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ATTORNEY GENEW.bE July 5, 1960 

Honorable Zollie Steakley Opinion No. WW-871 

Secretary of State 

State Capitol Res Authority of the 

Austin, Texae Secretary of State to 

accept and file the 

application for Certlficate of Authority of 

Panhandle Telephone CoOperative, Inc., a 

foreign corporation, 

which propoeee to furnieh rural telephone 

service and related 

queationa. 

Dear Mr, Steakley: 

You have requeeted our opinion on three queetlons.~ 

The.first concerns the authority of your office to accept and 

file an application for a Certlfloate of Authority submitted 

by Panhandle Telephone Co-Operative, Inc., a non-profit corporation chartered In Oklahoma purauant to the proviafone of 18 Okla. 

Stat. 43.81, et seq. The purpose for which the company proposes 

to transact business in Texas Is “to furnleh telephone eervice 

in rurdl areas to the widest praotloable number of were of such 

service; provided there shall be no duplleation of eervlae where 

reasonable and adequate telephone’service IB available.” Should 

we conclude that your office ha8 no authority to file such application, you then Inquire aa to whether or not the corporation 

oan lariully engage in buelnees in Texabas without a Certificate 

of Authority. Your third queetion is whether or not the corporation will be required to file a return and pay the franchlse 

taxee required under Chapter 12 of Title 122A (H-B. 11, Act6 56th 

Legielatum, Third Called Seseion 1959)~,regardleae of whether or 

not it may be required to obtain Certlfioate of Authority. 

Article 15280, V,C.S.T, (Acts 1950 - 51st Lagielature-First Called Seuelon9 page 33# Chapter 4) authorlrea the 

incorporation of “ad-operative, non-profit corporations. O . 

for the purpome of furnlqhing ‘telephone eerviae in rural areas 

to the widest, prsatical number of were of euch eervlee; provided there ohall be no~dupllcatldn In service where reasonable, 

adequate telephone rervlce la available.” Consequently, the 
. . 

Honorable Zollie Steakley, page 2 (WW-871) 

business of furnishing rural telephone service, being 8, lawful purpose for which corporations could be organized prior 

to the passage of either the Business Corporation Act or the 

Non-Profit Cdrporation Act, is a lawful purpose today unless 

either of these Acts prohibits the d”ormatlon of such oompanles. 

The Business Corporation Act, Art. 2.01, Sec. A, provides that 

corporations “for the purpose of operating non-profit inet%- 

tutions” may not adopt or be organized under the Act. Moreover, Sub-paragraph (4)(g) of Section B of Article 2.01 provides that co-operatives or limited co-operative associations 

may not be organized under the Act or obtain authority to trans’- 

act business in this State under same. 

An even more pointed prohibition is found In Paragraph B, Article 2,Ol of the Non-Profit Corporation Act 6Act.e 

1959-56th Legislature, Chapter 162) which provides that this 

Act shall not apply to any corporation nor may any corporation 

be organized under this Act or obtain authority to conduct Its 

affairs In this state under this Act, 0 0 (3) if any one 

or more of its purposes for the conduct of its’ai’fiirs In this 

state Is to organize telephone co-operative corporations.” In 

the face of this specific language we conclude that your office 

has no authority to accept and file the applfeation in question 

under the Non-Profit Corporation Aot, However3 any doubts as to 

whether or not Art. 1528~ was repealed by the passage of the 

Non-Profit Corporation Act are removed by Article 10.05, Paragraph B of the Act which provides: 

“Except as provided in Artfoie 10.06 of this 

Act, any limitations, obligations, liabflitles and 

powers applicable to a particular kind of oorporation, for which special provfsion is made by the 

laws of this state8 shall continue to be applicable 

to any such corporation and this Act fs not intended 

to repeal and does not repeal the statutory provi-’ 

sione providing for these speolal llmftatfons, oblfgatlons, liabflltfes and powers.sr 

If, then, the Panhandle Telephone Co-Operative, Inc. 

cannot obtain a Certificate of Authority to transact business 

.in this state by virtue of either the Rasiness Corporation Act 

or the Texas Non-Profit Corporation Act, the question arises 

as to whether or not there is an authority under which your 

office might Issue such a certi + Isate, PrSor to the passage 

bf the Texas Business Corporation Act and t,he Non-Profit Corporation Act, Chapter 19 of Title 32 (Art, 1529, VOC.S,) of 

the laws of the State of Texas provided the method and manner 

in which foreign corporations could qualify to do business in 

Texas. Article 1529 thereof elfmlnates foreign non-profit 

corporations from the purview of Chapter 19 by providing that 
- , 

Honorable Zollie Steakley, page 3 (~~-871) 

"any corporation for pecuniary profit,. e *shall file 'with 

the Secretary of State a duly certified copy of its Articles 

of Incorporation; land thereupon such official shall issue to 

such $orporation a permitto transact business in this state 

Consequently, prlor'to the passage of the Texas~Buslness*Corporatlon Act and the Non-Profit Corporation Aot, there 

were no provisions whereby a foreign corporation not for peouniary profit could obtain a permit to do business inthis state 

(see City of San Antonio v. Salvation Army, 127 S.W. 860) and 

such corporations could carry on their activities in this state 

without obtaining such a permit. Vol. 1 Prentice Hall Corporation Law Guide, page 3300. This, of course, 1s no longer true 

for foreign non-profit corporations covered by the Non-Profit 

Corporation Act. For those which are not it remains the law, 

primarily by virtue of the principle of comity. 

