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

Administrator, Texas Liquor 

Control Board Re: Requisites concerning 

State Office Building issuance of liquor permits 

Austin, Texaa to corporations. 

Bear 

Your 

Mr. Stevenson: 

request for an opinion reads as follows: 

"Is a corporation qualified to receive a 

permit or license from the Texas Liquor Control 

Board If less than 51% of its authorized capital 

stock but 5156 or more of Its Issued capital stock 

Is owned by persons who have been United States 

citizens and residents of Texas for a period of 

three years and possess the qualifications required 

of,other applicants for permits and licenses?" 

You state that this question has 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,State and unless at least fifty-one 

(512) percent of the stock of the corporation Is 

owned at all times by citizens who have resided 

within the State for a period of three years and 

who possess the,qualiflcatlons required of other 

applicants for permits; . . en 

Article 667-5, 2, (h), Vernon's Penal Code provides as follows: 

The County Judge shall refuse to approve the application for such license if he has 

reasonable grounds to believe and finds any of the 

following to be true: 

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Hon. Coke Stevenson, Jr., Page 2 (C-312) 

"2. If a Distributor or retailer: 

ihj *. that at least fifty-one percent 

(512) of the-stock of such corporation Is not owned 

'at all times by citizens who have resided within 

this State for a period of three (3)'years and who 

possess the qualifications required of other applicants for licenses; . , ." 

The sole question then, is to determine whether "stock", as 

used in the above statutes, refers to "authorized" stock or 

"Issued" stock. 

Thompson on Corporations, 8 3406 quotes and states: 

11 1 

. . 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 property which before it did not assess. 

Stur es v. Stetson, 1 Bias. (U.S.) 296, 23 Bed.Cas: 

135 68. This principle is further illustrated in a 

case where it appeared that the statute used the 

expression, 'the whole capital stock,' and It was 

held that in the connection in 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, 

requiring directors to call a special meeting of stockholders 

whenever so requested In writing by 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 authorized In the certificate of. the corporation 

though not issued. 

N.Y.S.2d 162 (1947). 

Weisblum v. Li Falco Mfg. Co., Inc., 84 

When the two statutes in question were passed in 1935 and 

1953 respectively, the Issuance of stock by a corporation was 

controlled by Article 1308, Vernon's Civil Statutes, since repealed. That law made it mandatory that a prospective corporation have all of its par-value stock in good faith subscribed, 

and 50% thereof paid in. With the enactment of the Texas DusiCorporation Act in 1955, however, the Legislature required that 

a corporation need only have issued and paid In $l,OOO.OO in 

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 

requirement refers only to stock already issued, and not to the 

entire authorized stock. To hold otherwise would be to require 

that at least 5146 of a corporation's authorized stock be Issued. 

This would be an unreasonable burden and contrary to the spirit, 

letter, and intent of the Texas Business Corporation Act. 

SUNMARY 

A corporation is qualified to receive a 

permit OP license from the Texas Liquor Control 

Board If 51% of its issued capital stock Is 

owned by persona who have been United States 

citizens and residents of Texas for a period of 

three years and possess the qualifications required of other applicants for permits and licenses. 

Respectfully submitted, 

WAGGONER CARR 

Attorney General of Texas 

BSC/lh 

APPROVED: 

OPIRIOR coMMITTEE 

W. V. Ceppert, Chairman 

Paul Phy 

LOMY Zwiener 

Cecil Rotsch 

Pat Bailey 

APPROVED FOR TRE ATTORNEY GEWERAL 

BY: Roger Tyler 

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