260
Oi=FICE Ok
‘rHE ATTORNEY GENERAL OF TEXAS
AUSTIN
Hoooreble Cleude Iebell
secretcry of state
Auatin, Texas
itteM&m: flofioreble
Xoraoe 8. .*eaione
Lieouritleacommlablor.r
'3earsir:
rty (30) peraoIIe. The
ssouritia8 Diviuion or
ra of the proposed
exa6 SoouritietsAot wae availebxa,
th6 reglstretlon provioloue of.
e neoeessry .
ornay contend8 that, rinoe thir ID
ifi whioh the aubsarlbera
ntarpriea
pertlalpeted in aubsorlbl~ ror etook,
the Texas tioaurities Aot would have no epplioa-
tiOE.
93inoe to our knowledge this mntter ha8 not
been the eubjsot or httorney Oenersl*e oplnlon,
and wa have no Taxes oaaea beering on the eubject,
,
we u5 .itiltlli
511all rspprCcl%te::o+rfi>vorin(- 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@tlonin &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 for wnioh the oorporhtion I8
organleod Is to rupply water to the pub110 In the
iw0a IalE4comauuity In Trinity county, Texe8.a'
T& amount of the 8took I8 Three Thourend Dollar8
(,3,000.00) 4lvi4od into 8Ixtb (60) ihnrea at rlrtyDollar8
(+SO.OO) leah, all of wtioh oepltel stook has beon in good
fait3 sub8orIbodand the 8um of Two Thousand Two Iiundnd Dol-
ler8 (i2,2OO.O0) pal& In as.per~arrIdavlt aooorapanylng the
chartar. Tha rpOunt paid in by the lubearibers wa8 paid by
tha aalo, tran8rar and oonveyanoe to the corporation 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-
ter of e priveto ~oorporatlon oannot be file4 unle88 tha full
amount of It8 authorized oapital stock he8 bean In go04 faith
aubrorlbod an4 rirtg per oant (56) thoreor peI4:ln oaah, or
it8 oquivaloentIn Other property or labor done. (Artlola
1308, Vernon08 Annotated Civil Statutea). Thin provl8Ion re-
refer8 in term8 to the aggregate mount of oeQlt.81stock. 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:eoklngCornyany,213
4. 3. 250.)
SuboootIon8 (a), (b) and (0) or Seotlon 2, Article
WOa, Varnon*8 Annot8te4 Clvll Statute8 are ~8 follow8r
*(a)T&o term * esourity’ or *8eaurltlo8*
8haU Inoludo any share, stook, troaaury ltook,
8took oortlrloate undar a votlng trust ag~oaant,
oollatoral trust oortIrlcate, aquipmsnt tru8t
262
06rtifioa tu , prtor,+iilzutioii ccrtiiicoto or receipt,
aubeoription or raoreonizetion o~rtlficotc, s.ota,
bond, debefitura , mortgo~a o6rtificat.eor other avi-
denca of indebtedness, an!, form of oOiUU6rOialpap6r,
cartiriotit6in or under 6 i.rofits:iurlI&or pUti.-
clpetlon egreem6nt, certlflcata or any inetrument
reprcraontinganj-interest in or under PfiOil, L;68
or mining 16686, fee or tltla, or any oertifloata
or inatrumant repreeentlng or 86our6d by en inter-
est in any or all or tha oapitol, property, 6aset8,
profita or oarri~a of eny oomyeny, inVaatm6I~tCOIL-
treat, or any other inetrument oommonly known 68 a
security, whether eMl6r to those herein rafarred
to or not.
*(b) The term *oompany' ahall inolu46 a aor-
poratlon, a pbraon, joint #took company, pertfiar-
ship, 888OOi8tiOn, OOmQeny, 8yndia6to trIl#t,in-
oorporatsd or unincorporated, h6retofora or horoerter
fOrrpSdtSI46rthe 16~8 Of this or any other Stat.,
oountry , 8OVOId&nty or politioal 8UbdiviDiOn thore-
OS. An ~884 horein, the term *trust9 8haU be daowb
to inoludo e eOpIleo0 leu trust, but ah6u not inoluda
a trust oreat or appointed under or 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-
tiOIl8 to, or Order8 for, or undertaking to 418po8e
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 or tu-ougn
any poreonor oomyany, other than a roglstere4 dealer,
ortern ror 8616, 60118 Or AT&~@ SuleD Of it8 Own
DOOUdty or 8~OUdtiO8 8h811 bo dOOnL.4 a dOd#r ?Uld
Shall bo rS~Uir04 ii0 oomply with the proVi#iO&I#
hereori provi464, howav6r. thie YeotiOU Or QrOVi8iOIi8
lh611 not 6Qply t0 8uoh i#@U~r if auoh 8eOllrityOr
saouriti68 6~ .0rf6ma ror aale or 8014 alth6r to a
:0J10ratll6
Glaude I~bcll, i;yi~;e
1+
action 3 of rrtiols 600s. Vernon*8 Annotated Civil
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 (;ualIfyfor Incorporation &en eubeoribed
by AOt aore than fifteen (15) lnoorporatorr In a
proposed Text8 oorporation."
Under the dafinitiOn 0i the tern “8eoUrity” or “8e0Uri-
tie&P there 18 no question but the atook referred to Is sub-
jsot to the yrorl~Io~a of the Seourltles Act, unle88 exempt
thereX= by 80~8 prdri8ions of the Act. The Tex88 Security
Aot r6gdXe8 the r6gittrttiOA Of all t6eUdti68 8016 IA Toxcr8
unleue 8uah atouritita oaw within a 8psoiflo exemption from
rtgirrtrttionunder Sootions 3 and 23, and the hot al80 pro-
vides that pawn8 makin any orfaring and eale OS 8eourltie8
be lioennd a8 nourity t ealert unlto~ the saourltler, ere aold
.X.~
,~ in exeiapttrsn8sotiont lI8ted under the sxemptioA8 proviatd
under 8ald eeotiona above mentioned.
