December 20, 1948 

Hon. Paul H. Brown Opinion No. V-746 

Secretary of State 

Austin, Texas Re: The legality of permitting a 

foreign corporation to do 

business for profit in Texas 

Dear Sir: when it-has no capital stock. 

Sand Springs Home, an Oklahoma corporation, has applied 

for a permit to do business in Texas under the provisions of Artitle 1529, Revised Ci,vil Statutes of Texas, for the purpose of engaging in business for pecuniary profit within the State of Texas, 

as authorized by~the provisions of Subdivision 37 of Article 1302, 

Revised Civil Statutes of Texas. Under the provisions of the 

charter granted to the corporation by the State of Oklahoma, it 

is authorized to engage in business for the same purposes provided in Subdivision 37 of Article UOZ,, 

The corporation has. not authorized or issued. shares of 

capital stock but has net capital assets in excess of $lOO,OOO.OO. 

Its corporate powers are exercised by trustees; and the profits 

realized from the business ventures of the corporation arc us,ed 

and applied’to the trust purposes set forth in its charter, which 

ar’e the support of charitable and benevolent organizations, the 

net result being that the corporation engages in business endeavors for profit, and the trustees then allocate the profits realized among various charitable and benevolent undertakings. 

The Secretary of State returned the application for the 

permit for the reason that the corporation, being a corporation 

for profit, but without authorized capital stock, may not be grant- 

‘ed a permit to engage in business in Texas since it is unable to 

comply with the provisions of Article 1530, Revised Civil Statutes 

of Texas, which provides that:, 

“Before such permit.1~ issued such corporation 

shall shop to the satisfaction of the Secretary of State 

that at least one hundred thousand dollars in cash of 

their authorized capital stock has been paid in, or 

that fifty per cent of their authorized capital stock 

has been subscribed, and at least ten per cent thereof paid in.” 

Upon this factual situation, you request the answer to the following questions- 
. . 

Hon. Paul H. Brown, Page 2 (V-746) 

“(1) Can the Secretary of State legally approve ~the application of this corporation for a 

permit to do business in Texas? 

“(2) If this corporation were not engaged 

in business for profit, could the application be 

approved ? ” 

The objection to the issuance of the permit is not based 

upon the nature or the purpose of the business proposed to be 

done in Texas or any insufficiency of the capital of the corporation, since it is manifest that both the purpose of the business 

and the sufficiency of the capital are in full compliance with 

the laws of Texas, but upon the framework or structure of tha 

corporation, since it has no shares of capital stock either authorized or issued. 

It is a well-settled rule of law that under the doctrine 

of comity and in the absence of any prohibitory law or rule of 

public policy, foreign corporations are entitled to enter a State 

and make any contracts or transact any business therein falling 

within the scope of their lawful corporate powers which are 

permitted to domestic corporations of like kind and character., 

In accordance with this ‘rule, if the laws of a State prohibit the 

formation of domestic corporations of a specified character, or 

for certain purposes, its policy is controlling; and a foreign 

corporation of that character or created for such purposes 

would not be allowed to enter the State and transact business 

therein. However, an intention to exclude foreign corporations 

from a State is not to be deduced from circumstances that the 

laws of the State have made no provisions for domestic corpo- 

.rations of like character. And in the absence of express constitutional or statutory inhibition, foreign corporations may 

enter a State and engage in business therein under the rules 

of comity, notwithstanding they are organized in accordance 

with methods which do not obtain in such State. Therefore, 

the comity of the State will not be withheld from foreign corporations merely because they have a framework or stock 

structure ,unlike that for domestic corporations. 17 Fletcher 

.Cyclopedia Corporations (Per. Ed.) Sec. 8335, pages 140 to 142. 

The State of Texas recognized these rules of law when 

foreign corporations created with no-pars-value stock first 

sought to enter the State of Texas before the enactment of 

Chapter 19A, Title 32, Revised Civil Statutes, in’l925. See 

Staples v. Kirby Petr~oleum Company, 250 S.W. 293 ‘(1923); 

American Refining Company v. Staples, 260 S.W. 614 (1924), 

affirmed 269 S.W. 420. In these opinions the courts cited with 

Lpproval the case of North American Petroleum Company v. 

Hopkins, 181 Pac. 625 by the Supreme Court of Kansas and State 
. 

Hon. Paul H. Brown, Page 3 (v-746) 

ex rel Standard Tank Car Company v. Sullivan, 221 S.W. 728 by 

the Supreme Court of Missouri. See also Commonwealth Acceptance Corporation v. Jordan, 246 Pac. 796 (,Sup.Ct. of California). 

