Source: https://chowinslaw.com/resources/texas-business-laws/292-shares-options-and-convertible-securities-texas-business-organizations
Timestamp: 2019-04-23 03:58:59+00:00

Document:
§ 21.151. NUMBER OF AUTHORIZED SHARES.
A corporation may issue the number of authorized shares stated in the corporation's certificate of formation.
§ 21.152. CLASSES AND SERIES OF SHARES.
(a) A corporation's certificate of formation may divide the corporation's authorized shares into one or more classes and may divide one or more classes into one or more series. If more than one class or series of shares is authorized, the certificate of formation must designate each class and series of authorized shares to distinguish that class and series from any other class or series.
(b) Shares of the same class must be of the same par value or be without par value, as stated in the certificate of formation.
(c) Shares of the same class must be identical in all respects unless the shares have been divided into one or more series. If the shares of a class have been divided into one or more series, the shares may vary between series, but all shares of the same series must be identical in all respects.
(2) one or more classes or series of shares, which may be the same class or series of shares as those with voting rights, that together are entitled to receive the net assets of the corporation on winding up and termination.
§ 21.153. DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RIGHTS OF A CLASS OR SERIES.
(a) If more than one class or series of shares is authorized under § 21.152(d), the certificate of formation must state the designations, preferences, limitations, and relative rights, including voting rights, of each class or series.
(b) The certificate of formation may limit or deny the voting rights of, or provide special voting rights for, the shares of a class or series or the shares of a class or series held by a person or class of persons to the extent the limitation, denial, or provision is not inconsistent with this code.
(c) A designation, preference, limitation, or relative right, including a voting right, of a class or series of shares of a corporation may be made dependent on facts not contained in the certificate of formation, including future acts of the corporation, if the manner in which those facts will operate on the designation, preference, limitation, or right is clearly and expressly stated in the certificate of formation.
§ 21.154. CERTAIN OPTIONAL CHARACTERISTICS OF SHARES.
(6) are convertible into shares of any other class or series, at the option of the corporation, shareholder, or other person or on the occurrence of a designated event.
(2) the amount of any deficiency computed under Subdivision (1) is transferred from surplus to stated capital.
§ 21.155. SERIES OF SHARES ESTABLISHED BY BOARD OF DIRECTORS.
(a) If expressly authorized by the corporation's certificate of formation and subject to the certificate of formation, the board of directors of a corporation may establish series of unissued shares of any class by setting and determining the designations, preferences, limitations, and relative rights, including voting rights, of the shares of the series to be established to the same extent that the designations, preferences, limitations, or relative rights could be stated if fully specified in the certificate of formation.
(b) To establish a series if authorized by the certificate of formation, the board of directors must adopt a resolution specifying the designations, preferences, limitations, and relative rights, including voting rights, of the series to be established or specifying any designation, preference, limitation, or relative right that is not set and determined by the certificate of formation.
(c) If the certificate of formation does not expressly restrict the board of directors from increasing or decreasing the number of unissued shares of a series to be established under Subsection (a), the board of directors may increase or decrease the number of shares in each series to be established, except that the board of directors may not decrease the number of shares in a particular series to a number that is less than the number of shares in that series that are issued at the time of the decrease.
(d) To increase or decrease the number of shares of a series under Subsection (c), the board of directors must adopt a resolution setting and determining the new number of shares of each series in which the number of shares is increased or decreased. If the number of shares of a series is decreased, the shares by which the series is decreased will resume the status of authorized but unissued shares of the class of shares from which the series was established, unless otherwise provided by the certificate of formation or the terms of the class or series.
(e) If no shares of a series established by board resolution under Subsection (b) are outstanding because no shares of that series have been issued or no issued shares of that series remain outstanding, the board of directors by resolution may delete the series from the certificate of formation and delete any reference to the series contained in the certificate of formation. Unless otherwise provided by the certificate of formation, the shares of any series deleted from the certificate of formation under this § shall resume the status of authorized but unissued shares of the class of shares from which the series was established.
(f) If no shares of a series established by resolution of the board of directors under Subsection (b) are outstanding because no shares of that series have been issued, the board of directors may amend the designations, preferences, limitations, and relative rights, including voting rights, of the series or amend any designation, preference, limitation, or relative right that is not set and determined by the certificate of formation.
§ 21.156. ACTIONS WITH RESPECT TO SERIES OF SHARES.
(7) a statement that the resolution was adopted by all necessary action on the part of the corporation.
(4) the resolution amending the designations, preferences, limitations, and relative rights of a series.
