50 percent of the voting
power of the owners or members of another organization. (TMCLA
2.06.C (part).)
(66) "Partner" means a limited partner or general
partner. (TRLPA 1.02(9).)
(67) "Partnership" means an entity governed as a
partnership under Title 4. (TRPA 1.01(11) (part).)
(68) "Partnership interest" means a partner's interest
in a partnership. The term includes the partner's share of profits
and losses or similar items and the right to receive distributions.
The term does not include a partner's right to participate in
management. (TRLPA 1.02(11); TRPA 1.01(13).)
(69) "Party to the merger" means a domestic entity or
non-code organization that under a plan of merger is divided or
combined by a merger. The term does not include a domestic entity
or non-code organization that is not to be divided or combined into
or with one or more domestic entities or non-code organizations,
regardless of whether ownership interests of the entity are to be
issued under the plan of merger. (TBCA 5.03.I(4).)
(70) "President" means the:
(A) individual designated as president of an
entity under the entity's governing documents; or
(B) officer or committee of persons authorized to
perform the functions of the principal executive officer of an
entity without regard to the designated name of the officer or
committee. (TNCPA 1.02.A(8).)
(71) "Professional association" has the meaning
assigned by Section 301.003. (TPAA 2(A), as amended Acts 77th Leg.,
R.S., Chs. 508 and 883.)
(72) "Professional corporation" has the meaning
assigned by Section 301.003. (TPCA 3(b).)
(73) "Professional entity" has the meaning assigned by
Section 301.003. (TLLCA 11.01.B(4).)
(74) "Professional individual" has the meaning
assigned by Section 301.003. (TLLCA 11.01.B(3).)
(75) "Professional limited liability company" has the
meaning assigned by Section 301.003. (TLLCA 11.01.B(2).)
(76) "Professional service" has the meaning assigned
by Section 301.003. (TLLCA 11.01.B(1); TPAA 3; TPCA 3(a).)
(77) "Property" includes tangible and intangible
property and an interest in that property. (TRPA 1.01(15).)
(78) "Real estate investment trust" means an entity
governed as a real estate investment trust under Title 5. (TREITA
2.10.)
(79) "Secretary" means the:
(A) individual designated as secretary of an
entity under the entity's governing documents; or
(B) officer or committee of persons authorized to
perform the functions of secretary of an entity without regard to
the designated name of the officer or committee. (TNPCA
1.02.A(10).)
(80) "Share" means a unit into which the ownership
interest in a for-profit corporation, professional corporation,
real estate investment trust, or professional association is
divided, regardless of whether the share is certificated or
uncertificated. (TBCA 1.02.A(23); TPAA 10; TPCA 12 (part); TREITA
3.10(A)(7) (part).)
(81) "Shareholder" or "holder of shares" means the
person in whose name shares issued by a for-profit corporation,
professional corporation, or real estate investment trust are
registered in the share transfer records maintained by the
for-profit corporation, professional corporation, or real estate
investment trust. (TBCA 1.02.A(22).)
(82) "Signature" means any symbol executed or adopted
by a person with present intention to authenticate a writing.
Unless the context requires otherwise, the term includes a digital
signature, an electronic signature, and a facsimile of a signature.
(Bus. & Com. Code 43.002(8); Gov. Code 311.005(6), 2054.060(e)(1);
TMCLA 7.07.C; TRLPA 13.04(b); TRPA 3.08(b)(12).)
(83) "Subscriber" means a person who agrees with or
makes an offer to an entity to purchase by subscription an ownership
interest in the entity. (TBCA 1.02.A(25).)
(84) "Subscription" means an agreement between a
subscriber and an entity, or a written offer made by a subscriber to
an entity before or after the entity's formation, in which the
subscriber agrees or offers to purchase a specified ownership
interest in the entity. (TBCA 1.02.A(26).)
(85) "Subsidiary" means an organization for which
another organization, either directly or indirectly through or with
one or more of its other subsidiaries:
(A) owns at least 50 percent of the outstanding
ownership or membership interests of the organization; or
(B) possesses at least 50 percent of the voting
power of the owners or members of the organization. (TMCLA 2.06.C
(part).)
(86) "Treasurer" means the:
(A) individual designated as treasurer of an
entity under the entity's governing documents; or
(B) officer or committee of persons authorized to
perform the functions of treasurer of an entity without regard to
the designated name of the officer or committee. (TNPCA
1.02.A(11).)
(87) "Uncertificated ownership interest" means an
ownership interest in a domestic entity that is not represented by
an instrument and is transferred by:
(A) amendment of the governing documents of the
entity; or
(B) registration on books maintained by or on
behalf of the entity for the purpose of registering transfers of
ownership interests. (TBCA 1.02.A(29).)
(88) "Vice president" means the:
(A) individual designated as vice president of an
entity under the governing documents of the entity; or
(B) officer or committee of persons authorized to
perform the functions of the president of the entity on the death,
absence, or resignation of the president or on the inability of the
president to perform the functions of office without regard to the
designated name of the officer or committee. (TNPCA 1.02.A(9).)
(89) "Writing" or "written" means an expression of
words, letters, characters, numbers, symbols, figures, or other
textual information that is inscribed on a tangible medium or that
is stored in an electronic or other medium that is retrievable in a
perceivable form. Unless the context requires otherwise, the term:
(A) includes stored or transmitted electronic
data and transmissions and reproductions of writings; and
(B) does not include sound or video recordings of
speech other than transcriptions that are otherwise writings.
(Bus. & Com. Code 1.201(46), 43.002(12), 43.007, 43.008(a); Gov.
Code 312.011(17).)
Sec. 1.003. DISINTERESTED PERSON. (a) For purposes of this
code, a person is disinterested with respect to the approval of a
contract, transaction, or other matter, or to the consideration of
the disposition of a claim or challenge relating to a contract,
transaction, or particular conduct, if the person or the person's
associate:
(1) is not a party to the contract or transaction or
materially involved in the conduct that is the subject of the claim
or challenge; and
(2) does not have a material financial interest in the
outcome of the contract or transaction or the disposition of the
claim or challenge.
(b) For purposes of Subsection (a), a person is not
materially involved in a contract or transaction that is the
subject of a claim or challenge and does not have a material
financial interest in the outcome of a contract or transaction or
the disposition of a claim or challenge solely because:
(1) the person was nominated or elected as a governing
person by a person who is:
(A) interested in the contract or transaction; or
(B) alleged to have engaged in the conduct that
is the subject of the claim or challenge;
(2) the person receives normal fees or customary
compensation, reimbursement for expenses, or benefits as a
governing person of the entity;
(3) the person has a direct or indirect equity
interest in the entity;
(4) the entity has, or its subsidiaries have, an
interest in the contract or transaction or was affected by the
alleged conduct;
(5) the person or an associate of the person receives
ordinary and reasonable compensation for reviewing, making
recommendations regarding, or deciding on the disposition of the
claim or challenge; or
(6) in the case of a review by the person of the
alleged conduct that is the subject of the claim or challenge:
(A) the person is named as a defendant in the
derivative proceeding regarding the matter or as a person who
engaged in the alleged conduct; or
(B) the person, acting as a governing person,
approved, voted for, or acquiesced in the act being challenged if
the act did not result in a material personal or financial benefit
to the person and the challenging party fails to allege particular
facts that, if true, raise a significant prospect that the
governing person would be held liable to the entity or its owners or
members as a result of the conduct. (TBCA 1.02.A(12).)
Sec. 1.004. INDEPENDENT PERSON. (a) For purposes of this
code, a person is independent with respect to considering the
disposition of a claim or challenge regarding a contract or
transaction, or particular or alleged conduct, if the person:
(1) is disinterested;
(2) either:
(A) is not an associate, or member of the
immediate family, of a party to the contract or transaction or of a
person who is alleged to have engaged in the conduct that is the
subject of the claim or challenge; or
(B) is an associate to a party or person
described by Paragraph (A) that is an entity if the person is an
associate solely because the person is a governing person of the
entity or of the entity's subsidiaries or associates;
(3) does not have a business, financial, or familial
relationship with a party to the contract or transaction, or with
another person who is alleged to have engaged in the conduct, that
is the subject of the claim or challenge that could reasonably be
expected to materially and adversely affect the judgment of the
person in favor of the party or other person with respect to the
consideration of the matter; and
(4) is not shown, by a preponderance of the evidence,
to be under the controlling influence of a party to the contract or
transaction that is the subject of the claim or challenge or of a
person who is alleged to have engaged in the conduct that is the
subject of the claim or challenge.
(b) For purposes of Subsection (a), a person does not have a
relationship that could reasonably be expected to materially and
adversely affect the judgment of the person regarding the
disposition of a matter that is the subject of a claim or challenge
and is not otherwise under the controlling influence of a party to a
contract or transaction that is the subject of a claim or challenge
or that is alleged to have engaged in the conduct that is the
subject of a claim or challenge solely because:
(1) the person has been nominated or elected as a
governing person by a person who is interested in the contract or
transaction or alleged to be engaged in the conduct that is the
subject of the claim or challenge;
(2) the person receives normal fees or similar
customary compensation, reimbursement for expenses, or benefits as
a governing person of the entity;
(3) the person has a direct or indirect equity
interest in the entity;
(4) the entity has, or its subsidiaries have, an
interest in the contract or transaction or was affected by the
alleged conduct;
(5) the person or an associate of the person receives
ordinary and reasonable compensation for reviewing, making
recommendations regarding, or deciding on the disposition of the
claim or challenge; or
(6) the person, an associate of the person, other than
the entity or its associates, or an immediate family member has a
continuing business relationship with the entity that is not
material to the person, associate, or family member. (TBCA
1.02.A(15).)
Sec. 1.005. CONSPICUOUS INFORMATION. In this code, required
information is conspicuous if the information is placed in a manner
or displayed using a font that provides or should provide notice to
a reasonable person affected by the information. Required
information in a document is conspicuous if the font used for the
information is capitalized, boldfaced, italicized, or underlined
or is larger or of a different color than the remainder of the
document. (TBCA 1.02.A(6).)
Sec. 1.006. SYNONYMOUS TERMS. To the extent not
inconsistent with the provisions of the constitution and other
statutes or codes wherein such terms may be found, and as the
context requires, in this code or any other statute or code of this
state:
(1) a reference to "articles of incorporation,"
"articles of organization," "articles of association,"
"certificate of limited partnership," and "charter" includes a
"certificate of formation";
(2) a reference to "authorized capital stock" includes
"authorized shares";
(3) a reference to "capital stock" includes
"authorized and issued shares," "issued share," and "stated
capital";
(4) a reference to a "certificate of registration,"
"certificate of authority," and "permit to do business" includes
"registration";
(5) a reference to "stock" and "shares of stock"
includes "shares";
(6) a reference to "stockholder" includes
"shareholder";
(7) a reference to "no par stock" includes "shares
without par value"; and
(8) a reference to "paid-up capital" includes "stated
capital." (TMCLA 1.02.)
Sec. 1.007. SIGNING OF DOCUMENT OR OTHER WRITING. For
purposes of this code, a writing has been signed by a person when
the writing includes the person's signature. A transmission or
reproduction of a writing signed by a person is considered signed by
that person for purposes of this code. (TBCA 9.10.A(3); TLLCA
2.23.B(2); TNPCA 9.10.C(5); TMCLA 7.07.B, C; TRLPA 13.04(b); TRPA
3.08(a)(12).)
Sec. 1.008. SHORT TITLES. (a) The provisions of this code
as described by this section may be cited as provided by this
section.
(b) The provisions of Title 2 and the provisions of Title 1
to the extent applicable to corporations may be cited as the "Texas
Corporation Law."
(c) The provisions of Chapters 20 and 21 and the provisions
of Title 1 to the extent applicable to for-profit corporations may
be cited as the "Texas For-Profit Corporation Law."
(d) The provisions of Chapters 20 and 22 and the provisions
of Title 1 to the extent applicable to nonprofit corporations may be
cited as the "Texas Nonprofit Corporation Law."
(e) The provisions of Title 3 and the provisions of Title 1
to the extent applicable to limited liability companies may be
cited as the "Texas Limited Liability Company Law."
(f) The provisions of Chapters 151, 152, and 154 and the
provisions of Title 1 to the extent applicable to general
partnerships may be cited as the "Texas General Partnership Law."
(g) The provisions of Chapters 151, 153, and 154 and the
provisions of Title 1 to the extent applicable to limited
partnerships may be cited as the "Texas Limited Partnership Law."
(h) The provisions of Title 5 and the provisions of Title 1
to the extent applicable to real estate investment trusts may be
cited as the "Texas Real Estate Investment Trust Law."
(i) The provisions of Chapter 251 and the provisions of
Title 1 to the extent applicable to cooperative associations may be
cited as the "Texas Cooperative Association Law."
(j) The provisions of Title 7 and the provisions of Titles
1, 2, and 3 to the extent applicable to professional entities may be
cited as the "Texas Professional Entities Law."
(k) The provisions of Chapter 252 may be cited as the
"Uniform Unincorporated Nonprofit Association Act."
(l) The provisions of Chapters 301 and 302 and the
provisions of Chapters 20 and 21 and Title 1 to the extent
applicable to professional associations may be cited as the "Texas
Professional Association Law."
(m) The provisions of Chapters 301 and 303 and the
provisions of Chapters 20 and 21 and Title 1 to the extent
applicable to professional corporations may be cited as the "Texas
Professional Corporation Law."
(n) The provisions of Chapters 301 and 304 and the
provisions of Titles 1 and 3 to the extent applicable to
professional limited liability companies may be cited as the "Texas
Professional Limited Liability Company Law." (CAA 1; TBCA 1.01.A;
TLLCA 1.01.A; TNPCA 1.01.A; TPAA 1; TPCA 1; TREITA 1.10; TRLPA 1.01;
TRPA 11.01; TUUNAA 1.)
Sec. 1.009. DOLLARS AS MONETARY UNITS. Unless the context
requires otherwise, a value or amount that is required by this code
to be stated in monetary terms must be stated in United States
dollars. Currency that is not specified is considered to be in
United States dollars. (New.)
[Sections 1.010-1.050 reserved for expansion]
SUBCHAPTER B. CODE CONSTRUCTION
Sec. 1.051. CONSTRUCTION OF CODE. Chapter 311, Government
Code (Code Construction Act), applies to the construction of each
provision in this code except as otherwise expressly provided by
this code. (New.)
Sec. 1.052. REFERENCE IN LAW TO STATUTE REVISED BY CODE. A
reference in a law to a statute or a part of a statute revised by
this code is considered to be a reference to the part of this code
that revises that statute or part of that statute. (TBCA 1.02.C.)
Sec. 1.053. APPLICABILITY TO FOREIGN AND INTERSTATE
AFFAIRS. This code applies to the conduct of affairs with foreign
countries and the other states of the United States only to the
extent permitted under the United States Constitution. (TBCA 9.11;
TLLCA 8.09; TNPCA 10.01.)
Sec. 1.054. RESERVATION OF POWER. The legislature at all
times has the power to amend, repeal, or modify this code and to
prescribe regulations, provisions, and limitations as the
legislature considers advisable. The regulations, provisions, and
limitations are binding on any entity subject to this code. (TBCA
9.12; TLLCA 8.10; TNPCA 10.02; TRPA 1.06.)
[Sections 1.055-1.100 reserved for expansion]
SUBCHAPTER C. DETERMINATION OF APPLICABLE LAW
Sec. 1.101. DOMESTIC FILING ENTITIES. The law of this state
governs the formation and internal affairs of an entity if the
entity's formation occurs when a certificate of formation filed in
accordance with Chapter 4 takes effect. (CAA 2(1); TBCA
1.02.A(11); TLLCA 1.02.A(3); TNPCA 1.02.A(1); TPAA 2(A); TPCA 6;
TREITA 2.10; TRLPA 1.02(5), (6); TRPA 1.01(11); TRPA 1.05(a).)
Sec. 1.102. FOREIGN FILING ENTITIES. If the formation of an
entity occurs when a certificate of formation or similar instrument
filed with a foreign governmental authority takes effect, the law
of the state or other jurisdiction in which that foreign
governmental authority is located governs the formation and
internal affairs of the entity. (TBCA 8.02 (part); TLLCA 7.02
(part); TNPCA 8.02 (part); TRLPA 9.01(a).)
Sec. 1.103. ENTITIES NOT FORMED BY FILING INSTRUMENT. If
the formation of an entity does not occur when a certificate of
formation or similar instrument filed with the secretary of state
or with a foreign governmental authority takes effect, the law
governing the entity's formation and internal affairs is the law of
the entity's jurisdiction of formation. (TRPA 1.05(a) (part),
10.01(a) (part).)
Sec. 1.104. LAW APPLICABLE TO LIABILITY. The law of the
jurisdiction that governs an entity as determined under Sections
1.101-1.103 applies to the liability of an owner, a member, or a
managerial official of the entity in the capacity as an owner, a
member, or a managerial official for an obligation, including a
debt or other liability, of the entity for which the owner, member,
or managerial official is not otherwise liable by contract or under
provisions of law other than this code. (TBCA 8.02 (part); TLLCA
7.02 (part); TNPCA 8.02 (part); TRLPA 9.01(a) (part); TRPA 1.05(b),
10.01(a) (part).)
Sec. 1.105. INTERNAL AFFAIRS. For purposes of this code,
the internal affairs of an entity include:
(1) the rights, powers, and duties of its governing
authority, governing persons, officers, owners, and members; and
(2) matters relating to its membership or ownership
interests. (TBCA 8.02 (part); TLLCA 7.02 (part); TNPCA 8.02
(part); TRLPA 9.01(a).)
Sec. 1.106. ORDER OF PRECEDENCE. (a) This title applies to
all domestic entities and foreign entities to the extent provided
by this title.
(b) Each title of this code, other than this title, applies
to a different type of entity to the extent provided by that title.
(c) If a provision of this title conflicts with a provision
in another title of this code, the provision of the other title
supersedes the provision of this title. (New.)
CHAPTER 2. PURPOSES AND POWERS OF DOMESTIC ENTITY
SUBCHAPTER A. PURPOSES OF DOMESTIC ENTITY
Sec. 2.001. GENERAL SCOPE OF PERMISSIBLE PURPOSES. A
domestic entity has any lawful purpose or purposes, unless
otherwise provided by this code. (TBCA 2.01.A (part); TLLCA
2.01.A; TNPCA 2.01.A (part); TRLPA 1.09(a).)
Sec. 2.002. PURPOSES OF NONPROFIT ENTITY. The purpose or
purposes of a domestic nonprofit entity may include one or more of
the following purposes:
(1) serving charitable, benevolent, religious,
eleemosynary, patriotic, civic, missionary, educational,
scientific, social, fraternal, athletic, aesthetic, agricultural,
and horticultural purposes;
(2) operating or managing a professional, commercial,
or trade association or labor union;
(3) providing animal husbandry; or
(4) operating on a nonprofit cooperative basis for the
benefit of its members. (TNPCA 2.01.A (part).)
Sec. 2.003. GENERAL PROHIBITED PURPOSES. A domestic entity
may not:
(1) engage in a business or activity that:
(A) is expressly unlawful or prohibited by a law
of this state;
(B) cannot lawfully be engaged in by that entity
under state law; or
(C) may not be engaged in by an entity without
first obtaining a license under the laws of this state to engage in
that business or activity and a license cannot lawfully be granted
to the entity; or
(2) operate as a:
(A) bank;
(B) trust company;
(C) savings association;
(D) insurance company;
(E) railroad company;
(F) cemetery organization; or
(G) abstract or title company governed by Chapter
9, Insurance Code. (CAA 6 (part); TBCA 2.01.B (part); TLLCA 2.01.B;
TNPCA 2.01.B (part); TRLPA 1.09(b).)
Sec. 2.004. LIMITATION ON PURPOSES OF PROFESSIONAL ENTITY.
Except as provided in Title 7, a professional entity may engage in
only:
(1) one type of professional service, unless the
entity is expressly authorized to provide more than one type of
professional service under state law regulating the professional
services; and
(2) services ancillary to that type of professional
service. (Court opinion; TLLCA 11.01.A(2); TPCA 4(a) (part), 6.)
Sec. 2.005. LIMITATION IN GOVERNING DOCUMENTS. The
governing documents of a domestic entity may contain limitations on
the entity's purposes. (TLLCA 2.01.A; TRLPA 1.09(a).)
Sec. 2.006. PERMISSIBLE PURPOSE OF FOR-PROFIT CORPORATION
RELATED TO RAILROADS. Notwithstanding Section 2.003(2)(E), a
for-profit corporation may:
(1) construct, acquire, maintain, and operate street
railways, suburban railways, and belt lines of railways in or near
municipalities to transport freight and passengers;
(2) construct, own, and operate union depots;
(3) buy, sell, and convey rights-of-way on which to
construct railroads;
(4) construct, acquire, maintain, and operate lines of
electric, gas, or gasoline, denatured alcohol, or naphtha motor
railways in and between municipalities, and interurban railways in
and between municipalities in this state to transport freight or
passengers;
(5) build, maintain, and operate a line of railroads
to mines, gins, quarries, manufacturing plants, or mills;
(6) construct, maintain, and operate terminal
railways; or
(7) operate a railroad passenger service by
contracting with a railroad corporation or other company that does
not construct, own, or maintain a railroad track. (TBCA 2.01.C;
TMCLA 3.05.)
Sec. 2.007. ADDITIONAL PROHIBITED ACTIVITIES OF FOR-PROFIT
CORPORATION. A for-profit corporation may not:
(1) operate a cooperative association, limited
cooperative association, or labor union;
(2) transact a combination of the businesses of:
(A) raising cattle and owning land for the
raising of cattle, other than operating and owning feedlots and
feeding cattle; and
(B) operating stockyards and slaughtering,
refrigerating, canning, curing, or packing meat; or
(3) engage in a combination of:
(A) the petroleum oil producing business in this
state; and
(B) the oil pipeline business in this state other
than through stock ownership in a for-profit corporation engaged in
the oil pipeline business and other than the ownership or operation
of private pipelines in and about the corporation's refineries,
fields, or stations. (TBCA 2.01.B (part).)
Sec. 2.008. NONPROFIT CORPORATIONS. A corporation formed
for the purpose of operating a nonprofit institution, including an
institution devoted to a charitable, benevolent, religious,
patriotic, civic, cultural, missionary, educational, scientific,
social, fraternal, athletic, or aesthetic purpose, may be formed
and governed only as a nonprofit corporation under this code and not
as a for-profit corporation under this code. (TBCA 2.01.A (part).)
Sec. 2.009. PERMISSIBLE PURPOSE OF NONPROFIT CORPORATION
RELATED TO ORGANIZED LABOR. Subject to Chapter 101, Labor Code, a
nonprofit corporation may be formed to organize laborers, workers,
or wage earners to protect themselves in their various pursuits.
(TNPCA 2.01.A (part).)
Sec. 2.010. PROHIBITED ACTIVITIES OF NONPROFIT
CORPORATION. A nonprofit corporation may not be organized or
registered under this code to conduct its affairs in this state to:
(1) engage in or operate as a group hospital service,
rural credit union, agricultural and livestock pool, mutual loan
corporation, cooperative association under Chapter 251,
cooperative credit association, farmers' cooperative society,
Co-operative Marketing Act corporation, rural electric cooperative
corporation, telephone cooperative corporation, or fraternal
organization operating under the lodge system and incorporated
under Subchapter C, Chapter 23; or
(2) engage in water supply or sewer service as an
entity incorporated under Chapter 67, Water Code. (TNPCA 2.01.B
(part).)
Sec. 2.011. PURPOSES OF COOPERATIVE ASSOCIATION. (a) A
person may organize a cooperative association under this code to
acquire, produce, build, operate, manufacture, furnish, exchange,
or distribute any type of property, commodities, goods, or services
for the primary and mutual benefit of the members of the cooperative
association.
(b) A cooperative association may not be organized to:
(1) serve or function as a health maintenance
organization;
(2) furnish medical or health care; or
(3) employ or contract with a health care provider in a
manner prohibited by the statute under which the provider is
licensed.
(c) A cooperative association may not directly or
indirectly engage in a health maintenance organization or a prepaid
legal service corporation. (CAA 5, 6 (part), 26(b) (part).)
Sec. 2.012. LIMITATION ON PURPOSES OF REAL ESTATE
INVESTMENT TRUST. The purposes of a real estate investment trust
are limited by Section 3.012. (TREITA 3.10(A) (part).)
[Sections 2.013-2.100 reserved for expansion]
SUBCHAPTER B. POWERS OF DOMESTIC ENTITY
Sec. 2.101. GENERAL POWERS. Except as otherwise provided by
this code, a domestic entity has the same powers as an individual to
take action necessary or convenient to carry out its business and
affairs. Except as otherwise provided by this code, the powers of a
domestic entity include the power to:
(1) sue, be sued, and defend suit in the entity's
business name;
(2) have and alter a seal and use the seal or a
facsimile of it by impressing, affixing, or reproducing it;
(3) acquire, receive, own, hold, improve, use, and
deal in and with property or an interest in property;
(4) sell, convey, mortgage, pledge, lease, exchange,
and otherwise dispose of property;
(5) make contracts and guarantees;
(6) incur liabilities, borrow money, issue notes,
bonds, or other obligations, which may be convertible into, or
include the option to purchase, other securities or ownership
interests in the entity, and secure its obligations by mortgaging
or pledging its property, franchises, or income;
(7) lend money, invest its funds, and receive and hold
property as security for repayment if the loan or assistance
reasonably may be expected to benefit, directly or indirectly, the
entity;
(8) acquire its own bonds, debentures, or other
evidences of indebtedness or obligations;
(9) acquire its own ownership interests, regardless of
whether redeemable, and hold the ownership interests as treasury
ownership interests or cancel or dispose of the ownership
interests;
(10) be a promoter, organizer, owner, partner, member,
associate, or manager of an organization;
(11) acquire, receive, own, hold, vote, use, pledge,
and dispose of ownership interests in or securities issued by
another person;
(12) conduct its business, locate its offices, and
exercise the powers granted by this code to further its purposes, in
or out of this state;
(13) lend money to, and otherwise assist, its
managerial officials, owners, members, or employees as necessary or
appropriate;
(14) elect or appoint officers and agents of the
entity, establish the length of their terms, define their duties,
and fix their compensation;
(15) pay pensions and establish pension plans, pension
trusts, profit-sharing plans, bonus plans, and incentive plans for
managerial officials, owners, members, or employees or former
managerial officials, owners, members, or employees;
(16) indemnify and maintain liability insurance for
managerial officials, owners, members, employees, and agents of the
entity or the entity's affiliate;
(17) adopt and amend governing documents for managing
the affairs of the entity subject to applicable law;
(18) make donations for the public welfare or for a
charitable, scientific, or educational purpose;
(19) voluntarily wind up its business and activities
and terminate its existence;
(20) transact business or take action that will aid
governmental policy; and
(21) take other action necessary or appropriate to
further the purposes of the entity. (TBCA 2.02.A (part); TLLCA
2.02.A, 2.11; TNPCA 2.02.A (part); TPAA 5; TREITA 6.10(A); TRPA
3.01 (part), 3.05(a).)
Sec. 2.102. ADDITIONAL POWERS OF NONPROFIT ENTITY OR
INSTITUTION. To effect its purposes, a domestic nonprofit entity or
institution formed for a religious, charitable, educational, or
eleemosynary purpose may acquire, own, hold, mortgage, and dispose
of and invest its funds in property for the use and benefit of,
under the discretion of, and in trust for a convention, conference,
or association organized under the laws of this state or another
state with which it is affiliated or by which it is controlled.
(TNPCA 2.02.A (part).)
Sec. 2.103. POWER TO INCUR INDEBTEDNESS. (a) Unless
otherwise provided by its governing documents or this code, a
domestic entity may create indebtedness for any consideration the
entity considers appropriate, including:
(1) cash;
(2) property;
(3) a contract to receive property;
(4) a debt or other obligation of the entity or of
another person;
(5) services performed or a contract for services to
be performed; or
(6) a direct or indirect benefit realized by the
entity.
(b) In the absence of fraud in the transaction, the judgment
of the governing authority of a domestic entity as to the value of
the consideration received by the entity for indebtedness is
conclusive.
(c) The consideration for the indebtedness may be received
either directly or indirectly by the domestic entity, including by
a domestic or foreign organization that is wholly or partially
owned, directly or indirectly, by the domestic entity.
(d) This section does not apply to indebtedness created by a
domestic entity that is incurred by reason of the authorization or
payment of a distribution. (TLLCA 8.12.B; TMCLA 2.06.A.)
Sec. 2.104. POWER TO MAKE GUARANTIES. (a) In this section,
"guaranty" means a mortgage, pledge, security agreement, or other
agreement making the domestic entity or its assets secondarily
liable for another person's contract, security, or other
obligation.
(b) Unless otherwise provided by its governing documents or
this code, a domestic entity may:
(1) make a guaranty on behalf of a parent, subsidiary,
or affiliate of the entity; or
(2) make a guaranty of the indebtedness of another
person if the guaranty may reasonably be expected directly or
indirectly to benefit the entity.
(c) For purposes of Subsection (b)(2), a decision by the
governing authority of the domestic entity that a guaranty may
reasonably be expected to benefit the entity is conclusive and not
subject to attack by any person, except:
(1) a guaranty may not be enforced by a person who
participated in a fraud on the domestic entity resulting in the
making of the guaranty or by a person who had notice of that fraud at
the time the person acquired rights under the guaranty;
(2) a proposed guaranty may be enjoined at the request
of an owner of the domestic entity on the ground that the guaranty
cannot reasonably be expected to benefit the domestic entity; or
(3) the domestic entity, whether acting directly or
through a receiver, trustee, or other legal representative, or
through an owner on behalf of the domestic entity, may bring suit
for damages against the managerial officials, owners, or members
who authorized the guaranty on the ground that the guaranty could
not reasonably be expected to benefit the domestic entity.
(d) This section does not:
(1) apply to a domestic entity governed by the
Insurance Code; or
(2) authorize a domestic entity that is not governed
by the Insurance Code to engage in a business or transaction
regulated by the Insurance Code. (TLLCA 8.12.B; TMCLA 2.06.B, C,
D.)
Sec. 2.105. ADDITIONAL POWERS OF CERTAIN PIPELINE
BUSINESSES. In addition to the powers provided by the other
sections of this subchapter, a corporation, general partnership,
limited partnership, limited liability company, or other
combination of those entities engaged as a common carrier in the
pipeline business for the purpose of transporting oil, oil
products, gas, carbon dioxide, salt brine, fuller's earth, sand,
clay, liquefied minerals, or other mineral solutions has all the
rights and powers conferred on a common carrier by Sections
111.019-111.022, Natural Resources Code. (TBCA 2.01.B (part);
TLLCA 2.02.D; TRLPA 1.09(c); TRPA 3.01 (part).)
Sec. 2.106. POWER OF NONPROFIT CORPORATION TO SERVE AS
TRUSTEE. (a) A nonprofit corporation that is described by Section
501(c)(3) or 170(c), Internal Revenue Code, or a corresponding
provision of a subsequent federal tax law, or a nonprofit
corporation listed by the Internal Revenue Service in the
Cumulative List of Organizations Described in Section 170(c) of the
Internal Revenue Code of 1986, I.R.S. Publication 78, or any
successor I.R.S. publication, may serve as the trustee of a trust:
(1) of which the nonprofit corporation is a
beneficiary; or
(2) benefiting another organization described by one
of those sections of the Internal Revenue Code, or a corresponding
provision of a subsequent federal tax law, or listed by the Internal
Revenue Service in the Cumulative List of Organizations Described
in Section 170(c) of the Internal Revenue Code of 1986, I.R.S.
Publication 78, or any successor I.R.S. publication.
(b) Any corporation (or person or entity assisting such
corporation) described in this section shall have immunity from
suit (including both a defense to liability and the right not to
bear the cost, burden, and risk of discovery and trial) as to any
claim alleging that the corporation's role as trustee of a trust
described in this section constitutes engaging in the trust
business in a manner requiring a state charter as defined in Section
181.002(a)(9), Finance Code. An interlocutory appeal may be taken
if a court denies or otherwise fails to grant a motion for summary
judgment that is based on an assertion of the immunity provided in
this subsection. (TNPCA 2.31.)
Sec. 2.107. STANDARD TAX PROVISIONS FOR CERTAIN CHARITABLE
NONPROFIT CORPORATIONS; POWER TO EXCLUDE. (a) Notwithstanding any
conflicting provision of this chapter, Chapter 3, or the
certificate of formation and except as provided by Subsection (b),
the certificate of formation of each corporation that is a private
foundation as defined by Section 509, Internal Revenue Code, is
considered to contain the following provisions: "The corporation
shall make distributions at the time and in the manner as not to
subject it to tax under Section 4942 of the Internal Revenue Code of
1986; the corporation shall not engage in any act of self-dealing
which would be subject to tax under Section 4941 of the Code; the
corporation shall not retain any excess business holdings which
would subject it to tax under Section 4943 of the Code; the
corporation shall not make any investments which would subject it
to tax under Section 4944 of the Code; and the corporation shall not
make any taxable expenditures which would subject it to tax under
Section 4945 of the Code."
(b) A nonprofit corporation described by Subsection (a) may
amend the certificate of formation of the corporation to expressly
exclude the application of Subsection (a). (TNPCA 2.27.A, B.)
Sec. 2.108. POWERS OF PROFESSIONAL ASSOCIATION. Except as
provided by Title 7, a professional association has the same
powers, privileges, duties, restrictions, and liabilities as a
for-profit corporation. (TPAA 25 (part).)
Sec. 2.109. POWERS OF PROFESSIONAL CORPORATION. Except as
provided by Title 7, a professional corporation has the same
powers, privileges, duties, restrictions, and liabilities as a
for-profit corporation. (TPCA 5 (part).)
Sec. 2.110. POWERS OF COOPERATIVE ASSOCIATION. (a) Except
as provided by Chapter 251, a cooperative association may exercise
the same powers and privileges and is subject to the same duties,
restrictions, and liabilities as a nonprofit corporation.
(b) A cooperative association may:
(1) own and hold membership in other associations or
corporations;
(2) own and hold share capital of other associations
or corporations;
(3) own and exercise ownership rights in bonds or
other obligations;
(4) make agreements of mutual aid or federation with
other associations, other groups organized on a cooperative basis,
or other nonprofit groups; and
(5) deliver money to a scholarship fund for rural
students. (CAA 6 (part).)
Sec. 2.111. LIMITATION ON POWERS OF COOPERATIVE
ASSOCIATION. Except for the payment of necessary legal fees or
promotion expenses, a cooperative association may not directly or
indirectly use its funds, issue shares, or incur indebtedness for
the payment of compensation for the organization of the cooperative
association in excess of five percent of the amount paid for the
shares or membership certificates involved in the promotion
transaction. (CAA 40(a).)
Sec. 2.112. STATED POWERS IN SUBCHAPTER SUFFICIENT. A
domestic entity is not required to state any of the powers provided
to the entity by this subchapter in its governing documents. (TBCA
3.02.B; TLLCA 3.02.B; TNPCA 3.02.C.)
Sec. 2.113. LIMITATION ON POWERS. (a) This subchapter does
not authorize a domestic entity or a managerial official of a
domestic entity to exercise a power in a manner inconsistent with a
limitation on the purposes or powers of the entity contained in its
governing documents, this code, or other law of this state.
(b) This code does not authorize any action in violation of
the antitrust laws of this state. (TBCA 2.02.B, C; TLLCA 2.02.B, C;
TNPCA 2.02.B, C; TREITA 6.10(B), (C).)
Sec. 2.114. CERTIFICATED INDEBTEDNESS; MANNER OF ISSUANCE;
SIGNATURE AND SEAL. (a) Except as otherwise provided by the
governing documents of the domestic entity, this code, or other
law, on the issuance by a domestic entity of a bond, debenture, or
other evidence of indebtedness in certificated form, the seal of
the entity, if the entity has adopted a seal, may be a facsimile
that may be engraved or printed on the certificate.
(b) Except as otherwise provided by the governing documents
of the domestic entity, this code, or other law, if a security
described by Subsection (a) is authenticated with the manual
signature of an authorized officer of the domestic entity or an
authorized officer or representative, to the extent permitted by
law, of a transfer agent or trustee appointed or named by an
indenture of trust or other agreement under which the security is
issued, the signature of any officer of the domestic entity may be a
facsimile signature.
(c) A security described by Subsection (a) that contains the
manual or facsimile signature of a person who is no longer an
officer when the security is delivered by the entity may be adopted,
issued, and delivered by the entity in the same manner and to the
same extent as if the person had remained an officer of the entity.
(TLLCA 8.12.B; TMCLA 2.05.)
CHAPTER 3. FORMATION AND GOVERNANCE
SUBCHAPTER A. FORMATION, EXISTENCE, AND
CERTIFICATE OF FORMATION
Sec. 3.001. FORMATION AND EXISTENCE OF FILING ENTITIES. (a)
Subject to the other provisions of this code, to form a filing
entity, a certificate of formation complying with Sections 3.003,
3.004, and 3.005 must be filed in accordance with Chapter 4.
(b) The filing of a certificate of formation described by
Subsection (a) may be included in a filing under Chapter 10.
(c) The existence of a filing entity commences when the
filing of the certificate of formation takes effect as provided by
Chapter 4.
(d) Except in a proceeding by the state to terminate the
existence of a filing entity, an acknowledgment of the filing of a
certificate of formation issued by the filing officer is conclusive
evidence of:
(1) the formation and existence of the filing entity;
(2) the satisfaction of all conditions precedent to
the formation of the filing entity; and
(3) the authority of the filing entity to transact
business in this state. (CAA 9(a), (b); TBCA 3.03.A, 3.04; TLLCA
3.01, 3.03.A, 3.04, 11.01.A(1) (part); TNPCA 3.03.A, 3.04; TPAA
12(A), 13; TPCA 4(a) (part); TREITA 3.10(B); TRLPA 2.01(a) (part),
(b).)
Sec. 3.002. FORMATION AND EXISTENCE OF NONFILING ENTITIES.
The requirements for the formation of and the determination of the
existence of a nonfiling entity are governed by the title of this
code that applies to that entity. (New.)
Sec. 3.003. DURATION. A domestic entity exists perpetually
unless otherwise provided in the governing documents of the entity.
A domestic entity may be terminated in accordance with this code or
the Tax Code. (TBCA 2.02.A (part); TLLCA 2.02.A; TNPCA 2.02.A
(part); TPCA 17 (part).)
Sec. 3.004. ORGANIZERS. (a) Any person having the capacity
to contract for the person or for another may be an organizer of a
filing entity.
(b) Each organizer of a filing entity must sign the
certificate of formation of the filing entity, except that:
(1) each general partner must sign the certificate of
formation of a domestic limited partnership; and
(2) each trust manager must sign and acknowledge
before an officer who is authorized by law to take acknowledgment of
a deed the certificate of formation of a domestic real estate
investment trust. (TBCA 3.01 (part); TLLCA 3.01 (part); TNPCA
3.01.A (part); TREITA 3.10(A) (part); TRLPA 2.01(a) (part).)
Sec. 3.005. CERTIFICATE OF FORMATION. (a) The certificate
of formation must state:
(1) the name of the filing entity being formed;
(2) the type of filing entity being formed;
(3) for filing entities other than limited
partnerships, the purpose or purposes for which the filing entity
is formed, which may be stated to be or include any lawful purpose
for that type of entity;
(4) for filing entities other than limited
partnerships, the period of duration, if the entity is not formed to
exist perpetually;
(5) the street address of the initial registered
office of the filing entity and the name of the initial registered
agent of the filing entity at the office;
(6) the name and address of each:
(A) organizer for the filing entity, unless the
entity is formed under a plan of conversion or merger;
(B) general partner, if the filing entity is a
limited partnership; or
(C) trust manager, if the filing entity is a real
estate investment trust;
(7) if the filing entity is formed under a plan of
conversion or merger, a statement to that effect and, if formed
under a plan of conversion, the name, address, date of formation,
prior form of organization, and jurisdiction of formation of the
converting entity; and
(8) any other information required by this code to be
included in the certificate of formation for the filing entity.
(b) The certificate of formation may contain other
provisions not inconsistent with law relating to the organization,
ownership, governance, business, or affairs of the filing entity.
(c) Except as provided by Section 3.004, Chapter 4 governs
the signing and filing of a certificate of formation for a domestic
entity. (TBCA 3.02.A (part); TLLCA 3.02.A (part), 11.01.A(1)
(part); TNPCA 3.02.A (part); TPAA 8(A) (part); TPCA 4(a) (part);
TREITA 3.10(A) (part); TRLPA 2.01(a) (part).)
Sec. 3.006. FILINGS IN CASE OF MERGER OR CONVERSION. (a) If
a new domestic filing entity is formed under a plan of conversion or
merger, the certificate of formation of the entity must be filed
with the certificate of conversion or merger under Section
10.155(a) or 10.153(a). The certificate of formation is not
required to be filed separately under Section 3.001.
(b) The formation and existence of a domestic filing entity
that is a converted entity in a conversion or that is to be created
under a plan of merger takes effect and commences on the
effectiveness of the conversion or merger, as appropriate. (TBCA
3.03.C (part), 3.04.B; TLLCA 3.03.C (part), 3.04.B; TRLPA 2.01(b)
(part), 2.11(e) (part), 2.15(c) (part).)
Sec. 3.007. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF FOR-PROFIT CORPORATION. (a) In
addition to the information required by Section 3.005, the
certificate of formation of a for-profit corporation must state:
(1) the aggregate number of shares the corporation is
authorized to issue;
(2) if the shares the corporation is authorized to
issue consist of one class of shares only, the par value of each
share or a statement that each share is without par value;
(3) if the corporation is to be managed by a board of
directors, the number of directors constituting the initial board
of directors and the name and address of each person who will serve
as director until the first annual meeting of shareholders and
until a successor is elected and qualified; and
(4) if the corporation is to be managed pursuant to a
shareholders' agreement in a manner other than by a board of
directors, the name and address of each person who will perform the
functions required by this code to be performed by the initial board
of directors.
(b) If the shares a for-profit corporation is authorized to
issue consist of more than one class of shares, the certificate of
formation of the for-profit corporation must, with respect to each
class, state:
(1) the designation of the class;
(2) the aggregate number of shares in the class;
(3) the par value of each share or a statement that
each share is without par value;
(4) the preferences, limitations, and relative rights
of the shares; and
(5) if the shares in a class the corporation is
authorized to issue consist of more than one series, the following
with respect to each series:
(A) the designation of the series;
(B) the aggregate number of shares in the series;
(C) any preferences, limitations, and relative
rights of the shares to the extent provided in the certificate of
formation; and
(D) any authority vested in the board of
directors to establish the series and set and determine the
preferences, limitations, and relative rights of the series.
(c) If the shareholders of a for-profit corporation are to
have a preemptive right or cumulative voting right, the certificate
of formation of the for-profit corporation must comply with Section
21.203 or 21.360, as appropriate. (TBCA 3.02.A (part).)
Sec. 3.008. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF CLOSE CORPORATION. (a) In addition to a
provision required or permitted to be stated in the certificate of
formation of a for-profit corporation under Section 3.007, the
certificate of formation of a close corporation, whether original,
amended, or restated, must include the sentence, "This corporation
is a close corporation."
(b) The certificate of formation of the close corporation
may contain:
(1) a provision contained or permitted to be contained
in a shareholders' agreement conforming to Subchapter O, Chapter
21, that the organizers elect to include in the certificate of
formation; or
(2) a copy of a shareholders' agreement that conforms
to Subchapter O, Chapter 21, and that may be filed in the manner
provided by Section 21.212.
(c) A provision contained in the certificate of formation
under Subsection (b) must be preceded by a statement that the
provision is subject to the corporation remaining a close
corporation. (TBCA 3.02.A (part), 12.11.)
Sec. 3.009. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF NONPROFIT CORPORATION. In addition to
the information required by Section 3.005, the certificate of
formation of a nonprofit corporation must include:
(1) if the nonprofit corporation is to have no
members, a statement to that effect;
(2) if management of the nonprofit corporation's
affairs is to be vested in the nonprofit corporation's members, a
statement to that effect;
(3) the number of directors constituting the initial
board of directors and the names and addresses of those directors
or, if the management of the nonprofit corporation is vested solely
in the nonprofit corporation's members, a statement to that effect;
and
(4) if the nonprofit corporation is to be authorized
on its winding up to distribute the nonprofit corporation's assets
in a manner other than as provided by Section 22.304, a statement
describing the manner of distribution. (TNPCA 3.02.A (part).)
Sec. 3.010. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF LIMITED LIABILITY COMPANY. In addition
to the information required by Section 3.005, the certificate of
formation of a limited liability company must state:
(1) whether the limited liability company will or will
not have managers;
(2) if the limited liability company will have
managers, the name and address of each initial manager of the
limited liability company; and
(3) if the limited liability company will not have
managers, the name and address of each initial member of the limited
liability company. (TLLCA 3.02.A (part).)
Sec. 3.011. SUPPLEMENTAL PROVISIONS REGARDING CERTIFICATE
OF FORMATION OF LIMITED PARTNERSHIP. (a) To form a limited
partnership, the partners must enter into a partnership agreement
and file a certificate of formation.
(b) The partners of a limited partnership formed under
Section 10.001 or 10.101 may include the partnership agreement
required under Subsection (a) in the plan of merger or conversion.
(c) A certificate of formation for a limited partnership
must include the address of the principal office of the partnership
in the United States where records are to be kept or made available
under Section 153.551.
(d) The fact that a certificate of formation is on file with
the secretary of state is notice that the partnership is a limited
partnership and of all other facts contained in the certificate as
required by Section 3.005. (TRLPA 2.01(a) (part), 2.09.)
Sec. 3.012. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF REAL ESTATE INVESTMENT TRUST. In
addition to the information required by Section 3.005, the
certificate of formation of a real estate investment trust must
state:
(1) that an assumed name certificate stating the name
of the real estate investment trust has been filed in the manner
provided by law;
(2) that the purpose of the real estate investment
trust is to:
(A) purchase, hold, lease, manage, sell,
exchange, develop, subdivide, and improve real property and
interests in real property, other than severed mineral, oil, or gas
royalty interests, and carry on any other business and perform any
other action in connection with a purpose described by this
paragraph;
(B) exercise powers conferred by the laws of this
state on a real estate investment trust; and
(C) perform any action described by Chapter 200
or Title 1 to the same extent as an individual;
(3) the post office address of the initial principal
office and place of business of the real estate investment trust;
(4) the aggregate number of shares of beneficial
interest the real estate investment trust is authorized to issue
and the par value to be received by the real estate investment trust
for the issuance of each share;
(5) if shares described by Subdivision (4) are divided
into classes as authorized by Section 200.102 or 200.103, a
description of each class of shares, including any preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions of redemption; and
(6) that the trust managers shall manage the money or
property received for the issuance of shares for the benefit of the
shareholders of the real estate investment trust. (TREITA 3.10(A)
(part).)
Sec. 3.013. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF COOPERATIVE ASSOCIATION. In addition to
the information required by Section 3.005, the certificate of
formation of a cooperative association must state:
(1) whether the cooperative association is organized
with or without shares;
(2) the number of shares or memberships subscribed for
the cooperative association;
(3) if the cooperative association is organized with
shares:
(A) the amount of authorized capital;
(B) the number and type of shares;
(C) par value of the shares, if any; and
(D) the rights, preferences, and restrictions of
each type of share;
(4) the method of distribution on winding up and
termination of any surplus of the cooperative association in
accordance with Section 251.403; and
(5) the names and street addresses of the directors
who will manage the affairs of the cooperative association for the
initial year, unless sooner changed by the members. (CAA 8(b)
(part).)
Sec. 3.014. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF PROFESSIONAL ENTITY. In addition to the
information required by Section 3.005, the certificate of formation
of a professional entity must state:
(1) the type of professional service to be provided by
the professional entity as the purpose of the entity; and
(2) that the professional entity is a:
(A) professional association;
(B) professional corporation; or
(C) professional limited liability company.
(TLLCA 11.01.A(1) (part); TPAA 8(A) (part); TPCA 4(a) (part).)
Sec. 3.015. SUPPLEMENTAL PROVISIONS REQUIRED IN
CERTIFICATE OF FORMATION OF PROFESSIONAL ASSOCIATION. (a) In
addition to containing the information required under Sections
3.005 and 3.014, the certificate of formation of a professional
association must:
(1) be signed by each member of the association; and
(2) state:
(A) the name and address of each original member
of the association; and
(B) that a member of the association may not
dissolve the association independently of other members of the
association.
(b) The certificate of formation of a professional
association may contain:
(1) provisions regarding shares or units of ownership
in the association;
(2) provisions governing the winding up and
termination of the association's business; and
(3) any other provision consistent with state law
regulating the internal affairs of a professional association.
(TPAA 8(A) (part), (B), (C), (D), (E).)
[Sections 3.016-3.050 reserved for expansion]
SUBCHAPTER B. AMENDMENTS AND RESTATEMENTS OF
CERTIFICATE OF FORMATION
Sec. 3.051. RIGHT TO AMEND CERTIFICATE OF FORMATION. (a) A
filing entity may amend its certificate of formation.
(b) An amended certificate of formation may contain only
provisions that:
(1) would be permitted at the time of the amendment if
the amended certificate of formation were a newly filed original
certificate of formation; or
(2) effect a change, exchange, reclassification, or
cancellation in the membership or ownership interests or the rights
of owners or members of the filing entity. (TBCA 4.01.A; TLLCA
3.05.A; TNPCA 4.01; TPAA 14(A); TREITA 22.10(A); TRLPA 2.02(a)
(part).)
Sec. 3.052. PROCEDURES TO AMEND CERTIFICATE OF FORMATION.
(a) The procedure to adopt an amendment to the certificate of
formation is as provided by the title of this code that applies to
the entity.
(b) A filing entity that amends its certificate of formation
shall sign and file, in the manner required by Chapter 4, a
certificate of amendment complying with Section 3.053 or a restated
certificate of formation complying with Section 3.059. (TBCA 4.05;
TLLCA 3.07.A; TNPCA 4.04; TPAA 16; TREITA 22.50; TRLPA 2.02(a)
(part).)
Sec. 3.053. CERTIFICATE OF AMENDMENT. A certificate of
amendment for a filing entity must state:
(1) the name of the filing entity;
(2) the type of the filing entity;
(3) for each provision of the certificate of formation
that is added, altered, or deleted, an identification by reference
or description of the added, altered, or deleted provision and, if
the provision is added or altered, a statement of the text of the
amended or added provision;
(4) that the amendment or amendments have been
approved in the manner required by this code and the governing
documents of the entity; and
(5) any other matter required by the provisions of
this code applicable to the filing entity to be in the certificate
of amendment. (TBCA 4.04.B; TLLCA 3.06.B; TNPCA 4.03; TPAA 15;
TREITA 22.40(B); TRLPA 2.02(a).)
Sec. 3.054. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF
AMENDMENT OF FOR-PROFIT CORPORATION. (a) In addition to the
statements required by Section 3.053, a certificate of amendment
for a for-profit corporation must state:
(1) if the amendment provides for an exchange,
reclassification, or cancellation of issued shares, the manner in
which the exchange, reclassification, or cancellation of the issued
shares will be effected if the manner is not specified in the
amendment; and
(2) if the amendment effects a change in the amount of
stated capital, the manner in which the change in the amount of
stated capital is effected and the amount of stated capital
expressed in dollar terms as changed by the amendment.
(b) An officer shall sign the certificate of amendment on
behalf of the for-profit corporation. If shares of the for-profit
corporation have not been issued and the certificate of amendment
is adopted by the board of directors, a majority of the directors
may sign the certificate of amendment on behalf of the for-profit
corporation. (TBCA 4.04.A, B (part).)
Sec. 3.055. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF
AMENDMENT OF REAL ESTATE INVESTMENT TRUST. (a) In addition to the
statements required by Section 3.053, a certificate of amendment
for a real estate investment trust must state:
(1) if the amendment provides for an exchange,
reclassification, or cancellation of issued shares, the manner in
which the exchange, reclassification, or cancellation of the issued
shares will be effected if the manner is not specified in the
amendment; and
(2) if the amendment effects a change in the amount of
stated capital, the manner in which the change in the amount of
stated capital is effected and the amount of stated capital
expressed in dollar terms as changed by the amendment.
(b) If shares of the real estate investment trust have not
been issued and the certificate of amendment is adopted by the trust
managers, a majority of the trust managers may execute the
certificate of amendment on behalf of the real estate investment
trust. (TREITA 22.40(A), (B) (part).)
Sec. 3.056. EFFECT OF FILING OF CERTIFICATE OF AMENDMENT.
(a) An amendment to a certificate of formation takes effect when
the filing of the certificate of amendment takes effect as provided
by Chapter 4.
(b) An amendment to a certificate of formation does not
affect:
(1) an existing cause of action in favor of or against
the entity for which the certificate of amendment is sought;
(2) a pending suit to which the entity is a party; or
(3) an existing right of a person other than an
existing owner.
(c) If the name of an entity is changed by amendment, an
action brought by or against the entity in the former name of the
entity does not abate because of the name change. (TBCA 4.06; TLLCA
3.08; TNPCA 4.05; TPAA 17; TREITA 22.60; TRLPA 2.02(e).)
Sec. 3.057. RIGHT TO RESTATE CERTIFICATE OF FORMATION. (a)
A filing entity may restate its certificate of formation.
(b) An amendment effected by a restated certificate of
formation must comply with Section 3.051(b). (TBCA 4.07.A (part);
TLLCA 3.09.A (part); TNPCA 4.06.A (part); TREITA 22.70(A) (part);
TRLPA 2.10(a), (e).)
Sec. 3.058. PROCEDURES TO RESTATE CERTIFICATE OF FORMATION.
(a) The procedure to adopt a restated certificate of formation is
governed by the title of this code that applies to the entity.
(b) A filing entity that restates its certificate of
formation shall sign and file, in the manner required by Chapter 4,
a restated certificate of formation and accompanying statements
complying with Section 3.059. (TBCA 4.07.A (part), D; TLLCA 3.09.A
(part), D; TNPCA 4.06.A (part), D; TREITA 22.70(A) (part); TRLPA
2.10(b) (part).)
Sec. 3.059. RESTATED CERTIFICATE OF FORMATION. (a) A
restated certificate of formation must accurately state the text of
the previous certificate of formation, regardless of whether the
certificate of formation is an original, corrected, or restated
certificate, and include:
(1) each previous amendment to the certificate being
restated that is carried forward; and
(2) each new amendment to the certificate being
restated.
(b) A restated certificate of formation may omit:
(1) the name and address of each organizer other than
the name and address of each general partner of a limited
partnership or trust manager of a real estate investment trust; and
(2) any other information that may be omitted under
the provisions of this code applicable to the filing entity.
(c) A restated certificate of formation that does not make
new amendments to the certificate of formation being restated must
be accompanied by:
(1) a statement that the restated certificate of
formation accurately states the text of the certificate of
formation being restated, as amended, restated, and corrected,
except for information omitted under Subsection (b); and
(2) any other information required by other provisions
of this code applicable to the filing entity.
(d) A restated certificate of formation that makes new
amendments to the certificate of formation being restated must:
(1) be accompanied by a statement that each new
amendment has been made in accordance with this code;
(2) identify by reference or description each added,
altered, or deleted provision;
(3) be accompanied by a statement that each amendment
has been approved in the manner required by this code and the
governing documents of the entity;
(4) be accompanied by a statement that the restated
certificate of formation:
(A) accurately states the text of the certificate
of formation being restated and each amendment to the certificate
of formation being restated that is in effect, as further amended by
the restated certificate of formation; and
(B) does not contain any other change in the
certificate of formation being restated except for information
omitted under Subsection (b); and
(5) include any other information required by the
title of this code applicable to the entity. (TBCA 4.07.A (part), B
(part), C (part); TLLCA 3.09.A (part), B (part), C (part); TNPCA
4.06.A (part), B (part), C (part); TREITA 22.70(A) (part), (B)
(part), (C) (part); TRLPA 2.10(b) (part), (c).)
Sec. 3.060. SUPPLEMENTAL PROVISIONS FOR RESTATED
CERTIFICATE OF FORMATION FOR FOR-PROFIT CORPORATION. (a) In
addition to the provisions authorized or required by Section 3.059,
a restated certificate of formation for a for-profit corporation
may update the current number of directors and the names and
addresses of the persons serving as directors.
(b) An officer shall sign the restated certificate of
formation on behalf of the corporation. If shares of the
corporation have not been issued and the restated certificate of
formation is adopted by the board of directors, the majority of the
directors may sign the restated certificate of formation on behalf
of the corporation. (TBCA 4.07.B (part), C (part).)
Sec. 3.061. SUPPLEMENTAL PROVISIONS FOR RESTATED
CERTIFICATE OF FORMATION FOR NONPROFIT CORPORATION. (a) In
addition to the provisions authorized or required by Section 3.059,
a restated certificate of formation for a nonprofit corporation may
update the current number of directors and the names and addresses
of the persons serving as directors.
(b) If the nonprofit corporation is a church in which
management is vested in the church's members under Section 22.202,
and the original certificate of formation is not required to
contain a statement to that effect, any restated certificate of
formation for the church must contain a statement to that effect in
addition to the information required by Section 3.059. (TNPCA
4.06.B (part), C (part).)
Sec. 3.062. SUPPLEMENTAL PROVISIONS FOR RESTATED
CERTIFICATE OF FORMATION FOR REAL ESTATE INVESTMENT TRUST. In
addition to the provisions authorized or required by Section 3.059,
a restated certificate of formation for a real estate investment
trust may update the current number of trust managers and the names
and addresses of the persons serving as trust managers. (TREITA
22.70(B) (part), (C) (part).)
Sec. 3.063. EFFECT OF FILING OF RESTATED CERTIFICATE OF
FORMATION. (a) A restated certificate of formation takes effect
when the filing of the restated certificate of formation takes
effect as provided by Chapter 4.
(b) On the date the restated certificate of formation takes
effect, the original certificate of formation and each prior
amendment or restatement of the certificate of formation is
superseded and the restated certificate of formation is the
effective certificate of formation.
(c) Sections 3.056(b) and (c) apply to an amendment effected
by a restated certificate of formation. (TBCA 4.07.F; TLLCA
3.09.F; TNPCA 4.06.F; TREITA 22.70(E); TRLPA 2.10(d).)
[Sections 3.064-3.100 reserved for expansion]
SUBCHAPTER C. GOVERNING PERSONS AND OFFICERS
Sec. 3.101. GOVERNING AUTHORITY. Subject to the title of
this code that governs the domestic entity and the governing
documents of the domestic entity, the governing authority of a
domestic entity manages and directs the business and affairs of the
domestic entity. (TBCA 2.31 (part); TLLCA 2.12 (part); TNPCA
2.14.A (part); TRLPA 4.03(a); TRPA 4.01(d) (part).)
Sec. 3.102. RIGHTS OF GOVERNING PERSONS IN CERTAIN CASES.
(a) In discharging a duty or exercising a power, a governing
person, including a governing person who is a member of a committee,
may, in good faith and with ordinary care, rely on information,
opinions, reports, or statements, including financial statements
and other financial data, concerning a domestic entity or another
person and prepared or presented by:
(1) an officer or employee of the entity;
(2) legal counsel;
(3) a certified public accountant;
(4) an investment banker;
(5) a person who the governing person reasonably
believes possesses professional expertise in the matter; or
(6) a committee of the governing authority of which
the governing person is not a member.
(b) A governing person may not in good faith rely on the
information described by Subsection (a) if the governing person has
knowledge of a matter that makes the reliance unwarranted. (TBCA
2.41.D; TNPCA 2.26.C (part), 2.28.B (part), C; TREITA 15.10(C),
(D).)
Sec. 3.103. OFFICERS. (a) Officers of a domestic entity may
be elected or appointed in accordance with the governing documents
of the entity or by the governing authority of the entity unless
prohibited by the governing documents.
(b) An officer of an entity shall perform the duties in the
management of the entity and has the authority as provided by the
governing documents of the entity or the governing authority that
elects or appoints the officer.
(c) A person may simultaneously hold any two or more offices
of an entity unless prohibited by this code or the governing
documents of the entity. (CAA 22 (part); TBCA 2.42.A (part), B;
TLLCA 2.21.A, B; TNPCA 2.20.A (part), B; TPAA 9(G) (part); TREITA
4.10(F) (part).)
Sec. 3.104. REMOVAL OF OFFICERS. (a) Unless otherwise
provided by the governing documents of a domestic entity, an
officer may be removed for or without cause by the governing
authority or as provided by the governing documents of the entity.
The removal of an officer does not prejudice any contract rights of
the person removed.
(b) Election or appointment of an officer does not by itself
create contract rights. (TBCA 2.43; TNPCA 2.21; TREITA 4.10(F)
(part).)
Sec. 3.105. RIGHTS OF OFFICERS IN CERTAIN CASES. (a) In
discharging a duty or exercising a power, an officer of a domestic
entity may, in good faith and ordinary care, rely on information,
opinions, reports, or statements, including financial statements
and other financial data, concerning the entity or another person
and prepared or presented by:
(1) another officer or an employee of the entity;
(2) legal counsel;
(3) a certified public accountant;
(4) an investment banker; or
(5) a person who the officer reasonably believes
possesses professional expertise in the matter.
(b) An officer may not in good faith rely on the information
described by Subsection (a) if the officer has knowledge of a matter
that makes the reliance unwarranted. (TBCA 2.42.C; TNPCA 2.20.D
(part), E.)
[Sections 3.106-3.150 reserved for expansion]
SUBCHAPTER D. RECORDKEEPING OF FILING ENTITIES
Sec. 3.151. BOOKS AND RECORDS FOR ALL FILING ENTITIES. (a)
Each filing entity shall keep:
(1) books and records of accounts;
(2) minutes of the proceedings of the owners or
members or governing authority of the filing entity and committees
of the owners or members or governing authority of the filing
entity;
(3) at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a
current record of the name and mailing address of each owner or
member of the filing entity; and
(4) other books and records as required by the title of
this code governing the entity.
(b) The books, records, minutes, and ownership or
membership records of any filing entity, including those described
in Subsection (a)(4), may be in written form or another form capable
of being converted into written form within a reasonable time.
(c) The records required by Subsection (a)(2) need not be
maintained by a limited partnership or a limited liability company
except to the extent required by its governing documents. (TBCA
2.44.A (part); TLLCA 2.22.A (part), B; TNPCA 2.23.A; TREITA
18.10(A); TRLPA 1.07(a) (part), (b).)
Sec. 3.152. GOVERNING PERSON'S RIGHT OF INSPECTION. (a) A
governing person of a filing entity may examine the entity's books
and records maintained under Section 3.151 and other books and
records of the entity for a purpose reasonably related to the
governing person's service as a governing person.
(b) A court may require a filing entity to open the books and
records of the filing entity, including the books and records
maintained under Section 3.151, to permit a governing person to
inspect, make copies of, or take extracts from the books and records
on a showing by the governing person that:
(1) the person is a governing person of the entity;
(2) the person demanded to inspect the entity's books
and records;
(3) the person's purpose for inspecting the entity's
books and records is reasonably related to the person's service as a
governing person; and
(4) the entity refused the person's good faith demand
to inspect the books and records.
(c) A court may award a governing person attorney's fees and
any other proper relief in a suit to require a filing entity to open
its books and records under Subsection (b).
(d) This section does not apply to limited partnerships.
Section 153.552 applies to limited partnerships. (TBCA 2.44.B.)
Sec. 3.153. RIGHT OF EXAMINATION BY OWNER OR MEMBER. Each
owner or member of a filing entity may examine the books and records
of the filing entity maintained under Section 3.151 and other books
and records of the filing entity to the extent provided by the
governing documents of the entity and the title of this code
governing the filing entity. (TBCA 2.44.C; TLLCA 2.22.D, E; TNPCA
2.23.B; TREITA 18.10(B).)
[Sections 3.154-3.200 reserved for expansion]
SUBCHAPTER E. CERTIFICATES REPRESENTING OWNERSHIP INTEREST
Sec. 3.201. CERTIFICATED OR UNCERTIFICATED OWNERSHIP
INTEREST; APPLICABILITY. (a) Ownership interests in a domestic
entity may be certificated or uncertificated.
(b) The ownership interests in a for-profit corporation,
real estate investment trust, or professional corporation must be
certificated unless the governing documents of the entity or a
resolution adopted by the governing authority of the entity states
that the ownership interests are uncertificated. If a domestic
entity changes the form of its ownership interests from
certificated to uncertificated, a certificated ownership interest
subject to the change becomes an uncertificated ownership interest
only after the certificate is surrendered to the domestic entity.
(c) Ownership interests in a domestic entity, other than a
domestic entity described by Subsection (b), are uncertificated
unless this code or the governing documents of the domestic entity
state that the interests are certificated.
(d) Sections 3.202-3.205 do not apply to a partnership or a
limited liability company except to the extent that the governing
documents of the partnership or limited liability company specify.
(e) The governing documents of a partnership or a limited
liability company may:
(1) provide that an owner's ownership interest may be
evidenced by a certificate of ownership interest issued by the
entity;
(2) provide for the assignment or transfer of
ownership interests represented by certificates; and
(3) make other provisions with respect to the
certificate. (TBCA 2.19.A (part); TLLCA 4.05.B; TREITA 7.20(A)
(part); TRLPA 7.02(c); TRPA 5.02(b).)
Sec. 3.202. FORM AND VALIDITY OF CERTIFICATES; ENFORCEMENT
OF ENTITY'S RIGHTS. (a) A certificate representing the ownership
interest in a domestic entity may contain an impression of the seal
of the entity, if any. A facsimile of the entity's seal may be
printed or lithographed on the certificate.
(b) If a domestic entity is authorized to issue ownership
interests of more than one class or series, each certificate
representing ownership interests that is issued by the entity must
conspicuously state on the front or back of the certificate:
(1) the designations, preferences, limitations, and
relative rights of the ownership interests of each class or series
to the extent they have been determined and the authority of the
governing authority to make those determinations as to subsequent
series; or
(2) that the information required by Subdivision (1)
is stated in the domestic entity's governing documents and that the
domestic entity, on written request to the entity's principal place
of business or registered office, will provide a free copy of that
information to the record holder of the certificate.
(c) A certificate representing ownership interests must
state on the front of the certificate:
(1) that the domestic entity is organized under the
laws of this state;
(2) the name of the person to whom the certificate is
issued;
(3) the number and class of ownership interests and
the designation of the series, if any, represented by the
certificate; and
(4) if the ownership interests are shares, the par
value of each share represented by the certificate, or a statement
that the shares are without par value.
(d) A certificate representing ownership interests that is
subject to a restriction, placed by or agreed to by the domestic
entity under this code, or otherwise contained in its governing
documents, on the transfer or registration of the transfer of the
ownership interests must:
(1) conspicuously state or provide a summary of the
restriction on the front of the certificate;
(2) state the restriction on the back of the
certificate and conspicuously refer to that statement on the front
of the certificate; or
(3) conspicuously state on the front or back of the
certificate that a restriction exists pursuant to a specified
document and:
(A) that the domestic entity, on written request
to the entity's principal place of business, will provide a free
copy of the document to the certificate record holder; or
(B) if the document has been filed in accordance
with this code, that the document:
(i) is on file with the secretary of state
or, in the case of a real estate investment trust, with the county
clerk of the county in which the real estate investment trust's
principal place of business is located; and
(ii) contains a complete statement of the
restriction.
(e) A domestic entity that fails to provide to the record
holder of a certificate within a reasonable time a document as
required by Subsection (d)(3)(A) may not enforce the entity's
rights under the restriction imposed on the certificated ownership
interests. (TBCA 2.19.A (part), B (part), C, G; TREITA 7.20(A)
(part), (B), (C), (F), (G).)
Sec. 3.203. SIGNATURE REQUIREMENT. (a) The managerial
official or officials of a domestic entity authorized by the
governing documents of the entity to sign certificated ownership
interests of the entity must sign any certificate representing an
ownership interest in the entity.
(b) A certificated ownership interest that contains the
manual or facsimile signature of a person who is no longer a
managerial official of a domestic entity when the certificate is
issued may be issued by the entity in the same manner and with the
same effect as if the person had remained a managerial official.
(TBCA 2.19.A (part); TREITA 7.20(A) (part).)
Sec. 3.204. DELIVERY REQUIREMENT. A domestic entity shall
deliver a certificate representing a certificated ownership
interest to which the owner is entitled. (TBCA 2.19.A (part);
TREITA 7.20(A) (part).)
Sec. 3.205. NOTICE FOR UNCERTIFICATED OWNERSHIP INTEREST.
(a) Except as provided by Subsection (c) and in accordance with
Chapter 8, Business & Commerce Code, after issuing or transferring
an uncertificated ownership interest, a domestic entity shall
notify the owner of the ownership interest in writing of any
information required under this subchapter to be stated on a
certificate representing the ownership interest.
(b) Except as otherwise expressly provided by law, the
rights and obligations of the owner of an uncertificated ownership
interest are the same as the rights and obligations of the owner of
a certificated ownership interest of the same class and series.
(c) A domestic entity is not required to send a notice under
Subsection (a) if:
(1) the required information is included in the
governing documents of the entity; and
(2) the owner of the uncertificated ownership interest
is provided with a copy of the governing documents. (TBCA 2.19.D
(part); TREITA 7.20(D) (part).)
CHAPTER 4. FILINGS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4.001. SIGNATURE AND DELIVERY. (a) A filing
instrument must be:
(1) signed by a person authorized by this code to act
on behalf of the entity in regard to the filing instrument; and
(2) delivered to the secretary of state in person or by
mail, courier, facsimile or electronic transmission, or any other
comparable form of delivery.
(b) A person authorized by this code to sign a filing
instrument for an entity is not required to show evidence of the
person's authority as a requirement for filing. (TBCA 2.06.B
(part), C (part), D, 2.07.B (part), 2.10.B (part), 2.10-1.B (part),
2.12.C(2) (part), (3) (part), 2.13.D (part), E (part), 2.22.E(2)
(part), 3.01, 3.03.A (part), C (part), 4.05.A (part), 4.07.D
(part), 4.10.B (part), C (part), 4.11.B (part), C (part), 4.12.B
(part), C (part), 4.14.B (part), C (part), 5.03.L (part), 5.04.A
(part), B, 5.16.B (part), C, 5.17.E (part), 5.18.A (part), B, 6.01
(part), 6.02, 6.05.B (part), 6.07.A (part), 7.01.E (part), 7.12.E
(part), 8.06.A (part), 8.09.A (part), B (part), D (part), 8.13.A,
B, D, 8.14.A (part), B, C, 8.15.A (part), 8.16.E (part), 10.01.B
(part), 10.03.A (part), B (part), 12.22.B (part), 12.34.B (part);
TLLCA 2.04.B (part), 2.06.B (part), D (part), 2.07.B (part), 3.01,
3.03.A (part), C (part), 3.06.A, 3.07.A (part), 3.09.D (part),
6.08.A (part), 7.06.A (part), 7.08.A, B, D, 7.09.A (part), B,
7.10.A (part), 7.11.E (part), 8.12.A, B, 9.01.B (part), 9.03.B,
10.03.A (part), B (part), 10.05.B (part), C (part), 10.09.B,
11.01.A (part), 11.07.A (part); TNPCA 2.04A.B, 2.06.D (part),
2.06A.A (part), B (part), 3.03.A (part), 4.03.A (part), 4.04.A
(part), 4.06.D (part), 5.04.A (part), B (part), 6.05.A (part),
6.06.A (part), 7.01.E (part), 8.05.A (part), 8.08.A (part), B
(part), D (part), 8.12.A, B, D, 8.14.A (part), 8.15.E (part),
10.07.B (part), C (part); TMCLA 7.01, 7.03.A (part); TPAA 8(E),
12(A) (part), 15 (part), 16(A) (part), 18 (part), 19(A) (part), 21
(part); TPCA 4(a) (part), 19A(a); TRLPA 1.05(a), (b) (part), (d)
(part), 1.06(b) (part), (c) (part), (f) (part), (h) (part), (i)
(part), 2.01(a) (part), 2.02(a) (part), (f) (part), 2.03(a) (part),
2.04(a), (b), 2.06(c) (part), 2.07(a) (part), 2.10(b) (part),
2.11(d) (part), (e) (part), 2.12.B, 2.14(b) (part), 2.15(e) (part),
9.02(a) (part), 9.06 (part), 9.09, 13.05(a) (part), (b) (part),
13.07(a) (part), 13.09(a) (part); TRPA 3.08(b) (part), (e), 9.01(a)
(part), (b) (part), 9.02(d) (part), (e) (part), 9.05(e) (part),
10.02(a) (part), (b), (c) (part), (f) (part), (g) (part), (k)
(part), 10.05(b) (part), (c) (part), (f) (part), (h) (part), (i)
(part); TREITA 3.10(A) (part), (B) (part), 5.10(B) (part), (C)
(part), (F) (part), 7.40(F) (part), 19.20(A) (part), (B), 22.40(A),
22.50, 22.70(D), 23.40(A) (part), (B), 26.10(C) (part), (D) (part),
27.10(A) (part), (B).)
Sec. 4.002. ACTION BY SECRETARY OF STATE. (a) If the
secretary of state finds that a filing instrument delivered under
Section 4.001 conforms to the provisions of this code that apply to
the entity and to applicable rules adopted under Section 12.001 and
that all required fees have been paid, the secretary of state shall:
(1) file the instrument by accepting it into the
filing system adopted by the secretary of state and assigning the
instrument a date of filing; and
(2) deliver a written or electronic acknowledgment of
filing to the entity or its representative.
(b) If a duplicate copy of the filing instrument is
delivered to the secretary of state, on accepting the filing
instrument, the secretary of state shall return the duplicate copy,
endorsed with the word "Filed" and the month, day, and year of
filing, to the entity or its representative with the acknowledgment
of filing. (TBCA 2.06.B (part), 2.10.B (part), D (part), 2.10-1.B
(part), 2.12.C(3) (part), 2.13.E (part), 2.22.E(2) (part), 3.03.A,
B, C (part), 4.05, 4.07.D (part), E, 4.10.C, 4.11.C, 4.12.C, 5.03.L
(part), 5.04.C, 5.17.E (part), 5.18.C, 6.01 (part), 6.05.C, 6.07.A
(part), B (part), 7.01.E (part), 8.06.A (part), B, 8.09.B (part), D
(part), 8.15.A (part), 8.16.D (part), E (part), 10.01.B (part),
10.03.B (part), 12.22.C, 12.34.C; TLLCA 2.04.B (part), 2.06.B
(part), 2.07.B (part), 3.03, 3.07, 3.09.D, E, 6.08.A (part), B
(part), 7.06.A (part), B, 7.10, 7.11.D (part), 8.12.A, B, 10.03.B,
10.09.C, 11.07.A (part), B; TMCLA 7.03, 7.08; TNPCA 2.06.B (part),
D (part), 2.06A.B (part), 3.03.A (part), B, 4.04.A (part), B,
4.06.D (part), E, 5.04.B (part), C, 6.06.A (part), B (part), 7.01.E
(part), 8.05.A (part), B, 8.08.B (part), D (part), 8.14.A (part), B
(part), 8.15.D (part), E (part), 9.01.E, 9.02.G, 10.07.C (part);
TPAA 12(A) (part), (B), 16(A) (part), (B), 19(A) (part), (B); TPCA
19A(a) (part), (b); TRLPA 1.06(c) (part), (g) (part), (i) (part),
2.07(a) (part), (c), 2.11(e) (part), 9.03(a), 9.09, 13.04(c),
13.05(d) (part), 13.07(b), 13.08(a) (part), 13.09(b); TRPA
3.08(b)(8), (9) (part), (16), (18), 9.02(e) (part), 9.05(f),
10.02(h), (i) (part), 10.05(c) (part), (e), (g), (i) (part).)
Sec. 4.003. FILING OR ISSUANCE OF REPRODUCTION OR
FACSIMILE. (a) A photographic, photostatic, facsimile,
electronic, or similar reproduction of a filing instrument,
signature, acknowledgment of filing, or communication may be filed
or issued in place of:
(1) an original filing instrument;
(2) an original signature on a filing instrument; or
(3) an original acknowledgment of filing or other
written communication from the secretary of state relating to a
filing instrument.
(b) To the extent any filing or action on a filing conforms
to this subchapter, a filing instrument or an acknowledgment of
filing issued by the secretary of state is not required to be on
paper or to be reduced to printed form. (TLLCA 8.12.B; TMCLA 7.07;
TRLPA 9.02(a) (part), 13.04; TRPA 3.08(b)(12), (16), (17), (18),
10.02(l).)
Sec. 4.004. TIME FOR FILING. Unless this code prescribes a
specific period for filing, an entity shall promptly file each
filing instrument that this code requires the entity to file. (TBCA
9.07.A; TLLCA 8.07.)
Sec. 4.005. CERTIFICATES AND CERTIFIED COPIES. (a) A
court, public office, or official body shall accept a certificate
issued as provided by this code by the secretary of state or a copy
of a filing instrument accepted by the secretary of state for filing
as provided by this code that is certified by the secretary of state
as prima facie evidence of the facts stated in the certificate or
instrument.
(b) A court, public office, or official body may record a
certificate or certified copy described by Subsection (a).
(c) A court, public office, or official body shall accept a
certificate issued under an official seal by the secretary of state
as to the existence or nonexistence of facts that relate to an
entity that would not appear from a certified copy of a filing
instrument as prima facie evidence of the existence or nonexistence
of the facts stated in the certificate. (TBCA 9.05; TLLCA 8.05;
TNPCA 9.06.)
Sec. 4.006. FORMS ADOPTED BY SECRETARY OF STATE. (a) The
secretary of state may adopt forms for a filing instrument or a
report authorized or required by this code to be filed with the
secretary of state.
(b) A person is not required to use a form adopted by the
secretary of state unless this code expressly requires use of that
form. (TBCA 9.06; TLLCA 8.06; TNPCA 9.07; TPAA 21 (part); TRLPA
13.05(b) (part), (d) (part); TRPA 3.08(b)(10), 10.02(j).)
Sec. 4.007. LIABILITY FOR FALSE FILING INSTRUMENTS. (a) A
person may recover damages, court costs, and reasonable attorney's
fees if the person incurs a loss and:
(1) the loss is caused by a:
(A) forged filing instrument; or
(B) filed filing instrument that constitutes an
offense under Section 4.008; or
(2) the person reasonably relies on:
(A) a false statement of material fact in a filed
filing instrument; or
(B) the omission in a filed filing instrument of
a material fact required by this code to be included in the
instrument.
(b) A person may recover under Subsection (a) from:
(1) each person who forged the forged filing
instrument or signed the filing instrument and knew when the
instrument was signed of the false statement or omission;
(2) any managerial official of the entity who directed
the signing and filing of the filing instrument who knew or should
have known when the instrument was signed or filed of the false
statement or omission; or
(3) the entity that authorizes the filing of the
filing instrument. (TRLPA 2.08, 9.05.)
Sec. 4.008. OFFENSE; PENALTY. (a) A person commits an
offense if the person signs or directs the filing of a filing
instrument that the person knows is materially false with intent
that the filing instrument be delivered on behalf of an entity to
the secretary of state for filing.
(b) An offense under this section is a Class A misdemeanor
unless the actor's intent is to defraud or harm another, in which
event the offense is a state jail felony. (TBCA 10.02; TLLCA 9.02;
TNPCA 9.03A; TPAA 26; TRPA 3.08(b)(13), 10.02(m).)
Sec. 4.009. FILINGS BY REAL ESTATE INVESTMENT TRUST. (a) A
filing instrument relating to a domestic real estate investment
trust must be filed with the county clerk of the county in which the
domestic real estate investment trust's principal place of business
is located.
(b) Subject to other state law governing the requirements
for filing instruments with a county clerk, this chapter applies to
a filing by a domestic real estate investment trust, except that in
relation to such a filing a reference in this chapter to the
secretary of state is considered to be a reference to the county
clerk of the county in which the domestic real estate investment
trust's principal place of business is located.
(c) A filing instrument relating to a foreign real estate
investment trust must be filed with the secretary of state and not a
county clerk. (TREITA 3.10(B) (part), 19.20(B), 22.50, 28.10(A).)
[Sections 4.010-4.050 reserved for expansion]
SUBCHAPTER B. WHEN FILINGS TAKE EFFECT
Sec. 4.051. GENERAL RULE. A filing instrument submitted to
the secretary of state takes effect on filing, except as permitted
by Section 4.052 or as provided by the provisions of this code that
apply to the entity making the filing or other law. (TBCA 2.10.C,
2.10-1.C, 2.12.C(4), 2.13.F, 2.22.F, 3.03.C (part), 3.04.A, B,
4.06.A, 4.07.F, 4.10.D, 4.11.D, 4.12.D, 4.14.C(7), 5.03.L (part),
5.05, 5.16.D, 5.19, 6.01.A(3) (part), 6.05.D (part), 6.07.B (part),
7.01.D (part), E (part), 8.07, 8.09.C, D(2) (part), 8.13.D, 8.15.B
(part), 8.16.E (part), 9.14.C(4), 12.22.D, 12.34.D; TLLCA 2.06.C,
D(2) (part), 2.07.C, 3.03.C (part), 3.04.A, B, 3.08.A, 3.09.F,
6.08.B (part), 7.07, 7.08.D, 7.10.B, 7.11.D (part), E (part),
9.03.F, 10.03.C, 10.05.C, 10.10; TNPCA 2.06.A, C, D(2) (part),
3.04, 4.05.A, 4.06.F, 5.05, 6.06.B (part), 7.01.E (part), 8.06,
8.08.C, D(2) (part), 8.12.D, 8.14.B (part), 8.15.E (part); TPAA 13,
17(A), 20; TRLPA 1.05(c), 1.06(d), (e), (g) (part), (i) (part),
2.01(b), 2.02(e), 2.03(c), 2.06(d), 2.07(b), 2.10(d), 2.11(f),
2.15(f), 9.09, 13.02(c) (part), 13.07(b), 13.08(b) (part); TRPA
3.08(b)(4), (6) (part), (7) (part), 9.01(f), 9.02(f), 9.05(g),
10.02(d), (f) (part), (g) (part), 10.05(d), (e), (f), (i) (part);
TREITA 3.10(B) (part), 5.10(E), 7.40(F)(4), 19.20(C), 22.60(A),
22.70(E), 23.50, 26.10(D)(6).)
Sec. 4.052. DELAYED EFFECTIVENESS OF CERTAIN FILINGS.
Except as provided by Section 4.058, a filing instrument may take
effect after the time the instrument would otherwise take effect as
provided by this code for the entity filing the instrument and:
(1) at a specified date and time; or
(2) on the occurrence of a future event or fact,
including an act of any person. (TBCA 10.03.A (part); TLLCA
9.03.A(1), (2) (part); TNPCA 10.07.A, B (part); TRLPA 2.12.A
(part); TREITA 27.10(A) (part), (F); TRPA 3.08(b)(4), 9.06,
10.02(d).)
Sec. 4.053. CONDITIONS FOR DELAYED EFFECTIVENESS. (a) The
date and time at which a filing instrument takes effect is delayed
if the instrument clearly and expressly states, in addition to any
other required statement or information:
(1) the specific date and time at which the instrument
takes effect; or
(2) if the instrument takes effect on the occurrence
of a future event or fact that may occur:
(A) the manner in which the event or fact will
cause the instrument to take effect; and
(B) the date of the 90th day after the date the
instrument is signed.
(b) If a filing instrument is to take effect on a specific
date and time other than that provided by this code:
(1) the date may not be later than the 90th day after
the date the instrument is signed; and
(2) the specific time at which the instrument is to
take effect may not be specified as "12:00 a.m." or "12:00 p.m."
(TBCA 10.03.A (part); TLLCA 9.03.A(2), (3); TNPCA 10.07.B (part);
TRLPA 2.12.A (part); TREITA 27.10(A) (part).)
Sec. 4.054. DELAYED EFFECTIVENESS ON FUTURE EVENT OR FACT.
A filing instrument that is to take effect on the occurrence of a
future event or fact, other than the passage of time, and for which
the statement required by Section 4.055 is filed within the
prescribed time, takes effect on the date and time at which the last
specified event or fact occurs or the date and time at which a
condition is satisfied or waived. (TBCA 10.03.D (part); TLLCA
9.03.D(1) (part); TNPCA 10.07.E (part); TRLPA 2.12.D (part); TREITA
27.10(D) (part); TRPA 9.06.)
Sec. 4.055. STATEMENT OF EVENT OR FACT. An entity that files
a filing instrument that takes effect on the occurrence of a future
event or fact, other than the passage of time, must sign and file as
provided by Subchapter A, not later than the 90th day after the date
the filing instrument is filed, a statement that:
(1) confirms that each event or fact on which the
effect of the instrument is conditioned has been satisfied or
waived; and
(2) states the date and time on which the condition was
satisfied or waived. (TBCA 10.03.A (part); TLLCA 9.03.A(4); TNPCA
10.07.B (part); TRLPA 2.12.A (part); TREITA 27.10(A) (part); TRPA
9.06.)
Sec. 4.056. FAILURE TO FILE STATEMENT. (a) If the effect of
a filing instrument is conditioned on the occurrence of a future
event or fact, other than the passage of time, and the statement
required by Section 4.055 is not filed before the expiration of the
prescribed time, the filing instrument does not take effect. This
section does not preclude the filing of a subsequent filing
instrument required by this code to make the event or transaction
evidenced by the original filing instrument effective.
(b) If the effect of a filing instrument is conditioned on
the occurrence of a future event or fact, other than the passage of
time, and the specified event or fact does not occur and is not
waived, the parties to the filing instrument must sign and file a
certificate of abandonment as provided by Section 4.057. (TBCA
10.03.E; TLLCA 9.03.E; TNPCA 10.07.F; TRLPA 2.12.E; TREITA
27.10(E).)
Sec. 4.057. ABANDONMENT BEFORE EFFECTIVENESS. (a) The
parties to a filing instrument may abandon the filing instrument if
the instrument has not taken effect.
(b) To abandon a filing instrument the parties to the
instrument must file with the filing officer a certificate of
abandonment.
(c) A certificate of abandonment must:
(1) be signed on behalf of each entity that is a party
to the action or transaction by the person authorized by this code
to act on behalf of the entity;
(2) state the nature of the filing instrument to be
abandoned, the date of the instrument, and the parties to the
instrument; and
(3) state that the filing instrument has been
abandoned in accordance with the agreement of the parties.
(d) On the filing of the certificate of abandonment, the
action or transaction evidenced by the original filing instrument
is abandoned and may not take effect.
(e) If in the interim before a certificate of abandonment is
filed the name of an entity that is a party to the action or
transaction becomes the same as or deceptively similar to the name
of another entity already on file or reserved or registered under
this code, the filing officer may not file the certificate of
abandonment unless the entity by or for whom the certificate is
filed changes its name in the manner provided by this code for that
entity. (TLLCA 9.03.F; TRLPA 2.12.F; 1 T.A.C. 79.82.)
Sec. 4.058. DELAYED EFFECTIVENESS NOT PERMITTED. The effect
of the following filing instruments may not be delayed:
(1) a reservation of name as provided by Subchapter C,
Chapter 5;
(2) a registration of name as provided by Subchapter
D, Chapter 5;
(3) a statement of event or fact as provided by Section
4.055; or
(4) a certificate of abandonment as provided by
Section 4.057. (TBCA 10.03.A (part); TLLCA 9.03.A(1); TNPCA
10.07.A.)
Sec. 4.059. ACKNOWLEDGMENT OF FILING WITH DELAYED
EFFECTIVENESS. (a) An acknowledgment of filing issued or other
action taken by the secretary of state affirming the filing of a
filing instrument that has a specific delayed effective date must
state the date and time at which the instrument takes effect.
(b) An acknowledgment of filing issued or other action taken
by the secretary of state affirming the filing of a filing
instrument the effect of which is delayed until the occurrence of a
future event or fact must:
(1) state that the effective date and time of the
filing instrument is conditioned on the occurrence of a future
event or fact as described in the filing instrument; or
(2) otherwise indicate that the effective date and
time of the instrument is conditioned on the occurrence of a future
event or fact. (TBCA 10.03.C, D (part); TLLCA 9.03.C, D(1) (part),
(2); TNPCA 10.07.D, E (part); TRLPA 2.12.C, D (part).)
[Sections 4.060-4.100 reserved for expansion]
SUBCHAPTER C. CORRECTION AND AMENDMENT
Sec. 4.101. CORRECTION OF FILINGS. (a) A filing instrument
that has been filed with the secretary of state that is an
inaccurate record of the event or transaction evidenced in the
instrument, that contains an inaccurate or erroneous statement, or
that was defectively or erroneously signed, sealed, acknowledged,
or verified may be corrected by filing a certificate of correction.
(b) A certificate of correction must be signed by the person
authorized by this code to act on behalf of the entity. (TLLCA
8.12.B; TMCLA 7.01; TRLPA 2.13(a), 9.05.)
Sec. 4.102. LIMITATION ON CORRECTION OF FILINGS. A filing
instrument may be corrected to contain only those statements that
this code authorizes or requires to be included in the original
instrument. A certificate of correction may not alter, add, or
delete a statement that by its alteration, addition, or deletion
would have caused the secretary of state to determine the filing
instrument did not conform to this code at the time of filing. (1
T.A.C. 79.24(a).)
Sec. 4.103. CERTIFICATE OF CORRECTION. The certificate of
correction must:
(1) state the name of the entity;
(2) identify the filing instrument to be corrected by
description and date of filing with the secretary of state;
(3) identify the inaccuracy, error, or defect to be
corrected; and
(4) state in corrected form the portion of the filing
instrument to be corrected. (TLLCA 8.12.B; TMCLA 7.02; TRLPA
2.13(b).)
Sec. 4.104. FILING CERTIFICATE OF CORRECTION. The
certificate of correction shall be filed with and acted on by the
secretary of state as provided by Subchapter A. On filing, the
secretary of state shall deliver to the entity or its
representative an acknowledgment of the filing. (TLLCA 8.12.B;
TMCLA 7.03.)
Sec. 4.105. EFFECT OF CERTIFICATE OF CORRECTION. (a) After
the secretary of state files the certificate of correction, the
filing instrument is considered to have been corrected on the date
the filing instrument was originally filed, except as provided by
Subsection (b).
(b) As to a person who is adversely affected by the
correction, the filing instrument is considered to have been
corrected on the date the certificate of correction is filed.
(c) An acknowledgment of filing or a similar instrument
issued by the secretary of state before a filing instrument is
corrected, with respect to the effect of filing the original filing
instrument, applies to the corrected filing instrument as of the
date the corrected filing instrument is considered to have been
filed under this section. (TLLCA 8.12.B; TMCLA 7.04; TRLPA
2.13(c).)
Sec. 4.106. AMENDMENT OF FILINGS. A filing instrument that
an entity files with the secretary of state may be amended or
supplemented to the extent permitted by the provisions of this code
that apply to that entity. (TBCA 4.01.A, 4.07.A (part), 4.14.A
(part), 8.13.A, B, D, 12.13.A (part), 12.21.A (part), 13.04.A
(part); TNPCA 4.01, 4.06.A (part), 8.12.A, B, D; TPAA 14; TLLCA
3.05.A, 3.09.A (part), 7.08.A, B, D; TRLPA 2.02(a) (part), (b),
(c), (d), 2.06(a) (part), 2.10(a), 9.05; TRPA 3.08(b)(11) (part);
TREITA 22.10(A), 22.70(A) (part), 26.10(A) (part).)
[Sections 4.107-4.150 reserved for expansion]
SUBCHAPTER D. FILING FEES
Sec. 4.151. FILING FEES: ALL ENTITIES. The secretary of
state shall impose the following fees:
(1) for filing a certificate of correction, $15;
(2) for filing an application for reservation or
registration of a name, $40;
(3) for filing a notice of transfer of a name
reservation or registration, $15;
(4) for filing an application for renewal of
registration of a name, $40;
(5) for filing a certificate of merger or conversion,
other than a filing on behalf of a nonprofit corporation, $300 plus,
with respect to a merger, any fee imposed for filing a certificate
of formation for each newly created filing entity or, with respect
to a conversion, the fee imposed for filing a certificate of
formation for the converted entity;
(6) for filing a certificate of exchange, $300; and
(7) for preclearance of a filing instrument, $50.
(TBCA 10.01.A (part); TLLCA 8.12.B, 9.01.A (part); TMCLA 7.05;
TNPCA 9.03.A (part); TRLPA 12.01 (part).)
Sec. 4.152. FILING FEES: FOR-PROFIT CORPORATIONS. For a
filing by or for a for-profit corporation, the secretary of state
shall impose the following fees:
(1) for filing a certificate of formation, $300;
(2) for filing a certificate of amendment, $150;
(3) for filing an application of a foreign corporation
for registration to transact business in this state, $750;
(4) for filing an application of a foreign corporation
for an amended registration to transact business in this state,
$150;
(5) for filing a restated certificate of formation and
accompanying statement, $300;
(6) for filing a statement of change of registered
office, registered agent, or both, $15;
(7) for filing a statement of change of name or address
of a registered agent, $15, except that the maximum fee for
simultaneous filings by a registered agent for more than one
corporation may not exceed $750;
(8) for filing a statement of resolution establishing
one or more series of shares, $15;
(9) for filing a certificate of winding up and
termination, $40;
(10) for filing a certificate of withdrawal of a
foreign corporation, $15;
(11) for filing a certificate from the home state of a
foreign corporation that the corporation no longer exists in that
state, $15;
(12) for filing a bylaw or agreement restricting
transfer of shares or securities other than as an amendment to the
certificate of formation, $15;
(13) for filing an application for reinstatement of a
certificate of formation or registration as a foreign corporation
following forfeiture under the Tax Code, $75;
(14) for filing an application for reinstatement of a
corporation or registration as a foreign corporation after
involuntary dissolution or revocation, $75; and
(15) for filing any instrument as provided by this
code for which this section does not expressly provide a fee, $15.
(TBCA 10.01.A.)
Sec. 4.153. FILING FEES: NONPROFIT CORPORATIONS. For a
filing by or for a nonprofit corporation, the secretary of state
shall impose the following fees:
(1) for filing a certificate of formation, $25;
(2) for filing a certificate of amendment, $25;
(3) for filing a certificate of merger, conversion, or
consolidation, without regard to whether the surviving or new
corporation is a domestic or foreign corporation, $50;
(4) for filing a statement of change of a registered
office, registered agent, or both, $5;
(5) for filing a certificate of dissolution, $5;
(6) for filing an application of a foreign corporation
for registration to conduct affairs in this state, $25;
(7) for filing an application of a foreign corporation
for an amended registration to conduct affairs in this state, $25;
(8) for filing a certificate of withdrawal of a
foreign corporation, $5;
(9) for filing a restated certificate of formation and
accompanying statement, $50;
(10) for filing a statement of change of name or
address of a registered agent, $15, except that the maximum fee for
simultaneous filings by a registered agent for more than one
corporation may not exceed $250;
(11) for filing a report under Chapter 22, $5;
(12) for filing a report under Chapter 22 to reinstate
a corporation's right to conduct affairs in this state, $5, plus a
late fee in the amount of $5 or in the amount of $1 for each month or
part of a month that the report remains unfiled, whichever amount is
greater, except that the late fee may not exceed $25;
(13) for filing a report under Chapter 22 to reinstate
a corporation or registration following involuntary termination or
revocation, $25; and
(14) for filing any instrument of a domestic or
foreign corporation as provided by this code for which this section
does not expressly provide a fee, $5. (TNPCA 8.15.E (part), 9.02.C,
F, 9.03.)
Sec. 4.154. FILING FEES: LIMITED LIABILITY COMPANIES. For
a filing by or for a limited liability company, the secretary of
state shall impose the same fee as the filing fee for a similar
instrument under Section 4.152. (TLLCA 7.11.E (part), 9.01.A.)
Sec. 4.155. FILING FEES: LIMITED PARTNERSHIPS. For a
filing by or for a limited partnership, the secretary of state shall
impose the following fees:
(1) for filing a certificate of formation or an
application for registration as a foreign limited partnership,
$750;
(2) for filing a certificate of amendment or an
amendment of registration of a foreign limited partnership, $150;
(3) for filing a restated certificate of formation,
$300;
(4) for filing a statement for change of registered
office, registered agent, or both, $15;
(5) for filing a statement of change of name or address
of a registered agent, $15, except that the maximum fee for
simultaneous filings by a registered agent for more than one
limited partnership may not exceed $750;
(6) for filing a certificate of winding up and
termination, $40;
(7) for filing a certificate of withdrawal of a
foreign limited partnership, $15;
(8) for filing a certificate of reinstatement of a
limited partnership or registration as a foreign limited
partnership after involuntary termination or revocation under
Chapter 11 or Chapter 9, $75;
(9) for filing a periodic report required under
Chapter 153, $50;
(10) for reviving a limited partnership's right to
transact business under Chapter 153, $50 plus a late fee in an
amount equal to the lesser of:
(A) $25 for each month or part of a month that
elapses after the date of the notice of forfeiture; or
(B) $100;
(11) for reinstatement of a certificate of formation
or registration under Chapter 153, $50 plus a late fee of $100 and a
reinstatement fee of $75;
(12) for filing any document required or permitted to
be filed for a limited liability partnership, the secretary of
state shall impose the same fee as the filing fee for a general
partnership under Section 4.158. For purposes of calculation of
the filing fee, all references to partners in Section 4.158 as
applied to limited partnerships mean general partners only; and
(13) for filing any instrument as provided by this
code for which this section does not expressly provide a fee, $15.
(TRLPA 12.01, 13.05(b) (part), 13.07(a) (part), 13.09(a).)
Sec. 4.156. FILING FEES: PROFESSIONAL ASSOCIATIONS. For a
filing by or for a professional association, the secretary of state
shall impose the following fees:
(1) for filing a certificate of formation or an
application for registration as a foreign professional
association, $750;
(2) for filing an annual statement, $35; and
(3) for filing any other instrument, the fee provided
for the filing of a similar instrument under Section 4.152. (TPAA
22.)
Sec. 4.157. FILING FEES: PROFESSIONAL CORPORATIONS. For a
filing by or for a professional corporation, the secretary of state
shall impose the same fee as the filing fee for a similar instrument
under Section 4.152. (TPCA 5 (part).)
Sec. 4.158. FILING FEES: GENERAL PARTNERSHIPS. For a
filing by or for a general partnership, the secretary of state shall
impose the following fees:
(1) for filing a limited liability partnership
application, $200 for each partner;
(2) for filing a limited liability partnership renewal
application, $200 for each partner on the date of renewal;
(3) for filing a statement of foreign qualification by
a foreign limited liability partnership, $200 for each partner in
this state, except that the maximum fee may not exceed $750;
(4) for filing a renewal of registration by a foreign
limited liability partnership, $200 for each partner in this state,
except that the maximum fee may not exceed $750;
(5) for filing a certificate of amendment for a
domestic limited liability partnership, $10, plus $200 for each
partner added by the amendment;
(6) for filing a certificate of amendment for a
foreign limited liability partnership, $10, plus $200 for each
partner in this state added by amendment not to exceed $750; and
(7) for filing any other filing instrument, the filing
fee imposed for a similar instrument under Section 4.155. (TRPA
3.08(b)(3), (7) (part), (11) (part), 10.02(c), (g) (part), (k)
(part).)
Sec. 4.159. FILING FEES: NONPROFIT ASSOCIATIONS. For a
filing by or for a nonprofit association, the secretary of state
shall impose the following fees:
(1) for filing a statement appointing an agent to
receive service of process, $25;
(2) for filing an amendment of a statement appointing
an agent, $5; and
(3) for filing a cancellation of a statement
appointing an agent, $5. (TUUNAA 12(d), 1 T.A.C. 80.21(c),
80.22(c), 80.23(c), 80.24(c).)
Sec. 4.160. FILING FEES: FOREIGN FILING ENTITIES. For a
filing by or for a foreign filing entity when no other fee has been
provided, the secretary of state shall impose the same fee as the
filing fee for a similar instrument under Section 4.151 or 4.152.
(New.)
CHAPTER 5. NAMES OF ENTITIES; REGISTERED AGENTS AND
REGISTERED OFFICES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 5.001. EFFECT ON RIGHTS UNDER OTHER LAW. (a) The
filing of a certificate of formation by a filing entity under this
code, an application for registration by a foreign filing entity
under this code, or an application for reservation or registration
of a name under this chapter does not authorize the use of a name in
this state in violation of a right of another under:
(1) the Trademark Act of 1946, as amended (15 U.S.C.
Section 1051 et seq.);
(2) Chapter 16 or 36, Business & Commerce Code; or
(3) common law.
(b) The secretary of state shall deliver a notice that
contains the substance of Subsection (a) to each of the following:
(1) a filing entity that files a certificate of
formation under this code;
(2) a foreign filing entity that registers under this
code;
(3) a person that reserves a name under Subchapter C;
and
(4) a person that registers a name under Subchapter D.
(TBCA 2.05.C; TLLCA 2.03.C.)
[Sections 5.002-5.050 reserved for expansion]
SUBCHAPTER B. GENERAL PROVISIONS RELATING TO NAMES
OF ENTITIES
Sec. 5.051. ASSUMED NAME. A domestic entity or a foreign
entity having authority to transact business in this state may
transact business under an assumed name by filing an assumed name
certificate in accordance with Chapter 36, Business & Commerce
Code. The requirements of this subchapter do not apply to an
assumed name set forth in an assumed name certificate filed under
that chapter. (TBCA 2.05.B, 8.03.A(2) (part); TNPCA 8.04.A (part);
TLLCA 2.03.B; TRLPA 9.03(b).)
Sec. 5.052. UNAUTHORIZED PURPOSE IN NAME PROHIBITED. A
filing entity or a foreign filing entity may not have a name that
contains any word or phrase that indicates or implies that the
entity is engaged in a business that the entity is not authorized by
law to pursue. (TBCA 2.05.A(2); TLLCA 2.03.A(2), 7.03 (part);
TNPCA 2.04 (part); TRLPA 1.03 (part).)
Sec. 5.053. IDENTICAL AND DECEPTIVELY SIMILAR NAMES
PROHIBITED. (a) A filing entity may not have a name, and a foreign
filing entity may not register to transact business in this state
under a name, that is the same as, or that the secretary of state
determines to be deceptively similar or similar to:
(1) the name of another existing filing entity;
(2) the name of a foreign filing entity that is
registered under Chapter 9;
(3) a name that is reserved under Subchapter C; or
(4) a name that is registered under Subchapter D.
(b) Subsection (a) does not apply if the other entity or the
person for whom the name is reserved or registered, as appropriate,
consents in writing to the use of the similar name. (TBCA
2.05.A(3), 8.03.A(2) (part); TLLCA 2.03.A(3), 7.03 (part); TNPCA
2.04 (part), 8.03.A(2) (part); TRLPA 1.03 (part).)
Sec. 5.054. NAME OF CORPORATION, FOREIGN CORPORATION, OR
PROFESSIONAL CORPORATION. (a) The name of a corporation or foreign
corporation must contain:
(1) the word "company," "corporation,"
"incorporated," or "limited"; or
(2) an abbreviation of one of those words.
(b) Subsection (a) does not apply to a nonprofit corporation
or foreign nonprofit corporation.
(c) Instead of a word or abbreviation required by Subsection
(a), the name of a professional corporation may contain the phrase
"professional corporation" or an abbreviation of the phrase. (TBCA
2.05.A(1), 8.03.A(1); TPCA 8 (part).)
Sec. 5.055. NAME OF LIMITED PARTNERSHIP OR FOREIGN LIMITED
PARTNERSHIP. (a) The name of a limited partnership or foreign
limited partnership must contain:
(1) the word "limited";
(2) the phrase "limited partnership"; or
(3) an abbreviation of that word or phrase.
(b) The name of a limited partnership that is a limited
liability limited partnership must also contain:
(1) the phrase "limited liability partnership" or
"limited liability limited partnership"; or
(2) an abbreviation of one of those phrases. (TRLPA
1.03 (part); TRPA 3.08(c).)
Sec. 5.056. NAME OF LIMITED LIABILITY COMPANY OR FOREIGN
LIMITED LIABILITY COMPANY. (a) The name of a limited liability
company or a foreign limited liability company doing business in
this state must contain:
(1) the phrase "limited liability company" or "limited
company"; or
(2) an abbreviation of one of those phrases.
(b) A limited liability company formed before September 1,
1993, the name of which complied with the laws of this state on the
date of formation but does not comply with this section is not
required to change its name. (TLLCA 2.03.A (part), 7.03 (part).)
Sec. 5.057. NAME OF COOPERATIVE ASSOCIATION. (a) The name
of a cooperative association must contain:
(1) the word "cooperative"; or
(2) an abbreviation of that word.
(b) A domestic or foreign entity may use the word
"cooperative" in its name to the extent permitted by Section
251.452. (CAA 8(b) (part), 39(a).)
Sec. 5.058. NAME OF PROFESSIONAL ASSOCIATION. The name of a
professional association must contain:
(1) the word "associated," "associates," or
"association";
(2) the phrase "professional association"; or
(3) an abbreviation of one of those words or that
phrase. (TPAA 4 (part).)
Sec. 5.059. NAME OF PROFESSIONAL LIMITED LIABILITY COMPANY.
(a) The name of a professional limited liability company must
contain:
(1) the phrase "professional limited liability
company"; or
(2) an abbreviation of that phrase.
(b) A professional limited liability company formed before
September 1, 1993, the name of which complied with the laws of this
state on the date of formation but does not comply with this
section, is not required to change its name. (TLLCA 11.02 (part).)
Sec. 5.060. NAME OF PROFESSIONAL ENTITY; CONFLICTS WITH
OTHER LAW OR ETHICAL RULE. The name of a professional entity must
not be contrary to a statute or regulation that governs a person who
provides a professional service through the professional entity,
including a rule of professional ethics. (TLLCA 11.02 (part); TPAA
4 (part); TPCA 8 (part).)
Sec. 5.061. NAME CONTAINING "LOTTO" OR "LOTTERY"
PROHIBITED. A filing entity or a foreign filing entity may not have
a name that contains the word "lotto" or "lottery." (TBCA
2.05.A(4); TNPCA 2.04.A(3).)
Sec. 5.062. VETERANS ORGANIZATIONS; UNAUTHORIZED USE OF
NAME. (a) Subject to Subsection (b), a filing entity may not have a
name that:
(1) reasonably implies that the entity is created by
or for the benefit of war veterans or their families; and
(2) contains the word or phrase, or any variation or
abbreviation of:
(A) "veteran";
(B) "legion";
(C) "foreign";
(D) "Spanish";
(E) "disabled";
(F) "war"; or
(G) "world war."
(b) The prohibition in Subsection (a) does not apply to a
filing entity with a name approved in writing by:
(1) a congressionally recognized veterans
organization with a name containing the same word or phrase, or
variation or abbreviation, contained in the filing entity's name;
or
(2) if a veterans organization described by
Subdivision (1) does not exist, the state commander of the:
(A) American Legion;
(B) Disabled American Veterans of the World War;
(C) Veterans of Foreign Wars of the United
States;
(D) United Spanish War Veterans; or
(E) Veterans of the Spanish-American War. (TMCLA
3.01.)
Sec. 5.063. NAME OF LIMITED LIABILITY PARTNERSHIP. (a) The
name of a domestic or foreign limited liability partnership must
contain:
(1) the phrase "limited liability partnership"; or
(2) an abbreviation of the phrase.
(b) A domestic or foreign limited liability partnership is
subject to Section 5.053.
(c) A domestic or foreign limited liability partnership
that is also a limited partnership must comply with Section 5.055
and not this section. (TRPA 3.08(c).)
[Sections 5.064-5.100 reserved for expansion]
SUBCHAPTER C. RESERVATION OF NAMES
Sec. 5.101. APPLICATION FOR RESERVATION OF NAME. (a) Any
person may file an application with the secretary of state to
reserve the exclusive use of a name under this chapter.
(b) The application must be:
(1) accompanied by any required filing fee; and
(2) signed by the applicant or by the agent or attorney
of the applicant. (TBCA 2.06.A, B (part); TLLCA 2.04.A, B (part);
TNPCA 2.04A; TRLPA 1.04(a), (b) (part).)
Sec. 5.102. RESERVATION OF CERTAIN NAMES PROHIBITED;
EXCEPTIONS. (a) The secretary of state may not reserve a name that
is the same as, or that the secretary of state considers deceptively
similar or similar to:
(1) the name of an existing filing entity;
(2) the name of a foreign filing entity that is
registered under Chapter 9;
(3) a name that is reserved under this subchapter; or
(4) a name that is registered under Subchapter D.
(b) Subsection (a) does not apply if the other entity or the
person for whom the name is reserved or registered, as appropriate,
consents in writing to the subsequent reservation of the similar
name. (TBCA 2.05.A(3), 2.06.B (part); TLLCA 2.03.A(3), 2.04.B
(part); TNPCA 2.04.A(2); TRLPA 1.03 (part), 1.04(b) (part).)
Sec. 5.103. ACTION ON APPLICATION. If the secretary of
state determines that the name specified in the application is
eligible for reservation, the secretary shall reserve that name for
the exclusive use of the applicant. (TBCA 2.06.B (part); TLLCA
2.04.B (part); TNPCA 2.04A.B; TRLPA 1.04(b) (part).)
Sec. 5.104. DURATION OF RESERVATION OF NAME. The secretary
of state shall reserve the name for the applicant until the earlier
of:
(1) the 121st day after the date the application is
accepted for filing; or
(2) the date the applicant files with the secretary of
state a written notice of withdrawal of the reservation. (TBCA
2.06.B (part), D; TLLCA 2.04.B (part), D; TNPCA 2.04A.B; TRLPA
1.04(b) (part).)
Sec. 5.105. RENEWAL OF RESERVATION. A person may renew the
person's reservation of a name under this subchapter for successive
120-day periods if, during the 30-day period preceding the
expiration of that reservation, the person:
(1) files a new application to reserve the name; and
(2) pays the required filing fee. (TRLPA 1.04(b)
(part).)
Sec. 5.106. TRANSFER OF RESERVATION OF NAME. (a) A person
may transfer the person's reservation of a name by filing with the
secretary of state a notice of transfer.
(b) The notice of transfer must:
(1) be signed by the person for whom the name is
reserved; and
(2) state the name and address of the person to whom
the reservation is to be transferred. (TBCA 2.06.C; TLLCA 2.04.C;
TNPCA 2.04A.B; TRLPA 1.04(b) (part).)
[Sections 5.107-5.150 reserved for expansion]
SUBCHAPTER D. REGISTRATION OF NAMES
Sec. 5.151. APPLICATION BY CERTAIN ENTITIES FOR
REGISTRATION OF NAME. An organization that is authorized to do
business in this state as a bank, trust company, savings
association, or insurance company, or that is a foreign filing
entity not registered to do business in this state under this code,
may apply to register its name under this subchapter. (TBCA 2.07.A
(part); TLLCA 8.12.A (part); TRLPA 1.05(a).)
Sec. 5.152. APPLICATION FOR REGISTRATION OF NAME. (a) To
register a name under this subchapter, an organization must file an
application with the secretary of state.
(b) The application must:
(1) state that the organization validly exists and is
doing business;
(2) contain a brief statement of the nature of the
organization's business;
(3) set out:
(A) the name of the organization;
(B) the name of the jurisdiction under whose laws
the organization is formed; and
(C) the date the organization was formed; and
(4) be accompanied by any required filing fee. (TBCA
2.07.B; TRLPA 1.05(b).)
Sec. 5.153. CERTAIN REGISTRATIONS PROHIBITED; EXCEPTIONS.
