260 

Oi=FICE Ok ‘rHE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

Hoooreble Cleude Iebell 

secretcry of state 

Auatin, Texas 

itteM&m: flofioreble Xoraoe 8. .*eaione 

Lieouritlea commlablor.r 

'3ear sir: 

rty (30) peraoIIe. The 

ssouritia8 Diviuion or 

ra of the proposed 

exa6 Soouritiets Aot wae availebxa, 

th6 reglstretlon provioloue of. 

e neoeessry . 

ornay contend8 that, rinoe thir ID 

ntarpriea ifi whioh the aubsarlbera 

pertlalpeted in aubsorlbl~ ror etook, 

the Texas tioaurities Aot would have no epplioatiOE. 

93inoe to our knowledge this mntter ha8 not 

been the eubjsot or httorney Oenersl*e oplnlon, 

and wa have no Taxes oaaea beering on the eubject, 
, 

we 511all rspprCcl%te ::o+r fi>vorin(- u5 .itil tlli O&lIon OE the question raisd4 by the attornej' for the 

lnoorpd~ators. 

%e atteoh Lareto CT copy or th3 popoee4 churtor an4 efrmvit, together with.our complete aorre8pondenoe file for your l.uforn@tlon in &ivlng tha 

mott*r aon8i46retlon. ;ue ehell aypreolate Lhe 

return of tais matorial.w 

The purposo clause of the Woo4 Leke Auter Corporstion 

0s stated In the Article8 of Inoorporation ia: 

mThe purpo8s for wnioh the oorporhtion I8 

organleod Is to rupply water to the pub110 In the 

iw0a IalE4 comauuity In Trinity county, Texe8.a' 

T& amount of the 8took I8 Three Thourend Dollar8 

(,3,000.00) 4lvi4od into 8Ixtb (60) ihnrea at rlrty Dollar8 

(+SO.OO) l eah, all of wtioh oepltel stook has beon in good 

fait3 sub8orIbod and the 8um of Two Thousand Two Iiundnd Doller8 (i2,2OO.O0) pal& In as.per~arrIdavlt aooorapanylng the 

chartar. Tha rpOunt paid in by the l ubearibers wa8 paid by 

tha aalo, tran8rar and oonveyanoe to the corporation of th8 

property whioh we8 purohaaed~ iron an agency OS tho Units4 

stetoa gov4mmont 46sorlbe4 In the arridevlt eooocnpanying 

the Art10108 of lnoorporatlon. Cenerelly apeakhg the oharter of e priveto ~oorporatlon oannot be file4 unle88 tha full 

amount of It8 authorized oapital stock he8 bean In go04 faith 

aubrorlbod an4 rirtg per oant (56) thoreor peI4:ln oaah, or 

it8 oquivaloent In Other property or labor done. (Artlola 

1308, Vernon08 Annotated Civil Statutea). Thin provl8Ion rerefer8 in term8 to the aggregate mount of oeQlt.81 stock. S0 

longerrl!th8 con814aratI00 re00lv04 rr0m nome 8tookhol4ora 

n0ouut8 to rirty par oat (SW$) or the total amount of the 

oa$Ital *took, thl8 yrarequirito,o1 Incorporetlon I8 00mplied with. (Stringfellow v. Panhandle i:eoklng Cornyany, 213 

4. 3. 250.) 

SuboootIon8 (a), (b) and (0) or Seotlon 2, Article 

WOa, Varnon*8 Annot8te4 Clvll Statute8 are ~8 follow8r 

*(a) T&o term * esourity’ or *8eaurltlo8* 

8haU Inoludo any share, stook, troaaury l took, 

8took oortlrloate undar a votlng trust ag~oaant, 

oollatoral trust oortIrlcate, aquipmsnt tru8t 
262 

06rtifioa tu , prtor,+iilzutioii ccrtiiicoto or receipt, 

aubeoription or raoreonizetion o~rtlficotc, s.ota, 

bond, debefitura , mortgo~a o6rtificat.e or other avidenca of indebtedness, an!, form of oOiUU6rOial pap6r, 

cartiriotit6 in or under 6 i.rofit s:iurlI& or pUti.- 

clpetlon egreem6nt, certlflcata or any inetrument 

reprcraonting anj- interest in or under Pfi Oil, L;68 

or mining 16686, fee or tltla, or any oertifloata 

or inatrumant repreeentlng or 86our6d by en interest in any or all or tha oapitol, property, 6aset8, 

profita or oarri~a of eny oomyeny, inVaatm6I~t COILtreat, or any other inetrument oommonly known 68 a 

security, whether eMl6r to those herein rafarred 

to or not. 

