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

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

Dear Sir: Opinion No. O-5792 Re: Whether a life insurance companywhose 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 andArticle 4704, Vernon’s Annotated Civil Statutes; and a related matter.

Your letter requesting the opinion of this department
onthe question0 etated therein reads as follows:

“ATexas 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 waspaid in in cash at incorporation.

“Thepurpose 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 mewhether, in view of Article 4704 andany other applicable statutee, a life insurance companywhose 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 mewhether the nopar stock maybe converted into stock with par value 60that the companymaythen proceed with the reduction under Article 4748.”

Article 4704, Vernon’e Annotated CivilStatutes, provides, in part:

“Sec. 2. Uponthe incorporation or uponthe amendmentof the charter in the mannernowor hereafter provided by law, of any insurance company organized under the laws of thie State, provieion maybe madefor the iesuance of &ares of its stock without a nominal or par value. Every euch ehare, shall be equal in all respects to everyother such share; provided, however, that the stockholders of any euch companyauthorizing the issuance of it8 stock without nominal or par value, shall be required in good faith to subscribe andpay 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 amended80a8to authorize the ireuance of shares without nominal or par value; andprovided further that in no event shall the amount 80paid be less than TwoHundredFifty Thousand ($250,000.00) Dollars.

n* * *

“Sec. 6. Theprivileges andpower8 conferred by thia Act shall be in addition to anyandall powere andprivileges conferred by anyother law

or lawa, and not in rertriction or limitation of any of the powere nowpermitted to ruchcompanies; life, health or accident inrurance companies organized or amendingtheir 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 andaccident insurance companies to amendtheir charter6 andalso increase or reduce the amount of their capital stock in the mannertherein prescribed.

Article 4748, Vernon's Annotated Civil Statutes, provides:

"Anyinsurance companytransacting business within this State, whose capital stock shall becomeimpaired to the extent of thirty-three and one-third per centthereof, computing its liabilities according to the terms of this chapter, shall makegood 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 makegood such impairment within said time shall forfeit its right to write newbusiness in this State until said impairment shall have been madegood. The Commissioner mayapply to any court of competent jurisdiction for the appointmentof a receiver to wind upthe affairs of such companywhenits 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. Nocompanyshall write newbusiness in Texas whenits 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 amendedso as to authorize the iseuance of shares without nominal or par value, and in no event shall the amount 60paid 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 80paid be less than $250,000.

It is our further opinion that Article 4719 authorizing life, health andaccident 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 amountleS6 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 sameare not inconsistent with anyprovision of this title."

Articles 1538a,-1538m, Vernon's Annotated Civil Statutes, authorize corporations generally to iSSUestock 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 samenumberor into a larger or smaller number of shares without nominal or par value, provided that all shares in any one class shall be changed onthe samebasis, or 60a6to change its shares without nominal or par value, or any ClaBBor classes thereof, into a larger or smaller numberof Shares without nominal or par value, provided that all shares in any one ClaSS shall be changed onthe samebasis. It will be noted that these statute6 donot 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, wehave failed to find any case paseing uponthe qUeStiOn under consideration. Wehave also failed to find anyauthority

or statute authorizing a life insurance companywho66shares 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 companywhose 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

OFTEXAS ATTOPJiEY

GENERALOFTEXAS

BY/s/ GWB By /a/ Ardell William6 CHAIRMAN Ardell William6 AW:RP Assistant