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Art. 5.01. Merger
A. A domestic corporation may adopt a plan of merger and one or more domestic corporations may merge with one or more domestic or foreign corporations or other entities if:
(1) the board of directors of each domestic corporation that is a party to the plan of merger acts upon and its shareholders (if required by Article 5.03 of this Act) approve the plan of merger in the manner prescribed in Article 5.03 of this Act;
(2) if one or more foreign corporations or other entities is a party to the merger or is to be created by the terms of the plan of merger, (a) the merger is permitted by the laws of the state or country under whose law each foreign corporation, if any, that is a party to the merger is incorporated, (b) the merger is either permitted by the laws under which each other entity that is a party to the merger is incorporated or organized or by the constituent documents of the other entity that are not inconsistent with such laws, and (c) each foreign corporation or other entity that is a party to the merger complies with such laws or documents in effecting the merger; and
(3) no shareholder of a domestic corporation that is a party to the merger will, as a result of such merger, become personally liable, without his consent, for the liabilities or obligations of any other person or entity.
B. A plan of merger shall set forth:
(1) the name of each domestic or foreign corporation or other entity that is a party to the merger and the name of each domestic or foreign corporation or other entity, if any, that shall survive the merger, which may be one or more of the domestic or foreign corporations or other entities party to the merger, and the name of each new domestic or foreign corporation or other entity, if any, that may be created by the terms of the plan of merger;
(2) the terms and conditions of the merger including, if more than one domestic or foreign corporation or other entity is to survive or to be created by the terms of the plan of merger, (a) the manner and basis of allocating and vesting the real estate and other property of each domestic or foreign corporation and of each other entity that is a party to the merger among one or more of the surviving or new domestic or foreign corporations and other entities, (b) the name of the surviving or new domestic or foreign corporation or other entity that is to be obligated for the payment of the fair value of any shares held by a shareholder of any domestic corporation that is a party to the merger who has complied with the requirements of Article 5.12 of this Act for the recovery of the fair value of his shares, and (c) the manner and basis of allocating all other liabilities and obligations of each domestic or foreign corporation and other entity that is a party to the merger (or making adequate provision for the payment and discharge thereof) among one or more of the surviving or new domestic or foreign corporations and other entities;
(3) the manner and basis of converting any of the shares or other evidences of ownership of each domestic or foreign corporation and other entity that is a party to the merger into shares, obligations, evidences of ownership, rights to purchase securities or other securities of one or more of the surviving or new domestic or foreign corporations or other entities, into cash or other property, including shares, obligations, evidences of ownership, rights to purchase securities or other securities of any other person or entity, or into any combination of the foregoing, and if any shares or other evidences of ownership of any holder of a class or series of shares or other evidence of ownership is to be converted in a manner or basis different than any other holder of shares of such class or series or other evidence of ownership, the manner and basis applicable to such holder;
(4) as an exhibit or attachment, the articles of incorporation of any new domestic corporation to be created by the terms of the plan of merger; and
(5) the articles of incorporation or other organizational documents of each other entity that is a party to the merger and that is to survive the merger or is to be created by the terms of the plan of merger.
C. The plan of merger may set forth:
(1) any amendments to the articles of incorporation of any surviving corporation;
(2) provisions relating to a share exchange; and
(3) any other provisions relating to the merger, including a provision requiring that the plan of merger be submitted to shareholders regardless of whether the board of directors determines after adopting the resolution or making the determination required by Section B, Article 5.03 of this Act, that the plan of merger is not advisable and recommends that the shareholders reject it.
D. Upon the merger's taking effect, the surviving or new foreign corporation or other entity, if any, that is the sole surviving or new foreign corporation or other entity in the merger, or if more than one domestic or foreign corporation or other entity is to survive or to be created by the terms of the plan of merger, the surviving or new foreign corporation or other entity that is designated in the plan of merger to be the entity obligated for the payment of the fair value of any shares held by a shareholder who has complied with the requirements of Article 5.12 of this Act for the recovery of the fair value of his shares, is deemed:
(1) to appoint the Secretary of State in this State as its agent for service of process in a proceeding to enforce any obligation or the rights of dissenting shareholders of each domestic corporation that is a party to the merger; and
(2) to agree that it will promptly pay to the dissenting shareholders of each domestic corporation that is a party to the merger the amount, if any, to which they are entitled under Article 5.11 of this Act.
E. This Article does not limit the power of a domestic or foreign corporation or other entity to acquire all or part of the shares of one or more classes or series of a domestic corporation through a voluntary exchange or otherwise.
F. This Article does not limit the power of domestic or foreign corporations to merge pursuant to Article 5.16 of this Act.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1971, 62nd Leg., p. 1173, ch. 276, Sec. 2, eff. May 19, 1971; Acts 1983, 68th Leg., p. 1714, ch. 326, Sec. 1, eff. Aug. 29, 1983; Acts 1983, 68th Leg., p. 2569, ch. 442, Sec. 7, eff. Sept. 1, 1983; Acts 1989, 71st Leg., ch. 801, Sec. 26, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 25, eff. Aug. 26, 1991; Acts 1997, 75th Leg., ch. 375, Sec. 24, eff. Sept. 1, 1997.
Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec. 27, eff. Sept. 1, 2003.
Art. 5.02. Share Exchange or Acquisition
A. One or more domestic or foreign corporations or other entities may acquire all of the outstanding shares of one or more classes or series of one or more domestic corporations if:
(1) the board of directors of each domestic corporation that is a party to the plan of exchange acts on a plan of exchange in the manner prescribed by Article 5.03 of this Act and its shareholders (if required by Article 5.03 of this Act ) approve the plan of exchange;
(2) one or more foreign corporations or other entities is to issue shares or other interests as part of the plan of exchange, the issuance of such shares or interests is either permitted by the laws under which such foreign corporation or other entity is incorporated, organized, or not inconsistent with such laws; and
(3) each acquiring domestic or foreign corporation or other entity takes all action that may be required by the laws of the state or country under which it was incorporated or organized and by its constituent documents to effect the exchange.
B. A plan of exchange must set forth:
(1) the name of the corporation or corporations whose shares will be acquired and the name of each acquiring domestic or foreign corporation and other entity;
(2) the terms and conditions of the exchange including, if there is more than one acquiring domestic or foreign corporation or other entity, the shares to be acquired by each such corporation or other entity; and
(3) the manner and basis of exchanging the shares to be acquired for shares, obligations, evidences of ownership, rights to purchase securities or other securities of one or more of the acquiring domestic or foreign corporations or other entities that is a party to the plan of exchange, or for cash or other property, including shares, obligations, evidences of ownership, rights to purchase securities or other securities of any other person or entity, or for any combination of the foregoing, and if any shares or other evidences of ownership of any holder of a class or series of shares or other evidence of ownership is to be exchanged in a manner or basis different than any other holder of shares of such class or series or other evidence of ownership, the manner and basis applicable to such holder.
C. The plan of exchange may set forth any other provisions relating to the exchange and may be contained in and be a part of a plan of merger, including a provision requiring that the plan of exchange be submitted to shareholders regardless of whether the board of directors determines after adopting the resolution or making the determination required by Section B, Article 5.03 of this Act, that the plan of exchange is not advisable and recommends that the shareholders reject it.
D. A plan of exchange may not be effected if any shareholder of a domestic corporation that is a party to the share exchange will, as a result of the share exchange, become personally liable, without his consent, for the liabilities or obligations of any other person or entity.
E. This Article does not limit the power of a domestic or foreign corporation or other entity to acquire all or part of the shares of one or more classes or series of a domestic corporation through a voluntary exchange or otherwise.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1971, 62nd Leg., p. 1173, ch. 276, Sec. 3, eff. May 19, 1971; Acts 1983, 68th Leg., p. 2570, ch. 442, Sec. 8, eff. Sept. 1, 1983; Acts 1989, 71st Leg., ch. 801, Sec. 27, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 26, eff. Aug. 26, 1991; Acts 1997, 75th Leg., ch. 375, Sec. 25, eff. Sept. 1, 1997.
Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec. 28, eff. Sept. 1, 2003.
Art. 5.03. Action on Plan of Merger or Exchange
A. Except as provided by Sections G and H of this Article, after acting on a plan of merger or exchange in the manner prescribed by Subsection (1) of Section B of this Article, the board of directors of each domestic corporation that is a party to the merger, and the board of directors of each domestic corporation whose shares are to be acquired in the share exchange, shall submit the plan of merger or exchange for approval by its shareholders. Unless the articles of incorporation otherwise require, no approval by shareholders of a plan of merger is required under this Article for any corporation that is a party to the plan of merger unless that corporation is also a party to the merger.
B. Except as provided by Sections G and H of this Article, for a plan of merger or exchange to be approved:
(1) the board of directors of the corporation shall adopt a resolution recommending that the plan of merger or exchange be approved by the shareholders of the corporation, unless the board of directors determines that for any reason it should not make that recommendation, in which case the board of directors shall adopt a resolution directing that the plan of merger or exchange be submitted to shareholders for approval without recommendation and, in connection with the submission, communicate the basis for its determination that the plan be submitted to shareholders without any recommendation; and
(2) the shareholders entitled to vote on the plan of merger or exchange must approve the plan.