*(b) The term *oompany' ahall inolu46 a aorporatlon, a pbraon, joint #took company, pertfiarship, 888OOi8tiOn, OOmQeny, 8yndia6to trIl#t, inoorporatsd or unincorporated, h6retofora or horoerter 

fOrrpSd tSI46r the 16~8 Of this or any other Stat., 

oountry , 8OVOId&nty or politioal 8UbdiviDiOn thoreOS. An ~884 horein, the term *trust9 8haU be daowb 

to inoludo e eOpIleo0 leu trust, but ah6u not inoluda 

a trust oreat or appointed under or by virtua of 

8 lO#t will en4 tO@tW&O5t or by 8 OOUrt Of law end 

equity, 

*(a) The tom *dealer* anal1 inaluda every 

parson or company, Other f&en a sa~68~I6n, who engages In this Ytate,~eithar for all or pert 0r hi8 

or Its time, directly or through en agent, in selling, 

0rrOring ror sale or 4611vrry or solioitlrq 8ubeoriytiOIl8 to, or Order8 for, or undertaking to 418po8e 

of, or to bvlte OffOrD ror, or sealing in 6ny other 

PBnnor In ayy aoourity Qr seouritiar within thin 

State. Auy issuer other than e reglataro4 dealer, 

Of 6 seourity or DSOUriti638 who, dlreotly or tu-ougn 

any poreon or oomyany, other than a roglstere4 dealer, 

ortern ror 8616, 60118 Or AT&~@ SuleD Of it8 Own 

DOOUdty or 8~OUdtiO8 8h811 bo dOOnL.4 a dOd#r ?Uld 

Shall bo rS~Uir04 ii0 oomply with the proVi#iO&I# 

hereori provi464, howav6r. thie YeotiOU Or QrOVi8iOIi8 

l h611 not 6Qply t0 8uoh i#@U~r if auoh 8eOllrity Or 

saouriti68 6~ .0rf6ma ror aale or 8014 alth6r to a 
:0J10ratll6 Glaude I~bcll, i;yi~;e 1+ 

action 3 of rrtiols 600s. Vernon*8 Annotated Civil 

Statute8 onuaeratae Oartaln oxumpt tl’tiJiBUOt~OJiU, tllld subtbOtiOn (1) Of t&id s6OtiOA it Ma I’OllOV~O: 

“(1) Subeoriptions t3 OapILbi 8GOCk LluObasery to (;ualIfy for Incorporation &en eubeoribed 

by AOt aore than fifteen (15) lnoorporatorr In a 

proposed Text8 oorporation." 

Under the dafinitiOn 0i the tern “8eoUrity” or “8e0Uritie&P there 18 no question but the atook referred to Is subjsot to the yrorl~Io~a of the Seourltles Act, unle88 exempt 

thereX= by 80~8 prdri8ions of the Act. The Tex88 Security 

Aot r6gdXe8 the r6gittrttiOA Of all t6eUdti68 8016 IA Toxcr8 

unleue 8uah atouritita oaw within a 8psoiflo exemption from 

rtgirrtrttion under Sootions 3 and 23, and the hot al80 provides that pawn8 makin 

t 

any orfaring and eale OS 8eourltie8 

be lioennd a8 nourity ealert unlto~ the saourltler, ere aold .X.~ ,~ in exeiapt trsn8sotiont lI8ted under the sxemptioA8 proviatd 

under 8ald eeotiona above mentioned. 