(a) The secretary of state may not register a name that is the same
as, or that the secretary of state determines to be deceptively
similar or similar to:
(1) the name of an existing filing entity;
(2) the name of a foreign filing entity that is
registered under Chapter 9;
(3) a name that is reserved under Subchapter C; or
(4) a name that is registered under this subchapter.
(b) Subsection (a) does not apply if:
(1) the other entity or the person for whom the name is
reserved or registered, as appropriate, consents in writing to the
registration of the similar name; or
(2) the applicant is a bank, trust company, savings
association, or insurance company that has been in continuous
existence from a date that precedes the date the conflicting name is
filed with the secretary of state. (TBCA 2.07.A (part); TLLCA
8.12.A (part).)
Sec. 5.154. DURATION OF REGISTRATION OF NAME. The
registration of a name under this subchapter is effective until the
earlier of:
(1) the first anniversary of the date the application
is accepted for filing; or
(2) the date the entity files with the secretary of
state a written notice of withdrawal of the registration. (TBCA
2.07.C; TLLCA 8.12.A (part); TRLPA 1.05(c).)
Sec. 5.155. RENEWAL OF REGISTRATION. A person may renew the
person's registration of a name under this subchapter for
successive one-year periods if, during the 90-day period preceding
the expiration of that registration, the person:
(1) files an application to renew the registration of
the name; and
(2) pays the required filing fee. (TBCA 2.08; TRLPA
1.05(d).)
[Sections 5.156-5.200 reserved for expansion]
SUBCHAPTER E. REGISTERED AGENTS AND REGISTERED OFFICES
Sec. 5.201. DESIGNATION AND MAINTENANCE OF REGISTERED AGENT
AND REGISTERED OFFICE. (a) Each filing entity and each foreign
filing entity shall designate and continuously maintain in this
state:
(1) a registered agent; and
(2) a registered office.
(b) The registered agent:
(1) is an agent of the entity on whom may be served any
process, notice, or demand required or permitted by law to be served
on the entity;
(2) may be:
(A) an individual who is a resident of this
state; or
(B) a domestic entity or a foreign entity that is
registered to do business in this state; and
(3) must maintain a business office at the same
address as the entity's registered office.
(c) The registered office:
(1) must be located at a street address where process
may be personally served on the entity's registered agent;
(2) is not required to be a place of business of the
filing entity or foreign filing entity; and
(3) may not be solely a mailbox service or a telephone
answering service. (TBCA 2.09, 2.11.A (part), 8.08, 8.10.A (part);
TLLCA 2.05, 2.08.A (part); TNPCA 2.05, 2.07.A (part), 8.07, 8.09.A
(part); TREITA 5.10(A), 5.20(A) (part); TRLPA 1.06(a), 1.08(a)
(part), 9.04; TRPA 10.05(a), (j) (part).)
Sec. 5.202. CHANGE BY ENTITY TO REGISTERED OFFICE OR
REGISTERED AGENT. (a) A filing entity or foreign filing entity may
change its registered office, its registered agent, or both by
filing a statement of the change in accordance with Chapter 4.
(b) The statement must contain:
(1) the name of the entity;
(2) the name of the entity's registered agent;
(3) the street address of the entity's registered
agent;
(4) if the change relates to the registered agent, the
name of the entity's new registered agent;
(5) if the change relates to the registered office,
the street address of the entity's new registered office;
(6) a recitation that the change specified in the
statement is authorized by the entity; and
(7) a recitation that the street address of the
registered office and the street address of the registered agent's
business are the same.
(c) On acceptance of the statement by the filing officer,
the statement is effective as an amendment to the appropriate
provision of:
(1) the filing entity's certificate of formation; or
(2) the foreign filing entity's registration. (TBCA
2.10.A, C, 8.09.A, C; TLLCA 2.06.A, C; TNPCA 2.06.A, C; TREITA
5.10(B); TRLPA 1.06(b), (d), (e); TRPA 10.05(b).)
Sec. 5.203. CHANGE BY REGISTERED AGENT TO NAME OR ADDRESS OF
REGISTERED OFFICE. (a) The registered agent of a filing entity or a
foreign filing entity may change its name, its address as the
address of the entity's registered office, or both by filing a
statement of the change in accordance with Chapter 4.
(b) The statement must be signed by the registered agent, or
a person authorized to sign the statement on behalf of the
registered agent, and must contain:
(1) the name of the entity represented by the
registered agent;
(2) the name of the entity's registered agent and the
address at which the registered agent maintained the entity's
registered office;
(3) if the change relates to the name of the registered
agent, the new name of that agent;
(4) if the change relates to the address of the
registered office, the new address of that office; and
(5) a recitation that written notice of the change was
given to the entity at least 10 days before the date the statement
is filed.
(c) On acceptance of the statement by the filing officer,
the statement is effective as an amendment to the appropriate
provision of:
(1) the filing entity's certificate of formation; or
(2) the foreign filing entity's registration.
(d) A registered agent may file a statement under this
section that applies to more than one entity. (TBCA 2.10-1.A, C;
TLLCA 2.07.A, C; TNPCA 2.06A.A, C; TREITA 5.10(F); TRLPA 1.06(h),
(i) (part); TRPA 10.05(h), (i) (part).)
Sec. 5.204. RESIGNATION OF REGISTERED AGENT. (a) A
registered agent of a filing entity or a foreign filing entity may
resign as the registered agent by giving notice to that entity and
to the appropriate filing officer.
(b) Notice to the entity must be given to the entity at the
address of the entity most recently known by the agent.
(c) Notice to the filing officer must be given before the
11th day after the date notice under Subsection (b) is mailed or
delivered and must include:
(1) the address of the entity most recently known by
the agent;
(2) a statement that written notice of the resignation
has been given to the entity; and
(3) the date on which that written notice of
resignation was given.
(d) On compliance with Subsections (b) and (c), the
appointment of the registered agent terminates. The termination is
effective on the 31st day after the date the secretary of state
receives the notice.
(e) If the filing officer finds that a notice of resignation
received by the filing officer conforms to Subsections (b) and (c),
the filing officer shall:
(1) notify the entity of the registered agent's
resignation; and
(2) file the resignation in accordance with Chapter 4,
except that a fee is not required to file the resignation. (TBCA
2.10.D, 8.09.D; TLLCA 2.06.D; TNPCA 2.06.D, 8.08.D; TREITA 5.10(C),
(D), (E); TRLPA 1.06(f), (g); TRPA 10.05(f), (g).)
[Sections 5.205-5.250 reserved for expansion]
SUBCHAPTER F. SERVICE OF PROCESS
Sec. 5.251. FAILURE TO DESIGNATE REGISTERED AGENT. The
secretary of state is an agent of an entity for purposes of service
of process, notice, or demand on the entity if:
(1) the entity is a filing entity or a foreign filing
entity and:
(A) the entity fails to appoint or does not
maintain a registered agent in this state; or
(B) the registered agent of the entity cannot
with reasonable diligence be found at the registered office of the
entity; or
(2) the entity is a foreign filing entity and:
(A) the entity's registration to do business
under this code is revoked; or
(B) the entity transacts business in this state
without being registered as required by Chapter 9. (TBCA 2.11.B
(part), 8.10.B (part); TLLCA 2.08.B (part); TNPCA 2.07.B (part),
8.09.B (part); TREITA 5.20(B) (part); TRLPA 1.08(b) (part), 9.10(b)
(part); TRPA 10.05(k).)
Sec. 5.252. SERVICE ON SECRETARY OF STATE. (a) Service on
the secretary of state under Section 5.251 is effected by:
(1) delivering to the secretary duplicate copies of
the process, notice, or demand; and
(2) accompanying the copies with any fee required by
law, including this code or the Government Code, for:
(A) maintenance by the secretary of a record of
the service; and
(B) forwarding by the secretary of the process,
notice, or demand.
(b) Notice on the secretary of state under Subsection (a) is
returnable in not less than 30 days. (TBCA 2.11.B (part), 8.10.B
(part); TLLCA 2.08.B (part); TNPCA 2.07.B (part), 8.09.B (part);
TREITA 5.20(B) (part), (D); TRLPA 1.08(b) (part), 9.10(b) (part);
TRPA 10.05(l) (part).)
Sec. 5.253. ACTION BY SECRETARY OF STATE. (a) After service
in compliance with Section 5.252, the secretary of state shall
immediately send one of the copies of the process, notice, or demand
to the named entity.
(b) The notice must be:
(1) addressed to the most recent address of the entity
on file with the secretary of state; and
(2) sent by certified mail, with return receipt
requested. (TBCA 2.11.B (part), 8.10.B (part); TLLCA 2.08.B
(part); TNPCA 2.07.B (part), 8.09.B (part); TREITA 5.20(B) (part);
TRLPA 1.08(b) (part), 9.10(b) (part); TRPA 10.05(l) (part).)
Sec. 5.254. REQUIRED RECORDS OF SECRETARY OF STATE. The
secretary of state shall keep a record of each process, notice, or
demand served on the secretary under this subchapter and shall
record:
(1) the time when each service on the secretary was
made; and
(2) each subsequent action of the secretary taken in
relation to that service. (TBCA 2.11.C, 8.10.C; TLLCA 2.08.C;
TNPCA 2.07.C, 8.09.C; TREITA 5.20(C); TRLPA 1.08(c), 9.10(c); TRPA
10.05(m).)
Sec. 5.255. AGENT FOR SERVICE OF PROCESS, NOTICE, OR DEMAND
AS MATTER OF LAW. For the purpose of service of process, notice, or
demand:
(1) the president and each vice president of a
domestic or foreign corporation is an agent of that corporation;
(2) each general partner of a domestic or foreign
limited partnership and each partner of a domestic or foreign
general partnership is an agent of that partnership;
(3) each manager of a manager-managed domestic or
foreign limited liability company and each member of a
member-managed domestic or foreign limited liability company is an
agent of that limited liability company;
(4) each person who is a governing person of a domestic
or foreign entity, other than an entity listed in Subdivisions
(1)-(3), is an agent of that entity; and
(5) each member of a committee of a nonprofit
corporation authorized to perform the chief executive function of
the corporation is an agent of that corporation. (TBCA 2.11.A
(part), 8.10.A (part); TLLCA 2.08.A (part); TNPCA 2.07.A (part),
8.09.A (part); TREITA 5.20(A) (part); TRLPA 1.08(a) (part), 9.10(a)
(part); TRPA 10.05(j) (part).)
Sec. 5.256. OTHER MEANS OF SERVICE NOT PRECLUDED. This
chapter does not preclude other means of service of process,
notice, or demand on a domestic or foreign entity as provided by
other law. (TBCA 8.10.D; TLLCA 2.08.D; TRLPA 9.10(d); TRPA
10.05(n).)
Sec. 5.257. SERVICE OF PROCESS BY POLITICAL SUBDIVISION.
(a) A process, notice, or demand required or permitted by law to be
served by a political subdivision of this state or by a person,
including another political subdivision or an attorney, acting on
behalf of a political subdivision in connection with the collection
of a delinquent ad valorem tax may be served on a domestic or
foreign corporation whose corporate privileges are forfeited under
Section 171.251, Tax Code, that is involuntarily terminated under
Chapter 11, or whose registration is revoked under Chapter 9 by
delivery of the process, notice, or demand to any officer or
director of the corporation, as listed in the most recent records of
the secretary of state.
(b) If the officers or directors of a corporation are
unknown or cannot be found, service on the corporation may be made
in the same manner as service is made on unknown shareholders under
law.
(c) Notwithstanding any disability or reinstatement of a
corporation, service of process under this section is sufficient
for a judgment against the corporation or a judgment in rem against
any property to which the corporation holds title. (TBCA 2.11.D,
8.10.E; TNPCA 2.07.D.)
CHAPTER 6. MEETINGS AND VOTING
SUBCHAPTER A. MEETINGS
Sec. 6.001. LOCATION OF MEETINGS. (a) Meetings of the
owners or members of a domestic entity may be held at locations in
or outside the state as:
(1) provided by or fixed in accordance with the
governing documents of the domestic entity; or
(2) agreed to by all persons entitled to notice of the
meeting.
(b) If the location of meetings of the owners or members of
the entity is not established under Subsection (a), the owners or
members may hold meetings only at the registered office of the
entity in this state or the principal office of the entity.
(c) The governing persons of a domestic entity, or a
committee of the governing persons, may hold meetings in or outside
the state as:
(1) provided by or fixed in accordance with:
(A) the governing documents of the domestic
entity; or
(B) the person calling the meeting; or
(2) agreed to by all persons entitled to notice of the
meeting. (CAA 13(b), 21(d); TBCA 2.24.A, 2.37.A; TLLCA 2.19.A, B;
TNPCA 2.10.A (part), 2.19.A; TREITA 10.10(A), 10.20(A).)
Sec. 6.002. ALTERNATIVE FORMS OF MEETINGS. (a) Subject to
this code and the governing documents of a domestic entity, the
owners, members, or governing persons of the entity, or a committee
of the owners, members, or governing persons, may hold meetings by
using a conference telephone or similar communications equipment,
or another suitable electronic communications system, including
videoconferencing technology or the Internet, or any combination,
if the telephone or other equipment or system permits each person
participating in the meeting to communicate with all other persons
participating in the meeting.
(b) If voting is to take place at the meeting, the entity
must:
(1) implement reasonable measures to verify that every
person voting at the meeting by means of remote communications is
sufficiently identified; and
(2) keep a record of any vote or other action taken.
(TBCA 9.10.C (part); TLLCA 2.23.C (part); TNPCA 9.11.A; TREITA
10.30(C) (part).)
Sec. 6.003. PARTICIPATION CONSTITUTES PRESENCE. A person
participating in a meeting is considered present at the meeting,
unless the participation is for the express purpose of objecting to
the transaction of business at the meeting on the ground that the
meeting has not been lawfully called or convened. (TBCA 9.10.C
(part); TLLCA 2.23.C (part); TREITA 10.30(C) (part).)
[Sections 6.004-6.050 reserved for expansion]
SUBCHAPTER B. NOTICE OF MEETINGS
Sec. 6.051. GENERAL NOTICE REQUIREMENTS. (a) Subject to
this code and the governing documents of the entity, notice of a
meeting of the owners, members, or governing persons of a domestic
entity, or a committee of the owners, members, or governing
persons, must:
(1) be given in the manner determined by the governing
authority of the entity; and
(2) state:
(A) the date and time of the meeting; and
(B) the location of the meeting or, if the
meeting is held by using a conference telephone or other
communications system authorized by Section 6.002, the form of
communication used for the meeting.
(b) Subject to this code and the governing documents of a
domestic entity, notice of a meeting that is:
(1) mailed is considered to be delivered on the date
notice is deposited in the United States mail with postage paid in
an envelope addressed to the person at the person's address as it
appears on the ownership or membership records of the entity; and
(2) transmitted by facsimile or electronic message is
considered to be delivered when the facsimile or electronic message
is successfully transmitted. (CAA 14 (part); TBCA 2.25.A (part),
2.37.B (part); TLLCA 2.19.B, E; TNPCA 2.11.A (part), 2.19.B
(part).)
Sec. 6.052. WAIVER OF NOTICE. (a) Notice of a meeting is
not required to be given to an owner, member, or governing person of
a domestic entity, or a member of a committee of the owners,
members, or governing persons, entitled to notice under this code
or the governing documents of the entity if the person entitled to
notice signs a written waiver of notice of the meeting, regardless
of whether the waiver is signed before or after the time of the
meeting.
(b) If a person entitled to notice of a meeting participates
in the meeting, the person's participation constitutes a waiver of
notice of the meeting unless the person participates in the meeting
solely to object to the transaction of business at the meeting on
the ground that the meeting was not lawfully called or convened.
(TBCA 2.37.B (part), 9.09; TLLCA 2.19.F, 8.08; TNPCA 2.19.B (part),
9.09; TREITA 21.10.)
Sec. 6.053. EXCEPTION. (a) Notice of a meeting is not
required to be given to an owner or member of a filing entity
entitled to notice under this code or the governing documents of the
entity if either of the following is mailed to the person entitled
to notice of the meeting to the person's address as it appears on
the ownership or membership transfer records of the entity and is
returned undeliverable:
(1) notice of two consecutive annual meetings and
notice of any meeting held during the period between the two annual
meetings; or
(2) all, but in no event less than two, payments of
distribution or interest on securities during a 12-month period if
the payments are sent by first class mail.
(b) Notice of a meeting is not required to be given to an
owner or member entitled to notice under this code or the governing
documents of a filing entity the notice requirements of which are
subject to the Securities Exchange Act of 1934, as amended (15
U.S.C. Section 78a et seq.), if the person entitled to notice of the
meeting is considered a lost security holder under that Act and the
regulations adopted under that Act.
(c) An action taken or a meeting held without giving notice
to a person not entitled to notice under this section has the same
force and effect as if notice had been given to the person.
(d) A certificate or other document filed with the secretary
of state as a result of a meeting held or an action taken by a filing
entity without giving notice of the meeting or action to a person
not entitled to notice under this section may state that notice of
the meeting or action was given to each person entitled to notice.
(e) Notice of a meeting must be given to a person not
entitled to notice of the meeting under this section if the person
delivers to the entity a written notice of the person's address.
(TBCA 2.25.B; TREITA 11.10(B), (C).)
[Sections 6.054-6.100 reserved for expansion]
SUBCHAPTER C. RECORD DATES
Sec. 6.101. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
CONSENT TO ACTION. (a) Subject to this code, the governing
documents of a domestic entity may provide the record date, or the
manner of determining the record date, for:
(1) determining the owners or members of the entity
entitled to:
(A) receive notice of a meeting of the owners or
members;
(B) vote at a meeting of the owners or members or
at any adjournment of a meeting; or
(C) receive a distribution from the entity other
than a distribution involving a purchase or redemption by the
entity of the entity's own securities; or
(2) any other proper purpose other than for
determining the owners or members entitled to consent to action
without a meeting of the owners or members.
(b) Subject to this code and the governing documents of a
domestic entity, the governing authority of the entity, in advance,
may provide a record date for determining the owners or members of
the entity, except that the date may not be earlier than the 60th
day before the date the action requiring the determination of
owners or members is taken.
(c) Subject to this code and the governing documents of a
domestic entity, the governing authority of the entity may provide
for the closing of the ownership or membership transfer records of
the entity for a period of not longer than 60 days to determine the
owners or members of the entity for a purpose described by
Subsection (a).
(d) If the owners or members of an entity are not otherwise
determined under this section, the record date for determining the
owners or members of an entity is the date on which:
(1) notice of the meeting is mailed to the owners or
members entitled to notice of the meeting; or
(2) with respect to a distribution, other than a
distribution involving a purchase or redemption by the domestic
entity of any of its own securities, the governing authority adopts
the resolution declaring the distribution.
(e) The record date for a meeting applies to any adjournment
of the meeting unless:
(1) the owners or members entitled to vote are
determined under Subsection (c); and
(2) the period during which the transfer records are
closed expires. (TBCA 2.26.B (part); TNPCA 2.11A; TREITA 11.20(C)
(part).)
Sec. 6.102. RECORD DATE FOR WRITTEN CONSENT TO ACTION. (a)
Subject to this code and the governing documents of an entity, the
governing authority of the entity may provide the record date for
determining the owners or members of the entity entitled to written
consent to action without a meeting of the owners or members unless
a record date is provided under Section 6.101 for that action. The
record date may not be earlier than the date the governing authority
adopts the resolution providing for the record date.
(b) Subject to this code and the governing documents of an
entity, the record date for determining the owners or members of the
entity entitled to written consent to action without a meeting of
the owners or members is the date a signed written consent to action
stating the action taken or proposed to be taken is first delivered
to the entity if:
(1) the governing authority of the entity does not
provide a record date under Subsection (a); and
(2) prior action by the governing authority is not
required under this code.
(c) Subject to this code or the governing documents of an
entity, the record date for determining the owners or members of the
entity entitled to written consent to action without a meeting of
the owners or members is at the close of business on the date the
governing authority of the entity adopts a resolution taking prior
action if:
(1) the governing authority does not provide a record
date under Subsection (a); and
(2) prior action by the governing authority is
required by this code. (TBCA 2.26.C (part); TREITA 11.20(D)
(part).)
Sec. 6.103. RECORD DATE FOR SUSPENDED DISTRIBUTIONS. (a)
In this section, "distribution" includes a distribution that:
(1) was payable to an owner or member but not paid and
was held in suspension by the entity making the distribution; or
(2) is paid or delivered by the entity making the
distribution into an escrow account or to a trustee or custodian.
(b) A distribution made by a domestic entity shall be
payable by the entity, or an escrow agent, trustee, or custodian of
the distribution, to the owner or member determined on the record
date for the distribution as provided by this subchapter.
(c) The right to a distribution under this section may be
transferred by contract, by operation of law, or under the laws of
descent and distribution. (TBCA 2.26.D; TREITA 11.20(E).)
[Sections 6.104-6.150 reserved for expansion]
SUBCHAPTER D. VOTING OF OWNERSHIP INTERESTS
Sec. 6.151. MANNER OF VOTING OF INTERESTS. Subject to the
title governing the domestic entity, voting of interests of a
domestic entity must be conducted in the manner provided by the
governing documents of the entity. (New.)
Sec. 6.152. VOTING OF INTERESTS OWNED BY ENTITY. (a) Except
as provided by Subsection (b), an ownership interest owned by the
entity that is the issuer of the interest, or by its direct or
indirect subsidiary, may not be:
(1) directly or indirectly voted at a meeting; or
(2) included in determining at any time the total
number of outstanding ownership interests of the entity.
(b) This section does not preclude a domestic or foreign
entity from voting an ownership interest, including an interest in
the entity, held or controlled by the entity in a fiduciary capacity
or for which the entity otherwise exercises voting power in a
fiduciary capacity. (TBCA 2.29.B; TREITA 13.10(B).)
Sec. 6.153. VOTING OF INTERESTS OWNED BY ANOTHER ENTITY. An
ownership interest in an entity owned by another entity, whether a
domestic or foreign entity, may be voted by the officer, agent, or
proxy as authorized by:
(1) the governing documents of the entity that owns
the interest; or
(2) the governing authority of the entity that owns
the interest, if the governing documents do not provide for the
manner of voting. (TBCA 2.29.E (part); TREITA 13.10(F) (part).)
Sec. 6.154. VOTING OF INTERESTS IN AN ESTATE OR TRUST. (a)
An administrator, executor, guardian, or conservator of an estate
who holds an ownership interest as part of the estate may vote the
interest without transferring the interest into the person's name.
(b) An ownership interest in the name of a trust may be voted
in person or by proxy by:
(1) the trustee; or
(2) a person authorized to act on behalf of the trust
by the trust agreement or the trustee. (TBCA 2.29.F; TREITA
13.10(G).)
Sec. 6.155. VOTING OF INTERESTS BY RECEIVER. (a) A receiver
may vote an ownership interest standing in the name of the receiver.
(b) A receiver may vote an ownership interest held by or
under the control of the receiver without transferring the interest
into the receiver's name if the court appointing the receiver
authorizes the receiver to vote the interest. (TBCA 2.29.G; TREITA
13.10(H).)
Sec. 6.156. VOTING OF PLEDGED INTERESTS. A pledged
ownership interest may be voted by:
(1) the owner of the pledged interest until the
interest is transferred into the pledgee's name; and
(2) the pledgee after the pledged interest is
transferred into the pledgee's name. (TBCA 2.29.H; TREITA
13.10(I).)
[Sections 6.157-6.200 reserved for expansion]
SUBCHAPTER E. ACTION BY WRITTEN CONSENT
Sec. 6.201. UNANIMOUS WRITTEN CONSENT TO ACTION. (a) This
section applies to any action required or authorized to be taken
under this code or the governing documents of a filing entity at an
annual or special meeting of the owners or members of the entity or
at a regular, special, or other meeting of the governing authority
of the entity or a committee of the governing authority.
(b) The owners or members or the governing authority of a
filing entity, or a committee of the governing authority, may take
action without holding a meeting, providing notice, or taking a
vote if each person entitled to vote on the action signs a written
consent or consents stating the action taken.
(c) A written consent described by Subsection (b) has the
same effect as a unanimous vote at a meeting.
(d) A filing instrument filed with the filing officer may
state that an action approved by written consent or consents has the
effect of an approval by a unanimous vote at a meeting. (TBCA
9.10.A(1) (part), B; TLLCA 2.23.B(1); TNPCA 9.10.A, B; TREITA
10.30(A), (B).)
Sec. 6.202. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT.
(a) This section applies to any action required or authorized to be
taken under this code or the governing documents of a filing entity
at an annual or special meeting of the owners or members of the
entity.
(b) Except as provided by this code, the certificate of
formation of a filing entity may authorize the owners or members of
the entity to take action without holding a meeting, providing
notice, or taking a vote if owners or members of the entity having
at least the minimum number of votes that would be necessary to take
the action that is the subject of the consent at a meeting, in which
each owner or member entitled to vote on the action is present and
votes, sign a written consent or consents stating the action taken.
(c) A written consent or consents described by Subsection
(b) must include the date each owner or member signed the consent
and is effective to take the action that is the subject of the
consent only if the consent or consents are delivered to the entity
not later than the 60th day after the date the earliest dated
consent is delivered to the entity as required by Section 6.203.
(d) The entity shall promptly notify each owner or member
who did not sign a consent described by Subsection (b) of the action
that is the subject of the consent. (TBCA 9.10.A(1) (part), (2)
(part), (4); TLLCA 2.23.B(1); TNPCA 9.10.C(1), (2) (part), (3).)
Sec. 6.203. DELIVERY OF LESS THAN UNANIMOUS WRITTEN
CONSENT. (a) A written consent signed by an owner or member of a
filing entity as provided by Section 6.202, if the consent is not
solicited on behalf of the entity or its governing authority, must
be delivered by hand or certified or registered mail, return
receipt requested, or by other means specified in the governing
documents, to:
(1) the entity's registered office or principal
executive office or place of business; or
(2) the managerial official or agent of the entity
having custody of the entity's records of meetings of owners or
members.
(b) A consent delivered to an entity's principal executive
office or place of business under Subsection (a)(1) must be
addressed to the chief managerial official of the entity or, if the
entity does not have a chief managerial official, the governing
authority of the entity. (TBCA 9.10.A(2) (part); TNPCA 9.10.C(2)
(part).)
Sec. 6.204. ADVANCE NOTICE NOT REQUIRED. Advance notice is
not required to be given to take an action by written consent as
provided by this subchapter. (TBCA 9.10.D; TREITA 10.30(D).)
[Sections 6.205-6.250 reserved for expansion]
SUBCHAPTER F. VOTING TRUSTS AND VOTING AGREEMENTS
Sec. 6.251. VOTING TRUSTS. (a) Except as provided by this
code or the governing documents, any number of owners of an entity
may enter into a written voting trust agreement to confer on a
trustee the right to vote or otherwise represent ownership or
membership interests of the entity.
(b) An ownership or membership interest that is the subject
of a voting trust agreement described by Subsection (a) shall be
transferred to the trustee named in the agreement for purposes of
the agreement.
(c) A copy of a voting trust agreement described by
Subsection (a) shall be deposited with the entity at the entity's
principal executive office or registered office and is subject to
examination by:
(1) an owner, whether in person or by the owner's agent
or attorney, in the same manner as the owner is entitled to examine
the books and records of the entity; and
(2) a holder of a beneficial interest in the voting
trust, whether in person or by the holder's agent or attorney, at
any reasonable time for any proper purpose. (TBCA 2.30.A; TREITA
13.20(A).)
Sec. 6.252. VOTING AGREEMENTS. (a) Except as provided by
this code or the governing documents, any number of owners of an
entity, or any number of owners of the entity and the entity itself,
may enter into a written voting agreement to provide the manner of
voting of the ownership interests of the entity. A voting agreement
entered into under this subsection is not part of the governing
documents of the entity.
(b) A copy of a voting agreement entered into under
Subsection (a):
(1) shall be deposited with the entity at the entity's
principal executive office or registered office; and
(2) is subject to examination by an owner, whether in
person or by the owner's agent or attorney, in the same manner as
the owner is entitled to examine the books and records of the
entity.
(c) A voting agreement entered into under Subsection (a) is
specifically enforceable against the holder of an ownership
interest that is the subject of the agreement, and any successor or
transferee of the holder, if:
(1) the voting agreement is noted conspicuously on the
certificate representing the ownership interests; or
(2) a notation of the voting agreement is contained in
a notice sent by or on behalf of the entity, if the ownership
interest is not represented by a certificate.
(d) Except as provided by Subsection (e), a voting agreement
entered into under Subsection (a) is specifically enforceable
against any person, other than a transferee for value, after the
time the person acquires actual knowledge of the existence of the
agreement.
(e) An otherwise enforceable voting agreement entered into
under Subsection (a) is not enforceable against a transferee for
value without actual knowledge of the existence of the agreement at
the time of the transfer, or any subsequent transferee, without
regard to value, if the voting agreement is not noted as required by
Subsection (c).
(f) Section 6.251 does not apply to a voting agreement
entered into under Subsection (a). (TBCA 2.30.B; TREITA 13.20(B).)
[Sections 6.253-6.300 reserved for expansion]
SUBCHAPTER G. APPLICABILITY OF CHAPTER TO PARTNERSHIPS
Sec. 6.301. APPLICABILITY OF CHAPTER TO PARTNERSHIPS. This
chapter does not apply to a general partnership or a limited
partnership except to the extent its governing documents specify.
(New.)
Sec. 6.302. APPLICABILITY OF SUBCHAPTERS C AND D TO LIMITED
LIABILITY COMPANIES. Subchapters C and D do not apply to a limited
liability company except to the extent its governing documents
specify. (New.)
CHAPTER 7. LIABILITY
Sec. 7.001. LIMITATION OF LIABILITY OF GOVERNING PERSON.
(a) Subsections (b) and (c) apply to:
(1) a domestic entity other than a partnership or
limited liability company;
(2) another organization incorporated or organized
under another law of this state; and
(3) to the extent permitted by federal law, a
federally chartered bank, savings and loan association, or credit
union.
(b) The certificate of formation or similar instrument of an
organization to which this section applies may provide that a
governing person of the organization is not liable, or is liable
only to the extent provided by the certificate of formation or
similar instrument, to the organization or its owners or members
for monetary damages for an act or omission by the person in the
person's capacity as a governing person.
(c) Subsection (b) does not authorize the elimination or
limitation of the liability of a governing person to the extent the
person is found liable under applicable law for:
(1) a breach of the person's duty of loyalty, if any,
to the organization or its owners or members;
(2) an act or omission not in good faith that:
(A) constitutes a breach of duty of the person to
the organization; or
(B) involves intentional misconduct or a knowing
violation of law;
(3) a transaction from which the person received an
improper benefit, regardless of whether the benefit resulted from
an action taken within the scope of the person's duties; or
(4) an act or omission for which the liability of a
governing person is expressly provided by an applicable statute.
(d) The liability of a governing person may be limited or
restricted:
(1) in a general partnership to the extent permitted
under Chapter 152;
(2) in a limited partnership to the extent permitted
under Chapter 153 and, to the extent applicable to limited
partnerships, Chapter 152; and
(3) in a limited liability company to the extent
permitted under Section 101.401. (TMCLA 7.06.)
CHAPTER 8. INDEMNIFICATION AND INSURANCE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 8.001. DEFINITIONS. In this chapter:
(1) "Delegate" means a person who is serving or who has
served as a representative of an enterprise at the request of that
enterprise at another enterprise. A person is a delegate to an
employee benefit plan if the performance of the person's official
duties to the enterprise also imposes duties on or otherwise
involves service by the person to the plan or participants in or
beneficiaries of the plan.
(2) "Enterprise" means a domestic entity or an
organization subject to this chapter, including a predecessor
domestic entity or organization.
(3) "Expenses" includes:
(A) court costs, a judgment, a penalty, a
settlement, a fine, and an excise or similar tax, including an
excise tax assessed against the person with respect to an employee
benefit plan; and
(B) reasonable attorney's fees.
(4) "Former governing person" means a person who was a
governing person of an enterprise.
(5) "Judgment" includes an arbitration award.
(6) "Official capacity" means:
(A) with respect to a governing person, the
office of the governing person in the enterprise or the exercise of
authority by or on behalf of the governing person under this code or
the governing documents of the enterprise; and
(B) with respect to a person other than a
governing person, the elective or appointive office, if any, in the
enterprise held by the person or the relationship undertaken by the
person on behalf of the enterprise.
(7) "Predecessor enterprise" means a sole
proprietorship or organization that is a predecessor to an
enterprise in:
(A) a merger, conversion, consolidation, or
other transaction in which the liabilities of the predecessor
enterprise are transferred or allocated to the enterprise by
operation of law; or
(B) any other transaction in which the enterprise
assumes the liabilities of the predecessor enterprise and the
liabilities that are the subject matter of this chapter are not
specifically excluded.
(8) "Proceeding" means:
(A) a threatened, pending, or completed action or
other proceeding, whether civil, criminal, administrative,
arbitrative, or investigative;
(B) an appeal of an action or proceeding
described by Paragraph (A); and
(C) an inquiry or investigation that could lead
to an action or proceeding described by Paragraph (A).
(9) "Representative" means a person serving as a
partner, director, officer, venturer, proprietor, trustee,
employee, or agent of an enterprise or serving a similar function
for an enterprise.
(10) "Respondent" means a person named as a respondent
or defendant in a proceeding. (TBCA 2.02-1.A, P, R (part), T
(part); TNPCA 2.22A.A, P, R(1) (part), T (part); TREITA 9.20(A)
(part), (P), (R) (part), (T) (part); TRLPA 11.01, 11.16, 11.18
(part), 11.20 (part); New.)
Sec. 8.002. APPLICATION OF CHAPTER. (a) Except as provided
by Subsection (b), this chapter does not apply to a:
(1) general partnership; or
(2) limited liability company.
(b) The governing documents of a general partnership or
limited liability company may adopt provisions of this chapter or
may contain enforceable provisions relating to:
(1) indemnification;
(2) advancement of expenses; or
(3) insurance or another arrangement to indemnify or
hold harmless a governing person. (TLLCA 2.20.A; TRPA 1.03(a).)
Sec. 8.003. LIMITATIONS IN GOVERNING DOCUMENTS. (a) The
certificate of formation of an enterprise may restrict the
circumstances under which the enterprise must or may indemnify or
may advance expenses to a person under this chapter.
(b) The written partnership agreement of a limited
partnership may restrict the circumstances in the same manner as
the certificate of formation under Subsection (a). (TBCA 2.02-1.M,
U; TNPCA 2.22A.M, U; TREITA 9.20(M), (U); TRLPA 11.13, 11.21.)
Sec. 8.004. LIMITATIONS IN CHAPTER. Except as provided in
Section 8.151, a provision for an enterprise to indemnify or
advance expenses to a governing person is valid only to the extent
it is consistent with this chapter. (TBCA 2.02-1.M; TNPCA 2.22A.M;
TREITA 9.20(M); TRLPA 11.13.)
[Sections 8.005-8.050 reserved for expansion]
SUBCHAPTER B. MANDATORY AND COURT-ORDERED INDEMNIFICATION
Sec. 8.051. MANDATORY INDEMNIFICATION. (a) An enterprise
shall indemnify a governing person or former governing person
against reasonable expenses actually incurred by the person in
connection with a proceeding in which the person is a respondent
because the person is or was a governing person if the person is
wholly successful, on the merits or otherwise, in the defense of the
proceeding.
(b) A court that determines, in a suit for indemnification,
that a governing person is entitled to indemnification under this
section shall order indemnification and award to the person the
expenses incurred in securing the indemnification. (TBCA 2.02-1.H,
I; TNPCA 2.22A.H, I; TREITA 9.20(H), (I); TRLPA 11.08, 11.09.)
Sec. 8.052. COURT-ORDERED INDEMNIFICATION. (a) On
application of a governing person, former governing person, or
delegate and after notice is provided as required by the court, a
court may order an enterprise to indemnify the person to the extent
the court determines that the person is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances.
(b) This section applies without regard to whether the
governing person, former governing person, or delegate applying to
the court satisfies the requirements of Section 8.101 or has been
found liable:
(1) to the enterprise; or
(2) because the person improperly received a personal
benefit, without regard to whether the benefit resulted from an
action taken in the person's official capacity.
(c) The indemnification ordered by the court under this
section is limited to reasonable expenses if the governing person,
former governing person, or delegate is found liable:
(1) to the enterprise; or
(2) because the person improperly received a personal
benefit, without regard to whether the benefit resulted from an
action taken in the person's official capacity. (TBCA 2.02-1.J;
TNPCA 2.22A.J; TREITA 9.20(J); TRLPA 11.10.)
[Sections 8.053-8.100 reserved for expansion]
SUBCHAPTER C. PERMISSIVE INDEMNIFICATION AND ADVANCEMENT
OF EXPENSES
Sec. 8.101. PERMISSIVE INDEMNIFICATION. (a) An enterprise
may indemnify a governing person, former governing person, or
delegate who was, is, or is threatened to be made a respondent in a
proceeding to the extent permitted by Section 8.102 if it is
determined in accordance with Section 8.103 that:
(1) the person:
(A) acted in good faith;
(B) reasonably believed:
(i) in the case of conduct in the person's
official capacity, that the person's conduct was in the
enterprise's best interests; and
(ii) in any other case, that the person's
conduct was not opposed to the enterprise's best interests; and
(C) in the case of a criminal proceeding, did not
have a reasonable cause to believe the person's conduct was
unlawful;
(2) with respect to expenses, the amount of expenses
other than a judgment is reasonable; and
(3) indemnification should be paid.
(b) Action taken or omitted by a governing person or
delegate with respect to an employee benefit plan in the
performance of the person's duties for a purpose reasonably
believed by the person to be in the interest of the participants and
beneficiaries of the plan is for a purpose that is not opposed to
the best interests of the enterprise.
(c) Action taken or omitted by a delegate to another
enterprise for a purpose reasonably believed by the delegate to be
in the interest of the other enterprise or its owners or members is
for a purpose that is not opposed to the best interests of the
enterprise.
(d) A person does not fail to meet the standard under
Subsection (a)(1) solely because of the termination of a proceeding
by:
(1) judgment;
(2) order;
(3) settlement;
(4) conviction; or
(5) a plea of nolo contendere or its equivalent. (TBCA
2.02-1.B, D (part), G (part), P, T (part); TNPCA 2.22A.B, D (part),
G (part), P, T (part); TREITA 9.20(B), (D) (part), (G) (part), (P),
(T) (part); TRLPA 11.02, 11.04 (part), 11.07 (part), 11.20 (part).)
Sec. 8.102. GENERAL SCOPE OF PERMISSIVE INDEMNIFICATION.
(a) Subject to Subsection (b), an enterprise may indemnify a
governing person, former governing person, or delegate against:
(1) a judgment; and
(2) expenses, other than a judgment, that are
reasonable and actually incurred by the person in connection with a
proceeding.
(b) Indemnification under this subchapter of a person who is
found liable to the enterprise or is found liable because the person
improperly received a personal benefit:
(1) is limited to reasonable expenses actually
incurred by the person in connection with the proceeding;
(2) does not include a judgment, a penalty, a fine, and
an excise or similar tax, including an excise tax assessed against
the person with respect to an employee benefit plan; and
(3) may not be made in relation to a proceeding in
which the person has been found liable for:
(A) wilful or intentional misconduct in the
performance of the person's duty to the enterprise;
(B) breach of the person's duty of loyalty owed
to the enterprise; or
(C) an act or omission not committed in good
faith that constitutes a breach of a duty owed by the person to the
enterprise.
(c) A governing person, former governing person, or
delegate is considered to have been found liable in relation to a
claim, issue, or matter only if the liability is established by an
order, including a judgment or decree of a court, and all appeals of
the order are exhausted or foreclosed by law. (TBCA 2.02-1.C, D
(part), E, P; TNPCA 2.22A.C, D (part), E, P; TREITA 9.20(C), (D)
(part), (E), (P); TRLPA 11.03, 11.04 (part), 11.05, 11.16.)
Sec. 8.103. MANNER FOR DETERMINING PERMISSIVE
INDEMNIFICATION. (a) Except as provided by Subsections (b) and
(c), the determinations required under Section 8.101(a) must be
made by:
(1) a majority vote of a quorum composed of the
governing persons who at the time of the vote are disinterested and
independent;
(2) if a quorum described by Subdivision (1) cannot be
obtained, a majority vote of a committee of the governing authority
of the enterprise designated to act in the matter by a majority vote
of the governing persons and composed solely of one or more
governing persons who at the time of the vote are disinterested and
independent;
(3) special legal counsel selected by the governing
authority of the enterprise, or selected by a committee of the board
of directors, by vote in accordance with Subdivision (1) or (2) or,
if a quorum described by Subdivision (1) cannot be obtained and a
committee described by Subdivision (2) cannot be established, by a
majority vote of the governing persons of the enterprise;
(4) the owners or members of the enterprise in a vote
that excludes the ownership or membership interests held by each
governing person who is not disinterested and independent; or
(5) a unanimous vote of the owners or members of the
enterprise.
(b) If special legal counsel determines under Subsection
(a)(3) that a person meets the standard under Section 8.101(a)(1),
the special legal counsel shall determine whether the amount of
expenses other than a judgment is reasonable under Section
8.101(a)(2) but may not determine whether indemnification should be
paid under Section 8.101(a)(3). The determination whether
indemnification should be paid must be made in a manner specified by
Subsection (a)(1), (2), (4), or (5).
(c) A provision contained in the governing documents of the
enterprise, a resolution of the owners, members, or governing
authority, or an agreement that requires the indemnification of a
person who meets the standard under Section 8.101(a)(1) constitutes
a determination under Section 8.101(a)(3) that indemnification
should be paid even though the provision may not have been adopted
or authorized in the same manner as the determinations required
under Section 8.101(a). The determinations required under Sections
8.101(a)(1) and (2) must be made in a manner provided by Subsection
(a). (TBCA 2.02-1.F, G; TNPCA 2.22A.F, G; TREITA 9.20(F), (G);
TRLPA 11.06, 11.07.)
Sec. 8.104. ADVANCEMENT OF EXPENSES. (a) An enterprise may
pay or reimburse reasonable expenses incurred by a governing
person, former governing person, or delegate who was, is, or is
threatened to be made a respondent in a proceeding in advance of the
final disposition of the proceeding without making the
determinations required under Section 8.101(a) after the
enterprise receives:
(1) a written affirmation by the person of the person's
good faith belief that the person has met the standard of conduct
necessary for indemnification under this chapter; and
(2) a written undertaking by or on behalf of the person
to repay the amount paid or reimbursed if the final determination is
that the person has not met that standard or that indemnification is
prohibited by Section 8.102.
(b) A provision in the governing documents of the
enterprise, a resolution of the owners, members, or governing
authority, or an agreement that requires the payment or
reimbursement permitted under this section authorizes that payment
or reimbursement after the enterprise receives an affirmation and
undertaking described by Subsection (a).
(c) The written undertaking required by Subsection (a)(2)
must be an unlimited general obligation of the person but need not
be secured and may be accepted by the enterprise without regard to
the person's ability to make repayment. (TBCA 2.02-1.K, L, P; TNPCA
2.22A.K, L, P; TREITA 9.20(K), (L), (P); TRLPA 11.11, 11.12,
11.16.)
Sec. 8.105. INDEMNIFICATION OF AND ADVANCEMENT OF EXPENSES
TO PERSONS OTHER THAN GOVERNING PERSONS. (a) Notwithstanding any
other provision of this chapter but subject to Sections 8.003 and
8.004 and to the extent consistent with other law, an enterprise may
indemnify and advance expenses to a person who is not a governing
person, including an officer, employee, agent, or delegate, as
provided by:
(1) the enterprise's governing documents;
(2) general or specific action of the enterprise's
governing authority;
(3) resolution of the enterprise's owners or members;
(4) contract; or
(5) common law.
(b) An enterprise shall indemnify and advance expenses to an
officer to the same extent that indemnification or advancement of
expenses is required under this chapter for a governing person.
(c) A person described by Subsection (a) may seek
indemnification or advancement of expenses from an enterprise to
the same extent that a governing person may seek indemnification or
advancement of expenses under this chapter. (TBCA 2.02-1.O, P, Q;
TNPCA 2.22A.O, P, Q; TREITA 9.20(O), (P), (Q); TRLPA 11.15, 11.16,
11.17.)
Sec. 8.106. PERMISSIVE INDEMNIFICATION OF AND
REIMBURSEMENT OF EXPENSES TO WITNESSES. Notwithstanding any other
provision of this chapter, an enterprise may pay or reimburse
reasonable expenses incurred by a governing person, officer,
employee, agent, delegate, or other person in connection with that
person's appearance as a witness or other participation in a
proceeding at a time when the person is not a respondent in the
proceeding. (TBCA 2.02-1.N; TNPCA 2.22A.N; TREITA 9.20(N); TRLPA
11.14.)
[Sections 8.107-8.150 reserved for expansion]
SUBCHAPTER D. LIABILITY INSURANCE; REPORTING REQUIREMENTS
Sec. 8.151. INSURANCE AND OTHER ARRANGEMENTS. (a)
Notwithstanding any other provision of this chapter, an enterprise
may purchase or procure or establish and maintain insurance or
another arrangement to indemnify or hold harmless an existing or
former governing person, delegate, officer, employee, or agent
against any liability:
(1) asserted against and incurred by the person in
that capacity; or
(2) arising out of the person's status in that
capacity.
(b) The insurance or other arrangement established under
Subsection (a) may insure or indemnify against the liability
described by Subsection (a) without regard to whether the
enterprise otherwise would have had the power to indemnify the
person against that liability under this chapter.
(c) Insurance or another arrangement that involves
self-insurance or an agreement to indemnify made with the
enterprise or a person that is not regularly engaged in the business
of providing insurance coverage may provide for payment of a
liability with respect to which the enterprise does not otherwise
have the power to provide indemnification only if the insurance or
arrangement is approved by the owners or members of the enterprise.
(d) For the benefit of persons to be indemnified by the
enterprise, an enterprise may, in addition to purchasing or
procuring or establishing and maintaining insurance or another
arrangement:
(1) create a trust fund;
(2) establish any form of self-insurance, including a
contract to indemnify;
(3) secure the enterprise's indemnity obligation by
grant of a security interest or other lien on the assets of the
enterprise; or
(4) establish a letter of credit, guaranty, or surety
arrangement.
(e) Insurance or another arrangement established under this
section may be purchased or procured or established and maintained:
(1) within the enterprise; or
(2) with any insurer or other person considered
appropriate by the governing authority, regardless of whether all
or part of the stock, securities, or other ownership interest in the
insurer or other person is owned in whole or in part by the
enterprise.
(f) The governing authority's decision as to the terms of
the insurance or other arrangement and the selection of the insurer
or other person participating in an arrangement is conclusive. The
insurance or arrangement is not voidable and does not subject the
governing persons approving the insurance or arrangement to
liability, on any ground, regardless of whether the governing
persons participating in approving the insurance or other
arrangement are beneficiaries of the insurance or arrangement.
This subsection does not apply in case of actual fraud. (TBCA
2.02-1.R; TNPCA 2.22A.R; TREITA 9.20(R); TRLPA 11.18.)
Sec. 8.152. REPORTS OF INDEMNIFICATION AND ADVANCES. (a)
An enterprise shall report in writing to the owners or members of
the enterprise an indemnification of or advance of expenses to a
governing person.
(b) Subject to Subsection (c), the report must be made with
or before the notice or waiver of notice of the next meeting of the
owners or members of the enterprise and before the next submission
to the owners or members of a consent to action without a meeting.
(c) The report must be made not later than the first
anniversary of the date of the indemnification or advance. (TBCA
2.02-1.S; TNPCA 2.22A.S; TREITA 9.20(S); TRLPA 11.19.)
CHAPTER 9. FOREIGN ENTITIES
SUBCHAPTER A. REGISTRATION
Sec. 9.001. FOREIGN ENTITIES REQUIRED TO REGISTER. (a) To
transact business in this state, a foreign entity must register
under this chapter if the entity:
(1) is a foreign corporation, foreign limited
partnership, foreign limited liability company, foreign business
trust, foreign real estate investment trust, foreign cooperative,
foreign public or private limited company, or another foreign
entity, the formation of which, if formed in this state, would
require the filing under Chapter 3 of a certificate of formation; or
(2) affords limited liability under the law of its
jurisdiction of formation for any owner or member.
(b) A foreign entity described by Subsection (a) must
maintain the entity's registration while transacting business in
this state. (CAA 43; TBCA 8.01.A (part); TLLCA 7.01.A (part); TNPCA
8.01.A (part); TPCA 19A(a) (part); TRLPA 9.02(a) (part).)
Sec. 9.002. FOREIGN ENTITIES NOT REQUIRED TO REGISTER. (a)
A foreign entity not described by Section 9.001(a) may transact
business in this state without registering under this chapter.
(b) Subsection (a) does not relieve a foreign entity from
the duty to comply with applicable requirements under other law to
file or register.
(c) A foreign entity is not required to register under this
chapter if other state law authorizes the entity to transact
business in this state.
(d) A foreign unincorporated nonprofit association is not
required to register under this chapter. (New.)
Sec. 9.003. PERMISSIVE REGISTRATION. A foreign entity that
is eligible under other law of this state to register to transact
business in this state, but that is not registered under that law,
may register under this chapter unless that registration is
prohibited by the other law. The registration under this chapter
confers only the authority provided by this chapter. (TLLCA
1.02.A(9).)
Sec. 9.004. REGISTRATION PROCEDURE. (a) A foreign filing
entity registers by filing an application for registration as
provided by Chapter 4.
(b) The application must state:
(1) the entity's name and, if that name would not
comply with Chapter 5, a name that complies with Chapter 5 under
which the entity will transact business in this state;
(2) the entity's type;
(3) the entity's jurisdiction of formation;
(4) the date of the entity's formation;
(5) that the entity exists as a valid foreign filing
entity of the stated type under the laws of the entity's
jurisdiction of formation;
(6) for a foreign entity other than a foreign limited
partnership:
(A) each business or activity that the entity
proposes to pursue in this state, which may be stated to be any
lawful business or activity under the law of this state; and
(B) that the entity is authorized to pursue the
same business or activity under the laws of the entity's
jurisdiction of formation;
(7) the date the foreign entity began or will begin to
transact business in this state;
(8) the address of the principal office of the foreign
filing entity;
(9) the address of the initial registered office and
the name and the address of the initial registered agent for service
of process that Chapter 5 requires to be maintained;
(10) the name and address of each of the entity's
governing persons; and
(11) that the secretary of state is appointed the
agent of the foreign filing entity for service of process under the
circumstances provided by Section 5.251.
(c) A foreign filing entity may register regardless of any
differences between the law of the entity's jurisdiction of
formation and of this state applicable to the governing of the
internal affairs or to the liability of an owner, member, or
managerial official. (TBCA 8.01.A (part), 8.05.A (part), 8.06.A;
TLLCA 7.01.A (part), 7.05.A, 7.06.A; TNPCA 8.01.A (part), 8.04.A
(part), 8.05.A; TPCA 19A; TRLPA 9.01(b), 9.02(a); TRPA 10.02(a)
(part).)
Sec. 9.005. SUPPLEMENTAL INFORMATION REQUIRED IN
APPLICATION FOR REGISTRATION OF FOREIGN FOR-PROFIT CORPORATION. In
addition to the information required by Section 9.004, a foreign
for-profit corporation's application for registration must state
the:
(1) aggregate number of shares the for-profit
corporation has authority to issue, itemized by classes, par value
of shares, shares without par value, and any series in a class;
(2) aggregate number of shares issued by the
for-profit corporation, itemized by classes, par value of shares,
shares without par value, and any series in a class; and
(3) amount of the stated capital of the for-profit
corporation. (TBCA 8.05.A (part).)
Sec. 9.006. SUPPLEMENTAL INFORMATION REQUIRED IN
APPLICATION FOR REGISTRATION OF FOREIGN NONPROFIT CORPORATION. In
addition to the information required by Section 9.004, a foreign
nonprofit corporation's application for registration must state:
(1) the names and addresses of the nonprofit
corporation's directors and officers;
(2) whether or not the nonprofit corporation has
members; and
(3) any additional information as necessary or
appropriate to enable the secretary of state to determine whether
the nonprofit corporation is entitled to register to conduct
affairs in this state. (TNPCA 8.04.A (part).)
Sec. 9.007. SUPPLEMENTAL INFORMATION REQUIRED IN
APPLICATION FOR REGISTRATION OF FOREIGN LIMITED LIABILITY
PARTNERSHIP. In addition to the information required by Section
9.004, a foreign limited liability partnership's application for
registration must state:
(1) the federal tax identification number of the
partnership;
(2) the date of initial registration as a limited
liability partnership under the laws of the state of formation;
(3) the number of partners at the date of the
statement; and
(4) that the secretary of state is appointed the agent
of the partnership for service of process under the circumstances
set forth by Section 5.251. (TRPA 10.02(a) (part).)
Sec. 9.008. EFFECT OF REGISTRATION. (a) The registration
of a foreign entity is effective when the application filed under
Chapter 4 takes effect. The registration remains in effect until
the registration terminates, is withdrawn, or is revoked.
(b) Except in a proceeding to revoke the registration, the
secretary of state's issuance of an acknowledgment that the entity
has filed an application is conclusive evidence of the authority of
the foreign filing entity to transact business in this state under
the entity's name or under another name stated in the application,
in accordance with Section 9.004(b)(1). (TBCA 8.07; TLLCA 7.07;
TNPCA 8.06; TRLPA 2.07(b).)
Sec. 9.009. AMENDMENTS TO REGISTRATION. (a) A foreign
filing entity must amend its registration to change its name or the
business or activity stated in its application for registration if
the name or business or activity has changed.
(b) A foreign filing entity may amend its application for
registration by filing an application for amendment of registration
in the manner required by Chapter 4.
(c) The application for amendment must be filed on or before
the 91st day following the date of the change. (TBCA 8.13.A, B, D;
TLLCA 7.08.A, B, D; TNPCA 8.12.A, B, D; TRLPA 9.05.)
Sec. 9.010. NAME CHANGE OF FOREIGN ENTITY. If a foreign
entity authorized to conduct affairs in this state changes its name
to a name that would cause the entity to be denied an application
for registration under this subchapter, the entity's registration
must be suspended. An entity the registration of which has been
suspended under this section may conduct affairs in this state only
after the entity:
(1) changes its name to a name that is available to it
under the laws of this state; or
(2) otherwise complies with this chapter. (TBCA 8.04;
TLLCA 7.04; TNPCA 8.03.B.)
Sec. 9.011. VOLUNTARY WITHDRAWAL OF REGISTRATION. (a) A
foreign filing entity registered in this state may withdraw the
entity's registration at any time by filing a certificate of
withdrawal in the manner required by Chapter 4.
(b) A certificate of withdrawal must state:
(1) the name of the foreign filing entity as
registered in this state;
(2) the type of entity and the entity's jurisdiction of
formation;
(3) the address of the principal office of the foreign
filing entity;
(4) that the foreign filing entity no longer is
transacting business in this state;
(5) that the foreign filing entity:
(A) revokes the authority of the entity's
registered agent in this state to accept service of process; and
(B) consents that service of process in any
action, suit, or proceeding stating a cause of action arising in
this state during the time the foreign filing entity was authorized
to transact business in this state may be made on the foreign filing
entity by serving the secretary of state;
(6) an address to which the secretary of state may mail
a copy of any process against the foreign filing entity served on
the secretary of state; and
(7) that any money due or accrued to the state has been
paid or that adequate provision has been made for the payment of
that money.
(c) A certificate from the comptroller that all franchise
taxes have been paid must be filed with the certificate of
withdrawal in accordance with Chapter 4 if the foreign filing
entity is a foreign professional corporation, foreign for-profit
corporation, or foreign limited liability company.
(d) If the existence or separate existence of a foreign
filing entity registered in this state terminates because of
dissolution, termination, merger, conversion, or other
circumstances, a certificate by an authorized governmental
official of the entity's jurisdiction of formation that evidences
the termination shall be filed with the secretary of state.
(e) The registration of the foreign filing entity in this
state terminates when a certificate of withdrawal under this
section or a certificate evidencing termination under Subsection
(d) is filed.
(f) If the address stated in a certificate of withdrawal
under Subsection (b)(6) changes, the foreign filing entity must
promptly amend the certificate of withdrawal to update the address.
(g) A certificate of withdrawal does not terminate the
authority of the secretary of state to accept service of process on
the foreign filing entity with respect to a cause of action arising
out of business or activity in this state. (TBCA 8.14, 8.15; TLLCA
7.09, 7.10; TNPCA 8.13; TRLPA 9.06.)
[Sections 9.012-9.050 reserved for expansion]
SUBCHAPTER B. FAILURE TO REGISTER
Sec. 9.051. TRANSACTING BUSINESS OR MAINTAINING COURT
PROCEEDING WITHOUT REGISTRATION. (a) On application by the
attorney general, a court may enjoin a foreign filing entity or the
entity's agent from transacting business in this state if:
(1) the entity is not registered in this state; or
(2) the entity's registration is obtained on the basis
of a false or misleading representation.
(b) A foreign filing entity or the entity's legal
representative may not maintain an action, suit, or proceeding in a
court of this state, brought either directly by the entity or in the
form of a derivative action in the entity's name, on a cause of
action that arises out of the transaction of business in this state
unless the foreign filing entity is registered in accordance with
this chapter. This subsection does not affect the rights of an
assignee of the foreign filing entity as:
(1) the holder in due course of a negotiable
instrument; or
(2) the bona fide purchaser for value of a warehouse
receipt, security, or other instrument made negotiable by law.
(c) The failure of a foreign filing entity to register does
not:
(1) affect the validity of any contract or act of the
foreign filing entity;
(2) prevent the entity from defending an action, suit,
or proceeding in a court in this state; or
(3) except as provided by Subsection (d), cause any
owner, member, or managerial official of the foreign filing entity
to become liable for the debts, obligations, or liabilities of the
foreign filing entity.
(d) Subsection (c)(3) does not apply to a general partner of
a foreign limited partnership. (TBCA 8.18.A, B; TLLCA 7.13.A, B;
TNPCA 8.17; TRLPA 9.07(a), (b), (c), 9.08; TRPA 10.03.)
Sec. 9.052. CIVIL PENALTY. (a) A foreign filing entity that
transacts business in this state and is not registered under this
chapter is liable to this state for a civil penalty in an amount
equal to all:
(1) fees and taxes that would have been imposed by law
on the entity had the entity registered when first required and
filed all reports required by law; and
(2) penalties and interest imposed by law for failure
to pay those fees and taxes.
(b) The attorney general may bring suit to recover amounts
due to this state under this section. (TBCA 8.18.C (part); TLLCA
7.13.C (part); TRLPA 9.07(d) (part).)
Sec. 9.053. VENUE. In addition to any other venue
authorized by law, a suit under Section 9.051 or 9.052 may be
brought in Travis County. (New.)
Sec. 9.054. LATE FILING FEE. The secretary of state may
collect from a foreign filing entity a late filing fee equal to the
registration fee for the entity for each year of delinquency if the
entity has transacted business in this state for more than 90 days.
The secretary may condition the effectiveness of a registration on
the payment of the late filing fee. (TBCA 8.18.C (part); TLLCA
7.13.C (part); TRLPA 9.07(d).)
Sec. 9.055. REQUIREMENTS OF OTHER LAW. This chapter does
not excuse a foreign entity from complying with duties imposed
under other law, including other chapters of this code, relating to
filing or registration requirements. (TBCA 8.02; TLLCA 7.02; TNPCA
8.02; TRLPA 9.01(c).)
[Sections 9.056-9.100 reserved for expansion]
SUBCHAPTER C. REVOCATION OF REGISTRATION BY SECRETARY OF STATE
Sec. 9.101. REVOCATION OF REGISTRATION BY SECRETARY OF
STATE. (a) If it appears to the secretary of state that, with
respect to a foreign filing entity, a circumstance described by
Subsection (b) exists, the secretary of state may notify the entity
of the circumstance by mail or certified mail addressed to the
foreign filing entity at the entity's registered office or
principal place of business as shown on the records of the secretary
of state.
(b) The secretary of state may revoke a foreign filing
entity's registration if the secretary of state finds that the
entity has failed to, and, before the 91st day after the date notice
was mailed, has not corrected the entity's failure to:
(1) file a report within the period required by law or
pay a fee or penalty prescribed by law when due and payable;
(2) maintain a registered agent or registered office
in this state as required by law;
(3) amend its registration when required by law; or
(4) pay a fee required in connection with a filing, or
payment of the fee was dishonored when presented by the state for
payment. (TBCA 8.16.B, C(1); TLLCA 7.11.B, C(1); TNPCA 8.15.B,
C(1); TRLPA 13.06(a), (b); TRPA 10.02(i).)
Sec. 9.102. CERTIFICATE OF REVOCATION. (a) If revocation
of a registration is required, the secretary of state shall:
(1) file a certificate of revocation; and
(2) deliver a certificate of revocation by regular or
certified mail to the foreign filing entity at its registered
office or principal place of business.
(b) The certificate of revocation must state:
(1) that the foreign filing entity's registration has
been revoked; and
(2) the date and cause of the revocation.
(c) Except as otherwise provided by this chapter, the
revocation of a foreign filing entity's registration under this
subchapter takes effect on the date the certificate of revocation
is filed. (TBCA 8.16.D; TLLCA 7.11.D; TNPCA 8.15.D.)
Sec. 9.103. REINSTATEMENT BY SECRETARY OF STATE AFTER
REVOCATION. (a) The secretary of state shall reinstate the
registration of an entity that has been revoked under this
subchapter if the entity files an application for reinstatement in
accordance with Section 9.104, accompanied by each amendment to the
entity's registration that is required by intervening events,
including circumstances requiring an amendment to the name of the
entity or the name under which the entity is registered to transact
business in this state as described in Section 9.105, and:
(1) the entity has corrected the circumstances that
led to the revocation and any other circumstances that may exist of
the types described by Section 9.101(b), including the payment of
fees, interest, or penalties; or
(2) the secretary of state finds that the
circumstances that led to the revocation did not exist at the time
of revocation.
(b) If a foreign filing entity's registration is reinstated
before the third anniversary of the revocation, the entity is
considered to have been registered or in existence at all times
during the period of revocation. (TBCA 8.16.E (part); TLLCA 7.11.E
(part); TNPCA 8.15.E (part).)
Sec. 9.104. PROCEDURES FOR REINSTATEMENT. (a) A foreign
filing entity, to have its registration reinstated, must complete
the requirements of this section not later than the third
anniversary of the date the revocation of the entity's registration
took effect.
(b) The foreign filing entity shall file a certificate of
reinstatement in accordance with Chapter 4.
(c) The certificate of reinstatement must contain:
(1) the name of the foreign filing entity;
(2) the filing number assigned by the filing officer
to the entity;
(3) the effective date of the revocation of the
entity's registration; and
(4) the name of the entity's registered agent and the
address of the entity's registered office.
(d) A letter of eligibility from the comptroller stating
that the foreign filing entity has satisfied all franchise tax
liabilities and its registration may be reinstated must be filed
with the certificate of reinstatement if the foreign filing entity
is a professional corporation, for-profit corporation, or limited
liability company.
(e) The registration of a foreign filing entity may not be
reinstated under this section if the termination occurred as a
result of:
(1) an order of a court; or
(2) forfeiture under the Tax Code. (TBCA 8.16.E
(part); TLLCA 7.11.E (part); TNPCA 8.15.E (part).)
Sec. 9.105. USE OF NAME SIMILAR TO PREVIOUSLY REGISTERED
NAME. If the secretary of state determines that a foreign filing
entity's name or the name under which it is registered to transact
business in this state is the same as, deceptively similar to, or
similar to a name of a filing entity or foreign filing entity as
provided by or reserved or registered under this code, the
secretary of state may not accept for filing the certificate of
reinstatement unless the foreign filing entity amends its
registration to change its name or obtains consent for the use of
the similar name. (TBCA 8.16.E (part); TLLCA 7.11.E (part); TNPCA
8.15.E (part); TRLPA 13.09(b) (part).)
Sec. 9.106. REINSTATEMENT OF REGISTRATION FOLLOWING TAX
FORFEITURE. A foreign filing entity whose registration has been
revoked under the provisions of the Tax Code must follow the
procedures in the Tax Code to reinstate its registration. (Op. Tex.
Att'y Gen. No. M-600 (1970).)
[Sections 9.107-9.150 reserved for expansion]
SUBCHAPTER D. JUDICIAL REVOCATION OF REGISTRATION
Sec. 9.151. REVOCATION OF REGISTRATION BY COURT ACTION. (a)
A court may revoke the registration of a foreign filing entity if,
as a result of an action brought under Section 9.153, the court
finds that one or more of the following problems exist:
(1) the entity did not comply with a condition
precedent to the issuance of the entity's registration or an
amendment to the registration;
(2) the entity's registration or any amendment to the
entity's registration was fraudulently filed;
(3) a misrepresentation of a material matter was made
in an application, report, affidavit, or other document the entity
submitted under this code;
(4) the entity has continued to transact business
beyond the scope of the purpose or purposes expressed in the
entity's registration; or
(5) public interest requires revocation because:
(A) the entity has been convicted of a felony or a
high managerial agent of the entity has been convicted of a felony
committed in the conduct of the entity's affairs;
(B) the entity or the high managerial agent has
engaged in a persistent course of felonious conduct; and
(C) revocation is necessary to prevent future
felonious conduct of the same character.
(b) Sections 9.152-9.157 do not apply to Subsection (a)(5).
(TBCA 8.16.A, F, G; TLLCA 7.11.A, F; TNPCA 8.15.A, F, G.)
Sec. 9.152. NOTIFICATION OF CAUSE BY SECRETARY OF STATE.
(a) The secretary of state shall provide to the attorney general:
(1) the name of a foreign filing entity that has given
cause under Section 9.151 for revocation of its registration; and
(2) the facts relating to the cause for revocation.
(b) When notice is provided under Subsection (a), the
secretary of state shall send written notice of the circumstances
to the foreign filing entity at its registered office in this state.
The notice must state that the secretary of state has given notice
under Subsection (a) and the grounds for the notification. The
secretary of state must record the date a notice required by this
subsection is sent.
(c) A court shall accept a certificate issued by the
secretary of state as to the facts relating to the cause for
judicial revocation of a foreign filing entity's registration and
the sending of a notice under Subsection (b) as prima facie evidence
of the facts stated in the certificate and the sending of the
notice. (TBCA 7.02.A, B; TNPCA 7.02.A, B; TLLCA 8.12.A (part).)
Sec. 9.153. FILING OF ACTION BY ATTORNEY GENERAL. The
attorney general shall file an action against a foreign filing
entity in the name of the state seeking the revocation of the
entity's registration if:
(1) the entity has not cured the problems for which
revocation is sought before the 31st day after the date the notice
under Section 9.152(b) is mailed; and
(2) the attorney general determines that cause exists
for judicial revocation of the entity's registration under Section
9.151. (TBCA 7.02.C; TNPCA 7.02.C; TLLCA 8.12.A (part).)
Sec. 9.154. CURE BEFORE FINAL JUDGMENT. An action filed by
the attorney general under Section 9.153 shall be abated if, before
a district court renders judgment on the action, the foreign filing
entity:
(1) cures the problems for which revocation is sought;
and
(2) pays the costs of the action. (TBCA 7.02.D; TNPCA
7.02.D; TLLCA 8.12.A (part).)
Sec. 9.155. JUDGMENT REQUIRING REVOCATION. If a district
court finds in an action brought under this subchapter that proper
grounds exist under Section 9.151(a) for revocation of the foreign
filing entity's registration, the court shall:
(1) make findings to that effect; and
(2) subject to Section 9.156, enter a judgment not
earlier than the fifth day after the date the court makes its
findings. (TBCA 7.02.E (part); TNPCA 7.02.E (part); TLLCA 8.12.A
(part).)
Sec. 9.156. STAY OF JUDGMENT. (a) If, in an action brought
under this subchapter, a foreign filing entity has proved by a
preponderance of the evidence and obtained a finding that the
problems for which the foreign filing entity has been found guilty
were not wilful or the result of a failure to take reasonable
precautions, the entity may make a sworn application to the court
for a stay of entry of the judgment to allow the foreign filing
entity a reasonable opportunity to cure the problems for which it
has been found guilty. An application made under this subsection
must be made not later than the fifth day after the date the court
makes its findings under Section 9.155.
(b) After a foreign filing entity has made an application
under Subsection (a), a court shall stay the entry of the judgment
if the court is reasonably satisfied after considering the
application and evidence offered for or against the application
that the foreign filing entity:
(1) is able and intends in good faith to cure the
problems for which it has been found guilty; and
(2) has not applied for the stay without just cause.
(c) A court shall stay an entry of judgment under Subsection
(b) for the period the court determines is reasonably necessary to
afford the foreign filing entity the opportunity to cure its
problems if the entity acts with reasonable diligence. The court
may not stay the entry of the judgment for longer than 60 days after
the date the court's findings are made.
(d) The court shall dismiss an action against a foreign
filing entity that, during the period the action is stayed by the
court under this section, cures the problems for which revocation
is sought and pays all costs accrued in the action.
(e) If a court finds that a foreign filing entity has not
cured the problems for which revocation is sought within the period
prescribed by Subsection (c), the court shall enter final judgment
requiring revocation of the foreign filing entity's registration.
(TBCA 7.02.E (part); TNPCA 7.02.E (part); TLLCA 8.12.A (part).)
Sec. 9.157. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF
FINDINGS BY APPEALS COURT. (a) An appellate court that affirms a
trial court's findings against a foreign filing entity under this
subchapter shall remand the case to the trial court with
instructions to grant the foreign filing entity an opportunity to
cure the problems for which the entity has been found guilty if:
(1) the foreign filing entity did not make an
application to the trial court for stay of the entry of the
judgment;
(2) the appellate court is satisfied that the appeal
was taken in good faith and not for purpose of delay or with no
sufficient cause;
(3) the appellate court finds that the problems for
which the foreign filing entity has been found guilty are capable of
being cured; and
(4) the foreign filing entity has prayed for the
opportunity to cure its problems in the appeal.
(b) The appellate court shall determine the period, which
may not be longer than 60 days after the date the case is remanded to
the trial court, to be afforded to a foreign filing entity to enable
the foreign filing entity to cure its problems under Subsection
(a).
(c) The trial court to which an action against a foreign
filing entity has been remanded under this section shall dismiss
the action if, during the period prescribed by the appellate court
for that conduct, the foreign filing entity cures the problems for
which revocation is sought and pays all costs accrued in the action.
(d) If a foreign filing entity has not cured the problems
for which revocation is sought within the period prescribed by the
appellate court under Subsection (b), the judgment requiring
revocation shall become final. (TBCA 7.02.F; TNPCA 7.02.F; TLLCA
8.12.A (part).)
Sec. 9.158. JURISDICTION AND VENUE. (a) The attorney
general shall bring an action for the revocation of the
registration of a foreign filing entity under this subchapter in:
(1) a district court of the county in which the
registered office or principal place of business of the filing
entity in this state is located; or
(2) a district court of Travis County.
(b) A district court described by Subsection (a) has
jurisdiction of the action for revocation of the registration of
the foreign filing entity. (TBCA 7.03 (part); TNPCA 7.03 (part);
TLLCA 8.12.A (part).)
Sec. 9.159. PROCESS IN STATE ACTION. Citation in an action
for the involuntary revocation of a foreign filing entity's
registration under this subchapter shall be issued and served as
provided by law. (TBCA 7.03 (part); TNPCA 7.03 (part); TLLCA 8.12.A
(part).)
Sec. 9.160. PUBLICATION OF NOTICE. (a) If process in an
action under this subchapter is returned not found, the attorney
general shall publish notice in a newspaper in the county in which
the registered office of the foreign filing entity in this state is
located. The notice must contain:
(1) a statement of the pendency of the action;
(2) the title of the court;
(3) the title of the action; and
(4) the earliest date on which default judgment may be
entered by the court.
(b) Notice under this section must be published at least
once a week for two consecutive weeks beginning at any time after
the citation has been returned.
(c) The attorney general may include in one published notice
the name of each foreign filing entity against which an action for
involuntary revocation is pending in the same court.
(d) Not later than the 10th day after the date notice under
this section is first published, the attorney general shall send a
copy of the notice to the appropriate foreign filing entity at the
foreign filing entity's registered office in this state. A
certificate from the attorney general regarding the sending of the
notice is prima facie evidence that notice was sent under this
section.
(e) Unless a foreign filing entity has been served with
citation, a default judgment may not be taken against the entity
before the 31st day after the date the notice is first published.
(TBCA 7.03 (part); TNPCA 7.03 (part); TLLCA 8.12.A (part).)
Sec. 9.161. FILING OF DECREE OF REVOCATION AGAINST FOREIGN
FILING ENTITY. (a) The clerk of a court that enters a decree
revoking the registration of a foreign filing entity shall file a
certified copy of the decree in accordance with Chapter 4.
(b) A fee may not be charged for the filing of a decree under
this section. (TBCA 8.17; TLLCA 7.12; TNPCA 8.16.)
[Sections 9.162-9.200 reserved for expansion]
SUBCHAPTER E. BUSINESS, RIGHTS, AND OBLIGATIONS
Sec. 9.201. BUSINESS OF FOREIGN ENTITY. A foreign entity
may not conduct in this state a business or activity that is not
permitted by this code to be transacted by the domestic entity to
which it most closely corresponds, unless other law of this state
authorizes the entity to conduct the business or activity. (TBCA
8.01.A (part); TLLCA 7.01.A (part); TNPCA 8.01.A (part).)
Sec. 9.202. RIGHTS AND PRIVILEGES. A foreign nonfiling
entity or a foreign filing entity registered under this chapter
enjoys the same but no greater rights and privileges as the domestic
entity to which it most closely corresponds. (TBCA 8.02 (part);
TLLCA 7.02 (part); TNPCA 8.02 (part); TRLPA 9.01(c).)
Sec. 9.203. OBLIGATIONS AND LIABILITIES. Subject to this
code and other laws of this state and except as provided by
Subchapter C, Chapter 1, in any matter that affects the transaction
of intrastate business in this state, a foreign entity and each
member, owner, or managerial official of the entity is subject to
the same duties, restrictions, penalties, and liabilities imposed
on a domestic entity to which it most closely corresponds or on a
member, owner, or managerial official of that domestic entity.
(TBCA 8.02 (part); TLLCA 7.02 (part); TNPCA 8.02 (part).)
Sec. 9.204. RIGHT OF FOREIGN FILING ENTITY TO PARTICIPATE
IN BUSINESS OF CERTAIN DOMESTIC ENTITIES. A vote cast or consent
provided by a foreign filing entity with respect to its ownership or
membership interest in a domestic entity of which the foreign
filing entity is a lawful owner or member, and the foreign filing
entity's participation in the management and control of the
business and affairs of the domestic entity to the extent of the
participation of other owners or members, are not invalidated if
the foreign filing entity does not register to transact business in
this state, subject to all law governing a domestic entity,
including the antitrust law of this state. (TBCA 2.29.E; TREITA
13.10(F).)
[Sections 9.205-9.250 reserved for expansion]
SUBCHAPTER F. DETERMINATION OF TRANSACTING BUSINESS IN
THIS STATE
Sec. 9.251. ACTIVITIES NOT CONSTITUTING TRANSACTING
BUSINESS IN THIS STATE. For purposes of this chapter, activities
that do not constitute transaction of business in this state
include:
(1) maintaining or defending an action or suit or an
administrative or arbitration proceeding, or effecting the
settlement of:
(A) such an action, suit, or proceeding; or
(B) a claim or dispute to which the entity is a
party;
(2) holding a meeting of the entity's managerial
officials, owners, or members or carrying on another activity
concerning the entity's internal affairs;
(3) maintaining a bank account;
(4) maintaining an office or agency for:
(A) transferring, exchanging, or registering
securities the entity issues; or
(B) appointing or maintaining a trustee or
depositary related to the entity's securities;
(5) voting the interest of an entity the foreign
entity has acquired;
(6) effecting a sale through an independent
contractor;
(7) creating, as borrower or lender, or acquiring
indebtedness or a mortgage or other security interest in real or
personal property;
(8) securing or collecting a debt due the entity or
enforcing a right in property that secures a debt due the entity;
(9) transacting business in interstate commerce;
(10) conducting an isolated transaction that:
(A) is completed within a period of 30 days; and
(B) is not in the course of a number of repeated,
similar transactions;
(11) in a case that does not involve an activity that
would constitute the transaction of business in this state if the
activity were one of a foreign entity acting in its own right:
(A) exercising a power of executor or
administrator of the estate of a nonresident decedent under
ancillary letters issued by a court of this state; or
(B) exercising a power of a trustee under the
will of a nonresident decedent, or under a trust created by one or
more nonresidents of this state, or by one or more foreign entities;
(12) regarding a debt secured by a mortgage or lien on
real or personal property in this state:
(A) acquiring the debt in a transaction outside
this state or in interstate commerce;
(B) collecting or adjusting a principal or
interest payment on the debt;
(C) enforcing or adjusting a right or property
securing the debt;
(D) taking an action necessary to preserve and
protect the interest of the mortgagee in the security; or
(E) engaging in any combination of transactions
described by this subdivision;
(13) investing in or acquiring, in a transaction
outside of this state, a royalty or other nonoperating mineral
interest; or
(14) the execution of a division order, contract of
sale, or other instrument incidental to ownership of a nonoperating
mineral interest. (TBCA 8.01.B; TLLCA 7.01.B; TNPCA 8.01.B; TRLPA
9.02(b); TRPA 10.04.)
Sec. 9.252. OTHER ACTIVITIES. The list provided by Section
9.251 is not exclusive of activities that do not constitute
transacting business in this state for the purposes of this code.
(TBCA 8.01.B (part); TLLCA 7.01.B (part); TNPCA 8.01.B (part);
TRLPA 9.02(b) (part); TRPA 10.04 (part).)
[Sections 9.253-9.300 reserved for expansion]
SUBCHAPTER G. MISCELLANEOUS PROVISIONS
Sec. 9.301. APPLICABILITY OF CODE TO CERTAIN FOREIGN
ENTITIES. (a) Except as provided by a statute described by this
subsection, the provisions of this code governing a foreign entity
apply to a foreign entity registered or granted authority to
transact business in this state under:
(1) a special statute that does not contain a
provision regarding a matter provided for by this code with respect
to a foreign entity; or
(2) another statute that specifically provides that
the general law for the granting of a registration or certificate of
authority to the foreign entity to transact business in this state
supplements the special statute.
(b) Except as provided by a special statute described by
Subsection (a), a document required to be filed with the secretary
of state under the special statute must be signed and filed in
accordance with Chapter 4. (TBCA 9.14.A; TMLCA 1.03; TNPCA
10.04.A.)
CHAPTER 10. MERGERS, INTEREST EXCHANGES, CONVERSIONS,
AND SALES OF ASSETS
SUBCHAPTER A. MERGERS
Sec. 10.001. ADOPTION OF PLAN OF MERGER. (a) A domestic
entity may effect a merger by complying with the applicable
provisions of this code. A merger must be set forth in a plan of
merger.
(b) To effect a merger, each domestic entity that is a party
to the merger must act on and approve the plan of merger in the
manner prescribed by this code for the approval of mergers by the
domestic entity.
(c) A domestic entity subject to dissenters' rights must
provide the notice required by Section 10.355.
(d) If one or more non-code organizations is a party to the
merger or is to be created by the plan of merger:
(1) to effect the merger each non-code organization
must take all action required by this code and its governing
documents;
(2) the merger must be permitted by:
(A) the law of the state or country under whose
law each non-code organization is incorporated or organized; or
(B) the governing documents of each non-code
organization if the documents are not inconsistent with the law
under which the non-code organization is incorporated or organized;
and
(3) in effecting the merger each non-code organization
that is a party to the merger must comply with:
(A) the applicable laws under which it is
incorporated or organized; and
(B) the governing documents of the non-code
organization.
(e) A domestic entity may not merge under this subchapter
if an owner or member of that entity that is a party to the merger
will, as a result of the merger, become personally liable, without
that owner's or member's consent, for a liability or other
obligation of any other person. (TBCA 5.01.A, 5.03.A; TLLCA 10.01;
TNPCA 5.01.A, 5.02.A, 5.07.A; TREITA 23.10(A); TRLPA 2.11(a)
(part); TRPA 9.02(a) (part).)
Sec. 10.002. PLAN OF MERGER: REQUIRED PROVISIONS. (a) A
plan of merger must include:
(1) the name of each organization that is a party to
the merger;
(2) the name of each organization that will survive
the merger;
(3) the name of each new organization that is to be
created by the plan of merger;
(4) a description of the organizational form of each
organization that is a party to the merger or that is to be created
by the plan of merger and its jurisdiction of formation;
(5) the manner and basis of converting any of the
ownership or membership interests of each organization that is a
party to the merger into:
(A) ownership interests, membership interests,
obligations, rights to purchase securities, or other securities of
one or more of the surviving or new organizations;
(B) cash;
(C) other property, including ownership
interests, membership interests, obligations, rights to purchase
securities, or other securities of any other person or entity; or
(D) any combination of the items described by
Paragraphs (A)-(C);
(6) the certificate of formation of each new domestic
filing entity to be created by the plan of merger;
(7) the governing documents of each new domestic
nonfiling entity to be created by the plan of merger; and
(8) the governing documents of each non-code
organization that:
(A) is to survive the merger or to be created by
the plan of merger; and
(B) is an entity that is not:
(i) organized under the laws of any state or
the United States; or
(ii) required to file its certificate of
formation or similar document under which the entity is organized
with the appropriate governmental authority.
(b) An item required by Subsections (a)(6)-(8) may be
included in the plan of merger by an attachment or exhibit to the
plan.
(c) If the plan of merger provides for a manner and basis of
converting an ownership or membership interest that may be
converted in a manner or basis different than any other ownership or
membership interest of the same class or series of the ownership or
membership interest, the manner and basis of conversion must be
included in the plan of merger in the same manner as provided by
Subsection (a)(5). (TBCA 5.01.B (part); TLLCA 10.02.A (part);
TNPCA 5.01.B (part), 5.02.B (part); TREITA 23.10(B) (part); TRLPA
2.11(b) (part); TRPA 9.02(b) (part).)
Sec. 10.003. CONTENTS OF PLAN OF MERGER: MORE THAN ONE
SUCCESSOR. If more than one organization is to survive or to be
created by the plan of merger, the plan of merger must include:
(1) the manner and basis of allocating and vesting the
property of each organization that is a party to the merger among
one or more of the surviving or new organizations;
(2) the name of each surviving or new organization
that is primarily obligated for the payment of the fair value of an
ownership or membership interest of an owner or member of a domestic
entity subject to dissenters' rights that is a party to the merger
and who complies with the requirements for dissent and appraisal
under this code applicable to the domestic entity; and
(3) the manner and basis of allocating each liability
and obligation of each organization that is a party to the merger,
or adequate provisions for the payment and discharge of each
liability and obligation, among one or more of the surviving or new
organizations. (TBCA 5.01.B (part); TLLCA 10.02.A (part); TREITA
23.10(B) (part); TRLPA 2.11(b) (part); TRPA 9.02(b) (part).)
Sec. 10.004. PLAN OF MERGER: PERMISSIVE PROVISIONS. A plan
of merger may include:
(1) amendments to the governing documents of any
surviving organization;
(2) provisions relating to an interest exchange,
including a plan of exchange; and
(3) any other provisions relating to the merger that
are not required by this chapter. (TBCA 5.01.C; TLLCA 10.02.B;
TNPCA 5.01.B (part), 5.02.B (part); TREITA 23.10(C); TRLPA 2.11(c);
TRPA 9.02(c).)
Sec. 10.005. CREATION OF HOLDING COMPANY BY MERGER. (a) In
this section:
(1) "Direct or indirect wholly owned subsidiary"
means, with respect to a domestic entity, another domestic entity,
all of the outstanding voting ownership or membership interests of
which are owned by the domestic entity or by one or more other
domestic entities or non-code organizations, all of the outstanding
voting ownership or membership interests of which are owned by the
domestic entity or one or more other wholly owned domestic entities
or non-code organizations.
(2) "Holding company" means a domestic entity that,
from its organization until a merger takes effect, was at all times
a direct or indirect wholly owned subsidiary of the domestic entity
and the ownership or membership interests of which are issued in the
merger.
(b) A domestic entity may, without owner approval and
pursuant to a plan of merger, restructure the ownership structure
of that entity to create a holding company structure under this
chapter and the provisions of this code under which the entity was
formed. The approval of the owners or members of a domestic entity
of a plan of merger that creates a holding company is not required
if:
(1) approval is not otherwise required by the
governing documents of the domestic entity;
(2) the domestic entity merges with a direct or
indirect domestic wholly owned entity;
(3) after the merger the domestic entity or its
successor is a direct or indirect wholly owned entity of a holding
company;
(4) the domestic entity and the direct or indirect
wholly owned entity are the only parties to the merger;
(5) each ownership or membership interest of the
domestic entity that is outstanding preceding the merger is
converted in the merger into an ownership or membership interest of
the holding company having the same designations, preferences,
limitations, and relative rights as the ownership or membership
interest held by the owner or member in the domestic entity;
(6) the holding company is a domestic entity of the
same organizational form as the merging domestic entity;
(7) except as provided by Subsections (c) and (d), the
initial governing documents of the holding company contain
provisions identical to the governing documents of the domestic
entity preceding the merger;
(8) except as provided by Subsections (c) and (d), the
initial governing documents of the surviving entity contain
provisions identical to the governing documents of the domestic
entity preceding the merger;
(9) the governing persons of the domestic entity
become or remain the governing persons of the holding company when
the merger takes effect;
(10) the owners or members of the domestic entity will
not recognize gain or loss for United States federal income tax
purposes or any other tax benefit or attribute as determined by the
governing authority of the domestic entity; and
(11) the governing authority of the domestic entity
adopts a resolution approving the plan of merger.
(c) Subsections (b)(7) and (8) do not require identical
provisions regarding the incorporator or incorporators, the entity
name, the registered office and agent, the initial governing
persons, and the initial subscribers of ownership interests and
provisions contained in any amendment to the certificate as are
necessary to effect a change, exchange, reclassification, or
cancellation of ownership or membership interests, if the change,
exchange, reclassification, or cancellation was in effect
preceding the merger.
(d) Notwithstanding Subsection (b)(8):
(1) the governing documents of the surviving entity
must require that an act or transaction by or involving the
surviving entity that requires for its approval under this code the
approval of the owners or members of the merging domestic entity
must, by specific reference to this section, require the approval
of the owners or members of the holding company, or any successor by
merger, by the same vote as is required by this code and the
governing documents of the surviving entity; and
(2) the governing documents of the surviving entity
may change the classes and series of ownership or membership
interests and the number of ownership or membership interests that
the surviving entity is authorized to issue.
(e) To the extent the provisions contained in Section 21.606
apply to a domestic entity and its owners or members when a merger
takes effect under this section, those provisions continue to apply
to the holding company and its owners or members immediately after
the merger takes effect as though the holding company were the
domestic entity. All ownership or membership interests of the
holding company acquired in the merger, for purposes of Section
21.606, are considered to have been acquired at the time the
ownership or membership interest of the domestic entity converted
in the merger was acquired. Any owner or member who, preceding the
merger, was not an affiliated owner or member as described by
Section 21.606 does not solely by reason of the merger become an
affiliated owner or member of the holding company.
(f) If the name of a holding company immediately following
the effectiveness of a merger under this section is the same as the
name of the domestic entity preceding the merger, the ownership or
membership interests of the holding company into which the
ownership or membership interests of the domestic entity are merged
are represented by the certificates, if any, that previously
represented the ownership or membership interests in the domestic
entity.
(g) This section shall not apply to partnerships. (TBCA
5.03.H, I (part), J, K.)
Sec. 10.006. SHORT FORM MERGER. (a) A parent organization
that owns at least 90 percent of the outstanding ownership or
membership interests of each class and series of each of one or more
subsidiary organizations may merge with one or more of the
subsidiary organizations as provided by this section if:
(1) at least one of the parties to the merger is a
domestic entity and each other party is a domestic entity or another
non-code organization organized under the laws of a jurisdiction
that permits a merger of the type authorized by this chapter; and
(2) the resulting organization or organizations are
the parent organization, one or more existing subsidiary
organizations, or one or more new organizations.
(b) No action by any subsidiary organization that is a
domestic entity is required to approve the merger.
(c) If the parent organization will not survive the merger,
a plan of merger must be adopted by action of the parent
organization in the same manner as a plan of merger not governed by
this section or Section 10.005.
(d) If the parent organization will survive the merger, the
merger is required to be approved only by a resolution adopted by
the governing authority of the parent organization.
(e) Sections 10.001(c)-(e), 10.002(c), 10.003, and
10.007-10.010 apply to a merger approved under Subsection (d),
except that the resolution approving the merger should be
considered the plan of merger for purposes of those sections.
(f) The resolution approving the merger under Subsection
(d) must describe:
(1) the basic terms of the merger;
(2) the organizations that are party to the merger;
and
(3) the organizations that survive the merger.
(g) If the parent organization does not own all of the
outstanding ownership or membership interests of each class or
series of ownership or membership interests of each subsidiary
organization that is a party to the merger, the resolution of the
parent organization required by Subsection (d) must describe the
terms of the merger, including the cash or other property,
including ownership or membership interests, obligations, rights
to purchase securities, or other securities of any person or
organization or any combination of the ownership or membership
interests, obligations, rights, or other securities, to be used,
paid, or delivered by the parent organization on surrender of each
ownership or membership interest of the subsidiary organizations
not owned by the parent organization.
(h) An entity is not disqualified from effecting a merger
under any other provision of this chapter because it qualifies for a
merger under this section.
(i) This section shall not apply if a subsidiary
organization that is a party to the merger is a partnership. (TBCA
5.16.A, B (part), C, D, E, F; TLLCA 10.05.A, B (part), C.)
Sec. 10.007. EFFECTIVENESS OF MERGER. Except as otherwise
provided by Subchapter B, Chapter 4, a merger takes effect at the
time provided by the plan of merger, except that a merger that
requires a filing under Subchapter D takes effect on the acceptance
of the filing of the certificate of merger by the secretary of state
or county clerk, as appropriate. (TBCA 5.05, 5.16.D; TLLCA
10.03.C; TNPCA 5.05, 5.07.B (part); TREITA 23.50; TRLPA 2.11(f);
TRPA 9.02(f).)
Sec. 10.008. EFFECT OF MERGER. (a) When a merger takes
effect:
(1) the separate existence of each domestic entity
that is a party to the merger, other than a surviving or new
domestic entity, ceases;
(2) all rights, title, and interests to all real
estate and other property owned by each organization that is a party
to the merger is allocated to and vested, subject to any existing
liens or other encumbrances on the property, in one or more of the
surviving or new organizations as provided in the plan of merger
without:
(A) reversion or impairment;
(B) any further act or deed; or
(C) any transfer or assignment having occurred;
(3) all liabilities and obligations of each
organization that is a party to the merger are allocated to one or
more of the surviving or new organizations in the manner provided by
the plan of merger;
(4) each surviving or new domestic organization to
which a liability or obligation is allocated under the plan of
merger is the primary obligor for the liability or obligation, and,
except as otherwise provided by the plan of merger or by law or
contract, no other party to the merger, other than a surviving
domestic entity or non-code organization liable or otherwise
obligated at the time of the merger, and no other new domestic
entity or non-code organization created under the plan of merger is
liable for the debt or other obligation;
(5) any proceeding pending by or against any domestic
entity or by or against any non-code organization that is a party to
the merger may be continued as if the merger did not occur, or the
surviving or new domestic entity or entities or the surviving or new
non-code organization or non-code organizations to which the
liability, obligation, asset, or right associated with that
proceeding is allocated to and vested in under the plan of merger
may be substituted in the proceeding;
(6) the governing documents of each surviving domestic
entity are amended to the extent provided by the plan of merger;
(7) each new filing entity whose certificate of
formation is included in the plan of merger under this chapter, on
meeting any additional requirements, if any, of this code for its
formation, is formed as a domestic entity under this code as
provided by the plan of merger;
(8) the ownership or membership interests of each
organization that is a party to the merger and that are to be
converted or exchanged, in whole or part, into ownership or
membership interests, obligations, rights to purchase securities,
or other securities of one or more of the surviving or new
organizations, into cash or other property, including ownership or
membership interests, obligations, rights to purchase securities,
or other securities of any organization, or into any combination of
these are converted and exchanged and the former owners or members
who held ownership or membership interests of each domestic entity
that is a party to the merger are entitled only to the rights
provided by the certificate of merger or, if applicable, any rights
to receive the fair value for the ownership or membership interests
previously held by them provided under this code; and
(9) notwithstanding Subdivision (4), the surviving or
new organization named in the plan of merger as primarily obligated
to pay the fair value of an ownership or membership interest under
Section 10.003(2) is the primary obligor for that payment and all
other surviving or new organizations are secondarily liable for
that payment.
(b) If the plan of merger does not provide for the
allocation and vesting of the right, title, and interest in any
particular real estate or other property or for the allocation of
any liability or obligation of any party to the merger, the
unallocated property is owned in undivided interest by, or the
liability or obligation is the joint and several liability and
obligation of, each of the surviving and new organizations, pro
rata to the total number of surviving and new organizations
resulting from the merger.
(c) If a surviving organization in a merger is not a
domestic entity, the surviving organization is considered to have:
(1) appointed the secretary of state in this state as
the organization's agent for service of process in a proceeding to
enforce any obligation of a domestic entity that is a party to the
merger; and
(2) agreed to promptly pay to the dissenting owners or
members of each domestic entity that is a party to the merger who
have the right of dissent and appraisal under this code the amount,
if any, to which they are entitled under this code.
(d) If the surviving organization in a merger is not a
domestic entity, the organization shall register to transact
business in this state if the entity is required to register for
that purpose by another provision of this code. (TBCA 5.01.D,
5.06.A, C, 5.16.B (part); TLLCA 10.04; TNPCA 5.06, 5.07.B (part);
TREITA 23.10(D), 23.60(A), (C); TRLPA 2.11(g) (part); TRPA 9.02(g)
(part).)
Sec. 10.009. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
MERGERS. (a) A partner of a domestic partnership that is a party to
a merger does not become liable as a result of the merger for the
liability or obligation of another person that is a party to the
merger unless the partner consents to becoming personally liable by
action taken in connection with the specific plan of merger
approved by the partner.
(b) A partner of a domestic partnership that is a party to a
merger who remains in or enters a partnership is treated as an
incoming partner in the partnership when the merger takes effect
for purposes of determining the partner's liability for a debt or
obligation of the partnership or partnerships that are parties to
the merger or to be created in the merger and in which the partner
was not a partner.
(c) If a partnership merges with an organization and,
because of the merger, no longer exists, a former partner who
becomes an owner or member of the surviving organization may, until
the first anniversary of the effective date of the merger, bind the
surviving organization to a transaction for which the owner or
member no longer has authority to bind the organization if the
transaction is one in which the actions by the owner or member as a
partner would have bound the partnership before the effective date
of the merger, and the other party to the transaction:
(1) does not have actual or constructive notice of the
merger;
(2) had done business with the terminated partnership
within one year preceding the effective date of the merger; and
(3) reasonably believes that the partner who was
previously an owner or member of the partnership that was merged
into the surviving organization and is now an owner or member of the
surviving organization has the authority to bind the surviving
organization to the transaction at the time of the transaction.
(d) If a partnership is formed under a plan of merger, the
existence of the partnership as a partnership begins when the
merger takes effect, and the persons to be partners become partners
at that time.
(e) A partner in a domestic partnership that is a party to
the merger but does not survive shall be treated as a partner who
withdrew from the nonsurviving domestic partnership as of the
effective date of the merger.
(f) The partnership agreement of each domestic partnership
that is a party to the merger must contain provisions that authorize
the merger provided for in the plan of merger adopted by the
partnership.
(g) Each domestic partnership that is a party to the merger
must approve the plan of merger in the manner prescribed in its
partnership agreement. (TRLPA 2.01(b) (part), 2.11(a) (part), (g)
(part); TRPA 2.02(d), 9.01(c), 9.02(a) (part), (g) (part).)
Sec. 10.010. SPECIAL PROVISIONS APPLYING TO NONPROFIT
CORPORATION MERGERS. (a) A domestic nonprofit corporation may not
merge into another entity if the domestic nonprofit corporation
would, because of the merger, lose or impair its charitable status.
(b) One or more domestic or foreign for-profit entities or
non-code organizations may merge into one or more domestic
nonprofit corporations that continue as the surviving entity or
entities.
(c) A domestic nonprofit corporation may not merge with a
foreign for-profit entity if the domestic nonprofit corporation
does not continue as the surviving entity.
(d) One or more domestic nonprofit corporations and
non-code organizations may merge into one or more foreign nonprofit
entities that continue as the surviving entity or entities. (TNPCA
5.01, 5.02, 5.07.A.)
[Sections 10.011-10.050 reserved for expansion]
SUBCHAPTER B. EXCHANGES OF INTERESTS
Sec. 10.051. INTEREST EXCHANGES. (a) For the purpose of
acquiring all of the outstanding ownership or membership interests
of one or more classes or series of one or more domestic entities,
one or more domestic entities or non-code organizations may adopt a
plan of exchange.
(b) To make an interest exchange under this section:
(1) the governing authority of each domestic entity
the ownership or membership interests of which are to be acquired in
the interest exchange must act on a plan of exchange and, if
otherwise required by this code, the owners or members of the
domestic entity must approve the plan of exchange in the manner
provided by this code; and
(2) each acquiring domestic entity must take all
action that may otherwise be required by this code and its governing
documents to effect the exchange.
(c) A domestic entity subject to dissenters' rights must
provide the notice required by Section 10.355.
(d) If a non-code organization is to acquire ownership or
membership interests in the exchange, each non-code organization
must take all action that is required under the laws of the
organization's jurisdiction of formation and the organization's
governing documents to effect the exchange.
(e) If one or more non-code organizations as part of the
plan of exchange are to issue ownership or membership interests,
the issuance of the ownership or membership interests must be
permitted by the laws under which the non-code organizations are
incorporated or organized or not inconsistent with those laws.
(f) A plan of exchange may not be effected if any owner or
member of a domestic entity that is a party to the interest exchange
will, as a result of the interest exchange, become personally
liable, without the consent of the owner or member, for the
liabilities or obligations of any other person or organization.
(TBCA 5.02.A, D, 5.03.A (part); TLLCA 10.06.A; TREITA 23.20(A),
(D); TRLPA 2.11(h) (part); TRPA 9.03(a) (part).)
Sec. 10.052. PLAN OF EXCHANGE: REQUIRED PROVISIONS. (a) A
plan of exchange must include:
(1) the name of each domestic entity the ownership or
membership interests of which are to be acquired;
(2) the name of each acquiring organization;
(3) if there is more than one acquiring organization,
the ownership or membership interests to be acquired by each
organization;
(4) the terms and conditions of the exchange; and
(5) the manner and basis of exchanging the ownership
or membership interests to be acquired for:
(A) ownership or membership interests,
obligations, rights to purchase securities, or other securities of
one or more of the acquiring organizations that is a party to the
plan of exchange;
(B) cash;
(C) other property, including ownership or
membership interests, obligations, rights to purchase securities,
or other securities of any other person or entity; or
(D) any combination of those items.
(b) The manner and basis of exchanging an ownership or
membership interest of an owner or member that is exchanged in a
manner or basis different from any other owner or member having
ownership or membership interests of the same class or series must
be included in the plan of exchange in the same manner as provided
by Subsection (a)(5). (TBCA 5.02.B; TREITA 23.20(B).)
Sec. 10.053. PLAN OF EXCHANGE: PERMISSIVE PROVISIONS. A
plan of exchange may include any other provisions not required by
Section 10.052 relating to the interest exchange. (TBCA 5.02.C;
TREITA 23.20(C).)
Sec. 10.054. EFFECTIVENESS OF EXCHANGE. Except as otherwise
provided by Subchapter B, Chapter 4, an interest exchange takes
effect at the time provided in the plan of exchange or otherwise
agreed to by the parties, except that an interest exchange that
requires a filing under Subchapter D takes effect on the acceptance
of the filing of the certificate of exchange by the secretary of
state or county clerk, as appropriate. (TBCA 5.05; TLLCA 10.06.B
(part); TREITA 23.50; TRLPA 2.11(h) (part); TRPA 9.03(b) (part).)
Sec. 10.055. GENERAL EFFECT OF INTEREST EXCHANGE. When an
interest exchange takes effect:
(1) the ownership or membership interest of each
acquired organization is exchanged as provided in the plan of
exchange, and the former owners whose interests are exchanged under
the plan of exchange are entitled only to the rights provided in the
certificate of exchange or, if applicable, a right to receive the
fair value for the ownership or membership interests provided under
Subchapter H; and
(2) the acquiring organization has all rights, title,
and interests with respect to the ownership or membership interest
to be acquired by it subject to the provisions of the certificate of
exchange. (TBCA 5.06.B; TLLCA 10.06.B (part); TREITA 23.60(B);
TRLPA 2.11(h) (part); TRPA 9.03(b) (part).)
Sec. 10.056. SPECIAL PROVISIONS APPLYING TO PARTNERSHIPS.
To effect an interest exchange:
(1) the partnership agreement of each domestic
partnership whose partnership interests are to be acquired pursuant
to the plan of exchange must authorize the partnership interest
exchange adopted by the partnership;
(2) each domestic partnership whose partnership
interests are to be acquired under the plan of exchange must approve
the plan of exchange in the manner prescribed by its partnership
agreement; and
(3) each acquiring domestic partnership must take all
actions that may be required by its partnership agreement in order
to effect the exchange. (TRLPA 2.11(h) (part); TRPA 9.03(a).)
[Sections 10.057-10.100 reserved for expansion]
SUBCHAPTER C. CONVERSIONS
Sec. 10.101. CONVERSION OF DOMESTIC ENTITIES. (a) A
domestic entity may convert into a different type of domestic
entity or a non-code organization by adopting a plan of conversion.
(b) To effect a conversion, the converting entity must act
on and the owners or members of the domestic entity must approve a
plan of conversion in the manner prescribed by this code for the
approval of conversions by the domestic entity or, if not
prescribed by this code, in the same manner as prescribed by this
code for the adoption and approval of a plan of merger by the
domestic entity when the domestic entity does not survive the
merger.
(c) A domestic entity subject to dissenters' rights must
provide the notice required by Section 10.355.
(d) A conversion may not take effect if the conversion is
prohibited by or inconsistent with the laws of the converted
entity's jurisdiction of formation, and the formation,
incorporation, or organization of the converted entity under the
plan of conversion must be effected in compliance with those laws
pursuant to the plan of conversion.
(e) At the time a conversion takes effect, each owner of the
converting entity, other than those who receive payment of their
ownership or membership interest under any applicable provisions of
this code relating to dissent and appraisal, has, unless otherwise
agreed to by that owner or member, an ownership or membership
interest in, and is the owner or member of, the converted entity.
(f) A domestic entity may not convert under this section if
an owner or member of the domestic entity, as a result of the
conversion, becomes personally liable, without the consent of the
owner or member, for a liability or other obligation of the
converted entity. (TBCA 5.17.A (part); TLLCA 10.08.A (part); TRLPA
2.15(a) (part); TRPA 9.01(a), (b), 9.05(a) (part).)
Sec. 10.102. CONVERSION OF NON-CODE ORGANIZATIONS. (a) A
non-code organization may convert into a domestic entity by
adopting a plan of conversion as provided by this section.
(b) To effect a conversion, the non-code organization must
take any action that may be required for a conversion under the laws
of the organization's jurisdiction of formation and the
organization's governing documents.
(c) The conversion must be permitted by the laws under which
the non-code organization is incorporated or organized or by its
governing documents, which may not be inconsistent with the laws of
the jurisdiction in which the non-code organization is incorporated
or organized. (TBCA 5.17.B; TLLCA 10.08.B; TRLPA 2.15(b); TRPA
9.05(b).)
Sec. 10.103. PLAN OF CONVERSION: REQUIRED PROVISIONS. (a)
A plan of conversion must include:
(1) the name of the converting entity;
(2) the name of the converted entity;
(3) a statement that the converting entity is
continuing its existence in the organizational form of the
converted entity;
(4) a statement of the type of entity that the
converted entity is to be and the converted entity's jurisdiction
of formation;
(5) the manner and basis of converting the ownership
or membership interests of the converting entity into ownership or
membership interests of the converted entity;
(6) any certificate of formation required to be filed
under this code if the converted entity is a filing entity; and
(7) the certificate of formation or similar
organizational document of the converted entity if the converted
entity is not a filing entity.
(b) An item required by Subsection (a)(6) or (7) may be
included in the plan of conversion by an attachment or exhibit to
the plan. (TBCA 5.17.C; TLLCA 10.08.C; TRLPA 2.15(c); TRPA
9.05(c).)
Sec. 10.104. PLAN OF CONVERSION: PERMISSIVE PROVISIONS. A
plan of conversion may include other provisions relating to the
conversion that are not inconsistent with law. (TBCA 5.17.D; TLLCA
10.08.D; TRLPA 2.15(d); TRPA 9.05(d).)
Sec. 10.105. EFFECTIVENESS OF CONVERSION. Except as
otherwise provided by Subchapter B, Chapter 4, a conversion takes
effect at the time provided by the plan of conversion, except that a
conversion that requires a filing under Subchapter D takes effect
on the acceptance of the filing of the certificate of conversion by
the filing officer. (TBCA 5.19; TLLCA 10.10; TRLPA 2.15(f); TRPA
9.05(g).)
Sec. 10.106. GENERAL EFFECT OF CONVERSION. When a
conversion takes effect:
(1) the converting entity continues to exist without
interruption in the organizational form of the converted entity
rather than in the organizational form of the converting entity;
(2) all rights, title, and interests to all property
owned by the converting entity continues to be owned, subject to any
existing liens or other encumbrances on the property, by the
converted entity in the new organizational form without:
(A) reversion or impairment;
(B) further act or deed; or
(C) any transfer or assignment having occurred;
(3) all liabilities and obligations of the converting
entity continue to be liabilities and obligations of the converted
entity in the new organizational form without impairment or
diminution because of the conversion;
(4) the rights of creditors or other parties with
respect to or against the previous owners or members of the
converting entity in their capacities as owners or members in
existence when the conversion takes effect continue to exist as to
those liabilities and obligations and may be enforced by the
creditors and obligees as if a conversion had not occurred;
(5) a proceeding pending by or against the converting
entity or by or against any of the converting entity's owners or
members in their capacities as owners or members may be continued by
or against the converted entity in the new organizational form and
by or against the previous owners or members without a need for
substituting a party;
(6) the ownership or membership interests of the
converting entity that are to be converted into ownership or
membership interests of the converted entity as provided in the
plan of conversion are converted as provided by the plan, and if the
converting entity is a domestic entity, the former owners or
members of the domestic entity are entitled only to the rights
provided in the plan of conversion or a right of dissent and
appraisal under this code;
(7) if, after the conversion takes effect, an owner or
member of the converted entity as an owner or member is liable for
the liabilities or obligations of the converted entity, the owner
or member is liable for the liabilities and obligations of the
converting entity that existed before the conversion took effect
only to the extent that the owner or member:
(A) agrees in writing to be liable for the
liabilities or obligations;
(B) was liable, before the conversion took
effect, for the liabilities or obligations; or
(C) by becoming an owner or member of the
converted entity, becomes liable under other applicable law for the
existing liabilities and obligations of the converted entity; and
(8) if the converted entity is a non-code
organization, the converted entity is considered to have:
(A) appointed the secretary of state in this
state as its agent for service of process in a proceeding to enforce
any obligation or the rights of dissenting owners or members of the
converting domestic entity; and
(B) agreed that the converted entity will
promptly pay the dissenting owners or members of the converting
domestic entity the amount, if any, to which they are entitled under
this code. (TBCA 5.20.A (part); TLLCA 10.11; TRLPA 2.15(g); TRPA
9.05(h).)
Sec. 10.107. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
CONVERSIONS. (a) If a partnership is formed under a plan of
conversion under this code, the existence of the partnership as a
partnership begins when the conversion takes effect, and the owners
or members designated to become the partners under the plan of
conversion become the partners at that time.
(b) The partnership agreement of a domestic partnership
that is converting must contain provisions that authorize the
conversion provided for in the plan of conversion adopted by the
partnership.
(c) A domestic partnership that is converting must approve
the plan of conversion in the merger provided in its partnership
agreement. (TRLPA 2.01(b) (part), 2.15(a) (part); TRPA 2.02(d),
9.05(a) (part).)
Sec. 10.108. SPECIAL PROVISIONS APPLYING TO NONPROFIT
CORPORATION CONVERSIONS. A domestic nonprofit corporation may not
convert into a for-profit entity. (New.)
[Sections 10.109-10.150 reserved for expansion]
SUBCHAPTER D. CERTIFICATE OF MERGER, EXCHANGE,
OR CONVERSION
Sec. 10.151. CERTIFICATE OF MERGER AND EXCHANGE. (a) After
approval of a plan of merger or a plan of exchange as provided by
this code, a certificate of merger, which may also include an
exchange, or a certificate of exchange, as applicable, must be
filed for a merger or interest exchange to become effective if:
(1) for a merger:
(A) any domestic entity that is a party to the
merger is a filing entity; or
(B) any domestic entity to be created under the
plan of merger is a filing entity; or
(2) for an exchange, an ownership or membership
interest in any filing entity is to be acquired in the interest
exchange.
(b) If a certificate of merger or exchange is required to be
filed in connection with an interest exchange or a merger, other
than a merger under Section 10.006, the certificate must be signed
on behalf of each domestic entity and non-code organization that is
a party to the merger or exchange by an officer or other authorized
representative and must include:
(1) the plan of merger or exchange or a statement
certifying:
(A) the name of each domestic entity or non-code
organization that is a party to the merger or exchange;
(B) the name of each domestic entity or non-code
organization that is to be created by the plan of merger or
exchange;
(C) the name of the jurisdiction in which each
domestic entity or non-code organization named under Paragraph (A)
or (B) is incorporated or organized;
(D) for a merger, the amendments or changes to
the certificate of formation of each filing entity that is a party
to the merger, or if no amendments are desired to be effected by the
merger, a statement to that effect;
(E) that the certificate of formation of each new
filing entity to be created under the plan of merger or exchange is
being filed with the certificate of merger or exchange;
(F) that a signed plan of merger or exchange is on
file at the principal place of business of each surviving,
acquiring, or new domestic entity or non-code organization, and the
address of each principal place of business; and
(G) that a copy of the plan of merger or exchange
will be on written request furnished without cost by each
surviving, acquiring, or new domestic entity or non-code
organization to any owner or member of any domestic entity that is a
party to or created by the plan of merger or exchange and, for a
merger with multiple surviving domestic entities or non-code
organizations, to any creditor or obligee of the parties to the
merger at the time of the merger if a liability or obligation is
then outstanding;
(2) if approval of the owners or members of any
domestic entity that was a party to the plan of merger or exchange
is not required by this code, a statement to that effect; and
(3) a statement that the plan of merger or exchange has
been approved as required by the laws of the jurisdiction of
formation of each organization that is a party to the merger or
exchange and by the governing documents of those organizations.
(c) A certificate of merger may also constitute a
certificate of exchange if it contains the information required for
a certificate of exchange. (TBCA 5.04.A; TLLCA 10.03.A (part), B,
10.06.A, B (part); TNPCA 5.04.A; TREITA 23.40(A); TRLPA 2.11(d)
(part), (e), (h) (part); TRPA 9.02(d), 9.03(b) (part).)