C. The board of directors may condition its submission to shareholders of a plan of merger or exchange on any basis. If, after the adoption of a resolution recommending that the plan of merger or exchange be approved or after a determination by the board of directors that a recommendation should not be made, the board of directors determines that the plan of merger or exchange is not advisable, the plan of merger or exchange may be submitted to the shareholders with a recommendation that the shareholders not approve the plan of merger or exchange.
D. The corporation shall notify each shareholder, whether or not entitled to vote, of the meeting of shareholders at which the plan of merger or exchange is to be submitted for approval in accordance with Article 2.25 of this Act. The notice shall be given at least 20 days before the meeting and shall state that the purpose, or one of the purposes, of the meeting is to consider the plan of merger or exchange and shall contain or be accompanied by a copy or summary of the plan.
E. Unless the board of directors (acting pursuant to Section C of this Article) requires a greater vote or a vote by class or series, the vote of shareholders required for approval of a plan of merger or exchange shall be the affirmative vote of the holders of at least two-thirds of the outstanding shares of each corporation entitled to vote thereon, unless any class or series of shares of any such corporation is entitled to vote as a class thereon, in which event the vote required for approval by the shareholders of such corporation shall be the affirmative vote of the holders of at least two-thirds of the outstanding shares within each class or series of shares entitled to vote thereon as a class and at least two-thirds of the outstanding shares otherwise entitled to vote thereon. Shares entitled to vote as a class shall be entitled to vote only as a class unless otherwise entitled to vote on each matter submitted to the shareholders generally or provided in the articles of incorporation.
F. Separate voting by a class or series of shares of a corporation shall be required:
(1) for approval of a plan of merger if (a) the plan contains a provision that if contained in a proposed amendment to the articles of incorporation would require approval by that class or series of shares under Article 4.03 of this Act, or (b) that class or series of shares is entitled under the articles of incorporation to vote as a class thereon; and
(2) on a plan of exchange if (a) shares of that class or series are to be exchanged pursuant to the terms of the plan, or (b) that class or series is entitled under the articles of incorporation to vote as a class thereon.
G. Unless the articles of incorporation otherwise require, approval by the shareholders of a corporation on a plan of merger shall not be required and the provisions of Sections A, B, C, D, E, and F of this Article do not apply if:
(1) the corporation is the sole surviving corporation in the merger;
(2) the articles of incorporation of the corporation will not differ from its articles of incorporation before the merger;
(3) each shareholder of the corporation whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations, and relative rights, immediately after the effective date of the merger;
(4) the voting power of the number of voting shares outstanding immediately after the merger, plus the voting power of the number of voting shares issuable as a result of the merger (either by the conversion of securities issued pursuant to the merger or the exercise of rights to purchase securities issued pursuant to the merger), will not exceed by more than 20 percent the voting power of the total number of voting shares of the corporation outstanding immediately before the merger;
(5) the number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger (either by the conversion of securities issued pursuant to the merger or the exercise of rights to purchase securities issued pursuant to the merger), will not exceed by more than 20 percent the total number of participating shares of the corporation outstanding immediately before the merger; and
(6) the board of directors of the corporation adopts a resolution approving the plan of merger.
H. Unless the articles of incorporation otherwise require, approval by the shareholders of a corporation of a plan of merger shall not be required and Sections A, B, C, D, E, and F of this Article do not apply if:
(1) the merger is a merger of the corporation with or into a direct or indirect wholly owned subsidiary of the corporation and after the merger the corporation or its successor is a direct or indirect wholly owned subsidiary of a holding company;
(2) the corporation and the direct or indirect wholly owned subsidiary of the corporation are the only parties to the merger;
(3) each share or a fraction of a share of stock of the corporation outstanding immediately prior to the effectiveness of the merger is converted in the merger into a share or fraction of share of capital stock of the holding company having the same designations, preferences, limitations, and relative rights as a share of stock of the corporation being converted in the merger;
(4) the holding company and the corporation are domestic corporations and the direct or indirect wholly owned subsidiary that is the other party to the merger is a domestic corporation or domestic limited liability company;
(5) the articles of incorporation and bylaws of the holding company immediately following the effective time of the merger contain provisions identical to the articles of incorporation and bylaws of the corporation immediately prior to the effective time of the merger (other than provisions, if any, regarding the incorporator or incorporators, the corporate name, the registered office and agent, the initial board of directors, and the initial subscribers of shares and such provisions contained in any amendment to the certificate as were necessary to effect a change, exchange, reclassification, or cancellation of shares, if such change, exchange, reclassification, or cancellation has become effective);
(6) the organizational documents or corresponding documents of the surviving entity immediately following the effective time of the merger contain provisions identical to the organizational documents or corresponding documents of the corporation immediately prior to the effective time of the merger (other than provisions, if any, regarding the incorporator or incorporators, the corporate or entity name, the registered office and agent, the initial board of directors, and the initial subscribers of shares, references to members rather than shareholders, references to interests, units, or similar property rather than stock or shares, references to managers, managing members, or other members of the governing body rather than directors, and such provisions contained in any amendment to the certificate as were necessary to effect a change, exchange, reclassification, or cancellation of shares, if such change, exchange, reclassification, or cancellation has become effective); provided, however, that:
(a) if the organizational documents of the surviving entity do not contain the following provisions, they shall be amended in the merger to contain provisions requiring that:
(i) any act or transaction by or involving a surviving entity, other than the election or removal of directors or managers, managing members, or other members of the governing body of the surviving entity, that requires for its approval under this Act or its organizational documents the approval of shareholders or members of the surviving entity shall, by specific reference to this section, require the approval of the shareholders of the holding company (or any successor by merger) by the same vote as is required by this Act or by the organizational documents of the surviving entity;
(ii) a surviving entity that is not a corporation obtain the approval of the shareholders of the holding company for any act or transaction by or involving the surviving entity, other than the election or removal of directors or managers, managing members, or other members of the governing body of the surviving entity, that would require the approval of the shareholders of the surviving entity if the surviving entity were a corporation subject to this Act;
(iii) any amendment of the organizational documents of a surviving entity that is not a corporation, that would, if adopted by a corporation subject to this Act, be required to be included in the articles of incorporation of the corporation, shall also require, by specific reference to this section, the approval of the shareholders of the holding company, or any successor by merger, by the same vote as is required by this Act or by the organizational documents of the surviving entity; and
(iv) the business affairs of a surviving entity that is not a corporation shall be managed by or under the direction of a board of directors, board of managers, or other governing body consisting of individuals who are subject to the same fiduciary duties applicable to directors of a corporation subject to this Act, and who are liable for breach of the duties to the same extent as directors of a corporation subject to this Act;
(b) the organizational documents of the surviving entity may be amended in the merger to change the classes and series of shares and the number of shares that the surviving entity is authorized to issue; and
(c) Subsection (6)(a) of this section or a provision of a surviving entity's organizational documents required by Subdivision (a) may not be construed as requiring approval of the shareholders of the holding company to elect or remove directors, managers, managing members, or other members of the governing body of the surviving entity;
(7) the directors of the corporation become or remain directors of the holding company on the effective time of the merger;
(8) the shareholders of the corporation will not recognize gain or loss for United States federal income tax purposes as determined by the board of directors of the corporation; and
(9) the board of directors of the corporation adopts a resolution approving the plan of merger.
H-1. The term "organizational documents," as used in Section H(6) of this article, means:
(1) in reference to a corporation, the articles of incorporation of the corporation; or
(2) in reference to a limited liability company, the limited liability company agreement of the limited liability company.
I. As used in this Article:
(1) "Direct or indirect wholly owned subsidiary" means, with respect to any corporation, another corporation, all of the outstanding voting stock of which is owned by the corporation or by one or more other domestic or foreign corporations or other entities, all of the outstanding voting stock or interests of which is owned by the corporation or one or more of such other wholly owned domestic or foreign corporations or other entities.
(2) "Holding company" means a corporation which, from its incorporation until the effectiveness of a merger pursuant to Section H of this Article, was at all times a direct or indirect wholly owned subsidiary of the corporation and whose stock is issued in the merger permitted by Section H of this Article.
(3) "Participating shares" means shares that entitle the holders thereof to participate without limitation in distributions.
(4) "Party to the merger" means:
(a) a domestic corporation that is to be divided into two or more new domestic corporations or into a surviving corporation and one or more new domestic or foreign corporations or other entities pursuant to a plan of merger; or
(b) a domestic or foreign corporation or other entity that is to be combined with one or more domestic or foreign corporations or other entities pursuant to a plan of merger resulting in (i) one or more surviving domestic or foreign corporations or other entities, (ii) the creation of one or more new domestic or foreign corporations or other entities, or (iii) one or more surviving domestic or foreign corporations or other entities and the creation of one or more new domestic or foreign corporations or other entities. A domestic or foreign corporation or other entity that is a party to a plan of merger that is not to be divided or combined into or with one or more domestic or foreign corporations or other entities is not considered to be a party to the merger even if shares, securities, or other property of such party is to be issued pursuant to the plan of merger.
