Mr. J. N. Nutt Opinion No. c-231 

Commissioner of Insurance 

State Board of Insurance Re: Must an ,existing life inCapitol Station surance company have on 

Austin, Texas hand aggregate capital and 

surplus of at least $250,- 

000 before it can amend 

its charter to provide adDear Mr. Nutts ditional no par shares. 

You have requested our opinion on the following question: 

"'Is a life insurance company which is authorized to issue stock without nominal or 

par value required to have on hand aggregate 

capital and surplus of at least $250,000 before it can amend its charter to provide additional no par shares?"" 

In youx letter you state that before approving a charter amendment to provide additional no par shares it has been 

the policy of the State Board of Rnsurance to require a statement of the company, under oath, that at least 50% of the authorized shares have been subscribed and fully paid for, and 

that not less than $250,000 has been received for such issued 

shares, 

01 0 I " but it has never been the policy of the 

Department to require evidence that not less 

than $250,000 baggre'gate capital and surplus) is 

in the possession of the company at the time of 

such amendment."" 
Mr. J. N. Nutt, page 2 (C-231) 

you indicate that this question has arisen by virtue 

of some of the language of the Attorney General's Opinion 

No. ~-360 (1958) which could be construed as holding that 

Article 3.02a of the Insurance Code requires $ZSO,OOO to be 

in the possession of the company at the time of such amendment. 

The applicable part of Article 3.02a of the Insurance 

Code provides: 

. . . At the time of filing of an original 

charter or any amendment of an existing charter authorizing the issuance of stock with no. 

par value the company sha.11 file a statement 

under oath with the State Board of Insurance 

setting forth the number of shares without par 

value subscribed and the actual consideration 

received by the company for such shares. Provided, however, that the stockholders of any 

such company authorizing the issuance of its 

stock without nominal or par value, shall be 

required in good faith to subscribe and pay 

for at least fifty per cent (50%) of the authorized shares to be issued without nominal 

or par value, before said corporation shall be 

chartered or have its charter amended so as to 

authorize the issuance of shares without nominal 

or par value: and provided further, that in no 

event shall the amount so paid be less than Two 

Hundred Fiftv Thousand Dollars ($250,000) . . .'I 

(Emphasis added.) 

In Attorney General's Opinion No. WE-360 the question 

of the requirements as to minimum,capital, minimum surplus and 

the minimum aggregate of capital and surplus of a life insurance company issuing no par value stock was presented. This 

Opinion did not have before it the specific question presented 

herein, and any statement concerning the capital, surplus and 

aggregate capital and surplus requirements before there can be 

a charter amendment to provide additional shares was dictum, 

and not controlling in the answer to this request. 

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Mr. J. N. Nutt, page 3 (C-231) 

Article 3.02a provides that the amount paid for a 

company's shares shall not be less than $250,000. However, 

Article3.02a has no application to the continuing financial 

structure of the company in relation to the minimum capital 

and minimum surplus which must be maintained by the company. 

See for example Section ,5 of Article 3.02 of the Insurance 

Code wherein the minimum capital and minimum surplus requirements at the time of ,incorooration are set forth, and then 

provides only that: 

II . . . such minimum capital shall at all times 

be maintained . . .'I 

Similarly Article 3.3%3(l) of the Insurance Code provides: 

,I ,. and the minimum capital of a companv 

,hereafter orsanized under said Article 3.02 

and the minimum free surplus of a company 

hereafter organized under said Article 11.01 

at all times shall be maintained in cash or 

in the same classes of investments . . ." 

This apparently places the requirement of the maintenance of 

surplus only on those mutual life insurance companies organized under Chapter 11, and restates the requirement that 

minimum capital only be maintained at all times by insurance 

companies under Chapter 3. 

The Insurance Code has been carefully searched for any 

intent that such aggregate minimum capital and surplus be maintained at all times, or in the alternative, that such must be 

on hand as a prerequisite to the amendment of its charter to 

provide for additional shares. No such intention is found and 

there appears to be no valid reason for placing this heavy a 

burden on no par life insurance companies. It is also observed that instead of providing any additional safeguards 

this purported onerous requirement could well have the very 

opposite effect. 

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Mr. J. N. Nutt, page 4 (c-231) 

It is, therefore, concluded that your departmental 

construction is correct, that it is not necessary for the 

company to have on hand an aggregate of $250,000 in their 

capital and surplus at the time, of such amendment, and that 

to the extent that the prior Opinion m-360 is in conflict, 

it is expressly overruled. 

SUMMARY 

An existing life insurance company authorized to issue no par stock is not required to have on hand aggregate capital 

and surplus of at least $250,000 before it 

can amend its charter to provide additional 

no par shares. 

Respectfully submitted, 

WAGGONER CARR 

Attorney General of Texas 

By,- 

PP:da:s Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

W. V. Geppert, Chairman 

Joe Long 

John Reeves 

W. 0. Shultz 

Robert Smith 

APPROVED FOR THE ATTORNEY GENERAL 

By: Ii. Grady Chandler 

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