BUSINESS CORPORATION ACT

PART 1. 


	Art. 1.01. SHORT TITLE, CAPTIONS, PARTS, ARTICLES, SECTIONS, 
SUBSECTIONS, AND PARAGRAPHS.  A. This Act shall be known and may be 
cited as the "Texas Business Corporation Act."
	B. The Division of this Act into Parts, Articles, Sections, 
Subsections and Paragraphs and the use of captions in connection 
therewith are solely for convenience and shall have no legal effect 
in construing the provisions of this Act.
	C. This Act has been organized and subdivided in the 
following manner:       
	(1) The Act is divided into Parts, containing groups of 
related Articles.  Parts are numbered consecutively with cardinal 
numbers.
	(2) The Act is also divided into Articles, numbered 
consecutively with Arabic numerals.
	(3) Articles are divided into Sections.  The Sections within 
each Article are numbered consecutively with capital letters.
	(4) Sections are divided into subsections.  The subsections 
within each Section are numbered consecutively with Arabic numerals 
enclosed in parentheses.
	(5) Subsections are divided into paragraphs.  The paragraphs 
within each subsection are numbered consecutively with lower case 
letters enclosed in parentheses.

Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.                     


	Art. 1.02. DEFINITIONS.  A. As used in this Act, unless the 
context otherwise requires, the term:
	(1) "Articles of incorporation" means the original or 
restated articles of incorporation and all amendments thereto.
	(2) "Associate," when used to indicate a relationship with a 
person, means:  
	(a) a domestic or foreign corporation or other entity of 
which the person is an officer or partner or is the beneficial owner 
of 10 percent or more of a class of voting shares or similar 
securities of that corporation or other entity;
	(b) a trust or estate in which the person has a substantial 
beneficial interest or as to which the person serves as trustee or 
in a similar fiduciary capacity;  or
	(c) a spouse of the person or a relative of the person, or of 
the person's spouse, who has the same home as the person or who is a 
director or officer of such person or any of its affiliates.
	(3) "Authorized shares" means the shares of all classes which 
the corporation is authorized to issue.
	(4) "Cancel" means to restore issued shares to the status of 
authorized but unissued shares.
	(5) "Certificated shares" means shares represented by 
instruments in bearer or registered form.
	(6) "Conspicuous" or "conspicuously," when prescribed for 
information appearing on a certificate for shares or other 
securities, means the location of such information or use of type of 
sufficient size, color, or character that a reasonable person 
against whom such information may operate should notice it.  For 
example, a printed or typed statement in capitals, or boldface or 
underlined type, or in type that is larger than or that contrasts in 
color with that used for other statements on the same certificate, 
is "conspicuous."
	(7) "Consuming assets corporation" means a corporation which 
is engaged in the business of exploiting assets subject to 
depletion or amortization and which elects to state in its articles 
of incorporation that it is a consuming assets corporation and 
includes as a part of its official corporate name the phrase "a 
consuming assets corporation," giving such phrase equal prominence 
with the rest of the corporate name on its financial statements and 
certificates representing shares.  All its certificates 
representing shares shall also contain a further sentence:  "This 
corporation is permitted by law to pay dividends out of reserves 
which may impair its stated capital."
	(8) "Conversion" means:                                                        
	(a) the continuance of a domestic corporation as, and in the 
organizational form of, a foreign corporation or other entity;  or
	(b) the continuance of a foreign corporation or other entity 
as, and in the organizational form of, a domestic corporation.
	(9) "Converted entity" means any domestic or foreign 
corporation or other entity to which a converting entity has 
converted or intends to convert as permitted by Article 5.17 of this 
Act.
	(10) "Converting entity" means any domestic or foreign 
corporation or other entity that has converted or intends to 
convert as permitted by Article 5.17 of this Act.
	(11) "Corporation" or "domestic corporation" means a 
corporation for profit subject to the provisions of this Act, 
except a foreign corporation.
	(12) "Disinterested," when used to indicate a director or 
other person is disinterested in a contract, transaction, or other 
matter for purposes of approval of a contract or transaction under 
Article 2.35-1 of this Act and for purposes of considering the 
disposition of a claim or challenge with respect to a particular 
contract or transaction or to particular conduct means the director 
or other person, or an associate of the director (other than the 
corporation and its associates) or other person, is not a party to 
the contract or transaction or is not materially involved in the 
conduct that is subject to the claim or challenge and does not 
otherwise have a material financial interest in the outcome of the 
contract or transaction or the disposition of the claim or 
challenge.  A director or other person is not to be considered to be 
materially involved in conduct that is subject to a claim or 
challenge or to otherwise have a material financial interest in the 
outcome of a contract or transaction or the disposition of the claim 
or challenge solely by reason of the existence of one or more of the 
following circumstances:
	(a) the person was nominated or elected as a director by 
persons who are interested in the contract or transaction or who are 
alleged to have engaged in the conduct that is subject to the claim 
or challenge;
	(b) the person receives normal director's fees or similar 
customary compensation, expense reimbursement, and benefits as a 
director of the corporation;
	(c) the person has a direct or indirect equity interest in the 
corporation;  
	(d) the corporation or its subsidiaries has an interest in 
the contract or transaction or was affected by the alleged conduct;
	(e) the person or an associate or affiliate of the person 
receives ordinary and reasonable compensation for services 
rendered to review, make recommendations, or decide on the 
disposition of the claim or challenge;  or
	(f) in the case of a review by the person of alleged conduct 
that is subject to a claim or challenge:
	(i) the person is named as a defendant in the derivative 
proceeding with respect to such matter or as a person who engaged in 
the alleged conduct;  or
	(ii) the person approved of, voted for, or acquiesced in, as a 
director, the act being challenged if the act resulted in no 
material personal or financial benefit to the person and the 
challenging party fails to allege with particularity facts that, if 
true, raise a significant prospect that the director would be 
adjudged liable to the corporation or its shareholders by reason of 
that conduct.
	(13) "Distribution" means a transfer of money or other 
property (except its own shares or rights to acquire its own 
shares), or issuance of indebtedness, by a corporation to its 
shareholders in the form of:
	(a) a dividend on any class or series of the corporation's 
outstanding shares;
	(b) a purchase, redemption, or other acquisition by the 
corporation, directly or indirectly, of any of its own shares;  or
	(c) a payment by the corporation in liquidation of all or a 
portion of its assets.
	(14) "Foreign corporation" means a corporation for profit 
organized under laws other than the laws of this State.
	(15) "Independent," when used to indicate a director or other 
person is independent for purposes of considering the disposition 
of a claim or challenge with respect to a particular contract or 