(5) "Voting shares" means shares that entitle the holders thereof to vote unconditionally in elections of directors.
(6) "Shares" means, without limitation, a receipt or other instrument issued by a depositary representing an interest in one or more shares of stock, or fractions thereof, solely of a domestic or foreign corporation, which stock is deposited with a depositary.
J. To the extent the provisions contained in Part Thirteen of this Act apply to the corporation and its shareholders at the effective time of a merger pursuant to Section H of this Article, those provisions shall continue to apply to the holding company and its shareholders immediately after the effective time of the merger as though it were the corporation, and all shares of the holding company acquired in the merger shall, for purposes of Part Thirteen, be deemed to have been acquired at the time that the shares of stock of the corporation converted in the merger were acquired, and any shareholder who, immediately prior to the effective time of the merger, was not an affiliated shareholder within the meaning of Article 13.02 of this Act shall not solely by reason of the merger become an affiliated shareholder of the holding company.
K. If the corporate name of a holding company immediately following the effective time of a merger pursuant to Section H of this Article is the same as the corporate name of the corporation immediately prior to the effective time of the merger, the shares of the holding company into which the shares of the corporation are converted in the merger shall be represented by the stock certificates that previously represented the shares of the corporation.
L. After a merger or share exchange is approved, and at any time before the merger or share exchange has become effective, the plan of merger or share exchange may be abandoned (subject to any contractual rights) by any of the corporations that are a party to the merger, without shareholder action, in accordance with the procedures set forth in the plan of merger or exchange or, if no such procedures are set forth in the plan, in the manner determined by the board of directors. If articles of merger or exchange have been filed with the Secretary of State but the merger or share exchange has not yet become effective, the merger or share exchange may be abandoned if a statement, executed on behalf of each domestic corporation and foreign corporation or other entity that is a party to the merger or share exchange by an officer or other duly authorized representative, stating that the plan of merger or exchange has been abandoned in accordance with applicable law is filed with the Secretary of State prior to the effectiveness of the merger or share exchange. If the Secretary of State finds that such statement conforms to law, he shall, when all fees have been paid as required by law:
(1) Endorse on the original and each copy the word "Filed" and the month, day, and year the filing thereof.
(2) File the original in his office.
(3) Issue a certificate of abandonment to each domestic or foreign corporation or other entity that is a party to the merger or exchange.
Upon the filing of such statement by the Secretary of State, the merger or share exchange shall be deemed abandoned and shall not become effective.
M. To the extent a shareholder of a corporation has standing to institute or maintain derivative litigation on behalf of the corporation immediately before a merger, nothing in this article may be construed to limit or extinguish the shareholder's standing.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1967, 60th Leg., p. 1720, ch. 657, Sec. 9, eff. June 17, 1967; Acts 1989, 71st Leg., ch. 801, Sec. 28, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 27, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec. 2.13, eff. Sept. 1, 1993; Acts 1997, 75th Leg., ch. 375, Sec. 26, eff. Sept. 1, 1997.
Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec. 29, eff. Sept. 1, 2003; Sec. H amended by Acts 2003, 78th Leg., ch. 238, Sec. 29, eff. Sept. 1, 2003; Sec. H-1 added by Acts 2003, 78th Leg., ch. 238, Sec. 29, eff. Sept. 1, 2003; Sec. M added by Acts 2003, 78th Leg., ch. 238, Sec. 29, eff. Sept. 1, 2003.
Art. 5.04. Articles of Merger or Exchange
A. If a plan of merger or exchange has been approved in accordance with Article 5.03 of this Act and has not been abandoned, or approved by the board of directors if shareholder approval is not required under that Article, articles of merger or exchange shall be executed on behalf of each domestic or foreign corporation or other entity that is a party to the merger or exchange by an officer or other duly authorized representative thereof and shall set forth:
(1) The plan of merger or exchange or statement certifying the following:
(a) the name and state of incorporation or organization of each domestic or foreign corporation or other entity that is a party to the plan of merger or exchange or that is to be created thereby;
(b) that a plan of merger or exchange has been approved;
(c) in the case of a merger, such amendments or changes in the articles of incorporation of each domestic surviving corporation, or if no such amendments are desired to be effected by the merger, a statement to that effect;
(d) that the articles of incorporation of each new domestic corporation to be created pursuant to the terms of the plan of merger are being filed with the Secretary of State with the articles of merger or exchange;
(e) that an executed plan of merger or exchange is on file at the principal place of business of each surviving, acquiring, or new domestic or foreign corporation or other entity, stating the address thereof; and
(f) that a copy of the plan of merger or exchange will be furnished by each surviving, acquiring, or new domestic or foreign corporation or other entity, on written request and without cost, to any shareholder of each domestic corporation that is a party to or created by the plan of merger or exchange and, in the case of a merger with multiple surviving domestic or foreign corporations or other entities, to any creditor or obligee of the parties to the merger at the time of the merger if such obligation is then outstanding.
(2) If shareholder approval is not required by Article 5.03 of this Act, a statement to that effect.
(3) As to each corporation the approval of whose shareholders is required, the number of shares outstanding, and, if the shares of any class or series are entitled to vote as a class, the designation and number of outstanding shares of each such class or series.
(4) As to each corporation the approval of whose shareholders is required, the number of shares, not entitled to vote only as a class, voted for and against the plan, respectively, and, if the shares of any class or series are entitled to vote as a class, the number of shares of each such class or series voted for and against the plan, respectively.
(5) As to each acquiring domestic or foreign corporation or other entity in a plan of exchange, a statement that the plan and performance of its terms were duly authorized by all action required by the laws under which it was incorporated or organized and by its constituent documents.
(6) As to each foreign corporation or other entity that is a party to the merger, a statement that the approval of the plan of merger was duly authorized by all action required by the laws under which it was incorporated or organized and by its constituent documents.
B. The original of the articles of merger or exchange, and such number of copies of the articles equal to the number of surviving, new, and acquiring domestic or foreign corporations and other entities that are a party to the merger or exchange or that will be created by the terms thereof, shall be delivered to the Secretary of State. An equal number of copies of the articles of incorporation of each domestic corporation that is to be incorporated pursuant to the plan of merger shall also be delivered to the Secretary of State with the articles of merger.
C. If the Secretary of State finds that the articles of merger or exchange conform to law, he shall, when all fees and franchise taxes have been paid as required by law, or if the plan of merger or exchange (or statement provided in lieu thereof) provides that one or more of the surviving, new, or acquiring domestic or foreign corporations or other entities will be responsible for the payment of all such fees and franchise taxes and that all of such surviving, new, or acquiring domestic or foreign corporations and other entities will be obligated to pay such fees and franchise taxes if the same are not timely paid:
(1) Endorse on the original and each copy the word "Filed," and the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Issue a certificate of merger or exchange, together with a copy of the articles affixed thereto, to each surviving, new, and acquiring domestic or foreign corporation or other entity that is a party to the merger or exchange or that is created thereby, or its or their respective representatives.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1979, 66th Leg., p. 228, ch. 120, Sec. 36, eff. May 9, 1979; Acts 1985, 69th Leg., ch. 128, Sec. 18, eff. May 20, 1985; Acts 1989, 71st Leg., ch. 801, Sec. 29, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 28, eff. Aug. 26, 1991; Acts 1997, 75th Leg., ch. 375, Sec. 27, eff. Sept. 1, 1997.
Art. 5.05. Effective Date of Merger or Share Exchange
A. Except as otherwise provided by Article 10.03 of this Act, upon the issuance of the certificate of merger or exchange by the Secretary of State, the merger or share exchange shall be effective.
Acts 1955, 54th Leg., p. 236, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 30, eff. Sept. 1, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 29, eff. Aug. 26, 1991.
Art. 5.06. Effect of Merger or Share Exchange
A. When a merger takes effect:
(1) the separate existence of every domestic corporation that is a party to the merger, except any surviving or new domestic corporation, shall cease;
(2) all rights, title and interests to all real estate and other property owned by each domestic or foreign corporation and by each other entity that is a party to the merger shall be allocated to and vested in one or more of the surviving or new domestic or foreign corporations and other entities as provided in the plan of merger without reversion or impairment, without further act or deed, and without any transfer or assignment having occurred, but subject to any existing liens or other encumbrances thereon;
(3) all liabilities and obligations of each domestic or foreign corporation and other entity that is a party to the merger shall be allocated to one or more of the surviving or new domestic or foreign corporations and other entities in the manner set forth in the plan of merger, and each surviving or new domestic or foreign corporation, and each surviving or new other entity to which a liability or obligation shall have been allocated pursuant to the plan of merger, shall be the primary obligor therefor and, except as otherwise set forth in the plan of merger or as otherwise provided by law or contract, no other party to the merger, other than a surviving domestic or foreign corporation or other entity liable thereon at the time of the merger and no other new domestic or foreign corporation or other entity created thereby, shall be liable therefor;
(4) a proceeding pending by or against any domestic or foreign corporation or by or against any other entity that is a party to the merger may be continued as if the merger did not occur, or the surviving or new domestic or foreign corporation or corporations or the surviving or new other entity or other entities to which the liability, obligation, asset or right associated with such proceeding is allocated to and vested in pursuant to the plan of merger may be substituted in the proceeding;
(5) the articles of incorporation of each surviving corporation shall be amended to the extent provided in the plan of merger;
(6) each new domestic corporation, the articles of incorporation of which are set forth in the plan of merger pursuant to Article 5.01 of this Act, shall be incorporated as a corporation under this Act; and each other entity to be incorporated or organized under the laws of this State, the organizational documents of which are set forth in the plan of merger shall, upon an executed copy of the articles of merger being delivered to or filed with any required governmental entity with which organizational documents of such other entity are required to be delivered or filed, and upon meeting such additional requirements, if any, of law for its incorporation or organization, shall be incorporated or organized as provided in the plan of merger; and
(7) the shares of each domestic or foreign corporation and the shares or evidences of ownership in each other entity that is a party to the merger that are to be converted or exchanged, in whole or part, into shares, obligations, evidences of ownership, rights to purchase securities or other securities of one or more of the surviving or new domestic or foreign corporations or other entities, into cash or other property, including shares, obligations, evidences of ownership, rights to purchase securities or other securities of any other person or entity, or into any combination of the foregoing, shall be so converted and exchanged and the former holders of the shares of each domestic corporation that is a party to the merger shall be entitled only to the rights provided in the plan of merger or to their rights under Article 5.11 of this Act.
