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The Attorney General of Texas
April 4, 1980
Honorable Sam Kelley Opinio? No. MW-160
Office of Consumer Credit
Commissioner Re: Whether a lender may charge
P. 0. Box 2107 interest of eighteen per cent per
Austin, Texas 78768 annum on a loan made to a
professional corporation or
professional association.
Dear Mr. Kelley:
You ask whether a lender may charge an interest rate of eighteen per
cent per annum on a loan made to a professional corporation or to a
professional association.
Professional corporations are organized under article 1528e, V.T.C.S.,
the Professional Corporation Act, while professional associations are
organized under article 1528f, V.T.C.S., the Professional Association Act.
Unless the legislature provides otherwise, a maximum rate of interest
greater than ten (10%) per cent per annum shall be deemed to be usurious.
See
- Tex. Const. art. XVI, 5 11; V.T.C.S. art. 5069-L02.
The legislature has established a corporate usury exception in the
Texas Miscellaneous Corporation Laws Act, which in subsection B of article
1302-1.03, V.T.C.S., provides:
B. This Act shall govern all foreign and domestic
corporations including but without being limited to
those corporations heretofore or hereafter organized
or granted a permit to do business under any Statute
of the State, including the Texas Business
Corporation Act, or the Texas Non-Profit
Corporation Act, except to the extent that any
provisions of this Act are expressly made inapplicable
by any provision of the Texas Business Corporation
Act, the Texas Non-Profit Corporation Act, or any
specinl Statute of this State pertaining to a particular
type of corporation.
(Emphasis added). The corporate usury exception is found in article
1302-2.09, V.T.C.S., which provides:
P- 514
Honorable Sam Kelley - Page Two (NW-160)
Notwithstanding any other provision of law, corporations,
domestic or foreign, may agree to and stipulate for any rate of
interest as such corporation may determute, not to exceed one and
one-half percent (1-l/2%) per month, on any bond, note, deht,
contract or other obligation of such corporation under which the
original principal amount is Five Thousand Dollars ($5,000) or more,
or on any series of advances of money pursuant thereof if the
aggregate of sums advanced or originally proposed to be advanced
shall exceed Five Thousand Dollars ($5,000), or on’any extension or
renewal thereof, and in such instances, the claim or defense of
usury by such corporation, its successors, guarantors, assigns or
anyone on its behalf is prohibited; however, nothing contained
herein shall prevent any charitable or religious corporation from
asserting the claim or interposing the defense of usury in any
action or proceeding.
(Emphasis added).
The only restriction contained in article 1302-2.09, V.T.C.S., does not prevent a
charitable or religious corporation from asserting a usury defense if it is charged the
higher rate. Professional corporations organized pursuant to article 1528e, V.T.C.S., and
professional associations organized pursuant to article 1528f, V.T.C.S., do not come within
the exception provided for charitable or religious corporations. The statute contains no
provision concerning the rate of interest that may be charged by lenders to professional
corporations and associations. Both the Professional Corporation Act and the Professional
Association Act provide that the Texas Business Corporation Act shall be applicable to the
respective professional entities. See V.T.C.S. arts. 1528e, 5 5; 1528f, § 25. No provision in
either statute exempts such pr?&sional entities from the provisions of the Texas
Miscellaneous Corporation Laws Act.
The Professional Corporation Act specifically authorizes a professional ccrporation
to borrow money at such rates of interest as its board of directors may permit. V.T.C.S.
art. 1528e, § 7(e). Although the Professional Association Act contains no identical
provision, a similar provision is to be found in article 2.028(g) of the Texas Business
Corporation Act, which is applicable to professional associations pursuant tu section 25 of
article 1528f, V.T.C.S.
The purpose of the Professional Corporation Act and of the Professional Association
Act is to permit persons duly licensed to practice a profession to obtain corporate status
in order to claim certain benefits, including those available pursuant to the federal income
tax statutes. s Hamilton, Professional Corporation Acts, 24 SW. L.J. 94 (1970), and Hall,
Professional Incorporation in Texas, 48 Tex. L. Hev. 84 (1969). Although the Texas
statutes distinguish between professional corporations and professional associations, both
entities are considered to be corporations for most practical purposes. As originally
enacted, the Professional Association Act provided that “the statutory and common law of
partnerships shall apply to associations formed under this Act.” Acts 1969, 6kt Leg., ch.
P. 5 I. 5
Honorable Sam Kelley - Page Three (MW-1 GO)
840, S 24, at 2518. In 1971, this provision was amended to provide: “The Texas Business
Corporation Act shall be applicable to professional associations.” V.T.C.S. art. 1528f,
S 25.
We believe that the legislature intended to confer full corporate status upon
professional corporations and professional associations, except where such status has been
specifically reserved or limited. Therefore, we believe that the corporate usury
exceptions contained in article 1302-2.09, V.T.C.S., applies ,to professional corporations
established under article 1528e, V.T.C.S., and to professional associations established
under article 1528f, V.T.C.S. Such corporations and associations may agree to an interest
rate not to exceed one and one-half (l-l/2%1 per cent per month upon corporate
obligations when the original principal amount is five thousand ($5,000) dollars or more.
SUMMARY
The corporate usury exception contained in article 1302-2.09,
V.T.C.S., is applicable to professional corporations established
under article 1528e, V.T.C.S., and to professional associations
established under article 1528f, V.T.C.S.
&X%$&f&
MARK WHITE
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
TED L. HARTLEY
Executive Assistant Attorney General
Prepared by Tom Pollan
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
C. Robert Heath, Chairman
Susan Garrison
Rick Gilpin
Tom Pollan
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