S.B. No. 860

AN ACT

relating to corporations and fundamental business transactions.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 1.002, Business Organizations Code, is amended by adding Subdivision (63-a) to read as follows:

(63-a) "Owner liability" means personal liability for a liability or other obligation of an organization that is imposed on a person:

(A) by statute solely because of the person's status as an owner or member of the organization; or

(B) by a governing document of an organization under a provision of this code or the law of the organization's jurisdiction of formation that authorizes the governing document to make one or more specified owners or members of the organization liable in their capacity as owners or members for all or specified liabilities or other obligations of the organization.

SECTION 2. Section 3.054, Business Organizations Code, is amended to read as follows:

Sec. 3.054. EXECUTION OF CERTIFICATE OF AMENDMENT OF FOR-PROFIT CORPORATION. Except as provided by Title 2 or this section, an [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, one or more [a majority] of the directors may sign the certificate of amendment on behalf of the for-profit corporation.

SECTION 3. Section 3.060(b), Business Organizations Code, is amended to read as follows:

(b) Except as provided by Title 2 or this subsection, an [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, one or more [the majority] of the directors may sign the restated certificate of formation on behalf of the corporation.

SECTION 4. Section 3.201(b), Business Organizations Code, is amended to read as follows:

(b) The ownership interests in a for-profit corporation, real estate investment trust, or professional corporation must be certificated, except to the extent a [unless the] governing document [documents] of the entity or a resolution adopted by the governing authority of the entity provides that some or all of the classes or series of [states that] the ownership interests are uncertificated or that some or all of the ownership interests in any class or series of the ownership interests are uncertificated. The entity may have outstanding both certificated and uncertificated ownership interests of the same class or series. 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.

SECTION 5. Section 10.001(e), Business Organizations Code, is amended to read as follows:

(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 subject to owner liability [personally liable], without that owner's or member's consent, for a liability or other obligation of any other person.

SECTION 6. Section 10.002, Business Organizations Code, is amended by amending Subsection (a) and adding Subsection (d) to read as follows:

(a) A plan of merger must be in writing and 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, including use of a formula, of converting or exchanging 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 identification of any of the ownership or membership interests of an organization that is a party to the merger that are:

(A) to be canceled rather than converted or exchanged; or

(B) to remain outstanding rather than converted or exchanged if the organization survives the merger;

(7) the certificate of formation of each new domestic filing entity to be created by the plan of merger;

(8) the governing documents of each new domestic nonfiling entity to be created by the plan of merger; and

(9) 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.

(d) Any of the terms of the plan of merger may be made dependent on facts ascertainable outside of the plan if the manner in which those facts will operate on the terms of the merger is clearly and expressly stated in the plan. In this subsection, "facts" includes the occurrence of any event, including a determination or action by any person.

SECTION 7. Section 10.004, Business Organizations Code, is amended to read as follows:

Sec. 10.004. PLAN OF MERGER: PERMISSIVE PROVISIONS. A plan of merger may include:

(1) amendments to, restatements of, or amendments and restatements of the governing documents of any surviving organization, including a certificate of amendment, a restated certificate of formation without amendment, or a restated certificate of formation containing amendments;

(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.

SECTION 8. Section 10.008(a), Business Organizations Code, is amended to read as follows:

(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, restated, or amended and restated to the extent provided by the plan of merger, and a certificate of amendment, a restated certificate of formation without amendment, or a restated certificate of formation containing amendments of a surviving filing entity shall have the effect stated in Section 3.063;

(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, or that are to be canceled or remain outstanding, are converted, exchanged, [or] canceled, or remain outstanding as provided in the plan of merger, 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 plan of merger or, if applicable, any rights to receive the fair value for the ownership interests provided under Subchapter H; 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.

SECTION 9. Section 10.051(f), Business Organizations Code, is amended to read as follows:

(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 subject to owner liability [personally liable], without the consent of the owner or member, for the liabilities or obligations of any other person or organization.

SECTION 10. Section 10.052, Business Organizations Code, is amended by amending Subsection (a) and adding Subsection (c) to read as follows:

(a) A plan of exchange must be in writing and 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, including use of a formula, 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.

(c) Any of the terms of the plan of exchange may be made dependent on facts ascertainable outside of the plan if the manner in which those facts will operate on the terms of the interest exchange is clearly and expressly stated in the plan. In this subsection, "facts" includes the occurrence of any event, including a determination or action by any person.

SECTION 11. Section 10.101(f), Business Organizations Code, is amended to read as follows:

(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 subject to owner liability [personally liable], without the consent of the owner or member, for a liability or other obligation of the converted entity.

