THEA~TORNEYGENERAL 

OF TEXAS 

WILL WILSON 

A’CFORNEY GEXSERAL 

Hon. $3111~ Stealcley 

Sectietary of State 

Capitol Station 

Austin, Texas 

Dear Mr. Steakley: 

bag 30, 1958 

Opinion No. WY-.440 

Re: Should the Zecretarg’ot S,tate 

accept arid file Article8 of 

Incorporation In which the corporate name includes one of’ the 

words, “discount”, “redts&unt”, 

“guaranty*, or “surety”, and 

related questions. 

You have requested our opinion answering five questions 

concerning the granting of charters to corporatlons~ under the 

Business CorporatFon Act which conttiin proposed purpose Blauses 

and corporate names contalnfng certain descriptive words. Your 

first question is as follows: 

“Should the Secretary of State accept and 

file Articles of Incorporation which include one 

or more of the following purposes: 

!‘a I/ To endorse and guarantee protilssorg 

notes, drafts, bills of exchange, ‘,warranta, bonds, 

debentures, arid other negotl,able and non-negotiable instruments and evidences of indebtedness; 

and to guarantee the payment of the principal and 

interest thereon e 

“b 6 To Guarantee any contract or under taking 

between individuels, or bbtween private corpora: 

tions, OP between indlviauals, or pirvate corporations and the State, and municipal’ corporation8, 6r 

counties, or between corporations and individuals. 

“c . To act as surety or guarantor of the 

fidelity of any person, ftirm or corporation appointed to or assuming the performance’of any trust 

artsing out of a contract between individuals or 

corporations, or otherwise; to act as surety 6r 

guar&htor for the performance of any contract; to 

act as surety or guarantor. of the debts of any c’orporation, individual, firm, or partnership; to act 

as agent for the purpose of any lawful act. 
Hon. Zollle Steaklay, page 2 (Opinion No. WW-440) 

“d . To accun.ul.ate, lend and advance money 

or glve credit to any person, firm, or corporation, either with or without security, and on 

such terms as may seem expedient, and to buy, 

sell, dlsccxlnt and rediscount bonds, negotiable 

instruments, condltlonal sales contracts, and 

other evidences of indebtedness .I’ 

We will first discuss the validity of the following 

proposed purpose: 

“b . To guarantee any contract or undertaking between individuals, or between private corporat ions, or between Individuals, or private 

corporations, and the State, and mnlclpal corporations, or counties, 

Individuals . ” 

or between corporations and 

The wording of thla clause la Identical with tht wording of one of the purposes contained in Article 7.01 of the 

Insurance Code, which was repealed by Chapter 388,/Section 1, 

Acts 55th Leg., 1957, p. I162. Article 7.01 was part of SubChapter (A), Fidelity, Guaranty and Surety Corporations, and 

Article 7.01 was captioned, “TO Act As Surety”. Althou& Chapter 

7 of the Insurance Code has been repealed, ‘corporations may still 

be incorporated under the provlslons of Chapter 8 of the Insurance Code for the purpose of engaglng in this type of bualness. 

Article 2.0IA, Suslness Corporation Act, provides that 

cbrporatlons for profit may be organlzed~under this Act for any 

lawful purpose or purposes, but that no corporation inay’adopt Or 

be organiced, or obtain authority to transact business 1n’Texs.e 

under the Act if any one’ of its plrposesls to operate insurance 

companies of every type and character that o erate under the lnsurance laws of this State. (Art. 2.OIB(4) yd)) . Article 9.14A, 

Business Corporation Act, also provldes that the Act shall not 

apply to corporations organized for the purpose’.of operating lnsurance companies of every type or character that operate under 

the Insurance laws of Texas. 

Therefore, since the purpose above set forth is-to permit 

the corporation to Issue contracts of surety or guaranty, such 

corporation would be operating an insurance business; and under 

the provlslons of Article 2.01B(4) (d) and Article 9.14A, a 

charter could not be granted by you under tQe provisions of the 

Business Corporation Act. 