(c) An amendment of the certificate of formation under this § is not subject to the procedure to amend the certificate of formation contained in Subchapter B.
§ 21.157. ISSUANCE OF SHARES.
(a) Except as provided by § 21.158, a corporation may issue shares for consideration if authorized by the board of directors of the corporation.
(c) This subsection applies only to shares issued in accordance with Subsections (a) and (b) and §§ 21.160 and 21.161 for consideration consisting, wholly or partly, of a contract for future services or benefits or a promissory note. A corporation may place the shares, although fully paid and nonassessable, in escrow, or make other arrangements to restrict the transfer of the shares, and may credit distributions made with respect to the shares against their purchase price, until the services are performed, the note is paid, or the benefits are received. If the services are not performed, the note is not paid, or the benefits are not received, the corporation may pursue remedies provided or afforded under law or in the contract or note, including causing the shares that are placed in escrow or restricted to be forfeited or returned to or reacquired by the corporation and the distributions that have been credited to be wholly or partly returned to the corporation.
(C) the minimum amount of consideration for which the shares may be issued.
§ 21.158. ISSUANCE OF SHARES UNDER PLAN OF MERGER OR CONVERSION.
(a) A converted corporation under a plan of conversion or a corporation created by a plan of merger may issue shares for consideration if authorized by the plan of conversion or plan of merger, as appropriate.
(b) A corporation may issue shares in the manner provided by and for consideration specified under a plan of merger or plan of conversion.
§ 21.159. TYPES OF CONSIDERATION FOR SHARES.
§ 21.160. DETERMINATION OF CONSIDERATION FOR SHARES.
(3) by a plan of merger, if the shares are to be issued under the plan by a corporation created under the plan.
(b) If the corporation's certificate of formation reserves to the shareholders the right to determine the consideration to be received for shares without par value, the shareholders shall determine the consideration for those shares before the shares are issued. The board of directors may not determine the consideration for shares under this subsection.
(c) A corporation may dispose of treasury shares for consideration that may be determined by the board of directors.
(d) The amount of the consideration to be received for shares may be determined in accordance with Subsection (a) by the approval of a minimum amount of consideration or a formula to determine that amount. The formula may include or be made dependent on facts ascertainable outside the formula, if the manner in which those facts operate on the formula is clearly or expressly set forth in the formula or in the authorization approving the formula.
§ 21.161. AMOUNT OF CONSIDERATION FOR ISSUANCE OF CERTAIN SHARES.
(a) Consideration to be received by a corporation for the issuance of shares with par value may not be less than the par value of the shares.
(b) The part of the surplus of a corporation that is transferred to stated capital on the issuance of shares as a share distribution is considered to be the consideration for the issuance of those shares.
(3) any additional consideration paid to the corporation on the issuance of the shares.
(2) any consideration received by the corporation for the issuance of shares on the exercise of the rights or options.
§ 21.162. VALUE AND SUFFICIENCY OF CONSIDERATION.
In the absence of fraud in the transaction, the judgment of the board of directors, the shareholders, or the party approving the plan of conversion or the plan of merger, as appropriate, is conclusive in determining the value and sufficiency of the consideration received for the shares.
§ 21.163. ISSUANCE AND DISPOSITION OF FRACTIONAL SHARES OR SCRIP.
(4) subject to Subsection (b), issue scrip in registered form that entitles the holder to receive a certificate for a full share or an uncertificated full share on the surrender of the scrip aggregating a full share.
(3) subject to any other condition the board of directors may determine advisable.
§ 21.164. RIGHTS OF HOLDERS OF FRACTIONAL SHARES OR SCRIP.
(a) A holder of a certificated or uncertificated fractional share is entitled to exercise voting rights, receive distributions, and make a claim with respect to the assets of the corporation in the event of winding up and termination.
(b) A holder of a certificate for scrip is not entitled to exercise voting rights, receive distributions, or make a claim with respect to the assets of the corporation in the event of winding up and termination unless the scrip provides for those rights.
(a) A corporation may accept a subscription by notifying the subscriber in writing.
(b) A subscription to purchase shares in a corporation in the process of being formed is irrevocable for six months if the subscription is in writing and signed by the subscriber, unless the subscription provides for a longer or shorter period or all of the other subscribers agree to the revocation of the subscription.
(c) A written subscription entered into after the corporation is formed is a contract between the subscriber and the corporation.
(a) The corporation may determine the payment terms of a preformation subscription unless the payment terms are specified by the subscription. The payment terms may authorize payment in full on acceptance or by installments.
