E NEY GENERAL 

EXAS 

Hon. William A. Harrison, Commissioner Opinion No,, WW-906 

State Board of Insurance 

International Life Builditrg Re: Whether or not the Texas BusiAustin, Texas ness Corporation Act is now 

or will become applicable to 

insurance companies subject 

to Art. 2.18 of the Texas Insurance Coda. in view ti H.B. 144, 

Dear Mr, Harrison: 56th Legislature, 

You have asked our opinion 0n several queetions concorning the applicability of the Texas Business Corporation Act (hsrefaafQr referred to as 

thu “Act’*) to inrurknce companies governed by,Ardcfe 2.18 of the hrurauca 

Coda. Thir Article provides as follows: 

“The 16~0 governing corporat$Qnr in general shall 

apply to and govern insurance companies inciarporated in 

this State in so far 0s the same or0 not inconoietent with 

any provision of th# Code. None 0f the provisions of this 

Chapter, 2 shall apply to insurance companies organixed 

or operating under tbu p~ovisioaa of Chapter 3 or Chapter 11 

uf &his, CaBa, aml Ckrlptir~ fO, 12, 19, or 14 of this Cud0;” 

Your request is predicated on the 1959 amondmont (H.B. 144) to~9.14A of 

thR A& which added the underlimrd &mrtlons~ to this 0cctlon now quo&$&as follows: 

4, m4. provided, however, that if any of said excepted 

domiaatic curporations were heretofore or are hereafter 

orSaniead under speciar?%tutes which contain no pr~viui~ns 

in regard to some of the matters provided for in this Act, 

or any such excepted foreign corporations were heretofore 

or hereafter granted authority to transact business withrn 

TliEgq e under any special statute which contains dQ provim < tin ih re ar or an 

mi3;75ct in respect of foreign corporations, or rf such special 

~a*luteS specfflcally provide that the general laws for incitrporatiunror for the granting of a certificate of auth 

transact blr$ine$s,, Jn this F$ttite, al ,the case may b 

supplemen?P&e pro”v”fons of such statutes, then the Provisions of this Act shall apply to the extent that they are not 

inconsistent with the provisions of such special stautes.‘” 

The recent Attorney General’s Opinion WW-905 was concerned with the00 

*ame questions in’regard to life insurance companies governed by 
Hon. William A. HarKson, page 2 (WW-906) 

Article 3.69 of the Insurance Code. In that Opinion we held that ‘*a literal 

reading of the 1959 amendment to 9.14A evidence6 a clear legislative intent 

to bring all insurance companies, regardless of when organized or admitted 

to Texas, under one set of corporate laws supplemental to the Code as of 

the effective date of such amendment,” and that the s@ions of 9.14 po6tponing the effective date of the Act for existing general business corporation6 

do not apply to life insurance companies, 

The 6ame principles apply with equal force to insurance companies incorporated under Chapter 2 of the Insurance Code and we therefore hold that 

the Texas Business, Corporation Act aupplementa the provioions of the Texas 

Insurance Code pertaining to insurance campaaiea gaverned by 2.18 of the 

Code where not inconaiatent therewith, 

The remaining quertio~ in this request turn on the issue of whether the 

provision of Article 2.17B of the Act limiting the allochtion of capital funds to 

surplus to not more than 25% applies to those inourance companies governed 

by Article 2.18 of the insurance Code. As in the case of life insurance companies, the Insurance Coda permit6 compFnie6 incorporated under Chapter 2, 

issuing no-par value stock under Section 2 Of Article 2.07 to begin business 

with a $250,Q00.00 minimum. Article 2.02, Section 4, Set6 out the authorized 

minimum capital and minimum sutplu6 requirements as follows: 

“4. The amount of its capital stock and it6 6urplus, 

which shall in no case be lesa than $100,000~00 capital and 

$50,000.00 surplus in the event the company is incorporated 

to engage in the bu6inesa of fire insurance ahd its allied lines, 

or marine ineurance, or both, and which in no case.ehall be 

less than $lSO,Obd.OO capital and $75,000,00 surplus if the 

company ie incorporated to engage in the carualty ln6urace 

businrse, including fidelity, guaranty, 8urety and trust busi& 

. . ness, and which in 00 case shall be leas than $~OO,OOO.OO 

capital and $100,000.00 ourplus in the event the company is 

incorporatid to enSage in the burinere of fire insurance and 

it’f allied lines, or morfna ia6uraacer or both fire mad marine 

-! insurance, and the business of ca6ualty ia6uraace~*0 

The application of 2,17B. of the Act to ,fbsurance compnn~es dercrtbediin 

1 this Article would require a company to begin busines6 with 8 greate amount 

of capital than permitted in Article 2,02, Section 4, in ordcrr for the described 

minimum surplus amount6 to constitute not more than 25% of the proceeds 

from the sale ~of no-par value stock as required by 2.17B.. Since theee 6ame 

points are discussed in detail by Attorney General’s Gpinion WW-905, they 

will not be extended here, 

We held in Attorney General”6 Qpinioa WW-905, :(dealiug with life inwarante compahies issuing no-par value 6tock) that “the restriction of 2.17B 

simply does not take into account or even conbmplote a required minimum 

surplus and hence is inconsistent with the Insurance Code,‘* The Dame is 

, 
true i~r, Chrpttw 2 companies, and we, therMore, hold that the restriction 

on the percentage of capital funds allocable to surplus in Article 2.17B of 

the Texbs Business Corporation Act ie iqconoiatent with the provis,i,q of 

the Texas Insurance Code regulating companies governed by Article~~&lB 

thereof, and, therefore, is not applicable to such componier. 

SUMMARY 

The Tatxau Bueinrar Corpolutim Act suppXemants 

.tbr ~roviotoua of the Texas Iusur8nco Coda, deal&g with 

Chapter 2 eocnpanies, where not inconsistent therkwith. 

However, the restriction m t&r pmcentage af capftel funds 

allocable to surplus in Article a.178 of the! Texar Busiuess 

Corporation Act is inconsistent witH the sections & the 

&surance Code dealing with componies issuing no*par value 

Mock governed by 23 and, therefore, So nut rppiicebb to 

ruck companfe6, 

Very truly yours, 

WILL WILsOhi 

Attorney General of Texas 

* 

RAW/p 

3 

Riahard A, Wells 

,Asalrhnt Attorl~ry Chnrrpl 

APPROVED: 

OPINION COMMITTEE: 

C. K. Richards, Chairman 

Miltbn Richards on 

S‘ohn Reeves 

Houghton Br ownlee L 

Chas$es Cabaniss 

R~EVIEWED FOR THE ATTORNEY bEN%RRL 

BY: 

Leonard Passtiore 

,