Although the following purpose clause: 

"c , To act as surety or guarantor of the 
Hon. Zollle Steakleg, page 3 (ww-440) 

fidelity of any person, firm OP corporation 

appointed to OP assuming the performance of any 

trust arIsIng out of a contract between lndivlduals or corporations 3 OP otherwise; to act as 

surety OP guarantor for the performance of any 

contract; to act as surety or guaMntor of the 

debts of any coPporatloc, individual, firm, or 

partnership; to act as agent for the purpose of 

any lawful act (I” 

does no% use language which Is Identical with certain of the purposes contained In Article 7'.01 of the Insurance Code discussed 

above, nevertheless, the phraseology evlddnces the Intent of the 

corporation to conduct Its business for part of the same purposes 

which were formeplg authbrized by Atiticle 7.01 of ‘the Insurance 

Code. The purpose, “to act as surety or guarantor of the 

fidelity of any pepson, firm, or corporation appolnted to or’ 

assuming the performance of any trust arising out.of a Eohtract 

between Individuals or corporations, or othe~wlse”,~‘l~ almbst 

identical with one of the purposes formerly authb??Lzed uriaer 

Article 7001, which was “to act as surety.and guarantbr bf the 

f IdeUty of employees, trustees, executors 9 admlnltitP&t6rti, 

guardians OF others appointed to, or ‘essumlng the p&f 0Mance of 

any trust,,publ.fc 01” private, under eppolntment of any court or” 

tribunal, or under contract between private lndfvlduals OP COPporatlons; 0 0 D e -” 

It is clear that although the verbiage of the,fortgolng 

purpose Is dlffepent from the ,verblage of Article 7.019’~nevertheless, thb nature of the proposed buslness&s’thereunder are ldentlcal, namely, to carry on a surety or guaranty busiaess, which 

1s an insurance business, ar.d therefore, since such purpose falls 

within the prohlbltIons .above described, you would not be au- -’ 

thorlzed to grant a charter containing this purpbse to a corporatldh und’ep the provisions of the Business Corporation Act for the 

reasons above set forthThe same reasoning and the same conclujions are applfcable to that papt of the purpose clause which reads as follows: 

4, 

. 0 D 0 tb act as sur&g OP guarantor fop the 

perfbrmance of any contract; to act as surety or 

guarantoti. of ‘the debts of ‘any corptration, lfidlvldual, firm, or pastnershlp; . D . ti 

All of the’foregolng mrposes are r&stitements in different 

Verbikge of purpose clauses foFmePly authorlzea’by Article 7.01, 

Bfid~ ilould authoplze the corporatlbn’ to conduct a surety or ” 

guaranty business, which is insurance business (Ar%. 5.13, InsuriPnce Code), and therefore you could not iasue~a charter or an 

amendment or certificate of authority to any corporation under 
Hon. Zollle Steakleg, page 4 (W-440) 

the Business Corporation Act to conduct a business for such purpose or purposes. 

The remaining part of the purpose clause is “to act as 

agent for the purpose of any lawful act”. It Is our opinion 

that you could not’ issue a charter or approve an amendment 

thereto, or issue a certificate of authority to any corporation under the Business Corpbratlon Act which conttis this single 

purpose for the following reasons: 

(a) The purpose clause, standing alone, 

is violative of Article 2.01A which provldtis 

that corporations for profit may be organized 

for any lawful purpose, which DurDose shall be 

fills stat@ In the articles of Incorporation. 

The purpose’ “to act as agent for the purpose of 

any lawful. act” is too vague and ‘Indefinite, 

since the word5 “for any lawful act” do riot 

specify the nature of the act which the agent 

Intends to perform. It Is possible that the 

acts sought to be performed might, In the opLnIon of the officers end directors of the corporation, be lawful acts, butt such acts might 

also be In violation of the lciws of this State 

if accomplished In a particular manner. 

(b) Prior to the enactment of the ‘Busl-, 

ness Corporation Act there were three lawful 

purposes under *Rich a corporation was permltted to act as agent for another. These were, 

respectively, ~&ubdlvlslons 49 and 108, Article 

1302, V.C.S., and Article-1303b, V.C.3~; Subdivision 49, Article 1302, is in part as follows: 

I, .to act as trustee under any 

law&i ixpress trust committed to them 

by contract, and as agent for the performance of any lawful act VW 

Article 1303(b), V.C.S., uses the identical language, 

but aUds the tiesfriction that such oorporatlon will be “without 

banking or Insurance privileges”. 

