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Art. 2.01. Purposes
A. Except as hereinafter in this Article excluded herefrom, corporations for profit may be organized under this Act for any lawful purpose or purposes. Corporations for the purpose of operating non-profit institutions, including but not limited to those devoted to charitable, benevolent, religious, patriotic, civic, cultural, missionary, educational, scientific, social, fraternal, athletic, or aesthetic purposes, may not adopt or be organized under this Act.
B. No corporation may adopt this Act or be organized under this Act or obtain authority to transact business in this State under this Act:
(1) If any one or more of its purposes for the transaction of business in this State is expressly prohibited by any law of this State.
(2) If any one or more of its purposes for the transaction of business in this State is to engage in any activity which cannot lawfully be engaged in without first obtaining a license under the authority of the laws of this State to engage in such activity and such a license cannot lawfully be granted to a corporation.
(3) If among its purposes for the transaction of business in this State, there is included, however worded, a combination of the two businesses listed in either of the following:
(a) The business of raising cattle and owning land therefor, and the business of operating stockyards and of slaughtering, refrigerating, canning, curing or packing meat. Owning and operating feed lots and feeding cattle shall not be considered as engaging in "the business of raising cattle and owning land therefor" within the purview of this paragraph of this subsection.
(b) The business of engaging in the petroleum oil producing business in this State and the business of engaging directly in the oil pipe line business in this State: provided, however, that a corporation engaged in the oil producing business in this State which owns or operates private pipe lines in and about its refineries, fields or stations or which owns stock of corporations engaged in the oil pipe line business shall not be deemed to be engaging directly in the oil pipe line business in this State; and provided that any corporation, or group of corporations acting in partnership or other combination with other corporations, engaged as a common carrier in the pipe line business for transporting oil, oil products, gas, carbon dioxide, salt brine, fuller's earth, sand, clay, liquefied minerals or other mineral solutions, shall have all of the rights and powers conferred by Sections 111.019 through 111.022, Natural Resources Code.
(4) If any one or more of its purposes is to operate any of the following:
(a) Banks, (b) trust companies, (c) building and loan associations or companies, (d) insurance companies of every type and character that operate under the insurance laws of this State, and corporate attorneys in fact for reciprocal or inter-insurance exchanges, (e) railroad companies, (f) cemetery companies, (g) cooperatives or limited cooperative associations, (h) labor unions, (i) abstract and title insurance companies whose purposes are provided for and whose powers are prescribed by Chapter 9 of the Insurance Code of this State.
C. A company may be incorporated under this Article or under Chapter 1, Title 112, Revised Statutes, if the company:
(1) operates a railroad passenger service by contracting with a railroad corporation or other company; and
(2) does not construct, own, or maintain a railroad track.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1486, ch. 545, Sec. 2, eff. Aug. 27, 1973; Acts 1977, 65th Leg., p. 2690, ch. 871, Sec. 3, eff. Sept. 1, 1977; Acts 1981, 67th Leg., p. 2489, ch. 650, Sec. 1, eff. Aug. 31, 1981; Acts 1989, 71st Leg., ch. 971, Sec. 2, eff. Aug. 28, 1989.
Art. 2.02. General Powers
A. Subject to the provisions of Sections B and C of this Article, each corporation shall have power:
(1) To have perpetual succession by its corporate name unless a limited period of duration is stated in its articles of incorporation. Notwithstanding the articles of incorporation, the period of duration for any corporation incorporated before September 6, 1955, is perpetual if all fees and franchise taxes have been paid as provided by law.
(2) To sue and be sued, complain and defend, in its corporate name.
(3) To have a corporate seal which may be altered at pleasure, and to use the same by causing it, or a facsimile thereof, to be impressed on, affixed to, or in any manner reproduced upon, instruments of any nature required to be executed by its proper officers.
(4) To purchase, receive, lease, or otherwise acquire, own, hold, improve, use and otherwise deal in and with, real or personal property, or any interest therein, wherever situated, as the purposes of the corporation shall require.
(5) To sell, convey, mortgage, pledge, lease, exchange, transfer and otherwise dispose of all or any part of its property and assets.
(6) To lend money to, and otherwise assist, its employees, officers, and directors if such a loan or assistance reasonably may be expected to benefit, directly or indirectly, the lending or assisting corporation.
(7) To purchase, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, mortgage, lend, pledge, sell or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in, or obligations of, other domestic or foreign corporations, associations, partnerships, or individuals, or direct or indirect obligations of the United States or of any other government, state, territory, government district, or municipality, or of any instrumentality thereof.
(8) To purchase or otherwise acquire its own bonds, debentures, or other evidences of its indebtedness or obligations; to purchase or otherwise acquire its own unredeemable shares and hold those acquired shares as treasury shares or cancel or otherwise dispose of those acquired shares; and to redeem or purchase shares made redeemable by the provisions of its articles of incorporation.
(9) To make contracts and incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of all or any of its property, franchises, and income.
(10) To lend money for its corporate purposes, invest and reinvest its funds, and take and hold real and personal property as security for the payment of funds so loaned or invested.
(11) To conduct its business, carry on its operations, and have offices and exercise the powers granted by this Act, within or without this State.
(12) To elect or appoint officers and agents of the corporation for such period of time as the corporation may determine, and define their duties and fix their compensation.
(13) To make and alter bylaws, not inconsistent with its articles of incorporation or with the laws of this State, for the administration and regulation of the affairs of the corporation.
(14) To make donations for the public welfare or for charitable, scientific, or educational purposes.
(15) To transact any lawful business which the board of directors shall find will be in aid of government policy.
(16) To indemnify directors, officers, employees, and agents of the corporation and to purchase and maintain liability insurance for those persons.
(17) To pay pensions and establish pension plans, pension trusts, profit sharing plans, stock bonus plans, and other incentive plans for any or all of, or any class or classes of, its directors, officers, or employees.
(18) To be an organizer, partner, member, associate, or manager of any partnership, joint venture, or other enterprise, and to the extent permitted by any other jurisdiction to be an incorporator of any other corporation of any type or kind.
(19) To cease its corporate activities and terminate its existence by voluntary dissolution.
(20) To renounce, in its articles of incorporation or by action of its board of directors, an interest or expectancy of the corporation in, or an interest or expectancy of the corporation in being offered an opportunity to participate in, specified business opportunities or specified classes or categories of business opportunities that are presented to the corporation or one or more of its officers, directors, or shareholders.
(21) Whether included in the foregoing or not, to have and exercise all powers necessary or appropriate to effect any or all of the purposes for which the corporation is organized.
B. Nothing in this Article grants any authority to officers or directors of a corporation for the exercise of any of the foregoing powers, inconsistent with limitations on any of the same which may be expressly set forth in this Act or in the articles of incorporation or in any other laws of this State. Authority of officers and directors to act beyond the scope of the purpose or purposes of a corporation is not granted by any provision of this Article.
C. Nothing contained in this Article shall be deemed to authorize any action in violation of the Anti-Trust Laws of this State, as now existing or hereafter amended.
Acts 1955, 64th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1967, 60th Leg., p. 1718, ch. 657, Sec. 2, eff. June 17, 1967; Acts 1973, 63rd Leg., p. 1486, ch. 545, Sec. 3, eff. Aug. 27, 1973; Acts 1979, 66th Leg., p. 175, ch. 96, Sec. 2, eff. May 2, 1979; Acts 1983, 68th Leg., p. 3140, ch. 540, Sec. 1, eff. Aug. 29, 1983; Acts 1987, 70th Leg., ch. 93, Sec. 2, eff. Aug. 31, 1987; Acts 1987, 70th Leg., ch. 93, Sec. 2, eff. Aug. 31, 1987; Acts 1993, 73rd Leg., ch. 215, Sec. 2.02, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 2, eff. Sept. 1, 2003.
Art. 2.02-1. Power to Indemnify and to Purchase Indemnity Insurance; Duty to Indemnify
A. In this article:
(1) "Corporation" includes any domestic or foreign predecessor entity of the corporation in a merger, conversion, or other transaction in which some or all of the liabilities of the predecessor are transferred to the corporation by operation of law and in any other transaction in which the corporation assumes the liabilities of the predecessor but does not specifically exclude liabilities that are the subject matter of this article.
(2) "Director" means any person who is or was a director of the corporation and any person who, while a director of the corporation, is or was serving at the request of the corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, employee benefit plan, other enterprise, or other entity.
(3) "Expenses" include court costs and attorneys' fees.
(4) "Official capacity" means
(a) when used with respect to a director, the office of director in the corporation, and
(b) when used with respect to a person other than a director, the elective or appointive office in the corporation held by the officer or the employment or agency relationship undertaken by the employee or agent in behalf of the corporation, but
(c) in both Paragraphs (a) and (b) does not include service for any other foreign or domestic corporation or any employee benefit plan, other enterprise, or other entity.
(5) "Proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such an action, suit, or proceeding, and any inquiry or investigation that could lead to such an action, suit, or proceeding.
B. A corporation may indemnify a person who was, is, or is threatened to be made a named defendant or respondent in a proceeding because the person is or was a director only if it is determined in accordance with Section F of this article that the person:
(1) conducted himself in good faith;
(2) reasonably believed:
(a) in the case of conduct in his official capacity as a director of the corporation, that his conduct was in the corporation's best interests; and
(b) in all other cases, that his conduct was at least not opposed to the corporation's best interests; and
(3) in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful.
C. Except to the extent permitted by Section E of this article, a director may not be indemnified under Section B of this article in respect of a proceeding:
(1) in which the person is found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the person's official capacity; or
(2) in which the person is found liable to the corporation.
D. The termination of a proceeding by judgment, order, settlement, or conviction, or on a plea of nolo contendere or its equivalent is not of itself determinative that the person did not meet the requirements set forth in Section B of this article. A person shall be deemed to have been found liable in respect of any claim, issue or matter only after the person shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom.
E. A person may be indemnified under Section B of this article against judgments, penalties (including excise and similar taxes), fines, settlements, and reasonable expenses actually incurred by the person in connection with the proceeding; but if the person is found liable to the corporation or is found liable on the basis that personal benefit was improperly received by the person, the indemnification (1) is limited to reasonable expenses actually incurred by the person in connection with the proceeding and (2) shall not be made in respect of any proceeding in which the person shall have been found liable for willful or intentional misconduct in the performance of his duty to the corporation.
F. A determination of indemnification under Section B of this article must be made:
(1) by a majority vote of the directors who at the time of the vote are not named defendants or respondents in the proceeding, regardless of whether the directors not named defendants or respondents constitute a quorum;
(2) by a majority vote of a committee of the board of directors, if:
(a) the committee is designated by a majority vote of the directors who at the time of the vote are not named defendants or respondents in the proceeding, regardless of whether the directors not named defendants or respondents constitute a quorum; and
(b) the committee consists solely of one or more of the directors not named as defendants or respondents in the proceeding;
(3) by special legal counsel selected by the board of directors or a committee of the board by vote as set forth in Subsection (1) or (2) of this section; or
(4) by the shareholders in a vote that excludes the shares held by directors who are named defendants or respondents in the proceeding.
G. Authorization of indemnification and determination as to reasonableness of expenses must be made in the same manner as the determination that indemnification is permissible, except that if the determination that indemnification is permissible is made by special legal counsel, authorization of indemnification and determination as to reasonableness of expenses must be made in the manner specified by Subsection (3) of Section F of this article for the selection of special legal counsel. A provision contained in the articles of incorporation, the bylaws, a resolution of shareholders or directors, or an agreement that makes mandatory the indemnification permitted under Section B of this article shall be deemed to constitute authorization of indemnification in the manner required by this section even though such provision may not have been adopted or authorized in the same manner as the determination that indemnification is permissible.
H. A corporation shall indemnify a director against reasonable expenses incurred by him in connection with a proceeding in which he is a named defendant or respondent because he is or was a director if he has been wholly successful, on the merits or otherwise, in the defense of the proceeding.
I. If, in a suit for the indemnification required by Section H of this article, a court of competent jurisdiction determines that the director is entitled to indemnification under that section, the court shall order indemnification and shall award to the director the expenses incurred in securing the indemnification.
J. If, upon application of a director, a court of competent jurisdiction determines, after giving any notice the court considers necessary, that the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he has met the requirements set forth in Section B of this article or has been found liable in the circumstances described by Section C of this article, the court may order the indemnification that the court determines is proper and equitable; but if the person is found liable to the corporation or is found liable on the basis that personal benefit was improperly received by the person, the indemnification shall be limited to reasonable expenses actually incurred by the person in connection with the proceeding.
K. Reasonable expenses incurred by a present director who was, is, or is threatened to be made a named defendant or respondent in a proceeding may be paid or reimbursed by the corporation, in advance of the final disposition of the proceeding and without the determination specified in Section F of this article or the authorization or determination specified in Section G of this article, after the corporation receives a written affirmation by the director of his good faith belief that he has met the standard of conduct necessary for indemnification under this article and a written undertaking by or on behalf of the director to repay the amount paid or reimbursed if it is ultimately determined that he has not met that standard or if it is ultimately determined that indemnification of the director against expenses incurred by him in connection with that proceeding is prohibited by Section E of this article. Notwithstanding any authorization or determination specified in this article, reasonable expenses incurred by a former director or officer, or a present or former employee or agent of the corporation, who was, is, or is threatened to be made a named defendant or respondent in a proceeding may be paid or reimbursed by the corporation, in advance of the final disposition of the proceeding, on any terms the corporation considers appropriate. A provision contained in the articles of incorporation, the bylaws, a resolution of shareholders or directors, or an agreement that makes mandatory the payment or reimbursement permitted under this section shall be deemed to constitute authorization of that payment or reimbursement.
L. The written undertaking required by Section K of this article must be an unlimited general obligation of the director but need not be secured. It may be accepted without reference to financial ability to make repayment.
M. A provision for a corporation to indemnify or to advance expenses to a director who was, is, or is threatened to be made a named defendant or respondent in a proceeding, whether contained in the articles of incorporation, the bylaws, a resolution of shareholders or directors, an agreement, or otherwise, except in accordance with Section R of this article, is valid only to the extent it is consistent with this article as limited by the articles of incorporation, if such a limitation exists.
N. Notwithstanding any other provision of this article, a corporation may pay or reimburse expenses incurred by a director in connection with his appearance as a witness or other participation in a proceeding at a time when he is not a named defendant or respondent in the proceeding.
O. An officer of the corporation shall be indemnified as, and to the same extent, provided by Sections H, I, and J of this article for a director and is entitled to seek indemnification under those sections to the same extent as a director. A corporation may indemnify and advance expenses to an officer, employee, or agent of the corporation to the same extent that it may indemnify and advance expenses to directors under this article. A determination of indemnification for an employee or agent of the corporation is not required to be made in accordance with Section F of this article.
P. A corporation may indemnify and advance expenses to persons who are not or were not officers, employees, or agents of the corporation but who are or were serving at the request of the corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, employee benefit plan, other enterprise, or other entity to the same extent that it may indemnify and advance expenses to directors under this article.
Q. A corporation may indemnify and advance expenses to an officer, employee, agent, or person identified in Section P of this article and who is not a director to such further extent, consistent with law, as may be provided by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract or as permitted or required by common law.
R. A corporation may purchase and maintain insurance or another arrangement on behalf of any person who is or was a director, officer, employee, or agent of the corporation or who is or was serving at the request of the corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, employee benefit plan, other enterprise, or other entity, against any liability asserted against him and incurred by him in such a capacity or arising out of his status as such a person, whether or not the corporation would have the power to indemnify him against that liability under this article. If the insurance or other arrangement is with a person or entity that is not regularly engaged in the business of providing insurance coverage, the insurance or arrangement may provide for payment of a liability with respect to which the corporation would not have the power to indemnify the person only if including coverage for the additional liability has been approved by the shareholders of the corporation. Without limiting the power of the corporation to procure or maintain any kind of insurance or other arrangement, a corporation may, for the benefit of persons indemnified by the corporation, (1) create a trust fund; (2) establish any form of self-insurance; (3) secure its indemnity obligation by grant of a security interest or other lien on the assets of the corporation; or (4) establish a letter of credit, guaranty, or surety arrangement. The insurance or other arrangement may be procured, maintained, or established within the corporation or with any insurer or other person deemed appropriate by the board of directors regardless of whether all or part of the stock or other securities of the insurer or other person are owned in whole or part by the corporation. In the absence of fraud, the judgment of the board of directors as to the terms and conditions of the insurance or other arrangement and the identity of the insurer or other person participating in an arrangement shall be conclusive and the insurance or arrangement shall not be voidable and shall not subject the directors approving the insurance or arrangement to liability, on any ground, regardless of whether directors participating in the approval are beneficiaries of the insurance or arrangement.
