BUSINESS CORPORATION ACT PART 2.
BUSINESS CORPORATION ACT
PART 2.
Art. 2.01. PURPOSES. A. Except as hereinafter in this
Article excluded herefrom, corporations for profit may be organized
under this Act for any lawful purpose or purposes. Corporations for
the purpose of operating non-profit institutions, including but not
limited to those devoted to charitable, benevolent, religious,
patriotic, civic, cultural, missionary, educational, scientific,
social, fraternal, athletic, or aesthetic purposes, may not adopt
or be organized under this Act.
B. No corporation may adopt this Act or be organized under
this Act or obtain authority to transact business in this State
under this Act:
(1) If any one or more of its purposes for the
transaction of business in this State is expressly prohibited by
any law of this State.
(2) If any one or more of its purposes for the
transaction of business in this State is to engage in any activity
which cannot lawfully be engaged in without first obtaining a
license under the authority of the laws of this State to engage in
such activity and such a license cannot lawfully be granted to a
corporation.
(3) If among its purposes for the transaction of
business in this State, there is included, however worded, a
combination of the two businesses listed in either of the
following:
(a) The business of raising cattle and owning
land therefor, and the business of operating stockyards and of
slaughtering, refrigerating, canning, curing or packing
meat. Owning and operating feed lots and feeding cattle shall not
be considered as engaging in "the business of raising cattle and
owning land therefor" within the purview of this paragraph of this
subsection.
(b) The business of engaging in the petroleum oil
producing business in this State and the business of engaging
directly in the oil pipe line business in this State: provided,
however, that a corporation engaged in the oil producing business
in this State which owns or operates private pipe lines in and about
its refineries, fields or stations or which owns stock of
corporations engaged in the oil pipe line business shall not be
deemed to be engaging directly in the oil pipe line business in this
State; and provided that any corporation, or group of corporations
acting in partnership or other combination with other corporations,
engaged as a common carrier in the pipe line business for
transporting oil, oil products, gas, carbon dioxide, salt brine,
fuller's earth, sand, clay, liquefied minerals or other mineral
solutions, shall have all of the rights and powers conferred by
Sections 111.019 through 111.022, Natural Resources Code.
(4) If any one or more of its purposes is to operate
any of the following:
(a) Banks, (b) trust companies, (c) building and
loan associations or companies, (d) insurance companies of every
type and character that operate under the insurance laws of this
State, and corporate attorneys in fact for reciprocal or
inter-insurance exchanges, (e) railroad companies, (f) cemetery
companies, (g) cooperatives or limited cooperative associations,
(h) labor unions, (i) abstract and title insurance companies whose
purposes are provided for and whose powers are prescribed by Title
11, Insurance Code.
C. A company may be incorporated under this Article or under
Chapter 1, Title 112, Revised Statutes, if the company:
(1) operates a railroad passenger service by contracting with
a railroad corporation or other company; and
(2) does not construct, own, or maintain a railroad track.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1486, ch. 545, Sec. 2, eff. Aug. 27, 1973;
Acts 1977, 65th Leg., p. 2690, ch. 871, Sec. 3, eff. Sept. 1, 1977;
Acts 1981, 67th Leg., p. 2489, ch. 650, Sec. 1, eff. Aug. 31, 1981;
Acts 1989, 71st Leg., ch. 971, Sec. 2, eff. Aug. 28, 1989.
Amended by:
Acts 2005, 79th Leg., Ch. 728, Sec. 11.162, eff. September 1,
2005.
Art. 2.02. GENERAL POWERS. A. Subject to the provisions of
Sections B and C of this Article, each corporation shall have power:
(1) To have perpetual succession by its corporate name unless
a limited period of duration is stated in its articles of
incorporation. Notwithstanding the articles of incorporation, the
period of duration for any corporation incorporated before
September 6, 1955, is perpetual if all fees and franchise taxes have
been paid as provided by law.
(2) To sue and be sued, complain and defend, in its corporate
name.
(3) To have a corporate seal which may be altered at pleasure,
and to use the same by causing it, or a facsimile thereof, to be
impressed on, affixed to, or in any manner reproduced upon,
instruments of any nature required to be executed by its proper
officers.
(4) To purchase, receive, lease, or otherwise acquire, own,
hold, improve, use and otherwise deal in and with, real or personal
property, or any interest therein, wherever situated, as the
purposes of the corporation shall require.
(5) To sell, convey, mortgage, pledge, lease, exchange,
transfer and otherwise dispose of all or any part of its property
and assets.
(6) To lend money to, and otherwise assist, its employees,
officers, and directors if such a loan or assistance reasonably may
be expected to benefit, directly or indirectly, the lending or
assisting corporation.
(7) To purchase, receive, subscribe for, or otherwise
acquire, own, hold, vote, use, employ, mortgage, lend, pledge, sell
or otherwise dispose of, and otherwise use and deal in and with,
shares or other interests in, or obligations of, other domestic or
foreign corporations, associations, partnerships, or individuals,
or direct or indirect obligations of the United States or of any
other government, state, territory, government district, or
municipality, or of any instrumentality thereof.
(8) To purchase or otherwise acquire its own bonds,
debentures, or other evidences of its indebtedness or obligations;
to purchase or otherwise acquire its own unredeemable shares and
hold those acquired shares as treasury shares or cancel or
otherwise dispose of those acquired shares; and to redeem or
purchase shares made redeemable by the provisions of its articles
of incorporation.
(9) To make contracts and incur liabilities, borrow money at
such rates of interest as the corporation may determine, issue its
notes, bonds, and other obligations, and secure any of its
obligations by mortgage or pledge of all or any of its property,
franchises, and income.
(10) To lend money for its corporate purposes, invest and
reinvest its funds, and take and hold real and personal property as
security for the payment of funds so loaned or invested.
(11) To conduct its business, carry on its operations, and
have offices and exercise the powers granted by this Act, within or
without this State.
(12) To elect or appoint officers and agents of the
corporation for such period of time as the corporation may
determine, and define their duties and fix their compensation.
(13) To make and alter bylaws, not inconsistent with its
articles of incorporation or with the laws of this State, for the
administration and regulation of the affairs of the corporation.
(14) To make donations for the public welfare or for
charitable, scientific, or educational purposes.
(15) To transact any lawful business which the board of
directors shall find will be in aid of government policy.
(16) To indemnify directors, officers, employees, and agents
of the corporation and to purchase and maintain liability insurance
for those persons.
(17) To pay pensions and establish pension plans, pension
trusts, profit sharing plans, stock bonus plans, and other
incentive plans for any or all of, or any class or classes of, its
directors, officers, or employees.
(18) To be an organizer, partner, member, associate, or
manager of any partnership, joint venture, or other enterprise, and
to the extent permitted by any other jurisdiction to be an
incorporator of any other corporation of any type or kind.
(19) To cease its corporate activities and terminate its
existence by voluntary dissolution.
(20) To renounce, in its articles of incorporation or by
action of its board of directors, an interest or expectancy of the
corporation in, or an interest or expectancy of the corporation in
being offered an opportunity to participate in, specified business
opportunities or specified classes or categories of business
opportunities that are presented to the corporation or one or more
of its officers, directors, or shareholders.
(21) Whether included in the foregoing or not, to have and
exercise all powers necessary or appropriate to effect any or all of
the purposes for which the corporation is organized.
B. Nothing in this Article grants any authority to officers
or directors of a corporation for the exercise of any of the
foregoing powers, inconsistent with limitations on any of the same
which may be expressly set forth in this Act or in the articles of
incorporation or in any other laws of this State. Authority of
officers and directors to act beyond the scope of the purpose or
purposes of a corporation is not granted by any provision of this
Article.
C. Nothing contained in this Article shall be deemed to
authorize any action in violation of the Anti-Trust Laws of this
State, as now existing or hereafter amended.
Acts 1955, 64th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1967, 60th Leg., p. 1718, ch. 657, Sec. 2, eff. June 17, 1967;
Acts 1973, 63rd Leg., p. 1486, ch. 545, Sec. 3, eff. Aug. 27, 1973;
Acts 1979, 66th Leg., p. 175, ch. 96, Sec. 2, eff. May 2, 1979; Acts
1983, 68th Leg., p. 3140, ch. 540, Sec. 1, eff. Aug. 29, 1983; Acts
1987, 70th Leg., ch. 93, Sec. 2, eff. Aug. 31, 1987; Acts 1987, 70th
Leg., ch. 93, Sec. 2, eff. Aug. 31, 1987; Acts 1993, 73rd Leg., ch.
215, Sec. 2.02, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 2, eff. Sept.
1, 2003.
Art. 2.02-1. POWER TO INDEMNIFY AND TO PURCHASE INDEMNITY
INSURANCE; DUTY TO INDEMNIFY. A. In this article:
(1) "Corporation" includes any domestic or foreign
predecessor entity of the corporation in a merger, conversion, or
other transaction in which some or all of the liabilities of the
predecessor are transferred to the corporation by operation of law
and in any other transaction in which the corporation assumes the
liabilities of the predecessor but does not specifically exclude
liabilities that are the subject matter of this article.
(2) "Director" means any person who is or was a director of
the corporation and any person who, while a director of the
corporation, is or was serving at the request of the corporation as
a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or
domestic corporation, employee benefit plan, other enterprise, or
other entity.
(3) "Expenses" include court costs and attorneys' fees.
(4) "Official capacity" means
(a) when used with respect to a director, the office of
director in the corporation, and
(b) when used with respect to a person other than a director,
the elective or appointive office in the corporation held by the
officer or the employment or agency relationship undertaken by the
employee or agent in behalf of the corporation, but
(c) in both Paragraphs (a) and (b) does not include service
for any other foreign or domestic corporation or any employee
benefit plan, other enterprise, or other entity.
(5) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such
an action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit, or proceeding.
B. A corporation may indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding because the person is or was a director only if it is
determined in accordance with Section F of this article that the
person:
(1) conducted himself in good faith;
(2) reasonably believed:
(a) in the case of conduct in his official capacity as a
director of the corporation, that his conduct was in the
corporation's best interests; and
(b) in all other cases, that his conduct was at least not
opposed to the corporation's best interests; and
(3) in the case of any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful.
C. Except to the extent permitted by Section E of this
article, a director may not be indemnified under Section B of this
article in respect of a proceeding:
(1) in which the person is found liable on the basis that
personal benefit was improperly received by him, whether or not the
benefit resulted from an action taken in the person's official
capacity; or
(2) in which the person is found liable to the corporation.
D. The termination of a proceeding by judgment, order,
settlement, or conviction, or on a plea of nolo contendere or its
equivalent is not of itself determinative that the person did not
meet the requirements set forth in Section B of this article. A
person shall be deemed to have been found liable in respect of any
claim, issue or matter only after the person shall have been so
adjudged by a court of competent jurisdiction after exhaustion of
all appeals therefrom.
E. A person may be indemnified under Section B of this article
against judgments, penalties (including excise and similar taxes),
fines, settlements, and reasonable expenses actually incurred by
the person in connection with the proceeding; but if the person is
found liable to the corporation or is found liable on the basis that
personal benefit was improperly received by the person, the
indemnification (1) is limited to reasonable expenses actually
incurred by the person in connection with the proceeding and (2)
shall not be made in respect of any proceeding in which the person
shall have been found liable for willful or intentional misconduct
in the performance of his duty to the corporation.
F. A determination of indemnification under Section B of this
article must be made:
(1) by a majority vote of the directors who at the time of the
vote are not named defendants or respondents in the proceeding,
regardless of whether the directors not named defendants or
respondents constitute a quorum;
(2) by a majority vote of a committee of the board of
directors, if:
(a) the committee is designated by a majority vote of the
directors who at the time of the vote are not named defendants or
respondents in the proceeding, regardless of whether the directors
not named defendants or respondents constitute a quorum; and
(b) the committee consists solely of one or more of the
directors not named as defendants or respondents in the proceeding;
(3) by special legal counsel selected by the board of
directors or a committee of the board by vote as set forth in
Subsection (1) or (2) of this section; or
(4) by the shareholders in a vote that excludes the shares
held by directors who are named defendants or respondents in the
proceeding.
G. Authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as the
determination that indemnification is permissible, except that if
the determination that indemnification is permissible is made by
special legal counsel, authorization of indemnification and
determination as to reasonableness of expenses must be made in the
manner specified by Subsection (3) of Section F of this article for
the selection of special legal counsel. A provision contained in
the articles of incorporation, the bylaws, a resolution of
shareholders or directors, or an agreement that makes mandatory the
indemnification permitted under Section B of this article shall be
deemed to constitute authorization of indemnification in the manner
required by this section even though such provision may not have
been adopted or authorized in the same manner as the determination
that indemnification is permissible.
H. A corporation shall indemnify a director against
reasonable expenses incurred by him in connection with a proceeding
in which he is a named defendant or respondent because he is or was a
director if he has been wholly successful, on the merits or
otherwise, in the defense of the proceeding.
I. If, in a suit for the indemnification required by Section H
of this article, a court of competent jurisdiction determines that
the director is entitled to indemnification under that section, the
court shall order indemnification and shall award to the director
the expenses incurred in securing the indemnification.
J. If, upon application of a director, a court of competent
jurisdiction determines, after giving any notice the court
considers necessary, that the director is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, whether or not he has met the requirements set forth
in Section B of this article or has been found liable in the
circumstances described by Section C of this article, the court may
order the indemnification that the court determines is proper and
equitable; but if the person is found liable to the corporation or
is found liable on the basis that personal benefit was improperly
received by the person, the indemnification shall be limited to
reasonable expenses actually incurred by the person in connection
with the proceeding.
K. Reasonable expenses incurred by a present director who
was, is, or is threatened to be made a named defendant or respondent
in a proceeding may be paid or reimbursed by the corporation, in
advance of the final disposition of the proceeding and without the
determination specified in Section F of this article or the
authorization or determination specified in Section G of this
article, after the corporation receives a written affirmation by
the director of his good faith belief that he has met the standard
of conduct necessary for indemnification under this article and a
written undertaking by or on behalf of the director to repay the
amount paid or reimbursed if it is ultimately determined that he has
not met that standard or if it is ultimately determined that
indemnification of the director against expenses incurred by him in
connection with that proceeding is prohibited by Section E of this
article. Notwithstanding any authorization or determination
specified in this article, reasonable expenses incurred by a former
director or officer, or a present or former employee or agent of the
corporation, who was, is, or is threatened to be made a named
defendant or respondent in a proceeding may be paid or reimbursed by
the corporation, in advance of the final disposition of the
proceeding, on any terms the corporation considers appropriate. A
provision contained in the articles of incorporation, the bylaws, a
resolution of shareholders or directors, or an agreement that makes
mandatory the payment or reimbursement permitted under this section
shall be deemed to constitute authorization of that payment or
reimbursement.
L. The written undertaking required by Section K of this
article must be an unlimited general obligation of the director but
need not be secured. It may be accepted without reference to
financial ability to make repayment.
M. A provision for a corporation to indemnify or to advance
expenses to a director who was, is, or is threatened to be made a
named defendant or respondent in a proceeding, whether contained in
the articles of incorporation, the bylaws, a resolution of
shareholders or directors, an agreement, or otherwise, except in
accordance with Section R of this article, is valid only to the
extent it is consistent with this article as limited by the articles
of incorporation, if such a limitation exists.
N. Notwithstanding any other provision of this article, a
corporation may pay or reimburse expenses incurred by a director in
connection with his appearance as a witness or other participation
in a proceeding at a time when he is not a named defendant or
respondent in the proceeding.
O. An officer of the corporation shall be indemnified as, and
to the same extent, provided by Sections H, I, and J of this article
for a director and is entitled to seek indemnification under those
sections to the same extent as a director. A corporation may
indemnify and advance expenses to an officer, employee, or agent of
the corporation to the same extent that it may indemnify and advance
expenses to directors under this article. A determination of
indemnification for an employee or agent of the corporation is not
required to be made in accordance with Section F of this article.
P. A corporation may indemnify and advance expenses to
persons who are not or were not officers, employees, or agents of
the corporation but who are or were serving at the request of the
corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, employee benefit plan, other enterprise,
or other entity to the same extent that it may indemnify and advance
expenses to directors under this article.
Q. A corporation may indemnify and advance expenses to an
officer, employee, agent, or person identified in Section P of this
article and who is not a director to such further extent, consistent
with law, as may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors, or
contract or as permitted or required by common law.
R. A corporation may purchase and maintain insurance or
another arrangement on behalf of any person who is or was a
director, officer, employee, or agent of the corporation or who is
or was serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent,
or similar functionary of another foreign or domestic corporation,
employee benefit plan, other enterprise, or other entity, against
any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person, whether or
not the corporation would have the power to indemnify him against
that liability under this article. If the insurance or other
arrangement is with a person or entity that is not regularly engaged
in the business of providing insurance coverage, the insurance or
arrangement may provide for payment of a liability with respect to
which the corporation would not have the power to indemnify the
person only if including coverage for the additional liability has
been approved by the shareholders of the corporation. Without
limiting the power of the corporation to procure or maintain any
kind of insurance or other arrangement, a corporation may, for the
benefit of persons indemnified by the corporation, (1) create a
trust fund; (2) establish any form of self-insurance; (3) secure
its indemnity obligation by grant of a security interest or other
lien on the assets of the corporation; or (4) establish a letter of
credit, guaranty, or surety arrangement. The insurance or other
arrangement may be procured, maintained, or established within the
corporation or with any insurer or other person deemed appropriate
by the board of directors regardless of whether all or part of the
stock or other securities of the insurer or other person are owned
in whole or part by the corporation. In the absence of fraud, the
judgment of the board of directors as to the terms and conditions of
the insurance or other arrangement and the identity of the insurer
or other person participating in an arrangement shall be conclusive
and the insurance or arrangement shall not be voidable and shall not
subject the directors approving the insurance or arrangement to
liability, on any ground, regardless of whether directors
participating in the approval are beneficiaries of the insurance or
arrangement.
S. Any indemnification of or advance of expenses to a
director in accordance with this article shall be reported in
writing to the shareholders with or before the notice or waiver of
notice of the next shareholders' meeting or with or before the next
submission to shareholders of a consent to action without a meeting
pursuant to Section A, Article 9.10, of this Act and, in any case,
within the 12-month period immediately following the date of the
indemnification or advance.