transaction or to particular conduct or alleged conduct means:
	(a) the director or other person is disinterested;                             
	(b) the director or other person is not an associate (other 
than by reason of being a director of the corporation or one more of 
its subsidiaries or associates) or member of the immediate family 
of a party to the contract or transaction that is the subject of the 
claim or challenge or that is alleged to have engaged in the conduct 
that is subject to the claim or challenge;
	(c) the director or other person, or an associate or member of 
the immediate family of the director or other person, does not have 
a business, financial, or familial relationship with a party to the 
contract or transaction that is the subject of the claim or 
challenge or that is alleged to have engaged in conduct that is 
subject to the claim or challenge, which, in each case, could 
reasonably be expected to materially and adversely affect the 
director's or other person's judgment with respect to the 
consideration of the disposition of the matter subject to the claim 
or challenge in the interests of the corporation;  and
	(d) the director or other person is not otherwise shown, by a 
preponderance of the evidence by the person challenging the 
independence of the director or other person, to be under the 
controlling influence of a party to the contract or transaction 
that is the subject of the claim or challenge or that is alleged to 
have engaged in conduct that is subject to the claim or challenge.
	A director or other person is not considered to have a 
relationship that could be expected to materially and adversely 
affect the director's or other person's judgment with respect to the 
consideration of the disposition of a matter subject to a claim or 
challenge or to otherwise be under the controlling influence of a 
party to a contract or transaction that is the subject of the claim 
or challenge or that is alleged to have engaged in conduct that is 
subject to a claim or challenge solely by reason of the existence of 
one or more of the following circumstances:
	(a) the person has been nominated or elected as a director by 
persons who are interested in the contract or transaction or who are 
alleged to have engaged in the conduct that is subject to the claim 
or challenge;
	(b) the person receives normal director's fees or similar 
customary compensation, expense reimbursement, and benefits as a 
director of the corporation;
	(c) the person has a direct or indirect equity interest in the 
corporation;  
	(d) the corporation or its subsidiaries have an interest in 
the contract or transaction or were affected by the alleged 
conduct;
	(e) the person or an associate or affiliate of such person 
receives ordinary and reasonable compensation for services 
rendered to review, make recommendations, or decide on the 
disposition of the claim or challenge;  or
	(f) the person or an associate (other than the corporation 
and its associates), immediate family, member or affiliate of the 
person has an ongoing business relationship with the corporation 
that is not material to that person, associate, family member, or 
affiliate.
	(16) "Insolvency" means inability of a corporation to pay its 
debts as they become due in the usual course of its business.
	(17) "Investment Company Act" means the Investment Company 
Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.);
	(18) "Merger" means (a) the division of a domestic 
corporation into two or more new domestic corporations or into a 
surviving corporation and one or more new domestic or foreign 
corporations or other entities, or (b) the combination of one or 
more domestic corporations with one or more domestic or foreign 
corporations or other entities 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.
	(19) "Net assets" means the amount by which the total assets 
of a corporation exceed the total debts of the corporation.
	(20) "Other entity" means any entity, whether organized for 
profit or not, that is a corporation (other than a domestic or 
foreign corporation), limited or general partnership, limited 
liability company, real estate investment trust, joint venture, 
joint stock company, cooperative, association, bank, trust, 
insurance company or other legal entity organized pursuant to the 
laws of this state or any other state or country.
	(21) "Share dividend" means a dividend by a corporation that 
is payable in its own authorized but unissued shares or in treasury 
shares.  An amendment to a corporation's articles of incorporation 
to change the shares of any class or series, whether with or without 
par value, into the same or a different number of shares, either 
with or without par value, of the same class or series or another 
class or series does not constitute a share dividend.
	(22) "Shareholder" or "holder of shares" means the person in 
whose name shares issued by a corporation are registered at the 
relevant time in the share transfer records maintained by the 
corporation pursuant to Article 2.44 of this Act.
	(23) "Shares" means the units into which the proprietary 
interests in a corporation are divided, whether certificated or 
uncertificated shares.
	(24) "Stated capital" means, at any particular time, the sum 
of:             
	(a) the par value of all shares of the corporation having a 
par value that have been issued;
	(b) the consideration fixed by the corporation in the manner 
provided by Article 2.15 of this Act for all shares of the 
corporation without par value that have been issued, except such 
part of the consideration that is actually received therefor (which 
part must be less than all of that consideration) that the board by 
resolution adopted no later than sixty (60) days after the issuance 
of those shares may have allocated to surplus;  and
	(c) such amounts not included in paragraphs (a) and (b) of 
this subsection as have been transferred to stated capital of the 
corporation, whether upon the payment of a share dividend or upon 
adoption by the board of directors of a resolution directing that 
all or part of surplus be transferred to stated capital, minus all 
reductions from such sum as have been effected in a manner permitted 
by law.
	(25) "Subscriber" means the offeror in a subscription.                         
	(26) "Subscription" means a memorandum in writing, executed 
before or after incorporation, wherein an offer is made to purchase 
and pay for a specified number of theretofore unissued shares of a 
corporation.
	(27) "Surplus" means the excess of the net assets of a 
corporation over its stated capital.
	(28) "Treasury shares" means shares of a corporation which 
have been issued, have been subsequently acquired by and belong to 
the corporation, and have not been canceled and restored to the 
status of authorized but unissued shares.  Treasury shares do not 
include shares held by a corporation, either directly or through a 
trust or similar arrangement, in a fiduciary capacity.  Treasury 
shares shall be deemed to be "issued" shares but not "outstanding" 
shares, and shall not be included in the total assets of a 
corporation for purposes of determining its "net assets."
	(29) "Uncertificated shares" means shares not represented by 
instruments and the transfers of which are registered upon books 
maintained for that purpose by or on behalf of the issuing 
corporation.
	(30) "Electronic transmission" means a form of communication 
that:           
	(a) does not directly involve the physical transmission of 
paper;            
	(b) creates a record that may be retained, retrieved, and 
reviewed by the recipient;  and
	(c) may be directly reproduced in paper form by the recipient 
through an automated process.
	B. Part Twelve of this Act provides definitions of terms used 
in the Texas Close Corporation Law.
	C. A reference in this Act to another statute is a reference 
to that statute as amended.

