FITHEA~TORNEY GENERAL
OF YXCXAS
Gerald C . Mann
June 12, 1939
Hon. Tom L. Beauchamp Opinion No. O-911
Secretary of State Re: Authorization of the Secretary
Austin, Texas of State to allow a foreign corpora-
tion to file a certificate of amend-
Attention of Mr. Claude ment changing the purpose clause in
A. Williams the com?any’s permit to do business
in Texas.
Dear Sir:
1Je acknowledge receipt of your request for an opinion
on the following three questions:
“3. Is this department authorized to allow a
foreign corporation to change its purpose clause?
“2. If this department is authorized to allow
a foreign corporatfon to change its purpose clause,
what filing fee should this department charge?
"3. Is the instrument hereto attached suffi-
cient to effectuate such a change in a foreign cor-
poration’s purpose clause under its permit?”
The first paragraph of your letter states that you en-
close the certificate of amendment of “General Syndicate, Inc.“,
a foreign corporation, and that it is in reality an application
for a change of purpose insofar as the company’s permit to do
business in Texas is concerned. You also state, and it is on
that basis that this opinion is written, that the corporation is
authorized under its Delaware charter to conduct such business,
but that it has heretofore applied for and secured a permit to do
business under a different purpose clause. We assume that all of
the necessary prerequisites and conditions were met by General
Syndicate, Inc. before it obtained its present permit:+ to do busi-
ness in Texas.
The issuance of permits to foreign corporations is goV-
erned by Article 1529 Revised Civil Statutes of Texas. Article
1532 provides that after obtaining such permit, foreign corpora-
tions shall have and enjoy all the rights and privileges confer-
red by the laws of this state on domestic corporations.
Because the situation here presented seems to be one of
first impression we consider it necessary, as a basis for the
Hon. Tom L. Beauchamp, June 12, 1939s Page 2 (O-911)
opinion to be rendered by this department, to discuss rather
fully the statutes and decisions covering the rights of a foreign
c’orpor&tion to do business under its permit, and amendments to
charters of corporations generally.
ilrtlcle 1314 of the Revised Civil Statutes relates to
the amendment of charters by private corporations and provides
among other things that “no amendmentsor change violative of the
constitution or law of this state or any provision of this title
or which so changes the original purpose of such corporation as
to prevent the execution thereof shall be of any force or effect.”
By the enactment of thi’s provision, the Legislature has expressly
prohibited a private corporation organized under the laws of the
state of Texas from amending its charter so as to change the pur-
pose clause under which the corporation was organized. It has
long been settled in this and other statesthat an amendment to a
corporation’s charter must n?.ot amount to an entire change of the
objects of the corporation. In I Thompson on Corporations, para-
graph 316, the following language appears:
IIOO..The charter i.s the constitution of a corpora-
tion. It is an instrument emanating from the sovereign
power in the nature of authority or a grant to certain
named persons to act as a body corporate and empowering
them to exercise corporate functions for certain speci-
fied purposes.1t
Again, at paragraph 397 of the same volume, in refer-
ring to amendments made by new charters the following language
appears:
“To be sure such substituted charter must be ger-
mane, necessary to the objects and purposes for which
the corporation was organized, and must not violate any
of ;he prfncip&s governing the doctrine of amendment.
00. Citing Snooks vse Georgia Implement Company, 9
SE 1104.
Generally speaking s alterations in corporate charters
which affect a material change in the nature and purpose of the
corporate venture for the prosecution or conduction of which it
was created are considered fundamental and material amendments
and are not allowed. Perkins vs. Coffin, 84 Corm. 275, 79 Atl.
1070, I Thompson on Corporations, para- 400. Further citations
and authorities in this connection include the .following:
State vs. Taylor, 44 NE 513; Youngblood VS.
Georgia Implement Co., 10 SE 1104; Mercantile
Statement Company vs. Kneal, 53 NW 632; I Thompson on
Corporations, Para 326, 332, 396.
Hon. Tom L. Beauchamp, June 12, 1939, Page 3 (O-911)
Article 1529 of the Revised Civil Statutes provides
for the issuance of a permit to a foreign corporation for the
purpose of doing business in the state of Texas and the last
sentence of such article reads as follows:.
“If such corporation is created’for more than
one purpose the permit may be limited to one or more
purposes eI
Article 15'37 of the Revised Civil Statutes provides
that each foreign corporation shall immediately file with the
Secretary of State a certified copy of any amendment or supple-
ment to its original articles of Incorporation.
The following quotations are from Vol. 8 of Thompson
on Corporations and are found in the paragraphs indicated:
IIts powers (speaking of a foreign corporation)
in another state will be measured by its charter and
it will not be allowed to exercise therein any powers
not conferred upon it, either expressly or implledly,
by its charter or the laws of the state of its lncor-
poration.t’ (para D 6582)
“The principal of comity permits a foreign cor-
poration to exercise only those powers with- the
state &&h a domestic cornoration of the same m
is aermitted to exer s der the constitution. th
1 s: and the nolicv%%% state and such a corporz-
t% may not exercise powers and privileges which are
denied to domestic corporations of like character. It
is an expression of p.rincipal that a foreign coroora-
&ion will not be allowed to t r wet &&.ness within
the state on more favorable conditions than orescribed
bv law for domestic c rooratiory. though it is given
the authority to do s&h acts by the laws of the state
of its incorporation.l~ (para. 6583) (emphasis ours)
“A state is not required to recognize as valid a
corporation formed by its own citizens in another
state to evade its own laws or the laws of other states.”
:P68a’~d6~~~krc~tais~~)Carroll vs. East St. Louis, 57 Ill.
.
In Vol. 8 of Thompson on Corporations at page 830, para.