T. For purposes of this article, the corporation is deemed to
have requested a director to serve as a trustee, employee, agent, or
similar functionary of an employee benefit plan whenever the
performance by him of his duties to the corporation also imposes
duties on or otherwise involves services by him to the plan or
participants or beneficiaries of the plan. Excise taxes assessed
on a director with respect to an employee benefit plan pursuant to
applicable law are deemed fines. Action taken or omitted by a
director with respect to an employee benefit plan in the
performance of his duties for a purpose reasonably believed by him
to be in the interest of the participants and beneficiaries of the
plan is deemed to be for a purpose which is not opposed to the best
interests of the corporation.
U. The articles of incorporation of a corporation may
restrict the circumstances under which the corporation is required
or permitted to indemnify a person under Section H, I, J, O, P, or Q
of this article.
Added by Acts 1983, 68th Leg., p. 3143, ch. 540, Sec. 2, eff. Aug.
29, 1983. Amended by Acts 1985, 69th Leg., ch. 128, Sec. 1, eff. May
20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 3, eff. Aug. 31, 1987;
Acts 1989, 71st Leg., ch. 801, Sec. 2, eff. Aug. 28, 1989; Acts
1997, 75th Leg., ch. 375, Sec. 2, eff. Sept. 1, 1997.
Sec. F amended by Acts 2003, 78th Leg., ch. 238, Sec. 3, eff. Sept.
1, 2003; Sec. K amended by Acts 2003, 78th Leg., ch. 238, Sec. 3,
eff. Sept. 1, 2003; Sec. O amended by Acts 2003, 78th Leg., ch. 238,
Sec. 3, eff. Sept. 1, 2003.
Art. 2.04. DEFENSE OF ULTRA VIRES. A. Lack of capacity of a
corporation shall never be made the basis of any claim or defense at
law or in equity.
B. No act of a corporation and no conveyance or transfer of
real or personal property to or by a corporation shall be invalid by
reason of the fact that such act, conveyance or transfer was beyond
the scope of the purpose or purposes of the corporation as expressed
in its articles of incorporation or by reason of limitations on
authority of its officers and directors to exercise any statutory
power of the corporation, as such limitations are expressed in the
articles of incorporation, but that such act, conveyance or
transfer was, or is, beyond the scope of the purpose or purposes of
the corporation as expressed in its articles of incorporation or
inconsistent with any such expressed limitations of authority, may
be asserted:
(1) In a proceeding by a shareholder against the corporation
to enjoin the doing of any act or acts or the transfer of real or
personal property by or to the corporation. If the unauthorized act
or transfer sought to be enjoined is being, or is to be, performed
or made pursuant to any contract to which the corporation is a
party, the court may, if all of the parties to the contract are
parties to the proceeding and if it deems the same to be equitable,
set aside and enjoin the performance of such contract, and in so
doing may allow to the corporation or to the other parties to the
contract, as the case may be, compensation for the loss or damage
sustained by either of them which may result from the action of the
court in setting aside and enjoining the performance of such
contract, but anticipated profits to be derived from the
performance of the contract shall not be awarded by the court as a
part of loss or damage sustained.
(2) In a proceeding by the corporation, whether acting
directly or through a receiver, trustee, or other legal
representative, or through shareholders in a representative suit,
against the incumbent or former officers or directors of the
corporation for exceeding their authority.
(3) In a proceeding by the Attorney General, as provided in
this Act, to dissolve the corporation, or in a proceeding by the
Attorney General to enjoin the corporation from transacting
unauthorized business, or to enforce divestment of real property
acquired or held contrary to the laws of this State.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Art. 2.05. CORPORATE NAME; USE OF ASSUMED NAMES. A. The
Corporate name shall conform to the following requirements:
(1) It shall contain the word "corporation,"
"company," "incorporated," or "limited," or shall contain an
abbreviation of one of such words, and shall contain such
additional words as may be required by law.
(2) It shall not contain any word or phrase which
indicates or implies that it is organized for any purpose other than
one or more of the purposes contained in its articles of
incorporation.
(3) It shall not be the same as, or deceptively similar
to, the name of any domestic corporation, limited partnership, or
limited liability company existing under the laws of this State, or
the name of any foreign corporation, non-profit corporation,
limited partnership, or limited liability company authorized to
transact business in this State, or a name the exclusive right to
which is, at the time, reserved in the manner provided in this Act
or any other statute providing for reservation of names by a limited
partnership or limited liability company, or the name of a
corporation, limited partnership, or limited liability company
which has in effect a registration of its company name as provided
in this Act or any other applicable law; provided that a name may
be similar if written consent is obtained from the existing
corporation, limited partnership, or limited liability company
having the name deemed to be similar or the person for whom the name
deemed to be similar is reserved in the office of the Secretary of
State.
(4) It shall not contain the word "lottery."
B. Any domestic or foreign corporation having authority to
transact business in this State may do so under an assumed name by
filing an assumed name certificate in the manner prescribed by law.
The assumed name may, but is not required to, comply with the
requirements of Section A(1) of this Article.
Text of section effective until April 1, 2009
C. The filing of articles of incorporation under Part Three
of this Act, an application to reserve a specified Corporate name
under Article 2.06 of this Act, or an application to register a
Corporate name by a foreign corporation under Article 2.07 of this
Act does not authorize the use of a Corporate name in this State in
violation of the rights of another under the federal Trademark Act
of 1946 (15 U.S.C., Section 1051 et seq.), the Texas trademark law
(Chapter 16, Business & Commerce Code), the Assumed Business or
Professional Name Act (Chapter 36, Business & Commerce Code), or
the common law. The Secretary of State shall deliver to each newly
organized corporation, applicant for reservation of a Corporate
name, and newly registered foreign corporation a notice containing
the substance of this section.
Text of section effective on April 1, 2009
C. The filing of articles of incorporation under Part Three
of this Act, an application to reserve a specified Corporate name
under Article 2.06 of this Act, or an application to register a
Corporate name by a foreign corporation under Article 2.07 of this
Act does not authorize the use of a Corporate name in this State in
violation of the rights of another under the federal Trademark Act
of 1946 (15 U.S.C., Section 1051 et seq.), the Texas trademark law
(Chapter 16, Business & Commerce Code), the Assumed Business or
Professional Name Act (Chapter 71, Business & Commerce Code), or
the common law. The Secretary of State shall deliver to each newly
organized corporation, applicant for reservation of a Corporate
name, and newly registered foreign corporation a notice containing
the substance of this section.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1987, 70th Leg., ch. 283, Sec. 1, eff. Aug. 31, 1987; Acts
1991, 72nd Leg., 1st C.S., ch. 6, Sec. 11A(a); Acts 1993, 73rd
Leg., ch. 215, Sec. 2.03, eff. Sept. 1, 1993; Acts 1997, 75th Leg.,
ch. 375, Sec. 3, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 67, Sec. 1, eff. September 1, 2005.
Acts 2007, 80th Leg., R.S., Ch. 885, Sec. 2.43, eff. April 1,
2009.
Art. 2.06. RESERVED NAME. A. The exclusive right to the use
of a corporate name may be reserved by any person.
B. The reservation shall be made by filing with the
Secretary of State an application to reserve a specified corporate
name, executed by the applicant or the attorney or agent
thereof. If the Secretary of State finds that the name is
available for corporate use, he shall reserve the same for the
exclusive use of the applicant for a period of one hundred and
twenty (120) days. A person may renew the person's reservation of
a name under this part for successive 120-day periods if, during the
30-day period preceding the expiration of that reservation, the
person:
(1) files a new application to reserve the name; and
(2) pays the required filing fee.
C. The right to the exclusive use of a specified corporate
name so reserved may be transferred to any other person or
corporation by filing in the office of the Secretary of State a
notice of such transfer, executed by the applicant for whom the name
was reserved, and specifying the name and address of the
transferee.
D. Any person for whom a specified corporate name has been
reserved pursuant to Section B of this article may, during the
period for which such name is reserved, terminate such reservation
by filing with the Secretary of State an application for
cancellation of reservation of corporate name, together with the
applicable fee.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1997, 75th Leg., ch. 375, Sec. 4, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 67, Sec. 2, eff. September 1, 2005.
Art. 2.07. REGISTERED NAME. A. Any corporation organized for
the purpose of operating a bank, trust company, building and loan
association or company, insurance company currently holding a valid
certificate of authority to do business in the State of Texas, and
any foreign corporation not authorized to transact business in this
State may register its corporate name under this Act, provided its
corporate name is not the same as, or deceptively similar to, the
name of any domestic corporation existing under the laws of this
State or the name of any foreign corporation authorized to transact
business in this State or any corporate name reserved or registered
under this Act. Provided, however, that any bank, trust company,
building and loan association, or insurance company will not be
prohibited from registering its corporate name even if the
corporate name may be deemed to be the same as or deceptively
similar to an otherwise authorized corporate name, if such bank,
trust company, building and loan association, or insurance company
was duly organized on, and in continual existence from, a date
preceding the date the conflicting corporate name was authorized by
the Secretary of State under this Act.
B. Such registration shall be made by:
(1) Filing with the Secretary of State an application
for registration executed by the corporation by an officer thereof,
setting forth the name of the corporation, the state or territory
under the laws of which it is incorporated, the date of its
incorporation, a statement that the corporation validly exists and
is carrying on or doing business, and a brief statement of the
business in which it is engaged; and
(2) Paying to the Secretary of State the required
registration fee.
C. Such registration shall be effective for a period of one
year from the date on which the application for registration is
filed, unless voluntarily withdrawn by the filing of a written
notice thereof with the Secretary of State.
1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by Acts
1967, 60th Leg., p. 1718, ch. 657, Sec. 3, eff. June 17, 1967; Acts
1985, 69th Leg., ch. 391, Sec. 1, eff. Aug. 26, 1985.
Amended by:
Acts 2005, 79th Leg., Ch. 67, Sec. 3, eff. September 1, 2005.
Art. 2.08. RENEWAL OF REGISTERED NAME. A. A corporation
which has in effect a registration of its corporate name may renew
such registration from year to year by filing annually an
application for renewal in the manner prescribed for the filing of
an original application. Such renewal application shall be filed
during the ninety (90) days preceding the expiration date of the
then current registration.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Art. 2.09. REGISTERED OFFICE AND REGISTERED AGENT. A. Each
corporation shall have and continuously maintain in this State:
(1) A registered office which may be, but need not be, the
same as its place of business.
(2) A registered agent, which agent may be either an
individual resident in this State or a domestic corporation, or
other entity organized under the laws of this state or authorized to
transact business in this State that has a business office
identical with each such registered office that is generally open
during normal business hours to accept service of process and
otherwise perform the functions of a registered agent.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 4, eff. Sept.
1, 2003.
Art. 2.10. CHANGE OF REGISTERED OFFICE OR REGISTERED AGENT.
A. A corporation may change its registered office or change its
registered agent, or both, upon filing in the office of the
Secretary of State a statement setting forth:
(1) The name of the corporation.
(2) The street address of its then registered office.
(3) If the street address of its registered office is
to be changed, the street address to which the registered office is
to be changed.
(4) The name of its then registered agent.
(5) If its registered agent is to be changed, the name
of its successor registered agent.
(6) That the street address of its registered office
and the street address of the business office of its registered
agent, as changed, will be identical.
(7) That such change was authorized by its Board of
Directors or by an officer of the corporation so authorized by the
Board of Directors.
B. The statement required by this article shall be executed
on behalf of the corporation by an officer. The original and a copy
of the statement shall be delivered to the Secretary of State. If
the Secretary of State finds that such statement conforms to the
provisions of this Act, he shall, when the appropriate filing fee is
paid as prescribed by law:
(1) Endorse on the original and the copy the word "Filed," and
the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to the corporation or its representative.
C. Upon such filing, the change of address of the registered
office, or the appointment of a new registered agent, or both, as
the case may be, shall become effective.
D. Any registered agent of a corporation may resign
(1) by giving written notice to the corporation at its last
known address
(2) and by giving written notice, in duplicate (the original
and one copy of the notice), to the Secretary of State within ten
days after mailing or delivery of said notice to the corporation.
Such notice shall include the last known address of the corporation
and shall include the statement that written notice of resignation
has been given to the corporation and the date thereof. Upon
compliance with the requirements as to written notice, the
appointment of such agent shall terminate upon the expiration of
thirty (30) days after receipt of such notice by the Secretary of
State.
If the Secretary of State finds that such written notice
conforms to the provisions of this Act, he shall:
(1) Endorse on the original and the copy the word "filed" and
the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to such resigning registered agent.
(4) Notify the corporation of the resignation of the
registered agent.
No fee shall be required to be paid for the filing of a
resignation under this section.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1969, 61st Leg., p. 2483, ch. 835, Sec. 1, 2, eff. June 18,
1969; Acts 1979, 66th Leg., p. 222, ch. 120, Sec. 23, eff. May 9,
1979; Acts 1981, 67th Leg., p. 838, ch. 297, Sec. 12, eff. Aug. 31,
1981; Acts 1983, 68th Leg., p. 684, ch. 158, Sec. 1, eff. May 20,
1983; Acts 1985, 69th Leg., ch. 128, Sec. 2, eff. May 20, 1985.
Amended by:
Acts 2005, 79th Leg., Ch. 67, Sec. 4, eff. September 1, 2005.
Art. 2.10-1. CHANGE OF ADDRESS OF REGISTERED AGENT. A. The
location of the registered office in Texas for a corporation,
domestic or foreign, may be changed from one address to another upon
filing in the office of the Secretary of State a statement setting
forth:
(1) The name of the corporation represented by such
registered agent.
(2) The address at which such registered agent has maintained
the registered office for said corporation.
(3) The new address at which such registered agent will
thereafter maintain the registered office for said corporation.
(4) A statement that notice of the change has been given to
said corporation in writing at least ten (10) days prior to such
filing.
B. The statement required by this article shall be signed by
the registered agent, or, if said agent is a corporation, by an
officer of such corporate agent on its behalf. If the registered
agent is simultaneously filing statements as to more than one
corporation, each such statement may contain facsimile signatures
in the execution. The original and one copy of the statement shall
be delivered to the Secretary of State. If the Secretary of State
finds that such statement conforms to the provisions of this Act, he
shall:
(1) Endorse on the original and the copy the word "Filed," and
the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to such registered agent.
C. The registered office of the corporation named in such
statement shall be changed to the new address of the registered
agent upon the filing of such statement by the Secretary of State.
Added by Acts 1967, 60th Leg., p. 1719, ch. 657, Sec. 4, eff. June
17, 1967. Amended by Acts 1979, 66th Leg., p. 223, ch. 120, Sec. 24,
eff. May 9, 1979; Acts 1983, 68th Leg., p. 685, ch. 158, Sec. 2,
eff. May 20, 1983; Acts 1987, 70th Leg., ch. 93, Sec. 4, eff. Aug.
31, 1987.
Art. 2.11. SERVICE OF PROCESS ON CORPORATION. A. The
president and all vice presidents of the corporation and the
registered agent of the corporation shall be agents of such
corporation upon whom any process, notice, or demand required or
permitted by law to be served upon the corporation may be served.
B. Whenever a corporation shall fail to appoint or maintain
a registered agent in this State, or whenever its registered agent
cannot with reasonable diligence be found at the registered office,
then the Secretary of State shall be an agent of such corporation
upon whom any such process, notice, or demand may be
served. Service on the Secretary of State of any process, notice,
or demand shall be made by delivering to and leaving with him, or
with the Deputy Secretary of State, or with any clerk having charge
of the corporation department of his office, duplicate copies of
such process, notice, or demand. In the event any such process,
notice, or demand is served on the Secretary of State, he shall
immediately cause one of the copies thereof to be forwarded by
registered mail, addressed to the corporation at its registered
office. Any service so had on the Secretary of State shall be
returnable in not less than thirty (30) days.
C. The Secretary of State shall keep a record of all
processes, notices and demands served upon him under this Article,
and shall record therein the time of such service and his action
with reference thereto.
D. Service of process, notice, or demand required or
permitted by law to be served by a political subdivision of this
state or by a person, including another political subdivision or an
attorney, acting on behalf of a political subdivision in connection
with the collection of a delinquent ad valorem tax may be served on
a corporation whose corporate privileges are forfeited under
Section 171.251, Tax Code, or is involuntarily dissolved under
Article 7.01 of this Act by delivering the process, notice, or
demand to any officer or director of the corporation, as listed in
the most recent records of the secretary of state. If the officers
or directors of the corporation are unknown or cannot be found,
service on the corporation may be made in the same manner as service
is made on unknown shareholders under law. Notwithstanding any
disability or reinstatement of a corporation, service of process
under this section is sufficient for a judgment against the
corporation or a judgment in rem against any property to which the
corporation holds title.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1999, 76th Leg., ch. 1481, Sec. 40, eff. Sept. 1, 1999.
Amended by:
Acts 2005, 79th Leg., Ch. 41, Sec. 8, eff. September 1, 2005.
Art. 2.12. AUTHORIZED SHARES. A. Each corporation may issue
the number of shares stated in its articles of incorporation. Such
shares may be divided into one or more classes, any or all of which
classes may consist of shares with par value or shares without par
value, as shall be stated in the articles of incorporation. Any
such class of shares may be divided into one or more series, as
shall be stated in the articles of incorporation. All shares of the
same class shall be of the same par value or be without par value.
Unless the shares of a class have been divided into series, all
shares of the same class shall be identical in all respects. If the
shares of a class have been divided into series, shares of the same
class may vary between series, but all shares of the same series
shall be identical in all respects. Any such class or series of
shares shall be so designated as to distinguish the shares of that
class or series from the shares of all other classes and series.
Any such class or series shall have such designations, preferences,
limitations, and relative rights, including voting rights, as shall
be stated in the articles of incorporation. The articles of
incorporation may limit or deny the voting rights of, or provide
special voting rights for, the shares of any class or series to the
extent that such limitation, denial, or provision is not
inconsistent with the provisions of this Act. Any of the
designations, preferences, limitations, and relative rights,
including voting rights, of any class or series of shares may be
made dependent upon facts ascertainable outside the articles of
incorporation, which facts may include future acts of the
corporation, provided that the manner in which such facts shall
operate upon the designations, preferences, limitations, and
relative rights, including voting rights, of such class or series
of shares is clearly and expressly set forth in the articles of
incorporation.
