Court Opinion

ID: 4144066
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:40:49.982029+00
Date Added: 2024-06-11T14:49:47.138405
License: Public Domain

Honorable Walter C. Woodward, Chairman
Board of Insurance Commissioners
Austin, Texas
Dear Sir:               Opinion No. O-2323
                        Re: Construction of Article 5001,
                             Revised Civil Statutes of Texas,
                             1925.

          This will acknowledge receipt of'your letter of
May 2, 1940, in which you request the opinion of this depart-
ment on the above stated question. We here set out the per-
tinent parts of your request:
          "Please refer to Article 5001, Texas Revised
      Civil Statutes, which reads as follows:
                "'Any such company may increase its
            capital stock at any time after the in-
            tention to so increase the capital stock
            shall have been ratified by a two-thirds
            vote of the stockholders, and after notice
            of the purpose to so increase the capital
            stock has been given by publication in some
            newspaper of general circulation for four
            consecutive weeks. IVJ Fncrease of capital
            stock in less amount than fifty thousand
            dollars is hereby authorized.'
          'We would like to be advised what is your con-
      struction of this Article insofar as it requires
      publication of the notice to increase the capital
      stock. In other words, when is this notice of the
      purpose to increase the capital stock to be pub-
      lished, before or after the proposed capital stock
      increase has been ratified by a two-thirds vote
      of the stockholders of the Company?"
          Article 5001, supra, Is found in Chapter 18, Title
78, of the Revised Civil Statutes of Texas. This Article
applies to casualty insurance companies organieed under such
chapter and is peculiar to this particular type of company.
Hon. Walter C. Woodward, page 2 (Opinion No. O-2323)

The other chapters in Title 78, dealing with other types of
insurance companies, as well as the general corporation laws
of this State do not contain provisions similar to the one
here being considered. This being true, it necessarily r0110ws
that we must look elsewhere for the procedure to be followed in
increasing the capital stock by all companies other than those
organized under Chapter 18, supra.

          Article 1330, Chapter 3, Title 32, dealing with private
corporations authorizes such corporations to amend their charters
So as to increase their capital stock by provldingt

          "The board of direators . . may increase its
      authorieed capital stock . . . when empowered to
      do so by a two-thirds vote of all its outstanding
      stock . . . at a special or called meeting for
      that purpose. . . ."
This article is silent as to the kind and character of notiae
required prior to a stockholders' meeting. We must necessarily
look to the common law for guidance. Here, we find it a well-
settled principle of law that no change can be made in the
capital structure of any corporation except by a two-thirds vote
of the outstanding stoak pursuant to notice of a meeting called
for that purpose. See Thompson on Corporations, 3rd Edition, Vol.
5, page 474, para. 3651; 18 Corpus Juris Seaundum, 1230, para.544.
Furthermore, the notice so required must state the purpose or
nature of the business proposed to be transacted thereat. Ann. Gas.
1917 E.,1004.
          A careful consideration of Article 5001, supra, leads
us to the conclusion that the Legislature did not intend to sub-
stitute the published notice provided for therein for the personal
notice required at aommon law, but intended that suoh published
notice should be notice to the public of a contemplated Increase
in the capital stook of suah corporation.
          We therefore oonstrue such artiale as requiring publi-
cation of the notiae after the stockholders have met and voted
to inorease the oapital stoak.  This holding is in line with the
praatloe of this department over a long period of time of approving
amendments to oharters of Chapter 18 casualty aompanies.
                             Yours very truly,
                          ATTORNEY GENERAL OF TEXAS

LA/AW/rt                  By /s/ Lloyd Armstrong
APPROVED MAY 15,194O                   Assistant
/s/ GERALD C. MANN
ATTORNEY QENERAL OF TEXAS        (This opinion considered and
                                  approved In limited conferenae)