6607, the case of St. Louis Metal & Construction Company vs. Beil-
harz, 88 SW 512, as cited in support of the principal of law there-
in announced. In that case the Texas Court of Civil Appeals stated
that a change in the name of a foreign corporation after it has
Hon. Tom L. Beauchamp, June 12, 1939, Page 4 (o-911)
obtained a permit to do business in Texas would not sffect the
validity of the permit granted or the right of the corporation
to do business in the state of Texas -as so lo
nsme did not involve a change in corporate charter or in the
character of the business of the cornoration or the management
thereof. In this connection it has long been settled that the
business of a corporation is confined to the objects for which
it was chartered and the same r-zle applies to foreign corpora-
tions permitted to do business in the state of Texas. a state
may exclude altogether foreign corporations, except in the case
of corporations engaged in interstate commerce, or if it admits
foreign corporations to do business within the state it may im-
pose whatever conditions it sees fit, A foreign corporation has
no existence beyond the bounds of the state creating it and it
exercises no functions outside of that state except uy consent
of the jurisdiction in which it seeks to do busine,ss.
In the case of Western Public Service Company vs. Me-
harg, Secretary of State, 286 SW 141, the Commission of Appeals
of Texas, in construing Article 1.529, said:
“In view of the comprehensive nature of the
first declarations expressed in Article 1529, it
appears to us that the conclitding sentence is per-
missive in favor of the corporation go lo&a as the
puraoses nw its charter do not i&4&
or which franchises are not Era&able to dome-
poraorations and does not j&lude a cglpBlDation of
Puruos not ‘De mitted to domestic co oorati u
So lonisas the Charter purposes are within t&s*
legitimate range, the farefgn corporation is entitled
to get that for which it asks. If in such a case
the corporation desires to restrict its business in
Texas to less than all of its charter purposes, it
must declare the 13mitatlon, else the Secretary of
State 8shall i.ssuen a permit in harmony with the ob-
jects named in the charter and evidenced by the cer-
tified copy thereof. Such, we think is the meaning
of Article 1529 as also, of Artfcle 1532, wherein
it is said thai ssuch corporations. 0D0shall have and
enjoy all the ri’hts and privileges conferred by the
laws of this sta,! ‘e D on domestic corporations. And
since Article 1302, R.SO 1925, subd. 88, contains au-
thority for a domestic corporation to have ‘two or
more’ of such purposes as are named in relator’s ap-
plication, it resu.1t.s that the Secretary of State
misinterpreted the law in respect to issuance of per-
mits for more than one purpose.” (emphasis ours)
Hon. Tom. D. Beauchamp, June l2, 1939, Page 5 (O-911)
In the case which confronts you at this time, there
has been no attempt by the corporation-to amend its Deiaware
charter, nor has there been any attempt by the corporation to
apply for a permit to do business in Texas for two purposes
which are inconsistent under the laws of this state. The cor-
poration having secured a permit to do business in Texas for
one purpose as expressed in 4rticle 1302, now desires to amend
its permit by substituting another purpose for the original pur-
pose under which the permit was issued. Under the laws of Dela-
ware the corporation is permitted to include more than one pur-
pose in its charter but when it applied for a permit to do busi-
ness in Texas, the &ecretary of State very properly limited the
issuance of the permit to one purpose. To allow a foreign cor-
poration which has thus secured a permit to do business in Texas
for a specific purpose to later amend the purpose expressed in
the permit and conduct an entirely different type of business-
even though such business is one which a corporation is author-
ized to conduct in the state of Texas, would be virtually annul-
ling the effect of the regulation accomplished by the issuance
of permits to foreign corporations. To so hold would open the
,fiela for Texas residents to form foreign corporations under the
laws of other states, authorized by their charter’ to do business
for numerous purposes, and to change the purpose clause in their
permit to do business in Texas as many times as they might desire.
No persons dealing with such a corporation in Texas ~would ever
know how long they would conduct the business for which they were
issued a permit. The situation is somewhat analagous, though it
is not parallel, to the case of a domestic corporation amending
its charter so as to change the purpose clause for which it was
incorporated. It is a well-settled rule that the charter of a
corporation is its constitution and it constitutes a contract be-
tween the corporation and its stockholders, between the corpora-
tion and the state, between the state and the stockholders, be-
tween the stockholders themselves and between the state and third
persons dealing with the corporations on the faith of the granted
power. It is equally true that the grant of a permit to do busi-
ness in Texas with a foreign corporation is in the nature of a
contract * The corporation contracts with the state of Texas not
to exceed the powers in the permit and of a necessity collateral
contracts arise as above mentioned,
Insofar as the state of Texas and its citizens are con-
cerned, the permit of a foreign corporation occupies substantially
the same position as the charter of a domestic corporation. The
laws do not permit a domestic corporation to amend its charter to
the extent of substituting a new purpose olause and thereby form-
ing a new corporation. To hold that a foreign corporation may
change the purpose clause in its permit would be to grant to such
corporation far greater powers than those permitted a corporation
organized under the laws of Texas.
-. c
Hon. Tom L. Beauchamp, June 12, 1939, Page 6 (O-911)
In answer to your first question, it is the opinion
of this department that a foreign corporation which has a per-
mit to do business in Texas for a purpose permitted under the
laws of the state of Texas is thereafter limited to the busi-
ness therein specified, and it cannot amend the permit so is-
sued so as to change the purpose for which it was originally
granted. Obviously, it is not necessary to consider your sec-
ond ana third questions.
Yours very truly
4TTORNEYGENERAL
OF TEXAS
By /s/ Ross Carlton
Ross Carlton, Assistant
.
APPROVErI:
/s'/ Gerald C. Mann
ATTORNEY GENERAL
OFTEXKS
APPROVED:OPIN;~NU~O$MITTEE
BY:
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