Case Information
Oi=FICE Ok ‘rHE ATTORNEY GENERAL OF TEXAS
AUSTIN
Hoooreble Cleude Iebell
secretcry of state
Auatin, Texas
itteM&m: flofioreble Xoraoe 8. .*eaione
Lieouritlea commlablor.r
'3ear sir:
rty (30) peraoIIe. The ssouritia8 Diviuion or ra of the proposed exa6 Soouritiets Aot wae availebxa, th6 reglstretlon provioloue of.
e neoeessry . ornay contend8 that, rinoe thir ID ifi whioh aubsarlbera ntarpriea in aubsorlbl~ ror etook, pertlalpeted the Texas tioaurities Aot would have no epplioa- tiOE. to our knowledge this mntter ha8 not 93inoe
been the eubjsot or httorney Oenersl*e oplnlon, and wa have no Taxes oaaea beering on the eubject, *2 ,
we 511all rspprCcl%te ::o+r fi>vorin(- u5 .itil tlli O&l- Ion OE the question raisd4 by the attornej' for the lnoorpd~ators. %e atteoh Lareto CT copy or th3 popoee4 chur-
tor an4 efrmvit, together with.our complete aor- re8pondenoe file for your l.uforn@tlon in &ivlng tha mott*r aon8i46retlon. ;ue ehell aypreolate Lhe return of tais matorial.w
The purposo clause of the Woo4 Leke Auter Corporstion 0s stated In the Article8 of Inoorporation ia:
mThe purpo8s wnioh the oorporhtion I8 organleod Is to rupply water to the pub110 In the iw0a IalE4 comauuity In Trinity county, Texe8.a' T& amount of the 8took I8 Three Thourend Dollar8 (,3,000.00) 4lvi4od into 8Ixtb (60) ihnrea at rlrty Dollar8 (+SO.OO) l eah, all of wtioh oepltel stook has beon in good fait3 sub8orIbod and the 8um of Two Thousand Two Iiundnd Dol- ler8 (i2,2OO.O0) pal& In as.per~arrIdavlt aooorapanylng chartar. Tha rpOunt paid in by l ubearibers wa8 paid by tha aalo, corporation and oonveyanoe tran8rar of th8 property whioh we8 purohaaed~ iron an agency OS tho Units4 stetoa gov4mmont 46sorlbe4 In the arridevlt eooocnpanying the Art10108 of lnoorporatlon. Cenerelly apeakhg the ohar- ~oorporatlon oannot file4 unle88 tha full ter of e priveto amount of It8 authorized oapital stock he8 bean In go04 faith aubrorlbod an4 rirtg per oant (56) thoreor peI4:ln oaah, or it8 oquivaloent In Other property or labor done. (Artlola 1308, Vernon08 Annotated Civil Statutea). Thin provl8Ion re- refer8 in term8 to the aggregate mount of oeQlt.81 stock. S0 longerrl!th8 con814aratI00 re00lv04 rr0m nome 8tookhol4ora n0ouut8 to rirty par oat (SW$) or the total amount of the oa$Ital *took, thl8 yrarequirito,o1 Incorporetlon I8 00m- plied with. (Stringfellow v. Panhandle i:eoklng Cornyany, 213 4. 3. 250.)