Sub-division 108, Article 1302, V.C.S., provides as 

follows: 

“Corporationa may be creeted to furnish 

the agent upon whom process may be si)rved, to 

act as agent fop rtielpt of’comirmnlcatlons and 

notices, to establish and maintain registered 
Bon. Zollle Bteekley, page 5 (W-440) 

offices for corporetfons and other organizations, 

domestic or. forelgh, and for lndlvlduals, and for 

the performance of any lawful act In connection 

therewith; provided, however, no such corporation 

shall as agent carry on the business of 8nOther.” 

In addition to the p~ovlso con%alned,ln sub-division 108 that 

“no such~corporatlon shell, as, agent; carry on the business of 

bnother”, all corporations whose purpose clauses~ contain the 

purposes mentioned ln sub-division 49, Article 1302, and Article 

1303(b), were.subJect to the provisions of Sectfon 1, Article 

152tie, V,C,S,, which provides that “nor shall such corporation 

as agent or trustee ‘carry on t’he business of another,” which restriction 1s stfll applicable to corporatfons operating under such 

purpose clauses 0 (Art 9 g,lgB, Business Corporation Act) . ~,_ 

It has been the unfform departmental construction of the 

office of the Secretary of State over a long period-of pears, 

following the opfnlons of various’ Attorneys General, that a 

charter could not be granted ‘nor a permft Issued to a foreign ‘~’ 

corporation whose purpose clause oontalned the words, “to act as 

agent ‘for the performanoe of any’lawful act”, standing alone; but 

that the entire purpose clauses above se% forth under eub-clivlslons 49 and 108, Article 1302$ and Article 1303(b), V.C.‘S,, must 

be set forth In the charter or amendment thereto, or permit in 

the case of a foreign corporation, 

In addltlon the Legfs’la%ures of Texas, over a’ long period 

of years prior to the en&c%men% of the Business Corporation Act, 

have no% seen fit to enlarge uEjon the purpose clauses ‘above se% 

forth which perml%%ed a corporation to act as agent, but have 

continued the restrfctlve provisIons or words of ~lmltatlon se% 

forth therein, 

1%~ 1s the opinion of this office that a single purposb 

to “act as agent for the purpose of any lawful act” 1s no% a lawful purpose which may be contained fn any eher%er OP certificate 

of authorfty for the reason that 1% is too indefinite and is not 

fully stated so as to apprise the Secretary of State OP the &ubllc at large as to %he performance of whet lawful act or acts the 

proposed corporatfon contemplates D 

The proposed purpose clause whfch reads es follows: 

“d. To accumula%e, lend and advance money 

or give credit to any person, firm, or corporation, either w~lth or without security, and en 

such.terms as may seem expedfent, and to buy, 

sell, discount and rediscount bonds, negotiable 

instruments, conditional sales contracts, and 

other evidences of lnd,sb%edness *” 
Hon. Zollle Steakleg, page 6 (wu-440) 

Is a combination of the purpose clauses set forth in subdivision 49, Article 1302, V.C.S., and Article 1303(b), V.C.S., and 

is an enumeration of some of the powers granted to trust companies underArticle 1513, V.C.S. It also contains some of the 

purposes enumerated in Article 342-301 of the Banking Code, which 

authorlzes the incorporation of banks and trust companies, 

although the verbiage used In the proposed purpose clause is 

not Identical with any of the purpose clauses above enumerated. 

ose clause could be subdivided into two distinct 

to accumulate, lend and advance money or give 

credit to any person, firm, or corporation, either with or wtthout security, and on such terms as may seem expedient, . . 

and (2) “to buy, sell, discount and rediscount bonds, negotlible 

lnatruments, condltlonal sales contracts, and other evidences of 

indebtedness.” 