Sec. 10.152. CERTIFICATE OF MERGER: SHORT FORM MERGER. (a)
The certificate of merger for a merger under Section 10.006 is
required to be signed only by an officer or other authorized
representative of the parent organization described by that
section.
(b) Except as provided by Subsection (c), the certificate of
merger must include:
(1) the name of the parent organization, the name of
each subsidiary organization that is a party to the merger, and the
jurisdiction of formation of each named organization;
(2) the number of outstanding ownership interests of
each class or series of each subsidiary organization and the number
and percentage of ownership interests of each class or series owned
by the parent organization;
(3) a copy of the resolution of merger adopted by the
governing authority of the parent organization authorizing the
merger and the date of the adoption of the resolution;
(4) a statement that the resolution has been approved
as required by the laws of the jurisdiction of formation of the
parent organization and by its governing documents; and
(5) if any surviving organization is not a domestic
entity, the address, including street number, if any, of its
registered or principal office in the organization's jurisdiction
of formation.
(c) If a plan of merger is required to be adopted by action
of the parent organization under Section 10.006(c), the certificate
of merger must include the information required by Section
10.151(b). (TBCA 5.16.B; TLLCA 10.05.B.)
Sec. 10.153. FILING OF CERTIFICATE OF MERGER OR EXCHANGE.
(a) If a certificate of merger or exchange is required to be filed,
the certificate of merger or exchange must be filed in accordance
with Chapter 4. The certificate of formation of each filing entity
that is to be formed under a plan of merger must also be filed with
the certificate of merger in accordance with Chapter 4. Except as
provided by this section, the certificate must be filed with the
secretary of state.
(b) If a domestic real estate investment trust is a party to
the merger or if an ownership interest in a domestic real estate
investment trust is to be acquired in the interest exchange, the
certificate of merger or exchange must be filed in accordance with
Chapter 4 with the county clerk of the county in which the domestic
real estate investment trust's principal place of business in this
state is located.
(c) If a domestic real estate investment trust is to be
created under the plan of merger, the certificate of formation of
the domestic real estate investment trust must also be filed with
the certificate of merger in accordance with Chapter 4 with the
county clerk of the county in which the domestic real estate
investment trust's principal place of business in this state is
located. (TBCA 5.04.B, 5.16.C; TLLCA 10.03.B; TNPCA 5.04.B; TREITA
23.40(B); TRLPA 2.11(e); TRPA 9.02(e).)
Sec. 10.154. CERTIFICATE OF CONVERSION. (a) After approval
of a plan of conversion as provided by this code, a certificate of
conversion must be filed for the conversion to become effective if:
(1) any domestic entity that is a party to the
conversion is a filing entity; or
(2) any domestic entity to be created under the plan of
conversion is a filing entity.
(b) If a certificate of conversion is required to be filed
in connection with a conversion, the certificate must be signed on
behalf of the converting entity and must include:
(1) the plan of conversion or a statement certifying
the following:
(A) the name and jurisdiction of organization of
the converting entity;
(B) the organizational form of the converting
entity;
(C) that a signed plan of conversion is on file at
the principal place of business of the converting entity, and the
address of the principal place of business;
(D) that a signed plan of conversion will be on
file after the conversion at the principal place of business of the
converted entity, and the address of the principal place of
business; and
(E) that a copy of the plan of conversion will be
on written request furnished without cost by the converting entity
before the conversion or by the converted entity after the
conversion to any owner or member of the converting entity or the
converted entity; and
(2) a statement that the plan of conversion has been
approved as required by the laws of the jurisdiction of formation
and the governing documents of the converting entity. (TBCA
5.18.A; TLLCA 10.09.A; TRLPA 2.15(e); TRPA 9.05(e) (part).)
Sec. 10.155. FILING OF CERTIFICATE OF CONVERSION. (a) If a
certificate of conversion is required to be filed, the certificate
of conversion must be filed in accordance with Chapter 4. If the
converted entity is a filing entity, the certificate of formation
of the filing entity must also be filed with the certificate of
conversion in accordance with Chapter 4. Except as provided by this
section, the certificate must be filed with the secretary of state.
(b) If the converting entity is a domestic real estate
investment trust, the certificate of conversion must be filed in
accordance with Chapter 4 with the county clerk of the county in
which the converting entity's principal place of business in this
state is located.
(c) If the converted entity is a domestic real estate
investment trust, the certificate of formation of the converted
entity must also be filed with the certificate of conversion in
accordance with Chapter 4 with the county clerk of the county in
which the converted entity's principal place of business in this
state is located. (TBCA 5.18.B; TLLCA 10.09.B; TRLPA 2.15(f); TRPA
9.05(e) (part).)
Sec. 10.156. ACCEPTANCE OF CERTIFICATE FOR FILING. The
filing officer may not accept a certificate of merger, exchange, or
conversion for filing if:
(1) the filing officer finds that the certificate of
merger, exchange, or conversion does not conform to law; or
(2) the required franchise taxes have not been paid or
the certificate of merger, exchange, or conversion does not provide
that one or more of the surviving, new, or acquiring organizations
or the converted entity is liable for the payment of the required
franchise taxes. (TBCA 5.04.C (part), 5.18.C (part); TLLCA 10.03.B
(part), 10.09.C (part); TNPCA 5.04.B (part); TRLPA 2.11(e) (part);
TRPA 9.02(e) (part), 9.05(f) (part).)
[Sections 10.157-10.200 reserved for expansion]
SUBCHAPTER E. ABANDONMENT OF MERGER, EXCHANGE, OR CONVERSION
Sec. 10.201. ABANDONMENT OF PLAN OF MERGER, EXCHANGE, OR
CONVERSION. After a merger, interest exchange, or conversion is
approved as provided by this code, and at any time before the
merger, interest exchange, or conversion takes effect, the plan of
merger, interest exchange, or conversion may be abandoned, subject
to any contractual rights, by any of the domestic entities that are
a party to the merger, interest exchange, or conversion, without
action by the owners or members, under the procedures provided by
the plan of merger, exchange, or conversion or, if no abandonment
procedures are provided, in the manner determined by the governing
authority. (TBCA 5.03.L (part), 5.17.E (part); TNPCA 5.03.B; TREITA
23.30(I) (part).)
Sec. 10.202. ABANDONMENT AFTER FILING. (a) If a
certificate of merger, exchange, or conversion has been filed, the
merger, interest exchange, or conversion may be abandoned before
its effectiveness in accordance with Sections 4.057 and 10.201.
(b) A filing of a certificate of abandonment under Section
4.057 is not required for the abandonment of a merger, interest
exchange, or conversion if no filing is required under Subchapter D
to make the merger, interest exchange, or conversion effective.
(TBCA 5.03.L (part), 5.17.E (part); TLLCA 9.03.F (part); TREITA
23.30(I) (part); TRLPA 2.12.F (part).)
[Sections 10.203-10.250 reserved for expansion]
SUBCHAPTER F. PROPERTY TRANSFERS AND DISPOSITIONS
Sec. 10.251. GENERAL POWER OF DOMESTIC ENTITY TO SELL,
LEASE, OR CONVEY PROPERTY. (a) Subject to any approval required by
this code or the governing documents of the domestic entity, a
domestic entity may transfer and convey by sale, lease, assignment,
or another method an interest in property of the entity, including
real property. The transfer and conveyance may:
(1) be made with or without the goodwill of the entity;
(2) be made on any terms and conditions and for any
consideration, which may consist wholly or partly of money or other
property, including an ownership interest in a domestic entity or
non-code organization; and
(3) be evidenced by a deed, assignment, or other
instrument of transfer or conveyance, with or without the seal of
the entity.
(b) Subject to any approval required by this code or the
governing documents of the domestic entity, a domestic entity may
grant a pledge, mortgage, deed of trust, or trust indenture with
respect to an interest in property of the entity, including real
property, with or without the seal of the entity. (TBCA 5.08
(part), 5.09.A; TNPCA 5.08 (part); TREITA 24.10(A), (C) (part).)
Sec. 10.252. NO APPROVAL REQUIRED FOR CERTAIN DISPOSITIONS
OF PROPERTY. Except as otherwise provided by this code, the
governing documents of the domestic entity, or specific limitations
established by the governing authority, a sale, lease, assignment,
conveyance, pledge, mortgage, deed of trust, trust indenture, or
other transfer of an interest in real property or other property
made by a domestic entity does not require the approval of the
members or owners of the entity. (TBCA 5.08 (part), 5.09.A (part);
TNPCA 5.08 (part), 5.09 (part); TREITA 24.10(A).)
Sec. 10.253. RECORDING INSTRUMENT CONVEYING REAL PROPERTY
OF DOMESTIC ENTITY. (a) A deed or other instrument executed by a
domestic entity that conveys an interest in real property may be
recorded in the same manner and with the same effect as other
similar instruments if the instrument is signed and acknowledged
by:
(1) an officer, authorized attorney-in-fact, or other
authorized person of the entity; or
(2) in the case of a partnership or limited liability
company, a governing person of the entity.
(b) A deed or other instrument executed by a domestic entity
that conveys an interest in real property and that is recorded and
signed by an officer, authorized attorney-in-fact, or other
authorized person of the entity constitutes prima facie evidence
that the sale or conveyance that is the subject of the instrument
was authorized under this code and the governing documents of the
entity. (TBCA 5.08; TLLCA 2.11; TNPCA 5.08; TREITA 24.10(C).)
Sec. 10.254. DISPOSITION OF PROPERTY NOT A MERGER OR
CONVERSION; LIABILITY. (a) A disposition of all or part of the
property of a domestic entity, regardless of whether the
disposition requires the approval of the entity's owners or
members, is not a merger or conversion for any purpose.
(b) Except as otherwise expressly provided by another law, a
person acquiring property described by this section may not be held
responsible or liable for a liability or obligation of the
transferring domestic entity that is not expressly assumed by the
person. (TBCA 5.10.B; TREITA 24.20(B).)
[Sections 10.255-10.300 reserved for expansion]
SUBCHAPTER G. BANKRUPTCY REORGANIZATION
Sec. 10.301. REORGANIZATION UNDER BANKRUPTCY AND SIMILAR
LAWS. (a) A trustee appointed for a domestic entity that is being
reorganized under a federal statute, the designated officers of a
domestic entity being reorganized under a federal statute, or any
other individual designated by a court having jurisdiction of a
domestic entity being reorganized under a federal statute to act on
behalf of the domestic entity may, without action by or notice to
the domestic entity's governing authority, owners, or members, in
order to carry out a plan of reorganization ordered by a court under
the federal statute:
(1) amend or restate the domestic entity's certificate
of formation if the certificate of formation after amendment or
restatement contains only provisions required or permitted to be
contained in the certificate of formation;
(2) merge or exchange an interest with one or more
domestic entities or non-code organizations under a plan of merger
or exchange having any provision required or permitted by Sections
10.002, 10.003, 10.004, 10.005, 10.052, and 10.053;
(3) change the location of the domestic entity's
registered office, change its registered agent, and remove or
appoint any agent to receive service of process;
(4) alter, amend, or repeal the domestic entity's
governing documents other than filing instruments;
(5) constitute or reconstitute and classify or
reclassify the domestic entity's governing authority and name,
constitute, or appoint managerial officials in place of or in
addition to all or some of the managerial officials;
(6) sell, lease, exchange, or otherwise dispose of
all, or substantially all, of the domestic entity's property and
assets;
(7) authorize and fix the terms, manner, and
conditions of the issuance of bonds, debentures, or other
obligations, regardless of whether the obligation is convertible
into ownership interests of any class or bearing warrants or other
evidences of optional rights to purchase or subscribe for any
ownership interests of any class;
(8) wind up and terminate the entity's existence; or
(9) effect a conversion.
(b) An action taken under Subsection (a)(4) or (5) takes
effect on entry of the order approving the plan of reorganization or
on another effective date as may be specified, without further
action of the domestic entity, as and to the extent provided by the
plan of reorganization or the order approving the plan of
reorganization. (TBCA 4.14.A; TLLCA 8.12.A; TREITA 26.10(A), (B);
TRLPA 2.06(a).)
Sec. 10.302. SIGNING OF DOCUMENTS. A trustee appointed for
a domestic entity being reorganized under a federal statute, the
designated officers of a domestic entity being reorganized under a
federal statute, or any other individual designated by a court
having jurisdiction of a domestic entity being reorganized under a
federal statute may sign on behalf of a domestic entity that is
being reorganized:
(1) a certificate of amendment or restated certificate
of formation containing:
(A) the name of the domestic entity;
(B) each amendment or the restatement approved by
the court;
(C) the date of the court's order approving the
certificate of amendment or the restatement;
(D) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order was entered; and
(E) a statement that the court had jurisdiction
of the case under a federal statute;
(2) a certificate of merger or exchange containing:
(A) the name of the domestic entity;
(B) the part of the plan of reorganization that
contains the plan of merger or exchange approved by the court, which
must include the information required by Section 10.151(b) or
10.152, as applicable, but which is not required to include the
resolution of the governing authority referred to in Section
10.152;
(C) the date of the court's order approving the
plan of merger or consolidation;
(D) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order or decree was entered; and
(E) a statement that the court had jurisdiction
of the case under a federal statute;
(3) a certificate of termination containing:
(A) the name of the domestic entity;
(B) the information required by Sections
11.101(c)(1)-(4);
(C) the date of the court's order approving the
certificate of termination;
(D) a statement that the obligations of the
domestic entity, including debts and liabilities, have been paid or
discharged as provided by the plan of reorganization and the
remaining property and assets of the domestic entity have been
distributed as provided by the plan of reorganization;
(E) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order or decree was entered; and
(F) a statement that the court had jurisdiction
of the case under a federal statute;
(4) a statement of change of registered office or
registered agent, or both, containing:
(A) the name of the domestic entity;
(B) the information required by Section
5.202(b), as applicable, but not the information included in the
statement referred to in Section 5.202(b)(6);
(C) the date of the court's order approving the
statement of change of registered office or registered agent, or
both;
(D) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order or decree was entered; and
(E) a statement that the court had jurisdiction
of the case under a federal statute; or
(5) a certificate of conversion containing:
(A) the name of the domestic entity;
(B) the part of the plan of reorganization that
contains the plan of conversion approved by the court, which must
include the information required by Section 10.103;
(C) the date of the court's order or decree
approving the plan of conversion;
(D) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order was entered; and
(E) a statement that the court had jurisdiction
of the case under a federal statute. (TBCA 4.14.B; TREITA 26.10(C),
(D); TRLPA 2.06(b).)
Sec. 10.303. REORGANIZATION WITH OTHER ENTITIES. If a
domestic entity or non-code organization that is not being
reorganized under a federal statute merges or exchanges an interest
with a domestic entity that is being reorganized under a plan of
reorganization under a federal statute:
(1) Subchapters A, B, D, E, and H apply to the domestic
entity or non-code organization that is not being reorganized to
the same extent those subchapters would apply if the domestic
entity or non-code organization were merging or engaging in an
interest exchange with a domestic entity that is not being
reorganized, except as otherwise provided by the plan of
reorganization ordered by a court under the federal statute;
(2) Subchapter H applies to a subsidiary organization
that is not being reorganized to the same extent that subchapter
would apply if the subsidiary organization were merging with a
parent organization that is not being reorganized;
(3) on the receipt of all required authorization for
all action required by this code for each domestic entity that is a
party to the plan of merger or exchange that is not being
reorganized and all action by each domestic entity or non-code
organization that is a party to the plan of merger or exchange
required by the laws of the entity's or organization's jurisdiction
of formation and governing documents, a certificate of merger or
exchange shall be signed by each domestic entity or non-code
organization that is a party to the merger or exchange other than
the domestic entity that is being reorganized as provided by
Section 10.151 and on behalf of the domestic entity that is being
reorganized by the persons specified in Section 10.302;
(4) the certificate of merger or exchange must contain
the information required by Section 10.302(2);
(5) the certificate of merger or exchange must be
filed in the manner provided by Section 10.153; and
(6) on the acceptance for filing of the certificate of
merger or exchange in accordance with Subchapter D, the merger or
interest exchange, when effective, has the same effect as if it had
been adopted by unanimous action of the governing authority and
owners or members of the domestic entity being reorganized, and the
effectiveness of the merger or interest exchange is determined as
provided by Section 10.007 or 10.054. (TBCA 4.14.C; TREITA
26.10(D); TRLPA 2.06(c), (d).)
Sec. 10.304. RIGHT OF DISSENT AND APPRAISAL EXCLUDED. An
owner or member of a domestic entity subject to dissenters' rights
being reorganized under a federal statute does not have a right to
dissent and appraisal under this code except as provided by the plan
of reorganization. (TBCA 4.14.D; TREITA 26.10(E).)
Sec. 10.305. AFTER FINAL DECREE. This subchapter does not
apply after the entry of a final decree in a reorganization case
under a federal statute even though the court that renders the
decree may retain jurisdiction of the case for limited purposes
unrelated to consummation of the plan of reorganization. (TBCA
4.14.E; TREITA 26.10(F); TRLPA 2.06(e).)
Sec. 10.306. CHAPTER CUMULATIVE OF OTHER CHANGES. This
chapter does not preclude other changes in a domestic entity or its
ownership or membership interests or securities by a plan of
reorganization ordered by a court under a federal statute. (TBCA
4.14.F; TREITA 26.10(G); TRLPA 2.06(f).)
[Sections 10.307-10.350 reserved for expansion]
SUBCHAPTER H. RIGHTS OF DISSENTING OWNERS
Sec. 10.351. APPLICABILITY OF SUBCHAPTER. (a) This
subchapter does not apply to a fundamental business transaction of
a domestic entity if, immediately before the effective date of the
fundamental business transaction, all of the ownership interests of
the entity otherwise entitled to rights to dissent and appraisal
under this code are held by one owner or only by the owners who
approved the fundamental business transaction.
(b) This subchapter applies only to a "domestic entity
subject to dissenters' rights," as defined in Section 1.002. That
term includes a domestic for-profit corporation, professional
corporation, professional association, and real estate investment
trust. Except as provided in Subsection (c), that term does not
include a partnership or limited liability company.
(c) The governing documents of a partnership or a limited
liability company may provide that its owners are entitled to the
rights of dissent and appraisal provided by this subchapter. (New.)
Sec. 10.352. DEFINITIONS. In this subchapter:
(1) "Dissenting owner" means an owner of an ownership
interest in a domestic entity subject to dissenters' rights who:
(A) provides notice under Section 10.356; and
(B) complies with the requirements for
perfecting that owner's right to dissent under this subchapter.
(2) "Responsible organization" means:
(A) the organization responsible for:
(i) the provision of notices under this
subchapter; and
(ii) the primary obligation of paying the
fair value for an ownership interest held by a dissenting owner;
(B) with respect to a merger or conversion:
(i) for matters occurring before the merger
or conversion, the organization that is merging or converting; and
(ii) for matters occurring after the merger
or conversion, the surviving or new organization that is primarily
obligated for the payment of the fair value of the dissenting
owner's ownership interest in the merger or conversion;
(C) with respect to an interest exchange, the
organization the ownership interests of which are being acquired in
the interest exchange; and
(D) with respect to the sale of all or
substantially all of the assets of an organization, the
organization the assets of which are to be transferred by sale or in
another manner. (New.)
Sec. 10.353. FORM AND VALIDITY OF NOTICE. (a) Notice
required under this subchapter:
(1) must be in writing; and
(2) may be mailed, hand-delivered, or delivered by
courier or electronic transmission.
(b) Failure to provide notice as required by this subchapter
does not invalidate any action taken. (New.)
Sec. 10.354. RIGHTS OF DISSENT AND APPRAISAL. (a) Subject
to Subsection (b), an owner of an ownership interest in a domestic
entity subject to dissenters' rights is entitled to:
(1) dissent from:
(A) a plan of merger to which the domestic entity
is a party if owner approval is required by this code and the owner
owns in the domestic entity an ownership interest that was entitled
to vote on the plan of merger;
(B) a sale of all or substantially all of the
assets of the domestic entity if owner approval is required by this
code and the owner owns in the domestic entity an ownership interest
that was entitled to vote on the sale;
(C) a plan of exchange in which the ownership
interest of the owner is to be acquired;
(D) a plan of conversion in which the domestic
entity is the converting entity if owner approval is required by
this code and the owner owns in the domestic entity an ownership
interest that was entitled to vote on the plan of conversion; or
(E) a merger effected under Section 10.006 in
which:
(i) the owner is entitled to vote on the
merger; or
(ii) the ownership interest of the owner is
converted or exchanged; and
(2) subject to compliance with the procedures set
forth in this subchapter, obtain the fair value of that ownership
interest through an appraisal.
(b) Notwithstanding Subsection (a), subject to Subsection
(c), an owner may not dissent from a plan of merger or conversion in
which there is a single surviving or new domestic entity or non-code
organization, or from a plan of exchange, if:
(1) the ownership interest held by the owner is part of
a class or series of ownership interests that are, on the record
date set for purposes of determining which owners are entitled to
vote on the plan of merger, conversion, or exchange, as
appropriate:
(A) listed on a national securities exchange or a
similar system;
(B) listed on the Nasdaq Stock Market or a
successor quotation system;
(C) designated as a national market security on
an interdealer quotation system by the National Association of
Securities Dealers, Inc., or a successor system; or
(D) held of record by at least 2,000 owners;
(2) the owner is not required by the terms of the plan
of merger, conversion, or exchange, as appropriate, to accept for
the owner's ownership interest any consideration that is different
from the consideration to be provided to any other holder of an
ownership interest of the same class or series as the ownership
interest held by the owner, other than cash instead of fractional
shares or interests the owner would otherwise be entitled to
receive; and
(3) the owner is not required by the terms of the plan
of merger, conversion, or exchange, as appropriate, to accept for
the owner's ownership interest any consideration other than:
(A) ownership interests of a domestic entity or
non-code organization of the same general organizational type that,
immediately after the effective date of the merger, conversion, or
exchange, as appropriate, will be part of a class or series of
ownership interests that are:
(i) listed on a national securities
exchange or authorized for listing on the exchange on official
notice of issuance;
(ii) approved for quotation as a national
market security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or a successor entity; or
(iii) held of record by at least 2,000
owners;
(B) cash instead of fractional ownership
interests the owner would otherwise be entitled to receive; or
(C) any combination of the ownership interests
and cash described by Paragraphs (A) and (B).
(c) Subsection (b) shall not apply to a domestic entity that
is a subsidiary with respect to a merger under Section 10.006. (TBCA
5.11, 5.16.E (part), 5.20.A (part); TREITA 25.10.)
Sec. 10.355. NOTICE OF RIGHT OF DISSENT AND APPRAISAL. (a)
A domestic entity subject to dissenters' rights that takes or
proposes to take an action regarding which an owner has a right to
dissent and obtain an appraisal under Section 10.354 shall notify
each affected owner of the owner's rights under that section if:
(1) the action or proposed action is submitted to a
vote of the owners at a meeting; or
(2) approval of the action or proposed action is
obtained by written consent of the owners instead of being
submitted to a vote of the owners.
(b) If a parent organization effects a merger under Section
10.006 and a subsidiary organization that is a party to the merger
is a domestic entity subject to dissenters' rights, the responsible
organization shall notify the owners of that subsidiary
organization who have a right to dissent to the merger under Section
10.354 of their rights under this subchapter not later than the 10th
day after the effective date of the merger. The notice must also
include a copy of the certificate of merger and a statement that the
merger has become effective.
(c) A notice required to be provided under Subsection (a) or
(b) must:
(1) be accompanied by a copy of this subchapter; and
(2) advise the owner of the location of the
responsible organization's principal executive offices to which a
notice required under Section 10.356(b)(2) may be provided.
(d) In addition to the requirements prescribed by
Subsection (c), a notice required to be provided under Subsection
(a)(1) must accompany the notice of the meeting to consider the
action, and a notice required under Subsection (a)(2) must be
provided to:
(1) each owner who consents in writing to the action
before the owner delivers the written consent; and
(2) each owner who is entitled to vote on the action
and does not consent in writing to the action before the 11th day
after the date the action takes effect.
(e) Not later than the 10th day after the date an action
described by Subsection (a)(1) takes effect, the responsible
organization shall give notice that the action has been effected to
each owner who voted against the action and sent notice under
Section 10.356(b)(2). (TBCA 5.03.D, 5.12.A (part), 5.16.E (part);
TREITA 23.30(D), 25.20(A) (part).)
Sec. 10.356. PROCEDURE FOR DISSENT BY OWNERS AS TO ACTIONS;
PERFECTION OF RIGHT OF DISSENT AND APPRAISAL. (a) An owner of an
ownership interest of a domestic entity subject to dissenters'
rights who has the right to dissent and appraisal from any of the
actions referred to in Section 10.354 may exercise that right to
dissent and appraisal only by complying with the procedures
specified in this subchapter. An owner's right of dissent and
appraisal under Section 10.354 may be exercised by an owner only
with respect to an ownership interest that is not voted in favor of
the action.
(b) To perfect the owner's rights of dissent and appraisal
under Section 10.354, an owner:
(1) with respect to the ownership interest for which
the rights of dissent and appraisal are sought:
(A) must vote against the action if the owner is
entitled to vote on the action and the action is approved at a
meeting of the owners; and
(B) may not consent to the action if the action is
approved by written consent; and
(2) must give to the responsible organization a notice
dissenting to the action that:
(A) is addressed to the president and secretary
of the responsible organization;
(B) demands payment of the fair value of the
ownership interests for which the rights of dissent and appraisal
are sought;
(C) provides to the responsible organization an
address to which a notice relating to the dissent and appraisal
procedures under this subchapter may be sent;
(D) states the number and class of the ownership
interests of the domestic entity owned by the owner and the fair
value of the ownership interests as estimated by the owner; and
(E) is delivered to the responsible organization
at its principal executive offices at the following time:
(i) before the action is considered for
approval, if the action is to be submitted to a vote of the owners at
a meeting;
(ii) not later than the 20th day after the
date the responsible organization sends to the owner a notice that
the action was approved by the requisite vote of the owners, if the
action is to be undertaken on the written consent of the owners; or
(iii) not later than the 20th day after the
date the responsible organization sends to the owner a notice that
the merger was effected, if the action is a merger effected under
Section 10.006.
(c) An owner who does not make a demand within the period
required by Subsection (b)(2)(E) is bound by the action and is not
entitled to exercise the rights of dissent and appraisal under
Section 10.354.
(d) Not later than the 20th day after the date an owner makes
a demand under this section, the owner must submit to the
responsible organization any certificates representing the
ownership interest to which the demand relates for purposes of
making a notation on the certificates that a demand for the payment
of the fair value of an ownership interest has been made under this
section. An owner's failure to submit the certificates within the
required period has the effect of terminating, at the option of the
responsible organization, the owner's rights to dissent and
appraisal under Section 10.354 unless a court, for good cause
shown, directs otherwise.
(e) If a domestic entity and responsible organization
satisfy the requirements of this subchapter relating to the rights
of owners of ownership interests in the entity to dissent to an
action and seek appraisal of those ownership interests, an owner of
an ownership interest who fails to perfect that owner's right of
dissent in accordance with this subchapter may not bring suit to
recover the value of the ownership interest or money damages
relating to the action. (TBCA 5.12.A (part), G (part), 5.13.B
(part), 5.16.E (part); TREITA 25.20(A) (part), (G) (part), 25.30(B)
(part).)
Sec. 10.357. WITHDRAWAL OF DEMAND FOR FAIR VALUE OF
OWNERSHIP INTEREST. (a) An owner may withdraw a demand for the
payment of the fair value of an ownership interest made under
Section 10.356 before:
(1) payment for the ownership interest has been made
under Sections 10.358 and 10.361; or
(2) a petition has been filed under Section 10.361.
(b) Unless the responsible organization consents to the
withdrawal of the demand, an owner may not withdraw a demand for
payment under Subsection (a) after either of the events specified
in Subsections (a)(1) and (2). (TBCA 5.13.C (part); TREITA 25.30(C)
(part).)
Sec. 10.358. RESPONSE BY ORGANIZATION TO NOTICE OF DISSENT
AND DEMAND FOR FAIR VALUE BY DISSENTING OWNER. (a) Not later than
the 20th day after the date a responsible organization receives a
demand for payment made by a dissenting owner in accordance with
Section 10.356, the responsible organization shall respond to the
dissenting owner in writing by:
(1) accepting the amount claimed in the demand as the
fair value of the ownership interests specified in the notice; or
(2) rejecting the demand and including in the response
the requirements prescribed by Subsection (c).
(b) If the responsible organization accepts the amount
claimed in the demand, the responsible organization shall pay the
amount not later than the 90th day after the date the action that is
the subject of the demand was effected if the owner delivers to the
responsible organization:
(1) endorsed certificates representing the ownership
interests if the ownership interests are certificated; or
(2) signed assignments of the ownership interests if
the ownership interests are uncertificated.
(c) If the responsible organization rejects the amount
claimed in the demand, the responsible organization shall provide
to the owner:
(1) an estimate by the responsible organization of the
fair value of the ownership interests; and
(2) an offer to pay the amount of the estimate provided
under Subdivision (1).
(d) An offer made under Subsection (c)(2) must remain open
for a period of at least 60 days from the date the offer is first
delivered to the dissenting owner.
(e) If a dissenting owner accepts an offer made by a
responsible organization under Subsection (c)(2) or if a dissenting
owner and a responsible organization reach an agreement on the fair
value of the ownership interests, the responsible organization
shall pay the agreed amount not later than the 60th day after the
date the offer is accepted or the agreement is reached, as
appropriate, if the dissenting owner delivers to the responsible
organization:
(1) endorsed certificates representing the ownership
interests if the ownership interests are certificated; or
(2) signed assignments of the ownership interests if
the ownership interests are uncertificated. (TBCA 5.12.A (part),
5.16.E (part); TREITA 25.20(A) (part).)
Sec. 10.359. RECORD OF DEMAND FOR FAIR VALUE OF OWNERSHIP
INTEREST. (a) A responsible organization shall note in the
organization's ownership interest records maintained under Section
3.151 the receipt of a demand for payment from any dissenting owner
made under Section 10.356.
(b) If an ownership interest that is the subject of a demand
for payment made under Section 10.356 is transferred, a new
certificate representing that ownership interest must contain:
(1) a reference to the demand; and
(2) the name of the original dissenting owner of the
ownership interest. (TBCA 5.13.B (part); TREITA 25.30(B) (part).)
Sec. 10.360. RIGHTS OF TRANSFEREE OF CERTAIN OWNERSHIP
INTEREST. A transferee of an ownership interest that is the subject
of a demand for payment made under Section 10.356 does not acquire
additional rights with respect to the responsible organization
following the transfer. The transferee has only the rights the
original dissenting owner had with respect to the responsible
organization after making the demand. (TBCA 5.13.B (part); TREITA
25.30(B) (part).)
Sec. 10.361. PROCEEDING TO DETERMINE FAIR VALUE OF
OWNERSHIP INTEREST AND OWNERS ENTITLED TO PAYMENT; APPOINTMENT OF
APPRAISERS. (a) If a responsible organization rejects the amount
demanded by a dissenting owner under Section 10.358 and the
dissenting owner and responsible organization are unable to reach
an agreement relating to the fair value of the ownership interests
within the period prescribed by Section 10.358(d), the dissenting
owner or responsible organization may file a petition requesting a
finding and determination of the fair value of the owner's
ownership interests in a court in:
(1) the county in which the organization's principal
office is located in this state; or
(2) the county in which the organization's registered
office is located in this state, if the organization does not have a
business office in this state.
(b) A petition described by Subsection (a) must be filed not
later than the 60th day after the expiration of the period required
by Section 10.358(d).
(c) On the filing of a petition by an owner under Subsection
(a), service of a copy of the petition shall be made to the
responsible organization. Not later than the 10th day after the
date a responsible organization receives service under this
subsection, the responsible organization shall file with the clerk
of the court in which the petition was filed a list containing the
names and addresses of each owner of the organization who has
demanded payment for ownership interests under Section 10.356 and
with whom agreement as to the value of the ownership interests has
not been reached with the responsible organization. If the
responsible organization files a petition under Subsection (a), the
petition must be accompanied by this list.
(d) The clerk of the court in which a petition is filed under
this section shall provide by registered mail notice of the time and
place set for the hearing to:
(1) the responsible organization; and
(2) each owner named on the list described by
Subsection (c) at the address shown for the owner on the list.
(e) The court shall:
(1) determine which owners have:
(A) perfected their rights by complying with this
subchapter; and
(B) become subsequently entitled to receive
payment for the fair value of their ownership interests; and
(2) appoint one or more qualified appraisers to
determine the fair value of the ownership interests of the owners
described by Subdivision (1).
(f) The court shall approve the form of a notice required to
be provided under this section. The judgment of the court is final
and binding on the responsible organization, any other organization
obligated to make payment under this subchapter for an ownership
interest, and each owner who is notified as required by this
section. (TBCA 5.12.B, C (part), 5.16.E (part); TREITA 25.20(B),
(C) (part).)
Sec. 10.362. COMPUTATION AND DETERMINATION OF FAIR VALUE OF
OWNERSHIP INTEREST. (a) For purposes of this subchapter, the fair
value of an ownership interest of a domestic entity subject to
dissenters' rights is the value of the ownership interest on the
date preceding the date of the action that is the subject of the
appraisal. Any appreciation or depreciation in the value of the
ownership interest occurring in anticipation of the proposed action
or as a result of the action must be specifically excluded from the
computation of the fair value of the ownership interest.
(b) In computing the fair value of an ownership interest
under this subchapter, consideration must be given to the value of
the organization as a going concern without including in the
computation of value any:
(1) payment for a control premium or minority discount
other than a discount attributable to the type of ownership
interests held by the dissenting owner; and
(2) limitation placed on the rights and preferences of
those ownership interests.
(c) The determination of the fair value of an ownership
interest made for purposes of this subchapter may not be used for
purposes of making a determination of the fair value of that
ownership interest for another purpose or of the fair value of
another ownership interest, including for purposes of determining
any minority or liquidity discount that might apply to a sale of an
ownership interest. (TBCA 5.12.A(1) (part).)
Sec. 10.363. POWERS AND DUTIES OF APPRAISER; APPRAISAL
PROCEDURES. (a) An appraiser appointed under Section 10.361 has
the power and authority that:
(1) is granted by the court in the order appointing the
appraiser; and
(2) may be conferred by a court to a master in chancery
as provided by Rule 171, Texas Rules of Civil Procedure.
(b) The appraiser shall:
(1) determine the fair value of an ownership interest
of an owner adjudged by the court to be entitled to payment for the
ownership interest; and
(2) file with the court a report of that
determination.
(c) The appraiser is entitled to examine the books and
records of a responsible organization and may conduct
investigations as the appraiser considers appropriate. A
dissenting owner or responsible organization may submit to an
appraiser evidence or other information relevant to the
determination of the fair value of the ownership interest required
by Subsection (b)(1).
(d) The clerk of the court appointing the appraiser shall
provide notice of the filing of the report under Subsection (b) to
each dissenting owner named in the list filed under Section 10.361
and the responsible organization. (TBCA 5.12.C (part), D (part);
TREITA 25.20(C) (part), (D) (part).)
Sec. 10.364. OBJECTION TO APPRAISAL; HEARING. (a) A
dissenting owner or responsible organization may object, based on
the law or the facts, to all or part of an appraisal report
containing the fair value of an ownership interest determined under
Section 10.363(b).
(b) If an objection to a report is raised under Subsection
(a), the court shall hold a hearing to determine the fair value of
the ownership interest that is the subject of the report. After the
hearing, the court shall require the responsible organization to
pay to the holders of the ownership interest the amount of the
determined value with interest, accruing from the 91st day after
the date the applicable action for which the owner elected to
dissent was effected until the date of the judgment.
(c) Interest under Subsection (b) accrues at the same rate
as is provided for the accrual of prejudgment interest in civil
cases.
(d) The responsible organization shall:
(1) immediately pay the amount of the judgment to a
holder of an uncertificated ownership interest; and
(2) pay the amount of the judgment to a holder of a
certificated ownership interest immediately after the certificate
holder surrenders to the responsible organization an endorsed
certificate representing the ownership interest.
(e) On payment of the judgment, the dissenting owner does
not have an interest in the:
(1) ownership interest for which the payment is made;
or
(2) responsible organization with respect to that
ownership interest. (TBCA 5.12.D (part); TREITA 25.20(D) (part).)
Sec. 10.365. COURT COSTS; COMPENSATION FOR APPRAISER. (a)
An appraiser appointed under Section 10.361 is entitled to a
reasonable fee payable from court costs.
(b) All court costs shall be allocated between the
responsible organization and the dissenting owners in the manner
that the court determines to be fair and equitable. (TBCA 5.12.D
(part); TREITA 25.20(D) (part).)
Sec. 10.366. STATUS OF OWNERSHIP INTEREST HELD OR FORMERLY
HELD BY DISSENTING OWNER. (a) An ownership interest of an
organization acquired by a responsible organization under this
subchapter:
(1) in the case of a merger, conversion, or interest
exchange, shall be held or disposed of as provided in the plan of
merger, conversion, or interest exchange; and
(2) in any other case, may be held or disposed of by
the responsible organization in the same manner as other ownership
interests acquired by the organization or held in its treasury.
(b) An owner who has demanded payment for the owner's
ownership interest under Section 10.356 is not entitled to vote or
exercise any other rights of another owner with respect to the
ownership interest except the right to:
(1) receive payment for the ownership interest under
this subchapter; and
(2) bring an appropriate action to obtain relief on
the ground that the action to which the demand relates would be or
was fraudulent.
(c) An ownership interest for which payment has been
demanded under Section 10.356 may not be considered outstanding for
purposes of any subsequent vote or action. (TBCA 5.12.E, 5.13.A;
TREITA 25.20(E), 25.30(A).)
Sec. 10.367. RIGHTS OF OWNERS FOLLOWING TERMINATION OF
RIGHT OF DISSENT. (a) The rights of a dissenting owner terminate
if:
(1) the owner withdraws the demand under Section
10.356;
(2) the owner's right of dissent is terminated under
Section 10.356;
(3) a petition is not filed within the period required
by Section 10.361; or
(4) after a hearing held under Section 10.361, the
court adjudges that the owner is not entitled to elect to dissent
from an action under this subchapter.
(b) On termination of the right of dissent under this
section:
(1) the dissenting owner and all persons claiming a
right under the owner are conclusively presumed to have approved
and ratified the action to which the owner dissented and are bound
by that action;
(2) the owner's right to be paid the fair value of the
owner's ownership interests ceases and the owner's status as an
owner of those ownership interests is restored without prejudice in
any interim proceeding if the owner's ownership interests were not
canceled, converted, or exchanged as a result of the action or a
subsequent fundamental business transaction; and
(3) the dissenting owner is entitled to receive
dividends or other distributions made in the interim to owners of
the same class and series of ownership interests held by the owner
as if a demand for the payment of the ownership interests had not
been made under Section 10.356, subject to any change in or
adjustment to ownership interests because of the cancellation or
exchange of the ownership interests after the date a demand under
Section 10.356 was made pursuant to a fundamental business
transaction. (TBCA 5.13.C (part); TREITA 25.30(C) (part).)
Sec. 10.368. EXCLUSIVITY OF REMEDY OF DISSENT AND
APPRAISAL. In the absence of fraud in the transaction, any right of
an owner of an ownership interest to dissent from an action and
obtain the fair value of the ownership interest under this
subchapter is the exclusive remedy for recovery of:
(1) the value of the ownership interest or money
damages to the owner with respect to the ownership interest; and
(2) the owner's right in the organization with respect
to a fundamental business transaction. (TBCA 5.12.G (part), 5.16.E
(part); TREITA 25.20(G) (part).)
[Sections 10.369-10.900 reserved for expansion]
SUBCHAPTER Z. MISCELLANEOUS PROVISIONS
Sec. 10.901. CREDITORS; ANTITRUST. This code does not
affect, nullify, or repeal the antitrust laws or abridge any right
or rights of any creditor under existing laws. (TBCA 5.15.)
Sec. 10.902. NONEXCLUSIVITY. This chapter does not limit
the power of a domestic entity or non-code organization to acquire
all or part of the ownership or membership interests of one or more
classes or series of a domestic entity through a voluntary exchange
or otherwise. (TBCA 5.01.E, 5.02.E; TREITA 23.10(E), 23.20(E).)
CHAPTER 11. WINDING UP AND TERMINATION OF DOMESTIC ENTITY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 11.001. DEFINITIONS. In this chapter:
(1) "Claim" means a right to payment, damages, or
property, whether liquidated or unliquidated, accrued or
contingent, matured or unmatured.
(2) "Event requiring a winding up" means an event
specified by Section 11.051.
(3) "Existing claim" with respect to an entity means:
(A) a claim against the entity that existed
before the entity's termination and is not barred by limitations;
or
(B) a contractual obligation incurred after
termination.
(4) "Terminated entity" means a domestic entity the
existence of which has been:
(A) terminated in a manner authorized or required
by this code, unless the entity has been reinstated in the manner
provided by this code; or
(B) forfeited pursuant to the Tax Code, unless
the forfeiture has been set aside.
(5) "Terminated filing entity" means a terminated
entity that is a filing entity.
(6) "Voluntary decision to wind up" means the
determination to wind up a domestic entity made by the domestic
entity or the owners, members, or governing authority of the
domestic entity in the manner specified by the title of this code
governing the domestic entity.
(7) "Voluntary winding up" means winding up as a
result of a voluntary decision to wind up.
(8) "Winding up" means the process of winding up the
business and affairs of a domestic entity as a result of the
occurrence of an event requiring winding up. (TBCA 7.12.F; TNPCA
7.12.H; TLLCA 8.12.A.)
[Sections 11.002-11.050 reserved for expansion]
SUBCHAPTER B. WINDING UP OF DOMESTIC ENTITY
Sec. 11.051. EVENT REQUIRING WINDING UP OF DOMESTIC ENTITY.
Winding up of a domestic entity is required on:
(1) the expiration of the domestic entity's period of
duration, if not perpetual;
(2) a voluntary decision to wind up the domestic
entity;
(3) an event specified in the governing documents of
the domestic entity requiring the winding up, dissolution, or
termination of the domestic entity;
(4) an event specified in this code requiring the
winding up or termination of the domestic entity; or
(5) a decree by a court requiring the winding up or
dissolution of the domestic entity, rendered under this code or
other law. (TBCA 6.01 (part), 6.02.A, 6.03.A (part), 7.01.A
(part), B (part), F (part), 7.09 (part), 7.12.E (part); TLLCA
6.01.A (part); TNPCA 6.01.A (part), 7.01.A (part), B (part), F
(part), 7.09 (part), 7.12.G (part); TPAA 8(B) (part); TREITA
3.10(A) (part), 19.10 (part); TRLPA 8.01, 8.02 (part); TRPA
8.01(a), (b), (c), (d), (e).)
Sec. 11.052. WINDING UP PROCEDURES. (a) Except as provided
by the title of this code governing the domestic entity, on the
occurrence of an event requiring winding up of a domestic entity,
unless the event requiring winding up is revoked under Section
11.151 or canceled under Section 11.152, the owners, members,
managerial officials, or other persons specified in the title of
this code governing the domestic entity shall, as soon as
reasonably practicable, wind up the business and affairs of the
domestic entity. The domestic entity shall:
(1) cease to carry on its business, except to the
extent necessary to wind up its business;
(2) if the domestic entity is not a partnership, send a
written notice of the winding up to each known claimant against the
domestic entity;
(3) collect and sell its property to the extent the
property is not to be distributed in kind to the domestic entity's
owners or members; and
(4) perform any other act required to wind up its
business and affairs.
(b) During the winding up process, the domestic entity may
prosecute or defend a civil, criminal, or administrative action.
(TBCA 6.04 (part); TLLCA 6.03 (part), 6.05 (part); TREITA 19.10
(part); TRLPA 8.04(a) (part), (b) (part); TRPA 8.03(a), (b)
(part).)
Sec. 11.053. PROPERTY APPLIED TO DISCHARGE LIABILITIES AND
OBLIGATIONS. (a) Except as provided by Subsection (b) and the title
of this code governing the domestic entity, a domestic entity in the
process of winding up shall apply and distribute its property to
discharge, or make adequate provision for the discharge of, all of
the domestic entity's liabilities and obligations.
(b) Except as provided by the title of this code governing
the domestic entity, if the property of a domestic entity is not
sufficient to discharge all of the domestic entity's liabilities
and obligations, the domestic entity shall:
(1) apply its property, to the extent possible, to the
just and equitable discharge of its liabilities and obligations,
including liabilities and obligations owed to owners or members,
other than for distributions; or
(2) make adequate provision for the application of the
property described by Subdivision (1).
(c) Except as provided by the title of this code governing
the domestic entity, after a domestic entity has discharged, or
made adequate provision for the discharge of, all of its
liabilities and obligations, the domestic entity shall distribute
the remainder of its property, in cash or in kind, to the domestic
entity's owners according to their respective rights and interests.
(d) A domestic entity may continue its business wholly or
partly, including delaying the disposition of property of the
domestic entity, for the limited period necessary to avoid
unreasonable loss of the entity's property or business. (TBCA 6.04
(part); TLLCA 6.04 (part), 6.05 (part); TNPCA 6.02.A(1); TREITA
19.10 (part); TRLPA 8.04(b) (part), 8.05; TRPA 8.03(b) (part), (c),
8.06(a).)
Sec. 11.054. COURT SUPERVISION OF WINDING UP PROCESS.
Subject to the other provisions of this code, on application of a
domestic entity or an owner or member of a domestic entity, a court
may:
(1) supervise the winding up of the domestic entity;
(2) appoint a person to carry out the winding up of the
domestic entity; and
(3) make any other order, direction, or inquiry that
the circumstances may require. (TBCA 6.04 (part); TLLCA 6.05
(part); TNPCA 6.02.A(3) (part); TRLPA 8.04(a) (part); TRPA 8.01(e),
8.03(a) (part).)
Sec. 11.055. COURT ACTION OR PROCEEDING DURING WINDING UP.
During the winding up process, a domestic entity may continue
prosecuting or defending a court action or proceeding by or against
the domestic entity. (TBCA 7.12.A (part); TLLCA 6.08.B (part);
TNPCA 7.12.A (part); TRLPA 8.04(b) (part).)
Sec. 11.056. SUPPLEMENTAL EVENT REQUIRING WINDING UP OF
LIMITED LIABILITY COMPANY. In addition to an event listed under
Section 11.051, the termination of the continued membership of the
last remaining member of a limited liability company is an event
requiring a winding up unless, not later than the 90th day after the
date of the termination, the legal representative or successor of
the last remaining member agrees:
(1) to continue the company; and
(2) to become a member of the company effective as of
the date of the termination or to designate another person who
agrees to become a member of the company effective as of the date of
the termination. (Del. Limited Liability Company Act 18-801(a)
(part); TLLCA 6.01.A (part).)
Sec. 11.057. SUPPLEMENTAL EVENTS REQUIRING WINDING UP OF
GENERAL PARTNERSHIP. (a) An event requiring winding up of a general
partnership includes, in addition to any event specified in Section
11.051, the following:
(1) in a general partnership that is not for a definite
term or for a particular undertaking or in which the partnership
agreement does not provide for winding up the partnership business
on a specified event, the express will of a majority-in-interest of
the partners who have not assigned their interests;
(2) in a general partnership for a definite term or for
a particular undertaking, on:
(A) the express will of all of the partners; or
(B) the expiration of the term or the completion
of the undertaking, unless otherwise continued under Section
152.709;
(3) in a general partnership in which the partnership
agreement provides for the winding up of the partnership business
on a specified event, upon:
(A) the express will of all of the partners; or
(B) the occurrence of the specified event, unless
otherwise continued under Section 152.709;
(4) an event that makes it illegal for all or
substantially all of the partnership business to be continued, but
a cure of illegality before the 91st day after the date of notice to
the general partnership of the event is effective retroactively to
the date of the event for purposes of this subsection;
(5) the sale of all or substantially all of the
property of the general partnership outside the ordinary course of
business; and
(6) if a general partnership is not for a definite term
or a particular undertaking and its partnership agreement does not
provide for a specified event requiring a winding up of the
partnership business, a request for winding up the partnership
business from a partner, other than a partner who has agreed not to
withdraw.
(b) An event described by Subsection (a)(6) requires the
winding up of a general partnership 60 days after the date on which
the general partnership receives notice of the request or at a later
date as specified by the notice, unless a majority-in-interest of
the partners agree to continue the general partnership. (TRPA
8.01(a), (b), (c), (d), (f), (g) (part).)
Sec. 11.058. SUPPLEMENTAL EVENTS REQUIRING WINDING UP OF
LIMITED PARTNERSHIP. An event requiring the winding up of a limited
partnership includes, in addition to any event specified in Section
11.051, the following:
(1) written consent of all partners to the winding up
and termination of the limited partnership; and
(2) an event of withdrawal of a general partner.
(TRLPA 8.01 (part).)
Sec. 11.059. SUPPLEMENTAL PROVISIONS FOR CORPORATIONS. For
purposes of Section 11.051(3), the event requiring the winding up,
dissolution, or termination of a domestic corporation must be
specific in:
(1) the certificate of formation of the corporation;
or
(2) bylaws of the corporation adopted by the owners or
members of the corporation in the same manner as an amendment to the
certificate of formation of the corporation. (New.)
[Sections 11.060-11.100 reserved for expansion]
SUBCHAPTER C. TERMINATION OF DOMESTIC ENTITY
Sec. 11.101. CERTIFICATE OF TERMINATION FOR FILING ENTITY.
(a) On completion of the winding up process under Subchapter B, a
filing entity must file a certificate of termination in accordance
with Chapter 4.
(b) A certificate from the comptroller that all taxes
administered by the comptroller under Title 2, Tax Code, have been
paid must be filed with the certificate of termination in
accordance with Chapter 4 if the filing entity is a professional
corporation, for-profit corporation, or limited liability company.
(c) The certificate of termination must contain:
(1) the name of the filing entity;
(2) the name and address of each of the filing entity's
governing persons;
(3) the entity's file number assigned by the secretary
of state, unless the entity is a real estate investment trust;
(4) the nature of the event requiring winding up;
(5) a statement that the filing entity has complied
with the provisions of this code governing its winding up; and
(6) any other information required by this code to be
included in the certificate of termination for the filing entity.
(TBCA 6.06 (part), 6.07 (part); TLLCA 6.07 (part), 6.08.A (part);
TNPCA 6.05 (part); TPAA 18 (part); TREITA 19.20(A), (B); TRLPA
2.03(a) (part), (b).)
Sec. 11.102. EFFECTIVENESS OF TERMINATION OF FILING ENTITY.
Except as otherwise provided by this chapter, the existence of a
filing entity terminates on the filing of a certificate of
termination with the filing officer. (TBCA 6.01.A(3) (part),
6.07.B (part); TLLCA 6.08.B (part); TNPCA 6.06.B; TREITA 19.20(C);
TRLPA 2.03(a) (part).)
Sec. 11.103. EFFECTIVENESS OF TERMINATION OF NONFILING
ENTITY. Except as otherwise provided by this chapter, the existence
of a nonfiling entity terminates on the completion of the winding up
of its business and affairs. Notice of the termination must be
provided by the nonfiling entity in the manner provided in the
governing documents of the nonfiling entity if notice of
termination is required under the governing documents. (TRPA
8.02.)
Sec. 11.104. ACTION BY SECRETARY OF STATE. The secretary of
state shall remove from its active records a domestic filing entity
whose period of duration has expired when the secretary of state
determines that:
(1) the entity has failed to file a certificate of
termination in accordance with Section 11.101; and
(2) the entity has failed to file an amendment to
extend its existence in accordance with Section 11.152. (New.)
Sec. 11.105. SUPPLEMENTAL INFORMATION REQUIRED BY
CERTIFICATE OF TERMINATION OF NONPROFIT CORPORATION. (a) In
addition to the information required by Section 11.101, the
certificate of termination filed by a nonprofit corporation that
has completed its winding up process must contain a statement that:
(1) any property of the nonprofit corporation has been
transferred, conveyed, applied, or distributed in accordance with
this chapter and Chapter 22; and
(2) there is no suit pending against the nonprofit
corporation or adequate provision has been made for the
satisfaction of any judgment, order, or decree that may be entered
against the nonprofit corporation in a pending suit.
(b) In addition to the statements required by Subsection
(a), if the nonprofit corporation received and held property
permitted to be used only for charitable, religious, eleemosynary,
benevolent, educational, or similar purposes, but the nonprofit
corporation did not hold the property on a condition requiring
return, transfer, or conveyance because of the winding up and
termination, the certificate of termination must include a
statement that distribution of that property has been effected in
accordance with a plan of distribution adopted in compliance with
this code for the distribution of that property. (TNPCA 6.05
(part).)
[Sections 11.106-11.150 reserved for expansion]
SUBCHAPTER D. REVOCATION AND CONTINUATION
Sec. 11.151. REVOCATION OF VOLUNTARY WINDING UP. (a)
Before the termination of the existence of a domestic entity takes
effect, the domestic entity may revoke a voluntary decision to wind
up the entity by approval of the revocation in the manner specified
in the title of this code governing the entity.
(b) A domestic entity may continue its business following
the revocation of a voluntary decision to wind up under Subsection
(a). (TBCA 6.05.A (part), D (part); TLLCA 6.06; TNPCA 6.04.A
(part), B; TRPA 8.01(g) (part); TRLPA 8.01 (part).)
Sec. 11.152. CONTINUATION OF BUSINESS WITHOUT WINDING UP.
(a) Subject to Subsections (c) and (d), a domestic entity to which
an event requiring the winding up of the entity occurs as specified
by Section 11.051(3) or (4) may cancel the event requiring winding
up in the manner specified in the title of this code governing the
domestic entity not later than the first anniversary of the date of
the event requiring winding up or an earlier period prescribed by
the title of this code governing the domestic entity.
(b) A domestic entity to which an event requiring winding up
as specified in Section 11.051(1) occurs may cancel the event
requiring winding up by amending its governing documents in the
manner provided by this code, not later than the third anniversary
of the date of the event requiring winding up or an earlier date
prescribed by the title of this code governing the domestic entity,
to extend the period of its duration. The expiration of the period
of its duration does not by itself create a vested right on the part
of an owner, member, or creditor of the entity to prevent the
extension of its existence. An act undertaken or a contract entered
into by a terminated entity during a period in which the entity
could have extended its existence under this section is not
invalidated by the expiration of the period of the entity's
duration, regardless of whether the entity has taken any action to
extend its existence.
(c) A domestic entity may not cancel an event requiring
winding up specified in Section 11.051(3) and continue its business
if the action is prohibited by the entity's governing documents or
the title of this code governing the entity.
(d) A domestic entity may cancel an event requiring winding
up specified in Section 11.051(4) and continue its business only if
the action:
(1) is not prohibited by the entity's governing
documents; and
(2) is expressly authorized by the title of this code
governing the entity.
(e) On cancellation of an event requiring winding up under
this section, the domestic entity may continue its business. (TBCA
7.12.E; TNPCA 7.12.G; TLLCA 6.01.B, 8.12.A; TRPA 4.07(a); TRLPA
8.01 (part).)
[Sections 11.153-11.200 reserved for expansion]
SUBCHAPTER E. REINSTATEMENT OF TERMINATED ENTITY
Sec. 11.201. CONDITIONS FOR REINSTATEMENT. (a) A
terminated entity may be reinstated under this subchapter if:
(1) the termination was by mistake or inadvertent;
(2) the termination occurred without the approval of
the entity's governing persons when their approval is required by
the title of this code governing the terminated entity;
(3) the process of winding up before termination had
not been completed by the entity; or
(4) the legal existence of the entity is necessary to:
(A) convey or assign property;
(B) settle or release a claim or liability;
(C) take an action; or
(D) sign an instrument or agreement.
(b) A terminated entity may not be reinstated under this
section if the termination occurred as a result of:
(1) an order of a court or the secretary of state;
(2) an event requiring winding up that is specified in
the title of this code governing the terminated entity, if that
title prohibits reinstatement; or
(3) forfeiture under the Tax Code. (TBCA 6.05.A
(part).)
Sec. 11.202. PROCEDURES FOR REINSTATEMENT. (a) To the
extent applicable, a terminated entity, to be reinstated, must
complete the requirements of this section not later than the third
anniversary of the date the termination of the terminated entity's
existence took effect.
(b) The owners, members, governing persons, or other
persons must approve the reinstatement of the domestic entity in
the manner provided by the title of this code governing the domestic
entity.
(c) After approval of the reinstatement of a filing entity
that was terminated, and not later than the third anniversary of the
date of the filing of the entity's certificate of termination, the
filing entity shall file a certificate of reinstatement in
accordance with Chapter 4.
(d) A certificate of reinstatement filed under Subsection
(c) must contain:
(1) the name of the filing entity;
(2) the filing number the filing officer assigned to
the entity;
(3) the effective date of the entity's termination;
(4) a statement that the reinstatement of the filing
entity has been approved in the manner required by this code; and
(5) the name of the entity's registered agent and the
address of the entity's registered office.
(e) A letter of eligibility from the comptroller stating
that the filing entity has satisfied all franchise tax liabilities
and may be reinstated must be filed with the certificate of
reinstatement if the filing entity is a professional corporation,
for-profit corporation, or limited liability company. (TBCA
6.05.B.)
Sec. 11.203. USE OF NAME SIMILAR TO PREVIOUSLY REGISTERED
NAME. If the secretary of state determines that a filing entity's
name contained in a certificate of reinstatement filed under
Section 11.202 is the same as, deceptively similar to, or similar to
a name of a filing entity or foreign entity on file as provided by or
reserved or registered under this code, the secretary of state may
not accept for filing the certificate of reinstatement unless the
filing entity contemporaneously amends its certificate of
formation to change its name or obtains consent for the use of the
similar name. (TBCA 6.05.C.)
Sec. 11.204. EFFECTIVENESS OF REINSTATEMENT OF NONFILING
ENTITY. The reinstatement of a terminated nonfiling entity takes
effect on the approval required by Section 11.202(b). (New.)
Sec. 11.205. EFFECTIVENESS OF REINSTATEMENT OF FILING
ENTITY. The reinstatement of a terminated filing entity that
previously filed a certificate of termination takes effect on the
filing of the entity's certificate of reinstatement. (TBCA 6.05.D
(part).)
Sec. 11.206. EFFECT OF REINSTATEMENT. When the
reinstatement of a terminated entity takes effect:
(1) the existence of the terminated entity is
considered to have continued without interruption from the date of
termination; and
(2) the terminated entity may carry on its business as
if the termination of its existence had not occurred. (TBCA 6.05.D
(part).)
[Sections 11.207-11.250 reserved for expansion]
SUBCHAPTER F. INVOLUNTARY TERMINATION OF FILING ENTITY
BY SECRETARY OF STATE
Sec. 11.251. TERMINATION OF FILING ENTITY BY SECRETARY OF
STATE. (a) If it appears to the secretary of state that, with
respect to a filing entity, a circumstance described by Subsection
(b) exists, the secretary of state may notify the entity of the
circumstance by regular or certified mail addressed to the entity
at the entity's registered office or principal place of business as
shown on the records of the secretary of state.
(b) The secretary of state may terminate a filing entity's
existence if the secretary finds that the entity has failed to, and,
before the 91st day after the date notice was mailed has not
corrected the entity's failure to:
(1) file a report within the period required by law or
to pay a fee or penalty prescribed by law when due and payable;
(2) maintain a registered agent or registered office
in this state as required by law; or
(3) pay a fee required in connection with a filing, or
payment of the fee was dishonored when presented by the state for
payment.
(c) This subchapter shall not apply to real estate
investment trusts. (TBCA 7.01.B, C(1); TLLCA 8.12.A; TNPCA 7.01.B,
C(1); TRLPA 13.06(a), (b), 13.08(a).)
Sec. 11.252. CERTIFICATE OF TERMINATION. (a) If
termination of a filing entity's existence is required, the
secretary of state shall:
(1) issue a certificate of termination; and
(2) deliver a certificate of termination by regular or
certified mail to the filing entity at its registered office or
principal place of business.
(b) The certificate of termination must state:
(1) that the filing entity has been involuntarily
terminated; and
(2) the date and cause of the termination.
(c) Except as otherwise provided by this chapter, the
existence of the filing entity is terminated on the issuance of the
certificate of termination by the secretary of state. (TBCA
7.01.C(2), D; TLLCA 8.12.A; TNPCA 7.01.C(2), D; TRLPA 13.06(b)
(part), 13.08(a) (part).)
Sec. 11.253. REINSTATEMENT BY SECRETARY OF STATE AFTER
INVOLUNTARY TERMINATION. (a) The secretary of state shall
reinstate a filing entity that has been involuntarily terminated
under this subchapter if the entity files a certificate of
reinstatement in accordance with Chapter 4 and:
(1) the entity has corrected the circumstances that
led to the involuntary termination and any other circumstances that
may exist of the types described by Section 11.251(b), including
the payment of fees, interest, or penalties; or
(2) the secretary of state finds that the
circumstances that led to the involuntary termination did not exist
at the time of termination.
(b) A certificate of reinstatement filed under Subsection
(a) must contain:
(1) the name of the filing entity;
(2) the filing number assigned by the filing officer
to the entity;
(3) the effective date of the involuntary termination;
(4) a statement that the circumstances giving rise to
the involuntary termination have been corrected; and
(5) the name of the entity's registered agent and the
address of the entity's registered office.
(c) A certificate of reinstatement must be accompanied by
each amendment to the entity's certificate of formation that is
required by intervening events, including circumstances requiring
an amendment to the filing entity's name as described in Section
11.203.
(d) If a filing entity is reinstated before the third
anniversary of the date of its involuntary termination, the entity
is considered to have continued in existence without interruption
from the date of termination. The reinstatement shall have no
effect on any issue of personal liability of the governing persons,
officers, or agents of the filing entity during the period between
termination and reinstatement. (TBCA 7.01.E (part); TLLCA 8.12.A;
TNPCA 7.01.E (part); TRLPA 13.09(a), (b) (part).)
Sec. 11.254. REINSTATEMENT OF CERTIFICATE OF FORMATION
FOLLOWING TAX FORFEITURE. A filing entity whose certificate of
formation has been forfeited under the provisions of the Tax Code
must follow the procedures in the Tax Code to reinstate its
certificate of formation. (TBCA 7.12.F(1) (part); TLLCA 8.12.A.)
[Sections 11.255-11.300 reserved for expansion]
SUBCHAPTER G. JUDICIAL WINDING UP AND TERMINATION
Sec. 11.301. INVOLUNTARY WINDING UP AND TERMINATION OF
FILING ENTITY BY COURT ACTION. (a) A court may enter a decree
requiring winding up of a filing entity's business and termination
of the filing entity's existence if, as the result of an action
brought under Section 11.303, the court finds that one or more of
the following problems exist:
(1) the filing entity or its organizers did not comply
with a condition precedent to its formation;
(2) the certificate of formation of the filing entity
or any amendment to the certificate of formation was fraudulently
filed;
(3) a misrepresentation of a material matter has been
made in an application, report, affidavit, or other document
submitted by the filing entity under this code;
(4) the filing entity has continued to transact
business beyond the scope of the purpose of the filing entity as
expressed in its certificate of formation; or
(5) public interest requires winding up and
termination of the filing entity because:
(A) the filing entity has been convicted of a
felony or a high managerial agent of the filing entity has been
convicted of a felony committed in the conduct of the filing
entity's affairs;
(B) the filing entity or high managerial agent
has engaged in a persistent course of felonious conduct; and
(C) termination is necessary to prevent future
felonious conduct of the same character.
(b) Sections 11.302-11.307 do not apply to Subsection
(a)(5). (TBCA 7.01.A, F, G; TLLCA 8.12.A; TNPCA 7.01.A, F, G.)
Sec. 11.302. NOTIFICATION OF CAUSE BY SECRETARY OF STATE.
(a) The secretary of state shall provide to the attorney general:
(1) the name of a filing entity that has given cause
under Section 11.301 for involuntary winding up of the entity's
business and termination of the entity's existence; and
(2) the facts relating to the cause for the winding up
and termination.
(b) When notice is provided under Subsection (a), the
secretary of state shall notify the filing entity of the
circumstances by writing sent to the entity at its registered
office in this state. The notice must state that the secretary of
state has given notice under Subsection (a) and the grounds for the
notification. The secretary of state must record the date a notice
required by this subsection is sent.
(c) A court shall accept a certificate issued by the
secretary of state as to the facts relating to the cause for the
winding up and termination and the sending of a notice under
Subsection (b) as prima facie evidence of the facts stated in the
certificate and the sending of the notice. (TBCA 7.02.A, B; TNPCA
7.02.A, B.)
Sec. 11.303. FILING OF ACTION BY ATTORNEY GENERAL. The
attorney general shall file an action against a filing entity in the
name of the state seeking termination of the entity's existence if:
(1) the filing entity has not cured the problems for
which winding up and termination is sought before the 31st day after
the date the notice under Section 11.302(b) is mailed; and
(2) the attorney general determines that cause exists
for the involuntary winding up of a filing entity's business and
termination of the entity's existence under Section 11.301. (TBCA
7.02.C; TNPCA 7.02.C.)
Sec. 11.304. CURE BEFORE FINAL JUDGMENT. An action filed by
the attorney general under Section 11.303 shall be abated if,
before a district court renders judgment on the action, the filing
entity:
(1) cures the problems for which winding up and
termination is sought; and
(2) pays the costs of the action. (TBCA 7.02.D; TNPCA
7.02.D.)
Sec. 11.305. JUDGMENT REQUIRING WINDING UP AND TERMINATION.
If a district court finds in an action brought under this subchapter
that proper grounds exist under Section 11.301(a) for a winding up
of a filing entity's business and termination of the filing entity's
existence, the court shall:
(1) make findings to that effect; and
(2) subject to Section 11.306, enter a judgment not
earlier than the fifth day after the date the court makes its
findings. (TBCA 7.02.E (part); TNPCA 7.02.E (part).)
Sec. 11.306. STAY OF JUDGMENT. (a) If, in an action brought
under this subchapter, a filing entity has proved by a
preponderance of the evidence and obtained a finding that the
problems for which the filing entity has been found guilty were not
wilful or the result of a failure to take reasonable precautions,
the entity may make a sworn application to the court for a stay of
entry of the judgment to allow the filing entity a reasonable
opportunity to cure the problems for which it has been found guilty.
An application made under this subsection must be made not later
than the fifth day after the date the court makes its findings under
Section 11.305.
(b) After a filing entity has made an application under
Subsection (a), a court shall stay the entry of the judgment if the
court is reasonably satisfied after considering the application and
evidence offered with respect to the application that the filing
entity:
(1) is able and intends in good faith to cure the
problems for which it has been found guilty; and
(2) has not applied for the stay without just cause.
(c) A court shall stay an entry of judgment under Subsection
(b) for the period the court determines is reasonably necessary to
afford the filing entity the opportunity to cure its problems if the
entity acts with reasonable diligence. The court may not stay the
entry of the judgment for longer than 60 days after the date the
court's findings are made.
(d) The court shall dismiss an action against a filing
entity that, during the period the action is stayed by the court
under this section, cures the problems for which winding up and
termination is sought and pays all costs accrued in the action.
(e) If a court finds that a filing entity has not cured the
problems for which winding up and termination is sought within the
period prescribed by Subsection (c), the court shall enter final
judgment requiring a winding up of the filing entity's business.
(TBCA 7.02.E (part); TLLCA 8.12.A; TNPCA 7.02.E (part).)
Sec. 11.307. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF
FINDINGS BY APPEALS COURT. (a) An appellate court that affirms a
trial court's findings against a filing entity under this
subchapter shall remand the case to the trial court with
instructions to grant the filing entity an opportunity to cure the
problems for which the entity has been found guilty if:
(1) the filing entity did not make an application to
the trial court for stay of the entry of the judgment;
(2) the appellate court is satisfied that the appeal
was taken in good faith and not for purpose of delay or with no
sufficient cause;
(3) the appellate court finds that the problems for
which the filing entity has been found guilty are capable of being
cured; and
(4) the filing entity has prayed for the opportunity
to cure its problems in the appeal.
(b) The appellate court shall determine the period, which
may not be longer than 60 days after the date the case is remanded to
the trial court, to be afforded to a filing entity to enable the
filing entity to cure its problems under Subsection (a).
(c) The trial court to which an action against a filing
entity has been remanded under this section shall dismiss the
action if, during the period prescribed by the appellate court for
that conduct, the filing entity cures the problems for which
winding up and termination is sought and pays all costs accrued in
the action.
(d) If a filing entity has not cured the problems for which
winding up and termination is sought within the period prescribed
by the appellate court under Subsection (b), the judgment requiring
winding up and termination shall become final. (TBCA 7.02.F; TLLCA
8.12.A; TNPCA 7.02.F.)
Sec. 11.308. JURISDICTION AND VENUE. (a) The attorney
general shall bring an action for the involuntary winding up and
termination of a filing entity under this subchapter in:
(1) a district court of the county in which the
registered office or principal place of business of the filing
entity in this state is located; or
(2) a district court of Travis County.
(b) A district court described by Subsection (a) has
jurisdiction of the action for involuntary winding up and
termination. (TBCA 7.03 (part); TLLCA 8.12.A; TNPCA 7.03 (part).)
Sec. 11.309. PROCESS IN STATE ACTION. Citation in an action
for the involuntary winding up and termination of a filing entity
under this subchapter shall be issued and served as provided by law.
(TBCA 7.03 (part); TLLCA 8.12.A; TNPCA 7.03 (part).)
Sec. 11.310. PUBLICATION OF NOTICE. (a) If process in an
action under this subchapter is returned not found, the attorney
general shall publish notice in a newspaper in the county in which
the registered office of the filing entity in this state is located.
The notice must contain:
(1) a statement of the pendency of the action;
(2) the title of the court;
(3) the title of the action; and
(4) the earliest date on which default judgment may be
entered by the court.
(b) Notice under this section must be published at least
once a week for two consecutive weeks beginning at any time after
the citation has been returned.
(c) The attorney general may include in one published notice
the name of each filing entity against which an action for
involuntary winding up and termination is pending in the same
court.
(d) Not later than the 10th day after the date notice under
this section is first published, the attorney general shall send a
copy of the notice to the filing entity at the filing entity's
registered office in this state. A certificate from the attorney
general regarding the sending of the notice is prima facie evidence
that notice was sent under this section.
(e) Unless a filing entity has been served with citation, a
default judgment may not be taken against the entity before the 31st
day after the date the notice is first published. (TBCA 7.03
(part); TLLCA 8.12.A; TNPCA 7.03 (part).)
Sec. 11.311. ACTION ALLOWED AFTER EXPIRATION OF FILING
ENTITY'S DURATION. The expiration of a filing entity's period of
duration does not, by itself, create a vested right on the part of
an owner or creditor of the filing entity to prevent an action by
the attorney general for the involuntary winding up of the filing
entity's business and termination of the filing entity's existence.
(TBCA 7.12.E (part); TLLCA 8.12.A; TNPCA 7.12.G (part).)
Sec. 11.312. COMPLIANCE BY TERMINATED ENTITY. On the decree
of a court requiring winding up of a filing entity's business, the
filing entity shall comply with:
(1) the requirements of the decree concerning the
winding up process; and
(2) Subchapter B to the extent it does not conflict
with the decree. (New.)
Sec. 11.313. TIMING OF TERMINATION. A court may enter a
decree under Section 11.301 terminating the existence of a filing
entity:
(1) when the court considers it necessary or
advisable; or
(2) on completion of the winding up process. (TBCA
7.09.)
Sec. 11.314. INVOLUNTARY WINDING UP AND TERMINATION OF
PARTNERSHIP OR LIMITED LIABILITY COMPANY. A district court in the
county in which the registered office or principal place of a
domestic partnership or limited liability company is located has
jurisdiction to order the winding up and termination of the
domestic partnership or limited liability company on application
by:
(1) a partner in the partnership if the court
determines that:
(A) the economic purpose of the partnership is
likely to be unreasonably frustrated; or
(B) another partner has engaged in conduct
relating to the partnership's business that makes it not reasonably
practicable to carry on the business in partnership with that
partner; or
(2) an owner of the partnership or limited liability
company if the court determines that it is not reasonably
practicable to carry on the entity's business in conformity with
its governing documents. (TLLCA 6.02; TRLPA 8.02; TRPA 8.01(e).)
Sec. 11.315. FILING OF DECREE OF TERMINATION AGAINST FILING
ENTITY. (a) The clerk of a court that enters a decree terminating
the existence of a filing entity shall file a certified copy of the
decree in accordance with Chapter 4.
(b) A fee may not be charged for the filing of a decree under
this section. (TBCA 7.10; TLLCA 8.12.A; TNPCA 7.10.)
[Sections 11.316-11.350 reserved for expansion]
SUBCHAPTER H. CLAIMS RESOLUTION ON TERMINATION
Sec. 11.351. LIABILITY OF TERMINATED FILING ENTITY. A
terminated filing entity is liable only for an existing claim.
(TBCA 7.12.C (part); TLLCA 8.12.A; TNPCA 7.12.C (part).)
Sec. 11.352. DEPOSIT WITH COMPTROLLER OF AMOUNT DUE OWNERS
AND CREDITORS WHO ARE UNKNOWN OR CANNOT BE LOCATED. (a) On the
voluntary or involuntary termination of a domestic filing entity,
the portion of the entity's assets distributable to creditors or
owners who are unknown or cannot be found after the exercise of
reasonable diligence by a person responsible for the distribution
in liquidation of the domestic filing entity's assets must be
reduced to cash and deposited as provided by Subsection (b).
(b) Money from assets liquidated under Subsection (a) shall
be deposited with the comptroller in a special account to be
maintained by the comptroller. The money must be accompanied by a
statement to the comptroller containing:
(1) the name and last known address of each person who
is known to be entitled to all or part of the account;
(2) the amount of each entitled person's distributive
portion of the money; and
(3) other information about each person who is
entitled to all or part of the money as the comptroller may
reasonably require.
(c) The comptroller shall issue a receipt for money received
under this section. (TBCA 7.11.A (part); TLLCA 8.12.A; TNPCA 7.11.A
(part).)
Sec. 11.353. DISCHARGE OF LIABILITY OF PERSON RESPONSIBLE
FOR LIQUIDATION. A person responsible for the distribution in
liquidation of a filing entity's assets will be released and
discharged from further liability with respect to money received
from the liquidation when the person deposits the money with the
comptroller under Section 11.352. (TBCA 7.11.A (part); TLLCA
8.12.A; TNPCA 7.11.A (part).)
Sec. 11.354. PAYMENT FROM ACCOUNT BY COMPTROLLER. (a) To
claim money deposited in an account under Section 11.352, a person
must submit to the comptroller satisfactory written proof of the
person's right to the money not later than the seventh anniversary
of the date the money was deposited with the comptroller.
(b) The comptroller shall issue a warrant drawn on the
account created under Section 11.352 in favor of a person who meets
the requirements for making a claim under Subsection (a) and in the
amount to which the person is entitled. (TBCA 7.11.B (part); TLLCA
8.12.A; TNPCA 7.11.B (part).)
Sec. 11.355. NOTICE OF ESCHEAT; ESCHEAT. (a) If no claimant
has made satisfactory proof of a right to the money within the
period prescribed by Section 11.354(a), the comptroller shall
publish in one issue of a newspaper of general circulation in Travis
County a notice of the proposed escheat of the money.
(b) A notice published under Subsection (a) must contain:
(1) the name and last known address of any known
creditor or owner entitled to the money;
(2) the amount of money deposited with the
comptroller; and
(3) the name of the terminated filing entity from
whose assets the money was derived.
(c) If no claimant makes satisfactory proof to the
comptroller of a right to the money before the 61st day after the
date notice under this section is published, the money
automatically escheats to and becomes the property of the state and
shall be deposited in the general revenue fund. (TBCA 7.11.B
(part); TLLCA 8.12.A; TNPCA 7.11.B (part).)
Sec. 11.356. LIMITED SURVIVAL AFTER TERMINATION. (a)
Notwithstanding the termination of a domestic filing entity under
this chapter, the terminated filing entity continues in existence
until the third anniversary of the effective date of the entity's
termination only for purposes of:
(1) prosecuting or defending in the terminated filing
entity's name an action or proceeding brought by or against the
terminated entity;
(2) permitting the survival of an existing claim by or
against the terminated filing entity;
(3) holding title to and liquidating property that
remained with the terminated filing entity at the time of
termination or property that is collected by the terminated filing
entity after termination;
(4) applying or distributing property, or its
proceeds, as provided by Section 11.053; and
(5) settling affairs not completed before
termination.
(b) A terminated filing entity may not continue its
existence for the purpose of continuing the business or affairs for
which the terminated filing entity was formed unless the terminated
filing entity is reinstated under Subchapter E.
(c) If an action on an existing claim by or against a
terminated filing entity has been brought before the expiration of
the three-year period after the date of the entity's termination
and the claim was not extinguished under Section 11.359, the
terminated filing entity continues to survive for purposes of:
(1) the action until all judgments, orders, and
decrees have been fully executed; and
(2) the application or distribution of any property of
the terminated filing entity as provided by Section 11.053 until
the property has been applied or distributed. (TBCA 7.12.A, C
(part); TLLCA 8.12.A; TNPCA 7.12.A, C (part).)
Sec. 11.357. GOVERNING PERSONS OF ENTITY DURING LIMITED
SURVIVAL. (a) Subject to the provisions of the title governing the
terminated filing entity, during the three-year period that a
terminated filing entity's existence is continued under Section
11.356, the governing persons of the terminated filing entity
serving at the time of termination shall continue to manage the
affairs of the terminated filing entity for the limited purposes
specified by Section 11.356 and have the powers necessary to
accomplish those purposes. The number of governing persons:
(1) may be reduced because of the death of a governing
person; and
(2) may include successors to governing persons chosen
by the other governing persons.
(b) In exercising powers prescribed under Subsection (a), a
governing person:
(1) has the same duties to the terminated filing
entity that the person had immediately before the termination; and
(2) is liable to the terminated filing entity for the
person's actions taken after the entity's termination to the same
extent that the person would have been liable had the person taken
those actions before the termination. (TBCA 7.12.B; TLLCA 8.12.A;
TNPCA 7.12.B.)
Sec. 11.358. ACCELERATED PROCEDURE FOR EXISTING CLAIM
RESOLUTION. (a) A terminated filing entity may shorten the period
for resolving a person's existing claim against the entity by
giving notice by registered or certified mail, return receipt
requested, to the claimant at the claimant's last known address
that the claim must be resolved under this section.
(b) The notice required under Subsection (a) must:
(1) state the requirements of Subsections (c) and (d)
for presenting a claim;
(2) provide the mailing address to which the person's
claim against the terminated filing entity must be sent;
(3) state that the claim will be extinguished if
written presentation of the claim is not received at the address
given on or before the date specified in the notice, which may not
be earlier than the 120th day after the date the notice is mailed to
the person by the terminated filing entity; and
(4) be accompanied by a copy of this section.
(c) To assert a claim, a person who is notified by a
terminated filing entity that the person's claim must be resolved
under this section must present the claim in writing to the
terminated filing entity at the address given by the entity in the
notice.
(d) A claim presented under Subsection (c) must:
(1) contain the:
(A) identity of the claimant; and
(B) nature and amount of the claim; and
(2) be received by the terminated filing entity not
later than the date specified in the notice under Subsection
(b)(3).
(e) If a person presents a claim that meets the requirements
of this section, the terminated filing entity to whom the claim is
presented may give written notice to the person that the claim is
rejected by the terminated entity.
(f) Notice under Subsection (e) must:
(1) be sent by registered or certified mail, return
receipt requested, and addressed to the last known address of the
person presenting the claim;
(2) state that the claim has been rejected by the
terminated entity;
(3) state that the claim will be extinguished unless
an action on the claim is brought:
(A) not later than the 180th day after the date
the notice of rejection of the claim was mailed to the person; and
(B) not later than the third anniversary of the
effective date of the entity's termination; and
(4) state the date on which notice of the claim's
rejection was mailed and the effective date of the entity's
termination. (TBCA 7.12.D (part); TLLCA 8.12.A; TNPCA 7.12.D, E.)
Sec. 11.359. EXTINGUISHMENT OF EXISTING CLAIM. (a) Except
as provided by Subsection (b), an existing claim by or against a
terminated filing entity is extinguished unless an action or
proceeding is brought on the claim not later than the third
anniversary of the date of termination of the entity.
(b) A person's claim against a terminated filing entity may
be extinguished before the period prescribed by Subsection (a) if
the person is notified under Section 11.358(a) that the claim will
be resolved under Section 11.358 and the person:
(1) fails to properly present the claim in writing
under Sections 11.358(c) and (d); or
(2) fails to bring an action on a claim rejected under
Section 11.358(e) before:
(A) the 180th day after the date the notice
rejecting the claim was mailed to the person; and
(B) the third anniversary of the effective date
of the entity's termination. (TBCA 7.12.C (part), D (part); TLLCA
8.12.A; TNPCA 7.12.C (part), F.)
[Sections 11.360-11.400 reserved for expansion]
SUBCHAPTER I. RECEIVERSHIP
Sec. 11.401. CODE GOVERNS. A receiver may be appointed for a
domestic entity or for a domestic entity's property or business
only as provided for and on the conditions set forth in this code.
(TBCA 7.07.A (part); TLLCA 8.12.A; TNPCA 7.07.A (part).)
Sec. 11.402. JURISDICTION TO APPOINT RECEIVER. (a) A court
that has subject matter jurisdiction over specific property of a
domestic or foreign entity that is located in this state and is
involved in litigation has jurisdiction to appoint a receiver for
that property.
(b) A district court in the county in which the registered
office or principal place of business of a domestic entity is
located has jurisdiction to:
(1) appoint a receiver for the property and business
of a domestic entity for the purpose of rehabilitating the entity;
or
(2) order the liquidation of the property and business
of a domestic entity and appoint a receiver to effect that
liquidation. (TBCA 7.04.A (part), 7.05.A (part), 7.06.A (part);
TLLCA 8.12.A; TNPCA 7.04.A (part), 7.05.A (part), 7.06.A (part).)
Sec. 11.403. APPOINTMENT OF RECEIVER FOR SPECIFIC PROPERTY.
(a) Subject to Subsection (b), and on the application of a person
whose right to or interest in any property or fund or the proceeds
from the property or fund is probable, a court that has jurisdiction
over specific property of a domestic or foreign entity may appoint a
receiver in an action:
(1) by a vendor to vacate a fraudulent purchase of the
property;
(2) by a creditor to subject the property or fund to
the creditor's claim;
(3) between partners or others jointly owning or
interested in the property or fund;
(4) by a mortgagee of the property for the foreclosure
of the mortgage and sale of the property, when:
(A) it appears that the mortgaged property is in
danger of being lost, removed, or materially injured; or
(B) it appears that the mortgage is in default
and that the property is probably insufficient to discharge the
mortgage debt; or
(5) in which receivers for specific property have been
previously appointed by courts of equity.
(b) A court may appoint a receiver for the property or fund
under Subsection (a) only if:
(1) with respect to an action brought under Subsection
(a)(1), (2), or (3), it is shown that the property or fund is in
danger of being lost, removed, or materially injured;
(2) circumstances exist that are considered by the
court to necessitate the appointment of a receiver to conserve the
property or fund and avoid damage to interested parties;
(3) all other requirements of law are complied with;
and
(4) the court determines that other available legal
and equitable remedies are inadequate.
(c) The court appointing a receiver under this section has
and shall retain exclusive jurisdiction over the specific property
placed in receivership. The court shall determine the rights of the
parties in the property or its proceeds.
(d) If the condition necessitating the appointment of a
receiver under this section is remedied, the receivership shall be
terminated immediately, and the receiver shall redeliver to the
domestic entity all of the property remaining in receivership.
(TBCA 7.04; TLLCA 8.12.A; TNPCA 7.04.)
Sec. 11.404. APPOINTMENT OF RECEIVER TO REHABILITATE
DOMESTIC ENTITY. (a) Subject to Subsection (b), a court that has
jurisdiction over the property and business of a domestic entity
under Section 11.402(b) may appoint a receiver for the entity's
property and business if:
(1) in an action by an owner or member of the domestic
entity, it is established that:
(A) the entity is insolvent or in imminent danger
of insolvency;
(B) the governing persons of the entity are
deadlocked in the management of the entity's affairs, the owners or
members of the entity are unable to break the deadlock, and
irreparable injury to the entity is being suffered or is threatened
because of the deadlock;
(C) the actions of the governing persons of the
entity are illegal, oppressive, or fraudulent;
(D) the property of the entity is being
misapplied or wasted; or
(E) with respect to a for-profit corporation, the
shareholders of the entity are deadlocked in voting power and have
failed, for a period of at least two years, to elect successors to
the governing persons of the entity whose terms have expired or
would have expired on the election and qualification of their
successors;
(2) in an action by a creditor of the domestic entity,
it is established that:
(A) the entity is insolvent, the claim of the
creditor has been reduced to judgment, and an execution on the
judgment was returned unsatisfied; or
(B) the entity is insolvent and has admitted in
writing that the claim of the creditor is due and owing; or
(3) in an action other than an action described by
Subdivision (1) or (2), courts of equity have traditionally
appointed a receiver.
(b) A court may appoint a receiver under Subsection (a) only
if:
(1) circumstances exist that are considered by the
court to necessitate the appointment of a receiver to conserve the
property and business of the domestic entity and avoid damage to
interested parties;
(2) all other requirements of law are complied with;
and
(3) the court determines that all other available
legal and equitable remedies, including the appointment of a
receiver for specific property of the domestic entity under Section
11.402, are inadequate.
(c) If the condition necessitating the appointment of a
receiver under this section is remedied, the receivership shall be
terminated immediately, the management of the domestic entity shall
be restored to its managerial officials, and the receiver shall
redeliver to the domestic entity all of its property remaining in
receivership. (TBCA 7.05; TLLCA 8.12.A; TNPCA 7.05.)
Sec. 11.405. APPOINTMENT OF RECEIVER TO LIQUIDATE DOMESTIC
ENTITY; LIQUIDATION. (a) Subject to Subsection (b), a court that
has jurisdiction over the property and business of a domestic
entity under Section 11.402(b) may order the liquidation of the
property and business of the domestic entity and may appoint a
receiver to effect the liquidation:
(1) when an action has been filed by the attorney
general under this chapter to terminate the existence of the entity
and it is established that liquidation of the entity's business and
affairs should precede the entry of a decree of termination;
(2) on application of the entity to have its
liquidation continued under the supervision of the court;
(3) if the entity is in receivership and the court does
not find that any plan presented before the first anniversary of the
date the receiver was appointed is feasible for remedying the
condition requiring appointment of the receiver;
(4) on application of a creditor of the entity if it is
established that irreparable damage will ensue to the unsecured
creditors of the domestic entity as a class, generally, unless
there is an immediate liquidation of the property of the domestic
entity; or
(5) on application of a member or director of a
nonprofit corporation or cooperative association and it appears the
entity is unable to carry out its purposes.
(b) A court may order a liquidation and appoint a receiver
under Subsection (a) only if:
(1) the circumstances demand liquidation to avoid
damage to interested persons;
(2) all other requirements of law are complied with;
and
(3) the court determines that all other available
legal and equitable remedies, including the appointment of a
receiver for specific property of the domestic entity and
appointment of a receiver to rehabilitate the domestic entity, are
inadequate.
(c) If the condition necessitating the appointment of a
receiver under this section is remedied, the receivership shall be
terminated immediately, the management of the domestic entity shall
be restored to its managerial officials, and the receiver shall
redeliver to the domestic entity all of its property remaining in
receivership. (TBCA 7.06; TLLCA 8.12.A; TNPCA 7.06.A, C.)
Sec. 11.406. RECEIVERS: QUALIFICATIONS, POWERS, AND
DUTIES. (a) A receiver appointed under this chapter:
(1) must be an individual citizen of the United States
or an entity authorized to act as receiver;
(2) shall give a bond in the amount required by the
court and with any sureties as may be required by the court;
(3) may sue and be sued in the receiver's name in any
court;
(4) has the powers and duties provided by other laws
applicable to receivers; and
(5) has the powers and duties that are stated in the
order appointing the receiver or that the appointing court:
(A) considers appropriate to accomplish the
objectives for which the receiver was appointed; and
(B) may increase or diminish at any time during
the proceedings.
(b) To be appointed a receiver under this chapter, a foreign
entity must be registered to transact business in this state. (TBCA
7.07.A (part), B; TLLCA 8.12.A; TNPCA 7.07.A (part), B.)
Sec. 11.407. COURT-ORDERED FILING OF CLAIMS. (a) In a
proceeding involving a receivership of the property or business of
a domestic entity, the court may require all claimants of the
domestic entity to file with the clerk of the court or the receiver,
in the form provided by the court, proof of their respective claims
under oath.
(b) A court that orders the filing of claims under
Subsection (a) shall:
(1) set a date, which may not be earlier than four
months after the date of the order, as the last day for the filing of
those claims; and
(2) prescribe the notice that shall be given to
claimants of the date set under Subdivision (1).
(c) Before the expiration of the period under Subsection (b)
for the filing of claims, a court may extend the period for the
filing of claims to a later date.
(d) A court may bar a claimant who fails to file a proof of
claim during the period authorized by the court from participating
in the distribution of the property of the domestic entity unless
the claimant presents to the court a justifiable excuse for its
delay in filing. A court may not order or effect a discharge of a
claim of the claimant described by this subsection. (TBCA 7.07.C;
TLLCA 8.12.A; TNPCA 7.07.C.)
Sec. 11.408. SUPERVISING COURT; JURISDICTION; AUTHORITY.
(a) A court supervising a receivership under this subchapter may,
from time to time:
(1) make allowances to a receiver or attorney in the
proceeding; and
(2) direct the payment of a receiver or attorney from
the property of the domestic entity that is within the scope of the
receivership or the proceeds of any sale or disposition of that
property.
(b) A court that appoints a receiver under this subchapter
for the property or business of a domestic entity has exclusive
jurisdiction over the domestic entity and all of its property,
regardless of where the property is located. (TBCA 7.07.D, E; TLLCA
8.12.A; TNPCA 7.07.D, E.)
Sec. 11.409. ANCILLARY RECEIVERSHIPS OF FOREIGN ENTITIES.
(a) Notwithstanding any provision of this code to the contrary, a
district court in the county in which the registered office of a
foreign entity doing business in this state is located has
jurisdiction to appoint an ancillary receiver for the property and
business of that entity when the court determines that
circumstances exist to require the appointment of an ancillary
receiver.
(b) A receiver appointed under Subsection (a) serves
ancillary to a receiver acting under orders of an out-of-state
court that has jurisdiction to appoint a receiver for the entity.
(TBCA 7.07.F (part); TLLCA 8.12.A; TNPCA 7.07.F (part).)
Sec. 11.410. RECEIVERSHIP FOR ALL PROPERTY AND BUSINESS OF
FOREIGN ENTITY. (a) A district court may appoint a receiver for all
of the property, in and outside this state, of a foreign entity
doing business in this state and its business if the court
determines, in accordance with the ordinary usages of equity, that
circumstances exist that necessitate the appointment of a receiver
even if a receiver has not been appointed by another court.
(b) The appointing court shall convert a receivership
created under Subsection (a) into an ancillary receivership if the
appointing court determines an ancillary receivership is
appropriate because a court in another state has ordered a
receivership of all property and business of the entity. (TBCA
7.07.F (part); TLLCA 8.12.A; TNPCA 7.07.F (part).)
Sec. 11.411. GOVERNING PERSONS AND OWNERS NOT NECESSARY
PARTIES DEFENDANT. Governing persons and owners or members of a
domestic entity are not necessary parties to an action for a
receivership or liquidation of the property and business of a
domestic entity unless relief is sought against those persons
individually. (TBCA 7.08; TLLCA 8.12.A; TNPCA 7.08.)
Sec. 11.412. DECREE OF INVOLUNTARY TERMINATION. In an
action to liquidate the property and business of a domestic entity,
the court shall enter a decree terminating the entity and the
existence of the entity shall cease:
(1) when the costs and expenses of the action and all
obligations and liabilities of the domestic entity have been paid
and discharged or adequately provided for and all of the entity's
remaining property has been distributed to its owners and members;
or
(2) if the entity's property is not sufficient to
discharge the costs and other expenses of the action and all
obligations and liabilities of the entity, when all the property of
the entity has been applied toward their payment. (TBCA 7.09; TLLCA
8.12.A; TNPCA 7.09.)
Sec. 11.413. SUPPLEMENTAL PROVISIONS FOR APPLICATION OF
PROCEEDS FROM LIQUIDATION OF NONPROFIT CORPORATION. (a) In
proceedings under Section 11.405, the property of a nonprofit
corporation or the proceeds resulting from a sale, conveyance, or
other disposition of its property shall be applied to:
(1) pay, satisfy, and discharge all costs and expenses
of the court proceedings and all liabilities and obligations of the
nonprofit corporation; or
(2) make adequate provision for the payment,
satisfaction, and discharge of the costs, expenses, liabilities, or
obligations described by Subdivision (1).
(b) Any property remaining after application is made under
this section must be applied and distributed in the manner provided
by Section 22.304. (TNPCA 7.06.B.)
CHAPTER 12. ADMINISTRATIVE POWERS
SUBCHAPTER A. SECRETARY OF STATE
Sec. 12.001. AUTHORITY OF SECRETARY OF STATE. (a) The
secretary of state may adopt procedural rules for the filing of
instruments, including the filing of instruments by electronic or
other means, authorized to be filed with the secretary of state
under this code.
(b) The secretary of state has the power and authority
reasonably necessary to enable the secretary to perform the duties
imposed on the secretary under this code. (TBCA 9.03; TLLCA 8.03;
TNPCA 9.04; TRPA 3.08(b)(15), 10.02(n); TMCLA 7.07.A (part).)
Sec. 12.002. INTERROGATORIES BY SECRETARY OF STATE. (a) As
necessary and proper for the secretary of state to determine
whether a filing entity or a foreign filing entity has complied with
this code, the secretary of state may serve by mail interrogatories
on the entity or a managerial official.
(b) An entity or individual to whom an interrogatory is sent
by the secretary of state shall answer the interrogatory before the
later of the 31st day after the date the interrogatory is mailed or
a date set by the secretary of state. Each answer to an
interrogatory must be complete, in writing, and under oath. An
interrogatory directed to an individual shall be answered by the
individual, and an interrogatory directed to an entity shall be
answered by a managerial official.
(c) The secretary of state is not required to file any
instrument to which an interrogatory relates until the
interrogatory is answered as provided by this section and only if
the instrument conforms to the requirements of this code. The
secretary of state shall certify to the attorney general for action
as the attorney general may consider appropriate an interrogatory
and answer to the interrogatory that disclose a violation of this
code.
(d) This section and Sections 12.003 and 12.004 do not apply
to domestic real estate investment trusts. (TBCA 9.01; TLLCA
8.01.)
Sec. 12.003. INFORMATION DISCLOSED BY INTERROGATORIES. An
interrogatory sent by the secretary of state and the answer to the
interrogatory are subject to Chapter 552, Government Code. (TBCA
9.02; TLLCA 8.02.)
Sec. 12.004. APPEALS FROM SECRETARY OF STATE. (a) If the
secretary of state does not approve the filing of a filing
instrument, the secretary of state shall, before the 11th day after
the date of the delivery of the filing instrument to the secretary
of state, notify the person delivering the filing instrument of the
disapproval and specifying each reason for the disapproval. The
disapproval of a filing instrument by the secretary of state may be
appealed only to a district court of Travis County by filing with
the court clerk a petition, a copy of the filing instrument sought
to be filed, and a copy of any written disapproval by the secretary
of state of the filing instrument. The court shall try the appeal
de novo and shall sustain the action of the secretary of state or
direct the secretary to take any action the court considers to be
proper.
(b) A final order or judgment entered by the district court
under this section in review of any ruling or decision of the
secretary of state may be appealed as in other civil actions. (TBCA
9.04.A; TLLCA 8.04; TNPCA 9.05.)
[Sections 12.005-12.150 reserved for expansion]
SUBCHAPTER B. ATTORNEY GENERAL
Sec. 12.151. AUTHORITY OF ATTORNEY GENERAL TO EXAMINE BOOKS
AND RECORDS. Each filing entity and foreign filing entity shall
permit the attorney general to inspect, examine, and make copies,
as the attorney general considers necessary in the performance of a
power or duty of the attorney general, of any record of the entity.
A record of the entity includes minutes and a book, account, letter,
memorandum, document, check, voucher, telegram, constitution, and
bylaw. (TMCLA 5.01.)
Sec. 12.152. REQUEST TO EXAMINE. To examine the business of
a filing entity or foreign filing entity, the attorney general
shall make a written request to a managerial official, who shall
immediately permit the attorney general to inspect, examine, and
make copies of the records of the entity. (TMCLA 5.02, 5.03.)
Sec. 12.153. AUTHORITY TO EXAMINE MANAGEMENT OF ENTITY. The
attorney general may investigate the organization, conduct, and
management of a filing entity or foreign filing entity and
determine if the entity has been or is engaged in acts or conduct in
violation of:
(1) its governing documents; or
(2) any law of this state. (TMCLA 5.03.)
Sec. 12.154. AUTHORITY TO DISCLOSE INFORMATION.
Information held by the attorney general and derived in the course
of an examination of an entity's records or documents is not public
information, is not subject to Chapter 552, Government Code, and
may not be disclosed except:
(1) in the course of an administrative or judicial
proceeding in which the state is a party;
(2) in a suit by the state to:
(A) revoke the registration of the foreign filing
entity or terminate the certificate of formation of the filing
entity; or
(B) collect penalties for a violation of the law
of this state; or
(3) to provide information to any officer of this
state charged with the enforcement of its laws. (TMCLA 5.04.)
Sec. 12.155. FORFEITURE OF BUSINESS PRIVILEGES. A foreign
filing entity or a filing entity that fails or refuses to permit the
attorney general to examine or make copies of a record, without
regard to whether the record is located in this or another state,
forfeits the right of the entity to do business in this state, and
the entity's registration or certificate of formation shall be
revoked or terminated. (TMCLA 5.05.A.)
Sec. 12.156. CRIMINAL PENALTY. (a) A managerial official
or other individual having the authority to manage the affairs of a
filing entity or foreign filing entity commits an offense if the
official or individual fails or refuses to permit the attorney
general to make an investigation of the entity or to examine or to
make copies of a record of the entity.
(b) An offense under this section is a Class B misdemeanor.
(TMCLA 5.05.B.)
[Sections 12.157-12.200 reserved for expansion]
SUBCHAPTER C. ENFORCEMENT LIEN
Sec. 12.201. LIEN FOR LAW VIOLATIONS. (a) If a filing
entity or foreign filing entity violates a law of this state,
including the law against trusts, monopolies, and conspiracies, or
combinations or contracts in restraint of trade, for the violation
of which a fine, penalties, or forfeiture is provided, all of the
entity's property in this state at the time of the violation or that
after the violation comes into this state is, because of the
violation, liable for any fine or penalty under this chapter and for
costs of suit and costs of collection.
(b) The state has a lien on all property of a filing entity
or foreign filing entity in this state on the date a suit is
instituted by or under the direction of the attorney general in a
court of this state for the purpose of forfeiting the certificate of
formation or revoking the registration of the entity or for the
collection of a fine or penalty due to the state.
(c) The filing of a suit for a fine, penalties, or
forfeiture is notice of the lien.
(d) In addition to the property subjected to the lien under
Subsection (b), the lien applies to any property that comes into the
possession of a receiver appointed under Subchapter D. (TMCLA 5.07,
5.08, 5.11 (part).)
[Sections 12.202-12.250 reserved for expansion]
SUBCHAPTER D. ENFORCEMENT PROCEEDINGS
Sec. 12.251. RECEIVER. In a suit filed by this state against
a filing entity or foreign filing entity for the termination of the
entity's certificate of formation or registration or for a fine or
penalty, the court in this state in which the suit is pending:
(1) shall appoint a receiver for the property and
business of the entity in this state or that subsequently comes into
this state during the receivership if the filing entity or foreign
filing entity commences the process of winding up its business in
this or another state or a judgment is rendered against it in this
or another state for the termination of the entity's certificate of
formation or registration; and
(2) may appoint a receiver for the entity if the
interest of the state requires the appointment. (TMCLA 5.10.)
Sec. 12.252. FORECLOSURE. (a) The attorney general may
bring suit to foreclose a lien created by this chapter.
(b) If a filing entity or a foreign filing entity subject to
this code has commenced the winding up process or has had the
entity's certificate of formation or registration terminated by a
judgment, citation in a suit for foreclosure may be served on any
person in this state who acted and was acting as agent of the entity
in this state when the entity commenced the winding up process or
the entity's certificate of formation or registration was
terminated. (TMCLA 5.12.)
Sec. 12.253. ACTION AGAINST INSOLVENT ENTITY. When the
attorney general is convinced that a filing entity or foreign
filing entity is insolvent, the attorney general shall institute
quo warranto or other appropriate proceedings to terminate the
certificate of formation or registration of the filing entity or
foreign filing entity that is insolvent. (TMCLA 5.14.)
Sec. 12.254. SUITS BY DISTRICT OR COUNTY ATTORNEY. A
district or county attorney shall bring and prosecute a proceeding
under Section 12.252 or 12.253 when directed to do so by the
attorney general. (TMCLA 5.12 (part), 5.15.)
Sec. 12.255. PERMISSION TO SUE. Before a petition may be
filed by the attorney general or by a district or county attorney in
a suit authorized by Section 12.252 or 12.253, leave must be granted
by the judge of the court in which the proceeding is to be filed.
(TMCLA 5.17.)
Sec. 12.256. EXAMINATION AND NOTICE. (a) The judge of a
court in which a proceeding under Section 12.252 or 12.253 is to be
filed shall carefully examine the petition before granting leave to
sue. The judge may also require an examination into the facts. If
it appears with reasonable certainty from the petition or from the
petition and facts that there is a prima facie showing for the
relief sought, the judge may grant leave to file.
(b) On an application for the appointment of a receiver, the
entity proceeded against is entitled to 10 days' notice before the
day set for the hearing. (TMCLA 5.18.)
Sec. 12.257. DISMISSAL OF ACTION. (a) A suit authorized by
Section 12.253 or 12.258 may not be filed or, if filed, shall be
dismissed if the entity, through its owners or members, reduces its
indebtedness so that it is not insolvent.
(b) The respondent shall pay the costs of a dismissed suit
under this section. (TMCLA 5.16.)
Sec. 12.258. LIQUIDATION OF INSOLVENT ENTITY. (a) A court
hearing a proceeding under Section 12.253 against an insolvent
entity may, after the entity has been shown to be insolvent, appoint
one or more receivers for the entity and its property. The receiver
may settle the affairs of the entity, collect outstanding debts,
and divide the money and property belonging to the entity among its
owners after paying the debts of the entity and all expenses
incidental to the judicial proceedings and receivership.
(b) The court may continue the existence of the entity for
three years and for additional reasonable time as necessary to
accomplish the purposes of this subchapter. (TMCLA 5.15.)
Sec. 12.259. EXTRAORDINARY REMEDIES; BOND. The state has a
right to a writ of attachment, garnishment, sequestration, or
injunction, without bond, to aid in the enforcement of the state's
rights created by this chapter. (TMCLA 5.11 (part).)
Sec. 12.260. ABATEMENT OF SUIT. An action or cause of action
for a fine, penalty, or forfeiture that this state has or may have
against a filing entity or foreign filing entity does not abate
because the entity dissolves, voluntarily or otherwise, or the
entity's certificate of formation is terminated or the entity's
registration is revoked. (TMCLA 5.09.)
Sec. 12.261. PROVISIONS CUMULATIVE. Each right or remedy
provided by this chapter is cumulative and does not affect any other
right or remedy for the enforcement, payment, or collection of a
fine, forfeiture, or penalty or any other means provided by law for
securing or preserving testimony or inquiring into the rights or
privileges of an entity. (TMCLA 5.06, 5.13, 5.19.)
TITLE 2. CORPORATIONS
CHAPTER 20. GENERAL PROVISIONS
Sec. 20.001. REQUIREMENT THAT FILING INSTRUMENT BE SIGNED
BY OFFICER. Unless otherwise provided by this title, a filing
instrument of a corporation must be signed by an officer of the
corporation. (TBCA 2.10.B (part), 2.12.C(3) (part), 2.13.E (part),
2.22.E(2) (part), 4.10.B (part), 4.11.B (part), 4.12.B (part);
TNPCA 4.03 (part), 4.06.D (part), 6.05 (part).)
Sec. 20.002. ULTRA VIRES ACTS. (a) Lack of capacity of a
corporation may not be the basis of any claim or defense at law or in
equity.
(b) An act of a corporation or a transfer of property by or
to a corporation is not invalid because the act or transfer was:
(1) beyond the scope of the purpose or purposes of the
corporation as expressed in the corporation's certificate of
formation; or
(2) inconsistent with a limitation on the authority of
an officer or director to exercise a statutory power of the
corporation, as that limitation is expressed in the corporation's
certificate of formation.
(c) The fact that an act or transfer is beyond the scope of
the expressed purpose or purposes of the corporation or is
inconsistent with an expressed limitation on the authority of an
officer or director may be asserted in a proceeding:
(1) by a shareholder or member against the corporation
to enjoin the performance of an act or the transfer of property by
or to the corporation;
(2) by the corporation, acting directly or through a
receiver, trustee, or other legal representative, or through
members in a representative suit, against an officer or director or
former officer or director of the corporation for exceeding that
person's authority; or
(3) by the attorney general to:
(A) terminate the corporation;
(B) enjoin the corporation from performing an
unauthorized act; or
(C) enforce divestment of real property acquired
or held contrary to the laws of this state.
(d) If the unauthorized act or transfer sought to be
enjoined under Subsection (c)(1) is being or is to be performed or
made under a contract to which the corporation is a party and if
each party to the contract is a party to the proceeding, the court
may set aside and enjoin the performance of the contract. The court
may award to the corporation or to another party to the contract, as
appropriate, compensation for loss or damage resulting from the
action of the court in setting aside and enjoining the performance
of the contract, excluding loss of anticipated profits. (TBCA
2.04; TNPCA 2.03.)
CHAPTER 21. FOR-PROFIT CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 21.001. APPLICABILITY OF CHAPTER. This chapter applies
only to a:
(1) domestic for-profit corporation formed under this
code; and
(2) foreign for-profit corporation that is
transacting business in this state, regardless of whether the
foreign corporation is registered to transact business in this
state. (New.)
Sec. 21.002. DEFINITIONS. In this chapter:
(1) "Authorized share" means a share of any class the
corporation is authorized to issue.
(2) "Board of directors" includes each person who is
authorized to perform the functions of the board of directors under
a shareholders' agreement as authorized by this chapter.
(3) "Cancel," with respect to an authorized share of a
corporation, means the restoration of an issued share to the status
of an authorized but unissued share.
(4) "Consuming assets corporation" means a
corporation that:
(A) is engaged in the business of exploiting
assets subject to depletion or amortization;
(B) states in its certificate of formation that
it is a consuming assets corporation;
(C) includes the phrase "a consuming assets
corporation" as part of its official corporate name and gives the
phrase equal prominence with the rest of the corporate name on the
financial statements and certificates of ownership of the
corporation; and
(D) includes in each of the certificates of
ownership of the corporation the sentence, "This corporation is
permitted by law to pay dividends out of reserves that may impair
its stated capital."
(5) "Corporation" or "domestic corporation" means a
domestic for-profit corporation subject to this chapter.
(6)(A) "Distribution" means a transfer of property,
including cash, or issuance of debt, by a corporation to its
shareholders in the form of:
(i) a dividend on any class or series of its
outstanding shares;
(ii) a purchase or redemption, directly or
indirectly, of any of its own shares; or
(iii) a payment by the corporation in
liquidation of all or a portion of its assets.
(B) The term does not include:
(i) a split-up or division of the issued
shares of a class of a corporation into a larger number of shares
within the same class that does not increase the stated capital of
the corporation; or
(ii) a transfer of the corporation's own
shares or rights to acquire its own shares.
(7) "Foreign corporation" means a for-profit
corporation formed under the laws of a jurisdiction other than this
state.
(8) "Investment Company Act" means the Investment
Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as amended.
(9) "Net assets" means the amount by which the total
assets of a corporation exceed the total debts of the corporation.
(10) "Share dividend" means a dividend by a
corporation that is payable in authorized but unissued shares or
treasury shares of the corporation. The term does not include:
(A) an amendment to the corporation's
certificate of formation to change the shares of a class or series,
with or without par value, into the same or a different number of
shares of the same or a different class or series, with or without
par value; or
(B) a split-up or division of the issued shares
of a class of a corporation into a larger number of shares within
the same class that does not increase the stated capital of the
corporation.
(11) "Stated capital" means the sum of:
(A) the par value of all shares of the
corporation with par value that have been issued;
(B) the consideration, as expressed in terms of
United States dollars, determined by the corporation in the manner
provided by Section 21.160 for all shares of the corporation
without par value that have been issued, except that part, but not
all, of the consideration that:
(i) has been actually received; and
(ii) the board, by resolution adopted not
later than the 60th day after the date of issuance of those shares,
has allocated to surplus; and
(C) an amount not included in Paragraphs (A) and
(B) that has been transferred to stated capital of the corporation,
on the payment of a share dividend or on adoption by the board of
directors of a resolution directing that all or part of surplus be
transferred to stated capital, minus each reduction made as
permitted by law.
(12) "Surplus" means the amount by which the net
assets of a corporation exceed the stated capital of the
corporation.
(13) "Treasury shares" means shares of a corporation
that have been issued, and subsequently acquired by the
corporation, that belong to the corporation and that have not been
canceled. The term does not include shares held by a corporation in
a fiduciary capacity, whether directly or through a trust or
similar arrangement. (TBCA 1.02.A(3), (4), (7), (11), (13), (14),
(17), (19), (21), (24), (27), (28) (part), 2.38-2.)
[Sections 21.003-21.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 21.051. NO PROPERTY RIGHT IN CERTIFICATE OF FORMATION.
A shareholder of a corporation does not have a vested property right
resulting from the certificate of formation, including a provision
in the certificate of formation relating to the management,
control, capital structure, dividend entitlement, purpose, or
duration of the corporation. (TBCA 4.01.B.)
Sec. 21.052. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
OF FORMATION. (a) To adopt an amendment to the certificate of
formation of a corporation as provided by Subchapter B, Chapter 3,
the board of directors of the corporation shall:
(1) adopt a resolution stating the proposed amendment;
and
(2) follow the procedures prescribed by Sections
21.053-21.055.
(b) The resolution may incorporate the proposed amendment
in a restated certificate of formation that complies with Section
3.059.
(c) The certificate of amendment must be filed in accordance
with Chapter 4 and takes effect as provided by Subchapter B, Chapter
3. (TBCA 4.02.A (part).)
Sec. 21.053. ADOPTION OF AMENDMENT BY BOARD OF DIRECTORS.
If a corporation does not have any issued and outstanding shares,
the board of directors may adopt a proposed amendment to the
corporation's certificate of formation by resolution without
shareholder approval. (TBCA 4.02.A(1) (part).)
Sec. 21.054. ADOPTION OF AMENDMENT BY SHAREHOLDERS. If a
corporation has issued and outstanding shares:
(1) a resolution described by Section 21.052 must also
direct that the proposed amendment be submitted to a vote of the
shareholders at a meeting; and
(2) the shareholders must approve the proposed
amendment in the manner provided by Section 21.055. (TBCA 4.02.A
(part).)