S. Any indemnification of or advance of expenses to a director in accordance with this article shall be reported in writing to the shareholders with or before the notice or waiver of notice of the next shareholders' meeting or with or before the next submission to shareholders of a consent to action without a meeting pursuant to Section A, Article 9.10, of this Act and, in any case, within the 12-month period immediately following the date of the indemnification or advance.
T. For purposes of this article, the corporation is deemed to have requested a director to serve as a trustee, employee, agent, or similar functionary of an employee benefit plan whenever the performance by him of his duties to the corporation also imposes duties on or otherwise involves services by him to the plan or participants or beneficiaries of the plan. Excise taxes assessed on a director with respect to an employee benefit plan pursuant to applicable law are deemed fines. Action taken or omitted by a director with respect to an employee benefit plan in the performance of his duties for a purpose reasonably believed by him to be in the interest of the participants and beneficiaries of the plan is deemed to be for a purpose which is not opposed to the best interests of the corporation.
U. The articles of incorporation of a corporation may restrict the circumstances under which the corporation is required or permitted to indemnify a person under Section H, I, J, O, P, or Q of this article.
Added by Acts 1983, 68th Leg., p. 3143, ch. 540, Sec. 2, eff. Aug. 29, 1983. Amended by Acts 1985, 69th Leg., ch. 128, Sec. 1, eff. May 20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 3, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 2, eff. Aug. 28, 1989; Acts 1997, 75th Leg., ch. 375, Sec. 2, eff. Sept. 1, 1997.
Sec. F amended by Acts 2003, 78th Leg., ch. 238, Sec. 3, eff. Sept. 1, 2003; Sec. K amended by Acts 2003, 78th Leg., ch. 238, Sec. 3, eff. Sept. 1, 2003; Sec. O amended by Acts 2003, 78th Leg., ch. 238, Sec. 3, eff. Sept. 1, 2003.
Art. 2.04. Defense of Ultra Vires
A. Lack of capacity of a corporation shall never be made the basis of any claim or defense at law or in equity.
B. No act of a corporation and no conveyance or transfer of real or personal property to or by a corporation shall be invalid by reason of the fact that such act, conveyance or transfer was beyond the scope of the purpose or purposes of the corporation as expressed in its articles of incorporation or by reason of limitations on authority of its officers and directors to exercise any statutory power of the corporation, as such limitations are expressed in the articles of incorporation, but that such act, conveyance or transfer was, or is, beyond the scope of the purpose or purposes of the corporation as expressed in its articles of incorporation or inconsistent with any such expressed limitations of authority, may be asserted:
(1) In a proceeding by a shareholder against the corporation to enjoin the doing of any act or acts or the transfer of real or personal property by or to the corporation. If the unauthorized act or transfer sought to be enjoined is being, or is to be, performed or made pursuant to any contract to which the corporation is a party, the court may, if all of the parties to the contract are parties to the proceeding and if it deems the same to be equitable, set aside and enjoin the performance of such contract, and in so doing may allow to the corporation or to the other parties to the contract, as the case may be, compensation for the loss or damage sustained by either of them which may result from the action of the court in setting aside and enjoining the performance of such contract, but anticipated profits to be derived from the performance of the contract shall not be awarded by the court as a part of loss or damage sustained.
(2) In a proceeding by the corporation, whether acting directly or through a receiver, trustee, or other legal representative, or through shareholders in a representative suit, against the incumbent or former officers or directors of the corporation for exceeding their authority.
(3) In a proceeding by the Attorney General, as provided in this Act, to dissolve the corporation, or in a proceeding by the Attorney General to enjoin the corporation from transacting unauthorized business, or to enforce divestment of real property acquired or held contrary to the laws of this State.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Art. 2.05. Corporate Name; Use of Assumed Names
A. The Corporate name shall conform to the following requirements:
(1) It shall contain the word "corporation," "company," or "incorporated," or shall contain an abbreviation of one of such words, and shall contain such additional words as may be required by law.
(2) It shall not contain any word or phrase which indicates or implies that it is organized for any purpose other than one or more of the purposes contained in its articles of incorporation.
(3) It shall not be the same as, or deceptively similar to, the name of any domestic corporation, limited partnership, or limited liability company existing under the laws of this State, or the name of any foreign corporation, non-profit corporation, limited partnership, or limited liability company authorized to transact business in this State, or a name the exclusive right to which is, at the time, reserved in the manner provided in this Act or any other statute providing for reservation of names by a limited partnership or limited liability company, or the name of a corporation, limited partnership, or limited liability company which has in effect a registration of its company name as provided in this Act or any other applicable law; provided that a name may be similar if written consent is obtained from the existing corporation, limited partnership, or limited liability company having the name deemed to be similar or the person for whom the name deemed to be similar is reserved in the office of the Secretary of State.
(4) It shall not contain the word "lottery."
B. Any domestic or foreign corporation having authority to transact business in this State may do so under an assumed name by filing an assumed name certificate in the manner prescribed by law. The assumed name may, but is not required to, comply with the requirements of Section A(1) of this Article.
C. The filing of articles of incorporation under Part Three of this Act, an application to reserve a specified Corporate name under Article 2.06 of this Act, or an application to register a Corporate name by a foreign corporation under Article 2.07 of this Act does not authorize the use of a Corporate name in this State in violation of the rights of another under the federal Trademark Act of 1946 (15 U.S.C., Section 1051 et seq.), the Texas trademark law (Chapter 16, Business & Commerce Code), the Assumed Business or Professional Name Act (Chapter 36, Business & Commerce Code), or the common law. The Secretary of State shall deliver to each newly organized corporation, applicant for reservation of a Corporate name, and newly registered foreign corporation a notice containing the substance of this section.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1987, 70th Leg., ch. 283, Sec. 1, eff. Aug. 31, 1987; Acts 1991, 72nd Leg., 1st C.S., ch. 6, Sec. 11A(a); Acts 1993, 73rd Leg., ch. 215, Sec. 2.03, eff. Sept. 1, 1993; Acts 1997, 75th Leg., ch. 375, Sec. 3, eff. Sept. 1, 1997.
Art. 2.06. Reserved Name
A. The exclusive right to the use of a corporate name may be reserved by:
(1) Any person intending to organize a corporation under this Act.
(2) Any domestic corporation intending to change its name.
(3) Any foreign corporation intending to make application for a certificate of authority to transact business in this State.
(4) Any foreign corporation authorized to transact business in this State and intending to change its name.
(5) Any person intending to organize a foreign corporation and intending to have such corporation make application for a certificate of authority to transact business in this State.
B. The reservation shall be made by filing with the Secretary of State an application to reserve a specified corporate name, executed by the applicant or the attorney or agent thereof. If the Secretary of State finds that the name is available for corporate use, he shall reserve the same for the exclusive use of the applicant for a period of one hundred and twenty (120) days.
C. The right to the exclusive use of a specified corporate name so reserved may be transferred to any other person or corporation by filing in the office of the Secretary of State a notice of such transfer, executed by the applicant for whom the name was reserved, and specifying the name and address of the transferee.
D. Any person for whom a specified corporate name has been reserved pursuant to Section B of this article may, during the period for which such name is reserved, terminate such reservation by filing with the Secretary of State an application for cancellation of reservation of corporate name, together with the applicable fee.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1997, 75th Leg., ch. 375, Sec. 4, eff. Sept. 1, 1997.
Art. 2.07. Registered Name
A. Any corporation organized for the purpose of operating a bank, trust company, building and loan association or company, insurance company currently holding a valid certificate of authority to do business in the State of Texas, and any foreign corporation not authorized to transact business in this State may register its corporate name under this Act, provided its corporate name is not the same as, or deceptively similar to, the name of any domestic corporation existing under the laws of this State or the name of any foreign corporation authorized to transact business in this State or any corporate name reserved or registered under this Act. Provided, however, that any bank, trust company, building and loan association, or insurance company will not be prohibited from registering its corporate name even if the corporate name may be deemed to be the same as or deceptively similar to an otherwise authorized corporate name, if such bank, trust company, building and loan association, or insurance company was duly organized on, and in continual existence from, a date preceding the date the conflicting corporate name was authorized by the Secretary of State under this Act.
B. Such registration shall be made by:
(1) Filing with the Secretary of State:
(a) An application for registration executed by the corporation by an officer thereof, setting forth the name of the corporation, the state or territory under the laws of which it is incorporated, the date of its incorporation, a statement that it is carrying on or doing business, and a brief statement of the business in which it is engaged, and
(b) A certificate setting forth that such corporation is in good standing under the laws of the state or territory wherein it is organized, executed by the Secretary of State of such state or territory or by such other official as may have custody of the records pertaining to corporations, and
(2) Paying to the Secretary of State the required registration fee.
C. Such registration shall be effective for a period of one year from the date on which the application for registration is filed, unless voluntarily withdrawn by the filing of a written notice thereof with the Secretary of State.
1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1967, 60th Leg., p. 1718, ch. 657, Sec. 3, eff. June 17, 1967; Acts 1985, 69th Leg., ch. 391, Sec. 1, eff. Aug. 26, Sec. 1985.
Art. 2.08. Renewal of Registered Name
A. A corporation which has in effect a registration of its corporate name may renew such registration from year to year by filing annually an application for renewal in the manner prescribed for the filing of an original application. Such renewal application shall be filed during the ninety (90) days preceding the expiration date of the then current registration.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Art. 2.09. Registered Office and Registered Agent
A. Each corporation shall have and continuously maintain in this State:
(1) A registered office which may be, but need not be, the same as its place of business.
(2) A registered agent, which agent may be either an individual resident in this State or a domestic corporation, or other entity organized under the laws of this state or authorized to transact business in this State that has a business office identical with each such registered office that is generally open during normal business hours to accept service of process and otherwise perform the functions of a registered agent.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 4, eff. Sept. 1, 2003.
Art. 2.10. Change of Registered Office or Registered Agent
A. A corporation may change its registered office or change its registered agent, or both, upon filing in the office of the Secretary of State a statement setting forth:
(1) The name of the corporation.
(2) The post-office address of its then registered office.
(3) If the post-office address of its registered office is to be changed, the post-office address to which the registered office is to be changed.
(4) The name of its then registered agent.
(5) If its registered agent is to be changed, the name of its successor registered agent.
(6) That the post-office address of its registered office and the post-office address of the business office of its registered agent, as changed, will be identical.
(7) That such change was authorized by its Board of Directors or by an officer of the corporation so authorized by the Board of Directors.
B. The statement required by this article shall be executed on behalf of the corporation by an officer. The original and a copy of the statement shall be delivered to the Secretary of State. If the Secretary of State finds that such statement conforms to the provisions of this Act, he shall, when the appropriate filing fee is paid as prescribed by law:
(1) Endorse on the original and the copy the word "Filed," and the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to the corporation or its representative.
C. Upon such filing, the change of address of the registered office, or the appointment of a new registered agent, or both, as the case may be, shall become effective.
D. Any registered agent of a corporation may resign
(1) by giving written notice to the corporation at its last known address
(2) and by giving written notice, in duplicate (the original and one copy of the notice), to the Secretary of State within ten days after mailing or delivery of said notice to the corporation. Such notice shall include the last known address of the corporation and shall include the statement that written notice of resignation has been given to the corporation and the date thereof. Upon compliance with the requirements as to written notice, the appointment of such agent shall terminate upon the expiration of thirty (30) days after receipt of such notice by the Secretary of State.
If the Secretary of State finds that such written notice conforms to the provisions of this Act, he shall:
(1) Endorse on the original and the copy the word "filed" and the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to such resigning registered agent.
(4) Notify the corporation of the resignation of the registered agent.
No fee shall be required to be paid for the filing of a resignation under this section.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1969, 61st Leg., p. 2483, ch. 835, Sec. 1, 2, eff. June 18, 1969; Acts 1979, 66th Leg., p. 222, ch. 120, Sec. 23, eff. May 9, 1979; Acts 1981, 67th Leg., p. 838, ch. 297, Sec. 12, eff. Aug. 31, 1981; Acts 1983, 68th Leg., p. 684, ch. 158, Sec. 1, eff. May 20, 1983; Acts 1985, 69th Leg., ch. 128, Sec. 2, eff. May 20, 1985.
Art. 2.10-1. Change of Address of Registered Agent
A. The location of the registered office in Texas for a corporation, domestic or foreign, may be changed from one address to another upon filing in the office of the Secretary of State a statement setting forth:
(1) The name of the corporation represented by such registered agent.
(2) The address at which such registered agent has maintained the registered office for said corporation.
(3) The new address at which such registered agent will thereafter maintain the registered office for said corporation.
(4) A statement that notice of the change has been given to said corporation in writing at least ten (10) days prior to such filing.
B. The statement required by this article shall be signed by the registered agent, or, if said agent is a corporation, by an officer of such corporate agent on its behalf. If the registered agent is simultaneously filing statements as to more than one corporation, each such statement may contain facsimile signatures in the execution. The original and one copy of the statement shall be delivered to the Secretary of State. If the Secretary of State finds that such statement conforms to the provisions of this Act, he shall:
(1) Endorse on the original and the copy the word "Filed," and the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to such registered agent.
C. The registered office of the corporation named in such statement shall be changed to the new address of the registered agent upon the filing of such statement by the Secretary of State.
Added by Acts 1967, 60th Leg., p. 1719, ch. 657, Sec. 4, eff. June 17, 1967. Amended by Acts 1979, 66th Leg., p. 223, ch. 120, Sec. 24, eff. May 9, 1979; Acts 1983, 68th Leg., p. 685, ch. 158, Sec. 2, eff. May 20, 1983; Acts 1987, 70th Leg., ch. 93, Sec. 4, eff. Aug. 31, 1987.
Art. 2.11. Service of Process on Corporation
A. The president and all vice presidents of the corporation and the registered agent of the corporation shall be agents of such corporation upon whom any process, notice, or demand required or permitted by law to be served upon the corporation may be served.
B. Whenever a corporation shall fail to appoint or maintain a registered agent in this State, or whenever its registered agent cannot with reasonable diligence be found at the registered office, then the Secretary of State shall be an agent of such corporation upon whom any such process, notice, or demand may be served. Service on the Secretary of State of any process, notice, or demand shall be made by delivering to and leaving with him, or with the Assistant Secretary of State, or with any clerk having charge of the corporation department of his office, duplicate copies of such process, notice, or demand. In the event any such process, notice, or demand is served on the Secretary of State, he shall immediately cause one of the copies thereof to be forwarded by registered mail, addressed to the corporation at its registered office. Any service so had on the Secretary of State shall be returnable in not less than thirty (30) days.
C. The Secretary of State shall keep a record of all processes, notices and demands served upon him under this Article, and shall record therein the time of such service and his action with reference thereto.
D. Service of 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 corporation whose corporate privileges are forfeited under Section 171.251, Tax Code, or is involuntarily dissolved under Article 7.01 of this Act by delivering 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. If the officers or directors of the 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. 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.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1999, 76th Leg., ch. 1481, Sec. 40, eff. Sept. 1, 1999.