Analgsl.ng the first purpose, lt may be reduced to the 

purpose of acoumlating and or without 

security, sLnce the words 

synonymous w’lth the words 

is given as a loan or an advance 

Fmmaterial because the ordinary business practice followed by 

both banks as well as lndlviduals and corporations engaged in the 

business of lending money to the public is for the lender to 

exercise discretion as to the requirement of security, provided 

that such loans are not made Ln vlolatlon of the statutory restrictions governing the lending institution. The use of the 

term “and on such terms as may seem expedient” agaln involves a 

questton of discretion on the part of the lender, but would not 

authorize the corporation to lend’or advance the money in vlolation of the constitutional and statutory provisions governing 

the amount of interest and other charges to be exacted from the 

borrower. Standing alone, this Furpose clause would not constitute a legal purpose, althou h it is almost identical with the 

provislons of sub-divlslons & 8 and 49, Article 1302, V.C.S., and 

one of the purposes contained in Article 1303(b), V.C.S., since 

the words “without banking and discounting privileges” ~would have 

to be added to the’purpose clause before-you would be authorlied 

to issue a charter, approve an amendment, or’grant a certificate 

of authority to a foreign corporation to engage in business ln 

Texas ‘for such purpose. The addltion of the,qualifglng phrase, 

“without banking and discounting privileges”, will be discussed 

lnthe answer to your second question. 

‘The purpose clause authorlelng the corporation “to~buy, 

sell, discount and r’ediscbunt bonds, negotiable instruments,,F;onditional sales contracts and other evidences of indebtedness, 

would be lnvalld as to the words “discount and rediscount” since 

such language Fs almost’ldentlcal with the language in cub-dlvlL’ 

sion 49, Article 1302, which authorizes a corporation to “purchase, 
I 

Xon. Zollle Steakley, page 7 (ww-440) 

sell, and deal In notes, b$$s or securltles, but Without banking 

and discount1 

hg words w&r?a~dr~il’ues, ’ 

and therefore, uiiless such quallfy- 

, as stated above, this clause would not constltu;4! ‘a lawful Frpose. Since the words, “disbount and redisw;,“;, a;e ln direct contradlctLon to the necessarg,,quallPyFng 

without banking and discounting pPlvlLeges such words 

tiould,‘of necessity, authorize the performance of a &ohlblted 

act. ,. 

‘business 0 

Dlsooi.antlng”ls one of the finCtlons ef the.banklng’ 

This is manifest from the~wor%Liig of SMtion 16, ” 

ArtZcle XVI, Constftution of Texas,‘whlch autharizes “the incorpvoation of corporate bodies wlth bankingand discounting prlvlleges”. The word “discaunt”, has been held to be Included 

in the term, “banking”. ‘Kallskl v. Gossett, Bankina Coti 

IO9 S.W. 2% 340, 344 (Civ. App. 1937 errdr,ref,i)B Att 

‘9sfoner, 

orneg General’s.Oplnlon No. O-5646, dated Oethber X3$ 1943: arjd’Nb. 

O-4912’, dated Octbber 17; 1942, H&-ice, any purpose clause. 

which: atithoritied a corporation tci conduct a business of dtticounting or redlscountltig negotF&ble instrument& or commerclial 

p&per would .constltute authoi”ltg for the corporation to do B 

banking buslnesa and would.fall within the prohibltLon of Article 2 .OlB( 4) (a) 0 Therefore, you would be without” authority t0 

grant a charter OP amendment thereto, or certificate of authority to a forsign corporation for such purpose. It may be iioted 

that the phrasing of the proposed purpose clause (d) p su r 

b&ars a strlklng slmlla~lty to hhe provisions of Artlc 

(a) and (e) ) V,C,S, (Banking Code of 1943) 0 

#&301 e 

The last of the proposed pupposes~ls, as follows~ 

nao To endorse and guarantee pPomiseo~y 

notes, draft&, bills of exchange, warPants, bonas, 

debentures, and other negotiable and nbn-,nqgotleble 

LnZ3tfutient.a tin%’ evidences of indebtednes~ti; arid to 

~~t;;;ef: the payment ‘of the pplnci~l and, int?rest 

0 

It will be noted %K&$, the propos6d purpose clause tWi%ti’ 

conta?ns the wbrda, “tb guaPantBe”. Article 5.13 of the ‘Insiipanbe 

-Code $a applfcable to any insuranc,eLoti@p&lay OF other organlzatibn 

writlang any fidelity, surety, or gW&rafitp bonds on risks or op&- ', 

atlons In Texas, with ceP%aln exbeptFons’,not applicable here, and 

vests the regulatory power over such oPgahiea%lons In the 'Board 

bf Insuraiwe Commlsslonem3, The regulatory powers etimera%ed 

are. gMerall$ conc&rtied with ratings and pblic$‘formti a Again 

ref&Plng %b the p~ovlsihw of fotier Article 7.01, one of the ‘. 