Sec. 21.055. NOTICE OF AND MEETING TO CONSIDER PROPOSED
AMENDMENT. (a) Each shareholder of record entitled to vote shall be
given written notice containing the proposed amendment or a summary
of the changes to be effected within the time and in the manner
provided by this code for giving notice of meetings to
shareholders. The proposed amendment or summary may be included in
the notice required to be provided for an annual meeting.
(b) At the meeting, the proposed amendment shall be adopted
only on receiving the affirmative vote of shareholders entitled to
vote required by Section 21.364.
(c) An unlimited number of amendments may be submitted for
adoption by the shareholders at a meeting. (TBCA 4.02.A (part), B.)
Sec. 21.056. RESTATED CERTIFICATE OF FORMATION. (a) A
corporation may adopt a restated certificate of formation as
provided by Subchapter B, Chapter 3, by following the same
procedures to amend its certificate of formation under Sections
21.052-21.055, except that shareholder approval is not required if
an amendment is not adopted.
(b) The restated certificate of formation shall be filed in
accordance with Chapter 4 and takes effect as provided by
Subchapter B, Chapter 3. (TBCA 4.07.A (part), D (part).)
Sec. 21.057. BYLAWS. (a) The board of directors of a
corporation shall adopt initial bylaws.
(b) The bylaws may contain provisions for the regulation and
management of the affairs of the corporation that are consistent
with law and the corporation's certificate of formation.
(c) A corporation's board of directors may amend or repeal
bylaws or adopt new bylaws unless:
(1) the corporation's certificate of formation or this
code wholly or partly reserves the power exclusively to the
corporation's shareholders; or
(2) in amending, repealing, or adopting a bylaw, the
shareholders expressly provide that the board of directors may not
amend, repeal, or readopt that bylaw. (TBCA 2.23.A, B.)
Sec. 21.058. DUAL AUTHORITY. Unless the certificate of
formation or a bylaw adopted by the shareholders provides otherwise
as to all or a part of a corporation's bylaws, a corporation's
shareholders may amend, repeal, or adopt the corporation's bylaws
regardless of whether the bylaws may also be amended, repealed, or
adopted by the corporation's board of directors. (TBCA 2.23.C.)
Sec. 21.059. ORGANIZATION MEETING. (a) This section does
not apply to a corporation created as a result of a conversion or
merger the plan of which states the bylaws and names the officers of
the corporation.
(b) After the filing of a certificate of formation takes
effect, an organization meeting shall be held at the call of the
majority of the initial board of directors or the persons named in
the certificate of formation under Section 3.007(a)(4) for the
purpose of adopting bylaws, electing officers, and transacting
other business.
(c) Not later than the third day before the date of the
meeting, the directors or other persons calling the meeting shall
send notice of the time and place of the meeting to each other
director or person named in the certificate of formation. (TBCA
3.06.)
[Sections 21.060-21.100 reserved for expansion]
SUBCHAPTER C. SHAREHOLDERS' AGREEMENTS
Sec. 21.101. SHAREHOLDERS' AGREEMENT. (a) The shareholders
of a corporation may enter into an agreement that:
(1) restricts the discretion or powers of the board of
directors;
(2) eliminates the board of directors and authorizes
the business and affairs of the corporation to be managed, wholly or
partly, by one or more of its shareholders or other persons;
(3) establishes the individuals who shall serve as
directors or officers of the corporation;
(4) determines the term of office, manner of selection
or removal, or terms or conditions of employment of a director,
officer, or other employee of the corporation, regardless of the
length of employment;
(5) governs the authorization or making of
distributions whether in proportion to ownership of shares, subject
to Section 21.303;
(6) determines the manner in which profits and losses
will be apportioned;
(7) governs, in general or with regard to specific
matters, the exercise or division of voting power by and between the
shareholders, directors, or other persons, including use of
disproportionate voting rights or director proxies;
(8) establishes the terms of an agreement for the
transfer or use of property or for the provision of services between
the corporation and another person, including a shareholder,
director, officer, or employee of the corporation;
(9) authorizes arbitration or grants authority to a
shareholder or other person to resolve any issue about which there
is a deadlock among the directors, shareholders, or other persons
authorized to manage the corporation;
(10) requires winding up and termination of the
corporation at the request of one or more shareholders or on the
occurrence of a specified event or contingency, in which case the
winding up and termination of the corporation will proceed as if all
of the shareholders had consented in writing to the winding up and
termination as provided by Subchapter K; or
(11) otherwise governs the exercise of corporate
powers, the management of the business and affairs of the
corporation, or the relationship among the shareholders, the
directors, and the corporation as if the corporation were a
partnership or in a manner that would otherwise be appropriate only
among partners and not contrary to public policy.
(b) A shareholders' agreement authorized by this section
must be:
(1) contained in:
(A) the certificate of formation or bylaws if
approved by all of the shareholders at the time of the agreement; or
(B) a written agreement that is:
(i) signed by all of the shareholders at the
time of the agreement; and
(ii) made known to the corporation; and
(2) amended only by all of the shareholders at the time
of the amendment, unless the agreement provides otherwise. (TBCA
2.30-1.A, B (part).)
Sec. 21.102. TERM OF AGREEMENT. A shareholders' agreement
under this subchapter is valid for 10 years, unless the agreement
provides otherwise. (TBCA 2.30-1.B (part).)
Sec. 21.103. DISCLOSURE OF AGREEMENT; RECALL OF CERTAIN
CERTIFICATES. (a) The existence of an agreement authorized by this
subchapter shall be noted conspicuously on the front or back of each
certificate for outstanding shares or on the information statement
required for uncertificated shares by Section 3.205.
(b) The disclosure required by this section must include the
sentence, "These shares are subject to the provisions of a
shareholders' agreement that may provide for management of the
corporation in a manner different than in other corporations and
may subject a shareholder to certain obligations or liabilities not
otherwise imposed on shareholders in other corporations."
(c) A corporation that has outstanding shares represented
by certificates at the time the shareholders of the corporation
enter into an agreement under this subchapter shall recall the
outstanding certificates and issue substitute certificates that
comply with this subchapter.
(d) The failure to note the existence of the agreement on
the certificate or information statement does not affect the
validity of the agreement or an action taken pursuant to the
agreement. (TBCA 2.30-1.C.)
Sec. 21.104. EFFECT OF SHAREHOLDERS' AGREEMENT. A
shareholders' agreement that complies with this subchapter is
effective among the shareholders and between the shareholders and
the corporation even if the terms of the agreement are inconsistent
with this code. (TBCA 2.30-1.A (part).)
Sec. 21.105. RIGHT OF RESCISSION; KNOWLEDGE OF PURCHASER OF
SHARES. (a) A purchaser of shares who does not have knowledge at
the time of purchase of the existence of a shareholders' agreement
authorized by this subchapter is entitled to rescind the purchase.
(b) A purchaser is considered to have knowledge of the
existence of the shareholders' agreement for purposes of this
section if:
(1) the existence of the agreement is noted on the
certificate or information statement for the shares as required by
Section 21.103; and
(2) with respect to shares that are not represented by
a certificate, the information statement noting existence of the
agreement is delivered to the purchaser not later than the time the
shares are purchased.
(c) An action to enforce the right of rescission authorized
by this section must be commenced not later than the earlier of:
(1) the 90th day after the date the existence of the
shareholder agreement is discovered; or
(2) the second anniversary of the purchase date of the
shares. (TBCA 2.30-1.D.)
Sec. 21.106. AGREEMENT LIMITING AUTHORITY OF AND
SUPPLANTING BOARD OF DIRECTORS; LIABILITY. (a) A shareholders'
agreement authorized by this subchapter that limits the discretion
or powers of the board of directors or supplants the board of
directors relieves the directors of, and imposes on a person in whom
the discretion or powers of the board of directors or the management
of the business and affairs of the corporation is vested, liability
for an act or omission of the person in accordance with Subsection
(b).
(b) A person on whom liability for an act or omission is
imposed under this section is liable in the same manner and to the
same extent as a director on whom liability for an act or omission
is imposed by this code or other law. (TBCA 2.30-1.F.)
Sec. 21.107. LIABILITY OF SHAREHOLDER. The existence of or
a performance under a shareholders' agreement authorized by this
subchapter is not a ground for imposing personal liability on a
shareholder for an act or obligation of the corporation by
disregarding the separate existence of the corporation or
otherwise, even if the agreement or a performance under the
agreement:
(1) treats the corporation as if the corporation were
a partnership or in a manner that otherwise is appropriate only
among partners;
(2) results in the corporation being considered a
partnership for purposes of taxation; or
(3) results in failure to observe the corporate
formalities otherwise applicable to the matters governed by the
agreement. (TBCA 2.30-1.G.)
Sec. 21.108. PERSONS ACTING IN PLACE OF SHAREHOLDERS. An
organizer or a subscriber for shares may act as a shareholder with
respect to a shareholders' agreement authorized by this subchapter
if no shares have been issued when the agreement is signed. (TBCA
2.30-1.H.)
Sec. 21.109. AGREEMENT NOT EFFECTIVE. (a) A shareholders'
agreement authorized by this subchapter ceases to be effective when
shares of the corporation are:
(1) listed on a national securities exchange or
similar system;
(2) quoted on an interdealer quotation system of a
national securities association or successor system; or
(3) regularly traded in a market maintained by one or
more members of a national or affiliated securities association.
(b) If a corporation does not have a board of directors and
an agreement of the shareholders of the corporation entered into
under this subchapter ceases to be effective, a board of directors
shall be instituted or reinstated to govern the corporation in the
manner provided by Section 21.710(c).
(c) If a shareholders' agreement that ceases to be effective
is contained in or referred to by the certificate of formation or
bylaws of a corporation, the board of directors of the corporation
may adopt an amendment to the certificate of formation or bylaws,
without shareholder action, to delete the agreement and any
references to the agreement. (TBCA 2.30-1.E.)
[Sections 21.110-21.150 reserved for expansion]
SUBCHAPTER D. SHARES, OPTIONS, AND CONVERTIBLE SECURITIES
Sec. 21.151. NUMBER OF AUTHORIZED SHARES. A corporation may
issue the number of authorized shares stated in the corporation's
certificate of formation. (TBCA 2.12.A (part).)
Sec. 21.152. CLASSES AND SERIES OF SHARES. (a) A
corporation's certificate of formation may divide the corporation's
authorized shares into one or more classes and may divide one or
more classes into one or more series. The certificate of formation
must designate each class and series of authorized shares to
distinguish that class and series from any other class or series.
(b) Shares of the same class must be of the same par value or
be without par value, as stated in the certificate of formation.
(c) Shares of the same class must be identical in all
respects unless the shares have been divided into one or more
series. If the shares of a class have been divided into one or more
series, the shares may vary between series, but all shares of the
same series will be identical in all respects. (TBCA 2.12.A
(part).)
Sec. 21.153. DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
RIGHTS OF A CLASS OR SERIES. (a) Each class or series of authorized
shares of a corporation must have the designations, preferences,
limitations, and relative rights, including voting rights, stated
in the corporation's certificate of formation.
(b) The certificate of formation may limit or deny the
voting rights of, or provide special voting rights for, the shares
of a class or series or the shares of a class or series held by a
person or class of persons to the extent the limitation, denial, or
provision is not inconsistent with this code.
(c) A designation, preference, limitation, or relative
right, including a voting right, of a class or series of shares of a
corporation may be made dependent on facts not contained in the
certificate of formation, including future acts of the corporation,
if the manner in which those facts will operate on the designation,
preference, limitation, or right is clearly and expressly stated
in the certificate of formation. (TBCA 2.12.A (part).)
Sec. 21.154. CERTAIN OPTIONAL CHARACTERISTICS OF SHARES.
(a) Subject to Section 21.153, if authorized by the corporation's
certificate of formation, a corporation may issue shares that:
(1) are redeemable, at the option of the corporation,
shareholder, or other person or on the occurrence of a designated
event, subject to Sections 21.303 and 21.304;
(2) entitle the holders of the shares to cumulative,
noncumulative, or partially cumulative distributions;
(3) have preferences over any or all other classes or
series of shares with respect to payment of distributions;
(4) have preferences over any or all other classes or
series of shares with respect to the assets of the corporation on
the voluntary or involuntary winding up and termination of the
corporation;
(5) are exchangeable, at the option of the
corporation, shareholder, or other person or on the occurrence of a
designated event, for shares, obligations, indebtedness, evidence
of ownership, rights to purchase securities of the corporation or
one or more other entities, or other property or for a combination
of those rights, assets, or obligations, subject to Section 21.303;
and
(6) are convertible into shares of any other class or
series, at the option of the corporation, shareholder, or other
person or on the occurrence of a designated event.
(b) Shares without par value may not be converted into
shares with par value unless:
(1) at the time of conversion, the part of the
corporation's stated capital represented by the shares without par
value is at least equal to the aggregate par value of the shares to
be converted; or
(2) the amount of any deficiency computed under
Subdivision (1) is transferred from surplus to stated capital.
(TBCA 2.12.B.)
Sec. 21.155. SERIES OF SHARES ESTABLISHED BY BOARD OF
DIRECTORS. (a) If expressly authorized by the corporation's
certificate of formation and subject to the certificate of
formation, the board of directors of a corporation may establish
series of unissued shares of any class by setting and determining
the designations, preferences, limitations, and relative rights,
including voting rights, of the shares of the series to be
established to the same extent that the designations, preferences,
limitations, or relative rights could be stated if fully specified
in the certificate of formation.
(b) To establish a series if authorized by the certificate
of formation, the board of directors must adopt a resolution
specifying the designations, preferences, limitations, and
relative rights, including voting rights, of the series to be
established or specifying any designation, preference, limitation,
or relative right that is not set and determined by the certificate
of formation.
(c) If the certificate of formation does not expressly
restrict the board of directors from increasing or decreasing the
number of unissued shares of a series to be established under
Subsection (a), the board of directors may increase or decrease the
number of shares in each series to be established, except that the
board of directors may not decrease the number of shares in a
particular series to a number that is less than the number of shares
in that series that are issued at the time of the decrease.
(d) To increase or decrease the number of shares of a series
under Subsection (c), the board of directors must adopt a
resolution setting and determining the new number of shares of each
series in which the number of shares is increased or decreased. If
the number of shares of a series is decreased, the shares by which
the series is decreased will resume the status of authorized but
unissued shares of the class of shares from which the series was
established, unless otherwise provided by the certificate of
formation or the terms of the class or series.
(e) If no shares of a series established by board resolution
under Subsection (b) are outstanding because no shares of that
series have been issued or no issued shares of that series remain
outstanding, the board of directors by resolution may delete the
series from the certificate of formation and delete any reference
to the series contained in the certificate of formation. Unless
otherwise provided by the certificate of formation, the shares of
any series deleted from the certificate of formation under this
section shall resume the status of authorized but unissued shares
of the class of shares from which the series was established.
(f) If no shares of a series established by resolution of
the board of directors under Subsection (b) are outstanding because
no shares of that series have been issued, the board of directors
may amend the designations, preferences, limitations, and relative
rights, including voting rights, of the series or amend any
designation, preference, limitation, or relative right that is not
set and determined by the certificate of formation. (TBCA 2.13.A,
B, C; New.)
Sec. 21.156. ACTIONS WITH RESPECT TO SERIES OF SHARES. (a)
To effect an action authorized under Section 21.155, the
corporation must file with the secretary of state a statement that
contains:
(1) the name of the corporation;
(2) if the statement relates to the establishment of a
series of shares, a copy of the resolution establishing and
designating the series and setting and determining the
designations, preferences, limitations, and relative rights of the
series;
(3) if the statement relates to an increase or
decrease in the number of shares of a series, a copy of the
resolution setting and determining the new number of shares of each
series in which the number of shares is increased or decreased;
(4) if the statement relates to the deletion of a
series of shares and all references to the series from the
certificate of formation, a copy of the resolution deleting the
series and all references to the series from the certificate of
formation;
(5) if the statement relates to the amendment of
designations, preferences, limitations, or relative rights of
shares of a series that was previously established by resolution of
the board of directors, a copy of the resolution in which the
amendment is specified;
(6) the date of the adoption of the resolution; and
(7) a statement that the resolution was adopted by all
necessary action on the part of the corporation.
(b) On the filing of a statement described by Subsection
(a), the following resolutions will become an amendment of the
certificate of formation, as appropriate:
(1) the resolution establishing and designating the
series and setting and determining the designations, preferences,
limitations, and relative rights of the series;
(2) the resolution setting the new number of shares of
each series in which the number of shares is increased or decreased;
(3) the resolution deleting a series and all
references to the series from the certificate of formation; or
(4) the resolution amending the designations,
preferences, limitations, and relative rights of a series.
(c) An amendment of the certificate of formation under this
section is not subject to the procedure to amend the certificate of
formation contained in Subchapter B. (TBCA 2.13.D, F; New.)
Sec. 21.157. ISSUANCE OF SHARES. (a) Except as provided by
Section 21.158, a corporation may issue shares for consideration if
authorized by the board of directors of the corporation.
(b) Shares may not be issued until the consideration,
determined in accordance with this subchapter, has been paid or
delivered as required in connection with the authorization of the
shares. When the consideration is paid or delivered:
(1) the shares are considered to be issued;
(2) the subscriber or other person entitled to receive
the shares is a shareholder with respect to the shares; and
(3) the shares are considered fully paid and
nonassessable. (TBCA 2.16.A (part).)
Sec. 21.158. ISSUANCE OF SHARES UNDER PLAN OF MERGER OR
CONVERSION. (a) A converted corporation under a plan of conversion
or a corporation created by a plan of merger may issue shares for
consideration if authorized by the plan of conversion or plan of
merger, as appropriate.
(b) A corporation may issue shares in the manner provided by
and for consideration specified under a plan of merger or plan of
conversion. (TBCA 2.16.A (part).)
Sec. 21.159. TYPES OF CONSIDERATION FOR SHARES. Shares with
or without par value may be issued for the following types of
consideration:
(1) a tangible or intangible benefit to the
corporation;
(2) cash;
(3) a promissory note;
(4) services performed or a contract for services to
be performed;
(5) a security of the corporation or any other
organization; and
(6) any other property of any kind or nature. (TBCA
2.16.A (part).)
Sec. 21.160. DETERMINATION OF CONSIDERATION FOR SHARES. (a)
Subject to Subsection (b), consideration to be received for shares
must be determined:
(1) by the board of directors;
(2) by a plan of conversion, if the shares are to be
issued by a converted corporation under the plan; or
(3) by a plan of merger, if the shares are to be issued
under the plan by a corporation created under the plan.
(b) If the corporation's certificate of formation reserves
to the shareholders the right to determine the consideration to be
received for shares without par value, the shareholders shall
determine the consideration for those shares before the shares are
issued. The board of directors may not determine the consideration
for shares under this subsection.
(c) A corporation may dispose of treasury shares for
consideration that may be determined by the board of directors.
(TBCA 2.15.A (part), B (part), C.)
Sec. 21.161. AMOUNT OF CONSIDERATION FOR ISSUANCE OF
CERTAIN SHARES. (a) Consideration to be received by a corporation
for the issuance of shares with par value may not be less than the
par value of the shares.
(b) The part of the surplus of a corporation that is
transferred to stated capital on the issuance of shares as a share
distribution is considered to be the consideration for the issuance
of those shares.
(c) The consideration received by a corporation for the
issuance of shares on the conversion or exchange of its
indebtedness or shares is:
(1) the principal of, and accrued interest on, the
indebtedness exchanged or converted, or the stated capital on the
issuance of the shares;
(2) the part of surplus, if any, transferred to stated
capital on the issuance of the shares; and
(3) any additional consideration paid to the
corporation on the issuance of the shares.
(d) The consideration received by a corporation for the
issuance of shares on the exercise of rights or options is:
(1) any consideration received by the corporation for
the rights or options; and
(2) any consideration received by the corporation for
the issuance of shares on the exercise of the rights or options.
(TBCA 2.15.A (part), D, E, F.)
Sec. 21.162. VALUE AND SUFFICIENCY OF CONSIDERATION. In the
absence of fraud in the transaction, the judgment of the board of
directors, the shareholders, or the party approving the plan of
conversion or the plan of merger, as appropriate, is conclusive in
determining the value and sufficiency of the consideration received
for the shares. (TBCA 2.16.B.)
Sec. 21.163. ISSUANCE AND DISPOSITION OF FRACTIONAL SHARES
OR SCRIP. (a) A corporation may:
(1) issue fractions of a share, either certificated or
uncertificated;
(2) arrange for the disposition of fractional
interests by persons entitled to the interests;
(3) pay cash for the fair value of fractions of a share
determined when the shareholders entitled to receive the fractions
are determined; or
(4) subject to Subsection (b), issue scrip in
registered or bearer form that entitles the holder to receive a
certificate for a full share or an uncertificated full share on the
surrender of the scrip aggregating a full share.
(b) The board of directors may issue scrip:
(1) on the condition that the scrip will become void if
not exchanged for certificated or uncertificated full shares before
a specified date;
(2) on the condition that the shares for which the
scrip is exchangeable may be sold by the corporation and the
proceeds from the sale of the shares may be distributed to the
holders of scrip; or
(3) subject to any other condition the board of
directors may determine advisable. (TBCA 2.20 (part).)
Sec. 21.164. RIGHTS OF HOLDERS OF FRACTIONAL SHARES OR
SCRIP. (a) A holder of a certificated or uncertificated fractional
share is entitled to exercise voting rights, receive distributions,
and make a claim with respect to the assets of the corporation in
the event of winding up and termination.
(b) A holder of a certificate for scrip is not entitled to
exercise voting rights, receive distributions, or make a claim with
respect to the assets of the corporation in the event of winding up
and termination unless the scrip provides for those rights. (TBCA
2.20 (part).)
Sec. 21.165. SUBSCRIPTIONS. (a) A corporation may accept a
subscription by notifying the subscriber in writing.
(b) A subscription to purchase shares in a corporation in
the process of being formed is irrevocable for six months if the
subscription is in writing and signed by the subscriber, unless the
subscription provides for a longer or shorter period or all of the
other subscribers agree to the revocation of the subscription.
(c) A written subscription entered into after the
corporation is formed is a contract between the subscriber and the
corporation. (TBCA 2.14.)
Sec. 21.166. PREFORMATION SUBSCRIPTION. (a) The
corporation may determine the payment terms of a preformation
subscription unless the payment terms are specified by the
subscription. The payment terms may authorize payment in full on
acceptance or by installments.
(b) Unless the subscription provides otherwise, a
corporation shall make calls placed to all subscribers of similar
interests for payment on preformation subscriptions uniform as far
as practicable.
(c) After the corporation is formed, if a subscriber fails
to pay any installment or call when due, a corporation may:
(1) collect in the same manner as any other debt the
amount due on any unpaid preformation subscription; or
(2) forfeit the subscription if the installment or
call remains unpaid for 20 days after written notice to the
subscriber.
(d) Although the forfeiture of a subscription terminates
all the rights and obligations of the subscriber, the corporation
may retain any amount previously paid on the subscription. (TBCA
2.14.D (part).)
Sec. 21.167. COMMITMENT TO PURCHASE SHARES. (a) A person
who contemplates the acquisition of shares in a corporation may
commit to act in a specified manner with respect to the shares after
the acquisition, including the voting of the shares or the
retention or disposition of the shares. To be binding, the
commitment must be in writing and be signed by the person acquiring
the shares.
(b) A written commitment entered into under Subsection (a)
is a contract between the shareholder and the corporation. (New.)
Sec. 21.168. STOCK RIGHTS, OPTIONS, AND CONVERTIBLE
INDEBTEDNESS. (a) Except as provided by the corporation's
certificate of formation and regardless of whether done in
connection with the issuance and sale of any other share or security
of the corporation, a corporation may create and issue:
(1) rights or options that entitle the holders to
purchase or receive from the corporation shares of any class or
series or other securities; and
(2) indebtedness convertible into shares of any class
or series of the corporation or other securities of the
corporation.
(b) A right, option, or indebtedness described by this
section shall be evidenced in the manner approved by the board of
directors.
(c) Subject to the certificate of formation, a right or
option described by this section must state the terms on which, the
time within which, and any consideration for which the shares may be
purchased or received from the corporation on the exercise of the
right or option.
(d) Subject to the certificate of formation, convertible
indebtedness described by this section must state the terms and
conditions on which, the time within which, and the conversion
ratio at which the indebtedness may be converted into shares. (TBCA
2.14-1 (part).)
Sec. 21.169. TERMS AND CONDITIONS OF RIGHTS AND OPTIONS.
(a) The terms and conditions of rights or options may include
restrictions or conditions that:
(1) prohibit or limit the exercise, transfer, or
receipt of the rights or options by certain persons or classes of
persons, including:
(A) a person who beneficially owns or offers to
acquire a specified number or percentage of the outstanding common
shares, voting power, or other securities of the corporation; or
(B) a transferee of a person described by
Paragraph (A); or
(2) invalidate or void the rights or options held by a
person or transferee described by Subdivision (1).
(b) Rights or options created or issued before the effective
date of this code that comply with this section and are not in
conflict with other provisions of this code are ratified.
(c) Unless otherwise provided under the terms of rights or
options or the agreement or plan under which the rights or options
are issued, the authority to grant, amend, redeem, extend, or
replace the rights or options on behalf of a corporation is vested
exclusively in the board of directors of the corporation. A bylaw
may not require the board to grant, amend, redeem, extend, or
replace the rights or options. (New.)
Sec. 21.170. CONSIDERATION FOR RIGHTS, OPTIONS, AND
CONVERTIBLE INDEBTEDNESS. (a) In the absence of fraud in the
transaction, the judgment of the board of directors of a
corporation as to the adequacy of the consideration received for
rights, options, or convertible indebtedness is conclusive.
(b) A corporation may issue rights or options to its
shareholders, officers, consultants, independent contractors,
employees, or directors without consideration if, in the judgment
of the board of directors, the issuance of the rights or options is
in the interests of the corporation.
(c) The consideration for shares having a par value, other
than treasury shares, and issued on the exercise of the rights or
options may not be less than the par value of the shares.
(d) A privilege of conversion may not be conferred on, or
altered with respect to, any indebtedness that would result in the
corporation receiving less than the minimum consideration required
to be received on issuance of the shares.
(e) The consideration for shares issued on the exercise of
rights, options, or convertible indebtedness shall be determined as
provided by Section 21.161. (TBCA 2.14-1 (part).)
Sec. 21.171. TREASURY SHARES. (a) Treasury shares are
considered to be issued shares and not outstanding shares.
(b) Treasury shares may not be included in the total assets
of a corporation for purposes of determining the net assets of a
corporation. (TBCA 1.02.A(28) (part).)
Sec. 21.172. EXPENSES OF ORGANIZATION, REORGANIZATION, AND
FINANCING OF CORPORATION. A corporation may pay or authorize to be
paid from the consideration received by the corporation as payment
for the corporation's shares the reasonable charges and expenses of
the organization or reorganization of the corporation and the sale
or underwriting of the shares without rendering the shares not
fully paid and nonassessable. (TBCA 2.18.)
Sec. 21.173. SUPPLEMENTAL REQUIRED RECORDS. In addition to
the books and records required to be kept under Section 3.151, a
corporation shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, a
record of:
(1) the original issuance of shares issued by the
corporation;
(2) each transfer of those shares that have been
presented to the corporation for registration of transfer;
(3) the names and addresses of all past shareholders
of the corporation; and
(4) the number and class or series of shares issued by
the corporation held by each current and past shareholder. (TBCA
2.44.A (part).)
[Sections 21.174-21.200 reserved for expansion]
SUBCHAPTER E. SHAREHOLDER RIGHTS AND RESTRICTIONS
Sec. 21.201. REGISTERED HOLDERS AS OWNERS. Except as
otherwise provided by this code and subject to Chapter 8, Business &
Commerce Code, a corporation may consider the person registered as
the owner of a share in the share transfer records of the
corporation at a particular time, including a record date set under
Section 6.101 or 6.102 or Subchapter H, as the owner of that share
at that time for purposes of:
(1) voting the share;
(2) receiving distributions on the share;
(3) transferring the share;
(4) receiving notice, exercising rights of dissent,
exercising or waiving a preemptive right, or giving proxies with
respect to that share;
(5) entering into agreements with respect to that
share in accordance with Section 6.251, 6.252, or 21.210; or
(6) any other shareholder action. (TBCA 2.26.A
(part).)
Sec. 21.202. DEFINITION OF SHARES. In Sections
21.203-21.208, "shares" includes a security:
(1) that is convertible into shares; or
(2) that carries a right to subscribe for or acquire
shares. (TBCA 2.22-1.A (part).)
Sec. 21.203. NO STATUTORY PREEMPTIVE RIGHT UNLESS PROVIDED
BY CERTIFICATE OF FORMATION. (a) Except as provided by Section
21.208, a shareholder of a corporation does not have a preemptive
right under this subchapter to acquire the corporation's unissued
or treasury shares except to the extent provided by the
corporation's certificate of formation.
(b) If the certificate of formation includes a statement
that the corporation "elects to have a preemptive right" or a
similar statement, Section 21.204 applies to a shareholder except
to the extent the certificate of formation expressly provides
otherwise. (New.)
Sec. 21.204. STATUTORY PREEMPTIVE RIGHTS. (a) If the
shareholders of a corporation have a preemptive right under this
subchapter, the shareholders have a preemptive right to acquire
proportional amounts of the corporation's unissued or treasury
shares on the decision of the corporation's board of directors to
issue the shares. The preemptive right granted under this
subsection is subject to uniform terms and conditions prescribed by
the board of directors to provide a fair and reasonable opportunity
to exercise the preemptive right.
(b) No preemptive right exists with respect to:
(1) shares issued or granted as compensation to a
director, officer, agent, or employee of the corporation or a
subsidiary or affiliate of the corporation;
(2) shares issued or granted to satisfy conversion or
option rights created to provide compensation to a director,
officer, agent, or employee of the corporation or a subsidiary or
affiliate of the corporation;
(3) shares authorized in the corporation's certificate
of formation that are issued not later than the 180th day after the
effective date of the corporation's formation; or
(4) shares sold, issued, or granted by the corporation
for consideration other than money.
(c) A holder of a share of a class without general voting
rights but with a preferential right to distributions of profits,
income, or assets does not have a preemptive right with respect to
shares of any class.
(d) A holder of a share of a class with general voting rights
but without preferential rights to distributions of profits,
income, or assets does not have a preemptive right with respect to
shares of any class with preferential rights to distributions of
profits, income, or assets unless the shares with preferential
rights are convertible into or carry a right to subscribe for or
acquire shares without preferential rights.
(e) For a one-year period after the date the shares have
been offered to shareholders, shares subject to preemptive rights
that are not acquired by a shareholder may be issued to a person at a
consideration set by the corporation's board of directors that is
not lower than the consideration set for the exercise of preemptive
rights. An offer at a lower consideration or after the expiration of
the period prescribed by this subsection is subject to the
shareholder's preemptive rights. (TBCA 2.22-1.A, B.)
Sec. 21.205. WAIVER OF PREEMPTIVE RIGHT. (a) A shareholder
may waive a preemptive right granted to the shareholder.
(b) A written waiver of a preemptive right is irrevocable
regardless of whether the waiver is supported by consideration.
(New.)
Sec. 21.206. LIMITATION ON ACTION TO ENFORCE PREEMPTIVE
RIGHT. (a) An action brought against a corporation, the board of
directors or an officer, shareholder, or agent of the corporation,
or an owner of a beneficial interest in shares of the corporation
for the violation of a preemptive right of a shareholder must be
brought not later than the earlier of:
(1) the first anniversary of the date written notice
is given to each shareholder whose preemptive right was violated;
or
(2) the fourth anniversary of the latest of:
(A) the date the corporation issued the shares,
securities, or rights;
(B) the date the corporation sold the shares,
securities, or rights; or
(C) the date the corporation otherwise
distributed the shares, securities, or rights.
(b) The notice required by Subsection (a)(1) must:
(1) be sent to the holder at the address for the holder
as shown on the appropriate records of the corporation; and
(2) inform the holder that the issuance, sale, or
other distribution of shares, securities, or rights violated the
holder's preemptive right. (TBCA 2.22-1.C.)
Sec. 21.207. DISPOSITION OF SHARES HAVING PREEMPTIVE
RIGHTS. The transferee or successor of a share that has been
transferred or otherwise disposed of by a shareholder of a
corporation whose preemptive right to acquire shares in the
corporation has been violated does not acquire the preemptive
right, or any right or claim based on the violation, unless the
previous shareholder has assigned the preemptive right to the
transferee or successor. (TBCA 2.22-1.D.)
Sec. 21.208. PREEMPTIVE RIGHT IN EXISTING CORPORATION.
Subject to the certificate of formation, a shareholder of a
corporation incorporated before the effective date of this code has
a preemptive right to acquire unissued or treasury shares of the
corporation to the extent provided by Sections 21.204, 21.206, and
21.207. After the effective date of this code, a corporation may
limit or deny the preemptive right of the shareholders of the
corporation by amending the corporation's certificate of
formation. (New.)
Sec. 21.209. TRANSFER OF SHARES AND OTHER SECURITIES.
Except as otherwise provided by this code, the shares and other
securities of a corporation are transferable in accordance with
Chapter 8, Business & Commerce Code. (TBCA 2.22.A (part).)
Sec. 21.210. RESTRICTION ON TRANSFER OF SHARES AND OTHER
SECURITIES. (a) A restriction on the transfer or registration of
transfer of a security may be imposed by:
(1) the corporation's certificate of formation;
(2) the corporation's bylaws;
(3) a written agreement among two or more holders of
the securities; or
(4) a written agreement among one or more holders of
the securities and the corporation if:
(A) the corporation files a copy of the agreement
at the principal place of business or registered office of the
corporation; and
(B) the copy of the agreement is subject to the
same right of examination by a shareholder of the corporation, in
person or by agent, attorney, or accountant, as the books and
records of the corporation.
(b) A restriction imposed under Subsection (a) is not valid
with respect to a security issued before the restriction has been
adopted, unless the holder of the security voted in favor of the
restriction or is a party to the agreement imposing the
restriction. (TBCA 2.22.B.)
Sec. 21.211. VALID RESTRICTIONS ON TRANSFER.
Notwithstanding Sections 21.210 and 21.213, a restriction placed on
the transfer or registration of transfer of a security of a
corporation is valid if the restriction reasonably:
(1) obligates the holder of the restricted security to
offer a person, including the corporation or other holders of
securities of the corporation, an opportunity to acquire the
restricted security within a reasonable time before the transfer;
(2) obligates the corporation, to the extent provided
by this code, or another person to purchase securities that are the
subject of an agreement relating to the purchase and sale of the
restricted security;
(3) requires the corporation or the holders of a class
of the corporation's securities to consent to a proposed transfer
of the restricted security or to approve the proposed transferee of
the restricted security for the purpose of preventing a violation
of law;
(4) prohibits the transfer of the restricted security
to a designated person or group of persons and the designation is
not manifestly unreasonable;
(5) maintains the status of the corporation as an
electing small business corporation under Subchapter S of the
Internal Revenue Code;
(6) maintains a tax advantage to the corporation; or
(7) maintains the status of the corporation as a close
corporation under Subchapter O. (TBCA 2.22.D.)
Sec. 21.212. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF
SHARES OR OTHER SECURITIES. (a) A corporation that has adopted a
bylaw or is a party to an agreement that restricts the transfer of
the shares or other securities of the corporation may file with the
secretary of state, in accordance with Chapter 4, a copy of the
bylaw or agreement and a statement attached to the copy that:
(1) contains the name of the corporation;
(2) states that the attached copy of the bylaw or
agreement is a true and correct copy of the bylaw or agreement; and
(3) states that the filing has been authorized by the
board of directors or, in the case of a corporation that is managed
in some other manner under a shareholders' agreement, by the person
empowered by the agreement to manage the corporation's business and
affairs.
(b) After a statement described by Subsection (a) is filed
with the secretary of state, the bylaws or agreement restricting
the transfer of shares or other securities is a public record, and
the fact that the statement has been filed may be stated on a
certificate representing the restricted shares or securities if
required by Section 3.202.
(c) A corporation that is a party to an agreement
restricting the transfer of the shares or other securities of the
corporation may make the agreement part of the corporation's
certificate of formation without restating the provisions of the
agreement in the certificate of formation by amending the
certificate of formation. If the agreement alters any provision of
the certificate of formation, the certificate of amendment shall
identify the altered provision by reference or description. If the
agreement is an addition to the certificate of formation, the
certificate of amendment must state that fact.
(d) The certificate of amendment must:
(1) include a copy of the agreement restricting the
transfer of shares or other securities;
(2) state that the attached copy of the agreement is a
true and correct copy of the agreement; and
(3) state that inclusion of the certificate of
amendment as part of the certificate of formation has been
authorized in the manner required by this code to amend the
certificate of formation. (TBCA 2.22.E (part), F.)
Sec. 21.213. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF
CERTAIN SECURITIES. (a) A restriction placed on the transfer or
registration of the transfer of a security of a corporation is
specifically enforceable against the holder, or a successor or
transferee of the holder, if:
(1) the restriction is reasonable and noted
conspicuously on the certificate or other instrument representing
the security; or
(2) with respect to an uncertificated security, the
restriction is reasonable and a notation of the restriction is
contained in the notice sent with respect to the security under
Section 3.205.
(b) Unless noted in the manner specified by Subsection (a)
with respect to a certificate or other instrument or an
uncertificated security, an otherwise enforceable restriction is
ineffective against a transferee for value without actual knowledge
of the restriction at the time of the transfer or against a
subsequent transferee, regardless of whether the transfer is for
value. A restriction is specifically enforceable against a person
other than a transferee for value from the time the person acquires
actual knowledge of the restriction's existence. (TBCA 2.22.C.)
Sec. 21.214. JOINT OWNERSHIP OF SHARES. (a) If shares are
registered on the books of a corporation in the names of two or more
persons as joint owners with the right of survivorship and one of
the owners dies, the corporation may record on its books and effect
the transfer of the shares to a person, including the surviving
joint owner, and pay any distributions made with respect to the
shares, as if the surviving joint owner was the absolute owner of
the shares. The recording and distribution authorized by this
subsection must be made after the death of a joint owner and before
the corporation receives actual written notice that a party other
than a surviving joint owner is claiming an interest in the shares
or distribution.
(b) The discharge of a corporation from liability under
Section 21.216 and the transfer of full legal and equitable title of
the shares does not affect, reduce, or limit any cause of action
existing in favor of an owner of an interest in the shares or
distributions against the surviving owner. (TBCA 2.22.G (part).)
Sec. 21.215. LIABILITY FOR DESIGNATING OWNER OF SHARES. A
corporation or an officer, director, employee, or agent of the
corporation may not be held liable for considering the person who is
registered as the owner of a share in the share transfer records of
the corporation at a particular time to be the owner of the share at
that time for a purpose described by Section 21.201, regardless of
whether the person possesses a certificate for that share. (TBCA
2.26.A(2).)
Sec. 21.216. LIABILITY REGARDING JOINT OWNERSHIP OF SHARES.
A corporation that transfers shares or makes a distribution to a
surviving joint owner under Section 21.214 before the corporation
has received a written claim for the shares or distribution from
another person is discharged from liability for the transfer or
payment. (TBCA 2.22.G (part).)
Sec. 21.217. LIABILITY OF ASSIGNEE OR TRANSFEREE. An
assignee or transferee of certificated shares, uncertificated
shares, or a subscription for shares in good faith and without
knowledge that full consideration for the shares or subscription
has not been paid may not be held personally liable to the
corporation or a creditor of the corporation for an unpaid portion
of the consideration. (TBCA 2.21.C.)
Sec. 21.218. EXAMINATION OF RECORDS. (a) In this section, a
holder of a beneficial interest in a voting trust entered into under
Section 6.251 is a holder of the shares represented by the
beneficial interest.
(b) Subject to the governing documents and on written demand
stating a proper purpose, a holder of shares of a corporation for at
least six months immediately preceding the holder's demand, or a
holder of at least five percent of all of the outstanding shares of
a corporation, is entitled to examine and copy, at a reasonable
time, the corporation's relevant books, records of account,
minutes, and share transfer records. The examination may be
conducted in person or through an agent, accountant, or attorney.
(c) This section does not impair the power of a court, on the
presentation of proof of proper purpose by a beneficial or record
holder of shares, to compel the production for examination by the
holder of the books and records of accounts, minutes, and share
transfer records of a corporation, regardless of the period during
which the holder was a beneficial holder or record holder and
regardless of the number of shares held by the person. (TBCA
2.44.C, E, G.)
Sec. 21.219. ANNUAL AND INTERIM STATEMENTS OF CORPORATION.
(a) On written request of a shareholder of the corporation, a
corporation shall mail to the shareholder:
(1) the annual statements of the corporation for the
last fiscal year that contain in reasonable detail the
corporation's assets and liabilities and the results of the
corporation's operations; and
(2) the most recent interim statements, if any, that
have been filed in a public record or other publication.
(b) The corporation shall be allowed a reasonable time to
prepare the annual statements. (TBCA 2.44.F.)
Sec. 21.220. PENALTY FOR FAILURE TO PREPARE VOTING LIST. An
officer or agent of a corporation who is in charge of the
corporation's share transfer records and who does not prepare the
list of owners, keep the list on file for a 10-day period, or
produce and keep the list available for inspection at the annual
meeting as required by Sections 21.354 and 21.372 is liable to an
owner who suffers damages because of the failure for the damage
caused by the failure. (TBCA 2.27.C (part).)
Sec. 21.221. PENALTY FOR FAILURE TO PROVIDE NOTICE OF
MEETING. If an officer or agent of a corporation is unable to comply
with the duties prescribed by Sections 21.354 and 21.372 because
the officer or agent did not receive notice of a meeting of owners
within a sufficient time before the date of the meeting, the
corporation, rather than the officer or agent, is liable to an owner
who suffers damages because of the failure for the extent of the
damage caused by the failure. (TBCA 2.27.C (part).)
Sec. 21.222. PENALTY FOR REFUSAL TO PERMIT EXAMINATION OF
CERTAIN RECORDS. (a) A corporation that refuses to allow a person
to examine and make copies of account records, minutes, and share
transfer records under Section 21.218 is liable to the shareholder
for any cost or expense, including attorney's fees, incurred in
enforcing the shareholder's rights under Section 21.218. The
liability imposed on a corporation under this subsection is in
addition to any other damages or remedy afforded to the shareholder
by law.
(b) It is a defense to an action brought under this section
that the person suing:
(1) has, within the two years preceding the date the
action is brought, sold or offered for sale a list of shareholders
or of holders of voting trust certificates in consideration for
shares of the corporation or any other corporation;
(2) has aided or abetted a person in procuring a list
of shareholders or of holders of voting trust certificates for the
purpose described by Subdivision (1);
(3) has improperly used information obtained through a
prior examination of the books and account records, minutes, or
share transfer records of the corporation or any other corporation;
or
(4) was not acting in good faith or for a proper
purpose in making the person's request for examination. (TBCA
2.44.D.)
Sec. 21.223. LIMITATION OF LIABILITY FOR OBLIGATIONS. (a)
A holder of shares, an owner of any beneficial interest in shares,
or a subscriber for shares whose subscription has been accepted, or
any affiliate of such a holder, owner, or subscriber of the
corporation, may not be held liable to the corporation or its
obligees with respect to:
(1) the shares, other than the obligation to pay to the
corporation the full amount of consideration, fixed in compliance
with Sections 21.157-21.162, for which the shares were or are to be
issued;
(2) any contractual obligation of the corporation or
any matter relating to or arising from the obligation on the basis
that the holder, beneficial owner, subscriber, or affiliate is or
was the alter ego of the corporation or on the basis of actual or
constructive fraud, a sham to perpetrate a fraud, or other similar
theory; or
(3) any obligation of the corporation on the basis of
the failure of the corporation to observe any corporate formality,
including the failure to:
(A) comply with this code or the articles of
incorporation or bylaws of the corporation; or
(B) observe any requirement prescribed by this
code or the articles of incorporation or bylaws of the corporation
for acts to be taken by the corporation or its directors or
shareholders.
(b) Subsection (a)(2) does not prevent or limit the
liability of a holder, beneficial owner, subscriber, or affiliate
if the obligee demonstrates that the holder, beneficial owner,
subscriber, or affiliate caused the corporation to be used for the
purpose of perpetrating and did perpetrate an actual fraud on the
obligee primarily for the direct personal benefit of the holder,
beneficial owner, subscriber, or affiliate. (TBCA 2.21.A.)
Sec. 21.224. PREEMPTION OF LIABILITY. The liability of a
holder, beneficial owner, or subscriber of shares of a corporation,
or any affiliate of such a holder, owner, or subscriber of the
corporation, for an obligation that is limited by Section 21.223 is
exclusive and preempts any other liability imposed for that
obligation under common law or otherwise. (TBCA 2.21.B (part).)
Sec. 21.225. EXCEPTIONS TO LIMITATIONS. Section 21.223 or
21.224 does not limit the obligation of a holder, beneficial owner,
subscriber, or affiliate to the obligee of the corporation if that
person:
(1) expressly assumes, guarantees, or agrees to be
personally liable to the obligee for the obligation; or
(2) is otherwise liable to the obligee for the
obligation under this code or other applicable statute. (TBCA
2.21.B (part).)
Sec. 21.226. PLEDGEES AND TRUST ADMINISTRATORS. (a) A
pledgee or other holder of shares as collateral security is not
personally liable as a shareholder.
(b) An executor, administrator, conservator, guardian,
trustee, assignee for the benefit of creditors, or receiver is not
personally liable as a holder of or subscriber to shares of a
corporation.
(c) The estate and funds administered by an executor,
administrator, conservator, guardian, trustee, assignee for the
benefit of creditors, or receiver are liable for the full amount of
the consideration for which the shares were or are to be issued.
(TBCA 2.21.D, E.)
[Sections 21.227-21.250 reserved for expansion]
SUBCHAPTER F. REDUCTIONS IN STATED CAPITAL;
CANCELLATION OF TREASURY SHARES
Sec. 21.251. REDUCTION OF STATED CAPITAL BY REDEMPTION OR
PURCHASE OF REDEEMABLE SHARES. (a) At the time a corporation
redeems or purchases the redeemable shares of the corporation, the
redemption or purchase has the effect of:
(1) canceling the shares; and
(2) restoring the shares to the status of authorized
but unissued shares, unless the corporation's certificate of
formation provides that shares may not be reissued after the shares
are redeemed or purchased by the corporation.
(b) If the corporation is prohibited from reissuing the
shares by the certificate of formation following a redemption or
purchase under Subsection (a), the number of shares of the class
that the corporation is authorized to issue is reduced by the number
of shares canceled.
(c) If shares redeemed or purchased by a corporation under
Subsection (a) constitute all of the outstanding shares of a
particular class of shares and the certificate of formation
provides that the shares of the class, when redeemed and
repurchased, may not be reissued, the corporation may not issue any
additional shares of the class of shares.
(d) Upon the redemption or purchase of redeemable shares
under this section, the stated capital of the corporation shall be
reduced by that part of the stated capital that was, at the time of
the redemption or purchase, represented by those redeemable shares.
(TBCA 4.10.A, D.)
Sec. 21.252. CANCELLATION OF TREASURY SHARES. (a) A
corporation, by resolution of the board of directors of the
corporation, may cancel all or part of the corporation's treasury
shares at any time.
(b) Upon the cancellation of treasury shares, the stated
capital of the corporation shall be reduced by that part of the
stated capital that was, at the time of the cancellation,
represented by the canceled shares, and the canceled shares shall
be restored to the status of authorized but unissued shares.
(c) This section does not prohibit a cancellation of shares
or a reduction of stated capital in any other manner permitted by
law. (TBCA 4.11.)
Sec. 21.253. PROCEDURES FOR REDUCTION OF STATED CAPITAL BY
BOARD OF DIRECTORS. (a) If all or part of the stated capital of a
corporation is represented by shares without par value, the stated
capital of the corporation may be reduced in the manner provided by
this section.
(b) The board of directors shall adopt a resolution that:
(1) states the amount of the proposed reduction of the
stated capital and the manner in which the reduction will be
effected; and
(2) directs that the proposed reduction be submitted
to a vote of the shareholders at an annual or special meeting.
(c) Each shareholder of record entitled to vote on the
reduction of stated capital shall be given written notice stating
that the purpose or one of the purposes of the meeting is to
consider the matter of reducing the stated capital of the
corporation in the amount and manner proposed by the board of
directors. The notice shall be given in the time and manner
provided by this code for giving notice of shareholders' meetings.
(d) The affirmative vote of the holders of at least the
majority of the shares entitled to vote on the matter is required
for approval of the resolution proposing the reduction of stated
capital.
(e) Upon the approval of the resolution by the shareholders,
the stated capital of the corporation shall be reduced as provided
in the resolution. (TBCA 4.12.A, D.)
Sec. 21.254. RESTRICTION ON REDUCTION OF STATED CAPITAL.
The stated capital of a corporation may not be reduced under this
subchapter if the amount of the aggregate stated capital of the
corporation would be reduced to an amount equal to or less than the
sum of the:
(1) aggregate preferential amounts payable on all
issued shares with a preferential right to the assets of the
corporation in the event of voluntary winding up and termination;
and
(2) aggregate par value of all issued shares with par
value but no preferential right to the assets of the corporation in
the event of voluntary winding up and termination. (TBCA 4.12.E.)
[Sections 21.255-21.300 reserved for expansion]
SUBCHAPTER G. DISTRIBUTIONS AND SHARE DIVIDENDS
Sec. 21.301. DEFINITIONS. In this subchapter:
(1) "Distribution limit," with respect to a
distribution made by a corporation, other than a distribution
described by Subdivision (2), means:
(A) the net assets of the corporation if the
distribution:
(i) is a purchase or redemption of its own
shares by a corporation that:
(a) is eliminating fractional shares;
(b) is collecting or compromising
indebtedness owed by or to the corporation; or
(c) is paying dissenting shareholders
entitled to payment for their shares under this code; or
(ii) is not the purchase or redemption of
its own shares by a consuming assets corporation; or
(B) the surplus of the corporation for a
distribution not described by Paragraph (A).
(2) "Distribution limit," with respect to a
distribution that is a purchase or redemption of its own shares by
an investment company the certificate of formation of which
provides that the company may purchase the company's own shares out
of stated capital, means the net assets of the investment company
rather than the surplus of the investment company.
(3) "Investment company" means a corporation
registered as an open-end company under the Investment Company Act.
(TBCA 2.38.C.)
Sec. 21.302. AUTHORITY FOR DISTRIBUTIONS. The board of
directors of a corporation may authorize a distribution and the
corporation may make a distribution, subject to Section 21.303.
(TBCA 2.38.A.)
Sec. 21.303. LIMITATIONS ON DISTRIBUTIONS. (a) A
corporation may not make a distribution that violates the
corporation's certificate of formation.
(b) Unless the distribution is made in compliance with
Chapter 11, a corporation may not make a distribution:
(1) if the corporation would be insolvent after the
distribution; or
(2) that exceeds the distribution limit. (TBCA
2.38.A, B, D.)
Sec. 21.304. REDEMPTIONS. (a) A distribution by a
corporation that involves a redemption of outstanding redeemable
shares of the corporation subject to redemption may be related to
any or all of those shares.
(b) If less than all of the outstanding redeemable shares of
a corporation subject to redemption are to be redeemed, the shares
to be redeemed shall be selected for redemption:
(1) in accordance with the corporation's certificate
of formation; or
(2) ratably or by lot in the manner prescribed by
resolution of the corporation's board of directors, if the
certificate of formation does not specify how shares are to be
selected for redemption.
(c) A redemption of redeemable shares takes effect by call
and written notice of the redemption of the shares. (TBCA 4.08.A
(part).)
Sec. 21.305. NOTICE OF REDEMPTION. (a) A notice of
redemption of redeemable shares of a corporation must state:
(1) the class or series of shares or part of the class
or series of shares to be redeemed;
(2) the date set for redemption;
(3) the redemptive price; and
(4) the place at which the shareholders may obtain
payment of the redemptive price.
(b) The notice of redemption shall be sent to each holder of
redeemable shares being called not later than the 21st day or
earlier than the 60th day before the date set for redemption.
(c) A notice that is mailed is considered to have been sent
when the notice is deposited in the United States mail, with postage
prepaid, addressed to the shareholder at the shareholder's address
as it appears on the share transfer records of the corporation.
(d) A corporation may give the transfer agent described by
Section 21.306 irrevocable instructions to send or complete the
notice of redemption. (TBCA 4.08.A (part), B.)
Sec. 21.306. DEPOSIT OF MONEY FOR REDEMPTION. (a) After the
date the notice of redemption required by Section 21.305 is sent and
before the day after the date set for redemption of redeemable
shares of the corporation, a corporation may deposit with a bank or
trust company in this or another state of the United States
appointed and acting as transfer agent for the corporation an
amount sufficient to redeem the shares called for redemption. The
amount must be deposited as a trust fund.
(b) Unless the corporation's certificate of formation
provides otherwise, if a corporation deposits money and gives
payment instructions in accordance with Subsection (a) and Section
21.307(b):
(1) the shares called for redemption are considered
redeemed, and distributions on those shares cease to accrue on and
after the date set for redemption; and
(2) the deposit constitutes full payment of the shares
called for redemption to the holders of the shares on and after the
date set for redemption.
(c) Unless the certificate of formation provides otherwise,
after the date a deposit is made and instructions are given under
this section and Section 21.307(b), the shares called for
redemption are not considered outstanding, and the holders of the
shares cease to be shareholders of the shares and have no right with
respect to the shares other than:
(1) the right to receive payment of the redemptive
price of the shares without interest from the bank or trust company;
and
(2) any right to convert those shares.
(d) Unless the certificate of formation provides otherwise,
a bank or trust company receiving a deposit under this section shall
pay to the corporation on demand the balance of the amount deposited
if one or more holders of the shares called for redemption do not
claim for redemption the amount deposited on or before the sixth
anniversary of the date of the deposit. After making a payment
under this subsection, the bank or trust company is relieved of all
responsibility to the holders with respect to the amount deposited.
(TBCA 4.08.B (part).)
Sec. 21.307. PAYMENT OF REDEEMED SHARES. (a) Payment of a
certificated share shall be made only on the surrender of the
respective share certificate.
(b) A corporation may give a transfer agent described by
Section 21.306 irrevocable instructions to pay, on or after the
date set for redemption of redeemable shares, the redemptive price
to the respective holders of the shares as evidenced by a list of
shareholders certified by an officer of the corporation. (TBCA
4.08.B (part).)
Sec. 21.308. PRIORITY OF DISTRIBUTIONS. (a) Except as
provided by Subsection (b) or (c), a corporation's indebtedness
that arises as a result of the declaration of a distribution and a
corporation's indebtedness issued in a distribution are at parity
with the corporation's indebtedness to its general, unsecured
creditors.
(b) The indebtedness described by Subsection (a) shall be
subordinated to the extent required by an agreement binding on the
corporation on the date the indebtedness arises or if agreed to by
the person to whom the indebtedness is owed or, with respect to
indebtedness issued in a distribution, as provided by the
corporation.
(c) The indebtedness described by Subsection (a) shall be
secured to the extent required by an agreement binding on the
corporation. (TBCA 2.38.E.)
Sec. 21.309. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM
SURPLUS. (a) A corporation, by resolution of the board of directors
of the corporation, may:
(1) create a reserve out of the surplus of the
corporation; or
(2) designate or allocate in any manner a part or all
of the corporation's surplus for a proper purpose.
(b) A corporation may increase, decrease, or abolish a
reserve, designation, or allocation in the manner provided by
Subsection (a). (TBCA 4.13.)
Sec. 21.310. AUTHORITY FOR SHARE DIVIDENDS. The board of
directors of a corporation may authorize a share dividend and the
corporation may pay a share dividend subject to Section 21.311 and
any restriction in its certificate of formation. (TBCA 2.38-1.A.)
Sec. 21.311. LIMITATIONS ON SHARE DIVIDENDS. A corporation
may not pay a share dividend in authorized but unissued shares of
any class if:
(1) the surplus of the corporation is less than the
amount required by Section 21.313 to be transferred to stated
capital at the time the share dividend is made; or
(2) the share dividend will be made to a holder of
shares of any other class or series, unless:
(A) the corporation's certificate of formation
provides for the dividend; or
(B) the share dividend is authorized by the
holders of at least a majority of the outstanding shares of the
class or series in which the share dividend is to be made. (TBCA
2.38-1.B, E.)
Sec. 21.312. VALUE OF SHARES ISSUED AS SHARE DIVIDENDS. (a)
A share dividend payable in authorized but unissued shares with par
value shall be issued at the par value of the respective share.
(b) A share dividend payable in authorized but unissued
shares without par value shall be issued at the value set by the
board of directors when the share dividend is authorized. (TBCA
2.38-1.C (part), D (part).)
Sec. 21.313. TRANSFER OF SURPLUS FOR SHARE DIVIDENDS. (a)
When a share dividend payable in authorized but unissued shares
with par value is made by a corporation, an amount of surplus
designated by the corporation's board of directors that is not less
than the aggregate par value of the shares issued as a share
dividend shall be transferred to stated capital.
(b) When a share dividend payable in authorized but unissued
shares without par value is made by a corporation, an amount of
surplus equal to the aggregate value set by the corporation's board
of directors with respect to shares under Section 21.312(b) shall
be transferred to stated capital. (TBCA 2.38-1.C (part), D (part).)
Sec. 21.314. DETERMINATION OF SOLVENCY, NET ASSETS, STATED
CAPITAL, AND SURPLUS. (a) For purposes of this subchapter, the
determination of whether a corporation is or would be insolvent and
the determination of the value of a corporation's net assets,
stated capital, or surplus and each of the components of net assets,
stated capital, or surplus may be based on:
(1) financial statements of the corporation,
including financial statements that:
(A) include subsidiary corporations or other
corporations accounted for on a consolidated basis or on the equity
method of accounting; or
(B) present the financial condition of the
corporation in accordance with generally accepted accounting
principles;
(2) financial statements prepared using the method of
accounting used to file the corporation's federal income tax return
or using any other accounting practices and principles that are
reasonable under the circumstances;
(3) financial information, including condensed or
summary financial statements, that is prepared on the same basis as
financial statements described by Subdivision (1) or (2);
(4) projection, forecast, or other forward-looking
information relating to the future economic performance, financial
condition, or liquidity of the corporation that is reasonable under
the circumstances;
(5) a fair valuation or information from any other
method that is reasonable under the circumstances; or
(6) a combination of a statement, valuation, or
information authorized by this section.
(b) Subsection (a) does not apply to the computation of the
Texas franchise tax or any other tax imposed on a corporation under
the laws of this state. (TBCA 2.38-3.)
Sec. 21.315. DATE OF DETERMINATION OF SOLVENCY, NET ASSETS,
STATED CAPITAL, AND SURPLUS. (a) For purposes of this subchapter, a
determination of whether a corporation is or would be insolvent
after a distribution or share dividend or a determination of the
value of a corporation's net assets, stated capital, or surplus, or
each component of net assets, stated capital, or surplus, shall be
made:
(1) on the date the distribution or share dividend is
authorized by the corporation's board of directors if the
distribution or share dividend is made not later than the 120th day
after the date of authorization; or
(2) if the distribution or share dividend is made more
than 120 days after the date of authorization:
(A) on the date designated by the corporation's
board of directors if the date so designated is not earlier than 120
days before the date the distribution or share dividend is made; or
(B) on the date the distribution or share
dividend is made if the corporation's board of directors does not
designate a date as described in Paragraph (A).
(b) For purposes of this section, a distribution that
involves:
(1) the incurrence by a corporation of indebtedness or
a deferred payment obligation is considered to have been made on the
date the indebtedness or obligation is incurred; or
(2) a requirement in the corporation's certificate of
formation or other contract of the corporation to redeem, exchange,
or otherwise acquire any of its own shares is considered to have
been made either on the date when the provision or other contract is
made or takes effect or on the date when the shares to be redeemed,
exchanged, or acquired are redeemed, exchanged, or acquired, at the
option of the corporation. (TBCA 2.38-4.)
Sec. 21.316. LIABILITY OF DIRECTORS FOR WRONGFUL
DISTRIBUTIONS. (a) Subject to Subsection (c), the directors of a
corporation who vote for or assent to a distribution by the
corporation that is prohibited by Section 21.303 are jointly and
severally liable to the corporation for the amount by which the
distribution exceeds the amount permitted by that section to be
distributed.
(b) A director is not liable for all or part of the excess
amount if a distribution of that amount would have been permitted by
Section 21.303 after the date the director authorized the
distribution.
(c) A director is not jointly and severally liable under
Subsection (a) if, in voting for or assenting to the distribution,
the director:
(1) relies in good faith and with ordinary care on:
(A) the statements, valuations, or information
described by Section 21.314; or
(B) other information, opinions, reports, or
statements, including financial statements and other financial
data, concerning the corporation or another person that are
prepared or presented by:
(i) one or more officers or employees of the
corporation;
(ii) a legal counsel, public accountant,
investment banker, or other person relating to a matter the
director reasonably believes is within the person's professional or
expert competence; or
(iii) a committee of the board of directors
of which the director is not a member;
(2) acting in good faith and with ordinary care,
considers the assets of the corporation to be valued at least at
their book value; or
(3) in determining whether the corporation made
adequate provision for payment, satisfaction, or discharge of all
of the corporation's liabilities and obligations, as provided by
Sections 11.053 and 11.356, relies in good faith and with ordinary
care on financial statements of, or other information concerning, a
person who was or became contractually obligated to pay, satisfy,
or discharge some or all of the corporation's liabilities or
obligations.
(d) The liability imposed under Subsection (a) is the only
liability of a director to the corporation or its creditors for
authorizing a distribution that is prohibited by Section 21.303.
(e) This section and Sections 21.317 and 21.318 do not limit
any liability imposed under Chapter 24, Business & Commerce Code,
or the United States Bankruptcy Code. (TBCA 2.41.A(1), C, G
(part).)
Sec. 21.317. STATUTE OF LIMITATIONS ON ACTION FOR WRONGFUL
DISTRIBUTION. An action may not be brought against a director of a
corporation under Section 21.316 after the second anniversary of
the date the alleged act giving rise to the liability occurred.
(TBCA 2.41.A(3).)
Sec. 21.318. CONTRIBUTION FROM CERTAIN SHAREHOLDERS AND
DIRECTORS. (a) A director who is held liable for a claim asserted
under Section 21.316 is entitled to receive contributions from
shareholders who accepted or received the wrongful distribution
knowing that it was prohibited by Section 21.303 in proportion to
the amounts received by the shareholders.
(b) A director who is liable for a claim asserted under
Section 21.316 is entitled to receive contributions from each of
the other directors who are liable with respect to that claim in an
amount appropriate to achieve equity.
(c) The liability provided by Subsection (a) is the only
liability of a shareholder to the corporation or a creditor of the
corporation for accepting or receiving a distribution by the
corporation that is prohibited by Section 21.303, except for any
liability under Chapter 24, Business & Commerce Code, or the United
States Bankruptcy Code. (TBCA 2.41.E, F, G (part).)
[Sections 21.319-21.350 reserved for expansion]
SUBCHAPTER H. SHAREHOLDERS' MEETINGS; VOTING AND QUORUM
Sec. 21.351. ANNUAL MEETING. (a) An annual meeting of the
shareholders of a corporation shall be held at a time that is stated
in or set in accordance with the corporation's bylaws.
(b) On the application of a shareholder who has previously
submitted a written request to the corporation that an annual
meeting be held, a court in the county in which the principal
executive office of the corporation is located may order a meeting
to be held if the annual meeting is not held or written consent
instead of the annual meeting is not executed within any 13-month
period, unless the meeting is not required to be held under Section
21.655.
(c) The failure to hold an annual meeting at the designated
time does not result in the winding up or termination of the
corporation. (TBCA 2.24.B.)
Sec. 21.352. SPECIAL MEETINGS. (a) A special meeting of the
shareholders of a corporation may be called by:
(1) the president, the board of directors, or any
other person authorized to call special meetings by the certificate
of formation or bylaws of the corporation; or
(2) the holders of the percentage of shares specified
in the certificate of formation, not to exceed 50 percent of the
shares entitled to vote or, if no percentage is specified, at least
10 percent of all of the shares of the corporation entitled to vote
at the proposed special meeting.
(b) Unless stated in or set in accordance with the bylaws,
the record date for determining which shareholders of the
corporation are entitled to call a special meeting is the date the
first shareholder signs the notice of that meeting.
(c) Other than procedural matters, the only business that
may be conducted at a special meeting of the shareholders is
business that is within the purposes described in the notice
required by Section 21.353. (TBCA 2.24.C.)
Sec. 21.353. NOTICE OF MEETING. (a) Except as provided by
Section 21.456, written notice of a meeting in accordance with
Section 6.051 shall be given to each shareholder entitled to vote at
the meeting not later than the 10th day and not earlier than the
60th day before the date of the meeting. Notice shall be given at
the direction of the president, secretary, or other person calling
the meeting.
(b) The notice of a special meeting must contain a statement
regarding the purpose or purposes of the meeting. (TBCA 2.25.A.)
Sec. 21.354. INSPECTION OF VOTING LIST. (a) The list of
shareholders entitled to vote at the meeting prepared under Section
21.372 shall be:
(1) subject to inspection by a shareholder during
regular business hours; and
(2) produced and kept open at the meeting.
(b) The original share transfer records are prima facie
evidence of which shareholders are entitled to inspect the list.
(TBCA 2.27.A (part).)
Sec. 21.355. CLOSING OF SHARE TRANSFER RECORDS. Share
transfer records that are closed in accordance with Section 6.101
for the purpose of determining which shareholders are entitled to
receive notice of a meeting of shareholders shall remain closed for
at least 10 days immediately preceding the date of the meeting.
(TBCA 2.26.B (part).)
Sec. 21.356. RECORD DATE FOR WRITTEN CONSENT TO ACTION. The
record date provided in accordance with Section 6.102(a) may not be
more than 10 days after the date on which the board of directors
adopts the resolution setting the record date. (TBCA 2.26.C
(part).)
Sec. 21.357. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
CONSENT TO ACTION. The record date provided by the directors in
accordance with Section 6.101 must be at least 10 days before the
date on which the particular action requiring the determination of
shareholders is to be taken. (TBCA 2.26.B (part).)
Sec. 21.358. QUORUM. (a) Subject to Subsection (b), the
holders of the majority of the shares entitled to vote at a meeting
of the shareholders of a corporation that are present or
represented by proxy at the meeting are a quorum for the
consideration of a matter to be presented at that meeting.
(b) The certificate of formation of a corporation may
provide that a quorum is present only if:
(1) the holders of a specified portion of the shares
that is greater than the majority of the shares entitled to vote are
represented at the meeting in person or by proxy; or
(2) the holders of a specified portion of the shares
that is less than the majority but not less than one-third of the
shares entitled to vote are represented at the meeting in person or
by proxy.
(c) Unless provided by the certificate of formation or
bylaws of the corporation, after a quorum is present at a meeting of
shareholders, the shareholders may conduct business properly
brought before the meeting until the meeting is adjourned. The
subsequent withdrawal from the meeting of a shareholder or the
refusal of a shareholder present at or represented by proxy at the
meeting to vote does not negate the presence of a quorum at the
meeting.
(d) Unless provided by the certificate of formation or
bylaws, the shareholders of the corporation at a meeting at which a
quorum is not present may adjourn the meeting until the time and to
the place as may be determined by a vote of the holders of the
majority of the shares who are present or represented by proxy at
the meeting. (TBCA 2.28.A.)
Sec. 21.359. VOTING IN ELECTION OF DIRECTORS. (a) Subject
to Subsection (b), directors of a corporation shall be elected by a
plurality of the votes cast by the holders of shares entitled to
vote in the election of directors at a meeting of shareholders at
which a quorum is present.
(b) The certificate of formation or bylaws of a corporation
may provide that a director of a corporation shall be elected only
if the director receives:
(1) the vote of the holders of a specified portion, but
not less than the majority, of the shares entitled to vote in the
election of directors;
(2) the vote of the holders of a specified portion, but
not less than the majority, of the shares entitled to vote in the
election of directors and represented in person or by proxy at a
meeting of shareholders at which a quorum is present; or
(3) the vote of the holders of a specified portion, but
not less than the majority, of the votes cast by the holders of
shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present. (TBCA 2.28.C.)
Sec. 21.360. NO CUMULATIVE VOTING RIGHT UNLESS AUTHORIZED.
Except as provided by Section 21.361 or 21.362, a shareholder does
not have the right to cumulate the shareholder's vote in the
election of directors. (New.)
Sec. 21.361. CUMULATIVE VOTING IN ELECTION OF DIRECTORS.
(a) If expressly authorized by a corporation's certificate of
formation in general or with respect to a specified class or series
of shares or group of classes or series of shares and subject to
Subsections (b) and (c), at each election of directors of the
corporation each shareholder entitled to vote at the election is
entitled to:
(1) vote the number of shares owned by the shareholder
for as many candidates as there are directors to be elected and for
whose election the shareholder is entitled to vote; or
(2) cumulate votes by:
(A) giving one candidate as many votes as the
total of the number of the directors to be elected multiplied by the
shareholder's shares; or
(B) distributing the votes among one or more
candidates using the same principle.
(b) Cumulative voting permitted by the certificate of
formation is permitted only in an election of directors in which a
shareholder who intends to cumulate votes has given written notice
of that intention to the secretary of the corporation on or before
the day preceding the date of the election at which the shareholder
intends to cumulate votes.
(c) All shareholders entitled to vote cumulatively may
cumulate their votes if a shareholder gives the notice required by
Subsection (b). (TBCA 2.29.D.)
Sec. 21.362. CUMULATIVE VOTING RIGHT IN CERTAIN
CORPORATIONS. Except as provided by the corporation's certificate
of formation, a shareholder of a corporation incorporated before
the effective date of this code has the right to cumulatively vote
the number of shares the shareholder owns in the election of
directors to the extent permitted and in the manner provided by
Section 21.361. A corporation may limit or deny a shareholder's
right to cumulatively vote shares at any time after the effective
date of this code by amending its certificate of formation. (New.)
Sec. 21.363. VOTING ON MATTERS OTHER THAN ELECTION OF
DIRECTORS. (a) Subject to Subsection (b), with respect to a matter
other than the election of directors or a matter for which the
affirmative vote of the holders of a specified portion of the shares
entitled to vote is required by this code, the affirmative vote of
the holders of the majority of the shares entitled to vote on, and
who voted for, against, or expressly abstained with respect to, the
matter at a shareholders' meeting of a corporation at which a quorum
is present is the act of the shareholders.
(b) With respect to a matter other than the election of
directors or a matter for which the affirmative vote of the holders
of a specified portion of the shares entitled to vote is required by
this code, the certificate of formation or bylaws of a corporation
may provide that the act of the shareholders of the corporation is:
(1) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on that matter;
(2) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on that matter and represented in person or by proxy at a
shareholders' meeting at which a quorum is present;
(3) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on, and who voted for or against, the matter at a shareholders'
meeting at which a quorum is present; or
(4) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on, and who voted for, against, or expressly abstained with
respect to, the matter at a shareholders' meeting at which a quorum
is present. (TBCA 2.28.B.)
Sec. 21.364. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION.
(a) In this section, a "fundamental action" means:
(1) an amendment of a certificate of formation;
(2) a voluntary winding up under Chapter 11;
(3) a revocation of a voluntary decision to wind up
under Section 11.151;
(4) a cancellation of an event requiring winding up
under Section 11.152; or
(5) a reinstatement under Section 11.202.
(b) Except as otherwise provided by this code or the
certificate of formation or bylaws of a corporation in accordance
with Section 21.363, the vote required for approval of a
fundamental action by the shareholders is the affirmative vote of
the holders of at least two-thirds of the outstanding shares
entitled to vote on the fundamental action.
(c) If a class or series of shares is entitled to vote as a
class or series on a fundamental action, the vote required for
approval of the action by the shareholders is the affirmative vote
of the holders of at least two-thirds of the outstanding shares in
each class or series of shares entitled to vote on the action as a
class or series and at least two-thirds of the outstanding shares
otherwise entitled to vote on the action. Shares entitled to vote
as a class or series shall be entitled to vote only as a class or
series unless otherwise entitled to vote on each matter submitted
to the shareholders generally or otherwise provided by the
certificate of formation.
(d) Unless an amendment to the certificate of formation is
undertaken by the board of directors under Section 21.155, separate
voting by a class or series of shares of a corporation is required
for approval of an amendment to the certificate of formation that
would result in:
(1) the increase or decrease of the aggregate number
of authorized shares of the class or series;
(2) the increase or decrease of the par value of the
shares of the class or series, including changing shares with par
value into shares without par value or changing shares without par
value into shares with par value;
(3) effecting an exchange, reclassification, or
cancellation of all or part of the shares of the class or series;
(4) effecting an exchange or creating a right of
exchange of all or part of the shares of another class or series
into the shares of the class or series;
(5) the change of the designations, preferences,
limitations, or relative rights of the shares of the class or
series;
(6) the change of the shares of the class or series,
with or without par value, into the same or a different number of
shares, with or without par value, of the same class or series or
another class or series;
(7) the creation of a new class or series of shares
with rights and preferences equal, prior, or superior to the shares
of the class or series;
(8) increasing the rights and preferences of a class
or series with rights and preferences equal, prior, or superior to
the shares of the class or series;
(9) increasing the rights and preferences of a class
or series with rights or preferences later or inferior to the shares
of the class or series in such a manner that the rights or
preferences will be equal, prior, or superior to the shares of the
class or series;
(10) dividing the shares of the class into series and
setting and determining the designation of the series and the
variations in the relative rights and preferences between the
shares of the series;
(11) the limitation or denial of existing preemptive
rights or cumulative voting rights of the shares of the class or
series;
(12) canceling or otherwise affecting the dividends on
the shares of the class or series that have accrued but have not
been declared; or
(13) the inclusion or deletion from the certificate of
formation of provisions required or permitted to be included in the
certificate of formation of a close corporation under Subchapter O.
(e) The vote required under Subsection (d) by a class or
series of shares of a corporation is required notwithstanding that
shares of that class or series do not otherwise have a right to vote
under the certificate of formation.
(f) Unless otherwise provided by the certificate of
formation, if the holders of the outstanding shares of a class that
is divided into series are entitled to vote as a class on a proposed
amendment that would affect equally all series of the class, other
than a series in which no shares are outstanding or a series that is
not affected by the amendment, the holders of the separate series
are not entitled to separate class votes.
(g) Unless otherwise provided by the certificate of
formation, a proposed amendment to the certificate of formation
that would solely effect changes in the designations, preferences,
limitations, or relative rights, including voting rights, of one or
more series of shares of the corporation that have been established
under the authority granted to the board of directors in the
certificate of formation in accordance with Section 21.155 does not
require the approval of the holders of the outstanding shares of a
class or series other than the affected series if, after giving
effect to the amendment:
(1) the preferences, limitations, or relative rights
of the affected series may be set and determined by the board of
directors with respect to the establishment of a new series of
shares under the authority granted to the board of directors in the
certificate of formation in accordance with Section 21.155; or
(2) any new series established as a result of a
reclassification of the affected series are within the preferences,
limitations, and relative rights that are described by Subdivision
(1). (TBCA 4.02.A (part), 4.03, 6.03.A (part), 6.05.A (part).)
Sec. 21.365. CHANGES IN VOTE REQUIRED FOR CERTAIN MATTERS.
(a) With respect to a matter for which the affirmative vote of the
holders of a specified portion of the shares entitled to vote is
required by this code, the certificate of formation of a
corporation may provide that the affirmative vote of the holders of
a specified portion, but not less than the majority, of the shares
entitled to vote on that matter is required for shareholder action
on that matter.
(b) With respect to a matter for which the affirmative vote
of the holders of a specified portion of the shares of a class or
series is required by this code, the certificate of formation may
provide that the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares of that class
or series is required for action of the holders of shares of that
class or series on that matter.
(c) If a provision of the certificate of formation provides
that the affirmative vote of the holders of a specified portion that
is greater than the majority of the shares entitled to vote on a
matter is required for shareholder action on that matter, the
provision may not be amended, directly or indirectly, without the
same affirmative vote unless otherwise provided by the certificate
of formation.
(d) If a provision of the certificate of formation provides
that the affirmative vote of the holders of a specified portion that
is greater than the majority of the shares of a class or series is
required for shareholder action on a matter, the provision may not
be amended, directly or indirectly, without the same affirmative
vote unless otherwise provided by the certificate of formation.
(TBCA 2.28.D.)
Sec. 21.366. NUMBER OF VOTES PER SHARE. (a) Except as
provided by the certificate of formation of a corporation or this
code, each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a
shareholders' meeting.
(b) If the certificate of formation provides for more or
less than one vote per share on a matter for all of the outstanding
shares or for the shares of a class or series, each reference in
this code or in the certificate of formation or bylaws, unless
expressly stated otherwise, to a specified portion of the shares
with respect to that matter refers to the portion of the votes
entitled to be cast with respect to those shares under the
certificate of formation. (TBCA 2.29.A.)
Sec. 21.367. VOTING IN PERSON OR BY PROXY. (a) A
shareholder may vote in person or by proxy executed in writing by
the shareholder.
(b) A telegram, telex, cablegram, or other form of
electronic transmission, including telephonic transmission, by the
shareholder, or a photographic, photostatic, facsimile, or similar
reproduction of a writing executed by the shareholder, is
considered an execution in writing for purposes of this section.
Any electronic transmission must contain or be accompanied by
information from which it can be determined that the transmission
was authorized by the shareholder. (TBCA 2.29.C (part); New.)
Sec. 21.368. TERM OF PROXY. A proxy is not valid after 11
months after the date the proxy is executed unless otherwise
provided by the proxy. (TBCA 2.29.C (part).)
Sec. 21.369. REVOCABILITY OF PROXY. (a) In this section, a
"proxy coupled with an interest" includes the appointment as proxy
of:
(1) a pledgee;
(2) a person who purchased or agreed to purchase the
shares subject to the proxy;
(3) a person who owns or holds an option to purchase
the shares subject to the proxy;
(4) a creditor of the corporation who extended the
corporation credit under terms requiring the appointment;
(5) an employee of the corporation whose employment
contract requires the appointment; or
(6) a party to a voting agreement created under
Section 6.252 or a shareholders' agreement created under Section
21.101.
(b) A proxy is revocable unless:
(1) the proxy form conspicuously states that the proxy
is irrevocable; and
(2) the proxy is coupled with an interest. (TBCA
2.29.C (part).)
Sec. 21.370. ENFORCEABILITY OF PROXY. (a) An irrevocable
proxy is specifically enforceable against the holder of shares or
any successor or transferee of the holder if:
(1) the proxy is noted conspicuously on the
certificate representing the shares subject to the proxy; or
(2) in the case of uncertificated shares, notation of
the proxy is contained in the notice sent under Section 3.205 with
respect to the shares subject to the proxy.
(b) An irrevocable proxy that is otherwise enforceable is
ineffective against a transferee for value without actual knowledge
of the existence of the irrevocable proxy at the time of the
transfer or against a subsequent transferee, regardless of whether
the transfer is for value, unless the proxy is:
(1) noted conspicuously on the certificate
representing the shares subject to the proxy; or
(2) in the case of uncertificated shares, notation of
the proxy is contained in the notice sent under Section 3.205 with
respect to the shares subject to the proxy.
(c) An irrevocable proxy shall be specifically enforceable
against a person who is not a transferee for value from the time the
person acquires actual knowledge of the existence of the
irrevocable proxy. (TBCA 2.29.C (part).)
Sec. 21.371. PROCEDURES IN BYLAWS RELATING TO PROXIES. A
corporation may establish in the corporation's bylaws procedures
consistent with this code for determining the validity of proxies
and determining whether shares that are held of record by a bank,
broker, or other nominee are represented at a meeting of
shareholders. The procedures may incorporate rules of and
determinations made by a stock exchange or self-regulatory
organization regulating the corporation or that bank, broker, or
other nominee. (TBCA 2.28.E.)
Sec. 21.372. SHAREHOLDER MEETING LIST. (a) Not later than
the 11th day before the date of each meeting of the shareholders of
a corporation, an officer or agent of the corporation who is in
charge of the corporation's shareholder records shall prepare an
alphabetical list of the shareholders entitled to vote at the
meeting or at any adjournment of the meeting. The list of
shareholders must:
(1) state:
(A) the address of each shareholder;
(B) the type of shares held by each shareholder;
(C) the number of shares held by each
shareholder; and
(D) the number of votes that each shareholder is
entitled to if the number of votes is different from the number of
shares stated under Paragraph (C); and
(2) be kept on file at the registered office or
principal executive office of the corporation for at least 10 days
before the date of the meeting.
(b) The original share transfer records of the corporation
are prima facie evidence of the shareholders of the corporation
entitled to vote at the meeting.
(c) Failure to comply with this section does not affect the
validity of any action taken at a meeting of the shareholders of the
corporation. (TBCA 2.27.A, B.)
[Sections 21.373-21.400 reserved for expansion]
SUBCHAPTER I. BOARD OF DIRECTORS
Sec. 21.401. MANAGEMENT BY BOARD OF DIRECTORS. (a) Except
as provided by Section 21.101 or Subchapter O, the board of
directors of a corporation shall:
(1) exercise or authorize the exercise of the powers
of the corporation; and
(2) direct the management of the business and affairs
of the corporation.
(b) In discharging the duties of director under this code or
otherwise and in considering the best interests of the corporation,
a director may consider the long-term and short-term interests of
the corporation and the shareholders of the corporation, including
the possibility that those interests may be best served by the
continued independence of the corporation. (TBCA 2.31 (part),
13.06.)
Sec. 21.402. BOARD MEMBER ELIGIBILITY REQUIREMENTS. Unless
the certificate of formation or bylaws of a corporation provide
otherwise, a person is not required to be a resident of this state
or a shareholder of the corporation to serve as a director. The
certificate of formation or bylaws may prescribe other
qualifications for directors. (TBCA 2.31 (part).)
Sec. 21.403. NUMBER OF DIRECTORS. (a) The board of
directors of a corporation may consist of one or more directors.
(b) If the corporation is to be managed by a board of
directors, the number of directors shall be set by, or in the manner
provided by, the certificate of formation or bylaws of the
corporation, except that the number of directors on the initial
board of directors must be set by the certificate of formation.
(c) The number of directors may be increased or decreased by
amendment to, or as provided by, the certificate of formation or
bylaws. A decrease in the number of directors may not shorten the
term of an incumbent director.
(d) If the certificate of formation or bylaws do not set the
number constituting the board of directors or provide for the
manner in which the number of directors must be determined, the
number of directors is the same as the number constituting the
initial board of directors as set by the certificate of formation.
(TBCA 2.32.A (part).)
Sec. 21.404. DESIGNATION OF INITIAL BOARD OF DIRECTORS. If
the corporation is to be managed by a board of directors, the
certificate of formation of a corporation must state the names and
addresses of the persons constituting the initial board of
directors of the corporation. (TBCA 2.32.A (part).)
Sec. 21.405. ELECTION OF BOARD OF DIRECTORS. (a) At the
first annual meeting of shareholders of a corporation and at each
subsequent annual meeting of shareholders, the holders of shares
entitled to vote in the election of directors shall elect directors
for the term provided under Section 21.407, except as provided by
Section 21.408.
(b) A corporation's certificate of formation may provide
that the holders of a class or series of shares or a group of classes
or series of shares are entitled to elect one or more directors of
the corporation. (TBCA 2.32.A (part), B (part).)
Sec. 21.406. SPECIAL VOTING RIGHTS OF DIRECTORS. (a) The
certificate of formation of a corporation may provide that
directors elected by the holders of a class or series of shares or
by a group of classes or series of shares entitled to elect one or
more directors, as provided by Section 21.405, are entitled to cast
more or less than one vote on specified matters.
(b) Unless expressly stated otherwise, each reference in
this code or in a corporation's certificate of formation or bylaws
to a specified portion of the directors means the portion of the
votes entitled to be cast by the directors to which the reference
applies. (TBCA 2.32.B (part).)
Sec. 21.407. TERM OF OFFICE. Unless otherwise provided by
this subchapter or removed in accordance with Section 21.409, the
term of office of a director extends from the date the director is
elected and qualified or named in the corporation's certificate of
formation until the next annual meeting of shareholders and until
the director's successor is elected and qualified. (TBCA 2.32.A
(part), B (part).)
Sec. 21.408. SPECIAL TERMS OF OFFICE. (a) The certificate
of formation or bylaws of a corporation may provide that all or some
of the board of directors may be divided into two or three classes
that shall include the same or a similar number of directors as each
other class and that have staggered terms of office.
(b) The terms of office of the initial directors
constituting the first class expire at the first annual meeting of
shareholders after the election of those directors. The terms of
office of the initial directors constituting the second class
expire at the second annual meeting of shareholders after election
of those directors. The terms of office of the initial directors
constituting the third class, if any, expire at the third annual
meeting of shareholders after election of those directors.
(c) If the certificate of formation or bylaws provide for
staggered terms of directors, the shareholders, at each annual
meeting, shall elect a number of directors equal to the number of
the class of directors whose terms expire at the time of the
meeting. The directors elected at an annual meeting shall hold
office until the second succeeding annual meeting, if there are two
classes, or until the third succeeding annual meeting, if there are
three classes.
(d) Unless provided by the certificate of formation or a
bylaw adopted by the shareholders, staggered terms for directors
must be effected at a meeting of shareholders at which directors are
elected. Staggered terms for directors may not be effected if any
shareholder has the right to cumulate votes for the election of
directors and the board of directors consists of fewer than nine
members.
(e) Directors elected by the holders of a class or series of
shares or a group of classes or series of shares in accordance with
the certificate of formation shall hold office for the terms
specified by the certificate of formation. (TBCA 2.32.B (part),
2.33.)
Sec. 21.409. REMOVAL OF DIRECTORS. (a) Except as otherwise
provided by the certificate of formation or bylaws of a corporation
or this subchapter, the shareholders of the corporation may remove
a director or the entire board of directors of the corporation, with
or without cause, at a meeting called for that purpose, by a vote of
the holders of a specified portion, but not less than the majority,
of the shares entitled to vote at an election of directors.
(b) If the certificate of formation entitles the holders of
a class or series of shares or a group of classes or series of shares
to elect one or more directors, only the holders of shares of that
class, series, or group may vote on the removal of a director
elected by the holders of shares of that class, series, or group.
(c) If the certificate of formation permits cumulative
voting and less than the entire board is to be removed, a director
may not be removed if the votes cast against the removal would be
sufficient to elect the director if cumulatively voted at an
election of the entire board of directors, or if there are classes
of directors, at an election of the class of directors of which the
director is a part.
(d) In the case of a corporation the directors of which
serve staggered terms, a director may not be removed except for
cause unless the certificate of formation provides otherwise.
(TBCA 2.32.C.)
Sec. 21.410. VACANCY. (a) A vacancy occurring in the
initial board of directors before the issuance of shares may be
filled by the affirmative vote or written consent of the majority of
the organizers or by the affirmative vote of the majority of the
remaining directors, even if the majority of the remaining
directors constitutes less than a quorum of the board of directors.
(b) Except as provided by Subsection (e), a vacancy
occurring in the board of directors after the issuance of shares may
be filled by election at an annual or special meeting of
shareholders called for that purpose or by the affirmative vote of
the majority of the remaining directors, even if the majority of
directors constitutes less than a quorum of the board of directors.
(c) The term of a director elected to fill a vacancy
occurring in the board of directors, including the initial
directors, is the unexpired term of the director's predecessor in
office.
(d) Except as provided by Subsection (e), a vacancy to be
filled because of an increase in the number of directors may be
filled by election at an annual or special meeting of shareholders
called for that purpose or by the board of directors for a term of
office continuing only until the next election of one or more
directors by the shareholders. During a period between two
successive annual meetings of shareholders, the board of directors
may not fill more than two vacancies created by an increase in the
number of directors.
(e) Unless otherwise authorized by a corporation's
certificate of formation, a vacancy or a newly created vacancy in a
director position that the certificate of formation entitles the
holders of a class or series of shares or group of classes or series
of shares to elect may be filled only:
(1) by the affirmative vote of the majority of the
directors then in office elected by the class, series, or group;
(2) by the sole remaining director elected in that
manner; or
(3) by the affirmative vote of the holders of the
outstanding shares of the class, series, or group. (TBCA 2.34.)
Sec. 21.411. NOTICE OF MEETING. (a) Regular meetings of the
board of directors of a corporation may be held with or without
notice as prescribed by the corporation's bylaws.
(b) Special meetings of the board of directors shall be held
with notice as prescribed by the bylaws.
(c) A notice of a board meeting is not required to specify
the business to be transacted at the meeting or the purpose of the
meeting, unless required by the bylaws. (TBCA 2.37.B (part).)
Sec. 21.412. WAIVER OF NOTICE. (a) If the bylaws of a
corporation require notice of a meeting to be given to a director, a
written waiver of the notice signed by the director entitled to the
notice, before or after the meeting, is equivalent to the giving of
the notice.
(b) The attendance of a director at a board meeting
constitutes a waiver of notice of the meeting, unless the director
attends the meeting for the express purpose of objecting to the
transaction of business at the meeting because the meeting has not
been lawfully called or convened.
(c) A waiver of notice of a board meeting is not required to
specify the business to be transacted at the meeting or the purpose
of the meeting, unless required by the bylaws. (TBCA 2.37.B
(part).)
Sec. 21.413. QUORUM. (a) A quorum of the board of directors
is the majority of the number of directors set or established in the
manner provided by the certificate of formation or bylaws of a
corporation unless the laws of this state, the certificate of
formation, or the bylaws require a different number or portion.
(b) Neither the certificate of formation nor the bylaws may
provide that less than one-third of the number of directors
constitutes a quorum. (TBCA 2.35 (part).)
Sec. 21.414. DISSENT TO ACTION. (a) A director of a
corporation who is present at a meeting of the board of directors at
which action has been taken is presumed to have assented to the
action taken unless:
(1) the director's dissent has been entered in the
minutes of the meeting;
(2) the director has filed a written dissent to the
action with the person acting as the secretary of the meeting before
the meeting is adjourned; or
(3) the director has sent a written dissent by
registered mail to the secretary of the corporation immediately
after the meeting has been adjourned.
(b) A director who voted in favor of an action may not
dissent to the action. (TBCA 2.41.B.)
Sec. 21.415. ACTION BY DIRECTORS. (a) The act of a majority
of the directors present at a meeting at which a quorum is present
is the act of the board of directors of a corporation, unless the
act of a greater number is required by the certificate of formation
or bylaws of the corporation or by this code.
(b) Unless otherwise provided by the certificate of
formation or bylaws, a written consent stating the action taken and
signed by all members of the board of directors is also an act of the
board of directors. (TBCA 2.35 (part), 9.10.B (part).)
Sec. 21.416. COMMITTEES OF BOARD OF DIRECTORS. (a) If
authorized by the certificate of formation or bylaws of a
corporation, the board of directors of the corporation, by
resolution adopted by the majority of the entire board of
directors, may designate:
(1) committees composed of one or more directors; or
(2) directors as alternate members of committees to
replace absent or disqualified committee members at a committee
meeting, subject to any limitations imposed by the board of
directors.
(b) To the extent provided by the resolution designating a
committee or the certificate of formation or bylaws and subject to
Subsection (c), the committee has the authority of the board of
directors.
(c) A committee of the board of directors may not:
(1) amend the certificate of formation, except to:
(A) establish series of shares;
(B) increase or decrease the number of shares in
a series; or
(C) eliminate a series of shares as authorized by
Section 21.155;
(2) propose a reduction of stated capital under
Sections 21.253 and 21.254;
(3) approve a plan of merger, share exchange, or
conversion of the corporation;
(4) recommend to shareholders the sale, lease, or
exchange of all or substantially all of the property and assets of
the corporation not made in the usual and regular course of its
business;
(5) recommend to the shareholders a voluntary winding
up and termination or a revocation of a voluntary winding up and
termination;
(6) amend, alter, or repeal the bylaws or adopt new
bylaws;
(7) fill vacancies on the board of directors;
(8) fill vacancies on or designate alternate members
of a committee of the board of directors;
(9) fill a vacancy to be filled because of an increase
in the number of directors;
(10) elect or remove officers of the corporation or
members or alternate members of a committee of the board of
directors;
(11) set the compensation of the members or alternate
members of a committee of the board of directors; or
(12) alter or repeal a resolution of the board of
directors that states that it may not be amended or repealed by a
committee of the board of directors.
(d) A committee of the board of directors may authorize a
distribution or the issuance of shares if authorized by the
resolution designating the committee or the certificate of
formation or bylaws.
(e) The board of directors may remove a member of a
committee appointed by the board if the board determines the
removal is in the best interests of the corporation. The removal of
the member is without prejudice to any contract rights of the person
removed. Appointment of a member of a committee does not create
contract rights.
(f) The designation and delegation of authority to a
committee of the board of directors does not relieve the board of
directors or a director of responsibility imposed by law. (TBCA
2.36, 9.10.B.)
Sec. 21.417. ELECTION OF OFFICERS. The board of directors
of a corporation shall elect a president and a secretary at the time
and in the manner prescribed by the corporation's bylaws. Other
officers, including assistant officers and agents as deemed
necessary, may be elected in accordance with Section 3.103. (TBCA
2.42.A (part).)
Sec. 21.418. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED DIRECTORS AND OFFICERS. (a) This section applies only
to a contract or transaction between a corporation and:
(1) one or more of the corporation's directors or
officers; or
(2) an entity or other organization in which one or
more of the corporation's directors or officers:
(A) is a managerial official; or
(B) has a financial interest.
(b) An otherwise valid contract or transaction is valid
notwithstanding that a director or officer of the corporation is
present at or participates in the meeting of the board of directors,
or of a committee of the board that authorizes the contract or
transaction, or votes to authorize the contract or transaction, if:
(1) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed to or
known by:
(A) the corporation's board of directors or a
committee of the board of directors and the board of directors or
committee in good faith authorizes the contract or transaction by
the affirmative vote of the majority of the disinterested directors
or committee members, regardless of whether the disinterested
directors or committee members constitute a quorum; or
(B) the shareholders entitled to vote on the
authorization of the contract or transaction, and the contract or
transaction is specifically approved in good faith by a vote of the
shareholders; or
(2) the contract or transaction is fair to the
corporation when the contract or transaction is authorized,
approved, or ratified by the board of directors, a committee of the
board of directors, or the shareholders.
(c) Common or interested directors of a corporation may be
included in determining the presence of a quorum at a meeting of the
corporation's board of directors, or a committee of the board of
directors, that authorizes the contract or transaction. (TBCA
2.35-1.)
[Sections 21.419-21.450 reserved for expansion]
SUBCHAPTER J. FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 21.451. DEFINITIONS. In this subchapter:
(1) "Participating shares" means shares that entitle
the holders of the shares to participate without limitation in
distributions.
(2) "Sale of all or substantially all of the assets"
means the sale, lease, exchange, or other disposition, other than a
pledge, mortgage, deed of trust, or trust indenture unless
otherwise provided by the certificate of formation, of all or
substantially all of the property and assets of a domestic
corporation that is not made in the usual and regular course of the
corporation's business without regard to whether the disposition is
made with the goodwill of the business. The term does not include a
transaction that results in the corporation directly or indirectly:
(A) continuing to engage in one or more
businesses; or
(B) applying a portion of the consideration
received in connection with the transaction to the conduct of a
business that the corporation engages in after the transaction.
(3) "Shares" includes a receipt or other instrument
issued by a depository representing an interest in one or more
shares or fractions of shares of a domestic or foreign corporation
that are deposited with the depository.
(4) "Voting shares" means shares that entitle the
holders of the shares to vote unconditionally in elections of
directors. (TBCA 5.03.I(3), (5), (6), 5.09.A (part), B.)
Sec. 21.452. APPROVAL OF MERGER. (a) A corporation that is
a party to the merger under Chapter 10 must approve the merger by
complying with this section.
(b) The board of directors of the corporation shall adopt a
resolution that:
(1) approves the plan of merger; and
(2) if shareholder approval of the merger is required
by this subchapter:
(A) recommends that the plan of merger be
approved by the shareholders of the corporation; or
(B) directs that the plan of merger be submitted
to the shareholders for approval without recommendation if the
board of directors determines for any reason not to recommend
approval of the plan of merger.
(c) Except as otherwise provided by this subchapter or
Chapter 10, the plan of merger shall be submitted to the
shareholders of the corporation for approval as provided by this
subchapter. The board of directors may place conditions on the
submission of the plan of merger to the shareholders.
(d) If the board of directors approves a plan of merger
required to be approved by the shareholders of the corporation but
does not adopt a resolution recommending that the plan of merger be
approved by the shareholders, the board of directors shall
communicate to the shareholders the reason for the board's
determination to submit the plan of merger without a
recommendation.
(e) Except as provided by Chapter 10 or Sections
21.457-21.459, the shareholders of the corporation shall approve
the plan of merger as provided by this subchapter. (TBCA 5.03.A
(part), B (part), C.)
Sec. 21.453. APPROVAL OF CONVERSION. (a) A corporation
must approve a conversion under Chapter 10 by complying with this
section.
(b) The board of directors of the corporation shall adopt a
resolution that approves the plan of conversion and:
(1) recommends that the plan of conversion be approved
by the shareholders of the corporation; or
(2) directs that the plan of conversion be submitted
to the shareholders for approval without recommendation if the
board of directors determines for any reason not to recommend
approval of the plan of conversion.
(c) The plan of conversion shall be submitted to the
shareholders of the corporation for approval as provided by this
subchapter. The board of directors may place conditions on the
submission of the plan of conversion to the shareholders.
(d) If the board of directors approves a plan of conversion
but does not adopt a resolution recommending that the plan of
conversion be approved by the shareholders of the corporation, the
board of directors shall communicate to the shareholders the reason
for the board's determination to submit the plan of conversion
without a recommendation.
(e) Except as provided by Sections 21.457-21.459, the
shareholders of the corporation shall approve the plan of
conversion as provided by this subchapter. (TBCA 5.03.B, C, 5.17.A
(part).)
Sec. 21.454. APPROVAL OF EXCHANGE. (a) A corporation the
shares of which are to be acquired in an exchange under Chapter 10
must approve the exchange by complying with this section.
(b) The board of directors shall adopt a resolution that
approves the plan of exchange and:
(1) recommends that the plan of exchange be approved
by the shareholders of the corporation; or
(2) directs that the plan of exchange be submitted to
the shareholders for approval without recommendation if the board
of directors determines for any reason not to recommend approval of
the plan of exchange.
(c) The plan of exchange shall be submitted to the
shareholders of the corporation for approval as provided by this
subchapter. The board of directors may place conditions on the
submission of the plan of exchange to the shareholders.
(d) If the board of directors approves a plan of exchange
but does not adopt a resolution recommending that the plan of
exchange be approved by the shareholders of the corporation, the
board of directors shall communicate to the shareholders the reason
for the board's determination to submit the plan of exchange to
shareholders without a recommendation.
(e) Except as provided by Sections 21.457-21.459, the
shareholders of the corporation shall approve the plan of exchange
as provided by this subchapter. (TBCA 5.02.A (part), 5.03.B (part),
C (part).)
Sec. 21.455. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
ASSETS. (a) Except as provided by the certificate of formation of a
domestic corporation, a sale, lease, pledge, mortgage, assignment,
transfer, or other conveyance of an interest in real property or
other assets of the corporation does not require the approval or
consent of the shareholders of the corporation unless the
transaction constitutes a sale of all or substantially all of the
assets of the corporation.
(b) A corporation must approve the sale of all or
substantially all of its assets by complying with this section.
(c) The board of directors of the corporation shall adopt a
resolution that approves the sale of all or substantially all of the
assets of the corporation and:
(1) recommends that the sale of all or substantially
all of the assets of the corporation be approved by the shareholders
of the corporation; or
(2) directs that the sale of all or substantially all
of the assets of the corporation be submitted to the shareholders
for approval without recommendation if the board of directors
determines for any reason not to recommend approval of the sale.
(d) The resolution proposing the sale of all or
substantially all of the assets of the corporation shall be
submitted to the shareholders of the corporation for approval as
provided by this subchapter. The board of directors may place
conditions on the submission of the proposed sale to the
shareholders.
(e) If the board of directors approves the sale of all or
substantially all of the assets of the corporation but does not
adopt a resolution recommending that the proposed sale be approved
by the shareholders of the corporation, the board of directors
shall communicate to the shareholders the reason for the board's
determination to submit the proposed sale to shareholders without a
recommendation.
(f) The shareholders of the corporation shall approve the
sale of all or substantially all of the assets of the corporation as
provided by this subchapter. After the approval of the sale by the
shareholders, the board of directors may abandon the sale of all or
substantially all of the assets of the corporation, subject to the
rights of a third party under a contract relating to the assets,
without further action or approval by the shareholders. (TBCA
5.09.A (part), 5.10.A (part).)
Sec. 21.456. GENERAL PROCEDURE FOR SUBMISSION TO
SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION. (a) If a
fundamental business transaction involving a corporation is
required to be submitted to the shareholders of the corporation
under this subchapter, the corporation shall notify each
shareholder of the corporation that the fundamental business
transaction is being submitted to the shareholders for approval at
a meeting of shareholders as required by this subchapter,
regardless of whether the shareholder is entitled to vote on the
matter.
(b) If the fundamental business transaction is a merger,
conversion, or interest exchange, the notice required by Subsection
(a) shall contain or be accompanied by a copy or summary of the plan
of merger, conversion, or interest exchange, as appropriate, and
the notice required by Section 10.355.
(c) The notice of the meeting must:
(1) be given not later than the 21st day before the
date of the meeting; and
(2) state that the purpose, or one of the purposes, of
the meeting is to consider the fundamental business transaction.
(TBCA 5.03.D, 5.10.A(3).)
Sec. 21.457. GENERAL VOTE REQUIREMENT FOR APPROVAL OF
FUNDAMENTAL BUSINESS TRANSACTION. (a) Except as provided by this
code or the certificate of formation of a corporation in accordance
with Section 21.365, the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the corporation entitled to
vote on a fundamental business transaction is required to approve
the transaction.
(b) Unless provided by the certificate of formation or
Section 21.458, shares of a class or series that are not otherwise
entitled to vote on matters submitted to shareholders generally are
not entitled to vote for the approval of a fundamental business
transaction.
(c) Except as provided by this code, if a class or series of
shares of a corporation is entitled to vote on a fundamental
business transaction as a class or series, in addition to the vote
required under Subsection (a), the affirmative vote of the holders
of at least two-thirds of the outstanding shares in each class or
series of shares entitled to vote on the fundamental business
transaction as a class or series is required to approve the
transaction. Shares entitled to vote as a class or series shall only
be entitled to vote as a class or series on the fundamental business
transaction unless that class or series is otherwise entitled to
vote on each matter submitted to the shareholders generally or is
otherwise entitled to vote under the certificate of formation.
(d) Unless required by the certificate of formation,
approval of a merger by shareholders is not required under this code
for a corporation that is a party to the plan of merger unless that
corporation is also a party to the merger. (TBCA 5.01.A (part),
5.03.E, 5.10.A(4).)
Sec. 21.458. CLASS VOTING REQUIREMENTS FOR CERTAIN
FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Separate voting by a class
or series of shares of a corporation is required for approval of a
plan of merger or conversion if:
(1) the plan of merger or conversion contains a
provision that would require approval by that class or series of
shares under Section 21.364 if the provision was contained in a
proposed amendment to the corporation's certificate of formation;
or
(2) that class or series of shares is entitled under
the certificate of formation to vote as a class or series on the
plan of merger or conversion.
(b) Separate voting by a class or series of shares of a
corporation is required for approval of a plan of exchange if:
(1) shares of that class or series are to be exchanged
under the terms of the plan of exchange; or
(2) that class or series is entitled under the
certificate of formation to vote as a class or series on the plan of
exchange.
(c) Separate voting by a class or series of shares of a
corporation is required for approval of a sale of all or
substantially all of the assets of a corporation if that class or
series of shares is entitled under the certificate of formation to
vote as a class or series on the sale of the corporation's assets.
(TBCA 5.03.F, 5.10.A(4) (part).)
Sec. 21.459. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN
FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Unless required by the
corporation's certificate of formation, a plan of merger is not
required to be approved by the shareholders of a corporation if:
(1) the corporation is the sole surviving corporation
in the merger;
(2) the certificate of formation of the corporation
following the merger will not differ from the corporation's
certificate of formation before the merger;
(3) immediately after the effective date of the
merger, each shareholder of the corporation whose shares were
outstanding immediately before the effective date of the merger
will hold the same number of shares, with identical designations,
preferences, limitations, and relative rights;
(4) the sum of the voting power of the number of voting
shares outstanding immediately after the merger and the voting
power of securities that may be acquired on the conversion or
exercise of securities issued under the merger does not exceed by
more than 20 percent the voting power of the total number of voting
shares of the corporation that are outstanding immediately before
the merger; and
(5) the sum of the number of participating shares that
are outstanding immediately after the merger and the number of
participating shares that may be acquired on the conversion or
exercise of securities issued under the merger does not exceed by
more than 20 percent the total number of participating shares of the
corporation that are outstanding immediately before the merger.
(b) Unless required by the certificate of formation, a plan
of merger effected under Section 10.005 or 10.006 does not require
the approval of the shareholders of the corporation. (TBCA
5.03.G.)
Sec. 21.460. RIGHTS OF DISSENT AND APPRAISAL. A shareholder
of a domestic corporation has the rights of dissent and appraisal
under Subchapter H, Chapter 10, with respect to a fundamental
business transaction. (TBCA 5.11.A.)
Sec. 21.461. PLEDGE, MORTGAGE, DEED OF TRUST, OR TRUST
INDENTURE. Except as provided by the corporation's certificate of
formation:
(1) the board of directors of a corporation may
authorize a pledge, mortgage, deed of trust, or trust indenture;
and
(2) an authorization or consent of shareholders is not
required for the validity of the transaction or for any sale under
the terms of the transaction. (TBCA 5.09.A (part).)
Sec. 21.462. CONVEYANCE BY CORPORATION. A corporation may
convey real property of the corporation when authorized by
appropriate resolution of the board of directors. (TBCA 5.09.A
(part).)
[Sections 21.463-21.500 reserved for expansion]
SUBCHAPTER K. WINDING UP AND TERMINATION
Sec. 21.501. APPROVAL OF VOLUNTARY WINDING UP,
REINSTATEMENT, OR REVOCATION OF VOLUNTARY WINDING UP. A corporation
must approve a voluntary winding up in accordance with Chapter 11, a
reinstatement in accordance with Section 11.202, a cancellation of
an event requiring winding up under Section 11.152, or revocation
of a voluntary decision to wind up in accordance with Section 11.151
by complying with one of the procedures prescribed by this
subchapter. (TBCA 6.01 (part), 6.03.A (part), 6.05.A (part).)
Sec. 21.502. CERTAIN PROCEDURES RELATING TO WINDING UP. To
approve a voluntary winding up, a reinstatement, a cancellation of
an event requiring winding up, or a revocation of a voluntary
decision to wind up, a corporation must follow one of the following
procedures:
(1) all shareholders of the corporation must consent
in writing to the winding up, the reinstatement, the cancellation
of an event requiring winding up, or the revocation of a voluntary
decision to wind up the corporation;
(2) if the corporation has not commenced business and
has not issued any shares, a majority of the organizers or the board
of directors of the corporation must adopt a resolution to wind up,
to reinstate, to cancel an event requiring winding up, or to revoke
a voluntary decision to wind up; or
(3)(A) the board of directors of the corporation must
adopt a resolution:
(i) recommending the winding up,
reinstatement, cancellation of an event requiring winding up, or
revocation of a voluntary decision to wind up the corporation; and
(ii) directing that the winding up,
reinstatement, cancellation of an event requiring winding up, or
revocation of a voluntary decision to wind up the corporation be
submitted to the shareholders for approval at an annual or special
meeting of shareholders; and
(B) the shareholders must approve the action
described by Paragraph (A) in accordance with Section 21.503. (TBCA
6.01 (part), 6.02.A, 6.03.A (part), 6.05.A (part).)
Sec. 21.503. MEETING OF SHAREHOLDERS; NOTICE. (a) Each
shareholder of record entitled to vote at a meeting described by
Section 21.502(3)(A)(ii) must be given written notice stating that
the purpose or one of the purposes of the meeting is to consider the
winding up, reinstatement, cancellation of the event requiring
winding up, or revocation of the voluntary decision to wind up the
corporation. The notice must be given in the time and manner
provided by Chapter 6 and this chapter for the giving of notice of
shareholders' meetings.
(b) A vote of shareholders entitled to vote at the meeting
shall be taken on the resolution to wind up, reinstate, cancel the
event requiring winding up, or revoke the voluntary decision to
wind up the corporation. The shareholders must approve the
resolution by the affirmative vote required by Section 21.364.
(TBCA 6.03.A (part), 6.05.A (part).)
Sec. 21.504. RESPONSIBILITY FOR WINDING UP. If a
corporation determines or is required to wind up, the directors of
the corporation shall manage the process of winding up the business
or affairs of the corporation. (New.)
[Sections 21.505-21.550 reserved for expansion]
SUBCHAPTER L. DERIVATIVE PROCEEDINGS
Sec. 21.551. DEFINITIONS. In this subchapter:
(1) "Derivative proceeding" means a civil suit in the
right of a domestic corporation or, to the extent provided by
Section 21.562, in the right of a foreign corporation.
(2) "Shareholder" includes a beneficial owner whose
shares are held in a voting trust or by a nominee on the beneficial
owner's behalf. (TBCA 5.14.A.)
Sec. 21.552. STANDING TO BRING PROCEEDING. A shareholder
may not institute or maintain a derivative proceeding unless:
(1) the shareholder:
(A) was a shareholder of the corporation at the
time of the act or omission complained of; or
(B) became a shareholder by operation of law from
a person that was a shareholder at the time of the act or omission
complained of; and
(2) the shareholder fairly and adequately represents
the interests of the corporation in enforcing the right of the
corporation. (TBCA 5.14.B.)
Sec. 21.553. DEMAND. (a) A shareholder may not institute a
derivative proceeding until the 91st day after the date a written
demand is filed with the corporation stating with particularity the
act, omission, or other matter that is the subject of the claim or
challenge and requesting that the corporation take suitable action.
(b) The waiting period required by Subsection (a) before a
derivative proceeding may be instituted is not required if:
(1) the shareholder has been previously notified that
the demand has been rejected by the corporation;
(2) the corporation is suffering irreparable injury;
or
(3) irreparable injury to the corporation would result
by waiting for the expiration of the 90-day period. (TBCA 5.14.C.)
Sec. 21.554. DETERMINATION BY DIRECTORS OR INDEPENDENT
PERSONS. (a) A determination of how to proceed on allegations made
in a demand or petition relating to a derivative proceeding must be
made by an affirmative vote of the majority of:
(1) the independent and disinterested directors of the
corporation present at a meeting of the board of directors of the
corporation at which interested directors are not present at the
time of the vote if the independent and disinterested directors
constitute a quorum of the board of directors;
(2) a committee consisting of two or more independent
and disinterested directors appointed by an affirmative vote of the
majority of one or more independent and disinterested directors
present at a meeting of the board of directors, regardless of
whether the independent and disinterested directors constitute a
quorum of the board of directors; or
(3) a panel of one or more independent and
disinterested persons appointed by the court on a motion by the
corporation listing the names of the persons to be appointed and
stating that, to the best of the corporation's knowledge, the
persons to be appointed are disinterested and qualified to make the
determinations contemplated by Section 21.558.
