Untitled Texas Attorney General Opinion

i~awrx;v aI. Teku;hp, -a?TiLL yrx.s ATTORNEY GENEW.bE July 5, 1960 Honorable Zollie Steakley Opinion No. WW-871 Secretary of State State Capitol Res Authority of the Austin, Texae Secretary of State to accept and file the application for Certl- ficate of Authority of Panhandle Telephone Co- Operative, Inc., a foreign corporation, which propoeee to fur- nieh rural telephone service and related queationa. Dear Mr, Steakley: You have requeeted our opinion on three queetlons.~ The.first concerns the authority of your office to accept and file an application for a Certlfloate of Authority submitted by Panhandle Telephone Co-Operative, Inc., a non-profit corpora- tion chartered In Oklahoma purauant to the proviafone of 18 Okla. Stat. 43.81, et seq. The purpose for which the company proposes to transact business in Texas Is “to furnleh telephone eervice in rurdl areas to the widest praotloable number of were of such service; provided there shall be no duplleation of eervlae where reasonable and adequate telephone’service IB available.” Should we conclude that your office ha8 no authority to file such ap- plication, you then Inquire aa to whether or not the corporation oan lariully engage in buelnees in Texabaswithout a Certificate of Authority. Your third queetion is whether or not the corpora- tion will be required to file a return and pay the franchlse taxee required under Chapter 12 of Title 122A (H-B. 11, Act6 56th Legielatum, Third Called Seseion 1959)~,regardleae of whether or not it may be required to obtain Certlfioate of Authority. Article 15280, V,C.S.T, (Acts 1950 - 51st Lagiela- ture-First Called Seuelon9 page 33# Chapter 4) authorlrea the incorporation of “ad-operative, non-profit corporations. O . for the purpome of furnlqhing ‘telephone eerviae in rural areas to the widest, prsatical number of were of euch eervlee; pro- vided there ohall be no~dupllcatldn In service where reasonable, adequate telephone rervlce la available.” Consequently, the . . Honorable Zollie Steakley, page 2 (WW-871) business of furnishing rural telephone service, being 8,law- ful purpose for which corporationscould be organized prior to the passage of either the Business CorporationAct or the Non-Profit CdrporationAct, is a lawful purpose today unless either of these Acts prohibits the d”ormatlonof such oompanles. The Business CorporationAct, Art. 2.01, Sec. A, provides that corporations “for the purpose of operating non-profit inet%- tutions” may not adopt or be organized under the Act. More- over, Sub-paragraph (4)(g) of Section B of Article 2.01 pro- vides that co-operativesor limited co-operativeassociations may not be organized under the Act or obtain authority to trans’- act business in this State under same. An even more pointed prohibitionis found In Para- graph B, Article 2,Ol of the Non-Profit CorporationAct 6Act.e 1959-56th Legislature,Chapter 162) which provides that this Act shall not apply to any corporationnor may any corporation be organized under this Act or obtain authority to conduct Its affairs In this state under this Act, 0 0 (3) if any one or more of its purposes for the conduct of its’ai’fiirsIn this state Is to organize telephone co-operativecorporations.” In the face of this specific language we conclude that your office has no authority to accept and file the applfeationin question under the Non-Profit CorporationAot, However3 any doubts as to whether or not Art. 1528~ was repealed by the passage of the Non-Profit CorporationAct are removed by Article 10.05, Para- graph B of the Act which provides: “Exceptas provided in Artfoie 10.06 of this Act, any limitations,obligations,liabflitlesand powers applicable to a particularkind of oorpora- tion, for which special provfsion is made by the laws of this state8 shall continue to be applicable to any such corporationand this Act fs not intended to repeal and does not repeal the statutory provi-’ sione providing for these speolal llmftatfons,ob- lfgatlons, liabflltfesand powers.sr If, then, the Panhandle Telephone Co-Operative,Inc. cannot obtain a Certificateof Authority to transact business .inthis state by virtue of either the Rasiness CorporationAct or the Texas Non-Profit CorporationAct, the question arises as to whether or not there is an authority under which your + Isate, PrSor to the passage office might Issue such a certi bf the Texas Business CorporationAct and t,heNon-Profit Cor- poration Act, Chapter 19 of Title 32 (Art, 1529, VOC.S,) of the laws of the State of Texas provided the method and manner in which foreign corporationscould qualify to do business in Texas. Article 1529 thereof elfmlnatesforeign non-profit corporationsfrom the purview of Chapter 19 by providing that - , Honorable Zollie Steakley, page 3 (~~-871) "any corporationfor pecuniary profit,. e *shall file 'with the Secretary of State a duly certified copy of its Articles of Incorporation;landthereupon such official shall issue to such $orporationa permitto transact business in this state Consequently,prlor'to the passage of the Texas~Busl- ness*CorporatlonAct and the Non-Profit CorporationAot, there were no provisionswhereby a foreign corporationnot for peoun- iary profit could obtain a permit to do business inthis state (see City of San Antonio v. Salvation Army, 127 S.W. 860) and such corporationscould carry on their activities in this state without obtaining such a permit. Vol. 1 Prentice Hall Corpora- tion Law Guide, page 3300. This, of course, 1s no longer true for foreign