Court Opinion

ID: 4135224
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:59:45.161406+00
Date Added: 2024-06-11T14:36:36.344641
License: Public Domain

THEATTORNEY                 GENERAL
                  OFTEXAS

                     April   8, 1964              \
Honorable J.N. Nutt          Opinion No. c-236
Commissionerof Insurance
State,Boardsof Insurance     RE: Whether a life Insurance
1110 San Jacihto             company is required to comply
Austin, Texas                with the provisions of Article
                             4.02A (1) and (2), Tcxaa Busi-
                             ness CorporationAct, In addl-
                             tlon to complyingwith the pro-
                             vlslona of Article 3.05, Texas
                             Insurance Code, in order to
                             effect an amendment to its
Dear Mr. Nutt:               articles of Incorporation.
         You hay! requested the opinion of this office con-
cerning the appllcabllltyof certain provisionsof the Texas
Business CorporationAct (hereinafterreferred to as the "Act"),
to a life insurance company seeking to amend Its articles of
Incorporationunder the provisionsof the Texas Insurance Code
(hereinafterreferred to as the “Code”).
        Your letter reads in part as follows:
            “The State Board of Insurance has pending an
        applicationfor approval of an amendment to the
        articles 0r incorporation0r a life Insurance
        company organized and operating under the laws of
        the State of Texas. It has been the policy of
        this Department for approximatelyfour years to
        require a life insurance company making applica-
        tion for approval of a charter amendment to furnish
        evidence of compliancewith the provislonsof
        Article 4.02A, Texas Business CorporationAct,
        in addition to requiring compliancewith Article
        3.05, Texas Insuranc’eCode.
           “Article 4.02A (l), Texas Euainess Corporation
        Act, requires that the board of directors of the
        company initiate the action by which a charter
        amendment is to be effected by the adoption of a
        resolution setting forth<the proposed amendment
        and dlpecting that it be submitted to a vote of
        the shareholders. Article 4.02A (2) requires
        that notice of the proposed amendment be given
        to each shareholdernot less than ten nor more

                             -1143-
Hon. J.N. Nutt, page 2, Opinion No. C-236

                                        .
        than fifty days prior to the date of the
        meetIn& at which the shareholderswill vote
        upon the proposed amendment. The documents
        filed with this Department In connection
        with the pending applicationdo not reflect :. '.'
        that the procedural steps required by Article
        4.02A (1) and (2) have been followed by the
        company lrlthat it does not appear~thatthe
        board of directors initiated the action &nd
        that it does not appear that any notice was
        given to the shareholdersprior to the meet-
        ing at which they voted to amend the charter.
        The company has taken the position that,Artlcle
        4.02A. Texas Business CorDorationAct. is not
        applicable to a life Insurance compani seeking
        to amend Its charter.
        II
         . * . we respectfullyrequest your opinion
        on the following question:
           'Is a life insurance company required
           to compl with the provisions of Article
           4.02A (I.3and (2), Texas Business Corp-
           oration Act, in addition tq complying with
           the provisionsof Article 3.05, Texas Insurance
           Code, in order to effect an amendment to its
           articles of Incorporation?'"
        The provisionsof Article 3.05 of the Code, entitled
"Amendmentof Charter," relevant to this question are as follows:
         '!Atany regular or called meeting of the stockholders,
         they may, by resolution,provide for any lawful
         amendment to the charter or articles of lncorpora-
         tion; and such amendment, accompaniedby a capy
         of such resolution,duly certified by the presi-
         dent and secretary of the company, shall be filed
         and recorded in the same manner as the original
         charter, and shall thereupon become effective . . . "
         Also, the pertinent provisionsof Article 4.02A of the
Act, referred to in thitirequest, are as follows;
         "A. The articles of incorporationmay be amended
         in the followingmanner:

                           -1144-
Hon. J.N. Nutt, page 3, Opinion No. c-236

           (1) The board of directors shall
           adopt a resolution setting foPth~,the
           proposed amendment and directing that
           it be submitted to a vote at a meeting
           of shareholders,which may be either
           an annual or a special meeting.
           (2) Wrltten or printed notice setting
           forth the proposed amendment or a summary
           of the changes to be effected thereby
           shall be given to each shareholderof
           record entitled to vote thereon within
           the time and in the manner provided in
           this Act, for the giving of notice of
           meeting8 of shareholders . . ..'
         The time and the manner for the glvl'$ of notice of
shareholders'meetings referred to in Article .02A (2) of the
Act are prescribed in Article 2.25, Texas Eualness Corporation
Act, which provides that written or printed notice stating
the place, day and hour of the meeting shall be delivered not
less than ten (10) nor more than fifty (50) days before the
date of the meeting to each shareholderof record entitled
to vote.ln such meeting.
         This office held, In Attorney General's Opinion WW-905,
Issued on August 18, 1960, that the provisionsof the Act sup-..
plement the Code In respect to life Insurance companies,insofar
as and to the extent that such provisions are not Inconsistent
with the provisions of the Code. (Article 9.14A, Texas 3uslness
CorporationAct, and Article 3.69, Texas Insurance Code). There-
for@, the precise question for our determinationIs whether
or not the requirementsas presented In Article 4.02A (1) and
       the Act, are Inconsistentwith any provision of the
&,21\eof
    . If not, such requirementsof the Act are applicable,
and must be complied with by a life Insurance company in
exercisingIts power to amend Its articles of incorporation.
         The authority to amend articles of lncorporatinlies
with the legislature,as does the power of creation of a corp-
oration In the first instance. However, this power to amend a
charter may be, and generally la, conferred,bythe legislature
upon the shareholdersof a corporation. (18 C.J.S. 472, Carp-
oration, Sec. 80). The placing by the leglnlatureof such
power to amend, In the shareholders,is consonant with established
corporate law in that although the general management and con-
trol of ordinary business affairs are vested in the.boardof

                           -1145-
Hon. J.N. Nutt, page 4, Opinion No. c-236

directors, extraordinaryor unusual powers not relating to
normal'
   --   corpmate
           -     affairs remain and are
                                      ._vested
                                          _    In the share-
holaers . Tne~power to amena a corporatlon~scharter or
articles of Incorporationfalls within the realm of such
"extraordinaryor unusual" powers vested In the shareholders.
2 Hildebrand on Texas Corporations(Perm. Fd. 1942) 499;
and 18 C.J.S. 476, Corporations,Sec. 81 (b)(l).
          It is our opinion that the legislature,by providing
under Article 3.05 of the Code, entitled "Amendmentof Charter,"
that ~the shareholdersx   by resolution provide for ang:l.lawful
amendment at any regular or special meeting, Intedded to
authorize the sharehbldersto exercise within their discretion
the ultimate power to amend the charter or articles of incorp-
oration; and that the legislaturefailed to prescribe the pro-
cedure to be followed In exercising this discretlonerypower
of amendment. It 18 apparent from a reading of Article 3.05
that there are no requirementsrespectingthe procedure to be
employed in the exercise of this power to amend articles of
incorporation,such 8s notice of the proposed amendment, to
whom notice Is given, by whom notice Is given, the time and
manner in which such notice Is given, the required vote of
the shareholdersnecessary to adopt an amendment (excepting ,.
the requirementof a majority of shareholdersfor the Increase
or reduction of capital stock), or any of the other normal
steps or incldencesof a method to be followed In seeking to
amend articles of Incorporation. Article 3.05 merely provides
that the amendment and the certified copy of the shareholders'
resolution, evidencingIts ultimate adoption-ofSuch amendment,
shall be filed In the same manner as the charter. Therefore,
 rior to the ultimate accept&nceof an amendment by resolution
!TiTfie shareholdersand the subsequent filing of such amend-
ment and certified resolution, the Code Is silent as to what
procedure Is to be followed in order to effect an amendment'
to articles of Incorporation.
         It Is therefore our opinion, baaed upon the foregoing
reasoning and principlesof law, that the requirement&a,spre-
sented In Article 4.02A (1) and (2) of the Act are not In&n-
sistent with the provisionsof the Code regulating life
insurance companies,and thereby should be complied with by
a life insurance company seeking to effect an amendment to
Its articles of Incorporation. The applicationof such Fequlre-
ments of the Act to a life Insurance company will not frustrate
or defeat the intent or spirit of Article 3.05 of the Code,
but togthe contrary is consistentand harmonious with the

                           -1146-
Hon. J.N. Nutt, page 5, Opinion No. c-236

the provisionsof'the Code for the amendment of articles of
incorporationof a l$fe insurance company.

               A life Insurance company 1s required to comply
            with the provisions of Article,4.02A (1) and (2),
            Texas Business CorporationAct, in addition to
            complying with the provisions of Article 3.05,
            Texas Insurance Code, In order to effect an amend-
            ment to its articles of Incorporation.
                              Yours very truly,
                              WAGGONER CARR
                              Attorney General of Texas

JNS$smd
APPROVED:

OPINION COMMITTEE:
W.V. Geppert, Chairman
Joe R. bng
Malcolm Quick
Gordon Appleman
James Strock
APPROVED FOR THE ATTORNEY GENERAL
BY;
     Howard W. Maya

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