Art. 2.12. Authorized Shares
A. Each corporation may issue the number of shares stated in its articles of incorporation. Such shares may be divided into one or more classes, any or all of which classes may consist of shares with par value or shares without par value, as shall be stated in the articles of incorporation. Any such class of shares may be divided into one or more series, as shall be stated in the articles of incorporation. All shares of the same class shall be of the same par value or be without par value. Unless the shares of a class have been divided into series, all shares of the same class shall be identical in all respects. If the shares of a class have been divided into series, shares of the same class may vary between series, but all shares of the same series shall be identical in all respects. Any such class or series of shares shall be so designated as to distinguish the shares of that class or series from the shares of all other classes and series. Any such class or series shall have such designations, preferences, limitations, and relative rights, including voting rights, as shall be stated in the articles of incorporation. The articles of incorporation may limit or deny the voting rights of, or provide special voting rights for, the shares of any class or series to the extent that such limitation, denial, or provision is not inconsistent with the provisions of this Act. Any of the designations, preferences, limitations, and relative rights, including voting rights, of any class or series of shares may be made dependent upon facts ascertainable outside the articles of incorporation, which facts may include future acts of the corporation, provided that the manner in which such facts shall operate upon the designations, preferences, limitations, and relative rights, including voting rights, of such class or series of shares is clearly and expressly set forth in the articles of incorporation.
B. Without being limited to the authority herein contained, a corporation, when so provided in its articles of incorporation, may issue shares of one or more classes or series:
(1) Redeemable, subject to compliance by the corporation with Articles 2.38 and 4.08 of this Act, at the option of the corporation, the shareholder or another person or upon the occurrence of a designated event.
(2) Entitling the holders thereof to cumulative, noncumulative, or partially cumulative dividends.
(3) Having preference over any other class, classes or series of shares as to the payment of dividends.
(4) Having preference in the assets of the corporation over any other class, classes or series of shares upon the voluntary or involuntary liquidation of the corporation.
(5) Exchangeable, subject to compliance by the corporation with Article 2.38 of this Act, at the option of the corporation, the shareholder or another person or upon the occurrence of a designated event, for shares, obligations, indebtedness, evidence of ownership, rights to purchase securities or other securities of the corporation or one or more other domestic or foreign corporations or other entities or for other property or for any combination of the foregoing.
(6) Convertible at the option of the corporation, the shareholder or another person or upon the occurrence of a designated event, into shares of any other class or series, but shares without par value shall not be converted into shares with par value unless that part of the stated capital of the corporation represented by such shares without par value is, at the time of conversion, at least equal to the aggregate par value of the shares into which shares without par value are to be converted or the amount of any such deficiency is transferred from surplus to stated capital.
C. (1) The board of directors of a corporation registered as an open-end company under the Investment Company Act may:
(a) establish classes of shares and series of unissued shares of any class by fixing and determining the designations, preferences, limitations, and relative rights, including voting rights, of the shares of any class or series so established to the same extent that the designations, preferences, limitations, and relative rights could be stated if fully set forth in the articles of incorporation; and
(b) increase or decrease the aggregate number of shares or the number of shares of, or eliminate and remove from the articles of incorporation, a class or series of shares that the corporation has authority to issue, unless a provision has been included in the articles of incorporation of the corporation after September 1, 1993, expressly prohibiting those actions by the board of directors. The board of directors may not:
(i) decrease the number of shares within a class or series to less than the number of shares of that class or series that are then outstanding; or
(ii) eliminate or remove from the articles of incorporation any reference to any class or series of which shares are then outstanding.
To establish a class or series, the board of directors shall adopt a resolution setting forth the designation of the class or series and fixing and determining the designations, preferences, limitations, and relative rights, including voting rights, of the class or series. In order to increase or decrease the number of shares of, or eliminate and remove from the articles of incorporation any reference to, a class or series of shares, the board of directors shall adopt a resolution fixing and determining the new number of shares of each class or series in which the number of shares is increased or decreased or eliminating the class or series and removing references to the class or series from the articles of incorporation. The shares of any eliminated series shall resume the status of authorized but unissued shares of the class of shares from which the series was established unless otherwise provided in the resolution or the articles of incorporation.
(2) Before the first issuance of any shares of a class or series established or increased or decreased by resolution adopted by the board of directors under Subsection (1) of this section, and in order to eliminate from the articles of incorporation a class or series of shares and all references to the class or series contained in the articles, the corporation shall file with the Secretary of State a statement setting forth:
(a) the name of the corporation;
(b) 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 and fixing and determining the preferences, limitations, and relative rights of the class or series;
(c) if the statement relates to an increase or decrease in the number of shares of any class or series, a copy of the resolution fixing and determining the new number of shares of each class or series in which the number of shares is increased or decreased;
(d) if the statement relates to the elimination of a class or series of shares and to the removal of all references to the class or series from the articles of incorporation, a copy of the resolution eliminating the class or series and removing all references to the class or series from the articles of incorporation;
(e) the date of adoption of the resolution; and
(f) that the resolution was duly adopted by all necessary action on the part of the corporation.
(3) The statement shall be executed on behalf of the corporation by an officer. The original and a copy of the statement shall be delivered to the Secretary of State. If the Secretary of State finds that the statement conforms to law, when the appropriate filing fee is paid as provided by law, the Secretary of State shall:
(a) endorse on the original and the copy the word "Filed," and the month, day, and year of the filing of the statement;
(b) file the original in the Secretary of State's office; and
(c) return the copy to the corporation or its representative.
(4) On the filing of a statement by the Secretary of State, the resolution establishing and designating the class or series and fixing and determining the preferences, limitations, and relative rights of the class or series, the resolution fixing the new number of shares of each class or series in which the number of shares is increased or decreased, or the resolution eliminating a class or series and all references to the class or series from the articles of incorporation, as appropriate, becomes an amendment of the articles of incorporation. An amendment of the articles of incorporation effected as provided by this Article is not subject to the procedure to amend the articles contained in Article 4.02 of this Act.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1488, ch. 545, Sec. 6, eff. Aug. 27, 1973; Acts 1985, 69th Leg., ch. 128, Sec. 3, eff. May 20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 5, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 3, eff. Aug. 28, 1989; Acts 1991, 72nd Leg. ch. 901, Sec. 1, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec. 2.04, eff. Sept. 1, 1993.
Art. 2.13. Series of Shares Established by Board of Directors
A. If the articles of incorporation shall expressly vest such authority in the board of directors, then the board of directors shall have authority to establish series of unissued shares of any class by fixing and determining the designations, preferences, limitations, and relative rights, including voting rights, of the shares of any series so established to the same extent that such designations, preferences, limitations, and relative rights could be stated if fully set forth in the articles of incorporation, but subject to and within the limitations set forth in the articles of incorporation. In order to establish a series, where authority so to do is contained in the articles of incorporation, the board of directors shall adopt a resolution setting forth the designation of the series and fixing and determining the designations, preferences, limitations and relative rights, including voting rights, thereof or so much thereof as shall not be fixed and determined by the articles of incorporation.
B. If the articles of incorporation shall expressly vest authority in the board of directors to establish series of unissued shares of a class and do not expressly restrict the board of directors from increasing or decreasing the number of shares of such a series, then the board of directors shall have authority to increase or decrease the number of shares within each such series; provided, however, that the board of directors may not decrease the number of shares within a series to less than the number of shares within such series that are then issued.
In order to so increase or decrease the number of shares of a series, the board of directors shall adopt a resolution fixing and determining the new number of shares of each series in which the number of shares is increased or decreased. In case the number of shares of a series shall be so decreased, the shares by which the series is decreased shall resume the status of authorized but unissued shares of the class of shares from which such series was established, unless otherwise provided in the articles of incorporation or the terms of such class or series.
C. If the articles of incorporation shall expressly vest authority in the board of directors to establish series of unissued shares, then if no shares of a series established by resolution of the board of directors are outstanding, either because none were issued or because no issued shares of such series remain outstanding or held as treasury shares, the board of directors shall have authority to eliminate from the articles of incorporation such series and all references to such series contained therein. In order to eliminate such series and such references from the articles of incorporation, the board of directors shall adopt a resolution eliminating such series and all reference to such series from the articles of incorporation. The shares of any such eliminated series shall resume the status of authorized but unissued shares of the class of shares from which such series was established, unless otherwise provided in the articles of incorporation.
D. Prior to the issuance of any shares of a series established by resolution adopted by the board of directors, and prior to the issuance of any shares of a series in which the number of shares has been increased or decreased by resolution adopted by the board of directors, if such issuance is the first issuance of shares of such series since such resolution was adopted, and in order to eliminate from the articles of incorporation a series of shares and all references to such series contained therein, the corporation shall file with the Secretary of State a statement setting forth:
(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 fixing and determining the preferences, limitations, and relative rights thereof.
(3) If the statement relates to an increase or decrease in the number of shares of any series, a copy of the resolution fixing 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 elimination of a series of shares and all references thereto from the articles of incorporation, a copy of the resolution eliminating such series and all references to such series from the articles of incorporation.
(5) The date of adoption of such resolution.
(6) That such resolution was duly adopted by all necessary action on the part of the corporation.
E. If the articles of incorporation expressly authorize the board of directors to establish series of unissued shares of a class and if no shares of a series established by resolution of the board of directors have been issued, the board of directors may amend the designations, preferences, limitations, and relative rights, including voting rights, of the series, unless otherwise provided in the articles of incorporation. To amend the designations, preferences, limitations, and relative rights of a series, the board of directors shall adopt a resolution amending the designations, preferences, limitations, and relative rights of the series. Before the issuance of any shares of the series, the corporation shall file with the secretary of state a statement setting forth:
(1) The name of the corporation.
(2) That no shares of the series have been issued.
(3) If the designation of the series is being changed, a statement of the original designation and the new designation.
(4) A copy of the resolution amending the designations, preferences, limitations, or relative rights of the series.
(5) The date of adoption of the resolution.
(6) That the resolution was adopted by all necessary action on the part of the corporation.
F. A statement filed in accordance with Section D or E of this article shall be executed on behalf of the corporation by an officer. The original and a copy of the statement shall be delivered to the Secretary of State. If the Secretary of State finds that such statement conforms to law, he shall, when the appropriate filing fee is paid as prescribed by law:
(1) Endorse on the original and the copy the word "Filed," and the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to the corporation or its representative.
G. Upon the filing of a statement described in Section D or E of this article by the Secretary of State, the resolution establishing and designating the series and fixing and determining the preferences, limitations, and relative rights thereof, the resolution fixing the new number of shares of each series in which the number of shares is increased or decreased, the resolution eliminating a series and all references to such series from the articles of incorporation, or the resolution amending the preferences, limitations, and relative rights of the series, as appropriate, shall become an amendment of the articles of incorporation. The filing of the statement or the filing of a restated certificate of incorporation under Article 4.07 of this Act does not prohibit the board of directors from subsequently adopting a resolution as authorized by this article. An amendment of the articles of incorporation effected pursuant to this Article 2.13 is not subject to the procedure to amend the articles of incorporation contained in Article 4.02 of this Act.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1489, ch. 545, Sec. 7, eff. Aug. 27, 1973; Acts 1979, 66th Leg., p. 223, ch. 120, Sec. 25, eff. May 9, 1979; Acts 1981, 67th Leg., p. 838, ch. 297, Sec. 13, eff. Aug. 31, 1981; Acts 1985, 69th Leg., ch. 128, Sec. 4, eff. May 20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 6, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 4, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 2, eff. Aug. 26, 1991.
Sec. E amended by Acts 2003, 78th Leg., ch. 238, Sec. 5, eff. Sept. 1, 2003; Sec. F amended by Acts 2003, 78th Leg., ch. 238, Sec. 5, eff. Sept. 1, 2003; Sec. G added by Acts 2003, 78th Leg., ch. 238, Sec. 5, eff. Sept. 1, 2003.
Art. 2.14. Subscription for Shares
A. Unless otherwise provided therein, a subscription for shares of a corporation to be organized may not be revoked within six (6) months, except with the consent of all other subscribers.
B. Repealed by Acts 2003, 78th Leg., ch. 238, Sec. 44(1).
C. Acceptance of a subscription shall be effected by a resolution of acceptance by the board of directors or by a written memorandum of acceptance executed by one authorized by the board of directors and delivered to the subscriber or his assignee.
D. Subscriptions for shares, whether made before or after the organization of a corporation, shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors unless the payment terms are specified by the subscription. Unless otherwise specified by the subscription, a call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series, as the case may be, as far as practicable. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation or declare the subscription forfeited if the amount due remains unpaid for a period of twenty (20) days after written demand has been made therefor to the subscriber. If mailed, such written demand shall be deemed to be made when deposited in the United States mail in a sealed envelope addressed to the subscriber at his last post office address known to the corporation, with postage thereon prepaid. The effect of such declaration of forfeiture shall be to terminate all the rights and obligations of the subscriber as such, but the corporation may retain any amount previously paid on the subscription.
E. Before acquiring shares in a corporation, a person may commit to act in a specified manner with respect to the shares after the acquisition, including with respect to 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. A written commitment entered into under this section is a contract between the shareholder and the corporation.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Sec. B repealed by Acts 2003, 78th Leg., ch. 238, Sec. 44(1), eff. Sept. 1, 2003; Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec. 6, eff. Sept. 1, 2003; Sec. D amended by Acts 2003, 78th Leg., ch. 238, Sec. 6, eff. Sept. 1, 2003; Sec. E added by Acts 2003, 78th Leg., ch. 238, Sec. 6, eff. Sept. 1, 2003.
Art. 2.14-1. Stock Rights, Options, and Convertible Indebtedness
A. Subject to any limitations in its articles of incorporation, a corporation may create and issue, whether or not in connection with the issuance and sale of any of its shares or other securities, (1) rights or options entitling the holders thereof to purchase or receive from the corporation any of its shares of any class, classes or series or other securities and (2) indebtedness convertible into any of its shares of any class, classes or series or other securities.
B. The terms of rights or options may:
(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) of this subsection; or
(2) invalidate the rights or options held by a person or transferee described by Subsection (1) of this section.
C. Such rights, options or indebtedness shall be evidenced in such manner as the board of directors shall approve and, subject to the provisions of the articles of incorporation, shall set forth:
(1) in the case of rights or options, the terms upon which, the time or times within which, and any consideration, including a formula by which the consideration may be determined, for which such shares may be purchased or received from the corporation upon the exercise of any such right or option; or
(2) in the case of convertible indebtedness, the terms and conditions upon which, the time or times within which, and the conversion ratio or ratios at which, such indebtedness may be converted into such shares.
D. In the absence of fraud in the transaction, the judgment of the board of directors as to the adequacy of the consideration received for such rights, options, or indebtedness shall be conclusive; provided that rights or options may be issued by a corporation to its shareholders, employees, or directors without consideration if, in the judgment of the board of directors, the issuance of those rights or options is in the interests of the corporation. The consideration to be received for any shares having a par value, other than treasury shares, to be issued upon the exercise of such rights or options shall not be less than the par value thereof. No privilege of conversion shall be conferred upon, or altered in respect to, any indebtedness that would result in receipt by the corporation of less than the minimum consideration required to be received upon issuance of the shares. The consideration for shares issued upon the exercise of convertible indebtedness shall be that provided in Section E of Article 2.15 of this Act. The consideration for shares issued upon the exercise of rights or options shall be that provided in Section F of Article 2.15 of this Act.
E. Except as provided by Section F of this article, 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.
F. The terms of the rights or options or the agreement or plan under which the rights or options are issued may provide that the board of directors may by resolution authorize one or more officers of the corporation to do one or both of the following:
(1) designate officers and employees of the corporation or of any of its subsidiaries to receive rights or options created by the corporation; or
(2) determine the number of the rights or options to be received by the officers and employees.
G. A resolution adopted under Section F of this article authorizing an officer of the corporation to designate recipients of rights or options shall specify the total number of rights or options the officer may award. The board of directors may not authorize an officer to designate himself or herself as a recipient of any rights or options.
Added by Acts 1973, 63rd Leg., p. 1489, ch. 545, Sec. 8, eff. Aug. 27, 1973. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 5, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 3, eff. Aug. 26, 1991.
Amended by Acts 2003, 78th Leg., ch. 238, Sec. 7, eff. Sept. 1, 2003.
