### FITHEA~TORNEY GENERAL OF YXCXAS
Gerald C

. Mann

June 12, 

### 1939

Hon. TomL. Beauchamp Opinion No. O-911 Secretary of State Re: Authorization of the Secretary Austin, Texas of State to allow a foreign corporation to file a certificate of amendAttention of Mr. Claude ment changing the purpose clause in A. Williams the com?any’s permit to do business in Texas. Dear Sir: 1Jeacknowledge receipt of your request for anopinion on the following three questions:

“3. Is this department authorized to allow a foreign corporation to change its purpose clause?

“2. If this department is authorized to allow a foreign corporatfon to change its purpose clause, what filing fee should this department charge? 

### "3. Is the instrument hereto attached sufficient to effectuate such a change in aforeign corporation’s purpose clause under its permit?” Thefirst paragraph of your letter states that you enclose the certificate of amendmentof “General Syndicate, Inc.“, aforeign corporation, andthat it is in reality anapplication for a change of purpose insofar as the company’s permit to do business in Texas is concerned. Youalso state, andit is on that basis that this opinion is written, that the corporation is authorized under its Delaware charter to conduct such business, but that it has heretofore applied for and secured apermit to do business under a different purpose clause. Weassumethat all of the necessary prerequisites and conditions were metby General Syndicate, Inc. before it obtained its present permit to dobusiness in Texas. :+

Theissuance of permits to foreign corporations is goVerned by Article 1529 Revised Civil Statutes of Texas. Article 1532 provides that after obtaining such permit, foreign corporations shall have and enjoy all the rights and privileges conferred by the laws of this state on domestic corporations.

Because the situation here presented seems to be one of first impression we consider it necessary, as abasis for theHon. TomL. Beauchamp,June 12, 1939s Page 2 (O-911)

opinion to be rendered bythis department, to discuss rather fully the statutes anddecisions covering the rights of aforeign c’orpor&tion to dobusiness under its permit, and amendmentsto charters of corporations generally.

ilrtlcle 1314 of the Revised Civil Statutes relates to the amendmentof charters by private corporations andprovides amongother things that “no amendments or change violative of the constitution or law of this state or any provision of this title or which so changes the original purpose of such corporation as to prevent the execution thereof shall be of anyforce or effect.” Bythe enactment of thi’s provision, the Legislature has expressly prohibited a private corporation organized under the laws of the state of Texas from amendingits charter so as to change the purpose clause under which the corporation was organized. It has long been settled in this and other statesthat an amendmentto a corporation’s charter mustn?.otamountto an entire change of the objects of the corporation. In I Thompsonon Corporations, paragraph 316, the following language appears:

II OO..The charter i.s the constitution of a corporation. It is an instrument emanating from the sovereign power in the nature of authority or a grant to certain namedpersons to act as a body corporate and empowering themto exercise corporate functions for certain specified purposes.1t Again, at paragraph 397 of the samevolume, in referring to amendmentsmadeby newcharters the following language appears:

“Tobe sure such substituted charter must be germane, necessary to the objects and purposes for which the corporation was organized, andmustnot violate any of ;he prfncip&s governing the doctrine of amendment. 00. Citing Snooks vse Georgia Implement Company, 9 SE1104. Generally speakingsalterations in corporate charters which affect amaterial change in the nature andpurpose of the corporate venture for the prosecution or conduction of which it was created are considered fundamental andmaterial amendments andare not allowed. Perkins vs. Coffin, 84 Corm. 275, 79 Atl. 1070, I Thompsonon Corporations, para- 400. Further citations andauthorities in this connection include the.following:

State vs. Taylor, 44 NE513; Youngblood VS. Georgia Implement Co., 10 SE1104; Mercantile Statement Companyvs. Kneal, 53 NW632; I Thompsonon Corporations, Para 326, 332, 396.Hon. TomL. Beauchamp, June 12, 1939, Page 3 (O-911)

Article 1529 of the Revised Civil Statutes provides for the issuance of apermit to aforeign corporation for the purpose of doing business in the state of Texas andthe last sentence of such article reads as follows:.

“If such corporation is created’for more than one purpose the permit maybe limited to one or more purposes eI Article 15'37 of the Revised Civil Statutes provides that each foreign corporation shall immediately file with the Secretary of State a certified copy of anyamendmentor supplementto its original articles of Incorporation.

The following quotations are from Vol. 8 of Thompson onCorporations and are found in the paragraphs indicated:

IIts powers (speaking of a foreign corporation) in another state will be measured by its charter and it will not be allowed to exercise therein anypowers not conferred upon it, either expressly or implledly, by its charter or the laws of the state of its lncorporation.t’ (paraD6582)

“The principal of comity permits a foreign corporation to exercise only those powers with- the state &&h adomestic cornoration of the samem is aermitted to exer s der the constitution. th 1 s: andthe nolicv%%% state and such a corporzt% maynot exercise powers andprivileges which are denied to domestic corporations of like character. It is an expression of p.rincipal that a foreign coroora- &ion will not be allowed to t wet &&.ness within r the state onmore favorable conditions than orescribed bv law for domestic c rooratiory. though it is given the authority to do s&h acts by the laws of the state of its incorporation.l~ (para. 6583) (emphasis ours)

“A state is not required to recognize as valid a corporation formed by its owncitizens in another state to evade its ownlaws or the laws of other states.” :P68a’~d6~~~krc~tais~~)Carroll vs. East St. Louis, 57Ill.

