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THEATTORNEY GENE-L 

OF TEXAS 

November 16, 1960 

Honorable William A. Harrison 

Commissioner of Insurance 

State Board of Insurance 

International Life Building 

Austin, Texas 

Opinion No. WW-958 

Re: May a foreign stock life, health 

or accident insurance company, 

with par value stock, having a 

par value of less than one dollar 

per share or more than one hunDear Mr. Harrison: 

dred dollars per share be granted 

a Certificate of Authority to transact the business of insurance in 

this State, and related questions. 

You request an opinion from this office and we quote from your letter 

as follows: 

“A foreign stock life insurance company with shares of 

stock of the par value of fifty (5OC) cents per share has filed 

application for a Certificate of Authority to do business in 

this State. Article 3. OZa, Texas Insurance Code, provides that 

the par value of each share of stock of a life, health or accident 

company organized or operating under the provisions of Chapter 

3 ‘shall be for not less than One ($1.00) Dollar nor more than 

One Hundred ($100. 00) Dollars. ’ Therefore, a question has 

arisen as to whether or nut this company can be admitted to do 

business in this State. In considering this point, it was called 

to our attention that there are at least four (4) such type companies presently doing business in this State whose shares of 

stock have been established at a par value of less than one ($1.00) 

dollar by charter amendments subsequently to the date of their 

admission to do business in this State. At the time that such 

companies were initially authorized to conduct business in this 

State the par value of their shares was one ($1.00) dollar or more. 

“In view of the above situations, it is urgent that we have 

youropinion at the earliest date possible concerning the following 

questions: 

I’( 1) May a foreign stock life, health or accident insur - 
- . 

Hon. William A. Harrison, page 2 (WW-958) 

ante company, with par value stock, having a par value 

of less than one ($1.00) dollar per share or more than 

one hundred ($100.00) dollars per share be granted a 

Certificate of Authority to transact the business of insurance in this State? 

r’(2) If a foreign stock life, health or accident 

insurance company, doing business in this State, amends 

its charter converting its shares into shares of par value 

less than one ($1.00) dollar or more than one hundred 

($100. 00) dollars, should the Certificate of Authority of 

such company to transact the business of insurance in this 

State be suspended or revoked for non-compliance with 

the provisions of the laws of this State? ” 

Your first question is answered in the affirmative. 

Prior to the adoption of the Insurance Code in 1951, what is now 

Article 2. 07 of the Code was the only statute dealing specifically with the 

value of shares of stock in an insurance company organized in Texas. 

At that time it was Article 4704, Vernon’s Civil Statutes, 1925. 

When the insurance laws of the State were codified, Chapter 3, 

thereof, entitled “Life, Health & Accident Insurance, ‘I contained various 

subchapters. Subchapter A is entitled Domestic Companies while B is 

entitled Foreign Companies. 

Contained in Subchapter A is Article 3.02a which reads in part as 

follows: 

“(a) The stock of any life, health or accident insurance company organized or operating under the provisions of 

this chapter may be divided or converted into shares of either 

par value or no-par value, or both, all of which shall be fully 

paid and non-assessable. If divided or converted into shares 

of par value, each share shall be for not less than One ($1. 00) 

Dollar nor more than One Hundred ($100. 00) Dollars . . . ” 

This provision, included as it was under the domestic companies’ 

subchapter, was not enacted until 1955 at which time the Code was already 

in existence and the division of “domestic” and “foreign” regulating statutes 

already established. While the Legislature could have easily expressed 

its intention that the minimum par value restriction should apply to foreign 
c 

Hon. William A. Harrison, page 3 (WW-958) 

companies as well, it did not choose to amend the subchapter of the Code 

regulating foreign companies, i. e., Subchapter B. 

Generally, where the Legislature intended that certain provisions 

of the Code would apply to both foreign and domestic companies such has 

been included in both Subchapters A and B. Subchapter A, dealing with 

domestic companies, contains several requirements which are also contained in B, relating to foreign companies. For instance, Subchapter A, 

Art. 3.04, Sec. 1, 3 requires of domestic companies: 

“An affidavit made by two (2) or more of its incorporators that all of the stock has been subscribed in good 

faith and fully paid for, as required by law, in the amount 

of not less than One Hundred Thousand Dollars ($100,000) 

capital and that such company is possessed of at least One 

Hundred Thousand Dollars ($100, 000) surplus, as required 

by law, in addition to its capital. . ~ ” 

That requirement, insofar as it relates to capital and surplus, is also contained in Subchapter B, Art. 3.22: 

“No such foreign stock insurance company shall be 

licensed by the Board of Insurance Commissioners or shall 

transact any such business of insurance’in this State unless 

such company is possessed of not less than the minimum 

capital and surplus required by this chapter of a similar 

domestic company in similar circumstances, including the 

same character of investments for its minimum capital and 

surplus. . . ” 

Likewise “A: by way of Article 3. 02, deals with domestic companies 

and the requirements for incorporating same, while “B” regulates the same 

subject matter as to foreign companies through Articles 3.20 and 3.2 1. 