Art. 2.15. Consideration for Shares
A. Shares having a par value may be issued for such consideration, not less than the par value thereof, as shall be fixed from time to time by the board of directors or, in the case of shares issued by a converted entity, in the plan of conversion or, in the case of a corporation created by a merger, in the plan of merger.
B. Shares without par value may be issued for such consideration, as may be fixed:
(1) by the board of directors from time to time, unless the articles of incorporation reserve to the shareholders the right to fix the consideration, in which case, prior to the issuance of such shares, the shareholders shall fix the consideration to be received for such shares, by a vote of the holders of a majority of all shares entitled to vote thereon;
(2) by a plan of conversion, in the case of shares to be issued pursuant to the plan of conversion by a corporation that is a converted entity; or
(3) by a plan of merger, in the case of shares to be issued pursuant to the plan of merger by a corporation created pursuant to the plan of merger.
C. Treasury shares may be disposed of by the corporation for such consideration as may be fixed from time to time by the board of directors.
D. That part of the surplus of a corporation which is transferred to stated capital upon the issuance of shares as a share dividend shall be deemed to be the consideration for the issuance of such shares.
E. In the event of the issuance of shares by a corporation upon the conversion or exchange of its indebtedness or shares, the consideration for the shares so issued shall be:
(1) The principal sum of, and accrued interest on, the indebtedness so exchanged or converted, or the stated capital then represented by the shares so exchanged or converted, and
(2) That part of surplus, if any, transferred to stated capital upon the issuance of shares for the shares so exchanged or converted, and
(3) Any additional consideration paid to the corporation upon the issuance of shares for the indebtedness or shares so exchanged or converted.
F. In the event of the issuance of shares by a corporation upon the exercise of rights or options entitling the holders thereof to purchase or receive from the corporation any of its shares, the consideration for the shares so issued shall be:
(1) The consideration, if any, received by the corporation for such rights or options, and
(2) The consideration, if any, received by the corporation for the issuance of shares upon the exercise of such rights or options.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1490, ch. 545, Sec. 9, eff. Aug. 27, 1973; Acts 1989, 71st Leg., ch. 801, Sec. 6, eff. Aug. 28, 1989; Acts 1997, 75th Leg., ch. 375, Sec. 5, eff. Sept. 1, 1997.
Art. 2.16. Payment for Shares
A. The board of directors or, in the case of shares to be issued pursuant to a plan of conversion by a corporation that is a converted entity, the plan of conversion, or, in the case of shares to be issued pursuant to a plan of merger by a corporation created pursuant to the plan of merger, the plan of merger may authorize shares to be issued for consideration consisting of any tangible or intangible benefit to the corporation or other property of any kind or nature, including cash, promissory notes, services performed, contracts for services to be performed, other securities of the corporation, or securities of any other corporation, domestic or foreign, or other entity. In addition, shares may be issued pursuant to a plan of conversion or plan of merger in the manner and for such consideration as may be provided for in the plan of conversion or plan of merger. Shares may not be issued until the full amount of the consideration, fixed as provided by law, has been paid or delivered as required in connection with the authorization of the shares. When such consideration shall have been so paid or delivered, the shares shall be deemed to have been issued and the subscriber or shareholder entitled to receive such issue shall be a shareholder with respect to such shares, and the shares shall be considered fully paid and non-assessable.
B. In the absence of fraud in the transaction, the judgment of the board of directors or the shareholders or the party or parties approving the plan of conversion or the plan of merger, as the case may be, as to the value and sufficiency of the consideration received for shares shall be conclusive.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1971, 62nd Leg., p. 1173, ch. 276, Sec. 1, eff. May 19, 1971; Acts 1983, 68th Leg., p. 3150, ch. 540, Sec. 4, eff. Aug. 29, 1983; Acts 1991, 72nd Leg., ch. 901, Sec. 4, eff. Aug. 26, 1991; Acts 1997, 75th Leg., ch. 375, Sec. 6, eff. Sept. 1, 1997.
Art. 2.18. Expenses of Organization, Reorganization, and Financing
A. The reasonable charges and expenses of organization or reorganization of a corporation, and the reasonable expenses of and compensation for the sale or underwriting of its shares, may be paid or allowed by such corporation out of the consideration received by it in payment for its shares without thereby rendering such shares not fully paid and non-assessable.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 1.
Art. 2.19. Certificates Representing Shares
A. A corporation shall deliver certificates representing shares to which shareholders are entitled, or the shares of a corporation may be uncertificated shares. Unless otherwise provided by the articles of incorporation or bylaws, the board of directors of a corporation may provide by resolution that some or all of any or all classes and series of its shares shall be uncertificated shares, provided that such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Certificates representing shares shall be signed by such officer or officers as the bylaws of the corporation shall prescribe, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of such officer or officers as the bylaws of the corporation shall prescribe upon a certificate may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issuance.
B. In the event a corporation is authorized to issue shares of more than one class or series, each certificate representing shares issued by such corporation (1) shall conspicuously set forth on the face or back of the certificate a full statement of all the designations, preferences, limitations, and relative rights of the shares of each class or series to the extent they have been fixed and determined and the authority of the board of directors to fix and determine the designations, preferences, limitations, and relative rights of subsequent series; or (2) shall conspicuously state on the face or back of the certificate that (a) such a statement is set forth in the articles of incorporation on file in the office of the Secretary of State and (b) the corporation will furnish a copy of such statement to the record holder of the certificate without charge on written request to the corporation at its principal place of business or registered office. In the event a corporation has by its articles of incorporation limited or denied the preemptive right of shareholders to acquire unissued or treasury shares of the corporation, each certificate representing shares issued by such corporation (1) shall conspicuously set forth on the face or back of the certificate a full statement of the limitation or denial of preemptive rights contained in the articles of incorporation, or (2) shall conspicuously state on the face or back of the certificate that (a) such a statement is set forth in the articles of incorporation on file in the office of the Secretary of State and (b) the corporation will furnish a copy of such statement to the record holder of the certificate without charge on request to the corporation at its principal place of business or registered office.
C. Each certificate representing shares shall state upon the face thereof:
(1) That the corporation is organized under the laws of this State.
(2) The name of the person to whom issued.
(3) The number and class of shares and the designation of the series, if any, which such certificate represents.
(4) The par value of each share represented by such certificate, or a statement that the shares are without par value.
D. In accordance with Chapter 8, Business & Commerce Code, a corporation shall, after the issuance or transfer of uncertificated shares, send to the registered owner of uncertificated shares a written notice containing the information required to be set forth or stated on certificates pursuant to this Act. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical. No share shall be issued until the consideration therefor, fixed as provided by law, has been fully paid.
E. No requirement of this Act with respect to matters to be set forth on certificates representing shares of a corporation shall apply to or affect certificates outstanding, when such requirement first becomes applicable to such certificates; but such requirements shall apply to all certificates thereafter issued whether in connection with an original issue of shares, a transfer of shares or otherwise. No certificate representing shares in which any provision of the articles of incorporation, or by-laws, or resolution, or agreement restricting the transfer of shares, shall have been incorporated by reference pursuant to the provisions of Section F of this Article prior to its amendment shall be invalidated or affected by such amendment; but such incorporation by reference shall not be used on certificates hereafter issued whether in connection with an original issue of shares, a transfer of shares, or otherwise.
F. Repealed by Acts 1975, 64th Leg., p. 322, ch. 134, Sec. 22, eff. Sept. 1, 1975.
G. In the event any restriction on the transfer, or registration of the transfer, of shares shall be imposed or agreed to by the corporation, as permitted by this Act, each certificate representing shares so restricted (1) shall conspicuously set forth a full or summary statement of the restriction on the face of the certificate, or (2) shall set forth such statement on the back of the certificate and conspicuously refer to the same on the face of the certificate, or (3) shall conspicuously state on the face or back of the certificate that such a restriction exists pursuant to a specified document and (a) that the corporation will furnish to the record holder of the certificate without charge upon written request to the corporation at its principal place of business or registered office a copy of the specified document, or (b) if such document is one required or permitted to be and has been filed under this Act, that such specified document is on file in the office of the Secretary of State and contains a full statement of such restriction. Unless such document was on file in the office of the Secretary of State at the time of the request, a corporation which fails within a reasonable time to furnish the record holder of a certificate upon such request and without charge a copy of the specified document shall not be permitted thereafter to enforce its rights under the restriction imposed on the shares represented by such certificate.
H. Repealed by Acts 1975, 64th Leg., p. 322, ch. 134, Sec. 22, eff. Sept. 1, 1975.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 2; Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 2; Acts 1973, 63rd Leg., p. 1490, ch. 545, Sec. 10, eff. Aug. 27, 1973; Acts 1975, 64th Leg., p. 305, ch. 134, Sec. 2, 3, 22, eff. Sept. 1, 1975; Acts 1983, 68th Leg., p. 2565, ch. 442, Sec. 3, eff. Sept. 1, 1983; Acts 1985, 69th Leg., ch. 128, Sec. 6, eff. May 20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 7, eff. Aug. 31, 1987; Acts 1991, 72nd Leg., ch. 901, Sec. 5, eff. Aug. 26, 1991.
Art. 2.20. Issuance of Fractional Shares or Scrip
A. A corporation may (1) issue fractions of a share, either represented by a certificate or uncertificated, (2) arrange for the disposition of fractional interests by those entitled thereto, (3) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (4) issue scrip in registered or bearer form which shall entitle the holder to receive a certificate for a full share or an uncertificated full share upon the surrender of such scrip aggregating a full share. A certificate for a fractional share or an uncertificated fractional share shall, but scrip shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The board of directors may cause scrip to be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares or uncertificated full shares before a specified date, or subject to the condition that the shares for which such scrip is exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip, or subject to any other conditions which the board of directors may determine advisable.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1492, ch. 545, Sec. 11, eff. Aug. 27, 1973; Acts 1983, 68th Leg., p. 2566, ch. 442, Sec. 4, eff. Sept. 1, 1983.
Art. 2.21. Liability of Subscribers and Shareholders
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 thereof or of the corporation, shall be under no obligation to the corporation or to its obligees with respect to:
(1) such shares other than the obligation, if any, of such person to pay to the corporation the full amount of the consideration, fixed in compliance with Article 2.15 of this Act, for which such 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, owner, subscriber, or affiliate is or was the alter ego of the corporation, or on the basis of actual fraud or constructive fraud, a sham to perpetrate a fraud, or other similar theory, unless the obligee demonstrates that the holder, 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, owner, subscriber, or affiliate; or
(3) any obligation of the corporation on the basis of the failure of the corporation to observe any corporate formality, including without limitation: (a) the failure to comply with any requirement of this Act or of the articles of incorporation or bylaws of the corporation; or (b) the failure to observe any requirement prescribed by this Act or by the articles of incorporation or bylaws for acts to be taken by the corporation, its board of directors, or its shareholders.
B. The liability of a holder, owner, or subscriber of shares of a corporation or any affiliate thereof or of the corporation for an obligation that is limited by Section A of this article is exclusive and preempts any other liability imposed on a holder, owner, or subscriber of shares of a corporation or any affiliate thereof or of the corporation for that obligation under common law or otherwise, except that nothing contained in this article shall limit the obligation of a holder, owner, subscriber, or affiliate to an obligee of the corporation when:
(1) the holder, owner, subscriber, or affiliate has expressly assumed, guaranteed, or agreed to be personally liable to the obligee for the obligation; or
(2) the holder, owner, subscriber, or affiliate is otherwise liable to the obligee for the obligation under this Act or another applicable statute.
C. Any person becoming an assignee or transferee of certificated shares or of uncertificated shares or of a subscription for shares in good faith and without knowledge or notice that the full consideration therefor has not been paid shall not be personally liable to the corporation or its creditors for any unpaid portion of such consideration.
D. An executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditors, or receiver shall not be personally liable as a holder of or subscriber to shares of a corporation, but the estate and funds in his hands shall be so liable.
E. No pledgee or other holder of shares as collateral security shall be personally liable as a shareholder.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1983, 68th Leg., p. 2566, ch. 442, Sec. 5, eff. Sept. 1, 1983; Acts 1989, 71st Leg., ch. 217, Sec. 1, eff; Aug. 28, 1989; Acts 1989, 71st Leg., ch. 801, Sec. 7, eff. Aug. 28, 1989; Acts 1993, 73rd Leg., ch. 215, Sec. 2.05, eff. Sept; 1, 1993; Acts 1997, 75th Leg., ch. 375, Sec. 7, eff; Sept; 1, 1997.
Art. 2.22. Transfer of Shares and Other Securities and Restrictions on Transfer
A. The shares and other securities of a corporation shall be personal property for all purposes and shall be transferable in accordance with the provisions of Chapter 8--Investment Securities--of the Business & Commerce Code, as amended, except as otherwise provided in this Act.
B. A restriction on the transfer or registration of transfer of a security, or on the amount of the corporation's securities that may be owned by any person or group of persons, may be imposed by the articles of incorporation, or by-laws, or a written agreement among any number of the holders of such securities, or a written agreement among any number of the holders and the corporation provided a counterpart of such agreement shall be placed on file by the corporation at its principal place of business or its registered office and shall be subject to the same right of examination by a shareholder of the corporation, in person or by agent, attorney or accountant, as are the books and records of the corporation. No restriction so imposed shall be valid with respect to any security issued prior to the adoption of the restriction unless the holder of the security voted in favor of the restriction or is a party to the agreement imposing it.
C. Any restriction on the transfer or registration of transfer of a security of a corporation, if reasonable and noted conspicuously on the certificate or other instrument representing the security or, in the case of an uncertificated security, if reasonable and if notation of the restriction is contained in the notice sent pursuant to Section D of Article 2.19 of this Act with respect to the security, shall be specifically enforceable against the holder of the restricted security or any successor or transferee of the holder. Unless noted conspicuously on the certificate or other instrument representing the security or, in the case of an uncertificated security, unless notation of the restriction is contained in the notice sent pursuant to Section D of Article 2.19 of this Act with respect to the security, a restriction, even though otherwise enforceable, is ineffective against a transferee for value without actual knowledge of the restriction at the time of the transfer or against any subsequent transferee (whether or not for value), but such a restriction shall be specifically enforceable against any other person who is not a transferee for value from and after the time that the person acquires actual knowledge of the existence of the restriction.
D. In particular and without limiting the general power granted in Sections B and C of this Article to impose reasonable restrictions, a restriction on the transfer or registration of transfer of securities of a corporation shall be valid if it reasonably:
(1) Obligates the holders of the restricted securities to offer to the corporation or to any other holders of securities of the corporation or to any other person or to any combination of the foregoing, a prior opportunity, to be exercised within a reasonable time, to acquire the restricted securities; or
(2) Obligates the corporation to the extent permitted by this Act or any holder of securities of the corporation or any other person, or any combination of the foregoing, to purchase the securities which are the subject of an agreement respecting the purchase and sale of the restricted securities; or
(3) Requires the corporation or the holders of any class of securities of the corporation to consent to any proposed transfer of the restricted securities or to approve the proposed transferee of the restricted securities for the purpose of preventing violations of federal or state laws; or
(4) Prohibits the transfer of the restricted securities to designated persons or classes of persons, and such designation is not manifestly unreasonable; or
(5) Maintains the status of the corporation as an electing small business corporation under Subchapter S of the United States Internal Revenue Code, maintains any other tax advantage to the corporation, or maintains the status of the corporation as a close corporation under Part Twelve of this Act; or
(6) Obligates the holder of the restricted securities to sell or transfer an amount of restricted securities to the corporation, to any other holders of securities of the corporation, or to any other person or combination of persons; or
(7) Causes or results in the automatic sale or transfer of an amount of restricted securities to the corporation, to any other holders of securities of the corporation, or to any other person or combination of persons.