B. Without being limited to the authority herein contained, a
corporation, when so provided in its articles of incorporation, may
issue shares of one or more classes or series:
(1) Redeemable, subject to compliance by the corporation with
Articles 2.38 and 4.08 of this Act, at the option of the
corporation, the shareholder or another person or upon the
occurrence of a designated event.
(2) Entitling the holders thereof to cumulative,
noncumulative, or partially cumulative dividends.
(3) Having preference over any other class, classes or series
of shares as to the payment of dividends.
(4) Having preference in the assets of the corporation over
any other class, classes or series of shares upon the voluntary or
involuntary liquidation of the corporation.
(5) Exchangeable, subject to compliance by the corporation
with Article 2.38 of this Act, at the option of the corporation, the
shareholder or another person or upon the occurrence of a
designated event, for shares, obligations, indebtedness, evidence
of ownership, rights to purchase securities or other securities of
the corporation or one or more other domestic or foreign
corporations or other entities or for other property or for any
combination of the foregoing.
(6) Convertible at the option of the corporation, the
shareholder or another person or upon the occurrence of a
designated event, into shares of any other class or series, but
shares without par value shall not be converted into shares with par
value unless that part of the stated capital of the corporation
represented by such shares without par value is, at the time of
conversion, at least equal to the aggregate par value of the shares
into which shares without par value are to be converted or the
amount of any such deficiency is transferred from surplus to stated
capital.
C. (1) The board of directors of a corporation registered as
an open-end company under the Investment Company Act may:
(a) establish classes of shares and series of unissued shares
of any class by fixing and determining the designations,
preferences, limitations, and relative rights, including voting
rights, of the shares of any class or series so established to the
same extent that the designations, preferences, limitations, and
relative rights could be stated if fully set forth in the articles
of incorporation; and
(b) increase or decrease the aggregate number of shares or
the number of shares of, or eliminate and remove from the articles
of incorporation, a class or series of shares that the corporation
has authority to issue, unless a provision has been included in the
articles of incorporation of the corporation after September 1,
1993, expressly prohibiting those actions by the board of
directors. The board of directors may not:
(i) decrease the number of shares within a class or series to
less than the number of shares of that class or series that are then
outstanding; or
(ii) eliminate or remove from the articles of incorporation
any reference to any class or series of which shares are then
outstanding.
To establish a class or series, the board of directors shall
adopt a resolution setting forth the designation of the class or
series and fixing and determining the designations, preferences,
limitations, and relative rights, including voting rights, of the
class or series. In order to increase or decrease the number of
shares of, or eliminate and remove from the articles of
incorporation any reference to, a class or series of shares, the
board of directors shall adopt a resolution fixing and determining
the new number of shares of each class or series in which the number
of shares is increased or decreased or eliminating the class or
series and removing references to the class or series from the
articles of incorporation. The shares of any eliminated series
shall resume the status of authorized but unissued shares of the
class of shares from which the series was established unless
otherwise provided in the resolution or the articles of
incorporation.
(2) Before the first issuance of any shares of a class or
series established or increased or decreased by resolution adopted
by the board of directors under Subsection (1) of this section, and
in order to eliminate from the articles of incorporation a class or
series of shares and all references to the class or series contained
in the articles, the corporation shall file with the Secretary of
State a statement setting forth:
(a) the name of the corporation;
(b) if the statement relates to the establishment of a class
or series of shares, a copy of the resolution establishing and
designating the class or series and fixing and determining the
preferences, limitations, and relative rights of the class or
series;
(c) if the statement relates to an increase or decrease in the
number of shares of any class or series, a copy of the resolution
fixing and determining the new number of shares of each class or
series in which the number of shares is increased or decreased;
(d) if the statement relates to the elimination of a class or
series of shares and to the removal of all references to the class
or series from the articles of incorporation, a copy of the
resolution eliminating the class or series and removing all
references to the class or series from the articles of
incorporation;
(e) the date of adoption of the resolution; and
(f) that the resolution was duly adopted by all necessary
action on the part of the corporation.
(3) The statement shall be executed on behalf of the
corporation by an officer. The original and a copy of the statement
shall be delivered to the Secretary of State. If the Secretary of
State finds that the statement conforms to law, when the
appropriate filing fee is paid as provided by law, the Secretary of
State shall:
(a) endorse on the original and the copy the word "Filed," and
the month, day, and year of the filing of the statement;
(b) file the original in the Secretary of State's office; and
(c) return the copy to the corporation or its representative.
(4) On the filing of a statement by the Secretary of State,
the resolution establishing and designating the class or series and
fixing and determining the preferences, limitations, and relative
rights of the class or series, the resolution fixing the new number
of shares of each class or series in which the number of shares is
increased or decreased, or the resolution eliminating a class or
series and all references to the class or series from the articles
of incorporation, as appropriate, becomes an amendment of the
articles of incorporation. An amendment of the articles of
incorporation effected as provided by this Article is not subject
to the procedure to amend the articles contained in Article 4.02 of
this Act.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1488, ch. 545, Sec. 6, eff. Aug. 27, 1973;
Acts 1985, 69th Leg., ch. 128, Sec. 3, eff. May 20, 1985; Acts 1987,
70th Leg., ch. 93, Sec. 5, eff. Aug. 31, 1987; Acts 1989, 71st Leg.,
ch. 801, Sec. 3, eff. Aug. 28, 1989; Acts 1991, 72nd Leg. ch. 901,
Sec. 1, eff. Aug. 26, 1991; Acts 1993, 73rd Leg., ch. 215, Sec.
2.04, eff. Sept. 1, 1993.
Art. 2.13. SERIES OF SHARES ESTABLISHED BY BOARD OF
DIRECTORS. A. If the articles of incorporation shall expressly
vest such authority in the board of directors, then the board of
directors shall have authority to establish series of unissued
shares of any class by fixing and determining the designations,
preferences, limitations, and relative rights, including voting
rights, of the shares of any series so established to the same
extent that such designations, preferences, limitations, and
relative rights could be stated if fully set forth in the articles
of incorporation, but subject to and within the limitations set
forth in the articles of incorporation. In order to establish a
series, where authority so to do is contained in the articles of
incorporation, the board of directors shall adopt a resolution
setting forth the designation of the series and fixing and
determining the designations, preferences, limitations and
relative rights, including voting rights, thereof or so much
thereof as shall not be fixed and determined by the articles of
incorporation.
B. If the articles of incorporation shall expressly vest
authority in the board of directors to establish series of unissued
shares of a class and do not expressly restrict the board of
directors from increasing or decreasing the number of shares of
such a series, then the board of directors shall have authority to
increase or decrease the number of shares within each such series;
provided, however, that the board of directors may not decrease the
number of shares within a series to less than the number of shares
within such series that are then issued.
In order to so increase or decrease the number of shares of a
series, the board of directors shall adopt a resolution fixing and
determining the new number of shares of each series in which the
number of shares is increased or decreased. In case the number of
shares of a series shall be so decreased, the shares by which the
series is decreased shall resume the status of authorized but
unissued shares of the class of shares from which such series was
established, unless otherwise provided in the articles of
incorporation or the terms of such class or series.
C. If the articles of incorporation shall expressly vest
authority in the board of directors to establish series of unissued
shares, then if no shares of a series established by resolution of
the board of directors are outstanding, either because none were
issued or because no issued shares of such series remain
outstanding or held as treasury shares, the board of directors
shall have authority to eliminate from the articles of
incorporation such series and all references to such series
contained therein. In order to eliminate such series and such
references from the articles of incorporation, the board of
directors shall adopt a resolution eliminating such series and all
reference to such series from the articles of incorporation. The
shares of any such eliminated series shall resume the status of
authorized but unissued shares of the class of shares from which
such series was established, unless otherwise provided in the
articles of incorporation.
D. Prior to the issuance of any shares of a series established
by resolution adopted by the board of directors, and prior to the
issuance of any shares of a series in which the number of shares has
been increased or decreased by resolution adopted by the board of
directors, if such issuance is the first issuance of shares of such
series since such resolution was adopted, and in order to eliminate
from the articles of incorporation a series of shares and all
references to such series contained therein, the corporation shall
file with the Secretary of State a statement setting forth:
(1) The name of the corporation.
(2) If the statement relates to the establishment of a series
of shares, a copy of the resolution establishing and designating
the series and fixing and determining the preferences, limitations,
and relative rights thereof.
(3) If the statement relates to an increase or decrease in the
number of shares of any series, a copy of the resolution fixing and
determining the new number of shares of each series in which the
number of shares is increased or decreased.
(4) If the statement relates to the elimination of a series of
shares and all references thereto from the articles of
incorporation, a copy of the resolution eliminating such series and
all references to such series from the articles of incorporation.
(5) The date of adoption of such resolution.
(6) That such resolution was duly adopted by all necessary
action on the part of the corporation.
E. If the articles of incorporation expressly authorize the
board of directors to establish series of unissued shares of a class
and if no shares of a series established by resolution of the board
of directors have been issued, the board of directors may amend the
designations, preferences, limitations, and relative rights,
including voting rights, of the series, unless otherwise provided
in the articles of incorporation. To amend the designations,
preferences, limitations, and relative rights of a series, the
board of directors shall adopt a resolution amending the
designations, preferences, limitations, and relative rights of the
series. Before the issuance of any shares of the series, the
corporation shall file with the secretary of state a statement
setting forth:
(1) The name of the corporation.
(2) That no shares of the series have been issued.
(3) If the designation of the series is being changed, a
statement of the original designation and the new designation.
(4) A copy of the resolution amending the designations,
preferences, limitations, or relative rights of the series.
(5) The date of adoption of the resolution.
(6) That the resolution was adopted by all necessary action
on the part of the corporation.
F. A statement filed in accordance with Section D or E of this
article shall be executed on behalf of the corporation by an
officer. The original and a copy of the statement shall be
delivered to the Secretary of State. If the Secretary of State
finds that such statement conforms to law, he shall, when the
appropriate filing fee is paid as prescribed by law:
(1) Endorse on the original and the copy the word "Filed," and
the month, day, and year of the filing thereof.
(2) File the original in his office.
(3) Return the copy to the corporation or its representative.
G. Upon the filing of a statement described in Section D or E
of this article by the Secretary of State, the resolution
establishing and designating the series and fixing and determining
the preferences, limitations, and relative rights thereof, the
resolution fixing the new number of shares of each series in which
the number of shares is increased or decreased, the resolution
eliminating a series and all references to such series from the
articles of incorporation, or the resolution amending the
preferences, limitations, and relative rights of the series, as
appropriate, shall become an amendment of the articles of
incorporation. The filing of the statement or the filing of a
restated certificate of incorporation under Article 4.07 of this
Act does not prohibit the board of directors from subsequently
adopting a resolution as authorized by this article. An amendment
of the articles of incorporation effected pursuant to this Article
2.13 is not subject to the procedure to amend the articles of
incorporation contained in Article 4.02 of this Act.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1489, ch. 545, Sec. 7, eff. Aug. 27, 1973;
Acts 1979, 66th Leg., p. 223, ch. 120, Sec. 25, eff. May 9, 1979;
Acts 1981, 67th Leg., p. 838, ch. 297, Sec. 13, eff. Aug. 31, 1981;
Acts 1985, 69th Leg., ch. 128, Sec. 4, eff. May 20, 1985; Acts 1987,
70th Leg., ch. 93, Sec. 6, eff. Aug. 31, 1987; Acts 1989, 71st Leg.,
ch. 801, Sec. 4, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901,
Sec. 2, eff. Aug. 26, 1991.
Sec. E amended by Acts 2003, 78th Leg., ch. 238, Sec. 5, eff. Sept.
1, 2003; Sec. F amended by Acts 2003, 78th Leg., ch. 238, Sec. 5,
eff. Sept. 1, 2003; Sec. G added by Acts 2003, 78th Leg., ch. 238,
Sec. 5, eff. Sept. 1, 2003.
Art. 2.14. SUBSCRIPTION FOR SHARES. A. Unless otherwise
provided therein, a subscription for shares of a corporation to be
organized may not be revoked within six (6) months, except with the
consent of all other subscribers.
B. Repealed by Acts 2003, 78th Leg., ch. 238, Sec. 44(1).
C. Acceptance of a subscription shall be effected by a
resolution of acceptance by the board of directors or by a written
memorandum of acceptance executed by one authorized by the board of
directors and delivered to the subscriber or his assignee.
D. Subscriptions for shares, whether made before or after the
organization of a corporation, shall be paid in full at such time,
or in such installments and at such times, as shall be determined by
the board of directors unless the payment terms are specified by the
subscription. Unless otherwise specified by the subscription, a
call made by the board of directors for payment on subscriptions
shall be uniform as to all shares of the same class or as to all
shares of the same series, as the case may be, as far as
practicable. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to
collect the amount due in the same manner as any debt due the
corporation or declare the subscription forfeited if the amount due
remains unpaid for a period of twenty (20) days after written demand
has been made therefor to the subscriber. If mailed, such written
demand shall be deemed to be made when deposited in the United
States mail in a sealed envelope addressed to the subscriber at his
last post office address known to the corporation, with postage
thereon prepaid. The effect of such declaration of forfeiture shall
be to terminate all the rights and obligations of the subscriber as
such, but the corporation may retain any amount previously paid on
the subscription.
E. Before acquiring shares in a corporation, a person may
commit to act in a specified manner with respect to the shares after
the acquisition, including with respect to the voting of the shares
or the retention or disposition of the shares. To be binding, the
commitment must be in writing and be signed by the person acquiring
the shares. A written commitment entered into under this section is
a contract between the shareholder and the corporation.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Sec. B repealed by Acts 2003, 78th Leg., ch. 238, Sec. 44(1), eff.
Sept. 1, 2003; Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec.
6, eff. Sept. 1, 2003; Sec. D amended by Acts 2003, 78th Leg., ch.
238, Sec. 6, eff. Sept. 1, 2003; Sec. E added by Acts 2003, 78th
Leg., ch. 238, Sec. 6, eff. Sept. 1, 2003.
Art. 2.14-1. STOCK RIGHTS, OPTIONS, AND CONVERTIBLE
INDEBTEDNESS. A. Subject to any limitations in its articles of
incorporation, a corporation may create and issue, whether or not
in connection with the issuance and sale of any of its shares or
other securities, (1) rights or options entitling the holders
thereof to purchase or receive from the corporation any of its
shares of any class, classes or series or other securities and (2)
indebtedness convertible into any of its shares of any class,
classes or series or other securities.
B. The terms of rights or options may:
(1) prohibit or limit the exercise, transfer, or receipt of
the rights or options by certain persons or classes of persons,
including:
(a) a person who beneficially owns or offers to acquire a
specified number or percentage of the outstanding common shares,
voting power, or other securities of the corporation; or
(b) a transferee of a person described by Paragraph (a) of
this subsection; or
(2) invalidate the rights or options held by a person or
transferee described by Subsection (1) of this section.
C. Such rights, options or indebtedness shall be evidenced in
such manner as the board of directors shall approve and, subject to
the provisions of the articles of incorporation, shall set forth:
(1) in the case of rights or options, the terms upon which,
the time or times within which, and any consideration, including a
formula by which the consideration may be determined, for which
such shares may be purchased or received from the corporation upon
the exercise of any such right or option; or
(2) in the case of convertible indebtedness, the terms and
conditions upon which, the time or times within which, and the
conversion ratio or ratios at which, such indebtedness may be
converted into such shares.
D. In the absence of fraud in the transaction, the judgment of
the board of directors as to the adequacy of the consideration
received for such rights, options, or indebtedness shall be
conclusive; provided that rights or options may be issued by a
corporation to its shareholders, employees, or directors without
consideration if, in the judgment of the board of directors, the
issuance of those rights or options is in the interests of the
corporation. The consideration to be received for any shares
having a par value, other than treasury shares, to be issued upon
the exercise of such rights or options shall not be less than the
par value thereof. No privilege of conversion shall be conferred
upon, or altered in respect to, any indebtedness that would result
in receipt by the corporation of less than the minimum
consideration required to be received upon issuance of the shares.
The consideration for shares issued upon the exercise of
convertible indebtedness shall be that provided in Section E of
Article 2.15 of this Act. The consideration for shares issued upon
the exercise of rights or options shall be that provided in Section
F of Article 2.15 of this Act.
E. Except as provided by Section F of this article, the
authority to grant, amend, redeem, extend, or replace the rights or
options on behalf of a corporation is vested exclusively in the
board of directors of the corporation. A bylaw may not require the
board to grant, amend, redeem, extend, or replace the rights or
options.
F. The terms of the rights or options or the agreement or plan
under which the rights or options are issued may provide that the
board of directors may by resolution authorize one or more officers
of the corporation to do one or both of the following:
(1) designate officers and employees of the corporation or of
any of its subsidiaries to receive rights or options created by the
corporation; or
(2) determine the number of the rights or options to be
received by the officers and employees.
G. A resolution adopted under Section F of this article
authorizing an officer of the corporation to designate recipients
of rights or options shall specify the total number of rights or
options the officer may award. The board of directors may not
authorize an officer to designate himself or herself as a recipient
of any rights or options.
Added by Acts 1973, 63rd Leg., p. 1489, ch. 545, Sec. 8, eff. Aug.
27, 1973. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 5, eff.
Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 3, eff. Aug. 26,
1991.
Amended by Acts 2003, 78th Leg., ch. 238, Sec. 7, eff. Sept. 1,
2003.
Art. 2.15. CONSIDERATION FOR SHARES. A. Shares having a par
value may be issued for such consideration, not less than the par
value thereof, as shall be fixed from time to time by the board of
directors or, in the case of shares issued by a converted entity, in
the plan of conversion or, in the case of a corporation created by a
merger, in the plan of merger.
B. Shares without par value may be issued for such
consideration, as may be fixed:
(1) by the board of directors from time to time, unless the
articles of incorporation reserve to the shareholders the right to
fix the consideration, in which case, prior to the issuance of such
shares, the shareholders shall fix the consideration to be received
for such shares, by a vote of the holders of a majority of all shares
entitled to vote thereon;
(2) by a plan of conversion, in the case of shares to be
issued pursuant to the plan of conversion by a corporation that is a
converted entity; or
(3) by a plan of merger, in the case of shares to be issued
pursuant to the plan of merger by a corporation created pursuant to
the plan of merger.
C. Treasury shares may be disposed of by the corporation for
such consideration as may be fixed from time to time by the board of
directors.
D. That part of the surplus of a corporation which is
transferred to stated capital upon the issuance of shares as a share
dividend shall be deemed to be the consideration for the issuance of
such shares.