In light of the foregoing, the requirement in Subchapter A that 

shares of par value stock shall be not less than $1. 00 nor more than $100. 00 

does not necessarily become applicable to foreign companies, especially 

when Subchapter B contains no express requirement of par value stock 

minimum or maximum for foreign companies. 

In 1959, the Legislature amended Article 2 1.43 of the Insurance Code 

to read in part as follows: 
Hon. William A. Harrison, page 4 (WW-958) 

“No foreign or alien insurance corporation shall be 

denied permission to do business within this state for the 

reason that all of its authorized capital stock has not been 

fully subscribed and paid for; provided 

‘I( 1) that at least the minimum dollar amount of 

capital stock of such corporation required by the laws of 

this state (which may be less than all of its authorized 

capital stock) has been subscribed and paid for; and 

“(2) that it has at least the minimum dollar amount 

of surplus required by the laws of this state for the kinds of 

business such corporations seek to write; and 

“(3) that such corporation has fully complied with all 

laws of its domiciliary state relating to authorization and 

issuance of capital stock. ” 

Again, no mention of minimum or maximum par value for foreign 

companies is made, but rather Section (3) above implies that such matters 

shall be controlled by the “laws of its domiciliary state. ” 

As far as can be determined, no Texas court has been called upon 

to decide the question. Consequently, we have examined the decisions of 

foreign jurisdictions for guidance and direction. In 8 ALR2d 1196, there 

is contained the most concise statement of existing authority: 

“It is now well settled that, in the absence of unmistakable language to the contrary, an intention to exclude a 

foreign corp”ration from doing business in a state will not 

be inferred merely because no provision is made by the law 

thereof for the organization of domestic corporations similar 

in stock structure, as based upon an issue or issues, or divisions of, a particular kind of stock, to that of the applicant.” 

A closely analogous case is State ex rel Standard Tank Car Company 

v. Sullivan, (1920) 282 MO. 261, 221 S. W. 728. There the Missouri Supreme 

Court held that a foreign corporation could not be refused the right to do 

business in Missouri for the reason that a part of the capital stock which the 

foreign company had issued had no par value and it (the foreign company) 

could not,: for that reason, have been organized as a domestic corporation. 

The Court stated that where there was no intention or established policy 

to exclude foreign corporations merely because the domestic laws forbade 
. c 

Hon. William A. Harrison, page 5 (WW-958) 

the particular kind of corporate structure possessed by such foreign corporation, this reason alone could not be used to exclude the foreign company from doing business in Missouri, at least in the absence of a more 

express prohibition. Three additional states have adopted this precise 

construction and in each instance the authoritv is that of the hiehest court 

in the respective state. State ex rel Fibreboard Products v. &kle, (1928) 

147 Wash. 10, 264 P. 1010; North h American American Petroleum Petroleum Co. v. Hopkins, Hopkins, 

(19 19) 105 Kan. 16 1, 18 1 P. 625; Commonwealth lmonwealth Acceptance Corp. v. Jordan, 

(1926) 198 Cal. 618, 246 P. 796. 

The basic reasoning behind those cases mentioned above, with which 

we agree, is that a state, acting through its legislature, in a proper case 

anu subject to limitations of the Federal and state constitutions, has the 

power to control and regulate domestic and foreign corporations equally, 

insofar as they operate within the state, including issuances of corporate 

stock, and can determine the legal effect of such activities. The only 

critical question is one of construction of those legislative acts. 