SuboootIon8 (a), (b) and (0) or Seotlon 2, Article WOa, Varnon*8 Annot8te4 Clvll Statute8 are ~8 follow8r T&o term * esourity’ *8eaurltlo8* *(a) troaaury took,
8haU Inoludo any share, stook, 8took oortlrloate undar a votlng trust ag~oaant, oollatoral oortIrlcate, aquipmsnt tru8t
06rtifioa tu , prtor,+iilzutioii ccrtiiicoto or receipt, or raoreonizetion o~rtlficotc, s.ota, aubeoription bond, debefitura , mortgo~a o6rtificat.e or other avi- denca of indebtedness, an!, form of oOiUU6rOial pap6r, cartiriotit6 in or under 6 i.rofit s:iurlI& or pUti.- clpetlon egreem6nt, certlflcata or any inetrument reprcraonting anj- interest in or under Pfi Oil, L;68 or mining 16686, fee or tltla, or any oertifloata or inatrumant repreeentlng or 86our6d en inter- est in any or all or tha oapitol, property, 6aset8, profita or oarri~a of eny oomyeny, inVaatm6I~t COIL- treat, or any other inetrument oommonly known 68 a security, whether eMl6r to those herein rafarred to or not. The term *oompany' ahall inolu46 a aor- *(b)
poratlon, a pbraon, joint #took company, pertfiar- ship, 888OOi8tiOn, OOmQeny, 8yndia6to trIl#t, in- oorporatsd or unincorporated, h6retofora or horoerter fOrrpSd tSI46r the 16~8 Of this or any other Stat., , 8OVOId&nty thore- or politioal 8UbdiviDiOn oountry OS. An ~884 horein, the term *trust9 8haU be daowb to inoludo e eOpIleo0 leu trust, but ah6u not inoluda a oreat or appointed under by virtua of 8 lO#t will en4 tO@tW&O5t or by 8 OOUrt Of law end equity, *(a) The tom *dealer* anal1 inaluda every
parson or company, Other f&en a sa~68~I6n, who en- gages In this Ytate,~eithar for all or pert 0r hi8 or Its time, directly or through en agent, in selling, 0rrOring ror sale or 4611vrry or solioitlrq 8ubeoriy- or Order8 for, or undertaking to 418po8e tiOIl8 to, of, or to bvlte OffOrD ror, or sealing in 6ny other PBnnor In ayy aoourity Qr seouritiar within thin State. Auy issuer other than e reglataro4 dealer, Of 6 seourity or DSOUriti638 who, dlreotly tu-ougn any poreon or oomyany, other than a roglstere4 dealer, ror 8616, 60118 Or AT&~@ SuleD Of it8 Own ortern DOOUdty or 8~OUdtiO8 8h811 bo dOOnL.4 a dOd#r ?Uld ii0 oomply with the proVi#iO&I# Shall bo rS~Uir04 hereori provi464, howav6r. thie YeotiOU Or QrOVi8iOIi8 h611 not 6Qply t0 8uoh i#@U~r if auoh 8eOllrity Or saouriti68 6~ ror aale or 8014 alth6r to a .0rf6ma *4 :0J10ratll6 Glaude I~bcll, i;yi~;e 1+ 3 of rrtiols 600s. Vernon*8 Annotated Civil action
Statute8 onuaeratae Oartaln oxumpt tl’tiJiBUOt~OJiU, tllld sub- tbOtiOn (1) Of t&id s6OtiOA it Ma I’OllOV~O: Subeoriptions t3 OapILbi 8GOCk LluOba- “(1)
sery to (;ualIfy for Incorporation &en eubeoribed by AOt aore than fifteen (15) lnoorporatorr In a proposed Text8 oorporation." tie&P there no [18] question Under the dafinitiOn but the atook referred to Is sub- 0i tern “8eoUrity” or “8e0Uri- to the yrorl~Io~a of the Seourltles Act, unle88 exempt jsot thereX= by 80~8 prdri8ions of the Act. The Tex88 Security Aot r6gdXe8 the r6gittrttiOA Of all t6eUdti68 8016 IA Toxcr8 oaw within a 8psoiflo exemption from unleue 8uah atouritita rtgirrtrttion under Sootions 3 and 23, and the hot al80 pro- vides that pawn8 makin any orfaring and eale OS 8eourltie8 unlto~ the saourltler, ere aold a8 nourity ealert be lioennd t .X.~ ,~ in exeiapt trsn8sotiont lI8ted under the sxemptioA8 proviatd under 8ald eeotiona above mentioned.