E. In the event of the issuance of shares by a corporation
upon the conversion or exchange of its indebtedness or shares, the
consideration for the shares so issued shall be:
(1) The principal sum of, and accrued interest on, the
indebtedness so exchanged or converted, or the stated capital then
represented by the shares so exchanged or converted, and
(2) That part of surplus, if any, transferred to stated
capital upon the issuance of shares for the shares so exchanged or
converted, and
(3) Any additional consideration paid to the corporation upon
the issuance of shares for the indebtedness or shares so exchanged
or converted.
F. In the event of the issuance of shares by a corporation
upon the exercise of rights or options entitling the holders
thereof to purchase or receive from the corporation any of its
shares, the consideration for the shares so issued shall be:
(1) The consideration, if any, received by the corporation
for such rights or options, and
(2) The consideration, if any, received by the corporation
for the issuance of shares upon the exercise of such rights or
options.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1490, ch. 545, Sec. 9, eff. Aug. 27, 1973;
Acts 1989, 71st Leg., ch. 801, Sec. 6, eff. Aug. 28, 1989; Acts
1997, 75th Leg., ch. 375, Sec. 5, eff. Sept. 1, 1997.
Art. 2.16. PAYMENT FOR SHARES. A. The board of directors or,
in the case of shares to be issued pursuant to a plan of conversion
by a corporation that is a converted entity, the plan of conversion,
or, in the case of shares to be issued pursuant to a plan of merger
by a corporation created pursuant to the plan of merger, the plan of
merger may authorize shares to be issued for consideration
consisting of any tangible or intangible benefit to the corporation
or other property of any kind or nature, including cash, promissory
notes, services performed, contracts for services to be performed,
other securities of the corporation, or securities of any other
corporation, domestic or foreign, or other entity. In addition,
shares may be issued pursuant to a plan of conversion or plan of
merger in the manner and for such consideration as may be provided
for in the plan of conversion or plan of merger. Shares may not be
issued until the full amount of the consideration, fixed as
provided by law, has been paid or delivered as required in
connection with the authorization of the shares. When such
consideration shall have been so paid or delivered, the shares
shall be deemed to have been issued and the subscriber or
shareholder entitled to receive such issue shall be a shareholder
with respect to such shares, and the shares shall be considered
fully paid and non-assessable.
B. In the absence of fraud in the transaction, the judgment of
the board of directors or the shareholders or the party or parties
approving the plan of conversion or the plan of merger, as the case
may be, as to the value and sufficiency of the consideration
received for shares shall be conclusive.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1971, 62nd Leg., p. 1173, ch. 276, Sec. 1, eff. May 19, 1971;
Acts 1983, 68th Leg., p. 3150, ch. 540, Sec. 4, eff. Aug. 29, 1983;
Acts 1991, 72nd Leg., ch. 901, Sec. 4, eff. Aug. 26, 1991; Acts
1997, 75th Leg., ch. 375, Sec. 6, eff. Sept. 1, 1997.
Art. 2.18. EXPENSES OF ORGANIZATION, REORGANIZATION, AND
FINANCING. A. The reasonable charges and expenses of organization
or reorganization of a corporation, and the reasonable expenses of
and compensation for the sale or underwriting of its shares, may be
paid or allowed by such corporation out of the consideration
received by it in payment for its shares without thereby rendering
such shares not fully paid and non-assessable.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 1.
Art. 2.19. CERTIFICATES REPRESENTING SHARES. A. A
corporation shall deliver certificates representing shares to
which shareholders are entitled, or the shares of a corporation may
be uncertificated shares. Unless otherwise provided by the
articles of incorporation or bylaws, the board of directors of a
corporation may provide by resolution that some or all of any or all
classes and series of its shares shall be uncertificated shares,
provided that such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the
corporation. Certificates representing shares shall be signed by
such officer or officers as the bylaws of the corporation shall
prescribe, and may be sealed with the seal of the corporation or a
facsimile thereof. The signatures of such officer or officers as
the bylaws of the corporation shall prescribe upon a certificate
may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it
may be issued by the corporation with the same effect as if he were
such officer at the date of its issuance.
B. In the event a corporation is authorized to issue shares
of more than one class or series, each certificate representing
shares issued by such corporation (1) shall conspicuously set forth
on the face or back of the certificate a full statement of all the
designations, preferences, limitations, and relative rights of the
shares of each class or series to the extent they have been fixed
and determined and the authority of the board of directors to fix
and determine the designations, preferences, limitations, and
relative rights of subsequent series; or (2) shall conspicuously
state on the face or back of the certificate that (a) such a
statement is set forth in the articles of incorporation on file in
the office of the Secretary of State and (b) the corporation will
furnish a copy of such statement to the record holder of the
certificate without charge on written request to the corporation at
its principal place of business or registered office.
C. Each certificate representing shares shall state upon the
face thereof:
(1) That the corporation is organized under the laws of this
State.
(2) The name of the person to whom issued.
(3) The number and class of shares and the designation of the
series, if any, which such certificate represents.
(4) The par value of each share represented by such
certificate, or a statement that the shares are without par value.
D. In accordance with Chapter 8, Business & Commerce Code, a
corporation shall, after the issuance or transfer of uncertificated
shares, send to the registered owner of uncertificated shares a
written notice containing the information required to be set forth
or stated on certificates pursuant to this Act. Except as otherwise
expressly provided by law, the rights and obligations of the
holders of uncertificated shares and the rights and obligations of
the holders of certificates representing shares of the same class
and series shall be identical. No share shall be issued until the
consideration therefor, fixed as provided by law, has been fully
paid.
E. No requirement of this Act with respect to matters to be
set forth on certificates representing shares of a corporation
shall apply to or affect certificates outstanding, when such
requirement first becomes applicable to such certificates; but
such requirements shall apply to all certificates thereafter issued
whether in connection with an original issue of shares, a transfer
of shares or otherwise. No certificate representing shares in
which any provision of the articles of incorporation, or by-laws,
or resolution, or agreement restricting the transfer of shares,
shall have been incorporated by reference pursuant to the
provisions of Section F of this Article prior to its amendment shall
be invalidated or affected by such amendment; but such
incorporation by reference shall not be used on certificates
hereafter issued whether in connection with an original issue of
shares, a transfer of shares, or otherwise.
F. Repealed by Acts 1975, 64th Leg., p. 322, ch. 134, Sec. 22,
eff. Sept. 1, 1975.
G. In the event any restriction on the transfer, or
registration of the transfer, of shares shall be imposed or agreed
to by the corporation, as permitted by this Act, each certificate
representing shares so restricted (1) shall conspicuously set forth
a full or summary statement of the restriction on the face of the
certificate, or (2) shall set forth such statement on the back of
the certificate and conspicuously refer to the same on the face of
the certificate, or (3) shall conspicuously state on the face or
back of the certificate that such a restriction exists pursuant to a
specified document and (a) that the corporation will furnish to the
record holder of the certificate without charge upon written
request to the corporation at its principal place of business or
registered office a copy of the specified document, or (b) if such
document is one required or permitted to be and has been filed under
this Act, that such specified document is on file in the office of
the Secretary of State and contains a full statement of such
restriction. Unless such document was on file in the office of the
Secretary of State at the time of the request, a corporation which
fails within a reasonable time to furnish the record holder of a
certificate upon such request and without charge a copy of the
specified document shall not be permitted thereafter to enforce its
rights under the restriction imposed on the shares represented by
such certificate.
H. Repealed by Acts 1975, 64th Leg., p. 322, ch. 134, Sec. 22,
eff. Sept. 1, 1975.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 2; Acts 1957, 55th Leg.,
p. 111, ch. 54, Sec. 2; Acts 1973, 63rd Leg., p. 1490, ch. 545, Sec.
10, eff. Aug. 27, 1973; Acts 1975, 64th Leg., p. 305, ch. 134, Sec.
2, 3, 22, eff. Sept. 1, 1975; Acts 1983, 68th Leg., p. 2565, ch.
442, Sec. 3, eff. Sept. 1, 1983; Acts 1985, 69th Leg., ch. 128, Sec.
6, eff. May 20, 1985; Acts 1987, 70th Leg., ch. 93, Sec. 7, eff.
Aug. 31, 1987; Acts 1991, 72nd Leg., ch. 901, Sec. 5, eff. Aug. 26,
1991.
Amended by:
Acts 2005, 79th Leg., Ch. 67, Sec. 5, eff. September 1, 2005.
Art. 2.20. ISSUANCE OF FRACTIONAL SHARES OR SCRIP. A. A
corporation may (1) issue fractions of a share, either represented
by a certificate or uncertificated, (2) arrange for the disposition
of fractional interests by those entitled thereto, (3) pay in cash
the fair value of fractions of a share as of the time when those
entitled to receive such fractions are determined, or (4) issue
scrip in registered or bearer form which shall entitle the holder to
receive a certificate for a full share or an uncertificated full
share upon the surrender of such scrip aggregating a full share. A
certificate for a fractional share or an uncertificated fractional
share shall, but scrip shall not unless otherwise provided therein,
entitle the holder to exercise voting rights, to receive dividends
thereon, and to participate in any of the assets of the corporation
in the event of liquidation. The board of directors may cause scrip
to be issued subject to the condition that it shall become void if
not exchanged for certificates representing full shares or
uncertificated full shares before a specified date, or subject to
the condition that the shares for which such scrip is exchangeable
may be sold by the corporation and the proceeds thereof distributed
to the holders of scrip, or subject to any other conditions which
the board of directors may determine advisable.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1492, ch. 545, Sec. 11, eff. Aug. 27, 1973;
Acts 1983, 68th Leg., p. 2566, ch. 442, Sec. 4, eff. Sept. 1, 1983.
Art. 2.21. LIABILITY OF SUBSCRIBERS AND SHAREHOLDERS. A. A
holder of shares, an owner of any beneficial interest in shares, or
a subscriber for shares whose subscription has been accepted, or
any affiliate thereof or of the corporation, shall be under no
obligation to the corporation or to its obligees with respect to:
(1) such shares other than the obligation, if any, of such
person to pay to the corporation the full amount of the
consideration, fixed in compliance with Article 2.15 of this Act,
for which such shares were or are to be issued;
(2) any contractual obligation of the corporation or any
matter relating to or arising from the obligation on the basis that
the holder, owner, subscriber, or affiliate is or was the alter ego
of the corporation, or on the basis of actual fraud or constructive
fraud, a sham to perpetrate a fraud, or other similar theory, unless
the obligee demonstrates that the holder, owner, subscriber, or
affiliate caused the corporation to be used for the purpose of
perpetrating and did perpetrate an actual fraud on the obligee
primarily for the direct personal benefit of the holder, owner,
subscriber, or affiliate; or
(3) any obligation of the corporation on the basis of the
failure of the corporation to observe any corporate formality,
including without limitation: (a) the failure to comply with any
requirement of this Act or of the articles of incorporation or
bylaws of the corporation; or (b) the failure to observe any
requirement prescribed by this Act or by the articles of
incorporation or bylaws for acts to be taken by the corporation, its
board of directors, or its shareholders.
B. The liability of a holder, owner, or subscriber of shares
of a corporation or any affiliate thereof or of the corporation for
an obligation that is limited by Section A of this article is
exclusive and preempts any other liability imposed on a holder,
owner, or subscriber of shares of a corporation or any affiliate
thereof or of the corporation for that obligation under common law
or otherwise, except that nothing contained in this article shall
limit the obligation of a holder, owner, subscriber, or affiliate
to an obligee of the corporation when:
(1) the holder, owner, subscriber, or affiliate has expressly
assumed, guaranteed, or agreed to be personally liable to the
obligee for the obligation; or
(2) the holder, owner, subscriber, or affiliate is otherwise
liable to the obligee for the obligation under this Act or another
applicable statute.
C. Any person becoming an assignee or transferee of
certificated shares or of uncertificated shares or of a
subscription for shares in good faith and without knowledge or
notice that the full consideration therefor has not been paid shall
not be personally liable to the corporation or its creditors for any
unpaid portion of such consideration.
D. An executor, administrator, conservator, guardian,
trustee, assignee for the benefit of creditors, or receiver shall
not be personally liable as a holder of or subscriber to shares of a
corporation, but the estate and funds in his hands shall be so
liable.
E. No pledgee or other holder of shares as collateral
security shall be personally liable as a shareholder.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1983, 68th Leg., p. 2566, ch. 442, Sec. 5, eff. Sept. 1, 1983;
Acts 1989, 71st Leg., ch. 217, Sec. 1, eff; Aug. 28, 1989; Acts
1989, 71st Leg., ch. 801, Sec. 7, eff. Aug. 28, 1989; Acts 1993,
73rd Leg., ch. 215, Sec. 2.05, eff. Sept; 1, 1993; Acts 1997, 75th
Leg., ch. 375, Sec. 7, eff; Sept; 1, 1997.
Art. 2.22. TRANSFER OF SHARES AND OTHER SECURITIES AND
RESTRICTIONS ON TRANSFER. A. The shares and other securities of a
corporation shall be personal property for all purposes and shall
be transferable in accordance with the provisions of Chapter
8--Investment Securities--of the Business & Commerce Code, as
amended, except as otherwise provided in this Act.
B. A restriction on the transfer or registration of transfer
of a security, or on the amount of the corporation's securities that
may be owned by any person or group of persons, may be imposed by the
articles of incorporation, or by-laws, or a written agreement among
any number of the holders of such securities, or a written agreement
among any number of the holders and the corporation provided a
counterpart of such agreement shall be placed on file by the
corporation at its principal place of business or its registered
office and shall be subject to the same right of examination by a
shareholder of the corporation, in person or by agent, attorney or
accountant, as are the books and records of the corporation. No
restriction so imposed shall be valid with respect to any security
issued prior to the adoption of the restriction unless the holder of
the security voted in favor of the restriction or is a party to the
agreement imposing it.
C. Any restriction on the transfer or registration of
transfer of a security of a corporation, if reasonable and noted
conspicuously on the certificate or other instrument representing
the security or, in the case of an uncertificated security, if
reasonable and if notation of the restriction is contained in the
notice sent pursuant to Section D of Article 2.19 of this Act with
respect to the security, shall be specifically enforceable against
the holder of the restricted security or any successor or
transferee of the holder. Unless noted conspicuously on the
certificate or other instrument representing the security or, in
the case of an uncertificated security, unless notation of the
restriction is contained in the notice sent pursuant to Section D of
Article 2.19 of this Act with respect to the security, a
restriction, even though otherwise enforceable, is ineffective
against a transferee for value without actual knowledge of the
restriction at the time of the transfer or against any subsequent
transferee (whether or not for value), but such a restriction shall
be specifically enforceable against any other person who is not a
transferee for value from and after the time that the person
acquires actual knowledge of the existence of the restriction.
D. In particular and without limiting the general power
granted in Sections B and C of this Article to impose reasonable
restrictions, a restriction on the transfer or registration of
transfer of securities of a corporation shall be valid if it
reasonably:
(1) Obligates the holders of the restricted securities to
offer to the corporation or to any other holders of securities of
the corporation or to any other person or to any combination of the
foregoing, a prior opportunity, to be exercised within a reasonable
time, to acquire the restricted securities; or
(2) Obligates the corporation to the extent permitted by this
Act or any holder of securities of the corporation or any other
person, or any combination of the foregoing, to purchase the
securities which are the subject of an agreement respecting the
purchase and sale of the restricted securities; or
(3) Requires the corporation or the holders of any class of
securities of the corporation to consent to any proposed transfer
of the restricted securities or to approve the proposed transferee
of the restricted securities for the purpose of preventing
violations of federal or state laws; or
(4) Prohibits the transfer of the restricted securities to
designated persons or classes of persons, and such designation is
not manifestly unreasonable; or
(5) Maintains the status of the corporation as an electing
small business corporation under Subchapter S of the United States
Internal Revenue Code, maintains any other tax advantage to the
corporation, or maintains the status of the corporation as a close
corporation under Part Twelve of this Act; or
(6) Obligates the holder of the restricted securities to sell
or transfer an amount of restricted securities to the corporation,
to any other holders of securities of the corporation, or to any
other person or combination of persons; or
(7) Causes or results in the automatic sale or transfer of an
amount of restricted securities to the corporation, to any other
holders of securities of the corporation, or to any other person or
combination of persons.
E. A corporation that has adopted a bylaw, or is a party to an
agreement, restricting the transfer of its shares or other
securities may file such bylaw or agreement as a matter of public
record with the Secretary of State, as follows:
(1) The corporation shall file a copy of the bylaw or
agreement in the office of the Secretary of State together with an
attached statement setting forth:
(a) the name of the corporation;
(b) that the copy of the bylaw or agreement is a true and
correct copy of the same; and
(c) that such filing has been duly authorized by the board of
directors or, in the case of a close corporation that, in
conformance with Part Twelve of this Act, is managed in some other
manner pursuant to a shareholders' agreement, by the shareholders
or by the persons empowered by the agreement to manage its business
and affairs.
(2) Such statement shall be executed on behalf of the
corporation by an officer. The original and a copy of the statement
shall be delivered to the Secretary of State with copies of such
bylaw or agreement restricting the transfer of shares or other
securities attached thereto. If the Secretary of State finds that
such statement conforms to law and the appropriate filing fee has
been paid as prescribed by law, he shall:
(a) endorse on the original and the copy the word "Filed", and
the month, day, and year of the filing thereof;
(b) file the original in his office; and
(c) return the copy to the corporation or its representative.
(3) After the filing of such statement by the Secretary of
State, the bylaw or agreement restricting the transfer of shares or
other securities shall become a matter of public record and the fact
of such filing shall be stated on any certificate representing the
shares or other securities so restricted if required by Section G,
Article 2.19, of this Act.
F. A corporation that is a party to an agreement restricting
the transfer of its shares or other securities may make such
agreement part of its articles of incorporation without restating
the provisions of such agreement therein by complying with the
provisions of Part Four of this Act for amendment of the articles of
incorporation. If such agreement shall alter any provision of the
original or amended articles of incorporation, the articles of
amendment shall identify by reference or description the altered
provision. If such agreement is to be an addition to the original
or amended articles of incorporation, the articles of amendment
shall state that fact. The articles of amendment shall have
attached thereto a copy of the agreement restricting the transfer
of shares or other securities, and shall state that the attached
copy of such agreement is a true and correct copy of the same and
that its inclusion as part of the articles of incorporation has been
duly authorized in the manner required by this Act to amend the
articles of incorporation.
