Court Opinion

ID: 4128256
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:37:22.243894+00
Date Added: 2024-06-11T14:34:13.814657
License: Public Domain

ATTORNEY GENERAL OF TEXAS
                                               GREG        ABBOTT

                                                     July 9,2009

The Honorable Hope Andrade                                 Opinion No. GA-0726
Texas Secretary of State
Post Office Box 13697                                      Re: Circumstances under which a foreign business
Austin, Texas 78711-3697                                   entity is required to register with the Secretary of
                                                           State (RQ-0778-GA)

Dear Secretary Andrade:

         You ask whether a foreign business entity is "considered to be transacting business in Texas"
under specific circumstances such that it would be required to register with the Secretary of
State's office under chapter 9 of the Business Organizations Code. 1 TEx. Bus. ORGS. CODE ANN.
§§ 9.001-.301 (Vernon 2008V Section 9.001 provides that "[t]o transact business in this state, a
foreign entity must register under this chapter ...." Id. § 9.001(a). The Legislature has not
affirmatively defined what it means to be transacting business in this state, but it has articulated
a list of "activities that [standing alone] do not constitute transaction of business in this state." Id.
§ 9.251 (emphasis added). Among other activities, that list specifically includes:

                  (2) holding a meeting of the entity's managerial officials, owners,
                  or members or carrying on another activity concerning the entity's
                  internal affairs;

                  (4)    maintaining an office or agency for:

                        (A) transferring, exchanging, or registering securities the
                  entity issues; or

         lRequest Letter at 1 (available at http://www.texasattorneygeneral.gov).

          2A "foreign entity" is defined as "an organization fonned under, and the internal affairs of which are governed
by, the laws of a jurisdiction other than this state." TEX. Bus. ORGS. CODE ANN. § 1.002(28) (Vernon 2008). "[T]he
internal affairs of an entity include: (1) the rights, powers, and duties of its governing authority, governing persons,
officers, owners, and members; and (2) matters relating to its membership or ownership interests." Id. § 1.105.
The Honorable Hope Andrade - Page 2              (GA-0726)

                      (B) appointing or maintaining a trustee or depositary related
                to the entity's securities;

                (9)   transacting business in interstate commerce;

                (10) conducting an isolated transaction that:

                      (A) is completed within a period of 30 days; and

                      (B) is not in the course of a number of repeated, similar
                transactions;

Id. Furthermore, the Legislature has explained that this list "is not exclusive of activities that do not
constitute transacting business in this state" for purposes of registering with the Secretary of State.
Id. at § 9.252. Beyond this non-exhaustive list, however, the Legislature has not defined the phrase
"transaction of business in this state" for purposes of the foreign entity registration requirement.

        You explain that "[i]n order to facilitate compliance" with the registration requirement, your
"office notifies foreign entities that are not registered with" your office "of the filing requirements."
Request Letter at 1. In response to these notifications, some "entities have responded that they are
not transacting business in Texas even though they maintain some presence" here. Id. You therefore
seek clarification about the following circumstances:

                1. Is a foreign business entity, which maintains no employees in
                Texas and performs the majority of its services outside of Texas,
                considered to be transacting business in Texas for purposes of
                registering with the secretary of state's office when its principal office
                or principal place of business is located in Texas?

                2. Is a foreign business entity, which maintains no employees in
                Texas and performs most of its services outside of Texas, considered
                to be transacting business in Texas for purposes of registering with
                the secretary of state's office when one or more of its
                directors/officers/managers is located in Texas?

                3. Is a foreign business entity that is a holding company transacting
                business for purposes of registering with the secretary of state when
                its principal place of business is located in Texas and the entity
                manages its subsidiaries from inside Texas?

Id.
The Honorable Hope Andrade - Page 3                       (GA-0726)

        You ask us to decide as a matter of law whether in these circumstances an entity transacts
business in this state under section 9.001 of the Business Organizations Code. See id. Whether a
given foreign entity is transacting business in this state, and is thereby required to register with the
Secretary of State's office, is a fact question that will depend on the specific circumstances of that
entity's business in Texas. See Altheimer & Baer, Inc. v. Vergal Bourland Home Appliances, 369
S.W.2d 478, 482 (Tex. App.-Fort Worth 1963, writ refd n.r.e.) ("In each case the transaction
involved must be considered in its entirety."); see also United States v. Scophony Corp., 333 U.S.
795, 819 (1948) (J. Frankfurter, concurring) ("Whether a corporation 'transacts business' in a
particular district [for purposes of the Clayton Act] is a question offact."); Lawrence Indus., Inc. v.
Sharp, 890 S.W.2d 886, 888 (Tex. App.-Austin 1994, writ denied) ("[W]hether a company is
'doing business' in a state [and is thereby subject to franchise tax] is inherently a factual inquiry.").

          Thus, facts in addition to those you posit are relevant to the decision as to whether a foreign
  entity is required to register with the Secretary of State's office. 3 For example, you explain in
  questions one and two that the hypothetical foreign business entity performs the "majority of its
  services" or "most of its services" outside of Texas. Request Letter at 1. Based on this limited
  information, it is impossible for this office to even determine whether those services performed in
  Texas are interstate commerce, such that an exemption to the registration requirement might apply.
  See TEx. Bus. ORGS. CODE ANN. § 9.251(9) (Vernon 2008) (transacting business in interstate
  commerce does not constitute transacting business in this state). A thorough analysis of the specific
. facts surrounding each foreign entity is necessary to determine whether that entity is transacting
  business in Texas. We cannot find and resolve questions of fact in an attorney general opinion:
 See Tex. Att'y Gen. Op. No. GA-0643 (2008) at 7 n.4. Thus, we cannot determine whether the
  circumstances described in your questions constitute the transaction of business in this state as a
  matter oflaw.

          3you cite three cases in support of your argument that the factual scenarios you propose involve the transaction
of business in Texas. See Request Letter at 2, nn.3-S. However, these cases do not address Texas foreign entity filing
requirements but instead address the federal court diversity jurisdiction statute, which states that a corporation is "deemed
to be a citizen of ... the State where it has its principal place of business." 28 U.S.C.A. § 1332(c)(1)(West2006). The
Texas Supreme Court has recognized that such jurisdictional issues are separate from and raise different issues than the
registration requirements for foreign entities. See 0 'Brien v. Lanpar Co., 399 S.W.2d 340, 343 (Tex. 1966) (noting that
the foreign entity registration requirements relate "to the general intrastate regulation of corporations. This is a different
problem from that of a state's power to assert jurisdiction over a nonresident corporation arising out of and limited to
its contacts in the forum state."); see also Retamco Operating, Inc. v. Rep. Drilling, Co., 278 S.W.3d 333,338 n.5 (Tex.
2009) (noting that the foreign entity registration requirements "do not limit the scope of the Texas long-arm statute.").
The Honorable Hope Andrade - Page 4           (GA-0726)

                                      SUMMARY

                       Whether a given foreign entity is transacting business in this
              state, and is thereby required to register with the Secretary of State's
              office under section 9.001 of the Business Organizations Code, is a
              fact question that will depend on the specific circumstances of that
              entity's business in Texas. Because this office does not find facts or
              resolve factual disputes in the opinion process, we cannot determine
              whether the scenarios you propose constitute transacting business in
              this state as a matter of law for purposes of the foreign entity
              registration requirement.

ANDREW WEBER
First Assistant Attorney General

JONATHAN K. FRELS
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Virginia K. Hoelscher
Assistant Attorney General, Opinion Committee