Under the reasoning of these opinions, it is the present 

rule of law in Texas that there is no express statutory inhibition 

or prohibition against the admission of foreign corporations entering this State and engaging in business therein, even though it 

might be that as to their framework and especially as to their 

stock structure or lack of it, such corporations would not have 

been entitled to organize as domestic corporations or receive 

certificates of incorporation as such under the lay of the State 

of Texas. 

It is therefore necessary to construe the provisions of 

Article 1530, Revised Civil Statutes of Texas, above quoted, as 

to whether or not by the inclusion of such Section as a part of 

Chapter 19, Title 32. Revised Civil Statutes of Texas, 1925, “Foreign Corporations,” it was the intention of the Legislature to 

forbN~‘the issuance of a permit to a foreign corporation for pecuniary profit unless the corporate structure thereof provided 

for authorized or issued capital stock. The Legislature of Texas 

has classified private corporations into three classes: (1) religious, (2) for charity or benevolence, and (3) for profit (Article 

1319, R.C.S., 1925). To determine whether or not ,it was the legislative intent to prohibit the ‘creation of domestic corporations 

or the admission of foreign corporations without capital stock to 

engage in business for profit within the State of Texas, it is necessary to look to all of the statutory provisions governing corporations, domestic and foreign, and their rights, privileges, 

and liabilities. 

Article 7084, Revised Civil Statutes of Texas, provides 

for the payment of a franchise tax by both domestic and foreign 

corporations chartered or authorized to do business in Texas 

or doing business within the State of Texas. Article 7094, Elevised Civil Statutes of Texas, exempts from the payment of the 

franchise tax, among other, corporations organized for the purpose of religious worship or for strictly educational purposes 

or for purposes of purely public charity. Article 7084, therefore, imposes a franchise tax on all corporations organized for 

profit except those otherwise specifically exempted by the Legislature. Prior to 1930, the franchise tax was based, among 

other elements, upon the authorized and issued capital stock 

. 

of both domestic and foreign corporations (Article 7084, Reviaed Civil Statutes of Texas, 1925). 

However, in 1930 the 4lst Legislature enacted Section 2, 

Chap. 68, Acts 41st Leg., Fifth C.S.; p. 220, amending and combining Arts. 7084 and 7085, Revised Civil Statutes of Texas, 1925, 
Hon. Paul H. Brown, Page 4 (V-746) 

and provided in the amended Article in Subdivision (A) as follows: “Capital stock as applied to corporations without capital 

stock shall mean the net assets.” This amendment has been 

carried as a part of Article 7084 through subsequent amendments down to and including 1941. It is apparent that the Legislature would not have added the quoted sentence unless it had 

intended to include corporations organized for profit but without capital stock which previously had not been taxed. 

Of further significance is the fact that in the codification of the Revised Civil Statutes of 1925, the Legislature included within the provisions of Chapter 2, Tftle 32, “Creation 

of Corporations,” Article 1312 dealing with corporations having 

no capital stock, as follows: 

“No society, assocation, company, corporation or 

institution that does not have a capital stock is required in its charter to make any statement of the amount 

of capital stock or amount of each share; but it will 

suffice if the charter contains the other statenatnts 

required, and also an estimate of the value of the 

goods, chattels, lands, rights and credits owned by 

the corporation.” 

This Article was derived from Article 1224, Revised Civil Sktutes of 1911 which formed a part of Chapter 11, Title 25, dealing 

with religious, charitable and other corporations, and which then 

read as f~ollowe: 

“‘No religious, literary, social, scientific, industrial,benevolent or other society, association, 

company, corporation or institution that does not 

have a capital stock will be required in its charter 

to make any statement of the amount of capital stock 

or amount of each share; but such charter, if it contains the other statements therein required, and also 

an estimate of the value of the goods, chattels, lands, 

rights and credits owned by the corporation will be 

sufficient. ” (Emphasis supplied) 

.The deletion of the emphasixed words’ from ArticIe 1312 

and the transposition of Article 1312 from Chap. 9 of Title 32 

and its inclusion within Chap. 2 of Title 32 in the 1925 codification is indicative of the intention of the Legislature to permit the 

creation of domestic corporations for pecuniary profit without 

the requirement of capital stock under the provisions of Article 

1308, Revised Civil Statutes of Texas. 