It will be notad that under, Sib8ection (1) , seotion 3,
8upra, sUb8oriptiOA8 to oapital 8took neoe88ary to qwirg
for inoorpor&d.on I*heA8ub8orIbed by not more then fiftOtA
(15) inoorporatora in & proposed Texae oorporatlon art exmipt
fP2m the JWOTi8iOA8 Of tht SOOllritI~8bOt. ItMy~:,~~a";;t
the dopartawt8l oonatruotion or the Seorttary 0
if there wore 010x% 'thanfifteen (15) subaoribsrs to. oapital
stook or e propoevd Texa8 Qorporetlon tLl6prOV&DiOA8 'of the
3ourItie8 itotwould oe applloeble, unless exempt b; nome
provI8lon8 OS the statute. The subsoribere Lo capital etook
m6 A06 moe88ariig the iAOOrpOBStOr8. The Inaorporators an
the panon obtaining the oharter. see 2 uordt EIAQ I’hrtntn,
1st seriar, 1623. (tioUidty v. Parsons et tl, 116 s. L. 907.)
It 18 8tated la HilGebrsnd18 Texas Corporation8, VOluait
'Tha Tou8 atatute8 do not dilrerentiate be-
tweon btookholdsrr* and ‘eubaorlberr* to the etook
Of the OOrpOretiOA. For iA6t6flO0iA VerJlOA'eAAAO-
tattd Civil statutea, Artiole 1308, It i8 provided
that before the charter oun btr filed by the &ore-
tary or state, tha full amount ot its oayital ntook
&et be eubeorlbed by Its atockholdaru. IA Arti
1313 It in thu stocnholdars t:ictxurriiehevidence
tu the xcrottiry of state t!i6ttlielow has been
oompliud with. fiocordiAGto krtiole 1326 th6
by-luwe me:: b6 altered, ohaagador timendedby a
majority vota or the StOOkhOld6ro. 4rtIole 1323
providea that thenbooks aAd raoorda of Lb6 oor>o-
ratiOA ehall b6 open t0 iA8peotiOJlOf any etook-
holdar. Artiola 1336 authorizee the forreiture
of the atook If aw atookholder n6,eleoteto 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 the
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 do riot
fUrAi8h e 801UtiOA Or muoh USSittJAAOt iA deoiding
th8 above problfma. . .*
YUbaectiOA (8) Of SeOtiOA 2 of krtiole 6008, VerAon'
CiVfiSt&Ate8 18 US rOllOWt:
.iJUIOtOted
*The t0rmt ~8~16~ or *orrer for sala* or *tell'
8hl.l inolude every diSpOSItiOA, Or 6tteJnytto die-
POM Or t 88OUdtJ for Vtbe. The term ‘S&h* meano
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 trust or otharwise. kqy seourlty
given or delivered with or as b bonus on eooount of,
any pUrohe8e of eeourltleo or other thIAg ortielue,
shell be oo~olusfvs~ prseumod to constitute a part
Of the aubjoot of ouoh puraheae end to htVobeen
sold for value. The teW 'Sell' m6eA8 eny eet by
rhioh a salo io mado, end the term *selec or *Offer
tOr 8810' 8hSu. inOhld@ 8 SUbSOriptIOA, eA OpttOn
ior Sth, a'solioitationof 8818, an attempt to ~011,
or an ofror to 8011, diwotly or by an egent or Sa~OS-
man, by a olroulsr, lotkr or 8dV6rti86m6nt or othar-
WiSe, IAOlUdiAg the deposit IA e United St6ttS POSt
tirflcaor ~11 box ~)rin ULA~in~m~er i;ltwit;United
;it,ateanails sithifithis 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
leo ur lty;but no lxohanga 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
offer for aala any aeourltlealaauad after the
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) to (1). both lnolualve of section 23
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 ltntaaunt verified under the oath
of an lxooutlre offioor of the lsauer and attaatad
by the aaoratary tharaof, .aottlngrorth the r0ii0+
ing inror5atlonr i . .*
Tha Artfolua of Inoorporatlon of tba Wood J,aka‘u;ater
CorpOrutiOi dlaoloaa that than ara th~raaincorporatora who here
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~eanpaid, aa horalnabove ltatad, ware paid in by the tranefer
Of oertaln proparty to the oorporntion. Gonerally agesking
atookholdora are menbora of a oorporatlonihowarar, thay an not
neoaaaarlly tha lnoorporatora. After oarorully conaiderin(Jyour
(iueatlon,wa place the laaa ooaatruotion on Subaaotion (19, Se+
tlon 3 of Artiola 600a, Veraon* Annotatad Civil Ytetutua aa tho
266
,ecrztury or stato,~tfrstis, 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-
ti0fiin .ueatlon It is our opinion Lhet the srovlaione of the
,ecurity Aot are applioeble end that the exemptions sat forth
in the Leourity Aot are not available to the proposed oorpora-
tial. stated differently it will be nooaaaary zor one of the
iuOor~oratora or lponsora eotlrrg ror the incorporatora to ap-
i,ly for and obtain a dealer*8 permit in order that the aaourl-
tiea iuayDB aold ln oomplianoe with th0 ?exne security kot. It
ie contended by the attorney for the incorporators that there
hts been no sale or will be 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-
Ierr& said property to the oorporatlon ror a Oartein number
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 oPearly 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.