SECTION 12. Section 10.103, Business Organizations Code, is amended by amending Subsection (a) and adding Subsection (c) to read as follows:

(a) A plan of conversion must be in writing and 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) if Sections 10.1025 and 10.109 do not apply, the manner and basis, including use of a formula, 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;

(7) the certificate of formation or similar organizational document of the converted entity if the converted entity is not a filing entity; and

(8) if Sections 10.1025 and 10.109 apply, a statement that the converting entity is electing to continue its existence in its current organizational form and jurisdiction of formation after the conversion takes effect.

(c) Any of the terms of the plan of conversion may be made dependent on facts ascertainable outside of the plan if the manner in which those facts will operate on the terms of the conversion is clearly and expressly stated in the plan. In this subsection, "facts" includes the occurrence of any event, including a determination or action by any person.

SECTION 13. Section 10.151, Business Organizations Code, is amended by amending Subsection (b) and adding Subsection (d) to read as follows:

(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 and organizational form of each domestic entity or non-code organization that is a party to the merger or exchange;

(B) for a merger, the name and organizational form of each domestic entity or non-code organization that is to be created by the plan of merger;

(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 any [each] filing entity that is a party to the merger, or a statement that amendments or changes are being made to the certificate of formation of any filing entity that is a party to the merger as set forth in a restated certificate of formation containing amendments or a certificate of amendment attached to the certificate of merger under Subsection (d) [if no amendments are desired to be effected by the merger, a statement to that effect];

(E) for a merger, if no amendments or changes to the certificate of formation of a filing entity are made under Paragraph (D), a statement to that effect, which may also refer to a restated certificate of formation attached to the certificate of merger under Subsection (d);

(F) for a merger, that the certificate of formation of each new filing entity to be created under the plan of merger is being filed with the certificate of merger;

(G) [(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

(H) [(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.

(d) As provided by Subsections (b)(1)(D) and (E), a certificate of merger filed under this section may include as an attachment a certificate of amendment, a restated certificate of formation without amendment, or a restated certificate of formation containing amendments for any filing entity that is a party to the merger.

SECTION 14. Section 10.154(b), Business Organizations Code, is amended to read as follows:

(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, organizational form, and jurisdiction of formation of the converting entity;

(B) the name, organizational form, and jurisdiction of formation of the converted 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.

SECTION 15. Sections 10.354(a) and (c), Business Organizations Code, are amended to read as follows:

(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; or

(F) a merger effected under Section 21.459(c) in which the shares of the shareholders are 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.

(c) Subsection (b) shall not apply either to a domestic entity that is a subsidiary with respect to a merger under Section 10.006 or to a corporation with respect to a merger under Section 21.459(c).

SECTION 16. Section 10.355, Business Organizations Code, is amended by adding Subsections (b-1) and (f) and amending Subsections (c) and (d) to read as follows:

(b-1) If a corporation effects a merger under Section 21.459(c), the responsible organization shall notify the shareholders of that corporation who have a right to dissent to the plan of merger under Section 10.354 of their rights under this subchapter not later than the 10th day after the effective date of the merger. Notice required under this subsection that is given to shareholders before the effective date of the merger may, but is not required to, contain a statement of the merger's effective date. If the notice is not given to the shareholders until on or after the effective date of the merger, the notice must contain a statement of the merger's effective date.

(c) A notice required to be provided under Subsection (a), [or] (b), or (b-1) 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)(1) or a demand under Section 10.356(b)(3), or both, [(3)] may be provided.

(d) In addition to the requirements prescribed by Subsection (c), a notice required to be provided:

(1) under Subsection (a)(1) must accompany the notice of the meeting to consider the action;

(2) [, and a notice required] under Subsection (a)(2) must be provided to:

(A) [(1)] each owner who consents in writing to the action before the owner delivers the written consent; and

(B) [(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; and

(3) under Subsection (b-1) must be provided:

(A) if given before the consummation of the tender or exchange offer described by Section 21.459(c)(2), to each shareholder to whom that offer is made; or

(B) if given after the consummation of the tender or exchange offer described by Section 21.459(c)(2), to each shareholder who did not tender the shareholder's shares in that offer.

(f) If the notice given under Subsection (b-1) did not include a statement of the effective date of the merger, the responsible organization shall, not later than the 10th day after the effective date, give a second notice to the shareholders notifying them of the merger's effective date. If the second notice is given after the later of the date on which the tender or exchange offer described by Section 21.459(c)(2) is consummated or the 20th day after the date notice under Subsection (b-1) is given, then the second notice is required to be given to only those shareholders who have made a demand under Section 10.356(b)(3).