Acts 1955, 54 Leg., p. 239, ch. 64, eff. Sept. 6, 1955.  Amended by 
Acts 1967, 60th Leg., p. 1718, ch. 657, Sec. 1, eff. June 17, 1967;  
Acts 1973, 63rd Leg., p. 1486, ch. 545, Sec. 1, eff. Aug. 27, 1973;  
Acts 1975, 64th Leg., p. 305, ch. 134, Sec. 1, eff. Sept. 1, 1975;  
Acts 1981, 67th Leg., p. 3113, ch. 818, Sec. 2, eff. Aug. 31, 1981;  
Acts 1983, 68th Leg., p. 2564, ch. 442, Sec. 2, eff. Sept. 1, 1983;  
Acts 1987, 70th Leg., ch. 93, Sec. 1, eff. Aug. 31, 1987;  Acts 1989, 
71st Leg., ch. 801, Sec. 1, eff. Aug. 28, 1989;  Acts 1993, 73rd 
Leg., ch. 215, Sec. 2.01, eff. Sept. 1, 1993;  Acts 1997, 75th Leg., 
ch. 375, Sec. 1, eff. Sept. 1, 1997.

Sec. A(30) added by Acts 2003, 78th Leg., ch. 238, Sec. 1, eff. 
Sept. 1, 2003.