### THEATTORNEY GENERAL OFTEXAS

April Honorable J.N. Nutt Commissioner

of Insurance State, Boards of Insurance 1110 San Jacihto Austin, Texas

Dear Mr. Nutt: RE: Whether a life Insurance company is required to comply with the provisionsof Article 4.02A (1) and (2), Tcxaa Business Corporation Act, In addltlon to complyingwith the provlslona of Article 

### 3.05,Texas Insurance Code, in order to effect an amendmentto its articles of Incorporation.
You hay! requested the opinion of this office concerning the appllcablllty of certain provisionsof the Texas Business Corporation Act (hereinafter

referred to as the "Act"), to a life insurance company seeking to amend Its articles of Incorporation

under the provisionsof the Texas InsuranceCode (hereinafter

referred to as the “Code”).



### 8, 1964 \ Opinion No. 

### c-236

Your letter reads in part as follows: “The State Board of Insurancehas pending an applicationfor approval of an amendment to the articles 0r incorporation 0r a life Insurance company organizedand operatingunder the laws of the State of Texas. It has been the policy of this Department for approximatelyfour years to require a life insurance company making application for approval of a charter amendment to furnish evidenceof compliance with the provislonsof Article 4.02A, Texas Business Corporation Act, in addition to requiring compliance with Article 

### 3.05, Texas Insuranc’e Code. “Article4.02A (l), Texas Euainess Corporation Act, requires that the board of directors of the company initiate the action by which a charter amendment is to be effectedby the adoption of a resolutionsetting forth< the proposedamendment and dlpecting that it be submitted to a vote of the shareholders. Article 4.02A (2) requires that notice of the proposedamendmentbe given to each shareholdernot less than ten nor more

-1143-Hon. J.N. Nutt, page 2, Opinion No. C-236

. than fifty days prior to the date of the meetIn& at which the shareholders will vote upon the proposedamendment. The documents filed with this DepartmentIn connection with the pending applicationdo not reflect :. '.' that the proceduralsteps requiredby Article 4.02A (1) and (2) have been followedby the company lrl

that it does not appear~thatthe board of directors initiated the action &nd that it does not appear that any notice was given to the shareholders prior to the meeting at which they voted to amend the charter. The company has taken the position that,Artlcle 4.02A. Texas Business CorDoration Act. is not applicableto a life Insurance to amend Its charter. II

. *

. we respectfully request on the followingquestion: compani seeking

your opinion

'Is a life insurance company required to compl with the provisionsof Article 4.02A (I.3

and (2), Texas Business Corporation Act, in addition tq complyingwith the provisionsof Article 3.05,Texas Insurance Code, in order to effect an amendment to its articles of Incorporation?'" The provisionsof Article 3.05 of the Code, entitled "Amendmentof Charter,"relevant to this questionare as follows:

'!At any regular or calledmeeting of the stockholders, they may, by resolution, provide for any lawful amendment to the charter or articles of lncorporation; and such amendment,accompaniedby a capy of such resolution,duly certifiedby the president and secretaryof the company, shall be filed and recorded in the same manner as the original charter,and shall thereuponbecome effective

. . . " Also, the pertinentprovisionsof Article 4.02A of the Act, referred to in thiti request, are as follows;
"A. The articles of incorporation may be amended in the followingmanner:

-1144-Hon. J.N. Nutt, page 

### 3, Opinion No. c-236

(1) The board of directors shall adopt a resolutionsetting foPth~,the proposed amendmentand directing that it be submitted to a vote at a meeting of shareholders,

which may be either an annual or a specialmeeting. (2) Wrltten or printed notice setting forth the proposed amendmentor a summary of the changes to be effected thereby shall be given to each shareholderof record entitled to vote thereon within the time and in the manner provided in this Act, for the giving of notice of meeting8 of shareholders

. . ..' The time and the manner for the glvl '$ of notice of shareholders'

meetings referred to in Article .02A (2) of the Act are prescribedin Article 2.25, Texas Eualness Corporation Act, which provides that written or printed notice stating the place, day and hour of the meeting shall be deliverednot less than ten (10) nor more than fifty (50) days before the date of the meeting to each shareholder of record entitled to vote.ln such meeting.