G. When shares are registered on the books of a corporation in
the names of two or more persons as joint owners with the right of
survivorship, after the death of a joint owner and before the time
that the corporation receives actual written notice that parties
other than the surviving joint owner or owners claim an interest in
the shares or any distributions thereon, the corporation may record
on its books and otherwise effect the transfer of those shares to
any person, firm, or corporation (including that surviving joint
owner individually) and pay any distributions made in respect of
those shares, in each case as if the surviving joint owner or owners
were the absolute owners of the shares. A corporation permitting
such a transfer by and making any distribution to such a surviving
joint owner or owners before the receipt of written notice from
other parties claiming an interest in those shares or distributions
is discharged from all liability for the transfer or payment so
made; provided, however, that the discharge of the corporation
from liability and the transfer of full legal and equitable title of
the shares in no way affects, reduces, or limits any cause of action
existing in favor of any owner of an interest in those shares or
distributions against the surviving owner or owners.
H. A restriction on the transfer or the registration of a
transfer of the securities of a corporation, the amount of
securities of a corporation, or the amount of securities of a
corporation that may be owned by a person or group of persons for
any of the following purposes is conclusively presumed to be for a
reasonable purpose:
(1) maintaining a local, state, federal, or foreign tax
advantage to the corporation or its shareholders, including:
(a) maintaining the corporation's status as an electing small
business corporation under Subchapter S of the Internal Revenue
Code of 1986;
(b) maintaining or preserving any tax attribute, including
net operating losses; or
(c) qualifying or maintaining the qualification of the
corporation as a real estate investment trust under the Internal
Revenue Code of 1986 or regulations adopted under the Internal
Revenue Code of 1986; or
(2) maintaining a statutory or regulatory advantage or
complying with a statutory or regulatory requirement under
applicable local, state, federal, or foreign law.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 3, 4; Acts 1967, 60th
Leg., p. 1719, ch. 657, Sec. 5, eff. June 17, 1967; Acts 1973, 63rd
Leg., p. 1493, ch. 545, Sec. 12, eff. Aug. 27, 1973; Acts 1975, 64th
Leg., p. 306, ch. 134, Sec. 4, 5, eff. Sept. 1, 1975; Acts 1979,
66th Leg., p. 223, ch. 120, Sec. 26, eff. May 9, 1979; Acts 1981,
67th Leg., p. 838, ch. 297, Sec. 14, eff. Aug. 31, 1981; Acts 1981,
67th Leg., p. 3113, ch. 818, Sec. 3, eff. Aug. 31, 1981; Acts 1985,
69th Leg., ch. 128, Sec. 7, eff. May 20, 1985; Acts 1987, 70th Leg.,
ch. 93, Sec. 8, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801,
Sec. 8, eff. Aug. 28, 1989.
Sec. B amended by Acts 2003, 78th Leg., ch. 238, Sec. 8, eff. Sept.
1, 2003; Sec. D amended by Acts 2003, 78th Leg., ch. 238, Sec. 8,
eff. Sept. 1, 2003; Sec. H added by Acts 2003, 78th Leg., ch. 238,
Sec. 8, eff. Sept. 1, 2003.
Art. 2.22-1. SHAREHOLDERS' PREEMPTIVE RIGHTS. A. Except as
provided by Section F of this article, the shareholders of a
corporation shall not have a preemptive right to acquire
additional, unissued, or treasury shares of the corporation, or
securities of the corporation convertible into or carrying a right
to subscribe to or acquire shares, except to the extent provided by
the articles of incorporation or by agreement.
B. The articles of incorporation may provide that the
shareholders of a corporation shall have a preemptive right by
including a statement that the corporation "elects to have a
preemptive right" or a similar statement. Section C of this article
applies to the shareholders' preemptive right except as otherwise
provided by the articles of incorporation.
C. (1) If the shareholders of a corporation have a preemptive
right under this article, the shareholders have a preemptive right
to acquire proportional amounts of the corporation's additional
unissued or treasury shares, or securities of the corporation
convertible into or carrying a right to subscribe to or acquire
shares on the decision of the corporation's board of directors to
issue the shares.
(2) Unless otherwise provided in the articles of
incorporation, no preemptive right shall exist with respect to:
(a) shares issued or granted to a director, officer, agent,
or employee of the corporation or a subsidiary or affiliate of the
corporation;
(b) shares issued or granted to satisfy conversion or option
rights created to provide compensation to a director, officer,
agent, or employee of the corporation or a subsidiary or affiliate
of the corporation;
(c) shares authorized in the corporation's articles of
incorporation that are issued not later than the 180th day after the
effective date of the corporation's formation; or
(d) shares sold, issued, or granted by the corporation for
consideration other than money.
(3) Holders of shares of any class or series without general
voting rights but that is preferred as to distributions shall not be
entitled to any preemptive right.
(4) Holders of shares of any class or series with general
voting rights that is not preferred as to distributions shall not be
entitled to any preemptive right to shares of any class or series
that is preferred as to distributions or to any obligations, unless
the shares with preferential rights or obligations are convertible
into or carry a right to subscribe to or acquire shares without
preferential rights.
(5) The preemptive right shall be only an opportunity to
acquire shares or other securities under such uniform terms and
conditions as the board of directors may fix for the purpose of
providing a fair and reasonable opportunity for the exercise of
such right.
(6) For a one-year period beginning on the date on which the
shares are offered to shareholders, shares subject to preemptive
rights that are not acquired by a shareholder may be issued to a
person for consideration set by the corporation's board of
directors that is not lower than the consideration set for the
exercise of preemptive rights. An offer at a lower consideration or
after the expiration of the period prescribed by this subsection is
subject to the shareholders' preemptive rights.
D. An action may not be brought against the corporation, its
directors, officers, or agents, any holder of shares or securities
of the corporation, or any owner of any beneficial interest in
shares or securities of the corporation on account of any violation
of any preemptive right of a shareholder to acquire any shares of
the corporation, or any securities of the corporation convertible
into or carrying a right to subscribe to or acquire shares, unless
such action is brought within the earlier of:
(1) One year after the date on which written notice is given
to each shareholder whose preemptive right was violated by the
issuance, sale, or other distribution of those shares or
securities, which notice shall be mailed to the shareholder at the
address of the shareholder as it appears on the share transfer
records of the corporation and shall inform the shareholder that
the issuance, sale, or other distribution of those shares or
securities was in violation of the preemptive right of the
shareholder; and
(2) Four years after the date on which the corporation
issued, sold, or otherwise distributed those shares or securities
or August 28, 1989, whichever is later.
E. In the event of a transfer or other disposition of shares
by any shareholder of a corporation whose preemptive right to
acquire shares of the corporation, or securities of the corporation
convertible into or carrying a right to subscribe to or acquire
shares, shall have been violated, the transferee or successor of
the shareholder shall not acquire the preemptive right, or any
right or claim based on that violation, unless the shareholder
shall have assigned the preemptive right to the transferee or
successor.
F. Subject to the articles of incorporation, shareholders of
a corporation incorporated before September 1, 2003, have a
preemptive right to acquire additional unissued or treasury shares
of the corporation, or securities of the corporation convertible
into or carrying a right to subscribe to or acquire shares, to the
extent provided by Sections C, D, and E of this article. After
September 1, 2003, a corporation may limit or deny the preemptive
right of the shareholders of the corporation by amending the
corporation's articles of incorporation.
G. A shareholder may waive a preemptive right granted to the
shareholder. A written waiver of a preemptive right is irrevocable
regardless of whether the waiver is supported by consideration.
Added by Acts 1973, 63rd Leg., p. 1494, ch. 545, Sec. 13, eff. Aug.
27, 1973. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 9, eff.
Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 6, eff. Aug. 26,
1991.
Amended by Acts 2003, 78th Leg., ch. 238, Sec. 9, eff. Sept. 1,
2003.
Art. 2.23. BYLAWS. A. The initial bylaws of a corporation
shall be adopted by its board of directors.The bylaws may contain
any provisions for the regulation and management of the affairs of
the corporation not inconsistent with law or the articles of
incorporation.
B. A corporation's board of directors may amend or repeal the
corporation's bylaws, or adopt new bylaws, unless:
(1) the articles of incorporation or this Act reserves the
power exclusively to the shareholders in whole or part; or
(2) the shareholders in amending, repealing, or adopting a
particular bylaw expressly provide that the board of directors may
not amend or repeal that bylaw.
C. Unless the articles of incorporation or a bylaw adopted by
the shareholders provides otherwise as to all or some portion of a
corporation's bylaws, a corporation's shareholders may amend,
repeal, or adopt the corporation's bylaws even though the bylaws
may also be amended, repealed, or adopted by its board of directors.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1494, ch. 545, Sec. 14, eff. Aug. 27, 1973;
Acts 1987, 70th Leg., ch. 93, Sec. 9, eff. Aug. 31, 1987.
Art. 2.24. MEETINGS OF SHAREHOLDERS. A. Meetings of
shareholders may be held at such place within or without this State
as may be stated in or fixed in accordance with the bylaws. If no
other place is so stated or fixed, the board of directors of the
corporation is not authorized to designate a place, or the board of
directors chooses not to designate a place, meetings shall be held
at the registered office of the corporation.
(1) If, under the articles of incorporation or the bylaws,
the board of directors is authorized to determine the place of a
meeting of shareholders, the board of directors may, in its
discretion, determine that the meeting may be held solely by means
of remote communication as provided by Subsection (2) of this
section.
(2) If authorized by the board of directors, and subject to
any guidelines and procedures adopted by the board of directors,
shareholders not physically present at a meeting of shareholders,
by means of remote communication:
(a) may participate in a meeting of shareholders; and
(b) may be considered present in person and may vote at a
meeting of shareholders held at a designated place or held solely by
means of remote communication if:
(i) the corporation implements reasonable measures to verify
that each person considered present and permitted to vote at the
meeting by means of remote communication is a shareholder;
(ii) the corporation implements reasonable measures to
provide the shareholders at the meeting by means of remote
communication a reasonable opportunity to participate in the
meeting and to vote on matters submitted to the shareholders,
including an opportunity to read or hear the proceedings of a
meeting substantially concurrently with the proceedings; and
(iii) the corporation maintains a record of any shareholder
vote or other action taken at the meeting by means of remote
communication.
B. An annual meeting of the shareholders shall be held at
such time as may be stated in or fixed in accordance with the
bylaws. If the annual meeting is not held within any 13-month
period and a written consent of shareholders has not been executed
instead of the meeting, any court of competent jurisdiction in the
county in which the principal office of the corporation is located
may, on the application of any shareholder who has previously
submitted a written request to the corporation that an annual
meeting be held, summarily order a meeting to be held unless the
meeting is not required to be held under Section D of this
article. Failure to hold the annual meeting at the designated time
shall not work a dissolution of the corporation.
C. Special meetings of the shareholders may be called (1) by
the president, the board of directors, or such other person or
persons as may be authorized in the articles of incorporation or the
bylaws or (2) by the holders of at least ten (10) percent of all the
shares entitled to vote at the proposed special meeting, unless the
articles of incorporation provide for a number of shares greater
than or less than ten (10) percent, in which event special meetings
of the shareholders may be called by the holders of at least the
percentage of shares so specified in the articles of incorporation,
but in no event shall the articles of incorporation provide for a
number of shares greater than fifty (50) percent. If not otherwise
stated in or fixed in accordance with the bylaws of the corporation,
the record date for determining shareholders entitled to call a
special meeting is the date the first shareholder signs the notice
of that meeting. Only business within the purpose or purposes
described in the notice required by Article 2.25 of this Act may be
conducted at a special meeting of the shareholders.
D. If the articles of incorporation or bylaws of a
corporation registered under the Investment Company Act so provide,
the corporation is not required to hold an annual meeting of
shareholders or elect directors in any year that the election of
directors is not required to be acted on under the Investment
Company Act. If the corporation is required by the Investment
Company Act to hold a meeting of shareholders to elect directors,
the meeting shall be designated as the annual meeting of
shareholders for that year.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1494, ch. 545, Sec. 15, eff. Aug. 27, 1973;
Acts 1987, 70th Leg., ch. 93, Sec. 10, eff. Aug. 31, 1987; Acts
1993, 73rd Leg., ch. 215, Sec. 2.06, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 10, eff. Sept.
1, 2003; Sec. B amended by Acts 2003, 78th Leg., ch. 238, Sec. 10,
eff. Sept. 1, 2003.
Amended by:
Acts 2005, 79th Leg., Ch. 67, Sec. 6, eff. September 1, 2005.
Art. 2.25. NOTICE OF SHAREHOLDERS' MEETINGS. A. Written or
printed notice stating the place, day and hour of the meeting, the
means of any remote communications by which shareholders may be
considered present and may vote at the meeting, and, in case of a
special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) days nor more than
sixty (60) days before the date of the meeting, personally, by
electronic transmission, or by mail, by or at the direction of the
president, the secretary, or the officer or person calling the
meeting, to each shareholder entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited
in the United States mail addressed to the shareholder at his
address as it appears on the share transfer records of the
corporation, with postage thereon prepaid.
B. Any notice required to be given to any shareholder, under
any provision of this Act or the articles of incorporation or bylaws
of any corporation, need not be given to the shareholder if (1)
notice of two consecutive annual meetings and all notices of
meetings held during the period between those annual meetings, if
any, or (2) all (but in no event less than two) payments (if sent by
first class mail) of distributions or interest on securities during
a 12-month period have been mailed to that person, addressed at his
address as shown on the share transfer records of the corporation,
and have been returned undeliverable. Any action or meeting taken
or held without notice to such a person shall have the same force
and effect as if the notice had been duly given and, if the action
taken by the corporation is reflected in any articles or document
filed with the Secretary of State, those articles or that document
may state that notice was duly given to all persons to whom notice
was required to be given. If such a person delivers to the
corporation a written notice setting forth his then current
address, the requirement that notice be given to that person shall
be reinstated.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1987, 70th Leg., ch. 93, Sec. 11, eff. Aug. 31, 1987; Acts
1989, 71st Leg., ch. 801, Sec. 10, eff. Aug. 28, 1989.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 11, eff. Sept.
1, 2003.
Art. 2.25-1. NOTICE BY ELECTRONIC TRANSMISSION. A. On
consent of a shareholder, notice from a corporation under any
provision of this Act, the articles of incorporation, or the bylaws
may be given to the shareholder by electronic transmission. The
shareholder may specify the form of electronic transmission to be
used to communicate notice. The shareholder may revoke this
consent by written notice to the corporation. The shareholder's
consent is deemed to be revoked if the corporation is unable to
deliver by electronic transmission two consecutive notices, and the
secretary, assistant secretary, or transfer agent of the
corporation, or another person responsible for delivering notice on
behalf of the corporation knows that delivery of these two
electronic transmissions was unsuccessful. The inadvertent
failure to treat the unsuccessful transmissions as a revocation of
shareholder consent does not invalidate a meeting or other action.
B. Notice under this article is deemed given when the notice
is:
(1) transmitted to a facsimile number provided by the
shareholder for the purpose of receiving notice;
(2) transmitted to an electronic mail address provided by the
shareholder for the purpose of receiving notice;
(3) posted on an electronic network and a message is sent to
the shareholder at the address provided by the shareholder for the
purpose of alerting the shareholder of a posting; or
(4) communicated to the shareholder by any other form of
electronic transmission consented to by the shareholder.
C. An affidavit of the secretary, assistant secretary,
transfer agent, or other agent of the corporation that notice has
been given by electronic transmission is, in the absence of fraud,
prima facie evidence that the notice was given.
Added by Acts 2003, 78th Leg., ch. 238, Sec. 13, eff. Sept. 1, 2003.
Art. 2.26. REGISTERED HOLDERS OF SHARES, CLOSING OF SHARE
TRANSFER RECORDS AND RECORD DATE. A. Registered Holders as Owners.
Unless otherwise provided in this Act, and subject to the
provisions of Chapter 8-Investment Securities of the Business &
Commerce Code:
(1) A corporation may regard the person in whose name any
shares issued by the corporation are registered in the share
transfer records of the corporation at any particular time
(including, without limitation, as of a record date fixed pursuant
to Section B or C of this Article) as the owner of those shares at
that time for purposes of voting those shares, receiving
distributions thereon or notices in respect thereof, transferring
those shares, exercising rights of dissent with respect to those
shares, exercising or waiving any preemptive right with respect to
those shares, entering into agreements with respect to those shares
in accordance with Article 2.22 or 2.30 of this Act, or giving
proxies with respect to those shares; and
(2) Neither the corporation nor any of its officers,
directors, employees, or agents shall be liable for regarding that
person as the owner of those shares at that time for those purposes,
regardless of whether that person does not possess a certificate
for those shares.
B. Fixing Record Dates for Matters Other Than Consents to
Action. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive a distribution by a
corporation (other than a distribution involving a purchase or
redemption by the corporation of any of its own shares) or a share
dividend, or in order to make a determination of shareholders for
any other proper purpose (other than determining shareholders
entitled to consent to action by shareholders proposed to be taken
without a meeting of shareholders), the board of directors of a
corporation may provide that the share transfer records shall be
closed for a stated period but not to exceed, in any case, sixty
(60) days. If the share transfer records shall be closed for the
purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such records shall be closed for
at least ten (10) days immediately preceding such meeting. In lieu
of closing the share transfer records, the bylaws, or in the absence
of an applicable bylaw the board of directors, may fix in advance a
date as the record date for any such determination of shareholders,
such date in any case to be not more than sixty (60) days and, in the
case of a meeting of shareholders, not less than ten (10) days,
prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If the share transfer
records are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive a
distribution (other than a distribution involving a purchase or
redemption by the corporation of any of its own shares) or a share
dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring
such distribution or share dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Article,
such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the
share transfer records and the stated period of closing has
expired.
C. Fixing Record Dates for Consents to Action. Unless a
record date shall have previously been fixed or determined pursuant
to this section, whenever action by shareholders is proposed to be
taken by consent in writing without a meeting of shareholders, the
board of directors may fix a record date for the purpose of
determining shareholders entitled to consent to that action, which
record date shall not precede, and shall not be more than ten (10)
days after, the date upon which the resolution fixing the record
date is adopted by the board of directors. If no record date has
been fixed by the board of directors and the prior action of the
board of directors is not required by this Act, the record date for
determining shareholders entitled to consent to action in writing
without a meeting shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is
delivered to the corporation as provided in Section A of Article
9.10 of this Act. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the
corporation's principal place of business shall be addressed to the
president or the principal executive officer of the corporation.
