Mr. J. N. Nutt OpinionNo. c-231

Commissioner of Insurance State Board of Insurance Re: Must an ,existinglife inCapitol Station surance companyhave on Austin, Texas hand aggregate capital and surplus of at least $250,- 000before it can amend its charter to provide adDear Mr. Nutts ditional no par shares.

You have requested our opinion on the followingquestion:
"'Is

a life insurance companywhich is authorized to issue stockwithout nominal or par value required to have on hand aggregate capital and surplus of at least $250,000before it can amend its charter to provide additional no par shares?""
In youx letteryou state that before approving a charter amendment to provide additionalno 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 shareshave been subscribedand fullypaid for, and that not less than $250,000has been received for such issued shares, 010 I "but it has neverbeen 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 questionhas arisenby virtue of some of the languageof theAttorney General's Opinion No. ~-360 (1958)which couldbe construedas holding that Article 3.02a of the InsuranceCode requires $ZSO,OOO to be in the possession of the company at the time of such amendment. The applicablepart 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 stockwith no. par value the company sha.11 file a statement under oathwith the State Board of Insurance setting forth **the** number of shareswithout par value subscribedand **the** actual consideration receivedby the company for such shares. Provided, however, that the stockholdersof any such company authorizing the issuance of its stockwithout nominal or par value, shallbe required in good faith to subscribe and pay for at least fifty per cent (50%)of the authorized shares to be issuedwithout nominal or par value, before said corporation shallbe chartered or have its charter amended so as to authorize the issuance of shareswithout nominal or par value: and provided further, that in no event shall the amount so paidbe less than Two Hundred Fiftv Thousand Dollars ($250,000)
. . .'I (Emphasisadded.)

In Attorney General'sOpinion No. WE-360 the question of the requirementsas to minimum,capital,minimum surplus and theminimum aggregate of capital and surplus of a life insurance company issuingno par value stockwas presented. This Opinion did nothave before it the specificquestionpresented herein, and any statement concerning the capital, surplus and aggregate capital and surplus requirementsbefore there can be a charter amendment to provide additional shareswas dictum, and not controlling in the answer to this request.

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Article 3.02aprovides that the amount paid for a company's shares shall not be less than $250,000. However, Article3.02ahas no application to the continuing financial structure of the company in relation to theminimum capital andminimum surpluswhich must be maintainedby the company. See for example Section ,5of Article 3.02 of the Insurance Code wherein the minimum capital and minimum surplus requirements at the time of ,incoroorationare set forth, and then provides only that:

II

. . . suchminimum capital shall at all times be maintained
. . .'I SimilarlyArticle 3.3%3(l) of the InsuranceCode provides: ,I ,.and the minimum capital of a companv

,hereafterorsanizedunder saidArticle 3.02 and theminimum free surplus of a company hereafter organizedunder said **Article** 11.01 at all times shallbe maintained in cash or in the **same** classes of investments
. . ." This apparentlyplaces the requirement of the maintenance of surplus only on thosemutual life insurance companies organized under Chapter 11, and restates the requirement **that** minimum capital only be maintained at all times by insurance companiesunder Chapter 3.

The Insurance Code has been carefully searched for any intent that such aggregateminimum capital and surplusbe maintained at all times, or in the alternative, that suchmust 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 couldwell 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 Opinionm-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 $250,000before it can amend its charter to provide additional no par shares.

Respectfully submitted,
WAGGONER CARR Attorney General of Texas 

# By,-

AssistantAttorney General PP:da:s 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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