B. When a share exchange takes effect, the shares of each acquired corporation shall be deemed to have been exchanged as provided in the plan of exchange, and the former holders of the shares exchanged pursuant to the plan of exchange shall be entitled only to the exchange rights provided in the articles of exchange or to their rights under Article 5.11 of this Act and the acquiring domestic or foreign corporation or corporations and the acquiring other entity or other entities of the shares to be acquired and exchanged in the share exchange shall be entitled to all rights, title, and interests with respect to the shares so acquired and exchanged subject to the provisions in the articles of exchange.
C. If the plan of merger shall fail to provide for the allocation and vesting of the right, title, and interest in any particular item of real estate or other property or for the allocation of any liability or obligation of any party to the merger, such item of real estate or other property shall be owned in undivided interest by, or such liability or obligation shall be the joint and several liability and obligation of, each of the surviving and new domestic and foreign corporations and other entities, pro rata to the total number of surviving and new domestic and foreign corporations and other entities resulting from the merger.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1967, 60th Leg., p. 1729, ch. 657, Sec. 19, eff. June 17, 1967; Acts 1987, 70th Leg., ch. 93, Sec. 24, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 31, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 30, eff. Aug. 26, 1991.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 30, eff. Sept. 1, 2003.
Art. 5.08. Conveyance by Corporation
A. Any corporation may convey land by deed, with or without the seal of the corporation, signed by an officer or attorney in fact of the corporation when authorized by appropriate resolution of the board of directors. Such deed, when acknowledged by such officer or attorney in fact to be the act of the corporation, or proved in the manner prescribed for other conveyances of lands, may be recorded in like manner and with the same effect as other deeds. Any such deed when recorded, if signed by an officer of the corporation, shall constitute prima facie evidence that such resolution of the board of directors was duly adopted.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 33, eff. Aug. 28, 1989.
Art. 5.09. Disposition of Assets Authorized by Board of Directors
A. Except as otherwise provided in the articles of incorporation and except as provided in the next sentence of this section, the sale, lease, exchange or other disposition of all, or substantially all, the property and assets of a corporation, when made in the usual and regular course of the business of the corporation, may be made upon such terms and conditions and for such considerations, which may consist in whole or in part of money or property, real or personal, including shares of any other corporation, domestic or foreign, as shall be authorized by its board of directors, without authorization or consent of the shareholders. Except as otherwise provided in the articles of incorporation, the board of directors may authorize any pledge, mortgage, deed of trust or trust indenture and no authorization or consent of the shareholders shall be required for the validity thereof or for any sale pursuant to the terms thereof.
B. A transaction referred to in this Article and in Article 5.10 of this Act shall be in the usual and regular course of business if the corporation shall, directly or indirectly, either continue to engage in one or more businesses or apply a portion of the consideration received in connection with the transaction to the conduct of a business in which it engages following the transaction.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 8; Acts 1987, 70th Leg., ch. 93, Sec. 25, eff. Aug. 31, 1987; Acts 1993, 73rd Leg., ch. 215, Sec. 2.14, eff. Sept. 1, 1993.
Art. 5.10. Disposition of Assets Requiring Special Authorization of Shareholders; Effect of Disposition Requiring or Not Requiring Authorization; Liability of Acquiring Corporation
A. A sale, lease, exchange, or other disposition (not including any pledge, mortgage, deed of trust or trust indenture unless otherwise provided in the articles of incorporation) of all, or substantially all, the property and assets, with or without the good will of a corporation, if not made in the usual and regular course of its business, may be made upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, real or personal, including shares of any corporation, domestic or foreign, as may be authorized in the following manner:
(1) The board of directors may adopt a resolution recommending that such sale, lease, exchange, or other disposition be approved by shareholders of the corporation, unless the board of directors determines that for any reason it should not make the recommendation in which case the board of directors may adopt a resolution directing that such sale, lease, exchange, or other disposition be submitted to shareholders without recommendation and, in connection with the submission, communicate the basis for its determination that the sale, lease, exchange or other disposition be submitted without recommendation.
(2) The board of directors may submit the proposed sale, lease, exchange or other disposition for authorization by the corporation's shareholders at a meeting of shareholders, which may be either an annual or a special meeting.
(3) Written or printed notice shall be given to each shareholder of record entitled to vote at such meeting within the time and in the manner provided for in this Act for the giving of notice of meetings of shareholders, and, whether the meeting be an annual or a special meeting shall state that the purpose, or one of the purposes, of such meeting is to consider the proposed sale, lease, exchange, or other disposition.
(4) At such meeting, the shareholders may authorize such sale, lease, exchange or other disposition and may fix, or may authorize the board of directors to fix, any or all of the terms and conditions thereof and the consideration to be received by the corporation therefor. Such authorization shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of the corporation entitled to vote thereon, unless any class or series of shares of the corporation is entitled to vote as a class thereon, in which event the vote required for authorization by the shareholders shall be the affirmative vote of the holders of at least two-thirds of the outstanding shares within each such class or series entitled to vote thereon as a class and at least two-thirds of the outstanding shares otherwise entitled to vote thereon. Shares entitled to vote as a class shall be entitled to vote only as a class unless otherwise entitled to vote on each matter submitted to the shareholders generally or provided in the articles of incorporation.
(5) After such authorization by vote of shareholders, the board of directors, nevertheless, in its discretion, may abandon such sale, lease, exchange or other disposition of assets, subject to the rights of third parties under any contracts relating thereto, without further action or approval by shareholders.
B. A disposition of any, all, or substantially all, of the property and assets of a corporation, whether or not it requires the special authorization of the shareholders of the corporation, effected under Section A of this article or under Article 5.09 of this Act or otherwise:
(1) is not considered to be a merger or conversion pursuant to this Act or otherwise; and
(2) except as otherwise expressly provided by another statute, does not make the acquiring corporation, foreign corporation, or other entity responsible or liable for any liability or obligation of the selling corporation that the acquiring corporation, foreign corporation, or other entity did not expressly assume.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 9; Acts 1967, 60th Leg., p. 1720, ch. 657, Sec. 11, eff. June 17, 1967; Acts 1979, 66th Leg., p. 422, ch. 194, Sec. 1, eff. May 17, 1979; Acts 1987, 70th Leg., ch. 93, Sec. 26, eff. Aug. 31, 1987; Acts 1991, 72nd Leg., ch. 901, Sec. 31, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec. 2.15, eff. Sept. 1, 1993; Acts 1997, 75th Leg., ch. 375, Sec. 28, eff. Sept. 1, 1997.
Art. 5.11. Rights of Dissenting Shareholders in the Event of Certain Corporate Actions
A. Any shareholder of a domestic corporation shall have the right to dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if shareholder approval is required by Article 5.03 or 5.16 of this Act and the shareholder holds shares of a class or series that was entitled to vote thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any pledge, mortgage, deed of trust or trust indenture unless otherwise provided in the articles of incorporation) of all, or substantially all, the property and assets, with or without good will, of a corporation if special authorization of the shareholders is required by this Act and the shareholders hold shares of a class or series that was entitled to vote thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which the shares of the corporation of the class or series held by the shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a shareholder shall not have the right to dissent from any plan of merger in which there is a single surviving or new domestic or foreign corporation, or from any plan of exchange, if:
(1) the shares, or depository receipts in respect of the shares, held by the shareholder are part of a class or series, shares, or depository receipts in respect of the shares, of which are on the record date fixed to determine the shareholders entitled to vote on the plan of merger or plan of exchange:
(a) listed on a national securities exchange;
(b) listed on the Nasdaq Stock Market (or successor quotation system) or designated as a national market security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or successor entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of merger or plan of exchange to accept for the shareholder's shares any consideration that is different than the consideration (other than cash in lieu of fractional shares that the shareholder would otherwise be entitled to receive) to be provided to any other holder of shares of the same class or series of shares held by such shareholder; and
(3) the shareholder is not required by the terms of the plan of merger or the plan of exchange to accept for the shareholder's shares any consideration other than:
(a) shares, or depository receipts in respect of the shares, of a domestic or foreign corporation that, immediately after the effective time of the merger or exchange, will be part of a class or series, shares, or depository receipts in respect of the shares, of which are:
(i) listed, or authorized for listing upon official notice of issuance, on a national securities exchange;
(ii) approved for quotation as a national market security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or successor entity; or
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be received; or
(c) any combination of the securities and cash described in Subdivisions (a) and (b) of this subsection.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 10; Acts 1973, 63rd Leg., p. 1508, ch. 545, Sec. 36, eff. Aug. 27, 1973; Acts 1989, 71st Leg., ch. 801, Sec. 34, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 32, eff. Aug. 26, 1991; Acts 1997, 75th Leg., ch. 375, Sec. 29, eff. Sept. 1, 1997.