. In Vol. 8of Thompsonon Corporations at page 830, para. 6607, the case of St. Louis Metal &Construction Companyvs. Beilharz, 88 SW512, as cited in support of the principal of law therein announced. In that case the Texas Court of Civil Appeals stated that achange in the nameof aforeign corporation after it hasHon. TomL. Beauchamp, June 12, 1939, Page 4 (o-911)

obtained apermit to dobusiness in Texas would not sffect the validity of the permit granted or the right of the corporation to dobusiness in the state of Texas so lo -as nsmedid not involve a change in corporate charter or in the character of the business of the cornoration or the management thereof. In this connection it has long been settled that the business of a corporation is confined to the objects for which it was chartered and the same r-zle applies to foreign corporations permitted to dobusiness in the state of Texas. a state mayexclude altogether foreign corporations, except in the case of corporations engaged in interstate commerce, or if it admits foreign corporations to do business within the state it mayimpose whatever conditions it sees fit, Aforeign corporation has no existence beyond the bounds of the state creating it andit exercises no functions outside of that state except uyconsent of the jurisdiction in which it seeks to dobusine,ss.

In the case of Western Public Service Companyvs. Meharg, Secretary of State, 286 SW141, the Commission of Appeals of Texas, in construing Article 1.529, said:

“In view of the comprehensive nature of the first declarations expressed in Article 1529, it appears to us that the conclitding sentence is permissive in favor of the corporation go lo&a as the puraoses nw its charter donot i&4& or which franchises are not Era&able to domeporaorations anddoes not j&lude a cglpBlDation of P not ‘Demitted to domestic co oorati u uruos So lonisas the Charter purposes are within t&s* legitimate range, the farefgn corporation is entitled to get that for which it asks. If in such a case the corporation desires to restrict its business in Texas to less than all of its charter purposes, it must declare the 13mitatlon, else the Secretary of State 8

shall i.ssuen a permit in harmonywith the objects namedin the charter and evidenced by the certified copy thereof. Such, wethink is the meaning of Article 1529 as also, of Artfcle 1532, wherein it is said thai ssuch corporations. 0 D 0 shall have and enjoy all the ri’hts andprivileges conferred by the

,! laws of this sta ‘eDondomestic corporations. And since Article 1302, R.SO 1925, subd. 88, contains authority for a domestic corporation to have ‘two or more’ of such purposes as are namedin relator’s application, it resu.1t.s that the Secretary of State misinterpreted the law in respect to issuance of permits for more than one purpose.” (emphasis ours)Hon. Tom. D. Beauchamp, Junel2, 1939, Page 5 (O-911)

In the case which confronts you at this time, there has been no attempt by the corporation-to amendits Deiaware charter, nor has there been any attempt by the corporation to apply for apermit to do business in Texas for two purposes which are inconsistent under the laws of this state. The corporation having secured apermit to dobusiness in Texas for one purpose as expressed in 4rticle 1302, nowdesires to amend its permit by substituting another purpose for the original purpose under which the permit was issued. Underthe laws of Delaware the corporation is permitted to include more than one purpose in its charter but whenit applied for a permit to do business in Texas, the &ecretary of State very properly limited the issuance of the permit to one purpose. Toallow a foreign corporation which has thus secured a permit to dobusiness in Texas for a specific purpose to later amendthe purpose expressed in the permit and conduct an entirely different type of businesseven though such business is onewhich acorporation is authorized to conduct in the state of Texas, would be virtually annulling the effect of the regulation accomplished by the issuance of permits to foreign corporations. To so hold would open the ,fiela for Texas residents to form foreign corporations under the laws of other states, authorized by their charter’ to do business for numerous purposes, andto change the purpose clause in their permit to do business in Texas as manytimes as they might desire. Nopersons dealing with such a corporation in Texas ~wouldever knowhowlong they would conduct the business for which they were issued a permit. The situation is somewhatanalagous, though it is not parallel, to the case of a domestic corporation amending its charter so as to change the purpose clause for which it was incorporated. It is awell-settled rule that the charter of a corporation is its constitution andit constitutes a contract between the corporation andits stockholders, between the corporation andthe state, between the state andthe stockholders, between the stockholders themselves and between the state andthird persons dealing with the corporations onthe faith of the granted power. It is equally true that the grant of a permit to do business in Texas with aforeign corporation is in the nature of a contract * The corporation contracts with the state of Texas not to exceed the powers in the permit andof a necessity collateral contracts arise as above mentioned,

Insofar as the state of Texas and its citizens are concerned, the permit of a foreign corporation occupies substantially the sameposition as the charter of a domestic corporation. The laws donot permit a domestic corporation to amendits charter to the extent of substituting anewpurpose olause andthereby forming anewcorporation. Tohold that a foreign corporation may change the purpose clause in its permit would be to grant to such corporation far greater powers than those permitted a corporation organized under the laws of Texas.-. c

Hon. TomL. Beauchamp, June 12, 1939, Page 6 (O-911)

In answer to your first question, it is the opinion of this department that a foreign corporation which has apermit to dobusiness in Texas for a purpose permitted under the laws of the state of Texas is thereafter limited to the business therein specified, andit cannot amendthe permit so issued so as to change the purpose for which it was originally granted. Obviously, it is not necessary to consider your second anathird questions. Yours very truly 4TTORNEY

GENERAL

OFTEXAS By/s/ Ross Carlton Ross Carlton, Assistant

. APPROVErI: /s'/ Gerald C. Mann ATTORNEY

GENERAL

OFTEXKS APPROVED:

OPIN;~NU~O$MITTEE BY: RC:AW:wb