Regarding the construction problem, with respect to a statute of the 

kind in question, particularly if it does not expressly state whether it is 

applicable to foreign corporations, it is said in 23 Am. Jur. 108, Foreign 

Corporations, Section 10 1: 

“In the construction of statutes applicable to corporations, it is not to be presumed that the legislature intended 

to grant greater rights to foreign than to domestic corporations and to favor them with rights and privileges greater 

than those conferred upon domestic corporations. No principle of comity requires that foreign corporations be placed 

in a more favorable situation under the local statutes than 

similar domestic corporations. However, statutory provisions dealing with the incorporation or organization of corporations, rather than with their business in the state, are 

ordinarily deemed inapplicable to foreign corporations, as 

are local laws concerned with strictly corporate acts as distinguished from those which may be done by agents. ” 

When it is remembered that Article 3. OZa, insofar as it applies to 

par value stock, is a prohibitory statute that obviously applies to domestic 

corporations, the following must likewise be considered with respect to 

such a prohibitory statute: 

“A general law prohibiting corporations from exer- 
Hon. William A. Harrison, page 6 (WW-958) 

cising particular powers and privileges ordinarily operates on foreign as well as on domestic corporations for 

the reason that the exercise by a foreign corporation of 

such powers in the enacting state would violate the public 

policy thereof as indicated by the general restraint imposed on its own corporations. On the other hand, all the 

limitations imposed by local statutes upon domestic corporations do not necessarily apply to foreign corporations. 

If an act forbidden is of such a nature that the right to perform it exists inherently in all corporations unless specially denied, or if the prohibition is designed to establish not 

a general public policy toward corporations, but merely a 

more effective exercise of visitorial power over them, a 

prohibitory statute which does not in terms refer to foreign 

corporations may be held not to apply to them. ” 23 Am. Jur. 

109, Foreign Corporations, Sec. 103. 

The only language of Article 3.02a which could possibly be construed 

to include a foreign company is that portion which reads: 

“The stock of any life, health or accident insurance 

company organized or operating under the provisions of 

this chapter. ~ . ” 

The language of this Article makes provision for regulating domestic 

companies which came into existence after codification of the insurance 

laws, thus were “organized” under Chapter 3. 

The term “operating” refers to those domestic companies which were 

organized under the insurance laws as they existed before the creation of 

Chapter 3. Though organized before Chapter 3 was created, these domestic 

companies are now subject to its requirements, thus are “operating” thereunder. 

Consequently, those domestic companies whxch were organized under 

Chapter 3 and those domestic companies which were organized under prior 

law but are now operating under Chapter 3 are both regulated thereunder 

and the language makes allowance for both situations. As previously discussed, such language alone does not indicate an intention on the part of the 

Legislature to make foreign companies subject to its requirements. 

Inasmuch as there is no provision establishing limits for par value 

stock for foreign life, health and accident companies contained in Subchap- 
Hon. William A. Harrison, page 7 (WW-958) 

ter B of Article 3 of the Texas Insurance Code; and inasmuch as any control 

relative thereto would have to be derived from statutes dealing with domestic companies only, we feel that the conclusion reached above conforms to 

existing authority and is consistent with the intent of the Legislature. 

Since we have held that foreign life, health and accident companies 

may have stock with a par value of less than One Dollar ($1. 00) or more than 

One Hundred Dollars ($100.00) per share, we answer your second question in 

the negative. Thus, the Certificate of Authority of a foreign stock life, health 

or accident company, doing business in this State, should not be revoked for 

non-compliance with Texas insurance laws, if, subsequent to its date of admission to do business here, it amends its charter converting its shares into 

shares of par value less than One Dollar ($1.00) or more than One Hundred 

Dollars ($100.00). Certainly if a foreign corporation may enter the State 

with less than One Dollar ($1. 00) par value, it may subsequently amend its 

charter so as to provide for shares having less than One Dollar ($1. 00) par 

value. 

SUMMARY 

1. A foreign stock life, health and accident company, 

with par value stock, having a par value of less than One 

Dollar ($1.00) per share or more than One Hundred Dollars 

($100.00) per share, may be granted a Certificate of Authority 

to transact the business of insurance in this State. 

2. A foreign stock life, health and accident insurance 

company, doing business in this State, who amends its charter, 

converting its shares into shares of par value less than One 

Dollar ($1. 00) or more than One Hundred Dollars ($lOO.,OO) 

should not have its Certificate of Authority suspended or revoked 

for non-compliance with the provislons of the laws of this State. 

Very truly yours, 

WILL WILSON 

Attorney General of Texas 

By c “&a& 

C. Dean Davis 

Assistant Attorney General 

CDD/pe 
Hon. William A. Harrison, page 8 (WW-958) 

APPROVED: 

OPINION COMMITTEE 

Morgan Nesbitt, Chairman 

Ray Loftin 

Arthur Sandlin 

Vernon Teofan 

REVIEWEDFORTHEATTORNEYGENERAL 

BY: Leonard Passmore