August 19, 1957

Hon. Zol,lie Steakley Opinion No. ww-234 Secretary of State Capftol Ftati.on ‘Re: Whether a corporation o?i:;!r5z.ed Austin, Texas pursuant to Chapter :j of l,!.p Insurance Code cJntj,nues in .li:gal existence after Ihe effe,:bt.i,y:e date of S.B. lC*:-.andr&ail:-,:I Dear MrOSteakley : questl,ons.

Youhave requested the opinion of Chl,soffice ,u: the const.r;ction of Sections 2 and 7 of Senate Ri.l.1165,’ coll:f.l?,d ;a5hapte;l~~89 Vernon’s Texas Session LawService, 55th L-g., ) ‘2.

. Youhave submitted five questi.ons which relate to js!ir duties as Secretary of State in the f:ilfng of ,zmenjments to their charters by existing corporations thereunde,r. &?ts~t;,‘i on No. 1: Does a corporation organized DWsuant to Chapter 7 of the Insu~ranceCode cont!r:ii? fn 16gal existence after the effective date of Senate Bill 1651 Question No. 2: If your answer is affirmati~ve ti: the foregoing, is such a corporation required to amendits charter immediately upon th,:neffective date of Senate Bill 165, or d,osuch’corporations have the right to avail themselves of bheprovisions of the Act at any time after it?; t:ffective date?Section 1 of the Act provides:

“Chapter 7of the Insurance Code, as enacted by Chapter 491 of the Acts of the 52nd Legislature, 1951, is hereby repealed,” Section 2 of the Act provides:

“Trust companies maybe created, andany corporation, however created, mayamendits charter in compliance herewith, or a foreign corporati,on mayobtafn a certificate of authority to do business in Texas for the following purpose:Han, Zollie Steakley, page 2 (WW-23i)

“ITo act as trustee, executor, administrator, or guardian whendesignated by any person, corporation, or court to do so, andas agent for the performance of any lawful act, including the right to receive deposits madeby agencies of the United States of America for the authorized account of any individual; to act as attorney-infact for reciprocal or ,interinsurance exchange. I!@ Senate Bill 165will become effective onAugust 22, 19!V9 at which time all corporations heretofore created under the provisions of Article 7.01 of the Insurance Code or whose charters contain any of the purpose clauses therein named, will cease to be corporations de lure andmayno longer exercise the general powers conferred by their charters. Huntv, Atkinson, 196 12 S.W.2d 142, 145 (Comm.App.1929); 18 C.J.S, Par. 9pe 502;

. Senate Bill 165 contains no savings clause or

“grandfather clause” preserving the corporate existence of corporations created thereunder.

However, since the Act which repeals the purpose clause authorized byArticle 7.01 also provides that any corporation, however created, mayamendits charter so as to becomea trust companyfor the purposes set forth in Section 2 cf the Act, it wasmanifestly the legislative.intent to peamit corporations organized under the provisions of Article 7.01 of the Insurance Code to amendtheir charters in accordance with the provisions of Section 2 of the Act so as to continue their corporate existence.

Since the Legislature did not provide for a definite period of time during which corporations created under the provisions of Article 7.01 could continue their corporate existence ‘topermit their charters to be amendedunder the provisions of Section 2 of the Act, and since upon the effective date of the Act such corporations will cease to be corporations deJUE, ariycorporation desiring to amendits charter pursuant to the pravlsions of Seation 2 of the Act must submit its charter amendmentso that the Secretary of State mayfile it cont?,mporaneously with the cessation of the corporate existence, guestion No. 2: Is a corporation seeking to amend its charter In compliance with Senate Bill 165 required to first adopt the provisions of the Texas Business Corporation Act?’ guestion No. 4: If your answer to the foregoing is negative, will charter. amendments.filed .pursuant to Section 2 of Senate Bill 165 be governed by theHon. Zolli,e Steakley, page 3 (W-234)

general corporation laws or by the Texas Buslness Corporation Act? Section 7 of the Act provides in part as follows:

“The genera!. laws for incorporation and governing of corporations, and the provisions of Article 1513, Revised Civil Statutes of Texas, and the provisions of the Texas Business ;:-zpora.tPon Act shall. supplement ,theprovisions ? ‘2hi.sAct and shall a.r>i.:; to such t?1:st, c:>m.. :z::ies to the extent that they are non;;.;~nc:.:ri-
,~. tent i?c.:rewl‘1; I:rovi.ded, the ppy;j .;);;>nsof ’i.cle ?,OlA ~ermit~~tinga coryior:i:i.,,;~. 7.c,‘,,i*,~,:’ .L‘tli+i one ;~,urpo:;z:shall no!, aI>;:;,J, i I *‘I

vide:; *

.;atArticle 7.15A of the Rusiness c,orycra:i.on Act proing co,‘:! , with certain exceptions not hnre pertinent, existorations shall continue to b’egoverned by the laws heret::,l‘-sre applicable thereto.

vides Article 7.1&B of the Business Cc-~;*pora~:ion Act prohat for a period of five years aft;,?r t!:? effective da,te of th;aAct, it shall not be applicable to any domestic co,rpcra-. tion duly chartered and existing on said effect:l~~veda!e u:~:lt;.r such corporation shall, during the five-year periad, 1o:Lantar-, ily elect to adopt the provisions of the Business Cor;.orati.or; Act in the mannerprovided by Article 7.1&C. It woui~c:;hczr:~. fore appear that any existing corporation which has not adopted the provisions of the Business Cor oration Act could amendits charter as provided in Article 131c9Revised Civil Stat,utes of Texas, as amended, without the necessity of adopting the provisions of the Business Corporation Act.