SECTION 17. Section 10.356(b), Business Organizations Code, is amended to read as follows:

(b) To perfect the owner's rights of dissent and appraisal under Section 10.354, an owner:

(1) if the proposed action is to be submitted to a vote of the owners at a meeting, must give to the domestic entity a written notice of objection to the action that:

(A) is addressed to the entity's president and secretary;

(B) states that the owner's right to dissent will be exercised if the action takes effect;

(C) provides an address to which notice of effectiveness of the action should be delivered or mailed; and

(D) is delivered to the entity's principal executive offices before the meeting;

(2) 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

(3) must give to the responsible organization a demand in writing 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) not later than the 20th day after the date the responsible organization sends to the owner the notice required by Section 10.355(e) that the action has taken effect, if the action was approved by 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 the notice required by Section 10.355(d)(2) that the action has taken effect, if the action was approved by 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; or

(iv) not later than the 20th day after the date the responsible organization gives to the shareholder the notice required by Section 10.355(b-1) or the date of the consummation of the tender or exchange offer described by Section 21.459(c)(2), whichever is later, if the action is a merger effected under Section 21.459(c).

SECTION 18. Section 11.001(3), Business Organizations Code, is amended to read as follows:

(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.

SECTION 19. Section 20.001, Business Organizations Code, is amended to read as follows:

Sec. 20.001. SIGNATURE REQUIREMENTS FOR FILING INSTRUMENTS [REQUIREMENT THAT FILING INSTRUMENT BE SIGNED BY OFFICER]. (a) Unless otherwise provided by Section 3.054 or 3.060(b) or this title, a filing instrument of a corporation must be signed by an officer of the corporation.

(b) A certificate of termination, a certificate of reinstatement, a certificate of amendment to cancel an event requiring winding up, or a restated certificate of formation that contains an amendment to cancel an event requiring winding up may be signed by:

(1) one of the organizers if the winding up, the reinstatement, or the cancellation of an event requiring winding up was authorized by the organizers under Section 21.502(2) or 22.302(1)(B); or

(2) one of the directors if the winding up, the reinstatement, or the cancellation of an event requiring winding up was authorized by the board of directors under Section 21.502(2) or 22.302(1)(B).

SECTION 20. Section 21.052, Business Organizations Code, is amended by adding Subsection (d) to read as follows:

(d) This section does not affect:

(1) the authority of the shareholders of a corporation to consent in writing to the cancellation of an event requiring winding up in accordance with Section 21.502(1); or

(2) the authority of the organizers of a corporation to adopt a resolution to cancel an event requiring winding up in accordance with Section 21.502(2).

SECTION 21. Section 21.053, Business Organizations Code, is amended by amending Subsection (a) and adding Subsection (c) to read as follows:

(a) If a corporation does not have any issued and outstanding shares, or in the case of an amendment under Subsection (b) or (c), the board of directors may adopt a proposed amendment to the corporation's certificate of formation by resolution without shareholder approval.

(c) Notwithstanding Section 21.054 and except as otherwise provided by the certificate of formation, the board of directors of a corporation that has outstanding shares may, without shareholder approval, adopt an amendment to the corporation's certificate of formation to change the word or abbreviation in its corporate name as required by Section 5.054(a) to be a different word or abbreviation required by that section.

SECTION 22. Section 21.056(a), Business Organizations Code, is amended to read as follows:

(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:

(1) shareholder approval is not required if an amendment is not adopted; and

(2) the shareholders of a corporation may consent in writing, or the organizers of a corporation may adopt a resolution, to authorize a restated certificate of formation that contains an amendment to cancel an event requiring winding up in accordance with Section 21.502(1) or (2).

SECTION 23. Section 21.102, Business Organizations Code, is amended to read as follows:

Sec. 21.102. TERM OF AGREEMENT. Any limit on the term or duration of a shareholders' agreement under this subchapter must be set forth in the agreement. A shareholders' agreement under this subchapter that was in effect before September 1, 2015, remains in effect for 10 years, unless the agreement provides otherwise. [A shareholders' agreement under this subchapter is valid for 10 years, unless the agreement provides otherwise.]

SECTION 24. Section 21.160, Business Organizations Code, is amended by adding Subsection (d) to read as follows:

(d) The amount of the consideration to be received for shares may be determined in accordance with Subsection (a) by the approval of a formula to determine that amount.

SECTION 25. Section 21.371, Business Organizations Code, is amended to read as follows:

Sec. 21.371. PROCEDURES IN BYLAWS RELATING TO PROXIES. (a) 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.

