Court Opinion

ID: 4135229
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:59:48.550016+00
Date Added: 2024-06-11T14:34:20.848197
License: Public Domain

Mr. J. N. Nutt                 Opinion No. c-231
Commissioner of Insurance
State Board of Insurance       Re: Must an ,existing life in-
Capitol Station                    surance company have on
Austin, Texas                      hand aggregate capital and
                                   surplus of at least $250,-
                                   000 before it can amend
                                   its charter to provide ad-
Dear Mr. Nutts                     ditional no par shares.

        You have requested our opinion on the following ques-
tion:

             "'Isa life insurance company which is au-
         thorized to issue stock without nominal or
         par value required to have on hand aggregate
         capital and surplus of at least $250,000 be-
         fore it can amend its charter to provide addi-
         tional no par shares?""

         In youx letter you state that before approving a char-
ter amendment to provide additional no par shares it has been
the policy of the State Board of Rnsurance to require a state-
ment of the company, under oath, that at least 50% of the au-
thorized shares have been subscribed and fully paid for, and
that not less than $250,000 has been received for such issued
shares,
         010 I " but it has never been the policy of the
         Department to require evidence that not less
         than $250,000 baggre'gatecapital and surplus) is
         in the possession of the company at the time of
         such amendment.""
Mr. J. N. Nutt, page 2 (C-231)

         you indicate that this question has arisen by virtue
of some of the language of the Attorney General's Opinion
No. ~-360 (1958) which could be construed as holding that
Article 3.02a of the Insurance Code requires $ZSO,OOO to be
in the possession of the company at the time of such amend-
ment.

         The applicable part of Article 3.02a of the Insurance
Code provides:

         . . . At the time of filing of an original
        charter or any amendment of an existing char-
        ter authorizing the issuance of stock with no.
        par value the company sha.11file a statement
        under oath with the State Board of Insurance
        setting forth the number of shares without par
        value subscribed and the actual consideration
        received by the company for such shares. Pro-
        vided, however, that the stockholders of any
        such company authorizing the issuance of its
        stock without nominal or par value, shall be
        required in good faith to subscribe and pay
        for at least fifty per cent (50%) of the au-
        thorized shares to be issued without nominal
        or par value, before said corporation shall be
        chartered or have its charter amended so as to
        authorize the issuance of shares without nominal
        or par value: and provided further, that in no
        event shall the amount so paid be less than Two
        Hundred Fiftv Thousand Dollars ($250,000) . . .'I
        (Emphasis added.)

         In Attorney General's Opinion No. WE-360 the question
of the requirements as to minimum,capital, minimum surplus and
the minimum aggregate of capital and surplus of a life insur-
ance company issuing no par value stock was presented.   This
Opinion did not have before it the specific question presented
herein, and any statement concerning the capital, surplus and
aggregate capital and surplus requirements before there can be
a charter amendment to provide additional shares was dictum,
and not controlling in the answer to this request.

                                 -1121-
Mr. J. N. Nutt, page 3 (C-231)

         Article 3.02a provides that the amount paid for a
company's shares shall not be less than $250,000. However,
Article3.02a has no application to the continuing financial
structure of the company in relation to the minimum capital
and minimum surplus which must be maintained by the company.
See for example Section ,5 of Article 3.02 of the Insurance
Code wherein the minimum capital and minimum surplus require-
ments at the time of ,incoroorationare set forth, and then
provides only that:
         II. . . such minimum capital shall at all times
         be maintained . . .'I

         Similarly Article 3.3%3(l) of the Insurance Code pro-
vides:
         ,I    ,. and the minimum capital of a companv
         ,hereafter orsanized under said Article 3.02
         and the minimum free surplus of a company
         hereafter organized under said Article  11.01
         at all times shall be maintained in cash or
         in the same classes of investments . . ."

This apparently places the requirement of the maintenance of
surplus only on those mutual life insurance companies orga-
nized under Chapter 11, and restates the requirement that
minimum capital only be maintained at all times by insurance
companies under Chapter 3.

         The Insurance Code has been carefully searched for any
intent that such aggregate minimum capital and surplus be main-
tained at all times, or in the alternative, that such must be
on hand as a prerequisite to the amendment of its charter to
provide for additional shares. No such intention is found and
there appears to be no valid reason for placing this heavy a
burden on no par life insurance companies. It is also ob-
served that instead of providing any additional safeguards
this purported onerous requirement could well have the very
opposite effect.

                                 -1122-
                                                                ---.

Mr. J. N. Nutt, page 4 (c-231)

         It is, therefore, concluded that your departmental
construction is correct, that it is not necessary for the
company to have on hand an aggregate of $250,000 in their
capital and surplus at the time,of such amendment, and that
to the extent that the prior Opinion m-360 is in conflict,
it is expressly overruled.

                          SUMMARY

               An existing life insurance company au-
          thorized to issue no par stock is not re-
          quired to have on hand aggregate capital
          and surplus of at least $250,000 before it
          can amend its charter to provide additional
          no par shares.

                                 Respectfully submitted,

                                 WAGGONER CARR
                                 Attorney General of Texas

PP:da:s
                                 By,-   Assistant Attorney General

APPROVED:
OPINION COMMITTEE

W. V. Geppert, Chairman
Joe Long
John Reeves
W. 0. Shultz
Robert Smith
APPROVED FOR THE ATTORNEY GENERAL
By: Ii.Grady Chandler

                               -1123-