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# The Attorney General ofTexas April 4, 1980

Honorable Sam Kelley Office ofConsumer Credit Commissioner P.0. Box2107 Austin, Texas 78768 Opinio? No. MW-160 Re: Whether a lender may charge interest of eighteen per cent per annum on a loan made to a professional corporation or professional association. Dear Mr.Kelley: Youask whether alender may charge an interest rate ofeighteen per cent per annum on a loan made to a professional corporation or to a professional association. Professional corporations are organized under article 1528e, V.T.C.S., the Professional Corporation Act, while professional associations are organized under article 1528f, V.T.C.S., the Professional Association Act. Unless the legislature provides otherwise, a maximum rate of interest greater than ten (10%)per cent per annum shall be deemed to be usurious. See Tex. Const. art. XVI,511;V.T.C.S. art. 5069-L02. - The legislature has established a corporate usury exception in the Texas Miscellaneous Corporation Laws Act, which insubsection Bof article 1302-1.03,V.T.C.S., provides:

B. This Act shall govern all foreign and domestic foreign domestic corporations including but without being limited to corporations including without limited corporations heretofore hereafter organized those corporations heretofore or hereafter organized granted a permit business under any Statute or granted to dobusiness Statute of the State, including the Texas Business Corporation Act, or the Texas Non-Profit Corporation Act, except to the extent that any Corporation provisions of this Act are expressly made inapplicable provisions expressly inapplicable by any provision of the Texas Business Corporation provision Business Corporation Act, the Texas Non-Profit Corporation Act, or any

Non-Profit Corporation specinl Statute ofthis State pertaining toaparticular specinl Statute pertaining particular type ofcorporation. (Emphasis added). The corporate usury exception is found in article 1302-2.09, V.T.C.S., which provides:

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Notwithstanding any other provision of law, corporations, domestic or foreign, may agree to and stipulate for any rate of interest assuch corporation may determute, not to exceed one and one-half percent (1-l/2%) per month, on any bond, note, deht, contract or other obligation of such corporation under which the original principal amount isFive Thousand Dollars ($5,000)or more, or on any series of advances of money pursuant thereof if the aggregate of sums advanced or originally proposed to beadvanced shall exceed Five Thousand Dollars ($5,000), or on’any extension or renewal thereof, and in such instances, the claim or defense of usury by such corporation, its successors, guarantors, assigns or anyone on its behalf is prohibited; however, nothing contained herein shall prevent any charitable or religious corporation from asserting the claim or interposing the defense of usury in any action orproceeding. (Emphasis added). The only restriction contained in article 1302-2.09, V.T.C.S., does not prevent a charitable or religious corporation from asserting a usury defense if it is charged the higher rate. Professional corporations organized pursuant to article 1528e,V.T.C.S., and professional associations organized pursuant to article 1528f, V.T.C.S., donot come within the exception provided for charitable or religious corporations. The statute contains no provision concerning the rate of interest that may be charged by lenders to professional corporations and associations. Both the Professional Corporation Act and the Professional Association Act provide that the Texas Business Corporation Act shall beapplicable tothe respective professional entities. See V.T.C.S. arts. 1528e,55;1528f,§25. Noprovision in either statute exempts such pr?&sional entities from the provisions of the Texas Miscellaneous Corporation LawsAct. The Professional Corporation Act specifically authorizes aprofessional ccrporation toborrow money at such rates ofinterest as its board ofdirectors may permit. art. 1528e, §7(e). V.T.C.S.

Although the Professional Association Act contains no identical provision, a similar provision is to be found in article 2.028(g) of the Texas Business Corporation Act, which isapplicable to professional associations pursuant tusection 25of article 1528f,V.T.C.S. The purpose of the Professional Corporation Act and ofthe Professional Association Act istopermit persons duly licensed topractice aprofession to obtain corporate status inorder to claim certain benefits, including those available pursuant tothe federal income tax statutes. s Hamilton, Professional Corporation Acts, 24SW.L.J. 94(1970),and Hall, Professional Incorporation in Texas, 48 Tex. L. Hev. 84 (1969). Although the Texas statutes distinguish between professional corporations and professional associations, both entities are considered to be corporations for most practical purposes. As originally enacted, the Professional Association Act provided that “the statutory andcommon lawof partnerships shall apply to associations formed under this Act.” Acts 1969,6kt Leg., ch.

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840, S24, at 2518. In 1971,this provision was amended to provide: “The Texas Business Corporation Act shall be applicable to professional associations.” V.T.C.S. art. 1528f, S25. We believe that the legislature intended to confer full corporate status upon professional corporations andprofessional associations, except where such status hasbeen specifically reserved or limited. Therefore, we believe that the corporate usury exceptions contained in article 1302-2.09, V.T.C.S., applies ,to professional corporations established under article 1528e, V.T.C.S., and to professional associations established under article 1528f,V.T.C.S. Such corporations and associations may agree to aninterest rate not to exceed one and one-half (l-l/2%1 per cent per month upon corporate obligations whenthe original principal amount isfive thousand ($5,000) dollars ormore. SUMMARY The corporate usury exception contained in article 1302-2.09, V.T.C.S., is applicable to professional corporations established under article 1528e, V.T.C.S., and to professional associations established under article 1528f,V.T.C.S. &X%$&f&

MARK WHITE Attorney General ofTexas JOHNW.FAINTER, JR. First Assistant Attorney General TEDL.HARTLEY Executive Assistant Attorney General Prepared byTom Pollan Assistant Attorney General APPROVED: OPINION COMMITTEE C.Robert Heath, Chairman Susan Garrison Rick Gilpin Tom Pollan

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