(b) The bylaws may contain one or both of the following:

(1) a provision requiring that, when soliciting proxies or consents with respect to an election of directors, the corporation include in both its proxy statement and any form of its proxy or consent, in addition to individuals nominated by the board of directors, one or more individuals nominated by a shareholder, subject to any procedures or conditions as may be provided in the bylaws; and

(2) a provision requiring that the corporation reimburse expenses incurred by a shareholder in soliciting proxies or consents with respect to an election of directors so long as the provision does not apply to any election for which the record date precedes the adoption of the bylaw provision, but subject to any procedures or conditions as may be provided in the bylaws.

SECTION 26. Section 21.459, Business Organizations Code, is amended by adding Subsections (c), (d), and (e) to read as follows:

(c) This subsection applies only to a corporation that is a party to the merger and whose shares are, immediately before the date its board of directors approves the plan of merger, either listed on a national securities exchange or held of record by at least 2,000 shareholders. Unless required by the corporation's certificate of formation, a plan of merger is not required to be approved by the shareholders of the corporation if:

(1) the plan of merger expressly:

(A) permits or requires the merger to be effected under this subsection; and

(B) provides that any merger effected under this subsection shall be effected as soon as practicable following the consummation of the offer described by Subdivision (2);

(2) an organization consummates a tender or exchange offer for all of the outstanding shares of the corporation on the terms provided in the plan of merger that, absent this subsection, would be entitled to vote on the approval of the plan of merger, except that the offer may exclude shares of the corporation owned at the time of the commencement of the offer by:

(A) the corporation;

(B) the organization making the offer;

(C) any person who owns, directly or indirectly, all of the ownership interests in the organization making the offer; or

(D) any direct or indirect wholly owned subsidiary of a person described by Paragraph (A), (B), or (C);

(3) shares that are irrevocably accepted for purchase or exchange pursuant to the consummation of the offer described by Subdivision (2) and that are received by the depository before the expiration of the offer in addition to the shares that are otherwise owned by the consummating organization equal at least the percentage of the shares, and of each class or series of those shares, of the corporation that, absent this subsection, would be required to approve the plan of merger by:

(A) Section 21.457 and, if applicable, Section 21.458; and

(B) the certificate of formation of the corporation;

(4) the organization consummating the offer described by Subdivision (2) merges with or into the corporation pursuant to the plan of merger; and

(5) each outstanding share of each class or series of the corporation that is the subject of and not irrevocably accepted for purchase or exchange in the offer described by Subdivision (2) is to be converted or exchanged in the merger into, or into the right to receive, the same amount and kind of consideration, as described by Section 10.002(a)(5), as to be paid or delivered for shares of such class or series of the corporation irrevocably accepted for purchase or exchange in the offer.

(d) In Subsection (c) and this subsection and, as applicable, in Sections 10.355(d)(3)(B), 10.355(f), and 10.356(b)(3)(E)(iv):

(1) "Consummates," "consummation," or "consummating" means irrevocably accepts for purchase or exchange shares tendered pursuant to a tender or exchange offer.

(2) "Depository" means an agent appointed to facilitate consummation of the offer described by Subsection (c)(2).

(e) For purposes of Subsection (c)(3), "received," with respect to shares, means:

(1) physical receipt of a certificate representing shares, in the case of certificated shares; and

(2) transfer into the depository's account or an agent's message being received by the depository, in the case of uncertificated shares.

SECTION 27. Section 22.109(a), Business Organizations Code, is amended to read as follows:

(a) A [The board of directors of a] corporation may adopt a restated certificate of formation as provided by Subchapter B, Chapter 3, by following the same procedure to amend its [the corporation's] certificate of formation provided by Sections 22.104-22.107, except that:

(1) member approval is required only if the restated certificate of formation contains an amendment; and

(2) the members may consent in writing, or the organizers of a corporation may adopt a resolution, to authorize a restated certificate of formation that contains an amendment to cancel an event requiring winding up in accordance with Section 22.302(1)(B) or 22.302(2), as applicable.

SECTION 28. Section 22.164, Business Organizations Code, is amended by amending Subsection (b) and adding Subsection (d) to read as follows:

(b) Except as otherwise provided by Subsection (c) or (d) 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.

(d) If the corporation has no members or has no members with voting rights and the corporation does not hold any assets and has not solicited any assets or otherwise engaged in activities, the vote required for approval of a fundamental action consisting of an amendment to the certificate of formation to cancel an event requiring winding up or any of the actions described by Subsections (a)(2) through (a)(6) is the affirmative vote of a majority of the organizers or a majority of the directors in office.