Sec. B amended by Acts 2003, 78th Leg., ch. 238, Sec. 31, eff. Sept. 1, 2003.
Art. 5.12. Procedure for Dissent by Shareholders as to Said Corporate Actions
A. Any shareholder of any domestic corporation who has the right to dissent from any of the corporate actions referred to in Article 5.11 of this Act may exercise that right to dissent only by complying with the following procedures:
(1)(a) With respect to proposed corporate action that is submitted to a vote of shareholders at a meeting, the shareholder shall file with the corporation, prior to the meeting, a written objection to the action, setting out that the shareholder's right to dissent will be exercised if the action is effective and giving the shareholder's address, to which notice thereof shall be delivered or mailed in that event. If the action is effected and the shareholder shall not have voted in favor of the action, the corporation, in the case of action other than a merger, or the surviving or new corporation (foreign or domestic) or other entity that is liable to discharge the shareholder's right of dissent, in the case of a merger, shall, within ten (10) days after the action is effected, deliver or mail to the shareholder written notice that the action has been effected, and the shareholder may, within ten (10) days from the delivery or mailing of the notice, make written demand on the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, for payment of the fair value of the shareholder's shares. The fair value of the shares shall be the value thereof as of the day immediately preceding the meeting, excluding any appreciation or depreciation in anticipation of the proposed action. The demand shall state the number and class of the shares owned by the shareholder and the fair value of the shares as estimated by the shareholder. Any shareholder failing to make demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved pursuant to Section A of Article 9.10 of this Act, the corporation, in the case of action other than a merger, and the surviving or new corporation (foreign or domestic) or other entity that is liable to discharge the shareholder's right of dissent, in the case of a merger, shall, within ten (10) days after the date the action is effected, mail to each shareholder of record as of the effective date of the action notice of the fact and date of the action and that the shareholder may exercise the shareholder's right to dissent from the action. The notice shall be accompanied by a copy of this Article and any articles or documents filed by the corporation with the Secretary of State to effect the action. If the shareholder shall not have consented to the taking of the action, the shareholder may, within twenty (20) days after the mailing of the notice, make written demand on the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, for payment of the fair value of the shareholder's shares. The fair value of the shares shall be the value thereof as of the date the written consent authorizing the action was delivered to the corporation pursuant to Section A of Article 9.10 of this Act, excluding any appreciation or depreciation in anticipation of the action. The demand shall state the number and class of shares owned by the dissenting shareholder and the fair value of the shares as estimated by the shareholder. Any shareholder failing to make demand within the twenty (20) day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, of a demand for payment made by a dissenting shareholder in accordance with Subsection (1) of this Section, the corporation (foreign or domestic) or other entity shall deliver or mail to the shareholder a written notice that shall either set out that the corporation (foreign or domestic) or other entity accepts the amount claimed in the demand and agrees to pay that amount within ninety (90) days after the date on which the action was effected, and, in the case of shares represented by certificates, upon the surrender of the certificates duly endorsed, or shall contain an estimate by the corporation (foreign or domestic) or other entity of the fair value of the shares, together with an offer to pay the amount of that estimate within ninety (90) days after the date on which the action was effected, upon receipt of notice within sixty (60) days after that date from the shareholder that the shareholder agrees to accept that amount and, in the case of shares represented by certificates, upon the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate action was effected, the value of the shares is agreed upon between the shareholder and the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, payment for the shares shall be made within ninety (90) days after the date on which the action was effected and, in the case of shares represented by certificates, upon surrender of the certificates duly endorsed. Upon payment of the agreed value, the shareholder shall cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the corporate action was effected, the shareholder and the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, do not so agree, then the shareholder or the corporation (foreign or domestic) or other entity may, within sixty (60) days after the expiration of the sixty (60) day period, file a petition in any court of competent jurisdiction in the county in which the principal office of the domestic corporation is located, asking for a finding and determination of the fair value of the shareholder's shares. Upon the filing of any such petition by the shareholder, service of a copy thereof shall be made upon the corporation (foreign or domestic) or other entity, which shall, within ten (10) days after service, file in the office of the clerk of the court in which the petition was filed a list containing the names and addresses of all shareholders of the domestic corporation who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the corporation (foreign or domestic) or other entity. If the petition shall be filed by the corporation (foreign or domestic) or other entity, the petition shall be accompanied by such a list. The clerk of the court shall give notice of the time and place fixed for the hearing of the petition by registered mail to the corporation (foreign or domestic) or other entity and to the shareholders named on the list at the addresses therein stated. The forms of the notices by mail shall be approved by the court. All shareholders thus notified and the corporation (foreign or domestic) or other entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the shareholders who have complied with the provisions of this Article and have become entitled to the valuation of and payment for their shares, and shall appoint one or more qualified appraisers to determine that value. The appraisers shall have power to examine any of the books and records of the corporation the shares of which they are charged with the duty of valuing, and they shall make a determination of the fair value of the shares upon such investigation as to them may seem proper. The appraisers shall also afford a reasonable opportunity to the parties interested to submit to them pertinent evidence as to the value of the shares. The appraisers shall also have such power and authority as may be conferred on Masters in Chancery by the Rules of Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the shareholders adjudged by the court to be entitled to payment for their shares and shall file their report of that value in the office of the clerk of the court. Notice of the filing of the report shall be given by the clerk to the parties in interest. The report shall be subject to exceptions to be heard before the court both upon the law and the facts. The court shall by its judgment determine the fair value of the shares of the shareholders entitled to payment for their shares and shall direct the payment of that value by the existing, surviving, or new corporation (foreign or domestic) or other entity, together with interest thereon, beginning 91 days after the date on which the applicable corporate action from which the shareholder elected to dissent was effected to the date of such judgment, to the shareholders entitled to payment. The judgment shall be payable to the holders of uncertificated shares immediately but to the holders of shares represented by certificates only upon, and simultaneously with, the surrender to the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, of duly endorsed certificates for those shares. Upon payment of the judgment, the dissenting shareholders shall cease to have any interest in those shares or in the corporation. The court shall allow the appraisers a reasonable fee as court costs, and all court costs shall be allotted between the parties in the manner that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, pursuant to the payment of the agreed value of the shares or pursuant to payment of the judgment entered for the value of the shares, as in this Article provided, shall, in the case of a merger, be treated as provided in the plan of merger and, in all other cases, may be held and disposed of by the corporation as in the case of other treasury shares.
F. The provisions of this Article shall not apply to a merger if, on the date of the filing of the articles of merger, the surviving corporation is the owner of all the outstanding shares of the other corporations, domestic or foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this Article to a shareholder objecting to any corporate action referred to in Article 5.11 of this Act is the exclusive remedy for the recovery of the value of his shares or money damages to the shareholder with respect to the action. If the existing, surviving, or new corporation (foreign or domestic) or other entity, as the case may be, complies with the requirements of this Article, any shareholder who fails to comply with the requirements of this Article shall not be entitled to bring suit for the recovery of the value of his shares or money damages to the shareholder with respect to the action.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1967, 60th Leg., p. 1721, ch. 657, Sec. 12, eff. June 17, 1967; Acts 1983, 68th Leg., p. 2570, ch. 442, Sec. 9, eff. Sept. 1, 1983; Acts 1987, 70th Leg., ch. 93, Sec. 27, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 35, eff. Aug. 28, 1989; Acts 1993, 73rd Leg., ch. 215, Sec. 2.16, eff. Sept. 1, 1993.
Art. 5.13. Provisions Affecting Remedies of Dissenting Shareholders
A. Any shareholder who has demanded payment for his shares in accordance with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to vote or exercise any other rights of a shareholder except the right to receive payment for his shares pursuant to the provisions of those articles and the right to maintain an appropriate action to obtain relief on the ground that the corporate action would be or was fraudulent, and the respective shares for which payment has been demanded shall not thereafter be considered outstanding for the purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the corporation shall make an appropriate notation thereof in its shareholder records. Within twenty (20) days after demanding payment for his shares in accordance with either Article 5.12 or 5.16 of this Act, each holder of certificates representing shares so demanding payment shall submit such certificates to the corporation for notation thereon that such demand has been made. The failure of holders of certificated shares to do so shall, at the option of the corporation, terminate such shareholder's rights under Articles 5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and sufficient cause shown shall otherwise direct. If uncertificated shares for which payment has been demanded or shares represented by a certificate on which notation has been so made shall be transferred, any new certificate issued therefor shall bear similar notation together with the name of the original dissenting holder of such shares and a transferee of such shares shall acquire by such transfer no rights in the corporation other than those which the original dissenting shareholder had after making demand for payment of the fair value thereof.