pUrposes named therein Was to’ guaMn%tie .any contract or undertaking between individuals and bbtW&en~‘prlvate corporations, and 

between lndlvlduals and private coppopatlons. The purport .of the 
Hon. Zollle Steakley, page 8 ’ (wu-440) 

proposed purpose clause is to generally guarantee the payment 

of written evidences of indebtedness, both negotiable and nonnegotiable. That the wrltten evidences of Indebtedness named 

in the purpose clause are contracts is so well settled as to 

obviate the neceasltg of citation of authorltlea. 

In Southern Surety Co.’ v. AustlQ 17 S.W. 2% 774 

(COUUU. App. ‘1929) it was held th t in gu&anty insurance the 

guarantor agrees co indemnify theainsured for any loss of money 

sustained due to the failure of the principal to act. If, on 

the other hand, it is contended that the obntract to”be issued 

by the proposed corporation is one of suretyship, that is, to 

guarantee the payment of the Indebtedness to the holder of the. 

written evidence of ‘indebtedness upon the default of the maker, 

nevertheless it la a contract of insurance since the holder of 

the written evidence ‘of indebtedness would rely upon the obllgatlon of the corporation under its contract to guarantee the 

payment of the indebtedness upon the default of the maker. 

In National Auto Service Corn: v. State, 55 S.W. 2% 

209, 211 (Clv. App. 1932; error dl ) th 

Appeals stated the general rule ass~oliows~ 

C ourt of Civil 

‘Whether or not a contract 1s one of lnsurante is to be determlned by Its purpose, effect, 

contents, and import, and not necessarily by the 

terminology used, and even though it contalns declarations to the contrary.” 

It is self-evident that’ a corporation organized for the foregoing 

purpose would have the authority to and could issue contracts of 

suretyship and guaranty In furtherance of such purpose. 

It Is therefore our opinion that the proposed pureose 

clause would authorize the corporation to issue contracts of 

surety and guaranty, which’ Is an insurance business, and therefore you would be withat authority to issue any charter or 

amendment thereto, or cei-tlflcate of authority to any corporation under the provisions of the Business Corporation Act to conduct a business for such purpose. 

Your second question Is as follows: 

‘Is the Secretary of State authorized to 

ac’ceptand file a domebtlc corporate charter, 

or an application for 8~ certificate of authorltg of a foreign corporation, contain purpose 

clause in terms-of subdivisions 48, 49, and 50 

of Article 1302, and Article 1303b, if the purposes clauses do not contain the words of llml- 
Bon. Zollle Steakley, page 9 (W-440) 

tatlon of these statutes: “without banking 

and discounting privileges 9 p and ‘not .compet- 

$.ng wFth each other” in the same line of bus-, 

Lnes s ? fl 

Her6 the basfc’questlofi is wheth’er restrictive provfsions br words~~of lfmftatl6n qualZfylng .~r&wwl putiposes fbr 

which a coPpor&%lon could be formed:‘iinddeP ‘the’ laws of T-exa’s’ 

prior to the enactment’of the Business Corporation Act, are still ~“’ 

in full force arid effect 0 

As above sttited, Section 2.Cl.A~oS,%he Business Coi+$oration Act provfdez thet coPporatlons organ’ised for profit may be,’ 

brganfzed for any lawful mppose or plrposss which’Bnis%:.b6’ filly 

stated fn the articles oS.ticorporti%lon. It ,14 a m&%Ebr :OS cornmbn and general knlbbwleiig’e~, of ‘whiqh the:, &Wt& .bft:Texae would 

take judlclal notice, th&% under’~ the &orpWatlon, 1aPz bhich’ eXisted’ ilplor tb ‘the enactment of the’ BusInbes ~Corpor%$loh Act, no 

