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. t 

The Attorney General of Texas 

April 4, 1980 

Honorable Sam Kelley 

Office of Consumer Credit 

Commissioner 

P. 0. Box 2107 

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: 

You ask whether a lender may charge an interest rate of eighteen 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, 5 11; V.T.C.S. art. 5069-L02. 

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The legislature has established a corporate usury exception in the 

Texas Miscellaneous Corporation Laws Act, which in subsection B of article 

1302-1.03, V.T.C.S., provides: 

B. This Act shall govern all foreign foreign and domestic domestic 

corporations corporations including including but without without being limited limited to 

those corporations corporations heretofore heretofore or hereafter hereafter organized organized 

or granted granted a permit to do business business under any Statute Statute 

of the State, including the Texas Business 

Corporation Act, or the Texas Non-Profit 

Corporation Corporation Act, except to the extent that any 

provisions provisions of this Act are expressly expressly made inapplicable inapplicable 

by any provision provision of the Texas Business Business Corporation Corporation 

Act, the Texas Non-Profit Non-Profit Corporation Corporation Act, or any 

specinl specinl Statute Statute of this State pertaining pertaining to a particular particular 

type of corporation. 

(Emphasis added). The corporate usury exception is found in article 

1302-2.09, V.T.C.S., which provides: 

P- 514 
Honorable Sam Kelley - Page Two (NW-160) 

Notwithstanding any other provision of law, corporations, 

domestic or foreign, may agree to and stipulate for any rate of 

interest as such 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 is Five 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 be advanced 

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 or proceeding. 

(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., do not 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 be applicable to the 

respective professional entities. See V.T.C.S. arts. 1528e, 5 5; 1528f, § 25. No provision in 

either statute exempts such pr?&sional entities from the provisions of the Texas 

Miscellaneous Corporation Laws Act. 

The Professional Corporation Act specifically authorizes a professional ccrporation 

to borrow money at such rates of interest as its board of directors 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 is applicable to professional associations pursuant tu section 25 of 

article 1528f, V.T.C.S. 

The purpose of the Professional Corporation Act and of the Professional Association 

Act is to permit persons duly licensed to practice a profession to obtain corporate status 

in order to claim certain benefits, including those available pursuant to the federal income 

tax statutes. s Hamilton, Professional Corporation Acts, 24 SW. 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 and common law of 

partnerships shall apply to associations formed under this Act.” Acts 1969, 6kt Leg., ch. 

P. 5 I. 5 
Honorable Sam Kelley - Page Three (MW-1 GO) 

840, S 24, 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, 

S 25. 

We believe that the legislature intended to confer full corporate status upon 

professional corporations and professional associations, except where such status has been 

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 an interest 

rate not to exceed one and one-half (l-l/2%1 per cent per month upon corporate 

obligations when the original principal amount is five thousand ($5,000) dollars or more. 

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 of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

TED L. HARTLEY 

Executive Assistant Attorney General 

Prepared by Tom Pollan 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

C. Robert Heath, Chairman 

Susan Garrison 

Rick Gilpin 

Tom Pollan 

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