(b) The court shall appoint a panel under Subsection (a)(3)
if the court finds that the persons recommended by the corporation
are independent and disinterested and are otherwise qualified with
respect to expertise, experience, independent judgment, and other
factors considered appropriate by the court under the circumstances
to make the determinations. A person appointed by the court to a
panel under this section may not be held liable to the corporation
or the corporation's shareholders for an action taken or omission
made by the person in that capacity, except for an act or omission
constituting fraud or wilful misconduct. (TBCA 5.14.H.)
Sec. 21.555. STAY OF PROCEEDING. (a) If the domestic or
foreign corporation that is the subject of a derivative proceeding
commences an inquiry into the allegations made in a demand or
petition and the person or group of persons described by Section
21.554 is conducting an active review of the allegations in good
faith, the court shall stay a derivative proceeding until the
review is completed and a determination is made by the person or
group regarding what further action, if any, should be taken.
(b) To obtain a stay, the domestic or foreign corporation
shall provide the court with a written statement agreeing to advise
the court and the shareholder making the demand of the
determination promptly on the completion of the review of the
matter. A stay, on application, may be reviewed every 60 days for
the continued necessity of the stay.
(c) If the review and determination made by the person or
group is not completed before the 61st day after the stay is ordered
by the court, the stay may be renewed for one or more additional
60-day periods if the domestic or foreign corporation provides the
court and the shareholder with a written statement of the status of
the review and the reasons why a continued extension of the stay is
necessary. (TBCA 5.14.D(1).)
Sec. 21.556. DISCOVERY. (a) If a domestic or foreign
corporation proposes to dismiss a derivative proceeding under
Section 21.558, discovery by a shareholder after the filing of the
derivative proceeding in accordance with this subchapter shall be
limited to:
(1) facts relating to whether the person or group of
persons described by Section 21.558 is independent and
disinterested;
(2) the good faith of the inquiry and review by the
person or group; and
(3) the reasonableness of the procedures followed by
the person or group in conducting the review.
(b) Discovery described by Subsection (a) may not be
expanded to include a fact or substantive matter regarding the act,
omission, or other matter that is the subject matter of the
derivative proceeding. The scope of discovery may be expanded if
the court determines after notice and hearing that a good faith
review of the allegations for purposes of Section 21.558 has not
been made by an independent and disinterested person or group in
accordance with that section. (TBCA 5.14.D(2).)
Sec. 21.557. TOLLING OF STATUTE OF LIMITATIONS. A written
demand filed with the corporation under Section 21.553 tolls the
statute of limitations on the claim on which demand is made until
the earlier of:
(1) the 91st day after the date of the demand; or
(2) the 31st day after the date the corporation
advises the shareholder that the demand has been rejected or the
review has been completed. (TBCA 5.14.E.)
Sec. 21.558. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A
court shall dismiss a derivative proceeding on a motion by the
corporation if the person or group of persons described by Section
21.554 determines in good faith, after conducting a reasonable
inquiry and based on factors the person or group considers
appropriate under the circumstances, that continuation of the
derivative proceeding is not in the best interests of the
corporation.
(b) In determining whether the requirements of Subsection
(a) have been met, the burden of proof shall be on:
(1) the plaintiff shareholder if:
(A) the majority of the board of directors
consists of independent and disinterested directors at the time the
determination is made;
(B) the determination is made by a panel of one or
more independent and disinterested persons appointed under Section
21.554(a)(3); or
(C) the corporation presents prima facie
evidence that demonstrates that the directors appointed under
Section 21.554(a)(2) are independent and disinterested; or
(2) the corporation in any other circumstance. (TBCA
5.14.F.)
Sec. 21.559. PROCEEDING INSTITUTED AFTER DEMAND REJECTED.
If a derivative proceeding is instituted after a demand is
rejected, the petition must allege with particularity facts that
establish that the rejection was not made in accordance with the
requirements of Sections 21.554 and 21.558. (TBCA 5.14.G.)
Sec. 21.560. DISCONTINUANCE OR SETTLEMENT. (a) A
derivative proceeding may not be discontinued or settled without
court approval.
(b) The court shall direct that notice be given to the
affected shareholders if the court determines that a proposed
discontinuance or settlement may substantially affect the
interests of other shareholders. (TBCA 5.14.I.)
Sec. 21.561. PAYMENT OF EXPENSES. (a) In this section,
"expenses" means reasonable expenses incurred by a party in a
derivative proceeding, including:
(1) attorney's fees;
(2) costs in pursuing an investigation of the matter
that was the subject of the derivative proceeding; or
(3) expenses for which the domestic or foreign
corporation or a corporate defendant may be required to indemnify
another person.
(b) On termination of a derivative proceeding, the court may
order:
(1) the domestic or foreign corporation to pay the
expenses the plaintiff incurred in the proceeding if the court
finds the proceeding has resulted in a substantial benefit to the
domestic or foreign corporation;
(2) the plaintiff to pay the expenses the domestic or
foreign corporation or other defendant incurred in investigating
and defending the proceeding if the court finds the proceeding has
been instituted or maintained without reasonable cause or for an
improper purpose; or
(3) a party to pay the expenses incurred by another
party relating to the filing of a pleading, motion, or other paper
if the court finds the pleading, motion, or other paper:
(A) was not well grounded in fact after
reasonable inquiry;
(B) was not warranted by existing law or a good
faith argument for the extension, modification, or reversal of
existing law; or
(C) was interposed for an improper purpose, such
as to harass, cause unnecessary delay, or cause a needless increase
in the cost of litigation. (TBCA 5.14.J.)
Sec. 21.562. APPLICATION TO FOREIGN CORPORATIONS. (a) In a
derivative proceeding brought in the right of a foreign
corporation, the matters covered by this subchapter are governed by
the laws of the jurisdiction of incorporation of the foreign
corporation, except for Sections 21.555, 21.560, and 21.561, which
are procedural provisions and do not relate to the internal affairs
of the foreign corporation.
(b) In the case of matters relating to a foreign corporation
under Section 21.554, a reference to a person or group of persons
described by that section refers to a person or group entitled under
the laws of the jurisdiction of incorporation of the foreign
corporation to review and dispose of a derivative proceeding. The
standard of review of a decision made by the person or group to
dismiss the derivative proceeding shall be governed by the laws of
the jurisdiction of incorporation of the foreign corporation. (TBCA
5.14.K.)
Sec. 21.563. CLOSELY HELD CORPORATION. (a) In this
section, "closely held corporation" means a corporation that has:
(1) fewer than 35 shareholders; and
(2) no shares listed on a national securities exchange
or regularly quoted in an over-the-counter market by one or more
members of a national securities association.
(b) Subject to Subsection (c), Sections 21.552-21.559 do
not apply to a closely held corporation.
(c) If justice requires:
(1) a derivative proceeding brought by a shareholder
of a closely held corporation may be treated by a court as a direct
action brought by the shareholder for the shareholder's own
benefit; and
(2) a recovery in a direct or derivative proceeding by
a shareholder may be paid directly to the plaintiff or to the
corporation if necessary to protect the interests of creditors or
other shareholders of the corporation. (TBCA 5.14.L.)
[Sections 21.564-21.600 reserved for expansion]
SUBCHAPTER M. AFFILIATED BUSINESS COMBINATIONS
Sec. 21.601. DEFINITIONS. In this subchapter:
(1) "Issuing public corporation" means a domestic
corporation that has:
(A) 100 or more shareholders of record as shown
by the share transfer records of the corporation;
(B) a class or series of the corporation's voting
shares registered under the Securities Exchange Act of 1934 (15
U.S.C. Section 77b et seq.), as amended; or
(C) a class or series of the corporation's voting
shares qualified for trading in a national market system.
(2) "Person" includes two or more persons acting as a
partnership, limited partnership, syndicate, or other group under
an agreement, arrangement, or understanding, regardless of whether
in writing, to acquire, hold, vote, or dispose of a corporation's
shares.
(3) "Share acquisition date" means the date a person
initially becomes an affiliated shareholder of an issuing public
corporation.
(4) "Subsidiary" means a domestic or foreign
corporation or other entity of which a majority of the outstanding
voting shares are owned, directly or indirectly, by an issuing
public corporation.
(5) "Voting share" means a share of capital stock of a
corporation that entitles the holder of the share to vote generally
in the election of directors. (TBCA 13.02.A(6), (7), (8), (9),
(10).)
Sec. 21.602. AFFILIATED SHAREHOLDER. (a) For purposes of
this subchapter, a person, other than the issuing public
corporation or a wholly owned subsidiary of the issuing public
corporation, is an affiliated shareholder if the person:
(1) is the beneficial owner of 20 percent or more of
the outstanding voting shares of the issuing public corporation; or
(2) during the preceding three-year period, was the
beneficial owner of 20 percent or more of the outstanding voting
shares of the issuing public corporation.
(b) To determine whether a person is an affiliated
shareholder, the number of voting shares of the issuing public
corporation considered outstanding includes shares considered
beneficially owned by that person under Section 21.603, but does
not include other unissued voting shares of the issuing public
corporation that may be issuable under an agreement, arrangement,
or understanding, or on exercise of conversion rights, warrants, or
options. (TBCA 13.02.A(2).)
Sec. 21.603. BENEFICIAL OWNER OF SHARES OR SIMILAR
SECURITIES. (a) For purposes of this chapter, a person is a
beneficial owner of shares or similar securities if the person
individually, or through an affiliate or associate, beneficially
owns, directly or indirectly, shares or similar securities.
(b) A beneficial owner of shares or similar securities is
entitled, individually or through an affiliate or associate, to:
(1) acquire shares or similar securities that may be
exercised immediately or after the passage of a certain amount of
time according to an oral or written agreement, arrangement, or
understanding, or on the exercise of conversion rights, exchange
rights, warrants, or options;
(2) vote the shares or similar securities according to
an oral or written agreement, arrangement, or understanding; or
(3) subject to Subsection (c), acquire, hold or
dispose of, or vote shares or similar securities with another
person who individually, or through an affiliate or associate,
beneficially owns, directly or indirectly, the shares or similar
securities.
(c) A person is not considered a beneficial owner of shares
or similar securities if:
(1) the shares or similar securities are:
(A) tendered under a tender or exchange offer
made by the person or an affiliate or associate of the person before
the tendered shares or securities are accepted for purchase or
exchange; or
(B) subject to an agreement, arrangement, or
understanding that expressly conditions the acquisition or
purchase of shares or securities on the approval of the acquisition
or purchase under Section 21.606 if the person has no direct or
indirect rights of ownership or voting with respect to the shares or
securities until the time the approval is obtained; or
(2) the agreement, arrangement, or understanding to
vote the shares:
(A) arises solely from an immediately revocable
proxy that authorizes the person named in the proxy to vote at a
meeting of the shareholders that has been called when the proxy is
delivered or at an adjournment of the meeting; and
(B) is not reportable on a Schedule 13D under the
Securities Exchange Act of 1934 (15 U.S.C. Section 77b et seq.), as
amended, or a comparable or successor report. (TBCA 13.02.A(3).)
Sec. 21.604. BUSINESS COMBINATION. A business combination
is:
(1) a merger, share exchange, or conversion of an
issuing public corporation or a subsidiary with:
(A) an affiliated shareholder;
(B) a foreign or domestic corporation or other
entity that is, or after the merger, share exchange, or conversion
would be, an affiliate or associate of the affiliated shareholder;
or
(C) another domestic or foreign corporation or
other entity, if the merger, share exchange, or conversion is
caused by an affiliated shareholder, or an affiliate or associate
of an affiliated shareholder, and as a result of the merger, share
exchange, or conversion this subchapter does not apply to the
surviving corporation or other entity;
(2) a sale, lease, exchange, mortgage, pledge,
transfer, or other disposition, in one transaction or a series of
transactions, including an allocation of assets under a merger, to
or with the affiliated shareholder, or an affiliate or associate of
the affiliated shareholder, of assets of the issuing public
corporation or a subsidiary that:
(A) has an aggregate market value equal to 10
percent or more of the aggregate market value of all of the assets,
determined on a consolidated basis, of the issuing public
corporation;
(B) has an aggregate market value equal to 10
percent or more of the aggregate market value of all of the
outstanding common stock of the issuing public corporation; or
(C) represents 10 percent or more of the earning
power or net income, determined on a consolidated basis, of the
issuing public corporation;
(3) the issuance or transfer by an issuing public
corporation or a subsidiary to an affiliated shareholder or an
affiliate or associate of the affiliated shareholder, in one
transaction or a series of transactions, of shares of the issuing
public corporation or a subsidiary, except by the exercise of
warrants or rights to purchase shares of the issuing public
corporation offered, or a share dividend paid, pro rata to all
shareholders of the issuing public corporation after the affiliated
shareholder's share acquisition date;
(4) the adoption of a plan or proposal for the
liquidation or dissolution of an issuing public corporation
proposed by or under any agreement, arrangement, or understanding,
regardless of whether in writing, with an affiliated shareholder or
an affiliate or associate of the affiliated shareholder;
(5) a reclassification of securities, including a
reverse share split or a share split-up, share dividend, or other
distribution of shares, a recapitalization of the issuing public
corporation, a merger of the issuing public corporation with a
subsidiary or pursuant to which the assets and liabilities of the
issuing public corporation are allocated among two or more
surviving or new domestic or foreign corporations or other
entities, or any other transaction proposed by or under an
agreement, arrangement, or understanding, regardless of whether in
writing, with an affiliated shareholder or an affiliate or
associate of the affiliated shareholder that has the effect,
directly or indirectly, of increasing the proportionate ownership
percentage of the outstanding shares of a class or series of voting
shares or securities convertible into voting shares of the issuing
public corporation that is beneficially owned by the affiliated
shareholder or an affiliate or associate of the affiliated
shareholder, except as a result of immaterial changes due to
fractional share adjustments; or
(6) the direct or indirect receipt by an affiliated
shareholder or an affiliate or associate of the affiliated
shareholder of the benefit of a loan, advance, guarantee, pledge,
or other financial assistance or a tax credit or other tax advantage
provided by or through the issuing public corporation, except
proportionately as a shareholder of the issuing public corporation.
(TBCA 13.02.A(4).)
Sec. 21.605. CONTROL. (a) For purposes of this subchapter,
a person has control of another person if the person has possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of the other person,
through the ownership of equity securities, by contract, or in
another manner.
(b) A person's beneficial ownership of 10 percent or more of
a person's outstanding voting shares or similar interests creates a
presumption that the person has control of the other person, but a
person is not considered to have control of another person who holds
the voting shares or similar interests in good faith and not to
circumvent this part, as an agent, bank, broker, nominee,
custodian, or trustee for one or more beneficial owners who do not
individually or as a group have control of the person. (TBCA
13.02.A(5).)
Sec. 21.606. THREE-YEAR MORATORIUM ON CERTAIN BUSINESS
COMBINATIONS. An issuing public corporation may not, directly or
indirectly, enter into or engage in a business combination with an
affiliated shareholder, or any affiliate or associate of the
affiliated shareholder, during the three-year period immediately
following the affiliated shareholder's share acquisition date
unless:
(1) the business combination or the purchase or
acquisition of shares made by the affiliated shareholder on the
affiliated shareholder's share acquisition date is approved by the
board of directors of the issuing public corporation before the
affiliated shareholder's share acquisition date; or
(2) the business combination is approved, by the
affirmative vote of the holders of at least two-thirds of the
outstanding voting shares of the issuing public corporation not
beneficially owned by the affiliated shareholder or an affiliate or
associate of the affiliated shareholder, at a meeting of
shareholders called for that purpose not less than six months after
the affiliated shareholder's share acquisition date. Approval may
not be by written consent. (TBCA 13.03.)
Sec. 21.607. APPLICATION OF MORATORIUM. Section 21.606 does
not apply to:
(1) a business combination of an issuing public
corporation if:
(A) the original articles of incorporation or
original bylaws of the corporation contain a provision expressly
electing not to be governed by this subchapter;
(B) before December 31, 1997, the corporation
adopted an amendment to the articles of incorporation or bylaws of
the corporation expressly electing not to be governed by this
subchapter; or
(C) after December 31, 1997, the corporation
adopts an amendment to the articles of incorporation or bylaws of
the corporation, approved by the affirmative vote of the holders,
other than an affiliated shareholder or an affiliate or associate
of the affiliated shareholder, of at least two-thirds of the
outstanding voting shares of the issuing public corporation,
expressly electing not to be governed by this subchapter, except
that the amendment to the articles of incorporation or bylaws takes
effect 18 months after the date of the vote and does not apply to a
business combination of the issuing public corporation with an
affiliated shareholder whose share acquisition date is on or before
the effective date of the amendment;
(2) a business combination of an issuing public
corporation with an affiliated shareholder who became an affiliated
shareholder inadvertently, if the affiliated shareholder:
(A) as soon as practicable divests itself of a
sufficient number of the voting shares of the issuing public
corporation so that the affiliated shareholder no longer is the
beneficial owner, directly or indirectly, of 20 percent or more of
the outstanding voting shares of the issuing public corporation;
and
(B) would not at any time within the three-year
period preceding the announcement date of the business combination
have been an affiliated shareholder except for the inadvertent
acquisition;
(3) a business combination with an affiliated
shareholder who was the beneficial owner of 20 percent or more of
the outstanding voting shares of the issuing public corporation on
December 31, 1996, and continuously until the announcement date of
the business combination;
(4) a business combination with an affiliated
shareholder who became an affiliated shareholder through a transfer
of shares of the issuing public corporation by will or intestate
succession and continuously was an affiliated shareholder until the
announcement date of the business combination; or
(5) a business combination of an issuing public
corporation with a domestic wholly owned subsidiary if the domestic
subsidiary is not an affiliate or associate of the affiliated
shareholder for a reason other than the affiliated shareholder's
beneficial ownership of voting shares in the issuing public
corporation. (TBCA 13.04.)
Sec. 21.608. EFFECT ON OTHER ACTIONS. (a) This subchapter
does not affect, directly or indirectly, the validity of another
action by the board of directors of an issuing public corporation.
(b) This subchapter does not preclude the board of directors
of an issuing public corporation from taking other action in
accordance with law.
(c) The board of directors of an issuing public corporation
does not incur liability for an election made or not made under this
subchapter. (TBCA 13.05.)
Sec. 21.609. CONFLICTING PROVISIONS. If this subchapter
conflicts with another provision of this code, this subchapter
controls. (TBCA 13.07.A.)
Sec. 21.610. CHANGE IN VOTING REQUIREMENTS. The affirmative
vote or concurrence of shareholders required for approval of an
action that is required to be submitted to a vote of the
shareholders under this subchapter may be increased but not
decreased under Section 21.365. (TBCA 13.07.B.)
[Sections 21.611-21.650 reserved for expansion]
SUBCHAPTER N. PROVISIONS RELATING TO INVESTMENT COMPANIES
Sec. 21.651. DEFINITION. In this subchapter, "investment
company" means a corporation registered as an open-end company
under the Investment Company Act. (TBCA 2.12.C(1) (part).)
Sec. 21.652. ESTABLISHING CLASS OR SERIES OF SHARES; CHANGE
IN NUMBER OF SHARES. (a) In addition to the actions the board may
undertake under Subchapters D, E, and F, the board of directors of
an investment company may:
(1) establish classes of shares and series of unissued
shares of a class by setting and determining the designations,
preferences, limitations, and relative rights, including voting
rights, of the shares of the class or series established under this
subdivision to the same extent that the designations, preferences,
limitations, and relative rights could be stated if fully stated in
the certificate of formation; and
(2) increase or decrease the aggregate number of
shares or the number of shares of, or delete from the investment
company's certificate of formation, a class or series of shares the
corporation has authority to issue, unless a provision has been
included in the certificate of formation of the corporation after
September 1, 1993, expressly prohibiting those actions by the board
of directors.
(b) The board of directors of an investment company may not:
(1) decrease the number of shares in a class or series
to a number that is less than the number of shares of that class or
series that are outstanding at the time; or
(2) delete from the certificate of formation a
reference to a class or series that has shares outstanding at the
time.
(c) To establish a class or series under this section, the
board of directors must adopt a resolution stating the designation
of the class or series and setting and determining the
designations, preferences, limitations, and relative rights,
including voting rights, of the class or series.
(d) To increase or decrease the number of shares of a class
or series of shares or to delete from the certificate of formation a
reference to a class or series of shares, the board of directors of
an investment company must adopt a resolution setting and
determining the new number of shares of each class or series in
which the number of shares is increased or decreased or deleting the
class or series and any reference to the class or series from the
certificate of formation. The shares of a series removed from the
certificate of formation shall resume the status of authorized but
unissued shares of the class of shares from which the series was
established unless otherwise provided by the resolution or the
certificate of formation of the investment company. (TBCA
2.12.C(1).)
Sec. 21.653. REQUIRED STATEMENT RELATING TO SHARES. (a)
Before the first issuance of shares of a class or series established
or increased or decreased by resolution adopted by the board of
directors of an investment company under Section 21.652, and to
delete from the investment company's certificate of formation a
class or series of shares and all references to the class or series
contained in the certificate of formation, the investment company
shall file with the secretary of state a statement that contains:
(1) the name of the investment company;
(2) if the statement relates to the establishment of a
class or series of shares, a copy of the resolution establishing and
designating the class or series or establishing and designating the
class or series and setting and determining the preferences,
limitations, and relative rights of the class or series;
(3) if the statement relates to an increase or
decrease in the number of shares of a class or series, a copy of the
resolution setting and determining the new number of shares of each
class or series in which the number of shares is increased or
decreased;
(4) if the statement relates to the deletion of a class
or series of shares and all references to the class or series from
the certificate of formation, a copy of the resolution deleting the
class or series and all references to the class or series from the
certificate of formation;
(5) the date of adoption of the resolution; and
(6) a statement that the resolution was adopted by all
necessary action on the part of the investment company.
(b) After the statement described by Subsection (a) is
filed, a resolution adopted under Section 21.652 becomes an
amendment of the certificate of formation. An amendment of the
certificate of formation described under this section is not
subject to the procedure to amend the certificate of formation
contained in Subchapter B. (TBCA 2.12.C(2), (4).)
Sec. 21.654. TERM OF OFFICE OF DIRECTORS. Unless removed in
accordance with the certificate of formation or bylaws of the
investment company, a director of an investment company shall serve
as director for the term for which the director is elected and holds
office until a successor is elected and qualifies. (TBCA 2.32.D.)
Sec. 21.655. MEETINGS OF SHAREHOLDERS. (a) If provided by
the certificate of formation or bylaws of an investment company,
the investment company is not required to hold an annual meeting of
shareholders or elect directors in a year in which an election of
directors is not required under the Investment Company Act.
(b) If an investment company is required to hold a meeting
of shareholders to elect directors under the Investment Company
Act, the meeting shall be designated as the annual meeting of
shareholders for that year. (TBCA 2.24.D.)
[Sections 21.656-21.700 reserved for expansion]
SUBCHAPTER O. CLOSE CORPORATION
Sec. 21.701. DEFINITIONS. In this subchapter:
(1) "Close corporation" means a domestic corporation
formed under this subchapter.
(2) "Close corporation provision" means a provision in
the certificate of formation of a close corporation or in a
shareholders' agreement of a close corporation.
(3) "Ordinary corporation" means a domestic
corporation that is not a close corporation.
(4) "Shareholders' agreement" means a written
agreement regulating an aspect of the business and affairs of or the
relationship among the shareholders of a close corporation that has
been executed under this subchapter. (TBCA 12.02.A.)
Sec. 21.702. APPLICABILITY OF SUBCHAPTER. (a) This
subchapter applies only to a close corporation.
(b) This chapter applies to a close corporation to the
extent not inconsistent with this subchapter. (TBCA 12.03.)
Sec. 21.703. FORMATION OF CLOSE CORPORATION. A close
corporation shall be formed in accordance with Chapter 3. (TBCA
12.12.)
Sec. 21.704. BYLAWS OF CLOSE CORPORATION. (a) A close
corporation does not need to adopt bylaws if provisions required by
law to be contained in the bylaws are contained in the certificate
of formation or a shareholders' agreement.
(b) A close corporation that does not have bylaws when it
terminates its status as a close corporation under Section 21.708
shall immediately adopt bylaws that comply with Section 21.057.
(TBCA 12.15.)
Sec. 21.705. ADOPTION OF AMENDMENT FOR CLOSE CORPORATION
STATUS. (a) An ordinary corporation may become a close corporation
by amending its certificate of formation in accordance with Chapter
3 to conform with Section 3.008.
(b) An amendment adopting close corporation status must be
approved by the affirmative vote of the holders of all of the
outstanding shares of each class established by the close
corporation, regardless of whether a class is entitled to vote on
the amendment by the certificate of formation of the ordinary
corporation. (TBCA 12.13.A.)
Sec. 21.706. ADOPTION OF CLOSE CORPORATION STATUS THROUGH
MERGER, EXCHANGE, OR CONVERSION. (a) A surviving or new
corporation resulting from a merger or conversion or a corporation
that acquires a corporation under an exchange under Chapter 10 may
become a close corporation if, as part of the plan of merger,
exchange, or conversion, the certificate of formation conforms with
Section 3.008.
(b) A plan of merger, exchange, or conversion adopting close
corporation status must be approved by the affirmative vote of the
holders of all of the outstanding ownership or membership
interests, and of each class or series of ownership or membership
interests, of each entity or non-code organization that is party to
the merger, exchange, or conversion, regardless of whether a class
or series of ownership or membership interests is entitled to vote
on the plan by the certificate of formation of the corporation.
(TBCA 12.13.B.)
Sec. 21.707. EXISTING CLOSE CORPORATION. (a) This section
applies to an existing corporation that elected to become a close
corporation before the effective date of this code and has not
terminated that status.
(b) A close corporation existing before the effective date
of this code is considered to be a close corporation under this
code.
(c) A provision in the articles of incorporation of a close
corporation authorized under former law is valid and enforceable if
the corporation's status as a close corporation has not been
terminated.
(d) An agreement among the shareholders of a close
corporation in conformance with former law and Sections
21.714-21.725 before the effective date of this code is considered
to be a shareholders' agreement.
(e) A certificate representing the shares issued or
delivered by the close corporation after the effective date of this
code, whether in connection with the original issue of shares or a
transfer of shares, must conform with Section 21.732. (TBCA
12.14.)
Sec. 21.708. TERMINATION OF CLOSE CORPORATION STATUS. A
close corporation may terminate its status as a close corporation
by:
(1) filing a statement terminating close corporation
status under Section 21.709;
(2) amending the close corporation's certificate of
formation under Chapter 3 by deleting from the certificate of
formation the statement that it is a close corporation;
(3) engaging in a merger, interest exchange, or
conversion under Chapter 10, unless the plan of merger, exchange,
or conversion provides that the surviving or new corporation will
continue as or become a close corporation and the plan has been
approved by the affirmative vote or consent of the holders of all of
the outstanding shares, and of each class and series of shares, of
the close corporation, regardless of whether a class or series of
shares is entitled to vote on the plan by the certificate of
formation; or
(4) instituting a judicial proceeding to enforce a
close corporation provision providing for the termination. (TBCA
12.21.)
Sec. 21.709. STATEMENT TERMINATING CLOSE CORPORATION
STATUS; FILING; NOTICE. (a) If a close corporation provision
specifies a time or event requiring the termination of close
corporation status, regardless of whether the provision is
identifiable by a person dealing with the close corporation, the
termination of the close corporation status takes effect on the
occurrence of the specified time or event and the filing of a
statement terminating close corporation status under this section.
(b) Promptly after the time or occurrence of an event
requiring termination of close corporation status, a statement
terminating close corporation status shall be signed by an officer
on behalf of the close corporation. A copy of the applicable close
corporation provision must be included in or attached to the
statement. The statement and any attachment shall be filed with the
secretary of state in accordance with Chapter 4.
(c) The statement terminating close corporation status must
contain:
(1) the name of the corporation;
(2) a statement that the corporation has terminated
its status as a close corporation in accordance with the included or
attached close corporation provision; and
(3) the time or event that caused the termination and,
in the case of an event, the approximate date of the event.
(d) After a statement terminating close corporation status
has been filed under this section, the certificate of formation of
the close corporation is considered to be amended to delete from the
certificate the statement that the corporation is a close
corporation, and the corporation's status as a close corporation is
terminated.
(e) The corporation shall personally deliver or mail a copy
of the statement to each shareholder of the corporation. A copy of
the statement is considered to have been delivered by mail under
this section when the copy is deposited in the United States mail,
with postage prepaid, addressed to the shareholder at the
shareholder's address as it appears on the share transfer records
of the corporation. The failure to deliver the copy of the
statement does not affect the validity of the termination. (TBCA
12.22.A, B, D, E.)
Sec. 21.710. EFFECT OF TERMINATION OF CLOSE CORPORATION
STATUS. (a) A close corporation that terminates its status as a
close corporation and becomes an ordinary corporation is subject to
this chapter as if the corporation had not elected close
corporation status under this subchapter.
(b) The effect of termination of close corporation status on
a shareholders' agreement is governed by Section 21.724.
(c) When the termination of close corporation status takes
effect, if the close corporation's business and affairs have been
managed by an entity other than a board of directors as provided by
Section 21.725, governance by a board of directors is instituted or
reinstated:
(1) if provided by a shareholders' agreement, in the
manner stated in the agreement or by the persons named in the
agreement to serve as the interim board of directors; or
(2) if each party to a shareholders' agreement agrees
to elect a board of directors at a shareholders' meeting. (TBCA
12.23.A, B, C.)
Sec. 21.711. SHAREHOLDERS' MEETING TO ELECT DIRECTORS. A
shareholders' meeting required by Section 21.710(c)(2) shall be
promptly called after the termination of close corporation status
takes effect. If a meeting is not called before the 31st day after
the date the termination takes effect, a shareholder may call a
shareholders' meeting on the provision of notice required by
Section 21.353, regardless of whether the shareholder is entitled
to call a shareholders' meeting or vote at the meeting. At the
meeting, the shareholders shall elect the number of directors
specified in the certificate of formation or bylaws of the
corporation or, in the absence of any specification, three
directors. (TBCA 12.23.D.)
Sec. 21.712. TERM OF OFFICE OF DIRECTORS. A director
succeeding to the management of the corporation under Section
21.710(c) shall have a term of office as set forth in Section
21.408. Until a board of directors is elected, the shareholders of
the corporation shall act as the corporation's board of directors,
and the business and affairs of the corporation shall be conducted
under Section 21.726. (TBCA 12.23.E.)
Sec. 21.713. MANAGEMENT. A close corporation shall be
managed:
(1) by a board of directors in the same manner an
ordinary corporation would be managed under this chapter; or
(2) in the manner provided by the close corporation's
certificate of formation or by a shareholders' agreement of the
close corporation. (TBCA 12.31.)
Sec. 21.714. SHAREHOLDERS' AGREEMENT. (a) The shareholders
of a close corporation may enter into one or more shareholders'
agreements.
(b) The business and affairs of a close corporation or the
relationships among the shareholders that may be regulated by a
shareholders' agreement include:
(1) the management of the business and affairs of the
close corporation by its shareholders, with or without a board of
directors;
(2) the management of the business and affairs of the
close corporation wholly or partly by one or more of its
shareholders or other persons;
(3) buy-sell, first option, first refusal, or similar
arrangements with respect to the close corporation's shares or
other securities, and restrictions on the transfer of the shares or
other securities, including more restrictions than those permitted
by Section 21.211;
(4) the declaration and payment of dividends or other
distributions in amounts authorized by Subchapter G, regardless of
whether the distribution is in proportion to ownership of shares;
(5) the manner in which profits or losses shall be
apportioned;
(6) restrictions placed on the rights of a transferee
or assignee of shares to participate in the management or
administration of the close corporation's business and affairs
during the term of the shareholders' agreement;
(7) the right of one or more shareholders to cause the
winding up and termination of the close corporation at will or on
the occurrence of a specified event or contingency, in which case
the winding up and termination of the close corporation shall
proceed as if all of the shareholders of the close corporation had
consented in writing to winding up and termination as provided by
Chapter 11;
(8) the exercise or division of voting power either in
general or with regard to specified matters by or among the
shareholders of the close corporation or other persons, including:
(A) voting agreements and voting trusts that do
not conform with Section 6.251 or 6.252;
(B) requiring the vote or consent of the holders
of a larger or smaller number of shares than is otherwise required
by this chapter or other law, including an action for termination of
close corporation status;
(C) granting one or some other specified number
of votes for each shareholder; and
(D) permitting an action for which this chapter
requires approval by the vote of the board of directors or the
shareholders of an ordinary corporation, or both, to be taken
without a vote, in the manner provided by the shareholders'
agreement;
(9) the terms and conditions of employment of a
shareholder, director, officer, or other employee of the close
corporation, regardless of the length of the period of employment;
(10) the individuals who will serve as directors, if
any, and officers of the close corporation;
(11) the arbitration or mediation of issues about
which the shareholders may become deadlocked in voting or about
which the directors or those empowered to manage the close
corporation may become deadlocked and the shareholders are unable
to break the deadlock;
(12) the termination of close corporation status,
including a right of dissent or other rights that may be granted to
shareholders who object to the termination;
(13) qualifications of persons who are or are not
entitled to be shareholders of the close corporation;
(14) amendments to or termination of the shareholders'
agreement; and
(15) any provision required or permitted to be
contained in the bylaws by this chapter. (TBCA 12.32.)
Sec. 21.715. EXECUTION OF SHAREHOLDERS' AGREEMENT. A
shareholders' agreement shall be executed:
(1) in the case of an existing close corporation, by
each shareholder at the time of execution, regardless of whether
the shareholder has voting power;
(2) in the case of an existing ordinary corporation
that will adopt close corporation status under Section 21.705, by
each shareholder at the time of execution, regardless of whether
the shareholder has voting power; or
(3) in the case of a close corporation that is being
formed under Section 21.703, by each person who is a subscriber to
the corporation's shares or agrees to become a holder of the
corporation's shares under the shareholders' agreement of the close
corporation. (TBCA 12.33.A.)
Sec. 21.716. ADOPTION OF AMENDMENT OF SHAREHOLDERS'
AGREEMENT. Unless otherwise provided by a shareholders' agreement,
an amendment to the shareholders' agreement of a close corporation
may be adopted only by the written consent of each person who would
be required to execute the shareholders' agreement if it were being
executed originally at the time of adoption of the amendment,
regardless of whether the person has voting power in the close
corporation. (TBCA 12.33.B.)
Sec. 21.717. DELIVERY OF SHAREHOLDERS' AGREEMENT. (a) The
close corporation shall deliver a complete copy of a shareholders'
agreement to:
(1) each person who is bound by the shareholders'
agreement;
(2) each person who is or will become a shareholder in
the close corporation as provided by Section 21.715 when a
certificate representing shares in the close corporation is
delivered to the person; and
(3) each person to whom a certificate representing
shares is issued and who has not received a complete copy of the
agreement.
(b) The failure to deliver a complete copy of a
shareholders' agreement as required by this section does not affect
the validity or enforceability of the shareholders' agreement.
(TBCA 12.33.C.)
Sec. 21.718. STATEMENT OF OPERATION AS CLOSE CORPORATION.
(a) On or after the formation of a close corporation or adoption of
close corporation status, a close corporation that begins to
conduct its business and affairs under a shareholders' agreement
that has become effective shall promptly execute and file with the
secretary of state a statement of operation as a close corporation
in accordance with Chapter 4.
(b) The statement required by Subsection (a) must:
(1) contain the name of the close corporation;
(2) state that the close corporation is being operated
and its business and affairs are being conducted under the terms of
a shareholders' agreement under this subchapter; and
(3) contain the date the operation of the corporation
began.
(c) A statement of operation as a close corporation shall be
executed by an officer on behalf of the corporation.
(d) On the filing of the statement of operation as a close
corporation, the fact that the close corporation is being operated
and its business and affairs are being conducted under the terms of
a shareholders' agreement becomes a matter of public record. (TBCA
12.34.A, B, D.)
Sec. 21.719. VALIDITY AND ENFORCEABILITY OF SHAREHOLDERS'
AGREEMENT. (a) A shareholders' agreement executed in accordance
with Section 21.715 is valid and enforceable notwithstanding:
(1) the elimination of a board of directors;
(2) any restriction imposed on the discretion or
powers of the board of directors or other person empowered to manage
the close corporation; and
(3) that the effect of the shareholders' agreement is
to treat the business and affairs of the close corporation as if the
close corporation were a partnership or in a manner that would
otherwise be appropriate only among partners.
(b) A close corporation, a shareholder of the close
corporation, or a party to a shareholders' agreement may initiate a
proceeding to enforce the shareholders' agreement in accordance
with Section 21.756. (TBCA 12.35.)
Sec. 21.720. PERSONS BOUND BY SHAREHOLDERS' AGREEMENT. (a)
A shareholders' agreement executed in accordance with Section
21.715 is:
(1) considered to be an agreement among all of the
shareholders of the close corporation; and
(2) binding on and enforceable against each
shareholder of the close corporation, regardless of whether:
(A) a particular shareholder acquired shares in
the close corporation by purchase, gift, bequest, or otherwise; or
(B) the shareholder had actual knowledge of the
existence of the shareholders' agreement at the time of acquiring
shares.
(b) A transferee or assignee of shares of a close
corporation in which there is a shareholders' agreement is bound by
the agreement for all purposes, regardless of whether the
transferee or assignee executed or was aware of the agreement.
(TBCA 12.36.A.)
Sec. 21.721. DELIVERY OF COPY OF SHAREHOLDERS' AGREEMENT TO
TRANSFEREE. (a) Before the transfer of shares of a close
corporation in which there is a shareholders' agreement, the
transferor shall deliver a complete copy of the shareholders'
agreement to the transferee.
(b) If the transferor fails to deliver a complete copy of
the shareholders' agreement:
(1) the validity and enforceability of the
shareholders' agreement against each shareholder of the
corporation, including the transferee, is not affected;
(2) the right, title, or interest of the transferee in
the transferred shares is not adversely affected; and
(3) the transferee is entitled to obtain on demand
from the transferor or from the close corporation a complete copy of
the shareholders' agreement at the transferor's expense. (TBCA
12.36.B.)
Sec. 21.722. EFFECT OF REQUIRED STATEMENT ON SHARE
CERTIFICATE AND DELIVERY OF SHAREHOLDERS' AGREEMENT. If a
certificate representing shares of a close corporation contains the
statement required by Section 21.732, and a complete copy of each
shareholders' agreement has been delivered as required by Section
21.717, each holder, transferee, or other person claiming an
interest in the shares of the close corporation is conclusively
presumed to have knowledge of a close corporation provision in
effect at the time of the transfer. (TBCA 12.36.C.)
Sec. 21.723. PARTY NOT BOUND BY SHAREHOLDERS' AGREEMENT ON
CESSATION; LIABILITY. (a) Notwithstanding the person's signature,
a person ceases to be a party to, and bound by, a shareholders'
agreement when the person ceases to be a shareholder of the close
corporation unless:
(1) the person's attempted cessation was in violation
of Section 21.721 or the shareholders' agreement; or
(2) the shareholders' agreement provides to the
contrary.
(b) Cessation as a party to a shareholders' agreement or as
a shareholder does not relieve a person of liability the person may
have incurred for breach of the shareholders' agreement. (TBCA
12.36.D.)
Sec. 21.724. TERMINATION OF SHAREHOLDERS' AGREEMENT. (a)
Except as provided by Subsection (b), a shareholders' agreement
terminates when the close corporation terminates its status as a
close corporation.
(b) If provided by the shareholders' agreement, all or part
of the agreement is valid and enforceable to the extent permitted
for an ordinary corporation by this chapter or other law. (TBCA
12.36.E.)
Sec. 21.725. CONSEQUENCES OF MANAGEMENT BY PERSONS OTHER
THAN BOARD OF DIRECTORS. Sections 21.726-21.729 apply only to a
close corporation the business and affairs of which are managed
wholly or partly by the shareholders of the close corporation or any
other person as provided by a shareholders' agreement rather than
solely by a board of directors. (TBCA 12.37.A.)
Sec. 21.726. SHAREHOLDERS CONSIDERED DIRECTORS. (a) When
required by the context of this chapter, the shareholders of a close
corporation described by Section 21.725 are considered to be
directors of the close corporation for purposes of applying a
provision of this chapter, other than a provision relating to the
election and removal of directors.
(b) A requirement that an instrument filed with a
governmental agency contain a statement that a specified action has
been taken by the board of directors is satisfied by a statement
that:
(1) the corporation is a close corporation with no
board of directors; and
(2) the action was approved by the shareholders of the
close corporation or the persons empowered to manage the business
and affairs of the close corporation under a shareholders'
agreement. (TBCA 12.37.B.)
Sec. 21.727. LIABILITY OF SHAREHOLDERS. The shareholders of
a close corporation described by Section 21.725 are subject to any
liability imposed on a director of a corporation by this chapter or
other law for a managerial act of or omission made by the
shareholders or any other person empowered to manage the business
and affairs of the close corporation under a shareholders'
agreement and relating to the business and affairs of the close
corporation, if the action is required by law to be undertaken by
the board of directors. (TBCA 12.37.C.)
Sec. 21.728. MODE AND EFFECT OF TAKING ACTION BY
SHAREHOLDERS AND OTHERS. (a) An action that shall or may be taken
by the board of directors of an ordinary corporation as required or
authorized by this chapter shall or may be taken by action of the
shareholders of a close corporation described by Section 21.725 at
a meeting of the shareholders or, in the manner permitted by a
shareholders' agreement, this subchapter, or this chapter, without
a meeting.
(b) Unless otherwise provided by the certificate of
formation of the close corporation or a shareholders' agreement of
the close corporation, an action is binding on a close corporation
if the action is taken after:
(1) the affirmative vote of the holders of the
majority of all outstanding shares entitled to vote on the action;
or
(2) the consent of all of the shareholders of the close
corporation, which may be proven by:
(A) the full knowledge of the action by all of the
shareholders and the shareholders' failure to object to the action
in a timely manner;
(B) written consent to the action in accordance
with Section 6.201 or this chapter or any other writing executed by
or on behalf of all of the shareholders reasonably evidencing the
consent; or
(C) any other means reasonably evidencing the
consent. (TBCA 12.37.D.)
Sec. 21.729. LIMITATION OF SHAREHOLDER'S LIABILITY. (a) A
shareholder of a close corporation described by Section 21.725 is
not liable because of a shareholders' vote or shareholder action
without a vote unless the shareholder had the right to vote or
consent to the action.
(b) A shareholder of a close corporation, without regard to
the right to vote or consent, may not be held liable for an action
taken by the shareholders or a person empowered to manage the
business and affairs of the close corporation under a shareholders'
agreement if the shareholder dissents from and has not voted for or
consented to the action.
(c) The dissent of a shareholder may be proven by:
(1) an entry in the minutes of the meeting of
shareholders;
(2) a written dissent filed with the secretary of the
meeting before the adjournment of the meeting;
(3) a written dissent sent by registered mail to the
secretary of the close corporation promptly after the meeting or
after a written consent was obtained from the other shareholders;
or
(4) any other means reasonably evidencing the dissent.
(TBCA 12.37.E.)
Sec. 21.730. LACK OF FORMALITIES; TREATMENT AS PARTNERSHIP.
The failure of a close corporation under this subchapter to observe
a usual formality or requirement prescribed for an ordinary
corporation by this chapter relating to the exercise of corporate
powers or the management of a corporation's business and affairs
and the performance of a shareholders' agreement that treats the
close corporation as if the corporation were a partnership or in a
manner that otherwise is appropriate only among partners may not:
(1) be a factor in determining whether to impose
personal liability on the shareholders for the close corporation's
obligations by disregarding the separate entity of the close
corporation or otherwise;
(2) be grounds for invalidating an otherwise valid
shareholders' agreement; or
(3) affect the status of the close corporation as a
corporation under this chapter or other law. (TBCA 12.37.F.)
Sec. 21.731. OTHER AGREEMENTS AMONG SHAREHOLDERS
PERMITTED. Sections 21.713-21.730 do not prohibit or impair any
other agreement between two or more shareholders of an ordinary
corporation permitted by this chapter or other law. (TBCA 12.38.)
Sec. 21.732. CLOSE CORPORATION SHARE CERTIFICATES. (a) In
addition to a matter required or authorized by law to be stated on a
certificate representing shares, each certificate representing
shares issued by a close corporation must conspicuously state on
the front or back of the certificate: "These shares are issued by a
close corporation as defined by the Texas Business Organizations
Code. Under Chapter 21 of that code, a shareholders' agreement may
provide for management of a close corporation by the shareholders
or in other ways different from an ordinary corporation. This may
subject the holder of this certificate to certain obligations and
liabilities not otherwise imposed on shareholders of an ordinary
corporation. On a sale or transfer of these shares, the transferor
is required to deliver to the transferee a complete copy of any
shareholders' agreement."
(b) Notwithstanding this chapter and Section 3.202, the
status of a corporation as a close corporation is not affected by
the failure of a share certificate to contain the statement
required by Subsection (a). (TBCA 12.39.)
[Sections 21.733-21.750 reserved for expansion]
SUBCHAPTER P. JUDICIAL PROCEEDINGS RELATING TO
CLOSE CORPORATION
Sec. 21.751. DEFINITIONS. In this subchapter:
(1) "Court" means a district court in the county in
which the principal office of the close corporation is located.
(2) "Custodian" means a person appointed by a court
under Section 21.761.
(3) "Provisional director" means a person appointed by
a court under Section 21.758.
(4) "Shareholder" means a record or beneficial owner
of shares in a close corporation, including:
(A) a person holding a beneficial interest in the
shares under an inter vivos, testamentary, or voting trust; or
(B) the personal representative, as defined by
the Texas Probate Code, of a record or beneficial owner. (TBCA
12.51.A.)
Sec. 21.752. PROCEEDINGS AUTHORIZED. In addition to any
other judicial proceeding pertaining to an ordinary corporation
provided for by this chapter or other law, a close corporation or
shareholder may institute a proceeding in a district court in the
county in which the principal office of the close corporation is
located to:
(1) enforce a close corporation provision;
(2) appoint a provisional director; or
(3) appoint a custodian. (TBCA 12.51.B.)
Sec. 21.753. NOTICE; INTERVENTION. (a) Notice of the
institution of a proceeding shall be given to the close
corporation, if the corporation is not a plaintiff, and to each
shareholder who is not a plaintiff in the manner prescribed by law
and consistent with due process of law as directed by the court.
(b) The close corporation or a shareholder of the close
corporation may intervene in the proceeding. (TBCA 12.51.C.)
Sec. 21.754. PROCEEDING NONEXCLUSIVE. Except as provided by
Section 21.755, the right of a close corporation or a shareholder to
institute a proceeding under Section 21.752 is in addition to
another right or remedy the plaintiff is entitled to under law.
(TBCA 12.51.D.)
Sec. 21.755. UNAVAILABILITY OF JUDICIAL PROCEEDING. (a) A
shareholder may not institute a proceeding before exhausting any
nonjudicial remedy contained in a close corporation provision for
resolution of an issue that is in dispute unless the shareholder
proves that the close corporation, the shareholders as a whole, or
the shareholder will suffer irreparable harm before the nonjudicial
remedy is exhausted.
(b) A shareholder may not institute a proceeding to seek
damages or other monetary relief if the shareholder is entitled to
dissent from a proposed action and receive the fair value of the
shareholder's shares under this code or a shareholders' agreement.
(TBCA 12.51.E.)
Sec. 21.756. JUDICIAL PROCEEDING TO ENFORCE CLOSE
CORPORATION PROVISION. (a) In a judicial proceeding under this
section, a court shall enforce a close corporation provision
without regard to whether there is an adequate remedy at law.
(b) The court may enforce a close corporation provision by
injunction, specific performance, or other relief the court
determines to be fair and equitable under the circumstances,
including:
(1) damages instead of or in addition to specific
enforcement;
(2) the appointment of a provisional director or
custodian;
(3) the appointment of a receiver for specific assets
of the close corporation in accordance with Section 11.403;
(4) the appointment of a receiver to rehabilitate the
close corporation in accordance with Section 11.404;
(5) subject to Section 21.757, the liquidation of the
assets and business and involuntary termination of the close
corporation and appointment of a receiver to effect the liquidation
in accordance with Section 11.405; and
(6) the termination of close corporation status.
(c) The court may not order termination of close corporation
status under Subsection (b)(6) unless the court determines that:
(1) any other remedy in law or equity, including
appointment of a provisional director, custodian, or other type of
receiver, is inadequate; and
(2) the size, the nature of the business, or the number
of shareholders of the close corporation, or their relationship to
one another or other similar factors, make it wholly impractical to
continue close corporation status. (TBCA 12.52.A.)
Sec. 21.757. LIQUIDATION; INVOLUNTARY WINDING UP AND
TERMINATION; RECEIVERSHIP. Except as provided by Section 21.756, in
a case in which a shareholder is entitled to wind up and terminate a
close corporation under a shareholders' agreement, a court may not
order liquidation, involuntary termination, or receivership under
that section unless the court determines that any other remedy in
law or equity, including appointment of a provisional director,
custodian, or other type of receiver, is inadequate. (TBCA
12.52.B.)
Sec. 21.758. APPOINTMENT OF PROVISIONAL DIRECTOR. (a) In a
judicial proceeding under this section, a court shall appoint a
provisional director for a close corporation on presentation of
proof that the directors or the persons empowered to manage the
business and affairs of the close corporation under a shareholders'
agreement are so divided with respect to the management of the
business and affairs of the close corporation that the required
votes or consent to take action on behalf of the close corporation
cannot be obtained, resulting in the business and affairs being
conducted in a manner that is not to the general advantage of the
shareholders.
(b) The provisional director must be an impartial person who
is not a shareholder, a party to a shareholders' agreement, a person
empowered to manage the close corporation under a shareholders'
agreement, or a creditor of the close corporation or of a subsidiary
or affiliate of the close corporation. The court shall determine
any further qualifications.
(c) A provisional director shall serve until removed by
court order or by a vote of the majority of the directors or the
holders of the majority of the shares with voting power, or by a
vote of a different number, not fewer than the majority, of
shareholders or directors if a close corporation provision requires
the concurrence of a larger or different majority for action by the
directors or shareholders. (TBCA 12.53.A, B (part).)
Sec. 21.759. RIGHTS AND POWERS OF PROVISIONAL DIRECTOR. A
provisional director has all the rights and powers of an elected
director of the close corporation, or the rights of vote or consent
of a shareholder and other rights and powers of shareholders or
other persons who have been empowered to manage the business and
affairs of the close corporation under a shareholders' agreement
with the voting power provided by court order, including the right
to notice of, and to vote at, meetings of directors or shareholders.
(TBCA 12.53.B (part).)
Sec. 21.760. COMPENSATION OF PROVISIONAL DIRECTOR. (a) The
compensation of a provisional director shall be determined by an
agreement between the provisional director and the close
corporation, subject to court approval.
(b) The court may set the compensation in the absence of an
agreement or in the event of a disagreement between the provisional
director and the close corporation. (TBCA 12.53.B (part).)
Sec. 21.761. APPOINTMENT OF CUSTODIAN. (a) In a judicial
proceeding under this section, a court shall appoint a custodian
for a close corporation on presentation of proof that:
(1) at a meeting held for the election of directors,
the shareholders are so divided that the shareholders have failed
to elect successors to directors whose terms have expired or would
have expired on qualification of a successor;
(2) the business of the close corporation is suffering
or is threatened with irreparable injury because the directors, or
the shareholders or the persons empowered to manage the business
and affairs of the close corporation under a shareholders'
agreement, are so divided with respect to the management of the
business and affairs of the close corporation that the required
vote or consent to take action on behalf of the close corporation
cannot be obtained and a remedy with respect to the deadlock in a
close corporation provision has failed; or
(3) the plaintiff or intervenor has the right to wind
up and terminate the close corporation under a shareholders'
agreement as provided by Section 21.714.
(b) To be eligible to serve as a custodian, a person must
comply with all the qualifications required to serve as a receiver
under Section 11.406. (TBCA 12.54.A, B (part).)
Sec. 21.762. POWERS AND DUTIES OF CUSTODIAN. A person who
qualifies as a custodian has all of the powers and duties and the
title of a receiver appointed under Sections 11.404-11.406. The
custodian shall continue the business of the close corporation and
may not liquidate the affairs or distribute the assets of the close
corporation, except as provided by court order or Section
21.761(a)(3). (TBCA 12.54.B (part).)
Sec. 21.763. TERMINATION OF CUSTODIANSHIP. If the condition
requiring the appointment of a custodian is remedied other than by
liquidation or winding up and termination, the court shall
terminate the custodianship immediately and management of the close
corporation shall be restored to the directors or shareholders of
the close corporation or to the persons empowered to manage the
business and affairs of the close corporation under a shareholders'
agreement. (TBCA 12.54.B (part).)
[Sections 21.764-21.800 reserved for expansion]
SUBCHAPTER Q. MISCELLANEOUS PROVISIONS
Sec. 21.801. SHARES AND OTHER SECURITIES ARE PERSONAL
PROPERTY. Except as otherwise provided by this code, the shares and
other securities of a corporation are personal property. (TBCA
2.22.A (part).)
Sec. 21.802. PENALTIES FOR LATE FILING OF CERTAIN
INSTRUMENTS. (a) A person required under Title 1 or this title to
file a change of registered office or agent, a certificate of
voluntary withdrawal, or a certificate of termination for a
corporation commits an offense if the person does not file the
required filing with the secretary of state before the earlier of:
(1) the 30th day after the date of the change,
withdrawal, or termination; or
(2) the date the filing is otherwise required by law.
(b) A person who violates Subsection (a) is liable to the
state for a civil penalty in an amount not to exceed $2,500 for each
violation. In determining the amount of a penalty under this
subsection, the court shall consider all the circumstances giving
rise to the offense. The attorney general or the prosecuting
attorney in the county in which the violation occurs may bring suit
to recover the civil penalty imposed under this section.
(c) The attorney general may bring an action in the name of
the state to restrain or enjoin a person from violating this
section.
(d) In an action or proceeding brought against a person who
has not complied with this section, the plaintiff or other party
bringing the suit or proceeding may recover, at the court's
discretion, reasonable costs and attorney's fees incurred by
locating and effecting service of process on the person. Any
damages recovered must be in conjunction with a pending action or
proceeding and shall be awarded as costs under the Texas Rules of
Civil Procedure. This section does not create a private
independent cause of action for failure to comply with this
section.
(e) A person who is entitled to recover damages under
Subsection (d) may request from the attorney general
nonconfidential information on the other person for the purpose of
effecting service of process. The attorney general shall comply
with a request made under this subsection to the extent
practicable. (TBCA 9.07.B, C, D, E, F.)
CHAPTER 22. NONPROFIT CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 22.001. DEFINITIONS. In this chapter:
(1) "Board of directors" means the group of persons
vested with the management of the affairs of the corporation,
regardless of the name used to designate the group.
(2) "Bylaws" means the rules adopted to regulate or
manage the corporation, regardless of the name used to designate
the rules.
(3) "Corporation" or "domestic corporation" means a
domestic nonprofit corporation subject to this chapter.
(4) "Foreign corporation" means a foreign nonprofit
corporation.
(5) "Nonprofit corporation" means a corporation no
part of the income of which is distributable to a member, director,
or officer of the corporation.
(6) "Ordinary care" means the care that an ordinarily
prudent person in a similar position would exercise under similar
circumstances. (TNPCA 1.02.A(1), (2), (3), (5), (7), (15).)
Sec. 22.002. MEETINGS BY REMOTE COMMUNICATIONS TECHNOLOGY.
Subject to the provisions of this code and the certificate of
formation and bylaws of a corporation, a meeting of the members of a
corporation, the board of directors of a corporation, or any
committee designated by the board of directors of a corporation may
be held by means of a remote electronic communications system,
including videoconferencing technology or the Internet, only if:
(1) each person entitled to participate in the meeting
consents to the meeting being held by means of that system; and
(2) the system provides access to the meeting in a
manner or using a method by which each person participating in the
meeting can communicate concurrently with each other participant.
(TNPCA 9.11.A.)
[Sections 22.003-22.050 reserved for expansion]
SUBCHAPTER B. PURPOSES AND POWERS
Sec. 22.051. GENERAL PURPOSES. A nonprofit corporation may
be formed for any lawful purpose or purposes not expressly
prohibited under this chapter or Chapter 2, including any purpose
described by Section 2.002. (TNPCA 2.01.A (part).)
Sec. 22.052. DENTAL HEALTH SERVICE CORPORATION. (a) A
charitable corporation may be formed to operate a dental health
service corporation that manages and coordinates the relationship
between a dentist who contracts to perform dental services and a
patient who will receive the services as a member of a group that
contracted with the dental health service corporation to provide
dental care to group members.
(b) The certificate of formation for a charitable
corporation formed under this section must have attached as an
exhibit:
(1) an affidavit of the organizer or organizers
stating:
(A) that not less than 30 percent of the dentists
legally engaged in the practice of dentistry in this state have
signed a contract to perform the required dental services for a
period of at least one year after incorporation; and
(B) the names and addresses of those dentists;
and
(2) a certification by the State Board of Dental
Examiners that:
(A) the applicants are reputable residents of
this state of good moral character; and
(B) the corporation will be in the best interest
of the public health.
(c) A corporation formed under this section must have at
least 12 directors, including 9 directors who are licensed to
practice dentistry in this state and are actively engaged in the
practice of dentistry in this state.
(d) A corporation formed under this section shall maintain
as participating or contracting dentists at least 30 percent of the
number of dentists actually engaged in the practice of dentistry in
this state. The corporation shall file annually in September with
the State Board of Dental Examiners the name and address of each
participating or contracting dentist.
(e) A corporation formed under this section may not:
(1) prevent a patient from selecting the licensed
dentist of the patient's choice to provide dental services to the
patient;
(2) deny a licensed dentist the right to participate
as a contracting dentist to perform the dental services contracted
for by the patient;
(3) discriminate among patients or licensed dentists
regarding payment or reimbursement for the cost of performing
dental services; or
(4) authorize any person to regulate, interfere with,
or intervene in any manner in the diagnosis or treatment provided by
a licensed dentist to a patient.
(f) A corporation formed under this section may require the
attending dentist to provide a narrative oral or written
description of the dental services provided to determine benefits
or provide proof of treatment. The corporation may request but may
not require diagnostic aids used in the course of treatment. (TNPCA
2.01.A (part).)
Sec. 22.053. DIVIDENDS PROHIBITED. A dividend may not be
paid to, and no part of the income of a corporation may be
distributed to, the corporation's members, directors, or officers.
(TNPCA 2.24 (part).)
Sec. 22.054. AUTHORIZED BENEFITS AND DISTRIBUTIONS. A
corporation may:
(1) pay compensation in a reasonable amount to the
members, directors, or officers of the corporation for services
provided;
(2) confer benefits on the corporation's members in
conformity with the corporation's purposes; and
(3) make distributions to the corporation's members on
winding up and termination to the extent authorized by this
chapter. (TNPCA 2.24 (part).)
Sec. 22.055. POWER TO ASSIST EMPLOYEE OR OFFICER. (a) A
corporation may lend money to or otherwise assist an employee or
officer of the corporation, but not a director, if the loan or
assistance may reasonably be expected to directly or indirectly
benefit the corporation.
(b) A loan made to an officer must be:
(1) made for the purpose of financing the officer's
principal residence; or
(2) set in an original principal amount that does not
exceed:
(A) 100 percent of the officer's annual salary,
if the loan is made before the first anniversary of the officer's
employment; or
(B) 50 percent of the officer's annual salary, if
the loan is made in any subsequent year. (TNPCA 2.02.A (part).)
Sec. 22.056. HEALTH ORGANIZATION CORPORATION. (a) Doctors
of medicine and osteopathy licensed by the Texas State Board of
Medical Examiners and podiatrists licensed by the Texas State Board
of Podiatric Medical Examiners may form a corporation that is
jointly owned, managed, and controlled by those practitioners to
perform a professional service that falls within the scope of
practice of those practitioners and consists of:
(1) carrying out research in the public interest in
medical science, medical economics, public health, sociology, or a
related field;
(2) supporting medical education in medical schools
through grants or scholarships;
(3) developing the capabilities of individuals or
institutions studying, teaching, or practicing medicine, including
podiatric medicine;
(4) delivering health care to the public; or
(5) instructing the public regarding medical science,
public health, hygiene, or a related matter.
(b) When doctors of medicine, osteopathy, and podiatry form
a corporation that is jointly owned by those practitioners, the
authority of each of the practitioners is limited by the scope of
practice of the respective practitioners and none can exercise
control over the other's clinical authority granted by their
respective licenses, either through agreements, the certificate of
formation or bylaws of the corporation, directives, financial
incentives, or other arrangements that would assert control over
treatment decisions made by the practitioner. The Texas State
Board of Medical Examiners and the Texas State Board of Podiatric
Medical Examiners continue to exercise regulatory authority over
their respective licenses. (TNPCA 2.01.C, D.)
[Sections 22.057-22.100 reserved for expansion]
SUBCHAPTER C. FORMATION AND GOVERNING DOCUMENTS
Sec. 22.101. INCORPORATION OF CERTAIN ORGANIZATIONS. A
religious society, a charitable, benevolent, literary, or social
association, or a church may incorporate as a corporation governed
by this chapter with the consent of a majority of its members. Those
members shall authorize the organizers to execute the certificate
of formation. (TNPCA 3.01.B.)
Sec. 22.102. BYLAWS. (a) The initial bylaws of a
corporation shall be adopted by the corporation's board of
directors or, if the management of the corporation is vested in the
corporation's members, by the members.
(b) The bylaws may contain provisions for the regulation and
management of the affairs of the corporation that are consistent
with law and the certificate of formation.
(c) The board of directors may amend or repeal the bylaws,
or adopt new bylaws, unless:
(1) this chapter or the corporation's certificate of
formation wholly or partly reserves the power exclusively to the
corporation's members;
(2) the management of the corporation is vested in the
corporation's members; or
(3) in amending, repealing, or adopting a bylaw, the
members expressly provide that the board of directors may not amend
or repeal the bylaw. (TNPCA 2.09.)
Sec. 22.103. INCONSISTENCY BETWEEN CERTIFICATE OF
FORMATION AND BYLAW. (a) A provision of a certificate of formation
of a corporation that is inconsistent with a bylaw controls over the
bylaw, except as provided by Subsection (b).
(b) A change in the number of directors by amendment to the
bylaws controls over the number stated in the certificate of
formation, unless the certificate of formation provides that a
change in the number of directors may be made only by amendment to
the certificate. (TNPCA 3.02.D.)
Sec. 22.104. ORGANIZATION MEETING. (a) After the
certificate of formation is filed, the board of directors named in
the certificate of formation of a corporation shall hold an
organization meeting of the board, either in or out of this state,
at the call of the incorporators or a majority of the directors to
adopt bylaws and elect officers and for other purposes determined
by the board at the meeting. The incorporators or directors calling
the meeting shall send notice of the time and place of the meeting
to each director named in the certificate of formation not later
than the third day before the date of the meeting.
(b) A first meeting of the members may be held at the call of
the majority of the directors on notice provided not later than the
third day before the date of the meeting. The notice must state the
purposes of the meeting.
(c) If the management of a corporation is vested in the
corporation's members, the members shall hold the organization
meeting on the call of an incorporator. An incorporator who calls
the meeting shall:
(1) send notice of the time and place of the meeting to
each member not later than the third day before the date of the
meeting;
(2) if the corporation is a church, make an oral
announcement of the time and place of the meeting at a regularly
scheduled worship service before the meeting; or
(3) send notice of the meeting in the manner provided
by the certificate of formation. (TNPCA 3.05.)
Sec. 22.105. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
OF FORMATION BY MEMBERS HAVING VOTING RIGHTS. (a) Except as
provided by Section 22.107(b), to amend the certificate of
formation of a corporation with members having voting rights, the
board of directors of the corporation must adopt a resolution
specifying the proposed amendment and directing that the amendment
be submitted to a vote at an annual or special meeting of the
members having voting rights.
(b) Written notice containing the proposed amendment or a
summary of the changes to be effected by the amendment shall be
given to each member entitled to vote at the meeting within the time
and in the manner provided by this chapter for giving notice of a
meeting of members.
(c) The proposed amendment shall be adopted on receiving the
vote required by Section 22.164. (TNPCA 4.02.A(1) (part).)
Sec. 22.106. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
OF FORMATION BY MANAGING MEMBERS. (a) To be approved, a proposed
amendment to the certificate of formation of a corporation the
management of the affairs of which is vested in the corporation's
members under Section 22.202 must be submitted to a vote at an
annual, regular, or special meeting of the members.
(b) Except as otherwise provided by the certificate of
formation or bylaws, notice containing the proposed amendment or a
summary of the changes to be effected by the amendment shall be
given to the members within the time and in the manner provided by
this chapter for giving notice of a meeting of members.
(c) The proposed amendment shall be adopted on receiving the
vote required by Section 22.164. (TNPCA 4.02.A(3) (part).)
Sec. 22.107. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
OF FORMATION BY BOARD OF DIRECTORS. (a) If a corporation has no
members or has no members with voting rights, or in the case of an
amendment under Subsection (b), an amendment to the corporation's
certificate of formation shall be adopted at a meeting of the board
of directors on receiving the vote of directors required by Section
22.164.
(b) Except as otherwise provided by the certificate of
formation, the board of directors of a corporation with members
having voting rights may, without member approval, adopt amendments
to the certificate of formation to:
(1) extend the duration of the corporation if the
corporation was incorporated when limited duration was required by
law;
(2) delete the names and addresses of the initial
directors;
(3) delete the name and address of the initial
registered agent or registered office, if a statement of change is
on file with the secretary of state; or
(4) change the corporate name by:
(A) substituting the word "corporation,"
"incorporated," "company," or "limited," or the abbreviation
"corp.," "inc.," "co.," or "ltd.," for a similar word or
abbreviation in the name; or
(B) adding, deleting, or changing a geographical
attribution to the name. (TNPCA 4.02.A(2), (4).)
Sec. 22.108. NUMBER OF AMENDMENTS SUBJECT TO VOTE AT
MEETING. Any number of amendments to the corporation's certificate
of formation may be submitted to and voted on by a corporation's
members at any one meeting of the members. (TNPCA 4.02.B.)
[Sections 22.109-22.150 reserved for expansion]
SUBCHAPTER D. MEMBERS
Sec. 22.151. MEMBERS. (a) A corporation may have one or
more classes of members or may have no members.
(b) If the corporation has one or more classes of members,
the corporation's certificate of formation or bylaws must include:
(1) a designation of each class;
(2) the manner of the election or appointment of the
members of each class; and
(3) the qualifications and rights of the members of
each class.
(c) A corporation may issue a certificate, card, or other
instrument evidencing membership rights, voting rights, or
ownership rights as authorized by the certificate of formation or
bylaws. (TNPCA 2.08.A, B, D.)
Sec. 22.152. IMMUNITY FROM LIABILITY. The members of a
corporation are not personally liable for a debt, liability, or
obligation of the corporation. (TNPCA 2.08.E.)
Sec. 22.153. ANNUAL MEETING. (a) Except as provided by
Subsection (b), a corporation shall hold an annual meeting of the
members at a time that is stated in or determined in accordance with
the corporation's bylaws.
(b) If the bylaws provide for more than one regular meeting
of members each year, an annual meeting is not required. If an
annual meeting is not required, directors may be elected at a
meeting as provided by the bylaws. (TNPCA 2.10.A(2) (part).)
Sec. 22.154. FAILURE TO CALL ANNUAL MEETING. (a) If the
board of directors of a corporation fails to call the annual meeting
of members at the designated time, a member of the corporation may
demand that the meeting be held within a reasonable time. The
demand must be made in writing and sent to an officer of the
corporation by registered mail.
(b) If the annual meeting is not called before the 61st day
after the date of demand, a member of the corporation may compel the
holding of the meeting by legal action directed against the board of
directors, and each of the extraordinary writs of common law and of
courts of equity are available to the member to compel the holding
of the meeting. Each member has a justiciable interest sufficient
to enable the member to institute and prosecute the legal
proceedings.
(c) Failure to hold the annual meeting at the designated
time does not result in the winding up and termination of the
corporation. (TNPCA 2.10.A(2) (part).)
Sec. 22.155. SPECIAL MEETINGS OF MEMBERS. A special meeting
of the members of a corporation may be called by:
(1) the president;
(2) the board of directors;
(3) members having not less than one-tenth of the
votes entitled to be cast at the meeting; or
(4) other officers or persons as provided by the
certificate of formation or bylaws of the corporation. (TNPCA
2.10.A(3).)
Sec. 22.156. NOTICE OF MEETING. (a) A corporation other
than a church shall provide written notice of the place, date, and
time of a meeting of the members of the corporation and, if the
meeting is a special meeting, the purpose or purposes for which the
meeting is called. The notice shall be delivered to each member
entitled to vote at the meeting not later than the 10th day and not
earlier than the 60th day before the date of the meeting. Notice
may be delivered personally or in accordance with Section 6.051(b).
(b) Notice of a meeting of the members of a corporation that
is a church is sufficient if given by oral announcement at a
regularly scheduled worship service before the meeting or as
otherwise provided by the certificate of formation or bylaws of the
corporation. (TNPCA 2.11.A (part), B.)
Sec. 22.157. SPECIAL BYLAWS AFFECTING NOTICE. (a) A
corporation may provide in the corporation's bylaws that notice of
an annual or regular meeting is not required.
(b) A corporation having more than 1,000 members at the time
a meeting is scheduled or called may provide notice of a meeting by
publication in a newspaper of general circulation in the community
in which the principal office of the corporation is located, if the
corporation provides for that notice in its bylaws. (TNPCA 2.11.C,
D.)
Sec. 22.158. PREPARATION AND INSPECTION OF LIST OF VOTING
MEMBERS. (a) After setting a record date for the notice of a
meeting, a corporation shall prepare an alphabetical list of the
names of all its voting members. The list must identify:
(1) the members who are entitled to notice and the
members who are not entitled to notice of the meeting;
(2) the address of each voting member; and
(3) the number of votes each voting member is entitled
to cast at the meeting.
(b) Not later than the second business day after the date
notice is given of a meeting for which a list was prepared in
accordance with Subsection (a), and continuing through the meeting,
the list of voting members must be available at the corporation's
principal office or at a reasonable place in the municipality in
which the meeting will be held, as identified in the notice of the
meeting, for inspection by members entitled to vote at the meeting
for the purpose of communication with other members concerning the
meeting.
(c) A voting member or voting member's agent or attorney is
entitled on written demand to inspect and, at the member's expense
and subject to Section 22.351, copy the list at a reasonable time
during the period the list is available for inspection.
(d) The corporation shall make the list of voting members
available at the meeting. A voting member or voting member's agent
or attorney is entitled to inspect the list at any time during the
meeting or an adjournment of the meeting. (TNPCA 2.11B.)
Sec. 22.159. QUORUM OF MEMBERS. (a) Unless otherwise
provided by the certificate of formation or bylaws of a
corporation, members of the corporation holding one-tenth of the
votes entitled to be cast, in person or by proxy, constitute a
quorum.
(b) The vote of the majority of the votes entitled to be cast
by the members present or represented by proxy at a meeting at which
a quorum is present is the act of the members meeting, unless the
vote of a greater number is required by law or the certificate of
formation or bylaws.
(c) Unless otherwise provided by the certificate of
formation or bylaws, a church incorporated before May 12, 1959, is
considered to have provided in the certificate of formation or
bylaws that members present at a meeting for which notice has been
given constitute a quorum. (TNPCA 2.12.)
Sec. 22.160. VOTING OF MEMBERS. (a) Each member of a
corporation, regardless of class, is entitled to one vote on each
matter submitted to a vote of the corporation's members, except to
the extent that the voting rights of members of a class are limited,
enlarged, or denied by the certificate of formation or bylaws of the
corporation.
(b) A member may vote in person or, unless otherwise
provided by the certificate of formation or bylaws, by proxy
executed in writing by the member or the member's attorney-in-fact.
(c) Unless otherwise provided by the proxy, a proxy is
revocable and expires 11 months after the date of its execution. A
proxy may not be irrevocable for longer than 11 months.
(d) If authorized by the certificate of formation or bylaws
of the corporation, a member vote on any matter may be conducted by
mail, by facsimile transmission, by electronic message, or by any
combination of those methods. (TNPCA 2.13.A, B.)
Sec. 22.161. ELECTION OF DIRECTORS. (a) A member entitled
to vote at an election of directors is entitled to vote, in person
or by proxy, for as many persons as there are directors to be
elected and for whose election the member has a right to vote.
(b) If expressly authorized by the corporation's
certificate of formation, the member may cumulate the member's vote
by:
(1) giving one candidate a number of votes equal to the
number of the directors to be elected multiplied by the member's
vote; or
(2) distributing the votes on the same principle among
any number of the candidates.
(c) A member who intends to cumulate votes under Subsection
(b) shall give written notice of the member's intention to the
secretary of the corporation not later than the day preceding the
date of the election. (TNPCA 2.13.C.)
Sec. 22.162. GREATER VOTING REQUIREMENTS UNDER CERTIFICATE
OF FORMATION. If the corporation's certificate of formation
requires the vote or concurrence of a greater proportion of the
members of a corporation than is required by this chapter with
respect to an action to be taken by the members, the certificate of
formation controls. (TNPCA 9.08.)
Sec. 22.163. RECORD DATE FOR DETERMINATION OF MEMBERS. (a)
The record date for determining members of a corporation may be set
as provided by Section 6.101.
(b) If a record date is not set under Section 6.101:
(1) members on the date of the meeting who are
otherwise eligible to vote are entitled to vote at the meeting;
(2) members at the close of business on the business
day preceding the date notice is given, or if notice is waived, at
the close of business on the business day preceding the date of the
meeting, are entitled to notice of a meeting of members; and
(3) members at the close of business on the later of
the day the board of directors adopts the resolution relating to the
action or the 60th day before the date of the action are entitled to
exercise any rights regarding any other lawful action.
(c) The board of directors of a corporation may set a new
date for determining the right to notice of or to vote at any
adjournment of a members' meeting. The board shall set a new date
if the meeting is adjourned to a date more than 90 days after the
record date for determining members entitled to notice of the
original meeting. (TNPCA 2.11A.A (part), B (part), C (part), E.)
Sec. 22.164. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION.
(a) In this section, "fundamental action" means:
(1) an amendment of a certificate of formation;
(2) a voluntary winding up under Chapter 11;
(3) a revocation of a voluntary decision to wind up
under Section 11.151;
(4) a cancellation of an event requiring winding up
under Section 11.152;
(5) a reinstatement under Section 11.202;
(6) a distribution plan under Section 22.305;
(7) a plan of merger under Subchapter F;
(8) a sale of all or substantially all of the assets of
a corporation under Subchapter F;
(9) a plan of conversion under Subchapter F; or
(10) a plan of exchange under Subchapter F.
(b) Except as otherwise provided by Subsection (c) or the
certificate of formation in accordance with Section 22.162, the
vote required for approval of a fundamental action is:
(1) at least two-thirds of the votes that members
present in person or by proxy are entitled to cast at the meeting at
which the action is submitted for a vote, if the corporation has
members with voting rights;
(2) at least two-thirds of the votes of members
present at the meeting at which the action is submitted for a vote,
if the management of the affairs of the corporation is vested in the
corporation's members under Section 22.202; or
(3) the affirmative vote of the majority of the
directors in office, if the corporation has no members or has no
members with voting rights.
(c) If any class of members is entitled to vote on the
fundamental action as a class by the terms of the certificate of
formation or the bylaws, the vote required for the approval of the
fundamental action is the vote required by Subsection (b)(1) and at
least two-thirds of the votes that the members of each class in
person or by proxy are entitled to cast at the meeting at which the
action is submitted for a vote. (TNPCA 4.02.A (part), 5.03.A
(part), 5.09 (part), 6.01.A (part), 6.03 (part), 6.04.A (part).)
[Sections 22.165-22.200 reserved for expansion]
SUBCHAPTER E. MANAGEMENT
Sec. 22.201. MANAGEMENT BY BOARD OF DIRECTORS. Except as
provided by Section 22.202, the affairs of a corporation are
managed by a board of directors. The board of directors may be
designated by any name appropriate to the customs, usages, or
tenets of the corporation. (TNPCA 2.14.A (part), D.)
Sec. 22.202. MANAGEMENT BY MEMBERS. (a) The certificate of
formation of a corporation may vest the management of the affairs of
the corporation in the members of the corporation. If the
corporation has a board of directors, the corporation may limit the
authority of the board to the extent provided by the certificate of
formation or bylaws.
(b) A corporation is considered to have vested the
management of the corporation's affairs in the board of directors
of the corporation in the absence of a provision to the contrary in
the certificate of formation, unless the corporation is a church
organized and operating under a congregational system that:
(1) was incorporated before January 1, 1994; and
(2) has the management of its affairs vested in the
corporation's members. (TNPCA 2.14.C.)
Sec. 22.203. BOARD MEMBER ELIGIBILITY REQUIREMENTS. A
director of a corporation is not required to be a resident of this
state or a member of the corporation unless the certificate of
formation or a bylaw of the corporation imposes that requirement.
The certificate of formation or bylaws may prescribe other
qualifications for directors. (TNPCA 2.14.A (part).)
Sec. 22.204. NUMBER OF DIRECTORS. (a) If the corporation
has a board of directors, a corporation may not have fewer than
three directors. The number of directors shall be set by, or in the
manner provided by, the certificate of formation or bylaws of the
corporation, except that the number of directors on the initial
board of directors must be set by the certificate of formation.
(b) The number of directors may be increased or decreased by
amendment to, or in the manner provided by, the certificate of
formation or bylaws. A decrease in the number of directors may not
shorten the term of an incumbent director.
(c) In the absence of a provision of the certificate of
formation or a bylaw setting the number of directors or providing
for the manner in which the number of directors shall be determined,
the number of directors is the same as the number constituting the
initial board of directors. (TNPCA 2.15.A.)
Sec. 22.205. DESIGNATION OF INITIAL BOARD OF DIRECTORS. If
the corporation is to be managed by a board of directors, the
certificate of formation of a corporation must state the names of
the members of the initial board of directors of the corporation.
(TNPCA 2.15.B (part).)
Sec. 22.206. ELECTION OR APPOINTMENT OF BOARD OF DIRECTORS.
Directors other than the initial directors are elected, appointed,
or designated in the manner provided by the certificate of
formation or bylaws. If the method of election, designation, or
appointment is not provided by the certificate of formation or
bylaws, directors other than the initial directors are elected by
the board of directors. (TNPCA 2.15.B (part).)
Sec. 22.207. ELECTION AND CONTROL BY CERTAIN ENTITIES. (a)
The board of directors of a religious, charitable, educational, or
eleemosynary corporation may be affiliated with, elected, and
controlled by an incorporated or unincorporated convention,
conference, or association organized under the laws of this or
another state, the membership of which is composed of
representatives, delegates, or messengers from a church or other
religious association.
(b) The board of directors of a corporation may be wholly or
partly elected by one or more associations or corporations
organized under the laws of this or another state if:
(1) the certificate of formation or bylaws of the
corporation provide for that election; and
(2) the corporation has no members with voting rights.
(TNPCA 2.14.B, E.)
Sec. 22.208. TERM OF OFFICE. (a) A director on the initial
board of directors of a corporation holds office until the first
annual election of directors or for the period specified in the
certificate of formation or bylaws of the corporation. Directors
other than the initial directors are elected, appointed, or
designated for the terms provided by the certificate of formation
or bylaws.
(b) In the absence of a provision in the certificate of
formation or bylaws setting the term of office for directors, a
director holds office until the next annual election of directors
and until a successor is elected, appointed, or designated and
qualified.
(c) A director may be removed from office as provided in
Section 22.211. (TNPCA 2.15.B (part), C (part).)
Sec. 22.209. CLASSIFICATION OF DIRECTORS. Directors may be
divided into classes. The terms of office of the several classes
are not required to be uniform. (TNPCA 2.15.C (part).)
Sec. 22.210. EX OFFICIO MEMBER OF BOARD. (a) The
certificate of formation or bylaws of a corporation may provide
that a person may be an ex officio member of the board of directors
of the corporation.
(b) A person designated as an ex officio member of the board
is entitled to receive notice of and to attend board meetings.
(c) An ex officio member is not entitled to vote unless the
certificate of formation or bylaws authorize the member to vote. An
ex officio member of the board who is not entitled to vote does not
have the duties or liabilities of a director provided by this
chapter. (TNPCA 2.14.F.)
Sec. 22.211. REMOVAL OF DIRECTOR. (a) A director of a
corporation may be removed from office under any procedure provided
by the certificate of formation or bylaws of the corporation.
(b) In the absence of a provision for removal in the
certificate of formation or bylaws, a director may be removed from
office, with or without cause, by the persons entitled to elect,
designate, or appoint the director. If the director was elected to
office, removal requires an affirmative vote equal to the vote
necessary to elect the director. (TNPCA 2.15.D.)
Sec. 22.212. VACANCY. (a) Unless otherwise provided by the
certificate of formation or bylaws of the corporation, a vacancy in
the board of directors of a corporation shall be filled by the
affirmative vote of the majority of the remaining directors,
regardless of whether that majority is less than a quorum. A
director elected to fill a vacancy is elected for the unexpired term
of the member's predecessor in office.
(b) A vacancy in the board occurring because of an increase
in the number of directors shall be filled by election at an annual
meeting or at a special meeting of members called for that purpose.
If a corporation has no members or has no members with the right to
vote on the vacancy, the vacancy shall be filled as provided by the
certificate of formation or bylaws. (TNPCA 2.16.)
Sec. 22.213. QUORUM. (a) A quorum for the transaction of
business by the board of directors of a corporation is the lesser
of:
(1) the majority of the number of directors set by the
corporation's bylaws or, in the absence of a bylaw setting the
number of directors, a majority of the number of directors stated in
the corporation's certificate of formation; or
(2) any number, not less than three, set as a quorum by
the certificate of formation or bylaws.
(b) A director present by proxy at a meeting may not be
counted toward a quorum. (TNPCA 2.17.A, B.)
Sec. 22.214. ACTION BY DIRECTORS. The act of a majority of
the directors present in person or by proxy at a meeting at which a
quorum is present is the act of the board of directors of a
corporation, unless the act of a greater number is required by the
certificate of formation or bylaws of the corporation. (TNPCA
2.17.C.)
Sec. 22.215. VOTING IN PERSON OR BY PROXY. A director of a
corporation may vote in person or, if authorized by the certificate
of formation or bylaws of the corporation, by proxy executed in
writing by the director. (TNPCA 2.17.D (part).)
Sec. 22.216. TERM AND REVOCABILITY OF PROXY. (a) A proxy
expires three months after the date the proxy is executed.
(b) A proxy is revocable unless otherwise provided by the
proxy or made irrevocable by law. (TNPCA 2.17.D (part).)
Sec. 22.217. NOTICE OF MEETING; WAIVER OF NOTICE. (a)
Regular meetings of the board of directors of a corporation may be
held with or without notice as prescribed by the corporation's
bylaws.
(b) Special meetings of the board of directors shall be held
with notice as prescribed by the bylaws. Attendance of a director
at a meeting constitutes a waiver of notice, unless the director
attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not
lawfully called or convened.
(c) Unless required by the bylaws, the business to be
transacted at, or the purpose of, a regular or special meeting of
the board of directors is not required to be specified in the notice
or waiver of notice of the meeting.
(d) Notice may be delivered personally or in accordance with
Section 6.051(b). (TNPCA 2.19.B.)
Sec. 22.218. MANAGEMENT COMMITTEE. (a) If authorized by
the certificate of formation or bylaws of the corporation, the
board of directors of a corporation, by resolution adopted by the
majority of the directors in office, may designate one or more
committees to have and exercise the authority of the board in the
management of the corporation to the extent provided by:
(1) the resolution;
(2) the certificate of formation; or
(3) the bylaws.
(b) A committee designated under this section must consist
of at least two persons. The majority of the persons on the
committee must be directors. If provided by the certificate of
formation or bylaws, the remaining persons on the committee are not
required to be directors.
(c) The designation of a committee and the delegation of
authority to the committee does not operate to relieve the board of
directors, or an individual director, of any responsibility imposed
on the board or director by law. A committee member who is not a
director has the same responsibility with respect to the committee
as a committee member who is a director. (TNPCA 2.18.A.)
Sec. 22.219. OTHER COMMITTEES. (a) The board of directors
of a corporation, by resolution adopted by the majority of the
directors at a meeting at which a quorum is present, or the
president, if authorized by a similar resolution of the board of
directors or by the certificate of formation or bylaws of the
corporation, may designate and appoint one or more committees that
do not have the authority of the board of directors in the
management of the corporation.
(b) The membership on a committee designated under this
section may be limited to directors. (TNPCA 2.18.B.)
Sec. 22.220. ACTION WITHOUT MEETING OF DIRECTORS OR
COMMITTEE. (a) The certificate of formation of a corporation may
provide that an action required by this chapter to be taken at a
meeting of the corporation's directors or an action that may be
taken at a meeting of the directors or a committee may be taken
without a meeting if a written consent, stating the action to be
taken, is signed by the number of directors or committee members
necessary to take that action at a meeting at which all of the
directors or committee members are present and voting. The consent
must state the date of each director's or committee member's
signature.
(b) A written consent signed by less than all of the
directors or committee members is not effective to take the action
that is the subject of the consent unless, not later than the 60th
day after the date of the earliest dated consent delivered to the
corporation in the manner required by this section, a consent or
consents signed by the required number of directors or committee
members are delivered to the corporation:
(1) at the registered office or principal place of
business of the corporation; or
(2) through the corporation's registered agent,
transfer agent, registrar, or exchange agent or an officer or agent
of the corporation having custody of the books in which proceedings
of meetings of directors or committees are recorded.
(c) Delivery under Subsection (b) must be by hand or by
certified or registered mail, return receipt requested. Delivery to
the corporation's principal place of business must be addressed to
the president or principal executive officer of the corporation.
(d) Prompt notice of the taking of an action by directors or
a committee without a meeting by less than unanimous written
consent shall be given to each director or committee member who did
not consent in writing to the action. (TNPCA 9.10.C(1), (2), (3).)
Sec. 22.221. GENERAL STANDARDS FOR DIRECTORS. (a) A
director shall discharge the director's duties, including duties as
a committee member, in good faith, with ordinary care, and in a
manner the director reasonably believes to be in the best interest
of the corporation.
(b) A director is not liable to the corporation, a member,
or another person for an action taken or not taken as a director if
the director acted in compliance with this section. A person
seeking to establish liability of a director must prove that the
director did not act:
(1) in good faith;
(2) with ordinary care; and
(3) in a manner the director reasonably believed to be
in the best interest of the corporation. (TNPCA 2.28.A, D.)
Sec. 22.222. RELIGIOUS CORPORATION DIRECTOR'S GOOD FAITH
RELIANCE ON CERTAIN INFORMATION. A director of a religious
corporation, in the discharge of a duty imposed or power conferred
on the director, including a duty imposed or power conferred as a
committee member, may rely in good faith on information or on an
opinion, report, or statement, including a financial statement or
other financial data, concerning the corporation or another person
that was prepared or presented by:
(1) a religious authority; or
(2) a minister, priest, rabbi, or other person whose
position or duties in the corporation the director believes justify
reliance and confidence and whom the director believes to be
reliable and competent in the matters presented. (TNPCA 2.28.B
(part).)
Sec. 22.223. NOT A TRUSTEE. A director of a corporation is
not considered to have the duties of a trustee of a trust with
respect to the corporation or with respect to property held or
administered by the corporation, including property subject to
restrictions imposed by the donor or transferor of the property.
(TNPCA 2.28.E.)
Sec. 22.224. DELEGATION OF INVESTMENT AUTHORITY. (a) The
board of directors of a corporation may:
(1) contract with an advisor who is an investment
counsel or a trust company, bank, investment advisor, or investment
manager; and
(2) confer on that advisor the authority to:
(A) purchase or otherwise acquire a stock, bond,
security, or other investment on behalf of the corporation; and
(B) sell, transfer, or otherwise dispose of an
asset or property of the corporation at a time and for a
consideration the advisor considers appropriate.
(b) The board of directors may:
(1) confer on an advisor described by Subsection (a)
other powers regarding the corporation's investments as the board
considers appropriate; and
(2) authorize the advisor to hold title to an asset or
property of the corporation, in the advisor's own name or in the
name of a nominee, for the benefit of the corporation.
(c) The board of directors is not liable for an action taken
or not taken by an advisor under this section if the board acted in
good faith and with ordinary care in selecting the advisor. The
board of directors may remove or replace the advisor, with or
without cause, if the board considers that action appropriate or
necessary. (TNPCA 2.29.)
Sec. 22.225. LOAN TO DIRECTOR PROHIBITED. (a) A
corporation may not make a loan to a director.
(b) The directors of a corporation who vote for or assent to
the making of a loan to a director, and any officer who participates
in making the loan, are jointly and severally liable to the
corporation for the amount of the loan until the loan is repaid.
(TNPCA 2.25.)
Sec. 22.226. DIRECTOR LIABILITY FOR CERTAIN DISTRIBUTIONS
OF ASSETS. (a) In addition to any other liability imposed by law on
the directors of a corporation, the directors who vote for or assent
to a distribution of assets other than in payment of the
corporation's debts, when the corporation is insolvent or when
distribution would render the corporation insolvent, or during the
liquidation of the corporation, without the payment and discharge
of or making adequate provisions for any known debt, obligation, or
liability of the corporation, are jointly and severally liable to
the corporation for the value of the assets distributed, to the
extent that the debt, obligation, or liability is not paid and
discharged.
(b) A director is not liable under this section if, in
voting for or assenting to a distribution, the director:
(1) relied in good faith and with ordinary care on
information or an opinion, report, or statement in accordance with
Section 3.102;
(2) acting in good faith and with ordinary care,
considered the assets of the corporation to be at least equal to
their book value; or
(3) in determining whether the corporation made
adequate provision for the discharge of all of its liabilities and
obligations as provided in Section 11.053, relied in good faith and
with ordinary care on financial statements of, or other information
concerning, a person who was or became contractually obligated to
discharge some or all of those liabilities or obligations. (TNPCA
2.26.A, C.)
Sec. 22.227. DISSENT TO ACTION. (a) A director of a
corporation who is present at a meeting of the board of directors at
which action is taken on a corporate matter described by Section
22.226(a) is presumed to have assented to the action unless:
(1) the director's dissent has been entered in the
minutes of the meeting;
(2) the director has filed a written dissent to the
action with the person acting as the secretary of the meeting before
the meeting is adjourned; or
(3) the director has sent a written dissent by
registered mail to the secretary of the corporation immediately
after the meeting has been adjourned.
(b) The right to dissent under this section does not apply
to a director who voted in favor of the action. (TNPCA 2.26.B.)
Sec. 22.228. RELIANCE ON WRITTEN OPINION OF ATTORNEY. A
director is not liable under Section 22.226 or 22.227 if, in the
exercise of ordinary care, the director acted in good faith and in
reliance on the written opinion of an attorney for the corporation.
(TNPCA 2.26.D.)
Sec. 22.229. RIGHT TO CONTRIBUTION. A director against whom
a claim is asserted under Section 22.226 or 22.227 and who is held
liable on the claim is entitled to contribution from persons who
accepted or received the distribution knowing the distribution to
have been made in violation of that section, in proportion to the
amounts received by those persons. (TNPCA 2.26.E.)
Sec. 22.230. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED DIRECTORS, OFFICERS, AND MEMBERS. (a) This section
applies only to a contract or transaction between a corporation
and:
(1) one or more of the corporation's directors,
officers, or members; or
(2) an entity or other organization in which one or
more of the corporation's directors, officers, or members:
(A) is a managerial official or a member; or
(B) has a financial interest.
(b) An otherwise valid contract or transaction is valid
notwithstanding that a director, officer, or member of the
corporation is present at or participates in the meeting of the
board of directors, of a committee of the board, or of the members
that authorizes the contract or transaction, or votes to authorize
the contract or transaction, if:
(1) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed to or
known by:
(A) the corporation's board of directors, a
committee of the board of directors, or the members, and the board,
the committee, or the members in good faith and with ordinary care
authorize the contract or transaction by the affirmative vote of
the majority of the disinterested directors, committee members or
members, regardless of whether the disinterested directors,
committee members or members constitute a quorum; or
(B) the members entitled to vote on the
authorization of the contract or transaction, and the contract or
transaction is specifically approved in good faith and with
ordinary care by a vote of the members; or
(2) the contract or transaction is fair to the
corporation when the contract or transaction is authorized,
approved, or ratified by the board of directors, a committee of the
board of directors, or the members.
(c) Common or interested directors or members of a
corporation may be included in determining the presence of a quorum
at a meeting of the board, a committee of the board, or members that
authorizes the contract or transaction. (TNPCA 2.30.)
Sec. 22.231. OFFICERS. (a) The officers of a corporation
shall include a president and a secretary and may include one or
more vice presidents, a treasurer, and other officers and assistant
officers as considered necessary. Any two or more offices, other
than the offices of president and secretary, may be held by the same
person.
(b) A properly designated committee may perform the
functions of an officer. A single committee may perform the
functions of any two or more officers, including the functions of
president and secretary.
(c) The officers of a corporation may be designated by other
or additional titles as provided by the certificate of formation or
bylaws of the corporation. (TNPCA 2.20.A (part), B.)
Sec. 22.232. ELECTION OR APPOINTMENT OF OFFICERS. (a) An
officer of a corporation shall be elected or appointed at the time,
in the manner, and for the terms prescribed by the certificate of
formation or bylaws of the corporation. The term of an officer may
not exceed three years.
(b) If the certificate of formation or bylaws do not include
provisions for the election or appointment of officers, the
officers shall be elected or appointed annually by the board of
directors or, if the management of the corporation is vested in the
corporation's members, by the members. (TNPCA 2.20.A (part).)
Sec. 22.233. APPLICATION TO CHURCH. A corporation that is a
church is not required to have officers as provided by this
subchapter. The duties and responsibilities of the officers may be
vested in the corporation's board of directors or other designated
body in any manner provided for by the certificate of formation or
bylaws of the corporation. (TNPCA 2.20.C.)
Sec. 22.234. RELIGIOUS CORPORATION OFFICER'S GOOD FAITH
RELIANCE ON CERTAIN INFORMATION. An officer of a religious
corporation, in the discharge of a duty imposed or power conferred
on the officer, may rely in good faith and with ordinary care on
information or on an opinion, report, or statement concerning the
corporation or another person that was prepared or presented by:
(1) a religious authority or another religious
corporation; or
(2) a minister, priest, rabbi, or other person whose
position or duties in the religious authority or religious
corporation the officer believes justify reliance and confidence
and whom the officer believes to be reliable and competent in the
matters presented. (TNPCA 2.20.D (part).)
Sec. 22.235. OFFICER LIABILITY. (a) An officer is not
liable to the corporation or any other person for an action taken or
omission made by the officer in the person's capacity as an officer
unless the officer's conduct was not exercised:
(1) in good faith;
(2) with ordinary care; and
(3) in a manner the officer reasonably believes to be
in the best interest of the corporation.
(b) This section shall not affect the liability of the
corporation for an act or omission of the officer. (TNPCA 2.22.)
[Sections 22.236-22.250 reserved for expansion]
SUBCHAPTER F. FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 22.251. APPROVAL OF MERGER. (a) A domestic
corporation that is a party to a merger under Chapter 10 must
approve the merger by complying with this section.
(b) If the corporation that is a party to the merger has no
members or has no members with voting rights, the plan of merger
must be approved by the vote of directors required by Section
22.164.
(c) If the management of the affairs of the corporation that
is a party to the merger is vested in its members under Section
22.202, the plan of merger:
(1) must be submitted to a vote at an annual, regular,
or special meeting of the members; and
(2) must be approved by the members by the vote
required by Section 22.164.
(d) If the corporation that is a party to the merger has
members with voting rights:
(1) the board of directors must adopt a resolution
that:
(A) approves the plan of merger; and
(B) directs that the plan be submitted to a vote
at an annual or special meeting of the members having voting rights;
and
(2) the members must approve the plan of merger by the
vote required by Section 22.164. (TNPCA 5.03.A(1) (part), (2), (3)
(part).)
Sec. 22.252. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF
ASSETS. (a) A corporation must approve the sale of all or
substantially all of its assets by complying with this section.
(b) If the corporation has no members or has no members with
voting rights, the sale of all or substantially all of the assets of
the corporation must be authorized by the vote of directors
required by Section 22.164.
(c) If the management of the affairs of the corporation is
vested in its members under Section 22.202, a resolution
authorizing a sale of all or substantially all of the assets of the
corporation:
(1) must be submitted to a vote at an annual, regular,
or special meeting of the members; and
(2) must be approved by the members by the vote
required by Section 22.164.
(d) If the corporation has members with voting rights:
(1) the board of directors of the corporation must
adopt a resolution that:
(A) recommends the sale; and
(B) directs that the resolution be submitted to a
vote at an annual or special meeting of the members having voting
rights; and
(2) the members must approve the resolution by the
vote required by Section 22.164.
(e) At the meeting required by Subsection (c) or (d), in
addition to approving the resolution authorizing the sale, the
members may set, or authorize the board of directors to set, the
terms and conditions of the sale and the consideration to be
received by the corporation for the sale by the same vote of
members.
(f) After the members authorize a sale under Subsection (d),
the board of directors may abandon the sale, subject to the rights
of third parties under any contracts relating to the sale, without
further action or approval by members.
(g) Notwithstanding Subsection (d), if a corporation is
insolvent, a sale of all or substantially all of the assets of the
corporation may be authorized on receiving the affirmative vote of
the majority of the directors in office.
(h) The phrase "sale of all or substantially all of the
assets" means the sale, lease, exchange, or other disposition,
other than a pledge, mortgage, deed of trust, or trust indenture
unless otherwise provided by the certificate of formation, of all
or substantially all of the property and assets of a domestic
corporation that is not made in the usual and regular course of the
corporation's activities without regard to whether the disposition
is made with the goodwill of the corporation's activities. The term
does not include a transaction that results in the corporation
directly or indirectly:
(1) continuing to engage in one or more activities; or
(2) applying a portion of the consideration received
in connection with the transaction to the conduct of an activity
that the corporation engages in after the transaction. (TNPCA 5.09
(part).)
Sec. 22.253. MEETING OF MEMBERS; NOTICE. (a) The
corporation must give to each member entitled to vote at a meeting
described by Section 22.251(c) or (d) or Section 22.252(c) or (d) a
written notice stating that the purpose or one of the purposes of
the meeting is to consider the plan of merger or the sale of all or
substantially all of the assets of the corporation. The notice must
be given in the time and manner provided by Chapter 6 and this
chapter for giving notice of a meeting to members.
(b) A vote of members entitled to vote at the meeting shall
be taken on the plan of merger or the resolution authorizing the
sale of all or substantially all of the assets of the corporation.
The members must approve the plan or resolution by the vote required
by Section 22.164.
(c) For a meeting to vote on a plan of merger, the notice of
the meeting must contain the plan of merger or a summary of the plan
of merger.
(d) For a corporation the management of the affairs of which
is vested in its members under Section 22.202, the notice of the
meeting is subject to the provisions of the certificate of
formation or bylaws of the corporation. (TNPCA 5.03.A (part), 5.09
(part).)
Sec. 22.254. PLEDGE, MORTGAGE, DEED OF TRUST, OR TRUST
INDENTURE. (a) Except as otherwise provided by Subsection (b) or by
the corporation's certificate of formation:
(1) the board of directors of a corporation may
authorize a pledge, mortgage, deed of trust, or trust indenture;
and
(2) an authorization or consent of members is not
required for the validity of the transaction or for any sale under
the terms of the transaction.
(b) If the management of the affairs of a corporation is
vested in the corporation's members under Section 22.202:
(1) the members may authorize a pledge, mortgage, deed
of trust, or trust indenture in the manner provided by Section
22.252(c) for a sale of all or substantially all of the assets of a
corporation; and
(2) an authorization by the board of directors is not
required for the validity of the transaction or for any sale under
the terms of the transaction. (TNPCA 5.09 (part).)
Sec. 22.255. CONVEYANCE BY CORPORATION. A corporation may
convey real property of the corporation when authorized by
appropriate resolution of the board of directors or members.
(TNPCA 5.08 (part).)
Sec. 22.256. APPROVAL OF CONVERSION. (a) A domestic
corporation must approve a conversion under Chapter 10 by complying
with this section.
(b) If the corporation has no members or has no members with
voting rights, the plan of conversion must be approved by the vote
of directors required by Section 22.164.
(c) If the management of the affairs of the corporation is
vested in its members under Section 22.202, the plan of conversion:
(1) must be submitted to a vote at an annual, regular,
or special meeting of the members; and
(2) must be approved by the members by the vote
required by Section 22.164.
(d) If the corporation has members with voting rights:
(1) the board of directors must adopt a resolution
that:
(A) approves the plan of conversion; and
(B) directs that the plan be submitted to a vote
at an annual or special meeting of the members having voting rights;
and
(2) the members must approve the plan of conversion by
the vote required by Section 22.164. (New.)
Sec. 22.257. APPROVAL OF EXCHANGE. (a) A domestic
corporation must approve an exchange under Chapter 10 by complying
with this section.
(b) If the corporation has no members or has no members with
voting rights, the plan of exchange must be approved by the vote of
directors required by Section 22.164.
(c) If the management of the affairs of the corporation is
vested in its members under Section 22.202, the plan of exchange:
(1) must be submitted to a vote at an annual, regular,
or special meeting of the members; and
(2) must be approved by the members by the vote
required by Section 22.164.
(d) If the corporation has members with voting rights:
(1) the board of directors must adopt a resolution
that:
(A) approves the plan of exchange; and
(B) directs that the plan be submitted to a vote
at an annual or special meeting of the members having voting rights;
and
(2) the members must approve the plan of exchange by
the vote required by Section 22.164. (New.)
[Sections 22.258-22.300 reserved for expansion]
SUBCHAPTER G. WINDING UP AND TERMINATION
Sec. 22.301. APPROVAL OF VOLUNTARY WINDING UP,
REINSTATEMENT, REVOCATION OF VOLUNTARY WINDING UP, OR DISTRIBUTION
PLAN. A corporation must approve a voluntary winding up in
accordance with Chapter 11, a reinstatement in accordance with
Section 11.202, a cancellation of an event requiring winding up
under Section 11.152, a revocation of a voluntary decision to wind
up in accordance with Section 11.151, or a distribution plan in
accordance with Section 22.305 by complying with the procedures
prescribed by this subchapter. (New.)
Sec. 22.302. CERTAIN PROCEDURES FOR APPROVAL. To approve a
voluntary winding up, a reinstatement, a cancellation of an event
requiring winding up, a revocation of a voluntary decision to wind
up, or a distribution plan, a corporation must follow the following
procedures:
(1) if the corporation has no members or has no members
with voting rights, the corporation's board of directors must adopt
a resolution to wind up, to reinstate, to cancel the event requiring
winding up, to revoke a voluntary decision to wind up, or to effect
the distribution plan by the vote of directors required by Section
22.164;
(2) if the management of the affairs of the
corporation is vested in the corporation's members under Section
22.202, the winding up, reinstatement, cancellation of event
requiring winding up, revocation of voluntary decision to wind up,
or distribution plan:
(A) must be submitted to a vote at an annual,
regular, or special meeting of members; and
(B) must be approved by the members by the vote
required by Section 22.164; or
(3) if the corporation has members with voting rights:
(A) the corporation's board of directors must
approve a resolution:
(i) recommending the winding up,
reinstatement, cancellation of event requiring winding up,
revocation of a voluntary decision to wind up, or distribution
plan; and
(ii) directing that the winding up,
reinstatement, cancellation of event requiring winding up,
revocation of a voluntary decision to wind up, or distribution plan
of the corporation be submitted to a vote at an annual or special
meeting of members; and
(B) the members must approve the action described
by Paragraph (A) in accordance with Section 22.303. (TNPCA 6.01.A
(part), 6.03 (part), 6.04.A (part).)
Sec. 22.303. MEETING OF MEMBERS; NOTICE. (a) The
corporation must give to each member entitled to vote at a meeting
described by Section 22.302(2) or (3) a written notice stating that
the purpose or one of the purposes of the meeting is to consider the
winding up, reinstatement, cancellation of event requiring winding
up, revocation of the voluntary decision to wind up, or
distribution plan of the corporation. The notice must be given in
the time and manner provided by Chapter 6 and this chapter for the
giving of notice of a meeting to members.
(b) A vote of members entitled to vote at the meeting shall
be taken on the resolution to wind up, reinstate, cancel the event
requiring winding up, revoke the voluntary decision to wind up, or
effect the distribution plan of the corporation. The members must
approve the resolution by the vote required under Section 22.164.
(c) For a meeting to vote on a distribution plan, the notice
of the meeting must contain the proposed plan of distribution or a
summary of the plan.
(d) For a corporation the management of the affairs of which
is vested in its members under Section 22.202, the notice of the
meeting is subject to the provisions of the certificate of
formation or bylaws of the corporation. (TNPCA 6.01.A (part), 6.03
(part), 6.04.A (part).)
Sec. 22.304. APPLICATION AND DISTRIBUTION OF PROPERTY. (a)
After all liabilities and obligations of a corporation in the
process of winding up are paid, satisfied, and discharged in
accordance with Section 11.053, the property of the corporation
shall be applied and distributed as follows:
(1) property held by the corporation on a condition
requiring return, transfer, or conveyance because of the winding up
or termination shall be returned, transferred, or conveyed in
accordance with that requirement; and
(2) unless otherwise provided by the corporation's
certificate of formation, the remaining property of the corporation
shall be distributed only for tax-exempt purposes to one or more
organizations that are exempt under Section 501(c)(3), Internal
Revenue Code, or described by Section 170(c)(1) or (2), Internal
Revenue Code, under a plan of distribution adopted under this
chapter.
(b) A district court of the county in which the
corporation's principal office is located shall distribute to one
or more organizations exempt under Section 501(c)(3), Internal
Revenue Code, or described by Section 170(c)(1) or (2), Internal
Revenue Code, the property of the corporation remaining after a
distribution of property under the plan of distribution. The court
shall make the distribution in the manner the court determines will
best accomplish the general purposes for which the corporation was
organized. (TNPCA 6.02.A(2), (3).)
Sec. 22.305. DISTRIBUTION PLAN. A plan providing for the
distribution of property may be adopted by a corporation in the
process of winding up, and shall be adopted by a corporation to
authorize a transfer or conveyance of assets for which this chapter
requires a plan of distribution, in the manner provided by this
subchapter. (TNPCA 6.03 (part).)
Sec. 22.306. LIMITED SURVIVAL AFTER NATURAL EXPIRATION. (a)
A corporation that was terminated by the expiration of the period of
its duration may, during the three-year period following the date
of termination, amend the corporation's certificate of formation by
following the procedures prescribed by Chapter 11 and this chapter
to extend or perpetuate the corporation's period of duration. The
expiration of a corporation's period of duration does not give a
member or creditor of the corporation a vested right to prevent the
corporation from taking action under this subsection.
(b) An act or contract of a terminated corporation during a
period within which the corporation could have extended the
corporation's existence under this section, regardless of whether
the corporation has taken action to extend its existence, is not
invalidated by the expiration of the period of duration. (TNPCA
7.12.G.)
Sec. 22.307. RESPONSIBILITY FOR WINDING UP. If a
corporation determines or is required to wind up, the winding up of
the corporation's affairs shall be managed by:
(1) the directors, if management of the affairs is not
vested in the corporation's members under Section 22.202; or
(2) the members, if management of the affairs is
vested in the corporation's members under Section 22.202. (New.)
[Sections 22.308-22.350 reserved for expansion]
SUBCHAPTER H. RECORDS AND REPORTS
Sec. 22.351. MEMBER'S RIGHT TO INSPECT BOOKS AND RECORDS. A
member of a corporation, on written demand stating the purpose of
the demand, is entitled to examine and copy at the member's expense,
in person or by agent, accountant, or attorney, at any reasonable
time and for a proper purpose, the books and records of the
corporation relevant to that purpose. (TNPCA 2.23.B.)
Sec. 22.352. FINANCIAL RECORDS AND ANNUAL REPORTS. (a) A
corporation shall maintain current and accurate financial records
with complete entries as to each financial transaction of the
corporation, including income and expenditures, in accordance with
generally accepted accounting principles.
(b) Based on the records maintained under Subsection (a),
the board of directors of the corporation shall annually prepare or
approve a financial report for the corporation for the preceding
year. The report must conform to accounting standards as adopted by
the American Institute of Certified Public Accountants and must
include:
(1) a statement of support, revenue, and expenses;
(2) a statement of changes in fund balances;
(3) a statement of functional expenses; and
(4) a balance sheet for each fund. (TNPCA 2.23A.A, B.)
Sec. 22.353. AVAILABILITY OF FINANCIAL INFORMATION FOR
PUBLIC INSPECTION. (a) A corporation shall keep records, books,
and annual reports of the corporation's financial activity at the
corporation's registered or principal office in this state for at
least three years after the close of the fiscal year.
(b) The corporation shall make the records, books, and
reports available to the public for inspection and copying at the
corporation's registered or principal office during regular
business hours. The corporation may charge a reasonable fee for
preparing a copy of a record or report. (TNPCA 2.23A.C.)
Sec. 22.354. FAILURE TO MAINTAIN FINANCIAL RECORD OR
PREPARE ANNUAL REPORT; OFFENSE. (a) A corporation commits an
offense if the corporation fails to maintain a financial record,
prepare an annual report, or make the record or report available to
the public in the manner required by Section 22.353.
(b) An offense under this section is a Class B misdemeanor.
(TNPCA 2.23A.D.)
Sec. 22.355. EXEMPTIONS FROM CERTAIN REQUIREMENTS RELATING
TO FINANCIAL RECORDS AND ANNUAL REPORTS. Sections 22.352, 22.353,
and 22.354 do not apply to:
(1) a corporation that solicits funds only from
members of the corporation;
(2) a corporation that does not intend to solicit and
receive and does not actually raise or receive during a fiscal year
contributions in an amount exceeding $10,000 from a source other
than its own membership;
(3) a private institution of higher education
described by Section 61.003(15), Education Code, accredited by a
recognized accrediting agency as defined by Section 61.003(13),
Education Code, or authorized to grant degrees under a certificate
of authority issued by the Texas Higher Education Coordinating
Board or a foundation chartered for the benefit of the institution
or any component part of the institution, a proprietary school that
has received a certificate of approval from the commissioner of
education, a public institution of higher education or a foundation
chartered for the benefit of the institution or any component part
of the institution, or an elementary or secondary school;
(4) a religious institution that is a church, an
ecclesiastical or denominational organization, or another
established physical place for worship at which religious services
are the primary activity and are regularly conducted;
(5) a trade association or professional society the
income of which is principally derived from membership dues and
assessments, sales, or services;
(6) an insurer licensed and regulated by the Texas
Department of Insurance;
(7) an organization the charitable activities of which
relate to public concern in the conservation and protection of
wildlife, fisheries, and allied natural resources; or
(8) an alumni association of a public or private
institution of higher education in this state that is recognized
and acknowledged as the official alumni association by the
institution. (TNPCA 2.23A.E.)
Sec. 22.356. CORPORATIONS ASSISTING STATE AGENCIES. (a) In
this section, "state agency" means:
(1) a board, commission, department, office, or other
entity that is in the executive branch of state government and that
was created by the constitution or a statute of this state,
including an institution of higher education as defined by Section
61.003, Education Code;
(2) the legislature or a legislative agency; or
(3) the supreme court, the court of criminal appeals,
a court of appeals, the state bar, or another state judicial agency.
