Hon. Coke Stevenson,Jr. Opinion No. c-312

Administrator,

Texas Liquor ControlBoard Re: Requisitesconcerning State Office Building issuanceof liquor permits Austin, Texaa to corporations.
Bear Your Mr. Stevenson: request for an opinion reads as follows:

"Is a corporationqualified to receive a permit or license from the Texas Liquor Control Board If less than 51% of its authorizedcapital stock but 5156

or more of Its Issued capital stock Is owned by persons who have been United States citizensand residentsof Texas for a period of three years and possess the qualifications required of,other applicantsfor permits and licenses?" You state that this questionhas arisen in connection with the following statutes: Article 666-18,Vernon's Penal Code, provides as follows:

It s * e No permit shall be issued to a corporation unless the same be incorporated under the laws of the,Stateand unless at least fifty-one (512)percent of the stock of the corporationIs owned at all times by citizenswho have resided within the State for a period of three years and who possess the,qualiflcatlons required of other applicantsfor permits;

. . en Article 667-5, 2, (h),Vernon's Penal Code provides as follows: The County Judge shall refuse to approve the applicationfor such license if he has reasonablegrounds to believe and finds any of the followingto be true:

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"2. If a Distributoror retailer: ihj *. that at least fifty-onepercent (512) of the-stockof such corporationIs not owned 'at all times by citizenswho have resided within this State for a period of three (3)'yearsand who possess the qualifications required of other applicants for licenses;

. , ." The sole question then, is to determinewhether "stock",as used in the above statutes,refers to "authorized"stock or "Issued" stock. Thompson on Corporations,8 3406 quotes and states:

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. . e Stock can be created only by contract, whether It be in the simple form of a subscription or in any other mode. There must be an agreement to take the stock, and nothing short of this can create It. This Imparts to the stock the quality of propertywhich before it did not assess. Stur es v. Stetson, 1 Bias. (U.S.) 296, 23 Bed.Cas: 135 68. This principle is further illustratedin a case where it appeared that the statuteused the expression, 'thewhole capital stock,'and It was held that in the connectionin which the words were used It meant the capital stock actually subscribed for and issued, and not the amount named in the articles of association."
In a New York Supreme Court case, a by-law of a corporation, requiringdirectorsto call a specialmeeting of stockholders whenever so requested In writingby stockholders representing not less than 51 percent of capital stock" of the corporation was held to mean 51 percent of the stock issued and outstanding In hands of stockholders rather than 51 percent of the stock authorizedIn the certificateof. the corporation though not issued. N.Y.S.2d 162 (1947). Weisblum v. Li Falco Mfg. Co., Inc., 84

When the two statutes in questionwere passed in 1935 and 1953 respectively,the Issuanceof stockby a corporation was controlled

by Article 1308, Vernon's Civil Statutes, since repealed. That law made it mandatory that a prospectivecorporation have all of its par-value stock in good faith subscribed, and 50% thereofpaid in. With the enactmentof the Texas DusiCorporationAct in 1955, however, the Legislaturerequired that a corporation

need only have issued and paid In $l,OOO.OOin stock or 10s of its total capitalization, whichever Is greater. Article 3.05, T.B.C.A.,V.C.S.

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Hon. Coke Stevenson,Jr., Page 3 (C-312)

In light of this, we feel that the aforementioned 51% statutory requirementrefers only to stock already issued, and not to the entire authorized stock. To hold otherwisewould be to require that at least 5146

of a corporation's authorized stockbe Issued. This would be an unreasonable burden and contrary to the spirit, letter, and intent of the Texas Business CorporationAct.

SUNMARY A corporationis qualifiedto receive a permit OP license from the Texas Liquor Control Board If 51% of its issued capital stock Is owned by personawho have been United States citizens and residents of Texas for a period of three years and possess the qualificationsrequired of other applicantsfor permits and licenses. Respectfullysubmitted, WAGGONER CARR Attorney General of Texas

BSC/lh APPROVED: OPIRIOR coMMITTEE W. V. Ceppert, Chairman Paul Phy LOMY Zwiener Cecil Rotsch Pat Bailey APPROVEDFOR TRE ATTORNEY GEWERAL BY: Roger Tyler

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