If no record date shall have been fixed by the board of directors
and prior action of the board of directors is required by this Act,
the record date for determining shareholders entitled to consent to
action in writing without a meeting shall be at the close of
business on the date on which the board of directors adopts a
resolution taking such prior action.
D. Distributions Held in Suspense. Distributions made by a
corporation, including those that were payable but not paid to a
holder of shares, or to his heirs, successors, or assigns, and have
been held in suspense by the corporation or were paid or delivered
by it into an escrow account or to a trustee or custodian, shall be
payable by the corporation, escrow agent, trustee, or custodian to
the holder of the shares as of the record date determined for that
distribution as provided in Section B of this Article, or to his
heirs, successors, or assigns.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1987, 70th Leg., ch. 93, Sec. 12, eff. Aug. 31, 1987; Acts
1989, 71st Leg., ch. 801, Sec. 11, eff. Aug. 28, 1989; Acts 1991,
72nd Leg., ch. 901, Sec. 7, eff. Aug. 26, 1991.
Art. 2.27. VOTING LIST. A. The officer or agent having
charge of the share transfer records for shares of a corporation
shall make, at least ten (10) days before each meeting of
shareholders, a complete list of the shareholders entitled to vote
at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares
held by each, which list, for a period of ten (10) days prior to such
meeting, shall be kept on file at the registered office or principal
place of business of the corporation and shall be subject to
inspection by any shareholder at any time during usual business
hours. Alternatively, the list of the shareholders may be kept on a
reasonably accessible electronic network, if the information
required to gain access to the list is provided with the notice of
the meeting. This article does not require the corporation to
include any electronic contact information of any shareholder on
the list. If the corporation elects to make the list available on
an electronic network, the corporation shall take reasonable steps
to ensure that the information is available only to shareholders of
the corporation. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting.
If the meeting is held by means of remote communication, the list
must be open to the examination of any shareholder for the duration
of the meeting on a reasonably accessible electronic network, and
the information required to access the list must be provided to
shareholders with the notice of the meeting. The original share
transfer records shall be prima-facie evidence as to who are the
shareholders entitled to examine such list or transfer records or
to vote at any meeting of shareholders.
B. Failure to comply with the requirements of this Article
shall not affect the validity of any action taken at such meeting.
C. An officer or agent having charge of the share transfer
records who shall fail to prepare the list of shareholders or keep
the same accessible to shareholders electronically or physically on
file at the principal place of business for a period of ten (10)
days, or produce and keep it accessible for inspection during the
meeting, as provided in this Article, shall be liable to any
shareholder suffering damages on account of such failure, to the
extent of such damage. In the event that such officer or agent does
not receive notice of the date of the meeting reasonably to enable
him to comply with the duties prescribed by this Article, the
corporation, not such officer or agent, shall be liable to any
shareholder suffering damage on account of such failure, to the
extent of such damage.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1989, 71st Leg., ch. 801, Sec. 12, eff. Aug. 28, 1989; Acts
1993, 73rd Leg., ch. 215, Sec. 2.07, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 12, eff. Sept.
1, 2003; Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec. 12,
eff. Sept. 1, 2003.
Art. 2.28. QUORUM OF AND VOTING BY SHAREHOLDERS. A. Quorum.
With respect to any meeting of shareholders, a quorum shall be
present for any matter to be presented at that meeting if the
holders of a majority of the shares entitled to vote at the meeting
are represented at the meeting in person or by proxy, unless
otherwise provided in the articles of incorporation in accordance
with this section. The articles of incorporation may provide:
(1) That a quorum shall be present at a meeting of
shareholders only if the holders of a specified greater portion of
the shares entitled to vote are represented at the meeting in person
or by proxy; or
(2) That a quorum shall be present at a meeting of
shareholders if the holders of a specified lesser portion, but not
less than one-third (1/3), of the shares entitled to vote are
represented at the meeting in person or by proxy.
Unless otherwise provided in the articles of incorporation or
the bylaws, once a quorum is present at a meeting of shareholders,
the shareholders represented in person or by proxy at the meeting
may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from
the meeting of any shareholder or the refusal of any shareholder
represented in person or by proxy to vote shall not affect the
presence of a quorum at the meeting. Unless otherwise provided in
the articles of incorporation or the bylaws, the shareholders
represented in person or by proxy at a meeting of shareholders at
which a quorum is not present may adjourn the meeting until such
time and to such place as may be determined by a vote of the holders
of a majority of the shares represented in person or by proxy at
that meeting.
B. Voting on Matters Other Than the Election of Directors.
With respect to any matter, other than the election of directors or
a matter for which the affirmative vote of the holders of a
specified portion of the shares entitled to vote is required by this
Act, the affirmative vote of the holders of a majority of the shares
entitled to vote on, and that voted for or against or expressly
abstained with respect to, that matter at a meeting of shareholders
at which a quorum is present shall be the act of the shareholders,
unless otherwise provided in the articles of incorporation or the
bylaws in accordance with this section. With respect to any matter,
other than the election of directors or a matter for which the
affirmative vote of the holders of a specified portion of the shares
entitled to vote is required by this Act, the articles of
incorporation or the bylaws may provide:
(1) That the act of the shareholders shall be the affirmative
vote of the holders of a specified portion, but not less than a
majority, of the shares entitled to vote on that matter;
(2) That the act of the shareholders shall be the affirmative
vote of the holders of a specified portion, but not less than a
majority, of the shares entitled to vote on that matter and
represented in person or by proxy at a meeting of shareholders at
which a quorum is present;
(3) That the act of the shareholders shall be the affirmative
vote of the holders of a specified portion, but not less than a
majority, of the shares entitled to vote on, and voted for or
against, that matter at a meeting of shareholders at which a quorum
is present; or
(4) That the act of the shareholders shall be the affirmative
vote of the holders of a specified portion, but not less than a
majority, of the shares entitled to vote on, and that voted for or
against or expressly abstained with respect to, that matter at a
meeting of shareholders at which a quorum is present.
C. Voting in the Election of Directors. Unless otherwise
provided in the articles of incorporation or the bylaws in
accordance with this section, directors shall be elected by a
plurality of the votes cast by the holders of shares entitled to
vote in the election of directors at a meeting of shareholders at
which a quorum is present. The articles of incorporation or the
bylaws may provide:
(1) That a director shall be elected only if the director
receives the vote of the holders of a specified portion, but not
less than a majority, of the shares entitled to vote in the election
of directors;
(2) That a director shall be elected only if the director
receives the vote of the holders of a specified portion, but not
less than a majority, of the shares entitled to vote in the election
of directors and represented in person or by proxy at a meeting of
shareholders at which a quorum is present; or
(3) That a director shall be elected only if the director
receives a specified portion, but not less than a majority, of the
votes cast by the holders of shares entitled to vote in the election
of directors at a meeting of shareholders at which a quorum is
present.
D. Changes in the Vote Required for Certain Matters. With
respect to any matter for which the affirmative vote of the holders
of a specified portion of the shares entitled to vote is required by
this Act, the articles of incorporation may provide that the act of
the shareholders on that matter shall be the affirmative vote of the
holders of a specified portion, but not less than a majority, of the
shares entitled to vote on that matter, rather than the affirmative
vote otherwise required by this Act. With respect to any matter for
which the affirmative vote of the holders of a specified portion of
the shares of any class or series is required by this Act, the
articles of incorporation also may provide that the act of the
holders of shares of that class or series on that matter shall be
the affirmative vote of the holders of a specified portion, but not
less than a majority, of the shares of that class or series, rather
than the affirmative vote of the holders of shares of that class or
series otherwise required by this Act. If any provision of the
articles of incorporation provides that the act of the shareholders
on any matter shall be the affirmative vote of the holders of a
specified portion of the shares entitled to vote on that matter that
is greater than a majority of the shares so entitled to vote, that
provision of the articles of incorporation may not be amended or
modified, directly or indirectly, without the affirmative vote of
the holders of that greater portion of the shares entitled to vote
on that matter, unless otherwise provided in the articles of
incorporation. If any provision of the articles of incorporation
provides that the act of the holders of shares of any class or
series on any matter shall be the affirmative vote of the holders of
a specified portion of the shares of that class or series that is
greater than a majority of the shares of that class or series, that
provision of the articles of incorporation may not be amended or
modified, directly or indirectly, without the affirmative vote of
the holders of that greater portion of the shares of that class or
series, unless otherwise provided in the articles of incorporation.
E. A corporation may establish procedures in its bylaws, not
inconsistent with this Act, for determining the validity of proxies
and whether shares that are held of record by a bank, broker, or
other nominee are represented at a meeting of shareholders with
respect to any matter. The procedures may incorporate or look to
rules and determinations of any stock exchange or self-regulatory
organization regulating the corporation or that bank, broker, or
other nominee.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1989, 71st Leg., ch. 801, Sec. 13, eff. Aug. 28, 1989; Acts
1991, 72nd Leg., ch. 901, Sec. 8, eff. Aug. 26, 1991; Acts 1997,
75th Leg., ch. 375, Sec. 8, eff. Sept. 1, 1997.
Art. 2.29. VOTING OF SHARES. A. (1) Each outstanding share,
regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders, except:
(a) To the extent that the articles of incorporation provide
for more or less than one vote per share or (if and to the extent
permitted by this Act) limit or deny voting rights to the holders of
the shares of any class or series, or
(b) As otherwise provided by this Act.
(2) If the articles of incorporation provide for more or less
than one vote per share for all the outstanding shares or for the
shares of any class or any series on any matter, every reference in
this Act (or in the articles of incorporation or bylaws, unless
expressly stated otherwise therein), in connection with such
matter, to a specified portion of such shares shall mean such
portion of the votes entitled to be cast in respect of such shares
by virtue of the provisions of such articles of incorporation.
B. Shares of its own stock owned by a corporation or by
another domestic or foreign corporation or other entity, if a
majority of the voting stock or voting interest of the other
corporation or other entity is owned or controlled by the
corporation, shall not be voted, directly or indirectly, at any
meeting, and shall not be counted in determining the total number of
outstanding shares at any given time. Nothing in this section shall
be construed as limiting the right of any domestic or foreign
corporation or other entity to vote stock, including but not
limited to its own stock, held or controlled by it in a fiduciary
capacity, or with respect to which it otherwise exercises voting
power in a fiduciary capacity.
C. Any shareholder may vote either in person or by proxy
executed in writing by the shareholder. A telegram, telex,
cablegram, or other form of electronic transmission, including
telephone transmission, by the shareholder, or a photographic,
photostatic, facsimile, or similar reproduction of a writing
executed by the shareholder, shall be treated as an execution in
writing for purposes of this Section. Any electronic transmission
must contain or be accompanied by information from which it can be
determined that the transmission was authorized by the shareholder.
No proxy shall be valid after eleven (11) months from the date of
its execution unless otherwise provided in the proxy. A proxy shall
be revocable unless the proxy form conspicuously states that the
proxy is irrevocable and the proxy is coupled with an interest.
Proxies coupled with an interest include the appointment as proxy
of:
(1) a pledgee;
(2) a person who purchased or agreed to purchase, or owns or
holds an option to purchase, the shares;
(3) a creditor of the corporation who extended it credit
under terms requiring the appointment;
(4) an employee of the corporation whose employment contract
requires the appointment; or
(5) a party to a voting agreement created under Section B,
Article 2.30, of this Act.
An irrevocable proxy, if noted conspicuously on the
certificate representing the shares that are subject to the
irrevocable proxy or, in the case of uncertificated shares, if
notation of the irrevocable proxy is contained in the notice sent
pursuant to Section D of Article 2.19 of this Act with respect to
the shares that are subject to the irrevocable proxy, shall be
specifically enforceable against the holder of those shares or any
successor or transferee of the holder. Unless noted conspicuously
on the certificate representing the shares that are subject to the
irrevocable proxy or, in the case of uncertificated shares, unless
notation of the irrevocable proxy is contained in the notice sent
pursuant to Section D of Article 2.19 of this Act with respect to
the shares that are subject to the irrevocable proxy, an
irrevocable proxy, even though otherwise enforceable, is
ineffective against a transferee for value without actual knowledge
of the existence of the irrevocable proxy at the time of the
transfer or against any subsequent transferee (whether or not for
value), but such an irrevocable proxy shall be specifically
enforceable against any other person who is not a transferee for
value from and after the time that the person acquires actual
knowledge of the existence of the irrevocable proxy.
D. (1) At each election for directors every shareholder
entitled to vote at such election shall have the right (a) to vote
the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to
vote or (b) only if expressly permitted by the articles of
incorporation (in general or with respect to a specified class or
series of shares or group of classes or series of shares) and
subject to subsection (2) of this Section D, to cumulate his votes
by giving one candidate as many votes as the number of such
directors multiplied by his shares shall equal, or by distributing
such votes on the same principle among any number of such
candidates.
(2) Cumulative voting shall not be allowed in an election of
directors unless the articles of incorporation expressly grant that
right, and a shareholder who intends to cumulate his votes as herein
authorized shall have given written notice of such intention to the
secretary of the corporation on or before the day preceding the
election at which such shareholder intends to cumulate his votes.
All shareholders entitled to vote cumulatively may cumulate their
votes if any shareholder gives the written notice provided for
herein.
(3) Except as provided by the articles of incorporation, a
shareholder of a corporation incorporated before September 1, 2003,
has the right to cumulatively vote the number of shares the
shareholder owns in the election of directors to the extent
permitted by this article. A corporation may limit or deny a
shareholder's right to cumulatively vote any time after September
1, 2003, by amending its articles of incorporation.
E. Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent, or proxy
as the bylaws of such corporation may authorize or, in the absence
of such authorization, as the board of directors of such
corporation may determine; provided, however, that when any
foreign corporation without a permit to do business in this State
lawfully owns or may lawfully own or acquire stock in Texas
corporation, it shall not be unlawful for such foreign corporation
to vote said stock and participate in the management and control of
the business and affairs of such Texas corporation, as other
stockholders, subject to all laws, rules and regulations governing
Texas corporations and especially subject to the provisions of the
Anti-Trust laws of the State of Texas.
F. Shares held by an administrator, executor, guardian, or
conservator may be voted by him so long as such shares forming a
part of an estate are in the possession and forming a part of the
estate being served by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name
of a trustee may be voted by him, either in person or by proxy, but
no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name as trustee.
G. Shares standing in the name of a receiver may be voted by
such a receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer thereof
into his name if authority so to do be contained in an appropriate
order of the court by which such receiver was appointed.
H. A shareholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111, ch. 54, Sec. 4A, eff. Aug. 22, 1957;
Acts 1961, 57th Leg., ch. 393, Sec. 1, eff. June 1, 1964; Acts 1961,
57th Leg., p. 423, ch. 206, Sec. 1; Acts 1967, 60th Leg., p. 1719,
ch. 657, Sec. 6, eff. June 17, 1967; Acts 1973, 63rd Leg., p. 1495,
ch. 545, Sec. 16, 17, eff. Aug. 27, 1973; Acts 1987, 70th Leg., ch.
93, Sec. 13, eff. Aug. 31, 1987; Acts 1989, 71st Leg., ch. 801, Sec.
14, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, Sec. 9, eff.
Aug. 26, 1991; Acts 1997, 75th Leg., ch. 375, Sec. 9, eff. Sept. 1,
1997.
Sec. C amended by Acts 2003, 78th Leg., ch. 238, Sec. 14, eff. Sept.
1, 2003; Sec. D amended by Acts 2003, 78th Leg., ch. 238, Sec. 14,
eff. Sept. 1, 2003.
Art. 2.30. VOTING TRUSTS AND VOTING AGREEMENTS. A. Any
number of shareholders of a corporation may enter into a written
voting trust agreement for the purpose of conferring upon a trustee
or trustees the right to vote or otherwise represent shares of the
corporation. The shares that are to be subject to the agreement
shall be transferred to the trustee or trustees for purposes of the
agreement, and a counterpart of the agreement shall be deposited
with the corporation at its principal place of business or
registered office. The counterpart of the voting trust agreement
so deposited with the corporation shall be subject to the same right
of examination by a shareholder of the corporation, in person or by
agent or attorney, as are the books and records of the corporation,
and shall be subject to examination by any holder of a beneficial
interest in the voting trust, either in person or by agent or
attorney, at any reasonable time for any proper purpose.
B. Any number of shareholders of a corporation, or any number
of shareholders of a corporation and the corporation itself, may
enter into a written voting agreement for the purpose of providing
that shares of the corporation shall be voted in the manner
prescribed in the agreement. A counterpart of the agreement shall
be deposited with the corporation at its principal place of
business or registered office and shall be subject to the same right
of examination by a shareholder of the corporation, in person or by
agent or attorney, as are the books and records of the corporation.
The agreement, if noted conspicuously on the certificate
representing the shares that are subject to the agreement or, in the
case of uncertificated shares, if notation of the agreement is
contained in the notice sent pursuant to Section D of Article 2.19
of this Act with respect to the shares that are subject to the
agreement, shall be specifically enforceable against the holder of
those shares or any successor or transferee of the holder. Unless
noted conspicuously on the certificate representing the shares that
are subject to the agreement or, in the case of uncertificated
shares, unless notation of the agreement is contained in the notice
sent pursuant to Section D of Article 2.19 of this Act with respect
to the shares that are subject to the agreement, the agreement, even
though otherwise enforceable, is ineffective against a transferee
for value without actual knowledge of the existence of the
agreement at the time of the transfer or against any subsequent
transferee (whether or not for value), but the agreement shall be
specifically enforceable against any other person who is not a
transferee for value from and after the time that the person
acquires actual knowledge of the existence of the agreement. A
voting agreement entered into pursuant to this Section B is not
subject to the provisions of Section A of this Article.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended
Acts 1961, 57th Leg., p. 423, ch. 206, Sec. 2, eff. Aug. 28, 1961.
Amended by Acts 1987, 70th Leg., ch. 93, Sec. 14, eff. Aug. 31,
1987; Acts 1989, 71st Leg., ch. 801, Sec. 15, eff. Aug. 28, 1989.
Art. 2.30-1. SHAREHOLDER AGREEMENTS. A. Scope of Agreement.