(b) The books and records of a corporation other than a bona
fide alumni association are subject to audit at the discretion of
the state auditor if:
(1) the corporation's charter specifically dedicates
the corporation's activities to the benefit of a particular state
agency; and
(2) a board member, officer, or employee of that state
agency sits on the board of directors of the corporation in other
than an ex officio capacity.
(c) If the corporation's charter specifically dedicates the
corporation's activities to the benefit of a particular state
agency but the conditions described by Subsection (b)(2) do not
exist, a corporation shall file with the secretary of state a copy
of the report required by Section 22.352(b) for the preceding
fiscal year not later than the 89th day after the last day of the
corporation's fiscal year. (TNPCA 2.23B.)
Sec. 22.357. REPORT OF DOMESTIC AND FOREIGN CORPORATIONS.
(a) The secretary of state may require a domestic corporation or a
foreign corporation registered to conduct affairs in this state to
file a report in accordance with Chapter 4 not more than once every
four years as required by this subchapter. The report must state:
(1) the name of the corporation;
(2) the state or country under the laws of which the
corporation is incorporated;
(3) the address of the registered office of the
corporation in this state and the name of the registered agent at
that address;
(4) if the corporation is a foreign corporation, the
address of the principal office of the corporation in the state or
country under the laws of which the corporation is incorporated;
and
(5) the names and addresses of the directors and
officers of the corporation.
(b) A corporation required to prepare a report under this
section shall prepare the report on a form adopted by the secretary
of state for that purpose and shall include in the report
information that is accurate as of the date the report is executed.
An officer or, if the corporation is in the hands of a receiver or
trustee, the receiver or trustee shall sign the report on behalf of
the corporation. (TNPCA 9.01.A, B.)
Sec. 22.358. NOTICE REGARDING REPORT. (a) The secretary of
state shall send written notice that the report required by Section
22.357 is due. The notice must be:
(1) addressed to the corporation; and
(2) mailed to the corporation's registered agent or to
the corporation at:
(A) the last known address of the corporation as
it appears on record in the office of the secretary of state; or
(B) any other known place of business of the
corporation.
(b) The secretary of state shall include with the notice a
report form to be prepared and filed as provided by this subchapter.
(TNPCA 9.01.C, D.)
Sec. 22.359. FILING OF REPORT. A copy of the report must be
filed with the secretary of state in accordance with Chapter 4 not
later than the 30th day after the date notice is mailed under
Section 22.358. (TNPCA 9.01.C (part), E (part).)
Sec. 22.360. FAILURE TO FILE REPORT. (a) A domestic or
foreign corporation that fails to file a report under Sections
22.357 and 22.359 when the report is due forfeits the corporation's
right to conduct affairs in this state.
(b) The forfeiture takes effect, without judicial action,
when the secretary of state enters on the record of the corporation
kept in the office of the secretary of state:
(1) the words "right to conduct affairs forfeited";
and
(2) the date of forfeiture. (TNPCA 9.02.A, B (part).)
Sec. 22.361. NOTICE OF FORFEITURE. Notice of forfeiture
under Section 22.360 shall be mailed to the corporation's
registered agent at the registered office or to the corporation at:
(1) the address of the principal place of business of
the corporation as it appears in the certificate of formation;
(2) the last known address of the corporation as it
appears on record in the office of the secretary of state; or
(3) any other known place of business of the
corporation. (TNPCA 9.02.B (part).)
Sec. 22.362. EFFECT OF FORFEITURE. (a) Unless the right of
the corporation to conduct affairs in this state is revived under
Section 22.363:
(1) the corporation may not maintain an action, suit,
or proceeding in a court of this state; and
(2) a successor or assignee of the corporation may not
maintain an action, suit, or proceeding in a court of this state on
a right, claim, or demand arising from the conduct of affairs by the
corporation in this state.
(b) This section does not affect the right of an assignee of
the corporation as:
(1) the holder in due course of a negotiable
promissory note, check, or bill of exchange; or
(2) the bona fide purchaser for value of a warehouse
receipt, stock certificate, or other instrument negotiable by law.
(c) The forfeiture of the right to conduct affairs in this
state does not:
(1) impair the validity of a contract or act of the
corporation; or
(2) prevent the corporation from defending an action,
suit, or proceeding in a court of this state. (TNPCA 9.02.B
(part).)
Sec. 22.363. REVIVAL OF RIGHT TO CONDUCT AFFAIRS. (a) A
corporation may be relieved from a forfeiture under Section 22.360
by filing the required report, accompanied by the revival fee, not
later than the 120th day after the date of mailing of the notice of
forfeiture under Section 22.361.
(b) If a corporation complies with Subsection (a), the
secretary of state shall:
(1) revive the right of the corporation to conduct
affairs in this state;
(2) cancel the words regarding the forfeiture on the
record of the corporation; and
(3) endorse on that record the word "revived" and the
date of revival. (TNPCA 9.02.C (part), D.)
Sec. 22.364. FAILURE TO REVIVE; TERMINATION OR REVOCATION.
(a) The failure of a corporation that has forfeited its right to
conduct affairs in this state to revive that right under Section
22.363 is grounds for:
(1) the involuntary termination of the domestic
corporation; or
(2) the revocation of the foreign corporation's
registration to transact business in this state.
(b) The termination or revocation takes effect, without
judicial action, when the secretary of state enters on the record of
the corporation filed in the office of the secretary of state the
word "forfeited" and the date of forfeiture and cites this chapter
as authority for that forfeiture. (TNPCA 9.02.E.)
Sec. 22.365. REINSTATEMENT. (a) A corporation that is
terminated or the registration of which has been revoked as
provided by Section 22.364 may be relieved of the termination or
revocation by filing the report required by Section 22.357,
accompanied by the filing fee for the report, if the corporation has
paid:
(1) all fees, taxes, penalties, and interest due and
accruing before the termination or revocation; and
(2) an amount equal to the total taxes from the date of
termination or revocation to the date of reinstatement that would
have been payable if the corporation had not been terminated or had
its registration revoked.
(b) When the report is filed and the filing fee is paid to
the secretary of state, the secretary of state shall:
(1) reinstate the certificate of formation or
registration without judicial action;
(2) cancel the word "forfeited" on the record; and
(3) endorse on the record kept in the secretary's
office relating to the corporation the words "set aside" and the
date of the reinstatement.
(c) If a termination or revocation is set aside under this
section, the corporation shall determine from the secretary of
state whether the name of the corporation is available. If the name
of the corporation is not available at the time of reinstatement,
the corporation shall amend its corporate name under this code.
(TNPCA 9.02.F (part), G.)
[Sections 22.366-22.400 reserved for expansion]
SUBCHAPTER I. CHURCH BENEFITS BOARDS
Sec. 22.401. DEFINITION. In this chapter, "church benefits
board" means an organization described by Section 414(e)(3)(A),
Internal Revenue Code, that:
(1) has the principal purpose or function of
administering or funding a plan or program to provide retirement
benefits, welfare benefits, or both for the ministers or employees
of a church or a conference, convention, or association of
churches; and
(2) is controlled by or affiliated with a church or a
conference, convention, or association of churches. (V.A.C.S.
1407a, Sec. 1.)
Sec. 22.402. PENSIONS AND BENEFITS. When authorized by the
corporation's members or as otherwise provided by law, a domestic
or foreign nonprofit corporation formed for a religious purpose may
provide, directly or through a separate church benefits board, for
the support and payment of benefits and pensions to:
(1) the ministers, teachers, employees, trustees,
directors, or other functionaries of the corporation;
(2) the ministers, teachers, employees, trustees,
directors, or other functionaries of organizations controlled by or
affiliated with a church or a conference, convention, or
association of churches under the jurisdiction and control of the
corporation; and
(3) the spouse, children, dependents, or other
beneficiaries of the persons described by Subdivisions (1) and (2).
(V.A.C.S. 1407a, Sec. 2.)
Sec. 22.403. CONTRIBUTIONS. (a) A church benefits board
may provide for:
(1) the collection of contributions and other payments
to assist in providing pensions and benefits under this subchapter;
and
(2) the creation, maintenance, investment,
management, and disbursement of necessary annuities, endowments,
reserves, or other funds for a purpose under Subdivision (1).
(b) A church benefits board may receive payments from a
trust fund or corporation that funds a church plan as defined by
Section 414(e), Internal Revenue Code. (V.A.C.S. 1407a, Sec. 3.)
Sec. 22.404. POWER TO ACT AS TRUSTEE. A church benefits
board may act as:
(1) a trustee under a lawful trust committed to the
board by contract, will, or otherwise; and
(2) an agent for the performance of a lawful act
relating to the purposes of the trust. (V.A.C.S. 1407a, Sec. 4
(part).)
Sec. 22.405. DOCUMENTS AND AGREEMENTS. A church benefits
board may provide to a program participant a certificate or
agreement of participation, a debenture, or an indemnification
agreement, as appropriate to accomplish the purposes of the board.
(V.A.C.S. 1407a, Sec. 4 (part).)
Sec. 22.406. INDEMNIFICATION. A church benefits board, or
an affiliate wholly owned by the board, may agree to indemnify
against damage or risk of loss:
(1) a minister, teacher, employee, trustee,
functionary, or director affiliated with the board or a family
member, dependent, or beneficiary of one of those persons;
(2) a church or a convention, conference, or
association of churches; or
(3) an organization that is controlled by or
affiliated with the board or with a church or a convention,
conference, or association of churches. (V.A.C.S. 1407a, Sec. 5.)
Sec. 22.407. PROTECTION OF BENEFITS. (a) Money or other
benefits that have been or will be provided to a participant or a
beneficiary under a plan or program provided by or through a church
benefits board under this subchapter are not subject to execution,
attachment, garnishment, or other process and may not be
appropriated or applied as part of a judicial, legal, or equitable
process or operation of a law other than a constitution to pay a
debt or liability of the participant or beneficiary.
(b) This section does not apply to a qualified domestic
relations order or an amount required by the church benefits board
to recover costs or expenses incurred in the plan or program.
(V.A.C.S. 1407a, Sec. 6.)
Sec. 22.408. ASSIGNMENT OF BENEFITS. An assignment or
transfer or an attempt to make an assignment or transfer by a
beneficiary of money, benefits, or other rights under a plan or
program under this subchapter is void if:
(1) the plan or program contains a provision
prohibiting the assignment or other transfer without the written
consent of the church benefits board; and
(2) the beneficiary assigns or transfers or attempts
to make an assignment or transfer without that consent. (V.A.C.S.
1407a, Sec. 7.)
Sec. 22.409. INSURANCE CODE NOT APPLICABLE. The Insurance
Code does not apply to a church benefits board or a program, plan,
benefit, or activity of the board or a person affiliated with the
board. (V.A.C.S. 1407a, Sec. 8.)
CHAPTER 23. SPECIAL-PURPOSE CORPORATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 23.001. DETERMINATION OF APPLICABLE LAW. (a) A
corporation created under this chapter or under a special statute
outside this code, to the extent not inconsistent with a special
statute regarding a particular corporation, is governed by:
(1) Title 1 and Chapter 21, if the corporation is
organized for profit; and
(2) Title 1 and Chapter 22, if the corporation is
organized not for profit.
(b) If a special statute does not contain any provision
regarding a matter provided for in Title 1 or Chapter 21 or 22, or if
the special statute specifically provides that the general laws for
corporations supplement the statute, to the extent consistent with
the special statute:
(1) Title 1 and Chapter 21 apply to a corporation
organized for profit; and
(2) Title 1 and Chapter 22 apply to a corporation
organized not for profit. (TBCA 9.14.A; TMCLA 1.03; TNPCA 10.04.A,
C.)
Sec. 23.002. APPLICABILITY OF FILING REQUIREMENTS. Except
as otherwise provided by the special statute, a document to be filed
with the secretary of state under a special statute shall be
executed and filed in accordance with Chapter 4. (New.)
Sec. 23.003. DOMESTIC CORPORATION ORGANIZED UNDER SPECIAL
STATUTE. A corporation organized under a special statute other than
this code is not considered a "domestic corporation" formed under
this code, although this code may apply to the corporation. (New.)
[Sections 23.004-23.050 reserved for expansion]
SUBCHAPTER B. BUSINESS DEVELOPMENT CORPORATIONS
Sec. 23.051. DEFINITIONS. In this subchapter:
(1) "Corporation" means a business development
corporation organized under this subchapter.
(2) "Financial institution" means a banking
corporation or trust company, savings and loan association,
governmental agency, insurance company, or related corporation,
partnership, foundation, or other institution engaged primarily in
lending or investing funds.
(3) "Loan limit" means the maximum amount permitted to
be outstanding at one time on loans made by a member to a
corporation.
(4) "Member" means a financial institution authorized
to do business in this state that undertakes to lend money to a
corporation. (V.A.C.S. 1528g, Sec. 1.)
Sec. 23.052. ORGANIZERS. Subject to The Securities Act
(Article 581-1 et seq., Vernon's Texas Civil Statutes), 25 or more
persons, the majority of whom must be residents of this state, may
form a business development corporation to promote, develop, and
advance the prosperity and economic welfare of this state.
(V.A.C.S. 1528g, Sec. 2(a).)
Sec. 23.053. PURPOSES. (a) A business development
corporation may be organized as a:
(1) for-profit corporation under Chapter 21; or
(2) nonprofit corporation under Chapter 22.
(b) The business development corporation must be organized
to:
(1) promote, stimulate, develop, and advance the
business prosperity and economic welfare of this state and the
residents of this state;
(2) encourage and assist, through loans, investments,
or other business transactions, new business and industry in this
state;
(3) rehabilitate and assist existing industry in this
state;
(4) stimulate and assist in the expansion of business
activity that will tend to promote the business development and
maintain the economic stability of this state, provide maximum
opportunities for employment, encourage thrift, and improve the
standard of living of the residents of this state;
(5) cooperate and act in conjunction with other public
or private organizations in the promotion and advancement of
industrial, commercial, agricultural, and recreational
developments in this state; or
(6) provide financing for the promotion, development,
and conduct of business activity in this state. (V.A.C.S. 1528g,
Secs. 2(b), (c) (part).)
Sec. 23.054. POWERS. (a) The powers of a corporation
include, in addition to the powers conferred on the corporation by
Chapters 2 and 21 or 22, as applicable, the power to:
(1) elect, appoint, and employ officers, agents, and
employees;
(2) make contracts and incur liabilities for a purpose
of the corporation;
(3) borrow money on a secured or unsecured basis to
carry out a purpose of the corporation;
(4) issue for the purpose of borrowing money a bond,
debenture, note, or other evidence of indebtedness, whether secured
or unsecured;
(5) secure an evidence of indebtedness by mortgage,
pledge, deed of trust, or other lien on a property, franchise,
right, or privilege of the corporation, or any part of or interest
in those items, without securing shareholder or member approval;
(6) make a secured or unsecured loan and establish and
regulate the terms and conditions of that loan and the charges for
interest or service connected with that loan;
(7) purchase, receive, hold, lease, or otherwise
acquire, and sell, convey, transfer, lease, or otherwise dispose
of, property and exercise those rights and privileges incidental
and appurtenant to the acquisition or disposal of the property and
to the use of the property, including any property acquired by the
corporation periodically in the satisfaction of a debt or
enforcement of an obligation;
(8) acquire improved or unimproved real property to
construct an industrial plant or other business establishment on
the property or dispose of the real property for the construction of
an industrial plant or other business establishment;
(9) acquire, construct or reconstruct, alter, repair,
maintain, operate, sell, convey, transfer, lease, or otherwise
dispose of an industrial plant or business establishment;
(10) protect the corporation's position as creditor by
acquiring the goodwill, business, rights, property, including a
share, bond, debenture, note, other evidence of indebtedness, other
asset, or any part of an asset or interest in an asset, of a person
to whom the corporation loaned money and assume, undertake, or pay
an obligation, debt, or liability of the person;
(11) mortgage, pledge, or otherwise encumber any
property, right, or thing of value, acquired under Subdivision (7),
(8), (9), or (10), as security for the payment of a part of the
purchase price;
(12) promote the establishment of local development
corporations in the various communities of this state, enter into
agreements with those local development corporations, and
cooperate with, assist, or otherwise encourage the local
foundations; and
(13) participate with a properly authorized federal
lending agency in the making of loans.
(b) A corporation may approve an application for a loan
under Subsection (a)(6) only if the applicant demonstrates that:
(1) the applicant applied for the loan through
ordinary banking channels; and
(2) the loan has been refused by at least two banks or
other financial institutions. (V.A.C.S. 1528g, Sec. 3(a).)
Sec. 23.055. STATEWIDE OPERATION. A corporation organized
under this subchapter is a state development company as defined by
Section 103, Small Business Investment Act of 1958 (15 U.S.C.
Section 662), as amended, or similar federal legislation, and may
operate on a statewide basis. (V.A.C.S. 1528g, Sec. 3(b).)
Sec. 23.056. CERTIFICATE OF FORMATION. (a) The certificate
of formation of a corporation must state:
(1) the name of the corporation;
(2) the purpose or purposes for which the corporation
is organized as required by Section 23.053; and
(3) any other information required by:
(A) Chapter 4; and
(B) Chapter 21 or 22, as applicable.
(b) The name of a corporation must include the words
"Business Development Corporation." (V.A.C.S. 1528g, Sec. 2(c)
(part).)
Sec. 23.057. MANAGEMENT BY BOARD OF DIRECTORS; NUMBER OF
DIRECTORS. (a) The organization, control, and management of a
corporation are vested in a board of directors. The board must
consist of not fewer than 15 and not more than 21 directors.
(b) The board of directors may exercise any power of the
corporation not conferred on the shareholders or members by law or
by the corporation's bylaws. (V.A.C.S. 1528g, Secs. 9(a), (b).)
Sec. 23.058. ELECTION OR APPOINTMENT OF DIRECTORS. (a) The
incorporators of a corporation shall name the directors
constituting the initial board of directors of the corporation.
Directors other than the initial directors shall be elected at each
annual meeting of the corporation. If an annual meeting is not held
at the time designated by the bylaws of the corporation, the
directors shall be elected at a special meeting held in lieu of the
annual meeting.
(b) At an annual meeting or special meeting held in lieu of
the annual meeting, the members of the corporation shall elect
two-thirds of the directors, and the shareholders of the
corporation shall elect the remaining directors. (V.A.C.S. 1528g,
Secs. 9(d), (e).)
Sec. 23.059. TERM OF OFFICE; VACANCY. (a) A director of a
corporation holds office until the next annual election of
directors and until a successor is elected and qualified, unless
the director is removed at an earlier date in accordance with the
corporation's bylaws.
(b) A vacancy in the office of a director elected by the
members shall be filled by the directors elected by the members, and
a vacancy in the office of a director elected by the shareholders
shall be filled by the directors elected by the shareholders.
(V.A.C.S. 1528g, Secs. 9(f), (g).)
Sec. 23.060. OFFICERS. The board of directors of a
corporation shall appoint a president, a treasurer, and any other
agent or officer of the corporation and shall fill each vacancy
other than a vacancy on the board. (V.A.C.S. 1528g, Sec. 9(c)
(part).)
Sec. 23.061. PARTICIPATION AS OWNER. (a) An individual,
corporation, or other organization authorized to conduct business
in this state, including a public utility company, insurance and
casualty company, or foreign corporation licensed to do business in
this state, or a trust may acquire, purchase, hold, sell, assign,
transfer, mortgage, pledge, or otherwise dispose of a bond,
security, or other evidence of indebtedness created by, or shares
of, the corporation.
(b) An owner of shares of the corporation may exercise any
right, power, or privilege of that ownership, including the right
to vote. (V.A.C.S. 1528g, Sec. 4.)
Sec. 23.062. FINANCIAL INSTITUTION AS MEMBER OF
CORPORATION. (a) A financial institution may become a member of a
corporation and may make loans to the corporation as provided by
this chapter.
(b) A financial institution may request membership in the
corporation by applying to the corporation's board of directors in
the manner prescribed by the board. Membership in the corporation
takes effect on the board's acceptance of the application.
(c) A financial institution that is a member of a
corporation may acquire, purchase, hold, sell, assign, transfer,
mortgage, pledge, or otherwise dispose of a bond, security, or
other evidence of indebtedness created by, or a share of, the
corporation. As owner of shares of the corporation, a financial
institution may exercise any right, power, or privilege of that
ownership, including the right to vote. A member of a corporation
may not acquire shares of the corporation in an amount greater than
10 percent of the member's loan limit. The amount of shares of the
corporation that a member may acquire is in addition to the amount
of shares of corporations that the member may otherwise acquire.
(d) A financial institution that is not a member of the
corporation may not acquire any shares of the corporation.
(V.A.C.S. 1528g, Sec. 5.)
Sec. 23.063. WITHDRAWAL OF MEMBER. (a) On written notice to
the corporation's board of directors, a member may withdraw from a
corporation on the date stated in the notice. The date of a
member's withdrawal must be at least six months after the date
notice is given under this subsection.
(b) A member is not obligated to make a loan to the
corporation pursuant to a call made after the date of the member's
withdrawal from the corporation, but a member shall fulfill any
obligation that has accrued or for which a commitment has been made
before the withdrawal date. (V.A.C.S. 1528g, Sec. 7.)
Sec. 23.064. POWERS OF SHAREHOLDERS AND MEMBERS. The
shareholders and members of a corporation may:
(1) determine the number of directors and elect the
directors as provided by Section 23.058;
(2) make, amend, and repeal bylaws of the corporation;
or
(3) exercise any other power of the corporation that
is conferred on the shareholders and members by the bylaws.
(V.A.C.S. 1528g, Sec. 8(a).)
Sec. 23.065. VOTING BY SHAREHOLDER OR MEMBER. (a) Each
shareholder of a corporation has one vote, in person or by proxy,
for each share held by the shareholder.
(b) Each member of a corporation has one vote in person or by
proxy.
(c) A member with a loan limit that exceeds $1,000 has one
additional vote, in person or by proxy, for each additional $1,000
the member may have outstanding on loans to the corporation at any
one time as determined under Section 23.068. (V.A.C.S. 1528g, Sec.
8(b).)
Sec. 23.066. LOAN TO CORPORATION. (a) When called on by a
corporation to make a loan to the corporation, a member of the
corporation shall make the loan on those terms and conditions
periodically approved by the board of directors.
(b) A loan made to the corporation by a member shall be
evidenced by a bond, debenture, note, or other evidence of
indebtedness of the corporation that:
(1) is freely transferable at any time; and
(2) accrues interest at a rate of not less than
one-fourth of one percent more than the rate of interest determined
by the board of directors to be the prime rate prevailing on the
date of issuance on unsecured commercial loans. (V.A.C.S. 1528g,
Secs. 6(a), (f).)
Sec. 23.067. PROHIBITED LOAN. (a) A member may not make a
loan to a corporation if, immediately after the loan would be made,
the total amount of the obligations of the corporation would exceed
50 times the capital of the corporation.
(b) For purposes of this section, the capital of the
corporation includes the amount of the outstanding shares of the
corporation, whether common or preferred, and the earned or paid-in
surplus of the corporation. (V.A.C.S. 1528g, Sec. 6(c).)
Sec. 23.068. LOAN LIMITS. (a) A loan limit shall be
established at the $1,000 amount nearest to the amount computed in
accordance with this section.
(b) The total amount outstanding on loans made to a
corporation by a member at any one time, when added to the amount of
the investment in the shares of the corporation then held by the
member, may not exceed:
(1) 20 percent of the total amount then outstanding on
loans to the corporation by all members, including outstanding
amounts validly called for a loan but not yet loaned; or
(2) the following limit, to be determined as of the
time the member becomes a member of the corporation, or at any time
requested by a member on the basis of the audited balance sheet of
the member at the close of its fiscal year immediately preceding its
application for membership or, in the case of an insurance company,
its last annual statement to the Texas Department of Insurance:
(A) an amount equal to the lesser of $750,000 or
two percent of the capital and surplus of a commercial bank or trust
company;
(B) an amount equal to one percent of the total
outstanding loans made by a savings and loan association;
(C) an amount equal to one percent of the capital
and unassigned surplus of a stock insurance company other than a
fire insurance company;
(D) an amount equal to one percent of the
unassigned surplus of a mutual insurance company other than a fire
insurance company;
(E) an amount equal to one-tenth of one percent
of the assets of a fire insurance company; or
(F) the limits approved by the board of directors
of the corporation for a government pension fund or other financial
institution.
(c) Subject to Subsection (b), each call made by the
corporation shall be prorated among the members of the corporation
in substantially the same proportion that the adjusted loan limit
of each member bears to the aggregate of the adjusted loan limits of
all members.
(d) For purposes of Subsection (c), the adjusted loan limit
of a member is the amount of the member's loan limit, reduced by the
balance of outstanding loans made by the member to the corporation
and the investment in shares of the corporation held by the member
at the time of the call. (V.A.C.S. 1528g, Secs. 6(b), (d), (e).)
Sec. 23.069. SURPLUS. (a) A corporation shall set apart as
earned surplus not less than 10 percent of the corporation's net
earnings each year until the surplus, with any unimpaired surplus
paid in, is equal to one-half of the amount paid in on the shares
then outstanding. The surplus shall be kept to secure against
losses and contingencies. If the surplus becomes impaired, the
surplus shall be reimbursed in the manner provided for its
accumulation.
(b) Net earnings and surplus shall be determined by the
board of directors after providing for the required reserves as the
directors consider advisable. A good faith determination of net
earnings and surplus by the directors under this subsection is
conclusive. (V.A.C.S. 1528g, Sec. 10.)
Sec. 23.070. DEPOSITORY. (a) A corporation may deposit the
corporation's funds in a banking institution that has been
designated as a depository by a vote of the majority of the
directors present at an authorized meeting of the board of
directors of the corporation, excluding a director who is an
officer or director of the designated depository.
(b) The corporation may not receive money on deposit.
(V.A.C.S. 1528g, Sec. 11.)
Sec. 23.071. ANNUAL REPORT; PROVISION OF REQUIRED
INFORMATION. (a) A corporation shall annually make a report of its
condition to the banking commissioner and the Texas Department of
Insurance.
(b) A corporation shall provide any information that is
required by the secretary of state. (V.A.C.S. 1528g, Sec. 12.)
[Sections 23.072-23.100 reserved for expansion]
SUBCHAPTER C. GRAND LODGES
Sec. 23.101. FORMATION. (a) An institution or order, by
resolution or other consent of its members, may incorporate under
this subchapter if the institution or order is:
(1) the grand lodge of Texas, Ancient, Free and
Accepted Masons;
(2) the Grand Royal Arch Chapter of Texas;
(3) the Grand Commandery of Knights Templars of Texas;
(4) the grand lodge of the Independent Order of Odd
Fellows of Texas; or
(5) another similar institution or order organized for
charitable or benevolent purposes.
(b) A corporation formed under this subchapter shall file a
certificate of formation in accordance with Chapter 4 that complies
with this subchapter. (V.A.C.S. 1399; New.)
Sec. 23.102. APPLICABILITY OF CHAPTER 22. If this
subchapter does not contain any provision regarding a matter
provided for in Chapter 22, to the extent consistent with this
subchapter, Chapter 22 applies to a corporation formed under this
subchapter. (TMCLA 1.03.A (part).)
Sec. 23.103. DURATION. A grand body that incorporates under
this subchapter may provide in the grand body's certificate of
formation for the expiration of its corporate powers at the end of a
stated number of years. If the certificate of formation does not
provide for the duration of the grand body, the grand body has
perpetual existence. The grand body may by its corporate name have
perpetual succession of its officers and members. (V.A.C.S. 1405.)
Sec. 23.104. SUBORDINATE LODGES. (a) The incorporation of
a grand body includes each of its subordinate lodges or bodies
holding a warrant or charter under the grand body.
(b) A subordinate body has all of the rights of other
corporations under and by the name given to the grand body in the
warrant or charter issued to the grand body to which it is attached.
Those rights shall be provided for in the charter of the grand body.
(c) A subordinate body is subject to the jurisdiction and
control of its respective grand body, and the warrant or charter of
the subordinate body may be revoked by the grand body. (V.A.C.S.
1400.)
Sec. 23.105. TRUSTEES AND DIRECTORS. A grand body and a
subordinate of the grand body may elect trustees and directors or
may appoint trustees or directors from among their officers.
(V.A.C.S. 1401 (part).)
Sec. 23.106. FRANCHISE TAXES. A corporation formed under
this subchapter is not subject to or required to pay a franchise
tax, except that a corporation is exempt from the franchise tax
imposed by Chapter 171, Tax Code, only if the corporation is
exempted by that chapter. (V.A.C.S. 1407.)
Sec. 23.107. GENERAL POWERS. A grand body and a subordinate
of the grand body may take action as directed or provided by law in
the case of other corporations and may make constitutions and
bylaws to govern their affairs. (V.A.C.S. 1401 (part).)
Sec. 23.108. AUTHORITY REGARDING PROPERTY. (a) A grand
body or subordinate body may acquire and hold property as necessary
or convenient for a site on which to erect a building for the use and
occupancy of the body and to erect homes and schools for members'
widows or orphans or elderly, disabled, or indigent members and may
sell or mortgage the property.
(b) A conveyance must be executed by the presiding officer
and attested to by the secretary with the seal.
(c) The authority of a subordinate body to sell or to
mortgage property is subject to the conditions periodically
prescribed or established by the grand body to which the
subordinate is attached. (V.A.C.S. 1402.)
Sec. 23.109. AUTHORITY REGARDING LOANS. (a) A grand body
incorporated under this subchapter may:
(1) loan money held and owned by the grand body for
charitable purposes, for the endowment of any of the institutions
of the grand body, or otherwise; and
(2) secure loans by taking and receiving liens on real
property or by another method elected by the grand body.
(b) On sale of real property secured by a lien, a grand body
may become the purchaser of the real property and hold title to the
property. (V.A.C.S. 1404.)
Sec. 23.110. WINDING UP AND TERMINATION OF SUBORDINATE
BODY. (a) On the winding up and termination of a subordinate body
attached to a grand body, all property and rights existing in the
subordinate body pass to and vest in the grand body to which it was
attached, subject to the payment of any debt owed by the subordinate
body.
(b) Notwithstanding a grand body's liability for the debt of
a subordinate body under Subsection (a), the grand body is not
liable for an amount greater than the actual cash value of the
subordinate body's effects or authority. (V.A.C.S. 1403.)
TITLE 3. LIMITED LIABILITY COMPANIES
CHAPTER 101. LIMITED LIABILITY COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 101.001. DEFINITIONS. In this title:
(1) "Company agreement" means any agreement, written
or oral, of the members concerning the affairs or the conduct of the
business of a limited liability company. A company agreement of a
limited liability company having only one member is not
unenforceable because only one person is a party to the company
agreement.
(2) "Foreign limited liability company" or "foreign
company" means a limited liability company formed under the laws of
a jurisdiction other than this state.
(3) "Limited liability company" or "company" means a
domestic limited liability company subject to this title. (TLLCA
1.02.A(3), (9); New.)
[Sections 101.002-101.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 101.051. CERTAIN PROVISIONS CONTAINED IN CERTIFICATE
OF FORMATION. (a) A provision that may be contained in the company
agreement of a limited liability company may alternatively be
included in the certificate of formation of the company as provided
by Section 3.005(b).
(b) A reference in this title to the company agreement of a
limited liability company includes any provision contained in the
company's certificate of formation instead of the company agreement
as provided by Subsection (a). (TLLCA 2.09.A (part), 3.02.A
(part).)
Sec. 101.052. COMPANY AGREEMENT. (a) Except as provided by
Section 101.054, the company agreement of a limited liability
company governs:
(1) the relations among members, managers, and
officers of the company, assignees of membership interests in the
company, and the company itself; and
(2) other internal affairs of the company.
(b) To the extent that the company agreement of a limited
liability company does not otherwise provide, this title and the
provisions of Title 1 applicable to a limited liability company
govern the internal affairs of the company.
(c) Except as provided by Section 101.054, a provision of
this title or Title 1 that is applicable to a limited liability
company may be waived or modified in the company agreement of a
limited liability company.
(d) The company agreement may contain any provisions for the
regulation and management of the affairs of the limited liability
company not inconsistent with law or the certificate of formation.
(TLLCA 2.09.A (part).)
Sec. 101.053. AMENDMENT OF COMPANY AGREEMENT. The company
agreement of a limited liability company may be amended only if each
member of the company consents to the amendment. (TLLCA 2.09.B.)
Sec. 101.054. WAIVER OR MODIFICATION OF CERTAIN STATUTORY
PROVISIONS PROHIBITED; EXCEPTIONS. (a) Except as provided by this
section, the following provisions may not be waived or modified in
the company agreement of a limited liability company:
(1) this section;
(2) Section 101.101(b), 101.206, 101.501, or 101.502;
(3) Chapter 1, if the provision is used to interpret a
provision or define a word or phrase contained in a section listed
in this subsection;
(4) Chapter 2, except that Section 2.104(c)(2),
2.104(c)(3), or 2.113 may be waived or modified in the company
agreement;
(5) Chapter 3, except that Subchapters C and E may be
waived or modified in the company agreement; or
(6) Chapter 4, 5, 7, 10, 11, or 12, other than Section
11.056.
(b) A provision listed in Subsection (a) may be waived or
modified in the company agreement if the provision that is waived or
modified authorizes the limited liability company to waive or
modify the provision in the company's governing documents.
(c) A provision listed in Subsection (a) may be modified in
the company agreement if the provision that is modified specifies:
(1) the person or group of persons entitled to approve
a modification; or
(2) the vote or other method by which a modification is
required to be approved.
(d) A provision in this title or in that part of Title 1
applicable to a limited liability company that grants a right to a
person, other than a member, manager, officer, or assignee of a
membership interest in a limited liability company, may be waived
or modified in the company agreement of the company only if the
person consents to the waiver or modification. (New.)
[Sections 101.055-101.100 reserved for expansion]
SUBCHAPTER C. MEMBERSHIP
Sec. 101.101. MEMBERS REQUIRED. (a) A limited liability
company may have one or more members. Except as provided by this
section, a limited liability company must have at least one member.
(b) A limited liability company that has managers is not
required to have any members during a reasonable period between the
date the company is formed and the date the first member is admitted
to the company.
(c) A limited liability company is not required to have any
members during the period between the date the continued membership
of the last remaining member of the company is terminated and the
date the agreement to continue the company described by Section
11.056 is executed. (TLLCA 4.01.A (part); New.)
Sec. 101.102. QUALIFICATION FOR MEMBERSHIP. (a) A person
may be a member of or acquire a membership interest in a limited
liability company unless the person lacks capacity apart from this
code.
(b) A person is not required, as a condition to becoming a
member of or acquiring a membership interest in a limited liability
company, to:
(1) make a contribution to the company;
(2) otherwise pay cash or transfer property to the
company; or
(3) assume an obligation to make a contribution or
otherwise pay cash or transfer property to the company. (TLLCA
4.01.C; New.)
Sec. 101.103. EFFECTIVE DATE OF MEMBERSHIP. (a) A person
who acquires a membership interest in a limited liability company
in connection with the formation of the company becomes a member of
the company on the date the company is formed if the person is named
as an initial member in the company's certificate of formation.
(b) A person who acquires a membership interest in a limited
liability company during the formation of the company but who is not
named as an initial member in the company's certificate of
formation becomes a member of the company on the latest of:
(1) the date the company is formed;
(2) the date stated in the company's records as the
date the person becomes a member of the company; or
(3) if the company's records do not state a date
described by Subdivision (2), the date the person's admission to
the company is first reflected in the company's records.
(c) A person who, after the formation of a limited liability
company, acquires directly or is assigned a membership interest in
the company becomes a member of the company on approval or consent
of all of the company's members. (TLLCA 4.01.A (part), B.)
Sec. 101.104. CLASSES OR GROUPS OF MEMBERS OR MEMBERSHIP
INTERESTS. (a) The company agreement of a limited liability
company may:
(1) establish within the company classes or groups of
one or more members or membership interests each of which has
certain expressed relative rights, powers, and duties, including
voting rights; and
(2) provide for the manner of establishing within the
company additional classes or groups of one or more members or
membership interests each of which has certain expressed relative
rights, powers, and duties, including voting rights.
(b) The rights, powers, and duties of a class or group of
members or membership interests described by Subsection (a)(2) may
be stated in the company agreement or stated at the time the class
or group is established.
(c) If the company agreement of a limited liability company
does not provide for the manner of establishing classes or groups of
members or membership interests under Subsection (a)(2),
additional classes or groups of members or membership interests may
be established only by the adoption of an amendment to the company
agreement.
(d) The rights, powers, or duties of any class or group of
members or membership interests of a limited liability company may
be senior to the rights, powers, or duties of any other class or
group of members or membership interests in the company, including
a previously established class or group. (TLLCA 4.02.)
Sec. 101.105. ISSUANCE OF MEMBERSHIP INTERESTS AFTER
FORMATION OF COMPANY. A limited liability company, after the
formation of the company, may:
(1) issue membership interests in the company to any
person with the approval of all of the members of the company; and
(2) if the issuance of a membership interest requires
the establishment of a new class or group of members or membership
interests, establish a new class or group as provided by Sections
101.104(a)(2), (b), and (c). (TLLCA 2.23.D (part), 4.02.A.)
Sec. 101.106. NATURE OF MEMBERSHIP INTEREST. (a) A
membership interest in a limited liability company is personal
property.
(b) A member of a limited liability company or an assignee
of a membership interest in a limited liability company does not
have an interest in any specific property of the company. (TLLCA
4.04.)
Sec. 101.107. WITHDRAWAL OR EXPULSION OF MEMBER PROHIBITED.
A member of a limited liability company may not withdraw or be
expelled from the company. (TLLCA 5.05.)
Sec. 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST. (a) A
membership interest in a limited liability company may be wholly or
partly assigned.
(b) An assignment of a membership interest in a limited
liability company:
(1) is not an event requiring the winding up of the
company; and
(2) does not entitle the assignee to:
(A) participate in the management and affairs of
the company;
(B) become a member of the company; or
(C) exercise any rights of a member of the
company. (TLLCA 4.05.A (part).)
Sec. 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF MEMBERSHIP
INTEREST BEFORE MEMBERSHIP. (a) A person who is assigned a
membership interest in a limited liability company is entitled to:
(1) receive any allocation of income, gain, loss,
deduction, credit, or a similar item that the assignor is entitled
to receive to the extent the allocation of the item is assigned;
(2) receive any distribution the assignor is entitled
to receive to the extent the distribution is assigned;
(3) require, for any proper purpose, reasonable
information or a reasonable account of the transactions of the
company; and
(4) make, for any proper purpose, reasonable
inspections of the books and records of the company.
(b) An assignee of a membership interest in a limited
liability company is entitled to become a member of the company on
the approval of all of the company's members.
(c) An assignee of a membership interest in a limited
liability company is not liable as a member of the company until the
assignee becomes a member of the company. (TLLCA 4.05.A (part), C,
4.07.A.)
Sec. 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF
MEMBERSHIP INTEREST AFTER BECOMING MEMBER. (a) An assignee of a
membership interest in a limited liability company, after becoming
a member of the company, is:
(1) entitled, to the extent assigned, to the same
rights and powers granted or provided to a member of the company by
the company agreement or this code;
(2) subject to the same restrictions and liabilities
placed or imposed on a member of the company by the company
agreement or this code; and
(3) except as provided by Subsection (b), liable for
the assignor's obligation to make contributions to the company.
(b) An assignee of a membership interest in a limited
liability company, after becoming a member of the company, is not
obligated for a liability of the assignor that:
(1) the assignee did not have knowledge of on the date
the assignee became a member of the company; and
(2) could not be ascertained from the company
agreement. (TLLCA 4.07.B.)
Sec. 101.111. RIGHTS AND DUTIES OF ASSIGNOR OF MEMBERSHIP
INTEREST. (a) An assignor of a membership interest in a limited
liability company continues to be a member of the company and is
entitled to exercise any unassigned rights or powers of a member of
the company until the assignee becomes a member of the company.
(b) An assignor of a membership interest in a limited
liability company is not released from the assignor's liability to
the company, regardless of whether the assignee of the membership
interest becomes a member of the company. (TLLCA 4.05.A (part),
4.07.C.)
Sec. 101.112. JUDGMENT CREDITOR; CHARGE OF MEMBERSHIP
INTEREST. (a) On application by a judgment creditor of a member of
a limited liability company or any other owner of a membership
interest in a limited liability company, a court may charge the
membership interest of the member or owner, as appropriate, with
payment of the unsatisfied amount of the judgment.
(b) If a court charges a membership interest with payment of
a judgment as provided by Subsection (a), the judgment creditor has
only the rights of an assignee of the membership interest.
(c) This section may not be construed to deprive a member of
a limited liability company or any other owner of a membership
interest in a limited liability company of the benefit of any
exemption laws applicable to the membership interest of the member
or owner. (TLLCA 4.06.)
Sec. 101.113. PARTIES TO ACTIONS. A member of a limited
liability company may be named as a party in an action by or against
the limited liability company only if the action is brought to
enforce the member's right against or liability to the company.
(TLLCA 4.03.C.)
Sec. 101.114. LIABILITY FOR OBLIGATIONS. Except as and to
the extent the company agreement specifically provides otherwise, a
member or manager is not liable for a debt, obligation, or liability
of a limited liability company, including a debt, obligation, or
liability under a judgment, decree, or order of a court. (TLLCA
4.03.A.)
[Sections 101.115-101.150 reserved for expansion]
SUBCHAPTER D. CONTRIBUTIONS
Sec. 101.151. REQUIREMENTS FOR ENFORCEABLE PROMISE. A
promise to make a contribution or otherwise pay cash or transfer
property to a limited liability company is enforceable only if the
promise is:
(1) in writing; and
(2) signed by the person making the promise. (TLLCA
5.02.A.)
Sec. 101.152. ENFORCEABLE PROMISE NOT AFFECTED BY CHANGE IN
CIRCUMSTANCES. A member of a limited liability company is obligated
to perform an enforceable promise to make a contribution or
otherwise pay cash or transfer property to the company without
regard to the death, disability, or other change in circumstances
of the member. (TLLCA 5.02.B (part).)
Sec. 101.153. FAILURE TO PERFORM ENFORCEABLE PROMISE;
CONSEQUENCES. (a) A member of a limited liability company, or the
member's legal representative or successor, who does not perform an
enforceable promise to make a contribution, including a previously
made contribution, or to otherwise pay cash or transfer property to
the company, is obligated, at the request of the company, to pay in
cash the agreed value of the contribution, as stated in the company
agreement or the company's records required under Sections 3.151
and 101.501, less:
(1) any amount already paid for the contribution; and
(2) the value of any property already transferred.
(b) The company agreement of a limited liability company may
provide that the membership interest of a member who fails to
perform an enforceable promise to make a payment of cash or transfer
property to the company, whether as a contribution or in connection
with a contribution already made, may be:
(1) reduced;
(2) subordinated to other membership interests of
nondefaulting members;
(3) redeemed or sold at a value determined by
appraisal or other formula; or
(4) made the subject of:
(A) a forced sale;
(B) forfeiture;
(C) a loan from other members of the company in an
amount necessary to satisfy the enforceable promise; or
(D) another penalty or consequence. (TLLCA
5.02.B (part), C.)
Sec. 101.154. CONSENT REQUIRED TO RELEASE ENFORCEABLE
OBLIGATION. The obligation of a member of a limited liability
company, or of the member's legal representative or successor, to
make a contribution or otherwise pay cash or transfer property to
the company, or to return cash or property to the company paid or
distributed to the member in violation of this code or the company
agreement, may be released or settled only by consent of each member
of the company. (TLLCA 5.02.D (part).)
Sec. 101.155. CREDITOR'S RIGHT TO ENFORCE CERTAIN
OBLIGATIONS. A creditor of a limited liability company who extends
credit or otherwise acts in reasonable reliance on an enforceable
obligation of a member of the company that is released or settled as
provided by Section 101.154 may enforce the original obligation if
the obligation is stated in a document that is:
(1) signed by the member; and
(2) not amended or canceled to evidence the release or
settlement of the obligation. (TLLCA 5.02.D (part).)
Sec. 101.156. REQUIREMENTS TO ENFORCE CONDITIONAL
OBLIGATION. (a) An obligation of a member of a limited liability
company that is subject to a condition may be enforced by the
company or a creditor described by Section 101.155 only if the
condition is satisfied or waived by or with respect to the member.
(b) A conditional obligation of a member of a limited
liability company under this section includes a contribution
payable on a discretionary call of the limited liability company
before the time the call occurs. (TLLCA 5.02.D (part).)
[Sections 101.157-101.200 reserved for expansion]
SUBCHAPTER E. ALLOCATIONS AND DISTRIBUTIONS
Sec. 101.201. ALLOCATION OF PROFITS AND LOSSES. The profits
and losses of a limited liability company shall be allocated to each
member of the company in accordance with the member's percentage or
other interest in the company on the date of the allocation as
stated in the company's records required under Sections 3.151 and
101.501. (TLLCA 5.02-1.)
Sec. 101.202. DISTRIBUTION IN KIND. A member of a limited
liability company is entitled to receive or demand a distribution
from the company only in the form of cash, regardless of the form of
the member's contribution to the company. (TLLCA 5.07.)
Sec. 101.203. SHARING OF DISTRIBUTIONS. Distributions of
cash and other assets of a limited liability company shall be made
to each member of the company according to the agreed value of the
member's contribution to the company as stated in the company's
records required under Sections 3.151 and 101.501. (TLLCA 5.03.)
Sec. 101.204. INTERIM DISTRIBUTIONS. A member of a limited
liability company, before the winding up of the company, is not
entitled to receive and may not demand a distribution from the
company until the company's governing authority declares a
distribution to:
(1) each member of the company; or
(2) a class or group of members that includes the
member. (TLLCA 5.04.)
Sec. 101.205. DISTRIBUTION ON WITHDRAWAL. A member of a
limited liability company who validly exercises the member's right
to withdraw from the company granted under the company agreement is
entitled to receive, within a reasonable time after the date of
withdrawal, the fair value of the member's interest in the company
as determined as of the date of withdrawal. (TLLCA 5.06.)
Sec. 101.206. PROHIBITED DISTRIBUTION; DUTY TO RETURN. (a)
A limited liability company may not make a distribution to a member
of the company if, immediately after making the distribution, the
company's total liabilities, other than liabilities described by
Subsection (b), exceed the fair value of the company's total
assets.
(b) For purposes of Subsection (a), the liabilities of a
limited liability company do not include:
(1) a liability related to the member's membership
interest; or
(2) except as provided by Subsection (c), a liability
for which the recourse of creditors is limited to specified
property of the company.
(c) For purposes of Subsection (a), the assets of a limited
liability company include the fair value of property subject to a
liability for which recourse of creditors is limited to specified
property of the company only if the fair value of that property
exceeds the liability.
(d) A member of a limited liability company who receives a
distribution from the company in violation of this section is
required to return the distribution to the company if the member had
knowledge of the violation.
(e) This section may not be construed to affect the
obligation of a member of a limited liability company to return a
distribution to the company under the company agreement or other
state or federal law. (TLLCA 5.09.)
Sec. 101.207. CREDITOR STATUS WITH RESPECT TO DISTRIBUTION.
Subject to Sections 11.053 and 101.206, when a member of a limited
liability company is entitled to receive a distribution from the
company, the member, with respect to the distribution, has the same
status as a creditor of the company and is entitled to any remedy
available to a creditor of the company. (TLLCA 5.08.)
[Sections 101.208-101.250 reserved for expansion]
SUBCHAPTER F. MANAGEMENT
Sec. 101.251. MEMBERSHIP. The governing authority of a
limited liability company consists of:
(1) the managers of the company, if the company's
certificate of formation states that the company will have one or
more managers; or
(2) the members of the company, if the company's
certificate of formation states that the company will not have
managers. (TLLCA 2.12 (part).)
Sec. 101.252. MANAGEMENT BY GOVERNING AUTHORITY. The
governing authority of a limited liability company shall manage the
business and affairs of the company as provided by:
(1) the company agreement; and
(2) this title and the provisions of Title 1
applicable to a limited liability company to the extent that the
company agreement does not provide for the management of the
company. (TLLCA 2.12.)
Sec. 101.253. DESIGNATION OF COMMITTEES; DELEGATION OF
AUTHORITY. (a) The governing authority of a limited liability
company by resolution may designate:
(1) one or more committees of the governing authority
consisting of one or more governing persons of the company; and
(2) subject to any limitation imposed by the governing
authority, a governing person to serve as an alternate member of a
committee designated under Subdivision (1) at a committee meeting
from which a member of the committee is absent or disqualified.
(b) A committee of the governing authority of a limited
liability company may exercise the authority of the governing
authority as provided by the resolution designating the committee.
(c) The designation of a committee under this section does
not relieve the governing authority of any responsibility imposed
by law. (TLLCA 2.12 (part), 2.18.A, C.)
Sec. 101.254. DESIGNATION OF AGENTS; BINDING ACTS. (a)
Except as provided by this title and Title 1, each governing person
of a limited liability company and each officer or agent of a
limited liability company vested with actual or apparent authority
by the governing authority of the company is an agent of the company
for purposes of carrying out the company's business.
(b) An act committed by an agent of a limited liability
company described by Subsection (a) for the purpose of apparently
carrying out the ordinary course of business of the company,
including the execution of an instrument, document, mortgage, or
conveyance in the name of the company, binds the company unless:
(1) the agent does not have actual authority to act for
the company; and
(2) the person with whom the agent is dealing has
knowledge of the agent's lack of actual authority.
(c) An act committed by an agent of a limited liability
company described by Subsection (a) that is not apparently for
carrying out the ordinary course of business of the company binds
the company only if the act is authorized in accordance with this
title. (TLLCA 2.11, 2.21.C, D.)
Sec. 101.255. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED GOVERNING PERSONS OR OFFICERS. (a) This section applies
only to a contract or transaction between a limited liability
company and:
(1) one or more of the company's governing persons or
officers; or
(2) an entity or other organization in which one or
more of the company's governing persons or officers:
(A) is a managerial official; or
(B) has a financial interest.
(b) An otherwise valid contract or transaction is valid
notwithstanding that a governing person or officer of the company
is present at or participates in the meeting of the governing
authority, or of a committee of the governing person's authority,
that authorizes the contract or transaction or votes to authorize
the contract or transaction, if:
(1) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed to or
known by:
(A) the company's governing authority or a
committee of the governing authority and the governing authority or
committee in good faith authorizes the contract or transaction by
the affirmative vote of the majority of the disinterested governing
persons or committee members, regardless of whether the
disinterested governing persons or committee members constitute a
quorum; or
(B) the members of the company, and the members
in good faith approve the contract or transaction by vote of the
members; or
(2) the contract or transaction is fair to the company
when the contract or transaction is authorized, approved, or
ratified by the governing authority, a committee of the governing
authority, or the members of the company.
(c) Common or interested governing persons of a limited
liability company may be included in determining the presence of a
quorum at a meeting of the company's governing authority or of a
committee of the governing authority that authorizes the contract
or transaction. (TLLCA 2.12.A (part), 2.17.)
[Sections 101.256-101.300 reserved for expansion]
SUBCHAPTER G. MANAGERS
Sec. 101.301. APPLICABILITY OF SUBCHAPTER. This subchapter
applies only to a limited liability company that has one or more
managers. (New.)
Sec. 101.302. NUMBER AND QUALIFICATIONS. (a) The managers
of a limited liability company may consist of one or more persons.
(b) Except as provided by Subsection (c), the number of
managers of a limited liability company consists of the number of
initial managers listed in the company's certificate of formation.
(c) The number of managers of a limited liability company
may be increased or decreased by amendment to, or as provided by,
the company agreement, except that a decrease in the number of
managers may not shorten the term of an incumbent manager.
(d) A manager of a limited liability company is not required
to be a:
(1) resident of this state; or
(2) member of the company. (TLLCA 2.12 (part), 2.13
(part).)
Sec. 101.303. TERM. A manager of a limited liability
company serves:
(1) for the term, if any, for which the manager is
elected and until the manager's successor is elected; or
(2) until the earlier resignation, removal, or death
of the manager. (TLLCA 2.13 (part).)
Sec. 101.304. REMOVAL. Subject to Section 101.306(a), a
manager of a limited liability company may be removed, with or
without cause, at a meeting of the company's members called for that
purpose. (TLLCA 2.13 (part).)
Sec. 101.305. MANAGER VACANCY. (a) Subject to Section
101.306(b), a vacancy in the position of a manager of a limited
liability company may be filled by:
(1) the affirmative vote of the majority of the
remaining managers of the company, without regard to whether the
remaining managers constitute a quorum; or
(2) if the vacancy is a result of an increase in the
number of managers, an election at an annual or special meeting of
the company's members called for that purpose.
(b) A person elected to fill a vacancy in the position of a
manager serves for the unexpired term of the person's predecessor.
(TLLCA 2.15.A, B.)
Sec. 101.306. REMOVAL AND REPLACEMENT OF MANAGER ELECTED BY
CLASS OR GROUP. (a) If a class or group of the members of a limited
liability company is entitled by the company agreement of the
company to elect one or more managers of the company, a manager may
be removed from office only by the class or group that elected the
manager.
(b) A vacancy in the position of a manager elected as
provided by Subsection (a) may be filled only by:
(1) a majority vote of the managers serving on the date
the vacancy occurs who were elected by the class or group of
members; or
(2) a majority vote of the members of the class or
group. (TLLCA 2.13 (part), 2.15.C.)
Sec. 101.307. METHODS OF CLASSIFYING MANAGERS. Other
methods of classifying managers of a limited liability company,
including providing for managers who serve for staggered terms of
office or terms that are not uniform, may be established in the
company agreement. (TLLCA 2.14.)
[Sections 101.308-101.350 reserved for expansion]
SUBCHAPTER H. MEETINGS AND VOTING
Sec. 101.351. APPLICABILITY OF SUBCHAPTER. This subchapter
applies only to a meeting of and voting by:
(1) the governing authority of a limited liability
company;
(2) the members of a limited liability company if the
members do not constitute the governing authority of the company;
and
(3) a committee of the governing authority of a
limited liability company. (TLLCA 2.12.A (part).)
Sec. 101.352. GENERAL NOTICE REQUIREMENTS. (a) Except as
provided by Subsection (b), notice of a regular or special meeting
of the governing authority or members of a limited liability
company, or a committee of the company's governing authority, shall
be given in writing to each governing person, member, or committee
member, as appropriate, and as provided by Section 6.051.
(b) If the members of a limited liability company do not
constitute the governing authority of the company, notice required
by Subsection (a) shall be given by or at the direction of the
governing authority not later than the 10th day or earlier than the
60th day before the date of the meeting. Notice of a meeting
required under this subsection must state the business to be
transacted at the meeting or the purpose of the meeting if:
(1) the meeting is a special meeting; or
(2) a purpose of the meeting is to consider a matter
described by Section 101.356. (TLLCA 2.12.A (part), 2.19.B, C, D.)
Sec. 101.353. QUORUM. A majority of all of the governing
persons, members, or committee members of a limited liability
company constitutes a quorum for the purpose of transacting
business at a meeting of the governing authority, members, or
committee of the company, as appropriate. (TLLCA 2.23.A (part).)
Sec. 101.354. EQUAL VOTING RIGHTS. Each governing person,
member, or committee member of a limited liability company has an
equal vote at a meeting of the governing authority, members, or
committee of the company, as appropriate. (TLLCA 2.23.F.)
Sec. 101.355. ACT OF GOVERNING AUTHORITY, MEMBERS, OR
COMMITTEE. Except as provided by this title or Title 1, the
affirmative vote of the majority of the governing persons, members,
or committee members of a limited liability company present at a
meeting at which a quorum is present constitutes an act of the
governing authority, members, or committee of the company, as
appropriate. (TLLCA 2.23.A (part), F.)
Sec. 101.356. VOTES REQUIRED TO APPROVE CERTAIN ACTIONS.
(a) Except as provided in this section or any other section in this
title, an action of a limited liability company may be approved by
the company's governing authority as provided by Section 101.355.
(b) Except as provided by Subsection (c), (d), or (e) or any
other section in this title, an action of a limited liability
company not apparently for carrying out the ordinary course of
business of the company must be approved by the affirmative vote of
the majority of all of the company's governing persons.
(c) Except as provided by Subsection (d) or (e) or any other
section in this title, a fundamental business transaction of a
limited liability company, or an action that would make it
impossible for a limited liability company to carry out the
ordinary business of the company, must be approved by the
affirmative vote of the majority of all of the company's members.
(d) Except as provided by Subsection (e) or any other
section of this title, an amendment to the certificate of formation
of a limited liability company must be approved by the affirmative
vote of all of the company's members.
(e) A requirement that an action of a limited liability
company must be approved by the company's members does not apply
during the period prescribed by Section 101.101(b). (TLLCA 2.23.D,
E, G, H.)
Sec. 101.357. MANNER OF VOTING. (a) A member of a limited
liability company may vote:
(1) in person; or
(2) by a proxy executed in writing by the member.
(b) A manager or committee member of a limited liability
company, if authorized by the company agreement, may vote:
(1) in person; or
(2) by a proxy executed in writing by the manager or
committee member, as appropriate. (TLLCA 2.23.A (part); New.)
Sec. 101.358. ACTION BY LESS THAN UNANIMOUS WRITTEN
CONSENT. (a) This section applies only to an action required or
authorized to be taken at an annual or special meeting of the
governing authority, the members, or a committee of the governing
authority of a limited liability company under this title, Title 1,
or the governing documents of the company.
(b) Notwithstanding Sections 6.201 and 6.202, an action may
be taken without holding a meeting, providing notice, or taking a
vote if a written consent or consents stating the action to be taken
is signed by the number of governing persons, members, or committee
members of a limited liability company, as appropriate, necessary
to have at least the minimum number of votes that would be necessary
to take the action at a meeting at which each governing person,
member, or committee member, as appropriate, entitled to vote on
the action is present and votes. (TLLCA 2.23.B(1).)
[Sections 101.359-101.400 reserved for expansion]
SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION
Sec. 101.401. EXPANSION OR RESTRICTION OF DUTIES AND
LIABILITIES. The company agreement of a limited liability company
may expand or restrict any duties, including fiduciary duties, and
related liabilities that a member, manager, officer, or other
person has to the company or to a member or manager of the company.
(TLLCA 2.20.B.)
Sec. 101.402. PERMISSIVE INDEMNIFICATION, ADVANCEMENT OF
EXPENSES, AND INSURANCE OR OTHER ARRANGEMENTS. (a) A limited
liability company may:
(1) indemnify a person;
(2) pay in advance or reimburse expenses incurred by a
person; and
(3) purchase or procure or establish and maintain
insurance or another arrangement to indemnify or hold harmless a
person.
(b) In this section, "person" includes a member, manager, or
officer of a limited liability company or an assignee of a
membership interest in the company. (TLLCA 2.02.A, 2.20.A.)
[Sections 101.403-101.450 reserved for expansion]
SUBCHAPTER J. DERIVATIVE PROCEEDINGS
Sec. 101.451. DEFINITIONS. In this subchapter:
(1) "Derivative proceeding" means a civil suit in the
right of a domestic limited liability company or, to the extent
provided by Section 101.462, in the right of a foreign limited
liability company.
(2) "Member" includes a person who beneficially owns a
membership interest through a voting trust or a nominee on the
person's behalf. (TLLCA 8.12.A, C; TBCA 5.14.A.)
Sec. 101.452. STANDING TO BRING PROCEEDING. A member may
not institute or maintain a derivative proceeding unless:
(1) the member:
(A) was a member of the limited liability company
at the time of the act or omission complained of; or
(B) became a member by operation of law from a
person that was a member at the time of the act or omission
complained of; and
(2) the member fairly and adequately represents the
interests of the limited liability company in enforcing the right
of the limited liability company. (TLLCA 8.12.A, C; TBCA 5.14.B.)
Sec. 101.453. DEMAND. (a) A member may not institute a
derivative proceeding until the 91st day after the date a written
demand is filed with the limited liability company stating with
particularity the act, omission, or other matter that is the
subject of the claim or challenge and requesting that the limited
liability company take suitable action.
(b) The waiting period required by Subsection (a) before a
derivative proceeding may be instituted is not required if:
(1) the member has been previously notified that the
demand has been rejected by the limited liability company;
(2) the limited liability company is suffering
irreparable injury; or
(3) irreparable injury to the limited liability
company would result by waiting for the expiration of the 90-day
period. (TLLCA 8.12.A, C; TBCA 5.14.C.)
Sec. 101.454. DETERMINATION BY GOVERNING OR INDEPENDENT
PERSONS. (a) The determination of how to proceed on allegations
made in a demand or petition relating to a derivative proceeding
must be made by an affirmative vote of the majority of:
(1) the independent and disinterested governing
persons present at a meeting of the governing authority at which
interested governing persons are not present at the time of the vote
if the independent and disinterested governing persons constitute a
quorum of the governing authority;
(2) a committee consisting of two or more independent
and disinterested governing persons appointed by the majority of
one or more independent and disinterested governing persons present
at a meeting of the governing authority, regardless of whether the
independent and disinterested governing persons constitute a
quorum of the governing authority; or
(3) a panel of one or more independent and
disinterested persons appointed by the court on a motion by the
limited liability company listing the names of the persons to be
appointed and stating that, to the best of the limited liability
company's knowledge, the persons to be appointed are disinterested
and qualified to make the determinations contemplated by Section
101.458.
(b) The court shall appoint a panel under Subsection (a)(3)
if the court finds that the persons recommended by the limited
liability company are independent and disinterested and are
otherwise qualified with respect to expertise, experience,
independent judgment, and other factors considered appropriate by
the court under the circumstances to make the determinations. A
person appointed by the court to a panel under this section may not
be held liable to the limited liability company or the limited
liability company's members for an action taken or omission made by
the person in that capacity, except for acts or omissions
constituting fraud or wilful misconduct. (TLLCA 8.12.A, C; TBCA
5.14.H.)
Sec. 101.455. STAY OF PROCEEDING. (a) If the domestic or
foreign limited liability company that is the subject of a
derivative proceeding commences an inquiry into the allegations
made in a demand or petition and the person or group of persons
described by Section 101.454 is conducting an active review of the
allegations in good faith, the court shall stay a derivative
proceeding until the review is completed and a determination is
made by the person or group regarding what further action, if any,
should be taken.
(b) To obtain a stay, the domestic or foreign limited
liability company shall provide the court with a written statement
agreeing to advise the court and the member making the demand of the
determination promptly on the completion of the review of the
matter. A stay, on motion, may be reviewed every 60 days for the
continued necessity of the stay.
(c) If the review and determination made by the person or
group is not completed before the 61st day after the date on which
the court orders the stay, the stay may be renewed for one or more
additional 60-day periods if the domestic or foreign limited
liability company provides the court and the member with a written
statement of the status of the review and the reasons why a
continued extension of the stay is necessary. (TLLCA 8.12.A, C;
TBCA 5.14.D(1).)
Sec. 101.456. DISCOVERY. (a) If a domestic or foreign
limited liability company proposes to dismiss a derivative
proceeding under Section 101.458, discovery by a member after the
filing of the derivative proceeding in accordance with this
subchapter shall be limited to:
(1) facts relating to whether the person or group of
persons described by Section 101.458 is independent and
disinterested;
(2) the good faith of the inquiry and review by the
person or group; and
(3) the reasonableness of the procedures followed by
the person or group in conducting the review.
(b) Discovery described by Subsection (a) may not be
expanded to include a fact or substantive matter regarding the act,
omission, or other matter that is the subject matter of the
derivative proceeding. The scope of discovery may be expanded if
the court determines after notice and hearing that a good faith
review of the allegations for purposes of Section 101.458 has not
been made by an independent and disinterested person or group in
accordance with that section. (TLLCA 8.12.A, C; TBCA 5.14.D(2).)
Sec. 101.457. TOLLING OF STATUTE OF LIMITATIONS. A written
demand filed with the limited liability company under Section
101.453 tolls the statute of limitations on the claim on which
demand is made until the earlier of:
(1) the 91st day after the date of the demand; or
(2) the 31st day after the date the limited liability
company advises the member that the demand has been rejected or the
review has been completed. (TLLCA 8.12.A, C; TBCA 5.14.E.)
Sec. 101.458. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A
court shall dismiss a derivative proceeding on a motion by the
limited liability company if the person or group of persons
described by Section 101.454 determines in good faith, after
conducting a reasonable inquiry and based on factors the person or
group considers appropriate under the circumstances, that
continuation of the derivative proceeding is not in the best
interests of the limited liability company.
(b) In determining whether the requirements of Subsection
(a) have been met, the burden of proof shall be on:
(1) the plaintiff member if:
(A) the majority of the governing authority
consists of independent and disinterested persons at the time the
determination is made;
(B) the determination is made by a panel of one or
more independent and disinterested persons appointed under Section
101.454(a)(3); or
(C) the limited liability company presents prima
facie evidence that demonstrates that the persons appointed under
Section 101.454(a)(2) are independent and disinterested; or
(2) the limited liability company in any other
circumstance. (TLLCA 8.12.A, C; TBCA 5.14.F.)
Sec. 101.459. ALLEGATIONS IF DEMAND REJECTED. If a
derivative proceeding is instituted after a demand is rejected, the
petition must allege with particularity facts that establish that
the rejection was not made in accordance with the requirements of
Sections 101.454 and 101.458. (TLLCA 8.12.A, C; TBCA 5.14.G.)
Sec. 101.460. DISCONTINUANCE OR SETTLEMENT. (a) A
derivative proceeding may not be discontinued or settled without
court approval.
(b) The court shall direct that notice be given to the
affected members if the court determines that a proposed
discontinuance or settlement may substantially affect the
interests of other members. (TLLCA 8.12.A, C; TBCA 5.14.I.)
Sec. 101.461. PAYMENT OF EXPENSES. (a) In this section,
"expenses" means reasonable expenses incurred by a party in a
derivative proceeding, including:
(1) attorney's fees;
(2) costs of pursuing an investigation of the matter
that was the subject of the derivative proceeding; or
(3) expenses for which the domestic or foreign limited
liability company may be required to indemnify another person.
(b) On termination of a derivative proceeding, the court may
order:
(1) the domestic or foreign limited liability company
to pay the expenses the plaintiff incurred in the proceeding if the
court finds the proceeding has resulted in a substantial benefit to
the domestic or foreign limited liability company;
(2) the plaintiff to pay the expenses the domestic or
foreign limited liability company or other defendant incurred in
investigating and defending the proceeding if the court finds the
proceeding has been instituted or maintained without reasonable
cause or for an improper purpose; or
(3) a party to pay the expenses incurred by another
party relating to the filing of a pleading, motion, or other paper
if the court finds the pleading, motion, or other paper:
(A) was not well grounded in fact after
reasonable inquiry;
(B) was not warranted by existing law or a good
faith argument for the extension, modification, or reversal of
existing law; or
(C) was interposed for an improper purpose, such
as to harass, cause unnecessary delay, or cause a needless increase
in the cost of litigation. (TLLCA 8.12.A, C; TBCA 5.14.J.)
Sec. 101.462. APPLICATION TO FOREIGN LIMITED LIABILITY
COMPANIES. (a) In a derivative proceeding brought in the right of a
foreign limited liability company, the matters covered by this
subchapter are governed by the laws of the jurisdiction of
organization of the foreign limited liability company, except for
Sections 101.455, 101.460, and 101.461, which are procedural
provisions and do not relate to the internal affairs of the foreign
limited liability company.
(b) In the case of matters relating to a foreign limited
liability company under Section 101.454, a reference to a person or
group of persons described by that section refers to a person or
group entitled under the laws of the jurisdiction of organization
of the foreign limited liability company to review and dispose of a
derivative proceeding. The standard of review of a decision made by
the person or group to dismiss the derivative proceeding shall be
governed by the laws of the jurisdiction of organization of the
foreign limited liability company. (TLLCA 8.12.A, C; TBCA 5.14.K.)
Sec. 101.463. CLOSELY HELD LIMITED LIABILITY COMPANY. (a)
In this section, "closely held limited liability company" means a
limited liability company that has:
(1) fewer than 35 members; and
(2) no membership interests listed on a national
securities exchange or regularly quoted in an over-the-counter
market by one or more members of a national securities association.
(b) Subject to Subsection (c), Sections 101.452-101.459 do
not apply to a closely held limited liability company.
(c) If justice requires:
(1) a derivative proceeding brought by a member of a
closely held limited liability company may be treated by a court as
a direct action brought by the member for the member's own benefit;
and
(2) a recovery in a direct or derivative proceeding by
a member may be paid directly to the plaintiff or to the limited
liability company if necessary to protect the interests of
creditors or other members of the limited liability company.
(TLLCA 8.12.A, C; TBCA 5.14.L.)
[Sections 101.464-101.500 reserved for expansion]
SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS
Sec. 101.501. SUPPLEMENTAL RECORDS REQUIRED FOR LIMITED
LIABILITY COMPANIES. (a) In addition to the books and records
required to be kept under Section 3.151, a limited liability
company shall keep at its principal office in the United States, or
make available to a person at its principal office in the United
States not later than the fifth day after the date the person
submits a written request to examine the books and records of the
company under Section 3.152(a) or 101.502:
(1) a current list of each member of a class or group
of membership interests in the company;
(2) a copy of the company's federal, state, and local
tax information or income tax returns for each of the six preceding
tax years;
(3) a copy of the company's certificate of formation,
including any amendments to or restatements of the certificate of
formation;
(4) if the company agreement is in writing, a copy of
the company agreement, including any amendments to or restatements
of the company agreement;
(5) an executed copy of any powers of attorney;
(6) a copy of any document that establishes a class or
group of members of the company as provided by the company
agreement; and
(7) except as provided by Subsection (b), a written
statement of:
(A) the amount of a cash contribution and a
description and statement of the agreed value of any other
contribution made or agreed to be made by each member;
(B) the dates any additional contributions are to
be made by a member;
(C) any event the occurrence of which requires a
member to make additional contributions;
(D) any event the occurrence of which requires
the winding up of the company; and
(E) the date each member became a member of the
company.
(b) A limited liability company is not required to keep or
make available at its principal office in the United States a
written statement of the information required by Subsection (a)(7)
if that information is stated in the company agreement.
(c) A limited liability company shall keep at its registered
office located in this state and make available to a member of the
company on reasonable request the street address of the company's
principal office in the United States in which the records required
by this section and Section 3.151 are maintained or made available.
(TLLCA 2.22.A, C.)
Sec. 101.502. RIGHT TO EXAMINE RECORDS AND CERTAIN OTHER
INFORMATION. (a) A member of a limited liability company or an
assignee of a membership interest in a limited liability company,
or a representative of the member or assignee, on written request
and for a proper purpose, may examine and copy at any reasonable
time and at the member's or assignee's expense:
(1) records required under Sections 3.151 and 101.501;
and
(2) other information regarding the business,
affairs, and financial condition of the company that is reasonable
for the person to examine and copy.
(b) A limited liability company shall provide to a member of
the company or an assignee of a membership interest in the company,
on written request by the member or assignee sent to the company's
principal office in the United States or, if different, the person
and address designated in the company agreement, a free copy of:
(1) the company's certificate of formation, including
any amendments to or restatements of the certificate of formation;
(2) if in writing, the company agreement, including
any amendments to or restatements of the company agreement; and
(3) any tax returns described by Section
101.501(a)(2). (TLLCA 2.22.D, E.)
[Sections 101.503-101.550 reserved for expansion]
SUBCHAPTER L. SUPPLEMENTAL WINDING UP
AND TERMINATION PROVISIONS
Sec. 101.551. PERSONS ELIGIBLE TO WIND UP COMPANY. After an
event requiring the winding up of a limited liability company
unless a revocation as provided by Section 11.151 or a cancellation
as provided by Section 11.152 occurs, the winding up of the company
must be carried out by:
(1) the company's governing authority or one or more
persons, including a governing person, designated by the governing
authority, the members, or the governing documents;
(2) if the event requiring the winding up of the
company is the termination of the continued membership of the last
remaining member of the company, the legal representative or
successor of the last remaining member or one or more persons
designated by the legal representative or successor; or
(3) a person appointed by the court to carry out the
winding up of the company under Section 11.054, 11.405, 11.409, or
11.410. (TLLCA 6.03.)
Sec. 101.552. APPROVAL OF VOLUNTARY WINDING UP, REVOCATION,
CANCELLATION, OR REINSTATEMENT. A majority vote of all of the
governing members of a limited liability company or, if the limited
liability company has no members, a majority vote of all of the
managers of the company is required to approve:
(1) a voluntary winding up of the company under
Chapter 11;
(2) a revocation of a voluntary decision to wind up the
company under Section 11.151;
(3) a cancellation of an event requiring the winding
up of the company under Section 11.152; or
(4) a reinstatement of a terminated company under
Section 11.202. (TLLCA 6.01, 6.06.)
TITLE 4. PARTNERSHIPS
CHAPTER 151. GENERAL PROVISIONS
Sec. 151.001. DEFINITIONS. In this title:
(1) "Capital account" means the amount computed by:
(A) adding the amount of a partner's original and
additional contributions of cash to a partnership, the agreed value
of any other property that that partner originally or additionally
contributed to the partnership, and allocations of partnership
profits to that partner; and
(B) subtracting the amount of distributions to
that partner and allocations of partnership losses to that partner.
(2) "Foreign limited partnership" means a partnership
formed under the laws of another state that has one or more general
partners and one or more limited partners.
(3) "Majority-in-interest," with respect to all or a
specified group of partners, means partners who own more than 50
percent of the current percentage or other interest in the profits
of the partnership that is owned by all of the partners or by the
partners in the specified group, as appropriate.
(4) "Partnership agreement" means any agreement,
written or oral, of the partners concerning a partnership. (TRLPA
1.02(1), (3), (7), (10); TRPA 1.01(2), (8), (10), (12).)
Sec. 151.002. KNOWLEDGE OF FACT. For purposes of this
title, a person has knowledge of a fact only if the person has
actual knowledge of the fact. (TRPA 1.02(a).)
Sec. 151.003. NOTICE OF FACT. (a) For purposes of this
title, a person has notice of a fact if the person:
(1) has knowledge of the fact;
(2) has received a communication of the fact as
provided by Subsection (c); or
(3) reasonably should have concluded, from all facts
then known to that person, that the fact exists.
(b) A person notifies or gives notice to another person of a
fact by taking actions reasonably required to inform the other
person of the fact in the ordinary course of business, regardless of
whether the other person actually has knowledge of the fact.
(c) A person is notified or receives notice of a fact when
the fact is communicated to:
(1) the person;
(2) the person's place of business; or
(3) another place held out by the person as the place
for receipt of communications.
(d) Receipt of notice by a partner of a fact relating to the
partnership is effective immediately as notice to the partnership
unless fraud against the partnership is committed by or with the
consent of the partner receiving the notice. (TRPA 1.02(b), (c),
(d), (e).)
CHAPTER 152. GENERAL PARTNERSHIPS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 152.001. DEFINITIONS. In this chapter:
(1) "Event of withdrawal" or "withdrawal" means an
event specified by Section 152.501(b).
(2) "Event requiring a winding up" means an event
specified by Section 11.051 or 11.057.
(3) "Foreign limited liability partnership" means a
partnership that:
(A) is foreign; and
(B) has the status of a limited liability
partnership pursuant to the laws of the jurisdiction of formation.
(4) "Other partnership provisions" means the
provisions of Chapters 151 and 154 and Title 1 to the extent
applicable to partnerships.
(5) "Transfer" includes:
(A) an assignment;
(B) a conveyance;
(C) a lease;
(D) a mortgage;
(E) a deed;
(F) an encumbrance; and
(G) the creation of a security interest.
(6) "Withdrawn partner" means a partner with respect
to whom an event of withdrawal has occurred. (TRPA 1.01(6), (7),
(8), (9), (10), (11), (12), (13), (14), (15), (16), (17), (18),
(19).)
Sec. 152.002. EFFECT OF PARTNERSHIP AGREEMENT; NONWAIVABLE
AND VARIABLE PROVISIONS. (a) Except as provided by Subsection (b),
a partnership agreement governs the relations of the partners and
between the partners and the partnership. To the extent that the
partnership agreement does not otherwise provide, this chapter and
the other partnership provisions govern the relationship of the
partners and between the partners and the partnership.
(b) A partnership agreement or the partners may not:
(1) unreasonably restrict a partner's right of access
to books and records under Section 152.212;
(2) eliminate the duty of loyalty under Section
152.205, except that the partners by agreement may identify
specific types of activities or categories of activities that do
not violate the duty of loyalty if the types or categories are not
manifestly unreasonable;
(3) eliminate the duty of care under Section 152.206,
except that the partners by agreement may determine the standards
by which the performance of the obligation is to be measured if the
standards are not manifestly unreasonable;
(4) eliminate the obligation of good faith under
Section 152.204(b), except that the partners by agreement may
determine the standards by which the performance of the obligation
is to be measured if the standards are not manifestly unreasonable;
(5) vary the power to withdraw as a partner under
Section 152.501(b)(1), (7), or (8), except for the requirement that
notice be in writing;
(6) vary the right to expel a partner by a court in an
event specified by Section 152.501(b)(5);
(7) restrict rights of a third party under this
chapter or the other partnership provisions, except for a
limitation on an individual partner's liability in a limited
liability partnership as provided by this chapter;
(8) select a governing law not permitted under
Sections 1.103 and 1.002(43)(C); or
(9) except as provided in Subsections (c) and (d),
waive or modify the following provisions of Title 1:
(A) Chapter 1, if the provision is used to
interpret a provision or to define a word or phrase contained in a
section listed in this subsection;
(B) Chapter 2, other than Sections 2.104(c)(2),
2.104(c)(3), and 2.113;
(C) Chapter 3, other than Subchapters C and E of
that chapter; or
(D) Chapters 4, 5, 10, 11, and 12, other than
Sections 11.057(a)(1), (2), (5), and (6) and 11.057(b).
(c) A provision listed in Subsection (b)(9) may be waived or
modified in a partnership agreement if the provision that is waived
or modified authorizes the partnership to waive or modify the
provision in the partnership's governing documents.
(d) A provision listed in Subsection (b)(9) may be waived or
modified in a partnership agreement if the provision that is
modified specifies:
(1) the person or group of persons entitled to approve
a modification; or
(2) the vote or other method by which a modification is
required to be approved. (TRPA 1.03.)
Sec. 152.003. SUPPLEMENTAL PRINCIPLES OF LAW. The
principles of law and equity and the other partnership provisions
supplement this chapter unless otherwise provided by this chapter
or the other partnership provisions. (TRPA 1.04(a).)
Sec. 152.004. RULE OF STATUTORY CONSTRUCTION NOT
APPLICABLE. The rule that a statute in derogation of the common law
is to be strictly construed does not apply to this chapter or the
other partnership provisions. (TRPA 1.04(b).)
Sec. 152.005. APPLICABLE INTEREST RATE. If an obligation to
pay interest arises under this chapter and the rate is not
specified, the interest rate is the rate specified by Section
302.002, Finance Code. (TRPA 1.04(c).)
[Sections 152.006-152.050 reserved for expansion]
SUBCHAPTER B. NATURE AND CREATION OF PARTNERSHIP
Sec. 152.051. PARTNERSHIP DEFINED. (a) In this section,
"association" does not have the meaning of the term "association"
under Section 1.002.
(b) Except as provided by Subsection (c) and Section
152.053(a), an association of two or more persons to carry on a
business for profit as owners creates a partnership, regardless of
whether:
(1) the persons intend to create a partnership; or
(2) the association is called a "partnership," "joint
venture," or other name.
(c) An association or organization is not a partnership if
it was created under a statute other than:
(1) this title and the provisions of Title 1
applicable to partnerships and limited partnerships;
(2) a predecessor to a statute referred to in
Subdivision (1); or
(3) a comparable statute of another jurisdiction.
(d) The provisions of this chapter govern limited
partnerships only to the extent provided by Sections 153.003 and
153.152 and Subchapter H, Chapter 153. (TRPA 2.02(a), (b).)
Sec. 152.052. RULES FOR DETERMINING IF PARTNERSHIP IS
CREATED. (a) Factors indicating that persons have created a
partnership include the persons':
(1) receipt or right to receive a share of profits of
the business;
(2) expression of an intent to be partners in the
business;
(3) participation or right to participate in control
of the business;
(4) agreement to share or sharing:
(A) losses of the business; or
(B) liability for claims by third parties against
the business; and
(5) agreement to contribute or contributing money or
property to the business.
(b) One of the following circumstances, by itself, does not
indicate that a person is a partner in the business:
(1) the receipt or right to receive a share of profits
as payment:
(A) of a debt, including repayment by
installments;
(B) of wages or other compensation to an employee
or independent contractor;
(C) of rent;
(D) to a former partner, surviving spouse or
representative of a deceased or disabled partner, or transferee of
a partnership interest;
(E) of interest or other charge on a loan,
regardless of whether the amount varies with the profits of the
business, including a direct or indirect present or future
ownership interest in collateral or rights to income, proceeds, or
increase in value derived from collateral; or
(F) of consideration for the sale of a business
or other property, including payment by installments;
(2) co-ownership of property, regardless of whether
the co-ownership:
(A) is a joint tenancy, tenancy in common,
tenancy by the entirety, joint property, community property, or
part ownership; or
(B) is combined with sharing of profits from the
property;
(3) the right to share or sharing gross returns or
revenues, regardless of whether the persons sharing the gross
returns or revenues have a common or joint interest in the property
from which the returns or revenues are derived; or
(4) ownership of mineral property under a joint
operating agreement.
(c) An agreement by the owners of a business to share losses
is not necessary to create a partnership. (TRPA 2.03.)
Sec. 152.053. QUALIFICATIONS TO BE PARTNER; NONPARTNER'S
LIABILITY TO THIRD PERSON. (a) A person may be a partner unless the
person lacks capacity apart from this chapter.
(b) Except as provided by Section 152.307, a person who is
not a partner in a partnership under Section 152.051 is not a
partner as to a third person and is not liable to a third person
under this chapter. (TRPA 2.02(c), 2.03(c).)
Sec. 152.054. FALSE REPRESENTATION OF PARTNERSHIP OR
PARTNER. (a) A false representation or other conduct falsely
indicating that a person is a partner with another person does not
of itself create a partnership.
(b) A representation or other conduct indicating that a
person is a partner in an existing partnership, if that is not the
case, does not of itself make that person a partner in the
partnership. (TRPA 3.06(a), (b).)
Sec. 152.055. AUTHORITY OF CERTAIN PROFESSIONALS TO CREATE
PARTNERSHIP. (a) Persons licensed as doctors of medicine and
persons licensed as doctors of osteopathy by the Texas State Board
of Medical Examiners and persons licensed as podiatrists by the
Texas State Board of Podiatric Medical Examiners may create a
partnership that is jointly owned by those practitioners to perform
a professional service that falls within the scope of practice of
those practitioners.
(b) When doctors of medicine, osteopathy, and podiatry
create a partnership that is jointly owned by those practitioners,
the authority of each of the practitioners is limited by the scope
of practice of the respective practitioners and none can exercise
control over the other's clinical authority granted by their
respective licenses, either through agreements, bylaws,
directives, financial incentives, or other arrangements that would
assert control over treatment decisions made by the practitioner.
(c) The Texas State Board of Medical Examiners and the Texas
State Board of Podiatric Medical Examiners continue to exercise
regulatory authority over their respective licenses. (TRPA
2.02(e).)
Sec. 152.056. PARTNERSHIP AS ENTITY. A partnership is an
entity distinct from its partners. (TRPA 2.01.)
[Sections 152.057-152.100 reserved for expansion]
SUBCHAPTER C. PARTNERSHIP PROPERTY
Sec. 152.101. NATURE OF PARTNERSHIP PROPERTY. Partnership
property is not property of the partners. A partner or a partner's
spouse does not have an interest in partnership property. (TRPA
2.04.)
Sec. 152.102. CLASSIFICATION AS PARTNERSHIP PROPERTY. (a)
Property is partnership property if acquired in the name of:
(1) the partnership; or
(2) one or more partners, regardless of whether the
name of the partnership is indicated, if the instrument
transferring title to the property indicates:
(A) the person's capacity as a partner; or
(B) the existence of a partnership.
(b) Property is presumed to be partnership property if
acquired with partnership property, regardless of whether the
property is acquired as provided by Subsection (a).
(c) Property acquired in the name of one or more partners is
presumed to be the partner's property, regardless of whether the
property is used for partnership purposes, if the instrument
transferring title to the property does not indicate the person's
capacity as a partner or the existence of a partnership, and if the
property is not acquired with partnership property.
(d) For purposes of this section, property is acquired in
the name of the partnership by a transfer to:
(1) the partnership in its name; or
(2) one or more partners in the partners' capacity as
partners in the partnership, if the name of the partnership is
indicated in the instrument transferring title to the property.
(TRPA 2.05.)
[Sections 152.103-152.200 reserved for expansion]
SUBCHAPTER D. RELATIONSHIP BETWEEN PARTNERS AND BETWEEN
PARTNERS AND PARTNERSHIPS
Sec. 152.201. ADMISSION AS PARTNER. A person may become a
partner only with the consent of all partners. (TRPA 4.01(g).)
Sec. 152.202. CREDITS OF AND CHARGES TO PARTNER. (a) Each
partner is credited with an amount equal to:
(1) the cash and the value of property the partner
contributes to a partnership; and
(2) the partner's share of the partnership's profits.
(b) Each partner is charged with an amount equal to:
(1) the cash and the value of other property
distributed by the partnership to the partner; and
(2) the partner's share of the partnership's losses.
(c) Each partner is entitled to be credited with an equal
share of the partnership's profits and is chargeable with a share of
the partnership's capital or operating losses in proportion to the
partner's share of the profits. (TRPA 4.01(a), (b).)
Sec. 152.203. RIGHTS AND DUTIES OF PARTNER. (a) Each
partner has equal rights in the management and conduct of the
business of a partnership. A partner's right to participate in the
management and conduct of the business is not community property.
(b) A partner may use or possess partnership property only
on behalf of the partnership.
(c) A partner is not entitled to receive compensation for
services performed for a partnership other than reasonable
compensation for services rendered in winding up the business of
the partnership.
(d) A partner who, in the proper conduct of the business of
the partnership or for the preservation of its business or
property, reasonably makes a payment or advance beyond the amount
the partner agreed to contribute, or who reasonably incurs a
liability, is entitled to be repaid and to receive interest from the
date of the:
(1) payment or advance; or
(2) incurrence of the liability. (TRPA 4.01(c), (d),
(e), (f).)
Sec. 152.204. GENERAL STANDARDS OF PARTNER'S CONDUCT. (a)
A partner owes to the partnership and the other partners:
(1) a duty of loyalty; and
(2) a duty of care.
(b) A partner shall discharge the partner's duties to the
partnership and the other partners under this code or under the
partnership agreement and exercise any rights and powers in the
conduct or winding up of the partnership business:
(1) in good faith; and
(2) in a manner the partner reasonably believes to be
in the best interest of the partnership.
(c) A partner does not violate a duty or obligation under
this chapter or under the partnership agreement merely because the
partner's conduct furthers the partner's own interest.
(d) A partner, in the partner's capacity as partner, is not
a trustee and is not held to the standards of a trustee. (TRPA
4.04(a), (d), (e), (f).)
Sec. 152.205. PARTNER'S DUTY OF LOYALTY. A partner's duty of
loyalty includes:
(1) accounting to and holding for the partnership
property, profit, or benefit derived by the partner:
(A) in the conduct and winding up of the
partnership business; or
(B) from use by the partner of partnership
property;
(2) refraining from dealing with the partnership on
behalf of a person who has an interest adverse to the partnership;
and
(3) refraining from competing or dealing with the
partnership in a manner adverse to the partnership. (TRPA 4.04(b).)
Sec. 152.206. PARTNER'S DUTY OF CARE. (a) A partner's duty
of care to the partnership and the other partners is to act in the
conduct and winding up of the partnership business with the care an
ordinarily prudent person would exercise in similar circumstances.
(b) An error in judgment does not by itself constitute a
breach of the duty of care.
(c) A partner is presumed to satisfy the duty of care if the
partner acts on an informed basis and in compliance with Section
152.204(b). (TRPA 4.04(c).)
Sec. 152.207. STANDARDS OF CONDUCT APPLICABLE TO PERSON
WINDING UP PARTNERSHIP BUSINESS. Sections 152.204-152.206 apply to
a person winding up the partnership business as the personal or
legal representative of the last surviving partner to the same
extent that those sections apply to a partner. (TRPA 4.04(g).)
Sec. 152.208. AMENDMENT TO PARTNERSHIP AGREEMENT. A
partnership agreement may be amended only with the consent of all
partners. (TRPA 4.01(i).)
Sec. 152.209. DECISION-MAKING REQUIREMENT. (a) A
difference arising in a matter in the ordinary course of the
partnership business may be decided by a majority-in-interest of
the partners.
(b) An act outside the ordinary course of business of a
partnership may be undertaken only with the consent of all
partners. (TRPA 4.01(h).)
Sec. 152.210. PARTNER'S LIABILITY TO PARTNERSHIP AND OTHER
PARTNERS. A partner is liable to a partnership and the other
partners for:
(1) a breach of the partnership agreement; or
(2) a violation of a duty to the partnership or other
partners under this chapter that causes harm to the partnership or
the other partners. (TRPA 4.05.)
Sec. 152.211. REMEDIES OF PARTNERSHIP AND PARTNERS. (a) A
partnership may maintain an action against a partner for a breach of
the partnership agreement or for the violation of a duty to the
partnership causing harm to the partnership.
(b) A partner may maintain an action against the partnership
or another partner for legal or equitable relief, including an
accounting of partnership business, to:
(1) enforce a right under the partnership agreement;
(2) enforce a right under this chapter, including:
(A) the partner's rights under Sections
152.201-152.209, 152.212, and 152.213;
(B) the partner's right on withdrawal to have the
partner's interest in the partnership redeemed under Subchapter H
or to enforce any other right under Subchapters G and H; and
(C) the partner's rights under Subchapter I;
(3) enforce the rights and otherwise protect the
interests of the partner, including rights and interests arising
independently of the partnership relationship; or
(4) enforce a right under Chapter 11.
(c) The accrual of and a time limitation on a right of action
for a remedy under this section is governed by other applicable law.
(d) A right to an accounting does not revive a claim barred
by law. (TRPA 4.06.)
Sec. 152.212. BOOKS AND RECORDS OF PARTNERSHIP. (a) In this
section, "access" includes the opportunity to inspect and copy
books and records during ordinary business hours.
(b) A partnership shall keep its books and records, if any,
at its chief executive office.
(c) A partnership shall provide access to its books and
records to a partner or an agent or attorney of a partner.
(d) The partnership shall provide a former partner or an
agent or attorney of a former partner access to books and records
pertaining to the period during which the former partner was a
partner or for any other proper purpose with respect to another
period.
(e) A partnership may impose a reasonable charge, covering
the costs of labor and material, for copies of documents furnished
under this section. (TRPA 4.03(a), (b).)
Sec. 152.213. INFORMATION REGARDING PARTNERSHIP. (a) On
request and to the extent just and reasonable, each partner and the
partnership shall furnish complete and accurate information
concerning the partnership to:
(1) a partner;
(2) the legal representative of a deceased partner or
a partner who has a legal disability; or
(3) an assignee.
(b) A legal representative of a deceased partner or a
partner who has a legal disability and an assignee are subject to
the duties of a partner with respect to information made available.
(TRPA 4.03(c).)
Sec. 152.214. CERTAIN THIRD-PARTY OBLIGATIONS NOT
AFFECTED. Sections 152.203, 152.208, and 152.209 do not limit a
partnership's obligations to another person under Sections 152.301
and 152.302. (TRPA 4.01(j).)
[Sections 152.215-152.300 reserved for expansion]
SUBCHAPTER E. RELATIONSHIP BETWEEN PARTNERS AND OTHER PERSONS
Sec. 152.301. PARTNER AS AGENT. Each partner is an agent of
the partnership for the purpose of its business. (TRPA 3.02(a)
(part).)
Sec. 152.302. BINDING EFFECT OF PARTNER'S ACTION. (a)
Unless a partner does not have authority to act for the partnership
in a particular matter and the person with whom the partner is
dealing knows that the partner lacks authority, an act of a partner,
including the execution of an instrument in the partnership name,
binds the partnership if the act is apparently for carrying on in
the ordinary course:
(1) the partnership business; or
(2) business of the kind carried on by the
partnership.
(b) An act of a partner that is not apparently for carrying
on in the ordinary course a business described by Subsection (a)
binds the partnership only if authorized by the other partners.
(c) A conveyance of real property by a partner on behalf of
the partnership not otherwise binding on the partnership binds the
partnership if the property has been conveyed by the grantee or a
person claiming through the grantee to be a holder for value without
knowledge that the partner exceeded that partner's authority in
making the conveyance. (TRPA 3.02(a) (part), (b), (c).)
Sec. 152.303. LIABILITY OF PARTNERSHIP FOR CONDUCT OF
PARTNER. (a) A partnership is liable for loss or injury to a
person, including a partner, or for a penalty caused by or incurred
as a result of a wrongful act or omission or other actionable
conduct of a partner acting:
(1) in the ordinary course of business of the
partnership; or
(2) with the authority of the partnership.
(b) A partnership is liable for the loss of money or
property of a person who is not a partner that is:
(1) received in the course of the partnership's
business; and
(2) misapplied by a partner while in the custody of the
partnership. (TRPA 3.03.)
Sec. 152.304. NATURE OF PARTNER'S LIABILITY. (a) Except as
provided by Subsection (b) or Section 152.801(b), all partners are
liable jointly and severally for a debt or obligation of the
partnership unless otherwise:
(1) agreed by the claimant; or
(2) provided by law.
(b) A person who is admitted as a partner into an existing
partnership does not have personal liability under Subsection (a)
for an obligation of the partnership that:
(1) arises before the partner's admission to the
partnership;
(2) relates to an action taken or omission occurring
before the partner's admission to the partnership; or
(3) arises before or after the partner's admission to
the partnership under a contract or commitment entered into before
the partner's admission. (TRPA 3.04, 3.07.)
Sec. 152.305. REMEDY. An action may be brought against a
partnership and any or all of the partners in the same action or in
separate actions. (TRPA 3.05(b).)
Sec. 152.306. ENFORCEMENT OF REMEDY. (a) A judgment
against a partnership is not by itself a judgment against a partner.
A judgment may be entered against a partner who has been served with
process in a suit against the partnership.
(b) Except as provided by Subsection (c), a creditor may
proceed against one or more partners or the property of the partners
to satisfy a judgment based on a claim against the partnership only
if a judgment:
(1) is also obtained against the partner; and
(2) based on the same claim:
(A) is obtained against the partnership;
(B) has not been reversed or vacated; and
(C) remains unsatisfied for 90 days after:
(i) the date on which the judgment is
entered; or
(ii) the date on which the stay expires, if
the judgment is contested by appropriate proceedings and execution
on the judgment is stayed.
(c) Subsection (b) does not prohibit a creditor from
proceeding directly against one or more partners or the property of
the partners without first seeking satisfaction from partnership
property if:
(1) the partnership is a debtor in bankruptcy;
(2) the creditor and the partnership agreed that the
creditor is not required to comply with Subsection (b);
(3) a court orders otherwise, based on a finding that
partnership property subject to execution in the state is clearly
insufficient to satisfy the judgment or that compliance with
Subsection (b) is excessively burdensome; or
(4) liability is imposed on the partner by law
independently of the person's status as a partner.
(d) This section does not limit the effect of Section
152.801 with respect to a limited liability partnership. (TRPA
3.05(c), (d), (e), (f).)
Sec. 152.307. EXTENSION OF CREDIT IN RELIANCE ON FALSE
REPRESENTATION. (a) The rights of a person extending credit in
reliance on a representation described by Section 152.054 are
determined by applicable law other than this chapter and the other
partnership provisions, including the law of estoppel, agency,
negligence, fraud, and unjust enrichment.
(b) The rights and duties of a person held liable under
Subsection (a) are also determined by law other than the law
described by Subsection (a). (TRPA 3.06(c), (d).)
[Sections 152.308-152.400 reserved for expansion]
SUBCHAPTER F. TRANSFER OF PARTNERSHIP INTERESTS
Sec. 152.401. TRANSFER OF PARTNERSHIP INTEREST. A partner
may transfer all or part of the partner's partnership interest.
(TRPA 5.03(a) (part).)
Sec. 152.402. GENERAL EFFECT OF TRANSFER. A transfer of all
or part of a partner's partnership interest:
(1) is not an event of withdrawal;
(2) does not by itself cause a winding up of the
partnership business; and
(3) against the other partners or the partnership,
does not entitle the transferee, during the continuance of the
partnership, to participate in the management or conduct of the
partnership business. (TRPA 5.03(a) (part).)
Sec. 152.403. EFFECT OF TRANSFER ON TRANSFEROR. After
transfer, the transferor continues to have the rights and duties of
a partner other than the interest transferred. (TRPA 5.03(b)
(part).)
Sec. 152.404. RIGHTS AND DUTIES OF TRANSFEREE. (a) A
transferee of a partner's partnership interest is entitled to
receive, to the extent transferred, distributions to which the
transferor otherwise would be entitled.
(b) If an event requires a winding up of partnership
business under Subchapter I, a transferee is entitled to receive,
to the extent transferred, the net amount otherwise distributable
to the transferor.
(c) Until a transferee becomes a partner, the transferee
does not have liability as a partner solely as a result of the
transfer.
(d) For a proper purpose the transferee may require
reasonable information or an account of a partnership transaction
and make reasonable inspection of the partnership books. In a
winding up of partnership business, a transferee may require an
accounting only from the date of the latest account agreed to by all
of the partners.
(e) Until receipt of notice of a transfer, a partnership is
not required to give effect to a transferee's rights under this
section and Sections 152.401-152.403. (TRPA 5.03(b) (part), (c),
(d).)
Sec. 152.405. POWER TO EFFECT TRANSFER OR GRANT OF SECURITY
INTEREST. A partnership is not required to give effect to a transfer
prohibited by a partnership agreement. (TRPA 5.03(e).)
Sec. 152.406. EFFECT OF DEATH OR DIVORCE ON PARTNERSHIP
INTEREST. (a) For purposes of this code:
(1) on the divorce of a partner, the partner's spouse,
to the extent of the spouse's partnership interest, is a transferee
of the partnership interest from the partner;
(2) on the death of a partner, the partner's surviving
spouse, if any, and an heir, legatee, or personal representative of
the partner, to the extent of their respective partnership
interest, is a transferee of the partnership interest from the
partner; and
(3) on the death of a partner's spouse, an heir,
legatee, or personal representative of the spouse, to the extent of
their respective partnership interest, is a transferee of the
partnership interest from the partner.
(b) An event of the type described by Section 152.501
occurring with respect to a partner's spouse is not an event of
withdrawal.
(c) This chapter does not impair an agreement for the
purchase or sale of a partnership interest at any time, including
the death of an owner of the partnership interest. (TRPA 5.04.)
[Sections 152.407-152.500 reserved for expansion]
SUBCHAPTER G. WITHDRAWAL OF PARTNER
Sec. 152.501. EVENTS OF WITHDRAWAL. (a) A person ceases to
be a partner on the occurrence of an event of withdrawal.
(b) An event of withdrawal of a partner occurs on:
(1) receipt by the partnership of notice of the
partner's express will to withdraw as a partner on:
(A) the date on which the notice is received; or
(B) a later date specified by the notice;
(2) an event specified in the partnership agreement as
causing the partner's withdrawal;
(3) the partner's expulsion as provided by the
partnership agreement;
(4) the partner's expulsion by vote of a
majority-in-interest of the other partners if:
(A) it is unlawful to carry on the partnership
business with that partner;
(B) there has been a transfer of all or
substantially all of that partner's partnership interest, other
than:
(i) a transfer for security purposes that
has not been foreclosed; or
(ii) the substitution of a successor
trustee or successor personal representative;
(C) not later than the 90th day after the date on
which the partnership notifies an entity partner, other than a
nonfiling entity or foreign nonfiling entity partner, that it will
be expelled because it has filed a certificate of termination or the
equivalent, its existence has been involuntarily terminated or its
charter has been revoked, or its right to conduct business has been
terminated or suspended by the jurisdiction of its formation, if
the certificate of termination or the equivalent is not revoked or
its existence, charter, or right to conduct business is not
reinstated; or
(D) an event requiring a winding up has occurred
with respect to a nonfiling entity or foreign nonfiling entity that
is a partner;
(5) application by the partnership or another partner
for the partner's expulsion by judicial decree because the partner:
(A) engaged in wrongful conduct that adversely
and materially affected the partnership business;
(B) wilfully or persistently committed a
material breach of:
(i) the partnership agreement; or
(ii) a duty owed to the partnership or the
other partners under Sections 152.204-152.206; or
(C) engaged in conduct relating to the
partnership business that made it not reasonably practicable to
carry on the business in partnership with that partner;
(6) the partner's:
(A) becoming a debtor in bankruptcy;
(B) executing an assignment for the benefit of a
creditor;
(C) seeking, consenting to, or acquiescing in the
appointment of a trustee, receiver, or liquidator of that partner
or of all or substantially all of that partner's property; or
(D) failing, not later than the 90th day after
the appointment, to have vacated or stayed the appointment of a
trustee, receiver, or liquidator of the partner or of all or
substantially all of the partner's property obtained without the
partner's consent or acquiescence, or not later than the 90th day
after the date of expiration of a stay, failing to have the
appointment vacated;
(7) if a partner is an individual:
(A) the partner's death;
(B) the appointment of a guardian or general
conservator for the partner; or
(C) a judicial determination that the partner has
otherwise become incapable of performing the partner's duties under
the partnership agreement;
(8) termination of a partner's existence;
(9) if a partner has transferred all of the partner's
partnership interest, redemption of the transferee's interest
under Section 152.611;
(10) an agreement to continue the partnership under
Section 11.057(b) if the partnership has received a notice from the
partner under Section 11.057(a)(6) requesting that the partnership
be wound up; or
(11) a conversion of the partnership if the partner:
(A) did not consent to the conversion; and
(B) failed to notify the partnership in writing
of the partner's desire not to withdraw within 60 days after the
later of:
(i) the effective date of the conversion;
or
(ii) the date the partner receives actual
notice of the conversion.
(c) A withdrawal of a partner under the circumstances
described in Subsection (b)(11) is effective immediately before the
effective date of the conversion and is not considered a wrongful
withdrawal under Section 152.503. (TRPA 6.01.)
Sec. 152.502. EFFECT OF EVENT OF WITHDRAWAL ON PARTNERSHIP
AND OTHER PARTNERS. A partnership continues after an event of
withdrawal. The event of withdrawal affects the relationships
among the withdrawn partner, the partnership, and the continuing
partners as provided by Sections 152.503-152.506 and Subchapter H.
(TRPA 2.06(a).)
Sec. 152.503. WRONGFUL WITHDRAWAL; LIABILITY. (a) At any
time before the occurrence of an event requiring a winding up of
partnership business, a partner may withdraw from the partnership
and cease to be a partner as provided by Section 152.501.
(b) A partner's withdrawal is wrongful only if:
(1) the withdrawal breaches an express provision of
the partnership agreement;
(2) in the case of a partnership for a definite term or
particular undertaking or for which the partnership agreement
provides for winding up on a specified event, before the expiration
of the term, the completion of the undertaking, or the occurrence of
the event, as appropriate:
(A) the partner withdraws by express will;
(B) the partner withdraws by becoming a debtor in
bankruptcy; or
(C) in the case of a partner that is not an
individual, a trust other than a business trust, or an estate, the
partner is expelled or otherwise withdraws because the partner
wilfully dissolved or terminated; or
(3) the partner is expelled by judicial decree under
Section 152.501(b)(5).
(c) In addition to other liability of the partner to the
partnership or to the other partners, a wrongfully withdrawing
partner is liable to the partnership and to the other partners for
damages caused by the withdrawal. (TRPA 6.02.)
Sec. 152.504. WITHDRAWN PARTNER'S POWER TO BIND
PARTNERSHIP. (a) The action of a withdrawn partner occurring not
later than the first anniversary of the date of the person's
withdrawal binds the partnership if the transaction would bind the
partnership before the person's withdrawal and the other party to
the transaction:
(1) does not have notice of the person's withdrawal as
a partner;
(2) had done business with the partnership within one
year preceding the date of withdrawal; and
(3) reasonably believed that the withdrawn partner was
a partner at the time of the transaction.
(b) A withdrawn partner is liable to the partnership for
loss caused to the partnership arising from an obligation incurred
by the withdrawn partner after the withdrawal date and for which the
partnership is liable under Subsection (a). (TRPA 7.02.)
Sec. 152.505. EFFECT OF WITHDRAWAL ON PARTNER'S EXISTING
LIABILITY. (a) Withdrawal of a partner does not by itself discharge
the partner's liability for an obligation of the partnership
incurred before the date of withdrawal.
(b) The estate of a deceased partner is liable for an
obligation of the partnership incurred while the deceased was a
partner to the same extent that a withdrawn partner is liable for an
obligation of the partnership incurred before the date of
withdrawal.
(c) A withdrawn partner is discharged from liability
incurred before the date of withdrawal by an agreement to that
effect between the partner and a partnership creditor.
(d) If a creditor of a partnership has notice of a partner's
withdrawal and without the consent of the withdrawn partner agrees
to a material alteration in the nature or time of payment of an
obligation of the partnership incurred before the date of
withdrawal, the withdrawn partner is discharged from the
obligation. (TRPA 7.03(a), (b), (c), (d).)
Sec. 152.506. LIABILITY OF WITHDRAWN PARTNER TO THIRD
PARTY. A person who withdraws as a partner in a circumstance that is
not an event requiring a winding up of partnership business under
Section 11.051 or 11.057 is liable to another party as a partner in
a transaction entered into by the partnership or a surviving
partnership under Section 10.001 not later than the second
anniversary of the date of the partner's withdrawal only if the
other party to the transaction:
(1) does not have notice of the partner's withdrawal;
and
(2) reasonably believed that the withdrawn partner was
a partner at the time of the transaction. (TRPA 7.03(e).)
[Sections 152.507-152.600 reserved for expansion]
SUBCHAPTER H. REDEMPTION OF WITHDRAWING PARTNER'S OR
TRANSFEREE'S INTEREST
Sec. 152.601. REDEMPTION IF PARTNERSHIP NOT WOUND UP. The
partnership interest of a withdrawn partner automatically is
redeemed by the partnership as of the date of withdrawal in
accordance with this subchapter if:
(1) the event of withdrawal occurs under Sections
152.501(b)(1)-(9) and an event requiring a winding up of
partnership business does not occur before the 61st day after the
date of the withdrawal; or
(2) the event of a withdrawal occurs under Section
152.501(b)(10). (TRPA 7.01(a).)
Sec. 152.602. REDEMPTION PRICE. (a) Except as provided by
Subsection (b), the redemption price of a withdrawn partner's
partnership interest is the fair value of the interest on the date
of withdrawal.
(b) The redemption price of the partnership interest of a
partner who wrongfully withdraws before the expiration of a
definite term, the completion of a particular undertaking, or the
occurrence of a specified event requiring a winding up of
partnership business is the lesser of:
(1) the fair value of the withdrawn partner's
partnership interest on the date of withdrawal; or
(2) the amount that the withdrawn partner would have
received if an event requiring a winding up of partnership business
had occurred at the time of the partner's withdrawal.
(c) Interest is payable on the amount owed under this
section. (TRPA 7.01(b).)
Sec. 152.603. CONTRIBUTION OBLIGATION. If a wrongfully
withdrawing partner would have been required to make contributions
to the partnership under Section 152.707 or 152.708 if an event
requiring winding up of the partnership business had occurred at
the time of withdrawal, the withdrawn partner is liable to the
partnership to make contributions to the partnership in that amount
and pay interest on the amount owed. (TRPA 7.01(c).)
Sec. 152.604. SETOFF FOR CERTAIN DAMAGES. The partnership
may set off against the redemption price payable to the withdrawn
partner the damages for wrongful withdrawal under Section
152.503(b) and all other amounts owed by the withdrawn partner to
the partnership, whether currently due, including interest. (TRPA
7.01(d).)
Sec. 152.605. ACCRUAL OF INTEREST. Interest payable under
Sections 152.602-152.604 accrues from the date of the withdrawal to
the date of payment. (TRPA 7.01(e).)
Sec. 152.606. INDEMNIFICATION FOR CERTAIN LIABILITY. (a) A
partnership shall indemnify a withdrawn partner against a
partnership liability incurred before the date of withdrawal,
except for a liability:
(1) that is unknown to the partnership at the time; or
(2) incurred by an act of the withdrawn partner under
Section 152.504.
(b) For purposes of this section, a liability is unknown to
the partnership if it is not known to a partner other than the
withdrawn partner. (TRPA 7.01(f).)
Sec. 152.607. DEMAND OR PAYMENT OF ESTIMATED REDEMPTION.
(a) If a deferred payment is not authorized under Section 152.608
and an agreement on the redemption price of a withdrawn partner's
interest is not reached before the 121st day after the date a
written demand for payment is made by either party, not later than
the 30th day after the expiration of the period, the partnership
shall:
(1) pay to the withdrawn partner in cash the amount the
partnership estimates to be the redemption price and any accrued
interest, reduced by any setoffs and accrued interest under Section
152.604; or
(2) make written demand for payment of its estimate of
the amount owed by the withdrawn partner to the partnership, minus
any amount owed to the withdrawn partner by the partnership.
(b) If a deferred payment is authorized under Section
152.608 or a contribution or other amount is owed by the withdrawn
partner to the partnership, the partnership may offer in writing to
pay, or deliver a written statement of demand for, the amount it
estimates to be the net amount owed, stating the amount and other
terms of the obligation.
(c) On request of the other party, the payment, tender,
offer, or demand required or allowed by Subsection (a) or (b) must
be accompanied or followed promptly by:
(1) if payment, tender, offer, or demand is made or
delivered by the partnership, a statement of partnership property
and liabilities from the date of the partner's withdrawal and the
most recent available partnership balance sheet and income
statement, if any; and
(2) an explanation of the computation of the estimated
payment obligation.
(d) The terms of a payment, tender, offer, or demand under
Subsection (a) or (b) govern a redemption if:
(1) accompanied by written notice that:
(A) the payment or tendered amount, if made,
fully satisfies a party's obligations relating to the redemption of
the withdrawn partner's partnership interest; and
(B) an action to determine the redemption price,
a contribution obligation or setoff under Section 152.603 or
152.604, or other terms of the redemption obligation must be
commenced not later than the first anniversary of the later of:
(i) the date on which the written notice is
given; or
(ii) the date on which the information
required by Subsection (c) is delivered; and
(2) the party receiving the payment, tender, offer, or
demand does not commence an action in the period described by
Subdivision (1)(B). (TRPA 7.01(g), (h), (i), (j).)
Sec. 152.608. DEFERRED PAYMENT ON WRONGFUL WITHDRAWAL. (a)
A partner who wrongfully withdraws before the expiration of a
definite term, the completion of a particular undertaking, or the
occurrence of a specified event requiring a winding up of
partnership business is not entitled to receive any portion of the
redemption price until the expiration of the term, the completion
of the undertaking, or the occurrence of the specified event, as
appropriate, unless the partner establishes to the satisfaction of
a court that earlier payment will not cause undue hardship to the
partnership.
(b) A deferred payment accrues interest.
(c) The withdrawn partner may seek to demonstrate to the
satisfaction of the court that security for a deferred payment is
appropriate. (TRPA 7.01(k).)
Sec. 152.609. ACTION TO DETERMINE TERMS OF REDEMPTION. (a)
A withdrawn partner or the partnership may maintain an action
against the other party under Section 152.211 to determine:
(1) the terms of redemption of that partner's
interest, including a contribution obligation or setoff under
Section 152.603 or 152.604; or
(2) other terms of the redemption obligations of
either party.