E. A corporation that has adopted a bylaw, or is a party to an agreement, restricting the transfer of its shares or other securities may file such bylaw or agreement as a matter of public record with the Secretary of State, as follows:
(1) The corporation shall file a copy of the bylaw or agreement in the office of the Secretary of State together with an attached statement setting forth:
(a) the name of the corporation;
(b) that the copy of the bylaw or agreement is a true and correct copy of the same; and
(c) that such filing has been duly authorized by the board of directors or, in the case of a close corporation that, in conformance with Part Twelve of this Act, is managed in some other manner pursuant to a shareholders' agreement, by the shareholders or by the persons empowered by the agreement to manage its business and affairs.
(2) Such statement shall be executed on behalf of the corporation by an officer. The original and a copy of the statement shall be delivered to the Secretary of State with copies of such bylaw or agreement restricting the transfer of shares or other securities attached thereto. If the Secretary of State finds that such statement conforms to law and the appropriate filing fee has been paid as prescribed by law, he shall:
(a) endorse on the original and the copy the word "Filed", and the month, day, and year of the filing thereof;
(b) file the original in his office; and
(c) return the copy to the corporation or its representative.
(3) After the filing of such statement by the Secretary of State, the bylaw or agreement restricting the transfer of shares or other securities shall become a matter of public record and the fact of such filing shall be stated on any certificate representing the shares or other securities so restricted if required by Section G, Article 2.19, of this Act.
F. A corporation that is a party to an agreement restricting the transfer of its shares or other securities may make such agreement part of its articles of incorporation without restating the provisions of such agreement therein by complying with the provisions of Part Four of this Act for amendment of the articles of incorporation. If such agreement shall alter any provision of the original or amended articles of incorporation, the articles of amendment shall identify by reference or description the altered provision. If such agreement is to be an addition to the original or amended articles of incorporation, the articles of amendment shall state that fact. The articles of amendment shall have attached thereto a copy of the agreement restricting the transfer of shares or other securities, and shall state that the attached copy of such agreement is a true and correct copy of the same and that its inclusion as part of the articles of incorporation has been duly authorized in the manner required by this Act to amend the articles of incorporation.
G. When 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, after the death of a joint owner and before the time that the corporation receives actual written notice that parties other than the surviving joint owner or owners claim an interest in the shares or any distributions thereon, the corporation may record on its books and otherwise effect the transfer of those shares to any person, firm, or corporation (including that surviving joint owner individually) and pay any distributions made in respect of those shares, in each case as if the surviving joint owner or owners were the absolute owners of the shares. A corporation permitting such a transfer by and making any distribution to such a surviving joint owner or owners before the receipt of written notice from other parties claiming an interest in those shares or distributions is discharged from all liability for the transfer or payment so made; provided, however, that the discharge of the corporation from liability and the transfer of full legal and equitable title of the shares in no way affects, reduces, or limits any cause of action existing in favor of any owner of an interest in those shares or distributions against the surviving owner or owners.
H. A restriction on the transfer or the registration of a transfer of the securities of a corporation, the amount of securities of a corporation, or the amount of securities of a corporation that may be owned by a person or group of persons for any of the following purposes is conclusively presumed to be for a reasonable purpose:
(1) maintaining a local, state, federal, or foreign tax advantage to the corporation or its shareholders, including:
(a) maintaining the corporation's status as an electing small business corporation under Subchapter S of the Internal Revenue Code of 1986;
(b) maintaining or preserving any tax attribute, including net operating losses; or
(c) qualifying or maintaining the qualification of the corporation as a real estate investment trust under the Internal Revenue Code of 1986 or regulations adopted under the Internal Revenue Code of 1986; or
(2) maintaining a statutory or regulatory advantage or complying with a statutory or regulatory requirement under applicable local, state, federal, or foreign law.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 3, 4; Acts 1967, 60th Leg., p. 1719, ch. 657, Sec. 5, eff. June 17, 1967; Acts 1973, 63rd Leg., p. 1493, ch. 545, Sec. 12, eff. Aug. 27, 1973; Acts 1975, 64th Leg., p. 306, ch. 134, Sec. 4, 5, eff. Sept. 1, 1975; Acts 1979, 66th Leg., p. 223, ch. 120, Sec. 26, eff. May 9, 1979; Acts 1981, 67th Leg., p. 838, ch. 297, Sec. 14, eff. Aug. 31, 1981; Acts 1981, 67th Leg., p. 3113, ch. 818, Sec. 3, eff. Aug. 31, 1981; Acts 1985, 69th Leg., ch. 128, Sec. 7, eff. May 20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 8, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 8, eff. Aug. 28, 1989.
Sec. B amended by Acts 2003, 78th Leg., ch. 238, Sec. 8, eff. Sept. 1, 2003; Sec. D amended by Acts 2003, 78th Leg., ch. 238, Sec. 8, eff. Sept. 1, 2003; Sec. H added by Acts 2003, 78th Leg., ch. 238, Sec. 8, eff. Sept. 1, 2003.
Art. 2.22-1. Shareholders' Preemptive Rights
A. Except as provided by Section F of this article, the shareholders of a corporation shall not have a preemptive right to acquire additional, unissued, or treasury shares of the corporation, or securities of the corporation convertible into or carrying a right to subscribe to or acquire shares, except to the extent provided by the articles of incorporation or by agreement.
B. The articles of incorporation may provide that the shareholders of a corporation shall have a preemptive right by including a statement that the corporation "elects to have a preemptive right" or a similar statement. Section C of this article applies to the shareholders' preemptive right except as otherwise provided by the articles of incorporation.
C. (1) If the shareholders of a corporation have a preemptive right under this article, the shareholders have a preemptive right to acquire proportional amounts of the corporation's additional unissued or treasury shares, or securities of the corporation convertible into or carrying a right to subscribe to or acquire shares on the decision of the corporation's board of directors to issue the shares.
(2) Unless otherwise provided in the articles of incorporation, no preemptive right shall exist with respect to:
(a) shares issued or granted to a director, officer, agent, or employee of the corporation or a subsidiary or affiliate of the corporation;
(b) 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;
(c) shares authorized in the corporation's articles of incorporation that are issued not later than the 180th day after the effective date of the corporation's formation; or
(d) shares sold, issued, or granted by the corporation for consideration other than money.
(3) Holders of shares of any class or series without general voting rights but that is preferred as to distributions shall not be entitled to any preemptive right.
(4) Holders of shares of any class or series with general voting rights that is not preferred as to distributions shall not be entitled to any preemptive right to shares of any class or series that is preferred as to distributions or to any obligations, unless the shares with preferential rights or obligations are convertible into or carry a right to subscribe to or acquire shares without preferential rights.
(5) The preemptive right shall be only an opportunity to acquire shares or other securities under such uniform terms and conditions as the board of directors may fix for the purpose of providing a fair and reasonable opportunity for the exercise of such right.
(6) For a one-year period beginning on the date on which the shares are offered to shareholders, shares subject to preemptive rights that are not acquired by a shareholder may be issued to a person for 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 shareholders' preemptive rights.
D. An action may not be brought against the corporation, its directors, officers, or agents, any holder of shares or securities of the corporation, or any owner of any beneficial interest in shares or securities of the corporation on account of any violation of any preemptive right of a shareholder to acquire any shares of the corporation, or any securities of the corporation convertible into or carrying a right to subscribe to or acquire shares, unless such action is brought within the earlier of:
(1) One year after the date on which written notice is given to each shareholder whose preemptive right was violated by the issuance, sale, or other distribution of those shares or securities, which notice shall be mailed to the shareholder at the address of the shareholder as it appears on the share transfer records of the corporation and shall inform the shareholder that the issuance, sale, or other distribution of those shares or securities was in violation of the preemptive right of the shareholder; and
(2) Four years after the date on which the corporation issued, sold, or otherwise distributed those shares or securities or August 28, 1989, whichever is later.
E. In the event of a transfer or other disposition of shares by any shareholder of a corporation whose preemptive right to acquire shares of the corporation, or securities of the corporation convertible into or carrying a right to subscribe to or acquire shares, shall have been violated, the transferee or successor of the shareholder shall not acquire the preemptive right, or any right or claim based on that violation, unless the shareholder shall have assigned the preemptive right to the transferee or successor.
F. Subject to the articles of incorporation, shareholders of a corporation incorporated before September 1, 2003, have a preemptive right to acquire additional unissued or treasury shares of the corporation, or securities of the corporation convertible into or carrying a right to subscribe to or acquire shares, to the extent provided by Sections C, D, and E of this article. After September 1, 2003, a corporation may limit or deny the preemptive right of the shareholders of the corporation by amending the corporation's articles of incorporation.
G. A shareholder may waive a preemptive right granted to the shareholder. A written waiver of a preemptive right is irrevocable regardless of whether the waiver is supported by consideration.
Added by Acts 1973, 63rd Leg., p. 1494, ch. 545, Sec. 13, eff. Aug. 27, 1973. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 9, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 6, eff. Aug. 26, 1991.
Amended by Acts 2003, 78th Leg., ch. 238, Sec. 9, eff. Sept. 1, 2003.
Art. 2.23. Bylaws
A. The initial bylaws of a corporation shall be adopted by its board of directors.The bylaws may contain any provisions for the regulation and management of the affairs of the corporation not inconsistent with law or the articles of incorporation.
B. A corporation's board of directors may amend or repeal the corporation's bylaws, or adopt new bylaws, unless:
(1) the articles of incorporation or this Act reserves the power exclusively to the shareholders in whole or part; or
(2) the shareholders in amending, repealing, or adopting a particular bylaw expressly provide that the board of directors may not amend or repeal that bylaw.
C. Unless the articles of incorporation or a bylaw adopted by the shareholders provides otherwise as to all or some portion of a corporation's bylaws, a corporation's shareholders may amend, repeal, or adopt the corporation's bylaws even though the bylaws may also be amended, repealed, or adopted by its board of directors.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1494, ch. 545, Sec. 14, eff. Aug. 27, 1973; Acts 1987, 70th Leg., ch. 93, Sec. 9, eff. Aug. 31, 1987.
Art. 2.24. Meetings of Shareholders
A. Meetings of shareholders may be held at such place within or without this State as may be stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, the board of directors of the corporation is not authorized to designate a place, or the board of directors chooses not to designate a place, meetings shall be held at the registered office of the corporation.
(1) If, under the articles of incorporation or the bylaws, the board of directors is authorized to determine the place of a meeting of shareholders, the board of directors may, in its discretion, determine that the meeting may be held solely by means of remote communication as provided by Subsection (2) of this section.
(2) If authorized by the board of directors, and subject to any guidelines and procedures adopted by the board of directors, shareholders not physically present at a meeting of shareholders, by means of remote communication:
(a) may participate in a meeting of shareholders; and
(b) may be considered present in person and may vote at a meeting of shareholders held at a designated place or held solely by means of remote communication if:
(i) the corporation implements reasonable measures to verify that each person considered present and permitted to vote at the meeting by means of remote communication is a shareholder;
(ii) the corporation implements reasonable measures to provide the shareholders at the meeting by means of remote communication a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of a meeting substantially concurrently with the proceedings; and
(iii) the corporation maintains a record of any shareholder vote or other action taken at the meeting by means of remote communication.
B. An annual meeting of the shareholders shall be held at such time as may be stated in or fixed in accordance with the bylaws. If the annual meeting is not held within any 13-month period and a written consent of shareholders has not been executed instead of the meeting, any court of competent jurisdiction in the county in which the principal office of the corporation is located may, on the application of any shareholder, summarily order a meeting to be held unless the meeting is not required to be held under Section D of this article. Failure to hold the annual meeting at the designated time shall not work a dissolution of the corporation.
C. Special meetings of the shareholders may be called (1) by the president, the board of directors, or such other person or persons as may be authorized in the articles of incorporation or the bylaws or (2) by the holders of at least ten (10) percent of all the shares entitled to vote at the proposed special meeting, unless the articles of incorporation provide for a number of shares greater than or less than ten (10) percent, in which event special meetings of the shareholders may be called by the holders of at least the percentage of shares so specified in the articles of incorporation, but in no event shall the articles of incorporation provide for a number of shares greater than fifty (50) percent. If not otherwise stated in or fixed in accordance with the bylaws of the corporation, the record date for determining shareholders entitled to call a special meeting is the date the first shareholder signs the notice of that meeting. Only business within the purpose or purposes described in the notice required by Article 2.25 of this Act may be conducted at a special meeting of the shareholders.
D. If the articles of incorporation or bylaws of a corporation registered under the Investment Company Act so provide, the corporation is not required to hold an annual meeting of shareholders or elect directors in any year that the election of directors is not required to be acted on under the Investment Company Act. If the corporation is required by the Investment Company Act to hold a meeting of shareholders to elect directors, the meeting shall be designated as the annual meeting of shareholders for that year.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1494, ch. 545, Sec. 15, eff. Aug. 27, 1973; Acts 1987, 70th Leg., ch. 93, Sec. 10, eff. Aug. 31, 1987; Acts 1993, 73rd Leg., ch. 215, Sec. 2.06, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 10, eff. Sept. 1, 2003; Sec. B amended by Acts 2003, 78th Leg., ch. 238, Sec. 10, eff. Sept. 1, 2003.
Art. 2.25. Notice of Shareholders' Meetings
A. Written or printed notice stating the place, day and hour of the meeting, the means of any remote communications by which shareholders may be considered present and may vote at the meeting, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) days nor more than sixty (60) days before the date of the meeting, personally, by electronic transmission, or by mail, by or at the direction of the president, the secretary, or the officer or person calling the meeting, to each shareholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the share transfer records of the corporation, with postage thereon prepaid.
B. Any notice required to be given to any shareholder, under any provision of this Act or the articles of incorporation or bylaws of any corporation, need not be given to the shareholder if (1) notice of two consecutive annual meetings and all notices of meetings held during the period between those annual meetings, if any, or (2) all (but in no event less than two) payments (if sent by first class mail) of distributions or interest on securities during a 12-month period have been mailed to that person, addressed at his address as shown on the share transfer records of the corporation, and have been returned undeliverable. Any action or meeting taken or held without notice to such a person shall have the same force and effect as if the notice had been duly given and, if the action taken by the corporation is reflected in any articles or document filed with the Secretary of State, those articles or that document may state that notice was duly given to all persons to whom notice was required to be given. If such a person delivers to the corporation a written notice setting forth his then current address, the requirement that notice be given to that person shall be reinstated.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1987, 70th Leg., ch. 93, Sec. 11, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 10, eff. Aug. 28, 1989.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 11, eff. Sept. 1, 2003.
Art. 2.25-1. Notice by Electronic Transmission
A. On consent of a shareholder, notice from a corporation under any provision of this Act, the articles of incorporation, or the bylaws may be given to the shareholder by electronic transmission. The shareholder may specify the form of electronic transmission to be used to communicate notice. The shareholder may revoke this consent by written notice to the corporation. The shareholder's consent is deemed to be revoked if the corporation is unable to deliver by electronic transmission two consecutive notices, and the secretary, assistant secretary, or transfer agent of the corporation, or another person responsible for delivering notice on behalf of the corporation knows that delivery of these two electronic transmissions was unsuccessful. The inadvertent failure to treat the unsuccessful transmissions as a revocation of shareholder consent does not invalidate a meeting or other action.
B. Notice under this article is deemed given when the notice is:
(1) transmitted to a facsimile number provided by the shareholder for the purpose of receiving notice;
(2) transmitted to an electronic mail address provided by the shareholder for the purpose of receiving notice;
(3) posted on an electronic network and a message is sent to the shareholder at the address provided by the shareholder for the purpose of alerting the shareholder of a posting; or
(4) communicated to the shareholder by any other form of electronic transmission consented to by the shareholder.
C. An affidavit of the secretary, assistant secretary, transfer agent, or other agent of the corporation that notice has been given by electronic transmission is, in the absence of fraud, prima facie evidence that the notice was given.
Added by Acts 2003, 78th Leg., ch. 238, Sec. 13, eff. Sept. 1, 2003.