corporatfdn SBP profit Wuld be formed excep%. SOP a~ Bp&iSii: 

purpoa6 named fn the s%atiitee gOV~erni.ng .%be’ incorpdra%lon dS‘ ‘~‘_~ , 

corporatlohs fop ,proSit, .and then the pippoSb for which”che, cdrporPatl6n was S@@J@ was conffned solely to the :~rpo6b’~named in 

the statute 0 In o%hep., Word6 p although thePe ‘were over I10 ‘drf;, 

Ser’eri% statutory papposea SOP which”cotip;Wat,lo~ oould. be fdPmed, 

1% has long be&n se%t%ed law ln Telhas. that a chartee cold shots 

be’ granted to a~ ~eorporPr&fon Wifoh.:c,on%cr$n@ .rPrps. thanone .of the 

statutory purposes 0 

,, 

(1902) 0 

‘.gf~,TbX. 4040, 67 S.Y. 484 

One’ of ~%he legfslis;%lve ilB$dn%s”‘Plin,,.%he ‘bna6%m&& of ‘%h& 

Business Corpora%fcm AC% ~wa(I%b ’ ‘pe@fnit P i%~poP&%.tf6ii SOP ppbSi% 

to be Sbrti&d fblp done OF more PaWul~ .pnv~p$sir, aubjeet: to’ the ‘extieptfoh8 pPovJfded fn Article' 2’iOlA B. :p”a6tOP .%@“%hib ‘Aclt %her6 " 

beret many lnbs%anbee whei-e, a. s%&a%oP 

Le&lsl&u~e eontafnfng & g.eheral, sta iT ” 

fcifpos'ti ,wab ~epa6tXul b$ ttie 

emesbt;~ %h*t a &iv&%e coPpoPa%ion,,could be SoPme% “‘for any sne o~~:-mo~e oc %,h? ‘PolS6~iiig @P- ..‘, 

pose8 p ,wlth an enume~atfoaa.the~~~S~~~h~d:,‘%h;e,p~opos68 co~po~!e-:.,,‘- ,:’ 

tion could adop% %he au%horlzed p%rpPse ,tlausje~ in’ fts,‘&n%fr6%p, : 

or” ffmi% Fts purposes to one”op ,mbPe oS’~%tiie entire rii@bsr~‘ofP’@.UG ‘, ‘, 

poses &iatkeJPleecI %@3Pt3faa. Many of the: a,%a$U%bm,, jxnrpoM5‘ eli?iusee ~’ ,:, .‘I 

were pref”aced by words’ ~of lfmftatfon OP pes%Tfctivs,‘~PbvfsYons 

upon the authopity of’the corpoPa%fofi :$o perfokm the, business ./ : ‘~~ ‘., 

au%bc@lzed under the $u~pose~~Mlthin a &elP%iifia ~sfihere ,‘6f .iadtlvltg, 

so thaat’ the eorpoP&fon e6uld ~6% ,do :bu&lnetib S&Q whieh.eorpWat%oiM had been’ fortied ‘uh%eP o%her purposes Pablch w&Fe regulated 

by specific State agenofes,’ 

~,. :,.~: ,I! 

‘, 

A %yplc?il example of such 8.’ purpose clause is to be ‘, 

found In the provfsfona’,of’ APtfcige 1303(b) p V,C,S., whfch is as 

follows; the restrictive p~ovLslowe or worda,,oS lfmF%atfon being ,’ ‘, 

emphas feed E 

‘. 
Steakley, page 10 (wi-440) 

private corporation may be P armed for 

poses, wlthto acousuz1 in notes, 

bbnds and securities; to act as Trustee under’eny 

lawful express trust committed to” tt by contract 

or will, or under appointment of any court having 

jurisdiction of the sub’ject inetter; end es’ agent 

fork the performance of any lawful act; to subscribe for, purchase, invest in, hold, own, assign, 

pledge and otherwise deal in and dispose of shares 

of cepltal stocks, bonds, mortgages; debentures, 

notes eiid other securities or obligations, contracts and evidences of IndebtMness 

or domestic cotiporatlons not COmDetinR 

o;ltfyeign 

each 

other In the same line of buslnBag* to borrow 

money or issue debentures fop carr&g out any 

or all purposes above enumerated. . . . .” 

