April 21, 1960

Hon. Zollie Steakley Secretary of State Hon. Robert S. Calvert Comptroller of Public Accounts Capitol Station Austin, Texas

OpinionNo. W-826

Rer The joint responsibility of the. Secretary of State and the Comptroller of PublicAccounts
on the administrativeprocedure of forfeiting
a corporation’sright to do business.

Dears,*.K

Steakley and Kr

. Calvert:

You have requested that in the light ofAttorney General’s OpinionNo. W-806 you be advised concerning the following:

“The joint or separateresponsibility,duty
< ‘ :: and authority of the Secretary of State and the Comptroller of PublicAccounts to take thenecessary administrativeaction and to establish the administrativeprocedure for:

“1. The forfeiture of the right to do business of a corporationwhich is delinquent in the filing of its franchise tax report and the payment of franchise taxes.
“2., The forfeiture .without.judiclal:ascertainment of the charter of a corporationwhose right to do business has beenpreviously forfeited,.and which has falled and refused. to have~!itsright to do business revived prior to the first day of January next~succeedingthe date’of forfeiture of its right to do business.’

Attorney General’s OpinionNo., W-806 towhich you refer in your request isin part as follows:

“It is the opinion of this office that the powers and duties transferred to the Comptrollerby thisHon. Zollie Steakley

Eon. Robert S. Calvert,page 2 (NW-820)

Act were limited to those incident to the collection of the franchise tax and that itwas not the intent of the legislature to take away from the Secretary of State the authority and duty to administrativelyforfeit a corporation'sright to do business. Therefore, the Secretary of State has the authority to administer the procedure for the forfeiture of the right to do business of a corporationwhich is delinquent in the filing of its franchise tax report and is delinquent in the payment of franchise taxes."

We will first consider 'ch;: necessary administrativeaction and procedure in connectionWith the forfeiture of the right to do business of a corporationwhich is delinquent in the filing of its franchise report or the payment of franchise taxes. The applicable sLatutoryprovision relating to the forfeiture of the right to do business is Article 12.14 of Chapter 12, Title LXX, Revised Civil Statutes of Texas,which is in part as follows:

"Any corporation, either domestic or foreign which shall fail to pay any franchise tax provided for in this Chapterwhen the same shall become due and payable under the provisions of this Chapter, shall thereuponbecome liable to a penalty of ten per cent (10%)of the amount of such franchise tax due by such corporation. If the reports required by Articles 12.08 and 12.09 be not filed in accordance with the provisions of this Chapter, or if the amount of such tax and penaltiesbe not paid in full
on or before the thirtiethday after notice of delinquency is mailed to such corporation, such corporation shall for such default forfeit its right to do business in this State;which forfeiture shallbe consummatedwithout judicialascertainmentby the Secretary of State entering upon the margin of the record kept in his office relating to such corporation thewords, 'rightto do business forfeited' and the date of such forfeiture.tl

The charters of all corparationsrequired to pay franchise taxes under the provisions of Chapter 12, Title 122A, are filed in the office of the Secretary of State in accordancewith the applicable statutoryprovisions. Xe are informed tncztthe Secretary of State also keeps a permanent card index record of all such corporationsupon which all status changes concerning each individual corucrationhave been noted heretofore. The records reflecting the filing of franchise tax reports and paymentHon. Zollie Steakley

Hon. Robert S. Calvert, page 3 (W-826)

of franchise taxeswhich heretoforewere kept in the office of the Secretary of Statehave been transferred to the office of the State Comptroller of PublicAccounts under the provisions ofArticle 12.22.

Since this officehas held in Attorney General's Opinion No. W-806 that the Secretary of State alone has the authority to forfeit the right to do business of a corporationunder the provisions of Article 12.14, it is clear that the State Comptroller of PublicAccounts iswithout such authority. However, such forfeiture can only result from the failure of the corporation to file the required franchise tax reports or pay the franchise taxeswhen the same become due and payable,which reportsmust be filedwith and taxes paid to the Comptroller of PublicAccounts in whose office the records reflecting the filing of the reports and payment of taxes are kept, and which are not available in the office of the Secretary of State.