Art. 2.26. Registered Holders of Shares, Closing of Share Transfer Records and Record Date
A. Registered Holders as Owners. Unless otherwise provided in this Act, and subject to the provisions of Chapter 8-Investment Securities of the Business & Commerce Code:
(1) A corporation may regard the person in whose name any shares issued by the corporation are registered in the share transfer records of the corporation at any particular time (including, without limitation, as of a record date fixed pursuant to Section B or C of this Article) as the owner of those shares at that time for purposes of voting those shares, receiving distributions thereon or notices in respect thereof, transferring those shares, exercising rights of dissent with respect to those shares, exercising or waiving any preemptive right with respect to those shares, entering into agreements with respect to those shares in accordance with Article 2.22 or 2.30 of this Act, or giving proxies with respect to those shares; and
(2) Neither the corporation nor any of its officers, directors, employees, or agents shall be liable for regarding that person as the owner of those shares at that time for those purposes, regardless of whether that person does not possess a certificate for those shares.
B. Fixing Record Dates for Matters Other Than Consents to Action. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive a distribution by a corporation (other than a distribution involving a purchase or redemption by the corporation of any of its own shares) or a share dividend, or in order to make a determination of shareholders for any other proper purpose (other than determining shareholders entitled to consent to action by shareholders proposed to be taken without a meeting of shareholders), the board of directors of a corporation may provide that the share transfer records shall be closed for a stated period but not to exceed, in any case, sixty (60) days. If the share transfer records shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such records shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the share transfer records, the bylaws, or in the absence of an applicable bylaw the board of directors, may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty (60) days and, in the case of a meeting of shareholders, not less than ten (10) days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the share transfer records are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive a distribution (other than a distribution involving a purchase or redemption by the corporation of any of its own shares) or a share dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such distribution or share dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Article, such determination shall apply to any adjournment thereof except where the determination has been made through the closing of the share transfer records and the stated period of closing has expired.
C. Fixing Record Dates for Consents to Action. Unless a record date shall have previously been fixed or determined pursuant to this section, whenever action by shareholders is proposed to be taken by consent in writing without a meeting of shareholders, the board of directors may fix a record date for the purpose of determining shareholders entitled to consent to that action, which record date shall not precede, and shall not be more than ten (10) days after, the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors and the prior action of the board of directors is not required by this Act, the record date for determining shareholders entitled to consent to action in writing without a meeting shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation as provided in Section A of Article 9.10 of this Act. Delivery shall be by hand or by certified or registered mail, return receipt requested. Delivery to the corporation's principal place of business shall be addressed to the president or the principal executive officer of the corporation. If no record date shall have been fixed by the board of directors and prior action of the board of directors is required by this Act, the record date for determining shareholders entitled to consent to action in writing without a meeting shall be at the close of business on the date on which the board of directors adopts a resolution taking such prior action.
D. Distributions Held in Suspense. Distributions made by a corporation, including those that were payable but not paid to a holder of shares, or to his heirs, successors, or assigns, and have been held in suspense by the corporation or were paid or delivered by it into an escrow account or to a trustee or custodian, shall be payable by the corporation, escrow agent, trustee, or custodian to the holder of the shares as of the record date determined for that distribution as provided in Section B of this Article, or to his heirs, successors, or assigns.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1987, 70th Leg., ch. 93, Sec. 12, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 11, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 7, eff. Aug. 26, 1991.
Art. 2.27. Voting List
A. The officer or agent having charge of the share transfer records for shares of a corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office or principal place of business of the corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Alternatively, the list of the shareholders may be kept on a reasonably accessible electronic network, if the information required to gain access to the list is provided with the notice of the meeting. This article does not require the corporation to include any electronic contact information of any shareholder on the list. If the corporation elects to make the list available on an electronic network, the corporation shall take reasonable steps to ensure that the information is available only to shareholders of the corporation. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. If the meeting is held by means of remote communication, the list must be open to the examination of any shareholder for the duration of the meeting on a reasonably accessible electronic network, and the information required to access the list must be provided to shareholders with the notice of the meeting. The original share transfer records shall be prima-facie evidence as to who are the shareholders entitled to examine such list or transfer records or to vote at any meeting of shareholders.
B. Failure to comply with the requirements of this Article shall not affect the validity of any action taken at such meeting.
C. An officer or agent having charge of the share transfer records who shall fail to prepare the list of shareholders or keep the same accessible to shareholders electronically or physically on file at the principal place of business for a period of ten (10) days, or produce and keep it accessible for inspection during the meeting, as provided in this Article, shall be liable to any shareholder suffering damages on account of such failure, to the extent of such damage. In the event that such officer or agent does not receive notice of the date of the meeting reasonably to enable him to comply with the duties prescribed by this Article, the corporation, not such officer or agent, shall be liable to any shareholder suffering damage on account of such failure, to the extent of such damage.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 12, eff. Aug. 28, 1989; Acts 1993, 73rd Leg., ch. 215, Sec. 2.07, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 12, eff. Sept. 1, 2003; Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec. 12, eff. Sept. 1, 2003.
Art. 2.28. Quorum of and Voting by Shareholders
A. Quorum. With respect to any meeting of shareholders, a quorum shall be present for any matter to be presented at that meeting if the holders of a majority of the shares entitled to vote at the meeting are represented at the meeting in person or by proxy, unless otherwise provided in the articles of incorporation in accordance with this section. The articles of incorporation may provide:
(1) That a quorum shall be present at a meeting of shareholders only if the holders of a specified greater portion of the shares entitled to vote are represented at the meeting in person or by proxy; or
(2) That a quorum shall be present at a meeting of shareholders if the holders of a specified lesser portion, but not less than one-third (1/3), of the shares entitled to vote are represented at the meeting in person or by proxy.
Unless otherwise provided in the articles of incorporation or the bylaws, once a quorum is present at a meeting of shareholders, the shareholders represented in person or by proxy at the meeting may conduct such business as may be properly brought before the meeting until it is adjourned, and the subsequent withdrawal from the meeting of any shareholder or the refusal of any shareholder represented in person or by proxy to vote shall not affect the presence of a quorum at the meeting. Unless otherwise provided in the articles of incorporation or the bylaws, the shareholders represented in person or by proxy at a meeting of shareholders at which a quorum is not present may adjourn the meeting until such time and to such place as may be determined by a vote of the holders of a majority of the shares represented in person or by proxy at that meeting.
B. Voting on Matters Other Than the Election of Directors. With respect to any 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 Act, the affirmative vote of the holders of a majority of the shares entitled to vote on, and that voted for or against or expressly abstained with respect to, that matter at a meeting of shareholders at which a quorum is present shall be the act of the shareholders, unless otherwise provided in the articles of incorporation or the bylaws in accordance with this section. With respect to any 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 Act, the articles of incorporation or the bylaws may provide:
(1) That the act of the shareholders shall be the affirmative vote of the holders of a specified portion, but not less than a majority, of the shares entitled to vote on that matter;
(2) That the act of the shareholders shall be the affirmative vote of the holders of a specified portion, but not less than a majority, of the shares entitled to vote on that matter and represented in person or by proxy at a meeting of shareholders at which a quorum is present;
(3) That the act of the shareholders shall be the affirmative vote of the holders of a specified portion, but not less than a majority, of the shares entitled to vote on, and voted for or against, that matter at a meeting of shareholders at which a quorum is present; or
(4) That the act of the shareholders shall be the affirmative vote of the holders of a specified portion, but not less than a majority, of the shares entitled to vote on, and that voted for or against or expressly abstained with respect to, that matter at a meeting of shareholders at which a quorum is present.
C. Voting in the Election of Directors. Unless otherwise provided in the articles of incorporation or the bylaws in accordance with this section, directors 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. The articles of incorporation or the bylaws may provide:
(1) That a director shall be elected only if the director receives the vote of the holders of a specified portion, but not less than a majority, of the shares entitled to vote in the election of directors;
(2) That a director shall be elected only if the director receives the vote of the holders of a specified portion, but not less than a 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) That a director shall be elected only if the director receives a specified portion, but not less than a 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.
D. Changes in the Vote Required for Certain Matters. With respect to any matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by this Act, the articles of incorporation may provide that the act of the shareholders on that matter shall be the affirmative vote of the holders of a specified portion, but not less than a majority, of the shares entitled to vote on that matter, rather than the affirmative vote otherwise required by this Act. With respect to any matter for which the affirmative vote of the holders of a specified portion of the shares of any class or series is required by this Act, the articles of incorporation also may provide that the act of the holders of shares of that class or series on that matter shall be the affirmative vote of the holders of a specified portion, but not less than a majority, of the shares of that class or series, rather than the affirmative vote of the holders of shares of that class or series otherwise required by this Act. If any provision of the articles of incorporation provides that the act of the shareholders on any matter shall be the affirmative vote of the holders of a specified portion of the shares entitled to vote on that matter that is greater than a majority of the shares so entitled to vote, that provision of the articles of incorporation may not be amended or modified, directly or indirectly, without the affirmative vote of the holders of that greater portion of the shares entitled to vote on that matter, unless otherwise provided in the articles of incorporation. If any provision of the articles of incorporation provides that the act of the holders of shares of any class or series on any matter shall be the affirmative vote of the holders of a specified portion of the shares of that class or series that is greater than a majority of the shares of that class or series, that provision of the articles of incorporation may not be amended or modified, directly or indirectly, without the affirmative vote of the holders of that greater portion of the shares of that class or series, unless otherwise provided in the articles of incorporation.
E. A corporation may establish procedures in its bylaws, not inconsistent with this Act, for determining the validity of proxies and whether shares that are held of record by a bank, broker, or other nominee are represented at a meeting of shareholders with respect to any matter. The procedures may incorporate or look to rules and determinations of any stock exchange or self-regulatory organization regulating the corporation or that bank, broker, or other nominee.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 13, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 8, eff. Aug. 26, 1991; Acts 1997, 75th Leg., ch. 375, Sec. 8, eff. Sept. 1, 1997.
Art. 2.29. Voting of Shares
A. (1) Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, except:
(a) To the extent that the articles of incorporation provide for more or less than one vote per share or (if and to the extent permitted by this Act) limit or deny voting rights to the holders of the shares of any class or series, or
(b) As otherwise provided by this Act.
(2) If the articles of incorporation provide for more or less than one vote per share for all the outstanding shares or for the shares of any class or any series on any matter, every reference in this Act (or in the articles of incorporation or bylaws, unless expressly stated otherwise therein), in connection with such matter, to a specified portion of such shares shall mean such portion of the votes entitled to be cast in respect of such shares by virtue of the provisions of such articles of incorporation.
B. Shares of its own stock owned by a corporation or by another domestic or foreign corporation or other entity, if a majority of the voting stock or voting interest of the other corporation or other entity is owned or controlled by the corporation, shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Nothing in this section shall be construed as limiting the right of any domestic or foreign corporation or other entity to vote stock, including but not limited to its own stock, held or controlled by it in a fiduciary capacity, or with respect to which it otherwise exercises voting power in a fiduciary capacity.
C. Any shareholder may vote either in person or by proxy executed in writing by the shareholder. A telegram, telex, cablegram, or other form of electronic transmission, including telephone transmission, by the shareholder, or a photographic, photostatic, facsimile, or similar reproduction of a writing executed by the shareholder, shall be treated as 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. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. A proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest. Proxies coupled with an interest include the appointment as proxy of:
(1) a pledgee;
(2) a person who purchased or agreed to purchase, or owns or holds an option to purchase, the shares;
(3) a creditor of the corporation who extended it credit under terms requiring the appointment;
(4) an employee of the corporation whose employment contract requires the appointment; or
(5) a party to a voting agreement created under Section B, Article 2.30, of this Act.
An irrevocable proxy, if noted conspicuously on the certificate representing the shares that are subject to the irrevocable proxy or, in the case of uncertificated shares, if notation of the irrevocable proxy is contained in the notice sent pursuant to Section D of Article 2.19 of this Act with respect to the shares that are subject to the irrevocable proxy, shall be specifically enforceable against the holder of those shares or any successor or transferee of the holder. Unless noted conspicuously on the certificate representing the shares that are subject to the irrevocable proxy or, in the case of uncertificated shares, unless notation of the irrevocable proxy is contained in the notice sent pursuant to Section D of Article 2.19 of this Act with respect to the shares that are subject to the irrevocable proxy, an irrevocable proxy, even though 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 any subsequent transferee (whether or not for value), but such an irrevocable proxy shall be specifically enforceable against any other person who is not a transferee for value from and after the time that the person acquires actual knowledge of the existence of the irrevocable proxy.
D. (1) At each election for directors every shareholder entitled to vote at such election shall have the right (a) to vote the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote or (b) only if expressly permitted by the articles of incorporation (in general or with respect to a specified class or series of shares or group of classes or series of shares) and subject to subsection (2) of this Section D, to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by his shares shall equal, or by distributing such votes on the same principle among any number of such candidates.
(2) Cumulative voting shall not be allowed in an election of directors unless the articles of incorporation expressly grant that right, and a shareholder who intends to cumulate his votes as herein authorized shall have given written notice of such intention to the secretary of the corporation on or before the day preceding the election at which such shareholder intends to cumulate his votes. All shareholders entitled to vote cumulatively may cumulate their votes if any shareholder gives the written notice provided for herein.
(3) Except as provided by the articles of incorporation, a shareholder of a corporation incorporated before September 1, 2003, has the right to cumulatively vote the number of shares the shareholder owns in the election of directors to the extent permitted by this article. A corporation may limit or deny a shareholder's right to cumulatively vote any time after September 1, 2003, by amending its articles of incorporation.
E. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent, or proxy as the bylaws of such corporation may authorize or, in the absence of such authorization, as the board of directors of such corporation may determine; provided, however, that when any foreign corporation without a permit to do business in this State lawfully owns or may lawfully own or acquire stock in Texas corporation, it shall not be unlawful for such foreign corporation to vote said stock and participate in the management and control of the business and affairs of such Texas corporation, as other stockholders, subject to all laws, rules and regulations governing Texas corporations and especially subject to the provisions of the Anti-Trust laws of the State of Texas.
F. Shares held by an administrator, executor, guardian, or conservator may be voted by him so long as such shares forming a part of an estate are in the possession and forming a part of the estate being served by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name as trustee.
G. Shares standing in the name of a receiver may be voted by such a receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.
H. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 4A, eff. Aug. 22, 1957; Acts 1961, 57th Leg., ch. 393, Sec. 1, eff. June 1, 1964; Acts 1961, 57th Leg., p. 423, ch. 206, Sec. 1; Acts 1967, 60th Leg., p. 1719, ch. 657, Sec. 6, eff. June 17, 1967; Acts 1973, 63rd Leg., p. 1495, ch. 545, Sec. 16, 17, eff. Aug. 27, 1973; Acts 1987, 70th Leg., ch. 93, Sec. 13, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 14, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 9, eff. Aug. 26, 1991; Acts 1997, 75th Leg., ch. 375, Sec. 9, eff. Sept. 1, 1997.
Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec. 14, eff. Sept. 1, 2003; Sec. D amended by Acts 2003, 78th Leg., ch. 238, Sec. 14, eff. Sept. 1, 2003.
Art. 2.30. Voting Trusts and Voting Agreements
A. Any number of shareholders of a corporation may enter into a written voting trust agreement for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent shares of the corporation. The shares that are to be subject to the agreement shall be transferred to the trustee or trustees for purposes of the agreement, and a counterpart of the agreement shall be deposited with the corporation at its principal place of business or registered office. The counterpart of the voting trust agreement so deposited with the corporation shall be subject to the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation, and shall be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at any reasonable time for any proper purpose.