C. Any shareholder who has demanded payment for his shares in accordance with either Article 5.12 or 5.16 of this Act may withdraw such demand at any time before payment for his shares or before any petition has been filed pursuant to Article 5.12 or 5.16 of this Act asking for a finding and determination of the fair value of such shares, but no such demand may be withdrawn after such payment has been made or, unless the corporation shall consent thereto, after any such petition has been filed. If, however, such demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B of this Article the corporation shall terminate the shareholder's rights under Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking for a finding and determination of fair value of such shares by a court shall have been filed within the time provided in Article 5.12 or 5.16 of this Act, as the case may be, or if after the hearing of a petition filed pursuant to Article 5.12 or 5.16, the court shall determine that such shareholder is not entitled to the relief provided by those articles, then, in any such case, such shareholder and all persons claiming under him shall be conclusively presumed to have approved and ratified the corporate action from which he dissented and shall be bound thereby, the right of such shareholder to be paid the fair value of his shares shall cease, and his status as a shareholder shall be restored without prejudice to any corporate proceedings which may have been taken during the interim, and such shareholder shall be entitled to receive any dividends or other distributions made to shareholders in the interim.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts 1967, 60th Leg., p. 1723, ch. 657, Sec. 13, eff. June 17, 1967; Acts 1983, 68th Leg., p. 2573, ch. 442, Sec. 10, eff. Sept. 1, 1983; Acts 1993, 73rd Leg., ch. 215, Sec. 2.17, eff. Sept. 1, 1993.
Art. 5.14. Derivative Proceedings
A. Certain Definitions. For purposes of this Article:
(1) "Derivative proceeding" means a civil suit in the right of a domestic corporation or, to the extent provided in Section K of this Article, in the right of a foreign corporation.
(2) "Shareholder" includes a beneficial owner whose shares are held in a voting trust or by a nominee on the beneficial owner's behalf.
B. Standing. A shareholder may not commence or maintain a derivative proceeding unless the shareholder:
(1) was a shareholder of the corporation at the time of the act or omission complained of or became a shareholder by operation of law from a person that was a shareholder at that time; and
(2) fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.
C. Demand. No shareholder may commence a derivative proceeding until:
(1) a written demand is filed with the corporation setting forth with particularity the act, omission, or other matter that is the subject of the claim or challenge and requesting that the corporation take suitable action; and
(2) 90 days have expired from the date the demand was made, unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless irreparable injury to the corporation is being suffered or would result by waiting for the expiration of the 90-day period.
D. Stay; Discovery. (1) If the domestic or foreign corporation commences an inquiry into the allegations made in a demand or petition and the person or group described in Section H of this Article is conducting an active review of the allegations in good faith, the court shall stay a derivative proceeding until the review is completed and a determination is made by the person or group as to what further action, if any, should be taken. To obtain a stay, the domestic or foreign corporation must provide the court with a written statement containing an undertaking to advise the court and the shareholder making the demand of the determination promptly on the completion of the review of the matter. A stay shall, on motion, be reviewed as to its continued necessity every 60 days thereafter. If the review and determination by the person or group described in Section H of this Article is not completed within 60 days, the stay may be renewed for one or more additional 60-day periods on the domestic or foreign corporation providing the court and the shareholder making the demand with a written statement of the status of the review and the reasons a continued extension of the stay is necessary.
(2) If a domestic or foreign corporation proposes to dismiss a derivative proceeding pursuant to Section F of this Article, discovery by a shareholder following the filing of the derivative proceeding in accordance with the provisions of this Article shall be limited to facts relating to whether the person or group described in Section H of this Article is independent and disinterested, the good faith of the inquiry and review by such person or group, and the reasonableness of the procedures followed by such person or group in conducting its review and will not extend to any facts or substantive matters with respect to the act, omission, or other matter that is the subject matter of the action in the derivative proceeding. The scope of discovery may be expanded if the court determines after notice and hearing that a good faith review of the allegations for purposes of Section F of this Article has not been made by an independent and disinterested person or group in accordance with Section F of this Article.
E. Tolling of the Statute of Limitations. A written demand filed with the corporation under Section C of this Article tolls the statute of limitations on the claim on which demand is made until the earlier of (1) 90 days or (2) 30 days after the corporation advises the shareholder that the demand has been rejected or the review has been completed.
F. Dismissal of Derivative Proceeding. A court shall dismiss a derivative proceeding on a motion by the corporation if the person or group described in Section H of this Article determines in good faith, after conducting a reasonable inquiry and based on the factors as the person or group deems appropriate under the circumstances, that the continuation of the derivative proceeding is not in the best interests of the corporation. In determining whether the requirements of the previous sentence have been met, the burden of proof shall be on:
(1) the plaintiff shareholder, if a majority of the board of directors consists of independent and disinterested directors at the time the determination is made or if the determination is made by a panel of one or more independent and disinterested persons appointed under Section H(3) of this Article; or
(2) the corporation, in all other circumstances; provided that if the corporation presents prima facie evidence that demonstrates that the directors appointed pursuant to Section H(2) of this Article are independent and disinterested, the burden of proof is on the plaintiff shareholder.
G. Commencement of Proceeding After Rejection of Demand. If a derivative proceeding is commenced after a demand is rejected, the petition must allege with particularity facts that establish that the rejection was not made in accordance with the requirements of Sections F and H of this Article.
H. Determination by Directors or Independent Persons. The determination described in Section F of this Article must be made by:
(1) a majority vote of independent and disinterested directors present at a meeting of the board of directors at which interested directors are not present (at the time of the vote) if the independent and disinterested directors constitute a quorum of the board of directors;
(2) a majority vote of a committee consisting of two or more independent and disinterested directors appointed by a majority vote of one or more independent and disinterested directors present at a meeting of the board of directors, whether or not the independent and disinterested directors so acting constitute a quorum of the board of directors; or
(3) a panel of one or more independent and disinterested persons appointed by the court on a motion by the corporation setting forth the names of the persons to be so appointed together with a statement that to the best of its knowledge the persons so proposed are disinterested persons and qualified to make the determinations contemplated by Section F of this Article. Such panel shall be appointed if the court finds that such persons are independent and disinterested persons and are otherwise qualified in regard to expertise, experience, independent judgment, and other factors deemed appropriate by the court under the circumstances to make such determinations. Persons appointed by the court shall have no liability to the corporation or its shareholders for any action or omission taken by them in that capacity, absent fraud or wilful misconduct.
I. Discontinuance or Settlement. A derivative proceeding may not be discontinued or settled without the approval of the court. If the court determines that a proposed discontinuance or settlement may substantially affect the interest of other shareholders, it shall direct that notice be given to the affected shareholders.
J. Payment of Expenses. (1) On termination of a derivative proceeding, the court may order:
(a) the domestic or foreign corporation to pay the expenses of the plaintiff incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the domestic or foreign corporation;
(b) the plaintiff to pay the expenses of the domestic or foreign corporation or any defendant incurred in investigating and defending the proceeding if it finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose; or
(c) a party to pay the expenses incurred by another party (including the domestic or foreign corporation) because of the filing of a pleading, motion, or other paper, if it finds that the pleading, motion, or other paper (i) was not well grounded in fact after reasonable inquiry, (ii) was not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, or (iii) was interposed for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
(2) For purposes of this section, "expenses" mean reasonable expenses incurred in the defense of a derivative proceeding, including without limitation:
(a) attorney's fees;
(b) costs in pursuing an investigation of the matter that was the subject of the derivative proceeding; and
(c) expenses for which the domestic or foreign corporation or a corporate defendant may be required to indemnify another person.
K. Application to Foreign Corporations. In any derivative proceeding brought in the right of a foreign corporation, the matters covered by this Article are governed by the laws of the jurisdiction of incorporation of the foreign corporation, except for Sections D, I, and J of this Article, which are procedural and not matters relating to the internal affairs of the foreign corporation. In the case of matters relating to a foreign corporation under Section D of this Article, references to a person or group described in Section H of this Article are to be deemed to refer to a person or group entitled under the laws of the jurisdiction of incorporation of the foreign corporation to review and dispose of a derivative proceeding, and the standard of review of a decision by the person or group to dismiss the derivative proceeding is to be governed by the laws of the jurisdiction of incorporation of the foreign corporation.
L. Closely Held Corporations. (1) The provisions of Sections B through H of this Article are not applicable to a closely held corporation. If justice requires:
(a) a derivative proceeding brought by a shareholder of a closely held corporation may be treated by a court as a direct action brought by the shareholder for his own benefit; and
(b) a recovery in a direct or derivative proceeding by a shareholder may be paid either directly to the plaintiff or to the corporation if necessary to protect the interests of creditors or other shareholders of the corporation.