Article 12.15 provides for the administrativeprocedure in the office of the Secretary of State governing the forfeiture by a corporation of its right to do business in this State. By substituting thewords Tomptroller of PublicAccounts" for the words "Secretaryof StateI1in thoseparts of Article 12.15which pertain to the administrativepowers and duties incident to the collectionand administration of the franchise tax, Article 12.15 would read as follows:

The Comptroller of PublicAccounts shall notify each domestic and foreign corporation which may be or become subject to a franchise tax under the laws of this State,which has failed to file such report or pay franchise tax
on or before the first day of May, that unless such overdue report is filed or such overdue tax togetherwith said penalties thereon shall be paid within thirty (30)days of the mailing of such notice, the right of such corporation to do business in this State will be forfeitedwithout judicial ascertainment, Such notice may be either written or printed and shallbe verified by the seal of the office of the Comptroller of Public Accounts, and shall be addressed to such corporation and mailed to the post officenamed in its articles of incorporationas its principalplace of business, or to any otherknown place of business of such corporation. A record of the date of mailing suchnotice shallbe kept in the office of the Comptroller of PublicAccounts, and such notice and record thereof shall constitute,-

Hon. Zollie Steakley Hon. Robert 6. Calvert,page 4 (W-826)

legal and sufficientnotice thereof for all purposes of this Chapter.

. . .”

Upon a determinationby the Comptroller of PublicAccounts from his records that the reports requiredby Articles 12.08 and 12.09 were not filed as required by law, or that the franchise tax due by a corporation, togetherwith the penalties, has not been paidwithin the time prescribed, the Comptroller of PublicAccounts should certify such facts to the Secretary of State advisinghim that the corporation,by its failure to file the reports or pay the delinquent taxes is subject to forfeiture of Its right to do business in this State under the provisions of Article 12.14. Upon receipt of such certificationthe Secretary of State shouldenter upon themargin of the record kept in his office relating to the corporation thewords “right to do business forfeited,” and the date of such forfel ure. .i The Secretary of Statemay choosewhether to make such endorsementupon the folder containing the charter of the corporationor on the permanent card index relating to the corporation since both are permanent records in his office. The Secretary of State should advise the Comptroller of PublicAccounts as to the date upon which the entry was made upon the record.

Article 12.15 then providesas follows:

II Any corporationwhose right to do busineis’miyhave been forfeited as provided in this Chapter, shall be relieved from such forfeiture by paying to the Comptrollerof PublicAccounts at any time prior to the forfeiture of the charter or permit of such corporationas hereinafter provided, the full amount of the franchise taxes and penalties due by it, togetherwith an additional amount of five per cent (5%)of such taxes for each month, or fractionalpart of a month, which shall elapse after such forfeiture
as a revival fee; provided, that such amount shall in no case be less than Five Dollars ($5).

. . .‘I

When the taxes and penalties and revival fee have been paid to the Comptroller of PublicAccounts, he should certify such fact to the Secretary of Statewho thereupon shall revive the right of the corporation to do businesswithin this State by cancelling thewords “right to do business forfeited” uponhis record and endorsing thereon theword ffrevived,ff and the date of such revival. The Secretary of State should then advise the Comptroller of PublicAccounts as to the date of such entry uponhis records.
Article 12.15 further provides:Hon. Zollie Steakley

Hon. Robert S. Calvert,page 5 OdtJ-826)

“.

. . If any domestic corporation or foreign corporation,whose right to do businesswithin this State shallhereafter be forfeited under the provisions of this Chapter, shall fail to pay the Comptroller of Public Accountswithin one hundred and twenty (120)days after such forfeiture, the amount necessary to entitle it to have its rights to do business revived under the provisions of this Chapter, such failure shall constitute sufficientground for the forfeiture,by judgment of any court of competent jurisdiction,of the charter of such domestic corporation, or of the permit of such foreign corporation. It shall be the duty of the Comptrollerof Public Accounts, after such onehundred and twenty (120)days next following such forfeiture, to certify to theAttorney General the names of all corporations, domestic and foreign, whose right to do businesswithin this State shall have been forfeited as hereinbefore provided,and upon receiving such certificate the Attorney General shall forthwith institute suit against such corporationsunder the provisions of Article 12.16 of this Chapter."