B. Any number of shareholders of a corporation, or any number of shareholders of a corporation and the corporation itself, may enter into a written voting agreement for the purpose of providing that shares of the corporation shall be voted in the manner prescribed in the agreement. A counterpart of the agreement shall be deposited with the corporation at its principal place of business or registered office and shall be subject to the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation. The agreement, if noted conspicuously on the certificate representing the shares that are subject to the agreement or, in the case of uncertificated shares, if notation of the agreement is contained in the notice sent pursuant to Section D of Article 2.19 of this Act with respect to the shares that are subject to the agreement, shall be specifically enforceable against the holder of those shares or any successor or transferee of the holder. Unless noted conspicuously on the certificate representing the shares that are subject to the agreement or, in the case of uncertificated shares, unless notation of the agreement is contained in the notice sent pursuant to Section D of Article 2.19 of this Act with respect to the shares that are subject to the agreement, the agreement, even though otherwise enforceable, is ineffective against a transferee for value without actual knowledge of the existence of the agreement at the time of the transfer or against any subsequent transferee (whether or not for value), but the agreement shall be specifically enforceable against any other person who is not a transferee for value from and after the time that the person acquires actual knowledge of the existence of the agreement. A voting agreement entered into pursuant to this Section B is not subject to the provisions of Section A of this Article.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended Acts 1961, 57th Leg., p. 423, ch. 206, Sec. 2, eff. Aug. 28, 1961. Amended by Acts 1987, 70th Leg., ch. 93, Sec. 14, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 15, eff. Aug. 28, 1989.
Art. 2.30-1. Shareholder Agreements
A. Scope of Agreement. An agreement among the shareholders of a corporation that complies with this article is effective among the shareholders and the corporation even though it is inconsistent with one or more provisions of this Act in that it:
(1) restricts the discretion or powers of the board of directors;
(2) eliminates the board of directors and permits management of the business and affairs of the corporation by its shareholders, or in whole or in part by one or more of its shareholders, or by one or more persons not shareholders;
(3) establishes the natural persons who shall be the directors or officers of the corporation, their term of office or manner of selection or removal, or terms or conditions of employment of any director, officer, or other employee of the corporation, regardless of the length of employment;
(4) governs the authorization or making of distributions whether in proportion to ownership of shares, subject to the limitations in Article 2.38 of this Act, or determines the manner in which profits and losses shall be apportioned;
(5) governs, in general or in regard to specific matters, the exercise or division of voting power by and between the shareholders, directors (if any), or other persons or by or among any of them, including use of disproportionate voting rights or director proxies;
(6) establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer, or employee of the corporation, or other person or among any of them;
(7) authorizes arbitration or grants authority to any shareholder or other person as to any issue about which there is a deadlock among the directors, shareholders, or other person or persons empowered to manage the corporation to resolve that issue;
(8) requires dissolution of the corporation at the request of one or more of the shareholders or on the occurrence of a specified event or contingency, in which case the dissolution of the corporation shall proceed as if all the shareholders had consented in writing to dissolution of the corporation as provided in Article 6.02 of this Act; or
(9) 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, or among any of them, as if the corporation were a partnership or in a manner that would otherwise be appropriate only among partners, and is not contrary to public policy.
B. Procedures Required. An agreement authorized by this article shall be:
(1) set forth (a) in the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of the agreement, or (b) in a written agreement that is signed by all the persons who are shareholders at the time of the agreement and is made known to the corporation;
(2) subject to amendment only by all persons who are shareholders at the time of the amendment, unless the agreement provides otherwise; and
(3) valid for 10 years, unless the agreement provides otherwise.
C. Notation of Existence. The existence of an agreement authorized by this article 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 Article 2.19 of this Act and shall include the following: "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." If at the time of the agreement the corporation has shares outstanding represented by certificates, the corporation shall recall the outstanding certificates and issue substitute certificates that comply with this section. The failure to note the existence of the agreement on the certificate or information statement shall not affect the validity of the agreement or any action taken pursuant to it.
D. Right of Rescission. Any purchaser of shares who, at the time of purchase, did not have knowledge of the existence of an agreement authorized by this article shall be entitled to rescission of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or information statement for the shares in compliance with Section C of this article and, if the shares are not represented by a certificate, the information statement noting existence of the agreement is delivered to the purchaser at or prior to the time of purchase of the shares. An action to enforce the right of rescission authorized by this section must be commenced within the earlier of 90 days after discovery of the existence of the agreement or two years after time of the purchase of the shares.
E. Cessation. An agreement authorized by this article shall cease to be effective when shares of the corporation are listed on a national securities exchange, quoted on an interdealer quotation system of a national securities association, or regularly traded in a market maintained by one or more members of a national or affiliated securities association. If the agreement ceases to be effective for any reason and the corporation does not have a board of directors, governance by a board of directors shall be instituted or reinstated in the manner provided in Section C, Article 12.23, of this Act. If the agreement is contained or referred to in the corporation's articles of incorporation or bylaws, the board of directors may adopt an amendment to the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.
F. Managerial Liabilities. An agreement authorized by this article that limits the discretion or powers of the board of directors or supplants the board of directors shall relieve the directors of, and impose on the person or persons in whom such discretion or powers or management of the business and affairs of the corporation are vested, liability for action or omissions imposed by this Act or other law on directors to the extent that the discretion or powers of the directors are limited or supplanted by the agreement.
G. Limitation of Liability. The existence or performance of an agreement authorized by this article shall not be grounds for imposing personal liability on any shareholder for the acts or obligations of the corporation by disregarding the separate entity of the corporation or otherwise, even if the agreement or its performance:
(1) treats the corporation as if it 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.
H. If No Shares Issued. Incorporators or subscribers for the shares may act as shareholders with respect to an agreement authorized by this article if no shares have been issued when the agreement is signed.
Added by Acts 1997, 75th Leg., ch. 375, Sec. 10, eff. Sept. 1, 1997.
Art. 2.31. Board of Directors
A. Except as provided by Article 2.30-1 and Part Twelve of this Act, the powers of a corporation shall be exercised by or under the authority of, and the business and affairs of a corporation shall be managed under the direction of, the board of directors of the corporation. Directors need not be residents of this State or shareholders of the corporation unless the articles of incorporation or bylaws so require. The articles of incorporation or bylaws may prescribe other qualifications for directors.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 16, eff. Aug. 28, 1989; Acts 1997, 75th Leg., ch. 375, Sec. 11, eff. Sept. 1, 1997.
Art. 2.32. Number and Election of Directors
A. The board of directors of a corporation shall consist of one or more members. The number of directors shall be fixed by, or in the manner provided in, the articles of incorporation or the bylaws, except as to the number constituting the initial board of directors, which number shall be fixed by the articles of incorporation. The number of directors may be increased or decreased from time to time by amendment to, or in the manner provided in, the articles of incorporation or the bylaws, but no decrease shall have the effect of shortening the term of any incumbent director. In the absence of a bylaw or a provision of the articles of incorporation fixing the number of directors or providing for the manner in which the number of directors shall be fixed, the number of directors shall be the same as the number constituting the initial board of directors as fixed by the articles of incorporation. The names and addresses of the members of the initial board of directors shall be stated in the articles of incorporation. Unless otherwise provided by the articles of incorporation or the bylaws, a director may resign at any time by giving notice in writing or by electronic transmission to the corporation. Absent resignation or removal in accordance with the provisions of the bylaws or the articles of incorporation, such persons shall hold office until the first annual meeting of shareholders, and until their successors shall have been elected and qualified. At the first annual meeting of shareholders and at each annual meeting thereafter, the holders of shares entitled to vote in the election of directors shall elect directors to hold office until the next succeeding annual meeting, except in case of the classification of directors as permitted by this Act.
B. The articles of incorporation may provide that the holders of any class or series of shares or any group of classes or series of shares shall be entitled to elect one or more directors, who shall hold office for such terms as shall be stated in the articles of incorporation. The articles of incorporation may provide that any directors elected by the holders of any such class or series of shares or any such group shall be entitled to more or less than one vote on all or any specified matters, in which case every reference in this Act (or in the articles of incorporation or bylaws, unless expressly stated otherwise therein) to a specified portion of the directors shall mean such portion of the votes entitled to be cast by the directors to which such reference is applicable. Absent resignation or removal in accordance with provisions of the bylaws or the articles of incorporation, each director shall hold office for the term for which he is elected and until his successor shall have been elected and qualified.
C. Except as otherwise provided in this Article, the bylaws, or the articles of incorporation, at any meeting of shareholders called expressly for that purpose, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of the director or directors. Whenever the holders of any class or series of shares or any such group are entitled to elect one or more directors by the provisions of the articles of incorporation, only the holders of shares of that class or series or group shall be entitled to vote for or against the removal of any director elected by the holders of shares of that class or series or group. In the case of a corporation having cumulative voting, if less than the entire board is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors, or if there be classes of directors, at an election of the class of directors of which he is a part. In the case of a corporation whose directors have been classified as permitted by this Act, unless the articles of incorporation otherwise provide, a director may not be removed except for cause.
D. Notwithstanding Section B of this Article, a director of a corporation registered under the Investment Company Act, absent resignation or removal in accordance with the provisions of the articles of incorporation or bylaws, holds office for the term for which the director is elected and until the director's successor has been elected and qualified.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1500, ch. 545, Sec. 23, eff. Aug. 27, 1973; Acts 1989, 71st Leg., ch. 801, Sec. 17, eff. Sept. 1, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 10, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec. 2.08, eff. Sept. 1, 1993; Acts 1997, 75th Leg., ch. 375, Sec. 12, eff. Sept. 1, 1997.
Amended by Acts 2003, 78th Leg., ch. 238, Sec. 15, eff. Sept. 1, 2003.
Art. 2.33. Classification of Directors
A. The bylaws of a corporation may provide that the directors, the directors elected by any class or series of shares or any group of classes or series of shares, or any portion of the directors or of the directors elected by any class or series of shares or any such group shall be divided into either two or three classes, each class to be as nearly equal in number as possible, the terms of office of directors of the first class to expire at the first annual meeting of shareholders after their election, that of the second class to expire at the second annual meeting after their election, and that of the third class, if any, to expire at the third annual meeting after their election. If the bylaws provide for the classification of directors, (1) the whole number of directors of the corporation need not be elected annually, and (2) at each annual meeting after such classification, the number of directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the second succeeding annual meeting, if there be two classes, or until the third succeeding annual meeting, if there be three classes. No classification of directors shall be effective prior to the next annual meeting of shareholders at which directors are elected unless the classification is effected by a bylaw adopted by the shareholders. No classification of directors shall be effective for any corporation if any shareholder has the right to cumulate his votes for the election of directors of the corporation unless the board of directors of the corporation consists of nine or more members.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 18, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 11, eff. Aug. 26, 1991.
Art. 2.34. Vacancies
A. Any vacancy occurring in the initial board of directors before the issuance of shares may be filled by the affirmative vote or written consent of a majority of the incorporators or by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected for the unexpired term of the director's predecessor in office.
B. Any vacancy occurring in the board of directors after the issuance of shares may be filled in accordance with Section D of this article or may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office.
C. A directorship to be filled by reason of an increase in the number of directors may be filled in accordance with Section D of this article or may be filled by the board of directors for a term of office continuing only until the next election of one or more directors by the shareholders; provided that the board of directors may not fill more than two such directorships during the period between any two successive annual meetings of shareholders.
D. Any vacancy occurring in the board of directors or any directorship to be filled by reason 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.
E. Notwithstanding Sections B, C, and D of this article, whenever the holders of any class or series of shares or group of classes or series of shares are entitled to elect one or more directors by the provisions of the articles of incorporation, any vacancies in such directorships and any newly created directorships of such class or series to be filled by reason of an increase in the number of such directors may be filled by the affirmative vote of a majority of the directors elected by such class or series, or by such group, then in office, or by a sole remaining director so elected, or by the vote of the holders of the outstanding shares of such class or series or of such group, and such directorships shall not in any case be filled by the vote of the remaining directors or the holders of the outstanding shares as a whole unless otherwise provided in the articles of incorporation.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1983, 68th Leg., p. 3151, ch. 540, Sec. 6, eff. Aug; 29, 1983; Acts 1985, 69th Leg., ch. 128, Sec. 8, eff. May 20, 1985; Acts 1991, 72nd Leg., ch. 901, Sec. 12, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec. 2.09, eff. Sept. 1, 1993.
Art. 2.35. Quorum of and Action by Directors
A. A majority of the number of directors fixed by, or in the manner provided in, the articles of incorporation or the bylaws shall constitute a quorum for the transaction of business unless a different number or portion is required by law or the articles of incorporation or the bylaws. In no case may the articles of incorporation or bylaws provide that less than one-third of the number of directors so fixed constitute a quorum. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by law or the articles of incorporation or the bylaws.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1501, ch. 545, Sec. 24, eff. Aug. 27, 1973; Acts 1989, 71st Leg., ch. 801, Sec. 19, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 13, eff. Aug. 26, 1991.
Art. 2.35-1. Interested Directors
A. An otherwise valid contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other domestic or foreign corporation or other entity in which one or more of its directors or officers are directors or officers or have a financial interest, shall be valid notwithstanding whether the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if any one of the following is satisfied:
(1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved, or ratified by the board of directors, a committee thereof, or the shareholders.
B. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.
Added by Acts 1985, 69th Leg., ch. 128, Sec. 9, eff. May 20, 1985. Amended by Acts 1997, 75th Leg., ch. 375, Sec. 13, eff. Sept. 1, 1997.
Art. 2.36. Committees of the Board of Directors
A. If the articles of incorporation or the bylaws so provide, the board of directors may designate from among its members one or more committees, each of which shall be comprised of one or more of its members, and may designate one or more of its members as alternate members of any committee, who may, subject to any limitations imposed by the board of directors, replace absent or disqualified members at any meeting of that committee. Any such committee, to the extent provided in the resolution of the board of directors or in the articles of incorporation or the bylaws, shall have and may exercise all of the authority of the board of directors, subject to the limitations set forth in Sections B and C of this Article.
B. No committee of the board of directors shall have the authority of the board of directors in reference to:
(1) amending the articles of incorporation, except that a committee may, to the extent provided in the resolution designating that committee or in the articles of incorporation or the bylaws, exercise the authority of the board of directors vested in it in accordance with Article 2.13 of this Act;
(2) proposing a reduction of the stated capital of the corporation in the manner permitted by Article 4.12 of this Act;
(3) approving a plan of merger, share exchange, or conversion of the corporation;
(4) recommending to the shareholders the sale, lease, or exchange of all or substantially all of the property and assets of the corporation otherwise than in the usual and regular course of its business;
(5) recommending to the shareholders a voluntary dissolution of the corporation or a revocation thereof;
(6) amending, altering, or repealing the bylaws of the corporation or adopting new bylaws of the corporation;
(7) filling vacancies in the board of directors;
(8) filling vacancies in or designating alternate members of any such committee;
(9) filling any directorship to be filled by reason of an increase in the number of directors;
(10) electing or removing officers of the corporation or members or alternate members of any such committee;
(11) fixing the compensation of any member or alternate members of such committee; or
(12) altering or repealing any resolution of the board of directors that by its terms provides that it shall not be so amendable or repealable.
C. Unless the resolution designating a particular committee, the articles of incorporation, or the bylaws expressly so provide, no committee of the board of directors shall have the authority to authorize a distribution or to authorize the issuance of shares of the corporation.
D. The designation of a committee of the board of directors and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed by law.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1501, ch. 545, Sec. 25, eff. Aug. 27, 1973; Acts 1975, 64th Leg., p. 316, ch. 134, Sec. 13, eff. Sept. 1, 1975; Acts 1983, 68th Leg., p. 3152, ch. 540, Sec. 7, eff. Aug. 29, 1983; Acts 1985, 69th Leg., ch. 128, Sec. 10, eff. May 20, 1985; Acts 1989, 71st Leg., ch. 801, Sec. 20, eff. Aug. 28, 1989; Acts 1997, 75th Leg., ch. 375, Sec. 14, eff. Sept. 1, 1997.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 16, eff. Sept. 1, 2003.
Art. 2.37. Place and Notice of Directors' Meetings
A. Meetings of the board of directors, regular or special, may be held either within or without this State.
B. Regular meetings of the board of directors may be held with or without notice as prescribed in the bylaws. Special meetings of the board of directors shall be held upon such notice as is prescribed in the bylaws. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a 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. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting, unless required by the bylaws.