This office held, In Attorney General'sOpinion WW-905, Issued on August 18, 1960, that the provisionsof the Act sup-.. plement the Code In respect to life Insurance companies,insofar as and to the extent that such provisionsare not Inconsistent with the provisionsof the Code. (Article9.14A, Texas 3uslness Corporation

Act, and Article 3.69, Texas Insurance Code). Therefor@, the precise question for our determinationIs whether or not the requirements as presented In Article 4.02A (1) and &,21\eof the Act, are Inconsistent with any provisionof the

. If not, such requirements of the Act are applicable, and must be compliedwith by a life Insurancecompany in exercisingIts power to amend Its articles of incorporation.

The authorityto amend articles of lncorporatinlies with the legislature, as does the power of creation of a corporation In the first instance. However, this power to amend a chartermay be, and generally la, conferred,by the legislature upon the shareholders of a corporation. oration, Sec. 80). (18 C.J.S. 472, CarpThe placing by the leglnlatureof such power to amend, In the shareholders, is consonantwith established corporatelaw in that although the generalmanagementand control of ordinary business affairs are vested in the.boardof

-1145-Hon. J.N. Nutt, page 4, Opinion No. 

### c-236

directors,extraordinary or unusual normal' corpmate affairs remain and
-- - powers not relating to are vested In the share-

._ _ holaers

. Tne~

power to amena a corporatlon~s charter or articles of Incorporation falls within the realm of such "extraordinary

or unusual" powers vested In the shareholders. 2 Hildebrandon Texas Corporations (Perm. Fd. 1942) 499; and 18 C.J.S. 

### 476, Corporations, Sec. 

### 81 (b)(l).
It is our opinion that the legislature, by providing under Article 3.05 of the Code, entitled "Amendmentof Charter," that~theshareholders x by resolutionprovide for ang:l.lawful amendmentat any regular or specialmeeting, Intedded to authorize the sharehbldersto exercisewithin their discretion the ultimate power to amend the charter or articlesof incorporation; and that the legislaturefailed to prescribe the procedure to be followed In exercisingthis discretlonery power of amendment. It 18 apparent from a reading of Article 3.05 that there are no requirements respectingthe procedure to be employed in the exerciseof this power to amend articles of incorporation,

such 8s notice of the proposed amendment,to whom notice Is given, by whom notice Is given, the time and manner in which such notice Is given, the requiredvote of the shareholders necessary to adopt an amendment (excepting ,. the requirementof a majority of shareholdersfor the Increase or reductionof capital stock), or any of the other normal steps or incldencesof a method to be followed In seeking to amend articles of Incorporation. Article 3.05 merely provides that the amendmentand the certified copy of the shareholders' resolution,evidencingIts ultimate adoption-ofSuch amendment, shall be filed In the same manner as the charter. Therefore, rior to the ultimate accept&nceof an amendmentby resolution !TiTfi e shareholders

and the subsequentfiling of such amendment and certifiedresolution,the Code Is silent as to what procedure Is to be followed in order to effect an amendment' to articles of Incorporation.

It Is thereforeour opinion,baaed upon the foregoing reasoningand principlesof law, that the requirement& a,spresented In Article 4.02A (1) and (2) of the Act are not In&nsistent with the provisionsof the Code regulatinglife insurancecompanies,and thereby should be compliedwith by a life insurancecompany seeking to effect an amendment to Its articles of Incorporation. The applicationof such Fequlrements of the Act to a life Insurance companywill not frustrate or defeat the intent or spirit of Article 3.05 of the Code, but tog the contrary is consistentand harmoniouswith the

-1146-Hon. J.N. Nutt, page 5, Opinion No. c-236

the provisionsof'the Code for the amendmentof articles of incorporation

of a l$fe insurance company.

JNS$smd A life Insurance company 1s required to comply

with the provisionsof Article,4.02A (1) and (2), Texas Business Corporation Act, in addition to complyingwith the provisionsof Article 3.05, Texas InsuranceCode, In order to effect an amendment to its articles of Incorporation.
Yours very truly,
WAGGONER CARR Attorney General of Texas

APPROVED: OPINION COMMITTEE:
W.V. Geppert, Chairman Joe R. bng Malcolm Quick Gordon Appleman James Strock
APPROVED FOR THE ATTORNEY GENERAL BY; Howard W. Maya

-1147-