Under the foregoing part of Article 12.15 it would be the duty of the Comptroller of PublicAccounts to supply to the Attorney General the factual situation concerning the failure to pay the amounts necessary to entitle the corporation tohave its right to do business revived, therebyauthorizing the Attorney General to institute suit against the corporationunder the provisions ofArticle 12.16.

Your second request concerns the responsibility,duty, and authority of the Secretary of State and the Comptrollerof PublicAccounts to take the necessary administrativeaction and to establish the administrativeprocedure for the forfeiture of the charter of a corporationwhose right to do businesshas been previously forfeited and which has failed and refused to have its right to do business revived prior to the first day of Januarynext succeeding the date of forfeiture of its right to do business. You then request advice as to whether the Secretary of State has the sole responsibility,duty, and authority to forfeit the charter of
a corporationwithout judicial ascertainmentand what information should be furnished or certified to the Secretary of State by the Comptroller or theAttorney General in order that the corporate chartermay be forfeitedwithout judicialascertainment.

The applicable provisions of Article 12.07 which authorize the forfeiture of the charter of a corporationwithout judicial ascertainmentare as follows:Ron. Zollie Steakley

Hon. Robert S. Calvert,page 6 (WW-826)

'TIpon determinationby the Secretary of State that any domestic corporationwhose right to do businesshas been previously forfeited by that officer,and which corporationhas failed and refused tohave its right to do business revived pursuant to the provisions of this Chapter, and which corporationfails to revive its right to do business prior to the first day of January next succeeding the date of forfeiture of its right to do business, and which corporationhas
no assets from which a judgmentfor the franchise tax, penalties, and court costsmay be satisfied, and approval of such determinationby theAttorney General, the charter of any such corporation may be forfeited,which forfeiture shallbe consummatedwithout judicialascertainmentby the Secretary of State entering upon the charter of such corporationfiled in his office, thewords, 'Charterforfeited,' giving the date thereof and citing this Act as authority therefor."
Only the Secretary of State is chargedwith the responsibility,duty, and authority to forfeit the charter of a corporationwithout judicialascertainment for the reasons given in Attorney General's OpinionNo. W-406, and in answer to your first question, sunra.

However, since all of the records reflecting the failure
or refusal of a corporationwhich had its right to do business previously forfeited to revive its right to do business prior to the first day of January next succeeding the date of such forfeiture are in the possessionand under the control of the Comptroller of PublicAccounts and are not reflected by the records in the office of the Secretary of State, it is the duty and responsibility of the Comptroller of PublicAccounts to certify such information to the Secretary of State, togetherwith a determination that the corporationhas no assets fromwhich a judgmentfor the franchise tax, penalties and court costs may be satisfied,after apprwal of such determina

i. Ion by the Attorney General, for forfeiture of the charter of the corporationby the Secretary of State in the manner provided inArticle 12.17. The action of the Secretary of State in thus forfeiting the charter of the corporation &thout judicial ascertainmentwould be purelyministerial and based upon the certification by the Comptroller of PublicAccounts of the necessary factual requisites set forth in Article 12.07.

The Comptrollerof PublicAccounts has the duty and responsibility ofmaking the determination that the corporationhas
no assets from which a judgmentfor the franchise tax, penalties,Hon. Zollie Steakley

Hon. Robert S. Calvert, page 7 (Ww-826)

and court costs may be satisfied, since the corporation'sfranchise tax report is in the possession of the Comptroller of PublicAccounts and, in addition,he has the authority to examine the books and records of the corporationunder the provisions of Article 1.04, Chapter 1, Title 112A, R.C.3.

SUMMARY

The responsibility,duty, and authority of the Secretary of State and the Comptroller of Public Accounts to take administrativeaction and establish administrativeprocedure for the forfeiture of the right of a corporation to do business in the State of Texas under the provisions ofArticle 12.14, Title 122A, R.C.S., and for the forfeiturewithout judicial ascertainment of a charter of a corporationunder the provisions ofArticle 12.17, Title 122A, R.C.S.

CKRrwb

APPROVED:

OPINIONCOMMITTEE Very trulyyours,

WILL WILSON Attorney General of Texas

M. V. Geppert, Chairman RichardWells Leon F. Pesek Marvin Brown RFXIEMED FOR THE ATTORNEY GENERAL

BY: Leonard Passmore C. K. Richards Assistant