(b) Unless the subscription provides otherwise, a corporation shall make calls placed to all subscribers of similar interests for payment on preformation subscriptions uniform as far as practicable.
(d) Although the forfeiture of a subscription terminates all the rights and obligations of the subscriber, the corporation may retain any amount previously paid on the subscription.
§ 21.167. COMMITMENT TO PURCHASE SHARES.
(a) A person who contemplates the acquisition of shares in a corporation may commit to act in a specified manner with respect to the shares after the acquisition, including the voting of the shares or the retention or disposition of the shares. To be binding, the commitment must be in writing and be signed by the person acquiring the shares.
(b) A written commitment entered into under Subsection (a) is a contract between the shareholder and the corporation.
§ 21.168. STOCK RIGHTS, OPTIONS, AND CONVERTIBLE INDEBTEDNESS.
(2) indebtedness convertible into shares of any class or series of the corporation or other securities of the corporation.
(b) A right, option, or indebtedness described by this § shall be evidenced in the manner approved by the board of directors.
(c) Subject to the certificate of formation, a right or option described by this § must state the terms on which, the time within which, and any consideration, including a formula by which the consideration may be determined, for which the shares may be purchased or received from the corporation on the exercise of the right or option. A formula by which the consideration may be determined may include or be made dependent on facts ascertainable outside the formula, if the manner in which those facts operate on the formula is clearly or expressly set forth in the formula or in the authorization approving the formula.
(d) Subject to the certificate of formation, convertible indebtedness described by this § must state the terms and conditions on which, the time within which, and the conversion ratio at which the indebtedness may be converted into shares.
§ 21.169. TERMS AND CONDITIONS OF RIGHTS AND OPTIONS.
(2) invalidate or void the rights or options held by a person or transferee described by Subdivision (1).
(b) Rights or options created or issued before the effective date of this code that comply with this § and are not in conflict with other provisions of this code are ratified.
(c) Unless otherwise provided under the terms of rights or options or the agreement or plan under which the rights or options are issued, the authority to grant, amend, redeem, extend, or replace the rights or options on behalf of a corporation is vested exclusively in the board of directors of the corporation. A bylaw may not require the board to grant, amend, redeem, extend, or replace the rights or options.
(2) determine the number of rights or options to be received under Subdivision (1).
(e) A resolution adopted under Subsection (d)(1) must specify the total number of rights or options the authorized officer or officers may award. An officer may not be designated as a recipient of any rights or options that the officer is authorized to award under Subsection (d)(1).
§ 21.170. CONSIDERATION FOR RIGHTS, OPTIONS, AND CONVERTIBLE INDEBTEDNESS.
(a) In the absence of fraud in the transaction, the judgment of the board of directors of a corporation as to the adequacy of the consideration received for rights, options, or convertible indebtedness is conclusive.
(b) A corporation may issue rights or options to its shareholders, officers, consultants, independent contractors, employees, or directors without consideration if, in the judgment of the board of directors, the issuance of the rights or options is in the interests of the corporation.
(c) The consideration for shares having a par value, other than treasury shares, and issued on the exercise of the rights or options may not be less than the par value of the shares.
(d) A privilege of conversion may not be conferred on, or altered with respect to, any indebtedness that would result in the corporation receiving less than the minimum consideration required to be received on issuance of the shares.
(e) The consideration for shares issued on the exercise of rights, options, or convertible indebtedness shall be determined as provided by § 21.161.
§ 21.171. OUTSTANDING OR TREASURY SHARES.
(a) Shares that are issued are outstanding shares unless the shares are treasury shares or are canceled.
(b) If there are outstanding shares, one or more shares that together have unlimited voting rights and one or more shares that together are entitled to receive the net assets of the corporation on the winding up and termination of the corporation must be outstanding shares.
(c) Treasury shares are considered to be issued shares and not outstanding shares.
(d) Treasury shares may not be included in the total assets of a corporation for purposes of determining the net assets of a corporation.
§ 21.172. EXPENSES OF ORGANIZATION, REORGANIZATION, AND FINANCING OF CORPORATION.
A corporation may pay or authorize to be paid from the consideration received by the corporation as payment for the corporation's shares the reasonable charges and expenses of the organization or reorganization of the corporation and the sale or underwriting of the shares without rendering the shares not fully paid and nonassessable.
§ 21.173. SUPPLEMENTAL REQUIRED RECORDS.
(4) the number and class or series of shares issued by the corporation held by each current and past shareholder.

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