(2) For purposes of this section, a "closely held corporation" means a corporation:
(a) with less than 35 shareholders; and
(b) that has no shares listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national securities association.
Added by Acts 1965, 59th Leg., p. 698, ch. 332, Sec. 1. Amended by Acts 1973, 63rd Leg., p. 1508, ch. 545, Sec. 37, eff. Aug. 27, 1973; Acts 1997, 75th Leg., ch. 375, Sec. 30, eff. Sept. 1, 1997.
Art. 5.15. Antitrust Laws; Creditors
Nothing contained in Part 5 of this Act shall ever be construed as affecting, nullifying or repealing the Anti-trust laws or as abridging any right or rights of any creditor under existing laws.
Acts 1955, 54th Leg., p. 239, ch. 64, art. 5.14, eff. Sept. 6, 1955. Renumbered as art. 5.15 by Acts 1965, 59th Leg., p. 699, ch. 332, Sec. 2. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 36, eff. Aug. 28, 1989.
Art. 5.16. Merger with Subsidiary Entities
A. In any case in which at least ninety (90%) per cent of the outstanding shares of each class and series of shares, membership interests, or other ownership interests of one or more domestic or foreign corporations or other entities, other than a corporation that has in its articles of incorporation the provision required by Article 5.03(H)(6)(a) of this Act, of which there are outstanding shares that would be entitled to vote on the merger absent this section, is owned by another domestic or foreign corporation or other entity, and at least one of the parent or subsidiary entities is a domestic corporation and the other or others are domestic corporations, foreign corporations, or other entities organized under the laws of a jurisdiction that permit such a merger or whose organizational documents or other constituent documents not inconsistent with those laws permit such a merger, the corporation or other entity may enter into a merger:
(a) in the event that the corporation or other entity having at least 90 percent ownership will be a surviving entity in the merger, by executing and filing articles of merger in accordance with Section B of this Article; or
(b) in the event that the corporation or other entity having at least 90 percent ownership will not be a surviving entity in the merger, by the entity having such ownership adopting a plan of merger in the manner required by the laws of its jurisdiction of organization or formation and its organizational or other constituent documents, except that no action under Section 5.03 shall be required to be taken by the corporation or corporations whose shares are so owned, and executing and filing articles of merger in accordance with Section B of this Article.
B. The articles of merger shall be signed on behalf of the parent entity by an officer or other duly authorized representative of the parent entity and shall set forth:
(1) The name of the parent entity and the name of each subsidiary entity and the type of entity and respective jurisdiction under which each subsidiary entity is organized.
(2) The total number or percentage of outstanding shares, membership interests, or other ownership interests, identified by class, series, or group, and the number or percentage of shares, membership interests, or other ownership interests in each class, series, or group owned by the parent entity.
(3) A copy of the resolution or merger adopted by the parent entity in accordance with the laws of its jurisdiction of organization or formation and its organizational or other constituent documents together with a statement that the resolution was so adopted and the date of the adoption thereof. If the parent entity does not own all the outstanding shares, membership interests, or other ownership interests of each class of each subsidiary entity that is a party to the merger, the resolution shall state the terms and conditions of the merger, including the cash or other property, including shares, obligations, evidences of ownership, rights to purchase securities, or other securities of any person or entity or any combination of the shares, obligations, evidences of ownership, rights, or other securities, to be used, paid or delivered by the surviving entity upon surrender of each share, membership interest, or other ownership interest of the subsidiary entity or entities not owned by the parent entity.
(4) If the surviving entity is a foreign corporation or other entity, the address, including street number if any, of its registered or principal office in the jurisdiction under whose laws it is governed. If the surviving entity is a foreign corporation or other entity, on the merger taking effect the surviving entity is deemed to (a) appoint the Secretary of State of this state as its agent for service of process to enforce an obligation or the rights of dissenting shareholders of each domestic corporation that is a party to the merger, and (b) agree that it will promptly pay to the dissenting shareholders of each domestic corporation that is a party to the merger the amount, if any, to which they are entitled under this Article.
(5) If a plan of merger is required by Section A of this Article to be adopted in the manner required by Article 5.03 of this Act, the information required by Section A of Article 5.04 of this Act.
C. The articles of merger shall be delivered to the Secretary of State and filed as provided by Sections B and C of Article 5.04 of this Act.
D. The effective date and the effect of such merger shall be the same as provided in Articles 5.05 and 5.06 of this Act if the surviving entity is a domestic corporation. If the surviving entity is a foreign corporation or other entity, the effective date and the effect of such merger shall be the same as in the case of the merger of domestic corporations except in so far as the laws of such other jurisdiction provide otherwise.
E. In the event all of the shares of a subsidiary domestic corporation that is a party to a merger effected under this Article are not owned by the parent entity immediately prior to the merger, the surviving parent entity shall, within ten (10) days after the effective date of the merger, mail to each shareholder of record of each subsidiary domestic corporation a copy of the articles of merger and notify the shareholder that the merger has become effective. Any such shareholder who holds shares of a class or series that would have been entitled to vote on the merger if it had been effected pursuant to Article 5.03 of this Act shall have the right to dissent from the merger and demand payment of the fair value for the shareholder's shares in lieu of the cash or other property to be used, paid or delivered to such shareholder upon the surrender of such shareholder's shares pursuant to the terms and conditions of the merger, with the following procedure:
(1) Such shareholder shall within twenty (20) days after the mailing of the notice and copy of the articles of merger make written demand on the surviving parent entity for payment of the fair value of the shareholder's shares. The fair value of the shares shall be the value thereof as of the day before the effective date of the merger, excluding any appreciation or depreciation in anticipation of such act. The demand shall state the number and class of the shares owned by the dissenting shareholder and the fair value of such shares as estimated by the shareholder. Any shareholder failing to make demand within the twenty (20) day period shall be bound by the corporate action.
(2) Within ten (10) days after receipt by the surviving entity of a demand for payment by the dissenting shareholder of the fair value of the shareholder's shares in accordance with Subsection (1) of this section, the surviving entity shall deliver or mail to the dissenting shareholder a written notice which shall either set out that the surviving entity accepts the amount claimed in the demand and agrees to pay such amount within ninety (90) days after the date on which the corporate action was effected and, in the case of shares represented by certificates, upon the surrender of the shares certificates duly endorsed, or shall contain an estimate by the surviving parent entity of the fair value of such shares, together with an offer to pay the amount of that estimate within ninety (90) days after the date on which such corporate action was effected, upon receipt of notice within sixty (60) days after that date from the shareholder that the shareholder agrees to accept that amount and, in the case of shares represented by certificates, upon the surrender of the shares certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate action was effected, the value of the shares is agreed upon between the dissenting shareholder and the surviving entity, payment for the shares shall be made within ninety (90) days after the date on which the corporate action was effected and, in the case of shares represented by certificates, upon surrender of the certificate or certificates representing such shares. Upon payment of the agreed value, the dissenting shareholder shall cease to have any interest in such shares or in the corporation.
(4) If, within sixty (60) days after the date on which such corporate action was effected, the shareholder and the surviving entity do not so agree, then the dissenting shareholder or the surviving entity may, within sixty (60) days after the expiration of the sixty (60) day period, file a petition in any court of competent jurisdiction in the county in which the principal office of the corporation is located, asking for a finding and determination of the fair value of the shareholder's shares as provided in Section B of Article 5.12 of this Act and thereupon the parties shall have the rights and duties and follow the procedure set forth in Sections B to D inclusive of Article 5.12.
(5) In the absence of fraud in the transaction, the remedy provided by this Article to a shareholder objecting to the corporate action is the exclusive remedy for the recovery of the value of the shareholder's shares or money damages to the shareholder with respect to the corporate action. If the surviving entity complies with the requirements of this Article, any such shareholder who fails to comply with the requirements of this Article shall not be entitled to bring suit for the recovery of the value of the shareholder's shares or money damages to such shareholder with respect to such corporate action.
F. If a plan of merger is required by Section A of this Article to be adopted in the manner required by Article 5.03 of this Act, the provisions of Articles 5.11 and 5.12 of this Act shall apply to the rights of the shareholders of a parent corporation to dissent from such merger. Except as otherwise provided in this Article, the provisions of Articles 5.11 and 5.12 of this Act shall not be applicable to a merger effected under the provisions of this Article. The provisions of Article 5.13 of this Act shall be applicable to any merger effected under the provisions of this Article to the extent provided in Article 5.13 of this Act.
Added by Acts 1969, 61st Leg., p. 844, ch. 280, Sec. 1, eff. May 22, 1969. Amended by Acts 1979, 66th Leg., p. 228, ch. 120, Sec. 37, eff. May 9, 1979; Acts 1979, 66th Leg., p. 423, ch. 194, Sec. 2, eff. May 17, 1979; Acts 1983, 68th Leg., p. 2573, ch. 442, Sec. 11, eff. Sept. 1, 1983; Acts 1985, 69th Leg., ch. 128, Sec. 19, eff. May 20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 28, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec. 37, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 33, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec. 2.18, eff. Sept. 1, 1993; Acts 1997, 75th Leg., ch. 375, Sec. 31, eff. Sept. 1, 1997.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 32, eff. Sept. 1, 2003.