(b) The action must be commenced not later than the first
anniversary of the later of:
(1) the date of delivery of information required by
Section 152.607(c); or
(2) the date written notice is given under Section
152.607(d).
(c) The court shall determine the terms of the redemption of
the withdrawn partner's interest, any contribution obligation or
setoff due under Section 152.603 or 152.604, and accrued interest
and shall enter judgment for an additional payment or refund.
(d) If deferred payment is authorized under Section
152.608, the court shall also determine the security for payment if
requested to consider whether security is appropriate.
(e) If the court finds that a party failed to tender payment
or make an offer to pay or to comply with the requirements of
Section 152.607(c) or otherwise acted arbitrarily, vexatiously, or
not in good faith, the court may assess damages against the party,
including, if appropriate, in an amount the court finds equitable:
(1) a share of the profits of the continuing business;
(2) reasonable attorney's fees; and
(3) fees and expenses of appraisers or other experts
for a party to the action. (TRPA 7.01(l).)
Sec. 152.610. DEFERRED PAYMENT ON WINDING UP PARTNERSHIP.
If a partner withdraws under Section 152.501 and not later than the
60th day after the date of withdrawal an event requiring winding up
occurs under Section 11.051 or 11.057:
(1) the partnership may defer paying the redemption
price to the withdrawn partner until the partnership makes a
winding up distribution to the remaining partners; and
(2) the redemption price or contribution obligation is
the amount the withdrawn partner would have received or contributed
if the event requiring winding up had occurred at the time of the
partner's withdrawal. (TRPA 7.01(m).)
Sec. 152.611. REDEMPTION OF TRANSFEREE'S PARTNERSHIP
INTEREST. (a) A partnership must redeem the partnership interest
of a transferee for its fair value if:
(1) the interest was transferred when:
(A) the partnership was for a definite term not
yet expired;
(B) the partnership was for a particular
undertaking not yet completed; or
(C) the partnership agreement provided for
winding up of the partnership business on a specified event that had
not yet occurred;
(2) the definite term of the partnership has expired,
the particular undertaking has been completed, or the specified
event has occurred; and
(3) the transferee makes a written demand for
redemption.
(b) If an agreement for the redemption price of a
transferee's interest is not reached before the 121st day after the
date a written demand for redemption is made, the partnership must
pay to the transferee in cash the amount the partnership estimates
to be the redemption price and any accrued interest from the date of
demand not later than the 30th day after the expiration of the
period.
(c) On request of the transferee, the payment required by
Subsection (b) must be accompanied or followed by:
(1) a statement of partnership property and
liabilities from the date of the demand for redemption;
(2) the most recent available partnership balance
sheet and income statement, if any; and
(3) an explanation of the computation of the estimated
payment obligation.
(d) If the payment required by Subsection (b) is accompanied
by written notice that the payment is in full satisfaction of the
partnership's obligations relating to the redemption of the
transferee's interest, the payment, less interest, is the
redemption price unless the transferee, not later than the first
anniversary of the written notice, commences an action to determine
the redemption price. (TRPA 7.01(n), (o), (p), (q).)
Sec. 152.612. ACTION TO DETERMINE TRANSFEREE'S REDEMPTION
PRICE. (a) A transferee may maintain an action against a
partnership to determine the redemption price of the transferee's
interest.
(b) The court shall determine the redemption price of the
transferee's interest and accrued interest and enter judgment for
payment or refund.
(c) If the court finds that the partnership failed to make
payment or otherwise acted arbitrarily, vexatiously, or not in good
faith, the court may assess against the partnership in an amount the
court finds equitable:
(1) reasonable attorney's fees; and
(2) fees and expenses of appraisers or other experts
for a party to the action.
(d) The redemption of a transferee's interest under
Sections 152.611(a) and (b) may be deferred as determined by the
court if the partnership establishes to the satisfaction of the
court that failure to defer redemption will cause undue hardship to
the partnership business. (TRPA 7.01(r), (s).)
[Sections 152.613-152.700 reserved for expansion]
SUBCHAPTER I. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS
Sec. 152.701. EFFECT OF EVENT REQUIRING WINDING UP. On the
occurrence of an event requiring winding up of a partnership
business under Section 11.051 or 11.057:
(1) the partnership continues until the winding up of
its business is completed, at which time the partnership is
terminated; and
(2) the relationship among the partners is changed as
provided by this subchapter. (TRPA 2.06(b), 8.02.)
Sec. 152.702. PERSONS ELIGIBLE TO WIND UP PARTNERSHIP
BUSINESS. (a) After the occurrence of an event requiring a winding
up of a partnership business, the partnership business may be wound
up by:
(1) the partners who have not withdrawn;
(2) the legal representative of the last surviving
partner; or
(3) a person appointed by the court to carry out the
winding up under Subsection (b).
(b) On application of a partner, a partner's legal
representative or transferee, or a withdrawn partner whose interest
is not redeemed under Section 152.608, a court, for good cause, may
appoint a person to carry out the winding up and may make an order,
direction, or inquiry that the circumstances require. (TRPA
8.03(a).)
Sec. 152.703. RIGHTS AND DUTIES OF PERSON WINDING UP
PARTNERSHIP BUSINESS. (a) To the extent appropriate for winding
up, as soon as reasonably practicable, and in the name of and for
and on behalf of the partnership, a person winding up a
partnership's business may take the actions specified in Sections
11.052, 11.053, and 11.055.
(b) Section 11.052(a)(2) shall not be applicable to a
partnership. (TRPA 8.03(b).)
Sec. 152.704. BINDING EFFECT OF PARTNER'S ACTION AFTER
EVENT REQUIRING WINDING UP. After the occurrence of an event
requiring winding up of the partnership business, a partnership is
bound by a partner's act that:
(1) is appropriate for winding up; or
(2) would bind the partnership under Sections 152.301
and 152.302 before the occurrence of the event requiring winding
up, if the other party to the transaction does not have notice that
an event requiring winding up has occurred. (TRPA 8.05.)
Sec. 152.705. PARTNER'S LIABILITY TO OTHER PARTNERS AFTER
EVENT REQUIRING WINDING UP. (a) Except as provided by Subsection
(b), after the occurrence of an event requiring winding up of the
partnership business, the losses with respect to which a partner
must contribute under Section 152.708(a) include losses from a
liability incurred under Section 152.704.
(b) A partner who incurs, with notice that an event
requiring a winding up of the partnership business has occurred, a
partnership liability under Section 152.704(2) by an act that is
not appropriate for winding up is liable to the partnership for a
loss caused to the partnership arising from that liability. (TRPA
8.04.)
Sec. 152.706. DISPOSITION OF ASSETS. (a) In winding up the
partnership business, the property of the partnership, including
any required contributions of the partners under Sections 152.707
and 152.708, shall be applied to discharge its obligations to
creditors, including partners who are creditors other than in the
partners' capacities as partners.
(b) A surplus shall be applied to pay in cash the net amount
distributable to partners in accordance with their right to
distributions under Section 152.707. (TRPA 8.06(a).)
Sec. 152.707. SETTLEMENT OF ACCOUNTS. (a) Each partner is
entitled to a settlement of all partnership accounts on winding up
the partnership business.
(b) In settling accounts among the partners, the
partnership interest of a withdrawn partner that is not redeemed
under Subchapter H is credited with a share of any profits for the
period after the partner's withdrawal but is charged with a share
of losses for that period only to the extent of profits credited for
that period.
(c) The profits and losses that result from the liquidation
of the partnership property must be credited and charged to the
partners' capital accounts.
(d) The partnership shall make a distribution to a partner
in an amount equal to that partner's positive balance in the
partner's capital account. Except as provided by Section
152.304(b) or 152.801, a partner shall contribute to the
partnership an amount equal to that partner's negative balance in
the partner's capital account. (TRPA 8.06(b).)
Sec. 152.708. CONTRIBUTIONS TO DISCHARGE OBLIGATIONS. (a)
Except as provided by Sections 152.304(b) and 152.801, to the
extent not taken into account in settling the accounts among
partners under Section 152.707:
(1) each partner shall contribute, in the proportion
in which the partner shares partnership losses, the amount
necessary to satisfy partnership obligations, excluding
liabilities that creditors have agreed may be satisfied only with
partnership property without recourse to individual partners;
(2) if a partner fails to contribute, the other
partners shall contribute the additional amount necessary to
satisfy the partnership obligations in the proportions in which the
partners share partnership losses; and
(3) a partner or partner's legal representative may
enforce or recover from the other partners, or from the estate of a
deceased partner, contributions the partner or estate makes to the
extent the amount contributed exceeds that partner's or the
estate's share of the partnership obligations.
(b) The estate of a deceased partner is liable for the
partner's obligation to contribute to the partnership.
(c) The following persons may enforce the obligation of a
partner or the estate of a deceased partner to contribute to a
partnership:
(1) the partnership;
(2) an assignee for the benefit of creditors of a
partnership or a partner; or
(3) a person appointed by a court to represent
creditors of a partnership or a partner. (TRPA 8.06(c), (d), (e).)
Sec. 152.709. CONTINUATION OF PARTNERSHIP. (a) If all the
partners in a partnership for a definite term or for a particular
undertaking or for which the partnership agreement provides for
winding up on a specified event agree to continue the partnership
business notwithstanding the expiration of the term, the completion
of the undertaking, or the occurrence of the event, as appropriate,
other than the withdrawal of a partner, the partnership is
continued and the partnership agreement is considered amended to
provide that the expiration, the completion, or the occurrence of
the event did not result in an event requiring the winding up of the
partnership business.
(b) A continuation of the business for 90 days by the
partners or those who habitually acted in the business during the
term or undertaking or preceding the event, without a settlement or
liquidation of the partnership business and without objection from
a partner, is prima facie evidence of agreement by all partners to
continue the business under Subsection (a).
(c) The continuation of the business by the other partners
or by those who habitually acted in the business before the notice
under Section 11.057(b), other than the partner giving the notice,
without any settlement or liquidation of the partnership business,
is prima facie evidence of an agreement to continue the partnership
under Section 11.057(b).
(d) To approve a revocation under Section 11.151 by a
partnership of a voluntary decision to wind up pursuant to the
express will of all the partners as specified in Section
11.057(a)(2) or (3), prior to completion of the winding up process,
all the partners must agree in writing to revoke the voluntary
decision to wind up and to continue the business of the partnership.
(e) To approve a revocation under Section 11.151 by a
partnership of a voluntary decision to wind up pursuant to the
express will of a majority-in-interest of the partners as specified
in Section 11.057(a)(1), prior to completion of the winding up
process, a majority-in-interest of the partners must agree in
writing to revoke the voluntary decision to wind up and to continue
the business of the partnership. (TRPA 4.07, 8.01(g).)
Sec. 152.710. REINSTATEMENT. To approve a reinstatement of
a partnership under Section 11.202, all remaining partners, or
another group or percentage of partners as specified by the
partnership agreement, must agree in writing to reinstate and
continue the business of the partnership. (New.)
[Sections 152.711-152.800 reserved for expansion]
SUBCHAPTER J. LIMITED LIABILITY PARTNERSHIPS
Sec. 152.801. LIABILITY OF PARTNER. (a) Except as provided
by Subsection (b), a partner in a limited liability partnership is
not personally liable, directly or indirectly, by contribution,
indemnity, or otherwise, for a debt or obligation of the
partnership incurred while the partnership is a limited liability
partnership.
(b) A partner in a limited liability partnership is not
personally liable for a debt or obligation of the partnership
arising from an error, omission, negligence, incompetence, or
malfeasance committed by another partner or representative of the
partnership while the partnership is a limited liability
partnership and in the course of the partnership business unless
the first partner:
(1) was supervising or directing the other partner or
representative when the error, omission, negligence, incompetence,
or malfeasance was committed by the other partner or
representative;
(2) was directly involved in the specific activity in
which the error, omission, negligence, incompetence, or
malfeasance was committed by the other partner or representative;
or
(3) had notice or knowledge of the error, omission,
negligence, incompetence, or malfeasance by the other partner or
representative at the time of the occurrence and then failed to take
reasonable action to prevent or cure the error, omission,
negligence, incompetence, or malfeasance.
(c) Sections 2.101(1), 152.305, and 152.306 do not limit the
effect of Subsection (a) in a limited liability partnership.
(d) In this section, "representative" includes an agent,
servant, or employee of a limited liability partnership.
(e) Subsections (a) and (b) do not affect:
(1) the liability of a partnership to pay its debts and
obligations from partnership property;
(2) the liability of a partner, if any, imposed by law
or contract independently of the partner's status as a partner; or
(3) the manner in which service of citation or other
civil process may be served in an action against a partnership.
(f) This section controls over the other parts of this
chapter and the other partnership provisions regarding the
liability of partners of a limited liability partnership, the
chargeability of the partners for the debts and obligations of the
partnership, and the obligations of the partners regarding
contributions and indemnity. (TRPA 3.08(a).)
Sec. 152.802. REGISTRATION. (a) In addition to complying
with Sections 152.803 and 152.804, a partnership, to become a
limited liability partnership, must file an application with the
secretary of state in accordance with Chapter 4 and this section.
The application must:
(1) set out:
(A) the name of the partnership;
(B) the federal tax identification number of the
partnership;
(C) the street address of the partnership's
principal office in this state or outside of this state, as
applicable; and
(D) the number of partners at the date of
application; and
(2) contain a brief statement of the partnership's
business.
(b) The application must be signed by:
(1) a majority-in-interest of the partners; or
(2) one or more partners authorized by a
majority-in-interest of the partners.
(c) A partnership is registered as a limited liability
partnership by the secretary of state on:
(1) the date on which a completed initial or renewal
application is filed in accordance with Chapter 4; or
(2) a later date specified in the application.
(d) A registration is not affected by subsequent changes in
the partners of the partnership.
(e) The registration of a limited liability partnership is
effective until the first anniversary of the date of registration
or a later effective date, unless the application is:
(1) withdrawn or revoked at an earlier time; or
(2) renewed in accordance with Subsection (g).
(f) A registration may be withdrawn by filing a withdrawal
notice with the secretary of state in accordance with Chapter 4. A
withdrawal notice terminates the status of the partnership as a
limited liability partnership from the date on which the notice is
filed or a later date specified in the notice, but not later than
the expiration date under Subsection (e). A withdrawal notice
must:
(1) contain:
(A) the name of the partnership;
(B) the federal tax identification number of the
partnership;
(C) the date of registration of the partnership's
last application under this subchapter; and
(D) the current street address of the
partnership's principal office in this state and outside this
state, if applicable; and
(2) be signed by:
(A) a majority-in-interest of the partners; or
(B) one or more partners authorized by a
majority-in-interest of the partners.
(g) An effective registration may be renewed before its
expiration by filing an application with the secretary of state in
accordance with Chapter 4. A renewal application filed under this
subsection continues an effective registration for one year after
the date the registration would otherwise expire. The renewal
application must contain:
(1) current information required for an initial
application; and
(2) the most recent date of registration of the
partnership.
(h) The secretary of state may remove from its active
records the registration of a partnership the registration of which
has:
(1) been withdrawn or revoked; or
(2) expired and not been renewed.
(i) The secretary of state is not responsible for
determining whether a partnership is in compliance with the
requirements of Section 152.804(a).
(j) A document filed under this subchapter may be amended by
filing an application for amendment of registration with the
secretary of state in accordance with Chapter 4 and this
subsection. The application for amendment must:
(1) contain:
(A) the name of the partnership;
(B) the tax identification number of the
partnership;
(C) the identity of the document being amended;
(D) the date on which the document being amended
was filed;
(E) a reference to the part of the document being
amended; and
(F) the amendment or correction; and
(2) be signed by:
(A) a majority-in-interest of the partners; or
(B) one or more partners authorized by a
majority-in-interest of the partners. (TRPA 3.08(b)(1), (2), (4),
(5), (6), (7), (8), (11), (14).)
Sec. 152.803. NAME. The name of a limited liability
partnership must comply with Section 5.063. (TRPA 3.08(c).)
Sec. 152.804. INSURANCE OR FINANCIAL RESPONSIBILITY. (a) A
limited liability partnership must:
(1) carry at least $100,000 of liability insurance of
a kind that is designed to cover the kind of error, omission,
negligence, incompetence, or malfeasance for which liability is
limited by Section 152.801(b); or
(2) provide $100,000 specifically designated and
segregated for the satisfaction of judgments against the
partnership for the kind of error, omission, negligence,
incompetence, or malfeasance for which liability is limited by
Section 152.801(b) by:
(A) deposit of cash, bank certificates of
deposit, or United States Treasury obligations in trust or bank
escrow;
(B) a bank letter of credit; or
(C) insurance company bond.
(b) If the limited liability partnership is in compliance
with Subsection (a), the requirements of this section may not be
admissible or be made known to the jury in determining an issue of
liability for or extent of:
(1) the debt or obligation in question; or
(2) damages in question.
(c) If compliance with Subsection (a) is disputed:
(1) compliance must be determined separately from the
trial or proceeding to determine:
(A) the partnership debt or obligation in
question;
(B) the amount of the debt or obligation; or
(C) partner liability for the debt or obligation;
and
(2) the burden of proof of compliance is on the person
claiming limitation of liability under Section 152.801(b). (TRPA
3.08(d).)
Sec. 152.805. LIMITED PARTNERSHIP. A limited partnership
may become a limited liability partnership by complying with
applicable provisions of Chapter 153. (TRPA 3.08(e).)
[Sections 152.806-152.900 reserved for expansion]
SUBCHAPTER K. FOREIGN LIMITED LIABILITY PARTNERSHIPS
Sec. 152.901. GENERAL. (a) A foreign limited liability
partnership is subject to Section 2.101 with respect to its
activities in this state to the same extent as a domestic limited
liability partnership.
(b) A foreign limited liability partnership may not be
denied registration because of a difference between the laws of the
state under which the partnership is formed and the laws of this
state. (TRPA 10.01(b), (c).)
Sec. 152.902. NAME. The name of a foreign limited liability
partnership must:
(1) satisfy the requirements of the state of
formation; and
(2) comply with Section 5.063. (TRPA 10.02(a) (part).)
Sec. 152.903. ACTIVITIES NOT CONSTITUTING TRANSACTING
BUSINESS. Without excluding other activities that do not constitute
transacting business in this state, a foreign limited liability
partnership is not considered to be transacting business in this
state for purposes of this code because it carries on in this state
one or more of the activities listed by Section 9.251. (TRPA 10.04.)
Sec. 152.904. REGISTERED AGENT. A foreign limited liability
partnership subject to this chapter shall maintain a registered
office and registered agent in this state in accordance with
Chapter 5. (TRPA 10.05.)
Sec. 152.905. STATEMENT OF FOREIGN QUALIFICATION. (a)
Before transacting business in this state, a foreign limited
liability partnership must file an application for registration in
accordance with this section and Chapters 4 and 9.
(b) The application must be signed by:
(1) a majority-in-interest of the partners; or
(2) one or more partners authorized by a
majority-in-interest of the partners.
(c) A partnership is registered as a foreign limited
liability partnership on:
(1) the date on which a completed initial or renewal
statement of foreign qualification is filed with the secretary of
state in accordance with Chapter 4; or
(2) a later date specified in the statement.
(d) A registration is not affected by subsequent changes in
the partners of the partnership.
(e) The registration of a foreign limited liability
partnership is effective until the first anniversary of the date
after the date of registration or a later effective date, unless the
statement is:
(1) withdrawn or revoked at an earlier time; or
(2) renewed in accordance with Section 152.908. (TRPA
10.02(a), (b), (d), (e).)
Sec. 152.906. CANCELLATION OF REGISTRATION. (a) A
registration may be canceled by filing a certificate of
cancellation.
(b) The certificate of cancellation must:
(1) contain:
(A) the federal tax identification number of the
partnership; and
(B) the date of effectiveness of the
partnership's last application for registration under this
subchapter; and
(2) be signed by:
(A) a majority-in-interest of the partners; or
(B) one or more partners authorized by a
majority-in-interest of the partners. (TRPA 10.02(f) (part).)
Sec. 152.907. EFFECT OF CERTIFICATE OF CANCELLATION. A
certificate of cancellation terminates the registration of the
partnership as a foreign limited liability partnership as of the
date on which the notice is filed or a later date specified in the
notice, but not later than the expiration date under Section
152.905(e). (TRPA 10.02(f) (part).)
Sec. 152.908. RENEWAL OF REGISTRATION. (a) An effective
registration may be renewed before its expiration by filing a
renewal application for registration with the secretary of state in
accordance with Chapter 4.
(b) The renewal application must contain:
(1) current information required for an initial
statement of qualification; and
(2) the most recent date of registration of the
partnership.
(c) An application for registration filed under this
section continues an effective registration for one year after the
date the registration would otherwise expire. (TRPA 10.02(g).)
Sec. 152.909. ACTION BY SECRETARY OF STATE. The secretary
of state may remove from its active records the registration of a
foreign limited liability partnership the registration of which
has:
(1) been withdrawn or revoked; or
(2) expired and not been renewed. (TRPA 10.02(h).)
Sec. 152.910. EFFECT OF FAILURE TO QUALIFY. (a) A foreign
limited liability partnership that transacts business in this state
without being registered is subject to Subchapter B, Chapter 9.
(b) A partner of a foreign limited liability partnership is
not liable for a debt or obligation of the partnership solely
because the partnership transacted business in this state without
being registered. (TRPA 10.03.)
Sec. 152.911. AMENDMENT. (a) A document filed under this
subchapter may be amended by filing with the secretary of state an
application for amendment of registration in accordance with
Chapter 4.
(b) The application for amendment must contain:
(1) the name of the partnership;
(2) the tax identification number of the partnership;
(3) the identity of the document being amended;
(4) a reference to the date on which the document being
amended was filed;
(5) the part of the document being amended; and
(6) the amendment or correction. (TRPA 10.02(k).)
Sec. 152.912. EXECUTION OF APPLICATION FOR AMENDMENT. The
application for amendment must be signed by:
(1) a majority-in-interest of the partners; or
(2) one or more partners authorized by a
majority-in-interest of the partners. (TRPA 10.02(k) (part).)
Sec. 152.913. EXECUTION OF STATEMENT OF CHANGE OF
REGISTERED OFFICE OR REGISTERED AGENT. A statement filed by a
foreign limited liability partnership in accordance with Section
5.202 must be signed by:
(1) a majority-in-interest of the partners; or
(2) one or more partners authorized by a
majority-in-interest of the partners. (TRPA 10.03(c) (part).)
CHAPTER 153. LIMITED PARTNERSHIPS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 153.001. DEFINITION. In this chapter, "other limited
partnership provisions" means the provisions of Title 1 and
Chapters 151 and 154, to the extent applicable to limited
partnerships. (New.)
Sec. 153.002. CONSTRUCTION. (a) This chapter and the other
limited partnership provisions shall be applied and construed to
effect its general purpose to make uniform the law with respect to
limited partnerships among states that have similar laws.
(b) The rule that a statute in derogation of the common law
is to be strictly construed does not apply to this chapter and the
other limited partnership provisions. (TRLPA 13.01.)
Sec. 153.003. APPLICABILITY OF OTHER LAWS. (a) Except as
provided by Subsection (b), in a case not provided for by this
chapter and the other limited partnership provisions, the
provisions of Chapter 152 governing partnerships that are not
limited partnerships and the rules of law and equity govern.
(b) The powers and duties of a limited partner shall not be
governed by a provision of Chapter 152 that would be inconsistent
with the nature and role of a limited partner as contemplated by
this chapter.
(c) A limited partner shall not have any obligation or duty
of a general partner solely by reason of being a limited partner.
(TRLPA 13.03(a); New.)
Sec. 153.004. NONWAIVABLE TITLE 1 PROVISIONS. (a) Except
as provided by this section, the following provisions of Title 1 may
not be waived or modified in the partnership agreement of a limited
partnership:
(1) Chapter 1, if the provision is used to interpret a
provision or define a word or phrase contained in a section listed
in this subsection;
(2) Chapter 2, other than Section 2.104(c)(2),
2.104(c)(3), or 2.113;
(3) Chapter 3, other than Subchapters C and E of that
chapter and Section 3.151 (provided, that in all events a
partnership agreement may not validly waive or modify Sections
153.551 and 153.552); or
(4) Chapter 4, 5, 10, 11, or 12, other than Section
11.058.
(b) A provision listed in Subsection (a) may be waived or
modified in the partnership agreement if the provision that is
waived or modified authorizes the limited partnership to waive or
modify the provision in the limited partnership's governing
documents.
(c) A provision listed in Subsection (a) may be modified in
the partnership agreement if the provision that is modified
specifies:
(1) the person or group of persons who are entitled to
approve a modification; or
(2) the vote or other method by which a modification is
required to be approved. (New.)
Sec. 153.005. WAIVER OR MODIFICATION OF RIGHTS OF THIRD
PARTIES. A provision in this title or in that part of Title 1
applicable to a limited partnership that grants a right to a person,
other than a general partner, a limited partner, or assignee of a
partnership interest in a limited partnership, may be waived or
modified in the partnership agreement of the limited partnership
only if the person consents to the waiver or modification. (New.)
[Sections 153.006-153.050 reserved for expansion]
SUBCHAPTER B. SUPPLEMENTAL PROVISIONS REGARDING AMENDMENT
TO CERTIFICATE OF FORMATION
Sec. 153.051. REQUIRED AMENDMENT TO CERTIFICATE OF
FORMATION. (a) A general partner shall file a certificate of
amendment reflecting the occurrence of one or more of the following
events not later than the 30th day after the date on which the event
occurred:
(1) the admission of a new general partner;
(2) the withdrawal of a general partner;
(3) a change in the name of the limited partnership; or
(4) except as provided by Section 5.202, a change in:
(A) the address of the registered office; or
(B) the name or address of the registered agent
of the limited partnership.
(b) A general partner who becomes aware that a statement in
a certificate of formation was false when made or that a matter
described in the certificate has changed, making the certificate
false in any material respect, shall promptly amend the certificate
to make it accurate. (TRLPA 2.02(b), (c), (e).)
Sec. 153.052. DISCRETIONARY AMENDMENT TO CERTIFICATE OF
FORMATION. (a) A certificate of formation may be amended at any
time for a proper purpose as determined by the general partners.
(b) A certificate of formation may be amended to state the
name, mailing address, and street address of the business or
residence of each person winding up the limited partnership's
affairs if, after an event requiring the winding up of a limited
partnership but before the limited partnership is reconstituted or
a certificate of cancellation is filed as provided by Section
153.451:
(1) the certificate of formation has been amended to
reflect the withdrawal of all general partners; or
(2) a person who is not shown on the certificate of
formation as a general partner is carrying out the winding up of a
limited partnership's affairs.
(c) If the certificate of formation is amended under
Subsection (b), each person winding up the limited partnership's
affairs shall execute and file the certificate of amendment. A
person winding up the partnership's affairs is not subject to
liability as a general partner because of the filing of the
certificate of amendment.
(d) A general partner who is not winding up the limited
partnership's affairs is not required to execute and file a
certificate of amendment as provided by this section. (TRLPA
2.02(d), (f).)
[Sections 153.053-153.100 reserved for expansion]
SUBCHAPTER C. LIMITED PARTNERS
Sec. 153.101. ADMISSION OF LIMITED PARTNERS. (a) In
connection with the formation of a limited partnership, a person
acquiring a limited partnership interest becomes a limited partner
on the later of:
(1) the date on which the limited partnership is
formed; or
(2) the date stated in the records of the limited
partnership as the date on which the person becomes a limited
partner or, if that date is not stated in those records, the date on
which the person's admission is first reflected in the records of
the limited partnership.
(b) After a limited partnership is formed, a person who
acquires a partnership interest directly from the limited
partnership becomes a new limited partner on:
(1) compliance with the provisions of the partnership
agreement governing admission of new limited partners; or
(2) if the partnership agreement does not contain
relevant admission provisions, the written consent of all partners.
(c) After formation of a limited partnership, an assignee of
a partnership interest becomes a new limited partner as provided by
Section 153.253(a).
(d) A person may be a limited partner unless the person
lacks capacity apart from this chapter and the other limited
partnership provisions. (TRLPA 3.01.)
Sec. 153.102. LIABILITY TO THIRD PARTIES. (a) A limited
partner is not liable for the obligations of a limited partnership
unless:
(1) the limited partner is also a general partner; or
(2) in addition to the exercise of the limited
partner's rights and powers as a limited partner, the limited
partner participates in the control of the business.
(b) If the limited partner participates in the control of
the business, the limited partner is liable only to a person who
transacts business with the limited partnership reasonably
believing, based on the limited partner's conduct, that the limited
partner is a general partner. (TRLPA 3.03(a), (d).)
Sec. 153.103. ACTIONS NOT CONSTITUTING PARTICIPATION IN
BUSINESS FOR LIABILITY PURPOSES. For purposes of this section and
Sections 153.102, 153.104, and 153.105, a limited partner does not
participate in the control of the business because the limited
partner has or has acted in one or more of the following capacities
or possesses or exercises one or more of the following powers:
(1) acting as:
(A) a contractor for or an agent or employee of
the limited partnership;
(B) a contractor for or an agent or employee of a
general partner;
(C) an officer, director, or stockholder of a
corporate general partner;
(D) a partner of a partnership that is a general
partner of the limited partnership; or
(E) a member or manager of a limited liability
company that is a general partner of the limited partnership;
(2) acting in a capacity similar to that described in
Subdivision (1) with any other person that is a general partner of
the limited partnership;
(3) consulting with or advising a general partner on
any matter, including the business of the limited partnership;
(4) acting as surety, guarantor, or endorser for the
limited partnership, guaranteeing or assuming one or more specific
obligations of the limited partnership, or providing collateral for
borrowings of the limited partnership;
(5) calling, requesting, attending, or participating
in a meeting of the partners or the limited partners;
(6) winding up the business of a limited partnership
under Chapter 11 and Subchapter K of this chapter;
(7) taking an action required or permitted by law to
bring, pursue, settle, or otherwise terminate a derivative action
in the right of the limited partnership;
(8) serving on a committee of the limited partnership
or the limited partners; or
(9) proposing, approving, or disapproving, by vote or
otherwise, one or more of the following matters:
(A) the dissolution or winding up of the limited
partnership;
(B) an election to reconstitute the limited
partnership or continue the business of the limited partnership;
(C) the sale, exchange, lease, mortgage,
assignment, pledge, or other transfer of, or granting of a security
interest in, an asset of the limited partnership;
(D) the incurring, renewal, refinancing, or
payment or other discharge of indebtedness by the limited
partnership;
(E) a change in the nature of the business of the
limited partnership;
(F) the admission, removal, or retention of a
general partner;
(G) the admission, removal, or retention of a
limited partner;
(H) a transaction or other matter involving an
actual or potential conflict of interest;
(I) an amendment to the partnership agreement or
certificate of formation;
(J) if the limited partnership is qualified as an
investment company under the federal Investment Company Act of 1940
(15 U.S.C. Section 80a-1 et seq.), as amended, any matter required
by that Act or the rules and regulations of the Securities and
Exchange Commission under that Act, to be approved by the holders of
beneficial interests in an investment company, including:
(i) electing directors or trustees of the
investment company;
(ii) approving or terminating an investment
advisory or underwriting contract;
(iii) approving an auditor; and
(iv) acting on another matter that that Act
requires to be approved by the holders of beneficial interests in
the investment company;
(K) indemnification of a general partner under
Chapter 8 or otherwise;
(L) any other matter stated in the partnership
agreement;
(M) the exercising of a right or power granted or
permitted to limited partners under this code and not specifically
enumerated in this section; or
(N) the merger or conversion of a limited
partnership. (TRLPA 3.03(b).)
Sec. 153.104. ENUMERATION OF ACTIONS NOT EXCLUSIVE. The
enumeration in Section 153.103 does not mean that a limited partner
who has acted or acts in another capacity or possesses or exercises
another power constitutes participation by that limited partner in
the control of the business of the limited partnership. (TRLPA
3.03(c).)
Sec. 153.105. CREATION OF RIGHTS. Sections 153.103 and
153.104 do not create rights of limited partners. Rights of limited
partners may be created only by:
(1) the certificate of formation;
(2) the partnership agreement;
(3) other sections of this chapter; or
(4) the other limited partnership provisions. (TRLPA
3.03(e).)
Sec. 153.106. ERRONEOUS BELIEF OF CONTRIBUTOR BEING LIMITED
PARTNER. Except as provided by Section 153.109, a person who
erroneously but in good faith believes that the person has made a
contribution to and has become a limited partner in a limited
partnership is not liable as a general partner or otherwise
obligated because of making or attempting to make the contribution,
receiving distributions from the partnership, or exercising the
rights of a limited partner if, within a reasonable time after
ascertaining the mistake, the person:
(1) causes an appropriate certificate of formation or
certificate of amendment to be signed and filed;
(2) files or causes to be filed with the secretary of
state a written statement in accordance with Section 153.107; or
(3) withdraws from participation in future profits of
the enterprise by executing and filing with the secretary of state a
certificate declaring the person's withdrawal under this section.
(TRLPA 3.04(a) (part).)
Sec. 153.107. STATEMENT REQUIRED FOR LIABILITY PROTECTION.
(a) A written statement filed under Section 153.106(2) must be
entitled "Filing under Section 153.106(2), Business Organizations
Code," and contain:
(1) the name of the partnership;
(2) the name and mailing address of the person signing
the written statement; and
(3) a statement that:
(A) the person signing the written statement
acquired a limited partnership interest in the partnership;
(B) the person signing the written statement has
made an effort to cause a general partner of the partnership to file
an accurate certificate of formation required by the code and the
general partner has failed or refused to file the certificate; and
(C) the statement is being filed under Section
153.106(2) and the person signing the written statement is claiming
status as a limited partner of the partnership named in the
document.
(b) The statement is effective for 180 days.
(c) A statement filed under Section 153.106(2) may be signed
by more than one person claiming limited partnership status under
this section and Sections 153.106, 153.108, and 153.109. (TRLPA
3.04(a) (part), (b) (part), (e).)
Sec. 153.108. REQUIREMENTS FOR LIABILITY PROTECTION
FOLLOWING EXPIRATION OF STATEMENT. (a) If a certificate described
by Section 153.106(1) has not been filed before the expiration of
the 180-day period described by Section 153.107(b), the person
filing the statement has no further protection from liability under
Section 153.106(2) unless the person complies with this section. To
be protected under Section 153.106 the person must, not later than
the 10th day after the date of expiration of the 180-day period:
(1) withdraw under Section 153.106(3); or
(2) bring an action under Section 153.554 to compel
the execution and filing of a certificate of formation or
amendment.
(b) If an action is brought within the applicable period and
is diligently prosecuted to conclusion, the person bringing the
action continues to be protected from liability under Section
153.106(2) until the action is finally decided adversely to that
person.
(c) This section and Sections 153.106, 153.107, and 153.109
do not protect a person from liability that arises under Sections
153.102-153.105. (TRLPA 3.04(b) (part), (d).)
Sec. 153.109. LIABILITY OF ERRONEOUS CONTRIBUTOR.
Regardless of whether Sections 153.106, 153.107, and 153.108 apply,
a person who makes a contribution in the circumstances described by
Section 153.106 is liable as a general partner to a third party who
transacts business with the partnership before an action taken
under Section 153.106 if:
(1) the contributor has knowledge or notice that no
certificate has been filed or that the certificate inaccurately
referred to the contributor as a general partner; and
(2) the third party reasonably believed, based on the
contributor's conduct, that the contributor was a general partner
at the time of the transaction and extended credit to the
partnership in reasonable reliance on the credit of the
contributor. (TRLPA 3.04(c).)
Sec. 153.110. WITHDRAWAL OF LIMITED PARTNER. A limited
partner may withdraw from a limited partnership only at the time or
on the occurrence of an event specified in a written partnership
agreement. The withdrawal of the partner must be made in accordance
with that agreement. (TRLPA 6.03.)
Sec. 153.111. DISTRIBUTION ON WITHDRAWAL. Except as
otherwise provided by Section 153.210 or the partnership agreement,
on withdrawal a withdrawing limited partner is entitled to receive,
not later than a reasonable time after withdrawal, the fair value of
that limited partner's interest in the limited partnership as of
the date of withdrawal. (TRLPA 6.04.)
Sec. 153.112. RECEIPT OF WRONGFUL DISTRIBUTION. A limited
partner who receives a distribution that is not permitted under
Section 153.210 is not required to return the distribution unless
the limited partner knew that the distribution violated the
prohibition of Section 153.210. This section does not affect an
obligation of the limited partner under the partnership agreement
or other applicable law to return the distribution. (TRLPA
6.07(b).)
Sec. 153.113. POWERS OF ESTATE OF LIMITED PARTNER WHO IS
DECEASED OR INCAPACITATED. If a limited partner who is an
individual dies or a court adjudges the limited partner to be
incapacitated in managing the limited partner's person or property,
the limited partner's executor, administrator, guardian,
conservator, or other legal representative may exercise all of the
limited partner's rights and powers to settle the limited partner's
estate or administer the limited partner's property, including the
power of an assignee to become a limited partner under the
partnership agreement. (TRLPA 7.05.)
[Sections 153.114-153.150 reserved for expansion]
SUBCHAPTER D. GENERAL PARTNERS
Sec. 153.151. ADMISSION OF ADDITIONAL GENERAL PARTNERS. (a)
After a limited partnership is formed, additional general partners
may be admitted:
(1) in the manner provided by a written partnership
agreement; or
(2) if a written partnership agreement does not
provide for the admission of additional general partners, with the
written consent of all partners.
(b) A person may be a general partner unless the person
lacks capacity apart from this chapter. (TRLPA 4.01.)
Sec. 153.152. GENERAL POWERS AND LIABILITIES OF GENERAL
PARTNER. (a) Except as provided by this chapter, the other limited
partnership provisions, or a partnership agreement, a general
partner of a limited partnership:
(1) has the rights and powers and is subject to the
restrictions of a partner in a partnership without limited
partners; and
(2) has the liabilities of a partner in a partnership
without limited partners to the partnership and to the other
partners.
(b) Except as provided by this chapter or the other limited
partnership provisions, a general partner of a limited partnership
has the liabilities of a partner in a partnership without limited
partners to a person other than the partnership and the other
partners. (TRLPA 4.03.)
Sec. 153.153. POWERS AND LIABILITIES OF PERSON WHO IS BOTH
GENERAL PARTNER AND LIMITED PARTNER. A person who is both a general
partner and a limited partner:
(1) has the rights and powers and is subject to the
restrictions and liabilities of a general partner; and
(2) except as otherwise provided by the partnership
agreement, this chapter, or the other limited partnership
provisions, has the rights and powers and is subject to the
restrictions and liabilities, if any, of a limited partner to the
extent of the general partner's participation in the partnership as
a limited partner. (TRLPA 4.04 (part).)
Sec. 153.154. CONTRIBUTIONS BY AND DISTRIBUTIONS TO GENERAL
PARTNER. A general partner of a limited partnership may make a
contribution to, be allocated profits and losses of, and receive a
distribution from the limited partnership as a general partner, a
limited partner, or both. (TRLPA 4.04 (part).)
Sec. 153.155. WITHDRAWAL OF GENERAL PARTNER. (a) A person
ceases to be a general partner of a limited partnership on the
occurrence of one or more of the following events of withdrawal:
(1) the general partner withdraws as a general partner
from the limited partnership as provided by Subsection (b);
(2) the general partner ceases to be a general partner
of the limited partnership as provided by Section 153.252(b);
(3) the general partner is removed as a general
partner in accordance with the partnership agreement;
(4) unless otherwise provided by a written partnership
agreement, or with the written consent of all partners, the general
partner:
(A) makes a general assignment for the benefit of
creditors;
(B) files a voluntary bankruptcy petition;
(C) becomes the subject of an order for relief or
is declared insolvent in a federal or state bankruptcy or
insolvency proceeding;
(D) files a petition or answer seeking for the
general partner a reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under
law;
(E) files a pleading admitting or failing to
contest the material allegations of a petition filed against the
general partner in a proceeding of the type described by Paragraphs
(A)-(D); or
(F) seeks, consents to, or acquiesces in the
appointment of a trustee, receiver, or liquidator of the general
partner or of all or a substantial part of the general partner's
properties;
(5) unless otherwise provided by a written partnership
agreement or with the written consent of all partners, the
expiration of:
(A) 120 days after the date of the commencement
of a proceeding against the general partner seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution,
or similar relief under law if the proceeding has not been
previously dismissed;
(B) 90 days after the date of the appointment,
without the general partner's consent, of a trustee, receiver, or
liquidator of the general partner or of all or a substantial part of
the general partner's properties if the appointment has not
previously been vacated or stayed; or
(C) 90 days after the date of expiration of a
stay, if the appointment has not previously been vacated;
(6) the death of a general partner;
(7) a court adjudicating a general partner who is an
individual mentally incompetent to manage the general partner's
person or property;
(8) unless otherwise provided by a written partnership
agreement or with the written consent of all partners, the
commencement of winding up activities intended to conclude in the
termination of a trust that is a general partner, but not merely the
substitution of a new trustee;
(9) unless otherwise provided by a written partnership
agreement or with the written consent of all partners, the
commencement of winding up activities of a separate partnership
that is a general partner;
(10) unless otherwise provided by a written
partnership agreement or with the written consent of all partners,
the:
(A) filing of a certificate of termination or its
equivalent for an entity, other than a nonfiling entity or a foreign
nonfiling entity, that is a general partner; or
(B) termination or revocation of the certificate
of formation or its equivalent of an entity, other than a nonfiling
entity or a foreign nonfiling entity, that is a general partner and
the expiration of 90 days after the date of notice to the entity of
termination or revocation without a reinstatement of its
certificate of formation or its equivalent; or
(11) the distribution by the fiduciary of an estate
that is a general partner of the estate's entire interest in the
limited partnership.
(b) A general partner may withdraw at any time from a
limited partnership and cease to be a general partner under
Subsection (a) by giving written notice to the other partners.
(TRLPA 4.02(a), 6.02(a) (part).)
Sec. 153.156. NOTICE OF EVENT OF WITHDRAWAL. A general
partner who is subject to an event that with the passage of the
specified period becomes an event of withdrawal under Section
153.155(a)(4) or (5) shall notify the other partners of the event
not later than the 30th day after the date on which the event
occurred. (TRLPA 4.02(b).)
Sec. 153.157. WITHDRAWAL OF GENERAL PARTNER IN VIOLATION OF
PARTNERSHIP AGREEMENT. Unless otherwise provided by the
partnership agreement, a withdrawal by a general partner of a
partnership for a definite term or particular undertaking before
the expiration of that term or completion of that undertaking is a
breach of the partnership agreement. (TRLPA 6.02(a) (part).)
Sec. 153.158. EFFECT OF WITHDRAWAL. (a) Unless otherwise
provided by a written partnership agreement and subject to the
liability created under Section 153.162, if a general partner
ceases to be a general partner under Section 153.155, the remaining
general partner or partners, or, if there are no remaining general
partners, a majority-in-interest of the limited partners in a vote
that excludes any limited partnership interest held by the
withdrawing general partner, may:
(1) convert that general partner's partnership
interest to that of a limited partner; or
(2) pay to the withdrawn general partner in cash, or
secure by bond approved by a court of competent jurisdiction, the
value of that partner's partnership interest minus the damages
caused if the withdrawal constituted a breach of the partnership
agreement.
(b) Until an action described by Subsection (a) is taken,
the owner of the partnership interest of the withdrawn general
partner has the status of an assignee under Subchapter F, Section
153.113, and Section 153.555.
(c) If there are no remaining general partners following the
withdrawal of a general partner, the partnership may be
reconstituted. (TRLPA 6.02(b), (e).)
Sec. 153.159. CONVERSION OF PARTNERSHIP INTEREST AFTER
WITHDRAWAL. If the partners convert the partnership interest under
Section 153.158(a)(1), the limited partnership interest may be
reduced pro rata with all other partners to provide compensation,
an interest in the partnership, or both, to a replacement general
partner. (TRLPA 6.02(c) (part).)
Sec. 153.160. EFFECT OF CONVERSION OF PARTNERSHIP INTEREST.
(a) After an amendment to the certificate of formation reflecting
the general partner's withdrawal as a general partner is filed
under Section 153.051, the withdrawing general partner:
(1) may vote as a limited partner in all matters, to
the same extent as the members of the class of limited partners
having the least voting rights with respect to the matter on which
the vote is taken; and
(2) may not vote on the admission and compensation of a
general partner who replaces the withdrawing general partner.
(b) If the general partner's withdrawal violates the
partnership agreement, the general partner does not have voting
rights. (TRLPA 6.02(c) (part).)
Sec. 153.161. LIABILITY OF GENERAL PARTNER FOR DEBT
INCURRED AFTER EVENT OF WITHDRAWAL. (a) Unless otherwise provided
by a written partnership agreement and subject to the liability
created under Section 153.162, a general partner who ceases to be a
general partner under Section 153.155 is not personally liable in
the partner's capacity as a general partner for partnership debt
incurred after that partner ceases to be a general partner unless
the applicable creditor at the time the debt was incurred
reasonably believed that the partner remained a general partner.
(b) A creditor of the partnership has reason to believe that
a partner remains a general partner if:
(1) the creditor had no knowledge or notice of the
general partner's withdrawal and:
(A) was a creditor of the partnership at the time
of the general partner's withdrawal; or
(B) had extended credit to the partnership within
two years before the date of withdrawal; or
(2) the creditor had known that the partner was a
general partner in the partnership before the general partner's
withdrawal and had no knowledge or notice of the withdrawal and the
general partner's withdrawal had not been advertised in a
newspaper of general circulation in each place at which the
partnership business was regularly conducted. (TRLPA 6.02(d).)
Sec. 153.162. LIABILITY FOR WRONGFUL WITHDRAWAL. (a) If a
general partner's withdrawal from a limited partnership violates
the partnership agreement, the partnership may recover damages from
the withdrawing general partner for breach of the partnership
agreement, including the reasonable cost of obtaining replacement
of the services the withdrawn partner was obligated to perform.
(b) In addition to pursuing any remedy available under
applicable law, the partnership may effect the recovery of damages
under Subsection (a) by offsetting those damages against the amount
otherwise distributable to the withdrawing general partner,
reducing the limited partner interest into which the withdrawing
general partner's interest may be converted under Section
153.158(a)(1), or both. (TRLPA 6.02(a) (part).)
[Sections 153.163-153.200 reserved for expansion]
SUBCHAPTER E. FINANCES
Sec. 153.201. FORM OF CONTRIBUTION. The contribution of a
limited partner may consist of a tangible or intangible benefit to
the limited partnership or other property of any kind or nature,
including:
(1) cash;
(2) a promissory note;
(3) services performed;
(4) a contract for services to be performed; and
(5) another interest in or security of the limited
partnership, another domestic or foreign limited partnership, or
other entity. (TRLPA 5.01.)
Sec. 153.202. ENFORCEABILITY OF PROMISE TO MAKE
CONTRIBUTION. (a) A promise by a limited partner to make a
contribution to, or pay cash or transfer other property to, a
limited partnership is not enforceable unless the promise is in
writing and signed by the limited partner.
(b) Except as otherwise provided by the partnership
agreement, a partner or the partner's legal representative or
successor is obligated to the limited partnership to perform an
enforceable promise to make a contribution to or pay cash or
transfer other property to a limited partnership, notwithstanding
the partner's death, disability, or other change in circumstances.
(c) If a partner or a partner's legal representative or
successor does not make a contribution or other payment of cash or
transfer of other property required by the enforceable promise,
whether as a contribution or with respect to a contribution
previously made, that partner or the partner's legal representative
or successor is obligated, at the option of the limited
partnership, to pay to the partnership an amount of cash equal to
the portion of the agreed value, as stated in the partnership
agreement or in the partnership records required to be kept under
Sections 153.551 and 153.552, of the contribution represented by
the amount of cash that has not been paid or the value of the
property that has not been transferred.
(d) A partnership agreement may provide that the
partnership interest of a partner who fails to make a payment of
cash or transfer of other property to the partnership, whether as a
contribution or with respect to a contribution previously made,
required by an enforceable promise is subject to specified
consequences, which may include:
(1) a reduction of the defaulting partner's percentage
or other interest in the limited partnership;
(2) subordination of the partner's partnership
interest to the interest of nondefaulting partners;
(3) a forced sale of the partner's partnership
interest;
(4) forfeiture of the partner's partnership interest;
(5) the lending of money to the defaulting partner by
other partners of the amount necessary to meet the defaulting
partner's commitment;
(6) a determination of the value of the defaulting
partner's partnership interest by appraisal or by formula and
redemption or sale of the partnership interest at that value; or
(7) another penalty or consequence. (TRLPA 5.02(a),
(b), (c).)
Sec. 153.203. RELEASE OF OBLIGATION TO PARTNERSHIP. Unless
otherwise provided by the partnership agreement, the obligation of
a partner or the legal representative or successor of a partner to
make a contribution, pay cash, transfer other property, or return
cash or property paid or distributed to the partner in violation of
this chapter or the partnership agreement may be compromised or
released only by consent of all of the partners. (TRLPA 5.02(d)
(part).)
Sec. 153.204. ENFORCEABILITY OF OBLIGATION. (a)
Notwithstanding a compromise or release under Section 153.203, a
creditor of a limited partnership who extends credit or otherwise
acts in reasonable reliance on an obligation described by Section
153.203 may enforce the original obligation if:
(1) the obligation is reflected in a document signed
by the partner; and
(2) the document is not amended or canceled to reflect
the compromise or release.
(b) Notwithstanding the compromise or release, a general
partner remains liable to persons other than the partnership and
the other partners, as provided by Sections 153.152(a)(2) and (b).
(TRLPA 5.02(d) (part).)
Sec. 153.205. REQUIREMENTS TO ENFORCE CONDITIONAL
OBLIGATION. (a) An obligation of a limited partner of a limited
partnership that is subject to a condition may be enforced by the
partnership creditor described by Section 153.204 only if the
condition is satisfied or waived by or with respect to the limited
partner.
(b) A conditional obligation of a limited partner of a
limited partnership includes a contribution payable on a
discretionary call of the limited partnership before the time the
call occurs. (TRLPA 5.02(d) (part).)
Sec. 153.206. ALLOCATION OF PROFITS AND LOSSES. (a) The
profits and losses of a limited partnership shall be allocated
among the partners in the manner provided by a written partnership
agreement.
(b) If a written partnership agreement does not provide for
the allocation of profits and losses, the profits and losses shall
be allocated:
(1) in accordance with the current percentage or other
interest in the partnership stated in partnership records of the
kind described by Section 153.551(a); or
(2) if the allocation of profits and losses is not
provided for in partnership records of the kind described by
Section 153.551(a), in proportion to capital accounts. (TRLPA
5.03.)
Sec. 153.207. RIGHT TO DISTRIBUTION. Subject to Section
153.210, when a partner becomes entitled to receive a distribution,
the partner has with respect to the distribution the status of and
is entitled to all remedies available to a creditor of the limited
partnership. (TRLPA 6.06.)
Sec. 153.208. SHARING OF DISTRIBUTIONS. (a) A distribution
of cash or another asset of a limited partnership shall be made to a
partner in the manner provided by a written partnership agreement.
(b) If a written partnership agreement does not provide
otherwise, a distribution that is a return of capital shall be made
on the basis of the agreed value, as stated in the partnership
records required to be maintained under Section 153.551(a), of the
contribution made by each partner to the extent that the
contribution has not been returned. A distribution that is not a
return of capital shall be made in proportion to the allocation of
profits as determined under Section 153.206.
(c) Unless otherwise defined by a written partnership
agreement, in this section, "return of capital" means a
distribution to a partner to the extent that the partner's capital
account, immediately after the distribution, is less than the
amount of that partner's contribution to the partnership as reduced
by a prior distribution that was a return of capital. (TRLPA
1.02(13), 5.04.)
Sec. 153.209. INTERIM DISTRIBUTIONS. Except as otherwise
provided by this section and Section 153.210, a partner is entitled
to receive a distribution from a limited partnership to the extent
and at the time or on the occurrence of an event specified in the
partnership agreement before:
(1) the partner withdraws from the partnership; and
(2) the winding up of the partnership business.
(TRLPA 6.01.)
Sec. 153.210. LIMITATION ON DISTRIBUTION. A limited
partnership may not make a distribution to a partner if,
immediately after giving effect to the distribution and despite any
compromise of a claim referred to by Sections 153.203 and 153.204,
all liabilities of the limited partnership, other than liabilities
to partners with respect to their partnership interests and
liabilities for which the recourse of creditors is limited to
specified property of the limited partnership, exceed the fair
value of the partnership assets. The fair value of property that
is subject to a liability for which recourse of creditors is limited
shall be included in the partnership assets for purposes of this
subsection only to the extent that the fair value of that property
exceeds that liability. (TRLPA 6.07(a).)
[Sections 153.211-153.250 reserved for expansion]
SUBCHAPTER F. PARTNERSHIP INTEREST
Sec. 153.251. ASSIGNMENT OF PARTNERSHIP INTEREST. (a)
Except as otherwise provided by the partnership agreement, a
partnership interest is assignable wholly or partly.
(b) Except as otherwise provided by the partnership
agreement, an assignment of a partnership interest:
(1) does not dissolve a limited partnership;
(2) does not entitle the assignee to become, or to
exercise rights or powers of, a partner; and
(3) entitles the assignee to be allocated income,
gain, loss, deduction, credit, or similar items and to receive
distributions to which the assignor was entitled to the extent
those items are assigned. (TRLPA 7.02(a) (part).)
Sec. 153.252. RIGHTS OF ASSIGNOR. (a) Except as otherwise
provided by the partnership agreement, until the assignee becomes a
partner, the assignor partner continues to be a partner in the
limited partnership. The assignor partner may exercise any rights
or powers of a partner, except to the extent those rights or powers
are assigned.
(b) Except as otherwise provided by the partnership
agreement, on the assignment by a general partner of all of the
general partner's rights as a general partner, the general
partner's status as a general partner may be terminated by the
affirmative vote of a majority-in-interest of the limited partners.
(TRLPA 7.02(a) (part).)
Sec. 153.253. RIGHTS OF ASSIGNEE. (a) An assignee of a
partnership interest, including the partnership interest of a
general partner, may become a limited partner if and to the extent
that:
(1) the partnership agreement provides; or
(2) all partners consent.
(b) An assignee who becomes a limited partner, to the extent
of the rights and powers assigned, has the rights and powers and is
subject to the restrictions and liabilities of a limited partner
under a partnership agreement and this code. (TRLPA 7.04(a), (b)
(part).)
Sec. 153.254. LIABILITY OF ASSIGNEE. (a) Until an assignee
of the partnership interest in a limited partnership becomes a
partner, the assignee does not have liability as a partner solely as
a result of the assignment.
(b) Unless otherwise provided by a written partnership
agreement, an assignee who becomes a limited partner:
(1) is liable for the obligations of the assignor to
make contributions as provided by Sections 153.202-153.204;
(2) is not obligated for liabilities unknown to the
assignee at the time the assignee became a limited partner and that
could not be ascertained from a written partnership agreement; and
(3) is not liable for the obligations of the assignor
under Sections 153.105, 153.112, and 153.162. (TRLPA 7.02(b),
7.04(b) (part).)
Sec. 153.255. LIABILITY OF ASSIGNOR. Regardless of whether
an assignee of a partnership interest becomes a limited partner,
the assignor is not released from the assignor's liability to the
limited partnership under Subchapter E and Sections 153.105,
153.112, and 153.162. (TRLPA 7.04(c).)
Sec. 153.256. CHARGE IN PAYMENT OF JUDGMENT CREDITOR. (a)
On application to a court by a judgment creditor of a partner or
other owner of a partnership interest, the court may:
(1) charge the partnership interest of the partner or
other owner with payment of the unsatisfied amount of the judgment,
with interest;
(2) appoint a receiver for the debtor partner's share
of the partnership's profits and other money payable or that
becomes payable to the debtor partner with respect to the limited
partnership; and
(3) make other orders, directions, and inquiries that
the circumstances of the case require.
(b) To the extent that the partnership interest is charged
in the manner provided by Subsection (a), the judgment creditor has
only the rights of an assignee of the partnership interest.
(c) The partnership interest charged may be:
(1) redeemed at any time before foreclosure; or
(2) in case of a sale directed by the court, and
without constituting an event requiring winding up, purchased:
(A) by one or more of the general partners with
separate property of any general partner; or
(B) with respect to partnership property, by one
or more of the general partners whose interests are not charged, on
the consent of all general partners whose interests are not charged
and a majority in interest of the limited partners, excluding
limited partnership interests held by a general partner whose
interest is charged.
(d) The remedies provided by Subsection (a) are exclusive of
other remedies that may exist, including remedies under laws of
this state applicable to partnerships without limited partners.
(TRLPA 7.03(a), (b), (c).)
Sec. 153.257. EXEMPTION LAWS APPLICABLE TO PARTNERSHIP
INTEREST NOT AFFECTED. Section 153.256 does not deprive a partner
of the benefit of an exemption law applicable to that partner's
partnership interest. (TRLPA 7.03(d).)
[Sections 153.258-153.300 reserved for expansion]
SUBCHAPTER G. REPORTS
Sec. 153.301. PERIODIC REPORT. The secretary of state may
require a domestic limited partnership or a foreign limited
partnership registered to transact business in this state to file a
report not more than once every four years as required by this
subchapter. (TRLPA 13.05(a) (part).)
Sec. 153.302. FORM AND CONTENTS OF REPORT. (a) The report
must:
(1) include:
(A) the name of the limited partnership;
(B) the state or territory under the laws of
which the limited partnership is formed;
(C) the address of the registered office of the
limited partnership in this state and the name of the registered
agent at that address;
(D) the address of the principal office in the
United States where records are to be kept or made available under
Sections 153.551 and 153.552; and
(E) the name, mailing address, and street address
of the business or residence of each general partner;
(2) be made on a form adopted by the secretary of state
for that purpose; and
(3) be signed on behalf of the limited partnership by
at least one general partner.
(b) The information contained in the report must be given as
of the date of the execution of the report. (TRLPA 13.05(a) (part),
(b) (part).)
Sec. 153.303. FILING FEE. The filing fee for the report is
as provided by Chapter 4. (TRLPA 13.05(b) (part).)
Sec. 153.304. DELIVERY OF REPORT. The report must be
delivered to the secretary of state not later than the 30th day
after the date on which notice is mailed under Section 153.305.
(TRLPA 13.05(c) (part).)
Sec. 153.305. ACTION BY SECRETARY OF STATE. (a) The
secretary of state shall send a notice that the report required by
Section 153.301 is due.
(b) The notice must be:
(1) addressed to the limited partnership; and
(2) mailed to:
(A) the registered office of the limited
partnership;
(B) the last known address of the limited
partnership as it appears on record in the office of the secretary
of state; or
(C) any other known place of business of the
limited partnership.
(c) The secretary of state shall include with the notice a
copy of a report form to be prepared and filed as provided by this
subchapter. (TRLPA 13.05(c), (d) (part).)
Sec. 153.306. EFFECT OF FILING REPORT. (a) If the secretary
of state finds that the report complies with this subchapter, the
secretary shall:
(1) accept the report for filing;
(2) acknowledge to the limited partnership the filing
of the report; and
(3) update the records of the secretary of state's
office to reflect:
(A) a reported change in the address of the
registered office or principal office, or in the business or
residence address of a general partner; and
(B) a reported change in the name of the
registered agent.
(b) The filing of a report under Section 153.301 does not
relieve the limited partnership of the requirement to file an
amendment to the certificate of formation required under Section
153.051 or 153.052, except that the limited partnership is not
required to file an amendment to change the information specified
in Subsection (a)(3). (TRLPA 13.05(d) (part), (e).)
Sec. 153.307. EFFECT OF FAILURE TO FILE REPORT. (a) A
domestic or foreign limited partnership that fails to file a report
under Section 153.301 when the report is due forfeits the limited
partnership's right to transact business in this state. A
forfeiture under this section takes effect without judicial
ascertainment.
(b) When the right to transact business has been forfeited
under this section, the secretary of state shall note that the right
to transact business has been forfeited and the date of forfeiture
on the record kept in the secretary's office relating to the limited
partnership. (TRLPA 13.06(a), (b) (part).)
Sec. 153.308. NOTICE OF FORFEITURE OF RIGHT TO TRANSACT
BUSINESS. Notice of the forfeiture under Section 153.307 shall be
mailed to the limited partnership at:
(1) the registered office of the limited partnership;
(2) the last known address of the limited partnership;
or
(3) any other place of business of the limited
partnership. (TRLPA 13.06(b) (part).)
Sec. 153.309. EFFECT OF FORFEITURE OF RIGHT TO TRANSACT
BUSINESS. (a) Unless the right of the limited partnership to
transact business is revived in accordance with Section 153.310:
(1) the limited partnership may not maintain an
action, suit, or proceeding in a court of this state; and
(2) a successor or assignee of the limited partnership
may not maintain an action, suit, or proceeding in a court of this
state on a right, claim, or demand arising from the transaction of
business by the limited partnership in this state.
(b) The forfeiture of the right to transact business in this
state does not:
(1) impair the validity of a contract or act of the
limited partnership; or
(2) prevent the limited partnership from defending an
action, suit, or proceeding in a court of this state.
(c) This section and Sections 153.307 and 153.308 do not
affect the liability of a limited partner to the limited
partnership. (TRLPA 13.06(c), (d).)
Sec. 153.310. REVIVAL OF RIGHT TO TRANSACT BUSINESS. (a) A
limited partnership that forfeits the right to transact business in
this state as provided by Section 153.309 may be relieved from the
forfeiture by filing the required report not later than the 120th
day after the date of mailing of the notice of forfeiture under
Section 153.308, accompanied by the filing fees as provided by
Chapter 4.
(b) If a limited partnership complies with Subsection (a),
the secretary of state shall:
(1) revive the right of the limited partnership to
transact business in this state;
(2) cancel the note regarding the forfeiture; and
(3) note the revival and the date of revival on the
record kept in the secretary's office relating to the limited
partnership. (TRLPA 13.07.)
Sec. 153.311. CANCELLATION OF CERTIFICATE OR REGISTRATION
AFTER FORFEITURE. (a) The secretary of state may cancel the
certificate of formation of a domestic limited partnership, or the
registration of a foreign limited partnership, if the limited
partnership:
(1) forfeits its right to transact business in this
state under Section 153.307; and
(2) fails to revive that right under Section 153.310.
(b) Cancellation of the certificate or registration takes
effect without judicial ascertainment.
(c) The secretary of state shall note the cancellation and
the date of cancellation on the record kept in the secretary's
office relating to the limited partnership.
(d) On cancellation, the status of the limited partnership
is changed to inactive according to the records of the secretary of
state. The change to inactive status does not affect the liability
of a limited partner to the limited partnership. (TRLPA 13.08.)
Sec. 153.312. REINSTATEMENT OF CERTIFICATE OF FORMATION OR
REGISTRATION. (a) A limited partnership the certificate of
formation or registration of which has been canceled as provided by
Section 153.311 may be relieved of the cancellation by filing the
report required by Section 153.301, accompanied by the filing fees
provided by Chapter 4.
(b) If the limited partnership pays the fees required by
Subsection (a), the secretary of state shall:
(1) reinstate the certificate or registration of the
limited partnership without judicial ascertainment;
(2) change the status of the limited partnership to
active; and
(3) note the reinstatement on the record kept in the
secretary's office relating to the limited partnership.
(c) If the name of the limited partnership is not available
at the time of reinstatement, the secretary of state shall require
the limited partnership as a precondition to reinstatement to:
(1) file an amendment to the partnership's certificate
of formation; or
(2) in the case of a foreign limited partnership,
amend its application for registration to adopt an assumed name for
use in this state. (TRLPA 13.09.)
[Sections 153.313-153.350 reserved for expansion]
SUBCHAPTER H. LIMITED PARTNERSHIP AS LIMITED
LIABILITY PARTNERSHIP
Sec. 153.351. REQUIREMENTS. A limited partnership is a
limited liability partnership and a limited partnership if the
partnership:
(1) registers as a limited liability partnership:
(A) as permitted by its partnership agreement; or
(B) if its partnership agreement does not include
a provision for becoming a limited liability partnership, with the
consent of partners required to amend its partnership agreement;
(2) complies with Subchapter J, Chapter 152; and
(3) complies with Chapter 5. (TRLPA 2.14(a).)
Sec. 153.352. APPLICABILITY OF OTHER REQUIREMENTS. For
purposes of applying Section 152.802 to a limited partnership:
(1) an application to become a limited liability
partnership or to withdraw a registration must be signed by at least
one general partner; and
(2) other references to a partner mean a general
partner only. (TRLPA 2.14(b).)
Sec. 153.353. LAW APPLICABLE TO PARTNERS. If a limited
partnership is a limited liability partnership, Section 152.801
applies to a general partner and to a limited partner who is liable
under other provisions of this chapter for the debts or obligations
of the limited partnership. (TRLPA 2.14(c).)
[Sections 153.354-153.400 reserved for expansion]
SUBCHAPTER I. DERIVATIVE ACTIONS
Sec. 153.401. RIGHT TO BRING ACTION. A limited partner may
bring an action in a court on behalf of the limited partnership to
recover a judgment in the limited partnership's favor if:
(1) all general partners with authority to bring the
action have refused to bring the action; or
(2) an effort to cause those general partners to bring
the action is not likely to succeed. (TRLPA 10.01.)
Sec. 153.402. PROPER PLAINTIFF. In a derivative action, the
plaintiff must be a limited partner when the action is brought and:
(1) the person must have been a limited partner at the
time of the transaction that is the subject of the action; or
(2) the person's status as a limited partner must have
arisen by operation of law or under the terms of the partnership
agreement from a person who was a limited partner at the time of the
transaction. (TRLPA 10.02.)
Sec. 153.403. PLEADING. In a derivative action, the
complaint must contain with particularity:
(1) the effort, if any, of the plaintiff to secure
initiation of the action by a general partner; or
(2) the reasons for not making the effort. (TRLPA
10.03.)
Sec. 153.404. SECURITY FOR EXPENSES OF DEFENDANTS. (a) In a
derivative action, the court may require the plaintiff to give
security for the reasonable expenses incurred or expected to be
incurred by a defendant in the action, including reasonable
attorney's fees.
(b) The court may increase or decrease at any time the
amount of the security on a showing that the security provided is
inadequate or excessive.
(c) If a plaintiff is unable to give security, the plaintiff
may file an affidavit in accordance with the Texas Rules of Civil
Procedure.
(d) Except as provided by Subsection (c), if a plaintiff
fails to give the security within a reasonable time set by the
court, the court shall dismiss the suit without prejudice.
(e) The court, on final judgment for a defendant and on a
finding that suit was brought without reasonable cause against the
defendant, may require the plaintiff to pay reasonable expenses,
including reasonable attorney's fees, to the defendant, regardless
of whether security has been required. (TRLPA 10.04.)
Sec. 153.405. EXPENSES OF PLAINTIFF. If a derivative action
is successful, wholly or partly, or if anything is received by the
plaintiff because of a judgment, compromise, or settlement of the
action or claim constituting a part of the action, the court may
award the plaintiff reasonable expenses, including reasonable
attorney's fees, and shall direct the plaintiff to remit to a party
identified by the court the remainder of the proceeds received by
the plaintiff. (TRLPA 10.05.)
[Sections 153.406-153.450 reserved for expansion]
SUBCHAPTER J. CANCELLATION OF CERTIFICATE OF FORMATION
Sec. 153.451. CERTIFICATE OF CANCELLATION. (a) A
certificate of formation shall be canceled by filing a certificate
of cancellation with the secretary of state in accordance with
Chapter 4:
(1) on the completion of the winding up of the
partnership business;
(2) when there are no limited partners; or
(3) subject to Subsection (b), on a merger or
conversion as provided by Chapter 10.
(b) If a limited partnership formed under this code is not
one of the surviving or resulting domestic limited partnerships or
other entities in a merger or conversion, the certificate of merger
or conversion filed under Chapter 10 is sufficient, without a
filing under this section, to cancel the certificate of formation
of the nonsurviving limited partnership.
(c) To approve a reinstatement of a limited partnership
under Section 11.202, all of the remaining partners, or another
group or percentage of partners as specified by the partnership
agreement, must agree in writing to reinstate and continue the
business of the limited partnership. (TRLPA 2.03(a), (c).)
Sec. 153.452. CONTENTS OF CERTIFICATE OF CANCELLATION. A
certificate of cancellation must contain:
(1) the name of the limited partnership;
(2) the date of the filing of the partnership's
certificate of formation;
(3) the reason for filing the certificate of
cancellation;
(4) the future effective date or a certain time of
cancellation if cancellation is not effective on the filing of the
certificate; and
(5) other proper information as determined by the
person filing the certificate of cancellation. (TRLPA 2.03(b).)
[Sections 153.453-153.500 reserved for expansion]
SUBCHAPTER K. SUPPLEMENTAL WINDING UP AND TERMINATION
PROVISIONS
Sec. 153.501. CONTINUATION WITHOUT WINDING UP. (a) The
limited partnership may cancel an event requiring winding up as
specified in Section 11.051(1) or (3) if, not later than the 90th
day after the event, all remaining partners, or another group or
percentage of partners as specified by the partnership agreement,
agree in writing to continue the business of the limited
partnership.
(b) The limited partnership may revoke an event requiring
winding up as specified in Section 11.058(2) if:
(1) there remains at least one general partner and the
partnership agreement permits the business of the limited
partnership to be carried on by the remaining general partners and
those remaining general partners carry on the business; or
(2) not later than one year after the event, all
remaining partners, or another group or percentage of partners
specified in the partnership agreement:
(A) agree in writing to continue the business of
the limited partnership in writing; and
(B) to the extent that they desire or if there are
no remaining general partners, agree to the appointment of one or
more new general partners.
(c) The appointment of one or more new general partners
under Subsection (b)(2)(B) is effective from the date of
withdrawal.
(d) To approve a revocation under Section 11.151 by a
limited partnership of a voluntary decision to wind up as specified
in Section 11.058(1), prior to filing the certificate of
cancellation required by Section 153.451, all remaining partners,
or another group or percentage of partners as specified by the
partnership agreement, must agree in writing to revoke the
voluntary decision to wind up and continue the business of the
limited partnership. (TRLPA 8.01 (part).)
Sec. 153.502. WINDING UP PROCEDURES. (a) Except as
provided by the partnership agreement, the winding up of the
partnership's affairs shall be accomplished by:
(1) the general partners;
(2) if there are no general partners, the limited
partners or a person chosen by the limited partners; or
(3) a person appointed by the court to carry out the
winding up under Subsection (b).
(b) On application of a partner or a partner's legal
representative or transferee, a court, on cause shown, may wind up
the limited partnership's affairs and, in connection with the
winding up, may appoint a person to carry out the liquidation and
may make all other orders, directions, and inquiries that the
circumstances require.
(c) Section 11.052(a)(2) shall not be applicable to a
limited partnership. (TRLPA 8.04(a); New.)
Sec. 153.503. POWERS OF PERSON CONDUCTING WIND UP. (a)
After an event requiring the winding up of a limited partnership and
until the filing of a certificate of cancellation as provided by
Sections 153.451 and 153.452, unless a written partnership
agreement provides otherwise, a person winding up the limited
partnership's business in the name of and on behalf of the limited
partnership may take the actions specified in Sections 11.052 and
11.053.
(b) The acts described by Subsection (a) do not create a
liability for a limited partner that did not exist before an action
to wind up the business of the partnership was taken. (TRLPA
8.04(b), (c).)
Sec. 153.504. DISPOSITION OF ASSETS. On the winding up of a
limited partnership, its assets shall be paid or transferred as
follows:
(1) to the extent otherwise permitted by law, to
creditors, including partners who are creditors other than solely
because of the application of Section 153.207 for the payment or the
making of reasonable provision for payment to satisfy the
liabilities of the limited partnership;
(2) unless otherwise provided by the partnership
agreement, to partners and former partners to satisfy the
partnership's liability for distributions under Section 153.111 or
153.209; and
(3) unless otherwise provided by the partnership
agreement, to partners first for the return of their capital and
second with respect to their partnership interests, in the
proportions provided by Sections 153.208(a) and (b). (TRLPA 8.05.)
[Sections 153.505-153.550 reserved for expansion]
SUBCHAPTER L. MISCELLANEOUS PROVISIONS
Sec. 153.551. RECORDS. (a) A domestic limited partnership
shall maintain the following records in its principal office in the
United States or make the records available in that office not later
than the fifth day after the date on which a written request under
Section 153.552(a) is received:
(1) a current list that states:
(A) the name and mailing address of each partner,
separately identifying in alphabetical order the general partners
and the limited partners;
(B) the last known street address of the business
or residence of each general partner;
(C) the percentage or other interest in the
partnership owned by each partner; and
(D) if one or more classes or groups are
established under the partnership agreement, the names of the
partners who are members of each specified class or group;
(2) a copy of:
(A) the limited partnership's federal, state,
and local information or income tax returns for each of the
partnership's six most recent tax years;
(B) the partnership agreement and certificate of
formation; and
(C) all amendments or restatements;
(3) copies of any document that creates, in the manner
provided by the partnership agreement, classes or groups of
partners;
(4) an executed copy of any powers of attorney under
which the partnership agreement, certificate of formation, and all
amendments or restatements to the agreement and certificate have
been executed;
(5) unless contained in the written partnership
agreement, a written statement of:
(A) the amount of the cash contribution and a
description and statement of the agreed value of any other
contribution made by each partner;
(B) the amount of the cash contribution and a
description and statement of the agreed value of any other
contribution that the partner has agreed to make in the future as an
additional contribution;
(C) the date on which additional contributions
are to be made or the date of events requiring additional
contributions to be made;
(D) events requiring the limited partnership to
be dissolved and its affairs wound up; and
(E) the date on which each partner in the limited
partnership became a partner; and
(6) books and records of the accounts of the limited
partnership.
(b) A limited partnership shall maintain its records in
written form or in another form capable of being converted to
written form in a reasonable time.
(c) A limited partnership shall keep in its registered
office in this state and make available to a partner on reasonable
request the street address of its principal office in the United
States in which the records required by this section are
maintained. (TRLPA 1.07(a), (b), (c).)
Sec. 153.552. EXAMINATION OF RECORDS AND INFORMATION. (a)
On written request stating a proper purpose, a partner or an
assignee of a partnership interest may examine and copy, in person
or through a representative, records required to be kept under
Section 153.551 and other information regarding the business,
affairs, and financial condition of the limited partnership as is
just and reasonable for the person to examine and copy.
(b) The records requested under Subsection (a) may be
examined and copied at a reasonable time and at the partner's sole
expense.
(c) On written request by a partner or an assignee of a
partnership interest, the partnership shall provide to the
requesting partner or assignee without charge copies of:
(1) the partnership agreement and certificate of
formation and all amendments or restatements; and
(2) any tax return described by Section 153.551(a)(2).
(d) A request made under Subsection (c) must be made to:
(1) the person who is designated to receive the
request in the partnership agreement at the address designated in
the partnership agreement; or
(2) if there is no designation, a general partner at
the partnership's principal office in the United States. (TRLPA
1.07(d), (e).)
Sec. 153.553. EXECUTION OF CERTAIN FILINGS. (a) Each
certificate required by this code to be filed by a limited
partnership with the secretary of state shall be executed as
follows:
(1) an initial certificate of formation must be signed
as provided in Section 3.004(b)(1), except for an initial
certificate of formation signed by a person under Section
153.106(1);
(2) a certificate of amendment or restated certificate
of formation must be signed by at least one general partner and by
each other general partner designated in the certificate of
amendment as a new general partner, unless signed and filed by a
person under Section 153.052(b), 153.052(c), or 153.106(1), but the
certificate of amendment need not be signed by a withdrawing
general partner;
(3) a certificate of cancellation must be signed by
all general partners participating in the winding up of the limited
partnership's business or, if no general partners are winding up
the limited partnership's business, by all nonpartner liquidators
or, if the limited partners are winding up the limited
partnership's business, by a majority-in-interest of the limited
partners;
(4) a certificate of merger filed on behalf of a
domestic limited partnership must be signed as provided by Chapter
10;
(5) a certificate filed under Section 10.251 must be
signed by the person designated by the court; and
(6) a certificate of correction must be signed by at
least one general partner.
(b) Any person may sign a certificate or partnership
agreement or amendment or restated certificate by an attorney in
fact. A power of attorney relating to the signing of a certificate
or partnership agreement or amendment or restated certificate by an
attorney in fact:
(1) is not required to be sworn to, verified, or
acknowledged;
(2) is not required to be filed with the secretary of
state; and
(3) shall be retained with the partnership records
under Sections 153.551 and 153.552.
(c) The execution of a certificate by a general partner or
the execution of a written statement by a person under Section
153.106(2) is an oath or affirmation, under a penalty of perjury,
that, to the best of the executing party's knowledge and belief, the
facts stated in the certificate or statement are true. (TRLPA
2.04.)
Sec. 153.554. EXECUTION, AMENDMENT, OR CANCELLATION BY
JUDICIAL ORDER. (a) If a person fails or refuses to execute or file
a certificate as required by this chapter or Title 1 or to execute a
partnership agreement, another person adversely affected by the
failure or refusal may petition a court to direct the execution or
filing of the certificate or the execution of the partnership
agreement, as appropriate.
(b) If the court finds that the execution or filing of the
certificate is proper and that a person required to execute or file
the certificate has failed or refused to execute or file the
certificate, the court shall order the secretary of state to record
an appropriate certificate.
(c) The judicial remedy described by Subsection (b) is not a
limit on the rights of a person to file a written statement under
Section 153.106(2).
(d) If the court finds that the partnership agreement should
be executed and that a person required to execute the partnership
agreement has failed or refused to execute the agreement, the court
shall enter an order granting appropriate relief.
(e) If a court enters an order in favor of the adversely
affected person requesting relief under this section, the court
shall award to that person reasonable expenses, including
reasonable attorney's fees. (TRLPA 2.05.)
Sec. 153.555. PERMITTED TRANSFER IN CONNECTION WITH
RACETRACK LICENSE. The following transfer relating to a limited
partnership is not a prohibited transfer that violates Section
6.12(a), Texas Racing Act (Article 179e, Vernon's Texas Civil
Statutes):
(1) a transfer by a general partnership of its assets
to a limited partnership, the corporate general partner of which is
controlled by the partners of the general partnership; or
(2) a transfer by a limited partnership of the
beneficial use of or interest in any of its rights, privileges, or
assets to a local development corporation incorporated before
January 31, 1993, under Subchapter D, Chapter 431, Transportation
Code. (TRLPA 7.06.)
CHAPTER 154. PROVISIONS APPLICABLE TO BOTH GENERAL
AND LIMITED PARTNERSHIPS
SUBCHAPTER A. PARTNERSHIP INTERESTS
Sec. 154.001. NATURE OF PARTNER'S PARTNERSHIP INTEREST. (a)
A partner's partnership interest is personal property for all
purposes.
(b) A partner's partnership interest may be community
property under applicable law.
(c) A partner is not a co-owner of partnership property.
(TRPA 5.01, 5.02(a); TRLPA 7.01.)
Sec. 154.002. TRANSFER OF INTEREST IN PARTNERSHIP PROPERTY
PROHIBITED. A partner does not have an interest that can be
transferred, voluntarily or involuntarily, in partnership
property. (TRPA 5.01; TRLPA 7.01.)
[Sections 154.003-154.100 reserved for expansion]
SUBCHAPTER B. PARTNERSHIP AGREEMENT
Sec. 154.101. CLASS OR GROUP OF PARTNERS. (a) A written
partnership agreement may establish or provide for the future
creation of additional classes or groups of one or more partners
that have certain express relative rights, powers, and duties,
including voting rights. The future creation of additional classes
or groups may be expressed in the partnership agreement or at the
time of creation of the class or group.
(b) The rights, powers, or duties of a class or group of
partners may be senior to those partners of an existing class or
group. (TRPA 4.01(l); TRLPA 3.02(a), 4.05(a).)
Sec. 154.102. PROVISIONS RELATING TO VOTING. A written
partnership agreement that grants or provides for granting a right
to vote to a partner may contain a provision relating to:
(1) giving notice of the time, place, or purpose of a
meeting at which a matter is to be voted on by the partners;
(2) waiver of notice;
(3) action by consent without a meeting;
(4) the establishment of a record date;
(5) quorum requirements;
(6) voting in person or by proxy; or
(7) other matters relating to the exercise of the
right to vote. (TRPA 4.01(m); TRLPA 3.02(b), 4.05(b).)
Sec. 154.103. NOTICE OF ACTION BY CONSENT WITHOUT A
MEETING. (a) Prompt notice of the taking of an action under a
partnership agreement that may be taken without a meeting by
consent of fewer than all of the partners shall be given to a
partner who has not given written consent to the action.
(b) For purposes of this section, the "taking of an action"
includes:
(1) amending the partnership agreement; or
(2) creating under the partnership agreement a class
of partners that did not previously exist. (TRPA 4.01(n); TRLPA
3.02(c), (d).)
[Sections 154.104-154.200 reserved for expansion]
SUBCHAPTER C. PARTNERSHIP TRANSACTIONS AND RELATIONSHIPS
Sec. 154.201. BUSINESS TRANSACTIONS BETWEEN PARTNER AND
PARTNERSHIP. Except as otherwise provided by the partnership
agreement, a partner may lend money to and transact other business
with the partnership. Subject to other applicable law, a partner
has the same rights and obligations with respect to those matters as
a person who is not a partner. (TRPA 4.01(k); TRLPA 1.10.)
Sec. 154.202. EFFECT OF PARTNER CHANGE ON RELATIONSHIP
BETWEEN PARTNERSHIP AND CREDITORS. The relationships between a
partnership and its creditors are not affected by the:
(1) withdrawal of a partner; or
(2) addition of a new partner. (TRPA 2.06(c).)
Sec. 154.203. DISTRIBUTIONS IN KIND. (a) Except as
provided by the partnership agreement, a partner, regardless of the
nature of the partner's contribution, is not entitled to demand or
receive from a partnership a distribution in any form other than
cash.
(b) Except as provided by the partnership agreement, a
partner may not be compelled to accept a disproportionate
distribution of an asset in kind from a partnership to the extent
that the percentage portion of assets distributed to the partner
exceeds the percentage of those assets that equals the percentage
in which the partner shares in distributions from the partnership.
(TRPA 4.02; TRLPA 6.05.)
TITLE 5. REAL ESTATE INVESTMENT TRUSTS
CHAPTER 200. REAL ESTATE INVESTMENT TRUSTS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 200.001. DEFINITION. In this chapter, "real estate
investment trust" means an unincorporated trust:
(1) formed by one or more trust managers under this
chapter and Chapter 3; and
(2) managed under this chapter. (TREITA 2.10.)
Sec. 200.002. APPLICABILITY OF CHAPTER. (a) The provisions
of Chapters 20 and 21 govern a matter to the extent that this
chapter or Title 1 does not govern the matter.
(b) An unincorporated trust that does not meet the
requirements of this chapter is an unincorporated association.
(TREITA 28.10(A) (part), (B).)
Sec. 200.003. CONFLICT WITH OTHER LAW. In case of conflict
between this chapter and Chapters 20 and 21, this chapter controls.
Chapters 20 and 21 do not control over this chapter merely because a
provision of Chapter 20 or 21 is more or less extensive,
restrictive, or detailed than a similar provision of this chapter.
(TREITA 28.10(A) (part).)
Sec. 200.004. ULTRA VIRES ACTS. (a) Lack of capacity of a
real estate investment trust may not be the basis of any claim or
defense at law or in equity.
(b) An act of a real estate investment trust or a transfer of
property by or to a real estate investment trust is not invalid
because the act or transfer was:
(1) beyond the scope of the purpose or purposes of the
real estate investment trust as expressed in the real estate
investment trust's certificate of formation; or
(2) inconsistent with a limitation on the authority of
an officer or trust manager to exercise a statutory power of the
real estate investment trust, as that limitation is expressed in
the real estate investment trust's certificate of formation.
(c) The fact that an act or transfer is beyond the scope of
the expressed purpose or purposes of the real estate investment
trust or is inconsistent with an expressed limitation on the
authority of an officer or trust manager may be asserted in a
proceeding:
(1) by a shareholder against the real estate
investment trust to enjoin the performance of an act or the transfer
of property by or to the real estate investment trust; or
(2) by the real estate investment trust, acting
directly or through a receiver, trustee, or other legal
representative, or through shareholders in a representative suit,
against an officer or trust manager or former officer or trust
manager of the real estate investment trust for exceeding that
person's authority.
(d) If the unauthorized act or transfer sought to be
enjoined under Subsection (c)(1) is being or is to be performed or
made under a contract to which the real estate investment trust is a
party and if each party to the contract is a party to the
proceeding, the court may set aside and enjoin the performance of
the contract. The court may award to the real estate investment
trust or to another party to the contract, as appropriate,
compensation for loss or damage resulting from the action of the
court in setting aside and enjoining the performance of the
contract, excluding loss of anticipated profits. (TREITA 3.20.)
Sec. 200.005. SUPPLEMENTARY POWERS OF REAL ESTATE
INVESTMENT TRUST. (a) Subject to Section 2.113(a) and in addition
to the powers specified in Section 2.101, a real estate investment
trust may engage in activities mandated or authorized by:
(1) provisions of the Internal Revenue Code that are
related to or govern real estate investment trusts; and
(2) regulations adopted under the Internal Revenue
Code.
(b) This section does not authorize a real estate investment
trust or an officer or trust manager of a real estate investment
trust to exercise a power in a manner inconsistent with a limitation
on the purposes or powers of the real estate investment trust
contained in:
(1) the trust's certificate of formation;
(2) this code; or
(3) another law of this state. (TREITA 6.10(A)
(part), (B) (part).)
Sec. 200.006. REQUIREMENT THAT FILING INSTRUMENT BE SIGNED
BY OFFICER. Unless otherwise provided by this chapter, a filing
instrument of a real estate investment trust may be signed by an
officer of the real estate investment trust. (TREITA 22.40(A)
(part), 22.70(D) (part), 23.40(A) (part).)
[Sections 200.007-200.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 200.051. DECLARATION OF TRUST. For purposes of this
code, the certificate of formation of a real estate investment
trust is a declaration of trust. The certificate of formation may be
titled "declaration of trust" or "certificate of formation."
(New.)
Sec. 200.052. NO PROPERTY RIGHT IN CERTIFICATE OF
FORMATION. A shareholder of a real estate investment trust does not
have a vested property right resulting from the certificate of
formation, including a provision in the certificate of formation
relating to the management, control, capital structure, dividend
entitlement, purpose, or duration of the real estate investment
trust. (TREITA 22.10(B).)
Sec. 200.053. PROCEDURES TO ADOPT AMENDMENT TO CERTIFICATE
OF FORMATION. (a) To adopt an amendment to the certificate of
formation of a real estate investment trust as provided by
Subchapter B, Chapter 3, the trust managers shall:
(1) adopt a resolution stating the proposed amendment;
and
(2) follow the procedures prescribed by Sections
200.054-200.056.
(b) The resolution may incorporate the proposed amendment
in a restated certificate of formation that complies with Section
3.059. (TREITA 22.20.)
Sec. 200.054. ADOPTION OF AMENDMENT BY TRUST MANAGERS. If a
real estate investment trust does not have any issued and
outstanding shares, the trust managers may adopt a proposed
amendment to the real estate investment trust's certificate of
formation by resolution without shareholder approval. (TREITA
22.20(A) (part).)
Sec. 200.055. ADOPTION OF AMENDMENT BY SHAREHOLDERS. If a
real estate investment trust has issued and outstanding shares:
(1) a resolution described by Section 200.053 must
also direct that the proposed amendment be submitted to a vote of
the shareholders at a meeting; and
(2) the shareholders must approve the proposed
amendment in the manner provided by Section 200.056. (TREITA
22.20(A) (part).)
Sec. 200.056. NOTICE OF AND MEETING TO CONSIDER PROPOSED
AMENDMENT. (a) Each shareholder of record entitled to vote shall be
given written notice containing the proposed amendment or a summary
of the changes to be effected within the time and in the manner
provided by this code for giving notice of meetings to
shareholders. If the proposed amendment is to be considered at an
annual meeting, the proposed amendment or summary may be included
in the notice required to be provided for an annual meeting.
(b) At the meeting, the proposed amendment shall be adopted
only on receiving the affirmative vote of shareholders entitled to
vote required by Section 200.261.
(c) An unlimited number of amendments may be submitted for
adoption by the shareholders at a meeting. (TREITA 22.20(A)
(part), (B).)
Sec. 200.057. ADOPTION OF RESTATED CERTIFICATE OF
FORMATION. (a) A real estate investment trust may adopt a restated
certificate of formation as provided by Subchapter B, Chapter 3, by
following the same procedures to amend its certificate of formation
under Sections 200.053-200.056, except that shareholder approval
is not required if an amendment is not adopted.
(b) If shares of the real estate investment trust have not
been issued and the restated certificate of formation is adopted by
the trust managers, the majority of the trust managers may sign the
restated certificate of formation on behalf of the real estate
investment trust. (TREITA 22.70(A) (part), (D) (part).)
Sec. 200.058. BYLAWS. (a) The trust managers of a real
estate investment trust shall adopt initial bylaws.
(b) The bylaws may contain provisions for the regulation and
management of the affairs of the real estate investment trust that
are consistent with law and the real estate investment trust's
certificate of formation.
(c) The trust managers of a real estate investment trust may
amend or repeal bylaws or adopt new bylaws unless:
(1) the real estate investment trust's certificate of
formation or this chapter wholly or partly reserves the power
exclusively to the real estate investment trust's shareholders; or
(2) in amending, repealing, or adopting a bylaw, the
shareholders expressly provide that the trust managers may not
amend, repeal, or readopt that bylaw. (TREITA 9.10(A), (B).)
Sec. 200.059. DUAL AUTHORITY. Unless the certificate of
formation or a bylaw adopted by the shareholders provides otherwise
as to all or a part of a real estate investment trust's bylaws, the
shareholders of a real estate investment trust may amend, repeal,
or adopt the bylaws of the real estate investment trust even if the
bylaws may also be amended, repealed, or adopted by the trust
managers of the real estate investment trust. (TREITA 9.10(C).)
Sec. 200.060. ORGANIZATION MEETING. (a) After the real
estate investment trust has been formed, the initial trust managers
of the real estate investment trust shall hold an organization
meeting, at the call of a majority of those trust managers, for the
purpose of adopting bylaws, electing officers, and transacting
other business.
(b) Not later than the third day before the date of the
meeting, the initial trust managers calling the meeting shall send
notice of the time and place of the meeting to the other initial
trust managers named in the certificate of formation. (TREITA
3.10(C).)
[Sections 200.061-200.100 reserved for expansion]
SUBCHAPTER C. SHARES
Sec. 200.101. NUMBER. A real estate investment trust may
issue the number of shares stated in the real estate investment
trust's certificate of formation. (TREITA 3.10(A) (part).)
Sec. 200.102. CLASSIFICATION OF SHARES. A real estate
investment trust may provide in the real estate investment trust's
certificate of formation:
(1) that a specified class of shares is preferred over
another class of shares as to its distributive share of the assets
on voluntary or involuntary liquidation of the real estate
investment trust;
(2) the amount of a preference described by
Subdivision (1);
(3) that a specified class of shares may be redeemed at
the option of the real estate investment trust or of the holders of
the shares;
(4) the terms and conditions of a redemption of shares
described by Subdivision (3), including the time and price of
redemption;
(5) that a specified class of shares may be converted
into shares of one or more other classes;
(6) the terms and conditions of a conversion described
by Subdivision (5);
(7) that a holder of a specified security issued or to
be issued by the real estate investment trust has voting or other
rights authorized by law; and
(8) for other preferences, rights, restrictions,
including restrictions on transferability, and qualifications
consistent with law. (TREITA 3.30(A) (part).)
Sec. 200.103. CLASSES OF SHARES ESTABLISHED BY TRUST
MANAGERS. (a) A real estate investment trust may provide in the
real estate investment trust's certificate of formation that the
trust managers may classify or reclassify any unissued shares by
setting or changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the shares.
(b) Before issuing shares, the trust managers who perform as
authorized by the certificate of formation an action described by
Subsection (a) must file with the county clerk of the county of the
principal place of business of the real estate investment trust a
statement of designation that contains:
(1) a description of the shares, including the
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, as set or changed by the trust
managers; and
(2) a statement that the shares have been classified
or reclassified by the trust managers as authorized by the
certificate of formation. (TREITA 3.30(A) (part), (B).)
Sec. 200.104. ISSUANCE OF SHARES. (a) A real estate
investment trust may issue shares for consideration if authorized
by the trust managers.
(b) Shares may not be issued until the consideration,
determined in accordance with this subchapter, has been paid to the
real estate investment trust or to another entity of which all of
the outstanding ownership interests are directly or indirectly
owned by the real estate investment trust. When the consideration
is paid:
(1) the shares are considered to be issued;
(2) the shareholder entitled to receive the shares is
a shareholder with respect to the shares; and
(3) the shares are considered fully paid and
nonassessable. (TREITA 7.30(A) (part), (B) (part).)
Sec. 200.105. TYPES OF CONSIDERATION FOR ISSUANCE OF
SHARES. Shares with or without par value may be issued by a real
estate investment trust for the following types of consideration:
(1) a tangible or intangible benefit to the real
estate investment trust;
(2) cash;
(3) a promissory note;
(4) services performed or a contract for services to
be performed;
(5) a security of the real estate investment trust or
any other organization; and
(6) any other property of any kind or nature. (TREITA
7.30(B) (part).)
Sec. 200.106. DETERMINATION OF CONSIDERATION FOR SHARES.
Consideration to be received by a real estate investment trust for
shares shall be determined by the trust managers. (TREITA 7.30(A)
(part).)
Sec. 200.107. AMOUNT OF CONSIDERATION FOR ISSUANCE OF
SHARES WITH PAR VALUE. Consideration to be received by a real estate
investment trust for the issuance of shares with par value may not
be less than the par value of the shares. (TREITA 7.30(A) (part).)
Sec. 200.108. VALUE OF CONSIDERATION. In the absence of
fraud in the transaction, the judgment of the trust managers is
conclusive in determining the value of the consideration received
for the shares. (TREITA 7.30(C).)
Sec. 200.109. LIABILITY OF ASSIGNEE OR TRANSFEREE. An
assignee or transferee of certificated shares, uncertificated
shares, or a subscription for shares in good faith and without
knowledge that full consideration for the shares or subscription
has not been paid may not be held personally liable to the real
estate investment trust or a creditor of the real estate investment
trust for an unpaid portion of the consideration. (TREITA
8.10(C).)
Sec. 200.110. SUBSCRIPTIONS. (a) A real estate investment
trust may accept a subscription by notifying the subscriber in
writing.
(b) A subscription to purchase shares in a real estate
investment trust that is in the process of being formed is
irrevocable for six months if the subscription is in writing and
signed by the subscriber unless the subscription provides for a
longer or shorter period or all of the other subscribers agree to
the revocation of the subscription.
(c) A written subscription entered into after the real
estate investment trust is formed is a contract between the
subscriber and the real estate investment trust. (TREITA 7.10(A),
(C).)
Sec. 200.111. PREFORMATION SUBSCRIPTION. (a) A real estate
investment trust may determine the payment terms of a preformation
subscription unless the payment terms are specified by the
subscription. The payment terms may authorize payment in full on
acceptance or by installments.
(b) Unless the subscription provides otherwise, a real
estate investment trust shall make calls placed to all subscribers
of similar interests for payment on preformation subscriptions
uniform as far as practicable.
(c) After the real estate investment trust is formed, if a
subscriber fails to pay any installment or call when due, the real
estate investment trust may:
(1) collect in the same manner as any other debt the
amount due on any unpaid preformation subscription; or
(2) forfeit the subscription if the installment or
call remains unpaid for 20 days after written notice to the
subscriber.
(d) Although the forfeiture of a subscription terminates
all the rights and obligations of the subscriber, the real estate
investment trust may retain any amount previously paid on the
subscription. (TREITA 7.10(D).)
Sec. 200.112. COMMITMENT IN CONNECTION WITH PURCHASE OF
SHARES. (a) A person who contemplates the acquisition of shares in
a real estate investment trust may commit to act in a specified
manner with respect to the shares after the acquisition, including
the voting of the shares or the retention or disposition of the
shares. To be binding, the commitment must be in writing and be
signed by the person acquiring the shares.
(b) A written commitment entered into under Subsection (a)
is a contract between the shareholder and the real estate
investment trust. (New.)
Sec. 200.113. SUPPLEMENTAL REQUIRED RECORDS. In addition to
the books and records required to be kept under Section 3.151, a
real estate investment trust must keep at its principal office or
place of business, or at the office of its transfer agent or
registrar, a record of the number of shares held by each
shareholder. (TREITA 18.10(A) (part).)
[Sections 200.114-200.150 reserved for expansion]
SUBCHAPTER D. SHAREHOLDER RIGHTS AND RESTRICTIONS
Sec. 200.151. REGISTERED HOLDERS AS OWNERS. Except as
otherwise provided by this code and subject to Chapter 8, Business &
Commerce Code, a real estate investment trust may consider the
person registered as the owner of a share in the share transfer
records of the real estate investment trust at a particular time,
including a record date set under Section 6.102, as the owner of
that share at that time for purposes of:
(1) voting the share;
(2) receiving distributions on the share;
(3) transferring the share;
(4) receiving notice, exercising rights of dissent and
appraisal, exercising or waiving a preemptive right, or giving
proxies with respect to that share; or
(5) entering into agreements with respect to that
share in accordance with Section 6.251 or 6.252 or with this
subchapter. (TREITA 11.20(A).)
Sec. 200.152. NO STATUTORY PREEMPTIVE RIGHT UNLESS
SPECIFICALLY PROVIDED BY CERTIFICATE OF FORMATION. A shareholder of
a real estate investment trust does not have a preemptive right to
acquire securities except to the extent specifically provided by
the certificate of formation. (TREITA 3.30(A) (part).)
Sec. 200.153. CHARACTERIZATION AND TRANSFER OF SHARES AND
OTHER SECURITIES. Except as otherwise provided by this code, the
shares and other securities of a real estate investment trust are:
(1) personal property for all purposes; and
(2) transferable in accordance with Chapter 8,
Business & Commerce Code. (TREITA 7.40(A).)
Sec. 200.154. RESTRICTION ON TRANSFER OF SHARES AND OTHER
SECURITIES. (a) A restriction on the transfer or registration of
transfer of a security may be imposed by:
(1) the real estate investment trust's certificate of
formation;
(2) the real estate investment trust's bylaws;
(3) a written agreement among two or more holders of
the securities; or
(4) a written agreement among one or more holders of
the securities and the real estate investment trust if:
(A) the real estate investment trust files a copy
of the agreement at the principal place of business or registered
office of the real estate investment trust; and
(B) the copy of the agreement is subject to the
same right of examination by a shareholder of the real estate
investment trust, in person or by agent, attorney, or accountant,
as the books and records of the real estate investment trust.
(b) A restriction imposed under Subsection (a) is not valid
with respect to a security issued before the restriction has been
adopted, unless the holder of the security voted in favor of the
restriction or is a party to the agreement imposing the
restriction. (TREITA 7.40(B).)
Sec. 200.155. VALID RESTRICTION ON TRANSFER.
Notwithstanding Sections 200.154 and 200.157, a restriction placed
on the transfer or registration of transfer of a security of a real
estate investment trust is valid if the restriction reasonably:
(1) obligates the holder of the restricted security to
offer a person, including the real estate investment trust or other
holders of securities of the real estate investment trust, an
opportunity to acquire the restricted security within a reasonable
time before the transfer;
(2) obligates the real estate investment trust, to the
extent provided by this code, or another person to purchase a
security that is the subject of an agreement relating to the
purchase and sale of the restricted security;
(3) requires the real estate investment trust or the
holders of a class of the real estate investment trust's securities
to consent to a proposed transfer of the restricted security or to
approve the proposed transferee of the restricted security for the
purpose of preventing a violation of law;
(4) prohibits the transfer of the restricted security
to a designated person or group of persons and the designation is
not manifestly unreasonable; or
(5) maintains a tax advantage to the real estate
investment trust, including maintaining its status as a real estate
investment trust under the relevant provisions of the Internal
Revenue Code and regulations adopted under the Internal Revenue
Code. (TREITA 7.40(E).)
Sec. 200.156. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF
SHARES OR OTHER SECURITIES. (a) A real estate investment trust that
has adopted a bylaw or is a party to an agreement that restricts the
transfer of the shares or other securities of the real estate
investment trust may file with the county clerk of the county of the
principal place of business of the real estate investment trust a
copy of the bylaw or agreement and a statement attached to the copy
that:
(1) contains the name of the real estate investment
trust;
(2) states that the attached copy of the bylaw or
agreement is a true and correct copy of the bylaw or agreement; and
(3) states that the filing has been authorized by the
trust managers or shareholders, as appropriate.
(b) After the statement is filed with the county clerk, the
bylaws or agreement restricting the transfer of shares or other
securities is a public record, and the fact that the statement has
been filed must be stated on a certificate representing the
restricted shares or securities if required by Section 3.202.
(c) A real estate investment trust that is a party to an
agreement restricting the transfer of the shares or other
securities of the real estate investment trust may make the
agreement part of the real estate investment trust's certificate of
formation without restating the provisions of the agreement in the
certificate of formation by complying with this code or amending
the certificate of formation. If the agreement alters the original
or amended certificate of formation, the altered provision must be
identified by reference or description in the certificate of
amendment. If the agreement is an addition to the original or
amended certificate of formation, the certificate of amendment must
state that fact.
(d) The certificate of amendment must:
(1) include a copy of the agreement restricting the
transfer of shares or other securities;
(2) state that the attached copy of the agreement is a
true and correct copy of the agreement; and
(3) state that inclusion of the certificate of
amendment as part of the certificate of formation has been
authorized in the manner required by this code to amend the
certificate of formation. (TREITA 7.40(F)(1), (2), (4), (G).)
Sec. 200.157. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF
CERTAIN SECURITIES. (a) A restriction placed on the transfer or
registration of the transfer of a security of a real estate
investment trust is specifically enforceable against the holder, or
a successor or transferee of the holder, if:
(1) the restriction is reasonable and noted
conspicuously on the certificate or other instrument representing
the security; or
(2) with respect to an uncertificated security, the
restriction is reasonable and a notation of the restriction is
contained in the notice sent with respect to the security under
Section 3.205.
(b) Unless noted in the manner specified by Subsection (a)
with respect to a certificate or other instrument or an
uncertificated security, an otherwise enforceable restriction is
ineffective against a transferee for value without actual knowledge
of the restriction at the time of the transfer or against a
subsequent transferee, regardless of whether the transfer is for
value. A restriction is specifically enforceable against a person
other than a transferee for value from the time the person acquires
actual knowledge of the restriction's existence. (TREITA 7.40(C),
(D).)
Sec. 200.158. JOINT OWNERSHIP OF SHARES. (a) If shares are
registered on the books of a real estate investment trust in the
names of two or more persons as joint owners with the right of
survivorship and one of the owners dies, the real estate investment
trust may record on its books and effect the transfer of the shares
to a person, including the surviving joint owner, and pay any
distributions made with respect to the shares, as if the surviving
joint owner was the sole owner of the shares. The recording and
distribution authorized by this subsection must be made after the
death of a joint owner and before the real estate investment trust
receives actual written notice that a party other than a surviving
joint owner is claiming an interest in the shares or distribution.
(b) The discharge of a real estate investment trust from
liability under Section 200.160 and the transfer of full legal and
equitable title of the shares does not affect, reduce, or limit any
cause of action existing in favor of an owner of an interest in the
shares or distribution against the surviving owner. (TREITA
7.40(H) (part).)
Sec. 200.159. LIABILITY FOR DESIGNATING OWNER OF SHARES. A
real estate investment trust or an officer, trust manager,
employee, or agent of the real estate investment trust may not be
held liable for considering a person to be the owner of a share for a
purpose described by Section 200.151, regardless of whether the
person possesses a certificate for those shares. (TREITA
11.20(B).)
Sec. 200.160. LIABILITY REGARDING JOINT OWNERSHIP OF
SHARES. A real estate investment trust that transfers shares or
makes a distribution to a surviving joint owner under Section
200.158 before the real estate investment trust has received a
written claim for the shares or distribution from another person is
discharged from liability for the transfer or payment. (TREITA
7.40(H) (part).)
Sec. 200.161. LIMITATION OF LIABILITY FOR OBLIGATIONS. (a)
A holder of shares, an owner of any beneficial interest in shares,
or a subscriber for shares whose subscription has been accepted is
not under an obligation to the real estate investment trust or its
obligees with respect to:
(1) the shares, other than the obligation to pay to the
real estate investment trust the full amount of consideration,
fixed in compliance with Sections 200.104-200.108, for which the
shares were or are to be issued;
(2) any contractual obligation of the real estate
investment trust on the basis that the holder, beneficial owner, or
subscriber is or was the alter ego of the real estate investment
trust or on the basis of actual or constructive fraud, a sham to
perpetrate a fraud, or other similar theory; or
(3) any obligation of the real estate investment trust
on the basis of the failure of the real estate investment trust to
observe any formality, including the failure to:
(A) comply with this code or the declaration of
trust or bylaws of the real estate investment trust; or
(B) observe any requirement prescribed by this
code or the declaration of trust or bylaws of the real estate
investment trust for acts to be taken by the real estate investment
trust or its trust managers or shareholders.
(b) Subsection (a)(2) does not prevent or limit the
liability of a holder, beneficial owner, or subscriber if the
obligee demonstrates that the holder, beneficial owner, or
subscriber caused the real estate investment trust to be used for
the purpose of perpetrating and did perpetrate an actual fraud on
the obligee primarily for the direct personal benefit of the
holder, beneficial owner, or subscriber. (TREITA 8.10(A).)
Sec. 200.162. PREEMPTION OF LIABILITY. The liability of a
holder, beneficial owner, or subscriber of shares of a real estate
investment trust for an obligation that is limited by Section
200.161 is exclusive and preempts any other liability imposed for
that obligation under common law or otherwise. (TREITA 8.10(B)
(part).)
Sec. 200.163. EXCEPTIONS TO LIMITATIONS. Section 200.161 or
200.162 does not limit the obligation of a holder, beneficial
owner, or subscriber to the obligee of the real estate investment
trust if that person:
(1) expressly assumes, guarantees, or agrees to be
personally liable to the obligee for the obligation; or
(2) is otherwise liable to the obligee for the
obligation under this code or other applicable statute. (TREITA
8.10(B) (part).)
Sec. 200.164. PLEDGEES AND TRUST ADMINISTRATORS. (a) A
pledgee or other holder of shares as collateral security is not
personally liable as a shareholder.
(b) An executor, administrator, conservator, guardian,
trustee, assignee for the benefit of creditors, or receiver is not
personally liable as a holder of or subscriber to shares of a real
estate investment trust.
(c) The estate and funds administered by an executor,
administrator, conservator, guardian, trustee, assignee for the
benefit of creditors, or receiver are liable for the full amount of
the consideration for which the shares were or are to be issued.
(TREITA 8.10(D), (E).)
[Sections 200.165-200.200 reserved for expansion]
SUBCHAPTER E. DISTRIBUTIONS AND SHARE DIVIDENDS
Sec. 200.201. AUTHORITY FOR DISTRIBUTIONS. The trust
managers of a real estate investment trust may authorize a
distribution and the real estate investment trust may make a
distribution, subject to Section 200.202 and any restriction in the
certificate of formation. (TREITA 14.10(A).)
Sec. 200.202. LIMITATIONS ON DISTRIBUTIONS. (a) A real
estate investment trust may not make a distribution:
(1) if the real estate investment trust would be
insolvent after the distribution; or
(2) that is more than the surplus of the real estate
investment trust.
(b) Notwithstanding Subsection (a)(2), if the net assets of
a real estate investment trust are not less than the amount of the
proposed distribution, the real estate investment trust may make a
distribution involving a purchase or redemption of its own shares
if the purchase or redemption is made by the real estate investment
trust to:
(1) eliminate fractional shares;
(2) collect or settle indebtedness owed by or to the
real estate investment trust;
(3) pay dissenting shareholders entitled to receive
payment for their shares under this chapter; or
(4) effect the purchase or redemption of redeemable
shares in accordance with this code. (TREITA 14.10(B), (C).)
Sec. 200.203. PRIORITY OF DISTRIBUTIONS. A real estate
investment trust's indebtedness that arises as a result of the
declaration of a distribution and a real estate investment trust's
indebtedness issued in a distribution are at parity with the real
estate investment trust's indebtedness to its general, unsecured
creditors, except to the extent the indebtedness is subordinated,
or payment of that indebtedness is secured, by agreement. (TREITA
14.10(D).)
Sec. 200.204. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM
SURPLUS. (a) A real estate investment trust, by resolution of the
trust managers of the real estate investment trust, may:
(1) create a reserve out of the surplus of the real
estate investment trust; or
(2) designate or allocate in any manner a part or all
of the real estate investment trust's surplus for a proper purpose.
(b) A real estate investment trust may increase, decrease,
or abolish a reserve, designation, or allocation in the manner
provided by Subsection (a). (TREITA 14.60.)
Sec. 200.205. AUTHORITY FOR SHARE DIVIDENDS. The trust
managers of a real estate investment trust may authorize a share
dividend, and the real estate investment trust may pay a share
dividend subject to Section 200.206 and any restriction in the
certificate of formation. (TREITA 14.20(A).)
Sec. 200.206. LIMITATIONS ON SHARE DIVIDENDS. (a) A real
estate investment trust may not pay a share dividend in authorized
but unissued shares of any class if the surplus of the real estate
investment trust is less than the amount required by Section
200.208 to be transferred to stated capital at the time the share
dividend is made.
(b) A share dividend in shares of any class may not be made
to a holder of shares of any other class unless:
(1) the real estate investment trust's certificate of
formation provides for the dividend; or
(2) the share dividend is authorized by the
affirmative vote or the written consent of the holders of at least a
majority of the outstanding shares of the class in which the share
dividend is to be made. (TREITA 14.20(B), (E).)
Sec. 200.207. VALUE OF SHARES ISSUED AS SHARE DIVIDENDS.
(a) A share dividend payable in authorized but unissued shares with
par value shall be issued at the par value of the shares.
(b) A share dividend payable in authorized but unissued
shares without par value shall be issued at the value set by the
trust managers when the share dividend is authorized. (TREITA
14.20(C) (part), (D) (part).)
Sec. 200.208. TRANSFER OF SURPLUS FOR SHARE DIVIDENDS. (a)
When a share dividend payable in authorized but unissued shares
with par value is made by a real estate investment trust, an amount
of surplus designated by the trust managers that is not less than
the aggregate par value of the shares issued as a share dividend
shall be transferred to stated capital.
(b) When a share dividend payable in authorized but unissued
shares without par value is made by a real estate investment trust,
an amount of surplus equal to the aggregate value set by the trust
managers with respect to the shares under Section 200.207(b) shall
be transferred to stated capital. (TREITA 14.20(C) (part), (D)
(part).)