As stated in Attorney General Opinion V-746 by Honorable Price Daniel, "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 anv 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 specific character , or for certain purposes, Its 

policy is controlling; and a foreign corporation of that charaater or created for such purposes would not be allowed to enter 

the st,ate and transaot business therein. However, an intention 

to exclude foreign corporations from,the state Is not to be 

deduoed from circumstances that the laws of the state have.made 

no provisions for domestic corporations of like oharaoter. And 

in the absence of expressed constitutional or statutory Inhi= 

tlon, foreign corporations may enter a state and engage In buslness therein under the rule of comity notwithstandingthey are 

organized in accordance with methods which do not obtain in 

such state." Opinion V-746 dealt with a situation in which a 

foreign corporation organized for pecuniary profit, but without 

capital stock, deslred.to obtain a oertificate to do buslneas 

in Texas. Article 1530 of the then applicable statutes required 

that before a Certlfleate of Authority be issued the corporation must show to the.satisfaction of the Secretary of State 

that at least $100,000 in cash of its authorized capital stock 

had been paid In or that fifty per cent (50%) of its authorized 

capital stock had been subscribed, In accordanoe with the quoted 

language above, Opinion V-746 coneluded that the foreign corporation could obtain a oertiflcate of authority to do business in 

Texas despite its inability to meet the requirements of Article 

1530. In the instant situation, we find no constitutional or 

statutory prohibition against corporations of the type In question. 
Y 

< 

Honorable Zollle Steakley, page 4 (W-871) 

Rather, there exists a special act, Article 15280, which authorizes the formation of domestic corporations of the identical type. Although making no specific provisions for the obtaining of a certificate of authority by foreign corporations 

of this type, Article 1528~ assumes that foreign corporations 

will transact business in this state under its authority. For 

example, Section 6a(l) provides “the words ‘telephone cooperative’ shall not be used In the corporate name of corporations organized under the laws of this state, or authorized 

to do business herein, other than those organized pursuant to 

provisions of this Act *” Section 23, sub-paragraph (b) provides that “a corporation may not otherwise sell 0 0 . a substantial portion of its property unless such sale a D D Is authorized by an affirmative vote of not less than two-thirds 

(2/3) of all the members of the corporation; provided, however 0 e 0 the Board of Directors may a D L1 sell, lease or 

otherwise dispose of all or a substantial portion of its ptiperty to another corporation or a forelRn corporation doing 

business In this state pursuant to this act. D Q” Similar 

language may be found in Section 23. 

On the basis of the foregoing, in an8wer to your 

questions 1 and 2, we hold that the Secretary of State has no 

authority to accept and file the application of the Panhandle 

Telephone Co-Operative, Inc. for a Certificate of Authority to 

engage in business In this state for the above state purpose. 

We also hold that the corporation may lawfully engage In business In Texas without a certificate of authority. 

In answer to your third queetion, it is the opinion 

of this office that the corporation must file a return and pay 

the franchise taxes required under the provisions of Chapter 12 

of Title 122a, H. B. 11, Acts 56th Legislature, Third Called 

Session 1959, If It does business In this state. Article 

12,01(l) provides that “except as herein provided, every domestic and foreign corporation heretofore of hereafter chartered 

or authorized to do business in Texas or doing business in Texas, 

shall, on or before May 1st of each year, pay in advance to the 

Secretary of State a franchise tax for the year following which 

shall be based on whichever of the following shall yield the 

greater tax. D D ” Obviously, the Legislature contemplated 

that there would be ,sltuatlons in which a corporation may not 

have been chartered under the laws of this state, or have secured a permit to do business under the laws of this state, 

but yet might be doing business here for purposes of paying a 

franchise tax, 

SUMMARY 

The Secretary of State has no authority to 

accept and file the application of the Panhandle 
Honorable Zollie Steakley, page 5 (~~-871) 

Telephone Co-Operative, Inc., for a Certificate 

of Authority to engage In business In this state 

for the stated purpose. The corporation may lawfully engage In the business which it proposes In 

Texas without a Certificate of Authority, but must 

file a return and pay the franchise taxes required. 

Very truly yours, 

WILL WILSON 

Attorney General of Texas 

RVL:lmc:bh 

APPROVED: 

OPINION COMMITTEE 

W. V. Ceppert, Chairman 

Morgan Nesbltt ~- 

Fred B. Werkenthin 

Wallace P. Finfrock 

REVIEWED FOR THE ATTORNEY QENERAL 

BY: 

Leonard Passmore