An agreement among the shareholders of a corporation that complies
with this article is effective among the shareholders and the
corporation even though it is inconsistent with one or more
provisions of this Act in that it:
(1) restricts the discretion or powers of the board of
directors;
(2) eliminates the board of directors and permits management
of the business and affairs of the corporation by its shareholders,
or in whole or in part by one or more of its shareholders, or by one
or more persons not shareholders;
(3) establishes the natural persons who shall be the
directors or officers of the corporation, their term of office or
manner of selection or removal, or terms or conditions of
employment of any director, officer, or other employee of the
corporation, regardless of the length of employment;
(4) governs the authorization or making of distributions
whether in proportion to ownership of shares, subject to the
limitations in Article 2.38 of this Act, or determines the manner in
which profits and losses shall be apportioned;
(5) governs, in general or in regard to specific matters, the
exercise or division of voting power by and between the
shareholders, directors (if any), or other persons or by or among
any of them, including use of disproportionate voting rights or
director proxies;
(6) establishes the terms and conditions of any agreement for
the transfer or use of property or the provision of services between
the corporation and any shareholder, director, officer, or employee
of the corporation, or other person or among any of them;
(7) authorizes arbitration or grants authority to any
shareholder or other person as to any issue about which there is a
deadlock among the directors, shareholders, or other person or
persons empowered to manage the corporation to resolve that issue;
(8) requires dissolution of the corporation at the request of
one or more of the shareholders or on the occurrence of a specified
event or contingency, in which case the dissolution of the
corporation shall proceed as if all the shareholders had consented
in writing to dissolution of the corporation as provided in Article
6.02 of this Act; or
(9) otherwise governs the exercise of corporate powers, the
management of the business and affairs of the corporation, or the
relationship among the shareholders, the directors, and the
corporation, or among any of them, as if the corporation were a
partnership or in a manner that would otherwise be appropriate only
among partners, and is not contrary to public policy.
B. Procedures Required. An agreement authorized by this
article shall be:
(1) set forth (a) in the articles of incorporation or bylaws
and approved by all persons who are shareholders at the time of the
agreement, or (b) in a written agreement that is signed by all the
persons who are shareholders at the time of the agreement and is
made known to the corporation;
(2) subject to amendment only by all persons who are
shareholders at the time of the amendment, unless the agreement
provides otherwise; and
(3) valid for 10 years, unless the agreement provides
otherwise.
C. Notation of Existence. The existence of an agreement
authorized by this article shall be noted conspicuously on the
front or back of each certificate for outstanding shares or on the
information statement required for uncertificated shares by
Article 2.19 of this Act and shall include the following: "These
shares are subject to the provisions of a shareholders' agreement
that may provide for management of the corporation in a manner
different than in other corporations and may subject a shareholder
to certain obligations or liabilities not otherwise imposed on
shareholders in other corporations." If at the time of the
agreement the corporation has shares outstanding represented by
certificates, the corporation shall recall the outstanding
certificates and issue substitute certificates that comply with
this section. The failure to note the existence of the agreement on
the certificate or information statement shall not affect the
validity of the agreement or any action taken pursuant to it.
D. Right of Rescission. Any purchaser of shares who, at the
time of purchase, did not have knowledge of the existence of an
agreement authorized by this article shall be entitled to
rescission of the purchase. A purchaser shall be deemed to have
knowledge of the existence of the agreement if its existence is
noted on the certificate or information statement for the shares in
compliance with Section C of this article and, if the shares are not
represented by a certificate, the information statement noting
existence of the agreement is delivered to the purchaser at or prior
to the time of purchase of the shares. An action to enforce the
right of rescission authorized by this section must be commenced
within the earlier of 90 days after discovery of the existence of
the agreement or two years after time of the purchase of the shares.
E. Cessation. An agreement authorized by this article shall
cease to be effective when shares of the corporation are listed on a
national securities exchange, quoted on an interdealer quotation
system of a national securities association, or regularly traded in
a market maintained by one or more members of a national or
affiliated securities association. If the agreement ceases to be
effective for any reason and the corporation does not have a board
of directors, governance by a board of directors shall be
instituted or reinstated in the manner provided in Section C,
Article 12.23, of this Act. If the agreement is contained or
referred to in the corporation's articles of incorporation or
bylaws, the board of directors may adopt an amendment to the
articles of incorporation or bylaws, without shareholder action, to
delete the agreement and any references to it.
F. Managerial Liabilities. An agreement authorized by this
article that limits the discretion or powers of the board of
directors or supplants the board of directors shall relieve the
directors of, and impose on the person or persons in whom such
discretion or powers or management of the business and affairs of
the corporation are vested, liability for action or omissions
imposed by this Act or other law on directors to the extent that the
discretion or powers of the directors are limited or supplanted by
the agreement.
G. Limitation of Liability. The existence or performance of
an agreement authorized by this article shall not be grounds for
imposing personal liability on any shareholder for the acts or
obligations of the corporation by disregarding the separate entity
of the corporation or otherwise, even if the agreement or its
performance:
(1) treats the corporation as if it were a partnership or in a
manner that otherwise is appropriate only among partners;
(2) results in the corporation being considered a partnership
for purposes of taxation; or
(3) results in failure to observe the corporate formalities
otherwise applicable to the matters governed by the agreement.
H. If No Shares Issued. Incorporators or subscribers for the
shares may act as shareholders with respect to an agreement
authorized by this article if no shares have been issued when the
agreement is signed.
Added by Acts 1997, 75th Leg., ch. 375, Sec. 10, eff. Sept. 1, 1997.
Art. 2.31. BOARD OF DIRECTORS. A. Except as provided by
Article 2.30-1 and Part Twelve of this Act, the powers of a
corporation shall be exercised by or under the authority of, and the
business and affairs of a corporation shall be managed under the
direction of, the board of directors of the corporation. Directors
need not be residents of this State or shareholders of the
corporation unless the articles of incorporation or bylaws so
require. The articles of incorporation or bylaws may prescribe
other qualifications for directors.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1989, 71st Leg., ch. 801, Sec. 16, eff. Aug. 28, 1989; Acts
1997, 75th Leg., ch. 375, Sec. 11, eff. Sept. 1, 1997.
Art. 2.32. NUMBER AND ELECTION OF DIRECTORS.
A. The board of directors of a corporation shall consist of
one or more members. The number of directors shall be fixed by, or
in the manner provided in, the articles of incorporation or the
bylaws, except as to the number constituting the initial board of
directors, which number shall be fixed by the articles of
incorporation. The number of directors may be increased or
decreased from time to time by amendment to, or in the manner
provided in, the articles of incorporation or the bylaws, but no
decrease shall have the effect of shortening the term of any
incumbent director. In the absence of a bylaw or a provision of the
articles of incorporation fixing the number of directors or
providing for the manner in which the number of directors shall be
fixed, the number of directors shall be the same as the number
constituting the initial board of directors as fixed by the
articles of incorporation. The names and addresses of the members
of the initial board of directors shall be stated in the articles of
incorporation. Absent resignation or removal in accordance with
the provisions of the bylaws or the articles of incorporation, such
persons shall hold office until the first annual meeting of
shareholders, and until their successors shall have been elected
and qualified. At the first annual meeting of shareholders and at
each annual meeting thereafter, the holders of shares entitled to
vote in the election of directors shall elect directors to hold
office until the next succeeding annual meeting, except in case of
the classification of directors as permitted by this Act.
B. The articles of incorporation may provide that the holders
of any class or series of shares or any group of classes or series of
shares shall be entitled to elect one or more directors, who shall
hold office for such terms as shall be stated in the articles of
incorporation. The articles of incorporation may provide that any
directors elected by the holders of any such class or series of
shares or any such group shall be entitled to more or less than one
vote on all or any specified matters, in which case every reference
in this Act (or in the articles of incorporation or bylaws, unless
expressly stated otherwise therein) to a specified portion of the
directors shall mean such portion of the votes entitled to be cast
by the directors to which such reference is applicable. Absent
resignation or removal in accordance with provisions of the bylaws
or the articles of incorporation, each director shall hold office
for the term for which he is elected and until his successor shall
have been elected and qualified.
C. Except as otherwise provided in this Article, the bylaws,
or the articles of incorporation, at any meeting of shareholders
called expressly for that purpose, any director or the entire board
of directors may be removed, with or without cause, by a vote of the
holders of a majority of the shares then entitled to vote at an
election of the director or directors. Whenever the holders of any
class or series of shares or any such group are entitled to elect
one or more directors by the provisions of the articles of
incorporation, only the holders of shares of that class or series or
group shall be entitled to vote for or against the removal of any
director elected by the holders of shares of that class or series or
group. In the case of a corporation having cumulative voting, if
less than the entire board is to be removed, no one of the directors
may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of
the entire board of directors, or if there be classes of directors,
at an election of the class of directors of which he is a part. In
the case of a corporation whose directors have been classified as
permitted by this Act, unless the articles of incorporation
otherwise provide, a director may not be removed except for cause.
D. Notwithstanding Section B of this Article, a director of a
corporation registered under the Investment Company Act, absent
resignation or removal in accordance with the provisions of the
articles of incorporation or bylaws, holds office for the term for
which the director is elected and until the director's successor
has been elected and qualified.
E. Unless otherwise provided by the articles of
incorporation or the bylaws, a director may resign at any time by
giving notice in writing or by electronic transmission to the
corporation. The director's resignation takes effect on the date
the notice is received by the corporation, unless the notice
prescribes a later effective date or states that the resignation
takes effect on the occurrence of a future event, such as the
director's failure to receive a specified vote for reelection as a
director. If the director's resignation is to take effect on a
later date or on the occurrence of a future event, the resignation
takes effect on the later date or when the event occurs. The
director's resignation is irrevocable when it takes effect. The
director's resignation is revocable before it takes effect unless
the notice of resignation expressly states that it is irrevocable.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1500, ch. 545, Sec. 23, eff. Aug. 27, 1973;
Acts 1989, 71st Leg., ch. 801, Sec. 17, eff. Sept. 1, 1989; Acts
1991, 72nd Leg., ch. 901, Sec. 10, eff. Aug. 26, 1991; Acts 1993,
73rd Leg., ch. 215, Sec. 2.08, eff. Sept. 1, 1993; Acts 1997, 75th
Leg., ch. 375, Sec. 12, eff. Sept. 1, 1997.
Amended by Acts 2003, 78th Leg., ch. 238, Sec. 15, eff. Sept. 1,
2003.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 688, Sec. 140, eff. September
1, 2007.
Art. 2.33. CLASSIFICATION OF DIRECTORS. A. The bylaws of a
corporation may provide that the directors, the directors elected
by any class or series of shares or any group of classes or series of
shares, or any portion of the directors or of the directors elected
by any class or series of shares or any such group shall be divided
into either two or three classes, each class to be as nearly equal
in number as possible, the terms of office of directors of the first
class to expire at the first annual meeting of shareholders after
their election, that of the second class to expire at the second
annual meeting after their election, and that of the third class, if
any, to expire at the third annual meeting after their election. If
the bylaws provide for the classification of directors, (1) the
whole number of directors of the corporation need not be elected
annually, and (2) at each annual meeting after such classification,
the number of directors equal to the number of the class whose term
expires at the time of such meeting shall be elected to hold office
until the second succeeding annual meeting, if there be two
classes, or until the third succeeding annual meeting, if there be
three classes. No classification of directors shall be effective
prior to the next annual meeting of shareholders at which directors
are elected unless the classification is effected by a bylaw
adopted by the shareholders. No classification of directors shall
be effective for any corporation if any shareholder has the right to
cumulate his votes for the election of directors of the corporation
unless the board of directors of the corporation consists of nine or
more members.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1989, 71st Leg., ch. 801, Sec. 18, eff. Aug. 28, 1989; Acts
1991, 72nd Leg., ch. 901, Sec. 11, eff. Aug. 26, 1991.
Art. 2.34. VACANCIES. A. Any vacancy occurring in the
initial board of directors before the issuance of shares may be
filled by the affirmative vote or written consent of a majority of
the incorporators or by the affirmative vote of a majority of the
remaining directors though less than a quorum of the board of
directors. A director elected to fill a vacancy shall be elected
for the unexpired term of the director's predecessor in office.
B. Any vacancy occurring in the board of directors after the
issuance of shares may be filled in accordance with Section D of
this article or may be filled by the affirmative vote of a majority
of the remaining directors though less than a quorum of the board of
directors. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office.
C. A directorship to be filled by reason of an increase in the
number of directors may be filled in accordance with Section D of
this article or may be filled by the board of directors for a term of
office continuing only until the next election of one or more
directors by the shareholders; provided that the board of
directors may not fill more than two such directorships during the
period between any two successive annual meetings of shareholders.
D. Any vacancy occurring in the board of directors or any
directorship to be filled by reason of an increase in the number of
directors may be filled by election at an annual or special meeting
of shareholders called for that purpose.
E. Notwithstanding Sections B, C, and D of this article,
whenever the holders of any class or series of shares or group of
classes or series of shares are entitled to elect one or more
directors by the provisions of the articles of incorporation, any
vacancies in such directorships and any newly created directorships
of such class or series to be filled by reason of an increase in the
number of such directors may be filled by the affirmative vote of a
majority of the directors elected by such class or series, or by
such group, then in office, or by a sole remaining director so
elected, or by the vote of the holders of the outstanding shares of
such class or series or of such group, and such directorships shall
not in any case be filled by the vote of the remaining directors or
the holders of the outstanding shares as a whole unless otherwise
provided in the articles of incorporation.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1983, 68th Leg., p. 3151, ch. 540, Sec. 6, eff. Aug; 29, 1983;
Acts 1985, 69th Leg., ch. 128, Sec. 8, eff. May 20, 1985; Acts 1991,
72nd Leg., ch. 901, Sec. 12, eff. Aug. 26, 1991; Acts 1993, 73rd
Leg., ch. 215, Sec. 2.09, eff. Sept. 1, 1993.
Art. 2.35. QUORUM OF AND ACTION BY DIRECTORS. A. A majority
of the number of directors fixed by, or in the manner provided in,
the articles of incorporation or the bylaws shall constitute a
quorum for the transaction of business unless a different number or
portion is required by law or the articles of incorporation or the
bylaws. In no case may the articles of incorporation or bylaws
provide that less than one-third of the number of directors so fixed
constitute a quorum. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of
the board of directors, unless the act of a greater number is
required by law or the articles of incorporation or the bylaws.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1501, ch. 545, Sec. 24, eff. Aug. 27, 1973;
Acts 1989, 71st Leg., ch. 801, Sec. 19, eff. Aug. 28, 1989; Acts
1991, 72nd Leg., ch. 901, Sec. 13, eff. Aug. 26, 1991.
Art. 2.35-1. INTERESTED DIRECTORS. A. An otherwise valid
contract or transaction between a corporation and one or more of its
directors or officers, or between a corporation and any other
domestic or foreign corporation or other entity in which one or more
of its directors or officers are directors or officers or have a
financial interest, shall be valid notwithstanding whether the
director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for
such purpose, if any one of the following is satisfied:
(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
board of directors or the committee, and the board or committee in
good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
shareholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved, or ratified by the board
of directors, a committee thereof, or the shareholders.
B. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes the contract or
transaction.
Added by Acts 1985, 69th Leg., ch. 128, Sec. 9, eff. May 20, 1985.
Amended by Acts 1997, 75th Leg., ch. 375, Sec. 13, eff. Sept. 1,
1997.
Art. 2.36. COMMITTEES OF THE BOARD OF DIRECTORS. A. If the
articles of incorporation or the bylaws so provide, the board of
directors may designate from among its members one or more
committees, each of which shall be comprised of one or more of its
members, and may designate one or more of its members as alternate
members of any committee, who may, subject to any limitations
imposed by the board of directors, replace absent or disqualified
members at any meeting of that committee. Any such committee, to
the extent provided in the resolution of the board of directors or
in the articles of incorporation or the bylaws, shall have and may
exercise all of the authority of the board of directors, subject to
the limitations set forth in Sections B and C of this Article.
B. No committee of the board of directors shall have the
authority of the board of directors in reference to:
(1) amending the articles of incorporation, except that a
committee may, to the extent provided in the resolution designating
that committee or in the articles of incorporation or the bylaws,
exercise the authority of the board of directors vested in it in
accordance with Article 2.13 of this Act;
(2) proposing a reduction of the stated capital of the
corporation in the manner permitted by Article 4.12 of this Act;
(3) approving a plan of merger, share exchange, or conversion
of the corporation;
(4) recommending to the shareholders the sale, lease, or
exchange of all or substantially all of the property and assets of
the corporation otherwise than in the usual and regular course of
its business;
(5) recommending to the shareholders a voluntary dissolution
of the corporation or a revocation thereof;
(6) amending, altering, or repealing the bylaws of the
corporation or adopting new bylaws of the corporation;
(7) filling vacancies in the board of directors;
(8) filling vacancies in or designating alternate members of
any such committee;
(9) filling any directorship to be filled by reason of an
increase in the number of directors;
(10) electing or removing officers of the corporation or
members or alternate members of any such committee;
(11) fixing the compensation of any member or alternate
members of such committee; or
(12) altering or repealing any resolution of the board of
directors that by its terms provides that it shall not be so
amendable or repealable.
C. Unless the resolution designating a particular committee,
the articles of incorporation, or the bylaws expressly so provide,
no committee of the board of directors shall have the authority to
authorize a distribution or to authorize the issuance of shares of
the corporation.
D. The designation of a committee of the board of directors
and the delegation thereto of authority shall not operate to
relieve the board of directors, or any member thereof, of any
responsibility imposed by law.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1501, ch. 545, Sec. 25, eff. Aug. 27, 1973;
Acts 1975, 64th Leg., p. 316, ch. 134, Sec. 13, eff. Sept. 1, 1975;
Acts 1983, 68th Leg., p. 3152, ch. 540, Sec. 7, eff. Aug. 29, 1983;
Acts 1985, 69th Leg., ch. 128, Sec. 10, eff. May 20, 1985; Acts
1989, 71st Leg., ch. 801, Sec. 20, eff. Aug. 28, 1989; Acts 1997,
75th Leg., ch. 375, Sec. 14, eff. Sept. 1, 1997.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 16, eff. Sept.
1, 2003.
Art. 2.37. PLACE AND NOTICE OF DIRECTORS' MEETINGS. A.