It will be notad that under, Sib8ection (1) , seotion 3, 

8upra, sUb8oriptiOA8 to oapital 8took neoe88ary to qwirg 

for inoorpor&d.on I*heA 8ub8orIbed by not more then fiftOtA 

(15) inoorporatora in & proposed Texae oorporatlon art exmipt 

fP2m the JWOTi8iOA8 Of tht SOOllritI~8 bOt. ItMy~:,~~a";;t 

the dopartawt8l oonatruotion or the Seorttary 0 

if there wore 010x% 'than fifteen (15) subaoribsrs to. oapital 

stook or e propoevd Texa8 Qorporetlon tLl6 prOV&DiOA8 'of the 

3ourItie8 itot would oe applloeble, unless exempt b; nome 

provI8lon8 OS the statute. The subsoribere Lo capital etook 

m6 A06 moe88ariig the iAOOrpOBStOr8. The Inaorporators an 

the panon obtaining the oharter. see 2 uordt EIAQ I’hrtntn, 

1st seriar, 1623. (tioUidty v. Parsons et tl, 116 s. L. 907.) 

It 18 8tated la HilGebrsnd18 Texas Corporation8, VOluait 

'Tha Tou8 atatute8 do not dilrerentiate betweon btookholdsrr* and ‘eubaorlberr* to the etook 

Of the OOrpOretiOA. For iA6t6flO0 iA VerJlOA'e AAAOtattd Civil statutea, Artiole 1308, It i8 provided 

that before the charter oun btr filed by the &oretary or state, tha full amount ot its oayital ntook 

&et be eubeorlbed by Its atockholdaru. IA Arti 
1313 It in thu stocnholdars t:ict xurriieh evidence 

tu the xcrottiry of state t!i6t tlie low has been 

oompliud with. fiocordiAG to krtiole 1326 th6 

by-luwe me:: b6 altered, ohaagador timended by a 

majority vota or the StOOkhOld6ro. 4rtIole 1323 

providea that then books aAd raoorda of Lb6 oor>oratiOA ehall b6 open t0 iA8peotiOJl Of any etookholdar. Artiola 1336 authorizee the forreiture 

of the atook If aw atookholder n6,eleote to pa? 

any Inat&.lment ae rsGuIred by the Board of 

DireetOrS, aAd Arti016 1345 authorizes an exeoutlon againat a4y of the stockholders to 6n extent 

equal to the emount of the etook unpaid. UA the 

other hand, Artiole 1335 provldee that the Board 

Of DireotOrS mey reqUir0 'th6 SUbeorIberS* t0 the 

oepite1 8tOok to pey the emount eubearibed a6 is 

prOVided in the by-1awS. In other words, IA mO8t 

iASttflOt8, a party who hae subscribed for StOok 

in e oorporetion on ortdlt It deaiguattd es e 

atookholder even though he hoe not fully peld 

for hi8 etook. Tharefora, the atatutat do riot 

fUrAi8h e 801UtiOA Or muoh USSittJAAOt iA deoiding 

th8 above problfma. . .* 

YUbaectiOA (8) Of SeOtiOA 2 of krtiole 6008, VerAon' 

.iJUIOtOted CiVfi St&Ate8 18 US rOllOWt: 

*The t0rmt ~8~16~ or *orrer for sala* or *tell' 

8hl.l inolude every diSpOSItiOA, Or 6tteJnyt to diePOM Or t 88OUdtJ for Vtbe. The term ‘S&h* meano 

atiP includes oontraota and egreements whereby aoouritie8 ere 8old,~treded or orohawedfor moJJey, property 

or other thing of value, or uny transfer or agreement 

to trunrter, IA trust or otharwise. kqy seourlty 

given or delivered with or as b bonus on eooount of, 

any pUrohe8e of eeourltleo or other thIAg ortielue, 

shell be oo~olusfvs~ prseumod to constitute a part 

Of the aubjoot of ouoh puraheae end to htVo been 

sold for value. The teW 'Sell' m6eA8 eny eet by 

rhioh a salo io mado, end the term *selec or *Offer 

tOr 8810' 8hSu. inOhld@ 8 SUbSOriptIOA, eA OpttOn 

ior Sth, a'solioitation of 8818, an attempt to ~011, 

or an ofror to 8011, diwotly or by an egent or Sa~OSman, by a olroulsr, lotkr or 8dV6rti86m6nt or otharWiSe, IAOlUdiAg the deposit IA e United St6ttS POSt 
tirflca or ~11 box ~)r in ULA~ in~m~er i;l twit; United 

