d 

OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

February 9, 191-59 

Hon. Claude A. Willlam~ 

Aoting %olmtary of State 

Austin, Texas 

Dear Sir: 

pocre other tha 

brine aad othe 

V'PIMal powem* --&oh oorporation shall 

htwe the right to borrow money to an amount 

not In exoeon of ita paid up eapitel etook, 

an provided b? law, SO lrfmo 6took -and prererred stook, to mortgage ite tranohleee and 

property to meure the payment of any debt 

oontraoted for any purposes of suoh oorposation, and shall possem all the rlghta and 

poware of oorporationtl for profit In this 
.- 

Claude A. Wllllm~, February B, 1939, Page 2 

State whenever the same may be applicable to 

oorporationa .of this character. (Acts li399, p. 

202; ACta 1915, pa 259; AOtS 1917, p. 54.)' 

Thus, It is clear that all corporations covered 

by suoh chapter are apeolfioally authorized to laaue preferred atook. A careful examination of all other etatutea 

reapeotlng prfvata oorporatlona reveals the total absence 

of apeoifio statutory authority for corporations, other 

than those authgrlzed by chapter 15, tltle 32 of the Revised Civil Statutes of 1925, to issue preferred atook. 

Artlole 1304 of the Revised Civil Statutes of 

1925, in setting forth tha raqulmmenta of the charter itself, provides in Sea. 6 tharaof that the aharter muat 8at 

fortht 

'The amount of the napital stool, if my 

and the number of almrea into whloh it is dirtded." 

The matter oftha oraatlon of rights and praforenoea of stock must, tharafora, ba la?+. to the @l-ant 

of t&e Interested partlea In the axwolaa of their oontraotual rights. 

It la said in Thompson on Corporationi, Wd ti., 

Vol. 5, P. 276, Pare. S435r 

"It haa bean a~aatad....;.,that tha law 

usually raqairaa oapital qtook to’be dltidad 

into shares. But Ld tha prratioal oparatlon 

OS oorporatl?na tha oapltal atook, ior oonvanlenoe, has oome to ba olaaalfisd Into many 

dlrfarent kinds, wlthout regard to the dirlaion into shares.* 

It @a held in the case of People ex ml. Raosaa 

Exporting and Importing Corporation vs. Hugo, 182 R. I. Supp. 

9, that in the, absence of statutory provisions to the 00~ 

trarg, a oertlrfoate of inoorporation of a business oorporetion may make auoh prefarenoea between atookhold&a as to 

lta stock as seea beat, and that the matter of preferewes 

la a matter of oonOern only to the atookholders oi the Oorporation. 

The court said in Hamlin vs. Toledo Bt. L. k X. C. 

R. Co., 78 Fed. 664: 

*Ordinarily, preiarred atoak ia entitled 
Hon. Claude A. Willlams, February 9, 1939, Page 3 

to no preference over other stock in relation 

to capital. But where there is an expressed 

agreement givfng suoh a preferenoa not prohibit&d by looal law or the oharter, we see no reeson why it is not a valid oontraot as between 

the oorporation and such preferred stockholders.* 

The dlatlnotlon between oommon a 4 preferred stock 

resolves itself into a question of prefers 4 OIB and this is 

true whether the stock ie 80 deslgnnted oommon or preferred 

or by some other names. 

Tex. Jur., Vol. 10, p. 672 saga: 

*....Thare appaera to Da no seeson to doubt, 

that, between the atock.holdara end aubjeot tom 

the organisetion agreement, dl#ferent rights JEW 

I)be attached to different oleaaea of atook.* 

This statement In Texas Jurlaprudenoi la jo8tIfiad 

and supported by the cease of~.Bt. Beg18 Oendlaa vs. IioreB, 

3 si? (ad) 489 by ,the atmtniaalon 0r .Appea$a., Tha 04mt held 

In ananr to pueatlons oertiflad fti the Qourt of Olril A9- 

peals of the 1st Bugwane .Judioial Dfatrlot that e.ole8aifIoetlon,of atook into o&as A uwl olraa B atook with the ol&aa 

A afook having the role vqt%ng ouer waq not in oontrave3itioa 

of publio policy, the Oonatitut s on or the rtetutaa. 

A otireful eunination OS the authorities laeda 

thla Department to the opinion a@ ,pou era so e6rlaad that 

private oorporetlcna gonwwlly~uy iaaua pr*iazmd atnok 

a9011 ocmplianoe with lawa 4salIng rith end reapeotlng oorporetlona. 

Truqtlng that this aetlrfaotorlly anmrera your 

inquiry, we reamin 

Very truly yours 

IA? AW 

APPRovxDr 

\ ~iloytl Arm&r& 

Aaafatant