Additional evidence of legislative intent is shown by the 

enactment in 1943 of Senate Bill 21, Chapter 138, Acts 48th Leg- 
Hon. Paul H. Brown, Page 5 (v-746) 

islature, 1942, page 219 (Article 1315c, V.C.S.), which provides that 

corporations without capital stock shall have the right to have 

their charters extended upon proper application to the Secretary 

of Stite. The material portion of the emergency clause reads: 

“The fact that there are many corporations operating in the State that were organized without capital stock and that some of them are nearmg expiraRon, and the further fact that the present law is vague 

and indefinite, creates an emergency. . . .” (Emphasis 

supplied). 

The renewal of charters of corporationscreated for the 

support of benevolent, charitable, educational, or religious undertakings had theretofore been sufficiently provided for by Article 1315, Revised Civil Statutes of Texas, which was originally 

enacted in 1874, so that the inference may be drawn that Article 

1315c, V.C.S., was enacted to provide for the renewal of charters 

of corporations without capital stock which were organized for 

profit. 

The construction of an almost identical statute by the Supreme Court of Massachusetts in Pacific Wool Growers v. Commissioner of Corporation & Taxation, 25 N.E.(2d) 208, is highly 

persuasive. In that case the Supreme Court of Massachusetts, 

upon the application for a permit by a foreign corporation without shares of capital stock, granted a writ of mandamus requiring the Commissioner to admit the corporation. The Massachusetts statutes required every foreign corporation, before transacting business in the Commonwealth, to file a copy of its charter 

and by-laws and a certificate setting forth, among other things, 

*the amount of its capital stock, authorized and issued, the number and par value of its shares, the amount paid in thereon, and, 

if any part of such payment has been made otherwise than in 

money, the details of such payment . , ,” The contentions of 

the parties to the suit and the disposition made of the case is 

set forth in the last paragraph of the Court’s opinion, as follows: 

“The respondent contends that, if it had been the 

legislative’ intent to include corporations such as the 

petitioner within the scope of c. 181, it would have been 

natural for the Legislature to have inserted the words 

‘if any,’ after the words ‘the amount of its capital stock’ 

in section 5. We do not think this follows. The words 

‘the amount of its capital stock’ in said section are 

immediately qualified by the words ‘authorized and 

issued.’ To accept this contention would be in effect 

to require the court to read into the definition of 

‘Foreign Corporation’ . . . the words ‘having a capital stock.’ , , . When the Business Corporation Law 
l . , 

Hon. Paul H. Brown, Page 6 (V-746) 

was enacted . , . the manifest purpose of the Legislature in defining the term ‘Foreign Corporation’ as 

used in that act was to include every corporation, aaeociation~or organization established, organized or 

chartered under laws other than those of the Commonwealth for purposes, for which domestic corporations could be organized under that act. The important consideration was the purpose for which 

such foreign corporation, association or organization was established, organized or chartered and not 

the precise form or manner in which it had been so 

established. Such an intent is in harmony with the 

rule as to comity of States which extends to corporations the privilege of exercising the powers conferred by their charters beyond the limits of the 

State, or country, in which they had their origin and 

legitimate existence:’ 

In answer to your first ,question, it is our opinion that 

the Secretary of State may legally approve the application of 

Sand Springs Farm, an Oklahoma corporation, for a permit to 

do business in the State of Texas for the purposes provided in 

Subdivision 37 of Article 1302, Revised Civil Statutes of Texas. 

In view of our answer to your first questibn, it is, not, 

deemed necessary to answer your second question, 

SUMMARY 

The Secretary of State may legally approve the 

application for a permit by a foreign corporation to 

dr business in Texas for prefit where the purpose 

clause and the capital requirements of the corporation are in compliance with the laws of Texas, .oven, 

though the foreign corporation is without authorized 

or issued capital stock. ,Staplaa v* Kirby Petroleum 

Company, 250 SW. 293.; American Refining Co, v, 

Staples, 260 S.W, 614; North American Petroleum Co; 

v. Hopkins, 181 Pat’. 625; State v. Sullivan, 221 S.W. 

728; Commonwealth Acceptance Corp, v, Jordan, 246 

Pac. 796; Art. 1312, R.C.S.: Art. 1315c, V,C.S.; Art, 

1530, R,C,S.; Art. 7084, R,C.S,; Pacific Wool Growers v, Commissioner of Corporation k Taxation, 25 

N+E.(Zd) 208. 

Yours very truly 

APPROVED: 

CKR/JCP Assistant