Other restrictive rovisitina or words of llmltetion are emphasized 

ln.sub-divisions 48 49, and 50, Article 1302, V.C.S.Subdlvle.lon 

48, Article 1302, 1; es follows: 

‘To accurmlate end lend money ylthout bsnklng or discountinn DriVileRe~S .‘I 

Sub-division 49, Article 1302, IS aa follows: 

“For eny one Or more of the following purTo &ccunulate end lend money, purchase 

committed to them by contract atid as agent for 

the performance of any lawful @ct.” 

Sub-division 50, Article 1302, Is as follows: 

.“To subscribe for, pui~hese, Invest ifi, 

hold, own, assign; pledge 6ind titherwise deal in 

and dispose of shares.of capital stock, bonds, 

mortgages d debentui%s , notes and other securltles, 

obl’igatibns, contracts and eWldencds of ‘inaebtedness of foreign Or domestlc corpoi%tlons not 

comti6ting with each Other In the 8(u~e linnf busitiesis’; prollded the @wetis and hu?horltg’ herein conme&~ shall in no way effisct any provision of the 

antl-trust laws of this State.” 

Sub-division 108, Article 1302, quoted above, contains 

similar restrictive provisions or words of limitation. 
Hon. Zollle Steekley, page 11 (WV-440) 

Aswas stated in enswer to your first question, the 

Legislature of Texas over a period of many gears prior to the 

enactment of the Business Corporation Act has used words of 

limitation or restrlctlve~provlslons In connection with the 

statutory enactments of lawful purposes for which e corporation 

could be formed under the laws of Texas. Manifestly, by provldlng such restrictive provlslons or words of limitation It was 

the ‘leglslatlve Intent to limit the’ purposes for vhLch’e corporatlon might legally do business wlttiln this State so that 

lt.,could not transact’ builnebs which was properly being transac’ted by other corporations which were uiider.‘.strlct regulatory 

end ~aupervlsory Ilmltetlona imposed by law, end which were adminlatered by State- offlcers or agencies. Typical examples of 

such words of limltatlon or restriction were applicable to cbr- 

,poratlons formed for eny of,the purposes contained in sub-dlvislons 48; 49, end 50, Article 1302, V.C.S., Article 1303(b), 

V.C.S;, end under the present Busln6ss Corporetlon Act Article 

15138, V.C.S., all of which car oretlons..ware end ares 

P 

I Art. 

9.15B, Bualness Corporation Act sub’ject to the limitations end 

restrictions imposed by Article 15,2&r; V;C.S., under the supervision of the State Banking Commlsslonerp Formerly all title 

insurance companies incorporated under former Article 13028, 

V.C.S., now Chapter’ 9, Texas Inarence Code, were Incorporated by 

the Secretary of State, but were under the supervision of the 

Board of Insurance Commlssloners. Banks end trust companies 

which were created under the provisions of’ the Texas Benking Code 

of 1943 are under the supervision of the Banking Commissioner of 

Texas a Hence, any purposes contained In the general corporation 

laws which contain words of limitation or restrictive-provisions 

such as, “without banking and discounting prlvlleges”, although 

permitting the corporation to perform certain business transactions 

which were common to banks end trust oompenles, nevertheIes,s did 

not permit such corporations to engage in eny phase of banking OP 

discounting features which forms en integral part. of the banking 

business, thereby carrying on a banklng business without any 

supervlslon. 

Thls office has held (Attorney Cenerel’s Oplnian No. 

WW-77, dated April 1, 1957), that the statutory &zrpose clauses 

authorized under the provisions of Article ljO2’end sub-divisions 

therebf, Article 1303b 

Corporation Act were lawful purposes~ Andy still remain lawful~ purhoses for which a corporation may be organized under the Act, 

vith certeln exceptions noted therein, 

In enacting the Business Corporatlon Act the Legislature 

manlfestlg did’ not intend to ‘remove the restrlctlve provlsrons or 

words of llmltatlon whleh qualifiedthe lawful purposes granted 
Hon. Zollle Steakley, pegs 12 (lfu-440) 

by it (Art. p.l5B), but Intended only that such purposes es 

brlglnally enacted still COIMtitUted lewful pzrpos@ under which 

8 corporation oould be ahertetied for one or more lawful purposes 

which, under the prior law, wee prohibited. 

