FITHEA~TORNEY GENERAL 

OF YXCXAS 

Gerald C . Mann 

June 12, 1939 

Hon. Tom L. 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: 

1Je acknowledge receipt of your request for an opinion 

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 a foreign corporation’s purpose clause under its permit?” 

The first paragraph of your letter states that you enclose the certificate of amendment of “General Syndicate, Inc.“, 

a foreign corporation, and that it is in reality an application 

for a change of purpose insofar as the company’s permit to do 

business in Texas is concerned. You also state, and it 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 a permit to do 

business under a different purpose clause. We assume that all of 

the necessary prerequisites and conditions were met by General 

Syndicate, Inc. before it obtained its present permit to do business in Texas. :+ 

The issuance 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 a basis for the 
Hon. Tom L. Beauchamp, June 12, 1939s Page 2 (O-911) 

opinion to be rendered by this department, to discuss rather 

fully the statutes and decisions covering the rights of a foreign 

c’orpor&tion to do business under its permit, and amendments to 

charters of corporations generally. 

ilrtlcle 1314 of the Revised Civil Statutes relates to 

the amendment of charters by private corporations and provides 

among other 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 any force or effect.” 

By the enactment of thi’s provision, the Legislature has expressly 

prohibited a private corporation organized under the laws of the 

state of Texas from amending its 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 amendment to a 

corporation’s charter must n?.ot amount to an entire change of the 

objects of the corporation. In I Thompson on 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 

named persons to act as a body corporate and empowering 

them to exercise corporate functions for certain specified purposes.1t 

Again, at paragraph 397 of the same volume, in referring to amendments made by new charters the following language 

appears: 

“To be sure such substituted charter must be germane, necessary to the objects and purposes for which 

the corporation was organized, and must not violate any 

of ;he prfncip&s governing the doctrine of amendment. 

00. Citing Snooks vse Georgia Implement Company, 9 

SE 1104. 

Generally speaking s alterations in corporate charters 

which affect a material change in the nature and purpose of the 

corporate venture for the prosecution or conduction of which it 

was created are considered fundamental and material amendments 

and are not allowed. Perkins vs. Coffin, 84 Corm. 275, 79 Atl. 

1070, I Thompson on Corporations, para- 400. Further citations 

and authorities in this connection include the .following: 

State vs. Taylor, 44 NE 513; Youngblood VS. 

Georgia Implement Co., 10 SE 1104; Mercantile 

Statement Company vs. Kneal, 53 NW 632; I Thompson on 

Corporations, Para 326, 332, 396. 
Hon. Tom L. Beauchamp, June 12, 1939, Page 3 (O-911) 

Article 1529 of the Revised Civil Statutes provides 

for the issuance of a permit to a foreign corporation for the 

purpose of doing business in the state of Texas and the last 

sentence of such article reads as follows:. 

“If such corporation is created’for more than 

one purpose the permit may be 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 any amendment or supplement to its original articles of Incorporation. 

The following quotations are from Vol. 8 of Thompson 

on Corporations 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 any powers 

not conferred upon it, either expressly or implledly, 

by its charter or the laws of the state of its lncorporation.t’ (para D 6582) 

“The principal of comity permits a foreign corporation to exercise only those powers with- the 

state &&h a domestic cornoration of the same m 

is aermitted to exer s der the constitution. th 

1 s: and the nolicv%%% state and such a corporzt% may not exercise powers and privileges 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 r wet &&.ness within 

the state on more 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 own citizens in another 

state to evade its own laws or the laws of other states.” 

:P68a’~d6~~~krc~tais~~)Carroll vs. East St. Louis, 57 Ill. 

. 

In Vol. 8 of Thompson on Corporations at page 830, para. 

6607, the case of St. Louis Metal & Construction Company vs. Beilharz, 88 SW 512, as cited in support of the principal of law therein announced. In that case the Texas Court of Civil Appeals stated 

that a change in the name of a foreign corporation after it has 
Hon. Tom L. Beauchamp, June 12, 1939, Page 4 (o-911) 

obtained a permit to do business in Texas would not sffect the 

validity of the permit granted or the right of the corporation 

to do business in the state of Texas -as so lo 

nsme did 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 do business in the state of Texas. a state 

may exclude 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 may impose whatever conditions it sees fit, A foreign corporation has 

no existence beyond the bounds of the state creating it and it 

exercises no functions outside of that state except uy consent 

of the jurisdiction in which it seeks to do busine,ss. 

In the case of Western Public Service Company vs. Meharg, Secretary of State, 286 SW 141, 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 do not i&4& 

or which franchises are not Era&able to domeporaorations and does not j&lude a cglpBlDation of 

P uruos not ‘De mitted to domestic co oorati u 

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 harmony with the objects named in the charter and evidenced by the certified copy thereof. Such, we think is the meaning 

of Article 1529 as also, of Artfcle 1532, wherein 

it is said thai s such corporations. 0 D 0 shall have and 

enjoy all the ri’hts and privileges conferred by the 

laws of this sta ,! ‘e D on domestic 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 named in 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, June l2, 1939, Page 5 (O-911) 

In the case which confronts you at this time, there 

has been no attempt by the corporation-to amend its Deiaware 

charter, nor has there been any attempt by the corporation to 

apply for a permit to do business in Texas for two purposes 

which are inconsistent under the laws of this state. The corporation having secured a permit to do business in Texas for 

one purpose as expressed in 4rticle 1302, now desires to amend 

its permit by substituting another purpose for the original purpose under which the permit was issued. Under the laws of Delaware the corporation is permitted to include more than one purpose in its charter but when it applied for a permit to do business in Texas, the &ecretary of State very properly limited the 

issuance of the permit to one purpose. To allow a foreign corporation which has thus secured a permit to do business in Texas 

for a specific purpose to later amend the purpose expressed in 

the permit and conduct an entirely different type of businesseven though such business is one which a corporation 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, and to change the purpose clause in their 

permit to do business in Texas as many times as they might desire. 

No persons dealing with such a corporation in Texas ~would ever 

know how long they would conduct the business for which they were 

issued a permit. The situation is somewhat analagous, 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 a well-settled rule that the charter of a 

corporation is its constitution and it constitutes a contract between the corporation and its stockholders, between the corporation and the state, between the state and the stockholders, between the stockholders themselves and between the state and third 

persons dealing with the corporations on the faith of the granted 

power. It is equally true that the grant of a permit to do business in Texas with a foreign corporation is in the nature of a 

contract * The corporation contracts with the state of Texas not 

to exceed the powers in the permit and of 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 same position as the charter of a domestic corporation. The 

laws do not permit a domestic corporation to amend its charter to 

the extent of substituting a new purpose olause and thereby forming a new corporation. To hold 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. Tom L. 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 a permit to do business in Texas for a purpose permitted under the 

laws of the state of Texas is thereafter limited to the business therein specified, and it cannot amend the permit so issued so as to change the purpose for which it was originally 

granted. Obviously, it is not necessary to consider your second ana third questions. 

Yours very truly 

4TTORNEY GENERAL OF TEXAS 

By /s/ Ross Carlton 

Ross Carlton, Assistant 

. 

APPROVErI: 

/s'/ Gerald C. Mann 

ATTORNEY GENERAL OFTEXKS 

APPROVED: OPIN;~NU~O$MITTEE 

BY: 

RC:AW:wb