Sec. 200.209. DETERMINATION OF SOLVENCY, NET ASSETS, STATED
CAPITAL, AND SURPLUS. (a) The determination of whether a real
estate investment trust is or would be insolvent and the
determination of the value of a real estate investment trust's net
assets, stated capital, or surplus and each of the components of net
assets, stated capital, or surplus may be based on:
(1) financial statements of the real estate investment
trust that present the financial condition of the real estate
investment trust in accordance with generally accepted accounting
principles, including financial statements that include subsidiary
entities or other entities accounted for on a consolidated basis or
on the equity method of accounting;
(2) financial statements prepared using the method of
accounting used to file the real estate investment trust's federal
income tax return or using any other accounting practices and
principles that are reasonable under the circumstances;
(3) financial information, including condensed or
summary financial statements, that is prepared on the same basis as
financial statements described by Subdivision (1) or (2);
(4) a projection, a forecast, or other forward-looking
information relating to the future economic performance, financial
condition, or liquidity of the real estate investment trust that is
reasonable under the circumstances;
(5) a fair valuation or information from any other
method that is reasonable under the circumstances; or
(6) a combination of a statement, a valuation, or
information authorized by this section.
(b) Subsection (a) does not apply to the computation of any
tax imposed under the laws of this state. (TREITA 14.40.)
Sec. 200.210. DATE OF DETERMINATION OF SURPLUS. (a) For
purposes of this subchapter, a determination of whether a real
estate investment trust is or would be made insolvent by a
distribution or share dividend or a determination of the value of a
real estate investment trust's surplus shall be made:
(1) on the date the distribution or share dividend is
authorized by the trust managers of the real estate investment
trust if the distribution or the share dividend is made not later
than the 120th day after the date of authorization; or
(2) if the distribution or the share dividend is made
more than 120 days after the date of authorization:
(A) on the date designated by the trust managers
if the date so designated is not earlier than 120 days before the
date the distribution or the share dividend is made; or
(B) on the date the distribution or the share
dividend is made if the trust managers do not designate a date as
described in Paragraph (A).
(b) For purposes of this section, a distribution that
involves:
(1) the incurrence by a real estate investment trust
of indebtedness or a deferred payment obligation is considered to
have been made on the date the indebtedness or obligation is
incurred; or
(2) a contract by the real estate investment trust to
acquire any of its own shares is considered to have been made on the
date when the contract is made or takes effect or on the date the
shares are acquired, at the option of the real estate investment
trust. (TREITA 14.50.)
Sec. 200.211. SPLIT-UP OR DIVISION OF SHARES. The trust
managers of a real estate investment trust may authorize the real
estate investment trust to carry out any split-up or division of the
issued shares of a class of the real estate investment trust into a
larger number of shares within the same class that does not increase
the stated capital of the real estate investment trust because the
split-up or division of issued shares is not a share dividend or a
distribution. (TREITA 14.30.)
[Sections 200.212-200.250 reserved for expansion]
SUBCHAPTER F. SHAREHOLDERS' MEETINGS; VOTING AND QUORUM
Sec. 200.251. ANNUAL MEETING. (a) An annual meeting of the
shareholders of a real estate investment trust shall be held at a
time that is stated in or set in accordance with the bylaws of the
real estate investment trust.
(b) If the annual meeting is not held at the designated
time, a shareholder may by certified or registered mail make a
written request to an officer or trust manager of the real estate
investment trust that the meeting be held within a reasonable time.
If the annual meeting is not called before the 61st day after the
date the request calling for a meeting is made, any shareholder may
bring suit at law or in equity to compel the meeting to be held.
(c) Each shareholder has a justifiable interest sufficient
to enable the shareholder to institute and prosecute a legal
proceeding described by this section.
(d) The failure to hold an annual meeting at the designated
time does not result in the winding up or termination of the real
estate investment trust. (TREITA 10.10(B).)
Sec. 200.252. SPECIAL MEETINGS. A special meeting of the
shareholders of a real estate investment trust may be called by:
(1) a trust manager, an officer of the real estate
investment trust, or any other person authorized to call special
meetings by the certificate of formation or bylaws of the real
estate investment trust; or
(2) the holders of at least 10 percent of all of the
shares of the real estate investment trust entitled to vote at the
proposed special meeting unless a greater or lesser percentage of
shares is specified in the certificate of formation, not to exceed
50 percent of the shares entitled to vote. (TREITA 10.10(C).)
Sec. 200.253. NOTICE OF MEETING. (a) Written notice of a
meeting in accordance with Section 6.051 shall be given to each
shareholder entitled to vote at the meeting not later than the 10th
day and not earlier than the 60th day before the date of the
meeting. Notice shall be given in person or by mail by or at the
direction of a trust manager, officer, or other person calling the
meeting.
(b) The notice of a special meeting must contain a statement
regarding the purpose or purposes of the meeting. (TREITA 11.10(A)
(part).)
Sec. 200.254. CLOSING OF SHARE TRANSFER RECORDS. Share
transfer records that are closed in accordance with Section 6.101
for the purpose of determining which shareholders are entitled to
receive notice of a meeting of shareholders shall remain closed for
at least 10 days immediately preceding the date of the meeting.
(TREITA 11.20(C) (part).)
Sec. 200.255. RECORD DATE FOR WRITTEN CONSENT TO ACTION.
The record date provided in accordance with Section 6.102(a) may
not be more than 10 days after the date on which the trust managers
adopt the resolution setting the record date. (TREITA 11.20(D)
(part).)
Sec. 200.256. RECORD DATE FOR PURPOSE OTHER THAN WRITTEN
CONSENT TO ACTION. The record date provided by the trust managers in
accordance with Section 6.101 must be at least 10 days before the
date on which the particular action requiring the determination of
shareholders is to be taken. (TREITA 11.20(C) (part).)
Sec. 200.257. QUORUM. (a) Subject to Subsection (b), the
holders of the majority of the shares entitled to vote at a meeting
of the shareholders of a real estate investment trust that are
present or represented by proxy at the meeting are a quorum for the
consideration of a matter to be presented at that meeting.
(b) The certificate of formation of a real estate investment
trust may provide that a quorum is present only if:
(1) the holders of a specified portion of the shares
that is greater than the majority of the shares entitled to vote are
represented at the meeting in person or by proxy; or
(2) the holders of a specified portion of the shares
that is less than the majority but not less than one-third of the
shares entitled to vote are represented at the meeting in person or
by proxy.
(c) Unless provided by the certificate of formation or
bylaws of the real estate investment trust, after a quorum is
present at a meeting of shareholders, the shareholders may conduct
business properly brought before the meeting until the meeting is
adjourned. The subsequent withdrawal from the meeting of a
shareholder or the refusal of a shareholder present at or
represented by proxy at the meeting to vote does not negate the
presence of a quorum at the meeting.
(d) Unless provided by the certificate of formation or
bylaws, the shareholders of the real estate investment trust at a
meeting at which a quorum is not present may adjourn the meeting
until the time and to the place as may be determined by a vote of the
holders of the majority of the shares who are present or represented
by proxy at the meeting. (TREITA 12.10(A), (B).)
Sec. 200.258. VOTING IN ELECTION OF TRUST MANAGERS. (a)
Subject to Subsection (b), trust managers of a real estate
investment trust shall be elected by two-thirds of the votes cast by
the holders of shares entitled to vote in the election of trust
managers at a meeting of shareholders at which a quorum is present.
(b) The certificate of formation or bylaws of a real estate
investment trust may provide that a trust manager of the real estate
investment trust shall be elected only if the trust manager
receives:
(1) the vote of the holders of a specified portion, but
not less than the majority, of the shares entitled to vote in the
election of trust managers;
(2) the vote of the holders of a specified portion, but
not less than the majority, of the shares entitled to vote in the
election of trust managers and represented in person or by proxy at
a meeting of shareholders at which a quorum is present; or
(3) the vote of the holders of a specified portion, but
not less than the majority, of the votes cast by the holders of
shares entitled to vote in the election of trust managers at a
meeting of shareholders at which a quorum is present.
(c) Subject to Section 200.259, at each election of trust
managers of a real estate investment trust, each shareholder
entitled to vote at the election is entitled to vote, in person or
by proxy, the number of shares owned by the shareholder for as many
candidates as there are trust managers to be elected and for whose
election the shareholder is entitled to vote. (TREITA 12.10(D),
13.10(E)(1).)
Sec. 200.259. CUMULATIVE VOTING IN ELECTION OF TRUST
MANAGERS. (a) Cumulative voting is allowed only if specifically
authorized by the certificate of formation of a real estate
investment trust.
(b) Cumulative voting occurs when a shareholder:
(1) gives one candidate as many votes as the total of
the number of the trust managers to be elected multiplied by the
shareholder's shares; or
(2) distributes the votes among one or more candidates
using the same principle.
(c) If cumulative voting is specifically authorized by the
certificate of formation, a shareholder who intends to cumulate
votes must give written notice of that intention to the trust
managers on or before the day preceding the date of the election at
which the shareholder intends to cumulate votes. (TREITA
13.10(E)(2).)
Sec. 200.260. VOTING ON MATTERS OTHER THAN ELECTION OF
TRUST MANAGERS. (a) Subject to Subsection (b), with respect to a
matter other than the election of trust managers or a matter for
which the affirmative vote of the holders of a specified portion of
the shares entitled to vote is required by this code, the
affirmative vote of the holders of the majority of the shares
entitled to vote on, and who voted for, against, or expressly
abstained with respect to, the matter at a shareholders' meeting of
a real estate investment trust at which a quorum is present is the
act of the shareholders.
(b) With respect to a matter other than the election of
trust managers or a matter for which the affirmative vote of the
holders of a specified portion of the shares entitled to vote is
required by this code, the certificate of formation or bylaws of a
real estate investment trust may provide that the act of the
shareholders of the real estate investment trust is:
(1) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on that matter;
(2) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on that matter and represented in person or by proxy at a
shareholders' meeting at which a quorum is present;
(3) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on, and who voted for or against, the matter at a shareholders'
meeting at which a quorum is present; or
(4) the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares entitled to
vote on, and who voted for, against, or expressly abstained with
respect to, the matter at a shareholders' meeting at which a quorum
is present. (TREITA 12.10(C).)
Sec. 200.261. VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTION.
(a) In this section, a "fundamental action" means:
(1) an amendment of a certificate of formation;
(2) a voluntary winding up under Chapter 11;
(3) a revocation of a voluntary decision to wind up
under Section 11.151;
(4) a cancellation of an event requiring winding up
under Section 11.152; or
(5) a reinstatement under Section 11.202.
(b) Except as otherwise provided by this code or the
certificate of formation or bylaws of a real estate investment
trust in accordance with Section 200.260, the vote required for
approval of a fundamental action by the shareholders is the
affirmative vote of the holders of at least two-thirds of the
outstanding shares entitled to vote on the fundamental action.
(c) If a class or series of shares is entitled to vote as a
class or series on a fundamental action, the vote required for
approval of the action by the shareholders is the affirmative vote
of the holders of at least two-thirds of the outstanding shares in
each class or series of shares entitled to vote on the action as a
class and at least two-thirds of the outstanding shares otherwise
entitled to vote on the action. Shares entitled to vote as a class
or series shall be entitled to vote only as a class or series unless
otherwise entitled to vote on each matter generally or otherwise
provided by the certificate of formation.
(d) Unless an amendment to the certificate of formation is
undertaken by the trust managers under Section 200.103, separate
voting by a class or series of shares of a real estate investment
trust is required for approval of an amendment to the certificate of
formation that would result in:
(1) the increase or decrease of the aggregate number
of authorized shares of the class or series;
(2) the increase or decrease of the par value of the
shares of the class, including changing shares with par value into
shares without par value or changing shares without par value into
shares with par value;
(3) effecting an exchange, reclassification, or
cancellation of all or part of the shares of the class or series;
(4) effecting an exchange or creating a right of
exchange of all or part of the shares of another class or series
into the shares of the class or series;
(5) the change of the designations, preferences,
limitations, or relative rights of the shares of the class or
series;
(6) the change of the shares of the class or series,
with or without par value, into the same or a different number of
shares, with or without par value, of the same class or series or
another class or series;
(7) the creation of a new class or series of shares
with rights and preferences equal, prior, or superior to the shares
of the class or series;
(8) increasing the rights and preferences of a class
or series with rights and preferences equal, prior, or superior to
the shares of the class or series;
(9) increasing the rights and preferences of a class
or series with rights or preferences later or inferior to the shares
of the class or series in such a manner that the rights or
preferences will be equal, prior, or superior to the shares of the
class or series;
(10) dividing the shares of the class into series and
setting and determining the designation of the series and the
variations in the relative rights and preferences between the
shares of the series;
(11) the limitation or denial of existing preemptive
rights or cumulative voting rights of the shares of the class or
series; or
(12) canceling or otherwise affecting the dividends on
the shares of the class or series that have accrued but have not
been declared.
(e) Unless otherwise provided by the certificate of
formation, if the holders of the outstanding shares of a class that
is divided into series are entitled to vote as a class on a proposed
amendment that would affect equally all series of the class, other
than a series in which no shares are outstanding or a series that is
not affected by the amendment, the holders of the separate series
are not entitled to separate class votes.
(f) Unless otherwise provided by the certificate of
formation, a proposed amendment to the certificate of formation
that would solely effect changes in the designations, preferences,
limitations, or relative rights, including voting rights, of one or
more series of shares of the real estate investment trust that have
been established under the authority granted to the trust managers
in the certificate of formation in accordance with Section 200.103
does not require the approval of the holders of the outstanding
shares of a class or series other than the affected series if, after
giving effect to the amendment:
(1) the preferences, limitations, or relative rights
of the affected series may be set and determined by the trust
managers with respect to the establishment of a new series of shares
under the authority granted to the trust managers in the
certificate of formation in accordance with Section 200.103; or
(2) any new series established as a result of a
reclassification of the affected series are within the preferences,
limitations, and relative rights that are described by Subdivision
(1). (TREITA 19.10 (part), 22.20(A) (part), 22.30.)
Sec. 200.262. CHANGES IN VOTE REQUIRED FOR CERTAIN MATTERS.
(a) With respect to a matter for which the affirmative vote of the
holders of a specified portion of the shares entitled to vote is
required by this code, the certificate of formation of a real estate
investment trust may provide that the affirmative vote of the
holders of a specified portion, but not less than the majority, of
the shares entitled to vote on that matter is required for
shareholder action on that matter.
(b) With respect to a matter for which the affirmative vote
of the holders of a specified portion of the shares of a class or
series is required by this code, the certificate of formation may
provide that the affirmative vote of the holders of a specified
portion, but not less than the majority, of the shares of that class
or series is required for action of the holders of shares of that
class or series on that matter.
(c) If a provision of the certificate of formation provides
that the affirmative vote of the holders of a specified portion that
is greater than the majority of the shares entitled to vote on a
matter is required for shareholder action on that matter, the
provision may not be amended, directly or indirectly, without the
same affirmative vote unless otherwise provided by the certificate
of formation.
(d) If a provision of the certificate of formation provides
that the affirmative vote of the holders of a specified portion that
is greater than the majority of the shares of a class or series is
required for shareholder action on a matter, the provision may not
be amended, directly or indirectly, without the same affirmative
vote unless otherwise provided by the certificate of formation.
(TREITA 12.10(E).)
Sec. 200.263. NUMBER OF VOTES PER SHARE. (a) Except as
provided by the certificate of formation of a real estate
investment trust or this title or Title 1, each outstanding share,
regardless of class, is entitled to one vote on each matter
submitted to a vote at a shareholders' meeting.
(b) If the certificate of formation provides for more or
less than one vote per share on a matter for all of the outstanding
shares or for the shares of a class or series, each reference in
this code or in the certificate of formation or bylaws, unless
expressly stated otherwise, to a specified portion of the shares
with respect to that matter refers to the portion of the votes
entitled to be cast with respect to those shares under the
certificate of formation. (TREITA 13.10(A).)
Sec. 200.264. VOTING IN PERSON OR BY PROXY. (a) A
shareholder may vote in person or by proxy executed in writing by
the shareholder.
(b) A telegram, telex, cablegram, or other form of
electronic transmission, including telephonic transmission, by the
shareholder, or a photographic, photostatic, facsimile, or similar
reproduction of a writing executed by the shareholder, is
considered an execution in writing for purposes of this section.
Any electronic transmission must contain or be accompanied by
information from which it can be determined that the transmission
was authorized by the shareholder. (TREITA 13.10(C) (part).)
Sec. 200.265. TERM OF PROXY. A proxy is not valid after 11
months after the date the proxy is executed unless otherwise
provided by the proxy. (TREITA 13.10(C) (part).)
Sec. 200.266. REVOCABILITY OF PROXY. (a) In this section, a
"proxy coupled with an interest" includes the appointment as proxy
of:
(1) a pledgee;
(2) a person who purchased or agreed to purchase the
shares subject to the proxy;
(3) a person who owns or holds an option to purchase
the shares subject to the proxy;
(4) a creditor of the real estate investment trust who
extended the real estate investment trust credit under terms
requiring the appointment;
(5) an employee of the real estate investment trust
whose employment contract requires the appointment; or
(6) a party to a voting agreement created under
Section 6.252.
(b) A proxy is revocable unless:
(1) the proxy form conspicuously states that the proxy
is irrevocable; and
(2) the proxy is coupled with an interest. (TREITA
13.10(C) (part).)
Sec. 200.267. ENFORCEABILITY OF PROXY. (a) An irrevocable
proxy is specifically enforceable against the holder of shares or
any successor or transferee of the holder if:
(1) the proxy is noted conspicuously on the
certificate representing the shares subject to the proxy; or
(2) in the case of uncertificated shares, notation of
the proxy is contained in the notice sent under Section 3.205 with
respect to the shares subject to the proxy.
(b) An irrevocable proxy that is otherwise enforceable is
ineffective against a transferee for value without actual knowledge
of the existence of the irrevocable proxy at the time of the
transfer or against a subsequent transferee, regardless of whether
the transfer is for value, unless:
(1) the proxy is noted conspicuously on the
certificate representing the shares subject to the proxy; or
(2) in the case of uncertificated shares, notation of
the proxy is contained in the notice sent under Section 3.205 with
respect to the shares subject to the proxy.
(c) An irrevocable proxy shall be specifically enforceable
against a person who is not a transferee for value from the time the
person acquires actual knowledge of the existence of the
irrevocable proxy. (TREITA 13.10(D).)
Sec. 200.268. PROCEDURES IN BYLAWS RELATING TO PROXIES. A
real estate investment trust may establish in the bylaws of the real
estate investment trust procedures consistent with this code for
determining the validity of proxies and determining whether shares
held of record by a bank, broker, or other nominee are represented
at a meeting of shareholders. The procedures may incorporate rules
of and determinations made by a self-regulatory organization
regulating that bank, broker, or other nominee. (TREITA 12.10(F).)
[Sections 200.269-200.300 reserved for expansion]
SUBCHAPTER G. TRUST MANAGERS
Sec. 200.301. MANAGEMENT BY TRUST MANAGERS. The control,
operation, disposition, investment, and management of the trust
estate and the powers necessary or appropriate to effect any
purpose for which a real estate investment trust is organized are
vested in one or more trust managers. (TREITA 4.10(A) (part).)
Sec. 200.302. DESIGNATION OF TRUST MANAGERS. (a) The
certificate of formation of a real estate investment trust must
contain the name of each trust manager.
(b) A successor trust manager must be selected in accordance
with the certificate of formation. The selection of a successor
trust manager is considered an amendment to the certificate of
formation of a real estate investment trust. (TREITA 4.10(A)
(part).)
Sec. 200.303. TRUST MANAGER ELIGIBILITY REQUIREMENTS. A
trust manager of a real estate investment trust must be an
individual. Unless the certificate of formation or bylaws of a real
estate investment trust provide otherwise, a person is not required
to be a resident of this state or a shareholder of the real estate
investment trust to serve as a trust manager. The certificate of
formation or bylaws may prescribe other qualifications for trust
managers. (TREITA 4.10(A) (part).)
Sec. 200.304. NUMBER OF TRUST MANAGERS. (a) The
certificate of formation or bylaws of the real estate investment
trust shall set the number of trust managers or provide for the
manner of determining the number of trust managers, except that the
certificate of formation shall set the number constituting the
initial trust managers.
(b) The number of trust managers may be increased or
decreased by amendment to, or as provided by, the certificate of
formation or bylaws. A decrease in the number of trust managers may
not shorten the term of an incumbent trust manager. (TREITA 4.10(B)
(part).)
Sec. 200.305. COMPENSATION. A trust manager or officer of a
real estate investment trust is entitled to receive compensation
set by or in the manner provided by the certificate of formation or
bylaws of the real estate investment trust. If the certificate of
formation or bylaws do not provide for compensation to trust
managers and officers, the trust managers of the real estate
investment trust must determine the compensation by vote at a
meeting or by written consent. (TREITA 4.10(H).)
Sec. 200.306. TERM OF TRUST MANAGER. (a) Except as provided
by the certificate of formation or bylaws of a real estate
investment trust, a trust manager of the real estate investment
trust serves until the trust manager's successor is elected.
(b) A trust manager may succeed himself or herself in
office.
(c) If a successor trust manager is not elected, the trust
manager in office continues to serve as trust manager until the
trust manager's successor is elected. (TREITA 4.10(B) (part).)
Sec. 200.307. STAGGERED TERMS OF TRUST MANAGERS. (a) A
governing document of a real estate investment trust may provide
that all or some of the board of trust managers may be divided into
two or three classes. Each class must include the same or a similar
number of trust managers as each other class.
(b) The terms of office of trust managers constituting the
first class expire on the election of successors at the first annual
meeting of shareholders after the election of those trust managers.
The terms of office of trust managers constituting the second class
expire on the election of successors at the second annual meeting of
shareholders after election of those trust managers. The terms of
office of trust managers constituting the third class, if any,
expire on the election of successors at the third annual meeting of
shareholders after election of those trust managers.
(c) If a governing document of the real estate investment
trust provides for the classification of trust managers, an annual
election for trust managers as a whole is not necessary. At each
annual meeting held after the classification of trust managers, an
election shall be held to elect the number of trust managers equal
to the number of trust managers in the class the term of which
expires on the date of the meeting, and those trust managers serve
until:
(1) the second succeeding annual meeting if there are
two classes; or
(2) the third succeeding annual meeting if there are
three classes.
(d) Unless provided by the certificate of formation or a
bylaw adopted by shareholders, staggered terms for trust managers
do not take effect until the next annual meeting of shareholders at
which trust managers are elected. Staggered terms for trust
managers may not be effected if any shareholder has the right to
cumulate votes for the election of trust managers and the number of
trust managers is fewer than nine trust managers. (TREITA
4.10(C).)
Sec. 200.308. VACANCY. (a) Except as provided by
Subsection (b), a vacancy occurring in the office of a trust manager
of a real estate investment trust may be filled by the affirmative
vote of the majority of the remaining trust managers, even if the
majority of trust managers constitutes less than a quorum of the
trust managers.
(b) The certificate of formation or bylaws of the real
estate investment trust may provide an alternative procedure for
filling a vacancy occurring in the office of a trust manager,
including filling vacancies by simple majority or super majority
votes of the shareholders.
(c) The term of a trust manager elected to fill a vacancy
occurring in the office of a trust manager is the unexpired term of
the trust manager's predecessor in office and until the trust
manager's successor is elected and has qualified. (TREITA
4.10(D).)
Sec. 200.309. NOTICE OF MEETING. (a) Regular meetings of
the trust managers of a real estate investment trust may be held
with or without notice as prescribed by the real estate investment
trust's bylaws.
(b) Special meetings of the trust managers shall be held
with notice as prescribed by the bylaws.
(c) A notice of a board meeting is not required to specify
the business to be transacted at the meeting or the purpose of the
meeting, unless required by the bylaws. (TREITA 10.20(B) (part).)
Sec. 200.310. QUORUM. A quorum of the board of trust
managers of a real estate investment trust is the majority of the
number of trust managers unless the certificate of formation or
bylaws require a greater number. (TREITA 4.10(E).)
Sec. 200.311. COMMITTEES OF TRUST MANAGERS. (a) If
authorized by the certificate of formation or bylaws, the trust
managers of a real estate investment trust, by resolution adopted
by a majority of the trust managers, may designate:
(1) committees composed of one or more trust managers;
or
(2) trust managers as alternate committee members to
replace absent or disqualified committee members at a committee
meeting, subject to any limitations imposed by the trust managers.
(b) To the extent provided by the resolution designating a
committee or the certificate of formation or bylaws and subject to
Subsection (c), the committee has the authority of the trust
managers.
(c) A committee of the trust managers may not:
(1) amend the certificate of formation, except to
classify or reclassify shares in accordance with Section 200.103 if
authorized by the resolution designating the committee,
certificate of formation, or bylaws;
(2) propose a reduction of stated capital of the real
estate investment trust;
(3) approve a plan of merger or share exchange of the
real estate investment trust;
(4) recommend to shareholders the sale, lease, or
exchange of all or substantially all of the property and assets of
the real estate investment trust not made in the usual and regular
course of its business;
(5) recommend to the shareholders a voluntary winding
up and termination or a revocation of the real estate investment
trust;
(6) amend, alter, or repeal the bylaws or adopt new
bylaws;
(7) fill vacancies in the offices of the trust
managers;
(8) fill vacancies in or designate alternate members
of a committee of the trust managers;
(9) fill a vacancy to be filled because of an increase
in the number of trust managers;
(10) elect or remove officers of the real estate
investment trust or members or alternate members of a committee of
the trust managers;
(11) set the compensation of the members or alternate
members of a committee of the trust managers; or
(12) alter or repeal a resolution of the trust
managers that states that it may not be amended or repealed.
(d) A committee of the trust managers may authorize a
distribution or the issuance of shares if authorized by the
resolution designating the committee or by the certificate of
formation or bylaws.
(e) The designation of and delegation of authority to a
committee of the trust managers does not relieve a trust manager of
responsibility imposed by law. (TREITA 4.30.)
Sec. 200.312. LIABILITY OF TRUST MANAGERS. (a) A trust
manager of a real estate investment trust who votes for or assents
to a distribution of assets made by the real estate investment trust
to its shareholders during the liquidation of the real estate
investment trust without the payment and discharge of or the making
of adequate provision for the payment of all of the known debts,
liabilities, and other obligations of the real estate investment
trust is jointly and severally liable to the real estate investment
trust for the value of the distributed assets to the extent the
debts, liabilities, and other obligations are not paid and
discharged.
(b) A trust manager of a real estate investment trust who
votes for or assents to the making of a loan to another trust
manager or officer of the real estate investment trust or to the
making of a loan secured by shares of the real estate investment
trust is jointly and severally liable to the real estate investment
trust for the loan amount until the loan is repaid.
(c) A trust manager is not jointly and severally liable
under Subsection (a) if, in determining the amount available for
the distribution, the trust manager, acting in good faith and with
ordinary care:
(1) relied on information, opinions, reports, or
statements in accordance with Section 3.102; or
(2) considered the assets of the real estate
investment trust to be valued at least at book value. (TREITA
15.10(A) (part), (B).)
Sec. 200.313. STATUTE OF LIMITATIONS ON CERTAIN ACTION
AGAINST TRUST MANAGERS. An action may not be brought against a trust
manager of a real estate investment trust under Section 200.312
after the second anniversary of the date the alleged act giving rise
to the liability occurred. (TREITA 15.10(G).)
Sec. 200.314. IMMUNITY FROM LIABILITY FOR PERFORMANCE OF
DUTY. A trust manager of a real estate investment trust may not be
held liable to the real estate investment trust for an act,
omission, loss, damage, or expense arising from the performance of
the trust manager's duties under the trust, except for liability
arising from the wilful misfeasance, wilful malfeasance, or gross
negligence of the trust manager. (TREITA 15.10(E).)
Sec. 200.315. RIGHT OF CONTRIBUTION. A trust manager who is
liable for a claim asserted under Section 200.312 is entitled to
receive contribution from each of the other trust managers who are
liable with respect to that claim in an amount appropriate to
achieve equity. (TREITA 15.10(F).)
Sec. 200.316. OFFICERS. (a) An officer of a real estate
investment trust designated by the trust managers under Section
3.103 may exercise all of the powers of a trust manager relating to
the business and affairs of the real estate investment trust,
unless action by the trust managers is specified by this code or
another applicable law.
(b) A designation of or delegation of authority to an
officer of a real estate investment trust described by this section
does not relieve a trust manager of responsibility imposed by law.
(TREITA 4.10(F) (part).)
Sec. 200.317. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED TRUST MANAGERS AND OFFICERS. (a) This section applies
only to a contract or transaction between a real estate investment
trust and:
(1) one or more of the trust's trust managers or
officers; or
(2) an entity or other organization in which one or
more of the trust's trust managers or officers:
(A) is a managerial official; or
(B) has a financial interest.
(b) An otherwise valid contract or transaction is valid
notwithstanding that a trust manager or officer of the trust is
present at or participates in the meeting of the trust managers or
of a committee of the trust managers that authorizes the contract or
transaction, or votes to authorize the contract or transaction, if:
(1) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed to or
known by:
(A) the trust managers or a committee of the
trust managers, and the trust managers or committee of the trust
managers in good faith authorize the contract or transaction by the
affirmative vote of the majority of disinterested trust managers or
committee members, regardless of whether the disinterested trust
managers or committee members constitute a quorum; or
(B) the shareholders entitled to vote on the
authorization of the contract or transaction, and the contract or
transaction is specifically approved in good faith by a vote of the
shareholders; or
(2) the contract or transaction is fair to the real
estate investment trust when the contract or transaction is
authorized, approved, or ratified by the trust managers, a
committee of the trust managers, or the shareholders.
(c) Common or interested trust managers may be included in
determining the presence of a quorum at a meeting of the trust
managers, or a committee of the trust managers, that authorizes the
contract or transaction. (TREITA 4.20.)
[Sections 200.318-200.350 reserved for expansion]
SUBCHAPTER H. INVESTMENTS
Sec. 200.351. INVESTMENTS. A trust manager or officer of a
real estate investment trust has complete discretion with respect
to the investment of the trust estate unless the investment is
contrary to or inconsistent with:
(1) this chapter;
(2) a provision of the Internal Revenue Code relating
to or governing real estate investment trusts; or
(3) regulations adopted under a provision of the
Internal Revenue Code relating to or governing real estate
investment trusts. (TREITA 4.10(G).)
[Sections 200.352-200.400 reserved for expansion]
SUBCHAPTER I. FUNDAMENTAL BUSINESS TRANSACTIONS
Sec. 200.401. DEFINITIONS. In this subchapter:
(1) "Participating shares" means shares that entitle
the holders of the shares to participate without limitation in
distributions.
(2) "Sale of all or substantially all of the assets"
means the sale, lease, exchange, or other disposition, other than a
pledge, mortgage, deed of trust, or trust indenture unless
otherwise provided by the certificate of formation, of all or
substantially all of the property and assets of a domestic real
estate investment trust that is not made in the usual and regular
course of the trust's business without regard to whether the
disposition is made with the goodwill of the business. The term
does not include a transaction that results in the real estate
investment trust directly or indirectly:
(A) continuing to engage in one or more
businesses; or
(B) applying a portion of the consideration
received in connection with the transaction to the conduct of a
business that the real estate investment trust engages in after the
transaction.
(3) "Shares" includes a receipt or other instrument
issued by a depository representing an interest in one or more
shares or fractions of shares of a domestic or foreign real estate
investment trust that are deposited with the depository.
(4) "Voting shares" means shares that entitle the
holders of the shares to vote unconditionally in elections of trust
managers. (TREITA 23.30(H), 24.10(A) (part), (B), 24.20(A)
(part).)
Sec. 200.402. APPROVAL OF MERGER. (a) A real estate
investment trust that is a party to the merger under Chapter 10 must
approve the merger by complying with this section.
(b) The trust managers of the real estate investment trust
shall adopt a resolution that:
(1) approves the plan of merger; and
(2) if shareholder approval of the merger is required
by this subchapter:
(A) recommends that the plan of merger be
approved by the shareholders of the real estate investment trust;
or
(B) directs that the plan of merger be submitted
to the shareholders for approval without recommendation if the
trust managers determine for any reason not to recommend approval
of the plan of merger.
(c) Except as provided by this subchapter or Chapter 10, the
plan of merger shall be submitted to the shareholders of the real
estate investment trust for approval as provided by this
subchapter. The trust managers may place conditions on the
submission of the plan of merger to the shareholders.
(d) If the trust managers approve a plan of merger required
to be approved by the shareholders of the real estate investment
trust but do not adopt a resolution recommending that the plan of
merger be approved by the shareholders, the trust managers shall
communicate to the shareholders the reason for the trust managers'
determination to submit the plan of merger without a
recommendation.
(e) Except as provided by Chapter 10 or Sections
200.407-200.409, the shareholders of the real estate investment
trust shall approve the plan of merger as provided by this
subchapter. (TREITA 23.30(A), (B), (C).)
Sec. 200.403. APPROVAL OF CONVERSION. (a) A real estate
investment trust must approve a conversion under Chapter 10 by
complying with this section.
(b) The trust managers of the real estate investment trust
shall adopt a resolution that approves the plan of conversion and:
(1) recommends that the plan of conversion be approved
by the shareholders of the real estate investment trust; or
(2) directs that the plan of conversion be submitted
to the shareholders for approval without recommendation if the
trust managers determine for any reason not to recommend approval
of the plan of conversion.
(c) The plan of conversion shall be submitted to the
shareholders of the real estate investment trust for approval as
provided by this subchapter. The trust managers may place
conditions on the submission of the plan of conversion to the
shareholders.
(d) If the trust managers approve a plan of conversion but
do not adopt a resolution recommending that the plan of conversion
be approved by the shareholders of the real estate investment
trust, the trust managers shall communicate to the shareholders the
reason for the trust managers' determination to submit the plan of
conversion without a recommendation.
(e) Except as provided by Sections 200.407-200.409, the
shareholders of the real estate investment trust must approve the
plan of conversion as provided by this subchapter. (New.)
Sec. 200.404. APPROVAL OF EXCHANGE. (a) A real estate
investment trust the shares of which are to be acquired in an
exchange under Chapter 10 must approve the exchange by complying
with this section.
(b) The trust managers shall adopt a resolution that
approves the plan of exchange and:
(1) recommends that the plan of exchange be approved
by the shareholders of the real estate investment trust; or
(2) directs that the plan of exchange be submitted to
the shareholders for approval without recommendation if the trust
managers determine for any reason not to recommend approval of the
plan of exchange.
(c) The plan of exchange shall be submitted to the
shareholders of the real estate investment trust for approval as
provided by this subchapter. The trust managers may place
conditions on the submission of the plan of exchange to the
shareholders.
(d) If the trust managers approve a plan of exchange but do
not adopt a resolution recommending that the plan of exchange be
approved by the shareholders of the real estate investment trust,
the trust managers shall communicate to the shareholders the reason
for the trust managers' determination to submit the plan of
exchange to shareholders without a recommendation.
(e) Except as provided by Sections 200.407-200.409, the
shareholders of the real estate investment trust shall approve the
plan of exchange as provided by this subchapter. (TREITA 23.30(A),
(B), (C).)
Sec. 200.405. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL
OF ASSETS. (a) Except as provided by the certificate of formation
of a domestic real estate investment trust, a sale, lease, pledge,
mortgage, assignment, transfer, or other conveyance of an interest
in real property or other assets of the real estate investment trust
does not require the approval or consent of the shareholders of the
real estate investment trust unless the transaction constitutes a
sale of all or substantially all of the assets of the real estate
investment trust.
(b) A real estate investment trust must approve the sale of
all or substantially all of its assets by complying with this
section.
(c) The trust managers of the real estate investment trust
shall adopt a resolution that approves the sale of all or
substantially all of the assets of the real estate investment trust
and:
(1) recommends that the sale of all or substantially
all of the assets of the real estate investment trust be approved by
the shareholders of the real estate investment trust; or
(2) directs that the sale of all or substantially all
of the assets of the real estate investment trust be submitted to
the shareholders for approval without recommendation if the trust
managers determine for any reason not to recommend approval of the
sale.
(d) The sale of all or substantially all of the assets of the
real estate investment trust shall be submitted to the shareholders
of the real estate investment trust for approval as provided by this
subchapter. The trust managers may place conditions on the
submission of the proposed sale to the shareholders.
(e) If the trust managers approve the sale of all or
substantially all of the assets of the real estate investment trust
but do not adopt a resolution recommending that the proposed sale be
approved by the shareholders of the real estate investment trust,
the trust managers shall communicate to the shareholders the reason
for the trust managers' determination to submit the proposed sale
to shareholders without a recommendation.
(f) The shareholders of the real estate investment trust
shall approve the sale of all or substantially all of the assets of
the real estate investment trust as provided by this subchapter.
(g) After the approval of the sale by the shareholders, the
trust managers may abandon the sale of all or substantially all of
the assets of the real estate investment trust, subject to the
rights of a third party under a contract relating to the assets,
without further action or approval by the shareholders. (TREITA
24.10, 24.20(A) (part).)
Sec. 200.406. GENERAL PROCEDURE FOR SUBMISSION TO
SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION. (a) If a
fundamental business transaction involving a real estate
investment trust is required to be submitted to the shareholders of
the real estate investment trust under this subchapter, the real
estate investment trust shall notify each shareholder of the real
estate investment trust that the fundamental business transaction
is being submitted to the shareholders for approval at a meeting of
shareholders as required by this subchapter, regardless of whether
the shareholder is entitled to vote on the matter.
(b) If the fundamental business transaction is a merger,
conversion, or interest exchange, the notice required by Subsection
(a) shall contain or be accompanied by a copy or summary of the plan
of merger, conversion, or interest exchange, as appropriate, and
the notice required by Section 10.355.
(c) The notice of the meeting must:
(1) be given not later than the 21st day before the
date of the meeting; and
(2) state that the purpose, or one of the purposes, of
the meeting is to consider the fundamental business transaction.
(TREITA 23.30(D), 24.20(A) (part).)
Sec. 200.407. GENERAL VOTE REQUIREMENT FOR APPROVAL OF
FUNDAMENTAL BUSINESS TRANSACTION. (a) Except as provided by this
code or the certificate of formation or bylaws of a real estate
investment trust in accordance with Section 200.261, the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of the real estate investment trust entitled to
vote on a fundamental business transaction is required to approve
the transaction.
(b) Unless provided by the certificate of formation or
Section 200.408, shares of a class or series that are not otherwise
entitled to vote on matters submitted to shareholders generally
will not be entitled to vote for the approval of a fundamental
business transaction.
(c) Except as provided by this code, if a class or series of
shares of a real estate investment trust is entitled to vote on a
fundamental business transaction as a class or series, in addition
to the vote required under Subsection (a), the affirmative vote of
the holders of at least two-thirds of the outstanding shares in each
class or series of shares entitled to vote on the fundamental
business transaction as a class or series is required to approve the
transaction.
(d) Unless required by the certificate of formation,
approval of a merger by shareholders is not required under this code
for a real estate investment trust that is a party to the plan of
merger unless that real estate investment trust is also a party to
the merger. (TREITA 23.30(E), 24.20(A) (part).)
Sec. 200.408. CLASS VOTING REQUIREMENTS FOR CERTAIN
FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Separate voting by a class
or series of shares of a real estate investment trust is required
for approval of a plan of merger or conversion if:
(1) the plan of merger or conversion contains a
provision that would require approval by that class or series of
shares under Section 200.262 if the provision was contained in a
proposed amendment to the real estate investment trust's
certificate of formation; or
(2) that class or series of shares is entitled under
the certificate of formation to vote as a class or series on the
plan of merger or conversion.
(b) Separate voting by a class or series of shares of a real
estate investment trust is required for approval of a plan of
exchange if:
(1) shares of that class or series are to be exchanged
under the terms of the plan of exchange; or
(2) that class or series is entitled under the
certificate of formation to vote as a class or series on the plan of
exchange.
(c) Separate voting by a class or series of shares of a real
estate investment trust is required for approval of a sale of all or
substantially all of the assets of the real estate investment trust
if that class or series of shares is entitled under the certificate
of formation to vote as a class or series on the sale of the real
estate investment trust's assets. (TREITA 23.30(F), 24.20(A)
(part).)
Sec. 200.409. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN
FUNDAMENTAL BUSINESS TRANSACTIONS. (a) Unless required by the real
estate investment trust's certificate of formation, a plan of
merger is not required to be approved by the shareholders of a real
estate investment trust if:
(1) the real estate investment trust is the sole
surviving real estate investment trust in the merger;
(2) the certificate of formation of the real estate
investment trust following the merger will not differ from the real
estate investment trust's certificate of formation before the
merger;
(3) immediately after the effective date of the
merger, each shareholder of the real estate investment trust whose
shares were outstanding immediately before the effective date of
the merger will hold the same number of shares, with identical
designations, preferences, limitations, and relative rights;
(4) the sum of the voting power of the number of voting
shares outstanding immediately after the merger and the voting
power of securities that may be acquired on the conversion or
exercise of securities issued under the merger does not exceed by
more than 20 percent the voting power of the total number of voting
shares of the real estate investment trust that are outstanding
immediately before the merger; and
(5) the sum of the number of participating shares that
are outstanding immediately after the merger and the number of
participating shares that may be acquired on the conversion or
exercise of securities issued under the merger does not exceed by
more than 20 percent the total number of participating shares of the
real estate investment trust that are outstanding immediately
before the merger.
(b) Unless required by the certificate of formation, a plan
of merger effected under Section 10.005 or 10.006 does not require
the approval of the shareholders of the real estate investment
trust. (TREITA 23.30(G) (part).)
Sec. 200.410. RIGHTS OF DISSENT AND APPRAISAL. A
shareholder of a domestic real estate investment trust has the
rights of dissent and appraisal under Subchapter H, Chapter 10,
with respect to a fundamental business transaction. (TREITA 25.10,
25.20, 25.30.)
[Sections 200.411-200.450 reserved for expansion]
SUBCHAPTER J. SUPPLEMENTAL WINDING UP AND TERMINATION
PROVISIONS
Sec. 200.451. APPROVAL OF VOLUNTARY WINDING UP. A real
estate investment trust must approve a voluntary winding up under
Chapter 11 by the affirmative vote of the shareholders in
accordance with Section 200.261. (TREITA 19.10 (part).)
Sec. 200.452. APPROVAL OF REINSTATEMENT, CANCELLATION, OR
REVOCATION OF VOLUNTARY WINDING UP. A real estate investment trust
may reinstate its existence under Section 11.202, revoke a
voluntary decision to wind up under Section 11.151, or cancel an
event requiring winding up under Section 11.152 by the affirmative
vote of the shareholders in accordance with Section 200.261.
(New.)
Sec. 200.453. RESPONSIBILITY FOR WINDING UP. If a real
estate investment trust determines or is required to wind up, the
trust managers shall manage the winding up of the business or
affairs of the real estate investment trust. (TREITA 19.10
(part).)
[Sections 200.454-200.500 reserved for expansion]
SUBCHAPTER K. MISCELLANEOUS PROVISIONS
Sec. 200.501. EXAMINATION OF RECORDS. (a) On written
demand stating a proper purpose, a shareholder of record of a real
estate investment trust for at least six months immediately
preceding the shareholder's demand, or a holder of record of at
least five percent of all of the outstanding shares of a real estate
investment trust, is entitled to examine and copy, at a reasonable
time, the real estate investment trust's relevant books and records
of account, minutes, and share transfer records. The examination
may be conducted in person or through an agent or attorney.
(b) This section does not impair the power of a court, on the
presentation of proof of proper purpose by a shareholder, to compel
the production for examination by the shareholder of the books and
records of account, minutes, and share transfer records of a real
estate investment trust, regardless of the period during which the
shareholder was a record holder and regardless of the number of
shares held by the person. (TREITA 18.10(B), (C).)
Sec. 200.502. JOINDER OF SHAREHOLDERS NOT REQUIRED. The
joinder of shareholders of a real estate investment trust is not
required for any sale, lease, mortgage, or other disposition of all
or part of the assets of the real estate investment trust. (TREITA
17.10.)
Sec. 200.503. TAX LAW REQUIREMENTS. In connection with a
real estate investment trust qualifying or attempting to qualify as
a real estate investment trust under the Internal Revenue Code and
the regulations adopted under the Internal Revenue Code, a
provision of this chapter is subject to the provisions of the
Internal Revenue Code or the regulations relating to or governing
real estate investment trusts adopted under those provisions if:
(1) the provision of this chapter is contrary to or
inconsistent with the federal provisions or regulations;
(2) the federal provisions or regulations require a
real estate investment trust to take any action required to secure
or maintain its status as a real estate investment trust under the
federal provisions or regulations; or
(3) the federal provisions or regulations prohibit the
real estate investment trust from taking any action required to
secure or maintain its status as a real estate investment trust
under the federal provision or regulation. (TREITA 4.10(I).)
TITLE 6. ASSOCIATIONS
CHAPTER 251. COOPERATIVE ASSOCIATIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 251.001. DEFINITIONS. In this chapter:
(1) "Cooperative basis" means that net savings, after
payment of any investment dividends or after provision for separate
funds has been made as required or authorized by law, the
certificate of formation, or bylaws, are:
(A) allocated or distributed to a member patron
or to each patron in proportion to patronage; or
(B) retained by the entity for:
(i) actual or potential expansion of the
entity's services;
(ii) the reduction of charges to patrons;
or
(iii) any other purpose consistent with the
entity's nonprofit character.
(2) "Invested capital" means funds invested in a
cooperative association by an investor with the expectation of
receiving an investment dividend.
(3) "Investment dividend" means the return on invested
capital or on membership capital derived from the net savings of the
cooperative association.
(4) "Membership capital" means the funds of a
cooperative association derived from members of the cooperative
association generally as a requirement of membership or in lieu of
patronage dividends. The term does not include deposits or loans
from members.
(5) "Net savings" means the total income of a
cooperative association less the costs of operation.
(6) "Patronage dividend" means a share of the net
savings distributed among members of the cooperative association on
the basis of patronage, as provided by the certificate of
formation.
(7) "Savings returns" means the amount returned by a
cooperative association to patrons of a cooperative association in
proportion to patronage or otherwise. (CAA 2(3), (4), (5), (6),
(7), (8), (9).)
Sec. 251.002. APPLICABILITY OF NONPROFIT CORPORATION
PROVISIONS. (a) A provision of Title 1 and Chapters 20 and 22
governing nonprofit corporations applies to a cooperative
association.
(b) Notwithstanding Subsection (a), this chapter controls
over any conflicting provision of Title 1 and Chapters 20 and 22
governing nonprofit corporations. (CAA 3.)
Sec. 251.003. EXEMPTION. This chapter does not apply to a
corporation or association organized on a cooperative basis under a
statute of this state other than this chapter unless that other
statute specifically states that this chapter does apply. (CAA 45;
TNPCA 10.04.A (part), C; TMCLA 1.03.)
[Sections 251.004-251.050 reserved for expansion]
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 251.051. ORGANIZATION MEETING. After a cooperative
association's certificate of formation is filed, the cooperative
association shall hold an organization meeting in accordance with
Section 22.104. (CAA 9(c).)
Sec. 251.052. AMENDMENT OF CERTIFICATE OF FORMATION. (a)
The board of directors of a cooperative association may propose an
amendment to the cooperative association's certificate of
formation by a two-thirds vote of the board members. The members of
a cooperative association may petition to amend the certificate of
formation as provided by the bylaws.
(b) Not later than the 31st day before the date of the
meeting, the secretary shall:
(1) send notice of a meeting to consider a proposed
amendment to each member of the cooperative association at the
member's last known address; or
(2) post notice of a meeting to consider a proposed
amendment in a conspicuous place in all principal places of
activity of the cooperative association.
(c) The notice required by Subsection (b) must include the
full text of the proposed amendment and the text of the part of the
certificate of formation to be amended.
(d) To be approved, an amendment must be adopted by the
affirmative vote of two-thirds of the members voting on the
amendment.
(e) Not later than the 30th day after the date an amendment
is adopted by the members of a cooperative association, the
cooperative association shall file a certificate of amendment with
the secretary of state in accordance with Chapter 4. The
certificate of amendment must be:
(1) signed by an authorized officer of the cooperative
association; and
(2) in the form required by Section 3.052. (CAA 10.)
Sec. 251.053. BYLAWS. (a) Unless the certificate of
formation or bylaws of a cooperative association require a greater
majority, the bylaws may be adopted, amended, or repealed by a
majority vote of the cooperative association's members voting on
the matter.
(b) Except as provided by this code, the bylaws may contain:
(1) requirements for admission to membership;
(2) requirements for disposal of a member's interest
on cessation of membership;
(3) the time, place, and manner of calling and
conducting meetings;
(4) the number or percentage of the members
constituting a quorum;
(5) the number, qualifications, powers, duties, and
term of directors and officers;
(6) the method of electing, removing, and filling a
vacancy of directors and officers;
(7) the division or classification, if any, of
directors to provide for staggered terms;
(8) the compensation, if any, of the directors;
(9) the number of directors necessary to constitute a
quorum;
(10) the method for distributing the net savings;
(11) a requirement that each officer or employee of
the cooperative association who handles funds or securities be
bonded;
(12) other discretionary provisions of this chapter,
Title 1, and Chapters 20 and 22; and
(13) any other provision incident to a purpose or
activity of the cooperative association. (CAA 11, 12.)
[Sections 251.054-251.100 reserved for expansion]
SUBCHAPTER C. MANAGEMENT
Sec. 251.101. BOARD OF DIRECTORS. (a) Except as provided by
Subsections (b) and (c), a cooperative association is managed by a
board of directors in accordance with Chapter 22.
(b) The board shall contain at least five directors elected
by and from the cooperative association's members. A director:
(1) serves a term not to exceed three years as provided
by the bylaws; and
(2) holds office until the director is removed or the
director's successor is elected.
(c) The bylaws of a cooperative association may:
(1) apportion the number of directors among the units
into which the cooperative association may be divided; and
(2) provide for the election of the directors by the
respective units to which the directors are apportioned.
(d) An executive committee of the board of directors may be
elected in the manner and with the powers and duties specified by
the certificate of formation or bylaws. (CAA 21(a), (b), (c).)
Sec. 251.102. OFFICERS. (a) The directors of a cooperative
association shall annually elect, unless otherwise provided by the
bylaws, the following officers for the cooperative association:
(1) a president;
(2) one or more vice presidents; and
(3) a secretary and treasurer or a
secretary-treasurer.
(b) Any two or more offices, other than the offices of
president and secretary, may be held by the same person.
(c) The officers of a cooperative association may be
designated by other titles as provided by the certificate of
formation or the bylaws of the cooperative association.
(d) A committee duly designated by the board of directors
may perform the functions of any office, and the functions of any
two or more officers may be performed by a single committee,
including the functions of both president and secretary. (CAA 22.)
Sec. 251.103. REMOVAL OF DIRECTORS AND OFFICERS. (a) A
director or officer of a cooperative association may be removed
from office in the manner provided by the certificate of formation
or bylaws of the cooperative association.
(b) If the certificate of formation or bylaws do not provide
for the person's removal, a director or officer may be removed with
cause by a vote of a majority of the members voting at a regular or
special meeting. The director or officer who is to be removed is
entitled to be heard at the meeting.
(c) Except as provided by the certificate of formation or
bylaws, a vacancy on the board of directors caused by removal shall
be filled by a director elected in the same manner provided by the
bylaws for the election of directors. (CAA 23.)
Sec. 251.104. REFERENDUM. (a) The certificate of formation
or bylaws of a cooperative association may provide for a referendum
on any action undertaken by the cooperative association's board of
directors if the referendum is:
(1) requested by petition of 10 percent or more of all
of the members of the cooperative association; or
(2) requested and approved by the vote of at least a
majority of the directors of the cooperative association.
(b) The proposition to be voted on in a referendum
authorized under Subsection (a) must be submitted to the members of
the cooperative association for consideration within the time
specified in the document authorizing the referendum.
(c) A right of a third party that has vested between the time
of the action and the time of the referendum is not impaired by the
referendum results. (CAA 24.)
[Sections 251.105-251.150 reserved for expansion]
SUBCHAPTER D. MEMBERSHIP
Sec. 251.151. ELIGIBILITY AND ADMISSION. A person, an
unincorporated group or other person organized on a cooperative
basis, or a nonprofit group may be admitted to membership in a
cooperative association only if the person meets the qualifications
for eligibility stated in the certificate of formation or bylaws of
the cooperative association. (CAA 26(a).)
Sec. 251.152. EXPULSION. (a) A member of a cooperative
association may be expelled by the vote of a majority of the
cooperative association's members voting at a regular or special
meeting.
(b) Not later than the 11th day before the date of the
meeting, the cooperative association shall give the member written
notice of the charges. The member is entitled to be heard at the
meeting in person or by counsel.
(c) If the cooperative association votes to expel a member,
the cooperative association's board of directors shall cause the
cooperative association to purchase the member's capital holdings
at par value if the purchase does not jeopardize the cooperative
association's solvency. (CAA 33.)
Sec. 251.153. SUBSCRIBERS. (a) A person is a subscriber of
a cooperative association only if the person is:
(1) eligible for membership in the cooperative
association under Section 251.151; and
(2) legally obligated to purchase a share or
membership in the cooperative association.
(b) The certificate of formation or bylaws of a cooperative
association may state whether and the conditions under which voting
rights or other membership rights are granted to a subscriber of the
cooperative association. (CAA 27, as amended Acts 72nd Leg., R.S.,
Ch. 897.)
Sec. 251.154. LIABILITY. (a) Except as provided by
Subsection (b), a member or subscriber of a cooperative association
is not jointly or severally liable for a debt of the cooperative
association. A subscriber is liable for any unpaid amount on the
subscriber's membership certificates or invested capital
certificates.
(b) A subscriber who assigns the subscriber's interest in
membership certificates or invested capital certificates is
jointly and severally liable with the assignee until the
appropriate certificates are fully paid. (CAA 32.)
[Sections 251.155-251.200 reserved for expansion]
SUBCHAPTER E. SHARES
Sec. 251.201. SHARE AND MEMBERSHIP CERTIFICATES: ISSUANCE
AND CONTENTS. (a) A cooperative association may not issue a
certificate for membership capital or for invested capital until
any par value of the certificate has been paid in full.
(b) Each certificate for membership capital issued by a
cooperative association must contain a statement of the
requirements of Sections 251.202(a) and (b), 251.254, and 251.255.
(c) Each certificate for invested capital issued by a
cooperative association must contain a statement of the
restrictions on transferability as provided by the cooperative
association's bylaws. (CAA 28.)
Sec. 251.202. TRANSFER OF SHARES AND MEMBERSHIP;
WITHDRAWAL. (a) A member who decides to withdraw from a cooperative
association shall make a written offer to sell the member's
membership certificates to the cooperative association's board of
directors.
(b) Not later than the 90th day after the date the directors
receive an offer under Subsection (a), the directors may cause the
cooperative association to purchase the holdings by paying the
member the par value of the certificates and the directors shall
cause the cooperative association to reissue or cancel the shares
after purchasing the holdings. The directors shall cause the
cooperative association to purchase the shares if a majority of the
cooperative association's members voting at a regular or special
meeting vote to require the purchase.
(c) An investor owning investor certificates must sell,
assign, or convey the certificates in accordance with the
cooperative association's bylaws. If an investor fails to sell,
assign, or convey investor certificates in accordance with the
bylaws, the cooperative association on written notice to its
directors shall repurchase the certificates by paying the investor
the par value of the certificate plus all accrued investment
dividends. The certificates must be repurchased not later than the
90th day after the date the cooperative association receives notice
of the failure. (CAA 29.)
Sec. 251.203. SHARE AND MEMBERSHIP CERTIFICATES; RECALL.
(a) The bylaws of a cooperative association may authorize the
cooperative association's board of directors to recall during a
specified time and in accordance with the bylaws the membership
certificates of a member who fails to patronize the cooperative
association. The board may use the reserve funds to recall, at par
value, the membership certificates of any member in excess of the
amount required for membership.
(b) After the board of directors of a cooperative
association recalls a membership certificate under Subsection (a),
membership in the cooperative association is terminated and the
board shall cause the cooperative association to reissue or cancel
the certificate. The board of directors may not recall membership
certificates if recalling the certificates would jeopardize the
cooperative association's solvency.
(c) The board of directors may use the reserve funds to
recall and repurchase the investment certificates of an investor at
par value plus any investment dividends due.
(d) The bylaws of a cooperative association may establish
specific procedures, terms, and conditions for recalls and
repurchases of investment certificates. (CAA 30.)
Sec. 251.204. CERTIFICATES; ATTACHMENT. The minimum amount
necessary for membership in a cooperative association, not to
exceed $50, is exempt from attachment, execution, or garnishment
for the debts of a member of a cooperative association. If a
member's holdings are subject to attachment, execution, or
garnishment, the directors of the cooperative association may admit
the purchaser to membership or may purchase the holdings at par
value. (CAA 31.)
[Sections 251.205-251.250 reserved for expansion]
SUBCHAPTER F. MEETINGS AND VOTING
Sec. 251.251. MEETINGS. (a) Regular meetings of members of
a cooperative association shall be held at least once a year as
prescribed by the cooperative association's bylaws.
(b) A special meeting of the members of a cooperative
association may be requested by a majority vote of the directors or
by written petition of at least one-tenth of the membership of the
cooperative association. The secretary shall call a special
meeting to be held 30 days after receipt of the request for a
special meeting. (CAA 13(a).)
Sec. 251.252. NOTICE OF SPECIAL MEETING. The notice of a
special meeting of the members of a cooperative association shall
state the purpose of the meeting. (CAA 14.)
Sec. 251.253. MEETINGS BY UNITS OF MEMBERSHIP. (a) The
certificate of formation or bylaws of a cooperative association may
provide for the holding of meetings by units of the membership of
the cooperative association and may provide for:
(1) a method of transmitting the votes cast at unit
meetings to the central meeting;
(2) a method of representation of units of the
membership by the election of delegates to the central meeting; or
(3) a combination of both methods.
(b) Except as otherwise provided by the certificate of
formation or bylaws, a meeting by a unit of the membership shall be
called and held in the same manner as a regular meeting of the
members. (CAA 15.)
Sec. 251.254. ONE MEMBER--ONE VOTE. (a) Except as provided
by Subsection (b), a member of a cooperative association has one
vote.
(b) If a cooperative association includes among its
membership another cooperative association or a group that is
organized on a cooperative basis, the voting rights of the
cooperative association member or group member may be prescribed by
the certificate of formation or bylaws of the cooperative
association.
(c) Any voting agreement or other device that is made to
evade the one-member-one-vote rule is not enforceable. (CAA 16.)
Sec. 251.255. NO PROXY. A member is not entitled to vote by
proxy. (CAA 17.)
Sec. 251.256. VOTING BY MAIL. (a) The certificate of
formation or bylaws of a cooperative association may contain the
procedures in Subsection (b) or (c), or both, for voting by mail.
(b) With notice of a meeting sent to members of the
cooperative association, the secretary may include a copy of a
proposal to be offered at the meeting. If a mail vote is returned to
the cooperative association within the specified number of days,
the mail vote shall be counted with the votes cast at the meeting.
(c) The secretary may send to a member of the cooperative
association who is absent from a meeting an exact copy of the
proposal considered at the meeting. If the vote is returned to the
cooperative association within the specified number of days, the
mail vote is counted with the votes cast at the meeting.
(d) The certificate of formation or bylaws may state whether
and to what extent mail votes are counted in computing a quorum.
(CAA 18.)
Sec. 251.257. VOTING BY MAIL OR BY DELEGATES. (a) If a
cooperative association has provided for voting by mail or by
delegates, a provision of this chapter referring to votes cast by
members of the cooperative association applies to votes cast by
mail or by delegates.
(b) A delegate may not vote by mail. (CAA 19, 20.)
[Sections 251.258-251.300 reserved for expansion]
SUBCHAPTER G. CAPITAL AND NET SAVINGS
Sec. 251.301. LIMITATIONS ON RETURN ON CAPITAL. (a) Except
as otherwise provided by the cooperative association's bylaws, an
investment dividend of a cooperative association may not be
cumulative and may not exceed eight percent of investment capital.
(b) Total investment dividends distributed for a fiscal
year may not exceed 50 percent of the net savings for the period.
(CAA 25.)
Sec. 251.302. ALLOCATION AND DISTRIBUTION OF NET SAVINGS.
(a) At least once each year the members or directors of a
cooperative association, as provided by the certificate of
formation or bylaws of the cooperative association, shall apportion
the net savings of the cooperative association in the following
order:
(1) subject to Section 251.301, investment dividends
payable from the surplus of the total assets over total liabilities
may be paid on invested capital or, if authorized by the bylaws, may
be paid on the membership certificates;
(2) a portion of the remainder, as determined by the
certificate of formation or bylaws, may be allocated to an
educational fund to be used in teaching cooperation;
(3) a portion of the remainder may be allocated to
funds for the general welfare of the members of the cooperative
association;
(4) a portion of the remainder may be allocated to
retained earnings; and
(5) the remainder shall be allocated at the same
uniform rate to each patron of the cooperative association in
proportion to individual patronage as follows:
(A) for a member patron, the proportionate amount
of savings return distributed to the member may be any combination
of cash, property, membership certificates, or investment
certificates; and
(B) for a subscriber patron, the patron's
proportionate amount of savings returns as provided by the
certificate of formation or bylaws may be distributed to the
subscriber patron or credited to the subscriber patron's account
until the amount of capital subscribed for has been fully paid.
(b) This section does not prevent a cooperative association
engaged in rendering services from disposing of the net savings
from the rendering of services in a manner that lowers the fees
charged for services or furthers the common benefit of the members.
(c) A cooperative association may adopt a system in which:
(1) the payment of savings returns that would
otherwise be distributed are deferred for a fixed period; or
(2) the savings returns distributed are partly in cash
or partly in shares, to be retired at a fixed future date, in the
order of the shares' serial numbers or issuance dates. (CAA 34.)
[Sections 251.303-251.350 reserved for expansion]
SUBCHAPTER H. REPORTS AND RECORDS
Sec. 251.351. RECORDKEEPING. A cooperative association
shall keep books and records relating to the cooperative
association's business operation in accordance with standard
accounting practices. (CAA 35(a).)
Sec. 251.352. REPORTS TO MEMBERS. (a) A cooperative
association shall submit a written report to its members at the
annual meeting of the cooperative association. The annual report
must contain:
(1) a balance sheet;
(2) an income and expense statement;
(3) the amount and nature of the cooperative
association's authorized, subscribed, and paid-in capital;
(4) the total number of shareholders;
(5) the number of shareholders who were admitted to or
withdrew from the association during the year;
(6) the par value of the association's shares;
(7) the rate at which any investment dividends have
been paid; and
(8) if the cooperative association does not issue
shares:
(A) the total number of members;
(B) the number of members who were admitted to or
withdrew from the association during the year; and
(C) the amount of membership fees received.
(b) The directors shall appoint a committee composed of
members who are not principal bookkeepers, accountants, or
employees of the cooperative association to review the cooperative
association.
(c) The committee appointed under Subsection (b) shall
report on the quality of the annual report required by this section
and the bookkeeping system of the cooperative association at the
annual meeting. (CAA 35(b), (c), (d).)
Sec. 251.353. ANNUAL REPORT OF FINANCIAL CONDITION. (a)
This section applies only to a cooperative association that has at
least 100 members or at least $20,000 in annual business.
(b) Not later than the 120th day after the date on which the
association closes its business each year, a cooperative
association shall file in the association's registered office a
report of the association's financial condition stating:
(1) the name of the association;
(2) the address of the association's principal office;
(3) the name, address, occupation, and date of
expiration of the term of office of each officer and director;
(4) any compensation paid by the association to each
officer or director of the association;
(5) the amount and nature of the authorized,
subscribed, and paid-in capital;
(6) the total number of shareholders;
(7) the number of shareholders who were admitted to or
withdrew from the association during the year;
(8) the par value of the association's shares;
(9) the rate at which any investment dividends have
been paid; and
(10) if the association has no shares:
(A) the total number of members;
(B) the number of members who were admitted to or
withdrew from the association during the year; and
(C) the amount of membership fees received.
(c) The report required by Subsection (b) must:
(1) include a balance sheet and income and expense
statement of the cooperative association; and
(2) be signed by the president and secretary.
(d) A cooperative association that has at least 3,000
members or at least $750,000 in annual business shall file a copy of
the report required by this section with the secretary of state.
(e) A person commits an offense if the person signs a report
that is required by this section and contains a materially false
statement that the person knows is false. An offense under this
subsection is a misdemeanor punishable by:
(1) a fine of not less than $25 or more than $200;
(2) confinement in county jail for a term of not less
than 30 days or more than one year; or
(3) both the fine and confinement. (CAA 36.)
Sec. 251.354. FAILURE TO FILE REPORT. (a) If a cooperative
association required by Section 251.353 to file a copy of a report
with the secretary of state does not file the report within the
prescribed time, the secretary of state shall send written notice
of the requirement by registered mail to the cooperative
association. The notice must be sent to the cooperative
association's principal office not later than the 60th day after
the date the report becomes due.
(b) If a cooperative association is required by Section
251.353 to file a report at its registered office but not with the
secretary of state and fails to file the report within the
prescribed time, the secretary of state or any member of the
cooperative association may send written notice of the requirement
by registered mail to the cooperative association's principal
office.
(c) If the cooperative association does not file the report
before the 61st day after the date notice is sent under Subsection
(a) or (b), a member of the cooperative association or the attorney
general may seek a writ of mandamus against the cooperative
association and the appropriate officer or officers to compel the
filing of the report. The court shall require the cooperative
association or the officer who is determined to be at fault to pay
the expenses of the proceeding, including attorney's fees. (CAA
37.)
[Sections 251.355-251.400 reserved for expansion]
SUBCHAPTER I. WINDING UP AND TERMINATION
Sec. 251.401. VOLUNTARY WINDING UP AND TERMINATION. (a) A
cooperative association may wind up and terminate its affairs in
accordance with Chapter 11 and Sections 22.301-22.303.
(b) If a cooperative association is directed to wind up and
liquidate its affairs, three members of the cooperative association
elected by a vote of at least a majority of the members voting shall
be designated as trustees on behalf of the cooperative association
to:
(1) pay debts;
(2) liquidate the cooperative association's assets
within the time set in the trustees' designation or any extension of
time; and
(3) distribute the cooperative association's assets in
the manner provided by Section 251.403. (CAA 38(a), (c) (part).)
Sec. 251.402. EXECUTION OF CERTIFICATE OF TERMINATION. An
officer of a cooperative association or one or more of the persons
designated as a liquidating trustee under Section 251.401 shall
execute the certificate of termination on behalf of the cooperative
association. (CAA 38(a) (part); TNPCA 6.05.A (part).)
Sec. 251.403. DISTRIBUTION OF ASSETS. Subject to Sections
11.052 and 11.053(a), the trustees designated under Section 251.401
shall distribute the cooperative association's assets in the
following order:
(1) by returning the par value of the investors'
capital to investors;
(2) by returning the amounts paid on subscriptions to
subscribers for invested capital;
(3) by returning the amount of patronage dividends
credited to patrons' accounts to the patrons;
(4) by returning to members their membership capital;
and
(5) by distributing any surplus in the manner provided
by the certificate of formation:
(A) among the patrons who have been members or
subscribers of the cooperative association during the six years
preceding the date of dissolution, on the basis of patronage during
that period;
(B) as a gift to any cooperative association or
other nonprofit enterprise designated in the certificate of
formation; or
(C) by a combination of both methods of
distribution. (CAA 38(c).)
Sec. 251.404. INVOLUNTARY TERMINATION. A suit for
involuntary termination of a cooperative association organized
under this chapter may be instituted for the causes and prosecuted
in the manner provided by Chapter 11. The assets of a cooperative
association that is involuntarily terminated shall be distributed
in accordance with Section 251.403. (CAA 38(b).)
[Sections 251.405-251.450 reserved for expansion]
SUBCHAPTER J. MISCELLANEOUS PROVISIONS
Sec. 251.451. EXEMPTION FROM TAXES. A cooperative
association organized under this chapter is exempt from the
franchise tax and license fees imposed by the state or a political
subdivision of the state, except that a cooperative association is
exempt from the franchise tax imposed by Chapter 171, Tax Code, only
if the cooperative association is exempt under that chapter. (CAA
44.)
Sec. 251.452. USE OF NAME "COOPERATIVE." (a) Only a
cooperative association governed by this chapter, a group organized
on a cooperative basis under another law of this state, or a foreign
entity operating on a cooperative basis and authorized to do
business in this state may use the term "cooperative" or any
abbreviation or derivation of the term "cooperative" as part of its
business name or represent itself, in advertising or otherwise, as
conducting business on a cooperative basis.
(b) A person commits an offense if the person violates
Subsection (a). An offense under this subsection is a misdemeanor
punishable by:
(1) a fine of not less than $25 or more than $200 for
the first month in which the violation occurs;
(2) a fine of not more than $200 for each month during
which a violation occurs after the first month;
(3) confinement in the county jail for not less than 30
days or more than one year; or
(4) a combination of those punishments.
(c) The attorney general may sue to enjoin a violation of
this section.
(d) If a court renders a judgment that a person who used the
term "cooperative" before September 1, 1975, is not organized on a
cooperative basis but is authorized to continue to use the term, the
business shall place immediately after its name the words "does not
comply with the cooperative association law of Texas" in the same
kind of type and in letters not less than two-thirds the size of the
letters used in the word "cooperative."
(e) Notwithstanding this section, The University
Cooperative Society, a domestic nonprofit corporation related to
The University of Texas, may continue to use the word "cooperative"
in its name. (CAA 39.)
CHAPTER 252. UNINCORPORATED NONPROFIT ASSOCIATIONS
Sec. 252.001. DEFINITIONS. In this chapter:
(1) "Member" means a person who, under the rules or
practices of a nonprofit association, may participate in the
selection of persons authorized to manage the affairs of the
nonprofit association or in the development of policy of the
nonprofit association.
(2) "Nonprofit association" means an unincorporated
organization, other than one created by a trust, consisting of
three or more members joined by mutual consent for a common,
nonprofit purpose. A form of joint tenancy, tenancy in common, or
tenancy by the entirety does not by itself establish a nonprofit
association, regardless of whether the co-owners share use of the
property for a nonprofit purpose. (TUUNAA 2.)
Sec. 252.002. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW AND
EQUITY. Principles of law and equity supplement this chapter unless
displaced by a particular provision of this chapter. (TUUNAA 3.)
Sec. 252.003. TERRITORIAL APPLICATION. Real and personal
property in this state may be acquired, held, encumbered, and
transferred by a nonprofit association, regardless of whether the
nonprofit association or a member has any other relationship to
this state. (TUUNAA 4.)
Sec. 252.004. REAL AND PERSONAL PROPERTY; NONPROFIT
ASSOCIATION AS BENEFICIARY. (a) A nonprofit association in its
name may acquire, hold, encumber, or transfer an estate or interest
in real or personal property.
(b) A nonprofit association may be a beneficiary of a trust,
contract, or will. (TUUNAA 5.)
Sec. 252.005. STATEMENT OF AUTHORITY AS TO REAL PROPERTY.
(a) A nonprofit association may execute and record a statement of
authority to transfer an estate or interest in real property in the
name of the nonprofit association.
(b) An estate or interest in real property in the name of a
nonprofit association may be transferred by a person so authorized
in a statement of authority recorded in the county clerk's office in
the county in which a transfer of the property would be recorded.
(c) A statement of authority must contain:
(1) the name of the nonprofit association;
(2) the address in this state, including the street
address, if any, of the nonprofit association, or, if the nonprofit
association does not have an address in this state, its address out
of state; and
(3) the name or title of a person authorized to
transfer an estate or interest in real property held in the name of
the nonprofit association.
(d) A statement of authority must be executed in the same
manner as a deed by a person who is not the person authorized to
transfer the estate or interest.
(e) The county clerk may collect a fee for recording a
statement of authority in the amount authorized for recording a
transfer of real property.
(f) An amendment, including a cancellation, of a statement
of authority must meet the requirements for execution and recording
of an original statement. Unless canceled earlier, a recorded
statement of authority or its most recent amendment is canceled by
operation of law on the fifth anniversary of the date of the most
recent recording.
(g) If the record title to real property is in the name of a
nonprofit association and the statement of authority is recorded in
the county clerk's office of the county in which a transfer of real
property would be recorded, the authority of the person named in a
statement of authority is conclusive in favor of a person who gives
value without notice that the person lacks authority. (TUUNAA 6.)
Sec. 252.006. LIABILITY IN TORT AND CONTRACT. (a) A
nonprofit association is a legal entity separate from its members
for the purposes of determining and enforcing rights, duties, and
liabilities in contract and tort.
(b) A person is not liable for a breach of a nonprofit
association's contract or for a tortious act or omission for which a
nonprofit association is liable merely because the person is a
member, is authorized to participate in the management of the
affairs of the nonprofit association, or is a person considered as a
member by the nonprofit association.
(c) A tortious act or omission of a member or other person
for which a nonprofit association is liable is not imputed to a
person merely because the person is a member of the nonprofit
association, is authorized to participate in the management of the
affairs of the nonprofit association, or is a person considered as a
member by the nonprofit association.
(d) A member of, or a person considered as a member by, a
nonprofit association may assert a claim against the nonprofit
association. A nonprofit association may assert a claim against a
member or a person considered as a member by the nonprofit
association. (TUUNAA 7.)
Sec. 252.007. CAPACITY TO ASSERT AND DEFEND; STANDING. (a)
A nonprofit association, in its name, may institute, defend,
intervene, or participate in a judicial, administrative, or other
governmental proceeding or in an arbitration, mediation, or any
other form of alternative dispute resolution.
(b) A nonprofit association may assert a claim in its name
on behalf of members of the nonprofit association if:
(1) one or more of the nonprofit association's members
have standing to assert a claim in their own right;
(2) the interests the nonprofit association seeks to
protect are germane to its purposes; and
(3) neither the claim asserted nor the relief
requested requires the participation of a member. (TUUNAA 8.)
Sec. 252.008. EFFECT OF JUDGMENT OR ORDER. A judgment or
order against a nonprofit association is not by itself a judgment or
order against a member or a person considered as a member by the
nonprofit association. (TUUNAA 9.)
Sec. 252.009. DISPOSITION OF PERSONAL PROPERTY OF INACTIVE
NONPROFIT ASSOCIATION. (a) If a nonprofit association has been
inactive for three years or longer, or a shorter period as specified
in a document of the nonprofit association, a person in possession
or control of personal property of the nonprofit association may
transfer the custody of the property:
(1) if a document of a nonprofit association specifies
a person to whom transfer is to be made under these circumstances,
to that person; or
(2) if no person is specified, to a nonprofit
association or nonprofit corporation pursuing broadly similar
purposes, or to a government or governmental subdivision, agency,
or instrumentality.
(b) Notwithstanding the above, if a nonprofit association
is classified under the Internal Revenue Code as a 501(c)(3)
organization or is or holds itself out to be established or
operating for a charitable, religious, or educational purpose, as
defined by Section 501(c)(3), Internal Revenue Code, then any
distribution must be made to another nonprofit association or
nonprofit corporation with similar charitable, religious, or
educational purposes. (TUUNAA 10.)
Sec. 252.010. BOOKS AND RECORDS. (a) A nonprofit
association shall keep correct and complete books and records of
account for at least three years after the end of each fiscal year
and shall make the books and records available on request to members
of the association for inspection and copying.
(b) The attorney general may inspect, examine, and make
copies of the books, records, and other documents the attorney
general considers necessary and may investigate the association to
determine if a violation of any law of this state has occurred.
(TUUNAA 11.)
Sec. 252.011. APPOINTMENT OF AGENT TO RECEIVE SERVICE OF
PROCESS. (a) A nonprofit association may file in the office of the
secretary of state a statement appointing an agent authorized to
receive service of process.
(b) A statement appointing an agent must contain:
(1) the name of the nonprofit association;
(2) the federal tax identification number of the
nonprofit association, if applicable;
(3) the address in this state, including the street
address, if any, of the nonprofit association or, if the nonprofit
association does not have an address in this state, its address out
of state; and
(4) the name of the person in this state authorized to
receive service of process and the person's address, including the
street address, in this state.
(c) A statement appointing an agent must be signed by a
person authorized to manage the affairs of the nonprofit
association. The statement must also be signed by the person
appointed agent, who by signing accepts the appointment. The
appointed agent may resign by filing a resignation in the office of
the secretary of state and giving notice to the nonprofit
association.
(d) The secretary of state may collect a fee for filing a
statement appointing an agent to receive service of process, an
amendment, a cancellation, or a resignation in the amount charged
for filing similar documents.
(e) An amendment to a statement appointing an agent to
receive service of process must meet the requirements for execution
of an original statement.
(f) A statement appointing an agent may be canceled by
filing with the secretary of state a written notice of cancellation
executed by a person authorized to manage the affairs of the
nonprofit association. A notice of cancellation must contain:
(1) the name of the nonprofit association;
(2) the federal tax identification number of the
nonprofit association, if applicable;
(3) the date of filing of the nonprofit association's
statement appointing the agent; and
(4) a current street address, if any, of the nonprofit
association in this state or, if the nonprofit association does not
have an address in this state, its address out of state.
(g) The secretary of state may adopt forms and procedural
rules for filing documents under this section. (TUUNAA 12.)
Sec. 252.012. CLAIM NOT ABATED BY CHANGE. A claim for relief
against a nonprofit association does not abate merely because of a
change in the members or persons authorized to manage the affairs of
the nonprofit association. (TUUNAA 13.)
Sec. 252.013. SUMMONS AND COMPLAINT; SERVICE. (a) In an
action or proceeding against a nonprofit association, a summons and
complaint must be served on an agent authorized by appointment to
receive service of process, an officer, a managing or general
agent, or a person authorized to participate in the management of
its affairs, in accordance with the Civil Practice and Remedies
Code.
(b) Not later than the 10th day after the date of a request
by the attorney general to an officer or board member of a nonprofit
association or to the nonprofit association, the nonprofit
association shall provide to the attorney general the names,
current addresses, and telephone numbers of:
(1) each agent authorized to receive service of
process on behalf of the nonprofit association; and
(2) each officer, managing or general agent, and other
person authorized to participate in the management of the affairs
of the nonprofit association. (TUUNAA 14.)
Sec. 252.014. UNIFORMITY OF APPLICATION AND CONSTRUCTION.
This chapter shall be applied and construed to make uniform the law
with respect to the subject of this chapter among states enacting
it. (TUUNAA 15.)
Sec. 252.015. TRANSITION CONCERNING REAL AND PERSONAL
PROPERTY. If, before September 1, 1995, an estate or interest in
real or personal property was by the terms of the transfer
purportedly transferred to a nonprofit association, but under the
law the estate or interest was vested in a fiduciary such as
officers of the nonprofit association to hold the estate or
interest for members of the nonprofit association, on or after
September 1, 1995, the fiduciary may transfer the estate or
interest to the nonprofit association in its name, or the nonprofit
association, by appropriate proceedings, may require that the
estate or interest be transferred to it in its name. (TUUNAA 16.)
Sec. 252.016. EFFECT ON OTHER LAW. This chapter replaces
existing law with respect to matters covered by this chapter but
does not affect other law covering unincorporated nonprofit
associations. (TUUNAA 18.)
Sec. 252.017. CHAPTER CONTROLLING. (a) Except as provided
by Subsection (b), the only provisions of this code that apply to or
govern a nonprofit association are the provisions of this chapter.
(b) Chapters 1 and 4 and, if a nonprofit association
designates an agent for service of process, Subchapter E, Chapter
5, apply to a nonprofit association. (New.)
TITLE 7. PROFESSIONAL ENTITIES
CHAPTER 301. PROVISIONS RELATING TO
PROFESSIONAL ENTITIES
Sec. 301.001. APPLICABILITY OF TITLE. (a) This title
applies only to a professional entity or foreign professional
entity.
(b) This title does not affect:
(1) the professional or confidential relationship
between a person who provides a professional service and the
recipient of that service; or
(2) a person's legal remedies against another person
who commits an error, omission, negligent or incompetent act, or
malfeasance while providing a professional service.
(c) This title does not apply to partnerships or limited
liability partnerships. (TPCA 16 (part); TPAA 7; TLLCA 11.05
(part).)
Sec. 301.002. CONFLICTS OF LAW. This title prevails over a
conflicting provision of Title 1, 2, or 3. (TPCA 5 (part); TPAA 25
(part).)
Sec. 301.003. DEFINITIONS. In this title:
(1) "Licensed mental health professional" means a
person, other than a physician, who is licensed by the state to
engage in the practice of psychology or psychiatric nursing or to
provide professional therapy or counseling services.
(2) "Professional association" means an association,
as distinguished from either a partnership or a corporation, that
is:
(A) formed for the purpose of providing the
professional service rendered by a doctor of medicine, doctor of
osteopathy, doctor of podiatry, dentist, chiropractor,
optometrist, therapeutic optometrist, or licensed mental health
professional; and
(B) governed as a professional entity under this
title.
(3) "Professional corporation" means a corporation
that is:
(A) formed for the purpose of providing a
professional service that by law a corporation governed by Title 2
is prohibited from rendering; and
(B) governed as a professional entity under this
title.
(4) "Professional entity" means a professional
association, professional corporation, or professional limited
liability company.
(5) "Professional individual," with respect to a
professional entity, means an individual who is licensed to provide
in this state or another jurisdiction the same professional service
as is rendered by that professional entity.
(6) "Professional limited liability company" means a
limited liability company formed for the purpose of providing a
professional service and governed as a professional entity under
this title.
(7) "Professional organization," with respect to a
professional corporation or a professional limited liability
company, means a person other than an individual, whether
nonprofit, for-profit, domestic, or foreign and including a
nonprofit corporation or nonprofit association, that renders the
same professional service as the professional corporation or
professional limited liability company only through owners,
members, managerial officials, employees, or agents, each of whom
is a professional individual or professional organization.
(8) "Professional service" means any type of service
that requires, as a condition precedent to the rendering of the
service, the obtaining of a license in this state, including the
personal service rendered by an architect, attorney, certified
public accountant, dentist, physician, public accountant, or
veterinarian. (TLLCA 11.01.A(3), 11.01.B; TPCA 3(a), (b), 4(b), 12
(part), 15; TPAA 2, as amended Acts 77th Leg., R.S., Chs. 508 and
883, 3.)
Sec. 301.004. AUTHORIZED PERSON. For purposes of this
title, a person is an authorized person with respect to:
(1) a professional association if the person is a
professional individual; and
(2) a professional corporation or a professional
limited liability company if the person is a professional
individual or professional organization. (TPCA 12 (part), 15; TPAA
10; TLLCA 11.01.B(2), (3).)
Sec. 301.005. APPLICATION FOR REGISTRATION OF FOREIGN
PROFESSIONAL ENTITY. (a) When required by Chapter 9, a foreign
professional entity must file an application for registration to
transact business in this state.
(b) The secretary of state may accept an application filed
under Subsection (a) only if:
(1) the name and purpose of the foreign professional
entity stated in the application comply with this title and
Chapters 2 and 5; and
(2) the application states that the jurisdiction of
formation of the foreign professional entity permits reciprocal
admission of an entity formed under this code. (TPCA 19A(a) (part),
(b); TLLCA 11.07.A (part).)
Sec. 301.006. LICENSE REQUIRED TO PROVIDE PROFESSIONAL
SERVICE. (a) A professional association or foreign professional
association may provide a professional service in this state only
through owners, managerial officials, employees, or agents, each of
whom:
(1) is a professional individual; and
(2) is licensed in this state to provide the same
professional service provided by the entity.
(b) A professional entity, other than a professional
association, may provide a professional service in this state only
through owners, managerial officials, employees, or agents, each of
whom is an authorized person.
(c) An individual may not, under the guise of employment,
provide a professional service in this state unless the individual
is licensed to provide the professional service under the laws of
this state.
(d) This section may not be construed to prohibit a
professional entity or foreign professional entity from employing
individuals who do not, according to general custom and practice,
ordinarily provide a professional service, including clerks,
secretaries, bookkeepers, technicians, nurses, or assistants.
(TPCA 15, 19A(a) (part); TPAA 2(B)(1); TLLCA 11.04, 11.07.A.)
Sec. 301.007. CERTAIN REQUIREMENTS TO BE OWNER, GOVERNING
PERSON, OR OFFICER. (a) A person may be an owner of a professional
entity or a governing person of a professional limited liability
company only if the person is an authorized person.
(b) An individual may be an officer of a professional entity
or a governing person of a professional association or professional
corporation only if the individual is a professional individual.
(TPCA 9, 10, 12; TPAA 2(B)(1), 9(C), 10; TLLCA 11.03.A (part).)
Sec. 301.008. DUTIES AND POWERS OF OWNER OR MANAGERIAL
OFFICIAL WHO CEASES TO BE LICENSED; PURCHASE OF OWNERSHIP INTEREST.
(a) A managerial official of a professional entity who ceases to
satisfy the requirements of Section 301.007 shall promptly resign
the person's position and employment with the entity.
(b) An owner of a professional entity who ceases to be an
authorized person as required by Section 301.007 shall promptly
relinquish the person's ownership interest in the entity.
(c) A person who succeeds to the ownership interest of an
owner shall promptly relinquish the person's financial interest in
the entity if the person is not an authorized person as required by
Section 301.007.
(d) A professional entity shall purchase or cause to be
purchased the ownership interest in the entity of a person who is
required to relinquish the person's financial interest in the
entity under this section. The price and terms of a purchase of an
ownership interest required under this subsection may be provided
by the governing documents of the entity or an applicable
agreement.
(e) A person who owns all of the outstanding ownership
interests in a professional entity but is required under this
section to relinquish the person's financial interest in the entity
may act as a managerial official or owner of the entity only for the
purpose of winding up the affairs of the entity, including selling
the outstanding ownership interests and other assets of the entity.
(TPCA 14; TLLCA 11.03.B, C.)
Sec. 301.009. TRANSFER OF OWNERSHIP INTEREST. Except as
limited by the governing documents of the professional entity or an
applicable agreement, an ownership interest in a professional
entity may be transferred only to:
(1) an owner of the entity;
(2) the entity itself; or
(3) an authorized person. (TPCA 12 (part); TPAA 10;
TLLCA 11.03.A (part).)
Sec. 301.010. LIABILITY. (a) A professional entity is
jointly and severally liable for an error, omission, negligent or
incompetent act, or malfeasance committed by a person who:
(1) is an owner, managerial official, employee, or
agent of the entity; and
(2) while providing a professional service for the
entity or during the course of the person's employment, commits the
error, omission, negligent or incompetent act, or malfeasance.
(b) An owner, managerial official, employee, or agent of a
professional entity other than an owner, managerial official,
employee, or agent liable under Subsection (a) is not subject to the
same liability imposed on the professional entity under this
section.
(c) If a person described by Subsection (a) is a
professional organization, the professional organization and the
professional entity are jointly and severally liable for the error,
omission, negligent or incompetent act, or malfeasance committed by
the person, or the person's owner, member, managerial official,
employee, or agent, while providing a professional service for the
professional entity. (TPCA 16 (part); TPAA 24 (part); TLLCA 11.05
(part).)
Sec. 301.011. EXEMPTION FROM SECURITIES LAWS. (a) A sale,
issuance, or offer for sale of an ownership interest in a
professional entity to a person authorized under this title to own
an ownership interest in the professional entity is exempt from any
state law, other than this code, that regulates the sale, issuance,
or offer for sale of securities.
(b) A transaction described by Subsection (a) does not
require the approval of or other action by a state official or
regulatory agency authorized to regulate the sale, issuance, or
offer for sale of securities. (TPCA 19; TLLCA 11.06.)
Sec. 301.012. JOINT PRACTICE BY CERTAIN PROFESSIONALS. (a)
Persons licensed as doctors of medicine and persons licensed as
doctors of osteopathy by the Texas State Board of Medical Examiners
and persons licensed as podiatrists by the Texas State Board of
Podiatric Medical Examiners may jointly form and own a professional
association or a professional limited liability company to perform
professional services that fall within the scope of practice of
those practitioners.
(b) Professionals, other than physicians, engaged in
related mental health fields such as psychology, clinical social
work, licensed professional counseling, and licensed marriage and
family therapy may form a professional entity that is jointly owned
by those practitioners to perform professional services that fall
within the scope of practice of those practitioners.
(c) Persons licensed as doctors of medicine and persons
licensed as doctors of osteopathy by the Texas State Board of
Medical Examiners and persons licensed as optometrists or
therapeutic optometrists by the Texas Optometry Board may, subject
to the provisions regulating those professionals, jointly form and
own a professional association or a professional limited liability
company to perform professional services that fall within the scope
of practice of those practitioners.
(d) Only a physician, optometrist, or therapeutic
optometrist may have an ownership interest in a professional
association or professional limited liability company formed under
Subsection (c).
(e) An entity formed under Subsection (c) is not prohibited
from making one or more payments to an owner's estate following the
owner's death under an agreement with the owner or as otherwise
authorized or required by law.
(f) When doctors of medicine, osteopathy, and podiatry, or
doctors of medicine, osteopathy, and optometry or therapeutic
optometry, or mental health professionals form a professional
entity as provided by Subsections (a), (b), and (c), the authority
of each of the practitioners is limited by the scope of practice of
the respective practitioners and none can exercise control over the
other's clinical authority granted by their respective licenses,
either through agreements, bylaws, directives, financial
incentives, or other arrangements that would assert control over
treatment decisions made by the practitioner.
(g) The state agencies exercising regulatory control over
professions to which this section applies continue to exercise
regulatory authority over their respective licenses. (TPCA 4(b);
TPAA 2(B); TLLCA 11.01.A(3), (4).)
CHAPTER 302. PROVISIONS RELATING TO
PROFESSIONAL ASSOCIATIONS
Sec. 302.001. APPLICABILITY OF CERTAIN PROVISIONS
GOVERNING FOR-PROFIT CORPORATIONS. The provisions of Chapters 20
and 21 governing a for-profit corporation apply to a professional
association, unless there is a conflict with this title. (TPAA 25.)
Sec. 302.002. DURATION OF PROFESSIONAL ASSOCIATION. A
professional association continues:
(1) for all purposes as a separate entity independent
of the association's members until:
(A) the expiration of the period of duration
stated in the certificate of formation; or
(B) the association is wound up and terminated in
the manner provided by the certificate of formation or, if the
certificate of formation does not provide a manner for winding up
and termination, by a two-thirds vote of the association's members;
and
(2) in existence notwithstanding:
(A) the death, insanity, incompetency, felony
conviction, resignation, withdrawal, transfer of ownership
interest, or expulsion of a member other than the last surviving
member of the association;
(B) the admission of a new member or the transfer
of ownership interest to a new or existing member; or
(C) the occurrence of an event that would require
the winding up of a partnership under state law or similar
circumstances. (TPAA 8(B).)
Sec. 302.003. AMENDMENT OF CERTIFICATE OF FORMATION. (a) A
professional association may amend the association's certificate
of formation as provided by:
(1) Chapter 3;
(2) the procedure for amendment stated in the
certificate of formation; or
(3) if the certificate of formation does not provide a
procedure for amending the certificate, a two-thirds vote of the
association's members.
(b) A professional association is not required to amend the
association's certificate of formation to reflect a change in
membership or a transfer of ownership interests in the association.
(TPAA 14.)
Sec. 302.004. ADOPTION OF BYLAWS; DELEGATION OF AUTHORITY.
(a) The members of a professional association may adopt bylaws for
the association.
(b) The authority to adopt bylaws for a professional
association granted under Subsection (a) may be delegated under the
certificate of formation to the governing authority of the
association. (TPAA 9(D).)
Sec. 302.005. GOVERNING AUTHORITY. (a) A professional
association shall be governed by:
(1) a board of directors; or
(2) an executive committee.
(b) The governing authority of a professional association
shall be elected by the members of the association. (TPAA 9(A).)
Sec. 302.006. MEMBERS' VOTING RIGHTS. A member of a
professional association is entitled to cast a vote at a meeting of
the members as provided by the certificate of formation of the
association. (TPAA 9(E).)
Sec. 302.007. ELECTION OF OFFICERS. The governing authority
of a professional association shall elect the officers of the
association. (TPAA 9(A).)
Sec. 302.008. OFFICER AND GOVERNING PERSON ELIGIBILITY
REQUIREMENTS. (a) Only a member of the professional association is
eligible to serve as an officer or governing person of a
professional association.
(b) Except as provided by Subsection (c), a person is not
required to be a governing person of a professional association to
serve as an officer of the association.
(c) Only a governing person of a professional association is
eligible to serve as the president of the professional association.
(TPAA 9(C).)
Sec. 302.009. EMPLOYMENT OF AGENTS AND EMPLOYEES. The
officers of a professional association may employ agents or
employees for the association as the officers consider advisable.
(TPAA 9(F).)
Sec. 302.010. LIMITATION ON MEMBER'S POWER TO BIND
ASSOCIATION. A member of a professional association is not entitled
to bind the association within the scope of the association's
business or profession merely by virtue of being a member of the
professional association. (TPAA 9(B).)
Sec. 302.011. DIVISION OF PROFITS. The members of a
professional association shall divide the profits derived from the
association in the manner provided by the governing documents of
the association. (TPAA 2(A), as amended Acts 77th Leg., R.S., Chs.
508 and 883.)
Sec. 302.012. ANNUAL STATEMENT REQUIRED. (a) In June of
each year, a professional association shall file with the secretary
of state a statement that:
(1) lists:
(A) the name and address of each member of the
association; and
(B) the name of each officer and governing person
of the association; and
(2) states that each member of the association is
licensed to provide the same type of professional service provided
by the association.
(b) The statement required by this section must be executed
by an officer of the association on behalf of the association. (TPAA
21.)
Sec. 302.013. WINDING UP AND TERMINATION; CERTIFICATE OF
TERMINATION. (a) A professional association may wind up and
terminate the association's business as provided by:
(1) the association's certificate of formation; or
(2) if the certificate of formation does not provide
for the winding up and termination of the association, a two-thirds
vote of the association's members.
(b) Except as provided by Subsection (c), a certificate of
termination filed in accordance with Chapter 11 must be executed by
an officer of the professional association on behalf of the
association.
(c) If a professional association does not have any living
officer, the certificate of termination must be executed by the
legal representative of the last surviving officer of the
association. (TPAA 8(B) (part), 18 (part).)
CHAPTER 303. PROVISIONS RELATING TO
PROFESSIONAL CORPORATIONS
Sec. 303.001. APPLICABILITY OF CERTAIN PROVISIONS
GOVERNING FOR-PROFIT CORPORATIONS. The provisions of Chapters 20
and 21 governing a for-profit corporation apply to a professional
corporation, unless there is a conflict with this title. (TPCA 5
(part).)
Sec. 303.002. AUTHORITY AND LIABILITY OF SHAREHOLDER. (a)
A shareholder of a professional corporation is not required to
supervise the performance of duties by an officer or employee of the
corporation.
(b) A shareholder of a professional corporation is subject
to no greater liability than a shareholder of a for-profit
corporation. (TPCA 5 (part).)
Sec. 303.003. NOTICE OF RESTRICTION ON TRANSFER OF SHARES.
Any restriction on the transfer of shares in a professional
corporation that is imposed by the governing documents of the
corporation or an applicable agreement must be:
(1) noted on each certificate representing the shares;
or
(2) incorporated by reference in the manner provided
by Chapter 21. (TPCA 12 (part).)
Sec. 303.004. REDEMPTION OF SHARES; PRICE AND TERMS. (a) A
professional corporation may redeem shares of a shareholder,
including a deceased shareholder.
(b) The price and other terms of a redemption of shares may
be:
(1) agreed to between the board of directors of the
professional corporation and the shareholder or the shareholder's
personal representative; or
(2) specified in the governing documents of the
professional corporation or an applicable agreement. (TPCA 13.)
Sec. 303.005. EXISTENCE OF PROFESSIONAL CORPORATION BEFORE
WINDING UP AND TERMINATION. A professional corporation continues to
exist until the winding up and termination of the corporation as
provided by Chapter 11 without regard to:
(1) the death, incompetency, bankruptcy, resignation,
withdrawal, retirement, or expulsion of any shareholder of the
corporation;
(2) the transfer of shares to a new shareholder; or
(3) the occurrence of an event requiring the winding
up of a partnership. (TPCA 17 (part).)
Sec. 303.006. WINDING UP AND TERMINATION OF PROFESSIONAL
CORPORATION. A shareholder of a professional corporation may not
wind up the affairs of and terminate the corporation independently
of other shareholders of the corporation. (TPCA 17 (part).)
CHAPTER 304. PROVISIONS RELATING TO PROFESSIONAL
LIMITED LIABILITY COMPANIES
Sec. 304.001. APPLICABILITY OF CERTAIN PROVISIONS
GOVERNING LIMITED LIABILITY COMPANIES. Title 3 applies to a
professional limited liability company, unless there is a conflict
with this title. (TLLCA 11.01.B(2).)
TITLE 8. MISCELLANEOUS AND TRANSITION PROVISIONS
CHAPTER 401. GENERAL PROVISIONS
Sec. 401.001. DEFINITIONS. In this title:
(1) "Mandatory application date" means:
(A) for an entity subject to this code under
Section 402.001, January 1, 2006;
(B) for an entity subject to this code under
Section 402.003 or 402.004, the date of completion of the action
required by that section but no earlier than January 1, 2006; and
(C) for any other entity, January 1, 2010.
(2) "Prior law" means the applicable law in effect
before January 1, 2006.
CHAPTER 402. MISCELLANEOUS AND TRANSITION PROVISIONS
Sec. 402.001. APPLICABILITY UPON EFFECTIVE DATE. At the
effective date of this code, this code applies to:
(1) a domestic entity formed on or after the effective
date of this code;
(2) a foreign filing entity or other foreign entity
that has not registered with the secretary of state to transact
business in this state before the effective date of this code; and
(3) a foreign nonfiling entity.
Sec. 402.002. EARLY EFFECTIVENESS OF FEES. On or after the
effective date of this code, the fees required by Chapter 4 apply to
all filings made with the secretary of state, including comparable
filings under prior law, regardless of whether an entity is subject
to or has adopted this code. The intent of this section is to:
(1) require a filing fee for all documents filed under
either this code or the prior law without regard to the difference
in designation of the document; and
(2) make the filing fees described by Subdivision (1)
uniform from the effective date of this code.
Sec. 402.003. EARLY ADOPTION OF CODE BY EXISTING DOMESTIC
ENTITY. (a) A domestic entity formed before the effective date of
this code may voluntarily elect to adopt and become subject to this
code by:
(1) complying with the procedures to amend its
governing documents to adopt this code and, if necessary, to cause
its governing documents to comply with this code; and
(2) if the domestic entity is a filing entity, filing
with the secretary of state in accordance with Chapter 4:
(A) a statement that the filing entity is
electing to adopt this code; and
(B) if necessary, a certificate of amendment that
would cause its certificate of formation to comply with this code.
(b) If amendments to the governing documents of a domestic
entity that are necessary to conform the governing documents to
this code would not require, under prior law, the vote or consent of
the owners or members of the entity, this code and any amendment to
the governing documents required by this section may be adopted by
the governing authority only in the manner provided for an
amendment of the particular governing document.
Sec. 402.004. EARLY ADOPTION OF CODE BY REGISTERED FOREIGN
ENTITY. A foreign filing entity registered with the secretary of
state to transact business in this state before the effective date
of this code may voluntarily elect to adopt and become subject to
this code by filing with the secretary of state in accordance with
Chapter 4:
(1) a statement that the foreign filing entity is
electing to adopt this code; and
(2) an amendment to its application for registration
that would cause its application for registration to comply with
this code.
Sec. 402.005. APPLICABILITY TO EXISTING ENTITIES ON
MANDATORY APPLICATION DATE. On January 1, 2010, if a domestic
filing entity formed before the effective date of this code or a
foreign filing entity registered with the secretary of state to
transact business in this state before the effective date of this
code has not taken the actions specified by Section 402.003(a) or
402.004 to elect to adopt this code:
(1) this code applies to the entity and all actions
taken by the managerial officials, owners, or members of the
entity, except as otherwise expressly provided by this title;
(2) the entity is not considered to have failed to
comply with this code if the entity's certificate of formation or
application for registration, as appropriate, does not comply with
this code;
(3) if the entity is a domestic filing entity, the
entity shall conform its certificate of formation to the
requirements of this code when it next files an amendment to its
certificate of formation; and
(4) if the entity is a foreign filing entity, the
entity shall conform its application for registration to the
requirements of this code when it next files an amendment to its
application for registration.
Sec. 402.006. APPLICABILITY TO CERTAIN ACTS, CONTRACTS, AND
TRANSACTIONS. (a) Except as otherwise expressly provided by this
title, all of the provisions of this code govern acts, contracts, or
other transactions by an entity subject to this code or its
managerial officials, owners, or members that occur on or after the
mandatory application date. The prior law governs the acts,
contracts, or transactions of the entity or its managerial
officials, owners, or members that occur before the mandatory
application date.
(b) No requirement under Subchapter E, Chapter 3, with
respect to matters to be set forth on certificates evidencing
ownership interests of partnerships shall apply to or affect
certificates outstanding when the requirement first becomes
applicable to the certificates, but the requirement applies to all
subsequently issued certificates whether in connection with an
original issue of ownership interests, a transfer of ownership
interests, or otherwise.
Sec. 402.007. INDEMNIFICATION. Chapter 8 governs any
proposed indemnification by a domestic entity after the mandatory
application date, regardless of whether the events on which the
indemnification is based occurred before or after the mandatory
application date. A statement relating to indemnification
contained in the governing documents of a domestic entity on the
mandatory application date may not be construed as limiting the
indemnification authorized by Chapter 8 unless it expressly states
that is the intent.
Sec. 402.008. MEETINGS OF OWNERS AND MEMBERS; CONSENTS;
VOTING OF INTERESTS. (a) Except as provided by Subsection (b) and
regardless of whether a proxy or consent was executed by an owner or
member before the mandatory application date, Chapter 6 and any
other applicable provision of this code apply to:
(1) a meeting of owners or members held on or after the
mandatory application date;
(2) an action undertaken by owners or members under a
written consent that takes effect on or after the mandatory
application date;
(3) a vote cast at a meeting described by Subdivision
(1); and
(4) consent given for an action described by
Subdivision (2).
(b) Prior law applies to a meeting of owners or members and
to any vote cast at a meeting described by this section if the
meeting was initially called for a date before the mandatory
application date and notice of the meeting was given to owners or
members entitled to vote at the meeting.
Sec. 402.009. MEETINGS OF GOVERNING AUTHORITY AND
COMMITTEES; CONSENTS. (a) Except as provided by Subsection (b),
Chapter 6 and any other applicable provision of this code apply to:
(1) a meeting of the governing authority or a
committee of the governing authority held on or after the mandatory
application date;
(2) an action undertaken by the governing authority or
a committee of the governing authority under a written consent that
takes effect on or after the mandatory application date;
(3) a vote cast at a meeting described by Subdivision
(1); and
(4) consent given for an action described by
Subdivision (2).
(b) Prior law applies to a meeting of the governing
authority or a committee of the governing authority and to any vote
cast at a meeting described by this section if the meeting was
initially called for a date before the mandatory application date
and notice of the meeting was given to governing persons entitled to
vote at the meeting.
Sec. 402.010. SALE OF ASSETS, MERGERS, REORGANIZATIONS,
CONVERSIONS. Chapter 10 and any other applicable provisions of this
code apply to a transaction consummated by an entity after the
mandatory application date, except that if a required approval of
the owners or members of the entity has been given before the
mandatory application date or has been given after the mandatory
application date but at a meeting of owners or members initially
called for a date before the mandatory application date, the
transaction shall be governed by the prior law.
Sec. 402.011. WINDING UP AND TERMINATION. (a) Chapter 11
applies to:
(1) an action for involuntary or judicial winding up
and termination commenced after the mandatory application date; or
(2) a voluntary winding up and termination proceeding
initiated after the mandatory application date by:
(A) the governing authority;
(B) the terms of the governing documents; or
(C) applicable law.
(b) The prior law governs:
(1) an action described by Subsection (a)(1) that is
pending on the mandatory application date; or
(2) a proceeding described by Subsection (a)(2)
initiated before the mandatory application date.
Sec. 402.012. REGISTRATION OF CERTAIN FOREIGN ENTITIES. A
foreign entity that has transacted intrastate business in this
state before the mandatory application date and that is required by
Chapter 9 to register to transact business is not subject to a
direct or indirect penalty as a result of failure to register under
Chapter 9 if the application for registration is filed not later
than the 30th day after the mandatory application date.
Sec. 402.013. ENTITIES UNDER SUSPENSION FOR NONFILING OF
REQUIRED REPORTS OR PAYMENT OF TAXES; APPLICABILITY OF PRIOR LAW.
(a) If the rights, privileges, and powers of a domestic filing
entity have been suspended and are still suspended immediately
before the mandatory application date under the prior law, this
code applies to the entity on the mandatory application date.
(b) If the rights, privileges, and powers of a domestic
filing entity have been suspended and are still suspended under the
Tax Code immediately before the mandatory application date, the
suspension continues to apply to the entity until the rights,
privileges, and powers are restored by the secretary of state under
that code.
Sec. 402.014. MAINTENANCE OF PRIOR ACTION. Except as
expressly provided by this title, this code does not apply to an
action or proceeding commenced before the mandatory application
date. Prior law applies to the action or proceeding.
SECTION 2. CONFORMING AMENDMENT. Part Eleven, Texas
Business Corporation Act, is amended by adding Article 11.02 to
read as follows:
Art. 11.02. APPLICABILITY; EXPIRATION. A. Except as
provided by Title 8, Business Organizations Code, this Act does not
apply to a corporation to which the Business Organizations Code
applies.
B. This Act expires January 1, 2010.
SECTION 3. CONFORMING AMENDMENT. Part Seven, Texas
Miscellaneous Corporation Laws Act (Article 1302-7.01 et seq.,
Vernon's Texas Civil Statutes), is amended by adding Article 7.09
to read as follows:
Art. 7.09. APPLICABILITY; EXPIRATION. A. Except as
provided by Title 8, Business Organizations Code, this Act does not
apply to a corporation to which the Business Organizations Code
applies.
B. This Act expires January 1, 2010.
SECTION 4. CONFORMING AMENDMENT. The Texas Non-Profit
Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil
Statutes) is amended by adding Article 11.02 to read as follows:
Art. 11.02. APPLICABILITY; EXPIRATION. A. Except as
provided by Title 8, Business Organizations Code, this Act does not
apply to a corporation to which the Business Organizations Code
applies.
B. This Act expires January 1, 2010.
SECTION 5. CONFORMING AMENDMENT. The Cooperative
Association Act (Article 1396-50.01, Vernon's Texas Civil
Statutes) is amended by adding Section 47 to read as follows:
Sec. 47. APPLICABILITY; EXPIRATION. (a) Except as provided
by Title 8, Business Organizations Code, this Act does not apply to
an association to which the Business Organizations Code applies.
(b) This Act expires January 1, 2010.
SECTION 6. CONFORMING AMENDMENT. The Texas Uniform
Unincorporated Nonprofit Association Act (Article 1396-70.01,
Vernon's Texas Civil Statutes) is amended by adding Section 19 to
read as follows:
Sec. 19. APPLICABILITY; EXPIRATION. (a) Except as provided
by Title 8, Business Organizations Code, this Act does not apply to
a nonprofit association to which the Business Organizations Code
applies.
(b) This Act expires January 1, 2010.
SECTION 7. CONFORMING AMENDMENT. The Texas Professional
Corporation Act (Article 1528e, Vernon's Texas Civil Statutes) is
amended by adding Section 21 to read as follows:
Sec. 21. APPLICABILITY; EXPIRATION. (a) Except as provided
by Title 8, Business Organizations Code, this Act does not apply to
a professional corporation to which the Business Organizations Code
applies.
(b) This Act expires January 1, 2010.
SECTION 8. CONFORMING AMENDMENT. The Texas Professional
Association Act (Article 1528f, Vernon's Texas Civil Statutes) is
amended by adding Section 27 to read as follows:
Sec. 27. APPLICABILITY; EXPIRATION. (A) Except as provided
by Title 8, Business Organizations Code, this Act does not apply to
a professional association to which the Business Organizations Code
applies.
(B) This Act expires January 1, 2010.
SECTION 9. CONFORMING AMENDMENT. Part Eight, Texas Limited
Liability Company Act (Article 1528n, Vernon's Texas Civil
Statutes), is amended by adding Article 8.13 to read as follows:
Art. 8.13. APPLICABILITY; EXPIRATION. A. Except as
provided by Title 8, Business Organizations Code, this Act does not
apply to a limited liability company to which the Business
Organizations Code applies.
B. This Act expires January 1, 2010.
SECTION 10. CONFORMING AMENDMENT. Article 13, Texas Revised
Limited Partnership Act (Article 6132a-1, Vernon's Texas Civil
Statutes), is amended by adding Section 13.10 to read as follows:
Sec. 13.10. APPLICABILITY; EXPIRATION. (a) Except as
provided by Title 8, Business Organizations Code, this Act does not
apply to a limited partnership to which the Business Organizations
Code applies.
(b) This Act expires January 1, 2010.
SECTION 11. CONFORMING AMENDMENT. Article XI, Texas Revised
Partnership Act (Article 6132b-11.01 et seq., Vernon's Texas Civil
Statutes), is amended by adding Section 11.05 to read as follows:
Sec. 11.05. APPLICABILITY; EXPIRATION. (a) Except as
provided by Title 8, Business Organizations Code, this Act does not
apply to a partnership to which the Business Organizations Code
applies.
(b) This Act expires January 1, 2010.
SECTION 12. CONFORMING AMENDMENT. The Texas Real Estate
Investment Trust Act (Article 6138A, Vernon's Texas Civil Statutes)
is amended by adding Section 29.10 to read as follows:
Sec. 29.10. APPLICABILITY; EXPIRATION. (A) Except as
provided by Title 8, Business Organizations Code, this Act does not
apply to a real estate investment trust to which the Business
Organizations Code applies.
(B) This Act expires January 1, 2010.
SECTION 13. CONFORMING AMENDMENT. Article 1399, Revised
Statutes, is amended to read as follows:
Art. 1399. LODGES. The grand lodge of Texas, Ancient, Free
and Accepted Masons, the Grand Royal Arch Chapter of Texas, the
Grand Commandery of Knights Templars of Texas (Masonic); the grand
lodge of the Independent Order of Odd Fellows of Texas, and other
like institutions and orders organized for charitable or benevolent
purposes may, by the consent of their respective bodies expressed
by a resolution or otherwise, become bodies corporate under this
title. Except as provided by Title 8, Business Organizations Code,
this article and Articles 1400-1407, Revised Statutes, do not apply
to a grand body to which the Business Organizations Code applies.
SECTION 14. CONFORMING AMENDMENT. Chapter 963, Acts of the
70th Legislature, Regular Session, 1987 (Article 1407a, Vernon's
Texas Civil Statutes), is amended by adding Section 9 to read as
follows:
Sec. 9. APPLICABILITY. Except as provided by Title 8,
Business Organizations Code, this Act does not apply to a church
benefits board to which the Business Organizations Code applies.
SECTION 15. CONFORMING AMENDMENT. Chapter 853, Acts of the
62nd Legislature, Regular Session, 1971 (Article 1528g, Vernon's
Texas Civil Statutes), is amended by adding Section 13 to read as
follows:
Sec. 13. APPLICABILITY. Except as provided by Title 8,
Business Organizations Code, this Act does not apply to a business
development corporation to which the Business Organizations Code
applies.
SECTION 16. REPEALER. (a) The following Acts and articles
as compiled in Vernon's Texas Civil Statutes are repealed:
Articles 1525, 1526, 1527, 1527a, 1528, 1528a, and 1528h.
(b) The following Acts and articles as compiled in Vernon's
Texas Civil Statutes are repealed on January 1, 2010: Articles
1399, 1400, 1401, 1402, 1403, 1404, 1405, 1406, 1407, 1407a, and
1528g.
SECTION 17. EFFECTIVE DATE. This Act takes effect January
1, 2006.