THEA~TORNEY GENERAL 

OF TEXAS 

Aus- ~.TEXAS 

W’ILL WILSON 

A’CIORNEY GENERAL 

July 11, 1960 

Hon. Zollie Steakley 

secretary of state 

Austin, Texas 

,Dear Mr. Steakley: 

Opinion No. WW -880 

Re: Authority of the Secretary of State 

to accept and file an application 

for the adoption of the provisions 

of the Texas Non-Profit Corporation 

Act by a corporation which is incorporated for the purpose of maintaining fishing and hunting clubs and 

protecting Bnd preserving fish and 

game and raising livestock for profit on the preserves of the tilub. 

You have requested an opinion of this office concerning a corporation 

which has applied to adopt the provisions of the Texas Non-Profit Corporation 

Act and which has authority in its charter to issue stock and has for its corporate purpose the purpose expressed in Subdivision 10 of Article 1302 of 

Texas Revised Civil Statutes of 1925. Your questions are: 

1. Should the Secretary of State accept and file the application 

when the applicant was organized for the purpose expressed in 

Subdivision 10 of Article 1302 ? 

2. Should the Secretary of State accept and file an application 

made by a corporation authorized to issue capital stock under 

its existing charter ? 

3. What procedure should be followed by the Secretary of State 

in determining the non-profit status of those corporations which 

were organized under the provisions of Title 32 of the Revised 

Civil Statutes of 1925 and whose charters do not contain any express statement to the effect that they were organized for nonprofit purposes ? 

Your questions will be dealt with in reverse order. 

We assume the third question is asked with reference to such a determination being made in connection with an application for the adoption of the 

Texas Non-Profit Corporation Act. This opinion is accordingly so lim,ited. 

It is, of course, fundamental that no corporation except a non-profit corporation may adopt the provisions of the Non-Profit Corporation Act. Article 10.04 
. 

Hon. Zollie Steakley. page 2 (WW- 880) 

and Article 1.02A (I), (2). and (3), Texas Non-Profit Corporation Act.1 ~When 

a corporation proposes to adopt the provisions of the Act. and makes application to that effect to the Secretary of State, he, the Secretary of State, must 

find that the application “conforms to the law.” Article 10.04R (3). NonProfit Corporation Act. In so doing, the Secretary of State must nec,essarily 

determine whether the applicant corporation is, in fact, a non-profit corporation. As enunciated in Attorney General’s Opinion WW-849, the mere fact 

that the purpose clause in the charter of the applicant corporation recites 

that hit is non-profit is not conclusive or definitive of the corporation’s 

non-profit status. See Celina & Mercer County Telephone Co. v. Union Center 

Mutual Telephone Association, 102 Ohio St. 487, 133 N.K. 540 (1921) and Read v. 

Tidewater Coal Exchange Inc., 116 Atl. 898 (Del.Chan. 1922). The criterr 

b h’ h th Secretary of State should determine whether a corporation is in 

f~c~a’~on-;rofit corporation are set out in Article 1.02A (3) and 2.24 of the 

Act and were discussed at greater lengthsyin Opinion WW-849 to which you 

are referred. 

Your further attention is called to the provisions of Article 9.04 relating to the powers of the Secretary of State. which reads as follows: 

“The Secretary of State shall have the power and 

authority reasonably necessary to enable him to administer this Act efficiently and to perform the duties 

therein imposed upon him.” 

Since the Secretary of State must decide whether a corporation is, in 

fact, a nonFprofit corporation and since such a decision is necessarily factual 

in nature, the provisions of Article 9.04 authorize the Secretary of State as a 

condition precedent to the accepting and filing of any application for adoption 

of the provisions of the Non-Profit Corporation Act to require the applicant 

corporation to furnish such gerpane and material information as is reasonably 

necessary to enable the Secretary of State to determine the non-profit status 

of the corporation. 

In response to your second question, you are advised that the provision 

of the applicant corporation’s charter authorizing the issuance of capital stock 

is not in and of itself a bar to the applicant corporation’s adoption of the NonProfit Corporation Act. Snyder V* Findlay Chamber of Commerce, 53 Ohio St. 

1. 41 N.E. 33 (1895); Celina & Mercer County T one Co; v. Union Center 

102 Vhio St. 487, . . 0 (1921). As you 

quest, the Non-Profit Corporation Act does not 

lFo,r brevity this Act shall be ,referred to in the balance of the opinion 

merely as the Act or as the Non-Profit Corporation Act. 
1 

Hon. Zollie Steakley, page 3 (WW-880) 

expressly authorize the issuance of stock, but Article 2.08D does authorize 

the issuance of certificates or cards or other instruments evidencing, inter 

a~lia. ownership rights as authorized by artitiles of incor,poration arid the bylaws. In view of these authorities, we think that the authorization in the charter 

to issue stock is not in and of itself conclusive. Of course the authority to 

issue stock,. the,amount of stock issued, the distribution of the stock issued4 

and related factors are all materia,l facts, which, when considered with allother 

material facts, may well justify the Secretary of State in determining that a 

particular applicant corporation is not in fact a non-profit corporation. 