SECTION 29. Section 22.302, Business Organizations Code, is amended to read as follows:

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 and the corporation:

(A) holds any assets or has solicited any assets or otherwise engaged in activities, 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(b)(3) [22.164]; or

(B) does not hold any assets and has not solicited any assets or otherwise engaged in activities, 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, to revoke a voluntary decision to wind up, or to effect the distribution plan by the vote required by Section 22.164(d);

(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(b)(2) [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.

SECTION 30. Chapter 21, Business Organizations Code, is amended by adding Subchapter R to read as follows:

SUBCHAPTER R. RATIFICATION OF DEFECTIVE CORPORATE ACTS OR SHARES;

PROCEEDINGS

Sec. 21.901. DEFINITIONS. In this subchapter:

(1) "Corporate statute," with respect to an action or filing, means this code, the former Texas Business Corporation Act, or any predecessor statute of this state that governed the action or the filing.

(2) "Defective corporate act" means:

(A) an overissue;

(B) an election or appointment of directors that is void or voidable due to a failure of authorization; or

(C) any act or transaction purportedly taken by or on behalf of the corporation that is, and at the time the act or transaction was purportedly taken would have been, within the power of a corporation to take under the corporate statute, but is void or voidable due to a failure of authorization.

(3) "District court" means a district court in:

(A) the county in which the corporation's principal office in this state is located; or

(B) the county in which the corporation's registered office in this state is located, if the corporation does not have a principal office in this state.

(4) "Failure of authorization" means the failure to authorize or effect an act or transaction in compliance with the provisions of the corporate statute, the governing documents of the corporation, or any plan or agreement to which the corporation is a party, if and to the extent the failure would render the act or transaction void or voidable.

(5) "Overissue" means the purported issuance of:

(A) shares of a class or series in excess of the number of shares of that class or series that the corporation has the power to issue under the corporate statute at the time of issuance; or

(B) shares of any class or series that are not at the time authorized for issuance by the governing documents of the corporation.

(6) "Putative shares" means the shares of any class or series of the corporation, including shares issued on exercise of options, rights, warrants, or other securities convertible into shares of the corporation, or interests with respect to the shares that were created or issued pursuant to a defective corporate act, that:

(A) would constitute valid shares, if not for a failure of authorization; or

(B) cannot be determined by the board of directors to be valid shares.

(7) "Time of the defective corporate act" means the date and time the defective corporate act was purported to have been taken.

(8) "Validation effective time" or "effective time of the validation," with respect to any defective corporate act ratified under this subchapter, means the later of:

(A) the time at which the resolution submitted to the shareholders for adoption under Section 21.905 is adopted by the shareholders or, if no shareholder approval is required for adoption, the time at which the notice required by Section 21.911 is given; or

(B) the time at which any certificate of validation filed under Section 21.908 takes effect in accordance with Chapter 4.

(9) "Valid shares" means the shares of any class or series of the corporation that have been authorized and validly issued in accordance with the corporate statute.

Sec. 21.902. RATIFICATION OF DEFECTIVE CORPORATE ACT AND PUTATIVE SHARES. Subject to Section 21.909 or 21.910, a defective corporate act or putative shares are not void or voidable solely as a result of a failure of authorization if the act or shares are:

(1) ratified in accordance with this subchapter; or

(2) validated by the district court in a proceeding brought under Section 21.914.

Sec. 21.903. RATIFICATION OF DEFECTIVE CORPORATE ACT; ADOPTION OF RESOLUTION. (a) To ratify a defective corporate act, the board of directors of the corporation shall adopt a resolution stating:

(1) the defective corporate act to be ratified;

(2) the time of the defective corporate act;

(3) if the defective corporate act involved the issuance of putative shares, the number and type of putative shares issued and the date or dates on which the putative shares were purportedly issued;

(4) the nature of the failure of authorization with respect to the defective corporate act to be ratified; and

(5) that the board of directors approves the ratification of the defective corporate act.

(b) The resolution may also state that, notwithstanding the adoption of the resolution by the shareholders, the board of directors may, at any time before the validation effective time, abandon the resolution without further shareholder action.

Sec. 21.904. QUORUM AND VOTING REQUIREMENTS FOR ADOPTION OF RESOLUTION. (a) The quorum and voting requirements applicable to the adoption of a resolution under Section 21.903 are the same as the quorum and voting requirements applicable at the time of the adoption of a resolution for the type of defective corporate act proposed to be ratified.

