THE ,~TJ?O’RNEY GENERAL 

OF TEXAS 

Hon. William A. Harrison Opinion No. ~~-830 

Commissioner of Insurance 

State Department of Insurance Re: Whether or not a charter 

Austin, Texas amendment which will result in an insurance company issuing fractional 

shares of stock can be 

Dear Mr. Harrison: approved. 

YOU have requested our opinion on the legality of a 

charter amendment presented to your office whereby a Casualty 

stock company with par stock of the value of $2.50 per share, 

proposes to amend its charter to effect a stock split by 

changing the par value to $1.50 per share. The capital of 

the company is unchanged by the amendment but the conversion 

of the stock's par value results in its capital being divided 

into 1,918,966 2/3 shares. You ask whether or not this 

charter amendment should be approved since the amendment will 

result in a fractlonal share of stock being issued. 

It Is our opinion that the proposed amendment may be 

approved. 

Your request was occasioned by an Attorney General's 

opinion dated December 21, 1926, which is to the effect that 

an insurance company cannot issue fractional shares of stock. 

We do not find anything In the Insurance Code speclfitally prohibiting the issuance of fractional shares. The 

former Attorney General's opinion pointed out a statutory provision that each stockholder shall be entitled to one vote 

for each share of stock fully paid up appearing in his name 

on the books of the company and reasoned that it would be 

impossible for this language to have application in case 

certificates could be issued for fractional shares. A similar 

provision appears in the present Insurance Code in Article 

3.04, section 4. 

Turning to the Business Corporation Act, Art. 2.29 

likewise provides that each outstanding share shall be entitled to one vote at a meeting of shareholders. Nevertheless, Art. 2.20 apeclfically authorizes ,the issuance 
Hon. William A. Harrison, page 2 (W-830) 

of fractional shares and provides further that a certificate 

for a fractional share shall entitle the holder to exercise 

voting rights, to receive dividends thereon, and to particlpate in any of the assets of the corporation In the event 

of liquidation. AlSO, Art. 1333 of Title 32, R.C.S., 

formerly the exclusive general corporate law, provides that 

when a corporation shall reduce its capital stock, and by 

reason thereof fractional shares shall be issued or held 

by any stockholders, the holder of any such fractional 

share shall be entitled to vote the same at any meeting 

of the stockholders in accordance with proportionate or 

ratable value of such shares. 

These provisions of our corporate statutes show that 

a legislative admonition that each fully paid up share of 

stock must entitle its owner to one vote does not preclude 

the existence of fractional shares. This being the case 

we do not believe that a provision in the Insurance Code 

that each stockholder is entitled to one vote for each 

share of stock held was intended to prohibit the Issuance 

of fractional shares by insurance companies, but was 

simply intended as a protection for the stockholder, and 

to secure for him the right to vote in stockholders 

meetings. 

Therefore, the reasoning of the previous opinion 

we believe to be erroneous and it is consequently overruled. 

By this opinion we do not hold that those provisions 

of the Business Corporation Act relating to fractional shares 

apply to insurance companies. To do so is not necessary to 

this opinion. They are mentioned solely by way of analogy. 

We therefore hold that the charter amendment about which 

you inquire may be approved. 

Your letter also requests our opinion on an additlonal charter amendment, but you have since advised that 

further information will be submitted in connection with 

that proposal. We will accordingly dispose of that question 

in a subsequent opinion. 
Hon. William A. Harrision, page 3 (~-830) 

SUMMARY 

A casualty stock company with par stock may 

issue a certificate for a fractional share. 

Very truly yours 

WILL WILSON 

Attorney General of Texas 

By: 

Assistant 

APPROVED: 

OPINION COMMITTEE 

W. V. Geppert, Chairman 

Raymond V. Loftin, Jr. 

C. K. Richards 

Fred Werkenthin 

REVIEWED FOR THE ATTORNEY GENERAL 

By: Leonard Passmore