It will notad that under, Sib8ection (1) , seotion 3, 8upra, sUb8oriptiOA8 to oapital 8took neoe88ary to qwirg inoorpor&d.on I*heA 8ub8orIbed by not more then fiftOtA for in & proposed Texae oorporatlon art exmipt (15) inoorporatora fP2m the JWOTi8iOA8 Of tht SOOllritI~8 bOt. ItMy~:,~~a";;t the dopartawt8l or the Seorttary oonatruotion there wore 010x% 'than fifteen if (15) subaoribsrs to. oapital stook e propoevd Texa8 Qorporetlon tLl6 prOV&DiOA8 'of the 3ourItie8 itot would oe applloeble, unless exempt b; nome provI8lon8 OS the statute. The subsoribere Lo capital etook the iAOOrpOBStOr8. The Inaorporators an m6 A06 moe88ariig panon obtaining the oharter. see 2 uordt EIAQ I’hrtntn, 1623. (tioUidty v. Parsons et tl, 116 s. L. 907.) 1st seriar, Texas Corporation8, VOluait
It 18 8tated la HilGebrsnd18 'Tha Tou8 atatute8 do not dilrerentiate be- tweon btookholdsrr* and ‘eubaorlberr* etook Of the OOrpOretiOA. For iA6t6flO0 iA VerJlOA'e AAAO- tattd Civil statutea, Artiole 1308, It i8 provided that before the charter oun btr filed by the &ore- tary state, tha full amount ot its oayital ntook &et be eubeorlbed Its atockholdaru. IA Arti *5 1313 It in thu stocnholdars t:ict xurriieh evidence tu the xcrottiry of state t!i6t tlie low has been oompliud with. fiocordiAG to krtiole 1326 th6 by-luwe me:: b6 altered, ohaagador timended by a majority vota or the StOOkhOld6ro. 4rtIole 1323 providea that then books aAd raoorda of Lb6 oor>o- ratiOA ehall b6 open t0 iA8peotiOJl Of any etook- holdar. Artiola 1336 authorizee the forreiture of the atook If aw atookholder n6,eleote to pa?
any Inat&.lment ae rsGuIred by the Board of DireetOrS, aAd Arti016 1345 authorizes an exeou- tlon againat a4y of the stockholders to 6n extent equal to the emount of the etook unpaid. UA other hand, Artiole 1335 provldee that the Board Of DireotOrS mey reqUir0 'th6 SUbeorIberS* t0 the oepite1 8tOok to pey the emount eubearibed a6 is prOVided in the by-1awS. In other words, IA mO8t iASttflOt8, a party who hae subscribed for StOok in e oorporetion on ortdlt It deaiguattd es e atookholder even though he hoe not fully peld for hi8 etook. Tharefora, the atatutat fUrAi8h e 801UtiOA Or muoh USSittJAAOt iA deoiding do riot th8 above problfma. . .* YUbaectiOA (8) Of SeOtiOA 2 of krtiole 6008, VerAon'
.iJUIOtOted CiVfi St&Ate8 18 US rOllOWt:
*The t0rmt ~8~16~ or *orrer for sala* or *tell' 8hl.l inolude every diSpOSItiOA, Or 6tteJnyt to die- The term ‘S&h* meano POM Or t 88OUdtJ Vtbe. atiP includes oontraota and egreements whereby aoouri- tie8 ere 8old,~treded or orohawedfor moJJey, property or other thing of value, or uny transfer or agreement to trunrter, IA or otharwise. kqy seourlty given or delivered with or as b bonus on eooount of, any pUrohe8e of eeourltleo other thIAg ortielue, shell be oo~olusfvs~ prseumod to constitute a part Of aubjoot of ouoh puraheae end to htVo been The teW 'Sell' m6eA8 eny eet by sold for value. rhioh a salo io mado, end term *selec or *Offer tOr 8810' 8hSu. inOhld@ 8 SUbSOriptIOA, eA OpttOn ior Sth, a'solioitation of 8818, an attempt to ~011, or an ofror to 8011, diwotly or by an egent or Sa~OS- man, a olroulsr, lotkr or 8dV6rti86m6nt othar- WiSe, IAOlUdiAg the deposit IA e United St6ttS POSt *6 tirflca or ~11 box ~)r in ULA~ in~m~er i;l twit; United ;it,atea nails sithifi this state of a latter, clroular or other sdvortlaln& matter; yrovidr;d, !iowt)ver, that notninE harsin shell llmlt or dlmiuleh the full meaning or the tarma *aala,' *sell* or 'offer: for anle' aa used by or aooaptad ln courta of law or uquity. Provided, further, that ths aala of a aoourlty undar oondltlona whioh entitle the pur- ohaaer or subaaquant holder to exohangv ths, aaaa for, or to purohaaa noaa other eeourlty ahall not ba deaaad a eula or offer ror sale or suoh other l eourlty; but no l xohanga for or sale of suoh othar aaourltg ahall aver ba made unleaa and until the aala tharaof ahall have basn flrat authorlzad in Texas under this Aot, if not exempt hereundur, or by other prorlaiona Of law.*