(b) Notwithstanding Subsection (a) and except as provided by Subsection (c), if in order for a quorum to be present or to approve the defective corporate act, the presence or approval of a larger number or portion of directors or of specified directors would have been required by the governing documents of the corporation, any plan or agreement to which the corporation was a party, or any provision of the corporate statute, each as in effect at the time of the defective corporate act, then the presence or approval of the larger number or portion of such directors or of such specified directors must be required for a quorum to be present or to adopt the resolution, as applicable.

(c) The presence or approval of any director elected, appointed, or nominated by holders of any class or series of which no shares are then outstanding, or by any person that is no longer a shareholder, shall not be required for a quorum to be present or to adopt the resolution.

Sec. 21.905. SHAREHOLDER ADOPTION OF RESOLUTION REQUIRED. The resolution adopted under Section 21.903 must be submitted to shareholders for adoption as provided by Sections 21.906 and 21.907, unless:

(1) no other provision of the corporate statute, no provision of the corporation's governing documents, and no provision of any plan or agreement to which the corporation is a party would have required shareholder approval of the defective corporate act to be ratified, either at the time of the act or at the time when the resolution required by Section 21.903 is adopted; and

(2) the defective corporate act to be ratified did not result from a failure to comply with Subchapter M.

Sec. 21.906. NOTICE REQUIREMENTS FOR RESOLUTION SUBMITTED FOR SHAREHOLDER APPROVAL. (a) If Section 21.905 requires that the resolution be submitted to the shareholders for approval, notice of the time, place, if any, and purpose of the meeting shall be given at least 20 days before the date of the meeting to each holder of valid shares and putative shares, whether voting or nonvoting, at the address of the holder as it appears or most recently appeared, as appropriate, on the corporation's records.

(b) Notice under this section shall be given to each holder of record of valid shares and putative shares, regardless of whether the shares are voting or nonvoting, as of the time of the defective corporate act, except that notice is not required to be given to a holder whose identity or address cannot be ascertained from the corporation's records.

(c) The notice must contain:

(1) a copy of the resolution; and

(2) a statement that the following must be brought not later than the 120th day of the validation effective time:

(A) any claim that the defective corporate act or putative shares ratified under this subchapter are void or voidable due to the identified failure of authorization; or

(B) any claim that the district court, in its discretion, should declare that a ratification made in accordance with this subchapter not take effect or that it take effect only on certain conditions.

Sec. 21.907. SHAREHOLDER MEETING; QUORUM AND VOTING. (a) At the shareholder meeting, the quorum and voting requirements applicable to the adoption of the resolution under Section 21.905 shall be the same as the quorum and voting requirements applicable at the time of such adoption by the shareholders for the type of defective corporate act to be ratified, except as provided by this section.

(b) If the presence or approval of a larger number or portion of shares or of any class or series of shares or of specified shareholders would have been required for a quorum to be present or to approve the defective corporate act, as applicable, by the corporation's governing documents, any plan or agreement to which the corporation was a party, or any provision of the corporate statute, each as in effect at the time of the defective corporate act, then the presence or approval of the larger number or portion of shares or of the class or series of shares or of such specified shareholders shall be required for a quorum to be present or to adopt the resolution, as applicable, except that the presence or approval of shares of any class or series of which no shares are then outstanding, or of any person that is no longer a shareholder, shall not be required.

(c) The adoption of a resolution to ratify the election of a director requires the affirmative vote of the majority of shares present at the meeting and entitled to vote on the election of the director, unless the governing documents of the corporation then in effect or in effect at the time of the defective election require or required a larger number or portion of shares to elect the director, in which case the affirmative vote of the larger number or portion of shares is required to ratify the election of the director.

(d) If a failure of authorization results from the failure to comply with Subchapter M, the ratification of the defective corporate act requires the vote set forth by Section 21.606(2), regardless of whether that vote would have otherwise been required.

Sec. 21.908. CERTIFICATE OF VALIDATION. (a) If the defective corporate act ratified under this subchapter would have required under any other provision of the corporate statute the filing of a filing instrument or other document with the filing officer, the corporation, instead of filing the filing instrument or other document otherwise required by this code, shall file a certificate of validation in accordance with Chapter 4, regardless of whether a filing instrument or other document was previously filed with respect to the defective corporate act.

(b) The certificate of validation must set forth:

(1) a copy of the resolution adopted in accordance with Sections 21.903 and 21.904, the date of adoption of the resolution by the board of directors and, if applicable, the date of adoption by the shareholders, and a statement that the resolution was adopted in accordance with this subchapter;

(2) if a filing instrument or document was previously filed with a filing officer under the corporate statute in respect of the defective corporate act, the title and date of filing of the prior filing instrument or document and any articles or certificate of correction to the filing instrument; and

(3) the provisions that would be required under any other section of this code to be included in the filing instrument that otherwise would have been required to be filed with respect to the defective corporate act under this code.

