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
reduce its capital to $100,000 for the purpose of mak-
ing good an impairment of its capital.
Honorable 0. P. Lockhart, page 2 (O-5792)
“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 3, Title 78, 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 life, health and accident 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 in
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."
Article 4704, 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
reduce its capital to $100,000. Such statute (Article 4704) ex-
- .. _
Honorable 0. P. Lockhart, page 4 (O-5792)
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
life, health and accident 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.
Article 4715, Vernon's Annotated Civil Statutes, provides:
"The laws governing corporations in general Shall
apply to and govern insurance companies incorporated in
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.
APPROVED Yours very truly
APPROVED JAN 28, 1944 OPINION
/s/ Grover Sellers COMMITTEE ATTORNEY GENERAL OF TEXAS
ATTOPJiEYGENERALOFTEXASBY /s/ GWB By /a/ Ardell William6
CHAIRMAN Ardell William6
AW:RP Assistant