However, any,corporation which was originally incorporated under the provisions of Chapter 7 of the Insurance Code could not amendunder the provisions of Article 1314 for t:rie reason that the latter article provides that any privar ?crporation organized for any purpose mentioned in Title 32 ~1 :y ;;ml~ amendor change to another purpose mentioned in Title : 1, The purpose for which a private corporation was created ur-12~~1~A:-=- title 7.01 of the Insurance Code is not contained in Title 32, nor is the purpose authorized under the provisions of Section 2 of Senate Bill 165 contained in Title 32, Hence9co ’rporations created under the provisions of Chapter 7 of the lnsurante Codemayonly amendtheir charters by first adopting the provisions of the Business Corporation Act and amending their charters in the mannerprovided in Articles 4.01 to 4.05, inciusive, subject to the limitation onArticle 2.01A provided inHon. Zollie Steakley, page 4 (WW-234)

Section 7 of the Act, which limits the corporation to one purpose* Corporations which were created under the provisions of Title 32, Revised Civil Statutes of Texas, and for the purposes namedtherein, must adopt the provisions of the Business Corporation Act since, although such corporations were organized for purposes mentioned in Title 32, nevertheless amendments so as to change the purpose of such corporations under the provisions of Article 1314 are confined to purposes mentioned in Title 32. In enacting Senate Bill 165 the Legislature did not provide for its inclusion as a part of Title 32, Re,vised Ci,vil Statutes of Texas, or as an amendmentto any article contained therein. Therefore, the purpose mentioned in Section 2 of the Act is not a purpose mentioned in Title 32.

It will be necessary for any corporation, however craated, desiring to amendits charter under the provisions of Section 2 of the Act, to first adopt the provisions of the Texas Business Corporation Act and thereafter amendits charter in the manner therein provided. Question No. 5: If you hold thatthe filing of charter amendments~

oursuant to Section 2 of Senate %.:~I. 165 is governed-by the Texas Business Corporation Act, is this office authorized to file and approve Restated Articles of Incorporation in the form prescribed by Article 4.07, or must the instruments filed pu,rsuant to Section 2 of Senate Bill 165 be in the form of an amendmentto the charter and governed by Art!cles: L.Cl4.05, inclusive7 Article 4.07A(2) of the Business Corporation Act provides that a corporation may, by following the procedure to amendthe articles of incorporation provided by Articles 4.01 to 4.05, inclusive, authorize, execute, and file restated articles of incorporation which mayrestate the entire tex,t of the articles of incorporation as amendedor supplemented t;;;all certificates of amendmentpreviously issued by the Se::r.~?-;iryof State, andas further amendedby such restated art.Xle,:_,,:~- corporation. 'Inasmuch as it is a condition precedent i,:<.::jny corporation, however created, to adopt the Business / C~yr;-ratl.Jn Act in order to amendits charter under the provisions c>YSectlon 2 ,ofthe Act, the provisions of Article 4.O7A(2) ,prvtde an spti:Jnal method of amending the charter of the co:rp:a.ration. It 1~sthe opinion of this office that the Secretary~ cf State is autho:ri,Zed to file andapprove restated articles of in:~r~oration as authorized by the provisions of Article 407Aj2) of the Business Corporation Act as an alternative to fiing tn.- c~barterHon. Zollie Steakley, page 5 (WW-234)

amendmentas provided in Articles 4.01 to 4-05 of the Business Corporation Act. SUMMARY

Acorporation created under the provisions of Article 7.01 of the Insurance Code ceases to be a corporation de lure onAugust 22, 1957, the effective date of Senate Bill 165. If such corporation desires to amendits charter under the provisions of Section 2, Senate Bill 165, it must submit its proposed charter amendmentto the Secretary of State for filing contemporaneously with the effective date of the repeal of Chapter '7of the Insurance Code.All corporations, however created, desiring to amendtheir charters under the provisions of Section 2 Senate Bill 165, must first adopt the provfsions **of!** the Business Corporation Act and thereafter file such charter amendmentunder the provisions of the Business Corporation Act.Yours very truly, WILLWILSON Attorney General of Te: cas

e I A, Rv CKR:wb APPROVED: OPINIONCOMMITTEE E. Grady Chandler, Chairman W.V, Geppert John Reeves JamesN. Ludlum -*c. K. Richards Assistant

REVIEWED

FORTHEATTORNEY

GENERAL BY: Geo. P. Blackburn