Sec. 21.909. ADOPTION OF RESOLUTION; EFFECT ON DEFECTIVE CORPORATE ACT. On or after the validation effective time, unless determined otherwise in an action brought under Section 21.914, each defective corporate act set forth in the resolution adopted under Sections 21.903 and 21.904 may not be considered void or voidable as a result of a failure of authorization identified in the resolution, and the effect shall be retroactive to the time of the defective corporate act.

Sec. 21.910. ADOPTION OF RESOLUTION; EFFECT ON PUTATIVE SHARES. On or after the validation effective time, unless determined otherwise in an action brought under Section 21.914, each putative share or fraction of a putative share issued or purportedly issued pursuant to the defective corporate act and identified in the resolution adopted under Sections 21.903 and 21.904 may not be considered void or voidable as a result of a failure of authorization identified in the resolution and, in the absence of any failure of authorization not ratified, is considered to be an identical share or fraction of a share outstanding as of the time it was purportedly issued.

Sec. 21.911. NOTICE TO SHAREHOLDERS FOLLOWING ADOPTION OF RESOLUTION. (a) Notice of the adoption of a resolution under this subchapter shall be given promptly to:

(1) each holder of valid shares and putative shares, regardless of whether the shares are voting or nonvoting, as of the date the board of directors adopted the resolution; or

(2) each holder of valid shares and putative shares, regardless of whether the shares are voting or nonvoting, as of a date not later than the 60th day after the date on which the resolution is adopted, as established by the board of directors.

(b) Notice under this section shall be sent to the address of a holder of shares described by Subsection (a)(1) or (a)(2) as the address appears or most recently appeared, as appropriate, on the records of the corporation.

(c) Notice under this section shall also be given to each holder of record of valid shares and putative shares, regardless of whether the shares are voting or nonvoting, as of the time of the defective corporate act, except that notice is not required to be given to a holder whose identity or address cannot be ascertained from the corporation's records.

(d) The notice must contain:

(1) a copy of the resolution; and

(2) a statement that the following must be brought not later than the 120th day of the validation effective time:

(A) any claim that the defective corporate act or putative shares ratified under this subchapter are void or voidable due to the identified failure of authorization; or

(B) any claim that the district court, in its discretion, should declare that a ratification made in accordance with this subchapter not take effect or that it take effect only on certain conditions.

(e) Notwithstanding Subsections (a)-(d), notice is not required to be given under this section if notice of the resolution is given in accordance with Section 21.906.

(f) For purposes of Section 21.906 and this section, notice to holders of putative shares and notice to holders of valid shares and putative shares as of the time of the defective corporate act shall be treated as notice to holders of valid shares for purposes of Sections 6.051, 6.052, 6.053, 21.353, and 21.3531.

Sec. 21.912. VALID SHARES OR PUTATIVE SHARES. In the absence of actual fraud in the transaction, the judgment of the board of directors of a corporation that shares of the corporation are valid shares or putative shares is conclusive, unless otherwise determined by the district court in a proceeding brought under Section 21.914.

Sec. 21.913. RATIFICATION PROCEDURES OR COURT PROCEEDINGS CONCERNING VALIDATION NOT EXCLUSIVE. (a) Ratification of an act or transaction under this subchapter or validation of an act or transaction as provided by Sections 21.914 through 21.917 is not the exclusive means of ratifying or validating any act or transaction taken by or on behalf of the corporation, including any defective corporate act or any issuance of putative shares or other shares.

(b) The absence or failure of ratification of an act or transaction in accordance with this subchapter or of validation of an act or transaction as provided by Sections 21.914 through 21.917 does not, of itself, affect the validity or effectiveness of any act or transaction or the issuance of any shares properly ratified under common law or otherwise, nor does it create a presumption that any such act or transaction is or was a defective corporate act or that those shares are void or voidable.

Sec. 21.914. PROCEEDING REGARDING VALIDITY OF DEFECTIVE CORPORATE ACTS AND SHARES. (a) The following may bring an action under this section:

(1) the corporation;

(2) any successor entity to the corporation;

(3) any member of the corporation's board of directors;

(4) any record or beneficial holder of valid shares or putative shares of the corporation;

(5) any record or beneficial holder of valid shares or putative shares as of the time a defective corporate act was ratified in accordance with this subchapter; or

(6) any other person claiming to be substantially and adversely affected by a ratification under this subchapter.

