Honorable WllllamM. King State Securltiea

Cbmaaiesioner State Securities

hoard Austin, Texas Opinion No. **W-564**
Re: Application

‘of the exemption contained

In Section **5** (I) of the Securities

Act to

DearMr..

Kingi sale of oil and gaa faterests.

You&letter requesting our op$nionrelative to the captlouad matterreade lu+rt as follows: :.

“SeC$ion

4.A. of the Securlties.Act states ‘The term ~“Beourity”

or “securities”

shall inclUe
. ; ceitiflcate

or any lnet.rument

repreaentlug

auy %utk est ia or under aa oil, gas or .ml+ag lease,fee or: title
. ‘. 

### l

,I
“An opinion of your office is requested ae to (1) whethera person selling (as that term 18 deified la Section

4. A of the Securftlefi Act) such interest may claim the uemption’ of Section **5.** 5. or the ‘Sacurltlee Act if after the sale of any oae such Intereet the total number of,perscas holdlug lutereets

in the particular

oil, gaa or mining lease, fee or title, does not exceedthirty-five and the sale is .&de without the u8e ‘of

advertisements

or shy form of publld ,solicitatioh. “If youx answer to this questionis ~3.u the af: flrmative,~

(2) Is it aeceeaaryfo? the person eeiilng’ atch a eecurlty

to hold a .llcehee

under the Secukitida Act aa a dealer in oil aud gas.” Article 581-5,

V.C.8, dada lh,part a44 i0im8:

I “Except an hereiu#ter in this”Acfapecifioally provided,’

the provieioae

of thie Act shsll not i@pSy. .~ to the sale of auy seourlty when made in auy of the following

transactlone

aud under any of the followbq coaditlons,

and the coapauyor pcreoh engaged, thereinahallnot be deemeda dealerwfthfrr the meaulag of this Act; that ,la to say, the p~ovlelons of :Honorable WilliamM. Klug, Page 2, (WW-564)

this Act shallnot apply, to any sale,offer for sale, solicitation, subscription,

dealing 'in

or delivery

of any security

under any of the following tramactions or conditions:

. . . . "I. The saleby any corporation of it6 eecuritlea

or by any unincorporated association

or partaerehlp

of interest,

where the total mambership or stockholders will not thereafter exceed thirty-five

(35), and where the sale Is made withoutthe use of advertisements or any form of public solicitation;" SectionI ouly mentionssalesby corporations, unincorporated associations and partnerships; accordingly this exemption cau ohly spply to a traasactlou

where au entity of thls,charactex Is the vaudor. With respect to unincorporated associations

aud partnerehlps, the ohly security

exempted

by Sectlon I is the sale of au.Yihterest". Iu otherwords, the vendeemust acquirea proprietaryiatei'e'eef'iu the partziershlp

or unincorporated

association

as such. The legielatlvehiatory of SectionI iudicates such is the proper comtructlou. The present exemption

Is reallya merger of three sections found in Section3 (exempt tramactions) of the 1955 Securities Act, Acts 54th Legislature, KS., 1955, Chapter67, Article 579.l through 579-42

V.C.S. and Section 3 of the Iusurauce'Securlties Act, Acts **54** Legislature, R.S. 1955, Chapter384,Article 580-l through 580-39 V.C.S. Thoee rrectlons were Secthns **3(J),** (k) .-J (1). Section 3(k),, which $6 the section applicable to partnerships,

pools or other companies not a corporation,

exempted ouly "the sale of an intereetia a partnership, etc." Therefore,

with respect

to sales in which the vendor 1s an unincorporated aseociation or partnership,

lu order for the sale to qualify as exempt

under Sectlou I, the salemust be of au Interestin~thevendor-association or partaerahip, as the case may be, and after the sale theremust not be @re thau thirty-rive

mambers In the association or partnership. (Of couree, the salemust be msde withoutthe use' of advertisement

or advertisements

or auy 

### rmu of public sollcltatlon.)

Concerning

corporations,

Section I only exemptsfrom the Securities 

### Act, saleemade by corporations of its securities,

which could re6ult ln lucreasing

the stockholders

of the corporation. The only eecurlties that a corporation could sell that could increase the number of stockholders

would be sharesof its capitalstock. The exemption

contained

in Section I is ouly.appllcable to the sale of a security that would result in the vendee acquiring a proprietary

interestin the corporation, uuincorporated

association

or partnership. The number of personsholdingan Interestin ox under au oil,Honorable William

M. King, Page 3, (WW-564)

gas or mining lease, fee or title as a resultof the sale is.immaterial as far as such exemption is concerned. The purchaser

of an interest

in or underan oil, gas or mining lease, fee or title from a corporation does not thereby

becomea stockholder In the sellercorporation. The mere purchase

of an Interest

in or under an oil, gas or mining lease, fee or title from an unincorporated association

or partnership

does not therebymake the purchaser a member of the unincorporated association

or partnership

which sold the security and the purchaser

does not acquirean "interest" therein. Of course, by subsequent

contract,

eitherexpressor implied, or by subsequent acts or conduct

amounting

to an estoppelsuch purchaser couldbecomea memberthereofor acquirean interest therein,

but the mere purchase of an Interest

in or under an oil, gas or mining lease, fee or title would not make the purchaser

a member of the unincorporated association

or partnership,or amountto the acquisition of an interest

therein,

or make him a stockholder

in a seller corporation.
Your first questionis therefore answeredin the negative. We are not passingon your secondquestion, in that it was predicated on an affirmative

answer to your first question.

SUMMAR,Y The sellerof any interestin or under an oil, gas or mining lease, fee or title may not claim the exemption

containedin Section I. of Article **581-5** V.C.S. Yours very truly,
WILL WILSON Attorney

Generalof Texas WVG/fb APPROVED: OFlNION

CO~ITTEE: Geo. P. Blackburn,

Chairman J. C. Davis,Jr. Wallace

P. Fiufrock

RBVIm FOR THE ATTORNEXGENFBAL. BY:

. MorganNesbitt W. V. Geppert