It is our opinion that you world not be euthorleed to. 

grant e charter or amendment thereto to~‘~e domestic cOrporetlon, 

or an eppllcetion for 8 certlflcete oft euthority tb e Torelgn 

cbrpotietlon which cohtelned purposs clause& aubstentially the 

same es sub-divisions 48, 49, end 50; ArtlOle 1302; or Article’ 

1303b, or any other simller purpos&‘cleusea which were eutholiized 

izs lawful-purposes prior to the enactment of the Bublness Corpeetlon Act, unless such pui?pose clauses contelned’ quaXlfying proVisions or words of llmltetlon which were originally e part 

thereof. 

Your third question Is es follovs: 

“Should the Secreterj of State accept and 

file Artlcleb of Incorporetlon Including dlscounting or redlsaountlng purposes if words of 

llmltetlon l re added, to-wit: 

or dlacountlng privilegea? I ” 

‘wlthaut benklng 

This quest(ion~~has been discussed end apawered in the 

answers to your first and second queitlons. 

Your fourth question is es followsr 

“Should the Secretary of State ecc&pt end 

file Article& of Incorporation which include 

surety or. guerenty purporer If words oi’llmltation are added thereto, to-wit: ‘lnbofer es may 

be’~permltted by law end nothlng cbnt8lnbd herein 

shell be construed to grant this corporation lnsurence powers?’ ’ 

Since we have held In emwer to yoim first queatlon thiit 

a purpose to dc a surety or guaranty business would constitute a 

purpbse tb don en lnsu+nc& business, yo!~ would“not be atithorlesd 

to grant e charter or at~emendiUnt ‘theMto bra 6i ‘certificate 6f 

auth6rlty for e foreign aorpotietion tb do buslne’ss In Teties-ilnder 

the pri%lsl~ns of the Bublnebs Corporation Act, end therefore it 

is lmmaterlel whether the qualifying or restrictive phrase should 

be added to such purpose. 

Your fifth question 1s es follows: 

“Should the Seoretery of State eccept and , 

file Articlea of Incorporation in which the 
Hon. Zollie Steakley, page 13 (Wu-440) 

corporate name includes one of the words, ‘&iscount ’ , !~redlscount I, ‘guerenty’ , or ‘surety’?” 

Article 2.05A62) of the Business Corporation Act refers 

to the “Corporete Name es follows: 

“It shell not contain any word or phrase 

which lndlcetes or implies that It Is organized 

for any purpose other then the one or more of 

the purposes contained in its articles of lncorporation. ” 

Since we have held that you are Ytthbut authority to 

grant e cherter or en amendment thereto, or a certificate off 

authority to’ a foreign corporation to-do a discounting, redlsbountlng, guaranty or surety business, the use of such words lh 

the corporat6 name would be in violetion of Section 2.05A(2) of 

the Business Corporation Act. 

The Secretary of State is without authority. 

to issue e charter or grant a certificate of authority to a foreign corporation for the purpose 

of doing business es e fidelity, surety, or guer-- 

anty business, which is the business of lnsurence, 

or for the purpose of doing a beriklng business. 

Words of llmltetl~n or restrlctlve provlslons 

contained In lawful stetutory purpose cleuaes of 

private corporations for profit in effect prior to 

the enectment of the Business Corporation Act ere 

&till in full foroe end effect as to any lawful 

Furpose for which e corporation mey-be formed under the provisions of Article 2.OlA, Business 

Corporation Act. 

A corporetlon mey not use In Its corporete 

tieme ,eny word or phrehe which is not descriptive 

of one of the purposes for which the corporation 

is formed. 

CKR:wb :wc Very truly yours, 

APPROVED : WILL WILSON 

Opinion Committee Attorney General of Texas 

Geo. P. B>ackburn, Chekrmen 

Mary K. Well By s/C.K. Rlcherbs 

Milton Richardson C .K. Rlcherds 

Fred Werkenthln Assistant 

Reviewed for the Attorney General 

By: W. V. Geppert