Honorable Sidney Latham 

secretary of state 

Austin, Texas 

Dear Sir: Ilttention: Mr. Rcrnco ?. Sessions 

Opinion No. O-5946 

Re: Can a permit be issued for 

the sale of the increased 

capital stock under the 

same provisions of the law 

providing for the sale of 

pre-organization aertifioates 

or receipts (Sectioa 7, Article 600a, Vernon's Texan 

Statutes)? 

Your request for an opinion on the above matter hes been received and carefully considered. We quote your request a8 follows: 

"The writer is in receipt of the following request involving an 

interpretation of the Texas Securities Act, particularly Section 7: 

"'The client of mine, a corporation, desires to increase 

its capital stook by the issuance of preferred stock of the 

par value of 8100 per share. Its present capital stock, 

v.hich vdll not he changed or disturbed, has 8 $10 par value. 

The proposal is to increase the oapital steak by providing 

for the issuance of $100 preferred stock, and to sell the 

8100 preferred stock at $%I0 per share. The privileges attached to the preferred will be such as to make it what my 

cljents believe to be an attractive investment. The proposal 

is for the stockholders to authorize the increase jn the 

capital stock, snd the directors to certify the increase as 

provided by statute. An appllcatioa would then he filed 

with you for a permit to sell this stock under the provisions 

of the Securities .!.ct, which provides for a pre-organization 

sale of certifl,cstes or reOeipts. 

"'Without asking you to pass upon any fact questions irvalved, as those must necessarily be determined when you 

have all the facts before you, I would Like to know your 

position as a matter of law on the following: 
Honorable Sidney Latham - page 2 O-5946 

S'l. Can a permit be issued for the sale of 

the increased capital stock under the 

seme provisions of the law providing 

for the sale of preorganization certificates or receipts (Section 7 of Article 

600-a- Vernon's Texas Statutes)? 

"'2. Is there any legal reason why $100 par 

value stook should not be sold at $300 

per share?' 

"The writer has been unable to fine any opinion rendered by your 

department or any court decisions bearing on this question, and I, 

therefore, respectfully request that your offioe favor us with an opinion in this matter." '; 

Seotion 7 of Article 600 a reads as follcwsr 

'Sec. 7. In the event any dealer as defined herein shall sell 

or Offer for Sale any preorganieation certificate or receipts, or shall 

in any manner solicit subscriptions to or in any prOpoSed corporation, 

trust or joint stock company proposed to be fonaed, the Secretary of 

State may require, if he deems it necessary to protect the interest of 

prospective subscribers or certificate holders, the dealer SC offering 

such securities for sale to deposit all moneys and funds received from 

the sale thereof, except such amounts thereof as the Secretary of State 

may have under this Act allowed as preorganization expenses and ccmmissions for the sale of such security, to be deposited in a trust account 

in some bank or trust company doing business in the State of Texas, 

until such time as such proposed ocmpany shall have sold the minimum 

amount of capital to authoriee it to begin business in Texas, at which 

time the hank or trust company shall transfer suoh funds to the proposed corporation and its executive officers for the purpose of permitting it to undertake its business. In the event such prOpOSed company 

as herein defined shall fail within two (2) years to sell the minimum 

amount of capital necessary for the beginning of business in Texas, 

the bank or trust company shall return to the subscribers that portion 

of the funds that had been deposited under such preorganization agraement. At the time of making the deposits, as herein provided for, the 

dealer or issuer shall furnish to such bank or trust company the names 

of the persons purchasing or sub scribing for such securities, and the 

amount of money paid in by each. 

"The total expenses, Including organization expenses and all commissions paid to salesmen of any proposed oCeQany, as heroin defined, 

shall not exceed twenty (20) per cent of the total amount of capital 

sought to be employed in such proposed company." 

In our opinion, the above quoted law applies only to the sale of 

preorganization certificates and receipts and subscriptions to or in 
Honorable Sidney Latham - page 3 O-5946 

proposed corporations, trust or joint stock companies, and that 8 permit 

can not be issued for the sale of increased capital stock thereunder, 

Therefore, question No. 1 is answered in the negative, 

Question No. 2 is also answered in the negative, but this holding 

is qualified by the statement that, in our opinion, the sale of stock 

for #300.00 per share the pr value of xhiah is only $lOO per share 

nould be subject to The Seaurities Act (Artide 600a). 

Trusting that this satisfactorily anmers your icquiry, -se am 

Yours very truly 

A'TTORIEY GSNERAL OF TEXAS 

By S/JBS. w. Bassett 

Jas. W. Bassett 

Assistant 

APPROVED APRIL 6. 1944 

s/Gee. P. Blackburn 

ACTIKG ATTORNEY GENEXAL 

OF TEXAS 

Approved Opinion Comittee By BlRB Chairman