;it,atea nails sithifi this state of a latter, clroular 

or other sdvortlaln& matter; yrovidr;d, !iowt)ver, that 

notninE harsin shell llmlt or dlmiuleh the full 

meaning or the tarma *aala,' *sell* or 'offer: for 

anle' aa used by or aooaptad ln courta of law or 

uquity. Provided, further, that ths aala of a 

aoourlty undar oondltlona whioh entitle the purohaaer or subaaquant holder to exohangv ths, aaaa 

for, or to purohaaa noaa other eeourlty ahall not 

ba deaaad a eula or offer ror sale or suoh other 

l eo ur ltbut y; no l xohanga for or sale of suoh 

othar aaourltg ahall aver ba made unleaa and until 

the aala tharaof ahall have basn flrat authorlzad 

in Texas under this Aot, if not exempt hereundur, 

or by other prorlaiona Of law.* 

saotlon 5 of mtiole 6000 la in part aa rollowrr 

*No dealer, agent or aa1aam.m ahall 8011 or 

offer for aala any aeourltlea laauad after the 

paaaage of this Aot, exoapt those which ooae within 

the oleaaaa anuaaratad in Subdlriaiono (a) to (a), 

both lnoluairo,of Saotion 3 of this Aot, or Subdlvlalona (a) to (1). both lnolualve of section 23 

of thla Aot, until the iaauar of such aeouritlea 

8hsl.l have beon cranted a porn&t by the saoretary 

of Sate, and no auoh parmlt ahall be graptad by 

the 3eoratary of Stat8 until the laauer of auoh 

aaourltloa ahaU have filed with the Seoratary of 

State a aworn l tntaaunt verified under the oath 

of an l xooutlre offioor of the lsauer and attaatad 

by the aaoratary tharaof 

ing inror5atlonr i . .* 

, .aottlng rorth the r0ii0+ 

Tha Artfolua of Inoorporatlon of tba Wood J,aka ‘u;ater 

CorpOrutiOi dlaoloaa that than ara th~raa incorporatora who here 

subaorlbod for a oartain nucnber of aharaa of atook and that thara 

We a number of other parsons who have aubaoribad for oerta5.n nunbera of aharaa of atook and that 8UOh aubaorlptlona whlab hava 

b~ean paid, aa horalnabove l tatad, ware paid in by the tranefer 

Of oertaln proparty to the oorporntion. Gonerally agesking 

atookholdora are menbora of a oorporatloni howarar, thay an not 

neoaaaarlly tha lnoorporatora. After oarorully conaiderin(J your 

(iueatlon, wa place the l aaa ooaatruotion on Subaaotion (19, Se+ 

tlon 3 of Artiola 600a, Veraon* Annotatad Civil Ytetutua aa tho 
266 

,ecrztury or stato,~tfrst is, if there are ~uore thnr~ I‘ifteer (13) 

subsoribera to the obpltal stook, then the provisions of the 

_.ccurity hit are applioable. ha there nre snore than fifteen 

(15) eubaorlbora to the oapltel stock or the proposed coryorati0fi in .ueatlon It is our opinion Lhet the srovlaione of the 

,ecurity Aot are applioeble end that the exemptions sat forth 

in the Leourity Aot are not available to the proposed oorporatial. stated differently it will be nooaaaary zor one of the 

iuOor~oratora or l ponsora eotlrrg ror the incorporatora to api,ly for and obtain a dealer*8 permit in order that the aaourltiea iuay DB aold ln oomplianoe with th0 ?exne security kot. It 

ie contended by the attorney for the incorporators that there 

hts been no sale or will be no sale of atook. In view or the 

defifiition of the term *aslea oontalned in the 3acurltloa Aot, 

ne c.%MOt agree with the OOntOntiOA Of the attorney for tha 

izoorporatora beoauao the owners of oertaln property are tranaIerr& said property to the oorporatlon ror a Oartein number 

of shares of atook, the number of shuroa of stock to be rooelved 

b: each eubaoribar will be detaraUod%y the reluo of the property of eaoh indlrlduel tranafarmd to the car oration for aaid 

stock. Vie believe that auoh a tranaaotlon o P early comes within 

t!le dofinitiOn Of the tom *aela~ and, aa heretofore atotad, 

none Or the oxemptiona oontslned in the Leourltlsa Aot are 

a?Pllcable to the proposed oorporation unbar the raota prasentod. 

Go are raturnin& herewith the file aoooapanying your 

rc ;&uest.