i~awrx;v aI. Teku;hp,

-a?TiLLyrx.s
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 furnishingrural telephone service,being 8,lawful purpose for which corporationscould be organizedprior to the passage of either the Business Corporation Act or the Non-ProfitCdrporationAct, 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 operatingnon-profit inet%- tutions”may not adopt or be organizedunder 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 organizedunder the Act or obtain authority to trans’- act business in this State under same.

An even more pointed prohibitionis found In Paragraph B, Article 2,Ol of the Non-ProfitCorporationAct 6Act.e 1959-56th Legislature, Chapter 162) which provides that this Act shall not apply to any corporation nor may any corporation be organizedunder 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 telephoneco-operative corporations.” In the face of this specific languagewe conclude that your office has no authorityto accept and file the applfeationin question under the Non-ProfitCorporation Aot, However3 any doubts as to whether or not Art. 1528~ was repealedby the passage of the Non-ProfitCorporationAct are removed by Article 10.05, Paragraph B of the Act which provides:

“Exceptas provided in Artfoie 10.06 of this Act, any limitations, obligations,liabflitlesand powers applicableto a particularkind of oorporation, for which specialprovfsion is made by the laws of this state8 shall continue to be applicable to any such corporationand this Act fs not intended to repeal and does not repeal the statutoryprovi-’ sione providingfor these speolal llmftatfons,oblfgatlons,liabflltfesand powers.sr
If, then, the PanhandleTelephoneCo-Operative,Inc. cannot obtain a Certificateof Authorityto transactbusiness .inthis state by virtue of either the Rasiness CorporationAct
or the Texas Non-ProfitCorporation Act, the question arises
as to whether or not there is an authorityunder which your + officemight Issue such a certi Isate, PrSor to the passage bf the Texas Business CorporationAct and t,he Non-ProfitCorporationAct, 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 corporationscould qualify to do business in Texas. Article 1529 thereof elfmlnatesforeign non-profit corporationsfrom the purview of Chapter 19 by providing that- ,

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

"any corporationfor pecuniaryprofit,. e *shall file 'with the Secretaryof State a duly certified copy of its Articles of Incorporation;

landthereupon such official shall issue to such $orporationa permitto transactbusiness in this state

Consequently,

prlor'to the passage of the Texas~Buslness*Corporatlon

Act and the Non-ProfitCorporationAot, there

were no provisionswhereby a foreign corporation not for peouniary profit could obtain a permit to do businessinthis state (see City of San Antonio v. SalvationArmy, 127 S.W. 860) and such corporationscould carry on their activities in this state without obtaining such a permit. Vol. 1 PrenticeHall Corporation Law Guide, page 3300. This, of course, 1s no longer true for foreign non-profit corporations covered by the Non-Profit CorporationAct. For those which are not it remains the law, primarilyby virtue of the principle of comity.

As stated in Attorney General OpinionV-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 contractsor transact any business therein falling within the scope of their lawful corporatepowers which are permitted to domestic corporations of like kind and character. In accordance, with this rule, if the laws of a state prohibit the formationof domestic corporations of a specific character
, or for certain purposes, Its policy is controlling; and a foreign corporationof that charaater or created for such purposeswould not be allowed to enter the st,ate

and transaotbusiness therein. However, an intention to exclude foreign corporationsfrom,the state Is not to be deduoed from circumstancesthat the laws of the state have.made
no provisionsfor 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 accordancewith methods which do not obtain in such state." OpinionV-746 dealt with a situation in which a foreign corporationorganizedfor pecuniaryprofit, but without capital stock, deslred.toobtain a oertificateto do buslneas in Texas. Article 1530 of the then applicablestatutes required that before a Certlfleateof Authoritybe issued the corporation must show to the.satisfaction of the Secretaryof State that at least $100,000 in cash of its authorizedcapital stock had been paid In or that fifty per cent (50%) of its authorized capital stock had been subscribed, In accordanoewith the quoted languageabove, OpinionV-746 coneluded that the foreign corporation could obtain a oertiflcateof authority to do business in Texas despite its inabilityto meet the requirementsof Article 1530. In the instant situation,we find no constitutional or statutoryprohibitionagainst 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 formationof domestic corporationsof the identical type. Althoughmaking no specificprovisionsfor the obtaining of a certificateof authorityby foreign corporations of this type, Article 1528~ assumes that foreign corporations will transactbusiness in this state under its authority. For example, Section 6a(l) provides “thewords ‘telephonecooperative’ shall not be used In the corporatename of corporations organizedunder the laws of this state, or authorized to do businessherein, other than those organizedpursuant to provisionsof this Act*” Section 23, sub-paragraph (b) provides that “a corporation may not otherwise sell 0 0

. a substantialportion of its property unless such sale a D D Is authorizedby 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 Directorsmay a D L1 sell, lease or otherwisedispose of all or a substantial portion of its ptiperty to another corporationor a forelRn corporationdoing business In this state pursuant to this act. D Q” Similar languagemay be found in Section 23.

On the basis of the foregoing,in an8wer to your questions 1 and 2, we hold that the Secretaryof State has no authority to accept and file the applicationof the Panhandle TelephoneCo-Operative,Inc. for a Certificateof 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 certificateof 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 requiredunder the provisionsof 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 “exceptas herein provided, every domestic and foreign corporation heretoforeof hereafter chartered
or authorizedto do business in Texas or doing business in Texas, shall, on or before May 1st of each year, pay in advance to the Secretaryof State a franchise tax for the year followingwhich shall be based on whicheverof the following shall yield the greater tax. D D” Obviously,the Legislaturecontemplated that there would be ,sltuatlons in which a corporation may not have been charteredunder the laws of this state, or have secured a permit to do business under the laws of this state, but yet might be doing businesshere for purposes of paying a franchise tax,
SUMMARY

The Secretaryof State has no authority to accept and file the applicationof the PanhandleHonorable Zollie Steakley,page 5 (~~-871)

TelephoneCo-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 businesswhich it proposes In Texas without a Certificateof Authority,but must file a return and pay the franchise taxes required.

Very truly yours,

WILL WILSON AttorneyGeneral 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