Honorable 0. P. Lockhart, Chairman Overruled by 0-5933A 

Board of Insurance Commissioners in 80 far a6 it conflicts &4~7 d

Auet in, Texae 

Dear Sir: Opinion No. O-5792 

Re: Whether a life insurance 

company whose stock ie 

without par value may reduce ite capital to $100,000 

for the purpose of making 

good an impairment of its 

capital under the provisions 

of Article 4748 and Article 

4704, Vernon’s Annotated 

Civil Statutes; and a 

related matter. 

Your letter requesting the opinion of this department 

on the question0 etated therein reads as follows: 

“A Texas life insurance company, whose share@ 

of etock are without nominal or par value, wishes to 

reduce its capital to $100,000. The Cotipany’s author.- 

ized capital ie $500,000, of which $250,000 was paid 

in in cash at incorporation. 

“The purpose of the reduction is to restore an 

impairment in its present capital etructure. Thie 

procedure is available to companiee with par value 

stock under Article 4748. 

“Will you please advise me whether, in view of 

Article 4704 and any other applicable statutee, a life 

insurance company whose stock ia without par value, may 

reduce its capital to $100,000 for the purpose of making good an impairment of its capital. 
Honorable 0. P. Lockhart, page 2 (O-5792) 

“If your anewer should be in the negative, ,. ~~ ~. ,,;; 

please advise me whether the no par stock may be 

converted into stock with par value 60 that the 

company may then proceed with the reduction under Article 4748.” 

Article 4704, Vernon’e Annotated Civil Statutes, provides, 

in part: 

“Sec. 2. Upon the incorporation or upon the 

amendment of the charter in the manner now or hereafter provided by law, of any insurance company 

organized under the laws of thie State, provieion 

may be made for the iesuance of &ares of its stock 

without a nominal or par value. Every euch ehare, 

shall be equal in all respects to every other such 

share; provided, however, that the stockholders of 

any euch company authorizing the issuance of it8 

stock without nominal or par value, shall be required in good faith to subscribe and pay for at 

leaet fifty (50s) per cent of the authorized share8 

to be issued without nominal or par value, before 

said corporation shall be chartered or have ite 

charter amended 80 a8 to authorize the ireuance of 

shares without nominal or par value; and provided 

further that in no event shall the amount 80 paid 

be less than Two Hundred Fifty Thousand ($250,000.00) 

Dollars. 

n * * * 

“Sec. 6. The privileges and power8 conferred 

by thia Act shall be in addition to any and all 

powere and privileges conferred by any other law 

or lawa, and not in rertriction or limitation of 

any of the powere now permitted to ruch companies; 

life, health or accident inrurance companies organized or amending their charter under thin Act shall 

be subject to and controlled by the provinionr of 

Chapter 3, Title 78, Revieed Civil Statute6 of Texae, 

1925, except where the provisions of eaid Chapter 

are inconsistent or in conflict’with the provisions 

of this Act.” 
Honorable 0. P. Lockhart, page 3 (O-5792) 

Article 4719, Vernon'8 Annotated Civil Statutes, 

authorizes life, health and accident insurance companies to 

amend their charter6 and also increase or reduce the amount 

of their capital stock in the manner therein prescribed. 

Article 4748, Vernon's Annotated Civil Statutes, 

provides: 

"Any insurance company transacting business 

within this State, whose capital stock shall become impaired to the extent of thirty-three and 

one-third per centthereof, computing its liabilities according to the terms of this chapter, shall 

make good such impairment within sixty days, by 

reduction of its capital stock, (provided such 

capital stock shall in no case be less than one 

hundred thousand dollars), or otherwise; and failing to make good such impairment within said time 

shall forfeit its right to write new business in 

this State until said impairment shall have been 

made good. The Commissioner may apply to any 

court of competent jurisdiction for the appointment of a receiver to wind up the affairs of such 

company when its capital stock shall become impaired to the extent of fifty per cent thereof, 

computing ita po~licy liabilities according to the 

American experience table of mortality and four 

and one-half per cent interest. No company shall 

write new business in Texas when its net surplus 

to policy holders is less than one hundred thousand 

dollars." 

Article 4704, supra, authorizes insurance companies to 

issue shares of their stock without nominal or par value. Said 

statute requires companies issuing such stock to subscribe and 

pay for at least fifty per cent of the authorized shares to be 

issued without nominal or par value before said corporation shall 

be chartered or have their charters amended so as to authorize 

the iseuance of shares without nominal or par value, and in no 

event shall the amount 60 paid be less than $25O,OOO. In view 

of Article 4704, it is our opinion that a life insurance company 

whose shares of stock are without nominal or par value cannot 

reduce its capital to $100,000. Such statute (Article 4704) ex- 
- . . _ 

Honorable 0. P. Lockhart, page 4 (O-5792) 

pressly provides that in no event shall the amount 80 paid be less 

than $250,000. 

It is our further opinion that Article 4719 authorizing 

life, health and accident insurance companies to reduce their capital stock does not authorize such companies to reduce their capital 

stock whose shares of stock are without nominal or par value to any 

amount leS6 than $250,000. 

Article 4715, Vernon's Annotated Civil Statutes, provides: 

"The laws governing corporations in general Shall 

apply to and govern insurance companies incorporated in 

this State in so far as the same are not inconsistent 

with any provision of this title." 

Articles 1538a,-1538m, Vernon's Annotated Civil Statutes, 

authorize corporations generally to iSSUe stock without nominal 

or par value. These statutes authorize private corporations for 

profit, other than corporation6 authorized to conduct a banking 

or insurance business, having authorized Share6 for par or face 

value, or shares without nominal or par value, or both, to change 

its shares of Stock with par or face value, or any class or classes 

thereof, into the same number or into a larger or smaller number 

of shares without nominal or par value, provided that all shares 

in any one class shall be changed on the same basis, or 60 a6 to 

change its shares without nominal or par value, or any ClaBB or 

classes thereof, into a larger or smaller number of Shares without nominal or par value, provided that all shares in any one ClaSS 

shall be changed on the same basis. It will be noted that these 

statute6 do not authorize corporations generally to convert Share6 

of stock without nominal or par value into stock with nominal or 

par value. 

After a careful search of the cases of the appellate 

courts, we have failed to find any case paseing upon the qUeStiOn 

under consideration. We have also failed to find any authority 

or statute authorizing a life insurance company who66 shares of 

stock are without nominal or par value to convert such stock into 

stock with nominal or par value. Therefore, it is our opinion 

that a life insurance company whose shares of Stock are without 

nominal or par value cannot legally convert such stock into Stock 

with nominal or par value. 

APPROVED Yours very truly 

APPROVED JAN 28, 1944 OPINION 

/s/ Grover Sellers COMMITTEE ATTORNEY GENERAL OF TEXAS 

ATTOPJiEY GENERALOFTEXAS BY /s/ GWB By /a/ Ardell William6 

CHAIRMAN Ardell William6 

AW:RP Assistant