saotlon 5 of mtiole 6000 la in part aa rollowrr
*No dealer, agent or aa1aam.m ahall 8011 or aala any aeourltlea laauad after offer paaaage of this Aot, exoapt those which ooae within the oleaaaa anuaaratad in Subdlriaiono (a) to (a), both lnoluairo,of Saotion 3 of this Aot, or Sub- dlvlalona (a) (1). both lnolualve of section of thla Aot, until the iaauar of such aeouritlea 8hsl.l have beon cranted a porn&t by the saoretary of Sate, and no auoh parmlt ahall be graptad by the 3eoratary of Stat8 until the laauer of auoh aaourltloa ahaU have filed with the Seoratary of State a aworn l tntaaunt verified under the oath of an l xooutlre offioor of the lsauer and attaatad the aaoratary tharaof , .aottlng rorth the r0ii0+ ing inror5atlonr i . .*
Tha Artfolua of Inoorporatlon of tba Wood J,aka ‘u;ater dlaoloaa that than ara th~raa incorporatora who here CorpOrutiOi subaorlbod for a oartain nucnber of aharaa of atook and that thara We a number of other parsons who have aubaoribad for oerta5.n nun- bera of aharaa of atook and that 8UOh aubaorlptlona whlab hava b~ean paid, aa horalnabove l tatad, ware paid in by the tranefer Of oertaln proparty to oorporntion. Gonerally agesking atookholdora are menbora of a oorporatloni howarar, thay an not neoaaaarlly tha lnoorporatora. After oarorully conaiderin(J your (iueatlon, wa place the aaa ooaatruotion on Subaaotion (19, Se+ tlon 3 of Artiola 600a, Veraon* Annotatad Civil Ytetutua aa tho ,ecrztury or stato,~tfrst is, if there are ~uore thnr~ I‘ifteer (13) subsoribera to the obpltal stook, then the provisions of the _.ccurity hit are applioable. ha there nre snore than fifteen (15) eubaorlbora to the oapltel stock or the proposed coryora- ti0fi in .ueatlon It is our opinion Lhet the srovlaione of ,ecurity Aot are applioeble end that the exemptions sat forth in Leourity Aot are not available to the proposed oorpora- stated differently it will be nooaaaary zor one of the tial. iuOor~oratora or ponsora eotlrrg ror the incorporatora to ap- i,ly for and obtain a dealer*8 permit in order that the aaourl- tiea iuay DB aold ln oomplianoe with th0 ?exne security kot. It ie contended by the attorney for the incorporators that there hts been no sale will no sale of atook. In view or the defifiition of the term *aslea oontalned in the 3acurltloa Aot, ne c.%MOt agree with the OOntOntiOA Of the attorney for tha izoorporatora beoauao the owners of oertaln property are trana- said property to the oorporatlon ror a Oartein number Ierr& of shares of atook, the number of shuroa of stock to be rooelved b: each eubaoribar will be detaraUod%y the reluo of the proper- ty of eaoh indlrlduel tranafarmd to the car oration for aaid stock. Vie believe that auoh a tranaaotlon o early P comes within t!le dofinitiOn Of the tom *aela~ and, aa heretofore atotad, none Or the oxemptiona oontslned in the Leourltlsa Aot are a?Pllcable to the proposed oorporation unbar the raota pra- sentod.
Go are raturnin& herewith the file aoooapanying your rc ;&uest.