Art. 5.17. Conversion
A. A domestic corporation may adopt a plan of conversion and convert to a foreign corporation or any other entity if:
(1) the converting entity acts on and its shareholders approve a plan of conversion in the manner prescribed by Article 5.03 of this Act as if the conversion were a merger to which the converting entity were a party and not the survivor;
(2) the conversion (a) is permitted by, or not inconsistent with, the laws of the state or country in which the converted entity is to be incorporated, formed, or organized, and (b) the incorporation, formation, or organization of the converted entity is effected in compliance with such laws;
(3) at the time the conversion becomes effective, each shareholder of the converting entity (other than those who receive payment of their shares under Article 5.12 of this Act) will, unless otherwise agreed to by that shareholder, own an equity interest or other ownership or security interest in, and be a shareholder, partner, member, owner, or other security holder of, the converted entity;
(4) no shareholder of the domestic corporation will, as a result of the conversion, become personally liable, without the shareholder's consent, for the liabilities or obligations of the converted entity; and
(5) the converted entity shall be incorporated, formed, or organized as part of or pursuant to the plan of conversion.
B. Any foreign corporation or other entity may adopt a plan of conversion and convert to a domestic corporation if:
(1) the conversion is permitted by the laws of the state or country in which the foreign corporation is incorporated, if a foreign corporation is converting;
(2) the conversion is either permitted by the laws under which the other entity is formed or organized or by the constituent documents of the other entity that are not inconsistent with the laws of the state or country in which the other entity is formed or organized, if another entity is converting; and
(3) the converting entity takes all action that may be required by the laws of the state or country under which it is incorporated, formed, or organized and by its constituent documents to effect the conversion.
C. A plan of conversion shall set forth:
(1) the name of the converting entity and the converted entity;
(2) a statement that the converting entity is continuing its existence in the organizational form of the converted entity;
(3) a statement as to the type of entity that the converted entity is to be and the state or country under the laws of which the converted entity is to be incorporated, formed, or organized;
(4) the manner and basis of converting the shares or other evidences of ownership of the converting entity into shares or other evidences of ownership or securities of the converted entity, or any combination thereof;
(5) in an attachment or exhibit, the articles of incorporation of the domestic corporation, if the converted entity is a domestic corporation; and
(6) in an attachment or exhibit, the articles of incorporation or other organizational documents of the converted entity, if the converted entity is not a domestic corporation.
D. A plan of conversion may set forth such other provisions relating to the conversion not inconsistent with law, including the initial bylaws and officers of the converted entity.
E. After a conversion of a corporation is approved, and at any time before the conversion has become effective, the plan of conversion may be abandoned (subject to any contractual rights) by the converting entity, without shareholder action, in accordance with the procedures set forth in the plan of conversion or, if any such procedures are not set forth in the plan, in the manner determined by the board of directors. If articles of conversion have been filed with the Secretary of State but the conversion has not become effective, the conversion may be abandoned if a statement, executed on behalf of the converting entity by an officer or other duly authorized representative and stating that the plan of conversion has been abandoned in accordance with applicable law, is filed with the Secretary of State prior to the effectiveness of the conversion. If the Secretary of State finds that such statement conforms to law, the Secretary of State shall, when all fees have been paid as required by law:
(1) endorse on the original and each copy the word "Filed" and the month, day, and year of the filing;
(2) file the original in his office; and
(3) issue a certificate of abandonment to the converting entity or its representatives.
F. On the filing of the statement described by Section E of this Article by the Secretary of State, the conversion shall be deemed abandoned and shall not become effective.
Added by Acts 1997, 75th Leg., ch. 375, Sec. 32, eff. Sept. 1, 1997.
Art. 5.18. Articles of Conversion
A. If a plan of conversion has been approved in accordance with Article 5.17 of this Act and has not been abandoned, articles of conversion shall be executed by the converting entity by an officer or other duly authorized representative and shall set forth:
(1) the plan of conversion or a statement certifying the following:
(a) the name, state or country of incorporation, formation, and organization of the converting entity, and organizational form of the converting entity;
(b) that a plan of conversion has been approved;
(c) that an executed plan of conversion is on file at the principal place of business of the converting entity, stating the address thereof, and that an executed plan of conversion will be on file, from and after the conversion, at the principal place of business of the converted entity, stating the address thereof; and
(d) that a copy of the plan of conversion will be furnished by the converting entity (prior to the conversion) or the converted entity (after the conversion), on written request and without cost, to any shareholder of the converting entity or the converted entity;
(2) if the converting entity is a domestic corporation, the number of shares outstanding and, if the shares of any class or series are entitled to vote as a class, the designation and number of outstanding shares of each such class or series;
(3) if the converting entity is a domestic corporation, the number of outstanding shares, not entitled to vote only as a class, voted for and against the plan, respectively, and, if the shares of any class or series are entitled to vote as a class, the number of shares of each such class or series voted for and against the plan, respectively; and
(4) if the converting entity is a foreign corporation or other entity, a statement that the approval of the plan of conversion was duly authorized by all action required by the laws under which it was incorporated, formed, or organized and by its constituent documents.
B. The original and one copy of the articles of conversion shall be delivered to the Secretary of State. Two copies of the articles of incorporation of the domestic corporation, if the converted entity is a domestic corporation, shall also be delivered to the Secretary of State with the articles of conversion.
C. If the Secretary of State finds that the articles of conversion conform to law, has received all filings required to be received, and has issued all certificates required to be issued in connection with the incorporation, formation, or organization of the converted entity, if any, the Secretary of State shall, when all fees and franchise taxes have been paid as required by law or if the articles of conversion provide that the converted entity will be liable for the payment of all such fees and franchise taxes:
(1) endorse on the original and each copy the word "Filed" and the month, day, and year of the filing;
(2) file the original in his office; and
(3) issue a certificate of conversion, together with a copy of the articles affixed thereto, to the converted entity or its representatives.
Added by Acts 1997, 75th Leg., ch. 375, Sec. 32, eff. Sept. 1, 1997.
Art. 5.19. Effective Date of Conversion
A. Except as otherwise provided by Article 10.03 of this Act, on the issuance of the certificate of conversion by the Secretary of State, the conversion of a converting entity shall be effective.
Added by Acts 1997, 75th Leg., ch. 375, Sec. 32, eff. Sept. 1, 1997.
Art. 5.20. Effect of Conversion
A. When a conversion of a converting entity takes effect:
(1) the converting entity shall continue to exist, without interruption, but in the organizational form of the converted entity rather than in its prior organizational form;
(2) all rights, title, and interests to all real estate and other property owned by the converting entity shall continue to be owned by the converted entity in its new organizational form without reversion or impairment, without further act or deed, and without any transfer or assignment having occurred, but subject to any existing liens or other encumbrances thereon;
(3) all liabilities and obligations of the converting entity shall continue to be liabilities and obligations of the converted entity in its new organizational form without impairment or diminution by reason of the conversion;
(4) all rights of creditors or other parties with respect to or against the prior interest holders or other owners of the converting entity in their capacities as such in existence as of the effective time of the conversion will continue in existence as to those liabilities and obligations and may be pursued by such creditors and obligees as if the conversion had not occurred;
(5) a proceeding pending by or against the converting entity or by or against any of the converting entity's interest holders or owners in their capacities as such may be continued by or against the converted entity in its new organizational form and by or against the prior interest holders or owners, as the case may be, without any need for substitution of parties;
(6) the shares and other evidences of ownership in the converting entity that are to be converted into shares, evidences of ownership, or other securities in the converted entity as provided in the plan of conversion shall be so converted, and if the converting entity is a domestic corporation, the former holders of shares in the domestic corporation shall be entitled only to the rights provided in the plan of conversion or to their rights under Article 5.11 of this Act;
(7) if, after the effectiveness of the conversion, a shareholder, partner, member, or other owner of the converted entity would be liable under applicable law, in such capacity, for the debts or obligations of the converted entity, such shareholder, partner, member, or other owner of the converted entity shall be liable for the debts and obligations of the converting entity that existed before the conversion takes effect only to the extent that such shareholder, partner, member, or other owner: (a) agreed in writing to be liable for such debts or obligations, (b) was liable under applicable law, prior to the effectiveness of the conversion, for such debts or obligations, or (c) by becoming a shareholder, partner, member, or other owner of the converted entity, becomes liable under applicable law for existing debts and obligations of the converted entity;
(8) if the converted entity is a foreign corporation or other entity, such converted entity shall be deemed to: (a) appoint the Secretary of State in this state as its agent for service of process in a proceeding to enforce any obligation or the rights of dissenting shareholders of the converting domestic corporation, and (b) agree that it will promptly pay the dissenting shareholders of the converting domestic corporation the amount, if any, to which they are entitled under Article 5.11 of this Act; and
(9) if the converting corporation is a domestic corporation, the provisions of Articles 5.11, 5.12, and 5.13 of this Act shall apply as if the converted entity were the survivor of a merger with the converting entity.
Added by Acts 1997, 75th Leg., ch. 375, Sec. 32, eff. Sept. 1, 1997.
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