Meetings of the board of directors, regular or special, may be held
either within or without this State.
B. Regular meetings of the board of directors may be held with
or without notice as prescribed in the bylaws. Special meetings of
the board of directors shall be held upon such notice as is
prescribed in the bylaws. Attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting is
not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of
the board of directors need be specified in the notice or waiver of
notice of such meeting, unless required by the bylaws.
C. On consent of a director, notice of the date, time, place,
or purpose of a regular or special meeting of the board of directors
may be given to the director by electronic transmission. The
director may specify the form of electronic transmission to be used
to communicate notice. The director may revoke this consent by
written notice to the corporation. The director's consent is
deemed to be revoked if the corporation is unable to deliver by
electronic transmission two consecutive notices and the secretary
of the corporation or other person responsible for delivering the
notice on behalf of the corporation knows that the delivery of these
two electronic transmissions was unsuccessful. The inadvertent
failure to treat the unsuccessful transmissions as a revocation of
the director's consent does not invalidate a meeting or other
action. An affidavit of the secretary or other agent of the
corporation that notice has been given by electronic transmission
is, in the absence of fraud, prima facie evidence that the notice
was given. Notice under this section is deemed given when the
notice is:
(1) transmitted to a facsimile number provided by the
director for the purpose of receiving notice;
(2) transmitted to an electronic mail address provided by the
director for the purpose of receiving notice;
(3) posted on an electronic network and a message is sent to
the director at the address provided by the director for the purpose
of alerting the director of a posting; or
(4) communicated to the director by any other form of
electronic transmission consented to by the director.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Sec. C added by Acts 2003, 78th Leg., ch. 238, Sec. 17, eff. Sept. 1,
2003.
Art. 2.38. DISTRIBUTIONS. A. The board of directors of a
corporation may authorize and the corporation may make
distributions subject to any restrictions in its articles of
incorporation and to the limitations set forth in this Article.
B. A distribution may not be made by a corporation if:
(1) after giving effect to the distribution, the corporation
would be insolvent; or
(2) the distribution exceeds the surplus of the corporation.
C. Notwithstanding the limitation set forth in Subsection (2)
of Section B of this Article, if the net assets of a corporation are
not less than the amount of the proposed distribution:
(1) the corporation may make a distribution involving a
purchase or redemption of any of its own shares if the corporation
is an open-end investment company, registered as such under the
Federal Investment Company Act of 1940 (15 U.S.C.A. Sec. 80a-1
(1986)), and its articles of incorporation provide in effect that
it may purchase its own shares out of stated capital;
(2) the corporation may make a distribution involving a
purchase or redemption of any of its own shares if the purchase or
redemption is made by the corporation to:
(a) eliminate fractional shares;
(b) collect or compromise indebtedness owed by or to the
corporation;
(c) pay dissenting shareholders entitled to payment for their
shares under this Act; or
(d) effect the purchase or redemption of redeemable shares in
accordance with this Act; and
(3) the corporation may make a distribution not involving a
purchase or redemption of any of its own shares if the corporation
is a consuming assets corporation.
D. Notwithstanding the limitations set forth in Section B of
this Article, the corporation may make distributions in compliance
with Article 6.04, 7.09, or 7.12 of this Act.
E. A corporation's indebtedness to a shareholder incurred by
reason of a distribution made in accordance with this Article shall
be at parity with the corporation's indebtedness to its general,
unsecured creditors, except to the extent the indebtedness is
subordinated, or payment of that indebtedness is secured, by
agreement.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1987, 70th Leg., ch. 93, Sec. 15, eff. Aug. 31, 1987; Acts
1989, 71st Leg., ch. 801, Sec. 21, eff. Aug. 28, 1989.
Art. 2.38-1. SHARE DIVIDENDS. A. The board of directors of a
corporation may authorize and the corporation may pay share
dividends subject to any restrictions in its articles of
incorporation and to the limitations set forth in this Article.
B. A share dividend payable in authorized but unissued shares
may not be paid by a corporation if the surplus of the corporation
is less than the amount required by this Article to be transferred
to stated capital at the time that share dividend is paid.
C. If a share dividend is payable in authorized but unissued
shares having a par value, those shares shall be issued at the par
value and at the time that share dividend is paid an amount of
surplus designated by the board of directors not less than the
aggregate par value of the shares to be issued as a share dividend
shall be transferred to stated capital.
D. If a share dividend is payable in authorized but unissued
shares without par value, those shares shall be issued at the value
fixed by resolution of the board of directors adopted at the time
the share dividend is authorized, and at the time the share dividend
is paid an amount of surplus equal to the aggregate value so fixed
in respect of those shares shall be transferred to stated capital.
E. A share dividend payable in shares of any class may not be
paid to the holders of shares of any other class unless the articles
of incorporation so provide or unless the payment is authorized by
the affirmative vote or the written consent of the holders of at
least a majority of the outstanding shares of the class in which the
payment is to be made.
Added by Acts 1987, 70th Leg., ch. 93, Sec. 16, eff. Aug. 31, 1987.
Art. 2.38-2. SPLIT-UP OR DIVISION WITHOUT STATED CAPITAL
INCREASE. A split-up or division of the issued shares of any class
of a corporation into a greater number of shares of the same class
without increasing the stated capital of the corporation does not
constitute a share dividend or a distribution.
Added by Acts 1987, 70th Leg., ch. 93, Sec. 16, eff. Aug. 31, 1987.
Art. 2.38-3. DETERMINATION OF NET ASSETS, STATED CAPITAL, AND
SURPLUS. A. Determinations whether a corporation is insolvent and
of the value of the net assets, and determination of stated capital,
and surplus of the corporation, and each of their components, may,
but is not required to, be based on:
(1) financial statements of the corporation, including
without limitation financial statements that include subsidiary
corporations or other corporations accounted for on a consolidated
basis or on the equity method of accounting, that present the
financial condition of the corporation in accordance with generally
accepted accounting principles;
(2) financial statements prepared on the basis of accounting
used to file the corporation's federal income tax return or any
other accounting practices and principles that are reasonable in
the circumstances;
(3) financial information, including without limitation
condensed or summary financial statements, that is prepared on a
basis consistent with the financial statements referred to in
Subsections (1) and (2) of this section;
(4) projection, forecast, or other forward looking
information relating to the future economic performance, financial
condition, or liquidity of the corporation that is reasonable in
the circumstances;
(5) a fair valuation or information from any other method
that is reasonable in the circumstances; or
(6) any combination of the statements, valuations, or
information authorized by this section.
B. Section A of this Article and the determinations made in
accordance therewith do not apply to the calculation of the Texas
franchise tax or any other tax imposed on corporations under the
laws of this state.
Added by Acts 1987, 70th Leg., ch. 93, Sec. 16, eff. Aug. 31, 1987.
Sec. A amended by Acts 1991, 72nd Leg., ch. 901, Sec. 14, eff. Aug.
26, 1991.
Art. 2.38-4. DATE OF DETERMINATION OF SURPLUS. A. In the
case of a distribution by a corporation or the payment of a share
dividend, the surplus of the corporation shall be determined, and
the determination whether the corporation would be insolvent after
giving effect to the distribution shall be made:
(1) on the date that action is authorized by the board of
directors if the action is taken on or before the 120th day after
the date of authorization;
(2) if the action is taken after the 120th day after the date
of authorization and the board of directors designates a date,
within 120 days before the date the action is taken, on which the
determination is to be made, on the date so designated by the board
of directors; or
(3) if the action is taken after the 120th day after the date
of authorization and the board of directors does not make the
designation described by Subsection (2) of this section, on the
date the action is taken.
B. For the purposes of this Article, a distribution that
involves the incurrence by a corporation of any indebtedness or
deferred payment obligation or that involves a requirement in the
corporation's articles of incorporation or other contract by the
corporation to redeem, exchange, or otherwise acquire any of its
own shares is deemed to have been made on the date the indebtedness
or obligation is incurred or, in the case of a provision in the
articles of incorporation of a corporation or other contract to
purchase, redeem, exchange, or otherwise acquire shares, at the
option of the corporation, is deemed to have been made on either the
date the provision or other contract is made or takes effect or the
date on which the shares to be redeemed, exchanged, or acquired are
redeemed, exchanged, or acquired.
Added by Acts 1987, 70th Leg., ch. 93, Sec. 16, eff. Aug. 31, 1987.
Sec. B amended by Acts 1997, 75th Leg., ch. 375, Sec. 15, eff. Sept.
1, 1997.
Art. 2.41. LIABILITY OF DIRECTORS AND SHAREHOLDERS IN CERTAIN
CASES. A. In addition to any other liabilities imposed by law upon
directors of a corporation:
(1) Directors of a corporation who vote for or assent to a
distribution by the corporation that is not permitted by Article
2.38 of this Act shall be jointly and severally liable to the
corporation for the amount by which the distributed amount exceeds
the amount permitted by Article 2.38 of this Act to be distributed;
provided that a director shall have no liability for the excess
amount, or any part of that excess, if on any date after the date of
the vote or assent authorizing the distribution, a distribution of
that excess or that part would have been permitted by Article 2.38.
(2) An action may not be brought against a director for
liability imposed by this section after two years after the date on
which the act alleged to give rise to the liability occurred.
B. A director of a corporation who is present at a meeting of
its board of directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless
he shall file his written dissent to such action with the person
acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
C. A director shall not be liable under Subsection (1) of
Section A of this Article if, in voting for or assenting to the
distribution, the director:
(1) relied in good faith and with ordinary care upon the
statements, valuations, or information referred to in Article
2.38-3 of this Act, or upon other information, opinions, reports,
or statements, including financial statements and other financial
data, concerning the corporation or another person, that were
prepared or presented by:
(a) one or more officers or employees of the corporation;
(b) legal counsel, public accountants, investment bankers,
or other persons as to matters the director reasonably believes are
within the person's professional or expert competence; or
(c) a committee of the board of directors of which the
director is not a member;
(2) acting in good faith and with ordinary care, considered
the assets of the corporation to be at least of their book value; or
(3) in determining whether the corporation made adequate
provision for payment, satisfaction or discharge of all of its
liabilities and obligations as provided in Articles 6.04 and 7.12
of this Act, relied in good faith and with ordinary care upon
financial statements of, or other information concerning, any
person who was or became contractually obligated to pay, satisfy,
or discharge some or all of those liabilities or obligations.
D. In the discharge of any duty imposed or power conferred
upon a director, including as a member of a committee, the director,
may in good faith and with ordinary care, rely on information,
opinions, reports, or statements, including financial statements
and other financial data, concerning the corporation or another
person, that were prepared or presented by:
(1) one or more officers or employees of the corporation;
(2) legal counsel, public accountants, investment bankers,
or other persons as to matters the director reasonably believes are
within the person's professional or expert competence; or
(3) a committee of the board of directors of which the
director is not a member.
A director is not relying in good faith within the meaning of
this Section if the director has knowledge concerning the matter in
question that makes reliance otherwise permitted by this Section
unwarranted.
E. A director against whom a claim shall be asserted under
this Article for a distribution made by the corporation, and who
shall be held liable thereon, shall be entitled to contribution
from the shareholders who accepted or received such distribution
knowing that such distribution was not permitted by Article 2.38,
in proportion to the amounts received by them, respectively.
F. A director found liable with respect to a claim shall be
entitled to contribution as appropriate to achieve equity from each
of the other directors who are liable with respect to that claim.
G. The liability provided in Subsection (1) of Section A of
this Article shall be the only liability of directors to a
corporation or its creditors for authorizing a distribution by the
corporation that is not permitted by Article 2.38 of this Act. The
liability provided in Section E of this Article shall be the only
liability of shareholders to a corporation or its creditors for
accepting or receiving a distribution by the corporation that is
not permitted by Article 2.38 of this Act; provided, however, that
this Section does not limit any liability under the Uniform
Fraudulent Transfer Act or the United States Bankruptcy Code.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1983, 68th Leg., p. 3153, ch. 540, Sec. 8, eff. Aug. 29, 1983;
Acts 1987, 70th Leg., ch. 93, Sec. 17, eff. Aug. 31, 1987; Acts
1989, 71st Leg., ch. 801, Sec. 22, eff. Aug. 28, 1989; Acts 1991,
72nd Leg., ch. 901, Sec. 15, eff. Aug. 26, 1991; Acts 1991, 72nd
Leg., ch. 901, Sec. 16, eff. Aug. 26, 1991; Acts 1993, 73rd Leg.,
ch. 215, Sec. 2.10, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 18, eff. Sept.
1, 2003.
Art. 2.42. OFFICERS. A. The officers of a corporation shall
consist of a president and a secretary, each of whom shall be
elected by the board of directors at such time and in such manner as
may be prescribed by the bylaws. Such other officers, including
assistant officers, and agents as may be deemed necessary may be
elected or appointed by the board of directors or chosen in such
other manner as may be prescribed by the bylaws. Any two (2) or more
offices may be held by the same person.
B. All officers and agents of the corporation, as between
themselves and the corporation, shall have such authority and
perform such duties in the management of the corporation as may be
provided in the bylaws, or as may be determined by resolution of the
board of directors not inconsistent with the bylaws.
C. In the discharge of any duty imposed or power conferred
upon an officer, of a corporation the officer may in good faith and
ordinary care rely on information, opinions, reports, or
statements, including financial statements and other financial
data, concerning the corporation or another person, that were
prepared or presented by:
(1) one or more other officers or employees of the
corporation including members of the board of directors; or
(2) legal counsel, public accountants, investment bankers,
or other persons as to matters the officer reasonably believes are
within the person's professional or expert competence.
An officer is not relying in good faith within the meaning of
this section if the officer has knowledge concerning the matter in
question that makes reliance otherwise permitted by this subsection
unwarranted.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1981, 67th Leg., p. 3114, ch. 818, Sec. 4, eff. Aug. 31, 1981;
Acts 1985, 69th Leg., ch. 128, Sec. 11, eff. May 20, 1985; Acts
1991, 72nd Leg., ch. 901, Sec. 17, eff. Aug. 26, 1991.
Art. 2.43. REMOVAL OF OFFICERS. A. Any officer or agent or
member of a committee elected or appointed by the board of directors
may be removed by the board of directors whenever in its judgment
the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an
officer or agent or member of a committee shall not of itself create
contract rights.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1975, 64th Leg., p. 314, ch. 134, Sec. 10, eff. Sept. 1, 1975.
Art. 2.44. BOOKS AND RECORDS. A. Each corporation shall keep
books and records of account and shall keep minutes of the
proceedings of its shareholders, its board of directors, and each
committee of its board of directors. Each corporation shall keep at
its registered office or principal place of business, or at the
office of its transfer agent or registrar, a record of the original
issuance of shares issued by the corporation and a record of each
transfer of those shares that have been presented to the
corporation for registration of transfer. Such records shall
contain the names and addresses of all past and current
shareholders of the corporation and the number and class or series
of shares issued by the corporation held by each of them. Any
books, records, minutes, and share transfer records may be in
written form or in any other form capable of being converted into
written paper form within a reasonable time. The principal place of
business of a corporation, or the office of its transfer agent or
registrar, may be located outside the State of Texas.
B. A director may examine the corporation's books and records
of account, share transfer records, corporate minutes and any other
corporate books and records for any purpose reasonably related to
the director's service as a director. A court of competent
jurisdiction may compel a corporation to open its books and records
of account, share transfer records, corporate minutes or any other
corporate books and records to permit the director to inspect the
books or records and make copies or extracts from the books or
records on a showing by a director that:
(1) he is a director;
(2) he demanded to inspect the corporate books and records;
(3) his purpose for inspecting the corporate books and
records was reasonably related to his service as a director; and
(4) his right of access to the books and records was refused
by the corporation.
The court may also award the director attorneys' fees and any
other relief that the court deems just and proper.
C. Any person who shall have been a shareholder for at least
six (6) months immediately preceding his demand, or shall be the
holder of at least five per cent (5%) of all the outstanding shares
of a corporation, upon written demand stating the purpose thereof,
shall have the right to examine, in person or by agent, accountant,
or attorney, at any reasonable time or times, for any proper
purpose, its relevant books and records of account, minutes, and
share transfer records, and to make extracts therefrom.
D. Any corporation which shall refuse to allow any such
shareholder or his agent, accountant or attorney, so to examine and
make extracts from its books and records of account, minutes, and
share transfer records, for any proper purpose, shall be liable to
such shareholder for all costs and expenses, including attorneys'
fees, incurred in enforcing his rights under this Article in
addition to any other damages or remedy afforded him by law. It
shall be a defense to any action for penalties under this section
that the person suing therefor has within two (2) years sold or
offered for sale any list of shareholders or of holders of voting
trust certificates for shares of such corporation or any other
corporation or has aided or abetted any person in procuring any list
of shareholders or of holders of voting trust certificates for any
such purpose, or has improperly used any information secured
through any prior examination of the books and records of account,
minutes, or share transfer records of such corporation or any other
corporation, or was not acting in good faith or for a proper purpose
in making his demand.
E. Nothing herein contained shall impair the power of any
court of competent jurisdiction, upon proof of proper purpose by a
beneficial or record holder of shares, irrespective of the period
of time during which such holder shall have been a beneficial or
record holder and irrespective of the number of shares held by him,
to compel the production for examination by such holder of the books
and records of account, minutes, and share transfer records of a
corporation.
F. Upon the written request of any shareholder of a
corporation, the corporation shall mail to such shareholder its
annual statements for its last fiscal year showing in reasonable
detail its assets and liabilities and the results of its operations
and the most recent interim statements, if any, which have been
filed in a public record or otherwise published. The corporation
shall be allowed a reasonable time to prepare such annual
statements.
G. A holder of a beneficial interest in a voting trust entered
into pursuant to Article 2.30 of this Act shall be regarded as a
holder of the shares represented by such beneficial interest for
the purposes of this Article.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1973, 63rd Leg., p. 1502, ch. 545, Sec. 26, eff. Aug. 27, 1973;
Acts 1989, 71st Leg., ch. 801, Sec. 23, eff. Aug. 28, 1989; Acts
1991, 72nd Leg., ch. 901, Sec. 18, eff. Aug. 26, 1991; Acts 1993,
73rd Leg., ch. 215, Sec. 2.11, eff. Sept. 1, 1993.
Sec. A amended by Acts 2003, 78th Leg., ch. 238, Sec. 19, eff. Sept.
1, 2003.