non-profit corporationscovered by the Non-Profit CorporationAct. For those which are not it remains the law, primarily by virtue of the principle of comity. As stated in Attorney General Opinion V-746 by Hon- orable Price Daniel, "it is a well settled rule of law that under the doctrine of comity and in the absence of any pro- hibitory law or rule of public policy, foreign corporationsare entitled to enter a state and make anv contracts or transact any business therein falling within the scope of their lawful corporate powers which are permitted to domestic corporations of like kind and character. In accordance, with this rule, if the laws of a state prohibit the formation of domestic corpora- tions of a specific character, or for certain purposes, Its policy is controlling;and a foreign corporationof that charaa- ter or created for such purposes would not be allowed to enter the st,ateand transaot business therein. However, an intention to exclude foreign corporationsfrom,the state Is not to be deduoed from circumstancesthat the laws of the state have.made no provisions for domestic corporationsof like oharaoter. And in the absence of expressed constitutionalor statutory Inhi= tlon, foreign corporationsmay enter a state and engage In busl- ness therein under the rule of comity notwithstandingthey are organized in accordancewith methods which do not obtain in such state." Opinion V-746 dealt with a situation in which a foreign corporationorganized for pecuniary profit, but without capital stock, deslred.to obtain a oertificateto do buslneas in Texas. Article 1530 of the then applicable statutes required that before a Certlfleateof Authority be issued the corpora- tion must show to the.satisfactionof the Secretary of State that at least $100,000 in cash of its authorized capital stock had been paid In or that fifty per cent (50%) of its authorized capital stock had been subscribed, In accordanoewith the quoted language above, Opinion V-746 coneluded that the foreign corpora- tion could obtain a oertiflcateof authority to do business in Texas despite its inability to meet the requirementsof Article 1530. In the instant situation,we find no constitutionalor statutory prohibitionagainst corporationsof the type In question. Y < Honorable Zollle Steakley, page 4 (W-871) Rather, there exists a special act, Article 15280, which au- thorizes the formation of domestic corporationsof the identi- cal type. Although making no specific provisions for the ob- taining of a certificateof authority by foreign corporations of this type, Article 1528~ assumes that foreign corporations will transact business in this state under its authority. For example, Section 6a(l) provides “the words ‘telephoneco- operative’ shall not be used In the corporate name of corpora- tions organized under the laws of this state, or authorized to do business herein, other than those organized pursuant to provisions of this Act*” Section 23, sub-paragraph(b) pro- vides that “a corporationmay not otherwise sell 0 0 . a sub- stantial portion of its property unless such sale a D D Is au- thorized by an affirmativevote of not less than two-thirds (2/3) of all the members of the corporation;provided, how- ever 0 e 0 the Board of Directors may a D L1sell, lease or otherwise dispose of all or a substantialportion of its ptip- erty to another corporationor a forelRn corporationdoing business In this state pursuant to this act. D Q” Similar language may be found in Section 23. On the basis of the foregoing, in an8wer to your questions 1 and 2, we hold that the Secretary of State has no authority to accept and file the applicationof the Panhandle Telephone Co-Operative,Inc. for a Certificateof Authority to engage in business In this state for the above state purpose. We also hold that the corporationmay lawfully engage In busi- ness In Texas without a certificateof authority. In answer to your third queetion, it is the opinion of this office that the corporationmust file a return and pay the franchise taxes required under the provisions of Chapter 12 of Title 122a, H. B. 11, Acts 56th Legislature,Third Called Session 1959, If It does business In this state. Article 12,01(l) provides that “except as herein provided, every domes- tic and foreign corporationheretofore of hereafter chartered or authorized to do business in Texas or doing business in Texas, shall, on or before May 1st of each year, pay in advance to the Secretary of State a franchise tax for the year following which shall be based on whichever of the following shall yield the greater tax. D D” Obviously, the Legislaturecontemplated that there would be ,sltuatlonsin which a corporationmay not have been charteredunder the laws of this state, or have se- cured a permit to do business under the laws of this state, but yet might be doing business here for purposes of paying a franchise tax, SUMMARY The Secretary of State has no authority to accept and file the applicationof the Panhandle Honorable Zollie Steakley, page 5 (~~-871) Telephone Co-Operative,Inc., for a Certificate of Authority to engage In business In this state for the stated purpose. The corporationmay law- fully engage In the business which it proposes In Texas without a Certificateof Authority,but must file a return and pay the franchise taxes required. Very truly yours, WILL WILSON Attorney General of Texas RVL:lmc:bh APPROVED: OPINION COMMITTEE W. V. Ceppert, Chairman Morgan Nesbltt ~- Fred B. Werkenthin Wallace P. Finfrock REVIEWED FOR THE ATTORNEY QENERAL BY: Leonard Passmore