(b) Subject to Section 21.917, the district court, on application by a person described by Subsection (a), may:

(1) determine the validity and effectiveness of any defective corporate act ratified in accordance with this subchapter;

(2) determine the validity and effectiveness of the ratification of any defective corporate act in accordance with this subchapter;

(3) determine the validity and effectiveness of:

(A) any defective corporate act not ratified under this subchapter; or

(B) any defective corporate act not ratified effectively under this subchapter;

(4) determine the validity of any corporate act or transaction and of any shares, rights, or options to acquire shares; and

(5) modify or waive any of the procedures set forth in Sections 21.901 through 21.913 to ratify a defective corporate act.

(c) In connection with an action brought under this section, the district court may:

(1) declare that a ratification in accordance with and pursuant to this subchapter is not effective or that the ratification is effective only at a time or on conditions as specified by the district court;

(2) validate and declare effective any defective corporate act or putative shares and impose conditions on such a validation;

(3) require measures to remedy or avoid harm to any person substantially and adversely affected by a ratification under this subchapter or from any order of the district court pursuant to this section, excluding any harm that would have resulted had the defective corporate act been valid when approved or effectuated;

(4) order the filing officer to accept for filing an instrument with an effective date and time as specified by the court, which may be before or subsequent to the time of the order;

(5) approve share records for the corporation that include any shares ratified in accordance with this subchapter or validated in accordance with this section and Sections 21.915 through 21.917;

(6) declare that putative shares are valid shares or require a corporation to issue and deliver valid shares in place of any putative shares;

(7) order that a meeting of holders of valid shares or putative shares be held and determine the right and power of persons to vote at the meeting;

(8) declare that a defective corporate act validated by the court is effective as of the time of the defective corporate act or at such other time as determined by the court;

(9) declare that putative shares validated by the district court are considered to be an identical valid share or a fraction of a valid share as of the time the shares were originally or purportedly issued or at such other time as determined by the district court; and

(10) make any other order regarding such matters as the court considers appropriate under the circumstances.

(d) In connection with the resolution of matters under Subsections (b) and (c), the district court may consider:

(1) whether the defective corporate act was originally approved or effectuated with the belief that the approval or effectuation was in compliance with the provisions of the corporate statute or the governing documents of the corporation;

(2) whether the corporation and the corporation's board of directors have treated the defective corporate act as a valid act or transaction and whether any person has acted in reliance on the public record that the defective corporate act was valid;

(3) whether any person will be or was harmed by the ratification or validation of the defective corporate act, excluding any harm that would have resulted had the defective corporate act been valid when it was approved or took effect;

(4) whether any person will be harmed by the failure to ratify or validate the defective corporate act; and

(5) any other factors or considerations the district court considers just and equitable.

Sec. 21.915. EXCLUSIVE JURISDICTION. The district court has exclusive jurisdiction to hear and determine any action brought under Section 21.914.

Sec. 21.916. SERVICE. (a) Service of an application filed under Section 21.914 on the registered agent of a corporation or in any other manner permitted by applicable law is considered to be service on the corporation, and no other party need be joined in order for the district court to adjudicate the matter.

(b) If an action is brought by a corporation under Section 21.914, the district court may require that notice of the action be provided to other persons identified by the court and permit those other persons to intervene in the action.

Sec. 21.917. STATUTE OF LIMITATIONS. (a) This section does not apply to:

(1) an action asserting that a ratification was not accomplished in accordance with this subchapter; or

(2) any person to whom notice of the ratification was not given as required by Sections 21.906 and 21.911.

(b) Notwithstanding any other provision of this subchapter, the following may not be brought after the expiration of the 120th day of the validation effective time:

(1) an action asserting that a defective corporate act or putative shares ratified in accordance with this subchapter are void or voidable due to a failure of authorization identified in the resolution adopted in accordance with Section 21.903; or

(2) an action asserting that the district court, in its discretion, should declare that a ratification in accordance with this subchapter not take effect or that the ratification take effect only on certain conditions.

SECTION 31. This Act takes effect September 1, 2015.

______________________________ ______________________________

President of the Senate Speaker of the House

I hereby certify that S.B. No. 860 passed the Senate on April 9, 2015, by the following vote: Yeas 31, Nays 0.

______________________________ Secretary of the Senate

I hereby certify that S.B. No. 860 passed the House on May 4, 2015, by the following vote: Yeas 135, Nays 0, two present not voting.

______________________________ Chief Clerk of the House

Approved:

______________________________

Date

______________________________

Governor