The purpose clause which is the subject matter of your first question 

reads as follows: 

” ‘The purpose for which it is formed is to “To establish 

and maintain fishing, hunting and boating clubs: to protect, 

preserve and propagate fish and game; to purchases and own 

such lands and bodies of water as may be desirable in connection therewith; to erect suitable improvements thereon, and to 

raise such livestock for profit only as the preserves of the 

club will maintain,” as authorized by subdivision 10 of Article 

1302 of the Texas Revised Civil Statutes of 1925.’ ” 

Were it not for the phrase “to raise such livestock for profit only as 

the preserves of the club will maintain’: it would be abundantly evident that 

such a corporation could be a non:profit corporation. Again this question, 

like all questions, is a matter of considering all relevant facts instead of 

merely the provisions of the purpose clause. The issue then evolves as to 

whether or not the addition of this phrase precludes an applicant corporation 

having such a purpose from being a non-profit corporation. 

The purpose clause in question has its historical origin in Article 642 

of the Revised Statutes of 1895, Section 42, which at th at time provided that 

corporations might be formed for the purpose of providing for “the protection, 

preservation and propagation of fish and game.” Later the purpose was enlarged to include the propagation of oysters as well. Acts 1897, 25th Leg., 

Ch. 130. p. 188. In 1907 the statute was amended to enlarge the purpose to 

the present language. Acts 1907. 30th Leg., Ch. 150, p. 291. At that time, 

there was a provision inthe corporate statutes providing for the formation 

of corporations which had as their general purpose the raising, buying, and 

selling of livestock. Thus the Legislature did not intend by its 1907 amendment to Article 642 R.S. 1895 to authorize corporations organized pursuant 

to Section 42 thereof (now subdivision 10, Article 1302, R.C.S., 1925) to engage 

in the general business of raising and selling livestock for profit. 

As we construe subdivision 10, Article 1302, it~authorises such a cor- 
Hon. Zollie Steakley, page 4 (WW-880) 

poration to own land only insofar as it is incident to the main and principal 

purpose of establishing and maintaining fishing and hunting and boating clubs, 

protecting, preserving and propagating fish and game. This construction is 

in accordance with the general prohibition in the corporate laws prohibiting 

corporations from owning land except as an incident to the carrying out of 

their corporate purposes. See Articles 1359, et seq, Revised Civil Statutes 

of 1925, having their historical origin in Acts 1897, 25th Leg., Ch. 48, p. 48. 

Subdiv,ision 10 further limits the raising of livestock and acquiring 

such livestock as may be sustained wholly from the game and fish preserves 

which the corporation has acquired. This, of course, would naturally present 

a rather stringent limitation upon the number of livestock that could be raised 

by the corporation since the preserves must primarily be used as game and 

fish preserves. The language authorizing such corporations to raise livestock for profit when limited by this context does not by any means authorize 

a corporation to engage in a business of raising livestock in such a way as 

would necessarily be calculated and intended that the profit or income thereby 

derived would be distributable to the members or stockholders in the club. 

The provision allowing a subdivision 10 corporation to raise livestock 

for profit under these limited circumstances is not determinative of the nonprofit status. The Act does not bar a corporation within its purview from 

engaging in an income producing enterprise but in fact contemplates such 

will be the case in some instances. Article 1.02A (3). The language of the 

Court in Southerland v. Decimo Club, Inc., 142 Atl. 786 (Del. Chan. 1928) 

is most appropriate in this regard: 

“It is doubtless true that a social organization may 

be incorporated under the non-profit provision of our 

statute and within reasonable and proper limite engage 

in an activity to make profit. How far such an organization can go in that direction it is impossible to say in 

,-general terms. Each case as observed in Read v. Tidewater Coal Exchange, Inc., supra, must stand on its own 

facts.” 

The ultimate question again to be determined is whether the corporation is in fact a non-profit corporation as that term is defined by the Act. YOU 

are accordingly advised that a corporation desiring to adopt the provisions of 

the Texas Non-Profit Corporation Act and having a corporate purpose identical 

to that set out in subdivison 10 of Article 1302, Revised Civil Statutes of 1925. 

is not per se barred from adoption of the Act. 

SUMMARY 

The Secretary of State is authorized as a condition 
Hon. Zollie Steakley, page 5 (WW-880) 

precedent to the filing of application for the adoption of 

the Texas Non-Profit Corporation Act to require such 

germane and material information from the applicant as 

may be reasonably necessary for the Secretary of State 

to determine whether the applicant corporation is in 

fact a non-profit corporation. 

Provis,ions in the corporate charter of a corporation 

+&g to adopt the provisions of the Texas Non-Profit 

Corporation Act which authorize the corporation to idsue 

shares of capital stock would not per se bar the corporation 

from the adoption of the provisions of the Act. 

A corporation desiring to adopt the provisions of the 

Texas Non-Profit Corporation Act is not per se barred from 

doing so by virtue of provisions of its corporate charter 

setting out a purpose clause identical to that contained in 

Section 10 of Article 1302, Revised Civil Statutes of 1925. 

Yours very truly, 

WILL WILSON 

Attorney General 6f Texas 

BY 

Wallace P. Finfrock 

Assistant 

WPF:pe 

APPROVED: 

OPINION COMMITTEE 

W. V. Geppert, Chairman 

Fred B. Werkenthin 

C. K. Richards 

J. C. Davis 

Donald Bernard 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: 

Leonard Passmore