Case Information
*1 Honorable 0. P. Lockhart, Chairman Overruled by 0-5933A Board of Insurance Commissioners in 80 far a6 it conflicts &4~7 d Auet in, Texae
Dear Sir: Opinion No. O-5792
Re: Whether a life insurance company whose stock ie without par value may re- duce ite capital to $100,000 for the purpose of making good an impairment of its capital under the provisions of Article 4748 and Article 4704, Vernon’s Annotated Civil Statutes; and a related matter.
Your letter requesting the opinion of this department on the question0 etated therein reads as follows:
“A Texas life insurance company, whose share@ of etock are without nominal or par value, wishes to reduce its capital to $100,000. The Cotipany’s author.- ized capital ie $500,000, of which $250,000 was paid in in cash at incorporation.
“The purpose of the reduction is to restore an impairment in its present capital etructure. Thie
procedure is available to companiee with par value
stock under Article 4748.
“Will you please advise me whether, in view of Article 4704 and any other applicable statutee, a life insurance company whose stock ia without par value, may to $100,000 for the purpose of mak- ing good an impairment of its capital. *2 “If your anewer should be in the negative, ,. ~~ ~. ,,;;
please advise me whether the no par stock may be converted into stock with par value 60 that the
company may then proceed with the reduction un-
der Article 4748.”
Article 4704, Vernon’e Annotated Civil Statutes, provides, in part:
“Sec. 2. Upon the incorporation or upon the amendment of the charter in the manner now or here- after provided by law, of any insurance company
organized under the laws of thie State, provieion
may be made for the iesuance of &ares of its stock without a nominal or par value. Every euch ehare,
shall be equal in all respects to every other such share; provided, however, that the stockholders of
any euch company authorizing the issuance of it8
stock without nominal or par value, shall be re-
quired in good faith to subscribe and pay for at
leaet fifty (50s) per cent of the authorized share8 to be issued without nominal or par value, before
said corporation shall be chartered or have ite
charter amended 80 a8 to authorize the ireuance of
shares without nominal or par value; and provided
further that in no event shall the amount 80 paid
be less than Two Hundred Fifty Thousand ($250,000.00) Dollars.
n * * *
“Sec. 6. The privileges and power8 conferred by thia Act shall be in addition to any and all
powere and privileges conferred by any other law
or lawa, and not in rertriction or limitation of
any of the powere now permitted to ruch companies; life, health or accident inrurance companies organ- ized or amending their charter under thin Act shall be subject to and controlled by the provinionr of
Chapter Title Revieed Civil Statute6 of Texae, 1925, except where the provisions of eaid Chapter
are inconsistent or in conflict’with the provisions
of this Act.”
Honorable 0. P. Lockhart, page 3 (O-5792)
Article 4719, Vernon'8 Annotated Civil Statutes, authorizes insurance companies to amend their charter6 and also increase or reduce the amount of their capital stock in the manner therein prescribed.
Article 4748, Vernon's Annotated Civil Statutes, provides:
"Any insurance company transacting business within this State, whose capital stock shall be-
come impaired to the extent of thirty-three and
one-third per centthereof, computing its liabili-
ties according to the terms of this chapter, shall
make good such impairment within sixty days, by
reduction of its capital stock, (provided such
capital stock shall in no case be less than one
hundred thousand dollars), or otherwise; and fail-
ing to make good such impairment within said time
shall forfeit its right to write new business
this State until said impairment shall have been
made good. The Commissioner may apply to any
court of competent jurisdiction for the appoint-
ment of a receiver to wind up the affairs of such
company when its capital stock shall become im-
paired to the extent of fifty per cent thereof,
computing ita po~licy liabilities according to the
American experience table of mortality and four
and one-half per cent interest. No company shall
write new business in Texas when its net surplus
to policy holders is less than one hundred thousand dollars." supra, authorizes insurance companies to
issue shares of their stock without nominal or par value. Said statute requires companies issuing such stock to subscribe and pay for at least fifty per cent of the authorized shares to be issued without nominal or par value before said corporation shall be chartered or have their charters amended so as to authorize the iseuance of shares without nominal or par value, and in no event shall the amount 60 paid be less than $25O,OOO. In view of Article 4704, it is our opinion that a life insurance company whose shares of stock are without nominal or par value cannot Such statute (Article 4704) ex- to $100,000.
- . . _ pressly provides that in no event shall the amount 80 paid be less than $250,000.
It is our further opinion that Article 4719 authorizing insurance companies to reduce their capi- tal stock does not authorize such companies to reduce their capital stock whose shares of stock are without nominal or par value to any amount leS6 than $250,000. Vernon's Annotated Civil Statutes, provides:
"The laws governing corporations in general Shall apply to and govern insurance companies incorporated
this State in so far as the same are not inconsistent with any provision of this title."
Articles 1538a,-1538m, Vernon's Annotated Civil Statutes, authorize corporations generally to iSSUe stock without nominal or par value. These statutes authorize private corporations for profit, other than corporation6 authorized to conduct a banking or insurance business, having authorized Share6 for par or face value, or shares without nominal or par value, or both, to change its shares of Stock with par or face value, or any class or classes thereof, into the same number or into a larger or smaller number of shares without nominal or par value, provided that all shares in any one class shall be changed on the same basis, or 60 a6 to change its shares without nominal or par value, or any ClaBB or classes thereof, into a larger or smaller number of Shares with- out nominal or par value, provided that all shares in any one ClaSS shall be changed on the same basis. It will be noted that these statute6 do not authorize corporations generally to convert Share6 of stock without nominal or par value into stock with nominal or par value.
After a careful search of the cases of the appellate courts, we have failed to find any case paseing upon the qUeStiOn under consideration. We have also failed to find any authority or statute authorizing a life insurance company who66 shares of stock are without nominal or par value to convert such stock into stock with nominal or par value. Therefore, it is our opinion that a life insurance company whose shares of Stock are without nominal or par value cannot legally convert such stock into Stock with nominal or par value.
Yours very truly
APPROVED
APPROVED JAN 28, 1944 OPINION
/s/ Grover Sellers COMMITTEE ATTORNEY GENERAL OF TEXAS ATTOPJiEY GENERALOFTEXAS BY /s/ GWB By /a/ Ardell William6 Ardell William6
CHAIRMAN Assistant AW:RP