C. On consent of a director, notice of the date, time, place, or purpose of a regular or special meeting of the board of directors may be given to the director by electronic transmission. The director may specify the form of electronic transmission to be used to communicate notice. The director may revoke this consent by written notice to the corporation. The director's consent is deemed to be revoked if the corporation is unable to deliver by electronic transmission two consecutive notices and the secretary of the corporation or other person responsible for delivering the notice on behalf of the corporation knows that the delivery of these two electronic transmissions was unsuccessful. The inadvertent failure to treat the unsuccessful transmissions as a revocation of the director's consent does not invalidate a meeting or other action. An affidavit of the secretary or other agent of the corporation that notice has been given by electronic transmission is, in the absence of fraud, prima facie evidence that the notice was given. Notice under this section is deemed given when the notice is:
(1) transmitted to a facsimile number provided by the director for the purpose of receiving notice;
(2) transmitted to an electronic mail address provided by the director for the purpose of receiving notice;
(3) posted on an electronic network and a message is sent to the director at the address provided by the director for the purpose of alerting the director of a posting; or
(4) communicated to the director by any other form of electronic transmission consented to by the director.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Sec. C added by Acts 2003, 78th Leg., ch. 238, Sec. 17, eff. Sept. 1, 2003.
Art. 2.38. Distributions
A. The board of directors of a corporation may authorize and the corporation may make distributions subject to any restrictions in its articles of incorporation and to the limitations set forth in this Article.
B. A distribution may not be made by a corporation if:
(1) after giving effect to the distribution, the corporation would be insolvent; or
(2) the distribution exceeds the surplus of the corporation.
C. Notwithstanding the limitation set forth in Subsection (2) of Section B of this Article, if the net assets of a corporation are not less than the amount of the proposed distribution:
(1) the corporation may make a distribution involving a purchase or redemption of any of its own shares if the corporation is an open-end investment company, registered as such under the Federal Investment Company Act of 1940 (15 U.S.C.A. Sec. 80a-1 (1986)), and its articles of incorporation provide in effect that it may purchase its own shares out of stated capital;
(2) the corporation may make a distribution involving a purchase or redemption of any of its own shares if the purchase or redemption is made by the corporation to:
(a) eliminate fractional shares;
(b) collect or compromise indebtedness owed by or to the corporation;
(c) pay dissenting shareholders entitled to payment for their shares under this Act; or
(d) effect the purchase or redemption of redeemable shares in accordance with this Act; and
(3) the corporation may make a distribution not involving a purchase or redemption of any of its own shares if the corporation is a consuming assets corporation.
D. Notwithstanding the limitations set forth in Section B of this Article, the corporation may make distributions in compliance with Article 6.04, 7.09, or 7.12 of this Act.
E. A corporation's indebtedness to a shareholder incurred by reason of a distribution made in accordance with this Article shall be at parity with the corporation's indebtedness to its general, unsecured creditors, except to the extent the indebtedness is subordinated, or payment of that indebtedness is secured, by agreement.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1987, 70th Leg., ch. 93, Sec. 15, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 21, eff. Aug. 28, 1989.
Art. 2.38-1. Share Dividends
A. The board of directors of a corporation may authorize and the corporation may pay share dividends subject to any restrictions in its articles of incorporation and to the limitations set forth in this Article.
B. A share dividend payable in authorized but unissued shares may not be paid by a corporation if the surplus of the corporation is less than the amount required by this Article to be transferred to stated capital at the time that share dividend is paid.
C. If a share dividend is payable in authorized but unissued shares having a par value, those shares shall be issued at the par value and at the time that share dividend is paid an amount of surplus designated by the board of directors not less than the aggregate par value of the shares to be issued as a share dividend shall be transferred to stated capital.
D. If a share dividend is payable in authorized but unissued shares without par value, those shares shall be issued at the value fixed by resolution of the board of directors adopted at the time the share dividend is authorized, and at the time the share dividend is paid an amount of surplus equal to the aggregate value so fixed in respect of those shares shall be transferred to stated capital.
E. A share dividend payable in shares of any class may not be paid to the holders of shares of any other class unless the articles of incorporation so provide or unless the payment 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 payment is to be made.
Added by Acts 1987, 70th Leg., ch. 93, Sec. 16, eff. Aug. 31, 1987.
Art. 2.38-2. Split-Up or Division Without Stated Capital Increase
A split-up or division of the issued shares of any class of a corporation into a greater number of shares of the same class without increasing the stated capital of the corporation does not constitute a share dividend or a distribution.
Added by Acts 1987, 70th Leg., ch. 93, Sec. 16, eff. Aug. 31, 1987.
Art. 2.38-3. Determination of Net Assets, Stated Capital, and Surplus
A. Determinations whether a corporation is insolvent and of the value of the net assets, and determination of stated capital, and surplus of the corporation, and each of their components, may, but is not required to, be based on:
(1) financial statements of the corporation, including without limitation financial statements that include subsidiary corporations or other corporations accounted for on a consolidated basis or on the equity method of accounting, that present the financial condition of the corporation in accordance with generally accepted accounting principles;
(2) financial statements prepared on the basis of accounting used to file the corporation's federal income tax return or any other accounting practices and principles that are reasonable in the circumstances;
(3) financial information, including without limitation condensed or summary financial statements, that is prepared on a basis consistent with the financial statements referred to in Subsections (1) and (2) of this section;
(4) projection, forecast, or other forward looking information relating to the future economic performance, financial condition, or liquidity of the corporation that is reasonable in the circumstances;
(5) a fair valuation or information from any other method that is reasonable in the circumstances; or
(6) any combination of the statements, valuations, or information authorized by this section.
B. Section A of this Article and the determinations made in accordance therewith do not apply to the calculation of the Texas franchise tax or any other tax imposed on corporations under the laws of this state.
Added by Acts 1987, 70th Leg., ch. 93, Sec. 16, eff. Aug. 31, 1987. Sec. A amended by Acts 1991, 72nd Leg., ch. 901, Sec. 14, eff. Aug. 26, 1991.
Art. 2.38-4. Date of Determination of Surplus
A. In the case of a distribution by a corporation or the payment of a share dividend, the surplus of the corporation shall be determined, and the determination whether the corporation would be insolvent after giving effect to the distribution shall be made:
(1) on the date that action is authorized by the board of directors if the action is taken on or before the 120th day after the date of authorization;
(2) if the action is taken after the 120th day after the date of authorization and the board of directors designates a date, within 120 days before the date the action is taken, on which the determination is to be made, on the date so designated by the board of directors; or
(3) if the action is taken after the 120th day after the date of authorization and the board of directors does not make the designation described by Subsection (2) of this section, on the date the action is taken.
B. For the purposes of this Article, a distribution that involves the incurrence by a corporation of any indebtedness or deferred payment obligation or that involves a requirement in the corporation's articles of incorporation or other contract by the corporation to redeem, exchange, or otherwise acquire any of its own shares is deemed to have been made on the date the indebtedness or obligation is incurred or, in the case of a provision in the articles of incorporation of a corporation or other contract to purchase, redeem, exchange, or otherwise acquire shares, at the option of the corporation, is deemed to have been made on either the date the provision or other contract is made or takes effect or the date on which the shares to be redeemed, exchanged, or acquired are redeemed, exchanged, or acquired.
Added by Acts 1987, 70th Leg., ch. 93, Sec. 16, eff. Aug. 31, 1987. Sec. B amended by Acts 1997, 75th Leg., ch. 375, Sec. 15, eff. Sept. 1, 1997.
Art. 2.41. Liability of Directors and Shareholders in Certain Cases
A. In addition to any other liabilities imposed by law upon directors of a corporation:
(1) Directors of a corporation who vote for or assent to a distribution by the corporation that is not permitted by Article 2.38 of this Act shall be jointly and severally liable to the corporation for the amount by which the distributed amount exceeds the amount permitted by Article 2.38 of this Act to be distributed; provided that a director shall have no liability for the excess amount, or any part of that excess, if on any date after the date of the vote or assent authorizing the distribution, a distribution of that excess or that part would have been permitted by Article 2.38.
(2) An action may not be brought against a director for liability imposed by this section after two years after the date on which the act alleged to give rise to the liability occurred.
B. A director of a corporation who is present at a meeting of its board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.
C. A director shall not be liable under Subsection (1) of Section A of this Article if, in voting for or assenting to the distribution, the director:
(1) relied in good faith and with ordinary care upon the statements, valuations, or information referred to in Article 2.38-3 of this Act, or upon other information, opinions, reports, or statements, including financial statements and other financial data, concerning the corporation or another person, that were prepared or presented by:
(a) one or more officers or employees of the corporation;
(b) legal counsel, public accountants, investment bankers, or other persons as to matters the director reasonably believes are within the person's professional or expert competence; or
(c) a committee of the board of directors of which the director is not a member;
(2) acting in good faith and with ordinary care, considered the assets of the corporation to be at least of their book value; or
(3) in determining whether the corporation made adequate provision for payment, satisfaction or discharge of all of its liabilities and obligations as provided in Articles 6.04 and 7.12 of this Act, relied in good faith and with ordinary care upon financial statements of, or other information concerning, any person who was or became contractually obligated to pay, satisfy, or discharge some or all of those liabilities or obligations.
D. In the discharge of any duty imposed or power conferred upon a director, including as a member of a committee, the director, may in good faith and with ordinary care, rely on information, opinions, reports, or statements, including financial statements and other financial data, concerning the corporation or another person, that were prepared or presented by:
(1) one or more officers or employees of the corporation;
(2) legal counsel, public accountants, investment bankers, or other persons as to matters the director reasonably believes are within the person's professional or expert competence; or
(3) a committee of the board of directors of which the director is not a member.
A director is not relying in good faith within the meaning of this Section if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by this Section unwarranted.
E. A director against whom a claim shall be asserted under this Article for a distribution made by the corporation, and who shall be held liable thereon, shall be entitled to contribution from the shareholders who accepted or received such distribution knowing that such distribution was not permitted by Article 2.38, in proportion to the amounts received by them, respectively.
F. A director found liable with respect to a claim shall be entitled to contribution as appropriate to achieve equity from each of the other directors who are liable with respect to that claim.
G. The liability provided in Subsection (1) of Section A of this Article shall be the only liability of directors to a corporation or its creditors for authorizing a distribution by the corporation that is not permitted by Article 2.38 of this Act. The liability provided in Section E of this Article shall be the only liability of shareholders to a corporation or its creditors for accepting or receiving a distribution by the corporation that is not permitted by Article 2.38 of this Act; provided, however, that this Section does not limit any liability under the Uniform Fraudulent Transfer Act or the United States Bankruptcy Code.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1983, 68th Leg., p. 3153, ch. 540, Sec. 8, eff. Aug. 29, 1983; Acts 1987, 70th Leg., ch. 93, Sec. 17, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 22, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 15, eff. Aug. 26, 1991; Acts 1991, 72nd Leg., ch. 901, Sec. 16, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec. 2.10, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 18, eff. Sept. 1, 2003.
Art. 2.42. Officers
A. The officers of a corporation shall consist of a president and a secretary, each of whom shall be elected by the board of directors at such time and in such manner as may be prescribed by the bylaws. Such other officers, including assistant officers, and agents as may be deemed necessary may be elected or appointed by the board of directors or chosen in such other manner as may be prescribed by the bylaws. Any two (2) or more offices may be held by the same person.
B. All officers and agents of the corporation, as between themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided in the bylaws, or as may be determined by resolution of the board of directors not inconsistent with the bylaws.
C. In the discharge of any duty imposed or power conferred upon an officer, of a corporation the officer may in good faith and ordinary care rely on information, opinions, reports, or statements, including financial statements and other financial data, concerning the corporation or another person, that were prepared or presented by:
(1) one or more other officers or employees of the corporation including members of the board of directors; or
(2) legal counsel, public accountants, investment bankers, or other persons as to matters the officer reasonably believes are within the person's professional or expert competence.
An officer is not relying in good faith within the meaning of this section if the officer has knowledge concerning the matter in question that makes reliance otherwise permitted by this subsection unwarranted.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1981, 67th Leg., p. 3114, ch. 818, Sec. 4, eff. Aug. 31, 1981; Acts 1985, 69th Leg., ch. 128, Sec. 11, eff. May 20, 1985; Acts 1991, 72nd Leg., ch. 901, Sec. 17, eff. Aug. 26, 1991.
Art. 2.43. Removal of Officers
A. Any officer or agent or member of a committee elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent or member of a committee shall not of itself create contract rights.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1975, 64th Leg., p. 314, ch. 134, Sec. 10, eff. Sept. 1, 1975.
Art. 2.44. Books and Records
A. Each corporation shall keep books and records of account and shall keep minutes of the proceedings of its shareholders, its board of directors, and each committee of its board of directors. Each 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 the original issuance of shares issued by the corporation and a record of each transfer of those shares that have been presented to the corporation for registration of transfer. Such records shall contain the names and addresses of all past and current shareholders of the corporation and the number and class or series of shares issued by the corporation held by each of them. Any books, records, minutes, and share transfer records may be in written form or in any other form capable of being converted into written paper form within a reasonable time. The principal place of business of a corporation, or the office of its transfer agent or registrar, may be located outside the State of Texas.
B. A director may examine the corporation's books and records of account, share transfer records, corporate minutes and any other corporate books and records for any purpose reasonably related to the director's service as a director. A court of competent jurisdiction may compel a corporation to open its books and records of account, share transfer records, corporate minutes or any other corporate books and records to permit the director to inspect the books or records and make copies or extracts from the books or records on a showing by a director that:
(1) he is a director;
(2) he demanded to inspect the corporate books and records;
(3) his purpose for inspecting the corporate books and records was reasonably related to his service as a director; and
(4) his right of access to the books and records was refused by the corporation.
The court may also award the director attorneys' fees and any other relief that the court deems just and proper.
C. Any person who shall have been a shareholder for at least six (6) months immediately preceding his demand, or shall be the holder of at least five per cent (5%) of all the outstanding shares of a corporation, upon written demand stating the purpose thereof, shall have the right to examine, in person or by agent, accountant, or attorney, at any reasonable time or times, for any proper purpose, its relevant books and records of account, minutes, and share transfer records, and to make extracts therefrom.
D. Any corporation which shall refuse to allow any such shareholder or his agent, accountant or attorney, so to examine and make extracts from its books and records of account, minutes, and share transfer records, for any proper purpose, shall be liable to such shareholder for all costs and expenses, including attorneys' fees, incurred in enforcing his rights under this Article in addition to any other damages or remedy afforded him by law. It shall be a defense to any action for penalties under this section that the person suing therefor has within two (2) years sold or offered for sale any list of shareholders or of holders of voting trust certificates for shares of such corporation or any other corporation or has aided or abetted any person in procuring any list of shareholders or of holders of voting trust certificates for any such purpose, or has improperly used any information secured through any prior examination of the books and records of account, minutes, or share transfer records of such corporation or any other corporation, or was not acting in good faith or for a proper purpose in making his demand.
E. Nothing herein contained shall impair the power of any court of competent jurisdiction, upon proof of proper purpose by a beneficial or record holder of shares, irrespective of the period of time during which such holder shall have been a beneficial or record holder and irrespective of the number of shares held by him, to compel the production for examination by such holder of the books and records of account, minutes, and share transfer records of a corporation.
F. Upon the written request of any shareholder of a corporation, the corporation shall mail to such shareholder its annual statements for its last fiscal year showing in reasonable detail its assets and liabilities and the results of its operations and the most recent interim statements, if any, which have been filed in a public record or otherwise published. The corporation shall be allowed a reasonable time to prepare such annual statements.
G. A holder of a beneficial interest in a voting trust entered into pursuant to Article 2.30 of this Act shall be regarded as a holder of the shares represented by such beneficial interest for the purposes of this Article.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1973, 63rd Leg., p. 1502, ch. 545, Sec. 26, eff. Aug. 27, 1973; Acts 1989, 71st Leg., ch. 801, Sec. 23, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 18, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec. 2.11, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 19, eff. Sept. 1, 2003.
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