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 provisions of Article 

4.02A (1) and (2), Tcxaa Business Corporation Act, In addltlon to complying with the provlslona of Article 3.05, Texas 

Insurance Code, in order to 

effect an amendment to its 

articles of Incorporation. 

You hay! requested the opinion of this office concerning the appllcablllty of certain provisions of 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 provisions of the Texas Insurance Code 

(hereinafter referred to as the “Code”). 

8, 1964 \ 

Opinion No. c-236 

Your letter reads in part as follows: 

“The State Board of Insurance has pending an 

application for approval of an amendment to the 

articles 0r incorporation 0r a life Insurance 

company organized and operating under the laws of 

the State of Texas. It has been the policy of 

this Department for approximately four years to 

require a life insurance company making application for approval of a charter amendment to furnish 

evidence of compliance with the provislons of 

Article 4.02A, Texas Business Corporation Act, 

in addition to requiring compliance with Article 

3.05, Texas Insuranc’e Code. 

“Article 4.02A (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 effected by the adoption of a 

resolution setting forth< the proposed amendment 

and dlpecting that it be submitted to a vote of 

the shareholders. Article 4.02A (2) requires 

that notice of the proposed amendment be given 

to each shareholder not 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 proposed amendment. The documents 

filed with this Department In connection 

with the pending application do not reflect :. '. ' 

that the procedural steps required by Article 

4.02A (1) and (2) have been followed by the 

company lrl that it does not appear~that the 

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 

applicable to a life Insurance 

to amend Its charter. 

II . * . we respectfully request 

on the following question: 

compani seeking 

your opinion 

'Is a life insurance company required 

to compl with the provisions of Article 

4.02A (I.3 and (2), Texas Business Corporation Act, in addition tq complying with 

the provisions of Article 3.05, Texas Insurance 

Code, in order to effect an amendment to its 

articles of Incorporation?'" 

The provisions of Article 3.05 of the Code, entitled 

"Amendment of Charter," relevant to this question are as follows: 

'!At any regular or called meeting of the stockholders, 

they may, by resolution, provide for any lawful 

amendment to the charter or articles of lncorporation; and such amendment, accompanied by a capy 

of such resolution, duly certified by the president and secretary of the company, shall be filed 

and recorded in the same manner as the original 

charter, and shall thereupon become effective . . . " 

Also, the pertinent provisions of Article 4.02A of the 

Act, referred to in thiti request, are as follows; 

"A. The articles of incorporation may be amended 

in the following manner: 

-1144- 
Hon. J.N. Nutt, page 3, Opinion No. c-236 

(1) The board of directors shall 

adopt a resolution setting foPth~,the 

proposed amendment and directing that 

it be submitted to a vote at a meeting 

of shareholders, which may be either 

an annual or a special meeting. 

(2) Wrltten or printed notice setting 

forth the proposed amendment or a summary 

of the changes to be effected thereby 

shall be given to each shareholder of 

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 prescribed in 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 delivered not 

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's Opinion WW-905, 

Issued on August 18, 1960, that the provisions of the Act sup-.. 

plement the Code In respect to life Insurance companies, insofar 

as and to the extent that such provisions are not Inconsistent 

with the provisions of the Code. (Article 9.14A, Texas 3uslness 

Corporation Act, and Article 3.69, Texas Insurance Code). Therefor@, the precise question for our determination Is whether 

or not the requirements as presented In Article 4.02A (1) and 

&,21\eof the Act, are Inconsistent with any provision of the 

. If not, such requirements of the Act are applicable, 

and must be complied with by a life Insurance company in 

exercising Its power to amend Its articles of incorporation. 

The authority to amend articles of lncorporatin lies 

with the legislature, as does the power of creation of a corporation In the first instance. However, this power to amend a 

charter may 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 leglnlature of such 

power to amend, In the shareholders, is consonant with established 

corporate law in that although the general management and control of ordinary business affairs are vested in the.board of 

-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 Hildebrand on 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 "Amendment of Charter," 

that ~the shareholders x by resolution provide for ang:l.lawful 

amendment at any regular or special meeting, Intedded to 

authorize the sharehblders to exercise within their discretion 

the ultimate power to amend the charter or articles of incorporation; and that the legislature failed to prescribe the procedure to be followed In exercising this discretlonery power 

of amendment. It 18 apparent from a reading of Article 3.05 

that there are no requirements respecting the procedure to be 

employed in the exercise of 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 required vote of 

the shareholders necessary to adopt an amendment (excepting ,. 

the requirement of a majority of shareholders for the Increase 

or reduction of capital stock), or any of the other normal 

steps or incldences of a method to be followed In seeking to 

amend articles of Incorporation. Article 3.05 merely provides 

that the amendment and the certified copy of the shareholders' 

resolution, evidencing Its ultimate adoption-of Such amendment, 

shall be filed In the same manner as the charter. Therefore, 

rior to the ultimate accept&nce of an amendment by resolution 

!TiTfi e shareholders and the subsequent filing of such amendment and certified resolution, the Code Is silent as to what 

procedure Is to be followed in order to effect an amendment' 

to articles of Incorporation. 

It Is therefore our opinion, baaed upon the foregoing 

reasoning and principles of law, that the requirement& a,s presented In Article 4.02A (1) and (2) of the Act are not In&nsistent with the provisions of the Code regulating life 

insurance companies, and thereby should be complied with by 

a life insurance company seeking to effect an amendment to 

Its articles of Incorporation. The application of such Fequlrements of the Act to a life Insurance company will not frustrate 

or defeat the intent or spirit of Article 3.05 of the Code, 

but tog the contrary is consistent and harmonious with the 

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

the provisions of'the Code for the amendment of articles of 

incorporation of a l$fe insurance company. 

JNS$smd 

A life Insurance company 1s required to comply 

with the provisions of Article,4.02A (1) and (2), 

Texas Business Corporation Act, in addition to 

complying with the provisions of Article 3.05, 

Texas Insurance Code, 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-